The recent past has seen historic revenue and profit growth in major asset-intensive industries — such as oil and gas — followed by an unprecedented economic decline. Although on the mend, global forces along with fluctuating demand have generated unpredictable markets and placed operations and balance sheets under stress. These factors, coupled with continuing capital constraints worldwide, make it essential to optimize investment decisions and lower operating costs to ensure a healthy return on investment (ROI). At the same time, the business environment continues to be very challenging, as the most highly skilled workers are nearing retirement age.

Better management

Project portfolio management (PPM) software solutions help E&P enterprises overcome these challenges by providing better visibility into projects and portfolios, improving collaboration and communication among project team members, better managing resources to ensure the right people are on the job at the right time, and mitigating and managing project risk.

Knowledge transfer has become more important in the last decade. The average employee age in the oil and gas industry is 46 to 49 years, while the average retirement age for the industry is 55.

The result is that companies can make better decisions on allocating resources to projects and achieve better project outcomes. PPM solutions can help organizations:

• Assess, prioritize, and select the best projects to invest in while managing contingencies and other risk factors;

• Improve management and integration of the engineering, procurement, and construction process and reduce program risk;

• Reduce shutdown times and improve productivity of internal and external resources;

• Manage with a limited pool of talent to maximize existing craft productivity and capture best practices for future generations of new hires.

There are four ways asset-intensive industries can use PPM to help them improve ROI. They are investment portfolio management, construction program management, complex and routine maintenance project management, and maximized resource optimization and capacity planning.

Investment portfolio management

The oil and gas industry regularly faces drastic changes in market and political conditions that force it to continually reexamine investment decisions. Making the right capital expenditure decisions has become more critical than ever in these challenging times. From a technology standpoint, fragmented and siloed data make it difficult to get real-time information from the numerous sources needed to make sound investment decisions.

Oracle’s Primavera Enterprise PPM helps address these challenges by providing an integrated platform to screen initial proposals, determine the best projects to invest in, and ensure the projects are aligned with corporate strategic investments. It can link strategic objectives with the portfolio of initiatives so that investment decisions can be assessed in measurable ways. PPM provides a platform and process for prioritizing and selecting these investments that have strong business case justification and analyzing them against available funding and resources. Portfolio performance can be assessed in real time to identify investment gaps and potential problems, such as negative cash flow.

Getting a handle on construction program management

After determining the right investments, the next step is to successfully execute them. Large-scale capital projects such as those in oil and gas exploration present significant challenges. Projects are becoming increasingly complex and costly, making it more important than ever to rigorously plan, execute, and measure them.

Environmental factors, market shifts, unforeseen engineering challenges, improper planning, skilled talent issues, and a wide range of other possible problems all have the potential to cause projects to financially underperform, incur delays, and exceed budget. Pressure to complete projects has resulted in a 25% reduction in construction schedules, which can lead to mistakes generating cost overruns in US $100s of millions. Executives responsible for managing these projects need to ensure that the company’s investment is protected and meet ROI metrics.

Likewise, the ability to model risks and plan for contingencies is a critical consideration when executing large-scale capital projects. Running simulations — like Monte Carlo analysis — helps mitigate and plan for risks. And for those managing projects, enterprise PPM solutions can provide change control and a master schedule to enhance coordination and collaboration both internally and externally with contractors and suppliers.

Managing maintenance projects

Once assets are in operation, an essential tenet of managing them is to keep them up and running efficiently. As a result, plant turnarounds and complex maintenance present some of the greatest planning and scheduling challenges. A major turnaround can sometimes involve tens of thousands of activities that must be completed within a very tight, fixed window of time.

A large company may have multiple turnaround projects underway at any time, not to mention thousands of ongoing day-to-day preventive maintenance activities and possibly several new construction projects or plant expansions as well. Profitability depends on being able to plan, schedule, and deploy resources in the most efficient manner throughout these various activities, between different turnaround projects, between preventive maintenance and turnarounds, and from project to project.

Enterprise PPM software simultaneously considers the impact of multiple turnaround and routine maintenance projects on overall enterprise resources while tracking activities to a finer level

of granularity. An enterprise view of resources provides a command center for coordinating teams around the globe, making it possible, for example, to spot an imbalance or inefficiency of work between areas so that crews can be reassigned from one project to another.

At any moment, management can obtain a real-time picture of the performance of individual projects, disciplines, locations, divisions, or any other element in the corporate structure. Automating the scheduling process on an enterprise basis means that resources can receive customized, up-to-the-minute detailed activity assignments, even via a Web browser.

Enterprise PPM solutions extend the value of enterprise asset management and asset lifecycle management systems by more effectively scheduling routine and daily work.

Maximizing resource optimization

A critical ingredient in operating assets is skilled personnel. Energy-related industries are facing a major talent shortage. The average employee age is 46 to 49 years, while the average retirement age for the industry is 55.

Retirement poses an immediate challenge to the industry’s workforce. Lack of skilled talent is increasing project costs and extending completion dates for many companies. In addition, mistakes resulting from poor or deteriorating project management skills are driving up costs.

To meet this challenge, the industry needs to invest in the right projects to maximize resource optimization, assign the right staff to the right project, and capture best practices/methodologies for the future workforce.

Enterprise PPM software makes it easier to match skills required to skills deployed to reduce costs, increase productivity, and enhance worker safety. By integrating the PPM solution with a company’s human capital management software, matching skills can become even more precise. Project teams can address staffing requirements and easily view available resources for common skill sets across all projects.

Capacity planning and resource leveling makes it easier to determine whether a company is over or under-allocating resources and whether its partners or service providers have the necessary skill sets. PPM software lets the company quickly adjust for illness and other risk or environmental factors. Finally, enterprise PPM software expedites communication, collaboration, and the capturing of best practices to speed the learning process of new hires and to “kick start” projects.

PPM pays off

In practice, the business processes and systems used to choose and manage projects and portfolios are fragmented, which results in potential cost escalation, lower productivity, and constrained resources. An enterprise PPM solution provides a single source for information, linking corporate goals with operational plans. It provides the platform for operating in a multidimensional world, streamlining the processes from initial investment through portfolio selection to execution. Enterprise PPM solutions enable E&P companies to identify the best investment opportunities and efficiently manage these assets from design to maintenance with the skills required to maximize return on investment.