Project Management in the Oil and Gas Industry

<p>Preface xv</p>
<p>About the Author xvii</p>
<p>1 How to Manage Oil and Gas Projects 1</p>
<p>1.1 The Principal of Project Management 1</p>
<p>1.2 Project Characteristics 2</p>
<p>1.3 Project Life Cycle 5</p>
<p>1.3.1 Initiation of the Project 7</p>
<p>1.3.1.1 Getting to the Scope Baseline 9</p>
<p>1.3.2 Feasibility Study 10</p>
<p>1.3.3 FEED (Preliminary) Engineering 11</p>
<p>1.3.4 Detail Engineering 15</p>
<p>1.3.5 Decision Support Package 17</p>
<p>1.3.6 Design Management 19</p>
<p>1.3.7 Execution Phase 20</p>
<p>1.3.8 Commissioning and Startup 21</p>
<p>1.4 Is this Project Successful? 22</p>
<p>1.4.1 Project Management Goals 22</p>
<p>1.4.1.1 Project Integration Management 23</p>
<p>1.4.1.2 Project Scope Management 23</p>
<p>1.4.1.3 Project Time Management 24</p>
<p>1.4.1.4 Project Cost Management 24</p>
<p>1.4.1.5 Project Quality Management 24</p>
<p>1.4.1.6 Project Human Resource Management 25</p>
<p>1.4.1.7 Project Communications Management 25</p>
<p>1.4.1.8 Project Risk Management 25</p>
<p>1.4.1.9 Project Procurement Management 25</p>
<p>1.5 Project Management Tasks 26</p>
<p>1.5.1 Define the Project Target 26</p>
<p>1.5.2 Define the Scope of Work 27</p>
<p>1.5.3 Define the Time Frame 27</p>
<p>1.5.4 Define the Available Resources 27</p>
<p>1.5.5 Define the Cost 28</p>
<p>1.5.6 Evaluate the Master Plan 28</p>
<p>1.5.7 Accept the Master Plan 28</p>
<p>1.5.8 Schedule Follow Up 29</p>
<p>1.5.9 Cost Follow Up 29</p>
<p>1.5.10 Comparing Between Actual Work and Master Plan Cost 29</p>
<p>1.5.11 Performance Evaluation 29</p>
<p>1.6 Project Manager Skill 30</p>
<p>Quiz 31</p>
<p>2 Project Economic Analysis 39</p>
<p>2.1 Introduction 39</p>
<p>2.2 Project Cash Flow 40</p>
<p>2.2.1 Depreciation Methods 43</p>
<p>2.2.1.1 Straight–Line Method 44</p>
<p>2.2.1.2 Declining–Balance Method 45</p>
<p>2.2.1.3 Sum–of–the–Year–Digits 45</p>
<p>2.2.1.4 Sinking–Fund Method 46</p>
<p>2.2.1.5 Service–Out Method 46</p>
<p>2.2.2 Method of Net Present Value (NPV) 47</p>
<p>2.2.2.1 Inflation Rate 47</p>
<p>2.2.3 Minimum Internal Rate of Return (MIRR) 48</p>
<p>2.2.4 Payout Method 49</p>
<p>2.3 Economic Risk Assessment 50</p>
<p>2.3.1 Probability Theory 50</p>
<p>2.3.2 Probability Distribution of Variables 55</p>
<p>2.3.2.1 Normal Distribution 55</p>
<p>2.3.2.2 Log Normal Distribution 57</p>
<p>2.3.2.3 Binominal Distribution 60</p>
<p>2.3.2.4 Poisson Distribution 63</p>
<p>2.3.2.5 Exponential Distribution 63</p>
<p>2.3.2.6 Weibull Distribution (Rayleigh Distribution) 63</p>
<p>2.3.2.7 Gamma Distribution 64</p>
<p>2.3.2.8 Logistic Distribution 65</p>
<p>2.3.2.9 Extreme Value (Gumbel Distribution) 66</p>
<p>2.3.2.10 Pareto Distribution 66</p>
<p>2.3.3 Distribution for Uncertainty Parameters 67</p>
<p>2.3.3.1 Triangular Distribution 67</p>
<p>2.3.3.2 Uniform Distribution 68</p>
<p>2.3.4 Choose the Appropriate Probability Distribution 69</p>
<p>2.3.4.1 Chai Square Method 70</p>
<p>2.3.4.2 Kolmograv–Smirnov (K–S) 70</p>
<p>2.4 Decision Tree 71</p>
<p>2.5 Monte–Carlo Simulation Technique 75</p>
<p>2.6 Risk Adjusted Value (RAV) 78</p>
<p>3 Pitfalls in Time Schedule Planning 81</p>
<p>3.1 Introduction 81</p>
<p>3.1.1 Plan Single Point of Accountability (SPA) 84</p>
<p>3.1.2 Starting the Plan 85</p>
<p>3.1.3 Work Breakdown Structure (WBS) 87</p>
<p>3.2 Responsibilities of the Team 90</p>
<p>3.3 Expected Activity Time Period 91</p>
<p>3.4 Calculate the Activity Time Period 93</p>
<p>3.5 Time Schedule Preparation 94</p>
<p>3.5.1 Gantt Chart 95</p>
<p>3.5.2 Arrow Diagram Method (ADM) 95</p>
<p>3.5.3 Precedence Diagram Method (PDM) 96</p>
<p>3.5.4 Critical Path Method (CPM) 96</p>
<p>3.5.5 Program Evaluation and Review Technique (PERT) 97</p>
<p>3.5.6 Example 98</p>
<p>3.5.7 Application of the PERT Method 102</p>
<p>3.5.7.1 Statistics Calculation for Activity Time 102</p>
<p>3.5.7.2 Example 103</p>
<p>3.5.7.3 Time schedule control 104</p>
<p>3.6 Planning Overview 107</p>
<p>Quiz 109</p>
<p>4 Project Cost Control 113</p>
<p>4.1 Introduction 113</p>
<p>4.2 Cost Types 115</p>
<p>4.2.1 Cost Estimate 116</p>
<p>4.2.1.1 Top–Down Estimates 117</p>
<p>4.2.1.2 Bottom–Up Estimates 117</p>
<p>4.2.1.3 Analogous Estimates 117</p>
<p>4.2.1.4 Parametric Estimates 118</p>
<p>4.2.2 Steel Structure Cost Estimate 122</p>
<p>4.2.3 Detailed Cost 124</p>
<p>4.2.4 Cost Estimate to Project Control 124</p>
<p>4.3 Economic Analysis to Project Cost 125</p>
<p>4.3.1 Work Breakdown Structure (WBS) 125</p>
<p>4.3.2 Organization Breakdown Structure (OBS) 126</p>
<p>4.3.3 OBS/WBS Matrix 126</p>
<p>4.3.4 Work Packages 127</p>
<p>4.3.5 Cost Control 128</p>
<p>4.3.6 (S) Curve 131</p>
<p>4.3.7 Engineering Cost Control 134</p>
<p>4.4 Cash Flow Calculation 135</p>
<p>4.4.1 Project Cash Flow 135</p>
<p>4.4.2 Impact on Increasing Cost 137</p>
<p>4.4.3 Project Late Impact 137</p>
<p>4.4.4 Impact of Operation Efficiency 138</p>
<p>Quiz 139</p>
<p>5 Resource Hiring 143</p>
<p>5.1 Introduction 143</p>
<p>5.2 Project Organization 144</p>
<p>5.2.1 Types of Organizations 144</p>
<p>5.2.1.1 Project Organization as a Part of the Company 145</p>
<p>5.2.1.2 Separate Project Organization 146</p>
<p>5.2.1.3 Matrix Organization 147</p>
<p>5.2.2 Selecting the Best Organization 149</p>
<p>5.3 Roles and Responsibilities of the Project Manager 151</p>
<p>5.3.1 Project Manager as a Leader 152</p>
<p>5.4 Administrative Organization for Total Quality Management 154</p>
<p>5.5 Team Member Selection 155</p>
<p>5.6 Managing the Team 157</p>
<p>5.7 Allocate Resources to Project Plan 158</p>
<p>5.7.1 Example 158</p>
<p>5.8 Relation Between Project Parties 162</p>
<p>5.9 Document and Information Transfer 162</p>
<p>5.10 Information Transfer 163</p>
<p>5.11 Quality Control in the Design Phase 164</p>
<p>5.11.1 Inputs and Outputs of the Design Phase 169</p>
<p>5.11.2 Design Verification 169</p>
<p>5.11.3 Change in the Design 169</p>
<p>5.11.4 Approval of the Design 174</p>
<p>Quiz 177</p>
<p>6 Tendering, Bidding, and Contract Traps 183</p>
<p>6.1 Introduction 183</p>
<p>6.2 Contracts 184</p>
<p>6.2.1 Measured Contract 186</p>
<p>6.2.2 Lump Sum 186</p>
<p>6.2.3 Cost Plus 187</p>
<p>6.3 Contract Between the Owner and Engineering Office 187</p>
<p>6.4 The Importance of Contracts in Assuring the Quality of the Project 189</p>
<p>6.5 Contracts in ISO 190</p>
<p>6.6 FIDIC Contracts 190</p>
<p>6.7 General Conditions in the Contracts 197</p>
<p>6.8 Arbitration and the Arbitrator 198</p>
<p>6.9 Bids and Tenders 200</p>
<p>6.9.1 Public (Open) Tender 200</p>
<p>6.9.2 Limited Tender 202</p>
<p>6.9.3 Negotiated Tender 203</p>
<p>6.9.4 Direct Order 203</p>
<p>6.9.5 Tender Technical Evaluation 204</p>
<p>6.9.6 Commercial Evaluation 207</p>
<p>6.9.6.1 Commercial Evaluation Methods 207</p>
<p>6.10 Closeout Report 208</p>
<p>Quiz 210</p>
<p>7 New Approach in Managing Oil and Gas Projects 215</p>
<p>7.1 Introduction 215</p>
<p>7.2 Quality System 216</p>
<p>7.3 ISO 9000 217</p>
<p>7.4 Quality Management Requirements 218</p>
<p>7.4.1 Quality Manual 218</p>
<p>7.4.2 Quality Plan 219</p>
<p>7.4.3 Quality Control 219</p>
<p>7.4.3.1 Why is Quality Control Important? 220</p>
<p>7.4.3.2 Submittal Data 221</p>
<p>7.4.3.3 How to Check Incoming Materials 222</p>
<p>7.4.3.4 Methods of Laying Out and Checking Work 222</p>
<p>7.4.3.5 Material/Equipment Compliance Tests 224</p>
<p>7.4.3.6 When to Inspect Work 225</p>
<p>7.4.3.7 Paperwork/Documentation 226</p>
<p>7.4.3.8 Quality Control Plans 228</p>
<p>7.4.4 Quality Assurance 229</p>
<p>7.4.4.1 Quality Assurance in the ISO 231</p>
<p>7.4.4.2 The Responsibility of the Contractor (Manufacturer) 232</p>
<p>7.4.4.3 Responsibility of the Owner 233</p>
<p>7.5 Project Quality Control in Various Stages 234</p>
<p>7.5.1 Feasibility Study Stage 234</p>
<p>7.5.2 Feed (Preliminary) Engineering 235</p>
<p>7.5.3 Detailed Engineering Study 238</p>
<p>7.5.3.1 Design Quality Control 239</p>
<p>7.5.4 Execution Phase 240</p>
<p>7.5.4.1 ISO and Control Work 242</p>
<p>7.5.4.2 Inspection Procedures 242</p>
<p>7.5.4.3 Importance of Contracts in Assuring the Project Quality 243</p>
<p>7.5.4.4 Checklists 243</p>
<p>7.6 Operational Phase of the Project 249</p>
<p>7.7 Total Building Commissioning System 250</p>
<p>7.7.1 Planning Stage 252</p>
<p>7.7.1.1 Identify Commissioning Team 252</p>
<p>7.7.1.2 Define Owner s Project Requirements with the Customer Agency 258</p>
<p>7.7.1.3 Develop Preliminary Commissioning Plan 258</p>
<p>7.7.1.4 Commissioning for Certifications (LEED, Energy Star, etc.) 258</p>
<p>7.7.1.5 Commissioning Agent Costs 261</p>
<p>7.7.1.6 Cost–Benefit Analysis for Commissioning 262</p>
<p>7.7.2 Design Stage 262</p>
<p>7.7.2.1 Incorporate Commissioning into A/E and CM Scope of Services 262</p>
<p>7.7.3 Construction Stage 272</p>
<p>7.7.3.1 Review Submittals for Performance Parameters 272</p>
<p>7.7.3.2 Develop and Utilize Construction Checklists 273</p>
<p>7.7.3.3 Oversee and Document Functional Performance Testing 274</p>
<p>7.7.3.4 Test Data Records 274</p>
<p>7.7.3.5 Hold Commissioning Team Meetings and Report Progress 275</p>
<p>7.7.3.6 Conduct Owner Training 276</p>
<p>7.7.3.7 Turnover Commissioning Record 277</p>
<p>7.7.4 Building Commissioning Process Post–Construction Stage 279</p>
<p>7.7.4.1 Post–Construction Stage 279</p>
<p>7.7.4.2 Perform Deferred and Seasonal Testing 279</p>
<p>7.7.4.3 Re–inspect/Review Performance Before End of Warranty Period 280</p>
<p>7.7.4.4 Complete Final Commissioning Report 280</p>
<p>7.7.4.5 Recommission Facility Every 3 5 Years 282</p>
<p>7.7.4.6 Recommissioning 282</p>
<p>7.7.5 Advantages for Total Building Commissioning System 283</p>
<p>Quiz 284</p>
<p>8 Practical Risk Management for Oil and Gas Projects 287</p>
<p>8.1 Introduction 287</p>
<p>8.1.1 The Risk Management Process 288</p>
<p>8.2 Project Risks 289</p>
<p>8.3 Risk Assessment 293</p>
<p>8.4 Risk Identification 294</p>
<p>8.4.1 Methods of Defining Risk 296</p>
<p>8.4.1.1 Brainstorming 296</p>
<p>8.4.1.2 Delphi Technique 297</p>
<p>8.4.1.3 Nominal Group Technique 298</p>
<p>8.4.1.4 Crawford Slip 299</p>
<p>8.4.1.5 Expert Interviews 299</p>
<p>8.4.1.6 Root Cause Identification 300</p>
<p>8.4.1.7 Checklists 300</p>
<p>8.4.1.8 Documentation Reviews 300</p>
<p>8.4.2 Grouping the Risks 301</p>
<p>8.5 Define Priorities 302</p>
<p>8.5.1 Matrix Method 302</p>
<p>8.5.2 Tabulated Method 303</p>
<p>8.6 Risk Response Planning and Strategies 305</p>
<p>8.7 Risk Monitoring and Control 306</p>
<p>8.8 Example 307</p>
<p>8.9 Operations risk 310</p>
<p>8.10 Methods of Risk Avoidance 312</p>
<p>Quiz 313</p>
<p>References 315</p>