SPE-171854-MS

Major Key factors And Guidelines for Preparation of Project Execution

Strategy
Nasser Al Hammadi and Shah Saud, GASCO

Copyright 2014, Society of Petroleum Engineers

This paper was prepared for presentation at the Abu Dhabi International Petroleum Exhibition and Conference held in Abu Dhabi, UAE, 10 –13 November 2014.

This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents
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Abstract
The fact that the majority of projects fail on at least one measure of success, and that billions of dollars
in project waste is reported each year, suggests that there is a critical need for improving the way we
manage these projects. The unrelenting truth is that the secret to more successful project management has
been right in front of us the whole time - learning from the past and preparing for future. The best way
to address the issue is thorough proper execution strategy.
The objective of this study is to identify major key factors & provide guidelines for preparation of
successful project execution strategy predominantly in oil and gas industry where meeting the schedule
is of utmost priority, especially in case of plant shutdown that is pre-planned for specific fixed period
cycle to carry out preventive maintenance and unit replacement.
This study utilizes a Case Study approach from projects for data analysis statistics, Identifying major
factors influencing Project Execution Strategy. Among various elements of Project Execution Strategy the
Project Resources, Risk Management & Engineering Deliverable Review Strategy are focused providing
in-depth analysis on 38 Major & 40 No’s Technical project having capital investment of more than US$26
Billion.
Utilization of Resources Data Bank prepared based on various project and how it will help Project
Management Team (PMT) to evaluate the resources requirement and subsequently the project duration
based on available organization resources. The Preparation of Data Bank & their accessibility will help
project management team to give quick analysis of project resources as well as project duration.
Further, Impact of Conducting Risk Analysis on project of complex nature is analyzed; a quantitative
analysis on major 38 No’s project provides the necessity of including the risk analysis as part of Project
Execution Strategy. This research will provide a platform and source of guidelines for project manager’s
to produce efficient & SMART execution strategies for EPC Projects in particular for gulf region.
Keywords: PMT · PMC · EPC · Shutdown · Execution Strategy · Productivity Norms · Data bank · Risk & Opportunity

Introduction
McTague and Jergeas (2002) indicated: “It was not uncommon for these projects to have cost overruns
of up to 100% of the original cost estimates. Although these projects are usually successful from an
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Figure 1—Key Elements of Execution Strategy

Figure 2—Break-up of Time of a Typical Construction Day (McTague and Jergeas 2002)

operational point of view, the cost overruns are a

cause of concern for many Albertan oil related
companies.”
The problem of successful Project Execution
Strategy in EPC Project of Oil & Gas industry is a
Global Phenomenon [Murali & Soon, 2006]. In
Saudi Arabia, Assaf and Al-Hejji [2006] found that
only 30% of construction projects were completed
within the schedule. The percentage of failed efforts
in new strategic projects is estimated at around 80
%. A root cause of failure in execution is simply that Figure 3—Project Life Cycle. (Naghi M Ngugen, NDV Project Manage-
it is not taken seriously enough. More often than ment services Inc.)
not, there is lack of clarity on what has to be
executed, starting with the strategy itself. [Gilbert, 2006]
This research intends to validate that the implementation of a detailed & SMART execution planning
strategy lead to higher project performance. The research problem and objective are defined as:
SPE-171854-MS 3

Figure 4 —Gates of Project Life Cycle.

i. Nomenclature of Project Execution ii. Nomenclature of Project Execution

Strategy for EPC Project (Owner): Strategy for EPC Project (Contractor):

i. INTRODUCTION i. INTRODUCTION
ii. PROJECT OBJECTIVES ii. PROJECT OBJECTIVES
iii. PROJECT DESCRIPTION iii. MILESTONES & SCHEDULE
iv. MILESTONES & SCHEDULE iv. RISK & OPPORTUNITY
v. RISK & OPPORTUNITY v. PROJECT RESOURCES
vi. PROJECT RESOURCES vi. PROJECT CONTROL
vii. ENGINEERING DELIVERABLE vii. ENGINEERING PLAN
REVIEW
viii. PROJECT CONTROL viii. PROCUREMENT PLAN
ix. PROJECT BUDGET ix. CONSTRUCTION METHODOLOGY
x. PROJECT SHAREHOLDERS x. SUB-CONTRACTING PLAN
xi. PROJECT AUTHORITIES xi. INTERFACE PLAN
xii. PROJECT CHANGE MANAGEMENT. xii. HSE/QA/QC PLAN
xiii. PROJECT REPORTING

● Problem: Incomplete parameters in project execution strategy in particular to determination of

manpower resources, conducting risk assessment and engineering deliverable review.
● Objective: To analyses the impact of the implementation of a detailed execution planning strategy
including preparation of manpower data bank for determination of manpower resources, conduct-
ing project risk workshop and compare results on project performance, in a mega-project
environment.
In this research the EPC stage from project life cycle, refer figure no 3, is selected for analysis and the
major key element that influence the project execution strategy for EPC project are outlined and key
factors namely Project Resources Requirement, Risk & Opportunities and Engineering Deliverable review
Strategy that are driving the objectives are discussed and analyzed. To obtain the purpose this research
involves case study analysis on 40 Major & 38 No’s Technical EPC project of oil & Gas industry
including Plant Development Projects, Expansion of existing plant, Gas Development Projects, Pipelines
& Infrastructure Projects with cost more than 27 Billion US$.
The contours shown in fig 1 includes various elements of project execution strategy, the most critical
is placed in inner contour, moderately are placed in middle and less critical are placed on outer contour.
In this research only most critical are analyzed.
The project that uses resources data bank to evaluate requirements and perform risk analysis at the
initial stages of EPC project was studies with that project that doesn’t. In addition the issues, present
4 SPE-171854-MS

Figure 5—Summary of Case study details

Figure 6 —Plan versus actual resources statistic

practice and recommendation pertaining to engi-

neering deliverable review is identified. The case
study results are compared and recommendations
are proposed to make project execution strategy
SMART. It is worth mentioning, the factors dis-
cussed above and as indicated in figure 1 under
most critical contour are not only reasons leading to
unsuccessful project execution strategy, there are
list of other reason too. The facts, collected and Figure 7—Implementation of Data Bank
analyzed give indications there is need to seriously
analyze the identified critical factors in this re-
search.

Background
Recent developed projects in the oil and gas construction industry experienced cost overruns, and to
greater extend schedule delays. The implementation of a more detailed execution planning strategy is
identified as a solution to some of the problems that lead to these overruns. This research project validates
that the implementation of a more detailed execution planning strategy lead to an increase in project
performance.
SPE-171854-MS 5

Figure 8 —Pre & Post Mitigation Risk Analysis Results

The Construction Owners Association of Alberta (2006), the Albertan Government (2004) and
McTague and Jergeas (2002) researched the causes for the cost overruns on mega-projects. All institutions
identified under average labour productivity rates as one of the major causes for low performance. Crews
of large projects were Observed and the time spent actually building was only 33% (Figure 2). The
remaining time was spent waiting for materials and equipment, traveling to the area, taking early breaks,
and planning how to do the work
With recent studies indicators, we adopted approach to analyze the key factors that drives the project
success. A project life cycle Refer (Figure 3) showing various phases of project from conceptual to
handover requires overall project execution strategy covering all phase. However, analysis of this paper
is focused on Engineering, Procurement & Construction (EPC) phase of project. To explain nomencla-
tures of project execution strategy pertaining to owner and contractor is indicated highlighting the key
element i.e. project resources, risk & opportunity and engineering deliverables review strategy, influenc-
ing success of overall attainment of objective.
6 SPE-171854-MS

Figure 10 —Project Risk Analysis summary

Exhibit 1—Civil Foundation Casting Template for Direct Resources Calculations

Project Life Cycle

The Model of any lifecycle of Projects, indicated in Figure 3, from project initiation through handover to
End User includes following phases:
1. Conceptual/Feasibility/Pre-FEED.
2. FEED
3. EPC
4. Handover/Operations
Time to adopt project execution strategy
At the end of the Project Definition Stage (Gate 2), as indicated in figure 4, a panel review of the Project
shall be held to confirm that:
a. Optimal Project Strategy has been adopted.
b. EPC tender documents are suitable for issue.
SPE-171854-MS 7

Exhibit 2—Structural Steel Pre-fabrication Template for Direct Resources Calculations

Exhibit 3—Piping Pre-fabrication Template for Direct Resources Calculations

c. Project risks have been adequately considered.

d. Project Capital Cost estimates is reasonable & secured.
8 SPE-171854-MS

Type of Project No of Project EPC Cost (Billion US$)

Plant Development 13 16.6

Expansion of Existing plant capacity 2 6
Pipeline Projects 17 2
Mechanical Projects 4 1.2
Total Projects 40 26

Nomenclature of Project Execution Strategy for EPC Project

The overall objective & goals of Project Execution Strategy on a broader view is identical for Owner as
well as Contractor, but varies methodologically to achieve the successful results.
Material for Research
Research involves completed project, total of 78 No’s projects, 40 Major & 38 Technical executed from
Year 2005 till 2014 of amount more than 26 billion dollor’s involving peak manpower of more than
10,000 personnel’s covering all different discipline including Plant Development, Expansion of Existing
Plant Capacity, Gas Development, Pipeline, Mechanical projects, Electrical and Civil projects.
Problem and objective of Research
The schedule overrun resulting in poor project performance from CAPEX & production perspective is
identified as the project problem for this research. The objective is to validate whether the implementation
of a detailed execution planning strategy lead to higher project performance. This study adds to the
discussion for companies whether efforts to invest in execution planning will increase their project
performance, and thus give a return on its investment.
Methodology

To come up with an effective recommendation on project execution strategy, case study approach was
adopted selecting 40 Majar/Mega Project and 38 Technical projects that were completed from year 2002
till 2014 as stated in section 3(d). The following definition of a Major/Mega-project is used: “An
investment project of great or monumental proportion, that require huge physical and financial resources,
with projects value is above $200-million can be considered as a mega-project & smaller projects with a
high complexity or risk profile is considered as technical project, but on average value less than 200
million.
The key parameters as mentioned in figure 1 above of completed project were analyzed, planned versus
actual statistic as shown in figure 6, 7 and 10 covering critical and driving factor were collected. Results
were analyzed solution were identified and implemented on upcoming new projects. The results were
again collected compared with earlier results and presented to show the difference. Based on derived,
results recommendation are made to improve project execution strategy.
Apart from case study approach for first two parameters mentioned in inner contour of Figure 1 (Key
Parameters of project execution strategy) i.e Project Resources and Risk & Opportunity. Qualitative
approach was adopted for third parameter namely engineering deliverable review strategy. The issue
related to engineering delay is highlighted; the current practice, as identified in this research, to tackle the
problem currently in use in is mentioned and recommendation to resolve the issue to overcome issues is
mentioned.
Data Analysis
a. Project Resources:
As stated in section 3(d) the project selected of different discipline, magnitude, complexity and data
SPE-171854-MS 9

for analysis is of completed projects. The plan versus actual manpower deployment schedule details
were collected analyzed between projects that uses well developed resources data bank (Please refer
below applied template shown in exhibit 1, 2 & 3) with project that doesn’t.
b. Risk & Opportunities:
Further, a total of 38 projects of oil and gas industry were selected for Risk & Opportunity Analysis
as shown in Figure 5. A comparative analysis showing the impact was displayed. Results and
recommendation were made at the end of each analysis (Please refer Figure 10).

Case study Details for Project Resources

To analyze impact of project execution strategy that lacks SMART ways to analyze the requirements &
determination of the project manpower resources, a total of 40 project of various discipline & complexity,
as mentioned in figure 5, that were completed between years 2002 till 2014 were selected.
a. Analysis of data, derivation of results & their comparison based on following two philosophy:
● Non development & usage of proper Data Bank & subsequent implementation in determination
of resources required by proper tool
● Properly developed Data Bank and its implementation on projects.
Under first category of projects i.e none developed & usage of proper Data Bank. A total of 40 major
projects in oil and gas industry completed from year 2002 till 2014 were analyzed that shown following
planned versus actual statistics also shown in figure 6 below.
● Total 40 projects (Oil & Gas, Petrochemical)

● Plan Man-hours 419,743,481

● Actual Man-Hours Spent 707,634,254

● Extra Man-hours Spent 180%

Under the second category of project i.e properly developed data bank for resources calculation, the
data was available for 2 mega project in Kuwait and data bank thus developed was implement on 3
technical projects and following were the results:
● Total 5 projects (Oil & Gas, Petrochemical)
● Plan Man-hours 10,875,251
● Actual Man-Hours Spent 13,050,300
● Extra Man-hours Spent 120%

a. Results:
Category “A” results, refer figure 6, are showing an average of 180% additional resources spend
against plan, whereas in Category “B” resources were derived based on Implementation of Data
Base shows extra man-hours reduced to 120%, refer figure 7. The overall extra resources were
reduced from 150-200% to 110-130%
b. Data Bank templates:
The accuracy of manpower resources determination was improved with the implementation of data
bank; a few of them are mentioned below as Exhibit 1, 2 & 3: The resources data base template
presented in this paper is preliminary focused on oil & gas industry. These templates may be used
to evaluation the manpower resources as part of project execution strategy:
10 SPE-171854-MS

RISK AND APPORTUNITIES

a) Al-Jibouri (2004) and PMI (2001) stress that besides the breakdown structure and the organiza-
tional structure there are some more important aspects to consider when integrating the systems,
these are: cost estimating and budgeting, resource planning, risk management, the organization’s
information systems, and the reporting structures. This research agrees with AL Jibouri (2004) and
analysised by comparing project on which risk analysis was conducted and their results were
analyzed. The results thus obtained indicates that conducting Risk Analysis on early stage of the
project reduces overall delays with duration more than 12 months to almost 0% and increases
probability of project with on time schedule from 12 to 29%.
b) Risk Management is useful to:
● Risk Management saves time and money. (Rita, 2009)
● Increase the probability & impact of opportunities of the project (Positive events), while
decreasing the probability & impact of threat of the project (Negative events) (Rita, 2009)
● Unto 90% of threats that are identified & investigated in the risk management process can be
eliminated. (Rita, 2009)
● Earlier the Risk are identification lesser the issues at latter stage.

c) Comprehensive Risk Management Plan Involve involves following steps: (PMBOK edition 4 chapter
11, project risk management page 274)
● Identify Risk/Creating Risk Register with risk owners
● Perform Qualitative Risk Analysis using probability/impact matrix for prioritization
● Performing Quantitative Risk Analysis for critical areas
● Finalization of Risk Response strategies
● Monitoring and controlling of identified/unidentified risk
Figure 8 shows Pre & Post mitigation results where project deterministic level (Confidence level) of
completion project as per schedule, has increased from 12% to 47%.
d) Case Study Details:
To analyze the impact of risk analysis as part of overall project execution strategy the following project
were selected:
● Total 38 projects (Oil & Gas)
● Major Projects, EPC Cost 26 Billion US$
● Minor Projects, EPC Cost 439,214,998 US$
e) Quantitative Analysis & Results:
The project selected for analysis that include 24 no’s on which risk analysis was not conducted and
14 no’s on which risk analysis was conducted, the results indicate that projects that has performed risk
analysis with an overall delay of more than 12 months was reduced to 0%. Further, percentage of
project was 12% for on time completion was increased to 29% by conducting risk analysis. Please
refer Figure 10.

● Risk Analysis Not Done Done

● Total Projects 24 No’s 14 No’s
● Project Completed (on Schedule) 3 No’s 4 No’s
● Project Completed (Delayed Less 13 No’s 10 No’s
than 12 months) (Mostly 6-12) (Mostly 1-3 months)
● Project Completed (Delayed More than 12 months) 08 No’s Nil
(Mostly 12-30)
SPE-171854-MS 11

Engineering Deliverables Review Strategy

Submission of engineering deliverable by CONTRACTOR/CONSULTANT within agreed time frame are
not meet in most of the cases that results the following impact:
Issue
● Review of engineering deliverable gets delayed as owner’s discipline engineer, dedicated for
agreed specified time frame, get engaged with other projects or went to predetermined leave.
● Delay in engineering deliverables of other discipline, procurement and construction.

Available practice
● Overtime but impact quality of review.
● Review cycle extended on availability of specific resources that may be engage with other project.
● Extension of Resources time & cost absorbed by Owner.
Recommendation
● Alternative resources should be identified while preparing the execution strategy for review/
approval of engineering documents to ensure responses are send back to the contractor as per
agreement requirement.
● Mobilization of discipline resources shall be arranged and a detailed strategy including contin-
gency plan shall be defined as part of overall execution Plan.
● Cost of mobilization shall either be absorbed by “OWNER” or back charge to “CONTRACTOR/
CONSULTANT”. Relevant Contractual Clause shall be documented in case of back charge to
contractor.
Results & Conclusion
Based on Case Study results the following recommendations are proposed to form as part of overall
project execution strategy:
1. Development & Implementation of Resources Data Bank as part of Project Execution Strategy:
Category “A” results, refer figure 6, are showing an average of 180% additional resources spend
against plan, whereas in Category “B” resources were derived based on Implementation of Data
Base shows extra man-hours reduced to 120%, refer figure 7. The overall extra resources were
reduced from 150-200% to 110-130%
Based on results from executed project and usage in determination of project resource by proper
tool will helps Project Management Team to identify actual requirement and may drops variance
significantly.
2. Conducting Risk Analysis:
The total number of projects for analysis were 38 No’s, risk analysis was conduction only on 12
project from year 2005 till 2014 whereas 24 no’s of project were completed from year 2002 till
2005 without risk analysis (in few cases it was conducted without any proper execution strategy
in place). Based on analysis the following results were can be observed:
Reduction in overall delays with duration more than 12 months to almost 0% and increase in
probability of project with on time schedule from 12 to 29% (Refer figure no 10)
Upon positive results obtained from the projects, it is recommended to make risk analysis as part
of overall project execution strategy to reduce uncertainties.
12 SPE-171854-MS

3. Inclusion of engineering deliverables review strategy will reduce extra charges for mobilization of
additional resources by owner and increase the accountability of each party.

References
1. Al-Jibouri, S. (2004). Dictaat Planning Control and Risk Management. Civil Engineering.
Enschede, University Twente.
2. Assaf SA, Al-Hejji S. Causes of delay in large construction projects. Int J Project Manage 2006;
24(4):349 –57.
3. McTague, B. and G. Jergeas (2002). Productivity improvements on Alberta major construction
projects, Alberta economic development.
4. Naghi M Ngugen, NDV Project Management services Inc.
5. PMBOK edition 4 chapter 11, project risk management page 274
6. Rita Mulchahy, PMP Exam Preparation sixth Edition 2009
7. Tom Kendrick, Identifying & Managing Project Risk (New York: AMACON, 2003), 165