with suppliers, trimming staff or even extending a project schedule in order to wait
out the market until prices recover.
But sometimes streamlining costs isn’t enough to save a project. BP CEO Bob
Dudley said in February that the fall in oil prices made many projects in the North
Sea unprofitable. BP plans to shrink its global portfolio of capital projects by US$4
billion this year. In the same vein, Royal Dutch Shell has pulled the plug on a long-delayed oil sands mine in Alberta, Canada that was expected to produce 200,000 barrels per day.
Yet other projects still offer enough payoff to portfolio managers to keep them
alive. BHP Billiton, for example, is going to cut back shale drilling on several of its
projects in the western part of Texas, USA, but will continue drilling projects on the
lucrative Black Hawk shale field in the state’s southern region.
In the Gulf of Mexico to the south, the U.S. government expects oil production to
keep rising through 2016 due to both new offshore projects and the redevelopment
of older oil fields. “Because of the long timelines associated with Gulf of Mexico projects, the recent downturn in oil prices is expected to have minimal direct impact,”
the U.S. Energy Information Administration (EIA) reported in a March press release.
To further bolster the profitability of these ongoing projects, many sponsors are
rolling out innovative new technologies to drive greater efficiencies. For example,
BHP Billiton last year implemented restricted-flow drilling technologies at the Black
Hawk field project site, which led to a 21 percent improvement in drilling times.
To mitigate the high cost of deep-water
drilling infrastructure in the Gulf of Mexico,
more than half of the projects starting there
in 2015 and 2016 will use “subsea tiebacks”
to connect to existing production platforms,
according to the EIA. That will reduce costs
and startup times.
The Talent Impact
Some industry experts, including Mr. Larry,
expect the price of oil to bounce back to
US$100 per barrel within five years. (Crude oil prices were above US$100 in June
2014.) But that’s cold comfort to the 31,000 people laid off across the industry as of
January due to the recent downturn in project prospects. That number is expected
to rise sharply throughout 2015—and it includes project managers, says Dr. Allman-Ward. Although they’ll need the talent again when oil prices get closer to US$100,
short-sighted companies looking to cut costs will likely eliminate project managers,
But not all organizations are making the same mistakes they made in the 1980s,
when the industry experienced a similar contraction and had to deal with a deficit
of experienced mid-level project and program managers years later, says Matthew
Stevenson, partner, workforce analytics and planning leader for global consultancy
Mercer in Washington, D.C., USA. “Some organizations are thinking about where
they want to be in 20 years and who they need to grow internally to get there,” he
says. “They want to avoid what happened in the ’80s.” —Sarah Fister Gale
READY, SET, BUILD
China’s Broad Sustainable Building Co. Ltd. in
March completed construction of the world’s
tallest prefabricated structure. And it took
only 19 days.
The secret to the speedy execution of the
project—a 57-floor skyscraper in Changsha, China—was prefabricated modular components
constructed and outfitted with pipes and wires
at an off-site
then transported to the
project site. In
addition to being faster, this
less waste, say
“Ninety percent of the work for our prefabricated, sustainable buildings is done in
the factory. Only the remaining 10 percent is
done on-site,” Zhang Yue, Broad Sustainable
Building chairman and CEO, told McKinsey &
Company last year.
Over the years, the organization has perfected its modular approach. In 2012 it constructed
the 30-story T30 Hotel in Changsha in just 15
days, while a 15-story hotel in the same city
took just six days.
The demand for space-saving building alternatives is growing in densely populated cities
around the globe. Modules of a 55-unit, micro-apartment complex developed by Monadnock
Development LLC and designed by NArchitects
are now being constructed at the Brooklyn
Navy Yard in New York, New York, USA and
will be available to tenants in Manhattan, just
across the East River, this year. —Imani Mixon
Some industry experts
expect the price of
oil to bounce back to
per barrel within