“The lamps are going out all over Europe,” said Foreign Secretary Sir Edward Grey as the UK stood on the brink of the First World War. The British government today faces a similar, although more literal fear: of keeping on the lights during a period of unprecedented energy challenges.
Just as the horrors of the Great War marked the end of the prosperous and peaceful nineteenth century, so the exhaustion of fossil fuels and the spectre of energy shortages threatens to define the 21st.
There is, however, considerably less cause for doom-mongering than a century ago. Government, industry and enterprise software vendors are all rising to the challenge of providing the energy we need to keep the home fires burning. The UK government, for example, recently announced vital reforms for the UK’s energy market, including new money for upgrading infrastructure, investment in both renewables and a new generation of nuclear power stations.
Furthermore, the government is working with the Nuclear Industry Association to present guidelines to strengthen the UK supply chain so that it is prepared for this huge investment. This is welcome recognition of the increased complexities of building tomorrow’s energy infrastructure, but it only addresses one of the challenges facing the energy industry itself, such as the vastly more complex range of regulatory, financial, political and even geophysical environments in which they operate.
The new technology of “fracking” for shale gas perfectly illustrates this new landscape. Energy firms now have to invest in new technologies to extract hydrocarbons; they must explore and survey new and more challenging regions; deal with rigorous environmental and health and safety legislation, including the threats of outright bans on fracking in states like Colorado.
While these firms are likely to have to contend with significant local opposition, as protests like those at Balcombe illustrated, an even bigger problem facing the industry is coping with the volatility of the worldwide energy market. Shale gives us another great example of how unexpected developments in the energy sector can affect major projects, with EDF Energy’s withdrawal this July from the US nuclear market– citing the “revolution” in energy markets caused by shale gas.
Given the fluctuations in the energy market and the huge costs and often decades-long lifecycles required for energy exploration, extraction and generation, the industry can only predict the viability of new projects if it can predict and measure the economic benefits of investment over the entire lifecycle of the project. Not only that, but they need the tools and technology to cope with the myriad of concerns over regulation, corporate social responsibility (CSR), project maintenance and management that will bedevil any major asset over its lifetime, whether it is an oil field or a wind farm. This requires a far more intelligent and unified approach to project management than the normal fragmented approach.
One key to success in any major enterprise project is project-based enterprise resource planning (ERP) software that integrates all the information generated from all the assets, partners, contractors and suppliers into a single, transparent application. For energy projects, which often have numerous assets scattered over a wide area, huge workforces and seriously complex supply chain, any minor faults can have serious repercussions all the way down the line. Having visibility over all these different aspects of the project is therefore likely to determine whether the project comes in on time and on budget.
The collaborative nature of projects means that information about a particular operation is useless if it’s kept isolated – but very powerful if integrated with all project data. A great example of this is a repository for multi-discipline engineering data that can be shared by everyone working on the project, ensuring error-free handovers of information from engineering to purchasing, fabrication to installation. In the event of a last minute design change, information may even flow from engineering straight to commissioning.
The same principle should be applied to costs and revenue. It is not enough to budget, track and compare costs in a general ledger – project managers should also be able to track project-by-project. This ensures real-time follow-up and tracking of incurred and actual costs, with reliable forecasting which supports the periodic review process by enabling the comparison of the latest predicted costs with budget and previous forecasts.
An integrated approach is also vital for reducing downtime across various assets, and enabling long-term management and maintenance. Any contractor that performs a service, upgrade or lifecycle extension on assets is met with strict quality requirements and demands, with any downtime directly affecting profitability. By integrating project management, logistics, maintenance planning, document management and financial and performance functions into an enterprise asset management (EAM) solution, firms can ensure that they schedule and manage maintenance with the utmost efficiency and effectiveness. Strong EAM functionality can deliver asset integrity management (AIM) capabilities that can mitigate risks posed by asset failure, perhaps even assuaging concerns of those who may be affected by an energy project in their backyard.
The purpose of the tools mentioned above – and this has been by no means an exhaustive list – can be summed up quite simply. It is to smooth over the increasing complexities that the energy industry faces by providing executives and project managers with visibility into every facet of a project. Only with this information, collated and integrated into a single system, can energy firms gain actionable, real-time insight into the health of their projects, and address potential problems before they cause serious consequences.
With more control over costs and budgets comes increased profitability, not to mention a host of other benefits, such as more efficient reporting and regulatory compliance. With this asset and project management functionality in place, the industry will be in an excellent position to undertake the great energy projects of the 21st century.