Uncertainty management in Statoil (Risk and opportunity management)

1. Uncertainty management in Statoil(Risk and opportunity management) NSP 18 September 2001

2. Requirements for uncertainty management in development projects • AR005 - Project development in Statoil • Classification requirements for cost estimates and schedules Practical guidance document Recommended practices for uncertainty management in development projects

3. Presentationcontent • Uncertainty management trough project phases and decision gates • The qualitative uncertainty management process • The quantitative uncertainty management process • Presentation to management at decision gates • Findings and recommendations

4. Uncertainty management trough project phases and decision gates DG 0: Decision to start feasibility studies (BoM). DG 1: Decision to start planning (BoK). DG 2: Provisional project sanction (BoV). DG 3: Project sanction (BoG). DG 4: Start operations (BoD).

5. Tools : Lotus Notes PIMS Uncertainty identification Uncertainty response control Continuous process Uncertainty assessment Uncertainty response action The qualitative uncertainty management process

6. Presentation to management at decision gates (I)

7. The quantitative uncertainty management process • The quantitative uncertainty management process consists of performing uncertainty analysis on the value chain. • A value chain includes all the variables that affect the cash flow. • Each uncertainty in the value chain is described with a probability distribution and linked to the economical model. • Dependencies between variables are taken into account. • Uncertainty in project economy is calculated through Monte-Carlo simulations.

8. Principle poster of the value chain analysis

9. The numbers in brackets correspond to different scenarios Presentation to management at decision gates (II)

10. Continues process Information flow Uncertainty management is a continues process through all decision gates and project phases Quantitative value chain analysis is mainly performed at important decision gates. Qualitative vs. quantitative uncertainty management

11. Project ranking and portfolio management

12. Findings and recommendationsThe qualitative uncertainty management process • The project management team must have ownership and actively support the uncertainty management process • Uncertainty management must be established as a continuous process integrated in project management • Uncertainty management must be delegated to the line of responsibility • High focus and effort should be given to the implementation phase. A person responsible for facilitating the process should be appointed to secure sufficient attention • Uncertainty management must be on the agenda in regular meetings • Uncertainty management must focus on the total value chain and the lifetime perspective to secure an overall management of risks and opportunities • A practical detailing and structure is needed in order to reduce the number of uncertainties • uncertainty management must be supported by efficient methods and tools. • Experience transfer from other projects is important

13. Findings and recommendationsThe quantitative uncertainty management process • Keep the analysis simple • Treat uncertainties on an aggregated level • One person must be appointed to coordinate the process • Challenge the input from the different disciplines and search for dependencies • Make sure that the input corresponds to the uncertainty suppliers view (everybody is not familiar with statistics and statistical definitions) • Present the results from the analysis to the project and explain in simple terms the value chain and the effect of each input on the totality as a quality assurance of the model • Get a second opinion on the model to avoid effects of subjective interpretations • Use benchmarking to quality assure the results