Energy Megaprojects: Project Controls, Risks and Challenges

Masjood Jafri
A sharp decline in oil prices has dramatically transformed the oil and gas industry landscape.

For oil and gas companies, an austere economic forecast has challenged the balance sheets and shareholder dividends, leading to cuts in project spending and increased focus on productivity and cost control. To achieve the strategic benefits from capital programs, owners are increasingly shifting their focus from accelerated program execution to delivering value for money through effective and efficient program management.

In the global league of capital projects, energy megaprojects, such as offshore upstream installations or onshore LNG plants, merit special consideration due to an extraordinary combination of rewards, risks and uncertainties. Historically, due to complexity, a high proportion of megaprojects have failed to meet cost, time, or output expectation. This underpins the need for rigorous planning, execution, and control throughout the project lifecycle.

To achieve the strategic benefits from capital programs, owners are increasingly shifting their focus from accelerated program execution to delivering value for money through effective and efficient program management.

In supporting clients, we find that project controls processes and systems established during the early stages, prior to front end engineering design (FEED) completion, often continue to be used during the detailed design and construction stages without being re-assessed for functionality and scalability. This causes gaps in the project controls processes, leading to inaccurate reporting, low confidence forecasting, data bottlenecks, ineffective decision making and a need for increased quality assurance. At this stage, a maturity assessment of the project controls processes could be helpful in proactively identifying and plugging the critical gaps through comparison with industry standards and best practices.

The project execution stage, in particular, requires robust project and construction management processes with adequate project controls to provide transparency, predictability and control. We believe that choosing the correct contracting strategy provides a strong foundation for the above. When contracts are developed with input from project controls specialists, the requirements are captured clearly to manage the contractor performance.

When contracts are developed with input from project controls specialists, the requirements are captured clearly to manage the contractor performance.

Similarly, the establishment of a centralised project management office (PMO) sets out the policies, standards, procedures, and systems necessary for project performance measurement, reporting and control. An effective PMO is developed in conjunction with the execution strategy, with the focus on guiding, controlling or directing, as determined by the owner. This tailored approach allows owners to manage the contractor performance effectively, reducing opportunities for disputes, claims, and renegotiations, all of which incur additional cost.

We believe that establishing robust project controls processes and systems, in line with the execution strategy, forms the backbone of effective contractor performance monitoring and control. Integrated IT solutions and automated processes could also be of significant benefit, if aligned and configured in association with the execution strategy.

We have conducted a number of project maturity and gap assessments for major capital programs, during both the planning and execution stages. Our expertise in developing PMOs in several countries, coupled with project controls systems configuration experience, has benefited clients faced with significant project controls challenges. Recent examples include a project controls assessment for Sasol’s multibillion-dollar chemical project in Louisiana. We also recently provided a maturity assessment for Williams Energy, followed by detailed requirements development, project management process improvement and project management information system implementation.

Our expertise in developing PMOs in several countries, coupled with project controls systems configuration experience, has benefited clients faced with significant project controls challenges.

Faithful+Gould has led projects in the rapidly changing energy sector for more than 60 years, forging strong relationships with major providers across the world. Our consulting services support energy companies in overcoming business challenges in both capital and asset management programs. Our global portfolio includes clients in upstream oil and gas, downstream refining and chemicals, nuclear energy, renewable energy technologies, power generation, transmission and distribution, and infrastructure.

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