• 02 Aug 2016

Development Pitfalls- Delays & Over-engineering

Upstream recently highlighted the dangers in over complicating development solution designs including, not least, the potential to delay several stages of a project (e.g. FEED, Detailed Engineering, Procurement and Construction):

“The oil and gas industry has become significantly less productive while the increasing complexity of projects is taking its toll on both budgets and schedules, according to Hilary Mercer, vice president integrated gas projects, Shell Global Solutions.

She claimed that that the Anglo-Dutch supermajor has a good track record on project delivery. However, like many of its peers, Shell in the last few years has struggled with soaring project costs, increasing complexity, more stringent regulations, declining productivity levels in design and construction.”

As commonly seen, delays inevitably lead to missed deadlines (whether it be for a client and/or a regulator) and cost escalation. Furthermore, other dangers or knock-on effects from delays in crucial design stages include (once operational) increased down-time and a requirement for higher manning levels and/or frequency of visits.

“Mercer questioned why, compared to a decade ago, it typically now takes the gas and oil industry twice as long to get a project from inception to the final investment decision.

She said that it now takes industry 50% longer to actually drill the wells and construct the facilities than it did in the 1990s or the first part of this century.”

When this occurs, even large projects can be at a significant disadvantage, and even for large capital rich companies this affects other business areas and plans, not only in terms of future budgets, but also future perception, both external and internal by instilling risk aversion and marginalising yet more projects.

“She also questioned why some of Shell’s later projects have become more complex or even apparently over-engineered.”

To get this right and reverse the trend, and at the same time reduce the sizes associated with what might commonly be considered marginal, future development solutions require simplification as well as innovation. Our approach embraces simplification and careful minimisation, to reduce complexity and lead times. In example, through our Consortium we intend to use the Arup Concept Elevating platform, which has a proven delivery record for Detailed Engineering, Procurement and Construction in 16 months. When combined with our normally unattended topsides the need for human intervention once operational is minimised to dramatically reduce project OPEX (boosting commercial viability and field reserves).

“Engaging stakeholders, both internal and external, early in the project cycle is seen as key in helping to keep budgets and timelines on track.

Much of a project’s success – or not – is influenced by those stakeholders. It’s vital that we actually include the concerns of those stakeholders at the very early stages of the project,” she said.

Failure to do so in many instances has led to disruption or confrontation, which inevitably leads to significant impact on cost and schedule.”

Being able to deliver this vision of a change to the conventional approach, relies on the adoption of a new philosophy, not only by engineers in terms of refreshed expertise, but also by stakeholders who need to embrace this simplification and step away from the norm. We intend to deliver this vision by utilising the project management skills, and strong collaborative relationships between members of our Consortium, but this will only succeed if adopted similarly by operators and regulators alike. And in the current market, this simplified but innovative approach might still ensure that your Company is first in the queue.