Decision-Making for Oil and Gas Projects: Using Front End Loading and Decision Analysis More Effectively

Abstract

The oil & gas industry has a history of projects not achieving the outcomes promised at sanction. It is well-known that good Front End Loading (FEL) will increase the likelihood of project success. However, despite this, a significant number of projects proceed with insufficient FEL. This research aims to find out why this is, and to develop ways of influencing decision makers so that FEL will be used more effectively in future. Making high quality decisions is the best way of maximising the likelihood of achieving desirable outcomes. Decision Analysis (DA) is a pragmatic methodology for making high quality decisions that has been around for many decades. However, it is not always used when making key decisions on oil and gas projects. This research aims to determine why this is, and to find ways to influence decision makers to use DA more effectively. Interviews and a survey were carried out with senior personnel from oil and gas companies to determine their knowledge and understanding of FEL and DA, how they think they should be used and how they are used in practice. These studies demonstrated a strong belief that FEL must be carried out if a project is to be successful, and that DA needs to be applied for major decisions - but these only happen in practice around half of the time. A follow up survey was carried out to clarify issues outstanding from the interviews and the initial survey, and to determine the likely uptake of proposals to encourage better use to be made of FEL and DA. There was strong support for the proposals which included developing a simple tool to give a pragmatic assessment of FEL, having performance incentives based on achieving good FEL and high Decision Quality, and undertaking training on project decision making. An experiment was set up to investigate how training, and the way a decision is framed, influence the approach taken for project decision making. Half of the participants received training by watching three short online videos, the other half received no training. They all then answered questions on three decision making scenarios for projects. The results showed that training influenced decisionmakers to take a more structured and process-based approach, and that the way a decision is framed by an authority figure has a strong influence on the approach taken for project decision making. An alternative way of assessing FEL has been developed to encourage FEL to be used more effectively and increase the likelihood of delivering better project outcomes. It is a simple, decision-based approach to assessing FEL which can be carried out in-house. It is proposed that it is used in conjunction with FEL benchmarking to gain the benefits of both approaches, provide a better understanding of FEL, and have a stronger basis for decision-making.