“Strong energy prices in recent years have allowed companies to delay putting an emphasis on project management as they focused instead on the urgent need of achieving greater throughput. But that was then and this is now,” according to Dennis Cassidy, managing director at AlixPartners and co-head of the firm’s global OGC (oil, gas and chemicals) practice.
It’s time for a culture change in companies across the oil, gas and chemicals industry worldwide, executives are saying. During the U.S. shale boom, companies in virtually all sectors of the OGC industry lacked a “cost culture,” according to a recent study by AlixPartners.
However, if companies are to survive the current downturn in commodity prices, they are going to have to plan and manage their projects for greater capital productivity.
In the survey, 250 high-level industry executives around the world said the biggest drawback in keeping projects on budget is that “company culture isn’t focused on project management.”
The survey found that just 30% of executives said their companies had explicit return-on-capital targets for projects prior to the crash in oil prices. Also, 12% of the executives said they think their companies are better than their competitors at project execution.
Meanwhile, only 19% of North American firms say their companies finish projects on budget, compared with 29% of all respondents globally.
The firm said that many projects aren’t benefitting from economies of scale or institutional knowledge. For example, just 34% of the executives polled agreed that project management is executed at the “company level” across all projects.
Only 39% of respondents—and just 30% of oil and gas drillers—said they have a strong series of checks and balances to ensure projects stay on track. And only 11% of all respondents said they employ a stage-gated process to assess project viability at defined milestones when developing a new capital program.
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