1. Capital project
life cycle management
for oil and gas

2. 2 Capital project lifecycle management for oil and gas
Transforming major
capital project effectiveness...................1
The pitfalls between concept
and commissioning.................................2
The consequences of risk........................4
How to bypass the pitfalls
and manage the risk...............................5
Focus areas for effective capital
project life cycle management................6
How Ernst & Young can help....................9
About Ernst & Young.............................12

3. 1
Transforming major capital project effectiveness
Managing the complexity of major capital projects in today’s
oil and gas landscape has never been more critical. Against
the backdrop of a decline in both global economic conditions
and corporate revenues, stakeholders are demanding improved
return on investment (ROI), reduced risk and exposure and
greater transparency. Since capital construction projects in the
upstream oil and gas industry comprise a significant percentage
of company spend, there must be a particular focus on
predictability, transparency and reliability, including controlling
and reducing the costs associated with these projects. Arguably
as important, however, is the focus on managing joint venture
relationships and overall project risk as it relates to safety, budget,
schedule and reputation.
For many years, the leading practice in planning for and executing
major capital projects was based on building or spending one’s way
into the market. However, given the market environment and the
lessons learned associated with the potential setbacks, there is a
renewed focus on the complete life cycle of a capital project. That
focus enables a holistic approach; one that is more balanced and
inclusive of well-planned handoffs, healthy asset management in
the areas of operations and maintenance and balanced project
portfolios — always with an eye on the potentially conflicting
requirements of risk, cost and schedule.
Understanding and managing the capital life cycle is crucial
to the long-term success of an upstream capital project.
Tremendous effort, time and resources are expended in
delivering a project. However, poor decisions today may result
in loss of value tomorrow. Despite a host of research, benchmarks
and project guidelines, oil and gas companies continue to struggle
with the same complex issues: budgets, schedules and execution.
These issues alone, if managed poorly, can be the cause of dramatic
losses in project value and prolonged disputes with vendors. Failure
to consider design, construction, commissioning and operational
issues during the planning phases of the project reduces the ability
to positively affect project performance and value. Companies
have learned the hard way that rushing into the construction phase
without adequately developing a plan that considers the entire
project life cycle may result in extended schedules, budgets and
operational difficulties.
One of the most proven and effective ways to manage capital
projects in the oil and gas industry is to take the holistic approach
of a stage-gate model for evaluating progress and enabling
informed decisions about next steps. Looking at the capital project
through the lens of one comprehensive life cycle encourages
collaboration across the stages and underpins the processes with
the appropriate systems support.
This approach to effective project management can mean less
rework in front-end engineering and design, improved cycle time
for certain stages and reduced impact of punch lists from handoff
to maintenance. Each stage includes a clear set of deliverables that
will enable the realization of opportunities and more effective long-
term risk management.
The best opportunity to make a positive impact on the life cycle of
a major capital project is during early planning, even before the
capital outlay occurs.
Project
definition
Engineering
design
Project
procurement
Construction
Hook-up and
commissioning
Asset
management
Decommissioning
and dismantling
Conceptual
Approve
capital
Front-end
engineering
Detailed
engineering
Contractorproject
management
Procurement
Fabricationand
construction
Transport
andinstall
Hook-up
Commissioning
Operations
support
Sustainment
Decommissioning
Dismantling
Figure 1: Stage gates of the capital project life cycle

4. 2 Capital project lifecycle management for oil and gas
By considering the long-term effect of the entire project during the conceptual and planning
stages, project owners can better predict future risks and make decisions that allow them
to appropriately allocate risk and control the project’s value chain. The forward-thinking
company will spend more time on strategic issues and the strategic development of a project
management approach that aims for the balance between risk allocation and value retention.
Since no one has a crystal ball, what should the company consider? What are the factors
in the upstream oil and gas industry, the marketplace and the business of engineering
and construction itself that contribute to successful projects that result in commensurate
rewards instead of a project fraught with risk and loss?
The pitfalls between concept and commissioning
With the oil and gas industry moving deeper into emerging assets and frontier areas, as
well as improved technology plays (such as unconventional), recovering these reserves
will require high levels of transparency and investment. Consequently, we are witnessing
a ramp-up of mega projects to commercialize these reserves. These mega projects are
generally managed via joint venture arrangements between and among national and
international oil and gas companies. The combination of leading edge technology, new
geographies, multibillion dollar capital expenditures and multi-party governance means that
these projects require high levels of assurance for cost, timeline and risk management.
These requirements, together with today’s market and economic factors are giving rise to
a range of opportunities that affect short and long-term project performance. This in turn
begs the question of why so many companies tend to overlook the impact of capital project
life cycle management. However, with challenges also come opportunities. To capitalize on
these opportunities, it is crucial to focus on major project decisions, the scale of the project
and the level of investment, all in light of their impact on governance and project support.
Many companies are inclined to plan their projects expecting to encounter certain risks
and possible pitfalls along the way. However, knowing what and where the pitfalls are and
factoring them into strategic project management is the first step to avoiding them.
The current uncertain economic situation demands a more systematic and pragmatic risk
management approach that makes project owners and stakeholders keenly aware of the
pitfalls up front. Following are some of the most common pitfalls that arise in the planning
and execution of major capital projects:
• Finance and credit risk: A risk strategy not aligned with the changing financial market
can have a significant impact on the feasibility of a project and even on the financial
stability of some companies. The gap typically occurs when the project sponsors don’t
take into account the global nature of the business or the current market and credit risks.
Problems can also arise if the project portfolio is not diverse enough to handle market
shifts or margin volatility.
• Schedule delays: There is an adage that says failing to plan is planning to fail; this
describes the typical genesis of schedule delays. Plans often leave out the necessary
schedule management elements of schedule development, acceptance, progress
measurement and reporting, and relationships to other project management disciplines.
Failure to implement appropriate schedule management and time-tracking tools could lead
to significant delays and an inability to identify at-risk activities and their impact, areas of
uncertainty, insufficient assumptions or potentially deficient scheduling methodologies.
The best opportunity
to make a positive
impact on the life
cycle of a major
capital project
is during early
planning, even
before the capital
outlay occurs.

5. • Ineffective cost management and lack of financial transparency: Ineffective contract
administration and monitoring of contracts both causes and results in a lack of visibility
that complicates the planning of project costs for reporting and budgeting activities. The
end result is likely to be an inaccurate perspective on the total costs incurred, limited
ability to accurately forecast cash flow, budget overruns and the inclusion of unapproved
costs. At the same time, not automating the cost management software tools and
failing to integrate them into a comprehensive project management information system
necessitates reliance on manual controls and associated increased risk tolerance related to
potential delays in identifying and reporting issues that may affect project performance.
• Inertia and a lack of urgency: As projects are significantly delayed, participants are
often subject to inertia and lose the sense of urgency and the focus on completing the
project, and maintaining quality. Simply put, when a project becomes a process, it can be
problematic. It is important to voice concerns regarding the reliability or accuracy of the
current cost and schedule estimates at completion, challenge original assumptions and
assess if they are still valid. Momentum can be lost if the cumulative impact of missing
critical project milestones (regulatory, financial, operational, contractual and long-lead
equipment) is not adequately addressed and if management accepts a fatalistic attitude
about future impacts.
• Unclear definition of roles and responsibilities: One of the big pitfalls of a joint venture
is unclear governance, which can lead to the project owner taking on unacceptable
risks. The cause is typically attributable to a combination of failing to assess the risks
thoroughly, clearly defining and communicating all roles and responsibilities for parties
involved, and building both contract and governance structures that take risk into
account and include adequate controls and monitoring.
• Operational impact: Operating and maintenance strategies are rarely planned at the
design phase and built into the ongoing project management strategy. Once the project
team has executed the handoff, the maintenance and support organizations may find
that the policy and procedural foundation is missing, the right people aren’t in place or
are unfamiliar with the landscape and finally systems, technology platforms and software
enablers are absent or inadequate. Companies are sometimes too quick to segregate
duties and may have been imprecise in identifying competency requirements or aligning
them accurately with the project organization chart and staffing plan.
• New operational challenges: Companies’ increased focus on E&P in deepwater and ultra-
deepwater areas means more projects in challenging and unfamiliar environments, which
can require a new generation of technical and operational solutions as well as different
training and support for personnel in the field. The costs and physical dangers involved
far exceed previous levels and add to owners’ risk, all with little or no assurance that
prices will continue to justify heavy investments in these areas.
• Asset integrity: An aging infrastructure can pose serious operational threats to
companies and jeopardize their public reputations and business relationships. These
structures require continuous inspection, monitoring, maintenance and repair, and may
not comply with current environmental standards and regulations.
• Cross-border controls: Projects that involve entities from more than one country carry
special considerations, requiring that processes and controls be adaptable to local
markets, business customs and international compliance standards. This is one key point
in the project life cycle where the relationship between owning risks and reaping reward
may diverge.
3
The pitfalls
• Finance and credit risk
• Schedule delays
• Ineffective cost management and lack
of financial transparency
• Inertia and lack of urgency
• Unclear definition of roles and
responsibilities
• Operational impact
• New operational challenges
• Asset integrity
• Cross border controls

6. Capital project lifecycle management for oil and gas4
The consequences of risk
The oil and gas industry wouldn’t exist if not for risk takers. What separates success from
failure is having a clear definition of what constitutes “acceptable risk” for a project, then
avoiding or mitigating the risk that remains. Being caught in the common pitfalls or failing
to address risk in a way that is proactive, realistic and transparent can lead to consequences
that span the spectrum from mere inconvenience to grave danger. Following are some
of the consequences, many of which are avoidable and all of which are manageable with
proper planning and forethought.
• Regulatory noncompliance: Failure to develop appropriate project controls could result
in non-compliance with governance, legal and regulatory standards. Similarly, failure
to properly track and adequately forecast costs could result in misstated financial
statements or inadequate disclosures in public filings. Non-compliance can lead to fines,
forfeitures and business restrictions, and could damage the reputation of the company.
The lack of compliance and effective communication can significantly increase potential
hazards on projects as well as damage the brand image, which can lead to risks in the
areas of investor confidence and stakeholder trust.
• Damage to reputation: An unexpected event that leads to environmental concerns is
a key focus area for governments and the public in general. The recent oil spill in the
Gulf of Mexico raised awareness and negatively affected the oil industry in terms of
profitability and reputation, leading to increased political risk and resulting legislation
undermining asset position, fines and damages from criminal or civil charges. Hence,
increased regulations, inspection times and potential liabilities need to be factored into
global operations. Limited prompt and strong attention to any unforeseen situation can
have irreversible consequences.
• Loss of competitive advantage: Oil and gas companies must continue to adopt new
technologies to mitigate the risk of losing their competitive advantage. This calls for a
strategic commitment to research and development, ongoing investments to upgrade
existing facilities and development with technology providers. Oil and gas companies
that operate as “technologically agnostic” are better able to maintain flexibility and allow
alignment with leading practices evolving in oil and gas and other industries.
• Claims and disputes: Undertaking a comprehensive assessment of contract claims risk
requires recognizing the interdependencies of the contracts, people, processes and
technology across the program. Contract language and detail should be clear with regard
to pricing arrangements, incorporation of critical path method scheduling techniques
and allocation of risk. Failure to develop appropriate procurement, invoicing and change
management controls could lead to potential claims. Equally important is evaluating how
claims and disputes are reported, as well as how control gaps are identified and risks
escalated. Each claim must be promptly and efficiently administered, which requires
understanding the document management sources and locations. Fraudulent reporting
of costs could lead to misappropriation of assets, public relations damage and problems
in the future relating to these assets. Owners should assess the risk associated with
contractor and subcontractor claims and develop an “owner’s team” methodology to
mitigate, defend and manage claims as the project develops.
The right information at the right time can turn a risk into an opportunity when the owners
properly allocate between themselves and their vendors not only financial risk but also the
risks associated with quality, safety, control and reputation.
A closer look at
the oil and gas
landscape
Barclays Capital’s report, Original
E&P Spending Survey, forecasts that
worldwide E&P spending budgets will
rise by 10.8% in 2011 to US$489.5
billion, up from 2010 budgets of
US $441.8 billion. Significant E&P
spending increases are expected for
the super majors next year, with the big
six projected to increase international
spending by an average of 18%. This is a
notable figure following a year in which
spending for the group was virtually
unchanged from previous year levels.
The Latin America region is leading
the way globally for exploration and
production spending during 2011 with
an expected increase of 20%; the Middle
East and Africa and Asia-Pacific regions
forecast relatively modest increases of
11% and 9%, respectively.
When the E&P budget was based
upon an average oil price of $77.32
per barrel, the survey reported that
45% of respondents expected to
spend a greater share of their capital
expenditure on exploration in 2011. The
survey also reported that the majority of
these companies would increase budgets
further with oil prices at $90 per barrel.
Considering that the current price per
barrel was already over $100 in the
first quarter of 2011, this forecasts a
near-certain increase in capital budgets.
For the past five years, the price per
barrel has increased an average of
6.25% annually, a trend indicating that
the oil and gas market will continue to
see increases in the price per barrel and
associated investment.

7. 5
How to bypass the pitfalls and manage the risk
Given the range of disparate factors that comprise the oil and
gas landscape and the challenges and pitfalls inherent in capital
projects, is it possible to develop an integrated project team
approach that can help these projects succeed? The short answer
is yes, as long as the framework of the deal and the framework for
project management are part of the process from the beginning.
The enemies of a successful project can be costly: excessive
unplanned downtime, lack of project controls, missed milestones
and overall operational underperformance. If a capital project is to
survive — or, better yet, prevent — the impact of these, it must be
grounded in an integrated process with critical success factors built
into the DNA of the project management plan.
Simply put, in order to move toward success, a risk planning process
must be implemented as part of the strategic development of the
project, defining the issues that must be addressed and completed
in order for the capital project to succeed at each stage gate in
the supply chain. Creating value throughout will improve ROI,
strengthen the relationship between the owner and engineering and
construction companies, and help drive a proper balance between
owning the risk and reaping the rewards.
Figure 2: Oil and gas capital project value driver tree
• Effective project management
• Regional execution
• Effective project management
• Total cost of ownership
• Governance, controls, policies and procedures
• Healthy stage gates
• Supplier performance management
• Effective contract management
• Cost management
• Handover management
• Risk assessment and reduction
• Safety
• Portfolio management
• Operating model design
• Operating model design
• R&D, upgrade existing facilities, development
with technology providers
Benefits
Improve capital project
success rate
Optimize project mix
Reduce effort/
headcount (FTE)
Project delivery
costs reduction
Process efficiencies
Identify poorly performing
projects sooner
Project schedule
Operational impact
Competitive advantage
Value driver Focus areaValue proposition
Reduce
costs
Increase
revenue
Reduce
risk

8. Capital project lifecycle management for oil and gas6
A closer look at the focus areas for effective capital
project life cycle management
Since the beginning of the upturn, oil and gas companies are demonstrating an increased
focus on the entire life cycle of a project, including a deeper commitment to beginning the
planning process earlier and ensuring that the quality of the execution is held to a higher
standard relative to cost, schedule and execution. These are some of the capabilities that,
when executed well, can prove to be game changers on large capital projects:
1. Effective project management: Make sure the plan includes appropriate focus on
safety, costs and schedule — attributes that need not be mutually exclusive. All parties
involved should be in alignment with the baseline schedule and must understand the
project’s critical path. Critical milestones play a major role in maintaining momentum;
developing a continuum of optimistic, realistic and pessimistic potential completion
dates based on actual progress can help maintain focus on the project.
2. Cost management and cost reduction: The best strategy is to develop an integrated
cost management function that aligns all cost-related processes and functions and
incorporates data developed or maintained in other processes. Emphasis should
be placed on budget control, approved corporate budget changes and project
management internal budget transfers. Expenditure tracking should include actual cost
to date, accruals and total cost incurred. Look for cost reduction opportunities, along
with opportunities to reduce planning budgets, engineering hours and cycle time, at
every stage of the life cycle. Pay particular attention to the larger line items in the
construction budget and operate with a mentality that helps promote accountability.
3. Supplier performance management: An improved approach to risk and exposure on
costs and delivery and improved management of stakeholders and suppliers can help
optimize third-party performance and keep relationships with stakeholders on an even
keel. It is important to analyze the contractor’s baseline as-planned schedule and its
cost loading, including the complete scope of work, and to identify the contractor’s
critical path and contract milestones. Risks and estimates of impact must be identified,
especially for critical and near-critical activities.
4. Healthy stage gates: Develop a holistic capital projects program with a stage-gate
model for evaluating progress and enabling informed decisions about next steps. In
addition to minimizing rework on front-end engineering and design, improving cycle
time and generating punch lists for handoff maintenance, this disciplined decision-
making framework is designed to move projects through the development pipeline to
facilitate more effective planning and evaluation of projects, which will translate into
better capital effectiveness. Early involvement in the process from all disciplines and
cross-functional participation throughout the development process will result in better
integration and alignment of activities.
5. Risk assessment and reduction: To help ensure a satisfactory degree of success,
project teams must control costs, ensure quality delivery, meet deadlines and identify
and mitigate future risks. Juggling such diverse and often conflicting objectives is a
major challenge. The capital project team is often too close to the day-to-day activities
to be able to take an objective view of performance. Consequently, shortcomings are
often recognized too late, by which time overall objectives in terms of cost and quality
are jeopardized or schedules slip, affecting both business strategy and operations. This
is when projects can erode, rather than support, the creation of business value.
Focus areas
1. Effective project management
2. Cost management and
cost reduction
3. Supplier performance management
4. Healthy stage gates
5. Risk assessment and reduction
6. Safety
7. Handover management
8. Regional execution
9. Total cost of ownership
10. Governance, controls, policies
and procedures
11. Operational model design
12. Contracting strategy

9. 7
6. Safety: Safety risks evolve throughout the capital project
life cycle, so those risks must be considered at each stage
of development. Engineering and procurement personnel
must make decisions that allow for the safe construction of
the project as well as its safe operation. Construction and
operations personnel must be trained properly, comply
with safety regulations and processes and utilize the safety
controls provided. Equipment or control failure could impact
personal safety as well as hinder the operations of a facility. An
approach to safety on all these fronts needs to be an integral
and proactive component of ongoing project management, not
just an emergency response.
7. Handover management: To avoid the impact of poor handover
management, operating teams must be mobilized at the right
time and given ample opportunity to work with the project
team at appropriate stages in the project life cycle. Likewise,
equipment needs to be easily serviceable and maximize
commonality wherever possible, with bills of materials, and
operating and maintenance instructions accurately captured
and readily accessible.
8. Regional execution: Integrated oil companies and national oil
companies are increasingly investing in new projects through joint
venture arrangements, with the national oil companies offering
more concession agreements to the integrated oil companies
for the rights to their reserves. These agreements are perfect
candidates for comprehensive risk reviews. The integrated oil
companies need the growth to offset stagnant home territories,
while the national oil companies need to generate more income
for their burgeoning populations and budgets while diversifying
their economies.
9. Total cost of ownership: The total cost of ownership (TCO)
for a capital project includes the total of all costs to design,
purchase, construct and operate. Most of the costs for these
elements can be internal or indirect costs paid to external
parties. Furthermore, costs to prepare bid lists and equipment
specifications are easy to identify whereas some other variables,
such as operating costs and lost profit opportunities, are
much more difficult to identify. In order to truly transform
a procurement strategy, an understanding of the major
contributing elements of TCO is essential.
10. Governance, controls, policies and procedures: Corporate
boards, joint venture partners and other stakeholders expect
their capital projects to be run with a governance model
that enables transparency and reliable reporting. Owners
must insist on the same. Processes and procedures must be
proactively enforced by monitoring, detecting, preventing and
reporting any actions that risk the confidentiality, integrity
and availability of project information. Systems must be able
to identify and manage current risks and evaluate current
performance, including the appropriate use of resources.
11. Operating model design: Many different internal and external
factors drive businesses to undertake organization redesign.
The impact of their decisions can be both positive and lead to
outstanding growth, or negative and lead to a further need
to restructure. There is no single solution when designing an
organization; a one-off solution is required in every instance.
Numerous interdependencies need to be considered, including
how affected stakeholders will be engaged and consulted
during the process. By taking a structured and systematic
approach to the design process, organizations give themselves
a much improved chance of achieving and sustaining their
strategy and realizing the benefits of restructuring.
12. Contracting strategy: Contracting strategy goes beyond the
pricing arrangement decision; it includes decisions about if and
how to compete the work, how to segregate the project scope
into various work packages, if and how to obtain financial
guarantees from vendors (such as bonds or letters of credit),
and how to allocate the risks and rewards of performance.
An upstream capital project is a complex set of engineered
facilities, systems and subsystems, and each of the contracts
requires a case-by-case contracting strategy definition.
Overall contracting strategy and approach should be
determined after carefully considering the owner’s capabilities,
experience and ability to manage the chosen contract type.
Contract language development, including critical operational,
management and financial considerations, as well as the
contract risk assessment is crucial to understanding the
inherent risks of the finalized contract and developing
management strategies to cover those risks. Independent of
the final strategy selected, each member of the project team
must understand and be able to quantify the risks accepted
and transferred and be prepared to manage the nuances of
obligations owned under the strategy.
The holistic approach to managing capital projects is proving to be
one of the most effective ingredients to a successful project. While
engineering and construction professionals often focus publicly on
the positive lessons learned, and privately on the negative ones,
Ernst & Young has found that the most effective deterrents to
project failure are based on a company’s ability to structure a capital
program that not only encourages, but depends on collaboration
across the functions, business units and stage-gates. We are seeing
healthy stage-gate approaches that are embedded and supported
internally, while driving transparency and collaboration externally
with joint venture partners, local governments and contractors.
Finding the balance between and among the interests of these
stakeholders and the interests of the project is the most effective
strategy for transforming project effectiveness.

10. 8 Capital project lifecycle management for oil and gas
Are you ready?
All too often a business advisor is called in at the end of the project life cycle to conduct a
post-mortem rather than at the beginning, during concept development and pre-planning.
The task of a good advisor is to help its clients do their jobs more efficiently and effectively,
managing their risks and realizing their rewards. Asking focused questions such as these
upfront can help avoid having to ask tough questions later:
• Is your capital projects program holistic, with a stage-gate approach?
• Have you clearly defined who bears the ultimate responsibility for the success or failure
of a project — an individual, management or the steering committee?
• Does your approach realistically match your organization’s capabilities?
• Is your capital project structured to balance the needs of various stakeholders?
• How will you measure and track progress?
• Do you have a plan for optimizing the performance of your suppliers?
• Do you have a realistic budget that factors in historical success rates in meeting projected
scope, schedule and quality goals?
• Are policies and procedures in place to manage and mitigate project risk?
• Is there a common understanding of the strategic implications and financial
consequences of project failure?

11. 9
It isn’t enough to give good advice on the technical issues related to project and asset
management. Ernst & Young’s objective is to be a business advisor, looking at the overall
goals of the organization, determining how a given project aligns and what we can do to
help it succeed. With that perspective in mind, we have designed the following offerings in
the major capital projects area:
Capital project risk assessment
Our major capital project risk assessment offers the greatest ability to positively affect the
full life cycle management of a project. Risk assessment efforts should focus on the issues
with the greatest potential to impact objectives. Strategic risks include environmental
considerations, investment and resource allocations and market dynamics.
Operational risks include supply chain, individual performance of team members,
contracts, information technology (IT), safety and physical assets. Financial risks include
market conditions, liquidity and credit, accounting and reporting, international currency
fluctuations, capital structure and taxes. Compliance risks include governance, code of
conduct, legal and regulatory requirements. Our risk assessment approach looks at the
interdependencies of these risks and how they are affected or mitigated by existing people,
process and technology assets. When gaps between identified risks and existing controls
are identified, we assist our clients in developing and implementing management plans to
mitigate, transfer, or, when necessary, prepare for the acceptance of these risks.
As the project progresses in maturity, the opportunity to influence its design and
performance is reduced proportionately, while the cost of making changes increases.
Our capital project risk and control services provide a structured review of the overall
strategy, planning, procurement, design, implementation and completion of capital
projects. The aim is to highlight performance weaknesses and determine future areas of
risk and opportunities for improvement, while building business confidence and enhancing
overall project performance.
Project contract management
The contract is the vehicle that largely defines and allocates responsibility for each of
the parties’ share of the project risks. In recent years, contractors and project owners
have developed new, innovative and complex approaches to contract structure, pricing
arrangements and risk allocations, which have included such elements as alliance
agreements, incentive fees and hybrid pricing arrangements.
Depending on the relative sophistication of the contracting parties, their familiarity with
the nuances of the contracting strategy, understanding of the associated risk allocation,
and organizational capabilities to mitigate those risks, each may be inadvertently accepting
more risk or risk that is different from what was originally planned. Ernst & Young
has broad cross-industry experience advising clients during the development of their
contracting strategy, including advising on potential contractually required controls and
remedies to mitigate the risk of the selected strategy.
We have assisted clients in the development of progress reporting requirements, invoicing
protocols, schedule management requirements, cost tracking and reporting, subcontracting
requirements and contract compliance monitoring programs.
How Ernst & Young can help

12. Capital project lifecycle management for oil and gas10
Supplier performance management
Oil and gas companies have been using suppliers to carry out a large part of their required
field operations for decades. The days of oil and gas companies having their own captive
fleets of drilling rigs and associated oilfield service capabilities are long past. Owners are
now deeply engaged with a supplier base that is both effective and mobile. However, with
the increasing use of suppliers across the “build” and “operate” areas of their business, a
new range of issues needs to be effectively managed.
We can help our oil and gas clients address this situation by assisting them in adopting a
more holistic view of supplier performance management. Within our Advisory capabilities,
we combine our competencies in a way that provides a tailored solution to address
this client need, encompassing the areas of enterprise risk management, procurement
transformation, technology enablement and contract compliance.
Capital project integrated project team
An increasing focus on capital life cycle management is beginning to emerge, putting
more emphasis on the front-end planning for the larger program management effort.
The management team typically tasked with this effort understands immediately that the
project life cycle must be controlled at every level of the organization.
Our integrated project team (IPT) approach focuses on the functions that are crucial to
the capital project that support the planning, development and execution of a portfolio
of activities. The IPT creates effective project oversight and control, minimizes project
confusion and promotes greater project success, keeps management well-informed,
improves integration of vendor and workgroup activities, builds project management
expertise, and helps define and achieve near-term project objectives and the company’s
long-term, post-project goals.
Companies that try to manage projects via uncoordinated, disconnected efforts discover
that risks and execution issues ultimately lead to widespread failure. Setting up an IPT can
be challenging, but this is not uncharted territory. The road is well-traveled, and many
organizations, large and small, are realizing the benefits that consistent control over
projects provides.
Operating model development
Our approach to organizational design differentiates Ernst & Young by delivering
sustainable improvement in five ways:
• We deliver integrated designs by adopting a systematic and structured approach, aligning
all interdependent components of an organization before completing designs.
• We confirm organizational designs are sustainable by building in flexibility and leaving an
ability to refine the design with the client.
• We facilitate stakeholder collaboration throughout the project journey that helps make
sure the solution is developed and owned by the client.
• We tailor the design to deliver a flexible and effective organization.
• We use a range of innovative tools and methods to bring designs to life in order to create
a workable and pragmatic solution.

13. 11
Following is a more comprehensive list of our capital project effectiveness service offerings:
Capital project life cycle management Asset management Supply chain
1. Capital project risk assessment
2. Capital project integrated project team
3. Operating model development
4. Project portfolio strategy
5. Project contract team
1. Operations and maintenance assessment
2. Asset integrity assessment
3. Maintenance readiness assessment
1. Supplier performance management
2. Procurement transformation
3. Supply chain rapid assessment
4. Logistics & network planning
5. Procurement process improvement
6. Sales & operations planning
7. Tax effective supply chain management
Contract risk services Program/project advisory services Cost management
1. Project contract management
2. Contract risk assessments
3. Negotiation support
4. Compliance monitoring
5. Litigation support and dispute resolution
6. Regulatory support
1. Business process improvement
2. Organizational design
3. Project management oversight
4. Project and process reviews
5. Strategic planning
6. Turnarounds and workouts
1. Cost management and control
2. Cost allocation
3. Change order reviews
4. Project cost audits
Detailed description for bolded services found on page 9 or 10.

14. Capital project life cycle management for oil and gas12
About Ernst & Young
Ernst & Young’s Oil & Gas Performance Improvement practice works with global clients to
develop, design and implement capital project life cycle management programs. Our team
is composed of advisors with experience in oil and gas, engineering, construction and
construction management, architecture, performance improvement and risk management.
We differentiate ourselves through the following:
• We understand the complexities associated with the development of large capital projects.
• We have deep oil and gas, engineering and construction industry knowledge gained
through years of working with exploration and production, drilling and oilfield services
companies, and leading engineering and construction firms.
• We provide a leading approach to project life cycle management, construction
management, risk management, cost control and supply chain transformation, based
on our extensive involvement with more than 250 projects annually.
• We value our independence and objectivity on every project we undertake.
United States
Jason Brown
+1 312 879 4377
jason.brown1@ey.com
Mark Costello
+1 212 773 0142
mark.costello@ey.com
Bill Hale
+1 713 750 8383
bill.hale@ey.com
David Blanc
+1 713 750 5129
david.blanc@ey.com
Australia:
Bradley Farrell
+61 8 9429 2336
bradley.farrell@au.ey.com
Canada:
Doug Burcham
+1 403 206 5304
doug.burcham@ca.ey.com
Great Britain:
Paul Allison
+44 20 7951 3654
pallison@uk.ey.com
Malcolm Bairstow
+44 20 7951 3685
mbairstow1@uk.ey.com
Netherlands:
Peter Spaans
+31 88 40 78810
peter.spaans@nl.ey.com
For more information on capital project management contact:

16. Ernst & Young
Assurance | Tax | Transactions | Advisory
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory
services. Worldwide, our 152,000 people are united by our shared values
and an unwavering commitment to quality. We make a difference by helping
our people, our clients and our wider communities achieve their potential.
Ernst & Young refers to the global organization of member firms of
Ernst & Young Global Limited, each of which is a separate legal entity.
Ernst & Young Global Limited, a UK company limited by guarantee, does not
provide services to clients. For more information about our organization,
please visit www.ey.com
How Ernst & Young’s Global Oil & Gas Center can help your business
The oil and gas sector is constantly changing. Increasingly uncertain energy
policies, geopolitical complexities, cost management and climate change
all present significant challenges. Ernst & Young’s Global Oil & Gas Center
supports a global practice of over 9,000 oil and gas professionals with
technical experience in providing assurance, tax, transaction and advisory
services across the upstream, midstream, downstream and oilfield service
sub-sectors. The Center works to anticipate market trends, execute the
mobility of our global resources and articulate points of view on relevant key
sector issues. With our deep sector focus, we can help your organization
drive down costs and compete more effectively to achieve its potential.
© 2012 EYGM Limited.
All Rights Reserved.
EYG No. DW0085
1203-1338642