Case study: Bukom master plan

Competitive tension in a market brings competitive results, especially in contractor selection, which comes with the precursors of financial and technical capability. Average tender prices unsurprisingly increased throughout 2021 due to inflation in the cost of labour and materials. These are anticipated to continue an upward trend in 2022, with an escalation in the average range between 5 and 8 percent estimated across the industry.

Pulau Bukom, Shell's largest petrochemical production and export centre in the Asia-Pacific region, currently has multiple projects planned and ongoing as part of the non-hydrocarbon master plan. One of the biggest challenges with the long-term implementation is expanding the pool of contractors, that are at standby readiness to participate in-preconstruction procurement and subsequent mobilization. As construction demand steadily increases in the city-state with capital projects in the energy sector, the pressures on vendor capacity are set to continue in the short term.

The limited contractor pool, as well as high overall demand, has shifted the power balance to the contractors, that are now more selective and inclined to inflate prices, as evidenced by recent tender returns. This trend is expected to remain until the backlog of projects brought forward by COVID-19 gradually eases, but subject to the gathering headwinds arising from the impacts of the conflict in Ukraine.

Setting up more framework delivery partnerships is essential to the success of the master plan implementation, especially with the site-specific restrictions in Bukom, adding to the layers of complexity.

Another opportunity is the adoption of digitalization and smart technology to become more flexible and agile in macroeconomic events. This includes using big data systems alongside disruptive technologies such as artificial intelligence (AI) and machine learning (ML), that provide critical information and insights before a project even breaks ground.

This allows potential issues such as coordination problems on construction sites, conflicts between different disciplines and trades, and even the weather impact could be addressed before it is too late.