Saudi Aramo's PMO Helps the Energy Giant Thrive amid an Increasingly Complex Project Portfolio
BY JEREMY GANTZ
PORTRAITS BY PIERRE ZABBAL
of the Year
230 full-time employees
With more than 260 billion barrels in proven reserves, Saudi Aramco is an undeniable force in the global oil market. But to remain one of the largest companies in the world, the state-owned entity wants to be less dependent on a single energy source. In line with a government initiative to move Saudi Arabia's economy beyond oil, Saudi Aramco is charting a more diversified future to compete globally in the natural gas, refining and petrochemical markets.
To fuel this transformation, the company's leaders began increasing capital project spending about a decade ago. Megaprojects multiplied—to expand refinery and petrochemical facilities, construct pipelines and other distribution infrastructure, and to implement new technologies. More than ever before, Saudi Aramco's project portfolio had become complex, geographically diffuse and strategically significant. Executives realized it was time to mature the company's project management capabilities to keep up.
“We span over all the continents, and we spend a lot of money in building our facilities,” says Ahmad Al-Sa'adi, senior vice president of technical services, Saudi Aramco, Dhahran, Saudi Arabia. The organization spends US$40 billion to US$50 billion annually on capital projects, he notes. “So just by the virtue of the amount of spend that we have, we wanted to have an organization that really has a good handle on our projects in terms of schedule, in terms of cost control, and in terms of deployment of technology and best practices.”
In 2010, Saudi Aramco launched an enterprise project management office (EPMO) with a clear mission: drive strategic alignment across the portfolio and raise the bar on project planning and execution. The ultimate goal was to establish a best-in-class PMO that drilled deep to find maximum value on every initiative. Saudi Aramco is hitting its target. With a staff of 230 and a portfolio of 200 projects encompassing capital spending as well as IT, security, and operations and maintenance, the EPMO has influence that is felt throughout Saudi Aramco, a PMI Global Executive Council member. “The PMO plays a key role by really connecting all the company's organizations together,” Mr. Al-Sa'adi says.
IN THE FLOW
The EPMO paid off immediately in the form of insights that generated cost savings and benefits realized. One of the PMO's first moves was to assess Saudi Aramco's project management practices by benchmarking project performance against that of the competition. The evaluation revealed that Saudi Aramco's capital project expenditures were 20 percent less efficient than the industry average.
The case for change was clear. So the EPMO seized the initiative to direct a top-to-bottom overhaul of governance, planning and execution practices—all in line with PMI's A Guide to the Project Management Body of Knowledge (PMBOK® Guide). The upgrade involved implementing 10 value improvement practices—such as value engineering and constructability. Today, these practices are embedded into Saudi Aramco's planning processes: For example, value engineering and constructability workshops are held to optimize the scope and budget.
As the organization's portfolio grew, the EPMO looked for every opportunity to achieve efficiencies through standardization of processes. One program involved constructing tie-ins to onshore oil wells. EPMO staff recognized how repeatable the work was and made sure teams weren't starting from scratch during planning and execution. Stitching repeatable practices into the fabric of initiatives extended all the way up to megaprojects with a value exceeding several billion dollars, says Motaz Al-Mashouk, project management general manager, Saudi Aramco.
“There is certainty in how we deliver projects. We do not need to reinvent the wheel every time. That has enabled us to excel in many dimensions in project delivery,” Mr. Al-Mashouk says.
By pushing discipline and consistency throughout Saudi Aramco, the EPMO has delivered real value since its launch, key performance indicators show. Average project cycle times have dropped by 22 percent, due to enhanced planning and project governance. Reductions in the number of late design changes led to an 18 percent improvement in the EPMO's schedule performance index, which measures actual progress against projects’ approved schedules. Cost estimates are now accurate 79 percent of the time—11 percent above the industry average. Major cost savings emerged as the EPMO supported all these improvements. For example, in 2017 alone, value engineering saved US$1 billion in capital program costs.
Another driver of cost savings and improved execution: The EPMO has made the contractor bidding process more competitive by seeking more bids. The average number of bids per project has gone up 56 percent since 2018.
“Since its creation, the PMO organization has helped remove inefficiencies in our capital program execution and has helped us to align with the best-in-class in the industry,” says Abdullah Al-Baiz, vice president of engineering services, Saudi Aramco.
—Abdullah Al-Baiz, Saudi Aramco
Such clear benefits burnished the EPMO's reputation in the C-suite. To reinforce alignment between the C-suite and the portfolio, the EPMO was positioned directly below corporate management on Saudi Aramco's organizational chart. Underscoring the value, the EPMO's director has a seat at management committee meetings, ensuring executives have a clear window into the performance of projects and the overall portfolio.
“The PMO plays a vital and influential role in management committee meetings. We add valuable information about cost performance, which guides the management committee in making go or no-go decisions,” says Badr Burshaid, PMO director, Saudi Aramco.
Executives don't have to wait until the management committee meets to seek project updates, however. The EPMO created a centralized capital project management system that serves as a dashboard that executives can consult anytime. It helps them to understand the status of any project—not just cost and schedule performance, but also quality delivered and human resources required.
“The dashboard has all these matrices mapped up into one solution. So all project management professionals all the way up to executives know the health of these projects in real time,” Mr. Burshaid says.
The EPMO's executive decision-making support goes beyond giving visibility to the portfolio. It also plays the role of a think tank supporting portfolio planning and strategy development, generating scores of reports on various markets both inside and outside Saudi Arabia. Those reports provide intelligence on issues like material price dynamics, energy demand, and labor market and technology trends—shedding light on potential risks of proposed projects and how they can be mitigated. “This data is key for helping us decide whether we'll be able to deliver on strategic objectives,” Mr. Al-Sa'adi says.
The EPMO also drives Saudi Aramco's portfolio planning efforts. It evaluates likely future market conditions, resource constraints and major risks that might impact efficient project execution—and then uses that data to optimize the composition of the organization's capital project portfolio, which is planned in three-year and 10-year cycles.
For Mr. Burshaid, the various ways the EPMO supports executive decision making boil down to ensuring that all projects are executed in alignment with Saudi Aramco's evolving strategy. “The most important role for the PMO is to provide the knowledge and market intelligence to drive the performance and strategic alignment of our portfolio,” he says.
Despite its demonstrated impact, the EPMO is not resting on its laurels. EPMO leaders stress continual improvement, gleaning lessons from every project to fine-tune the project management processes. The EPMO also is a center of excellence that cultivates talent. Promising project managers are sent from their own department to the EPMO to gain delivery skills.
“They go back to the execution side, and they have a grounding in all the project management practices and an appreciation for all the procedures and standards we should comply with,” Mr. Al-Mashouk says. “As a center of excellence, the PMO is instrumental in developing talent in Saudi Aramco.”
Its talent management role begins with onboarding new project professional hires. The EPMO assesses competencies against the skills required in a person's field and then creates an individual development plan. The plan charts professional growth and nurtures leadership potential through assignments, stretch goals, mentoring programs, self-development options and certification attainment. The most common certification held by EPMO staff is the Project Management Professional (PMP)®. In 2019, half of its 230 staff members had a PMP®, up from 35 percent the previous year. The EPMO's ultimate goal is for all staff to have earned the certification.
“If you really go to the bottom of it, the PMO is nothing but people. So we attract the best talent in the world, and we go out of our way to make sure that talent is kept abreast of the new development in the world,” Mr. Al-Sa'adi says. “We always make sure they get the best certification. The PMP certification is one of the must-haves for our young talent.”
The EPMO also supports professional development through its own specialty programs focused on skills like cost estimating, cost engineering and scheduling. “Knowledge is really vital for our profession,” Mr. Burshaid says. “We developed these specialties in alignment with PMI processes to make sure that our project professionals are reaching global standards.”
Having proven to Saudi Aramco executives that it can add significant value by raising the bar on project management standards and aligning the portfolio to strategy, the EPMO is seen as a vital part of the company. It “harnesses talent, standardizes procedures, deploys digital solutions to help deliver projects and tracks them,” Mr. Al-Sa'adi says. “The PMO is really where you have all the levers of project delivery together.”
For Mr. Al-Baiz, the EPMO has become essential.
“It would be difficult to imagine an organization the size of Saudi Aramco, with the huge capital program it has, being able to execute such a program in an efficient manner without an engine that is called the project management office.” PM
Saudi Aramco's enterprise project management office has generated improvements and value in multiple ways since launching in 2010:
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