Oil and Gas Industry Cuts Costs Through Replication

Oil and gas companies rely on small and mid-sized projects to balance risk and cash flow in their portfolios. To maximise the pay-off of these investments, companies are standardising operational processes.

 

The greatest benefits are achieved when project teams approach their first project with replication in mind, according to a new report from the Economist Intelligence Unit, Economies of Scale: How The Oil and Gas Industry Cuts Costs Through Replication.

 

A proactive approach effectively integrating owners, contractors and project teams is crucial to achieving these results. The report, sponsored by Oracle, looks at how oil and gas businesses have approached project replication, identifying key opportunities and challenges.

 

Companies have found that construction standardisation enables project teams to reduce delivery time, cut costs and secure incremental advantages on each subsequent investment.

 

However, executives highlight that this is not a process of cutting corners but the deliberate application of acquired experience. This process takes several years diligently building expertise in particular projects and then sharing that knowledge. Furthermore, it is challenging to attract adequately skilled project managers to smaller projects.

 

Large projects tend to attract the top talent, but seasoned oversight is vital to successfully carry out replication projects.

 

 

To achieve the benefits of replication, operating teams, contractors and owners must collaborate effectively. This does not mean that each group should try to maximise its own speed. Rather, together they should identify cross-functional strategies to reduce wasted time and ramp up productivity for the project as a whole. These steps can drive cost reductions of 15-30% and cut time to completion by 15-40%.

 

Attracting top talent to replication projects is a challenge, yet essential to success.

 

Executives’ attention is often focused on larger-scale projects, but successful replication requires the experience of a seasoned project manager to handle myriad contractors while avoiding delays and cost overruns.

 

The greatest benefits of replication are achieved when project teams approach their first project with duplication in mind, says the report.

 

 

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