Maersk Oil uses innovative SAP cost management solution on $4.5bn Culzean project

Maersk-Oil.jpgMaersk Group is a global conglomerate that operates primarily in the shipping and energy industries, Maersk Line is the world’s largest container shipping company. 

Maersk Oil, one of the world’s leading Mid-Cap independent exploration and production companies, is one of three partner organisations developing the Culzean gas field in the UK North Sea. Culzean is the largest new field discovered in the UK North Sea for ten years and the largest gas field sanctioned since 1990. First gas is expected in 2019 and when fully ramped up Culzean is anticipated to meet 5% of the UK's gas needs, expected around 2020/2021. 

The business challenge

Culzean is an enormous undertaking, expected to cost over $4.5 billion. The project presented Maersk Oil with a significant cost management challenge due to the complexities involved in a capital project of this size and scale. 

“We needed a powerful Project Cost Management tool which could sit within our SAP system and run the cost aspects of Culzean – base line planning, Budget Control, cash-flow forecasting, Accrual, Value of Work Done, Management of Changes, Earned Value Management and reporting and so on.” Flemming Binnerup, SAP Project Systems Process Expert in Global SAP team, Maersk Oil

Tracking and controlling costs on the project also involved a number of other intricate activities, including: 

  • Tracking actual spend
  • Budget baselines as original budget and current budget
  • Scenario baselines
  • Phasing of commitments from start to expected delivery
  • Forecasting FAC and phasing the estimate to complete FTC
  • Capturing Accruals and calculation of VOWD
  • Accrual history and trending
  • Managing contract spend and contract variation control
  • Reporting on the impact of currency exchange
  • Management of Change
  • Earned Value Management, capturing of physical progress and EVM reporting
  • Flexible reporting to support the project

Maersk Oil’s SAP landscape was not originally designed to support these requirements. The reporting system had been designed for the needs of the finance function, not the frontline project managers working on major projects. As a result, the Maersk Oil cost management solution was largely spreadsheet-based.  

Maersk Oil needed a solution that would integrate with its existing SAP landscape. It also had to incorporate a change and variation management tool which could model the project and financial implications of any mid-project logistical decisions. Additionally, Maersk Oil had specific requirements for the management and reporting of procurement in multiple currencies. 

The first phase of the solution had to be designed and installed within a few months, as sub-contractors for the development phase of Project Culzean were being appointed. 

The solution 

Maersk Oil evaluated a number of independent cost management solutions and were attracted by SAP Business Planning and Consolidation (SAP BPC) and its close integration with SAP ECC.

Bluefin Solutions had previously developed a template cost management solution for large capital projects, based on SAP BPC. This Bluefin template core functionality provided an excellent starting point for the majority of Maersk Oil’s requirements, integrating easily with SAP and allowing for data transfers from Primavera. This made for a faster and more cost effective delivery, rather than building a solution from scratch. The solution was expanded to incorporate Maersk Oil’s requirements which included: 

  • Management of the accruals process, with integration back into SAP Finance
  • Capture and phasing of estimate-to-complete on committed and uncommitted spend
  • Calculation of value of work done and forecast at completion
  • Support for multiple forecast versions – monthly snapshots and project milestone versions
  • Support for change and variation management processes
  • Handling of purchasing in multiple currencies, and reporting on the impact of exchange-rate fluctuations
  • Feeding FTE planning into the overall cost model
  • Management and earned value reporting and dashboards.
“The big selling point was demonstrating the integration with SAP, and the benefits of seamless integration between the project and the functions – procurement and finance." Brian Clark, Culzean Project Services Manager, Maersk Oil

Phased implementation 

The solution was implemented in three phases. In phase one, Bluefin installed its SAP BPC template in just three months. This delivered most of Maersk Oil’s requirements and ensured the business was up and running on the new system.   

Phase two and three provided additional functionality required by Maersk Oil. These phases were implemented over several months. The more straightforward enhancements were handled in phase two, leaving time to understand and design the more complex features during phase three. 

With the live system in place, Maersk Oil had the opportunity to work with a solution and in parallel visualise the future design for phase two and three. This approach also helped to integrate the project within the business leading to improved adoption of the solution.

“Bluefin Solutions’ experience of large capital projects was invaluable throughout the implementation. The implementation was very well-managed. Communication and working relations were excellent, and Bluefin challenged us to ensure we had a robust design and that the project was delivered against the agreed timeline.” Flemming Binnerup, SAP Project Systems Process Expert in Global SAP team, Maersk Oil

The benefits

Maersk Oil now has a powerful cost management solution capable of handling the scale and complexity of Culzean. It has delivered three key benefits to date: 

Transparency 

The Project Services team are effectively utilising the solution. It gives them crucial visibility over how the project is progressing against timescales and budget, by providing them with:  

  • Granular visibility over costs, down to individual contracts and purchase order line items
  • Powerful analysis, forecasting and change management 
  • Accurate cost tracking and cash-flow forecasting across all aspects of the project
  • A flexible reporting tool that can quickly produce information for the project’s stakeholders

Management of change

The financial impact of any changes to the project can be easily captured providing the team with greater visibility, and also serving as an audit log.

Planning and reporting 

Monthly planning and reporting cycles on Culzean are now faster and more efficient, freeing the project cost control team to work on higher-value activities such as financial analysis and scenario planning.

“SAP BPC has given us a new level of financial transparency on strategically important project. It has also made everybody’s life much easier. Extracting financial data into the planning system and outputting reports was extremely time-consuming. Now it’s done in just a click.” Flemming Binnerup, SAP Project Systems Process Expert in Global SAP team, Maersk Oil

Why Bluefin Solutions?

“Maersk Oil had not developed a solution for managing large Greenfield projects in their SAP template and projects were choosing a plethora of different tools to support their specific requirements. The SAP team were keen to work with a vendor who could utilize the functionality in an SAP solution to leverage the integration from the solution and remove the reliance on interfaces and manual reconciliations.  

Maersk Oil were impressed with Bluefin’s ability to understand our business requirements and utilize the functionality of SAP ECC, BW and BPC to deliver a solution which is fit for purpose, real-time and fully integrated with the ERP solution.

Bluefin collaborated with Maersk Oil in order to set a Cost Management vision, provide challenge and most importantly deliver a solution which the Culzean project team rely on to perform cost reporting internally and to our Joint Venture partners. This solution is the basis for a Global Cost Management solution which will be deployed across all our Greenfield and Brownfield projects."

Andy McIntosh, Head of SAP, Maersk Oil 

 

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