The project portfolios of many operating companies are shifting from major capital projects to more-modest in-plant ones. This requires an adaptable/scalable project delivery process (PDP) that supports the execution of these projects. Certain aspects of the process apply to all projects, while others only relate to major or more-complex ones. These project-specific planning and execution activities frequently are misunderstood and inappropriately applied — causing excessive project deliverables for some projects but missed steps for others. This inconsistent application of project delivery activities lowers the value generated from the capital employed.
The change in capital project portfolios varies from industry to industry. The reshaping happening in the chemical and refining sectors reflects uncertainties about future oil prices, the potential impact of shale oil as well as technological advances and environmental demands that aim to replace or reduce the consumption of fossil fuels.
The 2014–2015 drop in oil prices by itself significantly reduced the revenue stream of all oil producers, big and small. This resulted in deferral or redimensioning of large projects; many have been split into smaller projects.
This is not a small change. It requires an important alteration in the approach and resources needed for developing the redimensioned or redefined projects now in the portfolios. The number of projects probably has changed but, more importantly, many (if not most) of those projects now are smaller.
Key Differences In Projects
Large and small projects need different tracks for approval, follow-up and execution. While large projects involve a significant number of complex deliverables, small ones typically require a more simplified approach. Consider a very simple analogy — digging holes. If our task (project) was to dig large holes, then probably we’d need an excavator, bulldozer or backhoe. However, if the task has been rethought and now asks for much smaller holes, maybe we only require a simple shovel. This makes a major difference in how things should be done. Instead of contracting for a large piece of equipment and a specialized operator, now we only need someone with a hand tool. The equipment, the “operator” and the skills aren’t the same. Failing to recognize this fundamental differentiator will significantly impact the efficiency, quality, cost and schedule in executing the project. By definition, a bulldozer can’t dig small holes and, in turn, you wouldn’t use a shovel to dig an enormous one.
In this analogy, the difference is very easy to identify and visualize. However, in a real project, the difference sometimes isn’t as apparent because size isn’t the only relevant parameter to consider. You may need to review and analyze factors such as technology, strategic importance, complexity, etc., when characterizing a project and defining the right track in the PDP for its successful development/execution.
Regarding the approval and follow-up, the projects of utmost strategic significance, high cost and complexity require the involvement of corporate levels of the organization. This is natural considering the level of resources that such projects demand. On the other hand, engineering, maintenance or operational groups generally directly decide about the planning and execution of small capital projects in a process facility, such installing metering systems, new pumps, storage tanks, pipeline loops/bypass, replacing a vessel or revamping or updating utilities. So, as Figure 1 shows, a smaller project doesn’t require a phase gate at every stage of front-end loading (FEL).
Think about a large upstream project such as an offshore platform involving a jacket, drilling, topsides, tie-back operations, extensive use of supply vessels, transport and heavy lifting of equipment or whole units and facilities. An operation of this magnitude demands careful planning, design, coordination and integration of thousands of components, many of them fabricated and transported from different parts of the worlds. The specifications, drawings, procedures, etc., to completely define each component and the procedures for assembling, commissioning, starting up and testing such facilities are extraordinary. Each deliverable should be carefully developed at a very high level of detail following protocols (project assurance) that repeatedly, and in a timely manner, check the planning, quality of the design, constructability and integration of the facility. Such protocols include conducting independent reviews, readiness assessments, benchmarking, safety reviews, integrity reviews, as well as extensive use and application of value improving practices (VIPs), just to name a few. If the components can’t be integrated, are late, don’t comply with specifications and standards due to failure in properly designing, specifying, following up, or installing any of the components, the facility won’t work. This will mandate extensive rework, additional financial resources, and more time for completing and commissioning. Time to market, expected revenue and profits, and competitiveness will suffer by using resources inefficiently and ineffectively. For these reasons, the development, control, quality assurance and timely integration of all the deliverables of major capital projects is of paramount importance; this calls for careful implementation of all the steps of a sound PDP in all its details.