The Project Gap

An independent review before a project's start can reveal a disparity between intentions and likely outcomes.

Dennis Knox, OSSeas Consulting, London

What is the "project gap"? Do you have one, or more, in your offshore development project? The best explanation of the project gap is the differential between what the project was desired to achieve and what it actually delivered. This is not evident in the shape of the project. In almost every case, that will end up being almost as it was designed. So the outward appearance, the platform structure, the wind tower, the tidal generator, the pipelines and cables, all look just like it did on the plan.

No, in order to find the project gap you must look at the intangibles, and those are time and cost. Yes, there will most likely be physical indicators that a gap occurred in your project intentions — a pipeline that did not go quite in the same place as the design, some materials that were not quite as specified — but such things are only the scars, not the cause.

The intangibles are time and cost, but these are not known until after the project is completed and the numbers added up. In most cases, projects are completed within time and budget, but often that is due to revised scheduling or absorption of the contingency in the budget. In some cases however, the whole project budget has to be increased, and the developer has to return to the stakeholders for more money — simply because of the project gap.

So what are these gaps and how do you find them? Unfortunately, for the most part, they are invisible. Not because they cannot be seen, but because the project's owners cannot see them. They are the issues that arise during project execution that were not planned for, or mitigated against. They are revealed, as they drop out of the project execution as design or installation errors, contractual issues, and dis-synergies.

For the most part they can be avoided, or at least mitigated against, as long as you are expecting them. Their effect can be catastrophic to the intangibles of cost and time, but primarily costs because time over-runs affect long-term profitability. You can never recoup the losses realized from missing initial production targets.

The bottom line is the profitability of the project. While the objective may be the extraction of oil and gas, or generation of electricity, the reason that a project even exists is so that shareholders in the E&P or operating company make a profit. Project gaps erode that profitability.

"Hang on a minute," you may say. "All projects have contingency in the budget, both in time and cost for this." "Yes, true," I would answer, "but contingency is not there to cover for inadequate design, bad planning, or poor execution."

Are you confused since I have just said that these project gaps are invisible?

You may well be confused, but the issue here is that we do not know what we do not know. Let me give you a classic example. This last year I was in discussions with an operator developing a new field. The person responsible for the development came from a corporate background and had never been involved in actual project installation and construction offshore. I had spent my life at sea doing just that, and as offered, I was to review their project plan once it was delivered from the pre-FEED design company in a few weeks' time. The weeks passed and I contacted them again to see how the pre-FEED design was getting on, only to be advised that the job was done, quite quickly in fact, and had been accepted, so my services would not be required.

But why was it accepted without review? Because it "looked like they did a good job." You see, you do not know,what you do not know. I will be watching this project as it develops. I hope that no gaps will be discovered.

Another example involved a pipeline. The design had been done, and the pre-engineering survey was being conducted when we came on to the scene in an advisory capacity. We immediately flagged up the route selected for the pipeline. The area to be surveyed was very poor and would have significant issues during the installation phase. It ran far too close to existing facilities, went through a shipping choke point, and crossed international cables at the most difficult point for a safe crossing installation. This had all kinds of red flags flying — from installation difficulties to contractual issues to insurance liabilities.

Unfortunately, the operating company's project manager was a young engineer with no offshore experience. The project manager's response to our letter flagging these issues was, "We will leave it to the design company, they are the experts."

Well those same experts had created a whole raft of project gap potential in their routing. There was no subsequent change to the route, so I see this project producing some very unhappy shareholders indeed.

How do I know about project gaps? Well, for all our people, that comes from spending our lives at sea actually doing the work. It is in the execution of a project that the gaps are revealed. It is the mismatch between project intentions as desired by the E&P or operating company, and the project delivered by the management company or installation contractor. I have now lost count of the number of times my associates and I have stood together on the back deck of an installation barge and wondered, "Why did they design it that way?" "Why wasn't this dis-synergy recognized?" "Why didn't the contract cover that?"

For the most part, the people in the design phase of the project, both the developer and designer, lacked the practical experience necessary to recognize the likelihood of a gap.

Yes, there will always be project gaps, and no, it is not humanly possible to discover them all in every project. But E&P and operating companies should take the time and pay the small additional cost of independent reviews during the design phase. This is a minuscule amount against the huge potential costs of encountering the gap in the execution phase and better than using up your contingency or going cap in hand back to your investors to ask for more money.

The bottom line for any E&P or operating company is the contentment of their shareholders, and any CEO that can stand with confidence and say, "Our review of this project plan has highlighted several potential project gaps and those issues have been addressed. It is a good plan," will have the confidence of those same shareholders.

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