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Project Management in the Oil and Gas Industry

ISBN: 978-1-119-08361-0
336 pages
February 2016
Project Management in the Oil and Gas Industry (1119083613) cover image

Description

Oil and gas projects have special characteristics that need a different technique in project management. The development of any country depends on the development of the energy reserve through investing in oil and gas projects through onshore and offshore exploration, drilling, and increasing facility capacities. Therefore, these projects need a sort of management match with their characteristics, and project management is the main tool to achieving a successful project.

 

Written by a veteran project manager who has specialized in oil and gas projects for years, this book focuses on using practical tools and methods that are widely and successfully used in project management for oil and gas projects.  Most engineers study all subjects, but focus on project management in housing projects, administration projects, and commercial buildings or other similar projects. However, oil and gas projects have their own requirements and characteristics in management from the owners, engineering offices, and contractors’ side.

 

Not only useful to graduating engineers, new hires, and students, this volume is also an invaluable addition to any veteran project manager’s library as a reference or a helpful go-to guide.  Also meant to be a refresher for practicing engineers, it covers all of the project management subjects from an industrial point of view specifically for petroleum projects, making it the perfect desktop manual.

 

Not just for project managers and students, this book is helpful to any engineering discipline or staff in sharing or applying the work of a petroleum project and is a must-have for anyone working in this industry.
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Table of Contents

Preface xv

About the Author xvii

1 How to Manage Oil and Gas Projects 1

1.1 The Principal of Project Management 1

1.2 Project Characteristics 2

1.3 Project Life Cycle 5

1.3.1 Initiation of the Project 7

1.3.1.1 Getting to the Scope Baseline 9

1.3.2 Feasibility Study 10

1.3.3 FEED (Preliminary) Engineering 11

1.3.4 Detail Engineering 15

1.3.5 Decision Support Package 17

1.3.6 Design Management 19

1.3.7 Execution Phase 20

1.3.8 Commissioning and Startup 21

1.4 Is this Project Successful? 22

1.4.1 Project Management Goals 22

1.4.1.1 Project Integration Management 23

1.4.1.2 Project Scope Management 23

1.4.1.3 Project Time Management 24

1.4.1.4 Project Cost Management 24

1.4.1.5 Project Quality Management 24

1.4.1.6 Project Human Resource Management 25

1.4.1.7 Project Communications Management 25

1.4.1.8 Project Risk Management 25

1.4.1.9 Project Procurement Management 25

1.5 Project Management Tasks 26

1.5.1 Define the Project Target 26

1.5.2 Define the Scope of Work 27

1.5.3 Define the Time Frame 27

1.5.4 Define the Available Resources 27

1.5.5 Define the Cost 28

1.5.6 Evaluate the Master Plan 28

1.5.7 Accept the Master Plan 28

1.5.8 Schedule Follow Up 29

1.5.9 Cost Follow Up 29

1.5.10 Comparing Between Actual Work and Master Plan Cost 29

1.5.11 Performance Evaluation 29

1.6 Project Manager Skill 30

Quiz 31

2 Project Economic Analysis 39

2.1 Introduction 39

2.2 Project Cash Flow 40

2.2.1 Depreciation Methods 43

2.2.1.1 Straight-Line Method 44

2.2.1.2 Declining-Balance Method 45

2.2.1.3 Sum-of-the-Year-Digits 45

2.2.1.4 Sinking-Fund Method 46

2.2.1.5 Service-Out Method 46

2.2.2 Method of Net Present Value (NPV) 47

2.2.2.1 Inflation Rate 47

2.2.3 Minimum Internal Rate of Return (MIRR) 48

2.2.4 Payout Method 49

2.3 Economic Risk Assessment 50

2.3.1 Probability Theory 50

2.3.2 Probability Distribution of Variables 55

2.3.2.1 Normal Distribution 55

2.3.2.2 Log Normal Distribution 57

2.3.2.3 Binominal Distribution 60

2.3.2.4 Poisson Distribution 63

2.3.2.5 Exponential Distribution 63

2.3.2.6 Weibull Distribution (Rayleigh Distribution) 63

2.3.2.7 Gamma Distribution 64

2.3.2.8 Logistic Distribution 65

2.3.2.9 Extreme Value (Gumbel Distribution) 66

2.3.2.10 Pareto Distribution 66

2.3.3 Distribution for Uncertainty Parameters 67

2.3.3.1 Triangular Distribution 67

2.3.3.2 Uniform Distribution 68

2.3.4 Choose the Appropriate Probability Distribution 69

2.3.4.1 Chai Square Method 70

2.3.4.2 Kolmograv-Smirnov (K-S) 70

2.4 Decision Tree 71

2.5 Monte-Carlo Simulation Technique 75

2.6 Risk Adjusted Value (RAV) 78

3 Pitfalls in Time Schedule Planning 81

3.1 Introduction 81

3.1.1 Plan Single Point of Accountability (SPA) 84

3.1.2 Starting the Plan 85

3.1.3 Work Breakdown Structure (WBS) 87

3.2 Responsibilities of the Team 90

3.3 Expected Activity Time Period 91

3.4 Calculate the Activity Time Period 93

3.5 Time Schedule Preparation 94

3.5.1 Gantt Chart 95

3.5.2 Arrow Diagram Method (ADM) 95

3.5.3 Precedence Diagram Method (PDM) 96

3.5.4 Critical Path Method (CPM) 96

3.5.5 Program Evaluation and Review Technique (PERT) 97

3.5.6 Example 98

3.5.7 Application of the PERT Method 102

3.5.7.1 Statistics Calculation for Activity Time 102

3.5.7.2 Example 103

3.5.7.3 Time schedule control 104

3.6 Planning Overview 107

Quiz 109

4 Project Cost Control 113

4.1 Introduction 113

4.2 Cost Types 115

4.2.1 Cost Estimate 116

4.2.1.1 Top-Down Estimates 117

4.2.1.2 Bottom-Up Estimates 117

4.2.1.3 Analogous Estimates 117

4.2.1.4 Parametric Estimates 118

4.2.2 Steel Structure Cost Estimate 122

4.2.3 Detailed Cost 124

4.2.4 Cost Estimate to Project Control 124

4.3 Economic Analysis to Project Cost 125

4.3.1 Work Breakdown Structure (WBS) 125

4.3.2 Organization Breakdown Structure (OBS) 126

4.3.3 OBS/WBS Matrix 126

4.3.4 Work Packages 127

4.3.5 Cost Control 128

4.3.6 (S) Curve 131

4.3.7 Engineering Cost Control 134

4.4 Cash Flow Calculation 135

4.4.1 Project Cash Flow 135

4.4.2 Impact on Increasing Cost 137

4.4.3 Project Late Impact 137

4.4.4 Impact of Operation Efficiency 138

Quiz 139

5 Resource Hiring 143

5.1 Introduction 143

5.2 Project Organization 144

5.2.1 Types of Organizations 144

5.2.1.1 Project Organization as a Part of the Company 145

5.2.1.2 Separate Project Organization 146

5.2.1.3 Matrix Organization 147

5.2.2 Selecting the Best Organization 149

5.3 Roles and Responsibilities of the Project Manager 151

5.3.1 Project Manager as a Leader 152

5.4 Administrative Organization for Total Quality Management 154

5.5 Team Member Selection 155

5.6 Managing the Team 157

5.7 Allocate Resources to Project Plan 158

5.7.1 Example 158

5.8 Relation Between Project Parties 162

5.9 Document and Information Transfer 162

5.10 Information Transfer 163

5.11 Quality Control in the Design Phase 164

5.11.1 Inputs and Outputs of the Design Phase 169

5.11.2 Design Verification 169

5.11.3 Change in the Design 169

5.11.4 Approval of the Design 174

Quiz 177

6 Tendering, Bidding, and Contract Traps 183

6.1 Introduction 183

6.2 Contracts 184

6.2.1 Measured Contract 186

6.2.2 Lump Sum 186

6.2.3 Cost Plus 187

6.3 Contract Between the Owner and Engineering Office 187

6.4 The Importance of Contracts in Assuring the Quality of the Project 189

6.5 Contracts in ISO 190

6.6 FIDIC Contracts 190

6.7 General Conditions in the Contracts 197

6.8 Arbitration and the Arbitrator 198

6.9 Bids and Tenders 200

6.9.1 Public (Open) Tender 200

6.9.2 Limited Tender 202

6.9.3 Negotiated Tender 203

6.9.4 Direct Order 203

6.9.5 Tender Technical Evaluation 204

6.9.6 Commercial Evaluation 207

6.9.6.1 Commercial Evaluation Methods 207

6.10 Closeout Report 208

Quiz 210

7 New Approach in Managing Oil and Gas Projects 215

7.1 Introduction 215

7.2 Quality System 216

7.3 ISO 9000 217

7.4 Quality Management Requirements 218

7.4.1 Quality Manual 218

7.4.2 Quality Plan 219

7.4.3 Quality Control 219

7.4.3.1 Why is Quality Control Important? 220

7.4.3.2 Submittal Data 221

7.4.3.3 How to Check Incoming Materials 222

7.4.3.4 Methods of Laying Out and Checking Work 222

7.4.3.5 Material/Equipment Compliance Tests 224

7.4.3.6 When to Inspect Work 225

7.4.3.7 Paperwork/Documentation 226

7.4.3.8 Quality Control Plans 228

7.4.4 Quality Assurance 229

7.4.4.1 Quality Assurance in the ISO 231

7.4.4.2 The Responsibility of the Contractor (Manufacturer) 232

7.4.4.3 Responsibility of the Owner 233

7.5 Project Quality Control in Various Stages 234

7.5.1 Feasibility Study Stage 234

7.5.2 Feed (Preliminary) Engineering 235

7.5.3 Detailed Engineering Study 238

7.5.3.1 Design Quality Control 239

7.5.4 Execution Phase 240

7.5.4.1 ISO and Control Work 242

7.5.4.2 Inspection Procedures 242

7.5.4.3 Importance of Contracts in Assuring the Project Quality 243

7.5.4.4 Checklists 243

7.6 Operational Phase of the Project 249

7.7 Total Building Commissioning System 250

7.7.1 Planning Stage 252

7.7.1.1 Identify Commissioning Team 252

7.7.1.2 Define Owner’s Project Requirements with the Customer Agency 258

7.7.1.3 Develop Preliminary Commissioning Plan 258

7.7.1.4 Commissioning for Certifications (LEED, Energy Star, etc.) 258

7.7.1.5 Commissioning Agent Costs 261

7.7.1.6 Cost-Benefit Analysis for Commissioning 262

7.7.2 Design Stage 262

7.7.2.1 Incorporate Commissioning into A/E and CM Scope of Services 262

7.7.3 Construction Stage 272

7.7.3.1 Review Submittals for Performance Parameters 272

7.7.3.2 Develop and Utilize Construction Checklists 273

7.7.3.3 Oversee and Document Functional Performance Testing 274

7.7.3.4 Test Data Records 274

7.7.3.5 Hold Commissioning Team Meetings and Report Progress 275

7.7.3.6 Conduct Owner Training 276

7.7.3.7 Turnover Commissioning Record 277

7.7.4 Building Commissioning Process Post-Construction Stage 279

7.7.4.1 Post-Construction Stage 279

7.7.4.2 Perform Deferred and Seasonal Testing 279

7.7.4.3 Re-inspect/Review Performance Before End of Warranty Period 280

7.7.4.4 Complete Final Commissioning Report 280

7.7.4.5 Recommission Facility Every 3–5 Years 282

7.7.4.6 Recommissioning 282

7.7.5 Advantages for Total Building Commissioning System 283

Quiz 284

8 Practical Risk Management for Oil and Gas Projects 287

8.1 Introduction 287

8.1.1 The Risk Management Process 288

8.2 Project Risks 289

8.3 Risk Assessment 293

8.4 Risk Identification 294

8.4.1 Methods of Defining Risk 296

8.4.1.1 Brainstorming 296

8.4.1.2 Delphi Technique 297

8.4.1.3 Nominal Group Technique 298

8.4.1.4 Crawford Slip 299

8.4.1.5 Expert Interviews 299

8.4.1.6 Root Cause Identification 300

8.4.1.7 Checklists 300

8.4.1.8 Documentation Reviews 300

8.4.2 Grouping the Risks 301

8.5 Define Priorities 302

8.5.1 Matrix Method 302

8.5.2 Tabulated Method 303

8.6 Risk Response Planning and Strategies 305

8.7 Risk Monitoring and Control 306

8.8 Example 307

8.9 Operations risk 310

8.10 Methods of Risk Avoidance 312

Quiz 313

References 315

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