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CP-117 - Project Engineering - CoP
CP-117 - Project Engineering - CoP
0
Petroleum Development Oman LLC Effective: June 2012
Document ID CP-117
Security Unrestricted
Revision 5.0
This document is the property of Petroleum Development Oman, LLC. Neither the whole nor any part
of this document may be disclosed to others or reproduced, stored in a retrieval system, or
transmitted in any form by any means (electronic, mechanical, reprographic recording or otherwise)
without prior written consent of the owner.
i Document Authorisation
Authorised For Issue – June 2011
ii Revision History
Revision No. Date Author(s) Scope/Remarks
5.0 June 2012 Paul Sanders Update to reflect changes in processes and
UEP/5 standards, and to make the document more
accessible.
4.0 January Anton Brouwer/ Update/roll-out
2011 Mike Turberville
4.0 May 2010 Anton Brouwer/ Major Update to reflect improvements in
Mike Turberville processes and standards in Project Delivery
implemented since the last revision
3.0 June 2004 Austin Isaac Alignment with Opportunity Realisation
UEJ1 Process, Minimum Standards and Global
Processes.
2.0 April 1999 Ohi Aikhoje, Incorporates comments from engineers,
OTE4 CFDH’s and recommendations from
external reviews and audits.
1.0 August Paul Hagemeijer, Initial issue.
1998 OME1
Note: Originally conceived as an ERD and then
Jyoti Kumar Das, converted to a Code of Practice under the new
OT1/32 PDO Policy Cascade
Graham Bolam,
UEII
Various Project
Engineers
TABLE OF CONTENTS
i Document Authorisation........................................................................................................ 3
ii Revision History.................................................................................................................... 4
iii Related Corporate Management Frame Work (CMF) Documents........................................4
1 Introduction........................................................................................................................... 9
1.1 Purpose........................................................................................................................ 9
1.2 Target Audience............................................................................................................ 9
1.3 When and how should CP-117 be applied?.................................................................9
1.4 Scaling the CP-117 requirements...............................................................................10
1.5 Reference documents................................................................................................ 10
1.6 Document Owner....................................................................................................... 10
1.7 Document Hierarchy.................................................................................................. 10
2 Opportunity Realisation Process......................................................................................... 12
3 Project Delivery Organisations within PDO.........................................................................14
3.1 Asset Directorates, Central Project Delivery and Functional Directorate...................14
3.2 Delegated Project Delivery Responsibilities...............................................................14
3.2.1 Central Concept Engineering Team........................................................................15
3.2.2 FEED Office............................................................................................................ 15
3.2.3 Central Project Delivery.......................................................................................... 15
3.3 Asset - CPD - Function Relationship..........................................................................15
3.3.1 Facilities Engineering Leadership Team (FELT).....................................................16
3.3.2 Corporate Functional Discipline Heads (CFDH) Forum..........................................16
4 Project Governance and Assurance....................................................................................18
4.1 Project Governance................................................................................................... 18
4.2 Project Assurance...................................................................................................... 19
4.2.1 Pre-DG4 Assurance................................................................................................19
4.2.2 Post DG4 Assurance............................................................................................... 19
4.2.3 Project Controls and Assurance Plan......................................................................20
4.2.4 Assurance Activities Post DG4...............................................................................21
5 Key Project Activities.......................................................................................................... 22
5.1 Front End Loading (FEL)............................................................................................ 22
5.1.1 Concept Engineering...............................................................................................23
5.1.2 Basis for Design (BFD)...........................................................................................24
5.1.3 Front End Engineering and Design (FEED) and Project Specification...................25
5.2 Project Execution Planning (PEP).............................................................................26
5.3 Risk and Opportunity Management............................................................................27
5.4 Operations Readiness................................................................................................ 28
5.5 Management of Change............................................................................................. 28
6 Project Execution Activities................................................................................................. 30
6.1 Detailed Design.......................................................................................................... 30
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6.2 Procurement............................................................................................................... 31
6.3 Construction............................................................................................................... 31
6.3.1 Construction Definition............................................................................................ 31
6.3.2 Construction Objectives.......................................................................................... 32
6.3.3 Construction Planning............................................................................................. 32
6.3.4 Mechanical Completion.......................................................................................... 33
6.3.5 Pre-Commissioning................................................................................................. 34
6.4 Commissioning and Start-Up.....................................................................................34
6.4.1 Commissioning....................................................................................................... 34
6.4.2 Pre-Start-up Audit................................................................................................... 35
6.4.3 Ready for Start-up (RFSU).....................................................................................36
6.5 Project Close Out....................................................................................................... 36
7 Contracting and Procurement............................................................................................. 37
7.1 Contracting................................................................................................................. 37
7.1.1 Contracting Governance Structure.........................................................................37
7.1.2 Contracting and Procurement Activities & Deliverables.........................................38
7.1.3 Contract Owner, Holder & Contract Engineer Responsibilities...............................41
7.1.4 Tendering Process Pre Contract Award...................................................................41
7.1.5 Execution Process Post Contract Award.................................................................43
7.2 Procurement, Materials Management & Logistics......................................................44
7.2.1 Procurement........................................................................................................... 44
7.2.2 Vendor List Control................................................................................................. 44
7.2.3 Inventory Management........................................................................................... 45
7.2.4 Logistics Services................................................................................................... 45
8 Project Services.................................................................................................................. 47
8.1 Planning and Scheduling........................................................................................... 47
8.1.1 Definitions............................................................................................................... 48
8.1.2 Schedule Development........................................................................................... 49
8.1.3 Existing Assets and Integrated Activity Planning....................................................51
8.2 Cost Estimating.......................................................................................................... 52
8.2.1 Capex Estimates..................................................................................................... 52
8.2.2 Cost Estimate Preparation, Assurance and Approvals............................................53
8.2.3 Project Cost Estimates Build...................................................................................53
8.2.4 Base Estimate......................................................................................................... 54
8.2.5 Contingency - Cost Risk Assessment.....................................................................54
8.2.6 Future Market & EPC Premium..............................................................................55
8.2.7 Cost Analogues and Benchmarking........................................................................55
8.2.8 Estimate Data Collection........................................................................................ 55
8.3 Project Controls.......................................................................................................... 56
8.3.1 Introduction............................................................................................................. 56
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1 Introduction
1.1 Purpose
This Code of Practice (CoP) is intended to be an instruction manual or “recipe book” for
how to manage projects in PDO.
Compliance with the requirements stated in this CoP is MANDATORY for all project
development and execution activities.
Application of this CoP is intended to:
- Ensure a common way of managing projects within PDO.
- Facilitate internal and external (shareholder) project approvals.
- Enhance Project Delivery to achieve World Class performance.
This CoP supports the PDO vision:
To be renowned and respected for the excellence of our people and the value we
create for Oman and all our stakeholders
Where other documents are specified for usage, the reference will also indicate
whether the documents are Mandatory or Non-mandatory. A Diagram of the Corporate
Management Framework is given below:
At the end of each phase, up to and including the Define phase, there will be a decision
point called the Decision Gate (DG) where the Decision Executive (DE) will decide
whether the project is ready to proceed to the next phase. The readiness-to-proceed
depends on satisfactory closure of the preceding phase and sufficient business drive,
budget and resources to complete the following phase.
Each Decision Gate has 3 potential outcomes:
1. Project is given Permission to Proceed.
2. Project is told to Stop. (Project is dropped because it is not economic, is not
aligned to PDO’s strategic objectives, or does not have sufficient resources).
3. Project is told to Go-back. (Project has to do more work in the current phase to
achieve further definition and/or see if there is a Techno-Economic Solution
Space).
The project team should only go to the decision gate if they have sufficient information
for the DRB to decide on one of the outcomes. If the project team has the information
early (e.g. the project should “Stop”) then they should hold the decision gate early.
Once the Project has been operating for some time, there is a look-back (DG5) where
lessons learned are captured to be fed-back into future Projects.
The table below illustrates the ORP at a high level with key activities for each of the
ORP phases. The key deliverables for each phase are discussed elsewhere in this
document.
Identify Assess Select Define Execute Operate
Initiate Demonstrate Select the Define the Deliver the Start-up,
Project: feasibility of best concept selected promise: operate and
the Project: solution: concept: evaluate:
Generate Deliver an
ideas. Verify Assess a Assess the Define technical asset Ensure
alignment with complete range best concept scope, cost and consistent with performance
business of alternative for delivering schedule for the forecast specifications
strategy, concepts against value from the Final scope, cost and are met.
establish a complete range Project and Investment schedule. Maximize return
potential value of possible indicate why Decision. to shareholders.
and decide outcomes, in the other choices Leads to hand- Protect License
whether to fund context of all are not over decision to to Operate.
and staff. attendant risks: preferred. user for
Technical, Operate phase.
Economic,
Commercial,
Organizational,
Political.
For further details, refer to the Opportunity Realisation Manual (ORM) and Opportunity
Realisation Guide (ORG).
The ORP specifies a number of mandatory actions and deliverables:
• Project (Opportunity) Framing, and Re-Framing at each Decision Gate.
• Project (Opportunity) Roadmap (Decision-Based Roadmap).
• Stakeholder Management Plan.
• Risk and Opportunity Management Plan.
• Project Assurance Plan.
The FELT meets on a monthly basis to share learning’s and discuss project delivery
and engineering issues (either ad hoc or long term strategic in nature) that require to be
addressed through a common, unified approach. In particular it develops, agrees and
reviews the progress against the Project Delivery Improvement plans.
The FELT has five main roles and responsibilities:
1. The FELT is responsible for influencing Policies and generating Strategies:
Given the FELT overview of the entire project delivery within PDO, the FELT is
uniquely placed to provide key steer to the organization in the form of Policy and
Strategy recommendations, and translating these into Codes of Practice.
2. The FELT has accountability for Project Delivery:
All projects in PDO report via the FELT members. The FELT is jointly responsible for
project delivery within PDO. This responsibility includes accountability for annual
spend, and project schedules. The FELT is responsible for setting realistic project
targets (budget and schedule). One important aspect of this accountability is to jointly
agree staff moves to make the best use of scarce engineering resources across the
various assets and projects.
Another important aspect of this accountability is the FELT ownership of the corporate
risks relating to project delivery.
3. The FELT is responsible for disseminating information and driving initiatives:
The FELT forum is one of the most effective for disseminating information and
knowledge within the organization given the mixture of Assets, major Projects,
Function and Line in the FELT membership. The FELT has a responsibility to drive the
cross-fertilization of lessons learned and best practices. When new initiatives are
rolled-out, the FELT members have responsibility to drive the implementation
throughout PDO.
4. The FELT is a sounding board:
The FELT provides an accessible sounding board to listen to new ideas, challenges,
suggested changes, etc. coming from the rest of the organization (e.g. CFDH forum).
5. The FELT is an early warning system for the Managing Director and TDG:
The FELT informs the MD and TDG of issues that are surfacing within the organization,
and provides advice as to how best to deal with these issues. The FELT is the
“conscience” of the organization.
Governance is the responsibility of the DRB, chaired by the DE, up to and including
Final Investment Decision (FID, usually the end of Define). After FID, the DRB
members may change for continued Governance throughout Execution and Start-up,
up to and including the Post Investment Review.
The DRB, together with the Business Opportunity Manager (BOM), is responsible for
ensuring that Quality Decisions are made throughout the ORP stages.
For Major Projects in CPD the governance ‘Line of Sight” runs from the Project
Manager via the BOM and CPDM to the DRB. The PDO Technical Director (TD) acts
as the Decision Executive (DE).
For all other projects, the governance Line of Sight runs from the accountable Project
engineer / leader via a Head of Projects and/or the Asset Engineering Manager to the
relevant Asset Director (GD, OND, OSD, UID), who is also the DE.
1
This used to be called the PDAB
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The Value Assurance Review (VAR) process is owned by the Petroleum Engineering
Directorate (UPD) and coordinated via Value Assurance Advisor (UPV). VARs provide
key Project Assurance prior to decision gates.
VAR’s shall be held for all projects in excess of $100mln towards the end of each ORP
phase. The VAR provides independent assurance to the DE that the opportunity is
ready to proceed to the next phase.
The Estimate and Schedule Assurance Review (ESAR) process is owned by the
Functional Head of Project Services (UEP3). ESARs provide independent assurance
that the project cost estimate and schedule accurately represent the project scope and
risks to project delivery are compliant with ORP requirements.
ESARs are held prior to VARs and are mandatory for the following projects:
• Prior to DG3 for all projects with CAPEX exceeding $200mln
• Prior to DG4 for all projects with CAPEX exceeding $100mln.
Projects of lower Capex with a large degree of complexity or a high risk/uncertainty
profile should also be subject to ESAR. The ESAR process is described in more detail
in section 8.4.1.
The Project Health Check (PHC) process is owned by the Project Engineering Function
(UEP5) and is recommended to be carried out as a self assessment by the project
team to assess the status of the project against a predefined set of questions. An
approved PHC facilitator shall guide the team.
The early phases (until the end of Define) of the project are the opportunity for Value Creation.
This is where the Value Improvement Practices (VIPs) should be applied and attention given to
producing quality deliverables. The Execute phase focuses on Safeguarding the Value.
Concept Engineering shall take place in line with PR-1358 - Procedure for Concept
Selection and Preparing Basis for Design and the key steps are hard-wired in iPMS.
the DRB at completion of FDP to obtain approval for the FDP, prior to the stage gate
approval that is DG3(a), to allow completion of the CSR and commencement of the
BFD.
5.1.3 Front End Engineering and Design (FEED) and Project Specification
Support: UEP1
The Front End Engineering Design develops the requirements of BFD into design
deliverables leading to a Project Specification.
The transition from Select into Define at DG3 is a key milestone in the Project Delivery
lifecycle. It is critical that the project retains continuity of key staff, budget and
understanding of any outstanding (sub-surface) risks.
The FEED shall not start until the DE mandates it, usually when the BFD and other key
Select deliverables have been approved and fully signed off. The BFD should not
contain extensive “holds” on information, or outstanding concept selection choices. The
FEED start is also dependent on completion of any key recommendations from the
VAR3/DG3.
The FEED shall:
provide a sound technical basis for the Execution Phase (Detailed Design,
Procurement and Construction) with minimal uncertainties;
provide a basis for a Cost Estimate with +15% / -10% accuracy (Level 3);
provide a firm schedule for the Execution phase;
identify all the risks/opportunities and sensitivities.
During the FEED all assurance reviews to meet technical integrity shall be completed,
such as: HAZID, Design Review, HAZOP, QRA, FEA, PDMS Model reviews (3 stages),
SAFOP and IPF.
3D Model Reviews or 2D General Arrangement reviews shall consider, as a minimum,
process issues, safety issues (QRA, SIMOPS, etc) maintenance and operational
accessibility (including manual handling), constructability (equipment handling
requirements and access for construction) and escape routes (on ground and at
platforms).
An update of the Risk and Opportunity Management Plan shall be made shortly after
kick-off of the FEED phase and a risk register maintained during the Define phase to
track the Risk Mitigations. Those risks/opportunities that cannot be closed out before
execution phase should be mitigated and transferred to the execution contractor for
management (see section 5.3).
It is important to have PDO approved facilitators/leaders for HAZID, Design Review,
HAZOP, IPF and Value Engineering. It is the responsibility of the Project Engineer to
ensure close out of all action items resulting from various reviews and maintain the
records for the same.
The FEED shall deliver a Project Specification which will require only addition of
vendor specific information and construction related details. For a detailed list of
deliverables and activities to be covered in FEED reference is made to the list of
deliverables in DCAF. During this stage, extensive vendor communication needs to be
established so that the Process design takes into consideration the most probable
scheme in any vendor package. A ‘black box’ approach, where minimum information on
vendor packages are provided, shall be avoided. All interfaces with vendor packages
shall be finalised to avoid major changes during Detailed Design. The FEED shall also
ensure that all PDO Environmental and Sustainable Development requirements are
met.
A ‘HOLDS’ list shall be maintained and any residual holds shall be transferred to the
Project Team for management through the execution phase.
In FEED stage, specifications for all major equipment and Long Lead items shall be
developed. Depending on the procurement strategy these shall be used for
procurement by PDO or the contractor.
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All other projects shall have their own specific Project Execution Plan. Note that the
PEP is scalable depending on the size and complexity of the Project.
Field Development Plan, the Concept Select Report, the Basis for Design and
the Project Specification
Describes a structured method of assessing and approving or rejecting changes
against these parameters. A change to the Baseline Value Drivers will either
increase or erode the value of the project and is therefore subject to the MOC.
All changes are documented in a Change Proposal Form.
Defines Approval Levels associated with the varying degrees of change.
Sets up the Change Review Panel consisting of senior project personnel that
meets regularly and acts as the Stage Gate screening and approval body for
change impact. The Panel will review every Level 3/2/1 change proposal and
ensure that all implications of the change are considered before being accepted
or rejected. Periodically, the Panel reviews the list of Level 4 change proposals.
The Project Change Coordinator (usually appointed from Project Services) maintains
the Project Management of Change process.
The PEP, Risk and Opportunity Management and Management of Change (as described in
Section 5) continue to be applied and updated during the Execute phase, while the Operations
Readiness becomes increasingly important.
The Detailed Design scope shall also include development of Commissioning and
Start up procedures, Operating and Maintenance manuals, setup of the Construction
Completion Management System (CCMS), SAP Plant Maintenance System, HSE
case, Safety Critical Elements, etc. Close-out of the Detailed Design phase includes
handover of these deliverables to the Operator in the correct data format.
6.2 Procurement
Support: FPO
The Procurement phase may begin before Detailed Design, particularly for Long Lead
materials and equipment. However, the other procurement will commence during the
Detailed Design phase and continue into Construction.
Procurement is discussed in more detail in Section 7 and the Quality Assurance and
Control aspects are discussed in Section 9.
6.3 Construction
6.3.5 Pre-Commissioning
Support: UEP
6.4.1 Commissioning
Support: UEP, UOP4
These activities are those undertaken after pre-commissioning to dynamically verify
functionality of equipment and to ensure that systems, or facilities forming part of a
system, are in accordance with specified requirements to bring that system into
operation.
Typically, commissioning activities undertaken after pre-commissioning will be carried
out on a system basis by a multidiscipline team of engineers and operations staff under
simulated conditions. Commissioning responsibility may necessitate nitrogen and
helium testing, which shall normally be executed by specialist contractors and
supported by the commissioning personnel.
The Commissioning Start-up (CSU) Team will start up and operate the non-
hydrocarbon systems during commissioning activities until these systems are fully
proven and provisional handover to Operations can be carried out. For hydrocarbon
systems, provisional handover will take place after all pre-commissioning and
commissioning activities have been completed up to the point of hydrocarbon
introduction. The Operations group takes responsibility for the introduction of
hydrocarbons, the Start-up activities and operation of hydrocarbon process systems.
Co-ordination between the Operations and CSU is essential and particularly so on
7.1 Contracting
Contract Strategies
Tender
Pre -
Tender Lists
Company Estimate
Tender Period
Technical Disqualification
Commercial Clarifications
Negotiation results
Contract Awards
Suspension/Termination
Changes
Variations to Contract
New scope
Extensions of Time
Selection of Tenderers
o There are various options for selecting Tenderers to participate in a tender
such as PDO Public Tender (PPT), Prequalification, Registered
contractors, Pre-select and Unregistered contractors. The default approach
is PDO Public Tender. The option is selected based on the Preliminary
Cost Estimate and Risk Profile of the contract.
o The Contract Holder shall seek Tender Board endorsement of the selected
Tenderers.
Tender Document Preparation
o The Tender & Contract documents are prepared by the Contract Holder
and Contract Engineer.
o The Contract Holder has the overall responsibility.
o The Contract Engineer shall be the single focal point for all
correspondence with the Tenderers at the pre-contract award stage.
Tender Period
o The Tender document has to be issued only to the approved Tenderers.
o The Contract Holder has to ensure that all Technical queries from
Tenderers are clarified.
o All Tenderers have to be informed equally of any changes in the tender
document in the form of addenda.
o The Contract Holder has to arrange for pre-tender submission meetings
and Site meetings if necessary.
o The Contract Holder has to prepare the Technical Evaluation Model and
the Contract Engineer has to prepare the Commercial Evaluation Model.
o The Models have to be presented to Tender Board for endorsement.
Tender Evaluation
o The Contract Holder carries out the Technical Evaluation and the Contract
Engineer carries out the Commercial Evaluation. Results of evaluation with
award recommendation are to be presented to Tender Board for
endorsement.
7.2.1 Procurement
Support: FPO
Procurement of both materials and services are covered in PR-1233 - Contracting and
Procurement Procedure.
There are four Procurement Options that a project may decide to adopt as part of its
procurement strategy, namely:
1. EPC Projects: Contractor is fully responsible for all aspects of project’s
procurement requirements. In this case, PDO involvement is limited to
providing technical support and other relevant clarifications on the materials
requirements.
However, PDO may decide (depending on the approved contracting strategy)
to place the Purchase Orders (POs) of the long lead items then novate the
POs to the EPC Contractor at the award time.
In addition, PDO may opt to Tender the long lead items during the pre-award
phase then handover, at post award, the Tender to the EPC Contractor who
places and manages the PO. In all cases management fees for placing the PO
are included in the EPC Lump-Sum Price.
2. EpC (small p) Projects: This is similar to option 1 but PDO is responsible for
procurement of the critical items. For this type of work, PDO shall arrange
procurement of such materials and free issue to the contractor for installation
as appropriate.
3. EMC/ODC Projects: Contractor performs procurement on behalf of PDO. For
this type of jobs, the respective contractor is expected to use PDO SAP/IX2
systems to perform both the Sourcing (Tender) and Procurement of materials.
PDO will pay the material supplier (not the contractor) directly after the
successful processing of goods receipting in SAP. Good receipting and
transportation of materials to contractor’s storage sites or work locations will be
done via PDO’s nominated LSP (Logistics Service Provider).
4. Stock and Project specific items: PDO C&P Organisation performs the
procurement. This is mainly for standard or project specific items that need to
be stored at PDO logistics warehouses, prior to being (free) issued to
contractors. For stock items, the project pays for the material at the time of
goods issue to the project, while ordering of materials as “project items”
requires upfront payment by project at time of goods receipting.
All cargo haulage and related activities, such as Rig moves and all EMC-ODC
materials transportation are channelled into the 4PL by default. For all those services
not covered within 4PL scope, customers have to obtain a waiver by filling in a waiver
form available on the Logistics website and get it signed by the Logistics CFDH unless
otherwise stated in any other project strategy development.
8 Project Services
Support: UEP3
Project Services will provide resources, processes, systems and tools to deliver:
Robust estimates that allow for the uncertainties of our complex reservoirs and
novel development options in a volatile market.
Realistic achievable plans that still provide challenge to our project teams.
Effective controls that manage the work and show where we are and future
possibilities.
Valid up to date project management information that allow informed
management decisions.
Useful close-out processes that capture the lessons and data for future
improvement.
Benchmarking against our peers to demonstrate top quartile performance.
Active project wide risk management and analysis.
Baselined cost and schedule that enables active change management; impact
of changes to be communicated and understood.
Application and consistent use of Standards, Guides, PCSPs and adherence to
PDO business processes.
The CFDH for Project Services is the TA1 for the above areas and is responsible for
the setting and maintenance of the associated standards and processes. Once their
competence is proven, the TA1 appoints TA2s who sign off all their Project Services
documents specified as such in DCAF.
Project teams are required to have the above subject areas covered as appropriate to
the current project phase, with suitably competent staff, either directly or as part of a
matrix, as agreed with the CFDH.
Depending on the organisational make up of the project team, responsibility for
Information Management may also reside with Project Services on a day to day basis,
while under the overall management of the Engineering and Operations Information
Management office (UEPI), as described in section 11.
plans and reports. It should reflect all project activities needed to realise the project
objectives at the appropriate level of detail.
It is essential that the basis on which any schedule is made is clearly defined and
recorded, so that any consideration of the schedule is in the context of these
qualifications. In particular, decision makers should be made fully aware of any
limitations or risks inherent in such plans.
8.1.1 Definitions
Planning: Laying out the course of action, including all interfaces, studies, surveys,
reviews, decisions, approvals etc, to achieve the desired objective.
Scheduling: Incorporating time and resources into the plan to form a schedule network
from which control mechanisms can be derived.
Work Breakdown Structure (WBS): A deliverable-oriented hierarchical decomposition
of the work to be executed by the project team to accomplish the project objectives and
create the required deliverables.
schedules may consist of thousands of activities and are typically updated at least
weekly and in some cases daily.
8.1.2.3 Optimisation
The project management software also provides the functionality to evaluate options
for accelerating the schedule, using techniques such as “crashing” and “fast tracking”.
The impact of resource constraints can also be evaluated using techniques such as
“resource levelling”. The project team should be closely involved in any such schedule
optimisation exercise to ensure that the schedule stays grounded in reality.
Be aware that immature engineering deliverables are a major risk for under-estimating
the true costs of a project. The DG3b estimate must be based on a signed off Basis for
Design. Whilst the above table is a guide, the real accuracy of the estimate should be
assessed by either performing a TECOP analysis or executing a probabilistic risk
assessment (see 8.2.5).
Any estimate that is classified as Type 3 should for at least 70% of the build-up be
supported by costs coming from Frame Agreements, Bids, Quotes, etc. to secure the
robustness at DG4. Only a Type 3 estimate endorsed by the Technical Authority (TA) is
suitable for a Budget proposal, request or award.
All estimates require assurance reviews and approvals before presentation to the DRB
or Tender Board authorities as outlined in the table below.
Please note project teams must schedule their assurance reviews at least 3 months in
advance with the UEP/3 Function.
The Base Estimate is recorded in $US and MOD. Within a Base estimate some
equipment quotes may be in another currency, these should be converted to $US using
the prescribed exchange rates. To establish MOD costs the phased estimate is
converted with specified inflation factors. Both Exchange rates and inflation factors are
confirmed each year by UEP/32 in the Programme Build guidelines.
later project stages as the scope definition and execution strategies become more
mature.
All estimates including type “Updated 2” shall be subject to a deterministic cost risk
assessment covering the Technical, Economics, Commercial, Organisation and
Political (TECOP) risks. This exercise is mandatory and is supported by the Function.
The risks and opportunities identified through the TECOP exercise are input to the
deterministic accuracy and contingency tool maintained by the Function.
For type 3 & 4 estimates with cost larger than $100mln a Monte Carlo simulation shall
be carried out by the Function, in order to predict the cost probability distribution. A
deterministic TECOP assessment shall also be run in parallel as a check on these
probabilistic results.
8.3.1 Introduction
The key focus areas of Project Controls are
Management of Costs;
Management of Progress;
Management of Risk & Opportunities;
Management of Change;
Project Reporting;
Project Closeout;
Management of Resources.
Each is covered in a separate section below.
Project Controls provide a series of processes, based on these six focus areas, which
assist in executing a project in the most efficient and economical way. Secondly, but
not less importantly, project controls provide the mechanism to inform management at
any point in time during the project about the actual status of the project, both in cost
and time, so that, if required, corrective actions can pro-actively be prepared and
ultimately exercised in a timely fashion.
The Project Controls Plan (PCP) documents the minimum standards of project controls
systems and processes required to manage the project and provide a clear and concise
explanation of how project controls shall be implemented on a project including all key
references to applicable project procedures, standards and guidelines.
• Sets up the Change Review Panel consisting of senior project personnel that
meets regularly and acts as the Stage Gate screening and approval body for
change impact. The Panel will review every Level 3/2/1 change proposal and
ensure that all implications of the change are considered before being
accepted or rejected. Periodically, the Panel reviews the list of Level 4 change
proposals.
• The Project Change Coordinator (usually appointed from Project Services)
maintains the Project Management of Change process.
8.3.6 Reporting
Support: UEP31, UEP32
Project Reporting shall provide a true and honest reflection of the status of the project
at the cut off date by reporting of all cost and scheduling elements plus the main
project highlights and areas of concern (without unnecessary details) and including
forecasts and remedies.
For Large (>$50mln) and Major (>$200mln) projects, the project team shall issue a
progress report on a monthly basis, including a Project One Pager that shall be stored
on Project Livelink. All reports must be approved by the project manager before issue.
For specific ‘Flagship’ Shell projects, each quarter the Shell Business One templates
shall be completed and loaded into the Shell system.
9 Quality Assurance
Support: UEQ
PDO’s requirements for Quality Management have been defined within Quality
Management Policy PL-15 and;
CP-190 - Quality Management System for Project Delivery: Ensures that quality is
applied and consistently implemented in PDO projects by supporting the ORP to
provide a standardised Governance, Assurance and Delivery process and give
direction to Project Management).
SP-1122 - Project Quality Assurance Plans: Details the minimum requirements for
preparation and implementation of Project Quality Plan (PQP) for all projects.
SP-1171 - Specification for Quality Assurance Requirements for Product and Service :
Provides instructions which combined with the PQP specify the Company’s minimum
requirements for Quality Assurance in all contracts and purchase orders and provides
guidelines on the contents and development of a Contract Quality Plan and Quality
Control Plan.
SP-2061 – Technical Authority System: Provides information on Technical Authorities
(TA) system operates by PDO.
However, the existence of a good management system does not in itself guarantee a
quality product; this has to be accomplished via a combination of technical competence
and, most importantly, adherence by all contributors to the system.
The commitment and active involvement of the functional leadership team(s) in
developing and maintaining the project Quality Management System (QMS) is
therefore essential for the system to be effective.
The BOM/PM/PE has overall responsibility for quality and its implementation at every
stage of the project. The BOM/PM/PE should ensure that the project QMS is reviewed
at regular intervals ensuring its continuing suitability, adequacy and effectiveness.
Where repetitive projects (portfolio of projects) are covered within a single contract
scope, a single QMS / PQP may be developed (see CP-190, sections 2.4, 2.6, 2.7),
underpinned by level 3, 4 documents / deliverables.
Suitability is judged by its ability to sustain current performance.
Adequacy is judged by its ability to deliver the project that satisfies
requirements, standards and regulations.
The review output should include decisions and actions related to the improvement of
the effectiveness of the project QMS, its processes and related resource needs.
Further responsibility and authority include;
Ensuring that project quality requirements are addressed and included within
the PEP; CP-190 Appendix 1, 2 and 4. SP-1122.
Establishing, implementing and maintaining the project QMS including quality
strategy and PQP; CP-190 section 2.3, SP-1122 and DCAF.
Establishing the budget, resource estimate for quality and ensuring that
appropriate quality resources are available within their respective project team
and contractors organisations in order to achieve PDO’s Quality Policy &
Objectives: Identifying the objectives and providing the infrastructure and
quality resources, clearly defining Roles & Responsibilities and motivating
personnel to improve the processes and product. CP-190 section 2.3, 2.6 and
2.8.
Ensuring that project quality requirements are included within contract
documents and that contractors, subcontractors and vendors comply with
project QMS requirements. CP-190 all sections, SP 1122 and SP1171.
There is no pre-ordained scaling in DCAF. Controls and tools for each discipline have been
base-lined by the Functions (CFDH), but scaling / applicability is left to the Project or Asset, as
ultimate accountability for Controls and Assurance resides with the line of site of that project or
Asset.
The Business Opportunity Manager (BOM), Project Manager (PM) or Asset Manager (AM),
dependent on phase/gate, is responsible for the full day-to-day management of the Opportunity
(Project) or Asset and is responsible (supported by disciplines) for the PCAP/ACAL framing and
maintenance. The BOM/PM/AM or delegate uses the standard PDO template to draw up the
PCAP/ACAL (Mandatory Assurance events and specific controls, including deviations). This
shall be a team effort with all the required disciplines attending.
DCAF works by assigning accountability (ATA) for an overall decision or deliverable to a single
discipline (Competence based Technical Authority SP2061) whilst recognizing that the
contribution from other disciplines (responsibilities, RTA) may be a control in their own right,
finally DCAF acknowledges that other disciplines may have an impact and therefore may need
to be consulted and/or informed (C/I).
In signing off on a business-critical element and/or deliverable the individual is:
ATA – Signing as being ultimately accountable for the control: Control Point owner, accountable
for exercising the right Controls are properly identified/ implemented by qualified individuals.
May not claim full competence in all aspects, but he or she is considered to be responsible
enough to pull in necessary counsel to take on the accountability – Signs off the end control
deliverable.
RTA - Signing as being responsible for their respective Discipline input into the Control Point on
behalf of their Discipline: Shares in the accountability, personally accountable for their
input/action, the role of an RTA is to QC and sign-off the input of his/her Discipline into the
Control Point (deliverable/decision), he/she must fully understand the requirements
(CoP/SP/PR/DEP) and deliverables to be produced and ensure the Discipline Standard is
properly implemented.
C/I - Most Decisions and Deliverables are multi-disciplinary, signing as being consulted and/or
informed states that you have read the document and any known discrepancies, impacts have
been highlighted and discussed with the RTA/ATA.
PCAP/ACAL adherence will be required to be submitted to the DRB at each DG in order to
proceed to the next gate. Where controls have not been achieved, the BOM, PM, AM will
require to demonstrate (endorsed by CFDH as applicable) that the control has been mitigated
and will not impact the Project progression, delivery and Asset integrity.
10 HSE in Projects
10.1 Introduction
Support: MSE4
Getting HSE (Health, Safety and Environment) right in projects means identifying the
risks, managing them, and being able to demonstrate that they are under control. To
do so, the right organisation, plans and resources need to be in place.
The business expectation for effective management of HSE risks and opportunities is
set out in the PDO HSE Policy (PL-04) and supporting HSE Management System
(CP-122). In practice this involves working to deliver benefits and reduce impacts
through our operations. Meeting this commitment requires a particular mindset: one
where we balance short and long term interests; integrate economic, environmental
and social considerations into business decisions; and regularly engage with our many
stakeholders.
An HSE Technical Authority must be appointed by the Project Manager. He or she
shall establish, maintain and execute the appropriate HSE studies and/or activities in
order to adequately identify, assess, and document the HSE risks of the project, in line
with the HSE Management System (CP-122).
It is important to recognise that the HSE Function and Technical Safety Engineering
Discipline do not operate in isolation from the Project Team, the existing Asset team or
the wider community in which the Project is operating. Integration of the HSE
Technical Authority into the Project Team is essential to ensure that risks and
opportunities are identified and managed early.
The activities and deliverables required to ensure that HSE risks and opportunities are
appropriately managed will vary depending on the Project. The following table lists the
mandatory HSE activities for every project.
10.2 Application
Support: MSE4
The application of the full suite of HSE activities presented in DCAF is designed for
major capital projects. Some of the activities will not be applicable to smaller projects.
10.2.2 Applicability
It is essential that at the beginning of each project phase, the Business Opportunity
Manager/Project Manager reviews the HSE activities with an HSE Technical Authority
to determine and agree on the studies and deliverables that are required, their timing
and scope as applicable to that Project. Not all the studies in DCAF will be applicable,
depending on the nature of the Project. The following may apply to some Projects:
a low degree of complexity and novelty of the project;
submitted in accordance with PR-xxxx Procedure for Deviation from Standards (still
under development) and require supporting ALARP assessments that:
Demonstrate at least an equal standard of control as the SHALL [PS]
requirement (e.g. if the SHALL [PS] required an engineered control, then the
derogation should also rely on an engineered control rather than a procedural
control or PPE). See the Hierarchy of Control in CP-122;
Be supported by a suitable and sufficient risk assessment; and
Demonstrate that the risk to people, assets, environment and reputation is no
greater than would have been achieved through adoption of the SHALL [PS]
requirement.
11 Information Management
Support: UEPI
Designing and managing a project is a business activity that delivers two main assets,
the physical asset and the Information Asset
This Information Asset exists in 2 forms:
Documents (printed or electronic): to be read by people e.g. Reports,
Specifications.
Data: to be manipulated by tools e.g. Spare Parts, Tag Register & Maintenance
Routines.
Proper implementation of Project IM achieves two main objectives and serves two
“masters”:
The Project Team: Support for the engineering processes that deliver the
physical asset (i.e. design, review, approval, and handover between phases)
Operations (Maintenance, Engineering): Delivery of the information asset itself
(i.e. final handover to Operations).
The Information Asset is created in the same way as the Physical Asset and must be
designed, specified, implemented, controlled and handed over with the same attention
to detail and quality as the Physical Asset it represents. It will support commissioning,
start-up, maintenance, Operations, and future engineering activity, and is the
responsibility of the project team to deliver.
The recently (Q42010) established central Engineering and Operations Information
Management office (UEPI) sets the standards and processes to be used by projects,
and provides the resources, support and assurance to carry out these processes on
behalf of the project. Some of those resources will reside in a “back office” while
others will be co-located with the project team.
PDO engineering function has adopted an Information Management (IM) strategy that
delivers a common framework for IM practice in PDO based on Shell DEP 82.00.10.30-
Gen Engineering Information Specification (EIS)
This strategy, and the Document and Drawing Management requirements for Projects
are defined in the specifications SP-2065 - Document Management for Projects and
SP-2047 - Preparation & Content of Engineering Drawings.
The various tools used in Information management (which are a requirement for all
new projects) are:
Livelink (Document Management System)
Assai (Document Control System)
IDB (consolidation, quality checking and loading tool)
AHA4P (Engineering Data Warehouse)
12 Finance in Projects
In PDO, the Finance contribution to projects is delivered through:
Establishing and implementing a risk based controlled project environment, aimed
at achieving business objectives, providing honest, timely, objective and
transparent Management and Financial Information and promoting effective risk
management.
Providing guidance on Finance/ Accounting implications in accordance with
established internal and external Accounting Policies & Procedures.
Ensure compliance with PDO’s internal controls including compliance with
Corporate Management Framework, Company Policies Work Practices, Discipline
Control & Assurance Framework, Procedures and Guidelines as defined by
Corporate Finance and International Accounting Standards.
To ensure that all Investment Decision Manual requirements are followed, support
all Investment Proposals and assure that proper due diligence and independent
review have been performed. Thorough understanding and disclosure of economic
assumptions, contingencies, risks and accounting, contractual, insurance, tax and
treasury implications.
Independent challenge as custodian of the Business Controls and Assurance
framework.
For Major stand alone projects, the Project Finance Manager (PFM) is part of the
Project Management Team and will have a functional reporting line to the Business
Finance Manager.
For smaller projects executed in the Line, the Finance Manager for the respective
Directorate assumes this role across multiple projects (and usually delegates a senior
management accountant as focal point).
An integrated approach to cost management, work planning, finance, and contracting
and procurement will strongly contribute to a well controlled project environment. In
reality, these activities are often split between the Project Services organisation and the
Finance organisation.
In addition, the Project Finance will provide project teams with a robust set of global
standard processes, controls and tools supporting effective project execution:
Procedures defining the global project execution process and control
requirements.
Tools and instructions supporting the process & control requirements
o Budget Management
o Management of Invoices
o Project Cost Allocation
o Exchange Rate Application
o Manual Of Authorities
Pacesetter (DG3) benchmarking helps the team set define phase targets by providing
project definition status in the form of front end loading factors (reservoir, facilities, and
wells) and provides recommendations to close the gaps before FID. It also provides
performance information in cost & schedule.
Understand what
we are getting Focus in and evaluate
into – look wide – best and do-able
options culminating in Prepare to lock into Implement the
What’s feasible an investment opportunity Deliver the value
options? Concept Selection
IDENTIFY
SELECT DEFINE EXECUTE OPERATE
@ ASSESS
The Availability Assurance / Reliability VIP is tied to the project delivery schedule and is
the main control mechanism of the Project Team on the future availability performance
and Life Cycle Value of the facilities.
The Availability model is the ‘red thread’ of the process which is carried through all
project phases to enable the assessment of the impact of proposed design changes
and to evaluate the impact of new information produced during the project
development. The Availability Assurance process is initiated during the Identify &
Assess or Select phase of a new project and continues in the subsequent phases.
13.7 Constructability
Support: UEP2
The Constructability VIP is intended to ensure optimum use of construction knowledge
and experience in planning, design, procurement and field operations to achieve the
overall project objectives.
This VIP ensures that construction considerations are identified and properly
incorporated throughout the full course of a project, in line with the project success
criteria.
13.8 PEP-PER
Support: UEP2
The Project Execution Planning using Project Execution Risk (PEP-PER) tool is a VIP
for evaluating and managing execution-specific risk in major projects from early in
Select with further follow-up in the Define phase. The VIP focuses on prevention of
major execution risks as well as mitigation of risk events that may occur.
13.9 LIRA
Support: UWL
The Logistics, Infrastructure and Resource Assessment tool is a VIP for evaluating and
managing logistics and infrastructure risks for capital projects. Further guidance can be
found in PG-19 – Capital Project Logistics.
15 Technical Standards
15.2 DEM1
Support: UEP1, MSE4
DEM1 is mandatory for all projects and guidelines can be found in GU648 – Guideline
for Applying Process Safety in Projects.
DEM1 is discussed in more detail in Section 10.3.2.
The following standards, procedures, codes of practice and guides are referenced by Chapter
as follows:
Reference Information:
ORM Website
Tools:
iPMS
Reference Information
Project Guide 11 – Project Organisation
Tools
UEOD and UEP website
Reference Information
Project Guide 11 – Project Organisation
Project Guide 2a – Project Assurance
Project Guide 2B Project Execution Review
Project Guide 2c – Estimate and Schedule Assurance Review
PDO VAR Website
Shell Value and Project Assurance Website
Tools
PHC Tool
DCAF Tool
PR-1358 - Procedure for Concept Selection and Preparing Basis For Design
Reference Information
Concept Selection Handbook
5.1.2 BFD
Reference Information
Concept Selection Handbook
Reference Information
PG12b – Capital Project Close-out Report
5.1.3 FEED
Reference Information
FEED Office Engineering Management System
Tools
PDMS
Reference Information
Project Guide 7 – Project Premise
Project Guide 10a Project Execution Strategy and Planning
Tools
iPMS
Reference Information
Risk Management Resources
Tools
Easy Risk
Reference Information
Page 85 CP-117 – Project Engineering Code of Practice Printed 27/06/12
The controlled version of this CMF Document resides online in Livelink®. Printed copies are UNCONTROLLED.
Revision: 5.0
Petroleum Development Oman LLC Effective: June 2012
Tools
Operations Readiness Portal, ORSAT
Reference Information
PG 06 Capital Project Controls & Management of Change
Tools
Change Control System
Cost and Planning Toolbox
Tools
PDMS
6.3 Construction
Reference Information
PG 17a Constructability
PG 17b Construction Management
Shell “Wisdom” Packs
Reference Information
PG 14 Operations Readiness
Tools
CCMS
ORAKLE
Reference Information
Project Services and Finance Handover
7.1 Contracting
Tools
Omnicon (used for Pre-Award contract administration),
ProCon (used for Post-Award contract administration)
IX2 (used for Purchase Order administration both pre and post award)
SAP
Reference Information
PG 19 Capital Project Logistics
Tools
IX2
8 Project Services
Reference Information
Shell Project Guide 04 Capital Project Scheduling
Shell Project Guide 03 Integrated Activity Planning
Tools
Primavera
Primavera Risk Analysis
Reference Information
Shell Project Guide 06
Cost and Schedule Risk Analysis guide (ref. PG-03)
Tools
CES, Capco$t, CCES
Type 1 Cookbooks (under development)
Contingency and Accuracy Tool
@Risk
Reference Information
Further guidance is available in many external texts – the Guide to the Project Management
Body of Knowledge (PMBOK) from Portfolio Management and Integration (PMI) is perhaps the
most widely used.
Shell Project Guide 06 – Project Control
Tools
SAP, Primavera, Excel
Reference Information
Shell Project Cost Reporting Procedure PSM-I-U-001182-FA-6180-0020
Shell Cost Contingency Procedure PSM-I-U-001182-FA-6180-0021
Shell Value of Work Done Procedure PSM-I-U-001182-FA-6180-0022
Shell Earned Value Management Procedure PSM-I-U-001182-FA-6180-0025
Shell Cost Management Procedure PSM-I-U-001182-FA-6180-0028
Shell Management of Invoices Procedure PSM-I-U-001182-FA-6180-0044
Tools
SAP, Dassian
Reference Information
Shell Progress Management Procedure PSM-I-U-001182-FA-6180-0011
Tools
Primavera
Reference Information
PG 20 Capital Project Risk Management
Shell Project Process – Project Cost & Planning Risk Procedure : Cost & Schedule Risk
Analysis
Tools
Easyrisk
8.3.6 Reporting
Reference Information
PG 06 Capital Project Controls & Management of Change
Cost and Planning Toolbox
Shell Business One project reporting
Tools
PDO Project One Pager
Shell Major Projects Business One
Reference Information
Project Guide 12b – Project Close Out Report procedure
Reference Information
Shell PG 02c Capital Project Estimate Schedule & Assurance Review (ESAR)
9 Quality Assurance
Reference Information
ISO Standards
PG 13 Quality Assurance & Control
Tools
Variance and Audit Tracking System
Reference Information
User Reference Guide
Tools
DCAF Tool
10 HSE in Projects
Reference Information
GU-648 Guide for Applying Process Safety In Projects
PG-01 Capital Project HSSE & SP Management
Tools
DCAF
11 Information Management
Reference Information
PG 15 Capital Project Information Management
IM Toolbox
Tools
Livelink, Assai, AHA4P
Tools
PDO iPMS
12 Finance in Projects
Reference Information
FBM Business Finance Website
FBC Capital Budgeting
Shell Global Procedures
Reference Information
Opportunity Framing Resources
Value Engineering Resources
PG 16 TQ for Capital Projects, including Benchmarking
PG 19 Capital Project Logistics
Reference Information
PG 11 Capital Project Organisation
15 Technical Standards
Reference Information
GU-648 – Guide for Applying Process Safety in Projects
EP95 & EP-2005 – Shell EP Business HSSE Control Framework
Appendix 3 – Abbreviations
BOM Business Opportunity Managers
CFDH Corporate Functional Discipline Head
DE Decision Executives
EMC Engineering Management Contractors
ODC Offplot Development Contractors
CAPEX Capital Expenditure
PS Project Standard
PG Project Guide
TECOP Technical, Economical, Commercial, Organizational and Political
ORP Opportunity Realization Process
ORM Opportunity Realisation Manual
ORG Opportunity Realisation Guide
DG Decision Gate
FCP Field Change Proposals
CCET Central Concept Engineering Team
DSC Development Study Centre
FEED Front End Engineering Design
FELT Facilities Engineering Leadership Team
PCAP Project Control and Assurance Plan
VAR Value Assurance Review
PEP Project Execution Plan
FID Final Investment Decision
VIP Value Improvement Practice
DCAF Discipline Control and Assurance Framework
BfD Basis for Design
$ Denotes USD unless otherwise stated
mln million