Project Management Institute

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Al Diaz, Project Manager, Unocal Global Engineering & Construction, Sugarland, Texas, USA

BY ROSS FOTI

PHOTOGRAPHY BY PAUL HOWELL

When Unocal Thailand Ltd. leaders embarked on the North Pailin Gas Development Project in 1996, they wanted to deliver a project so well executed that it would win the PMI Project of the Year award. Although the team didn't win—it did rank within the top three entries—project managers achieved much more.

On 23 May 2002, the US$125 million North Pailin platform, off the coast of Thailand, produced its first gas 37 days ahead of schedule and 12 percent under budget. Today, the North Pailin facility generates 15 percent of Unocal Thailand's gas production and 6 percent of the Kingdom of Thailand's gas needs. It's hard to imagine that the team delivered this exceptional effort despite the 1997 Asian economic crisis—and the fact that Unocal's project management program was just one year old when the project began. “The Unocal Thailand project management initiative was in its infancy at the start of the North Pailin Project,” says Raymond Walker, vice president planning for Unocal Thailand, formerly the North Pailin project owner. “It was put to a true test through its use on the North Pailin project, and it more than delivered its promise.”

executive summary

img The North Pailin project team delivered a successful petroleum platform off the coast of Thailand, which produced its first gas 37 days ahead of schedule and 12 percent under budget.

img When the Asian economy took a sharp downturn, project managers implemented a procurement strategy that allowed the team to keep pace with the market conditions.

img Work involved global teams to produce integrated living quarters and the platform independently, allowing a number of cost and schedule savings.

img To minimize unnecessary changes, the team implemented a rigid change control system.

img The transition period from hookup to commissioning was flawless and represented the fastest hookup ever undertaken by Unocal Thailand.

img The North Pailin project is phase two of Unocal's work in the region, with the successful South Pailin Central Processing Platform completed in fall 1999. Team members incorporated lessons learned from South Pailin and contributed their own innovative ideas to launch the North Pailin platform—and shaped Unocal's project approach for years to come.

North Pailin Central Processing Platform

Location: 301 miles south of Rayong, 124 miles south east of Khanom and 100 miles east of Nakhon Si Thammarat in the Gulf of Thailand.

Special Feature: Integrated Production and Living Quarters

Investors:

  • Unocal Thailand Ltd. (35 percent working interest)
  • Petroleum Authority of Thailand Exploration & Production PLC (45 percent)
  • Amerada Hess Exploration (Thailand) Co. (15 percent)
  • MOECO Thai Oil Development Co. (5 percent).

Weight: Approximately 14,200 short tons (ST)

Components: 10,000 ST topsides, supported by a 2,200 ST jacket (legs) with 2,000 ST of piles, standing in 370 feet from the seabed to the top of the cranes in 189 feet of water.

Piping: 15 kilometers

Cabling: 82.5 kilometers

Market Slump

The North Pailin project was conceived in 1996 after exploration drilling uncovered additional reserves in the Pailin gas field. The opportunity looked so promising that Petroleum Authority of Thailand Exploration & Production PLC (PTT) wanted Unocal to accelerate the project by one year.

In 1997, when the Asian economy took a sharp downturn, engineering design for the fast-track effort abruptly halted. “There was grave concern that market demand would not allow projects such as North Pailin to sell gas as originally scheduled,” Mr. Walker says. After discussing the options, the Pailin Partners and PTT decided to defer the project delivery nine months to July 2002.

In 1998, Unocal Thailand identified that it could improve its project delivery and efficiency through the application of a proven project management methodology. North Pailin was the first major project to use the tools and techniques with the help of a project management coach, who was a part of the Unocal Thailand project management methodology development team. “Unocal Thailand believed that project management could add significant financial value to the business unit,” says Tara Tiradnakorn, president, Unocal Thailand. “This investment has saved us money and improved performance. We have greater confidence in project success and quality deliverables.”

img During the hiatus, the team solicited feedback from stakeholders on direction and scope. As the project players developed a better understanding of the long-term impacts of the recession on the gas market, engineering was restarted in October 1999. Because the Unocal team began detailed engineering in conjunction with a long lead item procurement strategy, the project was back on schedule, without significant capital investment.

“The project procurement schedule was maintained while providing the minimum amount of exposure in case the project was forced into a delay due to the Asian economic crisis,” says Project Manager Al Diaz, Unocal Global Engineering & Construction. “And an extremely well-defined engineering package was issued ‘Approved for Construction’ (AFC), which was a significant factor in the success of the project.”

Innovative Design

Worley Ltd., Perth, Australia, the project design engineers, provided the initial scope of work and approach. Worley staff used 15,000 vendor data items from 102 packages to create 2,000 documents and drawings that served as the basis of the AFC package.

The Unocal and Worley teams worked to ensure the full scope of work was included without “gold plating” the project, Mr. Diaz says. A US$20,000 incentives budget was set aside to encourage innovative, cost-saving ideas. The first innovation—to eliminate a sump tank—resulted in a savings of US$250,000.

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Carefully considering the benefits and risks, the project team decided to produce the platform at the McDermott fabrication facility, Batam, Indonesia, which had been closed for two years. Unocal negotiated a favorable contract in December 2000. As a result, more than 1,000 local people were employed and money flowed into the extremely poor local economy.

img As work on the platform continued, the Unocal team hired Lamprell, a specialist refurbishment company, to fabricate a new living quarters rather than include them with the main platform fabrication. A project management team, which assembled in Sharjah, United Arab Emirates, reported to the project manager leading the platform fabrication effort in Batam.

To minimize offshore commissioning work, instrument and electrical buildings were fabricated along with the structure modules onshore. Fiber optics cable was to be installed only in the central control room offshore.

A critical path analysis showed that the fabrication schedule had less than one month of float, including less than two weeks for offshore work. McDermott and Lamprell needed to maintain tight control.

McDermott provided Unocal with a schedule performance report, including the milestone plan and manpower forecast weekly during the fabrication. This report contained detailed information on cumulative early, late and actual performance for each of the fabrication work packages. Unocal closely monitored the performance, and McDermott received bonus payments for meeting critical milestones early.

Human Touch

During platform fabrication, the Worley design team was co-located with the project team at the fabrication yard, allowing design queries to be addressed within one or two days. It also reduced misunderstandings, clarified uncertainties and supported team development activities and growth, Mr. Diaz says.

Actually living in Indonesia posed a challenge, as the project team arrived within two weeks of bombings. “Risk evaluation and management was an important part of this process, as Indonesia was working through a change in leadership and, as a result, represented more political risk…at the time of awarding the fabrication and installation contract,” Mr. Walker says. To ensure security, the team was moved around the island, requiring greater emergency and evacuation planning.

Designer Touch

The North Pailin team considered improvements that would allow the platform to be:

1. Innovative. For this size project, the design would normally require two production trains. By using one compressor package and one inlet separator, the North Pailin team saved $5.3 million for equipment and used less deck space.

2. Cutting Edge. The condensate stabilization system eliminated reflux accumulators and pumps. A stripper column is simpler to control, operate and maintain. A kettle reboiler and a cold feed to cool/condense the column overheads saved US$150,000.

3. Efficient. Operational staffing requirements were reduced from the “normal” 130 to just 60 people with a maximum living capacity of 80. The throughput per employee (sales per employee on platform) ultimately proved to be three times better than the next best Unocal facility in the Gulf of Thailand and five times better than the average.

4. Integrated. Typically, separate living quarters are linked to the processing platform by bridge, but the North Pailin team integrated the two—the first time this was ever done for the Thailand Business Unit. Lightweight glass reinforced pipe and freefall lifeboats were incorporated to support a lightweight, compact platform design.

Political unrest wasn't the only problem—malaria and dengue fever affected some team members who had to return to the United States for treatment. As a result, leaders tracked disease movements quarterly and implemented regular medical checks and hygiene audits.

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Unocal Thailand believed that PROJECT MANAGEMENT could add significant financial value to the business unit. This investment has saved us money and improved performance. We have greater confidence in PROJECT SUCCESS and quality deliverables.

–TARA TIRADNAKORN, PRESIDENT, UNOCAL THAILAND

To support the global team, management hosted national theme dinners, lunches and other functions to celebrate completed milestones. Team members received polo shirts, baseball caps, insulating can holders, and a special project memento: a multi-tool symbolizing the tools required to complete a mechanical task.

“In particular, Unocal nurtured a great relationship with all its contractors especially Worley, McDermott and Lamprell,” Mr. Diaz says. “This was also extended to the local community in Batam, Indonesia, where Unocal embarked on a social responsibility program. This included food donations, school scholarships, sporting gifts, the donation of a dental chair and the organization of various events for the local community.”

Change Leaders

At the start of each project phase, project managers used a Front End Loading Index (FELI) tool to identify the amount of project planning and design required. This software, developed specifically for the newly implemented Unocal Thailand project management initiative, characterizes a project through organization, planning and control.

This rolling style ensured that plans were current, relevant to each phase and achievable. Also, the management tools were “fit for purpose” and could be effectively used by the project manager to define, verify and manage the project scope with contractors and the project team.

To minimize unnecessary changes, the team implemented a rigid change control system. Mr. Diaz imposed a design freeze, design change notice (DCN) and review system of the approved for design package to force accountability and clarity of scope.

The DCN system was first applied on 28 January 2001. The base design was frozen to allow the detailed design to proceed without expensive design variations.

After the issue for bid, the DCN was used to track changes as a result of vendor queries and new data prior to the contract award. A dedicated project controller tracked progress daily. When actual progress got dangerously close to the late dates, the controller identified the reasons so the team could take swift corrective action. When risks could no longer occur, the contingency funds were allocated for other projects, instead of waiting until the end of the project.

After awarding the fabrication and installation contract, McDermott had 28 days to review the AFC design package and highlight any errors, omissions or discrepancies and immediately bring these to Unocal attention. After this period, any contractual errors were deemed to be at the vendors' cost.

The DCN system also was employed at the fabrication yard and at the vendors' site to define change orders when appropriate. Unocal executives knew exactly which changes were being made on the project and their impact. As each phase drew to a close, leaders used a phase gate approach to ensure deliverables were complete.

A two-day lessons learned workshop was conducted at the end of each phase of the project, and approximately 500 lessons were collected by the end of the project. The process considered cultural dynamics, time availability and location of participants.

At first, the team and contractors found this rigorous decision-making and change control process difficult, Mr. Diaz says, but by end of project, everyone saw the value. Project controls, soft market conditions, contracting strategy and incorporating lessons learned resulted in an overall cost savings of 26 percent over the original estimate. The project design team incorporated 218 suggestions from the South Pailin project, which contributed to the reduced capital costs by 12 percent and increased capacity by 25 percent.

Routing Risk

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Through risk brainstorming sessions, the Unocal team prepared a detailed response and action plan for medium or high probability risks with potential for great impact. The most critical risks were:

  • Gas Market Fluctuations. Unocal had to keep the project on track while not overcommitting resources.
  • Schedule Delays. In many cases, contracts required payment only after milestones were achieved or tied to percentage progress to encourage timely completion. A project controller closely monitored and updated the project schedule to allow the team to take corrective action.
  • The Installation Lift. Original designs required offshore installation lifts that could exceed 5,600 ST. Instead, the team fabricated the decks to weigh less than 2,500 tons, allowing more competitive bids. Further, a third party was hired to inspect the cranes to ensure the platforms wouldn't be dropped into the sea.
  • Fabrication in Batam. The yard had been mothballed and required a cold start, but the McDermott team got the yard running swiftly. Also, to address political unrest and health issues, Unocal supported community development and mitigated health issues through a medical plan.
  • A Separate Living Quarters Fabricator. Lamprell was predominately a refurbishment company, but Unocal leaders recognized the firm's capabilities and cut costs significantly.

Surpassed Expectations

Each package was reviewed for completeness by the site project team and required a formal sign off by the discipline engineers and the document controller. Skilled inspectors were deployed worldwide to test equipment during manufacturing, in the fabrication yard for the platform and in Sharjah for the living quarters. “A key metric is the number of major punch list items remaining after handover to the project owner—this is a great measure of how much quality was put forth on the project,” Mr. Diaz says. “On the North Pailin Project, there were zero major punch list items outstanding after handover to operations. This was a first for projects performed in the Thailand Business Unit.”

The schedule for hookup and commissioning was broken down by subsystem. In addition, all details of the mechanical equipment, electrical works and instrumentation were tracked with a Web-based Project Information Management System (PIMS). “PIMS was an excellent tracking tool and provided real-time information regarding the real progress of the offshore work,” Mr. Diaz says.

img The transition period from hookup to commissioning was flawless and represented the fastest hookup ever undertaken by Unocal Thailand. The state-of-the-art project far exceeded the operational capability of previous platforms in the Gulf of Thailand. Since launch, the platform has delivered 10 percent more capacity than the design specified for a 24-hour period. Testing has shown that the facility can achieve 25 percent greater capacity than the design criteria, Mr. Diaz says.

BEST PRACTICES

A Solid Platform

Al Diaz calls North Pailin a “model project” for Unocal, and he stresses his biggest takeaway from the experience is recognizing the importance of planning. “Always remember to plan the work and work the plan,” he says. “There will always be storm clouds on the horizon so prepare to weather the storm.” Other tips include:

  1. 1 Recognize value in lessons learned, support the knowledge management process and apply it on your next project.
  2. 2 Form an autonomous team, including accountability and responsibilities. Keep the team focused and maintain open communications.
  3. 3 Have a tight contracting strategy with a well-defined scope of work, including a good set of specifications.
  4. 4 Adapt a phase approach to your project and include feasibility, selection, definition, implementation and operations.
  5. 5 Create clear deliverables for each of the phases.
  6. 6 Document your project execution plan and communicate it to the organization.
  7. 7 Launch a recognition award, value improvement program and bonus award as early as practical.
  8. 8 Adhere to safety standards and organize a safety rewards program.
  9. 9 Start planning for startup and commissioning as early as possible.
  10. 10 Nominate a project management coach to ensure best practices are followed.
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Overall, the project would have struggled to deliver results if we had not had the benefit of the new project management methodology and its disciplined approach.

Raymond Walker,
Vice President, Planning, Unocal Thailand

What's more, throughput per employee (gas sales per employee on the platform) is three times better than the next best Unocal facility in the Gulf of Thailand and five times better than the average. “Overall, the project would have struggled to deliver results if we had not had the benefit of the new project management methodology and its disciplined approach,” Mr. Walker says. “The savings on this project alone more than compensate for the investment in project management.”

Since the North Pailin effort, the use of project management processes has provided an incremental increase in ROI for Unocal Thailand's capital investment projects. “Projects can be completed with some amount of success without those project management processes, but in today's competitive environment, that incremental improvement in returns is what distinguishes the best companies from the rest and ensures their continued business viability,” Mr. Tiradnakorn says. “All too often, the focus of a capital project team is so concentrated on meeting the technical requirements that the financial requirements become a secondary priority. Meeting projects' financial objectives as well as technical objectives is the challenge that is consistently met through the application of good, sound project management practices.” PM

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK | OCTOBER 2004 | WWW.PMI.ORG
OCTOBER 2004 | PM NETWORK

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