Project abandoned… Continuous capital expenditure (CAPEX) inflation throughout the early project stages… New technologies prevented to go to the industrial scale or projects to be launched because of high costs… Sounds familiar? The lesson learnt? In the field of energy transition (carbon capture, circular, e-fuel, biofuel, hydrogen, energy transition, etc.), whose profitability is very far from that of traditional Oil & Gas, petrochemical or chemical projects, a brand new approach is needed. While focusing on CAPEX minimisation was not the focus on oil & gas projects, it is of utmost importance to enable energy transition projects to come to life. In Hervé Baron’s new Expert Paper 2024-01 ‘Enabling energy transition projects’, he explains why and how to overcome this specific issue through a transformation of project development and management.
Making new technology projects profitable requires a drastic change of mindset and practices across the entire project development phase up to Final Investment Decision (FID) and from all parties: Owner, Engineer, Licensor, suppliers and sub-contractors. The new approach is to focus on cost and strive to find the most competitive solutions. It requires a joint effort from all parties. Applying onerous standards and methods from Oil & Gas just won’t do.
First of all we should reduce the price of supplies. Inquiries must be made lean. What does this mean? The usual inquiry for Oil & Gas equipment includes numerous documents with technical requirements as well as fabrication, inspection, painting, documentation, “you name it” requirements. We must change this practice and stick to the functional (Process) requirements. Anything else must be questioned if not downright eliminated. This is a drastic change of the way Engineering contractors work, from the usual top down approach, where the Engineering contractor specifies everything, to a bottom up approach that lets suppliers propose their standards. Then we should also make a lean plant design. It starts by reviewing the design specifications in each discipline. We should challenge default choices, chase the unnecessary and hidden overdesign. Design reviews (PFD and P&IDs review, Plot plan and Equipment layout reviews, 3D model review) must be held with cost savings as a focus. Equipment overdesign, if any, must be set individually. Process conditions must be precisely defined to ensure the selection of the least onerous materials of construction and rating. New suppliers, not the ones usually found in Oil & Gas and chemical plants, but rather those in agro-industry or other more cost-sensitive industries, shall be identified. Local suppliers/sub-contractors shall be leveraged in the cost effectiveness efforts., etc
Read Hervé Baron’s new Expert Paper 2024-01 ‘Enabling energy transition projects’ for a better understanding of how energy transition projects can be made possible overcoming the limitations of traditional project management!
Hervé Baron, the author, will propose a one day workshop to discuss those issues: contact him at baron(dot)engtraining(at)gmail(dot)com for a space!
If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/expert/PVD_Expert_2024-01_Minimising_project_capex_v1.pdf
