Embracing Digitalization is Key for O&G EPCs to Thrive
By Gian Mario Tagliaretti
According to the International Energy Agency, global oil demand is forecast to be 3.2 million barrels per day higher in 2030 that in 2023, driven by emerging economies in Asia and by greater use of jet fuel and feedstocks from the booming petrochemicals industry, notably in China. In line with this, the global oil and gas energy, procurement and construction (EPC) market is also set to double in size to circa $93 billion by 2031. The scale of this predicted growth should emphasize the importance of managing projects efficiently, on time and on budget, and investing in ways to drive improvements.
What is clear is that change needs to happen, because right now, many of the large EPC projects come in over budget by circa ten percent, with three out of four projects at least 40 percent behind schedule. When a medium-sized powerplant may cost between €100 million and €400 million to construct, ten percent represents a significant amount of lost profitability.
A lack of willing to embrace new technology
Critically, this issue is driven by an unwillingness to embrace digitalization and the available technologies that currently exist. No one is suggesting that EPCs should turn to machine learning and AI overnight. What we are talking about is fundamentally more basic and is centered around the limitations of the widely used scheduling systems that the majority of EPCs use.
These software solutions are very good at what they are designed for: creating project schedules on a very large scale. However, they also have certain limitations in relation to some important areas of functionality and capability; not accurately calculating a project’s progress or providing an immediate comparative analysis with the baseline; not showing the methodology for calculating that progress at all levels in a transparent and verifiable way, especially with projects involving thousands of activities; and lacking an easily understandable visual interface with focused, selective, and user-definable views of how a project is developing in line with the schedule.
This means that many EPCs do not have the required level of insight or information and spend a significant amount of time on non-optimal activities. EPC projects are hugely complex with multiple phases and thousands of activities that need careful scheduling and management. They require software that delivers unprecedented detail, and transparency that brings data to life, fueling collaboration and communication to ensure projects remain on schedule and to plan. Without this, EPCs are often ‘operating blind’ when it comes to planning activities as they don’t have the information on whether some of the previous steps have been completed to commence the next activity. This means wasted time and money in planning and preparing for activities that you can’t begin.
Bringing projects to life; visually ‘showing’ progress and eliminating blind spots
To overcome this, some progressive EPCs are increasingly using advanced project management software, integrating and overlaying it into their scheduling platform. By utilizing 3D modelling, it enables them to visualize, analyze, estimate and report on the progress of a project, adding a clear layer of understanding and transparency, improving visibility and eliminating those blind spots. It brings a project to life in an intuitive way, where a picture is worth a thousand words, and conveys much more information than just tables of data.
Project management software, such as CADMATIC Projects is a good example of this. Launched in 2023, it helps EPCs to establish a framework for measuring and comparing progress to the project baseline. This helps project managers identify critical paths and potential bottlenecks as well providing early warning signs of any problems, so that they can take action to keep the project on track.
This increased visibility also creates more accountability as everyone can see what each stakeholder should be doing, inspiring collaboration and shared ownership for the same goal. On top of this, it can also track progress in real time against the budget that has been assigned to deliver the project, which helps mitigate unanticipated cost increases and overspend. Fundamentally, this type of software provides project managers with a complete overview of the entire health of a project and levels of insight that ensures optimal decision making.
It is for this reason that Consolidated Contractors International Company (CCC), one of the largest construction companies in the Middle East, recently partnered with Cadmatic to implement CADMATIC Projects to enhance efficiencies and performance within its operations and, empower project management teams both on site and at HQ to execute often very complex large-scale projects efficiently, on time and on budget. Understandably, CCC wanted to ensure that they were utilizing the right product, were supported in the right way and working with like-minded people.
Cadmatic therefore ran a pilot simulation for CCC on a past, medium-sized project, which involved up to 5,000 separate activities, demonstrating how CADMATIC Projects would have performed and managed the project. Starting from scratch, the Cadmatic team exported all data from the scheduling tool and imported it into the Projects software, creating the structure and linking the activities with the items in the 3D model, simulating costs and updates on progress over the length of the 12-month project (delivered by Cadmatic in just one month). The pilot demonstrated all the levels of functionality within the software and simulated all the outputs such as generating all the necessary reports on budgets, time and progress, showcasing the level of detail and transparency that the technology can provide. The success of the project has resulted in a formal agreement and Cadmatic is now working with CCC on a real-world megaproject, which is currently under construction.
Partnering with CCC, a recognized leader in the industry, demonstrates the opportunity to usher in a new era of streamlined project management, harnessing the power of digitalization to enhance decision-making, optimize resource allocation, and ensure the seamless execution of complex initiatives.
As the transition towards new sources of energy continues at pace, EPCs within the O&G market need to adapt and evolve. Not just in seizing new opportunities in renewables, decommissioning projects or supporting oil and gas companies in meeting the increasing demand for hydrocarbons. It also means embracing new ways of working and being open to new ideas and new innovations. Technology and digitalization are key components of this; driving efficiencies, ensuring projects remain on time and to budget and in improving the whole operational performance. Those that do will thrive and seize the opportunities that change always brings.
Gian Mario Tagliaretti
Gian Mario Tagliaretti is Vice President at Cadmatic, a leading developer of digital and intelligent 3D-based design, engineering and information management software solutions for the process, construction, and marine industries. Cadmatic provides solutions for all kinds of constructions including ships, offshore facilities, process facilities and commercial buildings, helping customers to design structures from the largest power plants, luxury yachts and cruise ships to shopping centers.