The Good, the Bad, and the Ugly of the Stage-Gate Project Management Process in the Oil and Gas Industry

Abstract

TX 75083-3836, U.S.A., fax 01-972-952-9435. AbstractManagement teams across the globe have and will continue to bet on major capital projects to drive their companies' performance. Capital committed to these mega-projects has increased at a compounded average growth rate of over 12% over the last decade, and this trend is expected to continue over the next decade. To manage the shareholder value at risk in these projects, almost every major oil and gas company has invested heavily in a formal stage-gate project management process. Yet the performance of major projects has not appreciably improved, and significant project failures-both technical and economic-continue to occur.We have investigated how the application of these state-ofthe-art processes has gone astray in the oil and gas industry. We identify the key organizational and technical shortcomings that are diminishing project performance and suggest the topten actions management can take to gain significant competitive advantage.

he Best of Both Worlds: Highlighting the Synergies of Combining Manual and Automatic Knowledge Organization Methods to Improve Information Search and Discovery

“…In the oil and gas industry, stage-gate processes typically help govern opportunities, prospects and projects as they pass through repeated execution, assurance and decision gates. It is crucial to be able to quickly locate the final version of a key document type (known item) that was created by (or used for) a particular stage gate process (Walkup and Ligon 2006). This stage gate structure lends itself to simple pre-attributed (pre-populated) process steps (folders), of deliverables required, underpinned by corporate taxonomies and authority lists.…”

Executive-level Capital Project Decision Making: Rational or Rationale?

“…In an article on the stage-gate process in the oil and gas industry, Walkup and Ligon (2006) note that almost every major oil and gas company has invested heavily in a formal stage-gate project management process. The purpose of having a gated process is to create greater shareholder value while protecting people and the environment.…”

“…However, in the past decade these indicators have become unreliable, and if they do not provide predictability but still act as the justification for a project, what is really going on with decision making? The first phase of the process ends with the review board determining whether to proceed with the project and, if so, how (Morgan, 1987;Walkup & Ligon, 2006). Phase two entails identifying the optimum development plan, including trade-offs between value drivers such as technology, reliability or reputation.…”

“…Who are the key stakeholders? This phase ends with the decision review board (DRB) deciding whether to proceed and how (Morgan, 1987;Walkup & Ligon, 2006).…”

“…Because beginning a project calls for conceptual thinking (Dinsmore, 1990), Morgan notes that the front end should not be used to gain experience but rather to apply the experience of people and not organizations. Walkup and Ligon (2006) state there is still a significant gap between the ideal and reality of a stage-gate process, with more than 25% of projects still encountering major problems. These are attributed to leadership, project governance, creating value, and stakeholder engagement.…”