CLIENT’S PROJECT MANAGEMENT STRATEGY FOR FAST TRACK EPC OIL & GAS PROJECT

In today's business world, corporations must be able to react to the changing market needs rapidly, effectively, and responsively. They must be able to reduce their time to market and adapt the changing environments. Decisions must be made quickly and must be done right at the first time. Corporations can no longer wait their time repeating tasks, thereby prolonging the time it takes to bring new products to market. Therefore, completing a project faster than the normal duration is always a challenge to the management of any project, as it often requires changes in prototype.

The Vietnamese Petroleum Industry is also passing through a very dynamic business environment due to the liberalization of many Government policies and the introduction of multinationals, the participation of International major players and the pressure of globalization and attracting Foreign Direct Investment. Development of Petroleum facilities for handling petroleum products is one of them. Moreover, these projects are required to be completed in faster duration compared to normal schedules to be vital and remain competitive, to get faster return on investment, and to give higher return with longer project life. However, using conventional tools and techniques of project management, it is impossible to handle the problem of reducing the project duration from a normal period.

On the other hand “Increasing competition and the growing technical sophistication of construction processes as well as the size of some projects has led to a growing importance of partnership agreements and strategic alliances in bidding for and implementing construction projects” (Construction Industry Institute - Hong Kong, 2002).

Same approach can be applied to the Client’s project as eventually the success of the subcontractors would be the Client’s success especially for the EPC Oil and Gas Project. Project Sanctions and major contracts usually have a lengthy process requiring various approvals from the Government Agencies.

Mr. Nguyen Quoc Hanh made a case study on “Client’s Project Management Strategy for Fast Track EPC Oil & Gas Project”. His study proposed the Client’s approach for the use of concurrent engineering/ fast track approach and alliance sprit in managing projects for radically reducing project duration. The phases of the project are accomplished simultaneously instead of in a series. The required approvals from the Government and relevant authorities are acquired much quicker with the involvement of local partners from the start.

The complexities that arise in managing projects are tackled through management of Government’s approval process, restructuring project organization, management of subcontractors and independent contract packages, improving management commitment, strengthening project-planning activities, ensuring project quality, managing project risk objectively and integrating project activities through information management systems.

These would not only ensure completion of projects in fast track, but also help to improve project effectiveness in terms of quality, cost effectiveness, long-term relationship building, etc. and in turn overall productivity of the project organization would improve.

His study’s objectives are to explore Client’s strategic approach to manage a Fast Tract EPC Oil & Gas Production Facility Development Project including: (1) management of Government’s approval process; (2) management of subcontractors via a strategic Alliance sprit; (3) management of interfaces and overlapping between contract packages over widely separated geographical areas; (4) contract type and commercial compensation scheme selection and breakdowns of contract packages; (5) project organization, authorization and management commitment; (6) communication and collaboration; and (7) procurement and centralization of logistics supports

Conclusions:

Project Owner required preparation

The conclusions he made based from his study is that to ensure a successful implementation of a fast track Project, the project owner must (1) have full support from its Stakeholder and the Government to the implementation of fast track concept; (2) have a strong leadership and commitment from senior management through out the execution of the Project. The availability and competency of the Project Management core team also contribute an important factor during the initial/ preparation phase when the rest of the team will be mobilized. As many cost-schedule trade-off are may be required and; (3) must prepare a strong financial status and willing to accept or compromise some commercial terms.

As the procurement is under Project Owner’s responsibility, which may not be a common practice, the Project Owner must either public its procurement plan or open an workshop/ briefing to all potential Suppliers to ensure the best interest of the Suppliers. The Suppliers might be able to provide a better offers if they are more confident on the Client’s creditability once the overall picture of the project is presented or published.

Review the requirements of the Petroleum Contract that they may have with the Government Agency to ensure the future compliance or any required exceptions/ changes, which must be accepted by Stakeholders/ Government Agency for the implementation of the Project.

Anticipated Obstacles/ Barriers

The Oil & Gas Client/ Project Owner must consider carefully the terms/ conditions/ requirements of the Petroleum Contract that they may have with the Government Agency as some Petroleum Contract require unanimous consents from all involved parties. Different understanding on fast track requirements within and from Client Project Management Team and Top management, Stakeholders, Primary Contractor, Sub-contractor, which lead to inappropriate response (i.e. provide/ supply inadequate resources or over react in spending money to protect the project schedule un-necessarily).

Extra costs are expected in terms of cost-schedule trade off to meet aggressive schedule and overlapping between project phases/ work packages, which would cause rework and cost overrun. It will be difficult to justify those extra expenses at the end of the Project due to different understanding of the fast track requirements and reasonability of the cost-schedule trade off. Therefore, close communication between Project Owner and Stakeholder/ Government Agency is required.

The selection of Alliance/Partnering concept may lead to the contractual differences came at the end of the contract and it would take longer time for closing out of the Project.

Lastly, it will not be easy to benchmark the effectiveness/ successfulness of a fast tract project as the complexity is varied from project to project.

Recommendations

He recommended that that the constancy and level of effort should be maintained not only from the start of the Project when the gaining on the schedule could have been significant but following up the tailed end of each work phase is not less important. The lack of effort and concentration by Client in following up and pursuing the completion of the engineering tailed end works will lead to the delay of the construction works. Impact of late engineering was a problem both contractually and practically. Delaying the start of the project would probably have more impact on overall schedule than engineering/ fabrication overlap.

His thesis abstract is copied and posted.

Abstract

Completing and delivery a project faster than normal required duration is always a big challenge to any Project Management Team and often demands dynamic approach and paradigm shifts. Many projects are required to be completed in faster duration compared to normal schedules to remain economic vital, to get faster return on investment, and to give longer project life. The conventional techniques of project management are impossible to handle the problem of reducing the project duration drastically. This project report provides an introduction to, and a practical exploration and evaluation of Client’s fastracking approach to manage an Oil and Gas Project.

This final project report presents and explores the Client’s dynamic approaches from the conceptual planning, managing contractors via contractual arrangements and strategic Alliance spirit, managing the Government’s approval process and the use of concurrent engineering concept for radically reducing project duration. The phases of the project are accomplished simultaneously instead of in a series across various areas. Along with its benefits, fast-tracking project delivery also has greater potential to impact the project development process than the traditional method. This final project report also presents the key enablers as well as required preparation and obstacles have been encountered during the actual execution of the project.

These approaches if successfully implemented would not only ensure the completion of projects by the required completion date, but also improve project effectiveness in terms cost effectiveness and in turn overall productivity of the project organization would improve.