Recovering large Brownfield projects in distress

2014 ◽  
Vol 54 (2) ◽  
pp. 546
Author(s):  
Andrew Stewart
Keyword(s):  
Oil And Gas ◽  
Investment Decision ◽  
Industrial Relations ◽  
Large Body ◽  
Oil And Gas Industry ◽  
Calendar Time ◽  
Full Spectrum ◽  
Track Record ◽  
Design Changes ◽  
Recent Case Study

A large body of knowledge exists about how to plan and establish projects for success; from project management guidelines to staged gate-execution methodologies. Despite such prescriptive means to guarantee project success, the upstream oil and gas industry has a poor track record for delivering large projects. Little guidance exists on how to restore delivery assurance to partially executed projects in distress. Furthermore, recovery efforts for large brownfield projects, mid-way through their execution, are further complicated and highly constrained. Operators and contractors alike are understandably concerned about the high failure rate of projects, particularly as Australia competes for global capital in the final investment decision for a project’s development. Issues cover the full spectrum of safety, cost, schedule, start-up, and operability. Furthermore, unanticipated issues such as industrial relations, resourcing, project controls, estimate basis, and design changes all play a central role in why projects find themselves in distress. In a recent case study, a structured recovery approach restored delivery assurance to a $900 m upstream brownfield project. Despite the numerous challenges encountered during the recovery efforts, the project went on to deliver ahead of its revised cost and schedule commitment, while also achieving outstanding safety performance. The self-governance program was instrumental in restoring delivery performance through responsive decision making that was robust, repeatable and preserved free calendar time for early intervention on high value recovery issues. The journey of recovery also restored a fractured client and contractor relationship by fostering a project delivery environment that was highly collaborative.

MULTI-CLIENT COLLABORATIVE R&D CONTRIBUTING TO NATIONAL PROSPERITY: A TALE OF TWO INDUSTRIES

1998 ◽  
Vol 38 (1) ◽  
pp. 794
Author(s):  
J. Cucuzza
Keyword(s):  
Oil And Gas ◽  
Industrial Relations ◽  
Cost Effective ◽  
Oil And Gas Industry ◽  
Common Interest ◽  
Research Association ◽  
Short Term ◽  
Business Units ◽  
Track Record ◽  
Business Goals

The business landscape has undergone some significant changes over the last several years. Accompanying these changes has been an alignment of corporate R&D with business goals. This has resulted in significant downsizing of corporate research laboratories and the devolving responsibility for R&D matters to operating sites or business units. The downside of this is that the operations are now more than ever focussing on productivity, industrial relations and other essential short-term profitability-motivated issues. Consequently, the changing environment is creating cultures that value and reward short-term results. This short-termism has important implications to industry and the research community.One of the more successful and cost-effective mechanisms by which Australia can enhance its R&D base and consequent prosperity is through collaborative R&D. The Australian Minerals Industries Research Association (AMIRA), together with its oil and gas Division APIRA, has demonstrated over the years how effective this can be. AMIRA's raison d'etre is to assist the resource industries improve their technology position through collaborative R&D. It achieves this by working closely with researchers and industry to identify areas of common interest, develop research proposals, and seek financial support for these proposals from industry. Once a project commences, the Association administers the financial and reporting aspects, as well as monitoring progress, organising progress review meetings and assisting in technology transfer. AMIRA/APIRA has the track record, the systems and expertise to facilitate and manage collaborative R&D focussing on industry needs.The evolution of the Australian collaborative R&D environment in the oil and gas and minerals sectors has been significantly different. The oil and gas industry, particularly in exploration, does not have a history of strong collaborative R&D in Australia. The reasons for this are varied and can be found in the different corporate cultures between mineral and oil and gas companies.

Better project delivery: Australia's value opportunity

2019 ◽  
Vol 59 (2) ◽  
pp. 709
Author(s):  
Angus Rodger
Keyword(s):  
Large Scale ◽  
Oil And Gas ◽  
Investment Decision ◽  
Oil And Gas Industry ◽  
Safety Net ◽  
Project Delivery ◽  
Capital Projects ◽  
Cost Overruns ◽  
Gas Industry ◽  
Track Record

Has the industry seen the light on project delivery? Numerous signs of improved execution through the downturn in Australia and across the globe suggest oil and gas companies are finally getting it right after a lengthy period of dismal performance. Even before prices went to US$100 per barrel and beyond, the oil and gas industry had a poor track record of delivering major projects. However, higher prices exacerbated the situation, encouraging poor capital discipline and overconfidence in undertaking large-scale, highly complex projects that overstretched the supply chain. The results were delays, cost overruns and billions of dollars in value destroyed. Over the past decade the average project was delivered 6 months late, with costs up 14% compared with the forecast at final investment decision. The top 15 cost blowouts were a cumulative US$80 billion over budget. Much of that was in Australia. But lessons have been learned. Without the safety net of higher prices, the successful execution of capital projects has become of crucial importance to the industry. There is now evidence of post-downturn projects being delivered on time and on budget; in Australasia, recent examples include Greater Western Flank Phase 2 and the Bayu-Undan infill drilling campaign. But do these successes mean execution has really improved? It can be argued these are relatively simple brownfield, subsea developments. When we enter the next investment cycle with bigger projects (Scarborough, Browse and Barossa), will we see the same old mistakes repeated again?

Why are the values of large capital projects routinely overestimated?

2016 ◽  
Vol 56 (2) ◽  
pp. 584 ◽  
Author(s):  
Stephen Reid
Keyword(s):  
Portfolio Management ◽  
Oil And Gas ◽  
Capital Expenditure ◽  
Commodity Prices ◽  
Oil And Gas Industry ◽  
Base Case ◽  
Full Spectrum ◽  
Capital Projects ◽  
Track Record ◽  
Project Costs

The values of resources projects are routinely overestimated and poorly understood when projects are sanctioned. The challenge with this is that shareholder funds can be squandered on projects that are less attractive than they are perceived to be. This extended abstract addresses how this happens. Behavioural biases at the organisational, portfolio, and project level lead to the benefits of projects being overestimated. Forecasts of capital expenditure and project timing are routinely optimistic. The author will survey the recent track record of the oil and gas industry in estimating project costs, showing that project costs and timelines are positively skewed; that is, costs and timelines have a greater tendency to be in excess of original estimates. Project valuations are often presented as simple base case and anchored high/low cases. A poor understanding of the full spectrum of value outcomes can remove the chance for the project design to be enhanced and the benefits of flexibility are routinely ignored. Small biases in commodity prices and demand projections can significantly improve the appearance of a project, particularly when these metrics move together. Too much comfort is placed in the FEED processes. There is a way to consider value to enable better decisions to be made when sanctioning resources projects. This approach combines tools and techniques from decision analysis, corporate finance and valuation, portfolio management, data analytics, and behavioural economics to provide tailored insights. The author will work through a case study on how to present value differently.

Adapted Methodology for Evaluating EOR Reserves and Resources, Incorporated and Applied at an Oil and Gas Company

2021 ◽  
Author(s):  
Lilibeth Chiquinquira Perdomo ◽  
Carlos Alvarez ◽  
Maria Edith Gracia ◽  
Guillermo Danilo Salomone ◽  
Gilberto Ventuirini ◽  
...  
Keyword(s):  
Oil And Gas ◽  
Large Body ◽  
Securities And Exchange Commission ◽  
Point Of View ◽  
Assessment Process ◽  
Pilot Projects ◽  
Oil Reserves ◽  
Track Record ◽  
Starting Point ◽  
Petroleum Resources

Abstract As other companies registered in the US stock market, the company reports oil and gas reserves, in compliance with the definitions of the Securities and Exchange Commission (SEC). In addition, it complies internally with the guidelines established by the Petroleum Resources Management System to certify its resources. The PRMS focuses on supporting consistent evaluation of oil resources based on technically sound industry practices, providing fundamental principles for the assessment and classification of oil reserves and resources, but does not provide specific guidance for the classification and categorization of quantities associated with IOR projects. Recently, the company has implemented EOR pilot projects, and their results seem to show commerciality for future development or expansion to new areas, displaying multiple opportunities and proposals to incorporate reserves and resources. So far, the pilot projects and their expansions have been addressed only from the point of view of incremental projects, as an improvement over the previous secondary recovery. The company does not have sufficient track record in booking reserves or resources from EOR projects, their quantities have been incorporated following bibliographic references and results of EOR projects with proven commerciality around the world. For this reason, the need arose to have a tool that provides the company with methodological criteria to evaluate the resources and reserves inherent in this type of project, that incorporate the "best practices" of the industry and that respect the guidelines and definitions of PRMS for incremental projects. That was how, the need to meet this challenging goal led company to develop its "EOR Resources and Reserves Assessment Guide" with the advice of a renowned consulting company. Although the Guide is not intended to be a review of the large body of existing IOR literature, it contains several useful references that serve as a starting point for understanding the IOR project for assessment process of resources and reserves. This document shows the process of development and implementation of the EOR guide, complementing the existing guides within the corporation and providing the company with a positive result within the internal processes of Audit, reserves and resources for this type of projects.

scholarly journals Evaluating the Intra-Industry Comparability of Sustainability Reports: The Case of the Oil and Gas Industry

2019 ◽  
Vol 11 (4) ◽  
pp. 1093 ◽  
Author(s):  
Andrea Cardoni ◽  
Evgeniia Kiseleva ◽  
Simone Terzani
Keyword(s):  
Financial Markets ◽  
Oil And Gas ◽  
Investment Decision ◽  
Methodological Approach ◽  
Oil And Gas Industry ◽  
Global Reporting Initiative ◽  
Gas Industry ◽  
Investment Decision Making ◽  
Sustainability Reports ◽  
Oil And Gas Sector

Environmental, social, and governance (ESG) data are in high demand in financial markets. However, the ESG data provided by companies do not allow for use in the investment decision-making process. The main limiting point for this is a lack of comparability across companies. This paper analyzes the problem of comparability with the aim to evaluate the intra-industry comparability of sustainability reports, framing the analysis on Global Reporting Initiative (GRI) Standards and discussing the results with the support of legitimacy and stakeholder theories. Drawing upon stakeholder and legitimacy theories, as well as financial and sustainability accounting concepts, we propose a theoretical framework of comparability and a methodology to evaluate the level of comparability on a sector-specific basis. The methodological approach adopted in this study is broadly qualitative, with the use of a multiple-stages model. Based on the example of one industry, we discovered that, despite comparability being mostly relevant to the listed companies from the oil and gas sector, the sustainability reports of these companies are still not comparable. Our findings reveal that, despite the availability of a large amount of ESG data and the existence of sustainability frameworks, the problem of comparability is still relevant even for companies that are theoretically most inclined to be comparable.

Dealing with oil and gas unions

2011 ◽  
Vol 51 (2) ◽  
pp. 736
Author(s):  
Allan Drake-Brockman ◽  
Daniel White
Keyword(s):  
Large Scale ◽  
Oil And Gas ◽  
Industrial Relations ◽  
Oil And Gas Industry ◽  
Industrial Activity ◽  
Gas Industry ◽  
Ripple Effects ◽  
Case Examples ◽  
Industrial Action ◽  
Poor Outcomes

Since the commencement of the Fair Work Act 2009 (Cth) (FW Act) on 1 July 2009, there has been a significant increase in union activity in Australia’s oil and gas industry. Recent case examples concerning the Pluto Project and various other disputes flag the importance of project managing industrial relations to ensure project delivery dates are met. Due to the contract interdependencies on large scale oil and gas projects, industrial action taken by a union in relation to a single sub-contractor can have ripple effects—causing budget blow-outs. Emerging union influence is such a concern that some of Australia’s leading companies operating in the oil and gas industry now identify industrial activity as a key project risk. Furthermore, many Australian leading financial institutions now assess a company’s potential exposure to industrial action as part of their key lending criteria. New innovative industrial relations strategies are now part of the weaponry Australian unions use when representing their members—this includes global union strategies. Moreover, there is already evidence that the FW Act can promote the occurrence of demarcation disputes between unions. This type of industrial activity leads to poor outcomes for employers and can prove to be very costly—especially in a multi-million dollar a day industry. Providing insight into the recent union activities in the industry are the following cases: Heath v Gravity Crane Services Pty Ltd Boskalis Australia Pty Ltd v Maritime Union of Australia CFMEU v Woodside Burrup Pty Ltd Offshore Marine Services Pty Ltd v Maritime Union of Australia There are a number of strategies oil and gas companies and sub-contractors can use to mitigate the effects of union influence in the workplace.

Tax issues impacting acquisitions in the Australian oil and gas industry

2011 ◽  
Vol 51 (2) ◽  
pp. 669
Author(s):  
Chad Dixon
Keyword(s):  
Income Tax ◽  
Oil And Gas ◽  
Investment Decision ◽  
Oil And Gas Industry ◽  
Capital Gains ◽  
Capital Gains Tax ◽  
Gas Industry ◽  
Resource Rent ◽  
Goods And Services ◽  
Petroleum Resource

Understanding the tax implications and structuring options of a transaction is critical when assessing and comparing new opportunities. When undertaking any transaction involving Australian oil and gas assets, the applicable taxation regime should be carefully explored and understood. From an Australian perspective, taxes such as corporate income tax, petroleum resource rent tax, capital gains tax, and goods and services tax have significant potential to influence the investment decision. This presentation will focus on the tax implications applicable to the acquisition and disposal of Australian oil and gas assets, providing valuable insights for both Australian companies and inbound investors.

An Empirical Investigation of the Extent of Corporate Financial Disclosure in the Oil and Gas Industry

1993 ◽  
Vol 8 (3) ◽  
pp. 249-273 ◽  
Author(s):  
David Malone ◽  
Clarence Fries ◽  
Thomas Jones
Keyword(s):  
Oil And Gas ◽  
Investment Decision ◽  
Research Question ◽  
Oil And Gas Industry ◽  
Financial Disclosure ◽  
Annual Reports ◽  
Parameter Estimates ◽  
Gas Industry ◽  
Final Model ◽  
Oil And Gas Firms

The principal research question addressed by the study was: Are there identifiable and measurable factors that are associated with the extent to which firms in the oil and gas industry disclose financial information? Extent of financial disclosure was measured by using a weighted index of disclosure items. The 10-K and annual reports of 125 oil and gas firms were examined in order to identify various financial disclosures provided by each firm. This set of disclosures was weighted by oil and gas financial analysts according to the importance of each disclosure in an investment decision. The items of information provided by an individual firm were then applied to the index. The dependent variable, extent of financial disclosure, was the ratio of a firm's total disclosure score to the firm's total possible disclosure. A stepwise regression model was used to determine which variables were “best” in explaining extent of financial disclosure. Of the ten independent variables entered, four were retained in the final model at the .20 level of significance: exchange listing status, audit firm size, ratio of debt to total equity, and number of shareholders. The final model was examined for the significance of parameter estimates. Three variables—listing status, ratio of debt to total equity, and number of shareholders—were determined to be statistically significant.

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