Cost Management System Critical for Oil & Gas Projects
Is it possible to control costs on a major project of significant complexity with simple in-house systems or Excel? Sure, it is possible. But is it responsible? That is a very different question. With our Cost Management System solution, reliability and quality of information is clearly higher. The system has been tested thoroughly and used on a wide variety of highly complex yet very successful projects. It performs a lot of the heavy lifting required in projects by capturing key project data into a single database automatically. The key reports Cost Engineers and the wider project team need are available at their fingertips on a web page from the moment they open their browser. It makes little sense for Cost Management labor to be largely consumed by managing the data rather than analysing it and managing cost, yet this is what many Excel-based and in-house systems require – particularly when projects are complex.
In large part precipitated by the downturn in Oil Price starting in Q4 2014, the Oil industry has shelved $200bn of spending on new projects[1]. Reprioritisation has resulted in the deferral of 46 large oil and gas projects with around 20bn barrels of oil equivalent.[1] Yet, despite this, many major organisations are maintaining project portfolios with significant total cost, albeit with much reduced average spend per project and a shift to more “short cycle” initiatives.
Clearly Project Controls and specifically Cost Management are areas you would expect organisations to focus on for their outstanding portfolios, and indeed most organisations have maintained very strong teams of key experts in this area. However, the tools that are available to these professionals to support the Cost Control aims of the business vary widely from one organisation to the next. Without a robust Cost Management solution teams have to use in-house or ad-hoc systems. In some cases very large capital projects may even have their costs managed using Excel. All of these non-system solutions add risk to the projects as human error in calculations are more likely, delays can be caused by the inability to mine and repurpose budget data quickly, and debugging and maintaining quality is a continual overhead for the cost team rather than something that is delivered ‘out of the box’ by a Cost Management system solution.
In short then, the industry has a perfect storm of cost reduction, smaller strategic project portfolios, and a greater need for on-time, on-budget planning than we have seen for decades. We know that ad-hoc, Excel based systems are less reliable and more error-prone than a purpose built Cost Management System. We also know that Cost Management systems provide enhanced accuracy, standards and rigor to Project Controls teams, enhancing their ability to both predict and control a project’s future expenses.
If you don’t have a robust Cost Management system today what should you do? Firstly, find a reputable solution supplier that has major customers that have created significant success on some of the world’s most complex projects. Ensure they are a supplier that works to empower your staff to use the technology rather than use their own consultants endlessly. Then leverage their expertise and technology. Executing key projects as efficiently and effectively as is possible will no longer be such a challenge and, let’s face it, such challenges are ones the industry can currently ill afford.
[1] “Oil groups have shelved $200bn in new projects as low prices bite” – Financial Times July 26th 2016 https://www.ft.com/content/d6877d5e-31ee-11e5-91ac-a5e17d9b4cff