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Is your business managed around projects?

Thursday, November 24, 2011

The work of oil companies is ultimately project based - explore here, drill there - so it makes sense to manage our work around projects, says Guy Barlow of Oracle Primavera

Most of us work with software tools designed for our specific work process, such as examining seismic, designing plant, managing maintenance.

But fundamentally the oil and gas industry organises its work around projects (build a production platform here, decommission there). All of these projects have a complex lifecycle, from selecting which project to go for, planning, deciding which ones to push forward with or cut back on as plans change, co-ordinating with all the companies involved.

How good are oil companies at managing their projects? The degree of maturity varies, says Guy Barlow, director, Industry Strategy at Oracle.

'Some companies use whiteboards, or don't have a rigorous or programmatic approach to their projects', he says.

'Often the connection between projects and the wider business impact is tenuous at best. Improving this connection take a rigorous standardized process and technology platform at both the project and broader business levels. Does a CFO really know which are his highest risk projects? Or the cash flow projections?'

Companies generally know what oil price various projects will be profitable at, but they don't know how profitable they will be, and they don't immediately know which projects they should be looking to pull forward or push back if the opportunity arises.

'We're pushing the idea of projects driving your business,' he says.
'Being able to execute projects in oil and gas is a business critical skill. That's what we help companies do.'

Companies put too much focus on their ERP data, which records the daily transactions and financial information, but falls short with day-to-day project management and how project trends impact the enterprise over the long term, he says.

Primavera

Oracle's 'Primavera' software suite helps companies manage projects across the enterprise. This includes the upfront capital planning solutions, 'Portfolio Management', to manage your entire portfolio - capital construction, turnarounds and daily maintenance -- and the P6 tool, which can be used to manage, monitor and control all those types of projects. Including managing resources, scheduling, and engineering contractors (EPCs)at a field level and reporting back KPIs, metrics and analytical information at the executive level.

The software is used to choose which projects to go for, evaluate risks and rewards, determine resources needed, manage project execution, keep projects on budget and schedule.

'The Primavera software could be used as people's daily 'hub' software for planning, pulling data from a range of different systems, such as SAP and Oracle including ERP systems, maintenance management systems and human resource systems', he says.

Primavera was originally the name of the software company which developed the products. It was founded in Pennsylvania and acquired by Oracle in January 2009.

Saipem, BP, CNOOC

Oil and gas engineering construction contractor Saipem recently announced that it was commissioning consultancy Accenture to put together a data management solution based on Primavera P6 for its onshore construction projects around the world, including planning, monitoring and managing projects in 35 countries.

Saipem will use the system to estimate construction work volumes and requirements, remotely plan activities, and track progress. A prototype phase to be finished in the third quarter of 2011, before being rolled out internationally.

'Oil and gas projects are becoming increasingly complex and are located in evermore remote locations,' says Marco Montesano, head of Engineering and Construction Management Information Systems, Saipem.

'Accenture's bespoke solution will help us integrate data between distant locations, helping reduce the cost, risks and time associated with construction projects.'

BP America also uses Primavera for planning projects for its oil refineries. BP estimates that cost savings of $3.5m are achieved from using it. It can manage maintenance and construction project data, and share this with contractors.

The system is also used by Offshore Oil Engineering of Beijing, a company which is an affiliate of China National Offshore Oil Corporation (CNOOC).

Tracking changes

An important function of the software suite is keeping track of changes in the field with contractors and making sure everybody is aware of the changes, their impact and the course of resolution.

'Research shows that 40 to 60 per cent of cost overruns are because of inefficient change management,' Mr Barlow says.

The critical thing is to get communications out of people's inboxes, off or spreadsheets and onto a central system which more people can access to more efficiently manage the change process, he says.

Improving work efficiency

The software can also be used to improve work efficiency.

It can be used for planning big jobs, such as turnarounds, when the entire plant is shut down for maintenance work and then brought up again.

A single turnaround can cost $100m. 'The more efficiently you can do it the better,' he says. You'll get a revenue generating asset back online and also reduce costs.

The Primavera software can be used to ensure the most efficient use of materials and time in turn improving project cash flow.

Studies have shown that the average 'wrench' or 'tool time' per shift, that is when staff are actually working with tools, can be as little as 2.5 hours.

Co-ordination

The software can also be used for co-ordination between companies. For example one company on the North Slope of Alaska was working with 3 different service companies, each responsible for critical elements in rig construction. And they were all working for separate schedules. 'Simply put, they weren't talking to each other,' Mr Barlow says.

Now they use Primavera to co-ordinate everything,' he said. As a result of using the solution, 'our client could pull forward the oil 1 year earlier.'

The software enabled the much needed interaction between procurement, fabrication and construction. That means faster time to first oil and earlier revenue recognition.

Contractors are able to access the system over the internet. Everything can be managed via web browser or smart phone.

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» Oracle Corporation

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