Joint presentations about facilities design that were given at the recent APE ATW in KL in April. Rolando’s talk is based on actual industry data and performance, and is quite thought provoking regarding why the industry wastes so much capex in its designs. Peter Kirkham show a case study with the evolution of Twinza’s Pasca A development over the past couple of years and the “appropriate scoping” into the concept.
Taking Charge in a Low Oil Price Environment
Rolando Gachter, Independent Project Analysis Pte Ltd
High oil prices in the past have bailed out many marginal developments. Waiting for price drops in the supply chain to improve today’s opportunities is a passive approach to business success.
To survive in a low-price environment requires:
(1) a thoughtful and rigorous portfolio management approach;
(2) making efficient scope selections; and
(3) being smart about development strategies and project practices
With this presentation we describe successful lean scoping approaches and sound development strategies that have improved CAPEX efficiency by over 40 percent.
Objectives and scope of the proposed topic:
• To examine why our project scopes have become so inefficient over the last 20 years by measuring:
• How much project scope has grown and explain why it has done so
• How inefficient project scopes affected performance
• Identify what needs to change in the scope development process and provide a framework to deliver more competitive project scopes
Methodology procedures and process of the topic:
• 387 offshore oil projects (recent) for which we have full detailed cost, schedule, production, and scope details were examined
• Root causes of performance were established from detailed review of the project case histories
• Causes (and effects) of scope inefficiency are calculated
Observations and conclusions of the proposed topic:
• Weight increases over time for almost identical pieces of scope can be demonstrated. There are three main drivers of inefficient scope decisions:
• Systematic subsurface over-confidence
• "Intense" reservoir depletion strategies
• Increase risk aversion
Recommendations to address these root causes are presented.
Mr. Gächter has over seventeen years of capital project benchmarking experience, specializing
in energy and minerals extraction projects. His experience includes large-scale project system
benchmarkings for major oil and natural gas producers. His experience also extends to reviews
of over 100 major capital projects worldwide in the petroleum exploration and production and
mining sectors covering over $5 billion in capital expenditures. Mr. Gächter has managed the
accounts of a diverse group of clients both big and small. These include a supermajor, a large
national oil company, as well as smaller independent operators. He currently serves as a senior
instructor of the IPA Institute which provides education to project professionals globally. Over the
years Mr. Gächter has presented at various industry conferences and seminars including the
United States, Europe, Africa, and the Middle East.
Establishing Appropriate Development Concept and Cost – Pasca A Case Study
Peter Kirkham, Twinza Oil
The days of $100+ oil are behind us (for now), but their legacy continues to live on in the
development concepts and engineering practices that the environment spawned. In the rush to
develop in the decade from 2003 to late 2014, oil and gas project costs spiraled out of control.
There are many reasons for these increases such as cost escalation, poor project practices
resulting from an overstretched industry, increasingly stringent engineering specifications, and
perhaps most simply: high demand for limited contractor services. When considering the capital
costs to use for exploration economics, it is common to use benchmarks, or perhaps a high-level
factored cost estimate based on industry norms, unit rates and similar concepts used previously.
But how relevant are these benchmarks today? If we just take conventional approaches to field
development and base our capital cost estimates on historical data (thinking that it’s all we have,
so we have to use it), then we consign ourselves to a conservative mindset. Exploration requires
creative thinking, and without it no-one would ever imagine a new play system or dare to drill an
exploration well. The economics to support such endeavours require a similar mindset. The
Pasca A development offshore PNG started concept engineering in October 2014, just as the oil
price began to fall. Unlike many other developments, the project was not shelved, and continues
towards development. One of the reasons for this is the “fit-for-purpose” development
philosophy that was adopted. Approaches taken during the Pasca A project are used to illustrate
aspects of project development that others might adopt in a low price environment.
• Clear objectives: Know where you are heading and the development priorities.
• Integrated team: Working together to deliver an optimised concept requires multi-discipline knowledge and communication – particularly for those running the economics at the heart of the project.
• Keep scope under control: Don’t over-design; identify and quantify the trade-offs that result from cutting scope.
• Appropriate design requirements: Using off-the-shelf design and designing to industry standards rather than bespoke solutions saves cost.
• Collaborate with contractors: easy to say, harder to do, but keeping an open mind to alternative concepts and embracing solutions that meet the functional requirements.
• Understand the economic drivers: increasing NPV is not necessarily the best outcome.
Peter is a petroleum engineer with 17 years industry experience across multiple engineering,
technical and commercial disciplines. He is a member of the Society of Petroleum Engineers
and currently serves on the committee for the Singapore Section. He started his career at Novus
Petroleum as the Commercial Assistant to CEO and helped manage all aspects of a portfolio
that included exploration, development and production operations for assets in Australia,
Indonesia, Egypt, Pakistan, Oman and the United States. He was subsequently involved in the
founding of Lodore Resources in 2004, a London-listed oil and gas explorer which drilled three
exploration wells in the United States, two of which discovered gas. Peter was a Senior Project
Analyst at Independent Project Analysis where he was involved in the evaluation of more than
65 oil and gas project developments ranging in size from 10s of millions to 10s of billions US
dollars, and encompassing a wide variety of development concepts and countries. Today Peter
is the Project Engineering Commercialisation Manager at Twinza Oil, based in Singapore. In this
role, Peter oversees Twinza’s Pasca A project development in offshore PNG, and has been
involved in most aspects of the project since early FEL 2.