Project management of surface facilities

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.

Communication

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.

Costs

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. 1

Fig. 1—Ability to influence project costs vs. project life cycle.

Purpose

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 page 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.

Contracts and Agreements

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 1.

Table 1

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."

Front-End Engineering and Design(FEED)

Preliminary engineering, feasibility studies and initial design work used to develop a detailed project scope of work, budget and execution plan, or schedule, before a fixed bid quotes are available and/or detailed design and construction contracts are awarded. FEED Studies are a critical input to a Formal or Final Investment Decision (FID).

Formal or Final Investment Decision(FID)

the point at which the Operating Company's Senior Management (or Board) &/or Management Committee of the Joint Venture Companies owning and/or operating an Asset or Concession formally Approve—or Sanction—the Project, as well as the associated Authority for the Expenditures (AFEs) involved in its execution.

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 2.

Table 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. 2 shows the primary elements of an example PFD. Table 3 lists the items that are normally specified.

Fig. 2—Primary elements of a process flow diagram.
Table 3

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. 3 shows the primary elements of an example P&ID. Table 4 describes in more detail rules for developing a P&ID.

Fig. 3—Primary elements of a mechanical flow diagram/process and instrument diagram.
Table 4

Facility layout

A scaled plan (view from above) that shows the relative locations and sizes of all major process equipment and civil items. Fig. 4 is an example onshore facility layout.

Fig. 4—Example onshore 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 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.

Table 5

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. 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. 6 and 7 show portions of a more complex project schedule.

Fig. 5—Example project schedule for a simple project.
Fig. 6—Portion of the project management and engineering schedule for a complex project.
Fig. 7—Portion of the procurement schedule for a complex project.

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 6 shows an example procurement and contracting plan.

Table 6

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 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.

Table 7

Authorization for expenditure

Summarizes the project scope, estimated cost, and schedule to obtain formal management and partner approval.

In the context of Capital expenditures, AFE stands for Authority for Expenditure on a well (authorized funds for drilling or workover); facilities; a pipeline, plant or a project of any sort. The level of expenditures involved and the nature of the project will determine the level at which this authority has to be given. This will normally be given by a Management Committee representing all the Joint Venture Partners involved in assets and funding the activities. With mega-projects this will involve the Board of Directors of all the partners, as well as and third parties providing Project Financing.

References

Use this section for citation of items referenced in the text to show your sources. [The sources should be available to the reader, i.e., not an internal company document.]

Noteworthy papers in OnePetro

Frankhouser, H.S. 1980. Project Management - Organizational Relationships. Presented at the European Offshore Technology Conference and Exhibition. http://dx.doi.org/10.2118/185-1980-MS.

Online multimedia

Williams, Chirinos. 2014. Result-Based and Earned Value – A New Integrated PM Approach. SPE Webinars. Society of Petroleum Engineers, 7 January. https://webevents.spe.org/products/result-based-and-earned-valuea-new-integrated-pm-approach

External links

Use this section to provide links to relevant material on websites other than PetroWiki and OnePetro

Project management of surface facilities

Contents

Communication

Costs

Purpose