Maximizing Efficiency: Centralized Project Material Management For Owner Operators in Oil and Gas

Abstract

The demand for oil and gas remains high despite the increasing prominence of renewable energy sources, highlighting the industry's vital role in the global economy. Oil and gas projects, requiring significant capital and facing high complexity and risk, necessitate effective project management to optimize performance through agility, accurate forecasting, risk mitigation, and stakeholder collaboration (Redda, Turner, and Milano 2018; Yananto, Putro, and Sunitiyoso 2022). Leveraging data-driven approaches enhance operational efficiency, reduce costs, and support informed decision-making, which is crucial given the lengthy timelines and substantial financial commitments in this sector (Darusulistyo et al. 2022; Urton and Murray 2021). Oil and gas projects span upstream exploration, midstream transportation, and downstream refining and distribution. Each phase presents unique challenges due to technical complexity, stringent regulatory demands, environmental considerations, and market volatility. Projects are generally managed through portfolios to enable dynamic prioritization based on scope, financial goals, risks, resource availability, and alignment with the organization's strategy and governance (Sirisomboonsuk et al. 2018). Portfolio management helps prioritize projects based on scope, financial goals, risks, and strategic alignment, improving financial performance and transparency (Sirisomboonsuk et al. 2018; Wood 2016). Major projects typically follow a stage-gate process, breaking the project into phases—Concept, Feasibility, Definition, Execution, and Operation—each marked by a gate ensuring the project is on track (Newman, Begg, and Welsh 2020; Akhtar 2020). This paper focuses on the critical aspect of material management that spans across all project phases and relevant contribution to improve capital-project performance. Globally, 64% of projects face budget overruns, and 73% experience schedule delays with material and equipment issues as one of the primary contributors (EY 2020). Material cost is a significant component of overall construction costs, constituting 25–40% of the total cost of typical projects (Mir et al. 2021). Effective material management is integral throughout the entire project lifecycle, from initial concept and feasibility studies to the final operation and maintenance phases. By emphasizing a comprehensive and integrated approach to material management, this study aims to demonstrate how coordinated efforts across all project phases can lead to enhanced project performance, reduced costs, and improved alignment with long-term operational goals.