spe seminar on ‘introduction to e&p projects’, 17 …€¦ · spe seminar on...

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Upstream Advisors Ltd,

Bowman House, 29 Wilson Street

London, EC2M 2SJ

SPE Seminar on ‘Introduction to E&P Projects’,17 November 2016, London

“Managing E&P Projects”by Prabhat Garga,

Senior Advisor, Upstream Advisors Ltd.

Upstream Advisors – A niche independent consultancy

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Our Key Business AreasOur Key Business Areas

Asset TransactionAsset Transaction Business ConsultingBusiness Consulting

• Business Process Improvement

• Change Management

• Corporate Strategy

• Business Process Improvement

• Change Management

• Corporate Strategy

Our Key Business AreasOur Key Business Areas

Business ConsultingBusiness ConsultingAsset TransactionAsset Transaction

• Due Diligence

• Asset Valuations

• Sales & Purchase Support

• Due Diligence

• Asset Valuations

• Sales & Purchase Support

Asset DevelopmentAsset Development

• Opportunity Realisation –Workflow to Perform Field Development

• Project Management

• Field Development Planning

• Commercial Services

• Audits & Peer Reviews

• Gas Master Planning

• Opportunity Realisation –Workflow to Perform Field Development

• Project Management

• Field Development Planning

• Commercial Services

• Audits & Peer Reviews

• Gas Master Planning

P.K. Garga - UAL Nov 2016, SPE Seminar

Context & Agenda

- Based mainly around management of large offshore projects(complex, deep water) .

- Introduction to good project management practices (based on learnings of professional PM bodies, APM & PMI)

- Some comparisons with large industrial & infrastructure projects.

- Key reasons for project under-performance

‘Managing E&P Projects’

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Typical fixed platform based offshore development( ‘dry trees’, weather independent production)

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gas

oil

pipelines to shore


Onshore Terminal

drilling & production facilities

Support platformfixed to sea-bed

Typical FPSO Development( ‘wet trees’ , weather dependent production )

FPSO

Shuttle

TankerRisers

Flowlines

Subsea Wells &

Manifold

P.K. Garga - UAL

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Nov 2016, SPE Seminar

Project Management of Complex Projects

Characteristics of complex offshore oil & gas proj ects

� tight timescales with heavy overlap of work activities� high continuous and total expenditure� extended, possibly global supply chains� construction in disparate locations� very early procurement of key materials and services (installation vessels) to secure schedule� significant risks and uncertainties

• The cost of doing work offshore is so high that a large part ( and in huge physical

chunks) is done onshore and shipped to its offshore location to be installed by

complex and large installation vessels. These vessels, of limited supply ad huge

cost, have to be signed up almost at the beginning of the project, well before

design is complete.

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Professional project management bodies

• US – Project Management Institute, PMI

• UK – Association for Project Management, APM

• European – International Project Management Association, IPMA

� Best practices embodied in their ‘Bodies of Knowledge’ (BoK’s) and competency framework

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Project management

“Project management is the process by which projects are defined planned, monitored, controlled and delivered such that the agreed benefits are realised ……. Projects bring about change and project management is recognised as the most efficient way of managing such change.”

- APM BoK ©

“Project management is the application of knowledge, skills, tools and techniques to project activities to meet project requirements. Project management is accomplished through the application and integration of project management processes of initiating, planning, executing, monitoring & controlling and closing.”

- PM BoK ©

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Projects – Cost, Time, Quality constraints

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Cost Time

Quality

Safety, Health & Environment

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Project Life Cycle

Project Types

Studies, Investigations

FEED,Detailed designPrototype dev.

EngineeringEng & ProcurementConstructionEng, Procure & Construct (EPC)EPC Management (EPCM)

Asset Support& Upgrade Projects

HUC

Gates

Sanction Operate(Engineer, Procure, Construct,

Hook-up & Commission)

Select DefineAppraiseE P

Execute

COperate

HUC

Execute

CPE

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Influence on value – client perspective

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Value(Profit, NPV,

IRR, etc.)

Contribution to Value (35-40%)

Contribution to Value (40-45%)

Time

Select Define

© Adept Knowledge Management

ExecuteSelect

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E&P Projects

Infra-structure Projects

Project life-cycle in E&P and Infra-structure projects

Appraise SelectExplore OperateDefine Execute

- High expenditure, short duration, high returns

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- Moderate expenditure, long duration (often in stages), low returns

Appraise SelectMaster

Planning

Operate

( & Expand)Define Execute

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Core Project Management Processes

“Project management is accomplished through the application and integration of project management process of initiating, planning, executing, monitoring & controlling and closing.” - PMBOK ©

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project inputs

project deliverables

executingthe plan

monitoring and controlling

closing the project

planning the project

initiating the project

project boundaries

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• Initiation

• Planning (schedule & cost)

• Execution

• Monitoring & Control

• Closing

• Stakeholder management

• Scope management

• Change management

• Supply change management

• Quality management

• HSE management

• Information management

• Risk management

& others

Core project management processes

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Starting the project

Internal FactorsProcessesToolsResourcesHSEGovernanceFinance

External FactorsLawsRegulationsStandardsSocio-politicalMarket Issues

SanctionProjectInitiatorClient

TechnicalRequirements

FunctionalRequirements

Objectives

Define Scope&

ExecutionMethodology

i.e. PEP

Execute

Supply Contract

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Planning: Documents & Sequence

Network

S-Curve

Gantt chartWBS

Histogram

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Why monitor and control?

• To know where you are against the plan at any given point in time,

- what have you achieved?

- how much you spent (or resources used) in getting there?

- how efficient and effective were you at getting there?

- what remains to be done?

• To be able to forecast what the completion duration and final cost might be

• To assist you in focusing on the key future management actions you need to take to redress any shortfalls or slippage

• To provide feedback to all your stakeholders (communications management)

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Stakeholder management

Stakeholders – anyone with an interest in the project

• Identify stakeholders

• Prioritise stakeholders

• Communicate to get their opinions

early and to gain their support

• Gain trust and understanding

• Requires continuous dialogue

Keep satisfied; don’t bore

them

High

Pow

er

Fully engage;Communicate

often

Monitor; but do not bore

with excessive

information

Keep informed, talk to them, can often be very helpful

LowLow Interest High

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Importance of Managing Stakeholders

• By definition there will be stakeholders external to the project delivery team. They will also need to be managed as they can influence the outcome of the project ( positively or negatively).

• The project team is not able to (and sometimes should not) communicate its issues to all stakeholders.

• Discussions on strategic issues can distract the attention of the project delivery team. The latter needs clear and timely decisions to stay in clear delivery mode.

• Some commercial and personnel related sensitive actions can only be taken and managed by a senior company person (sponsor).

‘Successful project management means successful pol itical management also’

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What is risk and risk management

Risk is :

• “An uncertain event, feature, activity, or situation that

can have a positive or a negative effect on objectives”

• Risk = opportunities + threats

Risk management is :

• “A formal process that enables identification, assessment, planning and management of risks”

• A formal approach is better than just an intuitive approach

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Quantifying risks

• Impact (I) is the magnitude of the consequence

• Probability (P) is the likelihood (chance) of occurrence

• Expected Value = I mpact (I) x Probability (P)

• Qualitative techniques use a rating system of adjectives or ranges to describe I&P (e.g. high, medium, low or 1 – 5 scale)

• Quantitative techniques use Expected Values to describe probable monetary value

- both allow individual risks to be graded to target management action

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Risks are mitigated or realised by taking action(effort, resources), not by ambitious words alone!

Managing change

• Change happens for many reasons and in many forms

• external – client, stakeholders, new regulations, changing environment, market changes, innovation

• internal – project team, materialising risks, inefficiencies, surprises (!), scope development, value adding ideas, performance slippage, poor initial scoping

• An organised systematic approach is needed to manage the positive or negative effects of the change on the project baseline objectives of cost, time and quality.

• Un-managed and ‘creeping’ changes usually cause havoc at the latter stages of a project. Often the cause of the major disputes between client and supplier.

• Documenting change is an important aspect of scope and configuration control, as well as being good commercial practice.

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APM - PM competence framework

Contextual(self and business

environment)e.g. GovernanceHSSECultural AwarenessCorporate StrategyBusiness Case

Technical(self knowledge & skills)e.g. Initiation

Stakeholder MangScope MangPlanningMonitoringChange MangRisk MangClose-out

Behavioural(self and others & work)e.g. Leadership

CreativityAdaptabilityJudgementCommunicationMotivationOrganising

‘Each competence element judged for knowledge and experience’

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Capex phase

E&P Projects, Under-performance Issues

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Cost & Duration Actual

Planned

time

Production

time

Planned

Actual

Opex Phase

• cost & schedule over-runs• delayed production (& income)• dissatisfied stakeholders


� Incorrectly chosen

� Poor initial definition before sanction

� Poor project start-up

� Poor supply chainmanagement

� Late realisation ofimpending problems

+ many more!

(whim, speculative, ‘strategic’ (so-called!), poor governance)

Key Causes of Project Failure

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(rush to procure and build, inadequate planning, poor or non-existent control processes)

(un-manageable risks placed on suppliers, insufficient assessment of supplier capabilities, incorrect contracts formats for delivery)

(poor risk management, over-reliance on heroic recovery actions over sound pro-active management)

(rushed, heroic timescales and budgets, supressed risks, reliant on exceptional execution and delivery)