ExxonMobil has become recognized for completing oil and gas development projects faster and at a lower cost than its competition. Why is that?
Plugge: The underlying reason dates back to Exxon’s decision before the merger with Mobil to establish one upstream company that was all about project management. That move reflected the corporation’s anticipation of significant growth in the number and size of development projects around the world, including many in higher-cost environments. Rather than the traditional model of carrying out development through affiliates, Exxon foresaw the efficiencies of having one organization consistently and flexibly deploying its expertise wherever needed.
How has the company advanced its reputation for project execution since the merger?
Plugge: First, ExxonMobil Development Company (EMDC) has had the benefit of working with the industry’s largest and most diverse portfolio of projects. Our portfolio contains more than 120 projects to develop 24 billion oil-equivalent barrels representing conventional and unconventional oil and gas, heavy oil, and liquefied natural gas (LNG) around the globe. This diversity has allowed us to be selective in pursuing the right projects at the right time. In addition, we have developed a structured project management system that has enabled not only performance consistency but a means for continuous improvement. Most importantly, in completing more than 100 projects over the past 15 years, we have developed a highly experienced workforce with a depth of technical and management expertise that is unmatched by our competitors.
Flood: Let me add that our project management structure focuses accountability for project execution at a regional level with the backing of one global organization that provides the people, processes and tools for those projects. Our global organization “sees the world,” so to speak, and within 24 hours we can apply lessons learned from one region to another when issues occur, regardless of whether they’re positive or negative. We have the ability to fly in project experts to provide solutions to any issues. We know of no other international oil company with that capability.
What factors must you consider in early project planning?
Plugge: Among the more critical steps is selecting a leadership team that understands the technical side of the work and has the right management skills. This decision evolves out of a process by which we decide if a project will be routine, meaning that it is something we have done before, or nonroutine. Nonroutine projects tend to be bigger, more complex and require many years to complete. By distinguishing routine versus nonroutine early on, we can select the leaders and teams best suited for the project.
Flood: Based on EMDC’s 15-plus years of proven, demonstrated project experience, we understand that it’s critical to lock down the development concept as soon as possible. The key then is to manage each of the critical transitions, from front-end engineering to detailed design to the beginning of the construction phase so that we can resolve all major project issues before moving from one phase to the next. We have seen major projects in the industry get derailed due to a constant recycling of poor decisions, resulting in the delay of critical engineering deliverables. This can have a significant negative impact, including driving up costs and delaying project completion. We must eliminate uncertainty as early as possible to ensure that you enhance project predictability for both cost and schedule performance.
How else do you achieve better predictability?
Plugge: It’s critical that we select contractors with the core competency for the work we want done. EMDC has built a global network of contractors to whom we return time and time again for engineering, procuring equipment, fabricating facilities, hooking up modules, building ship hulls, performing pre-commissioning and other work. In particular, their learning curve has grown tremendously, especially with their participation in our design-one, build-multiple approach. This has helped us increase overall project predictability, lower costs and achieve faster project completion.
When did ExxonMobil have its first big success with the design-one, build-multiple approach?
Flood: It started with the Kizomba A and B deepwater developments in Angola. We completed Kizomba A in 2004, including installation and startup of a floating production, storage and offloading vessel and a tension-leg drilling platform in an industry-record 34 months. We then adopted the design- one, build-multiple concept when we essentially replicated Kizomba A for Kizomba B and delivered the same scope of work in an industry-record 31 months. We have since used the approach many times, including at Sakhalin-1 in Russia and both the initial and expansion heavy- oil projects at Kearl in western Canada, as well as at our joint venture in Qatar with RasGas and Qatargas to build multiple LNG trains. We also plan to use it with the future SAGD oil sands project in western Canada and the potential Liza deepwater development in Guyana.
How does ExxonMobil’s project execution benefit from new technology?
Plugge: New technology, which mainly comes from ExxonMobil Upstream Research, improves project economics and is critically important amid today’s lower oil and gas prices. A good example is in Canada, where we could use solvent-assisted steam to produce more bitumen from our Aspen development. This new technology, along with other capital-efficiency initiatives, has significantly reduced costs.
What other competitive advantages does ExxonMobil have in project execution?
Flood: First is our disciplined ExxonMobil Capital Project Systems (EMCAPS), that standardize our processes across all projects. Second is our structured gate process to assure that we finish work before moving onto the next phase. This approach also allows us to confirm that project risks are properly addressed and to test the economics to assure the project is well founded and meets our stakeholders’ requirements for implementation. In addition, EMCAPS is our execution framework for managing the corporation’s Operations Integrity Management System, through which we not only design and construct facilities with safe execution in mind but focus on their ongoing integrity and safe operation for the long term.
A third advantage is the integrated approach we take across all of our upstream companies. Whether it’s Exploration, Production, or Gas and Power Marketing, we act as an integrated upstream company and work to meet the general interest of the corporation. A great example is how we integrate production personnel into the project team before front-end engineering to provide an operational perspective all the way through the commissioning and startup phase. This one-team approach is more efficient and timely compared to industry norms, and is being extended to the concept execution phase as part of our upstream synergies effort.
Please comment on how project execution excellence supports improved safety.
Flood: Safety has been a relentless journey, with consistent improvement since the establishment of EMDC. But people are still getting hurt. We know we need to continue to drive the value of caring about the safety of each and every person at our work sites so that we can achieve our objective of “Nobody Gets Hurt.” A great example of our safety progress is Sakhalin-1 in Russia. When we started almost 15 years ago, we didn’t know a lot about the safety culture in Russia. With continuous projects over this time and the application of our safety values and principles, we have seen Sakhalin become one of the corporation’s safest places to work. The Exxon Neftegas Limited project and ExxonMobil Drilling teams have won a combined 13 ExxonMobil Development Company President’s Safety Awards since the awards started in 2007.
Plugge: Our safety success also comes down to the strong relationships we have established with our contractors, which have never been better. We have excellent alignment about safety and what it means for the business. Our practice of having ExxonMobil teams work alongside contractor teams in the contractors’ fabrication yards and design shops has helped us achieve a leading safety performance.