Project Management in the Oil and Gas Industry

Mohamed A. El-Reedy

• Publisher: Wiley-Scrivener
• Year: 2016
• ISBN:
  9781119084105
• Edition: 1
• Topic: Physical Sciences
• Subtopic: Energy

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.

Chapter 1

How to Manage Oil and Gas Projects

1.1 The Principal of Project Management

The subject of project management has become one of the most common themes in the recent past, and that is due to the increase in the number of mega projects worldwide and the development of modern technology in all areas of knowledge, which requires new methods of project management to cope with fast-pace developing.

Oil and gas companies are clear examples of the difference between the concept of a project and daily routine operations. These companies, in most cases, have an operations department and project department and they should work together.

Therefore, project management is different from the daily activity in operation management. Thus, most books and references that discuss project management define a project as a number of tasks and duties to be implemented during a specific period of time in order to achieve a specific objective or set of specific targets.

In operation management, production managers focus on the daily oil or gas production compared to the previous day. Oil and gas production is measured by the number of oil barrels produced per day (BOPD) in millions of standard cubic feet of gas (MMSCF). So, the monitoring of production daily is very important to the present income of the company.

On the other hand, the definition of project management can be summed up as planning, organization, recruitment, direction, and controlling of all kinds of resources in a certain period of time in order to achieve a specific objective for financial and non-financial targets.

To clarify the difference between project management and operations management, we should consider what goes on in the mind of these two managers. The project manager’s goal is to finish the project on time. Then they evaluate where they will relocate after finishing the project. This is very different from the thinking of the operations manager, who never wants daily production to stop. So, they could not dream of work stopping, which is contrary to the project manager’s target. Therefore, you can imagine the difference between the thinking of the two managers.

The first difference in the definition of project management is the goal to finish the project in a certain amount of time and its set of objectives all at once. While some measures are applicable for both operation and project management, the use of budget and manpower puts an end to specific actions.

1.2 Project Characteristics

One of the most important features of a project is the selection of individuals at different locations of the same company. In some international projects, the individuals are from different countries, cultures, educations, and employment and all of these individuals have different skills. With all those differences, they must work together to complete the work in a specific time and definite target.

The project manager has to coordinate between the members of the project to reach the goal of the project. As a result of rapid development in modern technology, this specialty has become important because, now days, any project contains many different disciplines. An explicit example is in construction projects, where there is a team for constructing the reinforced concrete and other teams for finishing the work, such as plumbing work. So, every branch of the construction activity has its own technology and skills. Therefore, the project manager has to cooperate between the different disciplines to achieve the project objective.

The primary goal of a project manager is to complete a project with high quality and achieve the objective at the same time.

Every project has a main driver. In general, the driver is one of the two driving forces or, in other words, is one of the two philosophies in managing a project. One of them is cost-driven and the other is time-driven.

The driver is considered to be the underlying philosophy in the management of a project, which must be determined by the director of the project with other parties, as well as the official sponsor of the project and the stakeholder. The project driving philosophy should be known to both the technical and administrative department managers.

To illustrate the above two factors’ effects, we should think about all types of projects that are running around us. We will find that, in some projects, reducing the cost is the major factor and the time will be the second factor and, when the project duration time increases, it will not affect the project in the operation phase or, in precise meaning, it will not affect the owner and his investment. The building of houses, mosques, churches, museums, and other projects that have a social aspect is an example.

On the other hand, the aim of some projects is to reduce the time, which is the main challenge, so it will be a time-driven project. Examples of these projects include hotel projects because any projects that save in time will gain in profit, for an owner’s profit from a hotel is calculated per day of using the rooms in the hotels. Other examples are oil and gas or petrochemical projects in the petroleum industry, where any day that can be saved will save millions of dollars per day since production is measured by barrels of oil per day (BOPD) or millions of standard cubic feet per day (MMSCFD), which will multiply the oil or gas price respectively and bring in more revenue. For example, if the gain of production from the project is 50,000 BOPD with an oil price of forty dollars per barrel, every day can save and the owner can gain 2,000,000 dollars.

From the above discussion, the main driver in petroleum projects is time. Therefore, the main target in these projects is to reduce the time. It is very important to define the basic driving force for a project, which is either cost or time. It is essential that all staff working on the project should know this information and this is the responsibility of the project manager.

Any group of teams at work, both in design or execution, should provide proposals, recommendations, and action steps that are in the same direction of the project driver in reducing the time or cost.

It is necessary that the target is clear to everyone to avoid wasting time in discussing ideas and suggestions that are not feasible. Imagine that you are working on a housing project and one of the proposals from the engineers is to use a type of cement to provide a rapid setting to reduce the time of construction, but it will increase the cost. Is this proposal acceptable? Certainly, it will not be accepted. On the other side, in the case of the construction of an oil or gas plant or new offshore platform, imagine if one of the proposals is the use of materials that are the cheapest, but it requires extra time to import from abroad, which will delay the project some days. Is this proposal acceptable? Of course this proposal is unacceptable, but if we use these proposals for the other project, we will find that the two proposals are excellent and acceptable.

It is clear that when we lose communication between the project manager and the personnel, there is a lot of confusion. If everyone works hard, but in different directions, this becomes wasted effort and everyone is not going in the same direction in order to achieve the success of the project.

Moreover, it is important to communicate with suppliers and contractors, so that their proposals in supply materials and construction should be within the project driven criteria.

Project characteristics can be summarized as follows:

• A project has a specific target.
• A project is unique and cannot be replicated with the same task and resources expecting to give the same results.
• The focus is on the owner requirements and his or her expectations from the project.
• It is not routine work, but there are some tasks that are routine.
• A project consists of a number of activities that contribute to the project as a whole.
• There is a specific time in which to finish a project.
• A project is complex in that it works by a number of individuals from different departments.
• Project managers must be flexible to cover any change that occurs during the project.
• There are uncertainty factors, such as the performance of individuals and their skills, for some of the unfamiliar work or unknown external influences that may not have happened before.
• The total cost is defined and has a limited budget.
• A project gives unique opportunities to acquire new skills.
• It gives impetus to the project manager to learn to work under changing circumstances, as the nature of the project is to change.
• There are risks with each step of the project and the project manager should manage the risks to reach the project goal at the end.

1.3 Project Life Cycle

The project definition is a set of activities that has a start time, time period, and end time. These activities vary from project to project depending on the nature of the project. For example, a cultural or social project or civil project such as the construction of a residential building, hospital, road and bridges or industrial projects are different in their characteristics. In our scope we will focus on industrial projects.

Civil projects, in general, vary from project to project depending on the size and value of the project. It can be anything from constructing a guard-room to constructing a nuclear plant.

Therefore, the quality varies depending on the size of the project, especially in developing countries.

In a small project, it might be sufficient to apply a quality control only where small contracting companies or engineering offices do not wish to have a global competition. For example, increasing the quality will increase the project’s total cost and if these companies have quality assurance tracking systems that will also increase the cost of the project as a whole. Therefore, they often apply the quality control only within the structure safety of the building.

In the case of major projects, there are many execution companies or engineering offices working. Therefore, we must also take into account that firms implementing quality assurance procedures are necessary and vital, as well as the quality control carried out in all phases of the project based on the project specifications.

Stages of construction projects start with a feasibility study, followed by preliminary studies of the project, following detailed studies with detailed drawings. Then, the operation crew will receive the project to run.

In all these stages, there are many types of quality control that are required to obtain a successful project that can return benefits and money to the owner and all participants in the project. Figure 1.1 shows the life cycle of all projects.

Figure 1.1 Project life cycle.

From this figure, it is clear that when a feasibility study has been finished five percent of the progress of the project is shown and, upon completion of the engineering designs, 25 percent of the project progress is shown, and the biggest project stage, in terms of time and cost, is the period of the execution phase.

As shown in Figure 1.1, after the feasibility study, senior management should have a definite answer for the following question: will the project continue or will it be terminated? If there is a positive situation, then cross the gate to the next stage which is preliminary studies, which will provide a more accurate assessment of the project. After that, another decision will need to be made on whether the project will move forward to the detailed engineering and construction phase.

At each phase of the project, there is a role for the owner, the contractor, and the consulting engineer. Each system has its own method of project management and every stage of these methods has its own characteristics and circumstances. These follow a change in the area of employment or Scope Of Work (SOW) that clarifies each stage for each of the three parties.

A characteristic of the project life cycle is that it changes from time to time. In each period there is a...