Gigaprojects: The Stakes are High and Demand Improved Project Performance
SPE’s projects, facilities, and construction (PFC) discipline has had a good track record in developing and delivering workshops on topical themes over the last 10 years or so. Some of the workshops have been forums to discuss new and emerging technologies, like subsea processing, while others have worked to gain consensus on issues of the day, such as produced-water-discharge limits.
In the last few years, the workshops addressing single topics, called Advanced Technology Workshops, have been supplemented by Global Integrated Workshop Series events. In the series format, a single topic is chosen and a series of workshops is structured to address the topic through regional lenses. Typically, the workshops are linked and key issues, opportunities, and themes from the initial workshop are worked further in subsequent workshops. At the end of the final workshop, we develop a global perspective on the chosen topic with regional highlights identified, and share our collective knowledge globally. It is a great way to engage as many facilities engineers as possible, tackle topics that are important in a region, and cross-fertilize learnings and ideas from region to region.
Currently, SPE has several of these workshop series in development, and one that is of interest to me has been provisionally titled “Gigaproject Management.” Traditionally, a “gigaproject” has been defined as a project exceeding USD 1 billion in capital expenditure. However, as projects become more complex and costly, there is a growing consensus that a gigaproject should be redefined as having a capital expenditure of greater than USD 10 billion.
An Internet search yields a number of sources estimating that there may be as many as 80 gigaprojects being worked on at present in the upstream business. This includes those that are in the very early phase, as well as those that are nearing construction. The number was surprising to me, especially considering that an additional 30 or so future projects would also fit in this category.
As you would expect in an industry as broad as ours, there are dissenting opinions on whether capital alone should be the key criterion for the definition of a gigaproject. Some believe that project complexity should be an additional factor for inclusion. For me, this is a given, because I have not yet identified a gigaproject that looks simple from a facilities, supply chain, or resource-location perspective.
An interesting criterion for inclusion in the “giga club” is that a project, whose total cost exceeds USD 10 billion, must have a single asset (a platform, plant, or floater) that exceeds USD 1 billion. However, a search of publically available data indicates that many of the largest projects already meet this criterion—for example, the Ichthys, Prelude, and Wheatstone liquefied-natural-gas (LNG) projects in Australia, or several projects in the United States and China.
These projects are challenging in scope, complexity, and all have innovative solutions that use new technology. The LNG projects have significant production infrastructure: long offset subsea wells, large in-field host facilities, and in most cases, a remote LNG plant. (Prelude is unique in that the LNG facilities are offshore on the world’s largest floating production facility).
The giga oil projects also have significant complexity, for example, the US Gulf of Mexico projects often involve phased development, complex wells, and in some cases, improved oil recovery baked into the original development concept.
You might ask, “So what? There are no gigaprojects in my company’s portfolio. Why should I be interested in a workshop series?” Well, it turns out that as an industry we may not be doing very well with our current batch of mega and large projects, so there may be some lessons to be learned that can be applied across our entire greenfield and brownfield portfolio.
A recent review of megaprojects (capital expenditure exceeding USD 1 billion) by Ernst & Young (EY) indicated that 64% of the projects are facing cost overruns and 73% are reporting schedule delays. This is a quite startling figure.
We should note that the data set evaluated by EY is broader than just upstream projects—it includes pipelines and refining—but the message is clear: There is an opportunity for improvement and we need to understand it and deliver elevated project performance.
In the April 2012 Oil and Gas Facilities, Edward Merrow from Independent Project Analysis reported on oil and gas project performance using key project performance metrics. It was dismal reading. For gigaprojects, poor performance is unthinkable because the stakes are just too high.
The performance issue will be at the core of the debate in the gigaproject workshop series, addressing the key challenges and best practice sharing. To be successful, the workshops will need to tackle a number of questions: Which factors affect performance? What lessons can we take from our megaprojects? What can we truly control, what can we only influence, and how do we manage these project elements? How much can we rely on new technologies, and how do we qualify critical technologies to assure ourselves they will perform? What are the roles of the operator, engineering contractor, equipment supplier, and technology provider?
We know these questions are not unique, nor new, and it is possible that we felt comfortable with our answers in some of our existing projects. However, the performance data suggest we have gaps, so perhaps an overarching question should be: Have we been complacent in our self-belief that we can deliver high-capital, complex projects?
Looking at the industry’s proposed capital spend over the next 10 years, there is no doubt we will need to find the right formula to successfully deliver giga, mega, and large projects. With that in mind, I suggest that the PFC community look out for the upcoming gigaproject workshop series and plan to participate. We might learn some things that we can use across our entire global portfolio of projects.
For an in-depth discussion of the challenges that continue to vex project management and outcomes, read “Taking a Closer Look at Why Projects Fail” in this issue.
For Further Reading
Ernst & Young. 2014. Spotlight on Oil and Gas Megaprojects, http://www.ey.com/Publication/vwLUAssets/EY-spotlight-on-oil-and-gas-megaprojects/$FILE/EY-spotlight-on-oil-and-gas-megaprojects.pdf (accessed 12 September 2014).
Merrow, E. 2012. Oil and Gas Industry Megaprojects: Our Recent Track Record. Oil and Gas Fac 1 (2): 38–42.
Paul S. Jones is the subsea unit manager at Chevron and a past SPE technical director of Projects, Facilities, and Construction.
He is a member of the Editorial Board of Oil and Gas Facilities.
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