Project Managers and Project Controls Professionals sometimes have an unappreciated job. Battling inefficiencies, lack of transparency and sometimes near-anarchy conditions, we burn the midnight oil establishing processes to increase transparency, accountability and predictability — all to make sure that our organizations have the necessary information to make informed decisions.
As with politics where some say “a trillion dollars isn’t what it used to be”, in projects, a billion isn’t what it used to be either. It is not that long ago a billion dollar project used to a BIG project. In the energy industry today, though, megaprojects are getting bigger and more common. Take for example Pearl GTL, which is the world’s largest plant to turn natural gas into cleaner-burning fuels. Built and operated by Shell in Qatar it cost $20 billion to build, took about 80 million man hours by 52,000 people at its peak. It started operating this year. But even Pearl GTL seems small when Chevron brings along their massive Gorgon project — at an estimated $37 billion investment.
Energy companies realize their value through execution of projects. The global rise in demand for natural resources has driven the need for additional projects at bigger and bigger scale. However, just as they create value, if projects aren’t properly managed, they can quickly turn into value destroyers.
According to Edward Merrow, founder and CEO of Independent Project Analysis, Inc. (IPA), as many as 65% of industrial projects over $1 billion failed to meet their business objectives. He further points to that these results “are not inherent in the nature of activities. They are instead, caused by human decisions, ignorance, and uncontrolled, but controllable, human failings. These projects can be fixed.”
The amount of labor, coordination and integration needed to complete these projects is staggering. Without sound project management and decision-making practices in place these are the kinds of projects that can put the future of entire companies in danger.
It is estimated that the oil and gas industry capital expenditure for 2012 will be a record $1,026 billion. To put this in perspective: Did you know that only 15 countries in the world have a GDP greater than $1 trillion?
If you’re still not convinced about the value of Project Management let’s play a little number game. Some people argue that following sound Project Management practices can save your project 15–20%. For argument’s sake, say that your company is a medium-sized energy company with a stellar Project Management capability that is currently providing you an efficiency gain of 3% over your competition. Your current annual capital expenditure is $3 billion. Due to the compounding effect of that advantage, after 5 years you have a $500 million advantage over your competition — after 10 years you have enough to execute another $1 billion project more than your competitor.
Some feel that the benefits of Project Management practices are nebulous at best. However, in a commodity business you win by having a more competitive cost structure than your competition. By deploying sound Project Management practices you are setting yourself up with another edge against your competitors that can make all the difference in the long run.
Vik Bulletin 