Risk Management – Is Your Capital Project Ready to Deliver Business Value?

Companies in the global Oil & Gas sector make significant capital investments every year to achieve business plan goals for increased revenue, profitability, and growth to deliver value to the Enterprise. Many individual capital projects ranging from $100 million to $20 billion are initiated each year. Recently, overall capital spending has been reduced in the short-term due to the global oil market; however, these projects are often years in the making and are managed with a long-term view for business viability. While it is important to manage the ‘creation’ of new or upgraded assets, it is also important to assure the organization is ‘ready to operate’ these assets.

Operational Readiness is intended to avoid post-construction impacts such as:

  • Environmental incidents
  • Safety incidents
  • Delays in meeting production goals
  • Excessive production costs
  • Poor product quality
  • Poor customer service
  • High risk to the business

The following are often contributors to these impacts:

  • Inadequate equipment performance
  • Avoidable equipment failures
  • Extended equipment downtime
  • Information system problems (hardware, software, network)
  • Poor data
  • Inadequately trained personnel
  • Flawed business processes
  • Lack of spare parts, tools, and special equipment
  • Lack of specialty services

This article focuses on the potential causes for a lack of ‘Operational Readiness’ in a capital project that may be attributed to the above items. In addition, functional dysfunction can make a capital project fail, such as inadequate operational input into asset design as well as inadequate operational readiness of the production, maintenance, planning, supply chain, material management, and logistics organizations. The article also discusses some of the ways to address these causes.

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