Following my speech at the 2016 Modular Construction conference in Calgary, the Construction industry in Alberta took note of the concept of Enhanced Standardization.
Enhanced Standardization calls for a Uniform set of Specifications and standards for each system/process unit across the entire Oil Sands Industry. What this means is a set of common standards including pipe classes, insulation, coating, cleaning etc. as the first step. This Enhanced Standardization approach can be a real game-changer for the Alberta Oil/Gas industry, to help compete with US Shale Oil producers, Middle Eastern Low Cost producers and others.
In summary, Standardization of design and systems within the Oil Sands industry will result in multiple cost reduction benefits:
- Reduce Engineering and Design Costs - Several operating companies are already pursuing a "Templating" strategy, where projects are developed in phases. After the first phase, the subsequent phases are expected to be simply follow the template created by the first phase.
- Reduce Procurement Costs - While "Templating" works for individual operating companies, and by definition, are restricted to individual companies, enhanced Standardization across the industry can result in higher overall cost savings. This is achieved by:
- Develop industry wide Approved Vendor Lists.
- Increase competition between vendors through regular expansion of the Approved Vendor List, and leverage low cost fabrication centers more effectively.
- Since all vendors work off the same specifications and standards, there is less time spent on deciphering uniqueness of specs and standards between various owner companies, and more certainty in the overall bid price.
- Reduce Fabrication & Construction Costs - This is one of the biggest areas of focus during cost reduction, and where significant savings can be achieved if the Enhanced Standardization approach is implemented.
- Common set of standards and guidelines create a workforce trained on Oil Sands projects in Alberta. The trades and construction contractors become more familiar with the industry requirements and by working off a common base, effectively achieve continuous improvement in their skills.
- Construction contractors are able to be in a better position to accurately bid and execute jobs within the industry for various clients.
- The experience of personnel becomes more interchangeable when working on projects for different Owner/operating companies.
- Holistic Continuous Improvement - A more holistic and integrated continuous improvement process can be implemented within the industry resulting in the overall industry performance increasing year after year.
- Improve the standard design based on learnings obtained from a wide range of projects in the industry.
- Constant improvement in the productivity and efficiency of the workforce.
- Continuous enhancement of execution strategies based on what worked and what didn't, using more data points from projects all across the industry.
- Refine the standard modules on a continuous basis.
- Constantly help improve the skills of the vendors to deliver cheaper, faster and better quality of products and services.