UNLOCKING MAJOR COST SAVINGS ON OIL & GAS S $
RESPONDING TO A LOW-PRICE OIL ENVIRONMENT THE BENEFITS OF EARLY INVOLVEMENT: In our experience early involvement on a project is key when it comes to securing cost savings. By having the opportunity to review projects at feasibility stage, we can identify immediate savings and influence the key decisions that will impact the capital costs throughout the duration of a project. We have worked on a range of projects and assets including: 600 PRODUCTION FACILITIES 50 REFINERIES & TERMINALS 150 PIPELINE SITES With the price of oil expected to remain low for the foreseeable future, oil & gas clients in both the downstream and upstream sectors are increasingly focused on understanding where and how they can reduce costs on their capital projects and operations, without impacting future business performance. This focus on reducing cash outflow applies not only to future programmes but also to existing projects, many of which started at a time when the price for a barrel of oil was significantly higher. Oil & gas clients are looking for innovative solutions so that budgets remain suitable for a very different market dynamic. IDENTIFYING SIGNIFICANT COST SAVING OPPORTUNITIES Arcadis is recognized as the industry leader in cost management, with a team of over 4,000 qualified cost management professionals across Asia. This includes a dedicated team of experts who work within the oil and gas sector, providing cost management services to leading IOCs and NOCs on contracts worth over USD 20bn. We have worked on a range of projects and assets including 600 production facilities, 50 refineries and terminals, and 150 pipeline sites. We find that our advice typically helps clients to secure a 10-15% reduction in their project delivery costs, delivering up to a ten-fold return on our fees. In our experience there are three factors that are key to achieving savings of this magnitude; 1. Early involvement on projects 2. The creation of an incisive cost management and cost reduction plan 3. Ruthless attention to detail when it comes to effectively implementing these measures throughout the lifecycle of a project. PHASE 1 IDENTIFY & ASSESS INITIATION FEASIBILITY STUDY PHASE 2 SELECT CONCEPT SELECTION Our ability to influence cost decreases over time SPECIFICATION PHASE 3 DEFINE Typical cost expenditure over life of a project BASIS FOR DESIGN Having a forensic look at costs at the very outset can sometimes can be the key factor in achieving project viability. On a recent project, we conducted a cost review which included value engineering combined with reliability modelling, to deliver a streamlined design which would yield the same production capability at 55% of the original cost without compromising safety or quality. The benefits of early involvement in projects are well known, however very often these are not realized. The industry as a whole has more than 20 years experience in delivering mega projects, however significant cost growth and schedule slippage continue to be common occurrences. In our experience, most of the potential value from early involvement can be generated through a number of critical non-technical factors including: Alignment and collaboration between functions PHASE 4 EXECUTE DESIGN & CONSTRUCT (EPC) PHASE 5 OPERATE STARTUP & OPERATE CONSTRUCT The right number of interfaces and approvals without taking the ownership of quality away from the people who do the work Web based tools that support intuitive project controls rather than blind reliance on system generated information. Investment into value improvement practices such as value engineering, reliability modelling, lean management etc. Transparency and visibility of performance Non-technical risk management Our Total Cost Management approach combines the technical elements of effective project controls with a leadership framework that recognizes these critical human factors.
DELIVERING COST SAVINGS THROUGHOUT THE LIFECYCLE: Our dedicated team of experts has a deep understanding of oil & gas construction and maintenance contracts. This enables us to apply our cost management expertise to identify cost saving opportunities at all stages of the project lifecycle The table on the right showcases how we bring our expertise to bear at all phases of a project. PHASE 1 IDENTIFY & ASSESS PHASE 2 PHASE 3 SELECT DEFINE PHASE 4 PHASE 5 DESIGN & CONSTRUCT (EPC) STARTUP & OPERATE CONSTRUCT LEVEL 4 COST ESTIMATE +10%, -5% OPERATIONS & MAINTENANCE ESTIMATE EXECUTE OPERATE ARCADIS SERVICES INITIATION FEASIBILITY STUDY LEVEL 1 COST ESTIMATE +40%, -25% CONCEPT SELECTION SPEC LEVEL 2 COST ESTIMATE +25%, -15% COST ESTIMATING BASIS FOR DESIGN LEVEL 3 COST ESTIMATE +25%, -15% ESTIMATE REVIEW & ASSURANCE BENCHMARKING OF ESTIMATES ESTABLISH BASELINE & COST MANAGEMENT FRAMEWORK COST ENGINEERING COST & PERFORMANCE REPORT IMPLEMENT COST CONTROL PROCESS CHANGE MANAGEMENT CONTINGENCY MANAGEMENT DEFINE CONTRACT & PROCUREMENT STRATEGY QUANTITY SURVEYING TENDER DOCUMENT & BQ / SCHEDULE OF RATES COST REPORTING MAINTENANCE CONTRACT DOCUMENT QUANTITY TAKE-OFF FOR BQ TENDERING PROCESS COST MODELING LEGAL SUPPORT CONTROLS CONTRACT DOCUMENT DISPUTE AVOIDANCE CLAIMS MANAGEMENT DISPUTE RESOLUTION CLOSE OUT & FINAL ACCOUNTS PAYMENT CERTIFICATION & VALUATION SITE CHANGE MANAGEMENT CONTRACT ADMINISTRATION DEVELOP MAINTENANCE CONTRACT & PROCUREMENT STRATEGY, TENDERING PROCESS
A TRACK RECORD OF SUCCESS: Across Asia today Arcadis is currently providing cost management solutions for a number of IOCs on multi-billion contracts in both the upstream and downstream sectors. We have an outstanding track record in helping oil & gas clients to accurately scope, manage and reduce costs on their most important capital projects. Here are two examples from real-life projects we have worked on: 1. REDUCING CAPITAL COSTS FOR A LEADING IOC ACROSS A PORTFOLIO OF OFFSHORE AND ONSHORE S Arcadis has been a long-standing partner to one of the largest oil & gas producers in a South East Asia country for a number of years. On a daily basis the client supplies 350,000 barrels of oil and gas to a range of countries across Asia including Japan, Korea and Indonesia as well as numerous other markets around the world. We provide a comprehensive suite of cost management services to the client for all major capital and maintenance works across their portfolio of assets. These include over 200 offshore structures, a range of onshore facilities covering upstream, midstream and downstream assets, as well as the 5000km of pipelines which connects them. Key benefits included: Across an annual spend of USD 300m we have consistently delivered 10-15% savings across the total capital expenditure through improved cost estimating, value engineering and contract advisory services In the last two years alone (2014 and 2015) we have secured USD 85m cost savings for the client across a broad range of capital projects and maintenance works. Across an annual spend of USD 300m we have consistently delivered 10-15% savings across the total capital expenditure. Our deep understanding of what activities should cost enabled us to make reductions of up to 40% on submitted rates. 2. MANAGING COSTS AND CLAIMS ON A MEGA LNG Arcadis was appointed to provide cost management services on a multi-billion LNG project. The scheme included the construction of one of the largest offshore facilities in the industry, a state-of-the-art onshore processing facility and a huge pipeline uniting both assets. By carrying out a thorough review of EPC costs and claims, including module fabricator measurements and star rates, and benchmarking these against our industry-leading cost rates data, we were able to reduce the client s total CAPEX spend by USD 50m over a five-year period. Key benefits included: Detailed analysis of star rate costs helped to identify errors, duplication and omissions. Our deep understanding of what activities should cost enabled us to make reductions of up to 40% on submitted rates Throughout the project we provided the client with greater confidence all costs were assessed by an independent expert and all reporting on spend was current.
HEALTH & SAFETY FIRST Whilst reducing the costs of delivering capital projects will be increasingly important for oil and gas clients, ensuring the health and safety of their operations will always remain the number one priority. At Arcadis, safe operations are integral to our definition of success as well. Our team is committed to consistently delivering industry leading safety and technical leadership across all of the geographies we serve. Protecting our staff and our clients from injury, illness and other loss underpins the way that we act and the solutions that we provide to our clients. Our globally compatible, systematic approach focuses on proactive hazard recognition, risk assessment and control to prevent accidents. This commitment has been recognised by clients and the industry alike: Safety Excellence Award - Chevron Environmental Management Contractor Safety and Environmental Excellence Award - Marathon Oil Supplier Safety Achievement Award - Confidential Client Flawless Safety Execution Award - Confidential Client Global Contractor Safety Council, Safety Champion Award Shell Supplier Safety Award for three years without a recordable injury - BP Europe & South Africa SGW FDG Annual HSSE Award - Shell FRONT END PLANNING Due Diligence Feasibility Studies Preliminary Engineering Cost Estimating Planning & Permitting Project Development Support Safety & Risk Management A STRATEGIC PARTNER TO OIL AND GAS CLIENTS: With over 65 years of experience within the oil and gas industry, Arcadis supports our clients in a broad number of areas and throughout the full duration of a project. ENGINEERING & CONSTRUCTION Facility Infrastructure Product Storage & Transportation Systems Piping & Delivery Systems Instrumentation and Control Power & Water Utilities Project Management Services Engineering & Design Construction Management Cost Management & Claims Support Safety & Risk Management OPERATIONS & MAINTENANCE Asset Management Asset Integrity Operational Efficiency Project Services Contract Management Supply Chain Solutions Process Safety Management Regulatory Compliance Health & Safety Services ASSET RETIREMENT Planning and Strategy Development Data Acquisition Information Management Site Investigation Remediation Demolition Restoration Guaranteed Outcomes Portfolio Approaches
ABOUT ARCADIS Arcadis is the leading global Design & Consultancy firm for natural and built assets. Applying our deep market sector insights and collective design, consultancy, engineering, project and cost management services, we work in partnership with our clients to deliver exceptional and sustainable outcomes throughout the lifecycle of their natural and built assets. We are 27,000 people active in over 70 countries that generate 3.4 billion in revenues. We support UN- Habitat with knowledge and expertise to improve the quality of life in rapidly growing cities around the world. Arcadis. Improving quality of life. 80 YEAR HISTORY IN ASIA 5000 CONSULTANTS IN ASIA WHERE WE ARE IN THE WORLD 1 NO.1 IN COST MANAGEMENT IN EACH ASIA MARKET 50 OFFICES IN ASIA REGION PRESENT IN 13 ASIA COUNTRIES
CONTACT US Dr. Ian Kennedy Head of Oil & Gas, Asia E ian.kennedy@arcadis.com Darneil Perez Head of Cost Management, Philippines E darneil.perez@arcadis.com Shahril Othman Head of Cost Management, Brunei E shahril.othman@arcadis.com Jim Bausano Global Head of Oil & Gas E jim.bausano@arcadis.com Arcadis Asia @Arcadis_Asia www.arcadis.com Arcadis. Improving quality of life.