Capital projects in development
The commercial viability of capital projects has been pressured further by increasing project size, complexity of technical design, geographical and political complications, and, most acutely now, the oil price.
In this market, the impact of poor project performance has been exacerbated by increased sensitivity around development costs and its effect on overall project viability. Project hurdle rates across the industry have been recalibrated to a market expectation that oil prices will remain volatile. As a result, projects must be designed to be less costly and be delivered with greater certainty over budget, or they risk being deferred or canceled.
Faced with historical performance challenges and difficult market conditions, project leaders and corporate directors are increasingly questioning whether they have sufficient oversight over, capability within or efficiency to develop, sanction and execute projects that meet both hurdle rates and production demand.
Three themes for effective capital project delivery
- Increase stakeholder transparency over key decisions and project performance
- Improve operated and non-operated project performance through effective assurance
- Effectively govern project portfolios, managing risk and selecting optimum project investments
- Confirm sufficient capacity, proficiency and challenge to manage front end engineering design (FEED) and development contractors
- Effectively meet man-hour requirements for development activities across the project portfolio
- Maintain consistency in the development of project plans with a mobile and flexible workforce
- Reduce project development costs (while maintaining or improving quality) to meet more stringent planning budgets and continue to drive cost-efficiency over time
- Reduce inefficiency through effective collaboration in FEED work and detailed design with key contractors and suppliers
- Drive consistency of equipment and common units across projects to reduce time spent redesigning similar items