The importance of embracing digitalization for O&G EPCs to thrive

Inefficiencies, delays and budget overspending in oil and gas projects are needless. The industry must increase its uptake in technology that is available and utilized by many other progressive industries.

According to Fortune Business Insights, the global oil and gas EPC market (Engineering, Procurement and Construction) is set to nearly double in size in the next few years, growing from $46.6 billion in 2021 to $92.8 billion by 2031. It’s a dynamic market, fueled by the increasing use of hydrocarbons and rising O&G exploration on the back of demand from economically rich sectors such as automotive, aviation, manufacturing and construction. While this is somewhat tempered by the growth of renewables, which will seed an element of caution from O&G producers, diversification creates opportunity, and the general mood should be one of relative optimism.

Given this, the importance of managing projects efficiently, on time and on budget is critical. It’s therefore somewhat surprising that many of the large EPC projects come in over budget by circa 10% and are also delayed, with three out of four projects at least 40% behind schedule. While they may not attract the same budgets or resource, smaller projects still face similar challenges. When you consider that just a medium-sized power plant may cost between EUR100 million and EUR400 million to construct, 10% represents a significant amount of lost profitability. Clearly this number only increases on the megaprojects, which can take up to 24 months to complete, and where significant inefficiencies can be generated if not managed correctly.

Reluctance to embrace new technology

Critically, the reason for this issue is largely avoidable, as it is driven by an unwillingness to embrace digitalization and the readily available technologies and software that currently exist. For a sector that is ultimately responsible for providing the energy that drives global socioeconomic advancement and technology development across multiple industries, it seems astounding that it would approach operational management in ways akin to the last century.

No one is suggesting that EPCs should turn to machine learning and artificial intelligence overnight. However, this kind of technology will play an increasingly significant role in areas such as performance optimization, modernizing maintenance practices, and streamlining data management, documentation, and supply chains. What we are talking about is fundamentally more basic. And it is centered around the limitations of the widely used project management software that the majority of EPCs use; Oracle Primavera P6 and Microsoft Project.

Current challenges?

Now, these software solutions are very good at what they are designed for; creating project schedules on a very large scale. However, they also have certain limitations in relation to some important areas of functionality and capability. For example, they can’t accurately calculate and support a project’s progress or provide an immediate comparative analysis with the project baseline. They can’t show the methodology for calculating that progress at all levels in a transparent and verifiable way, especially with projects involving thousands of activities. And they also lack easily understandable visual interfaces with focused, selective, and user-definable views of how a project is developing in line with the schedule.

The direct impact of this means that many EPC companies do not have the required level of insight or information to influence the right decision making and they spend a significant amount of time on non-optimal activities.?

EPC projects are hugely complex with multiple phases and thousands of activities that need careful scheduling and management. They require software that delivers unprecedented detail, and transparency that brings data to life, fueling collaboration and communication to ensure projects remain on schedule and to plan. Without this, EPCs, in essence, are often ‘operating blind’ when it comes to planning activities as they don’t have the information on whether some of the previous steps have been completed - which need to be - in order to commence the next activity. This means wasted time and money in planning and preparing for activities that you can’t actually begin. It is the result of operating in an analogue way in a digital world.

Bringing projects to life – visually showing progress and eliminating blind spots

To overcome this, a small minority of progressive EPCs are increasingly using advanced project management software, integrating and overlaying it into their scheduling platform. By utilizing 3D modeling, it enables them to visualize, analyze, estimate and report on the progress of a project; essentially adding a clear layer of comprehension, understanding and transparency beyond what they have had before, improving visibility and eliminating those blind spots.?

This is particularly important when many of the people involved in a project may not be engineers with a deep technical knowledge. 3D modeling simplifies the process, brings a project to life in an intuitive way, where a picture is worth a thousand words, and conveys much more information than just tables of data.

Project management software, such as CADMATIC Projects is a good example of this. Launched by Cadmatic in 2023, it helps EPCs to establish a framework for measuring and comparing progress to the project baseline. This assists project managers in identifying critical paths and potential bottlenecks as well providing early warning signs of any problems, so that they can take action to correct, intervene and adapt accordingly to keep the project on track.

As well as more transparency, the increased visibility also creates a level of accountability as everyone can see what each stakeholder should be doing. This inspires collaboration and shared ownership in working towards the same goal. On top of this, it can also track progress at a real time level against the budget that has been assigned to deliver the project; often a project may be at 50% complete in terms of time and on schedule, but 70% of the budget may have already been spent, which leads to unanticipated cost increases and overspend.?

Fundamentally, as well as ensuring efficiency, allocating resources effectively and reducing waste (both in terms of time and materials), this type of software provides project managers with a complete overview of the entire health of a project and levels of insight and detail that ensures optimal decision making.

Case Study: CCC and Cadmatic

It is for this reason that CCC (Consolidated Contractors International Company) , one of the largest construction companies in the Middle East, has recently partnered with Cadmatic to implement CADMATIC Projects to enhance efficiencies and performance within its operations.

Zahi Ghantous, CCC’s Vice President for Project Support with responsibility for supporting all projects from inception and transition to completion in various technical processes, approached Cadmatic because they knew that they needed to better embrace digitalization.

Engineering and construction are rather ‘laid back’ industries that have not caught up with or embraced technology like other sectors such as manufacturing or production. We therefore wanted to better understand and introduce technologies and digital solutions available into our organization to better serve our needs, help us improve our performance and to empower our project management teams, both on site and at HQ to execute often very complex large-scale projects efficiently, on time and on budget.

Understandably, CCC wanted to ensure that they were utilizing the right product, were supported in the right way and working with like-minded people.

Cadmatic therefore ran a pilot simulation for CCC on a past, medium-sized project, which involved up to 5,000 separate activities, demonstrating how CADMATIC Projects would have performed and managed the project. Starting from scratch, the Cadmatic team exported all data from the scheduling tool and imported it into the Projects software, creating the structure and linking the activities with the items in the 3D model, simulating costs and updates on progress over the length of the 12-month project (delivered by Cadmatic in just one month).?

The pilot demonstrated all the levels of functionality within the software and simulated all the outputs such as generating all the necessary reports on budgets, time and progress, showcasing the level of detail and transparency that the technology can provide. The success of the project has resulted in a formal agreement and Cadmatic is now working with CCC on a real-world megaproject, which is currently under construction.

Ushering in a new era of opportunity

Commenting on the success of the trail, Moazim Ahmed, Cadmatic’s Regional Business Development Manager for the Middle East, emphasized the opportunity of embracing digitalization and setting new benchmarks within the region:

In the dynamic landscape of the Middle East, where innovation meets opportunity, we are really excited to explore new horizons in project management through our collaboration with CCC. We see immense potential in leveraging Digital Twin Technology to revolutionize project efficiency. By partnering with CCC, a recognized leader in the industry, we want to usher in a new era of streamlined project management, harnessing the power of digitalization to enhance decision-making, optimize resource allocation, and ensure the seamless execution of complex initiatives. Together, we envision a future where the integration of cutting-edge technology transforms the way we approach projects, setting new standards for excellence in the Middle East's business landscape. This collaboration promises to be a game-changer, paving the way for innovation, sustainability, and unparalleled success in the region.

As the transition towards new sources of energy continues at pace, EPCs within the O&G market will also need to adapt and evolve. This is not just related to seizing new opportunities in renewables, decommissioning projects or supporting oil and gas companies in meeting the current demand for hydrocarbons from burgeoning industries and economies. It also means embracing new ways of working and being open to new ideas and new innovations. Technology and digitalization are key components of this; driving efficiencies, ensuring projects remain on time and to budget and in improving the whole operational performance. Those that do will thrive and seize the opportunities that change always brings.

The original article was published in Oil & Gas Middle East in March 2024 . The article was modified to suit the Cadmatic in-house style.

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