Project Management Principles

• Understand the business environment

• Choose the “right” project

• Understand the energy value chains

• Identify risks – “hard” vs. “soft”

• Bring ALL risks close to the project mgt

• Value of lessons learned – mindful of uniqueness of situations

Commercial Framework

CommercialFramework

Government

Investor Consumer

Partnering

• Decision to partner is related to project risk

• Choose a partner you can work with

• Choice of operator depends on project requirements and comparative advantage of partners

• Consider strong local partner if local content rules are strong– Impact of local content rules

Petrobras Upstream Project: Investment Decision

(unexpected issues/risks to project management)

• Anticipate license/permitting requirements and incorporate in economic evaluation– Build integrated team that pulls together decision to

bid on block with project developers who will obtain license/permits

– Include a lawyer!– Consult government agencies on potential rules

changes– Survey political risk

• Include partner

Petrobras Upstream Project: Implementation

(unexpected issues/risks to project management)

• Environmental license/permits – process for obtaining– Integrated team for obtaining permits– ….

• Include partner

FLNG

• Regasification• Island• Cheniere/FLNG

– Tolling facility– COP and DOW – capacity holders

• “No bid” EPC– Two phases – phase I under construction

(current EPC contract)– Potential overlap with phase II

FLNG Project: Investment Decision

• Commercial constraint of intrastate market

• Probably there was inadequate project mgmt of decision process

FLNG Project: Implementation

• Risks– Weather – hurricane– Technology – equipment prototypes

(untested)– Design– Regulatory – compliance with changing

regulatory rules• Importance of communication between companies

and regulator

– Commercial – quality of the gas (heat rate)

FLNG Project: Implementation

• Risks, continued– Labor – competition for skilled crafts

• Change in project mgmt (beneficial!) – length of time for implementation

• Scheduling– Complicated– Ability to visualize all phases

• Cost management– Pressure on costs (materials, services)

• Quality management– Problems with control– Problems with communication

• Human resources/project team– Intervention of COP, DOW– Inability for COP, Dow to intervene in FLNG-TZS

contract

• Scope– Change in design – problem in communication– Reduced storage capacity to balance phase I and II

Solutions

• Improved communication across all project team functions

• Better planning to lay out timelines, milestones, etc

• Critical path scheduling• Regulatory approval

– Work more closely with regulator to define issues and resolve

– Change project team (leadership) if necessary

Solutions

• Adjust design for maximum weather related events

Evaluation of Project: Lessons Learned

• Large scale with challenges and unexpected issues in project management

• Some cost overruns – cost escalation will increase if phase II developed

• Ambitious – commercial strategy – LNG supply– Positions of COP, DOW would seem supportive

• Commercial constraint of intrastate connection relative to project cost and project mgmt demands– Connect to interstate? Or something for better value

creation

Evaluation: Lessons Learned

• Lack of participation by COP and Dow in beginning– For both investment decision and early stages

of project mgmt– Unusual choice of EPC contractor?

• Plan when you decide to invest and plan when you implement the investment