How to Achieve Capital Efficiency
To maintain shareholder value, operating companies must replace existing assets which are at the end of their life or add new assets which produce an acceptable return on their investment. Over the last several decades capital projects have significantly increased in final total installed cost reducing the asset’s return on investment. Owners are facing difficult decisions on whether to proceed with, postpone or cancel proposed projects which may not provide acceptable shareholder value.
Opportunities exist to reduce the upfront spend on facilities by applying strategies, methods and practices which provide more capital efficient results. Some strategies, methods and practices will be described which, if effectively applied can support a more capital efficient execution.
A key strategy is to evaluate the business objectives and obtaining alignment amongst all stakeholders. Understanding the differences and costs in “musts” versus “wants” are important to obtain a successful solution. Musts are requirements which assure the facility is safe, legal and operable based on clearly identified inputs and outputs.
Once alignment is obtained strategies can be applied which assure the capital spend supports the business case. Strategies which will be discussed are:
- Facility Minimum Kit
- Modularization and Standardization
- Integrated Material Supply Chain
- Execution Efficiency
Once effectively applied a value execution plan can be developed. Any plan requires continuous governance to assure effective implementation through the life of the project.
This paper will be of interest to operator’s executive management, operations, project management, engineers and constructors of process plants.