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Midstream Oil and Gas Company Achieves US$46.5 Million in Savings

July 31, 2023 | Organisational Effectiveness

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Our client is a midstream oil and gas company that stores, distributes, processes, and exports natural gas and natural gas liquids. They made a strategic decision to expand their operations by acquiring another midstream company. The aim of the acquisition was to venture into the transportation of natural gas liquids, which would further enhance their business diversification efforts.  

As the group continued to grow, they experienced several significant changes. They promoted a new President/CEO and appointed a new engineering executive to lead their expanding operations. Simultaneously, the group also launched a multi-billion dollar joint-venture project.  

Project approach 

The primary objectives of this project were to:  

  • Provide senior management mentoring to assist them improve their leadership and decision-making skills.  
  • Develop a single embedded Project Management Office (PMO) to improve the group’s project management practices and efficiency.  

Renoir deployed a two-part approach. The first four weeks of the project focused on clarifying expectations, to enable Renoir’s team to better define the scope, timeframe, and deliverables.  

Part 1: Clarification phase 

During this phase, several expectation exchange meetings were held with the newly appointed President/CEO. These meetings identified opportunities to address staff and organisational weaknesses, refine methodologies, and agree on the deliverables. In addition, structured interviews were conducted with executive staff to gain a 360-degree view of the issues.  

During these interviews, it was agreed that engineering would be the primary target for mentoring, while other staff – two of the three senior project managers — would be mentored on an as-needed basis.  

The structured interviews with all senior staff indicated that there were few formalised engineering practices, policies, or procedures in place. There were several engineering suppliers who were not performing up to the desired standards.  

Part II: Development of a comprehensive approach phase 

Based on the insights gained during the clarification phase, Renoir developed a comprehensive approach consisting of these key activities:  

  • Conducting a 360 Leadership Analysis every eight weeks. 
  • Organising weekly mentoring sessions to provide ongoing guidance and support. 
  • Developing expertise in project management and interface management skills to facilitate a seamless collaboration between project areas, joint venture partners, and the construction committee organisation. 
  • Establishing a supplier effectiveness and dispute resolution team.  

Project Implementation  

360 Leadership Analysis 

A comprehensive 360 Leadership Analysis was developed to evaluate the leadership style, approach, management fundamentals, and technical grasp within the engineering function. This analysis included input from all direct reports of the engineering manager and Renoir, providing a clear baseline evaluation. The baseline report indicated that 51 out of 78, or 65%, required further development to meet the desired standards.  

To address these gaps, mentoring sessions were conducted to improve competency levels in these attributes. The final leadership analysis conducted after the mentoring and development efforts, showed significant improvement in 33 out of the 51 attributes, to a level consistent with the role’s requirements. Recommendations for continued development were made for the remaining 18 attributes.  

After six months of the Renoir mentoring programme, the overall competency levels increased from 35% to 77%. Negative leadership attributes decreased by 23%, which is within the normal range.  

Project Management Office (PMO) 

The client’s project was divided into three distinct areas, and each with its dedicated engineering team. Renoir took on the role of the PMO, overseeing these two teams:  

  • Export Terminal: It has the capacity to store four million barrels of butane and propane per year. 
  • Dome Storage: Responsible for handling five wells and domes, and a distribution network spanning approximately 207 miles of pipelines. This team had additional responsibilities including JV reporting, project procedures, and coordinating the interface between all three project areas. The total estimated project capital was US$775 million.  

Executive Team Organisation Analysis 

As part of the Executive Team Organisation Analysis, Renoir conducted a review to identify the root causes of certain events within the organisation. Through structured interviews, analysis of personnel files, and a job attribute matrix, we identified the need for organisational structural changes. We recommended the replacement of 40% of the Executive Team and the addition of key performers to improve the team’s overall effectiveness.  

Key Results

Engineering Front End Loading (FEL) advanced from FEL 2 (+/-25%) to FEL 3 (+/-10%).

6% less than projected capital cost for FEL 3 project

7% less than projected actual engineering spend

Projected PMO savings of US$46.5 million

Leadership competency levels increased by 42%

In response to poor supplier performance, which was under the PMO’s responsibility, Renoir held several supplier accountability sessions. These sessions reinforced the following areas:

  • Project scope
  • Change order
  • Documentation and Fiduciary Engineering protocol

As a result of these initiatives, undocumented charges have been reduced by 25%, and there is an unapproved non-scope charge with a target reduction of 60%

Do you want to create a high-performance organisation that is well-positioned to take on any challenge that comes your way?

*We have intentionally omitted client-specific details to uphold strict confidentiality.  

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