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Downstream projects in Russia: how to achieve seamless project execution and capital efficiency

09-15-2017 02:52 PM CET | Business, Economy, Finances, Banking & Insurance

Press release from: GBC

To maintain position within the market, Russian oil and gas majors like Lukoil, Gazprom Neft, Sibur and Rosneft have to implement new revamp projects despite a low oil price environment. At the same time, without significantly reducing cost and enhancing project performance, these projects will not be able secure financing or be approved.

We can see that a lot has been done to improve capital efficiency in the Russian downstream sector in comparison to the poorly delivered projects in the 90s. However, even more sophisticated skills and advanced technologies are needed to manage the increasing scale and complexity of today’s capital projects to get the best returns from multibillion-dollar projects.

One of the recent success stories is Sibur's $9.5 billion ZapSibNeftekhim petrochemical project, which is several months ahead of schedule. Here’s an impressive video report on the project scope and progress: What are the keys for success in delivering downstream projects in Russia?

I collected several opinions from GBC’s speakers and industry friends on projecting market in Russia and success factors for driving capital efficiency with projects for the downstream sector:

Igor Nasirov, Business Development Director of Portfolio Management and Strategy Downstream at ThyssenKrupp Industrial Solutions suggests that “the Russian market has sufficient potential for further growth if state-of-the-art technologies are used and access is provided to cheap financing”. In his presentation delivered at the Downstream Tatarstan conference last week, he added: “New deep processing processes in Russian downstream are highly effective and have a short payback period.”

Oleg Kostin, General Director of JSC NIIK (Research & Design Institute of Urea and Organic Synthesis Products) lists the main success factors as follows: “First of all, it’s the demand. We can go on talking about process performance, but the bottom line is – a project is successful when it brings money. That’s why correct selection of a growth direction is of crucial importance to new enterprises.

I’d give the second place to energy efficiency, implementation of cost-saving solutions, and capital capacity of the production, since these things define cost efficiency of a project to a large extent.

Time is another factor that is of huge importance for successful implementation of a project. We are talking here not only about the direct impact time has on projects (schedule), but also about the right time for investments to start coming in.

On the one hand, a market for any product develops in cycles, and there is a considerable time lag between these cycles - sometimes it’s even longer than a new plant construction period. Which means that, to start producing when the market is on the rise, and to gain maximum profit, you have to start investing when the market is in decline – and that’s not an easy decision to make.

And, finally, people. Any facility is designed, built and managed by people.”
According to EY’s report, ‘Oil and gas megaproject development: project development to FID’, new technologies, such as 3-D printing, robotics and digitization, offer huge potential to drive improved performance. They state: “The oil and gas industry has significant potential to embrace visualization and other new technologies to improve project engineering accuracy”, and “The energy industry as a whole has fallen behind other industries in the adoption of data collection and the use of advanced analytics for decision-making”.

Directors of Capital Projects Departments, Chief Engineers, Facility Leaders and Capital Project Managers from project owner and contracting companies will be attending our 4th CEE & CIS Downstream Project Management Conference, on the 2nd -3rd November 2017 in Vienna, to exchange best practices in project management and capital efficiency. The event is officially supported by MOL and Slovnaft and includes a technical visit to Bratislava refinery.

If you have solutions or success stories to share with our clients, join us in Vienna for the insightful conference, interactive roundtables, a technical visit to Slovnaft refinery and the gala dinner.

Visit www.cisdownstream.com for more information.

PS Feel free to share your thoughts on improving capital efficiency in the refining & petrochemical projects in Russia in the comments to this article

GBC Ltd is an international company run by professionals with more than 20 years’ experience and a passion for organising highly successful international oil & gas events.

Our conferences provide a platform for companies looking to achieve successful corporate performance as well as expanding the scope of their expertise and establishing themselves in new markets. Our production team are experts in the upstream and downstream sectors who know the market inside out.

Office 301, 22 Highbury Grove, N5 2ER UK

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