Richard Young considers the pressures oil companies face as they pivot from black gold to green power.
BP’s journey to a more diversified energy portfolio goes back to at least 2000, when it rebranded as ‘Beyond Petroleum’. But that journey has been marked by diversions. In 2011, after the Deepwater Horizon disaster, BP sold its solar business to release much-needed cash. In 2014, it announced that its only significant ‘alternative’ energy investments would be biofuels.
But then, in August 2020, CEO Bernard Looney told investors that he planned to shrink BP’s oil and gas output by 40 per cent by 2030 and spend US$5bn a year on renewables.
BP’s story isn’t unique. Post-crash, Shell backed off on renewables, but the global focus on CO2 reduction has meant renewed interest in efforts to diversify its portfolio. In 2016, it launched Shell New Energies to handle its lower-carbon technology projects. This autumn, it announced Project Reshape, a cost-cutting strategy focused almost exclusively on its oil and gas operations.
Now things have turned in favour of renewables, the oil giants have been bulking up their sustainable energy portfolios. Acquiring ready-made capacity can quickly push a business such as Shell or BP into ‘credit’, whereas building projects from scratch is a longer job. But new projects are now very much on the cards too as they seek to keep up the momentum.
Investing in project management
“If we find projects that make sense, but where affordability constraints mean we have to make choices, we will probably give preference to the projects that will serve us better in the long-term future,” said Shell’s CEO Ben van Beurden earlier this year.
That means rapid growth in wholly owned or joint venture projects to bring new capacity online. No surprise, then, that majors such as Shell are investing in project management. “The capability to deliver projects is essential for us to be able to forge ahead,” says Guus van Ekelenburg, Shell Project Academy assessment and accreditation adviser. “We use the [APM] assessment process in support of our employees’ careers, allowing them to progress to more challenging roles.”
Vicki Griffiths, senior project manager at geo-data specialist Fugro, has worked on the development of offshore wind farms for some time. “An uptick in projects means demand for geotechnical and geophysics surveying vessels goes through the roof,” she says. “With a new oil platform, you head to a set of coordinates and drill a hole. With an offshore wind farm, the area you need to cover is vast, and each turbine needs its own borehole. So it’s not simply a question of turning on the tap; these projects have demanding and complex development phases.”
Even so, oil companies do have a head start. As BP’s Looney said in September, his company has an edge in renewables “because of our project management skills, experience with partnerships, integration of different departments and openness to digital solutions”.
Risks and uncertainties
Roeland Borsboom is project director and CEO at Blauwwind, the company behind Borssele III & IV, an integrated project of offshore wind farms powering 825,000 Dutch households that is a joint venture between Shell, Partners Group, Eneco, DGE and Van Oord.
“There are lots of joint ventures in the sector, so the principles are very familiar,” he says. “When it comes to project management, there’s very little difference. You have to understand the risks and uncertainties, just like oil and gas.”
In oil and gas, for example, there are risks around how you get natural resources out of the ground, whereas an offshore wind farm has to account for weather risks. Then there’s commercial risk. Oil platforms, pipelines and refineries are expensive, so project development includes a huge amount of forecasting around costs and long-term revenue projections.
“As a projects guy, you have to try and keep it simple,” says Borsboom. “You rely on people accounting for those risks in the early development phase. We could be talking about a five-year project to get a facility up and running, so looking back is fruitless. A project manager lives and dies by decisions that are intended to implement the business case well, not by challenging the business case.
“You’re talking about a commercial rationale for projects based on an economic life of 25 years. Then you look at the engineering and see whether you can extend its life. The big difference, of course, is that an oil deposit will eventually run out regardless of the condition of a platform. The wind won’t.”
Scaling up, drilling down
The other thing that project managers from the oil and gas sector are well acquainted with is scale. The MHI Vestas V164 turbines used by Blauwwind have a rotor diameter of 164m. The turbines sit more than 100m above sea level, and each of the three blades weighs around 34 tonnes.
“Offshore wind is about 10 per cent making the most of the wind and 90 per cent doing it offshore,” says Borsboom. “The installation phase looks a lot like an oil platform. You have massive construction requirements, you’re running undersea cabling to transformer stations and you’re dealing with ocean conditions and steelworks, just as you would with an oil platform.”
And here’s another example of the overlap: the three major project safety risks for Shell’s whole portfolio of operations are heavy lifts, dropped objects and marine operations. “We have all three,” says Borsboom.
Of course, there are some big differences too. Griffiths points out that while project managers on oil platforms will undoubtedly make safety a top priority, onshore and near-shore wind farms are more than likely covered by the complex Construction (Design and Management) Regulations as well. “That’s a lot more paperwork,” she says, “including submitting plans to the Health and Safety Executive, ensuring public safety and more onerous documentation of processes.”
Add in the broader stakeholder considerations, and there’s still plenty that the oil and gas project manager can learn from those steeped in renewables.
With the oil majors showing real commitment to the shift from black gold to green power, the scale of these projects is only going to get bigger – and the bigger the scale, the more crucial the project management discipline.
This blog is an edited extract from a longer feature published in the winter 2020 edition of Project journal, an exclusive benefit for APM members.
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