麦肯锡-石油和天然气的资本支出卓越：应对市场挑战的创新 Oil and Gas Capex excellence in oil and gas Innovations for market challenges

Mcsey

&company

OilandGas

Capexexcellenceinoilandgas:

Innovationsformarketchallenges

Novelcapitaldeploymentandprocurementapproachescouldhelpaddressthecurrentchallengeswithintheoilandgasindustry’supstreammarket,leadingtoincreasedvaluecreation.

ThisarticleisacollaborativeeffortbyAlessandroAgosta,GiorgioBresciani,RobertoArgolini,andSamLinder,withLucaRigovaccaandRiccardoBagnara,representingviewsfromMcKinsey’sOil&GasPractice.

©GettyImages

December2024

Likemanyindustries,theupstreamsectoroftheoilandgasindustryisfacingchallengesonseveralfronts:volatilecommoditymarketsdrivinghigher

costinflation,geopoliticalinstabilitycausingsupplychaindisruptions,competitionforconstruction

talentandlaborincertaingeographiessuch

asNorthAmerica,andincreasingpressuretoacceleratebringingnewproductiononline.1

Capitalexpenditure(capex)isrisingasaresult,

callingforcostoptimizationandinnovationin

capitaldeploymentprocessesalongthevalue

chain.Traditionalprocurementmodelsareoftennotagileorresilientenoughtorespondtothe

growingpressuresonupstreamcapitalcostsanddevelopmentspeed,potentiallyaffectingon-timeandon-budgetprojectdelivery.

Tocopewiththisincreasingcomplexity,some

oilandgasplayersareintroducinginnovative

procurementstrategies,suchasexpandingthetraditionalsupplybase,testingnewtendering

models,andadoptingshould-costmethodologyfromotherindustries,suchastheautomotive

sector.2

Thelastapproach,especially,offersapromising

solutionformanagingupstreamcosts:itis

structured,fact-based,andmodelsafairpriceforagivenprojectorservice,consideringboththe

underlyingcostdriversandexpectedmarginsofsuppliersalongthevaluechain.

Inthisarticle,weassessthefactorscausing

inefficiencyintraditionalprocurementmodels

inthecurrentenvironmentandhowupstream

organizationscoulduseprocessinnovationandtheshould-costmethodologytoovercomethem.

Newchallengesarechangingoilandgasprocurement

Theindustry’scapitaldeploymentapproach

requiresarethinktoaddressarangeofchallenges,includingrisingcostsandcompetitionforresources

andcontractorcapacity,thegrowingnumber

ofalternativesupplychainsolutions,andthe

increasingcomplexityofcommercialapproaches.

Highercostsarecausingashiftawayfromtraditionallumpsumapproaches

Fluctuationsinthepriceofrawmaterialshavemadeitdifficultforupstreamoilandgascompaniesto

relyonbenchmarkstosupportthecostestimationofnewcapitalprojectdevelopments.Forexample,thecostofshipbuildinggradesteelin2023

increasedmorethan55percentcomparedto2022prices.3

Akeychallengefacingnewprojectdevelopmentistherecentshifttowardsupplierrisk-sharing

agreementsinprocurementmodels.Followingunprecedenteddisruptions,suchastheCOVID-

19pandemicandanevolvinggeopolitical

environment,suppliersnowtendtopreferrisk-

sharingagreements(forexample,movingfrom

lumpsumcontractstobonus-malusprovisions).4Theserequireupstreamplayerstonegotiatenewcommercialclauses,withlimitedornoexperienceonthepotentialcostimplications,andshiftfromdebtfinancingtowardequityriskcapital,which

comeswithhigherreturnpremiums.

Werecentlyanalyzedasampleofprojectsin

thesectorpresentedatthe20thinternational

conferenceandexhibitiononliquefiednaturalgas,LNG2023.Industryexpertsestimatedthatthe

averagepercentageoftotalbidcostsallocatedtoprovisionalsumversuslumpsumhasdoubledcomparedtothepastfewyears(Exhibit1).

Thesechallengesaredrivingtheneedforsingle-sourcingprocurementapproaches

Therapidlyevolvinglandscapewithitsnew

challenges—includingfastertime-to-market

demandsandthescarcityofsuppliersincertaingeographies—requirestheindustrytofind

innovativesolutionsforstreamliningprocurement.Forexample,recentmarketuncertaintieshave

financiallychallengedmostcontractors,whilelocalcontentruleslimitthespectrumofsuppliersthat

canbeengaged.5

EricArnoHiller,“Whatshoulditcost?,”McKinsey,October5,2017.

1“Howoilandgascompaniescansecuresupply-chainresilience,”McKinsey,March6,2023.2

Bonus-malusreferstoanincentivesystemtoguidecontractorsbyofferingeitherrewardsorpenalties,dependingonperformance.5McKinseyanalysis.

3“OECDCouncilWorkingPartyonshipbuilding(WP6),”OECD,accessedMay2024;“Shipbuilding,”OECD,accessedMay2024.4

2Capexexcellenceinoilandgas:Innovationsformarketchallenges

Exhibit1

Theaveragepercentageoftotalbidcostsallocatedtoprovisionalsumversuslumpsumhasdoubledcomparedtothepastfewyears.

Lumpsumvsprovisionalsum,%oftotalcost-bidLumpsumProvisionalsum

70

55

15

15

85

70

15

15

15

85

15

70

30

Q3/Q420212023

Lumpsum

Contingencyandprofit

Totallumpsum

Initialprovisionalsum

Lumpsumconvertedtoprovisional

Totallumpsumand

provisional

McKinsey&Company

Toaddressthesechallenges,playerscouldstartusingsingle-sourcingprocurementmodels.The“technicalandcommercialpartnership”approach isemergingasanewmethodforsinglesourcingandisbecomingthemostrelevantfortheoilandgasindustry—itisbetterpositionedtodealwith

theincreasingcomplexitiesimpactingcapital

equipmentcostingcomparedtotraditional

approacheslikedesigncompetitionandfixed

designtender(seesidebar,“Procurementmodeltypes”).

Procurementmodeltypes

Singlesourcingthroughtechnicalandcommercialpartnership:Afterarapidmarketscan,apreferredsupplierofchoiceisselectedupfront,andthegranularcostbreakdownisnegotiatedwiththesupplier.

Designcompetition:Afewsuppliersarecalledontoprovideatechnicalandeconomicproposal,withnegotiationsandoptimizationsconductedindependentlytoselectthebestoption.

Fixeddesigntender:Atendertodevelopanupstreamprojectisconductedafterfront-endengineeringdesign(FEED),basedonaninvitationtotenderpackagewhereallsuppliersquoteonthesameengineeringsolution.Thenegotiationonthelumpsumpricetakesplaceafterafulltechnicalalignmentwithallsuppliers.

Capexexcellenceinoilandgas:Innovationsformarketchallenges3

Evolvingprocurementapproachesrequirenewcapabilities

Toleveragenewprocurementapproaches,manyupstreamcompaniesrequireastepupincapabilities.Thisincludesdevelopinganindependentperspectiveonthefaircostofaprojecttorunnegotiationswithsuppliers

successfully.Here,should-costmethodologycanbeusedtosupportsuchnegotiations,asitcan

strengthentheshiftfromalumpsumapproach

tothetechnicalandcommercialpartnership

approach.Thiscanbeachievedbysupporting

informationsymmetrybetweenengineering,

procurement,andconstruction(EPC)companiesandoilandgasoperatorsduringthetechnical

andeconomicoptimizationphases.

Aswellasenablingtheidentificationofmultiple

optimizationlevers(suchasalternativetechnicalsolutions,direct-buyonspecificprocurement

categories,andbroadersupplychainfootprints),wehaveobservedthatshould-costmethodology,coupledwithatechnicalandcommercial

partnershipapproach,canshortenoverall

timelinesforfinalinvestmentdecision(FID).For

projectswithlongbiddingtimes,timetoFIDcouldbereducedbysixtoninemonths,correspondingtoatwo-to-three-monthreductionineachdesignphase(conceptdesign,preliminarydesign,and

FEED)(Exhibit2).

Exhibit2

Should-costwithtechnicalcommercialpartnershipscanreducetime-to-marketbyuptosixtoninemonthsversustraditionalapproaches.

Conductedbycontractor

Conductedby

multiplecontractorsinparallel

Timetofinalinvestmentdecision(FID),byactivityandapproach,

months

Fixeddesigntender

~3~6~9–12

Concept

Preliminary

Front-endengineeringdesign

design

design

Conductedtogetherby

contractorandplantowner

Conductedtogetherbymultiplecontractorsinparallelwith

plantowner

~3

~6

TechnicalalignmentLumpsum

onsingleITT¹packagenegotiation

Designcompetition

~3

~6

~6

Preliminarydesign

~9–12

~3

Front-endengineeringdesign

Conceptdesign

Lumpsumnegotiation

Technicalalignmentwitheachsupplier

Should-costwithtechnicalandcommercialpartnership

~3

~6

Concept

Preliminary

Front-endengineeringdesign

design

design

~9–12

Upto6–9months

savedontimetoFID

Technical,economical,andsupplychainoptimizationwithshould-cost

1Invitationtotender.

McKinsey&Company

4Capexexcellenceinoilandgas:Innovationsformarketchallenges

Inthecourseofourworkwithclientsintheindustry,wehaveobservedhowshould-costcanhelpreducetimeandoptimizeoverallprojectspendingacrosstheoilandgasindustry:

—Afloatingliquefiednaturalgas(LNG)owner

carvedoutsomehullsectionsandtopside

modulesfromthelumpsumagreementto

bidthemoutindependently,achievingcost

optimizationsthroughbest-costsuppliersinnewgeographies.

—Inthemidstreamsector,morethanonecompanyismovingtoconvertiblecontractswithseparateFEEDtomaintaindirect-buyflexibilityonkey

categories.

—Someplayersintheoffshoreindustry,especiallyinregionsexperiencinggeopoliticalinstability,aretakinginsuppliersasequitypartnerstoreduce

riskmarginsthatarepricedintosupply.

—Someoilandgasplayersaredevelopingstrategicpartnershipswithcontractorsbynegotiating

multipleprojectsinthepipelineupfronttoensuretechnicalstandardizationandunlockcross-

projectprocurementsynergies.

Should-costmethodologycreates

informationsymmetrywithEPCs

throughgranularcosttransparency

Should-costmethodologyisemergingasoneof

themostreliablesolutionstohelpupstreamplayersaddresstheircurrentchallenges,providingthe

granularcosttransparencyneededtodealwiththechanginglandscape.Sohowdoesitwork?

Afterbreakingdownthetotalcostofaproject,

product,orserviceintogranularcomponentsand

assessingthecostdriversforeach,companiescan

determinethereasonableshould-costofaserviceorproductbasedonitsconstituentelements.Comparedtotraditionalsolutions(whichlimitthebenchmark

toafinitenumberofpastprojects),should-costcanestimatethecostsassociatedwithanycombinationofdesign,geographicfootprint,andcommercial

agreement.

Initiallydeveloped,fine-tuned,anddeployedat

scaleintheautomotivesector,theshould-cost

methodologyusesbottom-upmodelingofallsupplychaincoststhroughafour-stepapproach:

—Step1:Analyzingthedesignchoicesand2Dor3Ddrawingsoftheprojecttoderiveabillofquantitiesforrawandbulkmaterials.

—Step2:Mappingtheend-to-endvaluechaintoidentifyallthemanufacturingstepsrequiredtoproduceeachcomponent.

—Step3:Costingtherequiredquantitiesand

valuechainstocalculatedirectcosts,leveragingproprietarydatabasesandproductivitymodelstailoredtoeachcountry,technology,andsector.

—Step4:Completingthebottom-upshould-cost

calculationstodefineshould-costcomponents,

includingallelementsofsuppliers’coststructures.

Throughitsflexible,unbiased,andfact-based

methodology,ashould-costanalysiscan,therefore,provideup-to-date,end-to-endtransparencyontheentiresupplychaincoststructureforanupstream

project’stenancyincommon(TIC)investment.6

Toillustrate,weperformedadeepdiveshould-cost

analysisforLNGtanks,providingfulltransparency

onkeycostdriversforfurthernegotiationwiththe

supplier(Exhibit3).Thisanalysisenabledafact-basednegotiationwiththesupplierandledtoan8percent

costreductiononthefinalnegotiatedpricecomparedtotheinitialbid.

Should-costapplicationsintheoilandgasindustry’supstreammarket

Asignificantadvantageoftheshould-cost

methodologyisitsflexibilityintheupstreammarket,makingitdeployablealongmultiplephasesofa

project’stimeline—fromconceptdesigntoFIDandcommissioning.Thisallowscompaniestomake

informedinvestmentdecisionsandallocatecapitalmoreefficiently.

6

Tenancyincommoninvestmentmeansthatonceconstructed,aplantwillberunbymultipleownersandstakeholderswhoaresharingtheinvestment.

Capexexcellenceinoilandgas:Innovationsformarketchallenges5

Exhibit3

Anexampleofashould-costmodelforhullandLNGtanksgivesanoutputwithfulltransparencyonLNGtanks’costdrivers.

Illustrativeshould-costmodelforhullandLNGtanks

Keyspecifications

•Numberoftanks:8

•Tanksize:~30metrictons(mt)×~25mt×~40mt

•Insulationmaterialthickness:~300mm

•Overallstoragecapacity:~250km

Should-cost,%020406080100

MaterialRawmaterial

Purchasedmaterials

Totalmaterials

Detail

Rawmaterials

•304lstainlesssteel:$2.0/kg

•ReinforcedPUfoam:$2.6/kg

•Birchplywood(9mm):$12.2/m

ProductionLabor

Machinery

Batchsetup,scrap,andtooling

Manufacturingoverhead

Totalmanufacturing

Labor

•Average$55/hourrateforskilledworkerinSouthKorea

Machinery—mainmanufacturingsteps

•Masticapplicationequipment:~$55/hour

•Weldingandtrimming:~$150/hour

•Shotblasting:~$90/hour

•3,600toncrane:~$0.1million/downtimeday

•Testingandassembly:~$120/hour

IndirectOverhead(SG&A,¹R&D)

Profit

Outboundlogistics

Indirect

•SG&A:8%

•R&D:4%

•Qualificationandcertification:12%

•Profit:4%

•Outboundlogistics:2%

Totalshould-cost

1Selling,general,andadministrative.

Source:McKinseyCleansheetDatabase

McKinsey&Company

Theshould-costmethodologyhasbenefitsacross

multipleapplications.Theycanleadtomore

effectivenegotiationsbetweensuppliersandoilandgasoperatorsduetoimprovedinformation

sharing,allowingoperatorstopinpointtheir

effortsonhigh-potentialcostcategories.The

methodologycanenablefasterandmorefactualdecisionmakingalongtheprocurementprocess,fromassessingdesignalternativestoselecting

optimalsupplychainstructuresandinvestmentdecisions.

Theshould-costmethodologycanincreaseoverallprofitability,too,typicallyforbothoperatorsand

suppliers,giventheopportunitiesforidentifyingandtacklinginefficiencies.Thisanalysisalso

hasspecificapplicationswhereend-to-end

transparencyonthesupplychainiskeytosecuring

6Capexexcellenceinoilandgas:Innovationsformarketchallenges

andcreatingvalueinprojectdelivery.Specificinstanceswherethesebenefitscanberealizedinclude:

First-of-a-kindprojects:In-house

benchmarkingcanbechallengingforinnovative,

newtechnologiesduetothelackofproject

precedence.Should-costcanprovideasoundsolutiontothisproblembyindependently

modelingtheexpectedcostsofthesenewtechnologies.

Stakeholderalignmentoninvestment

costs:Should-costcansupportfact-based

discussions,approvals,andnegotiationswith

complexstakeholders—suchasgovernments

orinvestmentpartners—byprovidingdetailed

transparencyoncostdriversforspecificprojects.

Assessmentofasupplier’slearningcurve

whenrealizingpastprojectreplicas:Should-costmodelscanhelpassesspastproject

learnings,determiningwhichactivitiesshouldbereplicatedandwhichcanbeacceleratedoravoided.Forexample,inourexperience,oneoilandgasorganizationthatappliedthisapproachwasabletoquantifythisreplicaeffectinmorethan10percentoftotalprojectcosts.

Quantificationofpriceevolutionsinhighly

volatilemarkets:Should-costcanprovidefull

transparencyonprojectcostbreakdownsand

enabletheoverallprojectpricetobelinkedto

theevolutionofunderlyingmarketindexes(suchasforrawmaterialsorlaborcost).Anoilandgascompanyharnessedthisapproachtodynamicallymodelthepriceevolutionofamegaprojectbasedonmorethan35inflationindexes.

Assessmentoflocalconstraintimplications:

Severalcountrieshavetightconstraintsonthe

incidencethatlocalactivitiescanhaveonthe

overallprojectprice.7Basedonlocalcountryrisks,should-costcanquantifytheeconomicvalueof

requiredriskmitigationactions—orexpectedsuppliers’contingencies.

Trade-offanalysisforsupplychain

optimization:Should-costcansimulateexpectedcostsfordifferentsupplychain

structures.Forexample,anoilandgasoperator

wantedtodetermineifitshouldmovethe

constructionoftopsidemodulesforavesselto

anothercountry.Inlessthantwoweeks,should-costmodeledthevariationsinlogisticsandlaborcostsbetweenthetwocountries,leadingthe

operatortoconcludethatit,infact,shouldnotswitchcountries.

Contractstrategydefinition:Should-cost

analysiscansupportthedefinitionofacontract’stermsandconditions(T&Cs),optimizingeconomicandcontractualvalue.Thiscanbedoneby

modelingtheexpectedextracostandriskbuffersthatthesupplierwouldneedtoincurtocomply

withthecontractualT&Cs.

Claimmanagement:Should-costcanbe

employedtoassessthefairvalueofapotentialsupplier’sclaimsafterthelaunchofthe

constructionphase.Suppliers’quotationscanbecomparedandthennegotiatedbymodelingtheexpecteddeltapriceofagivenvariation.

Pricerenegotiations:Ifneeded,should-cost

cansupporttheeconomicevaluationofbonus-

malusprovisions.Bycalculatingcostsbottom-upwithquantitiesandunitaryprices,should-cost

allowsoperatorstoquantitivelydetermineifcostsincurredduringproductionarethesameasthosedeterminedinthebid.Throughcomparison,theycanthenworkoutifthereisacorresponding

bonusormalusprovision.

Consistentlycapturingshould-costbenefitsrequiresnewcapabilitieswithintheorganization

Whileshould-costapplicationcomeswithundisputedbenefitsintermsofcapital

deploymentoptimizationandtime-to-marketreduction,toconsistentlycapturethem,oil

andgasplayersarerequiredtobuilddedicated

7

McKinseyanalysis.

Capexexcellenceinoilandgas:Innovationsformarketchallenges7

capabilitieswithintheorganization.Throughourworkwithorganizationswithinandbeyondtheoilandgasindustry,wehaveidentifiedthreetypicalmodels—buy,hybrid,andmake—thatcompaniesusetostepuptheirshould-costcapabilities.

Buysolution:Abuysolutionresultsinthecompleteexternalizationofshould-cost

modelingforallpurchasecategories,withan

externalpartnerusedforeveryneed.Thetype

ofcompaniesthatcouldadoptthismodelcould

bepurchasersofsophisticatedsyste