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Ipa Fel 2 - Pac Introduction June 2011
Ipa Fel 2 - Pac Introduction June 2011
Ipa Fel 2 - Pac Introduction June 2011
Confidentiality Statement
This document is the proprietary property of Independent Project
Analysis, Inc., which retains all copyright and other ownership rights
in its contents.
Information about the subject matter, content, and structure of this
document is confidential and proprietary.
Neither this document nor any such information may be disclosed to
any third party without the prior written consent of IPA and Saudi
Aramco except as expressly provided by the contract between IPA
and Saudi Aramco.
This document is not to be copied or distributed without
authorization.
Outline
Introduction to IPA
Overview of Front-End Loading
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What We Do
In a typical year, IPA evaluates about 900 major
projects for companies around the world
We evaluate:
The quality and completeness of the business case and
commercial arrangements
The competitiveness of the project at the end of scope
development
The readiness of the project for sanction
The relative success of the project after startup
Occasionally, we look at projects mid-execution if they
are off in difficulty
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What We Do (contd.)
Over the past 20 years we have evaluated over 350
megaprojects and will evaluate over 40 this year alone
We develop a very complete technical and people
history of each project from front-end through early
operation
These histories become the data that we use to find
what works and what doesnt in capital projects
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BP
Bristol-Myers Squibb
Caltex
Cargill Inc.
Chevron
Chevron Phillips Chemical
China Three Gorges Project
Development Corp.
Chiyoda
CITGO
Clark Refining & Marketing
CNRL
Codelco
Colonial Pipeline Company
Cominco
Condea Vista
ConocoPhillips
Copesul
CRI
CSR
CVRD
CYTEC
De Beers
Degussa
Department of Defense (US)
Dofasco
Dow Chemical Company
DowCorning
DSM
DuPont
Eastman Chemical Co.
Ecopetrol
Edison Company
Eli Lilly & Co.
Encana
Entergy
ExxonMobil
Falconbridge
Flint Hills
Florida Power & Light
Fluor Daniel
FMC Corporation
Foster Wheeler
Gaz De France
Genentech
General Electric
Georgia Pacific
GlaxoSmithKline
Hess Corporation
Hoffmann-La Roche
Honeywell
Husky Oil
Hydro
ICI
IMC Global
Incitec
Inland Paperboard & Packaging
International Paper
Invista
Iscor
Jacobs
JGC
Johnson & Johnson
Kellogg Brown & Root
Kimberly-Clark
Kinder Morgan
Koch Industries
Kodak
Kraft
Kvaerner
Kumba Iron Ore
Kuwait Natl Petroleum
LG Caltex
Lasmo
LTV Steel
Lukoil
Lundin Malaysia
Lyondell Citgo
Lyondell Equistar
Initiation
Business
&
Project
Team
Interface
Gate
Business Front End
Loading
Scope
Project
Development
Definition
Project
Proposal
FEL 3
DBSP
FEL 2
Gate
Pacesetter Project
Evaluation
Gate
Execution
Start-up
Phase
Handover
Prospective Project
Evaluation
Closeout Project
Evaluation
Outline
Introduction to IPA
Overview of Front-End Loading
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10
Agenda
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11
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12
Basic Premise
Early in the project, you can influence the final
outcome of a project at a relatively low cost
Select the best projects
Eliminate the wrong projects
Select the best technology
Select the most appropriate scope of work
The work you do at the start of a project has a direct
effect on how well the project turns out
Better planning drives better outcomes
Best Practices help to drive down costs,
improve schedule, and improve predictability
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13
100%
PROJECT DEVELOPMENT
& FRONT-END LOADING
DETAILED DESIGN
Relative
PROCUREMENT
Level of
CONSTRUCTION
Influence
COST
COST OF
OF THE
THE
PROJECT
PROJECT
COMMITTED
COMMITTED
Cumulative
STARTUP AND
OPERATIONS
Cost of the
Project
COST
COST
INFLUENCE
INFLUENCE
LOW
0%
START
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TIME
14
COMPLETE
Technology
&
Business
FEL 0
Concept
Evaluation
FEL 1
Business
Planning
FEL 2
FEL 3
Scope
Refine Scope &
Development Plan Execution
Phase 4
Execute
Ideas
Phase
Review
Go / No Go
Phase Review
Go / No Go
Phase Review
Go / No Go
Sanction
Go / No Go
Business
Decision
TIME
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15
Agenda
Front End Loading (FEL)
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16
Proceed to Facility
Planning Phase
Cancel or Shelve
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17
Business
Planning
Scope
Development
Project
Definition
Execution
Startup &
Operation
INTERFACE
DELIVERABLES
A business need or opportunity is
developed into a business case
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18
Market forecasts
Sales/capacity reconciliation
Competitive studies
Legal/environmental/OH&S
Project
Definition
Execution
Startup &
Operation
INTERFACE
BUSINESS DELIVERABLES
Market forecasts
Sales/capacity reconciliation
Competitive studies
Legal/environmental/OH&S
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BUSINESS OBJECTIVES
STATEMENT
TO THE
PROJECT TEAM
19
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20
Consequences of
Incomplete FEL 1 Deliverables
Ill-Defined
Business Case
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Multiple
Alternatives
Evaluated
Unable to
Reach Closure
by FEL 2 Gate
21
Do Not
Complete FEL 3
Work
Reduced
Competitiveness
Better
Worse
Percentage of Projects
Completing FEL 2
70%
60%
50%
40%
30%
20%
10%
0%
Complete
In Development
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23
Agenda
Front End Loading (FEL)
FEL 1
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24
Proceed to Project
Planning Phase
Key Elements:
Project manager is named at the start of the
phase and project team is formed
Costs are typically capitalized
Gate-2 Review
Selected Alternative
Validation
25
Cancel or Shelve
Business
Planning
BUSINESS &
PROJECT
TEAM
INTERFACE
Project
Scope
Definition
Development
26
Execution
Startup &
Operation
DELIVERABLES
Economic evaluation of
alternative scopes/technologies
Site selection
Conceptual engineering
Flow sheets
Budget-type estimates
INDEPENDENT PROJECT ANALYSIS
Business
Planning
BUSINESS &
PROJECT
TEAM
INTERFACE
Project
Scope
Definition
Development
Execution
Startup &
Operation
PROJECT OBJECTIVES
Economic evaluation of
alternative scopes
Site selection
Conceptual engineering
Flow sheets
Budget-type estimates
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PROJECT OBJECTIVES
STATEMENT
TO THE
BUSINESS
27
Three Key
Practices Facilitate Reaching FEL 2 Goals
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28
FEL 2 Best
Practices
Clear Objectives
Engineering
Definition
Integrated Teams
70%
Pr<<0.05
0.05
Pr
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
Complete PFDs
Preliminary PFDs
PFDs Started
29
FEL Index
Components at Pacesetter (FEL 2)
Site
Factors
Site determined
Equipment block
layout identified
Preliminary soils and
hydrology data
collected
Environmental
permitting
requirements and
strategy identified
Health and safety
requirements and
strategy identified
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Project
Execution
Strategy
Engineering
Definition
Pacesetter
FEL
4
Best
Good
Fair
7
Scope
Development
Complete
Fair
10
11
12
Screening Study
10
11
12
Poor
Scope Development
inScreening Study
Screening Study
Progress
Integrated team
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31
32
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33
Percentage of Projects
100%
80%
60%
40%
20%
0%
Clear
Objectives
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Integrated
Team
34
Complete
PFDs
Clear Objectives,
Integrated Team, &
Complete PFDs
Agenda
Front End Loading (FEL)
FEL 1
FEL 2
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35
Proceed to Project
Execution Phase
Gate-3 Review
Execution
Authorization
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36
Cancel or Shelve
Business
Planning
BUSINESS &
PROJECT
TEAM
Scope
Project
Development
INTERFACE
Execution
Definition
Startup &
Operation
DELIVERABLES
Entry into FEL 3 should mark the end
of alternatives
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37
P&IDs
Equipment specifications
Procurement plan
Execution plan
Preliminary arrangements
Schedule analysis
FEL Index
Components at Prospective (FEL 3)
FEL
Index
Site
Factors
Plot plans
Soils data
Environmental
permitting
Health & safety
requirements
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Engineering
Definition
Engineering tasks
Detailed scope
PFDs, H&MBs, P&IDs
One-line electrical
diagrams
Equipment specs
Cost estimate
Sign-off from:
Operations
Maintenance
Business
38
Project
Execution
Plan
Contracting strategy
Team participants & roles
Integrated schedule
Detailed
Critical path
Resource loading
Plans
Procurement
Commissioning/startup
Etc.
INDEPENDENT PROJECT ANALYSIS
Technology
Strategy
Alignment of
Functions
Front-End
Loading
Use of Value
Improving Practices
Leading
Technology
Co
st
SAFETY
Executed
With
Minimum
Change
Optimal
Scope for
Business
Needs
Timely Involvement of
Contractors/Vendors
Lo
w
Fast Cycle
Time
t
en y
l
l
it
ce
Ex rabil
e
Op
BETTER
IRR
Project
Objectives
Project
objectives:
- Documented
- Communicated
- Agreed to
Trade-offs clear
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Team
Composition
Integrated team
Key functions
represented:
- Business
- Ops/Maintenance
- Engineering
- Construction
- Etc.
40
Project
Implementation
Process
Roles &
Responsibilities
Team member
roles &
responsibilities:
- Defined
- Agreed to
Tasks identified
Risks identified,
analyzed, &
mitigated
Project
implementation
process in place
Applied
consistently on
all projects
Process
understood &
followed by team
Estimating for
Control
Control During
Execution
41
Measurement of Progress
extent that physical
progressing was performed
level of detail of
measurements for each cost
category
Reporting of Progress and
Status
frequency of reports
level of detail of progress
reports for each asset and
activity
Owner Participation in Project
Control
INDEPENDENT PROJECT ANALYSIS
VIPs
FEL 1
FEL 2
FEL 3
Business Planning/
Appraise
Scope Development/
Select Alternative
Project Planning/
Define
Phase 1
Phase 2
Phase 3
Execution
Phase 4
Operation
Phase 5
Customizing Standards
and Specifications
Waste
Minimization
Energy
Optimization
Process
Simplification
Classes of
Facility
Quality
Value
Engineering
Design-to-Capacity
Reliability Simulation
Predictive
Modeling
Maintenance
Technology
Selection
3D CAD
Constructability Reviews
Recommended Best Practical range is 40-60% use of applicable VIPs. Most benefit from VIP use is
derived for Projects achieving Good or better FEL Index rating at authorization.
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42
1.2
Poor
1.1
Industry Average Cost
1.0
Good
0.9
0.8
Best Practical
3
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Good
Fair
6
FEL Rating
43
Poor
Screening
Cost
Index
1.05
1.00
0.95
0.90
0.85
1.15
OverBest
defined BEST
Practical
GOOD
Good
FAIR
Fair
Scope
POOR
Dev.
Complete
Scope
Screening
SCREENING
Dev.
in
Study
Progress
1.10
Execution
Schedule
Index
1.05
1.00
0.95
0.90
0.85
OverBest
defined BEST
Practical
GOOD
Good
FAIR
Fair
Scope
Scope
Screening
Dev.
Dev.
in
POOR
SCREENING
Study
Complete
Progress
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44
Outline
Introduction to IPA
Overview of Front-End Loading
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45
LEAD
ENGINEERS
Worksheet
General Information
MAINTENANCE
CONTRACTORS
PROJECT
MANAGER
Technical Characteristics
External Issues
OPERATIONS
COST/
SCHEDULE
ENGINEER
46
Introductions
Project Background, Drivers, Key Issues
Project History and Schedule
Technical Characteristics
Project Management & Safety Issues
Lunch
Project Definition (FEL)
Value Improving Practices
Cost & Controls Information
Other
Action Items
* Exact agenda may vary depending on team availability, project type, size, complexity and other defining
characteristics
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47
48
* Other documents may be required. Additionally, some documents listed may not be applicable to certain
types of projects and/or at certain stages. For example, closeout data, including lessons learned reports
is only relevant for evaluations of completed projects
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49
Analyst Preparation
Preliminary Analysis
Review Board
Complete Analysis
Edit/Review of Deliverable
Issue Final
Cycle time to draft deliverable (Presentation or Report format) is approximately 3-4 weeks
after all data is submitted.
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50
Questions?
Please address any questions concerning the
analysis to:
Switchboard +31 (0)70 335 07 07
Fax +31 (0)70 335 06 42
E-mail jcastaneda@ipaglobal.com
metchells@ipaglobal.com
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51
INFORMATION TECHNOLOGY
300+ projects; including
Applications Development,
Telecommunication, etc.
MEGAPROJECTS
300+ projects
$Billion class projects, all types
UPSTREAM PES
1,100+ projects
Petroleum production
platform worldwide
HAZRISK
400+ projects
Environmental assessments and
cleanups
PIPELINES
800+ projects
Pipelines, terminals, booster stations, etc.
POWER PLANTS
150+ projects
Single or combined cycle plants
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52