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Introduction

Over the last two decades, Project Performance Analysis has been used to monitor the performance of Oil & Gas Mega-Projects and to evaluate their success against the basic criteria below:

  • Will the Project be completed without harm to anyone involved?

  • Will the total cost be within 25% of the approved budget?

  • Will the Project be completed on schedule?

  • Will the completed asset deliver what was promised at FID?

Data from a large number of mega projects showed that more than 65% of them were judged as having failed on one or more of the criteria used and many exhibited continuing operational problems into the 2nd and 3rd years after start-up.

Essentially, stakeholders in such projects cannot wait until a project is declared as complete and handover to the operations team is imminent, to discover that something has been omitted or overlooked which would subsequently prevent or restrict operation of the asset to the design intent.

The solution to this problem is to ensure the requirements of the Owner/Operator are addressed during the conceptual, design and construction processes to ensure the Operability and Maintainability (and therefore the viability) of the asset is achieved. This is done using a robust Operations Readiness & Assurance process.

Until the creation of the OR&A Solution, there were two main obstacles to Companies wishing to use OR&A on their projects, these were cost and availability. A further complication was the lack of the ability to explain how using OR&A would benefit the Project (and subsequently the Asset) and how this could ever be cost effective (or reduce costs).

All of these obstacles have been overcome by the OR&A Solution which offers a robust and instantly deployable solution to OR&A available in any location and accessible from multiple locations simultaneously.

The Business Case for OR&A

Without a compelling Business Case for deploying OR&A, making a convincing argument for investing in OR&A is difficult when the Corporate Management Team of a Company who recommend such investments to the Board of Directors are focused on the ‘bottom line’.

However, the framework below outlines such a Business Case which illustrates how losses from failing to deploy OR&A could amount to some 9% of Asset Value over the first 5 years of operation.

Furthermore, the example below also illustrates how deploying OR&A can provide a return of 15:1 on the original investment over those same 5 years.

The calculations used here are extrapolated from a paper entitled 'Justification for Maintenance & Reliability Readiness' by Murray Macza of MRG Reliability Consulting, who  made a number of basic assumptions using typical industry specific benchmark data and baseline information on operability, maintainability and availability to develop the figures shown below.

Assumptions:

CAPEX

$1bn (Replacement Value)

Maintainable Equipment

15,000 items

Design Intent Production Rate

100,000 barrels/day (oil)

Oil Price

$40 per barrel

Design Life of Asset

30 yrs

Performance without OR&A

Typically expected - top 3rd quartile
(50% - 75%)

Performance with OR&A

Typically expected - mid 1st quartile
(80% - 85%)

Project Sponsor Hurdle Rate

12%

Maintenance Spend Improvement

2% of CAPEX if OR&A used

Reduced Cost of Spare Parts

1% of CAPEX if OR&A used

 

 

 

 

 

 

 

 

 

 

 

 

 

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