Global Upstream Project Delivery 'Finally Hitting the Mark'
Global upstream project delivery is “finally hitting the mark,” with a growing list of recent projects delivered on target, according to Wood Mackenzie (WoodMac).
“There is a growing list of mid to large projects that have been delivered on target over the past 12 months. This includes areas previously notorious for cost blowouts, such as the Arctic and Caspian,” WoodMac said in a company statement.
“Examples of improved execution include deepwater (BP's West Nile Delta and Atoll, Eni's Zohr and Cape Three Points), LNG (Novatek's Yamal), shallow-water gas (BP's Shah Deniz Phase 2) and subsea tie-backs such as Woodside's Persephone and Wintershall's Maria,” WoodMac added.
Improved project delivery in recent years has in part been supported by big oil's de-emphasis of mega-projects in the current environment, according to WoodMac, which said this is not sustainable longer-term in an industry underpinned by large, cash-generative assets.
In a video published on WoodMac’s website, Angus Rodger, WoodMac research director, said, “over the horizon we see some big projects coming, and these are complex, these are mega-projects.”
“What everyone in the industry will be watching is can this level of project delivery, on time, on budget, can it be maintained as we go to the next phase of the industry and the type of projects that they’re investing in,” Rodger added in the video.
Six Key Factors
WoodMac has identified six key factors that it says “in most recent cases combined to create better project execution.” These are listed below:
- Spare capacity through the supply chain – “This leads to better performance and lower costs,” WoodMac says.
- Service sector collaboration
- Improved project management – “Companies have more people looking at fewer things, while under-utilized service companies can offer their 'A-team' for each major contract,” WoodMac states.
- Greater corporate discipline – “Tougher pre-FID screening and more stringent hurdle rates have increased attention on execution and cost control,” WoodMac says.
- More pre-FID planning
- Reduced scope – “More tie-backs and brownfield projects that use existing infrastructure, less greenfield,” WoodMac says.
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