Fundamentals of Petroleum Project management

8/17/2019 Fundamentals of Petroleum Project management

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Lecture_1_Fundamentals of Petr. Proj. Management

Hydrocarbon Economics & Project Management (PEEN4001/Econ 6007)

Dr Ebenezer Sholarin, PMP®

Lecture 1

Fundamentals

ofHydrocarbon Project

Management

1st Semester, 2016


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Prepared by Dr Ebenezer A. Sholarin, PMP®

Module overview

• Project Management Conceptualisation

• Individual and Team Issues

• Petroleum Project Risk Management

• Project Organisational Design• Project Time Planning and Control

• Project Cost Planning and Control


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Meet Your Lecturer• More than 25 years experience in consulting, teaching, R&D, Oil & Gas

project planning, implementation and management in Eastern Europe, Africa and Asia pacific region;• Designed and implemented course unit: Petroleum economics & project

management in 2004, Petroleum economics, risks and projectmanagement in 2010, Hydrocarbon economics and projectmanagement for Subsea Engineers, 2014.

• PhD in Petroleum Economics and Management (1989),Gubkin University of Oil and Gas, Moscow, Russia.• MSc in Industrial engineering and management (1985)• Post Doctoral Diploma in Environmental Impact Assessment, Murdoch

University, Western Australia (2010)• Accredited Project Management Professional, PMP® since 2005.

• Book Author: Environmental Project Management: Principles,Methodology and processes, Springer, 2016.

• Director of Education, Project Management Institute, Western AustralianChapter (2008 – 2010)

• Member, Society of Petroleum Engineer, USA.

• Member, Project Management Institute, USA.


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Pre ared b Dr Ebenezer A. Sholarin PMP®

Outline

1. Introduction and module overview

2. Basic concepts and Definitions.

3. Projects Versus Operations.

4. Project Management System

– Project Organisational Structure

– Project management framework

– The triple constraint/PM triangle5. Management Versus Leadership

6. Engineering, procurement, and constructionmanagement (EPCM).


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“The balance between the global supply and demand forcrude oil is becoming progressively tighter, increasingly

requiring our industry to face new and unique

challenges. Our industry of tomorrow will have toaddress the demands of operating in an adverse

environment, development of new technologies andexpediting implementation in the field, as well as

optimization of processes and enhancing collaborative efforts to reduce cost.”

Statement made by former SPE President, Dr Behrooz Fattahi, athis University of Western Australia presentation on “Challenges of

the Future”, delivered 7th April, 2011

1. Introduction & Course

overview


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Lecture objectives

• At the end of this lecture, you should be able to: – Properly define a project scope and identify key constraints

– Recognize basic properties of projects, including their definition.

– Differentiate between project management practices and moretraditional, process-oriented business functions.

– Understand how effective project management contributes toachieving strategic objectives.

– Recognize the strength and weakness of three basic forms oforganizational structure and their implications for managingprojects.


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“ We will start digging from this side of the mountain.You and your gang start digging from the other side.

When we meet in the middle, we wil l have made atunnel. And i f we don’t meet, we will have made two

tunnels!”

Management Without Planning


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When to Use Project Management?

• When the scope of the challenge is larger thanone normally encounters;

• An ad hoc undertaking – unique or unfamiliar

organizational challenges;• When change is eminent and inevitable;

• When there is need for concurrent or value

engineering


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What Do we Need?

• Innovation and Creativity

• Managing Resources with ImmersiveVisualization, transparency and Control

• Employing Integrated ProjectManagement System.


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How are projects conceived?

• Ideas

Leaders

Strategy

Culture

Vision

CurrentReality

Execution

Commitment

Values

Focus

Capability

I.Q.

E.Q.

• Vision • Business Opportunity


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STO Project Management Model

Strategic

Planning

Tactical

Planning

OperationalPlanning



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2. Basic Concepts & Definitions

• What is PMBoK?

• What is a Project?

• Project Versus Traditional Business Operations

• Project, Program, Portfol io

• Petroleum Project Management definitions – Project deliverables

– The Triple Constraints or Project Management Triangle.

– Front-end Engineering and Design (FEED) Vs Front-endEnd Loading (FEL)


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PMBOK

• What is it?

– Project Management Body of Knowledge. A Guide published by the Project

Management Institute (PMI), USA.• Shell Petroleum has also developed its own

Body of Knowledge. It is called:

– Opportunity and Project ManagementGuide (OPMG)


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What is a Project?

• Consider the following definitions of projects: – A project is a unique venture with a beginning and end, conducted

by people to meet established goals within parameters of cost,schedule, and quality (Buchanan & Boddy, 1992)

– Projects are goal-oriented, involve the coordinated undertaking ofinterrelated activities, are of finite duration, and are all, to a degree,unique (Franem J.D., 1995).

– A temporary endeavour with a defined beginning and end (usuallytime-constrained, and often constrained by funding or deliverables),

undertaken to meet a unique goals and objectives, typically to bringabout beneficial change or added value. (IPMA, 2006).



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Project according to PMBoK Guide

“Project is a temporary endeavor

undertaken to create a unique product,service or result”

Source: PMI, 2013. A Guide to the Project Management Body ofKnowledge, PMBoK® Guide. Project Management Institute Inc., Atlanta.


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Characteristics of a Project A Project has the following attributes:

Projects are complex, one-time endeavor (processes)with a specific time frame or finite life span, i.e.temporary.Projects are limited by budget, schedule and resources.

Projects are developed to resolve a clear goal or set ofgoals.Projects are customer-focused.Projects are ad hoc endeavors with a clear life cycle.Projects are building blocks in the design and execution

of organizational strategies.Projects are terminated upon successful completion ofperformance objectives.


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Alignment of Projects with Corporate Strategy

• Integration

• Time

• Cost

• Scope

• Risk

• Human Resources

• Communications

• Quality

• Procurement

• Stakeholder/Interface

Initiate Plan Execute Control CloseOut

• Time• Budget

• Scope

“delivered”

Strategic

Management Project

Management• Strategy & finance

• Technology(requirements, design,make, test)

• Commercial (supplychain, procurement,etc.)

• Organizational(structure & people)

I n t e r a c t i o

n w i t h t h e b u s i n e s s a n d g e n e r a l e n v i r o n m

e n t

INTEGRATED PROJECT MANAGEMENT involves planning and delivery of projects throughout project

life cycle, in a fully integrated and consistent manner that cut across all project elements.

Concept Feasibility Definition ExecutionClose-out/Operations


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Example: An Offshore Project

The Galata Project, situated about 20km from the eastern port ofVarna, is being developed by Melrose Resources. The Galata gasfield is 23km offshore Bulgaria in the Black Sea.The field lies at awater depth of 35m and has gross proved and recoverablereserves of 49 billion cubic feet (bcf), and proved and probablereserves of 81bcf.

Van Gogh Oil Project, Exmouth Sub-Basin, Australia.FPSO Ningaloo Vision is slightly smaller than other FPSOs in the area,with a storage capacity of 620,000 barrels of oil and an oil-processing capacity of 63,000bpd.

http://www.offshore-technology.com/projects/apache_vangogh/http://www.offshore-technology.com/projects/galata-field/


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An artistic rendition of the Ivar Aasen FieldDevelopment.

An illustration of the Ivar Aasen Platform.The platform will be approximately 230m in height.

Ivar Aasen Field Development Project

Example: An Offshore Project (2)

http://www.offshore-technology.com/projects/ivar-aasen-field-development-norway/http://www.offshore-technology.com/projects/ivar-aasen-field-development-norway/


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Polyarnaya Zvezda (Polar Star) semi-submergeddrilling rig is currently drilling the first production well

at the Kirinskoye field.

Kir inskoye Gas and Condensate Field,Sea of Okhotsk, Russian Federation Chinguetti Oil Field, Mauri tania

The Chinguetti field lies off the coast of Mauritaniaand will be developed from an FPSO.

Example: An Offshore Project (3)

http://www.offshore-technology.com/projects/chinguetti/http://www.offshore-technology.com/projects/kirinskoye-gas-condensate-field-russia/


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3. Projects Vs Operations

E&P Operations E&P Project• Repeat process or product• Several objectives• Ongoing• People are homogenous• Well-established systems in

place to integrate efforts• Greater certainty of performance,

cost and schedule• Part of line organization• Supports status quo

• New process or product• One objective• One short – limited life• More heterogeneous• Systems must be created to

integrate efforts.• Greater uncertainty of

performance, cost and schedule.• Outside of the organisation• Upsets status quo.

Source: Graham, R.J. (1992). A Survival Guide for the Accidental Project

Manager, Proceedings of the Annual Project Management InstituteSymposium, Drexel Hill, PA: PMI, pp. 355-361.


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Project/Program/Portfolio

• A project is “a temporary endeavor undertaken to createa unique product, service, or result” (PMBOK)

• A Program is a group of projects managed in a

coordinated way to obtain benefits not available frommanaging them individually, e.g. CCS program, LNGProgram, GTL Program, ANLEC R&D program.

• A Portfolio is a set of projects or programs that areselected or prioritized in accordance with the

organization's business strategy, e.g. hydrocarbonportfolio comprising 15 projects (6 oil wells and 5 gaswells, 4 NGL projects).

H d b E i & P j M (PEEN4001/E 600 )


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Project management definitions

• “PM is the process of managing, allocating, and timingresources in order to achieve a given objective in anexpedient manner” (Badiru, et al 2008)

• “PM is the art and science of applying skills, knowledge,

tools and techniques to all aspects of project to achievethe project mission objective, within the specified time,budgeted cost and predefined quality specification”(Chan, et al 2009).

• “PM is the act of collaborating with people using otherrequired resources such that a project is planned,organised, and controlled effectively to accomplish itsgoals and objectives” (Vaidyanathan, G. 2013)


H d b E i & P j t M t (PEEN4001/E 6007)


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Project Management according to PMBoK Guide

• “The application of knowledge, skil ls, tools and

techniques to project activities in order to meet project requirements” (PMBOK, 2013)



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What is a deliverable?

A unique and verifiable product, result or capabilityto perform a service that is identified in the projectplanning documentation, and must be produced and

provided to complete the project. The process of breaking project deliverables down into

smaller, manageable components so that project tasks andactivities can be planned and estimated is calledDecomposition.



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Decomposition in Project Management



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4. Project management System

• Integration

• Time

• Cost

• Scope

• Risk

• Human Resources

• Communications

• Quality

• Procurement

• Stakeholder/Interface

Initiate Plan Execute Contro l CloseOut

• Time

• Budget

• Scope

“given” “delivered”

PROJECT MANAGEMENT:

“ On time, with in budget, to scope” execution/ delivery

Project

Management

Knowledge

Areas



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The Paradigm shiftPetroleum ProjectManagement Systems

Future

Present

Past



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• Organisation structure depends on three mainissues:

– Team Mix Requirements

• Or who you can get! – Procurement/Contracting Strategy

– Project Challenge

• There are three types of organisational

structure: – Functional

– Matrix

– Project based or “projectised”

4a Project Organisation Structure




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Types of Organizational Structure1. Functional Organization 2. Weak Matrix Organization

3. Strong Matrix Organization 4. Project-based Organization

FunctionalManagers

Functions Working

Level

People work within their functional

organization with little cross-functional

coordination

Project

CoordinatorLiaisons

People work within their functional

organizations with the project manager

serving as a cross-functional coordinator

Project

Manager

Customers

Project Manager has authority to make

personnel, budgetary and project decisions

and team has direct contact with customers People report directly to the project manager,

team members have minimal non-project

responsibilities and may be co-located, team

member keep functional organizations

informed about project progressAdapted from PMBOK Guide® 2013



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Responsibility Assignment Matrix (RAM)

PARIS Chart/

RAM PERSON

PHASE

Ben James John Ann David

Concept &

Initiation

S R A P P

Design &Development

S A A P P

Implementation

& Control

S R A P

Commissioning

& HandoverS A P P

LEGENDP=

Participant A=

Accountable

R=Review

Required

I=Input

Required

S=Sign-offRequired




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4b Project Management Framework

ASSESSMENT

PHASE

SELECTION

PHASE

DEVELOPMENT

PHASE

EXECUTION

PHASE

OPERATION

PHASE

Initiating

Processes

Planning

Processes

Executing

Processes

Controlling

Processes

Close-out

Processes

Scope

ManagementTime

Management

Cost

Management

Quality

ManagementIntegration

Management

Risk

Management

Human Resource

Management

Communications

Management

Procurement

Management

Adapted from PMI® 2013

Stakeholder

Management

Define Measure Analyze Improve Control


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Iterated Links of PM Processes

Initiating

Processes

(arrows represent

flow of information)

Controlling

Processes

Planning

Processes

Executing

Processes

ClosingProcesses

Define Measure/Plan

Analyze/DoImprove/Check Control/Review

Celebrate



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PLAN

DO

REVIEWRECOGNITION

ISO 9001 Project Management Model

CHECK



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36

Five Steps of Project Management

1. DEFINEIdentifyprojectactivities

Estimatetime and

costQualityandCommunicationmanagement

WriteProjectProposal

3. ORGANIZE 4. CONTROL2. PLAN 5. CLOSE

State theProblem/opportunity

IdentifyProject

Goal

List theobjectives

DeterminePreliminaryResources

Identify

Risks andstakeholdersSuccess criteria

DeterminePersonnelNeeds

IdentifyProject

ChampionRecruitProject Team

OrganizeProjectTeam Bidding

Assign

WorkPackages

DefineManagementStyle

EstablishControl Tools

PrepareStatus Reports

ReviewProjectSchedule, cost,team report

Issue ChangeOrders

ObtainClient

Acceptance

InstallDeliverables and

Commissioning

Document theProject

Issue FinalReport

Conduct Post-

Implementation Audit

DeliverablesProject charter WBS Recruitment Criteria Variance Reports Final Report

Project network/ Define Work packages Status Reports Audit ReportsCritical Path Assign work packagesProject proposal

PLANNING IMPLEMENTATION



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Project Phases

Scouting Study (30%)

Design Preparation ( 30% confirmed)

Decision #2

Decision #1

Project Spec’s Project Definition

Tender & evaluate

Decision #4 =

Final Investment Decision

Detailed design

Procurement

Construction

Commissioning &

Start-Up Performance Testing

Acceptanc e

incl. 10% estimate

Decision #3

Basic Design (20%)

Define Plan Organise Control Close



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Phase-Gate Project Management

Adapted from WoodsidePetroleum OPREP Material.



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Project Management Body of Knowledge

2. ScopeManagement

3. TimeManagement

4. CostManagement

6.. RiskManagement

9. ProcurementManagement

8. CommunicationManagement

5. QualityManagement

7. HumanResources

Management

1. ProjectIntegration

Management

• What are we going to do?

• What needs to be done?

• How long will it take?• How will it fit into the

FDP?

• What are the costsinvolved?

• How will I get the fundingI need?

• Is the Project worth doing?• What are the road blocks?

• How do I get what Ineed?

• Who are thecontractors/suppliers?

• How do we collaborate towork together?

• What are the processesfor sharing work?

• How many communicationchannels do I have?

• Are the technicalstandards being met?

• Who do I need for myproject?

• Where do I get themfrom?

• What project plans do Ineed?

• How do I get every teammember to do this?

10. StakeholderManagement

• Who are my

stakeholders?• What are theirexpectations?



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yd oca bo co o cs & oject a age e t ( 00 / co 600 )


4c The Triple Constraint or PM Triangle

S

T (Schedule)

CBudget

Scope

Time

Goal (Target)

• 3-Dimensions of Project Goal

• Projects must be within cost.• Projects must be delivered on time.

• Projects must be within scope.• Projects must meet customer

quality requirements.



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y j g ( )


Some Examples of a Project Goal• Saudi Aramco Haradh Gas Project:

– Objective - To create a $2 billion facility, which will be used togather, process and distribute natural gas, tapped from 87 gaswells, to satisfy the domestic Saudi market within 37 months.

Task: Can you identi fy the scope (target),

time (schedule) and Cost (budget)from each objective?

Think and develop 3D objectives related to your PM group project.

• NASA Autonomous Rotorcraft Project:

• Objective – To develop an unmanned helicopter (rotorcraft) thatwould operate with decision-making skill of a piloted aircraft.



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y j g ( )


Dimensions of Scope, Time & Budget

Step 1: Define Scope(Develop WBS or ABS) Step 2: SequenceThe Work (Scheduling) Step 3: Allocate theResources (Budgeting)

300

80

SCOPE TIME COST

75

65

80

25

20

35

5

10

105

5



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y j g ( )


Project Interface Management

Interface management: “the management of common boundaries between people,systems, equipment, or concepts” (Nooteboom 2004).



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y j g ( )


Project Stakeholder Management

Stakeholder Roles performed

Client • Person or organisation that ‘owns’ the project• Provides the financial resources, in cash or in kind, for the project• May initiate project changes

Sponsor • Initiate the project• Champions project from a position of authority• Supports project team’s most senior members

PerformingOrganisation

• Enterprise, whose employees are most directly involved in doingthe work of the project

Project Manager • Person responsible for the management of the project on a dailybasis

• Single point of responsibility for achievement of project objectives

Project Team

Members

• Responsible for performing project tasks

• Provides and applies technical skills

Suppliers/Contractors

• Delivers goods and services to the project as required• Provides logistical support

User • The person or organisation that will make use of the projectproduct.



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Lecture_1_Fundamentals of Petr. Proj. ManagementPrepared by Dr Ebenezer A. Sholarin, PMP®

Project Communication Management

Communications Channels = n(n-1)2

What isthe CC?



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Project Scope Management

HOW THE CUSTOMER EXPLAINEDIT… HOW THE PROJECT MANAGERUNDERSTOOD IT… HOW THE ENGINEERSDESIGNED IT…

WHAT OPERATIONS TEAM ACTUALLY INSTALLED…

HOW THE SALES EXECUTIVESDESCRIBED IT…

AND WHAT THE

CUSTOMER REALLY

NEEDED WAS …………




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Project Scope Management

HOW THE CUSTOMER EXPLAINEDIT… HOW THE PROJECT MANAGERUNDERSTOOD IT… HOW THE ENGINEERSDESIGNED IT…

WHAT OPERATIONS TEAM ACTUALLY INSTALLED…

HOW THE SALES EXECUTIVESDESCRIBED IT…



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Lecture_1_Fundamentals of Petr. Proj. Management Prepared by Dr Ebenezer A. Sholarin, PMP®

Take home message (1)…

Defining the scope of a project at the outset is

crucial to its success.

If you don’t have a fixed Scope, you have nothing

to manage against



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5. Management Vs Leadership

• Management:

– Ability to complete work through the efforts of

others.• Leadership:

– Ability to motivate others to produce the workwillingly.

“Management – getting people to do what needs to be done;Leadership – getting people to want to do what needs to be done”

Warren Bennis (1994) On Becoming a Leader



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Characteristics of an Effective Leader

• Ability to:

• Develop vision;

• Set clear objectives and targets;

• Put in place appropriate organizational structure, methods and

processes, Roles and Responsibilities;• Maintain team focus;

• Challenge status quo and accept constructive challenge;

• Obtain team buy-in;

• Get the best out of people by support, mentoring and coaching

• Prepared to let people “get on with it”• Enthusiasm, drive and determination consistently displayed.



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Improving technical competence with

business and leadership skills

Technicalskill

Business

skill

Leadership

skill

Adding

value

Competent

Petroleum/Subsea

Engineer

Explore - Develop - Produce - Transport - Sell

Value

chain



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So Who is a Project Manager?

• PM coordinates and integrates activitiesand resources across multiple, functionallines;

• PM plans, organises, evaluate, directs andcontrols the execution of the project to meet

the time, cost and performance objectives• PM understands the company’sorganisational structures and behavior

• PM possesses strong communication andinterpersonal skills and familiar with thehydrocarbon E&P operations

“ A Project Manager is distinguished by his knowledge,

known by his method and identif ied by his tools”



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Your Role as a Project Manager

Petroleum GeologistBusiness/

Risk Analyst

Engineering

Manager

Lead

Engineer

Applying the skills, knowledge, tools andtechniques to project activities tosuccessfully complete project objectives.



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Project Manager

Vs

Line ManagerProject Manager Lead Engineer/Manager

What is to be done? How will the task be done?

When will the task bedone?

Where will the task bedone?

Why will the task be done? Who will do the task?

How much money isavailable to do the task?

How well has the functionalinput been integrated intothe project?

How well has the totalproject been done?

Who deserves promotionfor doing the task well?

Project Managers get things done by working through others.


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Procurement and Outsourcing Strategies

• Outsourcing components have increased progressivelyover the years.

• Some industries have been outsourcing for an extendedtime

– Fashion industry• Nike – all manufacturing outsourced

– Electronics Industry• Cisco (major suppliers across the world

• Apple (over 70% of components outsourced) – Taiwanese companies now design and manufacture most laptop sold around the world.

– PalmOne collaborate with Asian suppliers on the design of their personal digital assistance(PDA)s




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Type of Contract• Lump sum turnkey (LSTK)

– Contractor is given defined starting and finishing points and undertakesto perform the whole of the specified work at a fixed price, bears the riskof any cost overruns and benefits from any savings that can be made(e.g., EPC contracts).

• Bills of Quantities

– Lump sum contracts with detailed bills of quantities forming precisedefinition of the scope of work.

• Schedule of Rates – This type of contract permits a degree of control over the final cost of

the job, without the need to define the SoW at the tender stage

• Reimbursable Cost Plus Profit Fee (RCPPF) – This type of contract should be avoided at all cost because there is no

incentive for the contractor to perform apart from his/her desire toestablish or maintain a good reputation (e.g., EPCM contracts).




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Successfully Closing The Project

Project Name: Project Control No.: Preparer Name: Preparer Signature:

Customer Contact: contact Phone: Date Prepared:

Planned Closeout

Closeout Date Complete Date

1. Obtain sign-off for deliverables

2. Update project plan for transfer to next project manager3. Provide project staffing plan for reduced resource

requirements if applicable

4. Write project turnover memo to all stakeholders

5. Perform postproject review (lesson learned):

... What worked well?

...What did not work well?

...What can be done to improve the next project?

6. Update project history file

7. Give individual performance feedback to team members8. Close project accounts and finalize all billing

9. No claims or audits are pending on this project

10. All customer-provided equipment returned

Customer:

Closeout Activity Yes N/A No

Project Closeout checklist template



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Where to get more information

• A Guide to the Project Management Body of Knowledge, PMBOKGuide®, 5th edition, PMI, 2013.

• SPE publications: Journal of Petroleum Science and Engineering, JPT, AAPG, etc.

• Havranek, Timothy J., Modern Project Management Techniques for the

Environmental Remediation Industry, St. Lucie Press, Florida, 1999.• Kerzner, Harold. Project Management: A systems Approach to

Planning, Scheduling & Controlling, 10th edition, 2009.• Avraham Shtub, et al, Project Management: Processes, Methodologies

and Economics, Pearson, 2nd edition, 2005.• Virine, L., Trumper, M., Project Decisions: The Art and Science,

Management concepts, 2008.• Pinto, Jeffrey K., Project Management: Achieving Competitive

Advantage, Pearson, 3rd edition, 2013.• Vanhoucke, Mario. Integrated Project Management and Control: First

Comes the Theory, then the Practice, Springer, 2014.



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Take home message (2)…

“...Never accept a project you did not define.Nor accept a project you have not defined.

It is a recipe for disaster...”




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Project Planning

Techniques Lecture 2




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Questions for self-assessment

1. How do you define a project?

2. Why do petroleum companies do projects?

3. What are the triple constraint in project management?

4. How do you identify deliverables in a project?

5. Mention three types of organisational structurediscussed in the lecture.

6. Project Management consists of how many knowledgeareas? Mention 7 of them.

7. If your project team consists of 15 members, how manycommunication channels do you require?

Documents

Fundamentals of Petroleum Project management