Building a Bulletproof ERP Integration for Oil and Gas Projects

Introduction

Oil and gas megaprojects, like Gorgon LNG ($20B overrun) and Ichthys LNG ($10B overrun), face catastrophic risks when financial systems (Enterprise Resource Planning, ERP) and project controls (scope and schedule) are disconnected. Poor integration leads to untracked costs, overstated progress, and audit failures, as seen in Gorgon’s year-long delay and defective welds. This article outlines a practical framework to integrate ERP with project controls using Business Intelligence (BI) tools like Power BI, ensuring cost-progress alignment. By structuring Work Breakdown Structure (WBS), Control Accounts (CAs), and Cost Breakdown Structure (CBS) correctly, and leveraging BI for real-time insights, projects can avoid disaster and deliver on time and budget

Key Components of Integration

1. Scope-Pure WBS: Define Deliverables, Not Execution

What: A WBS organizes project scope into deliverables (e.g., fuel gas system, pipeline section) that can be tested and handed over, not phases (e.g., engineering, construction) or disciplines (e.g., piping, electrical).
Porquê: Keeps scope stable despite changes in contractors or methods, avoiding Gorgon’s reporting chaos from misaligned WBS.
Example: Instead of “Piping → Engineering,” use “System 361-001 Fuel Gas,” with engineering as an attribute of work tasks.
Risk of Failure: Gorgon’s misstructured WBS led to untracked costs, contributing to $20B overruns (Reuters, 2016).

2. Control Accounts: Link Scope to Accountability

What: Control Accounts (CAs) connect a WBS deliverable (e.g., fuel gas system) to a responsible team (Organizational Breakdown Structure, OBS), with one manager (CAM) per CA.
Porquê: Ensures clear ownership of costs and progress, preventing Ichthys’ $10B overrun from blurred accountability (Australian Financial Review, 2018).
Example: A CA for “Fuel Gas × Piping Contractor” tracks piping costs and progress, with one CAM overseeing it.
Rules: Place one CA per deliverable unless multiple teams own distinct parts (e.g., piping and electrical). Never split by phase (e.g., construction, commissioning).

3. Work Packages: Tag Execution Details

What: Work Packages (WPs) are tasks under a CA (e.g., spool installation, cable pulls), tagged with execution details like phase, discipline, contractor, or test pack.
Porquê: Keeps execution flexible without altering WBS, enabling BI to filter by attributes (e.g., show all piping tasks).
Example: A WP for “hydro testing” in fuel gas carries tags: Construction, Piping, Test Pack TP-361-19.
Risk of Failure: Gorgon’s untracked attributes led to misreported progress, delaying first gas by a year (Bloomberg, 2016).

4. ERP-CBS Integration: Connect Costs to Scope

What: Map each CA to an ERP cost object (e.g., SAP WBS Element), with costs (labor, materials, rework) tagged by CBS (cost type) and CA identifier.
Porquê: Ensures every dollar ties to a deliverable, avoiding Gorgon’s unallocated costs.
Example: An invoice for cable posts to CA-361001-EI (Fuel Gas × Electrical) with CBS = Materials, visible in Power BI.
Risk of Failure: Ichthys’ misposted costs caused disputes, adding to delays.

5. BI Dashboards: Real-Time Insights

What: Use BI tools (e.g., Power BI, Tableau) to join ERP costs, WBS scope, and WP progress, showing metrics like Earned Value (EV), Actual Cost (ACWP), and Earned Schedule (ES).
Porquê: Provides instant visibility to catch variances, unlike Gorgon’s undetected rework.
Example: A Power BI dashboard flags a CA with high rework costs, prompting a weld inspection.

Why Integration Is Non-Negotiable

Financial Control: Prevents overruns by linking costs to deliverables (Gorgon’s $20B lesson).
Schedule Accuracy: Catches delays early with ES metrics (Ichthys’ 1-year delay).
Quality Assurance: Tracks rework, reducing costs (Gorgon’s weld failures).
Audit Readiness: Ensures traceability, avoiding Kashagan’s audit delays (Bloomberg, 2017).
Stakeholder Trust: Aligns payments with progress, preventing disputes (Ichthys’ contractor issues).
Proven Value: Johan Sverdrup saved $1B with integrated controls (Offshore Engineer, 2020), with 10–20% cost savings possible (McKinsey, 2023).

Practical Implementation: Three-Week Sprint

Define WBS: Draft deliverables (e.g., systems, pipelines), avoiding phase/discipline branches.
Set CAs: Assign one CAM per CA, mapping to ERP cost objects (e.g., Oracle Project Tasks).
Tag WPs: Add attributes (phase, discipline, test pack) to tasks, ensuring evidence-based progress.
Configure ERP: Enforce CA identifiers and CBS codes (e.g., REWORK, RETENTION) for all transactions.
Build BI Dashboards: Create Power BI views for costs, progress, and audit flags (e.g., EV without evidence).
Train Stakeholders: Conduct workshops for CAMs and contractors to ensure adoption.
Pilot and Audit: Test on one system (e.g., fuel gas), reconcile costs, and audit monthly.

Overcoming Adoption Barriers

Formação: Run CAM workshops on ERP and BI usage, emphasizing evidence submission (e.g., ITRs).
Contractor Buy-In: Clarify fair payment rules to reduce disputes, as in Ichthys.
Executive Support: Highlight ROI (e.g., 10–20% savings) to secure funding.

Glossary

WBS: Work Breakdown Structure, organizing project scope into deliverables.
CA: Control Account, linking a deliverable to a responsible team.
WP: Work Package, a task with execution details (e.g., phase, contractor).
CBS: Cost Breakdown Structure, categorizing spend types (e.g., labor, materials).
EVM: Earned Value Management, measuring progress against budget and schedule.

Conclusion

Poor ERP integration, as seen in Gorgon ($20B overrun), Ichthys ($10B), and Kashagan ($30B), risks catastrophic failures in oil and gas projects. By building a scope-pure WBS, clear CAs, tagged WPs, and ERP-BI integration, projects ensure cost-progress alignment, quality control, and audit readiness. A three-week sprint and stakeholder training make this practical. Successes like Johan Sverdrup prove integration’s value, making it non-negotiable for delivering megaprojects on time and budget.

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