Abstract TABLE OF CONTENTS - OSTI.GOV

Saudi Aramco: Oil to a Thirsty Marke t - International Cooperation Brings New Oil Field on Quickly 1

Abstract In a global project environment where many large projects struggle to meet their cost and schedule targets, Saudi Aramco has been executing its world-class mega projects with ever shorter schedules, and well within budget. Of the five mega projects completed in the last ten years, two were selected as Project Management Institute project of the year, and one was honored at the 2005 International Petroleum Technology Conference.

Saudi Aramco is currently executing a series of new mega projects that will help meet the worldwide energy demand increases and ensure its leadership position for years to come. Huge new gas processing plants, facilities for recovering valuable petrochemical feedstock, and new crude oil production facilities are all a part of Saudi Aramco's ambitious domestic capital program to increase oil supplies and support Saudi Arabia's burgeoning petrochemical industry.

Collectively, the Hawiyah, Khursaniyah, Khurais, Shaybah and Manifa programs will increase revenue to the Kingdom and promote the local economy by increasing oil processing capacity by 2.85 million BPD, sales gas by 1.4 BCFD, ethane production by .45 BCFD, and condensate by 325,000 BPD. All o f these projects are being executed on demanding schedules and within budget without a significant increase in Company personnel while expanding the Saudi Arabian procurement and construction content of the projects.

This paper will focus on the Khursaniyah Project, which will produce 500,000 barrels of oil per day only 34 months after the start of preliminary engineering, fully six months faster than any previous Saudi Aramco project, in the most resource competitive market the oil business has ever seen. The execution of this project required a new contracting strategy, novel engineering and construction methods, with international cooperation of international engineering, procurement, and construction firms and suppliers from all over the world.

In addition to the oil facilities, the project will complete a new one billion cubic foot per day gas plant receiving gas from five different sources with varying pressure and H2S content. The scope also includes all of the infrastructure facilities, huge water supply and injection plants, and all of the oil and gathering and product distribution pipelines.

The project also requires a temporary construction city for over 30,000 men in the desert. This city has people from over 30 countries, speaking 15 or more languages, all focused on achieving one goal - on time completion of the most complex project ever done in Saudi Arabia. The city has many of the same challenges of a normal city - traffic, safety, food and water supply, housing, training - and many unique ones. The paper will focus on the management challenges of a few of these unique issues.

Saudi Aramco is dedicated to supporting Saudi Arabia's role as the leading provider of energy to the world. History has demonstrated its success. Saudi Aramco will continue to build

on the success through innovation, solid integration and a strong will to meet future challenges.

TABLE OF CONTENTS

Page No.

1. Abstract I

2. Introduction 2

3. Project Scope and Schedule 3

A. Oil Processing

B. Gas Processing

C. Water Supply and Injection

D. Pipelines

E. Utilities and Industrial Support Facilities

F. Project Schedule

4. Meeting the Challenges 7

A. International Cooperation

B. Project and Off Job Safety

C. Running the Khursaniyah Project City

D. Construction Skill Training

E. Schedule Improvement Methods

5. Megaproject Success Factors 11

A. Leadership

B. Communication

C. Best Practices

Saudi Aramco: Oil to a Thirsty Market - International Cooperation Brings New Oil Field on Quickly 2

2. Introduction Saudi Aramco is the national integrated oil company for Saudi Arabia, operated for profit, with a production capacity of 10.5 million barrels per day, mostly for export. The Company also processes about 7.7 BCFD of associated and non-associated gas and operates five refineries with a total capacity of 1.8 million barrels per day, plus two joint venture refineries in Saudi Arabia and several international refining joint ventures.

Saudi Aramco has projects in development to add nearly 3 million barrels per day of crude processing capacity by 2011, four BCFD of gas stripping capacity, and 1.8 BCFD of gas processing capacity.

Saudi Aramco Project Management is charged with the responsibility of managing all engineered projects exceeding $2 million in value. For the last five years, PM has managed on average 150 active projects from S2 million to £2 billion with 650 - 750 project personnel, plus about 150 support personnel in estimating, contract management, and best practices implementation. Engineered project capital expenditures averaged S2.5 billion per year for the last five years, and will exceed $7 billion per year for the next few years as the megaprojecls are executed.

Today, the megaprojects are executed using international engineering firms for preliminary engineering, international EPC contractors for detailed engineering and procurement and local subcontractors for construction. Engineered materials are purchased from international suppliers and local manufacturers when possible. Smaller projects (up to $600 million) are now dominantly engineered and constructed using local contractors.

Mega Project History

Saudi Aramco has a history of successful project execution for the last seventy years. Facilities tend to be very large compared to similar facilities world wide, with the average Gas-Oil Separation Plants (GOSP) at 300,000 BPD to process oil, water, and gas from wells averaging 5 - 10,000 BPD each. Pipelines averaging 30" - 60" transport the oil to terminals with a shipping capacity commensurate with production.

Megaprojects were the order of the day early in the Company history, with new GOSP's, pressure maintenance with water injection, pipelines, oil stabilization, and export terminals. Major capacity expansions were built in the mid-1970's, after the first oil embargo. Until the late 1970's, projects in Saudi Aramco were managed by operations organizations working through major international EPC companies.

(n 1977, Aramco started managing its projects with an internal organization, using international contractors for engineering and construction. The first megaproject was a very large gas collection and distribution program to eliminate flaring and provide Saudi Arabia with natural gas. At that time, with expenditures running about S3.5 billion per year (2002 equivalent), Project Management had 6 General Managers and 19 departments to manage the gas program and multiple smaller projects.

In 1988, Arabian American Oil Company (Aramco) became

Saudi Aramco. This change was accompanied by increased hiring of Saudi Arabs and allowing attrition of experienced expatriates. In the late I980's we started using LSTK contracts for the largest projects, and local contractors for smaller projects. During the 1990's we built the Ras Tanura Refinery Upgrade, where we learned a lot of hard lessons, and the Shaybah Field Facilities, deep in the desert, 450 km from the nearest town, in only 36 months.

Modern Mega Projects

Below is a summary of the schedules for the megaprojects completed and in progress since 2000. The first three were about the same size and complexity, with lessons learned providing the impetus for schedule improvement. The Hawiyah NGL Recovery project processing four BCFD of gas is more technically complex and larger than any previous project; it will complete in less than 42 months.

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The Khursaniyah program, described herein, will complete in 34 months primarily due to a new contracting strategy allowing reimbursable engineering and procurement until a final LSTK price was negotiated. The Shaybah Expansion is a smaller scope project to expand the original Shaybah Facilities. The Khurais program to add 1.2 million BPD of oil processing is much larger than anything done previously, requiring a little more time. Manifa will add 900,000 BPD of oil capacity from shallow offshore fields, requiring three years for a causeway and drilling islands before offshore drilling commences.

The primary benefit of all of this mega project activity is an increased oil processing capacity of nearly four million barrels per day by 2011.

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2. Project Scope and Schedule

A. Location

The map above shows the Arabian Peninsula with the oil and gas fields in green and red. The picture on the right shows the location of the mega projects in the Eastern Province. Saudi Aramco's headquarters is located in Dhahran. Riyadh, the capital city of Saudi Arabia, is shown on the left edge of the photograph. The Khursaniyah Field is located about 200 km northwest of Dhahran. The nearest city is the port of Jubail, about 100 km northeast of the field.

Khursaniyah Program

B. Oil & Gas Production Facilities

The Khursaniyah Facilities will process oil from three medium size oil fields - Khursaniyah, Fadhili, and Abu Hadriyah. Oil, gas and water from 69 directionally drilled wells with an average production rate of 7,000 barrels per day will be piped to two satellite gas-oil separation plants at Abu Hadriyah and Fadhili for further shipment to the Central Processing Facility (CPF). Production from the wells is measured with a three phase meter, and then sent through manifolds and trunklines to a gas oil separator. There, most of the gas, water and salt are separated from the oil for further processing, and the oil is stabilized by heating to remove the remaining gas before it is shipped directly to the Ju'aymah Terminal for export.

After separation from the production stream, produced water is further processed to remove most of the residual oi l , then blended with injection water for reservoir pressurization.

Associated gas production of 300 million standard cubic feet per day is compressed to 1200 psi and sent to the new gas plant being built simultaneously.


B. Water Supply and Injection Facilities

Produced and well water are treated and pumped to injection into the reservoir for pressure maintenance. The water supply wells pump water from the aquifer for oxygen scavenging, then high pressure pumps supply water to the injection wells.

C. Gas Treatment Facilities

The Khursaniyah Gas Plant receives 300 MMSCFD of sour gas from Khursaniyah along with 700 MMSCFD of high and low pressure gas from three other sources and 100,000 BPD of hydrocarbon condensate for joint processing. Al l gas is compressed to 1200 psig, dehydrated and desulfurized, and then gas and natural gas liquids are separated in multiple columns. Most of the ethane is removed using a lurboexpander and a stripper column operating at -106 degrees Centigrade.

The remaining 550 MMSCFD of gas, stripped of ethane and heavier NGL, is recompressed and used for fuel or sent to the sales gas grid for distribution.

290,000 barrels per day of natural gas liquids consisting of ethane, propane, butane and other condensates are stored in six 10 meter diameter by 70 meter long high pressure storage tanks (see inset article.) From storage, the C2+ NGLs are sent to Ju'aymah Gas Plant for separation and distribution to industrial customers who use these products to make plastics, fertilizers and other commercial products for use in Saudi Arabia and exported around the world.

1800 tons per day of sulfur is removed from the process as a high concentration acid gas, is distilled in three sulfur recovery units and shipped as molten sulfur to Bern Gas Plant for sale to industrial facilities or export.

D. Pipelines

The gathering system for the project includes gathering lines from 69 oi) wells and 77 water supply wells and three production trunklines to the CPF. Three high pressure water injection trunk lines feed XXX distribution lines to injection wells. New gas and condensate cross country lines from other fields complete the gathering and distribution.

Product pipelines include the oil line to Ju'aymah terminal, gas to the nearest sales grid junction, and NGL to Ju'aymah Gas Plant.

KHURSANIYAH — Just as necessity is the mother of invention, challenge is the mother of innovation. Al-Zamil Heavy Industries' (ZHI) challenge at Saudi Aramco's Khursaniyah Gas Plant Project (KGP) is to build 39 pressure vessels all to be delivered in only 21 months from the date of the purchase order, six of which are the Khursaniyah Natural Gas Liquids (NGL) bullet storage vessels.

These six vessels weigh in at 1,050 metric tons each, with a diameter of 6.6 meters, an overall length of 67.7 meters and a wall thickness of 82 mm.

Figuring large in ZHI's solution to the challenge is to build and heat-treat the vessels on-site. This is no small feat and is the first time that kind of manufacturing job has been performed at a Saudi Aramco site by a Saudi manufacturer.

KGP is faced with more than its fair share of challenges, ranging from its strict schedule and a global shortage of steel, to a scope of more than 400 pressure vessels of different sizes and wall thicknesses.

ZHI has started to assemble a huge furnace on site, which will be lifted in pieces and placed over the huge vessels. Electric and gas heaters will be used to raise the vessel temperature to 690 degrees Celsius to perform a seven-day thermal treatment process on the vessel.

The Saudi Aramco Project Management Team (PMT) first explored the idea of on-site manufacturing with local manufacturers during the program planning phase. ZHI was the one manufacturer to step up to the challenge and quickly set out to work with Saudi Aramco, breaking records in the process. ZHI used the largest gantry crane in the Middle East — 120 metric tons with a 40 meter span — and, in just three months, erected a completely certified pressure-vessel-manufacturing facility.

On-site manufacturing will bring about many advantages for KGP, including a faster completion period, instant access to critical components for easier quality control and inspections, as well as minimal transport costs.

On-site manufacturing of some of the world's largest process vessels not only increases local market participation but also helps realize company's strategic imperative of promoting the Kingdom's economy.

Saudi Aramco: Oil to a Thirsty Marke t - International Cooperation Brings New Oil Field on Quickly 5

E. Utilities and Industrial Support Facilities

Power for the project is supplied by Saudi Electric Company and a 300 MW cogeneration plant using two 150 MW combustion gas turbine generator sets. Waste heat from the turbines is captured and used for crude stabilization.

A. International Cooperation

The biggest challenge to design and build a facility of this magnitude in 34 months is the required cooperation of hundreds of different firms supplying materials and up to 30,000 personnel on site at any time.

The overall project management is being supplied by 85 Saudi Aramco managers, engineers and administrators, most with mega project experience, but never of this magnitude. The project scoping documents were done at

Major buildings other than the control room include an administration building, maintenance and training buildings and other support buildings for the eventual staff of 550 management, operating and maintenance personnel.

The project includes state-of-the-art security for the plants and the industrial support facility.

Foster Wheeler in Reading, UK. The engineering, procurement and construction management firms are Snamprogetti, Milan for the Central Processing Facility, and a consortium of Bechtel, Inc. and Technip SPA for the Khursaniyah Gas Plant facilities. The remaining work is contracted to multiple Saudi Arabian firms that provide construction plus some engineering and procurement.

To complete the international scope of the project, let's look at where the materials are coming from. As you can see, this project is a world wide effort.

The central control room combines control systems for the oil and gas facilities, the largest such facility run by Saudi Aramco upstream operations. The communications network includes fiber optic cables to all of the wells for process control and measurement, telephones, radio and emergency communication systems.

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F. Project Schedule: The project was designed for 38 months from the start of the design basis and 34 months from the start of detailed design, compared to industry average of 54 and 45 months respectively. See details on the Schedule Improvement Methods of Challenges.

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B. Project and Off Job Safety

Saudi Aramco gives safety the highest priority on our projects, and as a result, our contractors have excellent safety records. Khursaniyah is no exception with 30 million manhours of construction work with no lost time incidents. The chart on the right shows the safety pyramid indicating a very safe facility for personnel.

Continuing this safety record is one of the most important responsibilities of the entire management team. They manage this with training, daily safety awareness sessions at the work sites, and by constant vigilance. They plan to keep up the no lost time accident record to pass the current record of the Haradh Gas Plant of 42 million manhours.

KHURSANIYAH - Contractors are taking great pride at this fast-track, 42 square-kilometer megaproject, in their record of 30 million man hours worked without a lost-time accident. Safety officials on the project say the milestone is the result of early planning and the cooperation of thousands of workers on site each day.

"We integrated safety into the design process," said Dave Brotherton, HSE manager for Bechtel-Technip Joint Venture. "We then developed an HSC plan using best practices from Bechtel and Technip. We've worked with CCC on many projects around the world, so we know the best of CCC's HSE procedures. We integrate the best practices throughout the organizations involved in the project."

Because of the tight construction labor market, the contractors knew they would be recruiting a largely unskilled work force, which prompted a focus on training.

"From a very early stage, we had to develop orientation training, which covered such simple issues as climbing ladders or climbing onto a scaffold to wearing a harness and the value of safety helmets, safety boots and eye protection," Brotherton said. "With a more skilled work force, you would expect people to already know these things."

Comprehensive training programs ensured the transformation of this unskilled work force into a skilled one. Future scaffolders, riggers, equipment operators, welders and safety officers received courses that led to certification. Scaffolders, for example, learned from inspecting more than a dozen structures created with deliberate flaws so they would be able to recognize potential dangers on the job site.

Brotherton said another key factor for the success so far is the project's Safety Task Analysis and Risk Reduction Talk (STARRT program.) Each day, the first order of business is the STARRT in which the work of the day is discussed in detail along with the potential hazards. Even when the work is identical to the day before, STARRT starts the day.

Employees also have embraced a near-miss card program that creates a communication loop between workers, safety officials and company managers. Brotherton credits employee enthusiasm for this program as a keystone in accident prevention at the job site.

The communication continues up the company ladders when top safety officials from each contractor and Saudi Aramco meet as an HSE Steering Committee, which examines a variety of issues and is empowered to fine tune project procedures to ensure continuous improvement in safety.

Brotherton notes contractors from around the globe have been watching this project with great interest and likely will adapt some of these procedures to improve safety on their job sites in the future.

"Every day on this project is a learning process," Brotherton said. "It's very exciting."

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C. Khursaniyah City

One of the seldom discussed challenges of running a megaproject in a remote area is the building and running of the city required to support project operations. For Khursaniyah, the city will house a peak of some 30,000 people, over 90% of whom are not native to Saudi Arabia. Most come from India and Southeast Asia.

The amount of traffic is immense, with as many as 20,000 vehicles per day coming into and out of the plant, all with a purpose, and a place to drop off their loads and pick up new ones. As you can imagine, most of the services of a typical city are here - recreation facilities, traffic control, dining facilities, etc. And many are not - you won't find shopping, restaurants or bars.

Recreation facilities include playing fields for soccer and cricket, gymnasiums and fitness equipment and common areas where old friends and new friends can enjoy conversation over a cup of coffee or tea. Employees get laundry service several times weekly.

This fledgling city, complete with fire protection, clinics and security, has its own Governing Council, comprised of company officials of the several entities working together at Saudi Arabia's largest construction site. Together, they sort out the challenges presented by any municipality, from sewage treatment and rubbish collection to the traffic congestion created by hundreds of buses and various company vehicles and the steady stream of 2,500 trucks arriving on site daily.

"It's important to make sure the workers are comfortable," Hallaq said "The training goes better, and the employees are more motivated on the job."

At the end of this project, the city of Khursaniyah will cease to exist. The land will be returned to its original state, and the housing dismantled to be reassembled at the site of the next Saudi Aramco megaproject What will remain is the Khursaniyah Oil and Gas Production Facility - a tribute to the thousands of men who made this incredible complex rise from the sands -- and who once lived there.


D. Construction Skill Training

The Khursaniyah Project is being built during the biggest oil and gas construction boom in history, creating resource shortage of every imaginable commodity, and shortages of skilled personnel for almost every job. To execute the work, the contractors must train people in basic and advanced skills of every kind. Many workers have come directly from farms in Saudi Arabia, India or Bangladesh; some have never seen a desert, or sometimes even a city. But somehow, they learn, they grow, and they become skilled at their particular craft.

KHURSANIYAH - One of many young Saudis who has found a rewarding career in the building trades is 26-year-old Fawaz Hassan of Al-Hasa, an agricultural center in the Kingdom's Eastern Province.

Hassan earlier worked as a communications operator, but when he got the chance in the spring of 2006 to train as a safety officer for Consolidated Contractors Co. at the Saudi Aramco Khursaniyah megaproject, he jumped at the opportunity.

"My brother worked in safety, and he encouraged me to get into involved in it," Hassan said. "I got training here with CCC, and I have a certificate now. I also got OSHA training. We had three or four classes a week for two to four hours. It was all done while I was on the job in Khursaniyah."

Because of his brother's experience, Hassan's family was supportive of his decision to enter the building trades. He said he hopes to get married one day soon now that he knows he has the wherewithal for a nice home and the other needs of a young family.

"I'm working with good people here, and there's a real spirit of teamwork. This is a great place to build my knowledge and my career," Hassan said. I want to develop myself because I don't want to stay in one place. I am going to stay a part of this CCC team."

Hassan said he encourages other young Saudis to enter the construction trades

"I tell my friends that if they get the chance to come onto this kind of job, they will have a good future. I tell them they should take English courses and work on their computer skills, and they'll get good jobs, too."

E. Schedule Improvement Methods Due to the increased international demand for oil, Saudi Aramco decided to accelerate the development of these fields using new contracting strategies for the GOSP and gas plant. Multiple strategies were used to meet the 34 month preliminary engineering to mechanical completion schedule (compared to an industry average of 45 months) for a project of this size and complexity. All of the methods below combined to allow the schedule to be met.

I. Contracting Strategy: The normal contracting strategy of completing preliminary engineering, obtaining commercial proposals, and awarding lump sum turnkey contracts would have taken at least 42 months - 8 months longer than allowed. Instead, Saudi Aramco chose to use a Converted LSTK (CLSTK) contract.

For this method, EPC contractors provided proposals based on an enhanced design basis and uplifts for engineering and procurement. Preliminary engineering, detailed design and procurement were done on a reimbursable basis to expedite the work. At about 70%

design, prices for final LSTK contracts were negotiated with the contractors.

The strategy provided multiple advantages, allowing:

a. The contractors to focus on the long lead items for preliminary and detailed design and early procurement of long lead equipment and materials.

b. The contractors and Saudi Aramco to select material suppliers and construction contractors based on a combination of cost and delivery time. It also enabled manufacturing slot commitments.

c. Changes to the design without the normal change order process.

d. Continuity between preliminary design and detailed design.

e. Alignment of purpose between Saudi Aramco and the contractors, since in the reimbursable phase, all parties are working to complete the project on lime, without an overriding concern for cost


f. In the actual situation, the choice of contracting strategy enabled Saudi Aramco to obtain the services of major EPC contractors when they still had manpower resources available. With the increase in world wide construction, a delay of one year could have limited the contractor choices and possibly increased prices substantially.

The strategy also had the disadvantage of an uncertain cost when the project was funded, and a risk of failure to negotiate a lump sum conversion, which would convert the contract to reimbursable, increasing costs and possibly delaying completion.

2. Design: The Khursaniyah Producing Facility contractor maximized the use of "Smart" design tools, a first for Saudi Aramco, including 3D-CADD integrated with smart P&ID's, Instrumentation and Electrical Drawings. These tools greatly enhanced design accuracy, consistency, quality, and change control. Saudi Aramco developed a quality assurance tool that checked P&1D design details overnight, and provided a detailed report on variances the next day.

3. Procurement: In addition to the contractual advantage for procurement, the project team pursued several other techniques which help meet the schedule.

a. The team advised local manufacturers several months before bidding that large orders would be solicited soon, giving those willing to take a risk on expanding capacity an increased probability of getting the orders.

Wasim Kabour - Project Engineer

b. Long lead items, including structural steel, major rotating equipment items and most of the pressure vessels were purchased based on preliminary information to assure fabrication slots. Pricing was

based on predetermined factors included in the bid documents.

c. The Al-Zamil on site fabrication (discussed above) of high priority vessels eliminated the time and risk of transportation from overseas plants, and allowed the project team to closely monitor fabrication progress.

Construction:

a. Because of the CLSTK contracting strategy, the contractors were able to gain commitment of the major construction subcontractors early in the process, assuring availability of many of the key personnel required for construction management.

b. The team chose to use a combination of concrete and steel pipe racks because of the shortage of steel fabrication facilities. The columns were mostly prefabricated and shipped to the site, with the final concrete work done on site. The concrete racks, used for the first time by Saudi Aramco, substantially reduce future maintenance and the need for fireproofing the steel racks; however, they limit future flexibility for

4.

Saudi A ramco : Oil to a Thirsty Market - Internat ional Cooperat ion Brings New Oil Field on Quickly 11

F. Megapro ject Success Factors:

Saudi Aramco believes that the success o f the recent and current megaprojects fo l lowing factors.

is based on a combination of the

1. Effective Contractors and Cont rac t ing Strategies

A l l o f the megaprojects to date were built by both local and major international EPC contractors. Each megaproject was divided into several large sub-projects with well defined interfaces. Contractors selected for bidding on the megaprojects all had successful experience on smaller projects, so they had already learned about Saudi Aramco procedures and processes, and, in turn, we were familiar with their methods. At Khursaniyah, EPC contractors with previous successful experience wi th Saudi Aramco were able to build on their experience and make improvements in the processes, many of which were archived as Saudi Aramco lessons learned-A l l o f the completed megaprojects were based on a detailed project proposal and Invitation for Proposal (1FP) documents, which include mandatory design and procurement standards based on international standards. The contracts are dominantly LSTK with contractors providing detailed engineering, procurement, and construction according to the IFP. Saudi Aramco makes extensive use o f purchase order novation to reduce critical path equipment lead times. (Novation: Saudi Aramco originates purchased contracts for long lead materials to begin engineering; the contracts are transferred after award to the contractor as part of his scope of work) They also provided the contractor with detailed designs for major standardized components, such as structural steel and substations, to expedite procurement and construction.

For Khursaniyah, this process was substantially modified by the CLSTK process above.

2. Leadership

a. Integrated Team

The integrated team concept has been proven throughout the history o f project execution. For Saudi Aramco megaprojects, the integrated teams are composed of participants from all Company stakeholder organization. Full t ime team members wi l l generally come from Project Management ( -60%); Operations (-20-30%); and Inspection, Central Engineering, and Materials Management (-10-20%). Part time team members come from finance, law, contracting, environmental, and others.

The management team is also mixed with operations and Project Management sharing the leadership roles. This combination o f integrated team and integrated management has ensured that the ownership of the project results is shared. Operations personnel appreciate the opportunity to learn how their facil i ty is built ; by so doing, they improve their abil i ty to operate effectively. Inclusion o f maintenance personnel helps the team design maintenance

considerations into the project from the beginning.

Project engineers work as one team with Plant Operations and Maintenance during pre-commissioning, commissioning, and start-up. This philosophy was extended to integrating the plant operation inspectors with project inspection staff, which led to elimination o f unnecessary inspection layers and resulting conflicts.

b. Executive Sponsorship

Each megaproject has a Senior Vice President from Exploration and Production or Gas Operations as an executive sponsor. His role, along with the VP o f Project Management, is to assist the project team within his organization, with other organizations inside the Company, with the project contractors, and, perhaps most importantly, with the Government agencies involved in the project. This high level o f sponsorship has provided certainty of internal resources, and great leverage on external resources.

However, with the high profile of the megaprojects, and the importance of their success to Saudi Aramco, the Saudi Arabian Government, and eventually the world, the de facto sponsors w i l l always be the Company President, Abdullah S. Ju'mah, and the Oi l Minister, A l i A l -Na imi .

c. Team Cont inu i ty

One o f the most important lessons from Ras Tanura (frequent changes) and Shaybah (minimal changes) was the value o f maintaining the project team intact throughout the project life. On today's megaprojects, management takes extra care to assure that management personnel are in place for the entire project, and that project team member changes arc minimized.

Communica t ion

a. Common Goals

Common project goals are achieved by extending the integrated project team to include the design contractor, major manufacturers and suppliers, and EPC contractors and subcontractors. Formal team building exercises are held at each stage and team spirit is actively promoted. Contracts are designed to promote common goals as much as possible given the diverse interests o f the various participants.

For example, on the Qat i f project, an element of trust was established to the extent that contractors wi l l ing ly came forward and 0 fife red numerous cost saving proposals during the detailed design process. One contractor stated, "Saudi Aramco helped us to finish on time and helped us to make it profitable in every respect. We were encouraged by the PMT to talk directly to the customer to understand their desires & needs."

Saudi Aramco provided the right environment and atmosphere for cooperation. The prime objective

Saudi A ramco : Oil to a Thirsty M a r k e t - Internat ional Cooperat ion Brings New Oil Field on Quick ly 12

was always the job , not for one side or the other to w in . Neither Aramco nor the contractor could have been successful without the cooperation o f the other party. The idea was to create an environment with a " W i n - W i n " situation for all parties. Contractors were encouraged to speak their minds. N o issues were hidden from team members, including financial issues. The fu l ly integrated team made decisions as partners. The integrated team structure allowed Lump Sum Turnkey ( LSTK) contractors one source for answers instead o f the traditional way o f using the P M T as a link to getting answers from the facility end-user.

b. C E O Meetings

This practice, introduced in the Shaybah program, has produced excellent results for all o f the parties. The CEO's o f all the major contractors, suppliers and Saudi Aramco traveled to globally located design offices or Saudi Arabia, generally twice a year, to demonstrate their high level o f commitment and support for the program. This innovative concept was implemented to coordinate challenges and avoid the need for getting contractor CEO management involved only after serious problems had surfaced. As a result o f these meetings, contractor and supplier CEO's were always cognizant o f the state of the project and how the performance o f their companies compared with the others and with program objectives.

c. Lessons Learned

Lessons Learned from previous projects are always integrated in a formal workshops to select applicable lessons. The Hawiyah Gas Plant program, which was completing as Qat i f started, held a three day workshop to gather their lessons, and many o f them were used in Qatif. One example was an automated exception item management system, which was used and expanded to help reduce precommissioning time and address outstanding issues proactively. This system has recently been updated and distributed to all projects, and includes automated mechanical completion.

Near the end o f each project phase, the project team holds a multi-day lessons-learned workshop. Lessons deemed to have company-wide application are transferred to the Project Management's Lessons Learned Database for use by future projects.

d. Improvement Cu l t u re

A culture o f continuous improvement has developed over the last ten years, and each of the megaprojects strives to improve on previous designs, and create their own unique contribution to the Company's success.

4. Best Practices

a. Benchmark ing and Target Sett ing

Saudi Aramco has not used benchmarking extensively for megaprojects, but has used it to great advantage to identify project system opportunities for improvement. The Hawiyah Gas Plant and Qati f projects were benchmarked by an independent benchmarking agency. Target setting, other than the tight schedules, was not used extensively. Its use is reserved more for departments managing multiple small projects.

b. Best Practices Implementat ions

Best Practices, discussed above and detailed in the definit ion section, have made major contributions to each o f the megaprojects, with each one gaining slightly more benefit as the learning progresses. The biggest benefits accrue to the project engineers on the job , as they stand on the shoulders of their predecessors.

c. C u r r e n t In i t iat ives for Fur ther Improvement

Saudi Aramco conducted its second system benchmark in early 2004 for 30 projects that started from 1999 - 2003. The results showed some improvement from the original study in 2000, wi th average schedules about 25% longer than industry, and costs about 15% higher. It also identified mult iple specific areas for improvement. Consequently, we started a Corporate Capital Program Best in Class initiative wi th 23 o f the 24 Administrative Areas in the Company participating. Nine major improvement areas were identified, and the initiatives are all moving into the implementation phase.

These initiatives are expected to have a great impact on cost and schedule performance o f all Saudi Aramco projects:

1) Greater use o f Innovative Contracting Strategies, which focus on converted LSTK (see above).

2) Standardized Component Design. The first effort was a standardized substation design using precast walls and roof with top entry electrical wir ing, al lowing a slab f loor and experienced erection subcontractors. This design wi l l save design time and about 3 - 4 months in construction.

3) Increased accountability during the design basis (IPA FEL 1 & 2) now uses a more formalized gate approval process.

4) Project team integration for groups of small projects based on the megaproject success in this area.

5) More rigorous review of plot plan layouts and equipment peripherals and instrumentation.

6) Procurement process improvements including standardized procurement systems for local contractors and requisition templates.


7) Construction productivity improvements for to the design process, and design quality local contractors who employ personnel from control. third world countries with limited industrial „ , , - ■ , , ^ - -r- , . . . . .

9) The integrated Project Technology initiative will increase the use of IT for improved project processes, data management and flow, and for

8) Productivity Improvement for Local Design program management reporting. Contractors, focuses on construction feedback

experience. The initial focus is on reducing interruptions.

Documents

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