Value Assurance Framework For Projects (Rev January 2024)

Management System Document
Value Assurance Framework (VAF)

For Projects
Scope of Effectiveness
PPL and its subsidiaries
Doc No Title Latest Issue Approval

BE–FW–VAF–001 Value Assurance Framework (VAF) for Revision 1.0 19 February 2024
Projects (25 January 2024)
VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 1 of 102

Document Control
a
a.1 DOCUMENT ADMINISTRATION
Document Title Value Assurance Framework (VAF) For Projects
Document BE–FW–VAF–001
Number
Revision Level 0.00
Issuance Date 25 January 2024
Status Approved Draft / Review / Final /

Approved
Circulation For use within PPL and its subsidiaries only.

This document cannot be transmitted outside of the organization without
MD’s approval.
Revision History
Date Version Description
18-Sep-2023 0.0 Draft for approval
10-Jan-2024 1.0 Recommended by Manuals Committee
25-Jan-2024 1.0 Incorporation of review comments

a.2 FIRST APPROVAL
First Project Evaluation and Approval Process (PEAP) was approved by PPL Board of Directors, in its
meeting held on 14 May 2015, to formalize decision-making process for all the investments worth more
than PKR 500 million and divestitures having value greater than PKR 100 million.
This was applicable to both the PPL and Partner Operated Assets. In subsequent years, certain process
improvements, based on process learnings, were carried out through separate internal office
memorandums. However, process gap analyses carried out at different stages showed incoherence
among different PEAP aspects, approved process improvements and the associated business processes.
In July 2016, an internal memo to the MD/CEO was approved regarding Partners Operated Areas (POA),
where it was directed that PPL would not approve AFEs having PPL investment value greater than PKR 500
million without Gate Approval; however, budget would be approved with a caveat that project AFE would
be approved after full review and prior to start of work.
In November 2017, procedure regarding Authorization for Expenditure (AFE) was approved as a part of
the Control framework to create business value and minimize risk. This procedure set a limit of USD 50,000
for any work activity approved in the company budget to be endorsed through an AFE prior to work
initiation. Further, as an added control measure, any work costing above USD 5 million would have to go
through the Peer Review (or Value Assurance) process prior to AFE initiation.
PEAP or the value assurance process was reviewed for gap identification and improvements by ERM
Function with its observations & recommendations submitted to the Executive Committee in November
2018; lack of process ownership was identified as one of the process gaps. Through an inter-office
memorandum issued by MD on PEAP ownership, DMD (TS) was nominated as PEAP owner (responsible
for overall compliance of process and strengthening it by continuous improvements) and the Reservoir
Modelling department as the PEAP documents custodian.
Enterprise risk regarding Investment Authorization (inadequate due diligence resulting in undertaking
nonoptimal exploration and development projects) has been a part of Enterprise Risk Register since 2015-
16, and different risk response plans have been included over different fiscal years. Development of a
comprehensive Value Assurance Framework was first included in Risk Register in FY 2018–19, and since
then, efforts have been made in multiple phases to develop the same.
In 2020, ERM again undertook a detailed review of the existing value assurance process and gave a total
of 17 recommendations to optimize capital allocation, avert potential value losses, improve decision
quality, facilitate risk-informed decision making and achieve strategic alignment.
A detailed review of the industry’s best practices and applicable standards, carried out by Business
Excellence Function in year 2023, resulted in developing a unified Value Assurance Framework covering
all the unaddressed areas of the existing PEAP.

FIGURE a-1: Business process evolution in PPL
Gap Analysis & Unified Value
Project Evaluation Authorization for
Review of PEAP Assurance
& Approval Expenditure (AFE)
for incorporation Framework (VAF)
Process (PEAP) process was
of lessons learned Development &
approved by the documented
approval of the
BoD Jun 2020
Nov 17 Value Assurance
May 2015 Framework (VAF)
Aug 2023
Aug 2006 Jul 2016 Dec 2018 May 2023
Budgeting process Gate Approval Process Internal Audit

documented in requirement Ownership for Project 3033 on
Accounting & added for AFEs in PEAP defined PEAP carried out
Internal Control Partner Operated through MD
Manual Areas memo

a.3 SIGN OFF – FIRST ISSUE – JANUARY 2024
S No Name Designation Signature & Date

`PREPARED BY
Deputy Chief Business Excellence &
1 Khalil Sultan Risk Officer
[DCBERO]
REVIEWED BY
Senior Manager (Business Excellence
& Continuity / Enterprise Risk
2 Muhammad Tauqeer
Management)
[SM (BE&C/ERM)]
RECOMMENDED BY
MANUALS COMMITTEE (MC)
Chairman, Manuals Committee
3 Syed Shariq Ali Hashmi Head (Development)
[H (D)]
General Manager (Exploration &

4 Arshad Hussain Palekar Core Business Development)
[GM E&CBD]
Mohammad Khalid Chief Financial Officer

5
Rehman [CFO]
Chief Operating Officer

6 Sikandar Memon Ali
[COO]
APPROVED BY
Managing Director &
7 Imran Abbasy Chief Executive Officer
[MD/CEO]

Document Change History
b
Revision Revision Type Placement Description Approval Date
1.0 – – Value Assurance Framework – First Issue (Rev 0) 10 January 2024
– – – – –

Table of Contents
c
REF SECTION …………………………………………… Page No
a DOCUMENT CONTROL …………………………………………… 2
a.1 Document Administration …………………………………………… 2
a.2 First approval …………………………………………… 3
a.3 Sign Off – First Issue – September 2023 …………………………………………… 5
b DOCUMENT CHANGE HISTORY …………………………………………… 6
c TABLE OF CONTENTS …………………………………………… 7
d LIST OF TABLES …………………………………………… 12
e LIST OF FIGURES …………………………………………… 13
f DEFINITIONS …………………………………………… 14
g ABBREVIATIONS & ACRONYMS …………………………………………… 15
1 OVERVIEW …………………………………………… 17
1.1 Objective …………………………………………… 17
1.2 Projects & Assets Classification …………………………………………… 17
1.3 Scope of Application …………………………………………… 18
1.3.1 … Exceptions …………………………………………… 19
1.4 Purpose of the Document …………………………………………… 19
1.5 Relevant Codes, Standards, & Guidelines …………………………………………… 19
1.6 Internal References …………………………………………… 20
1.7 Supersedure …………………………………………… 21
1.8 Document Review Requirements …………………………………………… 21
1.9 Framework Rollout …………………………………………… 21
1.9.1 … Purpose of the Transition Period …………………………………………… 22
1.9.2 … Conclusion of the Transition Period …………………………………………… 22
2 PROCESS GOVERNANCE …………………………………………… 23

2.1 Process Ownership & Governance Hierarchy …………………………………………… 23
2.1.1 … Business Excellence (BE) Function – Process …………………………………………… 23
Owner

2.2 Process Execution Committees …………………………………………… 23
2.2.1 … Decision Gate Review Committee (DGRC) …………………………………………… 23
2.2.2 … Execution Progress Review Committee (EPRC) …………………………………………… 24
Section A 26
New Projects in Existing Businesses
3 PROJECT TOLLGATE PROCESS …………………………………………… 27

3.1 Process Basics …………………………………………… 27
3.2 Objectives …………………………………………… 27
3.2.1 … Improved Decision Quality …………………………………………… 27
3.2.2 … Improved Execution Quality …………………………………………… 28
3.3 Overview of Process Phases …………………………………………… 28
3.3.1 … PHASE 1 (FEL-1) – Initiate …………………………………………… 29
3.3.2 … PHASE 2 (FEL-2) – Select …………………………………………… 30
3.3.3 … PHASE 3 (FEL-3) – Define …………………………………………… 30
3.3.4 … PHASE 4 (EPC) – Execute …………………………………………… 30
3.3.5 … PHASE 5 – Operate …………………………………………… 31
3.3.6 … PHASE 6 – Dispose …………………………………………… 31
3.4 Project Progression through the Phases …………………………………………… 32
3.5 Reauthorization of Decision Gate Review …………………………………………… 32
3.6 Application of the Tollgate Process to the Core (Oil …………………………………………… 33
& Gas Exploration & Production – E&P) and
Diversification Businesses
3.7 Procurement of Long-Lead Items (LLIs) …………………………………………… 35
4 PROJECTS CLASSIFICATION …………………………………………… 36

4.1 Project Challenge …………………………………………… 36
4.2 Classification Bases …………………………………………… 36
4.3 Process Roadmaps based on Project Class …………………………………………… 38
5 APPROVAL AUTHORITY …………………………………………… 40

5.1 Approval Matrix …………………………………………… 40
6 PROCESS EXECUTION …………………………………………… 41

6.1 Detailed Look at the Process …………………………………………… 41
6.1.1 … Decision Support Package and Phase Deliverables …………………………………………… 41
6.1.2 … Possible Tollgate Decisions or Outcomes …………………………………………… 42
6.2 Project Phases …………………………………………… 43
6.2.1 … PHASE 1 (FEL-1) - Initiate …………………………………………… 43
6.2.1.1 … … Purpose …………………………………………… 43
6.2.1.2 … … Description …………………………………………… 43

6.2.1.3 … … Review Questions for the Phase …………………………………………… 43
6.2.1.4 … … Phase Deliverables or Decision Support …………………………………………… 44
Package (DSP)
6.2.2 … PHASE 2 (FEL-2) - Select …………………………………………… 45
6.2.2.1 … … Purpose …………………………………………… 45
6.2.2.2 … … Description …………………………………………… 45
6.2.2.4 … … Phase Deliverables or DSP …………………………………………… 46
6.2.2.5 … … Decision Quality (DQ) …………………………………………… 48
6.2.3 … PHASE 3 (FEL-3) - Define …………………………………………… 48
6.2.3.1 … … Purpose …………………………………………… 48
6.2.3.2 … … Description …………………………………………… 48
6.2.4 … Phase 4 (EPC) – Implement or Execute …………………………………………… 52
6.2.4.1 … … Purpose …………………………………………… 52
6.2.4.2 … … Description …………………………………………… 52
6.2.4.5 … … Tools & Techniques …………………………………………… 53
6.2.5 … Phase 5 – Operate …………………………………………… 55
6.2.5.1 … … Purpose …………………………………………… 55
6.2.5.2 … … Description …………………………………………… 55
6.2.6 … Phase 6 – Dispose …………………………………………… 56
6.2.6.1 … … Purpose …………………………………………… 56
6.2.6.2 … … Description …………………………………………… 56
7 COST ESTIMATION …………………………………………… 58

7.1 Definition …………………………………………… 58
7.2 Requirement …………………………………………… 58
7.3 Estimates Classification …………………………………………… 60
7.4 Inputs for the Cost Estimates …………………………………………… 61
8 PROJECT SCHEDULING …………………………………………… 67

8.1 Definition …………………………………………… 67
8.2 Levels of Schedule …………………………………………… 67
8.2.1 … Level 1 Schedule – Master Schedule …………………………………………… 67
8.2.2 … Level 2 Schedule – Project Summary Schedule) …………………………………………… 67
8.2.3 … Level 3 Schedule – Control Level Schedule …………………………………………… 68
8.2.4 … Level 4 Schedule – Detailed Network Schedule …………………………………………… 68

8.2.5 … Level 5 Schedule – Detailed Report Schedule …………………………………………… 68
9 PROJECT RISK MANAGEMENT …………………………………………… 69

9.1 Corporate Risk Appetite for Projects Value …………………………………………… 69
Assurance
9.2 Projects’ Risk Management …………………………………………… 69
9.3 Project Risk Governance …………………………………………… 70
9.3.1 … Project Sponsor and/or Manager …………………………………………… 70
9.3.2 … Project Risk Manager …………………………………………… 70
9.3.3 … Risk Owner …………………………………………… 70
9.4 Risk Management Process …………………………………………… 71
9.5 Risk Assessment Methodologies – Qualitative & …………………………………………… 71
Quantitative
9.5.1 … Cost Risk Quantification Analysis …………………………………………… 71
9.5.2 … Schedule Risk Quantification Analysis …………………………………………… 72
10 ASSOCIATED BUSINESS PROCESSES …………………………………………… 73

10.1 Strategic Planning Process …………………………………………… 73
10.2 Capital Allocation or Budgeting Process …………………………………………… 73
10.3 Authorization For Expenditure (AFE) Process …………………………………………… 74
ANNEXURES 76
A DEFINITIONS …………………………………………… 77
A.1 Terms relating to ‘General Category’ …………………………………………… 77
A.2 Terms relating to ‘Organization / Companies’ …………………………………………… 77
A.3 Terms relating to ‘Management Systems’ …………………………………………… 78
A.4 Terms relating to ‘Project, Program and Portfolio …………………………………………… 78
Management’ and ‘Value Assurance Process’
A.5 Terms relating to ‘Risk Management’ …………………………………………… 80
B BUSINESS CASE ECONOMICS …………………………………………… 82

B.1 Standardization of Economics …………………………………………… 82
B.2 Economics - Past Assumptions …………………………………………… 83
C VALUE OF INFORMATION ANALYSIS (VoI) …………………………………………… 84

C.1 Background – Uncertainty Reduction …………………………………………… 84
C.2 Value of Information analysis …………………………………………… 85
C.3 Methodology for calculating VoI …………………………………………… 85
D RISK BREAKDOWN STRUCTURE (RBS) …………………………………………… 87

D.1 Background …………………………………………… 87

D.2 Hierarchical Chart …………………………………………… 87
E EPC PROJECT CHARTER …………………………………………… 99

E.1 Definition …………………………………………… 99
E.2 Standard Template …………………………………………… 99

List of Tables
d
S No Reference Table Title Page No
1 g-1 Abbreviations & Acronyms ……………………………… 15
2 1-1 Relevant Codes, Standards and Guidelines ……………………………… 19
3 1-2 Internal References ……………………………… 20
4 1-3 Supersedure ……………………………… 21
5 3-1 Project Lifecycle Terminology ……………………………… 31
6 3-2 E&P Business – Information gathering and ……………………………… 33
decision requirements
7 4-1 Project Complexity Profiling ……………………………… 37
8 4-2 Project Complexity Levels ……………………………… 38
9 6-1 Tollgate Decisions ……………………………… 42
10 6-2 Attributes of Decision Quality ……………………………… 48
11 6-3 Parameters for Earned Value Management ……………………………… 54
(EVM)
12 7-1 Cost Estimate Classification Matrix ……………………………… 60
for the Petroleum E&P Industry
13 7-2 Inputs Checklist (Summarized) for Cost ……………………………… 61
Estimates & their Maturity Matrix [defined
for Facility Development Projects]
14 7-3 Characteristics of the estimate classes as ……………………………… 62
applied in the petroleum E&P industry
ANNEXURES
15 D-1 Risk Breakdown Structure ……………………………… 88

List of Figures
e
S No Reference Figure Caption Page No
1 a-1 Business process evolution in PPL …………………………………………… 4

2 1-1 Value Creation for PPL …………………………………………… 18
3 2-1 Project Tollgate Decision Timeline …………………………………………… 24
4 3-1 Objectives and key activities of the …………………………………………… 29
phases
5 3-2 Link between influence over costs and …………………………………………… 32
the project stage
6 3-3 Mapping of Oil & Gas E&P (core …………………………………………… 34
business) and diversification business
activities with Tollgate process phases
7 3-4 Mapping of typical Development …………………………………………… 35
Project activities on Tollgate process
phases
8 4-1 Projects Classification Matrix …………………………………………… 36
9 4-2 Project Tollgate Roadmaps …………………………………………… 39
10 5-1 Approval Authority Matrix …………………………………………… 40
11 6-1 S-Curve Report …………………………………………… 54
12 6-2 Workflow for Projects Closeout …………………………………………… 55
13 7-1 Typical accuracies of the cost …………………………………………… 59
estimates associated with project
tollgate process and its activities
14 7-2 Illustration of the Variability in …………………………………………… 59
Accuracy Ranges for Petroleum E&P
Industry Estimates
15 10-1 Flow chart for the Budgeting & …………………………………………… 74
Planning process
16 10-2 Flow chart for AFE approval process …………………………………………… 75
ANNEXURES
17 B-1 Basis for Business Case Economics …………………………………………… 82
determination
18 B-2 Business Case Economics - Conversion …………………………………………… 83
to P50
19 B-3 Business Case Economics - Decision …………………………………………… 83
Tree (Swanson Rule)

f Definitions
SECTION’S REVISION HISTORY
There is no revision history since this is the first issue.
For the purposes of this document, the terms and definitions that apply are included in the
Annexure A.

gf Abbreviations & Acronyms
For the purposes of this document, the following terms and definitions apply.
TABLE g-1: Abbreviations & Acronyms
S No Acronym Full Form

1 AFE Authorization for Expenditure
2 ALARP As Low As Reasonably Practical
3 BE Business Excellence Function / Department
4 BoD Board of Directors
5 BRC Budget Review Committee
6 BSFC Board Strategy & Finance Committee
7 CEO Chief Executive Officer
8 COO Chief Operating Officer
9 DoA Delegation of Authority
10 DSP Decision Support Package
11 DRC Decision Review Committee
12 DQ Decision Quality
13 DQSD Decision Quality Spider Diagram
14 EBEC Executive Business Excellence Committee
15 EMV Expected Monetary Value
16 EPC Engineering, Procurement & Construction phase
17 EPR Execution Progress Review
18 ERC Execution Review Committee
19 EVII Expected Value of Imperfect Information
20 EVPI Expected Value of Perfect Information
21 FCF Free Cash Flow
22 FEED Front-End Engineering Design
23 FEL Front-End Loading
24 FEP Front-End Planning
25 FID Final Investment Decision
26 IC Investment Committee
27 IGR Independent Gate Review
28 IMU Investment Management Unit
29 JV Joint Venture

TABLE g-1: Abbreviations & Acronyms
S No Acronym Full Form

30 LLI Long Lead Item
31 M&A Mergers & Acquisitions
32 MD Managing Director
33 NPV Net Present Value
34 PC Procurement Committee
35 PEAP Project Evaluation & Approval Process
36 PPL Pakistan Petroleum Limited
37 PPRA Public Procurement Regulatory Authority
38 PRCT Peer Review Coordination Team
39 PVA Project Value Assurance
40 SOW Scope or Statement of Work
41 SPV Special Purpose Vehicle
42 VA Value Assurance
43 VAF Value Assurance Framework
44 VIP Value Improving Practice(s)
45 VoF ‘Value of Flexibility’ analysis
46 VoI ‘Value of Information’ analysis

1 Overview
1.1 OBJECTIVE
This document aims at developing a comprehensive framework for making or enabling effective
business decisions on investment and divestiture proposals and conducting Independent Gate
Reviews (IGRs) & Execution Progress Reviews (EPRs) for Exploration and other Capital Projects.
Implementation of this framework will reasonably ensure that the IGRs & EPRs for major projects
(as defined in the Section 1.2) are planned and conducted in a standardized and consistent way
throughout Company to improve decision making process.
PPL identifies and executes a significant number of high value projects in the pursuit of achieving
its business objectives, and it is imperative that the capital associated with these projects is
carefully managed to give the best possible outcome with the minimum of waste and rework.
This framework defines the requirements for corporate governance and management and the
delegation of authority (approvals mandate) in this regard.
1.2 PROJECTS & ASSETS CLASSIFICATION

Projects or assets are classified as ‘Major’ in the Value Assurance process under separate
thresholds for investments and divestitures. For investments, the classification limit is USD 5
million whereas for divestitures, the limit is USD 1.0 million. For PPL operated projects/fields,
gross investment size will be considered while for partner-operated projects/fields, PPL-net will
be considered.
The thresholds should be reviewed periodically (at the yearend after every 2 years) based on
Company’s market capitalization (in USD terms), investment capacity and other associated
factors.
• Investment threshold for projects’ review is defined as lower of (a) USD 5 million or (b)
1% of Company’s market capitalization (rounded off to the closest multiple of USD 5
million).
• Divestiture projects’ threshold will be 20% of the limit set for investments case.

REFERENCE CALCULATION:
• As of 30 June 2023, Company’s market cap (PSX) is ~ PKR 159 billion or USD 556 million
at the share price of PKR 58.45 for 2.72 billion outstanding shares and PKR 286.4 per USD.
• So, 1% of Company’s market capitalization, is USD 5.56 million. This leads to USD 5 million
as the project classification limit for investments when the market cap is rounded off to
the closest multiple of USD 5 million.
• Divestiture projects’ threshold will be USD 1 million (20%).
Same thresholds should be referred to for initiation or requirement of Value Assurance process
in associated business processes, such as ‘Authorization for Expenditure (AFE)’.
1.3 SCOPE OF APPLICATION

This Value Assurance Framework (VAF) applies to:
• The entire Company including all the departments and PPL’s subsidiaries within Pakistan
or abroad (and their branch offices) together with its Joint Ventures.
• Equity investments in an associated (or Associate) company or Joint Venture where PPL
may or may not be the Operator.
• Associated companies, only when their Board of Directors concur to its adoption. For
Associate Companies, PPL should enforce procedural requirements, in case any approval
by the Associate Company goes beyond the approved investment limits.
Figure 1-1 below illustrates the overall management framework for Value Creation efforts in PPL.
FIGURE 1-1: Value Creation for PPL
Value Creation
for Company
Existing Businesses Business Financial

Development Investments
Finance
Investment Policy
Core Business Diversification NOTE: No projectized

New Projects New projects activities, hence not a
in Core (Oil & Gas E&P) Businesses part of Company’s
in Divestitures
VAF for Projects.
Business Diversification (incl. farmout) Exploration & Core Business Corporate Planning &
(Oil & Gas Development [E&CBD] (Diversification) Business
Businesses
E&P) Procedure for acquisition of Development [CP&BD]
working interest through (Diversification) Business
farm-in and bid rounds Development Framework
Business Excellence [BE]

Value Assurance Framework
` (VAF)
for Projects
(Investments & Divestitures)
This Framework applies to all the projects and opportunities conceived, developed, and executed
in Company or Partner operated ventures that lie above a defined threshold (please refer to
Section 1.2 for threshold definition).
• Projects may cover, but will not be limited to, Exploration, Appraisal, Development,
Facilities Engineering and Projects, Well Engineering and Well Operations.
• (Business Development) Opportunities may pertain to merger, acquisition, creation of
new entities or expansion in Core business (Exploration or Production assets) and/or
Diversification businesses.
The current version of VAF covers value creation opportunities within Existing Businesses, as
shown above in Figure 1-1). Business Development and Financial Investment opportunities will
be included in the scope of VAF, which will then be revised, based on process learnings post
implementation of the VAF.
1.3.1 Exceptions
Exceptions to the area of application of this document are:
(a) Projects falling under Corporate Social Responsibility (CSR) category, such as Community
development.
However, decision for the exception for projects falling within this class will be made by EBEC on
case basis after review.
1.4 PURPOSE OF THE DOCUMENT

The purpose of this document is to:
• Provide governance framework for investment and divestiture value assurance related
activities,
• Identify the roles and responsibilities of the stakeholders involved in this process, and
• Provide reasonable assurance that with its implementation Company will be able to
allocate its Capital in the most optimized manner.
1.5 RELEVANT CODES, STANDARDS, AND GUIDELINES

Following codes, standards and guidelines have been referred to in development of this
Framework, in totality or in part.
TABLE 1-1: Relevant Codes, Standards and Guidelines
Category References
Standards, 1. Standard for Portfolio Management, PMI, third edition, 2013
Guidelines and 2. Standard for Program Management, PMI, fourth edition, 2017
Frameworks 3. Standard for Organizational Project Management, PMI, 2018
4. ISO 21500:2012 – Guidance on project management

TABLE 1-1: Relevant Codes, Standards and Guidelines
Category References
5. BS 6079:2019 – Project management - Principles and guidance for the
management of projects
6. ISO 10006 – Quality management (in projects)
7. ISO 19008:2016 – Standard cost coding system for oil and gas production
and processing facilities
8. 18R–97 – Cost Estimate Classification System as applied in Engineering,
Procurement, and Construction for the Process Industries – Association
for the Advancement of Cost Engineering (AACE) International
9. Petroleum Resources Management System (PRMS) – 2022 Update
Rules & Regulations 10. Public Sector Companies (Corporate Governance) Rules, 2013
11. Public Procurement Regulatory Authority (PPRA) Ordinance, 2002
1.6 INTERNAL REFERENCES

Following are the internal corporate procedures that have been referred to in this Framework.
TABLE 1-2: Internal References

S No Document Owner Department Approval Status
1 Procurement Manual Procurement Last revision approved by
MD on 4 July 2016
2 Procedure for Authorization of Finance Last revision approved by
Expenditure (AFE) MD on 17 Nov 2017
3 Statement of Investment Policy, Finance Last revision approved by
Objectives and Guidelines for PPL BoD on 10 Apr 2018
& Subsidiaries
4 Technical Manual – Projects Projects Last revision approved by
Department GMPC on 31 Mar 2021
5 Internal Office Memorandum – ERM Approved by MD on 31
ERM Process Third-Party Review Aug 2021
6 Procedure for farm-out of Exploration & Core Last revision approved by
Working Interests in exploration Business Development MD on 9 Aug 2021
assets and undeveloped (E&CBD)
discovered / producing assets
7 Procedure for acquisition of Exploration & Core Last revision approved by
working interest through farm-in Business Development MD on 24 Nov 2021
and bid rounds (E&CBD)
8 Enterprise Risk Management ERM Last revision approved by
(ERM) Framework (ERM-FW-001) BoD on 27 Feb 2023
9 Delegation of Authority (DoA) Finance Last revision approved by
BoD on 27 Apr 2023

TABLE 1-2: Internal References
S No Document Owner Department Approval Status
10 (Diversification) Business Diversification Business Draft issued for review and
Development Framework Development (DBD) approval
11 SOP – Inventory Management & Procurement Draft issued in May 2023,
Audit at Wells (PPL- currently under review for
PROC/SOP/003) approval
1.7 SUPERSEDURE
This document supersedes following corporate directives and other documents issued prior to
approval of this Framework.
TABLE 1-3: Supersedure
S No Document Dated Owner

Department
1 Note to the Board – Project Evaluation and 14 May 2015 MD Office
Approval Process
2 Note to MD – Gate Approval 30 Jun 2016 MD Office
3 Note to MD – Re: Gate Approval 13 Jul 2016 MD Office
4 Internal Office Memorandum – Project 27 Dec 2018 MD Office
Evaluation and Approval Process (PEAP)
1.8 DOCUMENT REVIEW REQUIREMENTS

This Framework document will be reviewed by the Business Process owner (as described in the
section 2.1) on as required basis or every three years, whichever comes first.
1.9 FRAMEWORK ROLLOUT

This framework has revised the value assurance business process by introducing decision making
requirements as per industry’s best practices that are aimed at enhancing proactive preparation
and planning within executing departments.
As part of rollout strategy, this Framework will initially be implemented for a period of one year
simultaneously on PPL operated and Partner Operated projects; this first year will be referred to
as “Transition Period (non-auditable)”. Goal of this transition period is to acquire process
learnings regarding challenges and improvements required, if any, in the implementation of this
revamped framework for project value assurance process. Upon completion of the transition
period, the VAF will be revised in light of process learnings, if needed, and the implementation
of the VAF will be continued for compliance.
For projects pertaining to the Partner Operated areas, efforts will be made to comply the process
requirements to the maximum extent possible, considering Company’s limited control over

partner operator for timely obtaining the project details that are included in the decision support
packages as defined in this Framework.
1.9.1 Purpose of the Transition Period

The transition period is introduced to ensure a seamless transition from the existing
process to this Value Assurance Framework. It serves the following purposes:
a. Get the ball rolling: During this transition period, asset teams will align their
processes with the revised requirements so as to adopt the VAF during the
transition.
b. Gather Feedback: Asset teams are encouraged to share their suggestions based
on their experience of following the new framework. This feedback will help
mature the framework.
1.9.2 Conclusion of the Transition Period

At the end of the transition period, the VAF will be fully implemented, incorporating the
enhancements based on stakeholders’ feedback, if any.

2 Process Governance
2.1 PROCESS OWNERSHIP & GOVERNANCE HIERARCHY

This section describes process ownership and the roles and responsibilities of committees
involved in the process.
2.1.1 Business Excellence (BE) Function – Process Owner
Business Excellence Function in the Strategy & Business Excellence (S&BE) Directorate will act
as the process custodian for Value Assurance and would be responsible for the overall
implementation of the process and its strengthening by continuous improvements.
Business Excellence Function as process custodian, will be responsible for nominating the
members for Decision Gate Review and Execution Progress Review Committees, which are
described below in Sections 2.2.1 and 2.2.2.
Business Excellence department will be responsible for:
• Classification of the projects for deciding on the applicable value assurance process roadmap.
• Handling of documents related to the process and implementation of workflows in an
integrated information environment.
2.2 PROCESS EXECUTION COMMITTEES

Decision Gate Review Committee (DGRC) and Execution Progress Review Committee (EPRC) will
be formed to execute different aspects of the process. These committees will be formed before
respective gate execution.
Previously existing Peer Review Coordination Team (PRCT) will stand dissolved with the approval
of this Framework, as the whole process will be managed by the Business Excellence Department.
2.2.1 Decision Gate Review Committee (DGRC)
This Committee, made up of the decision makers, will be constituted for each project at each
tollgate. Committee will consist of up to a maximum of 7 members and the selection of the
members will be in accordance with project nature. Committee size must be an odd number.

Minimum quorum for decisions approval will be 5 members. It is not necessary to have different
committee members at each tollgate of a project.
DGRC will essentially be a multifunctional team, external to the project, charged with:
a) Reviewing the recommendations of the project team at each decision gate (as described
in Section 4) before these are passed to the next stage of the project.
b) Recommending a Proceed, Hold, Reframe or Kill decision at each decision gate for the
projects under review. Hold or Kill decisions may be targeted for review by MD; however,
DGRC must provide plausible explanation for such decisions.
For more details regarding Proceed, Hold, Reframe or Kill decisions, please refer to the Section f
– ‘Definitions’ and Section 6.1.2 – ‘Tollgate Decisions (Table 6-1).
Project information dossier should be submitted to the DGRC for pre-read, at least, five business
days prior to the Decision Gate meeting. After the Decision Gate meeting including presentation
of project information to the DGRC members, queries or additional information requests should
be raised by the DGRC within seven business days. DGRC will be required to finalize its Tollgate
decision within seven business days after receipt of complete information dossier.
Figure 2-1 Project Tollgate Decision Timeline
5 7 7
business days business days business days
(at most)
Project Decision Gate Queries or Receipt of Tollgate
information meeting requests for complete project decision by
dossier additional information from DGRC
submitted to information raised Project Sponsor
DGRC by DGRC
2.2.2 Execution Progress Review Committee (EPRC)

This Committee will review the execution progress at different stages of a project viz-a-viz the
plan. Committee will consist of up to 5 members and the selection of the members will be in
accordance with project nature. Committee size must be an odd number. Minimum quorum for
execution review approval will be 3 members.
EPRC will essentially be a multifunctional team having relevant skills, external to the project,
charged with:
a) Evaluating the status of a project at key milestones during the implementation
(development and execution) of a project.
b) Making recommendations for course corrections / adjustments to the Project Owner
(through Business Excellence department) on the basis of the review.
Project execution will be reviewed by EPRC, which will be responsible for recommending the
need for course corrections, if any; however, responsibility for ensuring the achievement of the
project objectives will be Project Owner’s. EPRC review frequency is defined in the Section
6.2.4.2. To maintain consistency and accuracy of the review, the EPRC will remain same

throughout the closeout of a project; however, there will be different EPRCs for different projects
depending on project type and availability of the EPRC members.
EPRC will also review project risks and will recommend escalating any growing project risk to
higher management level for timely risk treatment, if needed. At the project end, DGRC and EPRC
will be responsible for recording of unbiased lessons learnt for future improvements.
EPRC will submit its review recommendations to the project team (Project Sponsor and Manager)
through Business Excellence Department. This will be required to ensure VA process trail for all
such reviews.

Section A
New Projects
in Existing Businesses

3 Project Tollgate Process
3
3.1 PROCESS BASICS

The Project Tollgate process defines the following:
a) Phases that a project will pass through,
b) Information dossier required for each phase to facilitate the decision & review process,
c) Timelines for the information package’s submission and the review process for each gate,
d) DGRC Team identification and assignment for each phase (considering continuity
requirements, if any),
e) EPRC Team identification, and
f) Requirements for a project delivery framework including corporate governance.
The process requires integration of activities pertaining to all the disciplines and functions across
the six phases of project lifecycle defined for the Project Tollgate Process as shown in Figure 3-1
below.
The objective of the Tollgate process is to ensure comprehensive risk-aware investment or
divestiture decision making before endorsing AFE for any project.
As mentioned later in Section 10 “Associated Business Processes”, budget can be approved (as
contingent) for capital allocation or planning purposes prior to tollgate approval for any project,
but only with a caveat that project AFE (or funds release) will only be approved after full review
and VA approval prior to start of work.
3.2 OBJECTIVES
This process seeks to achieve two main goals:
3.2.1 Improved Decision Quality

I. Selecting and progressing the advantageous projects
II. Supporting clear communication between the project managers and the DGRC
III. Reasonable assurance is given that the project will give desired deliverables and that most
feasible project has been chosen to add the desired value to the portfolio.

3.2.2 Improved Execution Quality
I. Streamlining the execution objectives and monitoring to reasonably ensure execution as
per plan for improved project outcomes.
II. Ensuring that the project receives clear expectations and clarity of detail to reduce risk /
uncertainty and avoid rework for a speedier project delivery.
III. Provides a framework where front-end and subsequent activities are identified and
implemented to achieve the desired project outcomes.
3.3 OVERVIEW OF PROCESS PHASES

The first three phases focus on identifying and maximizing the value of an opportunity (Value
Identification phases or Front-End Loading – FEL) by improving the architecture of the project;
remaining phases contribute to achieving the identified value (Value Realization phases).
Front-End Planning or Loading (FEP or FEL): This process translates business
opportunities into a technical reality by developing a sufficiently defined project scope of
work and execution plan that satisfies the intended business objectives. The product of
the FEL process will be the design-basis package (or Front-End Engineering Design (FEED)
package, particularly in case of Facility Development projects) of customized information
that can be used to support the production of detailed engineering design documents.
Completion of the FEL design-basis package will be required for the project final
investment decision (FID) or project authorization.
Project authorization will be that point in the project lifecycle where Company will
commit the majority of the project’s capital investment and contracts. FID will also be the
point where overall project risks should have been identified and sufficiently mitigated to
support project funding approval.
As described further below, FEL will start when the project idea is first conceived. After
the initial concept is organized into a project strategy, organized and collaborative
interaction and development will be required among the various project stakeholders to
create and assemble a project design-basis package suitable for subsequent
authorization, i.e., FID.
At the end of each phase, there will be decision gates or often called stage gates. These
decision gates have been formally established by PPL as the operating Company
authorizing or funding the project. These formal gates will allow for continuity across the
enterprise for authorization of additional funding for the next phase of engineering and
project definition. FID will follow Company corroboration that the project has achieved
or exceeded the minimum requirements for level of definition, risk exposure, capital cost,
investment rate of return, and execution planning.
Engineering, Procurement & Construction (EPC): This implementation stage of project
follows once the FEL is completed, and the most value-adding project design is achieved

for execution. Characteristics of EPC project or EPC phase are typically in contrast to that
of FEL phases.
In E&P industry (Operators and Contractors), these two major categories of activities are also
referred to as FEL and EPC projects for identification as project activities with separate nature.
Figure 3-1 illustrates the decision gates or stage gates for capital projects.
Figure 3-1 Objectives and key activities of the phases
Value Identification Value Realization
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6

INITIATE SELECT DEFINE IMPLEMENT OPERATE DISPOSE
IDENTIFY AND GENERATE AND DEVELOP OPERATE AND
ASSESS SELECT PREFERRED EXECUTE EVALUATE
ALTERNATIVES ALTERNATIVE(S)
Determine Generate and Finalize cost, Produce an Start-up, Plan for wind-
potential value select the scope, asset operate, evaluate down,
of the project preferred schedule and consistent with asset to ensure mothball or
and alignment project get the project scope, cost and performance dismantling
with the alternatives funded schedule specifications and disposal of
business and maximum asset, or
strategy return to strategic
stakeholders are farmout
achieved
Project Performance Project

Front End Loading (FEL)
Execution (EPC) Optimization Exit
INVESTMENT STRATEGY CONCEPT POST

TENDER EVALUATION
CONTRACT DELIVERY
BRIEF DESIGN DESIGN COMPLETION

DOCUMENTATION
DETAILED DESIGN
ABANDONMENT
REVIEW &
INVITATION TO
RESPONSIBLE
BENEFITS
REALIZATION
TENDER
TENDER
E E
FEED-ID FID
= FEED investment = Final investment decision (FID)
decision (FEED-ID) = Authorization for expenditure (AFE)
= Sanction
Phase 6
3.3.1 PHASE 1 (FEL-1) – INITIATE Dispose
Phase 1 focuses on framing the goal. Project Sponsor or Initiator should look for key boundary
conditions; that are from a corporate financial perspective, a project perspective, or other key
stakeholders’ perspectives. This latter view is valuable when working in international

environment or with joint venture partners. Phase 1 includes an effort to build a customized
project roadmap and project execution plans to help us achieve our goals more effectively.
PHASE 1 OBJECTIVES – Identify & Assess Opportunities

• Clearly frame goal.
• Identify Opportunities.
• Test for strategic fit with business objectives.
• Preliminarily assess uncertainties, potential return, and associated risks.
• Plan for next phase.
3.3.2 PHASE 2 (FEL-2) – SELECT

This phase focuses on alternatives. Multifunctional teams working together look at many
alternatives that will in fact grow value for Company.
FEED Investment Decision (FEED-ID) will be taken at the end of Phase 2 ‘Select’ for the selected
alternative.
PHASE 2 OBJECTIVES – Generate & Select Alternatives

• Generate alternatives.
• Reduce uncertainty & quantify associated risks.
• Develop expected value for selected alternatives.
• Identify preferred alternative(s).
• Plan for next phase.
3.3.3 PHASE 3 (FEL-3) – DEFINE Preferred Option

In Phase 3, the selected alternative is taken into front-end design to develop the scope and
contracting plan prior to Phase 4. This phase culminates in approval (or rejection) of the Final
Investment Decision (FID), and hence is the key phase in tollgate process.
PHASE 3 OBJECTIVES – Develop Preferred Alternative(s)

• Fully define the scope.
• Develop detailed execution plans.
• Refine estimates and economic analysis to preliminary control estimate (Class 3) levels.
• Confirm expected value meets business objectives.
In this framework, end of the phase 3 ‘Define’ will be referred to as ‘Final Investment Decision’
(FID).
3.3.4 PHASE 4 (EPC) – EXECUTE

Phase 4 is execution, where all of the efforts materialize.
PHASE 4 OBJECTIVES – Implement

• Implement execution plan.
• Finalize operating plan for the Asset.

• Collect, analyze, and share metrices and lessons learned.
3.3.5 PHASE 5 – OPERATE

During Phases 3 and 4, an effective turnover or handover to the Operations team (Phase 5) should
be planned. At the onset of Operation phase, the Project Closeout is a mandatory requirement
during or immediately after the handover of the asset. This phase also entails monitoring or
testing of value realization at regular intervals.
PHASE 5 OBJECTIVES – Operate & Evaluate

• Monitor performance.
• Benchmark performance against objectives & competitors.
• Share results and lessons learned.
• Continue performance assessment and identify opportunities.
3.3.6 PHASE 6 – DISPOSE

During Phase 6, when the project is deemed inoperable or not feasible anymore, the disposal is
pursued. This may include disposal of asset, shunning the use or other relevant measures. The
activities pertaining to strategic farmout from any asset or project in operation also fall in this
phase.
PHASE 6 OBJECTIVES
• Abandon the asset in a commercially, environmentally and socially responsible manner.
In continuation of the above section, it may please be noted that following alternate
terminologies are also used in the process industry for these project phases and may be used
interchangeably to refer to the same project phase.
Table 3-1 Project Lifecycle Terminology
FEL-1 FEL-2 FEL-3 EPC Operations Dispose

Conceptual Feasibility Definition EPC Operations
Early Pre-FEED* Late pre-FEED* FEED* Execute Operation
Appraise Select Define Project execution Operate
Start-up and
Identify Selection Develop Execution
operation
Business planning Facility planning Project planning Implementation Operate/evaluate
Evaluate
Assess opportunities Development EPC/start-up
alternatives
Assessment Development Validation
Concept Scope
development finalization
Feasibility AFD+
Appraisal/conceptual
Assess
*Front-end engineering design
+Authority for Development

3.4 PROJECT PROGRESSION THROUGH THE PHASES
As any project progresses through these phases, the degree of value identification and realization
changes.
For example, the illustration below, Figure 3-2, shows the variation in influence over costs as the
project advances from the initial to the later phases. Cost estimations are further discussed in
detail in the Section 7.
Figure 3-2 Link between influence over costs and the project stage
Initiate and Select
3.5 REAUTHORIZATION OF DECISION GATE REVIEW

After FID, if there is an increase in the overall project cost either by at least 15% or any other
number that makes project NPV negative, the decision will need to be revalidated by DGRC.
This reauthorization review is mandatorily required during Tender Evaluation (Procurement
Committee reviews) where it must be confirmed that project costs have not exceeded the
approved investment limit in accordance with FID approval for all project classes.
In addition to this, following scenarios will necessitate FID revalidation:

• Any significant alterations in fundamental assumptions, encompassing but not limited to
Crude Oil prices, Costs, Production, Reserves/ Resources, regulatory matters, and
economic conditions.
• Delay of more than 12 months in commencement of the project execution after FID
approval. However, it must be noted that LLI procurement, issuance of Work Order(s) for
site preparation, etc. will be considered part of the project execution.
For scenarios where the project cost escalates due to any unforeseen reasons or otherwise, the
causes of cost increases should be captured in the information package describing what went
wrong. Decision support package should include information regarding sunk cost, causes of cost
deviations against FID and lessons learned.

3.6 APPLICATION OF THE TOLLGATE PROCESS TO THE CORE (OIL & GAS
EXPLORATION & PRODUCTION – E&P) AND DIVERSIFICATION
Figure 3–3 illustrates mapping of different activity streams of Oil & Gas E&P projects with the
different phases of Tollgate process.
For Oil & Gas E&P business, there are primarily three main activity streams (each shown as a
separate row in the illustration):
• Exploration Business
• Exploration and Appraisal Activities
• Field Development
Sub-activities from each of these activity streams are mapped below against Tollgate process
phases.
Table 3–2 presents a synoptic view of all the business activities, information gathering & decision
requirements. This stage–gate process is aimed at helping decision makers reach to the best
course of action regarding the final decision of interest (well drilling, facility development, etc.).
For deciding the economic value associated with information gathering activities such as seismic
surveys, etc., “value of information” analysis will be required to determine if the proposed
information gathering activity for its given cost is worthwhile or not. Please refer to Annexure C
– “Value of Information (VoI) Analysis”.
Table 3-2 E&P Business – Information gathering and decision requirements

S No Business Activity Information Gathering Decision of Interest
1 Exploration Acreage – Bid, Farm-in, Farm-out,
acquisition Relinquishment
2 Exploration & Appraisal Magnetic, Gravity and Exploratory and appraisal well
Seismic surveys drilling
3 Development Engineering design studies Facility development, development
well drilling, production well
workover
4 Production – –
Majority of these decisions involve expenditures that are CAPEX in nature; however, some of the
projects may be Special OPEX, such as production well workover, etc.

Figure 3-3 Mapping of Oil & Gas E&P (core business) and diversification business activities on Tollgate
process phases.
Core Business DISPOSE
Develop New Identify the Select Strategic

Exploration & Define Execute Handover
exploration basins, farmout of
Appraisal Exploration imperative. licenses,
bids, the deal to to
working
Program Business negotiation obtain new Exploration
Assess companies, interests in
etc. license. Operations
world-wide etc. petroleum
[Section to be
included later]
options: concessions
buy/bid… NOTE: The new Opportunity
can enter Exploration
Activity at various phases
depending on its maturity.
Exploration & DISPOSE
Appraisal
Activity
Identify Select Define Drill the In success …
[Section A] and assess and well exploration case, follow
prospects propose location and/or development
(seismic, prospects and well appraisal process
studies, . proposal. well.
etc.)of Information
Value
FEL EPC
DISPOSE
Development Development
Program Project
Identify Select Define Drill the Handover Dispose
[Section A] the concept. project development to the asset
project: specifications well or Operations or
assess . Obtain FID. develop the execute
options. facility. strategic
farmouts
FEL EPC
DISPOSE
Diversification
Develop new Identify the Select Define Deliver the Handover Dispose
Diversification diversification investment concept project promise. to the asset
Program options specification Operations
business s. Obtain
[Section to be FID
included later]
DISPOSE
Diversification Identify the Select Define project Handover

Deliver the Dispose
Project project: concept specifications. to the asset,
promise.
assess Obtain FID Operations or execute
[Section A]
options strategic
farmouts

Figure 3–4 illustrates mapping of typical development project activities with the different phases
of Tollgate process.
Figure 3-4 Mapping of typical Development Project activities on Tollgate process phases
Initiate Select Define Implement Operate Dispose
Concept Concept Procurement

Detailed
Feasibility Screening / Definition / FEED
FEED & Operation Abandonment
Design
Selection Pre-FEED Construction
3.7 PROCUREMENT OF LONG-LEAD ITEMS (LLIs)
Long lead item (LLI) is a term from supply chain management, which refers to those items (the
equipment, product or system) that have a lengthier procurement lead time of more than 12
months – as defined in PPL’s Procurement Manual – revision July 2016. Procurement lead time is
defined as the duration from the raising of purchase requisition (PR) to the required item
delivery.
Timely delivery of LLIs is vital for delivering the project on time. They need to be identified at the
earliest stage of a project to have a reasonably accurate estimate of the overall completion
timeline of the project.
No LLIs should be procured before any project (exploratory well, development well, etc.) passes
the FID approval stage (stage gate 3 – ‘DEFINE’). For projects with LLIs having very long lead times,
the project sponsor must arrange for the project’s FID approval well in time to initiate the
procurement process. Further, it must be noted that the requirement for gate review and value
assurance process roadmap will be decided based on the project’s challenge level (total
investment size and complexity level), not only the cost of LLIs that are a part of the overall
project costs.
Following additional controls apply to the above:

a. Completion equipment for exploratory wells: No LLIs related to completion equipment
for exploratory wells shall be procured upfront. They will only be purchased after
discovery of hydrocarbons, based on the parameters like reservoir deliverability, gas
composition, operating conditions, economic feasibility, etc.
Further, cost of contingent inventory item(s), which are purchased upfront should be accounted
for in the project economics (dry-hole branch of the project’s decision tree) during FID review
gate.
Any exception to the above, based on proper justification, such as a portfolio of wells with nearby
processing facilities, etc., will be approved by MD.

4 Projects Classification
4.1 PROJECT CHALLENGE

Depending on the cost and complexity, projects will be classified as illustrated below in Figure 4–
1. Based on the project challenge level, relevant ‘roadmaps’ are applied to the projects for their
Tollgate approval process.
Project challenge establishes the maturity, complexity and size of the project. These parameters
determine the level of governance and assurance required. This approach allows the
management to give appropriate focus and time to any project in relation to its challenge.
4.2 CLASSIFICATION BASES

Projects are classified into one of the four Project Classes, as shown in Figure 4-1 and listed below,
based on their (a) investment size, and (b) complexity level in accordance with the Projects
Classification Matrix given below.
Figure 4-1 Projects Classification Matrix
LEGEND
CAPEX PEAP PROJECT CLASSIFICATION SCHEME
THRESHOLD Class-3
($ Million) Complexity
Class-2
PPL Investment
Threshold
Low Medium High Class-1
Minor
>100
25 – <100
5 – <25
<5

Four project classes that can be assigned to any project in increasing order of their challenge
are (a) Minor, (b) Class-1, (c) Class-2, and (d) Class-3.
Project Complexity Profiling is explained in the Table 4-1 below.
TABLE 4–1 Project Complexity Profiling

S No Complexity LOW MEDIUM HIGH
Dimension or Driver (1 Point) (2 Points) (3 Points)
1 EPC Project Duration ☐ less than 1 year ☐ 1 – 2 years ☐ More than 2 years
(Phase 4 – Implement or
Execute)
2 Geographical location ☐ Pakistan ☐ International – ☐ International –

First World Rest of the World
Countries
3 Schedule Flexibility ☐ Schedule is ☐ Schedule can ☐ Deadline is fixed
negotiable, not an undergo minor and cannot be
externally or variations, but changed; schedule
internally imposed deadlines are firm has no room for
date flexibility
4 Technical Complexity ☐ Routine, repeat, no ☐ Enhancement of ☐ Novel product /
new technology / existing product / Technology not time-
product / service tested
diversification
5 Stakeholders ☐ Wholly owned ☐ Joint Venture – ☐ Joint Venture –
(100%) – PPL Majority Share or Non-Operator with
Operatorship [PPL] Minority Share [PPL]
6 Legal & Regulatory ☐ Regulatory ☐ Regulatory ☐ Regulatory
Compliance authorities or permits authorities or authorities or permits
involved: ≤ 3 permits involved: 3 < involved: > 5
…≤5
7 Financing ☐ 100% Equity ☐ Debt < 40% ☐ Debt more than
40%
8 Contracting & ☐ Inhouse resources ☐ EPCC ☐ EPCM
Procurement
9 Human Resources ☐ Yes ☐ Partial ☐ No
(Availability of skills in the
organization)
10 Spread Between IRR ☐ Greater than 4% ☐ Between 2 and ☐ Less than 2%

and WACC 4%
Overall Project Comments:

Complexity Rating

Complexity scores corresponding to different project complexity levels are defined in the Table
4-2.
TABLE 4–2 Project Complexity Levels

Complexity Level Score
Low Less than 13
Medium 13 – 20
High More than 20
Complexity levels of projects will initially be determined by Project Owner and reviewed by
Business Excellence to determine final complexity and assign the appropriate roadmap.
All the projects, minor or otherwise, should be classified accordingly by the VA process custodian
(Business Excellence function) before their proposals are presented before Budget Review
Committee (BRC) for capital allocation approval. It should be noted that the project classification
is not the only requirement for presenting any proposal before BRC, and governing corporate
document for financial budgeting and planning should be referred to for any other requirements.
Process custodian should also develop a mechanism to monitor changes in project classification
basis as the project progresses. One such critical point is tender or bids’ commercial evaluation
to see if the project investment does not cross the class threshold, which was selected earlier.
Such checks could be incorporated in Procurement Committee (PC) reviews.
4.3 PROCESS ROADMAPS BASED ON PROJECT CLASS
The roadmaps are graded from a simple scope (1) to a full-scale toll gating process (3). This
defines the level of management control to be applied to the project.
The projects or opportunities should be screened at the Initiate gate to assess the applicable
roadmap. The number of decision points (independent gates reviews) for a project are defined
on the basis of project categorization according to the scheme illustrated below (Figure 4–2).

Figure 4-2 Project Tollgate Roadmaps
Class-3
HO
Projects
Class-2
Projects HO
Class-1
Projects HO
FEED-ID
Minor
HO
Projects
FEED-ID FID
GR – Gate Review
EPR – Execution Progress Review
PIR – Post Implementation
Review
For any roadmap, regardless of Decision Gate requirements, DOA approvals will be required for
every project phase. Instances, where decision gates are not required but management approvals
in line with DOA are still required, include FEED-ID for Class-1 and Minor Projects, and FID for
Minor Projects.

5 Approval Authority
S
t
a
There is no rrevision history since this is the first issue.
t
S
5.1 APPROVAL MATRIX
t
a
Following matrix (Figure 5-1) defines the approvers for corporate approvals required in the value
r
assurance process, i.e., voting rights in review committees’ different classes / gates.
t
The approvers change, as shown below, according to the project challenge level for each decision
gate or phase.
Figure 5-1 Approval Authority Matrix for Decision Gates
PROJECT Develop New Exploration & Development Project Diversification Project

CLASSIFICATION Exploration Business Appraisal Activity
Initiate – GM (E&CBD) Initiate – GM (E&CBD) Initiate – GM (Asset) Initiate – GM (S&BE)

Class 3 Select – COO Select – COO Select – COO Select – COO
Define (FID) – MD Define (FID) – MD Define (FID) – MD Define (FID) – MD
Select – COO Select – COO Select – COO Select – COO

Class 2 Define (FID) – MD Define (FID) – MD Define (FID) – MD Define (FID) – MD
Define (FID) – MD Define (FID) – MD Define (FID) – MD Define (FID) – MD

Class 1
No decision gate approval No decision gate approval No decision gate approval No decision gate approval
Minor required. required. required. required.

6 Process Execution
6.1 DETAILED LOOK AT THE PROCESS

There is a unique emphasis for each project phase that builds on the previous phase deliverables
and findings to produce a product or package that is sufficiently detailed to support the project
FID.
This section presents an account of the purpose, decision support documents and review process
for each phase of the tollgate process.
6.1.1 Decision Support Package and Phase Deliverables

Each project phase will require development of appropriate Decision Support Package (DSP) or
deliverables. DSP will include the project deliverables and their summarized information to
support key project decision making, such as whether to move a project into the next project
approval phase.
The key customer is the project’s Decision Gate Review Committee (DGRC). DSP will also
summarize the work completed, the key decisions made, and the rationale for those decisions,
which are useful for purposes such as onboarding new DGRC members. DSP will be required for
all the phase-gate decisions that will be reviewed and made by DGRC.
Objective of these deliverables is to ensure that the highest quality of decisions is reached. DGRC
members may ask for more documents that could support them in improving the decision
quality. Project sponsor may request for waiver of any standard deliverable(s) from DGRC if there
is any appropriate justification available.
A simple and effective format will be to present the DSP in following sections:
1. An executive summary that clarifies the decision(s) the DSP is addressing and presents
the recommendations with key supporting reasons. This is typically no more than about
one page.
2. A list of supporting documentation and other deliverables for reference in case a reader
needs further information.
DSP content will vary from phase to phase and with the size and nature of the project.

A good DSP is both clear and thorough to enable the reader to understand the information in the
DSP without referring to other documents. Other documents will be needed to provide more
detail, but the DSP should stand alone as a document providing the key information to support
decision making. In general, the DSP should not only be a set of PowerPoint slides. Mere slides,
while useful for presentations, will neither be an adequate nor an appropriate format for a DSP.
Further, it should be noted that phase deliverable requirements, as mentioned in the next
sections, are meant to serve as indicative baseline to DGRC. The committee may ask for more or
less information depending on the project nature or type.
6.1.2 Possible Tollgate Decisions or Outcomes

Tollgate process must end with a clear opinion of the review team, the “Tollgate outcome”
which must fall in one of the four categories below (Table 6-1).
The decision will be made by the DGRC. In case of disagreement, decision of majority of the
members of the team will be carried forward. All findings or observations or action items arising
from the tollgate review must be resolved before the project could proceed to the next phase.
TABLE 6-1 Tollgate Decisions

Color Flag Decision Description
Ready to Proceed Sufficient work has been done to support the
milestone decisions (and Tollgates). Project is
ready to proceed to the next phase.
Conditional Ready to Ready to proceed on specified conditions,
Proceed which entails resolving all the tollgate
observations. Complete the current work
including closeout of recommendations prior to
moving to next phase.
Continue Current Phase Repeat review is recommended, since project is
not mature for the gate and will need a
re-review. Insufficient work was done to
support moving to next phase. Address all
recommendations, followed by a repeat review
and/or external review before proceeding
further.
Not Ready to Proceed Project has severe shortcomings, and there are
(Hold / Reframe / Kill) major showstoppers for meeting the
business objectives. Recommend to:
[1] Put on hold,
[2] Reframe or recycle to an earlier phase, or
[3] Kill / Abandon / Exit.

6.2 PROJECT PHASES
6.2.1 PHASE 1 (FEL-1) – INITIATE

6.2.1.1 – Purpose
To identify and assess value creation opportunity for Company arising from the proposed project.
6.2.1.2 – Description
In FEL-1, the emphasis is to determine the basic economic viability of the conceptual project
before committing to more-definitive engineering and study expense. The FEL-1 phase will also
emphasize confirmation that the preferred conceptual process flow scheme and supporting
economics fulfill the business case that caused its initiation. This phase also will involve
determining the suitable site or short list of candidate sites for the project that have the best
combination of location attributes to best support the planned construction and operational
environment that will fulfill the project business drivers. For each candidate site, a conceptual
plot plan can be generated that will confirm the area requirements for processing units and
systems, area to support construction operations, and operations and maintenance activities
once the facility is operational. Once this work is defined adequately, generation of a
representative cost estimate and milestone schedule for the entire project is possible.
The emphasis in Phase–1 is on thinking widely, not deeply / in a very detailed manner. This
tollgate at the end marks the transition to Phase–2 for generating alternative project designs as
well as alternative projects / opportunities and selecting the best investment option at portfolio
level.
6.2.1.3 – Review Questions for the Phase

Project Initiation Review, prior to approval of entry commitment
a) Are the initiated scope and its related commitments understood?
b) Will it work?
c) Is there an economic solution?
d) Do we have the resources and funds to do this project?
e) Does the project meet corporate values?
Feasibility Review, prior to concept selection

f) Has a range of strategies and scenarios been identified as an adequate basis for risk
management and concept optimization?
g) Has the project been effectively formed and is there sufficient knowledge to start the
process of selecting the optimal alternative?
h) Is it economic?
i) Have the risks been assessed and deemed ALARP?
j) Scope & Constraints: What has already been decided or fixed for this project and what
are constraints?

k) External Environment: Are there pertinent developments in the external world, such as
(product) trends, changing regulations, etc.?
l) Challenges: What are the challenges in the execution of this project?
m) Opportunity: Does the project team clearly understand the opportunity?
n) Strength: What are the strengths of the executors related to the project in question?
o) Stakeholders: Have the stakeholders and their expectations been identified and
analyzed? Is there alignment with JV Partners on objectives and expectations?
p) Risks: Has the initial risk assessment been carried out and mitigations identified? Are the
social, environment and political risks understood?
q) Lessons Learned: Has the lessons learned from previous projects of similar nature been
reviewed by the project team to avoid repetition?
r) Roadmap: Is there a lifecycle plan with decisions, deliverables and activities per phase?
6.2.1.4 – Phase Deliverables or Decision Support Package (DSP)

The key decision at the end of Phase 1 is about whether to proceed with generating alternatives.
We need confidence that the opportunity is framed well, strategically aligned with our business,
and that the business case supports committing the resources needed in Phase 2.
Phase 1 DSP needs to provide the information to support these decisions and typically includes
the following:
• Project Initiation Note (or Project Charter) that would serve as opportunity framing
document. This should cover the following:
o Project Scope (project boundaries, potential project sites, block flow diagrams,
process schemes, etc.)
o Business assessment, including strategic fit checks for core and diversification
projects.
o Project assumptions and constraints
o Project success criteria
o Project risks
o List of internal and external stakeholders
o Preliminary Overall Plan (Level-1 EPC Project Schedule, as defined in Chapter 10)
o Preliminary economics based on Class-5 cost estimations. This should include a
reference case (Do Nothing scenario) which reflects the current operating plan for
the asset or business without the investment proposal (to correctly estimate the
value created by the investment proposal)
o A summary of the lessons gathered from relevant projects (such as analogs to
other assets)
o Preliminary Project Execution Plan (PEP) covering Staffing and resources (LLIs,
etc.)
For projects related to exploratory, appraisal and development wells, following may be needed:

1. Description of block/field including geographical accessibility, lease status, license
management, work program commitment details, etc.
2. Infrastructure Map showing available gas processing facilities, compressors, gas pipeline
network, etc. to identify possible synergies.
3. Seismic Interpretation & Mapping (if already acquired)
4. Geological Review and Details
o Petroleum play concept with details
o Depositional setting of the area
o Petrophysical property used for estimating Hydrocarbon volumes should be
consistent and derived from analog or field data.
o Uncertainty ranges should be estimated from analog/ field data for allocating in
REP sheet.
5. Prospect Risking
o Chance of Success
o HC In-Place Volume estimations
6. Production Profile and Economic Evaluation based on Class-5 estimates

o Resources / Reserves and related Production Profile
o Assumptions related to Point of Delivery, compression and/or processing plant
requirements, Extended Well Testing requirement and equipment rentals,
o Planned cost for the project CAPEX and OPEX with cost breakup
o Please refer to Annexure 2 for detailed description of the basis for business case
economics.
7. A summary of economic assumptions for project execution (Petroleum Policy, Discount
Factor, Cost escalation/inflation criteria, Oil Price, Anticipated tax benefits etc.)
8. Yearly and Cumulative Cash Flow Profiles
6.2.2 PHASE 2 (FEL-2) – SELECT

6.2.2.1 – Purpose
To generate alternatives to the proposed project / design, select the best opportunity at portfolio
level and take investment decision for carrying out FEED (FEED-ID).
This phase starts with generation of alternatives to the proposed project and concludes at
selecting and releasing funds for FEED for the best investment opportunity. Here, the selection
of the best opportunity means selecting the most feasible project on portfolio level, be it the
same project originally proposed but with different design or a new project altogether.
In FEL-2, the emphasis regarding design of the project is on determining the best technical and
economic flow scheme, associated technology, and support systems required to provide the
necessary annual production rate at the sales quality required in case of gas processing facility /
minerals development projects. This is done after the generated options / alternatives are
assessed in detail against the possible outcomes under uncertainties (oil price, reservoir
performance, market trends for hydrocarbons/minerals, etc.).

Project inventory to be maintained and updated and should be made part of decision support
package for portfolio management and optimal capital allocation. The ranking of all the available
investment options as per inventory will be maintained, periodically updated and available in the
decision support package for selection of best investment opportunity. Optimal selection of
projects should entail appropriate risk adjustments in all the possible investment options and this
detail should be made part of decision support package.

Concept Selection Review, prior to project definition
a) Has an optimal option from an appropriate range of alternatives been considered?
b) Are plans in place for successful completion of project definition?
c) Are plans under preparation to fully prepare for the execution phase?
d) Do we understand the risks at a detailed level and is a risk management plan in place?
e) Are there any Long Lead items which require pre-FID commitment?
f) Is the timeline achievable?
g) Do we have the resources and funds to proceed?
h) Have we assessed the environmental impact and reduced this to ALARP?
6.2.2.4 – Phase Deliverables or DSP

The key decision at the end of Phase 2 is whether to approve the selection of the preferred
alternative(s) and proceed with development of the FEED package of the preferred alternative(s).
The Phase 2 DSP needs to provide the information to support these decisions and typically
includes the following:
• Project Alternatives Analysis embracing the following:
o Description of the alternatives considered.
o Consistent level of detail in the cost estimate for each of the viable alternatives to
ensure consistent evaluation.
o Summary of the deterministic and/or probabilistic analyses of the alternatives
sufficient to support the selection of the preferred alternative. This will include
production forecasts and economics for all the alternatives.
o Description of the rationale for selecting the alternative.
• Framing Document reflecting any revisions made during Phase 2 for the preferred
alternative.
o Project Scope (project boundaries, potential project sites, block flow diagrams,
process schemes, etc.)
o Project assumptions and constraints
o Project success definition
o Project risks along with risk treatment plans
o List of internal and external stakeholders
o Level-2 EPC Project Schedule (Not mandatory requirement for Well projects)
o Project economics based on Class-4 cost estimations.

o A summary of the lessons gathered from relevant projects (such as analogs to
other assets)
o Preliminary Project Execution Plan (PEP), incl. staffing & resources (LLIs, etc.)
o Contracting and purchasing strategies
o Permitting and regulatory compliance plan
o Process flow diagrams (PFDs) for selected option(s)
o Preliminary utility flow diagrams and balances
o Preliminary equipment list and equipment load sheets
o Process hazards analysis (PFD level)
o Materials of construction identified, and MSDs issued
o Preliminary Basis of Design (Pre-FEED) for the preferred alternative.
One of the deliverables of this phase in case of an exploratory well is to take decision for
carrying out seismic survey; this is counterpart of FEED in case of a facility development project.
For projects related to exploratory, appraisal & development wells, following may be needed:
3. Seismic Interpretation & Mapping (if already acquired)
REP sheet.
5. Prospect Risking
o Chance of Success
6. Proposed Well location [coordinates at surface location and targeted depth]
o Subsurface Map with Coordinates (porosity & permeability maps etc.). Clearly
mention constraints if any.
o Surface location Map with coordinates
o Well Trajectory
7. Tentative Well construction design

11. A summary of impact of change in base assumptions on the project NPV/EMV separately.
(Decision Tree)
12. Sensitivity Analyses (Spider & Tornado Plots), with 25% adverse variations in input
parameters of the economic model, to highlight the factors that have the highest impact
on NPV of the project.
13. Sensitivity analyses to show the increase margin in project cost that will turn the Project
NPV to negative.
14. Sensitivity analyses to include the case of deferred cash collection to account for the
impact of Circular Debt issue on the projects.
15. Documentation of the team’s perception of Decision Quality (DQ) through spider diagram
and/or other tools.
6.2.2.5 – Decision Quality (DQ)

The quality of decision can be assessed using the following six attributes; these are being used
by global E&P companies in their value assurance processes. Note that the eventual outcome of
the decision does not feature as that outcome can be years away. Furthermore, good decisions
taken in the presence of risk and uncertainty still can have bad outcomes.
Table 6-2 Attributes of Decision Quality
S No DQ dimension Description
1 Appropriate Are purpose, perspective and scope clear? Is the
problem frame decision taken in the right context?
2 Meaningful and Is it clear on what information the decision is taken?
reliable information Have enough efforts been spent filling the gaps in data?
3 Creative alternatives Has an appropriate range of alternatives been
considered? Were the options Mutually Exclusive and
Collectively Exhaustive (MECE)?
4 Values and trade-offs Is it clear what we gain or lose if we choose one option
over another?
5 Logically correct Has the decision been tested against several possible
reasoning outcomes under key uncertainties? Are there any ‘leaps’
in the reasoning?
6 Commitment to Is there ‘appetite’ amongst stakeholders? Do partners
action agree? Is this what the government/ regulator expects?
Will resources be available? Is this doable?
6.2.3 PHASE 3 (FEL-3) – DEFINE

6.2.3.1 – Purpose
To completely define the selected option and take Final Investment Decision (FID).
In FEL-3, the emphasis is on achieving a “best practical” level of project definition that includes a
good-quality project estimate, schedule, and a detailed EPC phase project execution plan that

includes buy-in from key operations and maintenance staff. FEL-3 also involves process
optimization to determine the best flow scheme and support systems combination. This includes
consideration of the plot plan and equipment arrangements for the entire facility. Process
optimization cannot be done in isolation as it depends on significant interaction with operations,
maintenance, and construction experts to produce the best results. This level of project definition
and planning for the post-FID project is normally required in order to present to management a
candidate project that has the right combination of overall risk and projected economic
performance, and thereby secure the project FID.
DEFINE is about specifying the requirements of the project and thereby bringing it to FID. It is
about understanding the project well enough to commit to the bulk of the total investment,
which includes the cost for detailed design work, tendering for the construction followed by
onsite execution. If the costs received after commercial evaluation of the bids exceed the
predefined threshold as defined the Section 3.5, FID will be reauthorized by the Decision Gate
Review Committee (DGRC).
Pre-Final Investment Decision Review, prior to release of funds for execution
a) Are all plans, strategies, agreements, organizations, resources and systems in place to
commence execution in an optimal manner if funds are released?
b) Is everything in place to ensure success?
c) Have we got the team in place to deliver this opportunity?
d) Are all risks identified and have mitigation plans in place?
e) Is it economic? How does the opportunity stack up in the strategy?
f) Are all consents in place and stakeholders engaged and onboard?
g) Is the timeline realistic?
The key decision at the end of Phase 3 is whether to approve funding and proceed with execution.
The Phase 3 DSP needs to provide the information to support these decisions and typically
includes the following:
• Capital Allocation or Budget approval along with the proposal (Optional)
• Phase 2 Peer Review Report, with summary of actions taken to close identified gaps
• Updated Project Charter (fully defined scope)
o Documentation of the team’s decision quality (DQ Spider Diagram), along with a
description of the gaps, and why this level of decision quality is appropriate for
this decision
o Assignment of full project team members assigned, and all understand their roles
and responsibilities.
o RACI matrix for stakeholder management.
o Detailed EPC Phase Project Execution Plan with project charter, communication
plans, and turnaround strategy.
o Detailed EPC contracting strategy.

o Class-3 cost estimates based on complete scope, resource availabilities /
constraints, technical & commercial offers for Long Lead Items (LLIs) and key
equipment as well as quotations for rest of items, bulk materials and construction
services. Details on contingency, allowance, escalation and management reserve.
o Detailed and integrated resource-loaded critical-path Level-3 project schedule,
including effects of equipment delivery dates, interferences, successor and
predecessor activities, and turnover and commissioning sequences for startup.
This is not a mandatory requirement for Well projects.
o Project risks and risk treatment plans.
o Completed environment permit submittal.
• For Facility Development Projects:
o FEED Deliverables, including but not limited to:
▪ EPC phase – project execution plan
▪ EPC phase – cash flow plan
▪ EPC phase – training, commissioning, and startup plans
▪ EPC phase – materials management plan
▪ EPC phase – safety process and quality management plan
▪ Finalized utility flow diagrams and balances
▪ P&IDs — owner review and preliminary hazards analysis changes
▪ Preliminary process hazards analysis (P&ID level)
▪ Plot plans and critical equipment layouts— includes owner, operations,
and maintenance review changes
▪ Equipment list and datasheets—includes owner review changes
▪ Single-line electrical diagrams
▪ Control system summary and control room layout
▪ Materials of construction confirmed
▪ Material selection diagrams (MSDs) completed
▪ Completed HAZOP and SIL studies (excluding vendor packages),
recommendations incorporated in design.
▪ Project supply plan for complete scope based on approved vendor list
aligned between all relevant stakeholders (project – technology –
procurement – operations & maintenance).
▪ Definitive status about underground, soil, hydrology, contamination levels
of soils required.
▪ Construction Execution Planning to develop advanced Work Breakdown
Structure (WBS).
▪ Detailed plans and contingencies for logistic and any infrastructure
requirements.
For projects related to exploratory, appraisal and development wells, following may be
needed:


3. Seismic Interpretation & Mapping
NOTE
Decision for carrying out seismic should be taken on the basis of scoping economics i.e.,
wells, facilities, resources on volumetric basis, associated infrastructure; this can be done
at first gate when it comes as an exclusive project that is seismic survey. The DSP for
seismic decision will be almost same as given below with lower level of accuracy. In case
of deciding for seismic while reviewing for exploratory well, the decision for seismic will
be taken based on VOI i.e., no separate gate; this will be done in SELECT.
a. Include all necessary information including 2D and / or 3D processing details &
seismic interpretation.
b. Methodology of time-to-depth conversion with uncertainty range.
REP sheet.
5. Prospect Risking
o Chance of Success
6. Proposed Well location [coordinates at surface location and targeted depth]
o Subsurface Map with Coordinates (porosity & permeability maps etc.). Clearly
mention constraints if any.
o Surface location Map with coordinates
o Well Trajectory
7. Formation Tops Prognosis
8. Well construction design
9. Well Testing, Completion and Stimulation Plans (if any)

13. A summary of impact of change in base assumptions on the project NPV/EMV separately.
(Decision Tree)
14. Sensitivity Analysis (Spider & Tornado Plots) to highlight the factors that have the most
impact on NPV / EMV of the project.

6.2.4 PHASE 4 (EPC) – IMPLEMENT or EXECUTE
6.2.4.1 – Purpose
To deliver the promise and execute the planned activities.
Primary role during this phase will shift from the Project Sponsor to the Project Manager, who
will be responsible for delivering all the project objectives as described and agreed in the signed
Project Charter.
Once this phase 4 is successfully completed, key role will move back to the Project Sponsor for
operating the newly developed asset and deliver the business value as envisaged.
The thinking during EXECUTE is all about delivering the promise and about preventing internal
and external factors having a negative impact on that promise. Execution Progress Reviews (EPRs)
are meant to identify the gaps between plan and execution and help with devising way forward.
During course of execution, EPRs will be focused on monitoring project’s progress using
techniques such as Earned Value Analysis (S-curves). It is important that review teams remind
themselves regularly that they are part of governance. EPRs should predominantly be forward
looking.
EPRs have three prime objectives:

• To help to deliver the promise made at project sanction.
• To review and improve the controls of the project.
• To take learnings from the project.
Requirement for calling EPR: It is the responsibility of Project Owner to call EPRs, which will be
called at the lapse of the 25%, 50% and 75% of the total Project execution time for facility
development project. In addition to the above, following conditions will require an EPR to be
called by Project Owner:
1. Cost variance of 10%.
2. Schedule variance of 10%.
3. Change in the original SOW.
4. Risk propinquity changes.
5. Significant quality issues found.
At current maturation level of the process, EPR will not be applicable to wells; however, the same
may be requested by Asset Owner if so needed.
At the end of this phase, the project or the asset will be handed over to the Operations team.
Before this handover, pre-startup audit review is a mandatory requirement to ensure that all the
systems have been successfully commissioned as designed and can be operated safely for the
design life of the project. This will be undertaken by Project Manager and is not included in the
scope of EPRC.

Execution Progress Review
a) Is the Project progressing within the designated scope, cost, and time limits?
b) Which factors can cause significant cost escalations or schedule slippages that may
compromise any of the project objectives?
c) Are the project risks, as envisaged at the FID approval stage, increasing in magnitude?
Findings of the deviations in cost, schedule and scope and recommendations for course
corrections need to be shared (in accordance with Section 2.2.2) with Project Manager and
Project Owners for rectification. Quality inspection is not in the purview of EPRC as the same will
need to be arranged by Project Owner / Project Manager.
The deliverable at the end of Phase 4, will be the documentation to support the handover to
operations, to facilitate project lookbacks, and to close out the project. These documents do not
constitute a DSP; rather they meet specific EPC project management needs.
6.2.4.5 – Tools & Techniques

EARNED VALUE ANALYSIS (EVA)
As a key tool for continuous monitoring and reporting EPC project progress, Earned Value
Analysis or Management (EVA or EVM) is used to determine cost & schedule variance. It is a
project management technique that measures project’s progress & performance by combining
scope, schedule & costs into a single integrated system of monitoring & reporting.
Figure 6-1 illustrates S-Curve that is used to assess the progress and performance of a project
through the use of Earned Value Management (EVM). S-curves are typically created as part of
EVM process and serve as the foundation for evaluating project's progress & performance.
• Planned Value (PV) refers to the amount (in monetary units) which is planned to be spent
on a certain percentage of planned project completion.
• Earned Value (EV) is the amount which was planned to be spent on a certain percentage
of actual project work performed.
• Actual Costs (AC) is the amount which is spent on work that is actually performed.

Figure 6-1 – S-Curve Report – Output of Earned Value Analysis (EVA)
Estimate At Completion (EAC)
Actual Costs – OR – Value of Work Done (VoWD) in monetary units
(Cost) Variance at
Completion (VAC)
Budget at Completion (BAC)
Forecasted
Schedule
Actual Costs (AC)
Slippage
Cost
Planned Value (PV) Variance CV = EV – AC
(CV)
Schedule SV = EV – PV
Variance (SV)
Earned Value (EV) CPI = EV / AC
SPI = EV / PV
EAC = BAC + VAC
Actual TCPI = (BAC – EV) ÷ (BAC – AC)
Schedule
Slippage
PROJECT PLANNED ESTIMATED

REVIEW DATE COMPLETE COMPLETE
Planned Value (PV) Time

Actual Costs (AC)
Earned Value (EV)
Table 6-3 Parameters for Earned Value Management (EVM)

Parameter Symbol Formula Interpretation / Explanation
Cost Variance CV EV – AC NEGATIVE is overbudget
POSITIVE is within budget
Schedule Variance SV EV – PV NEGATIVE is behind schedule
POSITIVE is ahead of schedule
Cost Performance CPI EV / AC >1 indicates project is within budget
Index =1 indicates project is on budget
<1 indicates project is overbudget
Schedule SPI EV / PV >1 indicates project is ahead of schedule
Performance Index =1 indicates project is on schedule
<1 indicates project is behind schedule
Variance at VAC BAC – EAC POSITIVE – Projected budget surplus
Completion NEGATIVE – Projected budget deficit (How far over
budget do we expect to be?)
Estimate at EAC BAC + VAC The expected total cost of your project
Completion AC + ETC
Estimate to ETC EAC – AC Expected cost to finish the remaining project work
Complete
To-Complete TCPI (BAC – EV) / To forecast whether or not you can stick to your budget
Performance Index (BAC – AC)

6.2.5 PHASE 5 – OPERATE
6.2.5.1 – Purpose
To operate the project within design envelope for the design life.
Post Implementation Review (PIR) or Project Closeout is conducted during the operate phase
once the handover is complete, the facility achieves ‘steady state’ in operations post startup and
before the (remainder of) the project team is demobilized. PIR is not a gate review, but rather
aims at pursuing timely EPC project closeout and documenting the lessons learnt.
This Post-Implementation Review (PIR) should:

• Identify which best practices to be propagated to future projects.
• Isolate what mistakes to avoid on future projects.
• Decide whether the (remainder of) the project team can be disbanded.
Figure 6-2 Workflow for Projects Closeout
Project Completed A
Initiation of Close VA process review

Out Activity within participants feedback
45 days regarding Closeout
Interim Closeout at
Is it a Yes Review Meeting
Commercial Production
Plant?
Commencement Stage • To be called once feedback is
received.
No
Final Closeout after
Performance Testing A
To be initiated by Asset Project Close Out
Phase 5 will also include continuous monitoring of project value delivery during asset operation,
i.e., post-investment reviews, to determine if the project objectives (NPV, etc.) are being
achieved or not. Such reviews could be linked with other associated activities, such as, risk
appetite testing for Capital Creation. This will be done by Asset owner at suitable intervals to be
determined in accordance with nature of the project.
a) Did the project achieve the predicted objectives and performance?
b) What can be learned from the project and what further opportunities are there?

c) Have financial goals (Opex, Capex) been met? Has the business planning process been
adjusted to reflect changes?
d) How is the safety record of the new assets? Are operators trained and competent to
operate equipment?
e) How much additional ongoing Opex is being spent due to reduced capex spend during
project construction / completion?
f) How well is the project performing environmentally?
g) What feedback has been received from stakeholders: JV partners, landowners, etc.
• Project Closeout Report including lesson(s) learnt.
• (Guarantee) test run reports highlighting yields, federates, utilities consumption versus
design figures.
• Production logs since start up including reports highlighting relevant maintenance
experience.
• Economic data / reports (NPV waterfall).
• Periodic benefits realization reports.
6.2.6 PHASE 6 – DISPOSE

6.2.6.1 – Purpose
To decommission or dispose the project or asset at the end of the asset’s useful design life, or to
strategically farmout an asset or project.
Plan should be in place for socially and environmentally responsible abandonment of the asset.
This may include mothballing, relocation of the asset for use in some different business
application, sale of the asset at salvage value, etc. Project location should be restored in an
environmentally zero footprint manner.
For divestitures pertaining to strategic farmout, DISPOSE (or DIVESTITURE) decision gate will be
arranged for all the divestments above the threshold as described under Section 1.2, ‘Projects &
Assets Classification’. For exploration assets and undeveloped discovered / producing assets,
there is currently an approved procedure in place as listed under the section 1.6 ‘Internal
References’.

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7 Cost Estimation
7.1 DEFINITION
This chapter serves to provide general guidelines on cost estimation. Project cost estimation is
the process of predicting the quantity, cost, and price of the resources required by the scope of
a project. Since cost estimation is about the prediction of costs rather than counting the actual
cost, a certain degree of uncertainty is involved.
This uncertainty arises from the fact that the project scope definition is never entirely complete
until the project has been finished, at which point all expenses have been made and an
accountant can determine the exact amount of money spent on resources.
7.2 REQUIREMENT
These cost estimates are required for investment decisions, comparing alternative plans,
budgeting, cost control, and validation.
Cost estimates are prepared at different stages throughout the project lifecycle. Upfront, the goal
is to provide input for investment decisions. The cost estimate is used to determine the size of
the required investment to create or modify assets. It is also during the early phases that
alternative plans are considered that need to be priced. The cost estimate is a deliverable that
serves the decision-making process at each gate of the project lifecycle.
Later in the project, the budget is determined from a more extensive cost estimate that also
serves as a baseline for project controls and earned value measurement. As such, it is maintained
up-to-date and in synchronization with the planned schedule. By comparing expenses and
progress information with the baseline estimate, an indication of the project’s performance is
obtained that allows the cost control and project management to steer the project.
Cost estimates are classified into different accuracy classes that are related with the maturity
level of project definition. Figures 7-1 and 7-2 illustrate the trend of cost estimate accuracies with
the increasing level of project scope definition as project phases progress.

FIGURE 7-1 Typical accuracies of the cost estimates associated with project tollgate process
and its activities
Initiate Select Define Implement Operate Dispose
Concept Concept
Detailed Tendering &
Feasibility Screening / Definition / FEED
FEED Operation Abandon
Design Construction
Selection Pre-FEED
ESTIMATES
Class 1
Class 2
Class 4
Class 5
Class 3
COST
FIGURE 7-2 Illustration of the Variability in Accuracy Ranges for Petroleum E&P Industry
Estimates
80% Confidence Interval Accuracy Range after inclusion of P50
>> Increasing level of Project Scope Definition

Contingency +/- 0%

7.3 ESTIMATES CLASSIFICATION
Purpose of cost estimates classification is to align the estimating process with project stage-gate
scope development and decision-making processes.
Table 7-1, included below from the “AACE Recommended Practice No. 18R-97 – Cost Estimate
Classification System as applied in Engineering, Procurement, and Construction for the Process
Industries”, provides a summary of the characteristics of the five estimate classes.
The maturity level of project definition is the sole determining (i.e., primary) characteristic of
class. The maturity is roughly indicated by a percentage of complete definition; however, it is the
maturity of the defining deliverables that is the determinant, not the percent. The specific
deliverables, and their maturity or status are provided in Table 7-2. The other characteristics are
secondary and are generally correlated with the maturity level of project definition deliverables.
The post-sanction or post-FID cost estimate classes (Classes 1 and 2) are only indirectly covered
where new funding is indicated. Again, the characteristics are typical and may vary depending on
the circumstances.
TABLE 7-1 Cost Estimate Classification Matrix
for the Petroleum E&P Industry [Process Industry]
Primary Secondary Characteristic

Characteristic
ESTIMATE MATURITY LEVEL OR END USAGE METHODOLOGY EXPECTED ACCURACY
CLASS DEGREE OF PROJECT Typical purpose of Typical estimating method RANGE
estimate Typical variation in low and high
DEFINITION
ranges at an 80% confidence
(DELIVERABLES)
interval
Expressed as % of
complete definition
Conceptual Capacity factored, L: -20% to -50%
Class 5 0% to 2% planning parametric models, H: +30% to +100%
judgment, or analogy
Class 4 1% to 15% Screening Equipment factored or L: -15% to -30%
options parametric models H: +20% to +50%
Funding Semi-detailed unit costs L: -10% to -20%
Class 3 10% to 40% authorization with assembly level line H: +10% to +30%
items
Class 2 30% to 70% Project control Detailed unit cost with L: -5% to -15%
forced detailed take-off H: +5% to +20%
Class 1 70% to 100% Fixed price bid Detailed unit cost with L: -3% to -10%
check estimate detailed take-off H: +3% to +15%
This table presents standard cost estimate classification matrix. PPL may adjust this matrix to
reflect Company-specific impacts over time.
While the class estimates are defined on the basis of level of detailing, efforts should be made to
capture the expected cost variations due to market factors while preparing project estimates.

7.4 INPUTS FOR THE COST ESTIMATES
Table 7-2 below, in a summarized manner, maps the extent and maturity of estimate input
information (deliverables) against the five estimate classification levels. This is a checklist of basic
deliverables found in common practice in the petroleum E&P industries. The maturity level is an
approximation of the completion status of the deliverable.
The degree of completion is indicated by the following letters.
• None (blank): Development of the deliverable has not begun.

• Started (S): Work on the deliverable has begun. Development is typically limited to
sketches, rough outlines, or similar levels of early completion.
• Preliminary (P): Work on the deliverable is advanced. Interim, cross-functional reviews
have usually been conducted. Development may be near completion except for final
reviews and approvals.
• Complete (C): Deliverable has been reviewed and approved as appropriate.
TABLE 7-2 Inputs Checklist (Summarized) for Cost Estimates & their Maturity Matrix
[defined for Facility Development Projects]
ESTIMATE CLASSIFICATION
General Project Data: CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1
Project Scope Description General Preliminary Defined Defined Defined
Plant Production/Facility Capacity Assumed Preliminary Defined Defined Defined
Plant Location General Approximate Specific Specific Specific
Soils & Hydrology None Preliminary Defined Defined Defined
Integrated Project Plan None Preliminary Defined Defined Defined
Project Master Schedule None Preliminary Defined Defined Defined
Escalation Strategy None Preliminary Defined Defined Defined
Work Breakdown Structure None Preliminary Defined Defined Defined
Project Code of Accounts None Preliminary Defined Defined Defined
Contracting Strategy Assumed Assumed Preliminary Defined Defined
Engineering Deliverables:
Block Flow Diagrams S/P P/C C C C
Plot Plans S P/C C C
Process Flow diagrams (PFDs) S/P P/C C C
Utility Flow Diagrams (UFDs) S/P P/C C C
Piping and Instrument Diagrams (P&IDs) S P/C C C
Heat & Material Balances S P/C C C
Process Equipment List S/P P/C C C
Utility Equipment List S/P P/C C C
Electrical One-line Drawings S/P P/C C C
Specifications & Datasheets S P/C C C
General Equipment Arrangement S P/C C C
Drawings
Spare Parts Listings S/P P C
Mechanical Discipline Drawings S P P/C
Electrical Discipline Drawings S P P/C
Instrumentation/Control System S P P/C
Discipline Drawings
Civil/Structure/Site Discipline Drawings S P P/C

It is important to note that presentation of cost estimates that are presented to DGRC should
always accompany the Basis of Estimates.
Table 7-3 below provide detailed descriptions of the five estimate classifications as applied in the
petroleum E&P industry. They are presented in the order of least-defined estimates to the most-
defined estimates.
TABLE 7-3 Characteristics of the estimate classes as applied in the petroleum E&P industry
(Reference: AACE Standard 18R-97 for Cost Estimate Classification System)
Estimate Description End Usage Estimating Alternate
Class Methodology Name(s)
Class 5 Class 5 estimates are generally Class 5 Class 5 estimates Preliminary
prepared based on very limited estimates are generally rely on economic
information, and subsequently have prepared for available internal and assessment,
wide accuracy ranges. Class 5 any number of industry data for similar geological study
estimates are generally based on strategic previous projects. Gross estimate, order of
unclarified contingent resources business unit costs may be magnitude
defined by preliminary exploration planning applied to drilling and estimate, capacity
drilling and appraisal and general purposes, such completion. Factoring factor estimate,
experience with related projects to as but not techniques may be used conceptual study,
comply with disclosure standards. This limited to to extend major facility venture analysis,
would include a simple geological market costs to include all scoping study,
model and estimated recovery and studies, equipment, preliminary
quality of products produced. A simple assessment of commodities, and gross evaluation.
drilling and completion plan is then initial viability, unit costs applied to
prepared that covers drilling method; evaluation of building volumes,
gross production schedules; nominal alternate pipeline, and other
facility capacity; assumed block flow schemes, elements. Cost/capacity
diagrams and process rates; and rough project methods may be used
conceptual definition of infrastructure screening, for some plant
needs. Substructure design concepts project elements. Indirect costs
are selected. There may be a location are factored from
minimum of coring work and studies, and directs based on internal
geotechnical, analogues or other back long-range and industry experience
up studies available. No design capital with typical cost ratios
drawings or equipment specifications planning. and other parametric
may be prepared beyond some rough and modeling
notes and sketches by the project techniques utilized.
engineer, perhaps little more than
proposed plant type, capacity and
location. Class 5 estimates, due to the
requirements of end use, may be
prepared within a very limited amount
of time and with little effort
expended— sometimes requiring less
than an hour to prepare.
Class 4 Class 4 estimates are generally Class 4 Major equipment costs Pre-feasibility or
prepared based on limited information estimates are are based on recent preliminary
and subsequently have fairly wide vitally budget prices from feasibility,
accuracy ranges. A Class 4 estimate is important to vendors using intermediate
usually carried out using development E&P investors preliminary economic study

unclarified contingent resources internationally. requirements. Facility estimate,
defined by drilling confirmation of the Recoverable costs are estimated by equipment factor
reservoir zone(s). A preliminary reserves approximate quantity estimates,
geological model and preliminary well cannot be take-offs from the conceptual
plan are required, including identified as general arrangement estimate.
supporting facilities optimization, economic drawings and applying
geotechnical and hydro-geological without an unit cost factors.
studies, etc. Structure maps, single estimate of at Onshore earthworks,
rock properties for major reservoir least this class. substructures, and
layers are available. A feasible drilling They are held infrastructure are not
and completions concept is available. to disclosure well defined, but
Potential drilling and completion requirements allowances can be set
hazards are identified. For offshore by the based on preliminary
projects preliminary meta ocean data involved contours for overland
are acquired. The fluids test work and securities piping lengths and
production profile from analogs jurisdictions overhead electrical
should determine the probable and are power lines, etc.
process flow sheet and approximate subject to Equipment installation is
material balance and identify the analysis by estimated by a
major equipment. Engineering would third party combination of quantity
comprise at a minimum: general reviewers. The take-offs and unit cost
arrangement (GA) drawings, estimates are factors based on the
equipment lists for major equipment, used for available scope
nominal facility capacity, block refining and definition. Offshore
schematics, and process flow diagrams screening of structures and
(PFDs) for the main process systems. options, installations are based
analyzing on preliminary
technical and estimates of quantities,
economic fabrication locations,
feasibility, and and installation
then durations. The same
identifying the method also applies to
preferred indirect costs (as a % of
option(s) for directs).
the final
feasibility
study (Class 3
estimate) prior
to project
sanction.
Class 3 Class 3 estimates are generally Class 3 Class 3 estimates are Feasibility
prepared to form the basis for budget estimates are generally based on estimate, sanction
authorization, appropriation, and/or typically detail take-offs and estimate,
funding. A Class 3 estimate is prepared prepared to estimates for significant bankable
using development pending support full cost items for direct and feasibility
contingent resources (or justified for project indirect costs where estimate, final
development reserves) as defined funding detailing can be done feasibility
within acceptable confidence limits. requests for (e.g., pipe fittings not estimate, initial
Final drilling and completion program internal and/or detailed). Major budget (or

is approved. Casing and mud program external equipment and baseline)
is finalized. Preliminary analysis of investment. By fabrication contracts are estimate,
shallow hazards, fracture gradient, default, the priced based on supplier preliminary
and pore pressure data is sufficient. Class 3 quotations. control estimate,
Preliminary well design is available. estimate is the Construction (bulks, forced detail
Engineering is expected to provide initial baseline labor, and equipment) estimate, design
general arrangement drawings (GAs), for project and are estimated based on basis
issued for design piping and change control local pricing and trade memorandum
instrument diagrams (P&ID’s) and until agreements covering (DBM).
single line electrical drawings. For superseded by the available quantity
onshore projects, plot plans and the updated take-offs. For offshore
layout drawings provide primary project control projects, transportation
definition. Whereas, for offshore estimate (Class and installation bids
projects, topside deck arrangement, 2). have been received.
module fabrication, substructure Platform costs are based
design, marine transport, and subsea on definitive deck and
requirements provide primary substructure weights.
definition. Remedial action plan Flow, transfer, and
resulting from HAZOPs is identified. export lines are based
on platform and drilling
locations, and sales
points. Onshore mass
earthwork and
infrastructure such as
transport pipelines and
power transmission
lines are based on take-
off from preliminary
contours and routing.
Less significant costs
may be factored such as
small-bore pipe as a %
of large bore. Individual
well AFEs are prepared.
Local labor
requirements for crew
are determined. A logic-
driven schedule is
formulated.
Development,
depletion, and reservoir
surveillance plans are
finalized. Preliminary
logistics plan is
developed
Class 2 A Class 2 estimate is based upon a Class 2 Class 2 estimates Definitive cost
detailed well design and production estimates are generally involve a high estimate, project
schedule using justified or approved typically degree of deterministic control estimate
for development reserves and prepared as estimating methods. (PCE), revised

contains all the input of a Class 3 the detailed Class 2 estimates are baseline estimate,
estimate regarding process contractor prepared in detail as detailed control
information. Class 2 scope definitions control needed to support estimate,
will include all the information baseline (and bidding, project execution phase
contained in Class 4 and Class 3 update to administration and estimate, fall-out
estimates as well as additional owner’s change control. Most of detail estimate.
engineering information as the project control the equipment will have
proceeds into the execution phase baseline) been ordered or have
such as detail project execution plan against which firm quotes. For
and schedules, accurate topographic all actual costs onshore projects,
maps, actual surveys of the plant site and resources earthwork, and
and foundation data, etc. Meta ocean will now be infrastructure such as
data is confirmed and hindcast studies monitored for transport pipelines and
are completed. Wellhead and variations to power transmission
downhole equipment specifications the budget lines are based on take-
are defined. Casing and mud program and form a off from definitive
are finalized. part of the contours and routing.
change For offshore projects,
management flow, transfer, and
program. export lines are based
on final subsea
architecture, confirmed
bathymetry and routing.
Some subcontracts for
early works may be
underway. For those
areas of the project still
undefined, an assumed
level of detail takeoff
(forced detail) may be
developed to use as line
items in the estimate
rather than factored
allowances. A resource-
loaded network
schedule is used
especially for indirects
and equipment. Drilling
rigs are scheduled.
Class 1 Class 1 estimates are generally Class 1 Class 1 estimates Full detail
prepared for discrete parts or sections estimates are generally involve the estimate, tender
of the total project rather than for the used by highest degree of check estimate,
entire project based on extensive contractors to deterministic estimating firm price,
design definition. Reserves will be support their methods and require a bottoms-up
proven with drilling usually underway bids or by significant amount of estimate, detailed
either approved for development or in owners as a effort. Class 1 estimates engineering
production. The detail estimate may check on bids are prepared in detail, estimate, detailed
be used by subcontractors for bidding received. The usually on a selected control estimate,
estimates may portion of the project forced detail

or by owners for check estimates for be used by scope. All items in the estimate, change
various purposes. both parties to estimate are usually unit order estimate.
support their cost line items based on
contract actual design quantities.
negotiations,
change control
process,
and/or to
analyze and
resolve claims
and disputes.

8 Project Scheduling
8.1 DEFINITION
Project Schedule is a time, cost and resource control and management tool that identifies
activities for entire project with time scales, required budget and resources, and relations with
dependencies. The Project Schedule is a plan for completion of a project, list of planned activities
to be done within allowed timeframe, usually with intended start and finish dates that serves as
a tool to assist project management in achieving project goals through efficient use of available
resources.
8.2 LEVELS OF SCHEDULE
There are five (5) levels of Project Schedule as widely used in the E&P industry for projects
planning, monitoring, and reporting. As described below, increasing level corresponds to the
higher level of details and breakdown included for project activities, milestones, and deliverables.
1. Level 1 – Project Master Schedule,

2. Level 2 – Project Summary Schedule,
3. Level 3 – Control Level Schedule,
4. Level 4 – Detailed Network Schedule, and
5. Level 5 – Detailed Reports Schedule.
The Master or Project Summary Schedule (Level 1) is typically one of the contract documents,
and the Control Level Schedule (Level 3) is one of the EPC project baseline documents.
8.2.1 Level 1 Schedule – Master Schedule

Master Schedule (or Level 1 Schedule; Management Level Schedule; Major Milestone Schedule;
Top Management Report Schedule) is a simplest detailed project schedule that shows and
highlights major project activities and milestones on an entire project calendar, and usually
developed on the one page and used a bar chart or Gantt chart technique.
8.2.2 Level 2 Schedule – Project Summary Schedule
Project Summary Schedule (or Level 2 Schedule) is a high-level integrated project schedule for
the entire project time frame that is used for high level internal and external management
reporting by summarizing to the management summary schedule (Master Schedule (Level 1

Schedule). The Project Summary Schedule shows the project milestones of engineering,
procurement, construction, and start-up activities by network logic, identifies critical path, key
deliverables divided by units and system facilities includes key critical activities and units or
systems. The Project Summary Schedule is developed, usually, as a summarization of the Level 3
Project Schedule (Project Control Schedule).
8.2.3 Level 3 Schedule – Control Level Schedule
Control Level Schedule (Level 3 Schedule or Network Schedule) is an actual project schedule
control and management tool for a work level. The Project Control Level Schedule is integrated
detailed EPC activities for the entire project scope of work based on a Critical Path Method (CPM)
used a network scheduling technology with detailed input all major milestones, major elements
of design and engineering, procurement, construction, pre-commissioning, and commissioning
activities. The Project Control Level Schedule shows detail and individual work tasks and clearly
defined works by discipline or responsibility. This is a first level of detailed schedule that a
meaningful critical path management can be performed to monitor and manage the overall
project work accurately, and usually basis of a look ahead or window schedules for the project
schedule control and management.
8.2.4 Level 4 Schedule – Detailed Network Schedule
Detailed Network Schedule (Level 4 Schedule or Execution Schedule or Construction Detailed
Schedule) is a detailed and discipline-wide working level network schedule that is the critical path
method (CPM) management schedule displaying all detailed activities to be accomplished by the
project workforce. The Detailed Network Schedule can be expanded of the Project Control Level
(Level 3) Schedule. Sometime, the Detailed Network Schedule is developed by a construction
subcontractor based on the Project Control Level (Level 3) Schedule.
8.2.5 Level 5 Schedule – Detailed Report Schedule
Detailed Report Schedule (Level 5 Schedule) is a detailed report format schedule, covers detailed
activities with work steps with dates (planned, forecast and actual date), normally used for the
project documentation (plans, procedures, and reports, etc.), engineering deliverables,
procurement items, and construction equipment election status, etc.

9 Project Risk Management
9.1 CORPORATE RISK APPETITE FOR PROJECTS VALUE ASSURANCE

Effective February 2023, following risk appetite regarding projects value assurance has been
added to the Corporate Risk Appetite Framework.
“NPV dilution at project completion stage not more than 50% of initial NPV at investment
decision stage for major development and core diversification projects worth more than
USD 25 million.”
This risk appetite aims at monitoring and highlighting dilutions in projects’ NPV during the course
of their execution. Testing the corporate Risk Appetite Statement (RAS) at regular intervals is the
responsibility of Enterprise Risk Management (ERM) Function.
9.2 PROJECTS’ RISK MANAGEMENT

The objective of project risk management is to secure project targets, i.e., to enhance the
accuracy of estimates through a better understanding and control of project future uncertainties,
and to support the project team in achieving its objectives.
The main results should be an explicit list of uncertainties (Risk Register), identification of main
project drivers and a set of probabilistic estimates, supporting cost contingencies as well as
schedule margin calculations.
The scope includes the assessment and continuous management of risks associated with the
whole lifecycle of the project. It does not cover enterprise level business related risks as the same
are required to be managed under the ERM Framework. It should be noted that this guideline is
supplementary to the ‘ERM Framework’ as mentioned in the Section 1.6 ‘Internal References’.
Risk is an integral part of project management, and the Project Sponsor or the Project Manager
shall be accountable for managing risks. Responsibility will be decided based on who is leading
the project team for the stage being referred to. Typically, the Project Sponsor leads the Initiate
and Select stages, while the Project Manager leads the Define and Execute stages, but this can
change for different projects.
It is a mandatory requirement that independent project risk assessments, aimed at mitigating

risks associated with FID, be carried out by ERM Function during project tollgate process.

However, after FID, project risk management during execution is solely the responsibility of
Projects Manager.
9.3 PROJECT RISK GOVERNANCE

Appropriation of the risk management process and active participation by all project team
members involved are key success factors. Roles and responsibilities for the various risk
management activities are split across three different roles:
9.3.1 Project Sponsor and/or Manager
The Project Sponsor and/or Manager is responsible for:
• Ensuring the project risk management process is developed and in place

• Appointing project risk manager
• Analyzing project risks and ensuring adequate controls for effective monitoring of risks
• Validating mitigating actions and deployment of appropriate resources
• Approving contractor’s risk
9.3.2 Project Risk Manager

The Risk Manager is responsible for:
• Organizing the continuous progress of the project risk management; coordinating with
Project Manager to plan and implement the risk management process
• Maintaining alignment across functional areas and organizing identification sessions,
assessment, qualitative/quantitative risk models and reporting
• Leading risk sessions and ensuring mapping of risks to Risk Owners
• Providing support to Risk Owners, as required
• Coordinating overall risk management team and monitoring effectiveness of the overall
risk management process
• Facilitating Risk Owners to update the risk register
• Ensuring lessons learned related to project risk are incorporated
The Project Risk Manager role can be undertaken by the Project Sponsor or Project Manager.
However, for very large projects, individual Risk Managers or Leaders can be assigned by the
Project Sponsor or Manager. The Risk Manager should report directly to the Project Manager in
order to ensure independence from any other function.
9.3.3 Risk Owner

A Risk Owner is the person accountable for a particular risk. The role is responsible for:
• Ensuring that risks are appropriately identified, analyzed, evaluated, and treated
• Ongoing assessment of consequences, likelihood and level of risk
• Developing risk mitigation plans and obtaining approvals and resources from the Project
Manager for their implementation
• Assigning an action owner to undertake the mitigating action, as required

• Monitoring assigned risks and action plans
• Reporting to the Project Manager on the evaluation of the risk, the mitigation actions
proposed and the status of their implementation
• Updating the Risk Register and ensuring the quality of its input
The Risk Owner should generally be the relevant manager or team member responsible for the
area or discipline involving the risk.
Contractors are responsible for their own risk management and for participating in the risk
management process, including the effective implementation of the risk mitigation actions
assigned to them during ‘Execution’ phase.
9.4 RISK MANAGEMENT PROCESS
Project Risk Management will comprise of the following five steps. Please refer to the Corporate
ERM Framework for their detailed description.
• Risk preparation
• Risk identification
• Risk assessment
• Risk mitigation
• Risk monitoring, reporting and review
• Risk feedback
Key tools to support risk management process include:

• Risk register
• Risk breakdown structure
• Risk Dashboard or Risk Report
9.5 RISK ASSESSMENT METHODOLOGIES – QUALITATIVE & QUANTITATIVE

Risk assessment is a critical and mandatory component of project management across all phases
of a project lifecycle. Project risk assessment is performed through qualitative and quantitative
analysis; this should be selectively applied per project and stage.
• Qualitative risk assessment for both cost and schedule should be conducted for all
projects at each project phase in alignment to the Corporate ERM Framework and
associated guidelines.
• Quantitative risk assessment for projects can be divided into two types of analysis: cost
estimation risk and schedule risk.
o Schedule risk assessment should be conducted at Define and Execute stages.
o Cost estimation risk assessment can be broken down into a pre-deterministic
approach and a probabilistic approach which are to be selectively applied per
project type and phase.
9.5.1 Cost Risk Quantification Analysis
Cost risk quantification analysis is the process of identifying and quantifying the risk of cost items.
Cost risk quantification is used to determine an adequate level of project cost contingencies.

There are two approaches to cost risk quantification:
• Pre-deterministic: through pre-determined values based on expert judgment supported
by historical statistics
• Probabilistic: via a range estimating and quantitative Monte-Carlo risk analysis
Contingency determination process can be defined as well.

9.5.2 Schedule Risk Quantification Analysis
Schedule risk analysis is a comprehensive review of the project’s schedule with an aim to identify
key risks that could hinder delivering the project on time. It should provide the Decision Gate
Review Committee with necessary transparency as per the risks that can affect the schedule and
an estimate of their potential impact (i.e., probability of delay in number of months). This is a
major input to informed gate decisions and should form part of the DSP submitted at the review
gates.
It should be performed by those who are in control of the detailed schedule and closest to the
actual work being performed. As such, contractors (as applicable) should be held accountable for
delivering such risk analysis, while the project sponsor or execution team should be responsible
for performing their own risk analysis throughout the project lifecycle and reporting the results
to respective senior project stakeholders. The Project Sponsor or Manager is accountable for
initiating this analysis and directing his team to execute it.
This analysis should be performed and submitted as part of the Select and Define stages for all
projects. Additionally, the Decision Gate and Execution Progress Review Committees can request
for this analysis to be performed during other stages /steps of the project and as they see fit,
especially when there are large uncertainties and interdependencies related to the schedule.
Following information will be required to carry out this analysis:
• Project schedule evaluated (sequence of activities, links, type of constrains, etc.)
• Risk model modelled (specific risks related to project activities, inherent and residual
exposures, etc.)
• Risk assessments analysis conducted, build impacted schedule and review results (S-
curves)
• Risk mitigation measures defined and implemented
• Understand level of constraints and contingency for the project schedule
Schedule risk analysis will follow five (5) sequential steps:

• Step 1: Development of baseline schedule
• Step 2: Definition of risks
• Step 3: Simulation of impact to project schedule
• Step 4: Analysis of results
• Step 5: Interpretation of simulation results

Associated Business
10 Processes
Projects value assurance process should be linked with the other related business processes, such
as long-term strategy setting, annual budgeting, etc. The lack of linkage between these processes
could potentially lead to a misalignment of the project objectives Company’s overall goals and
strategy, and result in wasted resources and failure in achieving the desired outcomes.
10.1 STRATEGIC PLANNING PROCESS
Company’s long term strategic plan, i.e., Five Year Plan (FYP), will be developed using the project
proposals based on class-5 cost estimates.
In initial rollout of VA process, project proposals will not need to go through any gate(s) of the
Value Assurance Process for inclusion in the strategic plan. The requirement will be determined
based on process learnings and included in VAF.
10.2 CAPITAL ALLOCATION OR BUDGETING PROCESS
Flow chart for the approved Budgeting process, as documented in Accounting & Internal Control
Manual, is presented below in Figure 10-1.
While it is mandatory for PPL to not approve AFEs without tollgate process for large investments,
budget can be approved for planning but with a caveat that project AFE will only be approved
after full review and VA approval prior to start of work. In case of a facility development project,
an amount sufficient for carrying out FEED will be released by BRC and the rest kept as contingent
budget and released upon conclusion of the FEED and taking FID.
However, even for any project to be presented before Budget Review Committee (BRC) for
inclusion and approval as part of the budget, it is mandatory that it should pass the Initiate and
Select gates prior to BRC meeting. Following illustration, Figure 10-1, shows this sequence of
events.
Annual budget should be consistent with the project assumptions used in the projects value
assurance process. Any deviation from the approved assumption should be documented and
approved in the VA process as well.

Figure 10-1 Flow chart for the Budgeting & Planning process
INITIATE SELECT
Gate Gate
Assets’ Inputs Economics BRC Reviews Capital Allocation

Exploration & Work Program Work-Program driven Capital Allocation to
Development Work backed by Economics Budget Review Committee prioritize work program
Program Inventory Meetings
Board Approval BSFC Review EXCOM Reviews

DEFINE Review of Line Ministry and
Gate Central Monitoring Unit
(Finance)
• Quarterly Management Review
• Quarterly Capex / Opex forum
• Quarterly Forecasting & reporting to
the Board
10.3 AUTHORIZATION FOR EXPENDITURE (AFE) PROCESS
In November 2017, procedure regarding Authorization for Expenditure (AFE) was approved as a
part of the Control framework to create business value and minimize risk. AFE management is
core to the function of all E&P companies and deals largely with the costing and budgetary
approvals.
This procedure set a limit on USD 50,000 for any work activity approved in Company budget to
be endorsed through an AFE prior to work initiation.
Further, as an added control measure, any work costing above USD 5 million (as per 2017 AFE
Procedure approval) would have to go through the Peer Review (or Value Assurance) process
prior to AFE initiation. However, this limit of USD 5 million must now conform to the investment
threshold defined in the Value Assurance Framework (VAF) for investments and divestitures.
Flow chart for the approved AFE process, presented below in Figure 10-2, illustrates its
connection with the Value Assurance business process.

Figure 10-2 Flow chart for the AFE approval process

Annexures

ANNEXURE
Definitions
A
A.1 Terms relating to ‘General Category’
1.01 Integrity The quality or state of being of sound moral principle;

uprightness, honesty, and sincerity; the desire to do the
right thing, to profess and live up to a set of values and
expectations.
[Enterprise Risk Management- Integrated Framework
(2017): Appendix F]
A.2 Terms relating to ‘Organization / Companies’
2.01 Senior / Top Person or group of people who directs and controls an
Management organization at the highest level.
[Source: BS EN ISO 9000:2005, 3.2.7]
Includes Senior Managers and above.
2.02 Parent Company A company that has a controlling or majority interest in

another company or companies, which gives it the right
to control the subsidiary’s management and operations.
2.03 Subsidiary A company that is owned and controlled by a parent or

holding company, which may own more than 50% of the
subsidiary company but is not necessary.
Also referred to as ‘Daughter Company’.
2.04 Associate A company that is owned but not controlled by a parent

Company or holding company, which holds a non-controlling and
minority stake in the company.
Also referred to as ‘Affiliate Company’.

2.05 Sister Companies Subsidiaries with a common parent company.
A.3 Terms relating to ‘Management Systems’
3.01 Reasonable The concept that enterprise risk management, no

Assurance matter how well designed and operated, cannot
provide a guarantee regarding achievement of an
entity’s objectives. This is because of Inherent
Limitations in enterprise risk management.
[Enterprise Risk Management- Integrated Framework
(2017): Appendix F]
A.4 Terms relating to ‘Project, Program and Portfolio Management’ and ‘Value
Assurance Process’
4.01 Project Complexity Property of a project which makes it difficult to

understand, foresee, and keep under control its overall
behavior, even when given reasonably complete
information about the project system.
In other words, it is the characteristics of a project that
makes it difficult to predict project outcomes, to control
or manage the project.
4.02 Project Sponsor Person responsible for obtaining the resources and
executive decisions to enable success (of the project); in
other words, responsible for initiating, planning, and
budgeting the project.
[Source: ISO/TR 21506:2018, 3.78]
Typically, a senior executive in a corporation (often at or

just below board level) and is responsible to the
business for the success of the project.
4.03 Executive Sponsor Same as Project Sponsor.
4.04 Project Manager Person responsible for executing, monitoring and

controlling the project.
4.05 Statement / Scope A narrative description of the project purpose,

of Work (SOW) developed for soliciting approval of the project. It
should comprise of (a) Business Need - why to
undertake the project? (b) Strategic assessment of the

project - How does the project contribute towards
organizations overall objectives?
4.06 Project Charter Document comprising of SOW summary and the

following additional information:
• Project assumptions, constraints, high-level
descriptions, boundaries
• Project success criteria
• High-level risks
• Summary of Schedule & Budget
• Stakeholder list
• Project approval authority
• Project manager assigned to the project
4.07 Business Case Technical & commercial justification of the project as

defined in the SOW.
Documented justification to support decision making

about the commitment to a project, program or
portfolio.
[Source: ISO/TR 21506:2018, 3.8]
4.08 Time to Market the period of time between the project / opportunity
identification and startup.
4.09 Performance Tests Formal testing of the plant (or part of it) at the start of
operations to verify that the characteristics guaranteed
by the contract in terms of production capacity,
functionality, quality, limits and tolerances, etc. have
been met.
4.10 Startup The first start-up of a plant or part of a plant which

coincides with the introduction of the hydrocarbon fluid
into the plant.
4.11 Final Acceptance Moment when the development (project) activities are
concluded, both in terms of completion of a project's
authorized scope of work and in terms of support to the
activities of the relevant operations functions.
4.12 Hold Decision To pause the proceedings of the project until (a) some
awaited information is received, or (b) the internal or
external environment for the project decision changes.

4.13 Kill Decision To drop the project and move on to some other
strategic option or no alternate.
There could be a defined criteria for killing a project that

involves measurable benchmarks (time or money
invested, deadline, expected commercialization date,
etc.) requiring to compare the project expected
outcomes with the desired objectives.
4.14 Proceed Decision To move on to the next phase of the project.
4.15 Project On Hold The project has not finished, and work on the project
has been temporarily suspended.
A.5 Terms relating to ‘Risk Management’
5.01 Risk Effect of uncertainty on objectives. A risk is often

specified in terms of an event or circumstance and the
consequences that may flow from it. An effect is a
deviation from the expected. It can be positive or
negative, and can address, create or result in
opportunities and threats.
5.02 Project Risk Effect of uncertainty on project objectives that, if

occurs, has a positive or negative effect on a project
including project time, quality, expenses and people.
5.03 Strategic Risk Effect of uncertainty on objectives that arises from

trends in the economy and society, and includes
economic and political environment, demographics and
competition.
5.04 Financial Risk Effect of uncertainty on objectives that arises from the
effect of market forces on financial assets or liabilities,
and includes market, credit, price and liquidity risks.
5.05 Operational Risk Effect on uncertainty on objectives that arises from the
effect of people, processes, systems, or controls, and
includes people, IT, management oversight and
business processes risks.
5.06 Risk Assessment The overall process of risk identification, risk analysis
and risk evaluation.

5.07 Risk Appetite Amount and type of risk that an organization is willing
to pursue or retain.
5.08 Risk Governance Responsibilities and accountabilities of the roles

involved in risk management process for capital
projects.
5.09 Risk Matrix Tool for ranking and displaying risks by defining ranges
for consequence and likelihood
5.10 Risk Register Collection of information that defines a risk profile of a

defined context.

ANNEXURE
Business Case Economics
B
B.1 STANDARDIZATION OF ECONOMICS
• Pmean and P50 may sometimes be used intermittently for economics. It is

recommended that the standardized metrics to be used for economics. The PRMS
guidelines suggest use of P50.
• Economics of field development activities to be based on the booked reserves /
contingent resources. Any exception to be clearly highlighted and explained.
• Each reservoir should be evaluated separately.
• Value of Information to be evaluated for seismic acquisitions, i.e. incorporation of
the COS of trap.
• Experience adjustment for historic pre-drill vs post drill resources
• Petroleum Resources Management System issued by Society for Petroleum
Engineers prescribes in P50 for production forecast to determine project
economics of Mean.
• In addition to point forward, at Gate Review, DSP should also include full field life
Economics.
• Economics for exploration projects should be based on P50, while for appraisal or
development projects, it should be based on 2C resources and/or 2P reserves.
Figure B-1 Basis for Business Case Economics determination

Figure B-2 – Business Case Economics - Conversion to P50
Figure B-3 – Business Case Economics - Decision Tree (Swanson Rule)
B.2 ECONOMICS – PAST ASSUMPTIONS

• A comparison of current vs past assumptions to be included in the presentation
for those projects which had been part of an earlier peer review, e.g. Peer reviews
of facilities and development wells which were part of an earlier project (e.g.
exploration, appraisal well).
• It is to ensure that all options envisaged at the time of the earlier economics have
been looked into, e.g. processing the gas through a nearby field could have been
the only option at the time of drilling of exploration/appraisal well. However,
subsequently, a new facility may now be deemed economical if the past well costs
are ignored. As with all cases, the Company should go for the option with the
maximum NPV instead of just a positive NPV.

ANNEXURE
Value of Information (VoI)
C Analysis
C.1 BACKGROUND – UNCERTAINTY REDUCTION
Acquiring information about uncertain events has value because it has the capacity to reduce
uncertainty (i.e., change our beliefs, as quantified by probability) and thereby change a decision.
This principle underlies the application of decision tree analysis to calculating the economic value
of information, i.e., how much one should pay for acquiring any piece of knowledge that could
potentially reduce uncertainty.
Decision makers, who face projects with uncertain outcomes, can address the uncertainty
impacting their decisions by gathering data and information with the intention of reducing
the uncertainty.
“Information” here in a broad sense refers to cover acquisition of data, performing technical
studies, hiring consultants, performing diagnostic tests, etc. Examples of gathering information
to reduce uncertainty include
• conducting a seismic study,
• coring a well,
• running a well-test analysis,
• consulting an expert,
• running logging surveys,
• doing a pilot flood,
• drilling additional appraisal wells,
• doing a reservoir simulation study, and
• learning from other fields, companies, or people.
The intuitive reason for gathering information is straightforward: If the information can reduce
uncertainty about future outcomes, decisions with better chances can be made for a good
outcome. In fact, the only other valid reason for information collection or technical analysis can
be to meet regulatory requirements.
However, such information gathering is often costly. Questions that arise include the following:
• Can the uncertainty reduction change the decision?

• Is the expected uncertainty reduction worth its cost?
• If there are several potential sources of information, which one is most valuable?
• Which sequence of information sources is optimal?
C.2 VALUE OF INFORMATION ANALYSIS
The fundamental question for any information-gathering process is whether or not the expected
reduction in uncertainty is worth the cost of obtaining the information. The Value of Information
(VoI) technique is designed to answer this question.
This decision analysis will help to distinguish between constructive and wasteful information
gathering. The purpose of a VoI calculation is to estimate the value of a proposed information-
gathering exercise so that the decision of whether or not to implement it is made on an economic
basis.
For information to be valuable:

• A probabilistic dependence must exist between the information and the outcomes of the
uncertain event of interest (i.e., it must be relevant).
• The event of interest must impact a decision metric sufficiently that decision should be
changed (i.e., it must be material).
• Its value should exceed its cost, in which case the implicit investment rule says to acquire
the information.
C.3 METHODOLOGY FOR CALCULATING VALUE OF INFORMATION
Bayes’ theorem is applied for updating probability estimates. VoI can then be applied as a means
of putting a value on this ability to gather new information and update probabilities. It can be
thought of as the value attributed to the updated probabilities. In calculating this value, the
following information is needed:
1. Current, or a priori, probability estimates of the possible outcomes the quantity can take.
2. Reliability (likelihood) estimates of the efficacy of the information in predicting the
outcomes.
3. Project values in monetary terms for each of the possible combinations of outcomes
Procedural steps in conducting a VoI study are outlined below.
1. Calculate the expected value of the decision to be made as it currently stands (i.e.,
without the information). This calculation will be termed as the value of the base project.
It is usually depicted using a decision tree.
2. Formulate the structure of the decision situation to include the new information. Start by
adding a new branch to the first node of the decision tree to represent the choice to
acquire information. This branch should lead to an uncertainty node, the uncertain event

being the results of the information-gathering exercise. To each of the possible outcomes
of the information-gathering event, add the tree that represents the base project. The
resulting sub-tree says that, should we choose to get the information, once we know its
outcome, we will address the original decision.
This is the trickiest part of the procedure — To ensure that the decision situation has been
correctly formulated with the anticipated information included.
3. Calculate the Value of Perfect Information. This can be done either by inspection of the
decision tree in Step 2, or by entering 1 and 0 for the revised probabilities in Step 4. If the
expected value of perfect information (EVPI) is negligible, or less than the cost of acquiring
the information (if known at this stage), decide not to collect the information and choose
the highest-value alternative in the base project. Otherwise, proceed to Step 4.
4. Calculate the value of the project with the real, imperfect information. This step has the
following sub-steps:
a. Estimate the reliability (likelihood) probabilities—P (info says | real world is).
b. Calculate updated (posterior) probabilities for the outcomes.
c. Enter updated probabilities in the decision tree and solve for the project value.
5. Calculate the expected value of imperfect information (EVII) by taking the

difference in values between Steps 4 and 1 and compare this difference with
the cost of acquiring the information.
6. Perform a sensitivity analysis to test the robustness of the decision to changes

in the prior and reliability (likelihood) probabilities. The robustness of the
decision with respect to changes in the payoffs should also be investigated.
We do not, in general, need to assess the payoffs or probabilities with great
accuracy. If, over the range of possible probabilities and payoffs, the decision
does not change, the assessments are good enough for decision purposes.
Such knowledge can prevent protracted arguments, inefficiencies, or angst
about assessing them.

ANNEXURE
Risk Breakdown Structure
D (RBS)
D.1 BACKGROUND
All risks should be organized according to the Risk Breakdown Structure (RBS) in the Project’s Risk
Register.
The RBS reflects all stakeholders' perspectives and is structured to distinguish between risks
during all phases of the project. RBS allows a systematic way to distribute risks between the
various areas of the projects. RBS is common across all projects, and as a result allows project
risks to be consolidated in a common Risk Database, and then used as support for future projects.
Please refer to the next section D.2 for the table detailing RBS.
D.2 HIERARCHICAL CHART
The list below is non-exhaustive, and additional items can be added in the future revisions of this
framework.

TABLE D-1 – Risk Breakdown Structure (RBS)
RBS Level 0 Level 1 Level 2 Level 3

Reference
1. Technical
1.1. Engineering
1.1.1. Design Criteria consistency, lack of
data, change in
specifications
1.1.2. Geological Surveys access, quality, scaling,
& Studies 3D, computation, use
of explosives
1.1.3. Formation stability, pressure
Characteristics gradients, tightness,
porosity, caving,
fractures,
compression, data
availability
1.1.4. Fluid PVT, chemical
Characteristics compatibility, C02,
H2S, homogenous,
distribution, viscosity,
data, samples
availability & analysis
1.1.5. Reservoir Dynamics structure, geometry,
compartmentalization,
discontinuity,
connectivity, pressure,
permeability, facies,
porosity, skin,
depletion, water, gas,
fluids, data availability
1.1.6. Soil Characteristics geotechnical,
morphological, data
availability
1.1.7. Temperature insulation, convection,
high/low temperature
1.1.8. Pressure gradients, distribution
1.1.9. Material Selection corrosion, erosion,
incompatibility
1.1.10. Existing Facilities brownfield project,
lack of as-built
documentation,
obsolescence,
compatibility with
existing plant
1.1.11. Studies Quality contractors know how,
resources, experience,


Reference
validation process,
documentation
1.1.12. Studies Robustness engineering maturity,
details, technological
decisions
1.1.13. Scope of Work key components
Definition omitted, interfaces,
incorrect specification,
change orders, best
practices
1.1.14. Quantities accuracy, basis for
Definition calculation, scaling
factors, ratios
1.1.15. Innovation R&D, technology
maturity, scale-up,
design lead time,
unconventional, long-
term reliability
1.2. Procurement
1.2.1. Technical change of
Specifications specifications /
regulations
1.2.2. Equipment / raw, bulk, final
Material products
Availability
1.2.3. Quality & mean time between
Reliability failure, manufacturer
warranty, vendor
bankruptcy
1.2.4. Delivery Planning long lead items,
interfaces
1.2.5. Material Storage stock level, stock
rotation, time for
delivery, re-order,
storage space and
conditions
1.3. Fabrication &
Construction
1.3.1. SIMOPS hot works permits,
shut down, POB
capacity
1.3.2. Changes in Scope late modifications, re-
design, re-work,
compatibility


Reference
1.3.3. Structural & Tanks support,
prefabrication,
platforms, cement
structures, roofs,
walkways, pressured
tank, tightening,
containers, flare,
towers, welding,
cutting
1.3.4. Integration / interfaces, integration
Assembly with existing assets,
1.3.5. Electrical generators, lines,
stations, high voltage,
motors, transformers,
lighting, accumulators,
cathodic protection
1.3.6. Control / fire-fighting,
Instrumentation ventilation, control
room, panels,
metering, cables,
command
transmission, sensors,
detectors, servers,
computers, software
1.3.7. Telecommunication antennas, multiplex,
/ IT licenses, frequency,
data processing
1.3.8. Piping piping, materials,
flanges, spools, fitting,
racks
1.3.9. Machines pumps, multiphasic,
compressors, fans,
multiphase, turbines,
engines, motive
machines
1.3.10. Process Equipment columns, reactors,
exchangers,
condensers, furnaces,
coolers, crackers,
centrifuge, decanter
1.3.11. Flow management flow assurance, control
valves, safety valves,
gaskets


Reference
1.3.12. Surface Treatment painting, coating,
insulating,
containment,
convection, corrosion
1.3.13. Yard management dry dock, berthing,
cranes, draft, storage,
capacity; other
projects
1.4. Transportation &
Logistics
1.4.1. Transportation roads, maritime ports,
Infrastructures airfields, rail, logistic
bases
1.4.2. Transportation marine, aviation, land
Means transportation, cars,
trucks, ships, barges,
containers
1.4.3. Loading / crane capacities, fluids
Unloading transfer, clashes,
packaging,
containment
1.4.4. Waste storage, treatment,
Management disposal capacity
1.4.5. Storage warehouses, pits,
tanks, silos
1.4.6. Exceptional loads oversize, out of gauge
1.4.7. Towing tugs, cables, lines,
refueling,
hydrodynamics, wind
surface area
1.5. Installation
1.5.1 Site Selection and civil works, earth
Preparation movements,
foundations, piling,
load capacity, use of
explosives, fences,
roads, bridge,
embankment, dike,
dam
1.5.2. Heavy Lifting lifting means
availability,
exceptional loads
1.5.3. Vessels Availability special vessels, surfers,
and Capability supply, barge, tugs,


Reference
cranes, ROV, heave
compensation
1.5.4. Connectivity and pipes, cables,
Interfaces transmission,
electrical, hydraulics,
gaseous, data
1.5.5. Constructability clearances,
congestion, site
configuration changes,
out of gauge
1.5.6. Flowlines pipe, welding, pigging,
loops, diameters,
thickness, corrosion,
insulation, surface
treatment, tightness,
lay down, J-lay
1.5.7. Risers & Umbilicals tensioning, insulation,
coating, assembly,
towing, lay down,
welding
1.5.8. Manifolds & XMas procurement,
tree handling, test, stack-
up, ROV panels
1.5.9. Tie-ins metrology, spools,
flanges, lay down
1.5.10. Clashes collisions,
interferences,
bottlenecks
1.6. Commissioning &
Hand over
1.6.1. Equipment Control pressure, flow,
and Test temperature, power,
gas, fluids
1.6.2. Reworks late modifications,
unconformity, fail to
start
1.6.3. Start-up sequence, shut down,
heating, compression,
power supply, alarms
1.6.4. Handover to documentation,
Operations interfaces, manuals,
vendor quality,
remaining contractual
issues


Reference
2. External
2.1. Public Acceptance
2.1.1. Compensation financial,
Plans infrastructures,
education, goods,
employment
2.1.2. Media media plan, contacts,
campaigns
2.1.3. Local Community expectations,
disturbances, damage
to third parties,
neighbors
2.1.4. NGOs knowledge, relations
2.2. Local Environment
2.2.1. Rules & Culture customs, cross-cultural
management, religious
beliefs
2.2.2. Security criminality, sabotage,
kidnapping, theft,
terrorism, insurgency,
corruption
2.2.3. Near Industrial clashes, interferences,
Sites pollution
2.3. Health & Safety
2.3.1. HSE Requirements HSE directive, safety
reports, authorizations
2.3.2. Accidents lost time injury,
fatalities / injuries
2.3.3. Local Facilities Hospitals, MEDEVAC,
Civil Infrastructure
2.4. Environment
2.4.1. Atmospheric wind, rain, frost or
Conditions thaw, snow, heat,
forest fire
2.4.2. Sea Conditions water depth, loop
currents, strong heave,
hurricane season
2.4.3. Flora and Fauna light, noise, air, water
contamination, wildlife
protection
2.4.4. Pollution accidental discharge of
oil, gases, chemicals,
contaminated wastes,


Reference
effluents, thermal flux,
biocides, dust
2.4.5. Contamination contaminated area,
explosives, mines,
shallow / above /
underground hazards,
unidentified networks
2.4.6. Waste waste / reservoir fluid
management,
treatment, storage,
discard, recycling,
flaring
2.4.7. Natural Hazards earthquakes, flooding,
landslides, volcanoes,
tsunami
2.5. Labor
2.5.1. Available unemployment,
Resources turnover, key role
coverage, international
mobility,
2.5.2. Local Content
2.5.3. Cost
2.5.4. Strikes
3. Political
3.1. Legal / Regulatory
3.1.1. Regulations and stability, election,
Laws referendum, changes
in tariffs, quotas,
market mechanisms
3.1.2. Energy and Climate Stability, grid
Policies connection, pricing,
volume requirements.
Flaring, pollution
3.1.3. International OPEC, international
Policies communities, leagues,
conflicts, war, border
issues
3.1.4. Recourse & legal access,
Remedy independent justice,
arbitration
3.2. Local Government
3.2.1. Political Stability
3.2.2. Government
Interference


Reference
3.2.3. Corruption
3.3. Permits
3.3.1. Authorizations national, regional,
local
3.3.2. Authorities concession, contracts,
Approval delays
3.3.3. Land Allotment land use planning,
right access, way
leave, leases,
compensation, general
interest, expropriation
3.3.4. Custom Clearance clearance, export /
import taxes,
normalization,
standards,
requirements,
documentation
3.3.5. Visa & Work resources mobility,
Permits delays
4. Contractual
4.1. Revenues
4.1.1. Scope energy prices, spot
price, by-products,
rents
4.1.2. Demand alternatives, market
saturation,
competition,
commitment terms
4.2. Market/Commercial
4.2.1. Business Cycle economic
growth/recession
4.2.2. Market Situation cost escalation, bulk
material availability,
price volatility, market
maturity, knowledge,
demand
4.2.3. Volume Capacity sales reduction, export
capacity, scope control
4.3. Rates
4.3.1. Exchange Rate fluctuation, volatility
4.3.2. Inflation price revision,
indexation, volatility
4.3.3. Interest Rates credit worthiness, cost
of capital, re-financing


Reference
4.4. Financial
4.4.1. Credit lenders interference,
source of funds,
seniority of debt,
credit worthiness,
derivative, hedge,
swap
4.4.2. Insurance mechanical
breakdown, collision,
third party liability,
theft, property loss,
business interruption
4.4.3. Cash Flow cash in/out planning,
Management payment terms,
working capital
requirements
4.5. Contracting
4.5.1. Operatorship concession, buyback,
specifications,
4.5.2. Tendering technical
specifications,
requirements, bids
evaluation
4.5.3. Shareholders agreements, new
partner, loss of
financial shareholder-
ship
4.5.4. Approval decision process, lead
time, conflict of
interest, compliance
4.6. Resolution
4.6.1. Force Majeure sabotage, war,
insurrection, terrorism
4.6.2. Contractors Default bankruptcy, willful
noncompliance,
Performance
4.6.3. Dispute contractual ambiguity,
renegotiation
4.6.4. Claim & Penalties claim management,
change order request,
compensation,
negotiation
5. Organization


Reference
5.1. Project
Management
5.1.1. Roles & key personnel,
Responsibilities contractors, stability,
remote teams
5.1.2. Decision Process change management,
external factors,
shareholders /
stakeholders’ relations
5.1.3. Interfaces packages number,
scope,
5.1.4. Contractors variation orders,
supervision,
(sub)contractors
coordination,
performance
5.2. Objectives
5.2.1 Budget resources,
contingencies
5.2.2. Schedule constraints, fast track,
packages links, logical
sequence, critical path,
float management
5.2.3. Scope milestones, incentive /
penalties scheme
5.2.4. Estimates robustness, scope of
work definition,
accuracy, quantities,
calculation
5.3. Resources
5.3.1. Skills & availability, training
Competences capacity, tutoring,
knowledge,
experience, best
practices
5.3.2. Services quality, availability
5.3.3. Mobilization/ man-hours estimates /
Demobilization planning, hiring,
redeployment,
turnover, transfers,
5.3.4. Accommodation living quarters, offices,
catering, flotel, camp,
protection
5.4. Supervision


Reference
5.4.1. QA/QC resources, control &
audit plan, inspections,
unconformity
treatment
5.4.2. HSEQ personal protection,
equipment, safety
records, medical
facilities, medevac
5.4.3. Contractors progress, reports,
milestones,
inspections
5.5. Information
Management
5.5.1. Documentation reporting, procedures,
guidelines, technical
standards, archive
5.5.2. Data data management,
communications, back-
up, storage,
confidentiality
5.5.3. Communication communication to
third parties, press &
media management

ANNEXURE
EPC Project Charter
E
E.1 DEFINITION
Project charter is defined as “a document issued by the project initiator or sponsor that formally
authorizes the existence of a project and provides the project manager with the authority to
apply organizational resources to project activities.” The key word in this definition is “authority.”
It authorizes both the project and the project manager.
Following list mentions key information that the charter should provide, either directly or by
reference, including:
• Requirements
• Business needs
• Summary schedule
• Assumptions and constraints
• Business case, including return on investment
E.2 STANDARD TEMPLATE
This section presents standard template for Project Charter that should be used as a part of Value
Assurance (VA) Process.

Project
PROJECT CHARTER
Month - Year
Project Sponsor – Asset

S No Contents Page No.
1 Introduction and Summary …………………………………………… 3
2 Goal / Objective …………………………………………… 3
3 Business Benefits …………………………………………… 3
4 Project Cost …………………………………………… 4
5 Project Economics / Payback …………………………………………… 4
6 Project Scope …………………………………………… 5
6.1 … Gas Processing Facility …………………………………………… 5
6.2 … Wellhead, Surface Fittings, Feeder Line and Sales …………………………………………… 5
Gas Line
7 Project Execution Strategy …………………………………………… 6
7.1 Project Milestones and Deliverables ……………………………………………
8 Project Conditions …………………………………………… 7
8.1 … Project Assumptions / Constraints …………………………………………… 7
8.2 … Project Risks …………………………………………… 7
9 Resources Requirements …………………………………………… 7
10 Project Plan …………………………………………… 11
11 Approval …………………………………………… 11
12 Annexures …………………………………………… 12
1- Project Approval Note
2- Project Economics / Payback
3- Gas Composition
4- Evaluation Criteria
5- Risk Matrix with Post Mitigation Plan
6- Project Organogram
7- Land Acquisition Details
8- Detailed Project Plan / Schedule

– End of the Framework Document –

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Management System Document

Value Assurance Framework (VAF)

Doc No Title Latest Issue Approval

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 1 of 102

Document Title Value Assurance Framework (VAF) For Projects

Revision Level 0.00

Issuance Date 25 January 2024

Status Approved Draft / Review / Final /

Circulation For use within PPL and its subsidiaries only.

18-Sep-2023 0.0 Draft for approval

10-Jan-2024 1.0 Recommended by Manuals Committee

25-Jan-2024 1.0 Incorporation of review comments

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 2 of 102

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 3 of 102

Aug 2006 Jul 2016 Dec 2018 May 2023

Budgeting process Gate Approval Process Internal Audit

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 4 of 102

S No Name Designation Signature & Date

General Manager (Exploration &

Mohammad Khalid Chief Financial Officer

Chief Operating Officer

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 5 of 102

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 6 of 102

b DOCUMENT CHANGE HISTORY …………………………………………… 6

c TABLE OF CONTENTS …………………………………………… 7

d LIST OF TABLES …………………………………………… 12

e LIST OF FIGURES …………………………………………… 13

g ABBREVIATIONS & ACRONYMS …………………………………………… 15

2 PROCESS GOVERNANCE …………………………………………… 23

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 7 of 102

3 PROJECT TOLLGATE PROCESS …………………………………………… 27

4 PROJECTS CLASSIFICATION …………………………………………… 36

5 APPROVAL AUTHORITY …………………………………………… 40

6 PROCESS EXECUTION …………………………………………… 41

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 8 of 102

7 COST ESTIMATION …………………………………………… 58

8 PROJECT SCHEDULING …………………………………………… 67

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9 PROJECT RISK MANAGEMENT …………………………………………… 69

10 ASSOCIATED BUSINESS PROCESSES …………………………………………… 73

B BUSINESS CASE ECONOMICS …………………………………………… 82

C VALUE OF INFORMATION ANALYSIS (VoI) …………………………………………… 84

D RISK BREAKDOWN STRUCTURE (RBS) …………………………………………… 87

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 10 of 102

E EPC PROJECT CHARTER …………………………………………… 99

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 11 of 102

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1 a-1 Business process evolution in PPL …………………………………………… 4

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There is no revision history since this is the first issue.

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There is no revision history since this is the first issue.

TABLE g-1: Abbreviations & Acronyms

S No Acronym Full Form

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S No Acronym Full Form

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There is no revision history since this is the first issue.

1.2 PROJECTS & ASSETS CLASSIFICATION

VALUE ASSURANCE FRAMEWORK (VAF) FOR PROJECTS Page 17 of 102

1.3 SCOPE OF APPLICATION

Existing Businesses Business Financial

Core Business Diversification NOTE: No projectized