12/25/2023 0 Comments At the outsetNet present value (NPV), time to break even, return on investment and hurdle rates matter much more in the big picture.īy integrating various structured decision techniques into our technical consulting work, Advisian enables our clients to make sound decisions based on transparent, appropriate and robust criteria. Rather than just CAPEX, wise decisions take into account the trade-off between costs and benefits over the asset lifecycle. CAPEX is important, but rarely the whole story.ĭoes it make sense to spend a bit more on CAPEX to reduce OPEX? On a piece of equipment we believe will be more reliable than a cheaper alternative? On something that reduces our energy usage? How about a location which makes construction more expensive, but is likely to have less community resistance (and delay) than the alternatives? How about pre-investment in design for decommissioning: reducing the decommissioning liability cost that the asset owner will need to carry on their books? It’s all about the ker-ching, ker-ching… or is it?Įngineering contractors (and indeed client project teams) can easily fall into the trap of thinking that minimum CAPEX is the right answer to every question. See section 1 – it’s still not all about the process. Just because it doesn’t appear on a process flow diagram, doesn’t mean it isn’t important. However, sometimes we need reminding that the effort and level of attention given to various subjects should be in proportion to the impact they make on the overall decision – not in proportion to how close they are to our own technical specialism. Generally this is a good thing, because we're trained to think about systems holistically. Infrastructure, civil and structural works are often a far greater portion of the project total installed cost than the process equipment –another reality check for process engineers!Ĭoncept selection studies are typically performed by teams with a high proportion of process engineers. Once you’ve got this alignment, the team will have what they need to be making project-appropriate decisions every step of the way.Īt Advisian, we start every piece of consultancy with a facilitated Framing workshop with the client because we believe having better understanding of our client’s needs enables us to deliver the most appropriate solutions. Be proportional.įraming workshops help to align the team and make sure everyone understands the objectives, constraints and decision criteria. Framing workshops can vary from a couple of people round a whiteboard for an hour (for a fairly simple task), to a room full of people for a couple of days (for a complex project). There is no such thing as ‘too busy for Framing’ – in fact, the shorter the schedule, the less the team can afford for someone to spend time lost down a blind alley. It is absolutely vital that the whole team understands the needs and constraints underlying the project, as these inform the way we do the work and the decisions we take. It’s all about the framingįraming, Framing, Framing. Where complex risks cannot be eliminated by nature of the option selected, they're identified early and effective management plans can be set, running in parallel with technical scope. By asking the hard questions – ensuring that our framing and risk management processes ask questions about non-technical risk – right from the outset, means options are evaluated on an integrated basis, and the best overall option is recommended. Non-technical risks may not be equal for all the technical options under consideration for a development. These risks can all too easily go in the ‘too hard to think about’ bucket – and once there, they aren’t managed or mitigated. Non-technical risks are often ill-defined, and project delivery teams composed of technical people with a wealth of experience in their fields are often ill-equipped to know what to do about them. Non-technical risks – those that are commercial, environmental, social or political – can have a potentially show-stopping impact on a project.Ī study of the top 190 oil and gas projects around the world revealed that there was an average delay of 12 months for non-producing fields – 73% of these project delays were attributed to non-technical issues 1. The reality is, technical risks are comparatively well understood, and the engineering industry has several layers of established methods which help us eliminate, reduce, mitigate or manage technical risks such as: What we do is important, but that can lead to us thinking that it's the ONLY thing that is important. I’m proud of what I do and I believe the world is a better and safer place because people like me spend a lot of time thinking about ‘how not to blow things up’.
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