Theory and Practice of the Post-audit of Capital projects - Evidence from the Czech Republic

This paper reports on the post-audit practices of organisations in the Czech Republic. Much of the earlier published empirical research has been conducted in Australia, Canada, the USA, and Western Europe. Only recently, attention has been given to emerging markets, including Eastern European accession/transition countries. This exploratory study's main objective is to identify CZ companies' post-audit practices and obtain opinions on various post-audit issues. It also seeks to assess if these practices mirror those adopted by more developed economies. The research adopts interview, questionnaire, and descriptive statistical analysis approaches. The results present some interesting findings which are of value to both academics and practitioners. Although at the fringe of the general understanding of logistics, project management is a vital part. The authors believe that this is one of the first papers to focus on CZ post-audit practices and fills an important gap in the applied logistics literature.

Capital budgeting practices and political risk: evidence from Lebanon

Purpose This paper aims to examine how capital investment projects are appraised in Lebanon; whether the risk is incorporated into this process by Lebanese firms and the impact of political risk on the capital budgeting process. Design/methodology/approach This paper uses a questionnaire survey to investigate the capital budgeting practices of companies located in Lebanon, which is a country characterised by a high level of political risk. Findings Lebanese companies tend to use more than one method of investment appraisal and, increasingly, they are using sophisticated discounted cashflow techniques alongside the payback period. The most widely used methods to evaluate risk include scenario and sensitivity analysis. Finally, political risk plays an important role in the capital budgeting processes of Lebanese companies. Originality/value The paper reports on whether the methods of capital investment appraisal used throughout advanced Western economies are used in the context of an emerging economy. In addition, Lebanon is an ideal research site to study capital budgeting as the conflicts in the country of the past 50 years have required sizeable new expenditure on capital projects; the country is characterised by high levels of political risk which may lead corporate managers to use different approaches to investment appraisal and it provides an opportunity to study capital budgeting decisions by private, unlisted firms.

Smart and Agile Turnaround Management

Oil&Gas facilities operators are looking for safe and efficient Turnaround cycles with minimum downtime. However planning such project, ensuring availability of materials, of equipment and of skilled personnel, as well as orchestrating the hundreds of processes and stakeholders involved in the execution to keep it on schedule and on budget is a huge and complex challenge. How to handle and take into account what is planned and what is unplanned? A Turnaround project can be managed with similar approach than an EPC (Engineering Procurement Construction) project. It should leverage collaborative best practices developed to handle capital projects. Those practices allow to plan more productively, to execute with agility while taking into account unplanned changes "on the fly" without affecting on-going activities. A digital collaborative platform enables integrated knowledge as well as real-time visibility into every aspect of the Turnaround. It provides seamless collaboration for productive planning and intelligent execution. This is a strategy, which eliminates unproductive tasks and brings stakeholders together in a dynamic, collaborative management system. With better orchestration, plant owners and operators can reduce their planning and preparation workload by around 30% with also positive impact on all subcontractors. With a better seamless execution, plant owners and operators can get things done right the first time and recover to unplanned events. They can reduce the risk to be out of schedule and keep on track with more margin. They can even reduce the execution time by up to 5% in some situation. Finally, it enforces the reuse of insights that are gathered along Turnarounds to improve safety and extend by 20% the cycle in future Turnaround. A 3D collaborative platform provides an easy to use single source of truth to manage and monitor a Turnaround. Using such 3D environment, one can quickly identify the location of an issue where potential bottlenecks occur, and get access to any relevant vendor's specification, inspection or maintenance history report. Such 3D platform can also help to easily track with color-coding the leak test results of the many joints and their potential disturbances after Turnaround inspection.

Post-Investment Reviews of Oil and Gas Projects: Methodology, Lessons Learnt, and Limitations

Objectives/scope Discuss the analytical framework created by ADNOC for the implementation of post-investment reviews (PIR) of previous capital projects, and present an overview of both the results, the lessons learnt and the limitations of such exercises, based on ADNOC's return of experience on PIRs. Without sharing confidential project information, the article will focus on providing actionable insights on ADNOC's chosen approach for PIRs, including best practices in terms of data and stakeholder management. Methods, procedures, process The overall approach can be summarized as follows: Project choice: what are the tangible criteria to be used to focus PIRs on the capital projects with the highest potential in terms of learning opportunity? Data collection: what are the minimum data requirements to conduct a PIR for an O&G project? Variance analysis: what rules need to be followed to be able to generate two economics models (initial vs updated) that can be compared? Root cause analysis: how to organize the analysis process to explain the identified variances? Results, observations, conclusions PIRs can play an important role in the continuous improvement of O&G companies’ operations at the pre-investment stage, capital investment stage, and operation stage: At the investment stage, a PIR can provide insights into the effectiveness of the decision-making and, specifically, help to identify improvement areas in the valuation (project economics), assumptions, risk management, and decision-making processes. At the execution stage, PIRs can be useful to quantify the impact of project delays and cost overruns on the overall project economics, and associate such variances with the relevant underlying causes. At the operation stage, PIRs be useful to quantify the impact of OPEX, production, and price variances (actual – forecast) on overall project economics, and associate such variances with the relevant underlying causes. Limitations of PIRs Uncertainty on what projects are likely to yield the best learning opportunities. Subjectivity: PIRs are partly subjective, as the results are largely dependent on data availability and methodological choices. Applicability of recommendations and acceptance from key stakeholders

Comments: Shattering Crystal Balls

Begin a conversation about jobs in the oil and gas industry with people employed in the sector, or who have left their jobs voluntarily or involuntarily, and then settle in for a lengthy (maybe even heated) discussion of the pros and cons. Job availability, compensation, working conditions, opportunities for advancement, and work/life balance all come into play. But what does the employment in our industry look like after the tumultuous past 18 months? The US Department of Labor report released in early October showed the total of the monthly incremental increases since January 2021 was 7,400 in September, bringing the number of people employed in the US oil and gas industry from 133,000 to 140,400. This is nearly back to the level seen at the end of 2019 (142,500) but nowhere near the peak of October 2014 when nearly 201,000 people were employed (Table 1). The reasons for the lower levels of employment are many, among the most glaring are the industry downturns in 2016 and another in 2020 because of the global effects of the pandemic. As SPE President Kamel Ben-Naceur writes this month, the downturns brought with them a pullback in upstream spending of 26% in 2016 and 31% last year. As a result, cost cutting included the cancellation or delay of capital projects, selling of assets, and mergers and acquisitions to wring out savings wherever possible, ultimately also cutting headcounts. Also playing a significant role are technological advances and efficiency gains achieved in the things that make our industry hum. For example, automation of equipment such as rigs and the remarkable leaps in digitization in all functions, be it monitoring, modeling, or data interpretation and analysis. All disciplines have been touched by these advancements. And it cannot be ignored that retirements and attrition also contributed to the numbers, many of which were decisions made as the downturns took their toll. Fig. 1 shows the most recent breakdown of the 10 occupations accounting for the most employees in the oil and gas sector (May 2020). The numbers total 56,060, accounting for 44% of the total shown in the table for the same month (133,100). Leading the tally are petroleum engineers, accountants and auditors, and wellhead pumpers. While the numbers may have changed since May 2020, the graph serves as an indicator of the roles sustaining the industry. Providing another comparison, Fig. 2 shows the changes in industry employment globally. Even though the collection of the data may not have used the same criteria as the US Bureau of Labor, the figure shows the comparative decreases in 2021 compared with 2019. Is it realistic to think the peak could be seen again? For all industries, the dynamics of unexpected change and the need for quick adaptation are often unpredictable. No one predicted the global effects the pandemic would bring upon people, business, and trade, or how long they would linger. Many crystal balls were cloudy or shattered. The global move to cleaner energy sources to meet climate goals also affected the types of employment. As the transition progresses, it remains to be seen how roles will shift or change along with business strategies. Demand remains strong and the levels of investment low. The foreseeable short-term (possibly longer?) supply/demand imbalance also provides possibilities for roles in managing demand to ensure energy security, upskilling, and digital, among others. So, back to the question: Is it realistic to think the peak of 2014 could be seen again? Perhaps as the industry’s settling in for the long haul (if that is possible) continues, the types of jobs will change and a peak of employees in the “energy” industry will achieve or bypass the historical peak. Disclaimer: My crystal ball offers no more clarity in prognostications than others.

Impact of Communication on Capital Project Performance: A Mediated Moderation Model

Many studies demonstrate the importance of communication in project performance. However, little is known about how project communication exerts its effects on the outcomes of capital projects that have a large impact on environmental and economic sustainability. Using a longitudinal survey and bootstrap-based structural-equation modeling, this study uncovers how project competencies and team innovative behavior affect the relationship between project communication and capital project performance. This study collects repeated measures from project managers at two time points: immediately after the initiation and planning stages end and immediately after project completion. Excluding responses with missing data, this study’s sample includes 108 capital projects. This study finds that project technical and managerial competencies completely mediate the relationship between project communication and project performance. This study also finds that team innovative behavior affects project performance through the mediating effect of project technical competence. Team innovative behavior also moderates the relationship between project technical competence and project performance. Project communication has the largest effect on project performance despite having the smallest direct effect; project managerial competence possesses the next-largest effect on project performance despite having the largest direct effect. This study discusses the managerial and research implications.

Building information modeling to support facilities management of large capital projects: a critical review

Purpose This paper aims to present a review of research developments relating to the application of building information modeling (BIM) to facilities management (FM). It sheds light on major technical and organizational issues with the view of identifying how existing BIM for FM knowledge applies to large capital projects. Design/methodology/approach The study adopted a literature search approach to retrieve relevant articles which were subjected to keyword analysis to enable categorization of extant BIM for FM research into appropriate sub-domains. A qualitative analysis of 94 BIM for FM-related literature was carried out in addition to a review of 9 capital project-related articles, leading to the establishment of research trends, gaps and future directions. Findings The review found that research in the BIM-FM integration field is predominantly technology and process-oriented, with less attention paid to people or organizational aspects. Therefore, there is a need for expanding the knowledge base in this direction. Several future research directions were identified to lay the foundations for research on BIM application to FM in large capital projects and other application areas for interested researchers. These future directions were categorized under the identified sub-domains of the field and mapped onto two generic activities, i.e. technical integration and business integration, involved in technology adoption by organizations. Originality/value The main contribution of this study is the categorization of existing research on BIM for FM, leading to the identification of research gaps concerning the initiation and implementation of BIM for FM in large capital projects. As a secondary benefit, this study has validated some sub-domains of the BIM for the FM research field identified in previous review papers using an empirical approach. This validation of defined sub-domains is useful for an emerging research field as it provides a common understanding of trends and specific application areas.

MPEP Scorecard: A New Quantitative Approach to Measure Project's Maturity in Medco EP Indonesia

Oil & gas companies in Indonesia continue to struggle in executing their projects due to highly volatile oil price, lower demand and marginal field developments. Consequently, these companies need to be as prudent as possible in investing their limited resources to the selected projects in their portfolio. In order to face this challenge, MedcoEnergi developed a tool called Medco Project Excellence Process (MPEP) Scorecard to effectively measure the maturity of all of its major projects using a quantitative approach. The application of this tool can greatly help MedcoEnergi in deciding which projects to execute or which projects to hold, and therefore enabled the company to maximize its returns from its oil and gas projects portfolio. The paper presents the design of the MPEP Scorecard and how the tool is applied. The application of the tool is integrated with the gate review which is held when the project wants to proceed to its next stage. The project assurance committee which is a specialized team consist of experts from engineering, subsurface, drilling, commercial, etc., will review the projects deliverables during this gate review and the tool will allow them to assign a “score” based on their assessment and their discussion with the project team. There will be an individual score for each discipline and these scores will be used as inputs to calculate a single (overall) score that can accurately represents the project’s maturity. Currently, MPEP Scorecard has already been applied to the major capital projects in MedcoEnergi and the results have been presented to the senior management. Based on their feedbacks, it is agreed that the tool can give a much clearer picture on the project’s current condition, significantly help them in making the go/no go decision and enables them to create the most optimum investment strategy.

Data Centric Verification to Streamline Project Planning and Execution

There have been numerous calls for O&G companies to rethink the way they carry out capital projects. Various studies have highlighted that opportunities to enhance productivity exist from early development through to construction and handover to operations. Companies that are can realize these opportunities can complete projects safer and faster, reduce costs and quality issues, and improve schedule predictability. This paper presents data centric verification as a key enabler for such change, as it focusses on delivery of desired outcomes – the key to successful projects. This paper presents the rapid benefits that can be harvested, if the effort to put data centric verification in place is made. The following aspects are detailed to illustrate the benefits that are achievable: The wide variety of checking and confirmation activities on projects that frequently overlap, happen too late or don't focus on the correct aspects can be streamlined through a unified verification approach. Using a data centric approach to the set up and tracking of verification activities can support analytics to enable better planning and early identification of issues. Traceability in the data centric approach will enable quicker identification of root causes and remediations. Handover to operations moves from a document accumulation exercise to a data custody transfer. A typical O&G project is executed by a consortium of companies from owner/operators, engineering, procurement and construction companies, various suppliers and equipment manufacturers, etc. Data centric verification, if achieved, can only be through collaboration on a commonly agreed approach. Objectives/Scope Using data centric verification as an enabler to enhance project productivity from early development through handover. Methods, Procedures, Process This paper presents data centric verification as a key enabler for such change, as it focusses on delivery of desired outcomes – the key to successful projects. This paper presents the rapid benefits that can be harvested, if the effort to put data centric verification in place is made. The following aspects are detailed to illustrate the benefits that are achievable: The wide variety of checking and confirmation activities on projects that frequently overlap, happen too late or don't focus on the correct aspects can be streamlined through a unified verification approach. Using a data centric approach to the set up and tracking of verification activities can support analytics to enable better planning and early identification of issues. Traceability in the data centric approach will enable quicker identification of root causes and remediations. Handover to operations moves from a document accumulation exercise to a data custody transfer. Results, Observations, Conclusions The paper demonstrates the resulting requirements management and verification data models that can be established to enable the efficiency gains during project execution. Several example implementations of this data centric approach will be shared to validate the observed improvements. Novel/Additive Information Data centric verification is new to the Oil and Gas Industry. These Shell example projects are the first to implement this new approach within our supply chain.

Analysis of Carbon Footprint Applied to Conceptual Engineering of Offshore Production Units

As the environmental impact is critical for industry sustainability, early quantifying Greenhouse Gas (GHG) emissions of offshore units represents a central role and step-change improvement across the O&G value chain. Developing an overarching realistic model to estimate GHG emissions is a challenge due to the different methodologies available, the complexity of offshore installations, and the degree of uncertainty in the estimation of emission factors. The present work focuses on the earlier stages of new development, notably in Front End Loading-1 (FEL-1) and FEL-2, i.e., opportunity identification and conceptual engineering studies, respectively. The primary objective of this study is to propose an innovative modeling methodology to quantify Greenhouse Gas (GHG) emissions in offshore production facilities. Since E&P companies consider current and future carbon dioxide equivalents (CO2e) emissions as a factor into capital projects economics, this study additionally proposes a semi-empirical model for OPEX calculation considering the impact related to emissions (on a CO2e basis). Emissions of GHG in the O&G industry typically occur from one of the following general source classes: (i) combustion sources, including both stationary devices and mobile equipment; (ii) process emissions and vented sources; (iii) fugitive sources; and (iv) indirect sources. The projection of carbon emission costs along the asset life cycle is performed to simulate the economic impact of such emission on an OPEX perspective. After estimating the CO2e emissions, the procedure consists of using the "Carbon Emission Cost Projection" to calculate the cost of the CO2 emitted and penalize the OPEX of the evaluated alternative. The proposed model can be used to estimate Carbon Footprint for each one of the several conceptual engineering alternatives evaluated during the conceptual phase of the project, improving not only the techno-economic analysis but also the decision-making process of Capital Projects in the O&G Industry.