The right team, not the right time, for project success

The time spent in concept definition is an important driver of whether your project succeeds or fails against your plan, but a definition of good front-end loading is ‘best practical’, not ‘best possible’. Doing too much front-end loading can also waste time and money at the start of a project. The Performance Forum (www.performance-forum.com) has assessed the impact of time spent in the define including FEED stage on predictability (did the project meet its sanction target?) and competitiveness (was the sanction target appropriate?) and discovered that the right team, not the right time in define, was the key to project success.

How much time should you spend in concept definition?

Define duration shows little correlation with capex, region or the number of facilities in the project. Instead, the time spent is likely influenced mostly by the FEED duration (in turn, being driven by the optimum duration required by the operator). Categorizing the data into projects by majors and other operators did not show significant differences, but instead showed that the same type of project in the same region can have different define duration depending on the owner. It is at the owner’s discretion how fast to progress through define, steered by their own internal processes.

Analysis by the Performance Forum found that projects which were sanctioned post 2014 oil price crash had significantly reduced the time spent in define (start of define to end FEED) when compared to older projects. Older projects spent up to 36 months in concept definition and it was recognized that, despite this investment in front-end loading, more than half were overbudget at start-up. Newer projects have reduced concept definition (including FEED) to 4-18 months, with all but two spending less than 10 months. It is worth noting that while some recent projects told us they accelerated the define stage and took less time than they would have historically, their duration was still longer than most other recent projects, showing that acceleration is relative.

Owners were spending up to 18 months in FEED before the 2014 downturn. More recent projects have reduced FEED duration, with all apart from two projects spending less than a year in FEED, and a quarter of these projects showing a FEED duration of less than 6 months.

Who would sanction a project prior to completing FEED?

Time spent in select and define has reduced to under two years for many recent projects, but how has that affected the speed of final investment decision (FID)? While most projects took FID either at the date of FEED completion or shortly thereafter, most surprising were the one in six projects who sanctioned more than 3 months prior to FEED completing – in some cases 9-12 months early. Examining these projects in more detail identified that every region and facility type were represented in early sanction (GoM, North Sea, Africa, Asia, and Australia, for fixed platforms, floating facilities, and subsea). However, most early sanction projects were owned by Majors, perhaps indicating a greater financial security in progressing the project than some of the smaller operators?

What is the impact of time spent in define on project performance – specifically predictability and competitiveness?

More than half of all projects in the Performance Forum dataset which spent less than 12 months in define were within budget, with the remainder typically below budget. Comparatively, two thirds of projects which spent more than 12 months in define completed over budget and were not predictable. Over 80% of recent projects both reduced the define duration to less than 12 months and were on or below budget at start-up. While it might be anticipated that these would all be small, repeat subsea tiebacks, in fact, these projects were a mix of floating, fixed and subsea facilities. In summary, shorter define duration projects have been more predictable both for recent and older projects in our database. 

A predictable project is one where the cost (or duration) at start-up was closely matched to the sanction estimate, i.e. the outcome of the project was well predicated

However, the success of completing your project within budget depends on setting a competitive target. To assess whether the time spent in define had an impact on the cost competitiveness of the project, the sanction estimate for each main facility was compared against the relevant Performance Forum metric. We found that the majority of competitive projects spent less than 12 months in define. By comparison, all of the projects which spent more than 18 months in define were estimated higher at sanction versus PF upper precision range and were not competitive. Once again, shorter define duration projects have been more competitive.

A competitive project is one where the cost (or duration) estimated at sanction was the same or less than comparable projects

So far, there appears to be no negative impact of reducing define time on either cost predictability or competitiveness. But what about the impact on project schedule? Once more, the vast majority (75%) of projects which spent less than 12 months in define started-up early or on time. Whereas two thirds of projects which spent more than 12 months in define started up late. In reality, few projects start-up early, and when they do it is almost always because they had scheduled the execution duration longer than necessary.

Are you wasting time in define?

While shorter define duration is not the reason for improved project success, data from Performance Forum members has shown that offshore projects which have reduced time spent in define (including FEED) to less than 12 months have typically completed within or below budget, had set the budget appropriately and were more likely to start-up on time.

These projects were completed by different operators, were a mix of subsea, FPSO and fixed platforms, and started-up in four different regions. Perhaps contributing factors include the relative quality and efficiency of the time spent in define/FEED, a specific focus on reducing processes to fast-pace the project and the repetitive characteristics of the projects relative to the owner’s previous projects. If you are largely repeating past designs, adjusting as necessary due to specific conditions, then you may more confidently progress early with detailed design and long lead procurement. Ultimately, an empowered, skilled project team focussed during define may be the best strategy to have high performance throughout execution and complete on target.