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PEH:Project Management of Surface Facilities

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Publication Information


Petroleum Engineering Handbook

Larry W. Lake, Editor-in-Chief

Volume III – Facilities and Construction Engineering

Kenneth E. Arnold, Editor

Chapter 15 – Project Management of Surface Facilities

Gregory J. Kreider, AMEC Paragon

Pgs. 565-590

ISBN 978-1-55563-118-5
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Project management is quite different from engineering. An engineer is normally responsible only for his or her own work product and generally deals with the reactions of inanimate substances that follow the laws of physics. A project manager is required to be responsible for the quantity, quality, and timeliness of work products that generally do not follow any physical laws.

To succeed as a project manager, the most important thing is to ensure good communication within the project team. Communication can be accomplished in many forms (verbal, written, formal, and informal), but one size does not fit all, and the project manager is responsible for communications concerning the project and its execution. The communicator, not the listener, is responsible for ensuring that the message has been received and understood.

It is also important to understand that the final cost of a project is affected more by its design than by its execution. The decisions made in developing a concept have a much greater impact on cost than those made later on, as indicated in Fig. 15.1.

For our purposes, a project is defined as the group of tasks necessary to reach a given goal in the required timeframe. The project manager is the person responsible for getting those tasks accomplished and achieving that goal. The focus of this chapter is on project management of surface facilities; many of the details of this section are aimed at that type of facility. However, the concepts of this section may be used on any type of project.


Before we discuss how to do a project, we will define some of the basic terms used in that discussion.

  • Lease agreement—The agreement that defines the relationship (royalties, damages, rental, etc.) between the minerals owner(s) and the operating company.
  • Joint operating agreement (JOA)—The agreement that defines the relationship (expenditure approval, audit rights, operator rights, etc.) between the companies of a group that have joined together to share the monetary risk and rewards of developing a property.
  • Project formats—The various methods of contracting out parts of a project. The two basic project formats shown in Table 15.1 are the following:

  • Engineer Procure Construct (EPC)—One contractor is given the responsibility and control to perform the entire project, usually for a fixed price. This method is also called "turnkey," and the responsible contractor is known as the "prime contractor."
  • Engineer, Procure, and Construction-Management (EPCM)—The operating company retains project responsibility and controls the project by direct management of several smaller contracts to perform the project work. This method is also called "owner prime," and the operating company is the project’s "prime contractor."
  • General Services Contract (GSC)—A contract governing the relationship between the operator and a contractor that defines the basic framework (insurance requirements, invoicing instructions, rates, markups for contractor-supplied materials, payment terms, etc.) for future contracting of work between the companies. The required work is then directly requested with a form (callout form) defined in the GSC without the necessity of further, time-consuming, legal review. The GSC is normally in force for a fixed period of time (several years) and will ordinarily be used for many different callouts on many projects. The GSC is normally used to contract professional services, labor, and construction support equipment, usually on a rates basis.
  • Purchase Order (PO)—A contract governing the relationship between the operator and a supplier for the purchase of an item rather than services. The terms and conditions (Ts&Cs) section of the PO defines the basic legal framework (insurance requirements, invoicing instruction, rates, payment terms, etc.) between the companies. This relationship is usually less stringent than the GSC in that most of the work to produce the purchased item is usually on the premises of the contractor, not the company, as can happen in a GSC arrangement.
  • Project Specifications—Industry and/or company standards describing the quality levels, tolerances, and inspection levels necessary to obtain acceptable process, environmental, and safety risk levels in the completed project. Example project specifications and construction practices are shown in Table 15.2.
  • Process Flow Diagrams (PFDs)—Schematic drawings that define the process and serve as a baseline for comparison with alternate processes. The drawings normally show all major equipment items—main piping with flow arrows, process control scheme, flow rate, operating conditions (pressure and temperature), fluid properties, etc.—for all major lines. Equipment sizing is optional but helpful. Fig. 15.2 shows the primary elements of an example PFD. Table 15.3 lists the items that are normally specified.
  • Process and Instrumentation Diagram (P&IDs)—Schematic drawings that show and identify each equipment item—pipe, valve, instrument, etc.—in the project process and utility systems. These drawings are sometimes referred to as mechanical flow diagrams (MFDs). They form the basis for the detailed engineering drawings and are used in the procurement process to identify each instrument, valve, and specialty item that must be purchased. P&IDs are also used for operational and safety analysis, maintenance planning, and training of the facility operators. Fig. 15.3 shows the primary elements of an example P&ID. Table 15.4 describes in more detail rules for developing a P&ID.
  • Facility layout—A scaled plan (view from above) that shows the relative locations and sizes of all major process equipment and civil items. Fig. 15.4 is an example onshore facility layout.
  • Detailed engineering—The conversion of the conceptual and schematic documents to drawings suitable for field construction by the contractor.
  • Equipment and task list—A listing of all the items that must be purchased and tasks that must be undertaken to complete the project. The level of detail of this list depends on the scope of the project. The equipment and task list becomes the basis for cost estimating and project cost control, as well as forming a framework to develop a project schedule. Table 15.5 is an example equipment and task list for a simple onshore facility. On more complex projects, it is often beneficial to break down the engineering and project management tasks, costs, and schedules in much more detail.
  • Project schedule—A pictorial presentation of the chronological order of the items shown in the equipment and task list showing each item’s time duration and the mutual dependency of the items. Fig. 15.5 shows an example project schedule for a simple project. The level of detail depends on the complexity of the project. Most large facilities projects require a computer-based scheduling system to properly control and monitor the progress on the project. Figs. 15.6 and 15.7 show portions of a more complex project schedule.
  • Procurement and contracting plan—A matrix of the planned acquisition method (firm bid, rates bid, direct award, etc.) and contracting technique (PO, GSC, firm price contract, etc.) for each item or task shown on the equipment and task list. The matrix should also show a simple procurement scope for each item describing owner-furnished items and planned contractor supply. Table 15.6 shows an example procurement and contracting plan.
  • Cost estimate—An estimate of the project costs. The estimate is usually a matrix roll-up of the individual cost estimates of the items shown on the procurement and contracting plan. Table 15.7 shows an example cost estimate. Developing equipment and tasks lists, project schedules, procurement and contracting plans, and cost estimates for a specific project is an iterative and integrated effort. For example, although a first iteration is normally done in the order described above, resource-loading considerations or market conditions that become evident in the procurement and contracting plan may cause task and schedule changes to meet the project’s overall directives.
  • Authorization for expenditure—Summarizes the project scope, estimated cost, and schedule to obtain formal management and partner approval.

Project Execution

Project Initiation

Immediately after notification of your appointment as project manager, you should quickly determine whether your company has any previous experience in this type of project. If so, you should review the project files and determine whether that effort was considered a success or failure and the reasons for that assessment. Remember, those who ignore history are bound to repeat it.

You should also copy and review the lease and JOA that affect the project. The lease agreement defines your relationship with the leaseholder; the JOA defines your relationships with other working-interest owners for whom you are the operator. Both documents may have sections that are different from your company’s normal operational procedures and may affect the project accounting, procurement, facility, and pipeline options. It is important that you understand these documents and any reference in them that would affect the execution or final configuration of your project. For our purpose, we will refer to other working-interest owners as "partners," although in the United States and other jurisdictions, there may be a legal distinction between a "partner" and "working-interest owner."

The first two things to do before you actually begin the project execution are to confirm the project scope, including schedule, and to establish the contracting strategy you will follow to accomplish the task assigned. Confusion on either of these points will cause many problems later as you try to execute the project tasks. These understandings should be formalized in a project memo and communicated to all personnel working on the project.

The first part of the memo should cover the project scope and any schedule or operational constraints imposed on the project by your management or forces outside the company such as government, landowners, working interest owners, and various other interested groups. You will use this memo for future personal reference and to clearly communicate the project scope with your project team and other groups within your company who will support project actions. You will be surprised how easy it is to forget the objective and how other groups within your company may misunderstand the project objectives and limitations (we are just going to hook up the new well, not revamp the entire field).

The scope of the project should be clearly stated. Any available data, such as flow rate, fluid properties, formation properties, potential market standards, and environmental conditions, should be referenced and attached. Currently known schedule or operational constraints, such as lease expiration, market price spikes, and competitive leases, should be addressed. As an example, many gas projects schedule completion to take advantage of higher winter pricing and are willing to bear higher total project costs to meet that goal. Any drainage by a competitive lease could result in lost revenue and should be considered when a project schedule is developed.

The second part of this memo should discuss the project execution strategy. This section should include the rules that determine how the project will contract with various outside companies for work. The two basic types of project formats were presented in Table 15.1. There are many variations of these two basic types. The correct choice of project execution strategy depends on project goals, available competition, company policies, and other commercial constraints. The remainder of this discussion concentrates on the second type, EPCM, which gives the operating company maximum control over project execution.

Even if your company does not have strict rules concerning procurement, such rules may be implied by requirements in the JOA that will govern your project’s implementation. If your company or the JOA has set rules for contractor or supplier selection, then you must comply with them. In the absence of rules, an industry standard practice is that professional services are generally contracted and paid for on a rate (hourly or daily) basis, and definable materials, equipment, and fabrication and construction services are contracted and paid for on a lump-sum basis. Examples of professional services are land and legal, permitting, site inspection, and engineering and procurement services. Examples of definable materials, equipment, and fabrication and construction services are line pipe, production vessels, hookup materials, field hookup labor (if well defined), and site and road preparation. Typically, professional services are contracted with a GSC. The procurement of materials and manufactured items is normally contracted with a PO (with its attached Ts&Cs). Fabrication and construction services contracts are normally longer and project specific because of the potential safety risks and environmental liabilities involved in this work. Review the GSC and PO to determine how their wording will affect project execution.

You should also resolve how project invoices will be processed and coded. The invoices for all products, materials, and services for your project should come to you for review and initial approval. Although it is tempting to "just let accounting handle it," you will be losing your most valuable project control tools–the power of the purse and timely project financial information. It is not critical that the project manager have monetary approval authority; however, it is important that the project manager have the authority to review all invoices and disapprove those with which he or she disagrees. Invoicing approval should always follow the "two review rule." The invoice must first be agreed to by the team member directly responsible for the work before it is approved for payment by the individual with monetary approval authority. Depending on the level of the invoice, several members of the project team may be required to approve the invoice for payment. In no case should there be fewer than two signatures. This will make things easier on everyone at the end of the project if the joint-interest auditors show up to review project expenditures.

Choosing a Project Team

It is now time to start choosing the project team. Functions to be handled by the project team include operations, drilling, land and legal, insurance, marketing, environmental, engineering, purchasing, inspection, construction, and commissioning.

A project manager’s job is much like that of an orchestra conductor. It requires first the communication of a basic plan (the music), constant monitoring (listening to the individual playing), and any immediate correction of the players if they stray from the plan. On all except the simplest of projects, the project manager is not there to play himself but to guide the others to accomplish their individual tasks in a complementary manner. The other thing to note in this comparison is that in both instances all tasks are being done simultaneously.

Invite representatives of each of your company’s groups who are responsible for one or more of these functions to an internal project kickoff meeting to determine what parts they can play on the project team and what data they will need to start and complete their tasks. The actual size of this group varies from company to company; you may find that some of these services are performed by outside contractors. It is important that this meeting be held quickly. Any task that cannot be performed in house must be contracted to outside sources. This process must start early so as not to hinder the smooth startup of the project team. Remember that these people will also be glad to share their past experiences on this type of project with you if take the opportunity to ask every chance you get.

How much of the project work will done by personnel within your company will depend on its size, organization, past experience in this type of project, and current workload. Of these factors, the only function that could have a large negative impact on your company is legal matters. It is important that your company counsel be involved in all legal matters concerning contracts, purchase terms and conditions, and any other situation that may lead to court action. The other functions can be contracted out to firms that specialize in the field. In most cases, this is a preferred option to minimize impact on your company’s normal workloads.

The JOA may also provide a good reason to contract out these functions. Many times, the partners will not be obligated to directly pay for company labor working on the project. The JOA may make reference to "construction overhead" as a percent of total authorization for expenditure (AFE) cost. This amount is to cover all company labor working on the project not employed directly on site. With this in mind and because the partners are obligated to pay their share of any contract let for outside labor, it would seem that the cost of outside contracting for company noncritical labor may be more cost-effective than it would seem at first.

At this point it may be necessary to modify the project execution strategy to reflect the impact of these investigations.

Selecting an Engineering Company

Assuming you are following an EPCM project format and you do not have the engineering capabilities in house, soon after the internal kickoff meeting, you should choose an engineering company for the project. If your company has not already established a relationship with one engineering company, you should interview at least three companies at their places of business. You should describe the project scope to each company (use the memo), asking for examples of their experience with this type of work, and meet the person who would be the engineering manager for your project. Note the attitudes of the employees whom you meet and personally contact the job performance references supplied by the engineering company. If your company has already established a relationship with one or two engineering companies, this process can be shortened. However, make sure your company has a procedure in place to audit results and to ensure that value is received from this ongoing relationship.

If your company does not have equipment and material specifications that will fit the proposed work, discuss this problem with each engineering company and ask for a recommended solution and its cost. All quality engineering companies have their own specifications and construction practices that cover this type of work, and most will make them available to you for a nominal fee or even for free, depending on the competitive climate.

After furnishing the engineering company with a blank copy of the Services Contract, you should ask for a rough cost estimate and time frame for the completion of preliminary versions of the PFD, P&IDs, a facility layout, a preliminary project schedule, and a preliminary cost estimate of the project. The cost estimate should clearly note the total engineering cost for the job, along with the individual hourly rates of the personnel employed to complete the work. Using the data collected from these visits, make a recommendation to your boss, and have the company’s legal organization contract the successful company with a rates basis services contract.

AFE and Initial Cost Estimate

Your next task will be to obtain internal project financing with an AFE. This will consist of doing a project cost estimate and schedule for the total internal and external project expenditures and presenting it to management and partners for approval of these future expenditures. Depending on the data available to you from previous similar projects and your skill and confidence levels, you can do this estimate yourself or ask your chosen engineering contractor to help. You should review your company’s standard forms and conditions for AFEs. You should also review the JOA on this subject because its requirements may be different from your company’s requirements.

If you choose to do the AFE estimate yourself, you should consult the equipment and service vendors in your area that will eventually be supplying the project equipment and services for help in both these areas. These vendors are happy to give these types of cost and schedule estimates because it gives them additional market insight and the chance to meet and educate you about their company and its business. It is usually considered fair play to include those companies that supplied estimates on the final bid lists for those items. Do not forget to include intercompany services that may be directly charged to the project under the JOA.

A more standard industry solution is to use the engineering company to assist in the preparation of the AFE estimate. It is always advantageous to have the project engineering contractor involved in the AFE estimating process because doing so would allow the preliminary PFDs, P&IDs, schedule, and layout to be completed for presentation with the AFE or at the partners’ meeting called to discuss the project and AFE. By using these more complete documents to do the AFE estimate, you will obtain a much more accurate project cost and schedule. This is usually well worth the extra money and time spent to obtain it. However, this expenditure will occur before approval of the AFE, and you should get management approval before following this course of action. For smaller projects, one way out of this problem is to obtain permission to charge this cost to the well drilling or completion AFE. This solution will generally correctly charge the partners’ accounts.

Although you should use your company’s standard AFE form for formal approval, it may be lacking in detail. The accounting system is geared to its cost codes, and form changes will be difficult in this short time frame. Be sure that the project estimate is detailed enough to allow effective job control and that it is at least based on the initial project execution plan. The AFE cost codes should be noted on the project estimate as appropriate, and the project estimate should show how the estimate’s cost details roll into the AFE cost code amounts.

It is good to remember that even though these are only estimates, many people (especially management and the partners) will want to believe that these are firm prices not to be exceeded for any reason. Although most of these types of estimates are reasonably accurate, they are based on certain assumptions of conditions known at the time of the estimate. As these conditions become better defined, the final cost of the project will change. For these and other good reasons, it is always important to include a 10% to 15% general contingency in your estimate to account for these unknowns.

Partners’ Approval

A summary to this point in the project would show that you have reviewed the company’s past experience with this type of project; reviewed the lease and JOAs for possible conflicts with your company’s normal practices; published the project scope and contracting strategy memo; started multiple federal, state and local permit processes; discussed marketing opportunities with the company marketing group; resolved the issue of early project charges; hired the engineering company; and issued the AFE and initial schedule to the partners for their approval using the preliminary P&ID and layout as an estimating basis. With luck, the partners sign off on the AFE, and you move on to actually doing the real work of the project. However, that seldom happens today, and a partners meeting will be called to discuss the AFE cost, project schedule, project execution, marketing options (if any), and future plans in the area.

The partners meeting is very important because it is your opportunity to present the project for outside, sometimes critical, review. Plan on this being a team presentation by the engineering company manager and you, and be sure he or she is allowed to attend the meeting. Remember, your job is to manage the overall project, not discuss the heat transfer coefficients used in the heater design or any other technical detail on which you do not feel qualified to comment. That type of question will be answered by the engineering company manager or company personnel. Be sure to have a practice session with your boss and the engineering company manager at least 3 days before the meeting so that he or she can be confident in the presentation and you can make any necessary changes in time for the actual meeting.

You should present the project as represented by the AFE in a simple manner with high-quality overheads. Be sure that you hand out a copy of every overhead you present and that you have enough sets of handouts for everyone at the meeting. It is best if you personally present at the podium and the engineering company manager remains seated in the audience to handle any technical answers that might be outside your comfort zone.

Your presentation should include a project location map showing area pipelines and possible tie-ins (coordinated with marketing); excerpts from the scope and contracting memo covering those topics (especially note which project tasks are planned to be bid out and contracted on a firm price basis and which are to be contracted at day or hourly rates); the AFE; the P&ID, detailed cost estimate, schedule (pointing out the critical path items), and layout; a listing of the permits being procured; and short comments concerning any changes in any phases of the project that may have occurred since the AFE was originally presented to the partners. Be prepared for lengthy discussions on some of these topics. It would be very advantageous, but is not a requirement, to present for comment preliminary bid lists for the major project items (production equipment, hookup materials, site work, pipelines, etc.). Be prepared to consider modifications to this list or any other parts of the project on the basis of the partners’ past experiences in this type of project.

After the meeting, review the partners’ comments with the engineering company manager and your boss to determine whether any changes in your plan and the AFE are required. If any are needed, modify the appropriate documents and reissue as required.

Now that the partners meeting is behind you and the project is funded, you can proceed with the actual implementation of the project. You should confirm that the engineering company manager has the latest versions of all the required data and release him or her to finalize the drawings and documents necessary to define the project to the various contractors who will implement the work. In addition to completing the documents already generated, you must also complete the project team with experienced personnel to perform other project tasks besides engineering. It is important that these newcomers to the team be thoroughly briefed and furnished copies of all documents previously generated by the project.


Although we have a contracting strategy, we do not yet have a detailed procurement plan, and everyone knows that "the devil is in the details." The first step in procurement is to review the procurement and contracting plan and modify it as required by any change in concept or new information.

The procurement process involves preparation of a technical description of the item and the appropriate contracting terms called a "bid package" (see Table 15.8 for an example of instructions for preparing a bid package); presenting the description to the vendors for pricing (invitation to bid); resolving any questions from vendors concerning the description supplied (bid clarifications); requiring the reply to meet a standardized format to facilitate comparisons (bid reply form); comparing technical compliance, price, and contractual responses (bid tabulation); awarding the supply to the successful vendor on the basis of bid price and agreed-upon contracting terms (PO or contract); monitoring vendor progress and work quality (expediting and inspecting); approving final product (final acceptance report); and transporting to site (final shipping report). Obviously, no one individual can expertly monitor all of these activities, and how they are divided is a major challenge of project management.

Although many permutations are possible, one proven solution is as follows:
Technical description Engineering
Contracting terms Legal and purchasing
Present to Vendors Purchasing and project manager
Resolve vendor questions Engineering and legal
Bid Technical Compliance Engineering
Bid Contractual Compliance Legal
Bid Price Comparison Project manager
Award work to vendor Project manager
Expedite vendor Purchasing
Quality inspect vendor Purchasing and engineering
Final acceptance Purchasing and engineering
Final shipping Purchasing

Considering the above discussion on contracting work, it would seem that all but the legal requirements for the above work could be contracted out with minimum impact on the company. Another reason to contract these functions is to improve project control. People who work only for the project are more likely to view its priorities with a higher sense of urgency than people who have other, equally important competing interests. Company procurement people typically must give first priority to operational concerns. In addition, although they may be skilled in procurement of standard items needed to drill wells (tubulars, mud, etc.) and to support operations (valves, parts, etc.), they may not be skilled in procuring such engineered items as compressors, pump packages, and fabricated modules.

The simplest project solution that generally is most cost-effective for the company and project is to increase the engineering company’s scope to include most of the purchasing functions. This will make communication and interface control simpler and increase project efficiency. If this is your plan, then you must consider and evaluate the engineering company’s procurement and especially its material tracking capabilities in the step of selecting an engineering company.

Monitoring and Reporting Progress and Cost

The project team is now fully assembled, and it is time to start the physical project work with all members becoming involved in the engineering, purchasing, and contracting effort. These accomplishments must be measured and reported to determine the efficiency of the work and the true financial impact of the project.

Real progress on a job is determined by a counting of such things as the number of documents delivered vs. the total number or the number of welds made vs. the total number required. Progress is not measured by comparing the money spent vs. the money allocated. The requirement for real progress monitoring increases as the job grows in size and complexity. How to account for and measure real progress is a topic not discussed here because of its complexity and the cost of accomplishing it, but your engineering contractor can assist you with this task if necessary.

During this period, you need to quickly establish a project cost monitoring method. The word "monitoring" is used by choice because "cost control" is accomplished by timely and effective project execution and procurement methods. As shown in Fig. 15.1, the optimum time to affect the cost of a project is in the concept and front-end engineering phases, not by itemizing what you have already spent or committed in the detailed design and following execution phases. See Table 15.9 for a listing of some items that are helpful to keep in mind during project execution.

It is very important that a project manager not fool himself or herself by thinking that "we will save enough money tomorrow to cover today’s overexpenditure." Cost monitoring will allow you to determine quickly the quality of your AFE estimate and indicate trouble spots that require your personal attention. If an item costs significantly more than the original estimate, the project manager should determine the reason for the difference and assess any other potential project impacts that may be caused by similar reasoning.

An example cost status summary is shown in Table 15.10. This is based on the original cost estimate that is maintained for comparison. Columns for "committed" (signed PO amounts), "invoiced to date," and "estimated final costs" (accounting for prospective changes) are added. It is important from a presentation standpoint that the cost monitoring report be an extension of the original project cost estimate and that it be updated weekly or monthly. Note that, as new information becomes available, the updated estimated final cost of each item is inserted, and these are summed to determine the new estimated total project cost. The cost monitoring report should also clearly note any project equipment or services not considered in the original estimate as a new line item. Any estimated overexpenditure outside AFE tolerances should be reported to management immediately with a short explanation of the reason for the overexpenditure.

Table 15.11 shows an example project status report format. The centerpiece of this report is the cost control report. The project status report is the vehicle that you will use to formally communicate project progress to your management and the partners. It should cover the necessary topics (cost and schedule) simply but completely. Problems, their solutions, and any cost or schedule impacts should be presented in a clear, concise manner as soon as they are recognized. If a problem and its solution require more explanation than can be discussed in several sentences, attach a short discussion to the back of the report explaining the issue.

Managing Personnel

With your project team in place and actively working on the project tasks and your cost monitoring and reporting functioning, you should now concentrate on personnel management techniques. It is important that you have face-to-face conversations with the project team supervisors every week to discuss the project progress in more detail than can be handled with e-mails and phone conversations. The formality of this meeting is up to you, but at the least, an action item list noting the required action, the person responsible for handling the action, and the completion date should be compiled and circulated to the attendees and project team supervisors.

One thing to remember now that the project is in the execution phase is that one of the best ways to stop project momentum and efficiency is to allow change for change’s sake. Unless you find that part of your plan is wrong and will not work as planned, do not change. You will constantly be shown "better and cheaper ways" to do things that are already in progress. You should review each proposal carefully and be very resistive to any change. Any change will disrupt more plans and have greater schedule impact than you initially can identify and can lead to errors in engineering, which result in costly change orders and lengthy schedule impacts that are not immediately evident.

It is important that a project manager visits the engineering contractor and vendors often. During these visits it is important for you to determine that everyone on the project is working to the same goals and is "playing off the same sheet of music." Ask the fabricators and equipment suppliers what documents and drawings they are using for their work and assure yourself that these are the correct versions. Do not approve scope and execution plan changes without discussion with your boss and engineering company manager to assure that you see the full picture. Do not change the project equipment for a "better way" unless the original equipment was incorrect or would not function correctly. Changing project scope or equipment on the fly is one of the better ways to assure project failure. Do not be afraid to say, "I don’t know, but I will find out quickly," and keep your promise. Pay attention and ask questions that will increase your knowledge of this type of work and try to understand how the contractors operate and what generates their cash flow and profits. Good people to talk to are the engineering contractor’s engineering manager, operations people, and the shop and field inspectors. This is the time to learn how the system is supposed to work as the final exam is on the horizon.

Commissioning and Startup

In the course (not necessarily a smooth course) of the project, the POs will be turned into fabricated equipment and purchased materials and shipped to the site. Working under service contracts, field labor will clear the site and pipeline right-of-way and install the various pieces according to plans furnished by the engineering company. Now comes the final test—how to make it work. This part of the project is known as commissioning and startup and is the payoff for all the previous work. It is important enough that it should be considered in all phases of the project design and that a full-time instrument engineer or technician should be assigned to help accomplish the task.

Commissioning is the site checking of all equipment installed on site to ensure final compliance with the design and specification standards to which it was fabricated, purchased, and installed. Shop inspections and factory acceptance tests are considered precommissioning by this definition. The commissioning manager’s job is to confirm that the equipment is installed as per the design, is correctly tested, and is safe for the introduction of hydrocarbons. This includes all piping, electrical, instrumentation, and safety equipment.

Planning, executing, and writing the startup and operating manual is a full-time job over the last half of the project schedule and maybe even longer if the installation is complex. All commissioning and startup documentation should be reviewed by the appropriate project team members before work begins. The commissioning manager is assisted by the site installation contractor’s personnel. It is very important that the installation operator be involved in this part of the project. This is his or her chance to do a final check and plan the operation program.

When the commissioning manager has completed his or her work, the installation operator confirms that it is done and begins the startup procedures. The installation operator will be in charge of the installation startup and has final approval over the commissioning manager’s work. When the installation operator is satisfied that the commissioning is complete, he or she will start up the facility. This is the final test of the project. The installation operator is assisted by members of the project commissioning team for the initial startup.

Project Closeout

After successful installation startup, the project manager turns the startup and operating manual over to the installation operator and supervises the storage of project files. The closeout accounting and financial documentation could take 2 months or more to complete, depending on the complexity of the project, the final cost, and the possible requirement for a supplemental AFE to cover any significant cost overrun.

For further information please see also: Project management of surface facilities