Breaking the Cycle

A brief article in Issue 910 of The Chemical Engineer states that ‘A study of major oil and gas projects on the UK continental shelf found that on average 35% came in over budget….fewer than 25% were delivered on time…' The source of the article was the UK Oil and Gas Authority.

Clearly this performance is not acceptable now oil and gas is subject to real economic pressures with supply exceeding demand and likely to continue to do so.

Self Interest

The article goes on to say ‘...a working group will be established to deliver industry guidelines…for robust project delivery.’ In these days of data science, how can the appropriate solution be chosen without a successful analysis?

Who will be developing the guidelines? Previous experience with UKOOA, CRINE and LOGIC suggests the same organisations that fail to deliver the projects combine to deliver the guidelines. So no surprise in the chosen course of action.

For those of us with grey hair this cycle is familiar, but perhaps a new economic reality creates an opportunity for the performance metrics and the appropriate solution to be considered differently.

Courses of Action

Scale is designed to reduce unit price in commodity production facilitating commodity procurement practice in reducing price. This will work if each unit of production is indeed the same.

Alternatively, bespoke (anything commissioned to a particular specification) units are more efficiently produced by specialist providers, and are procured based primarily on fit with the specification.

We are of course trying to do both when running projects, but the performance metrics suggest we are not succeeding. We don't have the balance right. We have accidentally created the situation where actual cost and schedule are increasing whilst bid margins are being eroded. The same cycle repeats and projects are therefore at risk of being over budget and over schedule.

Courage to be Different

The balance can be found and the cycle can be broken by sacrificing self interest.

Where a standard product is appropriate then our large service providers need to offer truly modular products and cease charging for reinventing the wheel.

Where bespoke design and build is required customers need to recognise higher risk and engage directly with specialist expertise to actively mitigate the risk. Defaulting to large service providers in the false belief they will absorb the risk is clearly failing.