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Project Management Principles

Project Management Principles. Understand the business environment Choose the “right” project Understand the energy value chains Identify risks – “hard” vs. “soft” Bring ALL risks close to the project mgt Value of lessons learned – mindful of uniqueness of situations. Commercial Framework.

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Project Management Principles

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  1. Project Management Principles • Understand the business environment • Choose the “right” project • Understand the energy value chains • Identify risks – “hard” vs. “soft” • Bring ALL risks close to the project mgt • Value of lessons learned – mindful of uniqueness of situations

  2. Commercial Framework Government Commercial Framework Consumer Investor

  3. Partnering • Decision to partner is related to project risk • Choose a partner you can work with • Choice of operator depends on project requirements and comparative advantage of partners • Consider strong local partner if local content rules are strong • Impact of local content rules

  4. Petrobras Upstream Project: Investment Decision(unexpected issues/risks to project management) • Anticipate license/permitting requirements and incorporate in economic evaluation • Build integrated team that pulls together decision to bid on block with project developers who will obtain license/permits • Include a lawyer! • Consult government agencies on potential rules changes • Survey political risk • Include partner

  5. Petrobras Upstream Project: Implementation(unexpected issues/risks to project management) • Environmental license/permits – process for obtaining • Integrated team for obtaining permits • …. • Include partner

  6. FLNG • Regasification • Island • Cheniere/FLNG • Tolling facility • COP and DOW – capacity holders • “No bid” EPC • Two phases – phase I under construction (current EPC contract) • Potential overlap with phase II

  7. FLNG Project: Investment Decision • Commercial constraint of intrastate market • Probably there was inadequate project mgmt of decision process

  8. FLNG Project: Implementation • Risks • Weather – hurricane • Technology – equipment prototypes (untested) • Design • Regulatory – compliance with changing regulatory rules • Importance of communication between companies and regulator • Commercial – quality of the gas (heat rate)

  9. FLNG Project: Implementation • Risks, continued • Labor – competition for skilled crafts • Change in project mgmt (beneficial!) – length of time for implementation • Scheduling • Complicated • Ability to visualize all phases • Cost management • Pressure on costs (materials, services)

  10. Quality management • Problems with control • Problems with communication • Human resources/project team • Intervention of COP, DOW • Inability for COP, Dow to intervene in FLNG-TZS contract • Scope • Change in design – problem in communication • Reduced storage capacity to balance phase I and II

  11. Solutions • Improved communication across all project team functions • Better planning to lay out timelines, milestones, etc • Critical path scheduling • Regulatory approval • Work more closely with regulator to define issues and resolve • Change project team (leadership) if necessary

  12. Solutions • Adjust design for maximum weather related events

  13. Evaluation of Project: Lessons Learned • Large scale with challenges and unexpected issues in project management • Some cost overruns – cost escalation will increase if phase II developed • Ambitious – commercial strategy – LNG supply • Positions of COP, DOW would seem supportive • Commercial constraint of intrastate connection relative to project cost and project mgmt demands • Connect to interstate? Or something for better value creation

  14. Evaluation: Lessons Learned • Lack of participation by COP and Dow in beginning • For both investment decision and early stages of project mgmt • Unusual choice of EPC contractor? • Plan when you decide to invest and plan when you implement the investment

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