Suncor Firebag cogeneration project

Abstract

North of the 56^th parallel extreme risks occur from all sides. Weather can range from -50°C in the winter with only 6 ½ hrs of faint daylight to +30°C and 18 hrs of daylight in the summer with mosquitoes large enough to endanger even the bravest workers. This land of mega projects, extreme technical challenges, monstrous cost overruns and the constant onslaught of risks has seen more than its share of project failures. Early in 2004 one integrated project team initiated a project that overcame the odds and completed a highly successful project; as recognized in excellent safety performance, great cost management, first-rate plant quality and, of course, completed on time. All this in a financial climate where cost pressures are constantly challenging projects.

Introduction

In the fall of 2003 Suncor Energy Inc. and Jacobs Canada, Inc. set out to explore the potential for their first Cogeneration Plant at their Firebag Facility in the oilsands of Northern Alberta. In the spring of 2004 a team of talented individuals from within both their organizations were assembled to develop the project to what it is today.

Background

Firebag is the name of Suncor Energy’s largest in-situ heavy oil development. It is located northeast of Fort McMurray, Alberta. The original development started in the early 2000’s, and construction is expected to continue until 2012. At that time, the overall production of the facilities is expected to be in excess of 300,000 barrels per day (bpd).

Work to date on the Firebag Projects is engineered, procured and constructed as a Supplier of Choice arrangement between Jacobs Canada, Inc., Suncor Energy Inc., and Flint Construction. Suppliers of choice (SOC’s) are strategic business partners with Suncor who have been identified as bringing enhanced value to ongoing projects. SOC’s typically span several projects, are very integrated into Suncor’s business, and can be any type of supplier (equipment, materials or services).

Firebag is comprised of several projects being executed in parallel, ranging from sustaining project support to major work. Projects which have been worked with Suncor under the current SOC’s include:

• Stage 2 Facility
• Disposal Water Treatment Plant
• Cogeneration Facility
• Expansion of Stage 1and 2 Facilities
• Stage 3 and Beyond as part of Suncor’s proposed Voyageur Program
• Small Project Execution for Firebag Operations & Technology
• Program Common Services

Existing projects represent a multi-billion dollar investment to date by Suncor and the efforts of several thousand people working world wide. This multi-stage program uses Steam Assisted Gravity Drainage (SAGD) technology to reach deposits deep below the surface that would otherwise be unrecoverable using traditional open pit operations. The process involves injecting large quantities of steam into the formation to heat and mobilize the oil, and in turn producing back to the surface in its heated state.

The Cogeneration Project is one of a suite of projects developed at the Firebag site. The cogeneration project was developed to address two situations on the Firebag site. First of all, steam required for the SAGD. Secondly, all electrical power required for Stages 1 & 2 (approximately 40 MW) is provided to the site via one 144 KV power line back to Suncor’s Oil Sands Plant, 45 km away. Due to plant availability risk on this power line it was determined that a local source of power would provide a major improvement on overall plant availability and in turn bitumen supply to Suncor’s upgrading facility at their Oil Sands Plant.

Project Description

The Cogeneration Project is one of two projects combined under a common management umbrella, working interdependently, yet on separate timelines. The other project, an expansion of capacity for Firebag’s facilities, has also been completed. Together, the two projects form the Firebag Cogeneration & Expansion (C&E) program. C&E Projects will be an integrated expansion to the existing Firebag Plant 91 (Stage 1) and Plant 92 (Stage 2) facilities and will be capable of generating 80MW of electrical power and approximately 25,000 BPCD of bitumen. It will take advantage of the existing infrastructure constructed for Stages 1 and 2, including the roads, pipelines, SAGD wells, gathering system, and utilities.

The Cogeneration Project’s general scope consists of the following:

• Natural Gas fired turbine generator (GE – 7EA). The generator will be equipped with controls to allow it to operate in an “islanded” mode in case of a failure of the power supply from Oil Sands. This was a critical design element in providing the increase in availability for the overall facility.
• Heat Recovery Steam Generator (HRSG) capable of supplementary or duct firing on natural gas or Rich Fuel Gas (RFG). The primary heat source for the HRSG is the exhaust from the gas turbine, and its design allows a significant increase in thermal efficiency. Energy related to the thermal cycle of these plants is one of the largest operating costs.
• High Pressure Boiler Feed water pumps, blow down exchangers and all necessary utility systems to support the above.
• The Gas Turbine, HPBFW pumps and HRSG passes and controls are housed inside one common building.
• Electrical switchyard extension, transformer and switchgear to allow bi-directional power supply to-from the cogeneration unit.

Project Issues

In the previous decade, projects in the Oil Sands of Northern Alberta have experienced significant growth in costs and schedule. This can be attributed to many issues from material availability, weather, labor issues in both engineering and construction, and at times inadequate management. The results of these issues are well documented in the project results recently seen in the region.

At the outset, specific issues were recognized by the project, and unless they were adequately addressed, success was in jeopardy. These issues included:

• Team development. The stakeholders understood that resources were scarce and team talent continued to be a key success factor. They also recognized that the team included design, construction and supplier personnel.
• Adequate risk management. Risks to be addressed included traditional analysis of schedule and cost risk, but also included vendor, labor, and extraordinary delivery risks. Evidence of past projects showed that unless lessons learned were heeded, performance issues were bound to be repeated.
• The project faced many other challenges including its location, weather conditions, layout constraints, and field labor limitations.

Developing the Team

In an attempt to improve the management of their projects, Suncor’s Firebag Executive Team created a vision for their teams. Firebag’s vision is to create a program team that combines the strengths of all stakeholders and company affiliations do not impact the tasks at hand. Mr. Terry Jones, Project Director, has often been quoted as saying “Wear your Firebag hat, not your company hat…..” Part of the vision is of Firebag as a long-term program, providing individuals the opportunity to pass along their experiences, knowledge, and lessons learned from stage to stage, while developing a career path that encourages growth within, across, or between departments and/or project areas.

Firebag has a strong and unique culture. Through collaboration and the opportunity to use the ‘best’ each company has to offer, Firebag has created its own identity that includes everything from technical procedures and standards, to team development, communications, and organizational structure. Firebag fosters an environment where team members support each other while at the same time allowing for constructive and critical review that challenges the ’status quo.’

The Suncor Firebag Program management model was initially developed with Suncor in the management role and Jacobs in the support role. The key driver for this approach was that Suncor wanted to ensure its needs, including project discipline, were incorporated into every element of their projects. To drive project effectiveness, however, the Cogeneration Project team decided to enhance the client/contractor relationship and develop a combined (’salt & pepper’) team of Jacobs/Suncor personnel throughout the organizational structure.

The goal of the enhanced model was to ensure the right person was assigned the right job, alleviating the sharp line of responsibility between owner and contractor. The end result was a very effective and experienced team that covered all the responsibilities of both client and engineering contractor. Issues were resolved together, information was shared, and optimal solutions were developed. Optimization and deviation from Suncor standards, where necessary, was pushed, resulting in this successful project.

Organizational excellence was achieved in the modified organization. Benefits included:

• A culture of no blame. Blame is very destructive within projects, but with the “salt and pepper” team, there is no one to blame. The team is a single entity and as a result, its energy is always focused on the solutions, not the problems
• All stakeholders have developmental opportunities. Particularly, development of key people within the non Suncor companies became a team priority, and helped achieve complete buy-in from all stakeholders. In a tight labor market this is a key competitive advantage in attracting the best from all organizations.
• The best person for the job. When organizational boundaries fade, it is possible to draw on a larger talent pool for key positions. For example, the Cogeneration Project Management, Mr. Ken Harris and Mr. Shawn Scott, are both employees of Jacobs Engineering, but were in place as they were recognized as the best for the job.

Exhibit 1 below highlights this salt & pepper organization within the home office:

Exhibit 1 - Suncor/Jacobs salt & pepper organization
Legend Blue – Jacobs Engineering ; Red – Suncor Energy

Project Challenges

Many project specific challenges were faced by the team. These included:

Plant Location

The Firebag Facility is approximately northeast of Suncor’s Oil Sands Facility, which is north of Ft. McMurray, Alberta; a town of 65,000 people. To put this in perspective, Ft. McMurray is located almost 2,150 km directly north of Salt Lake City, Utah or about a 21 hour drive. Presently, only one access road exists into this facility, the Canterra Road, which is a low speed exploration road. This route takes traffic north then southeast into the plant. Preliminary plans exist for a new high speed highway as well as a private aerodrome designed to accommodate jets up to a Boeing 737-800. The aerodrome is planned to be operational in early 2008 with ILS landing capability. Presently all direct labor is transported via bus from either Ft. McMurray (two hour drive) or Edmonton (eight hour drive).

Cold Weather Construction

Extreme weather conditions exist at the Firebag facility, during the coldest of winter months (Jan/Feb) the night time temperature can dip to as low as -40°C with the wind chill making the ambient temperature feel like -50°C. At these temperatures, flesh freezes almost instantly, hydraulics become too viscous to work, diesel oil turns to gel (if not conditioned), and materials become extremely brittle and can shatter on impact. Great attention must be given in engineering to ensure proper material selection and in heat tracing and insulation. Raw bitumen, if allowed to cool too much, will turn solid in pipes and equipment and render a plant inoperable.

The typical work cycle at the Firebag site is 9 ½ days on and 4 ½ days off. The typical work day is 10 ½ hrs or 6:30 am to 5:30 pm. On the shortest winter days the sun rises at 9:00 am and sets at 3:45 pm, with only a dim quality of light in between. The workers spend a great majority of their day in darkness and cold which has a great impact on productivity as well as morale.

Plant Layout

During the early DBM phase a final location for the Cogen Plant was analyzed. At the time there was only one substation and one gas line. Several obvious locations were investigated, however all required extensive interconnect racks, overhead power lines, and underground services. A small open plot space directly northwest of the existing sub-station was available, clay capped and rough graded, however, based on the initial design of the facility, it would not fit in this area. The team was tasked with developing innovative ideas to modify the layout to suit the plot space. The end results were the following features which allowed for the layout of the plant to fit within the tight space allocated:

• The Gas Turbine needed to be purchased with a right hand exhaust.
• All external equipment needed to be stacked wherever possible, as shown in Exhibit 2 below.
  

  Exhibit 2
  Example of stacked external equipment

• The building and Heat Recovery Steam Generator (HRSG) access ladders, platforms and stairs needed to be combined
• The HRSG control valve module (with original dimensions of 6m x 18m) had to be deleted and the equipment relocated. This resulted in a vertically stacked control set arrangement which would be accessed via scissor lift in place of permanent platforms.
• The Power Module (PECC) that comes with the Gas Turbine Package needed to be deleted as no plot space was available. The equipment in this module was ultimately relocated to a common electrical room.

Key Equipment Deliveries

The two major pieces of equipment were the Gas Turbine Generator (GTG) and the Heat Recovery Steam Generator (HRSG) -- these were the critical path deliveries. The GTG, a GE–7EA, was to be delivered from Greenville, SC and Austria, and the Deltak – HRSG which was delivered from Korea, Montreal, Minneapolis, and Thailand. Due to the anticipated 50 week delivery for the tubes for the HRSG, it was determined that the HRSG delivery, and in particular the nine 175 ton heat exchanger modules, would be by far the critical path for the project.

Constant attention was paid to ensure timely approval of drawings and documents to ensure nothing affected the fabrication and testing of these modules. This element is often a cause of delays in fabrication but due to the diligence and planning by all members of the engineering, procurement, and Deltak teams, the modules were delivered to the site two months in advance of the original forecast date. The early deliveries did create some difficulties in heavy lifts in the coldest weather. However, the advantage of having them early was significant from a workface point of view, and the site team members were able to perform the heavy lifts on time, safely, and successfully. This is an example of the benefit of a fully integrated, single minded team.

Maximize Modularization / Offsite Fabrication

The availability of field labor as well as the high costs to accommodate labor in camp at this remote facility drove the team to design a facility with the maximum amount of offsite modularization and fabrication. The cost benefit on a fully burdened effort hour on site vs. shop was as high as 50%. Nine pipe rack modules, three equipment modules, nine HRSG heat exchanger modules, one HRSG stack and various other components were fabricated and assembled offsite. The pipe rack and equipment modules alone represented over 160,000 hours completed off site.

Transportation / Logistics

As discussed, the site represented several challenges. One of the most significant is the single access road, which was heavily used. Using representatives from several SOC’s the project was able to plan and safely execute deliveries of off site work as well as major equipment. This effort represented significant effort from many groups, including:

• The project team
• Suncor corporate logistics group
• Jacobs corporate logistics group
• Heavy haul contractors
• Fabricators
• Equipment suppliers
• Site construction and lift personnel

This is another example of a boundaryless team, with a common goal – achieving excellent results.

Risk Management

Risk Management was fully embraced on the Project to manage both internal and external risks. The project team was engaged in an initial qualitative risk management session to identify and rank a comprehensive list of project risks. This allowed the team to focus on high-ranking risks and develop a mitigation strategy for each. The risk register was updated throughout the project, ensuring the project team was aware of the changing risk profile and the highest risks. Significant risks which were identified and ultimately mitigated included:

• Availability of qualified technical and management staff. A unique team design (the “Salt and Pepper” team), active involvement of stakeholders’ management groups, and a reputation for excellence allowed the team to attract the best and keep them engaged. These strategies were identified early and became part of the project culture.
• Craft labor. Early and effective engagement of the construction contractor, Flint, allowed for adequate planning, effective field execution and a partnership which addressed issues such as sustainability and engagement in the field.
• Schedule risk. A quantitative Monte Carlo schedule analysis and a Monte Carlo contingency analysis were used to determine and quantify risks to the schedule. By quantifying the risks to the schedule, a tornado diagram was generated for schedule sensitivity so individual activities could be prioritized. For example, this diagram helped identify the critical path and schedule sensitivities around the equipment delivery which, in turn, contributed to getting the equipment modules delivered to site early.
• Cost risk. A quantitative Monte Carlo contingency analysis was used to determine and quantify risks to cost.By quantifying the risks to the project’s cost, a realistic (P70) contingency could be included in the estimate. Honest input from key stakeholders, most notably Flint, allowed realistic cost projections and estimates around field productivity.

Project Outcome

Safety

Throughout the project, 18 months of home office activity went incident free and 17 months or 657,000 hours of site work was completed with an LTI (lost time incident) frequency of 0.61 and an RIF (recordable injury frequency) of 2.44.

Timeline

The initial scheduled completion date for the project was March 15, 2007 in the DBM phase. During the EDS phase, the overall schedule was accelerated with a new completion date of December 14, 2006.

The project was successfully turned over on December 14, 2006 and successfully started up in February 2007. The driver behind accelerating the schedule was an overall steam shortage on the Firebag site, which could be satisfied by the HRSG portion of the Cogeneration Project. By accelerating the planned schedule by three months, Suncor was able to avoid an unplanned investment of significant capital. Without this acceleration, the Firebag site would have had to either invest in another project to provide steam with a large price tag, or accept lower production. As well, Suncor was able to reduce construction overhead by avoiding an additional three months of indirect costs. The project began the scoping phase in March 2004 with a significant effort spent on defining the scope through the DBM and EDS phases. The EDS phase was complete in May 2005, after which, the project had experienced no scope changes – a significant accomplishment. The only changes that did occur were deemed within the scope and managed between design allowance and contingency. The control of scope changes was the primary reason for achieving the schedule. And because the scope was well-defined during the DBM/EDS phases, the project team was able to focus on executing the scope.

A final contributor to achieving the accelerated completion date was the early arrival of the major equipment modules for the HRSG, two months ahead of the original schedule.

Key Milestones:

Original Date (Mechanical Completion): March 15, 2007
Actual Date (Mechanical Completion): December 14, 2006
Commencement Date (Start Scoping): March 1, 2004
Project Defined (Complete EDS Phase) : May 31, 2005
Client Approval (Approval by Board of Directors): Nove mber 15, 2005
Project Closeout: Planned for February 2007

Costs

The approved +/-10% AFE budget for the Cogeneration project was $155 million Canadian dollars (Cdn). The completion costs were $153 million Cdn.

The cost control performance on Fort McMurray-based projects has been highly volatile, with overruns of 20% to 30% and higher, well within the norm. To complete a project below the original budget with no scope changes is an incredible accomplishment in the current project environment. Additionally, being so remote means that attracting and retaining the labor required to construct the Cogeneration Project was a challenge throughout. Labor retention places significant pressure on projects, and could have driven the field productivity down by upwards of 20%. Proper labor engagement was key in controlling this cost.

Conclusion

Tenacity and proactive management were the forces driving the Cogen Project’s success. The cohesive “Team Culture” of this integrated group created the mechanism promoting excellent relations and proactive communications. The collective alignment from Engineering and Procurement to the Construction and C.&S.U (operation) groups provided a seamless process executing the Cogen Project on time and within the approved budget. The value added key to the overall success of the Cogen Project came from the exceptional work surrounding scope definition, planning, execution schedules, and the effect of excellent management on costs and time.

Every participant in the Cogen team, Senior Management, Program Management, Project Management, Engineering, Procurement, Construction, Vendor shops around the world and in Canada including commissioning, start-up, and Ops teams wanted success.

The final achievement was a project displaying excellence in safety and quality, within budget, on schedule and with significant overall cost reductions.

Congratulations to the Cogen Project Team.