Management

Uri Nooteboom, Vice President of Offshore Field Development, INTEC Engineering

Interface Management Improves On-Time, On-Budget Delivery of Megaprojects

The advent of huge, multinational offshore projects in the past decade and recent challenges in the timely, within-budget delivery of these projects finds the oil and gas industry grappling with how to bring balance to the planning and execution of these developments in terms of effective contracting, coordination, risk allocation, and conflict resolution. Many in the industry have determined that more effective interface management (IM)meaning the proactive avoidance or mitigation of any project issues, including design conflicts, installation clashes, new technology application, regulatory challenges, and contract claimswould enhance the successful delivery of megaprojects. But this discovery of IM as a possible solution has been born from the disappointment of projects gone wrong. That is, IM is not necessarily a new invention, but rather a critical project component that to date has not been fully appreciated or appropriately addressed. In truth, the management of interfacesreferring to common boundaries between people, systems, equipment, or conceptshas been a silent, hidden aspect of project management for a long time, but it was not specifically named or grasped until the rise of megaprojects, many of which have suffered significant losses. These projects involve multiple disciplines and globally dispersed execution teams, and they often apply contracting strategies that force execution risk onto engineering, procurement, and construction contractors who lack full understanding of the broad range of project scope and who are ill-equipped to handle the risks. Projects that have resulted in spectacular cost overruns have earned the scrutiny of owners, project teams, and the industry as a whole to figure out the source of breakdown and what went wrong. In most cases, failures are traced back to a common cause: poorly defined or inadequate attention to interfaces between design aspects, disciplines, execution teams, regional cultures, and contract scopes. As a result, industry has conceived the concept of IM to highlight the missing link. While specific avenues for incorporating IM as a critical link for project improvement vary because of the magnitude of todays projects, operators need to assume greater oversight of the process. Operator supervision will ensure continuity, authority, and accountability. Open communication between operators and contractors early in project phases will further help identify and work out critical risk issues. Cost Overruns, Delays Higher spending profiles and higher production rates have a critical impact on IM. The bigger the project, the greater the interfaces and the greater the project risk for asset owners and contractors alike. In fact, large, multidisciplined projects can easily have some 75,000 task-related interfaces. The breadth and scope of these interfaces finds IM problems typically accounting for up to 20% of project cost. To mitigate these losses, leaders of megaprojects need to allocate appropriate funds up front to ensure project continuity and to facilitate effective management of critical activities. Cost overruns and delays often emanate from a lack of planning and communication specific to the interfaces that link different scopes of work or equipment supply. Failure to properly manage the resulting conflicts can lead to formal litigation and general anxiety for project participants. Fast-track efforts to reach first oil or gas further complicate the management process since engineering for activities including topside, subsea, and floating systems often works in parallel, and often in different parts of the world, creating significant interface challenges. Contracting for these projects often is placed when engineering definition for the work scope is sometimes only 10 to 15% complete, compounding the interface struggle and contributing to late or over-budget deepwater projects. Studies by Independent Project Analysis Inc. (IPA) support these findings. The IPA reports that in the past 20 years, 14 of the industrys largest projects have experienced an average 46% cost growth over project sanction. To put this cost growth into perspective, on a U.S. $1 billion project, 46% amounts to U.S. $460 million, creating a lot of opportunity for improvement. One effective approach toward facilitating improvement is the integration of qualified IM experts into a project organization. IPA further reports that the high cost of developing reserves is contributing to the complexity of projects. In fact, large developments can contain reserves of 1 billion BOE and can have an average capital expenditure of about U.S. $2.7 billion, with some projects ranging as high as U.S. $6 billion. Other issues contributing to the complexity of projects include deeper water depths, higher pressures, applications of new technology, the diversity of cultures and languages, and conflicting nomenclature or understandings for technical descriptions within project documents and daily communications, both electronic and direct. However, the more subtle, nontechnical issues are often the most challenging for projects, since technology issues usually are well researched, planned, and considered. Subtle issues, such as working in a country for the first time or cultural differences in project execution and contract administration or nuances in regulatory rules, often present the greatest issues. Misalignment of Risk In the past decade, misalignment of risk between operators and contractors on large engineering and construction projects has exacerbated a lot of IM issues, with contractors assuming a significant portion of project risk. Contracting strategies, as industry has discovered, often do not minimize riskas perhaps intendedbut rather simply shift responsibility for resolution from the operator to the contractor. But projects today are too huge for an operator to shift the bulk of responsibility to a contractor, since no one company is suitably prepared to take on all the performance risk and significant capital cost. Contractors often coordinate their own IM issues well, effectively managing their own specific work scopes and schedules. Problems arise when issues cut across delivery teams, with cross-function issues often not receiving the necessary priority. Further, various project teams and disciplines are often unaware of how their activities affect the delivery or operation of other project teams. The multiplicity of teams involved on deepwater projectsincluding hull, deck, topside mooring, flow assurance, and installationcompounds the problem, leaving project

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participants unclear as to who has ownership of a particular interface. For instance, topside weight issues impact floater design, and ultimately production profiles, but who has ownership of this interface? Does the floating team take responsibility for weight management, or should the topside design team assume ownership? This dilemma is just one of many issues that project teams need to consider early in project development because the later an issue is addressed, the greater the consequence and impact on delivery and startup. Planning the Work Large, complex projects require a clear plan to achieve project goals. This plan should identify who has the vested interest for deliverables; should allow sufficient time for front-end planning; and should incorporate an overall project contracting strategy. Projects should conduct a detailed project assessment, clearly defining the scope of work. Project teams also need to anticipate how to mitigate interfaces through an effective evaluation of project tie-in points, identifying tasks that cut across team boundaries and considering how various activities impact each other. Project teams need to look at the tasks to be performed and make a conscious decision to work differently based on anticipated consequences. In considering how best to plan the work, a project team may find that reorganizing work processes or resequencing tasks may help avoid problems. Projects need to establish an IM philosophy early in project planning, during concept development and selection. This effort includes the formation of the contracting strategy to achieve an appropriate balance of

risk between the operator and contractors. The process involves assessing each contractors core competencies and matching the contract strategy with the contractors core capability. Project teams need to further understand and distinguish internal and external interfaces. Internal interfaces occur within a single contract or scope of work; external interfaces occur within contracts or scopes of work. That is, external interfaces may occur between a floating production, storage, and offloading (FPSO) vessel team; a subseaequipment team; a subsea-installation team; an offloading-systems team; and/or a drilling-contracts team. Internal interfaces occur within each of these teams. For instance, internal interfaces for FPSO-vessel components include the hull, topside, mooring system, equipment integration, mooring installation, towing, hookup, and commissioning. By assigning external IM to the operator, projects can more effectively achieve clarity for tie-in between major scopes of work. For example, in the area of field architecture, this process will minimize clashes of moorings, risers, flowlines, offloading lines, umbilicals, and fluid-transfer lines. Conflict Resolution Interface managers must have the authority to motivate project teams and get issues resolved early, thus preventing issues from being ignored or delayed. An interface manager also must have knowledge of project organizations, leadership skills, and the ability to facilitate and negotiate issues. Operators are becoming increasingly aware of some of these issues, assigning an IM

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manager to their megaprojects, with accountability directly to the project manager. This organizational approach allows the IM function to become a viable project discipline while affording the project a dedicated, experienced individual to anticipate difficulties and facilitate rapid conflict resolution. IM personnel can help resolve critical issues, facilitate timely decisions, and maintain schedules. This negotiation process among teams occasionally results in solutions that may not be universally appreciated but are necessary to meet delivery commitments. Specific recommendations for initiating IM during the front-end engineering design include addressing IM requirements in the tendering process for subsequent project execution. Detailed directives within the tendering documents will avoid costly change orders and delays because of any misunderstanding or lack of clarification. This approach also will cause contractors to anticipate issues and their appropriate resolutions. To ensure continual conflict resolution throughout the project, operators should require contractors, as part of the bid, to incorporate dedicated IM personnel charged with establishing and implementing these procedures be used during execution. Motivation, Mutual Goals In terms of motivating contractors and facilitating IM, operators need to understand the technological complexity of their projects while seeking to facilitate clarification of design. The rewards here will include a reduction in change orders that drive up project costs. Industry further needs to facilitate contractor success, identifying each contractors major cost drivers and developing purposeful plans to achieve mutual goals. Incentives will drive this culture change, tying the benefits of IM to project performance, thus encouraging full-team effort.

This process requires proper planning, early identification and prioritization of issues, and quick resolution to avoid negative impact on project cost, schedule, and quality of systems. The industry needs to think differently, discarding the traditional approach of an IM that simply tracks interfaces. The placement of skilled people and well-designed tools will encourage a rapid exchange of information and achieve early warning of interface clashes. Benchmarking and analysis of lessons learned with each project will further facilitate improved IM processes and project efficiency. In short, IM is the cornerstone of good project management and every operators, contractors, and suppliers key to successful project delivery. Those who ignore IM do so at their JPT own peril.

Uri Nooteboom is Vice President of Offshore Field Development with INTEC Engineering, responsible for coordinating business development, administration, and the execution of projects within the Subsea and Floating Systems business units. Nooteboom joined INTEC in 1990 and has 30 years of experience in the design and implementation of offshore oil and gas subsea and floatNooteboom ing production systems. He has worked in design, analysis, research and development, fabrication, installation, and project management and has worked on projects in the Gulf of Mexico, Canada, the North Sea, west Africa, the Mediterranean, and Southeast Asia. Nooteboom holds two patents: as a co-inventor of a subsea well worker method and for a deepwater mooring system. He earned an MS degree in aeronautical engineering from the U. of Delft, The Netherlands.

techbits
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Several talks explored the spatial variability of properties and methods of analysis and upscaling and demonstrated multiple scales of heterogeneity, from decimeters to kilometers, while other presentations addressed the role of subtle heterogeneities and fine-scale controls, such as thin low-permeability beds or the converse of thin high-permeability beds. Integrated issues of scaling, geostatistics, rock petrophysics, upscaling, and flow units were discussed, grappling with methodologies for correctly representing multiscalar petrophysical variability within stratigraphically controlled units and appropriate levels of scaleup. Of potential importance are the roles of vertical-to-horizontal permeability ratio and multiple relative permeability curves for similar rocks that begin at different initial saturations. Nearly a dozen talks focused on issues related to fractures, including presentations on new wireline imaging tools, analysis of the influence of fractures on flow, and workflows for history matching in fractured systems. Emphasis was on stochastic-model construction including translation of fracture-distribution data into modelsand constructing models that provide accurate simulation of flow from both discrete fracture networks and effective flow from fine-scale fracture/matrix systems. Seismic-imaging presentations explored crosswell seismic tomography, geologic-model-guided progressive inversion, and 4D imaging of CO2 flooding.

The collaborative nature of reservoir characterization was evident in talks that featured a geological context for discussion of hydrocarbon flow units or porosity/permeability distributions. It became evident that sequence stratigraphy is commonly used as the basis for well-to-well correlations, lithofacies distribution, and diagenetic evolution of porosity and permeability in the context of sea-level fluctuation. Technological advances, such as geomodeling software, seismic methods, borehole image logs, and crosswell seismic tomography, were presented as tools to aid interpretation, with presenters cautioning that uncertainty necessitates the use of multiple working hypotheses. The following insights emerged from symposium sessions: Increasing the amount of data is not always better. It may just change the bias. Correct use of data can have a bigger impact than collecting more data. Working as an integrated team improves the quality and may shorten study time. Every characterization project is unique. A critical factor in one reservoir may play a minor role in another. Abstracts from this meeting may be found at www.aapg.org/educaJPT tion/hedberg/ index.cfm.

Summary authors include Charles Feazel, ConocoPhillips; Alan Byrnes, Kansas Geological Survey; James Honefenger, Consulting Assets; Robert Leibrecht, Decision RE Consultants; Robert Loucks, U. of Texas at Austin; Steven McCants, Occidental Petroleum; and Art Saller, Unocal.

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