NEW YORK — Engineering and construction firms have come to the forefront in the efforts of the U.S. oil and gas industry to optimize and accelerate shale development and delivery, according to a new PwC US report, “Shale Gas: New conventions for unconventional development for the engineering and construction industry.” As the first segment of a three-part series, this report discusses how engineering and construction companies can successfully help deliver shale oil and gas products at quicker speeds and lower costs through integrated project planning, which has emerged as a leading trend in shale development.
“Given the high stakes, cost pressure, and intense competition in the shale industry, oil and gas companies are learning to apply a holistic lens to all aspects of shale development and managing them from end to end,” said John Doherty, U.S. engineering and construction advisory leader, PwC. “This creates an opportunity for engineering and construction firms to become a key asset in the process, as they adjust their traditional project management model and create fast response systems to the changing environment.”
According to the report, the first step in driving more efficient shale oil and gas delivery to the marketplace is to develop a project management model focused on reducing the organizational and administrative drag on all activities required to effectively produce shale oil and gas. By tightening the functional handoffs and improving the line of sight between demand in the field and organizational capacity, engineering and construction firms can help their oil and gas clients reduce their cycle time by up to 40 percent and their annual costs by up to 25 percent.
Portfolio planning and field execution should also be a tightly integrated process for shale development, which engineering and construction firms skillfully exhibit in their vast capabilities and resources. Through detailed planning, engineering and construction firms can help their oil and gas clients identify process inefficiencies and eliminate non-value-added work, increase the accuracy of cost, schedule, and resource forecasts.
PwC’s report highlights an effective communications plan as another crucial component in integrating the various levels and functions surrounding shale development. “Many oil and gas companies manage these elements in silos, resulting in difficulties when trying to balance the demands from the field with the priorities of other functions. Engineering and construction companies can help their oil and gas clients in spearheading an effective communications plan to address all the relevant parties that are critical to the overall production and delivery of shale oil and gas,” continued Doherty.
Additionally, integrating business systems such as automating the movement of data ensures that required information is provided to the right function at the right time. For example, if an engineering and construction project team is forecasting that the costs for a certain activity are going to exceed budget, the finance and project management organizations can take the appropriate action by being alerted in a timely manner. An integrated business and systems capability creates a more efficient workflow, linking elements from different processes and systems across all functions, and also between an engineering and construction firm and its client.
The report also outlines three key principles for engineering and construction firms to consider when working with their oil and gas clients for successful shale development and delivery:
• Listen to the “silent” business — Ensure that clients’ well development projects will support their ongoing business activities such as capital projects, inspections and maintenance, training and meetings.
• Factor in context — Implement all factors impacting shale development including the local climate of the shale well, geology and regulatory requirements.
• Lead and model the change — Encourage stakeholders to buy into the geographically distributed, but integrated planning approach to shale development.
“By implementing the project management approach in assessing, planning, and executing all activities across the development and production system, engineering and construction firms can optimize the end-to-end process from shale formation to delivering it to the marketplace,” added Doherty. “This is an opportune time for engineering and construction companies to become an invaluable component to the shale gas value chain, help reduce working capital as well as enhance returns on capital by optimizing efficiency and reducing costs.”
For a copy of PwC’s Shale Gas: New conventions for unconventional development for the engineering and construction industry, visit www.pwc.com/us/en/industrial-products/publications/shale-well-production-planning-new-business-models.jhtml.