Thought Leadership

Stephen Thornley, Head Consultant for KBR’s consulting team, explores the benefits of Value Improvement Practices(VIPs) in the pre sanction phases of upstream oil and gas projects in an African context.

Driven by slow regulatory approvals, political instability, fiscal uncertainty and supply chain inflation in recent years, the upstream oil and gas industry has had to demonstrate greater capital discipline amid tighter financing availability. This has led to projects being put on hold, delayed or recycled through development phases in a drive to ensure maximization of the value proposition. This challenge has been brought into even sharper focus with recent instability in the markets as a result of conflict in the Middle East.

At KBR, we are increasingly seeing clients revisit early project framing and development assumptions to improve resilience and investability, particularly in capital constrained environments such as Africa, where external drivers can change rapidly.

Year on year decline in the number of upstream offshore projects being formally sanctioned into Execution through Final Investment Decision (FID) was reported in 2024 to be as high as one third or more, with a large number of projects remaining stalled or in recycle during 2025 (1,2).

It is well understood that the most effective and efficient time to identify, screen and select a preferred upstream development concept is well before FID. However, many upstream projects can take years to mature from first hydrocarbon discovery to FID, and in that time the frame of a project can take many twists and turns, particularly in the external fiscal, regulatory and political environment where the developer has the least control.

Post sanction, the same can occur whereby the premise of a Board’s investment decision needs to be revisited, potentially forcing a project “re think”. Clearly the financial consequences of this type of scenario can be much more significant, with multiple suppliers and contractors already mobilised under contract, as well as an erosion of market and shareholder confidence.

In addition, project outcomes during execution can sometimes diverge from pre sanction assumptions. Examples include unexpected delays or price variations from suppliers which may not have been fully locked in pre sanction, particularly relevant given ongoing geopolitical uncertainty. Upstream developments also suffer from inherent subsurface technical uncertainties, which can result in drilling or early production outcomes that differ materially from FID assumptions.

This is the paradigm in which Value Improvement Practices (VIPs) become both necessary and extremely powerful. 

Systematic, Value Driven Methodology

Put simply, VIP—sometimes referred to as Value Engineering—is a structured approach to evaluating a project’s frame and current design against updated requirements, expectations and performance. The objective is economic value improvement through rigorous review of key value drivers, typically with a strong focus on CAPEX reduction where expenditure is not already sunk, as well as lifecycle production optimisation.

Drawing on KBR’s global upstream experience across greenfield, brownfield and redevelopment projects, VIPs also assess related areas such as project risk profile, design efficiency, execution strategy and overall robustness of the development concept.

In most jurisdictions, oil and gas developments progress through a stage gated decision process as the design and understanding of external factors matures. VIPs can be undertaken at any stage in the development lifecycle but are most effective when the design has reached sufficient maturity to allow meaningful critique of draft development decisions, while still leaving time for change.

A VIP will typically identify potential modifications to the current design that can be studied further by the project team to capture associated value. Timing is critical: the review must be undertaken early enough for findings to be incorporated into the active phase of work, but late enough to ensure sufficient definition exists.

A high degree of independence between the VIP team and the project team is key to success, along with clearly articulated Terms of Reference (TOR). This is why many operators engage third party specialists such as KBR Consulting, either as a fully independent review team or as part of an integrated model using subject matter experts not previously involved in developing the project frame.

The VIP process begins with definition and alignment of the TOR, ideally agreed collaboratively between the VIP lead and key stakeholders. This sets the foundation for a genuine “fresh eyes” review of both the technical design and the overall development frame, enabling constructive challenge without being constrained by legacy decisions or organisational bias.

Value Improvement exercises are most effective when constraints are minimised, allowing fundamental technical assumptions to be challenged. Best results are often achieved when areas traditionally considered “off limits” are revisited—such as plant sizing, throughput assumptions, well phasing strategies or the re use and debottlenecking of existing facilities.

VIPs differ from conventional design reviews in that they focus on identifying material value opportunities, rather than incremental optimisation. While CAPEX reduction is often the primary driver, a comprehensive VIP typically evaluates multiple dimensions simultaneously, including CAPEX phasing or deferment, lifecycle production, OPEX, execution schedule, Reliability, Availability and Maintenance (RAM), HSE, constructability and operability.

Maximising Existing Infrastructure

A frequent source of value lies in the strategic use of existing infrastructure. This is particularly relevant across many African basins, where long established oil and gas footprints exist. While aging in places, this infrastructure can often be extended or repurposed cost effectively through targeted life extension, debottlenecking or selective add on investments—an area where KBR has supported numerous clients globally.

Recent Case Study

Onshore Oil & Gas Plant – End of FEED VIP

Greenfield development located near an existing plant, North Africa

A recent KBR led pre FID VIP focused on identifying CAPEX reduction measures for an onshore gas plant that had completed FEED but faced significant economic challenges threatening sanction.

Outcome:

Seventeen major value opportunities of varying complexity and ease of implementation were identified, with a combined potential value improvement of approximately US$200 million.

High graded findings included adoption of telescoping upstream flowlines back to a central production facility rather than individual flowlines from each well pad; challenging gas injection specifications to enable treatment of a smaller slipstream rather than the full gas flow; and optimisation of initial well count, allowing improved phasing of capital expenditure with lower upfront investment.

This targeted, time bound techno economic review demonstrates how a well executed VIP at the right point in the lifecycle can make the difference between project recycle and progression to sanction.

Making Projects Investable in a Capital Constrained World

As competition for capital intensifies, ensuring projects are framed for resilience and value is essential. Harnessing structured processes such as VIPs—supported by robust data, digital tools and independent challenge—significantly improves the likelihood of progressing viable projects.

In today’s environment, VIPs are no longer optional. Applied early and revisited at key development milestones, they provide a disciplined, value driven approach to challenging assumptions, sharpening project framing and materially improving economics. For many upstream developments in Africa and beyond, they remain the decisive factor between delay and delivery.
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References
1.    Adeosun, M. (2025) Westwood Insight – Offshore EPC contracting activity to remain buoyant in 2025. Westwood Global Energy Group, 14 January.
2.    McKay, F. (2025) Global upstream update: the global sanctions slump, grappling with gas and potential US tailwinds. Wood Mackenzie, 5 March.