Real-Time Project Enterprise Management in the Energy Business
Authors: Anand Pradeep 
Published: June 2014

The energy industry is a capital projects intensive industry, and the success or failure of any firm depends on how well the company manages its capital projects. Hundreds of billions of dollars are spent on capital projects, yet they display consistent characteristics.Margins are razor thin, with very little room for error.Most projects are late and over budget.The hand-off to the operations and maintenance phase is seldom smooth.

Energy companies conceive and finance these projects, which major contractors engineer and construct. A major exploration and production project will involve a joint venture of multiple owners, including national and major oil companies working with 10 to 20 contractors from about as many as 10 countries from five continents. It is surprising that interaction is even possible under these circumstances. No wonder that cycle time and time to first cash are such big challenges.

Interaction costs are the costs of people and companies interacting to develop the specifications, design, plans, and installation. Interaction means finding it, keeping it, using it, communicating it, and - most importantly - deciding on it. The "it" is all knowledge associated with an individual's or a firm's responsibility.

Interaction costs pervade all industries. They account for 51% of total costs in the U.S. economy.1 The average for one U.S. electric utility business is about 58%. For the petroleum industry, interaction costs may account for over 70% of the total capital expenditure.

There are huge opportunities in addressing these interaction costs and reducing the time to completion of these projects. Owners, producers, contractors, and engineering/construction firms have eked out competitive advantages from economies of scale and economies of scope, but "economies of knowledge" 2 still elude them.

While current methods of managing projects can deliver marginal improvements, new technologies can deliver magnitude-scale improvements. Fundamental to delivering these huge savings is the use of a Contextual Communications Platform™ (CCP) that enables real-time, cross-enterprise collaboration and consultation for faster and better decision making.

The Importance of Context

The nature of a project is such that decisions have to be distributed. Unlike the manufacturing industry, project decisions are distributed along the project organization that tends to reflect the architecture of the project.

A project has multiple contexts that define it. The contractual context is a structured system of contracts and agreements that define how each company is obliged to perform. The technical context is defined in terms of a hierarchy, or structure, of technical specifications including design and performance details.

The construction context is a structured organization of the scope of work that each participating company is obliged to perform according to the contracts to meet the technical objectives. A work breakdown structure may represent the project management context, or perspective. There is a multitude of other smaller contexts embedded within these contexts.

If represented on a sheet of paper, contexts will look like a company organization chart, or an inverted tree. They are hierarchical, and they follow the axiom that subordinate contexts inherit the properties of the parent.

Contexts are very important in determining the interaction and its costs. The design of the context for every aspect of a project such as contracts, technical, scope of work, and work breakdown directly define the way the project is structured and executed. Every point in this context "tree" is a decision point. Someone somewhere in one of those dozen countries will make decisions at each of these decision points.

Every decision point in turn requires consultation with people and reference to previous best practices and knowledge, which are meaningless without context. A CCP is needed for project staff to make real-time decisions across project organizations.

The Contextual Communications Platform

The project environment needs a multilayered bus that carries data, information, knowledge, and wisdom behind decisions among cross-organizational project participants.

Most firms working on projects use people-network systems for consultative decision making. Many use collaborative methods that communicate just data and information. However, both are inadequate to deliver major savings in time and money without compromising on quality.

There is little reuse of knowledge and "lessons learned" because a critical element, "the context," has been missing from existing methods of recording them. The wisdom of decisions is based on multiple streams of knowledge, information, and data, all brought together by a context to create taxonomy for a delivered asset.

The telecommunications industry uses a bus that has many layers to transmit voice, video, and data over the infrastructure. However, in project environments, communications needs are far greater.