“Knots Ahead of the Rest”

Real Lessons in FPSO Execution

Failures and Critical Factors for

Successful Delivery

Presenter: Gurin Hanspal

Venue: FPSO & FSRU Asia 2016,

Shanghai, People’s Republic of China

Introduction

Currently Senior General Manager –Major Project (BumiArmada Berhad)

• Over 35 Years on oil & gas industry

• Responsible for the execution strategy and delivery of first converted

• FPSO in UK North Sea. Record setting 18 Months from start to 1stOil!

• Successfully executed ($10 Billion) FPSO + Subsea FEED for Mega

Project (Chevron Rosebank) in record setting 12 months.

• Successfully turned-around Kraken FPSO project for UK North Sea.

• Expert in EPCi planning, execution & contract negotiation/formulation

• Wide ranging technical expertise –FPSOs, LNG Terminals, Platforms,

Subsea and Full Field Development.

• International experience –Europe, Americas, Middle East and Asia

• Read more about me: https://linkedin.com/in/gurin-h

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Agenda

1. State of EPC Execution in Industry

2. Simple as EPC?

3. Why are so many FPSO Projects Late & Over Budget?

4. Understanding Project Lifecycle

5. Some Real Lessons in FPSO Execution Failures

6. Project Execution Success Factors

7. Effective Organization Example

8. Perceptions & Reality of EPC Modules

9. Schedule delays & consequences

10.Management of Change

11.Effective Communication

12.Summary & Close

13.Questions?

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State of EPC Execution in Industry

Projects - Schedule Management

Most EPC projects over the last decade have experienced substantial

schedule delays

This is true not just for FPSOs but across the oil & gas industry.

This true of all projects - large and small

Projects - Budget Control

Most EPC projects over the last decade have been substantially over

budget

This is true not just for FPSOs but across the oil & gas industry.

True for all projects – large and small

Projects – Completion & Operation

Many projects have proved to be difficult to complete

Schedule & budget pressures result in poor quality control

Offshore installation & commission has substantially taken longer than

estimated

Operational performance in many cases not as planned.

This presentation looks at some of the key causes of FPSO

Execution Failures and success factors to resolve some of the

issues faced by the industry today,

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Simple as EPC?

• The EPC process should be simple:

Engineer – Pre-FEED, FEED and Detail

Engineering.

Procure – Order equipment and materials

based on engineering.

Construct – Modules, Convert or New Build

Hull & Marine Systems, Lift modules,

Integrate, Commission, Install at site.

• But of course its not that simple!

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Real Lessons in FPSO Execution Failures

• The E & P & C sequence is very complex & not understood.

• The schedule “sold” by the bid team is unrealistic – win project and then manage

the execution.

• The “Pre-FEED” executed for the bid usually executed for bid in a short time

frame – not sufficient to define project execution.

• Usually new team executes after award – new people with great new ideas –

many changes to the “as bid” project. More cost and delay!

• “Design Freeze” is not implemented effectively – change control becomes major

issue.

• Equipment and materials ordered ahead of fixing design – more changes on the

way!

• Equipment and materials are over specified or wrong – non-industry standards –

more delay & cost!

• Engineers cause major delays in vendor document approval – delayed deliveries!

• Vendor performance in recent years results in delays and quality issues.

• Engineers neglect to ask/get vendor information early – more change coming!

• Recent trend to award “EPC” modules to equipment suppliers generally fail due

to lack of experience by suppliers.

• General lack of experience in the industry

• Project organization changes over life of the project – serious impact on project

outcome.

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Understanding Project Lifecycle

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Understanding Project Lifecycle

• Biggest influence on project completion/delivery is at the

Front End Loading phases (Conceptual through FEED). These

phases are also the cheapest of the project lifecycle. Many

companies ignore the importance of this.

• The least influence on project completion/delivery is at back

end phases (Detail Design, Construction, Commissioning).

These phases are the most expensive. Most companies throw

money and resources but struggle to finish on time and

budget.

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Project Execution Success Factors - Made Simple

1. Safety and Quality not to be compromised

2. Have an effective organisation

3. Execute FEED to order critical long lead items early

4. Freeze design as soon as practicable

5. FIX vendor interfaces as soon a practicable – apply interface

management system

6. Procure equipment & materials from high quality suppliers –

manage vendors from day one!

7. Conduct a thorough qualification contractors for EPC modules. –

Have an effective management team in place from day one!

8. Make timely decisions

9. Have a realistic schedule.

10. Manage operations & maintenance input to EPC process.

11. Manage client expectations

12. Management of Change (MOC)

13. Effective communication

14. Respond to changing situations

15. Focus on end goal – delivery

16. Have a stable project organization

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Example – Ineffective Org Chart

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Example – Ineffective Org Chart - Detail

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QA/QC

Managing Doc

Control??

QA/QC

Managing Reg

Compliance??

Effective Organisation Example - Delivery

Focussed

ENGINEERING &

PROCUREMENT TEAM

TOPSIDES

VESSEL

MOORING

CONSTRUCTION &

COMMISSIONING TEAM

TOPSIDES

VESSEL

MOORING

INTEGRATION

PROJECT

OVERSIGHT TEAM

HSE

QUALITY

CONTRACTS

PROJECT CONTROL

COST CONTROL

CRITICAL PROJECT

SUPPORT TEAM

REGULATORY COMPLIANCE

INTERFACE MANAGEMENT

CHANGE MANAGEMENT

RISK MANAGEMENT

PROJECT

MANAGER

OPERATIONS READINESS

TEAM

OPERATIONS INPUT TO PROJECT

SUPPORT COMMISSIONING

HIRE OPS & MAINT TEAM

Perceptions of EPC Modules

Owners view at bid stage

Get a fixed price “plug & play” module

Offload risk

Hands off /little monitoring – since EPC!

Supplier’s view at bid stage

Large, high value module

Contractor track record into complex/high end

module EPC

Contractor prestige

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Reality of EPC Modules

Suppliers Reality

Core experience is build & supply equipment/packages/skids.

Generally no recent experience of large complex modules.

Familiarity with large module EPC process (PMT, Engineering

Management, Procurement & Construction Management) are not

generally core competences.

Core competences are generally “hired in” – not a team

Results - poor execution of each EPC phase.

Bottom line – Late delivery & High costs ….LOSSES

Owners Reality

Start - Owner take hands off view at start – EPC module after all!

Finish - Expending substantial effort to manage completion and

delivery – budget overruns

Result – Late delivery & not as cheap as originally thought!

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Schedule delays & consequences - Sold vs Real

Example

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Contract Milestone Schedule

M33 M34 M35 M36M28 M29 M30 M31 M32M23 M24 M25 M26 M27

M21 M22M16 M17 M18 M19 M20M11 M12 M13 M14 M15M6 M7 M8 M9 M10M1 M2 M3 M4 M5

Year 3

Year 3 Year 4 Year 5

M21M13 M20M14 M15 M16 M17 M18 M19 M22M1 M9

Year 1 Year 2M10 M11 M12M2 M3 M4 M8M5 M6 M7

M23 M24 M25 M26 M27 M28 M29 M30 M31 M32 M33 M34 M35 M36 M37 M38 M39 M40

M37 M38 M39 M40

Revised Schedule

Original Schedule

Revised Schedule

Original Schedule

Contract Effective

Contract Effective / Contract Award

Mooring Award

EPCIC LOIA

Contract AwardVessel Arrival @

Yard, ready for R&LE

Vessel Arrival @ Yard, ready for R&LE

Mooring Award

Mooring installation

FPSO Sailaway from Deepwater Anchorage FPSO Arrival Site

FPSO Ready to Start Up

FPSO Ready for 1st Oil

FPSO Sailaway from Deepwater Anchorage

FPSO Arrival Offshore Site FPSO Ready to Start Up

FPSO Ready for 1st Oil

2nd Dry Dock

Flare Tower

1st Dry Dock

1st Dry Dock 2nd Dry Dock

Flare Tower

M01

M03

M02

M04

M05

M01

M02

M03

M04

M05

Schedule delays & consequences

• Example shows 9 months delay in 1st Oil

• Other recent projects have experienced even

longer delays – 18 months to 2 years.

• Consequences are bad for both operators and

FPSO owners – Higher costs and delays

directly impact revenue & profit.

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Management of Change – Easy MoC

Change is inevitable on any project so must be dealt with.

MoC process can be complex or simple.

Bottom line - simple works & complex doesn’t!

Keep it simple MoC rules:

– Allowed Changes

• Equipment, system or procedure is unsafe

• Equipment, system or procedure does not work

• Change in applicable rules, regulations, standards, etc.

– Disallowed Changes

• Function or operational improvement/optimisation

• Cost savings on equipment or systems

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Summary & Close

Executing a FPSO EPC project is not easy.

• It takes investment in front end loading along with:

• Experience

• Effective organization

• Managed engineering

• Good planning

• Effective MoC

• Excellent communication

Most importantly great teams deliver

projects!

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Questions?

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