CLAIM AND CONFLICT MANAGEMENT IN INTERNATIONAL OIL AND GAS PROJECTS

Today, many oil and gas projects were set up to satisfy petroleum and natural gas increasing demand caused by dramatically development of global economy. These projects are often large in terms of budget and people. They tend to be complex, with multiple zones, language barriers, and differing legal requirements, as well as cultural differences. Partner selection is very important and is a critical variable because it affects too much on project success and influences the overall mix of available skills and resources, operating policies and procedures of project.

In international oil and gas project, a multi projects group has a much broader range of knowledge, skills, abilities and experiences. The project management team has to deal with many issues such as logistical, governmental, communication due to different languages and values. These issues if not properly deal with, might cause for possible conflicts. The best project manager must know how to manage conflicts using different styles, depending on the circumstances in order to effectively supervise a diverse team.

The worldwide trends of joint ventures are increasing but with very unsatisfying results. To be able succeeding in an international project, major conflicts need to be managed. However, conflict in the workplace just seems to be a fact of life. But conflict isn’t always exactly a bad thing. According to the modern view of organization conflict “conflict within certain limit is essential to productivity”. In many cases, effective conflict resolution can make the difference between positive and negative outcomes.

Mr. Dang Huu Trinh made a case study on”Claim and Conflict Management in International Oil and Gas Projects”. In this study, he wanted to (1) identify types of conflicts and the source of conflicts occur in an international oil and gas projects; and (2) identify conflict management styles which are effective to solve the problems.

He also wanted to bring out in his study, how to solve fails of international oil and gas projects caused by conflicts during construction and operation. He conducted two case studies on which in this research work mentioned two different conflicts which frequently meet in project, specifically in Vietnam.

Based on the information he gathered, Mr. Trinh found out that the conflicts existed in international oil and gas projects normally relate to culture. Source of conflicts are different personalities and point of views, miscommunication, context and disbursement issue. The research findings revealed that the best approach for project manager to handle conflict in international oil and gas project is an “integrating style”. When working in multi-cultural projects, the project manager must be prepared for conflicts that might arise and must learn how to react with it differently. The project manager working in a multi-cultural project must have the following:

1. Culture awareness and competency: the manager should become aware of the cultural norms. He should understand the specific cultures with which he is working and last but not least he should develop a relevant skill set.

2. Conflict management: the manager should have an array of conflict management skill. He should be aware of how a conflict can arise, how it is dealt with and how to prevent it.

3. Project management: the manager should understand the strengths of his team and should be able to optimize these.

His thesis abstract is copied and posted.

ABSTRACT

Oil and gas projects are established intensely to satisfy the energy demand on the world. To operating effectively, alliance are increasingly being used as strategic organizational form in international in which each of attendant parties possessed strength in field related to project. In cooperating process, conflict and problems among parties are unavoidable; awareness and carefully managing conflict during construction stage play a key role in the subsequent success of projects. The theme of conflict management styles has been the focus of extensive research in social psychology, organizational behavior and the field of cross-cultural management.

By finding out and analyzing the conflict happening in Dung Quoc and Ca Mau project, through collecting data and interviewing staffs and relevant persons, the research study aim to identify and analyze the conflicts and problems as well as resolutions and try to suggest a conflict management styles which are effective to solve the problems.

A conflict management style was developed as a result of the research case study which is helpful for international oil and gas projects wishing to overcome obstacles by identifying the conflicts and solving them.

Construction Equipment: Accelerated Bridge Project in Massachusets

Contractors, subcontractors and construction equipment providers around Massachusetts may hope for multiple state highway and bridge projects as the Governor’s Accelerated Bridge Project (ABP) is now coming through. MSloane Consulting provides used construction equipment that are more economical to purchase especially during this time of economic recession.

There will be work for companies of all sizes. There will be jobs of all sizes for construction contractors. "The jobs range from the $300 million Longfellow Bridge to much smaller bridge preservation jobs, ranging in the hundreds of thousands dollars,” said Mass Highway Commissioner Luisa Paiewonsky. They are expecting an array and many types of companies that will be bidding on the work.

A total of 30 projects are ready for construction or under way as part of Gov. Deval Patrick’s Accelerated Bridge Program to reduce the Commonwealth’s backlog of structurally deficient bridges

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.

Mining Equipment for an Oil Prospect in Louisiana by U.S. Energy Corp.

Mining Equipment: U.S. Energy Corp., an exploration and mining company with molybdenum, oil and gas, geothermal projects projects, and real estate assets, announced that it has entered into a third Participation Agreement with Houston, Texas-based Houston Energy L.P. MSloane Consulting, on the other hand, provides mining and construction equipment for various mining and construction companies worldwide. Houston Energy L.P. will acquire a 25% working interest in an oil prospect located in southeast Louisiana. Houston Energy estimates the prospect has a potential reserve of 2.1 million barrels of oil.

FAST-TRACK PROJECT DELIVERY STRATEGY FOR CIVIL ENGINEERING AND ARCHITECTURAL HIGH-RISE BUILDING PROJECTS

Fast Track is known as a method of implementation where construction and design phases are overlapped to expedite completion of the project (Resource for OR design and construction). In addition, it is not only an activity that is simply done fast, but more than that, it refers to an overlap on stages of design and/or construction before other stage is done with the purpose to get an earlier project delivery.

Recently, Fast track has gained the popularity in current project delivery strategies and the popularity keeps on increasing due to its potential advantages in improving project performance. An effective fast track project can bring advantages including: (1) reduced time; (2) lower cost; (3) reduced burden for the project owner by contracting all responsibilities to a single party; and (4) invisible benefits by increasing the reputation of the owner thus offering further business opportunities in a competitive market
On the other hand, fast track project also contains some challenges like: (1) complications and difficulties in; planning procedures for approval; transfer of information; feedback, and evaluation documents (2) requiring a very strict cash-flow; prompt payment; capital resources; (3) requiring strong and experienced manpower resources, especially in project management

Ms. Mai Do Thuy Dung made a case study on “Fast-Track Project Delivery Strategy for Civil Engineering and Architectural High-Rise Building Projects” which goals were to: (1) identify a Fast Track Project Delivery Strategy which is applicable for High Rise Building Projects (private fund); (2) identify advantages and also threats to quality, budget and schedule during applying fast track project.

She concluded that fast track project delivery is a strategy for many high-rise building projects in Viet Nam. By using fast track project, the project owner can gain benefit in terms of earlier revenue and financial return. Aside from that, the unquantifiable benefit is from the improvement of company reputation in the market and the risk on construction can be earlier transferred. Furthermore, due to market demand and its complication, the need of an early deliver project is increasing evidently, especially for high-rise projects at where the footprint area is limited but carries several complicated task at the same time.

Even though fast track delivery is a current strategy for high-rise building, however, there are some problems that can occur when applying fast track due to lack of knowledge and inexperienced consultants. Therefore, the negative effectiveness of unsuccessful fast track projects is significant and can lead to more delay and cost.
The most difficult factor of all fast track projects is negotiating the contract between the owner and contractors and determining price changes. If it is fixed priced contract with changes to be paid by claim each time, it would cause the total cost of the project to overrun budget. But a cost- plus contract with a maximum guaranteed price could cause unnecessary difficulties for the contractors.

On the other hand, fast track delivery gives a limitation to the project owner's ability to make design changes once construction has started. Starting construction before design works are completed can lead to a large number of change orders. More than that it may cause redesign or demolishing and rebuild.

A fast track project method is not a must for all projects, as it depends on each project type and business strategy. The project owners should carry out a benefit analysis and have a business target to decide which strategy is suitable for their case.

Therefore, experienced consultants and project managers should provide a suitable plan for project owners based on analyzed and feasibility studies.

Ms. Dung’s recommended that in using fast track project methods, individual must know how to apply and manage these methods together, and analyzing its strengths and weaknesses.

Her recommendations for efficient fast track project are as follows:

1. A proper and successful fast track project requires skillful and experienced consultants and project management. When a project owner decides on fast track project, designers and contractors should be selected according to their experiences in this construction approach. To make this decision, the project owner should consider using a pre-qualification process to evaluate a contractor's experience.
2. Fast track project requires a clear and simple organization chart and responsibilities, in order to minimize the project confusion about line of approval, comment, who is in charge of what. If the fast track is not done carefully, it becomes a threat to quality, schedule and cost.

Her thesis abstract is copied and posted.

ABSTRACT

Nowadays, with the rapidly growing of economic as well as construction market, the need of effective fast track project is obviously. Many high rise building construction projects are implemented using fast track approaches. With fast track project delivery system, construction tasks begin before design and construction documents are completed, which allow other works to start earlier than with traditional method. Without doubt, fast-tracking offers many advantages and benefits, such as an earlier project completion, a shorter time spent before the work starts compared to the traditional design bid build method, earlier operation and earlier financial return. Therefore, fast track project delivery strategy which become applicable for high rise building projects. In order to understand how the current strategies are being operated together with the strengths and the weaknesses of the strategy, a case study is explored by approaching its documentations, interviewing involved persons. The results show the fast track project is not suitable to all projects, however, there are also some problems that can occur when applying fast track due to many reasons such as unforeseen changes, lack of knowledge and inexperienced consultants. As a result, the negative effectiveness of unsuccessful fast track projects is huge and can lead to more delay and cost. Therefore, in order to apply fast track project successful, owners should have proper plan.