Effective: June 2012
Petroleum Development Oman L.L.C.
Document Title: Project Engineering Code of Practice
Document ID / CP-117Document Type / Code of Practice
Security / Unrestricted
Discipline / Project Engineering
Owner / Engineering Project Delivery Manager
Issue Date / June 2012
Revision / 5.0
This document is the property of Petroleum Development Oman, LLC. Neither the whole nor any part of this document may be disclosed to others or reproduced, stored in a retrieval system, or transmitted in any form by any means (electronic, mechanical, reprographic recording or otherwise) without prior written consent of the owner.
This page was intentionally left blank
iDocument Authorisation
Authorised For Issue– June 2011
iiRevision History
Revision No. / Date / Author(s) / Scope/Remarks5.0 / June 2012 / Paul Sanders UEP/5 / Update to reflect changes in processes and standards, and to make the document more accessible.
4.0 / January 2011 / Anton Brouwer/ Mike Turberville / Update/roll-out
4.0 / May 2010 / Anton Brouwer/ Mike Turberville / Major Update to reflect improvements in processes and standards in Project Delivery implemented since the last revision
3.0 / June 2004 / Austin Isaac UEJ1 / Alignment with Opportunity Realisation Process, Minimum Standards and Global Processes.
2.0 / April 1999 / Ohi Aikhoje, OTE4 / Incorporates comments from engineers, CFDH’s and recommendations from external reviews and audits.
1.0 / August 1998 / Paul Hagemeijer, OME1
Jyoti Kumar Das, OT1/32
Graham Bolam, UEII
Various Project Engineers / Initial issue.
Note: Originally conceived as an ERD and then converted to a Code of Practice under the new PDO Policy Cascade
iiiRelated Corporate Management Frame Work (CMF) Documents
The related CMF Documents can be retrieved from the Corporate Business Control Documentation Register.
TABLE OF CONTENTS
iDocument Authorisation......
iiRevision History......
iiiRelated Corporate Management Frame Work (CMF) Documents......
1Introduction......
1.1Purpose......
1.2Target Audience......
1.3When and how should CP-117 be applied?......
1.4Scaling the CP-117 requirements......
1.5Reference documents......
1.6Document Owner......
1.7Document Hierarchy......
2Opportunity Realisation Process......
3Project Delivery Organisations within PDO......
3.1Asset Directorates, Central Project Delivery and Functional Directorate......
3.2Delegated Project Delivery Responsibilities......
3.2.1Central Concept Engineering Team......
3.2.2FEED Office......
3.2.3Central Project Delivery......
3.3Asset - CPD - Function Relationship......
3.3.1Facilities Engineering Leadership Team (FELT)......
3.3.2Corporate Functional Discipline Heads (CFDH) Forum......
4Project Governance and Assurance......
4.1Project Governance......
4.2Project Assurance......
4.2.1Pre-DG4 Assurance......
4.2.2Post DG4 Assurance......
4.2.3Project Controls and Assurance Plan......
4.2.4Assurance Activities Post DG4......
5Key Project Activities......
5.1Front End Loading (FEL)......
5.1.1Concept Engineering......
5.1.2Basis for Design (BFD)......
5.1.3Front End Engineering and Design (FEED) and Project Specification......
5.2Project Execution Planning (PEP)......
5.3Risk and Opportunity Management......
5.4Operations Readiness......
5.5Management of Change......
6Project Execution Activities......
6.1Detailed Design......
6.2Procurement......
6.3Construction......
6.3.1Construction Definition......
6.3.2Construction Objectives......
6.3.3Construction Planning......
6.3.4Mechanical Completion......
6.3.5Pre-Commissioning......
6.4Commissioning and Start-Up......
6.4.1Commissioning......
6.4.2Pre-Start-up Audit......
6.4.3Ready for Start-up (RFSU)......
6.5Project Close Out......
7Contracting and Procurement......
7.1Contracting......
7.1.1Contracting Governance Structure......
7.1.2Contracting and Procurement Activities & Deliverables......
7.1.3Contract Owner, Holder & Contract Engineer Responsibilities......
7.1.4Tendering Process Pre Contract Award......
7.1.5Execution Process Post Contract Award......
7.2Procurement, Materials Management & Logistics......
7.2.1Procurement......
7.2.2Vendor List Control......
7.2.3Inventory Management......
7.2.4Logistics Services......
8Project Services......
8.1Planning and Scheduling......
8.1.1Definitions......
8.1.2Schedule Development......
8.1.3Existing Assets and Integrated Activity Planning......
8.2Cost Estimating......
8.2.1Capex Estimates......
8.2.2Cost Estimate Preparation, Assurance and Approvals......
8.2.3Project Cost Estimates Build......
8.2.4Base Estimate......
8.2.5Contingency - Cost Risk Assessment......
8.2.6Future Market & EPC Premium......
8.2.7Cost Analogues and Benchmarking
8.2.8Estimate Data Collection......
8.3Project Controls......
8.3.1Introduction......
8.3.2Management of Cost......
8.3.3Management of Progress......
8.3.4Management of Change......
8.3.5Management of Risk......
8.3.6Reporting......
8.3.7Project Close Out Reporting......
8.4Project Assurance......
8.4.1Estimate and Schedule Assurance Reviews......
8.4.2Programme Build......
9Quality Assurance......
9.1Discipline Controls and Assurance Framework (DCAF)......
10HSE in Projects......
10.1Introduction......
10.2Application......
10.2.1Mandatory HSE Deliverables......
10.2.2Applicability......
10.2.3ALARP Decisions Context......
10.3Process Safety Management......
10.3.1Statement of Fitness......
10.3.2DEM1 Mandatory Process Safety Design & Engineering Requirements......
10.3.3DEM-2: Process Safety Basic Requirements......
10.4Contractor HSE Management......
11Information Management......
11.1Project Management System (iPMS)......
12Finance in Projects......
12.1Role of Finance in Project Governance......
12.2The Role of Finance within the Project......
13Value Improvement Practices......
13.1Opportunity Framing......
13.2Lessons Learned......
13.3Value Engineering......
13.4Benchmarking of Project Performance......
13.4.1Project Metrics......
13.5Technical Standards Challenge......
13.6Availability Assurance / Reliability......
13.7Constructability......
13.8PEP-PER......
13.9LIRA......
14Project Resourcing and Allocation......
15Technical Standards......
15.1Technical Standards Framework......
15.2DEM1
Appendix 1 – CP-117 Mandatory Requirements......
Appendix 2 –Governing documentation, References and Tools......
Appendix 3 – Abbreviations......
1Introduction
1.1Purpose
This Code of Practice (CoP) is intended to be an instruction manual or “recipe book” for how to manage projects in PDO.
Compliance with the requirements stated in this CoP is MANDATORY for all project development and execution activities.
Application of this CoP is intended to:
-Ensure a common way of managing projects within PDO.
-Facilitate internal and external (shareholder) project approvals.
-Enhance Project Delivery to achieve World Class performance.
This CoP supports the PDO vision:
To be renowned and respected for the excellence of our people and the value we create for Oman and all our stakeholders
1.2Target Audience
The target audience for this CoP is all staff involved in the development and execution of Projects, for example:
-Project Managers and Front End Project Managers
-Project Engineers
-Project Services Engineers
-Project Assurance Engineers
-Contracting and Procurement Staff
-QA/QC staff
-Technical Authorities, as defined in DCAF
-Decision Executives (DE)
-Business Opportunity Managers (BOM)
-Members of Decision Review Boards (DRB)
1.3When and how should CP-117 be applied?
This CoP shall be applied to all PDO Capital Projects.
The CoP requirements should be scaled to match the size and complexity of the various Projects, and the scalability is defined in various sections of this document.
Throughout the document a distinction is made between Mandatory and Non-mandatory requirements through the use of the words “shall” (Mandatory) and “should” (Non-mandatory). Non-mandatory activities are indicated for good practice and guidance.
Deviations from the Mandatory requirements shall require formal approval from the CFDH (and TA-1) for Project Engineering (in accordance with SP-2061 – Technical Authority System).
Although CP-117 does not apply to Field Change Proposals (FCPs), the elements described here are equally applicable to FCPs.
1.4Scaling the CP-117 requirements
In order to scale the CP-117 requirements, it has been assumed that Projects with higher Capex values generally have higher business risks and complexity, and therefore warrant a higher degree of project management, governance, planning and controls. A simple categorisation of the Mandatory requirements based on Capex is given in Appendix 1.
However, some Projects of lower Capex value may have significant complexity, business criticality, strategic importance, HSE exposure or other factors which also warrant a high level of attention.
The Business Opportunity Manager (BOM) or Project Manager (or Portfolio Manager) is responsible to recommend in which category a particular Project falls, and have this decision endorsed by the Decision Executive (DE). This decision shall provide the guidance for level of application of processes and tools defined in this Code of Practice.
1.5Reference documents
Appendix 2 contains links to the Corporate Management Framework portal (for PDO Governing documents) and Shell iPMS (for Reference documents). Via these two links the most up to date versions of the documents are available. Appendix 2 also lists the PDO Governing Documents, Reference Information and Tools which are relevant to each Section of this Code of Practice.
1.6Document Owner
This document is owned by the Corporate Functional Discipline Head (CFDH) and Technical Authority level 1 (TA-1) for Project Engineering, UEP, who is responsible for its regular update to reflect relevant internal and external learning’s and the best practices in project delivery.
UEP holds Functional responsibility for Project Delivery.
For any questions or clarifications relating to CP-117, please contact UEP or UEP/5. For questions on specific sections of CP-117, support contacts are indicated at the end of each section.
1.7Document Hierarchy
CP-117 forms part of the PDO Corporate Management Framework (CMF).
This CoP is designed to implement PDO Policies and to specify the usage of other PDO Codes of Practice, Specifications, Procedures and Guidelines as applicable to Engineering Projects.
This CoP is also intended to embed the principles and processes of Opportunity Realisation as provided in the Shell Opportunity Realisation Manual (ORM). It further reflects the intent of all Shell Project Standards (PS), and specifies the usage of certain Shell Project Guides (PG) and Procedures, where these are consistent with PDO strategic objectives.
PDO’s strategic objectives are indicated in the Diagram below:
PDO’s Strategic Objectives
Where other documents are specified for usage, the reference will also indicate whether the documents are Mandatory or Non-mandatory. A Diagram of the Corporate Management Framework is given below:
2Opportunity Realisation Process
Support: UCI, UEP
The Opportunity Realisation Process (ORP) is PDO’s process for managing Projects.
Applying the ORP is Mandatory for all Projects and deviation from the ORP requires approval from the relevant Project Decision Executive.
The underlying premise is that Project Success comes from:
–Setting up the Project for success with realistic and achievable goalsfrom the outset.
–Taking good quality decisionsand involving the right people in a clear governance structure.
–Safeguarding the valueacross the entire project lifecycle.
The foundation of the ORP is the provision of:
•A decision-driven, stage-gated process which encourages good preparation, planning and appropriate assurance in the execution and delivery of an opportunity.
•A clear governance structure for the opportunity.
•Clear roles, responsibilities and competences for the people who lead and staff the opportunities.
A project only moves as fast as the decisions are taken, and it is important to take Quality Decisions.
The ORP splits the Project into six phases:
At the end of each phase, up to and including the Define phase, there will be a decision point called the Decision Gate (DG) where the Decision Executive (DE) will decide whether the project is ready to proceed to the next phase. The readiness-to-proceed depends on satisfactory closure of the preceding phase and sufficient business drive, budget and resources to complete the following phase.
Each Decision Gate has 3 potential outcomes:
- Project is given Permission to Proceed.
- Project is told to Stop. (Project is dropped because it is not economic, is not aligned to PDO’s strategic objectives, or does not have sufficient resources).
- Project is told to Go-back. (Project has to do more work in the current phase to achieve further definition and/or see if there is a Techno-Economic Solution Space).
The project team should only go to the decision gate if they have sufficient information for the DRB to decide on one of the outcomes. If the project team has the information early (e.g. the project should “Stop”) then they should hold the decision gate early.
The objective of each Decision Gate is as follows:
PhaseGateObjective
IdentifyDG1Do we understand what we’re starting?
Do we understand how to exit, if required?
AssessDG2Have we identified a full range of strategies and scenarios?
SelectDG3Have we selected the optimum alternative?
DefineDG4Is everything in place to ensure success?
Once the Project has been operating for some time, there is a look-back (DG5) where lessons learned are captured to be fed-back into future Projects.
The table below illustrates the ORP at a high level with key activities for each of the ORP phases. The key deliverables for each phase are discussed elsewhere in this document.
Identify / Assess / Select / Define / Execute / OperateInitiate Project:
Generate ideas. Verify alignment with business strategy, establish potential value and decide whether to fund and staff. / Demonstrate feasibility of the Project:
Assess a complete range of alternative concepts against a complete range of possible outcomes, in the context of all attendant risks: Technical, Economic, Commercial, Organizational, Political. / Select the best concept solution:
Assess the best concept for delivering value from the Project and indicate why other choices are not preferred. / Define the selected concept:
Define technical scope, cost and schedule for Final Investment Decision. / Deliver the promise:
Deliver an asset consistent with the forecast scope, cost and schedule.
Leads to hand-over decision to user for Operate phase. / Start-up, operate and evaluate:
Ensure performance specifications are met. Maximize return to shareholders. Protect License to Operate.
For further details, refer to the Opportunity Realisation Manual (ORM) and Opportunity Realisation Guide (ORG).
The ORP specifies a number of mandatory actions and deliverables:
•Project (Opportunity) Framing, and Re-Framing at each Decision Gate.
•Project (Opportunity) Roadmap (Decision-Based Roadmap).
•Stakeholder Management Plan.
•Risk and Opportunity Management Plan.
•Project Assurance Plan.
3Project Delivery Organisations within PDO
Support: UEP
3.1Asset Directorates, Central Project Delivery and Functional Directorate
PDO’s Projects are delivered through a matrix organisation.
Asset Directorates
The accountability for the initiation, development, business planning and execution of all Projects, ranging from Field Change Proposals (FCP) and minor brown field modifications to major green and brown field developments, rests with the four respective Asset Directorates: Oil North (OND), Oil South (OSD), Infrastructure (UID) and Gas (GD).
Functional Directorate
The Engineering and Operations Function Directorate (UEOD), and the Functional Project Engineering Delivery Team (UEP), through the skillpool managers and the Corporate Functional Discipline Heads, support the Assets in the delivery of Projects by;
•setting and maintaining the technical and operational standards, procedures and guidelines;
•verifying compliance against these standards and providing effective independent technical assurance;
•providing and improving the necessary technical capability (resources, tools and systems);
•ensuring PDO’s resources are deployed in the best interest of the Company and the development of individual staff concerned;
•providing an effective knowledge sharing framework and delivering timely technical expertise where necessary;
•providing cost estimating, scheduling, planning and Information Management expertise for all PDO projects
Central Project Delivery
The responsibility for managing the execution of major projects (> $200mln) on behalf of the Assets has been delegated to the Central Project Delivery (CPD) department. See section 3.2.3
In principle, the Asset Directorates and CPD are resourced to be self sufficient with a full complement of project engineering delivery staff as necessary to deliver the complete range of Projects. However resources may reside organisationally in one of the Functions (e.g. cost estimating staff, rotating equipment engineers, Contracting & Procurement, Finance technical HSE), where this helps to maintain a critical mass and facilitates easy sharing of limited resources and expertise between assets and projects.
3.2DelegatedProject Delivery Responsibilities
Whilst the accountability for Project Delivery ultimately rests with the Asset Directorates, the responsibility for parts of the delivery can be delegated by the Asset to other parts of the organisation (e.g. Concept Team, FEED office, CPD), as described below in this section.
Other key delivery activities, executed by the Functions during the Define phase (e.g. Resourcing, Cost estimating, Contracting & Procurement) are further described elsewhere in this CoP.
3.2.1Central Concept Engineering Team
The concept development and selection of all major Sour and EOR Projects (with an estimated CAPEX above $200mln, depending on the strategic value) is normally carried out in the Central Concept Engineering Team (CCET), co-located in the Development Study Centre (DSC).
The decision regarding where the Concept Selection should take place (i.e. in the Asset or in the CCET) lies with the Decision Executive (DE), supported by the DRB.
3.2.2FEED Office
The Front End Engineering Design (FEED) of projects with an estimated CAPEX above $100mlnshall, by default, be executed by the in-house FEED office. Deviation from this default requires UEOD approval. Projects of smaller size, but of strategic value (e.g. sour projects) can also be carried out by the FEED office, subject to mutual agreement between Function and Asset and subject to FEED office capacity.
3.2.3Central Project Delivery
The Central Project Delivery (CPD) group is responsible for the execution of major Projects (>$200mln).
CPD will be a “centre of excellence” for Project Delivery. CPD is designed to:
•Enhance standardization, repeatability and dissemination of lessons learned/best practices.
•Manage projects according to the latest process and procedures, with particular emphasis on risk and change management.
Major Projects (generally >$200 mln) move to the Central Project Delivery group at DG3 and the CPD team is then responsible for delivering these Projects on behalf of the Assets.As the centre of excellence, CPD will also run certain portfolios of projects which fit segmentation themes (e.g. high sour, high pressure, thermal EOR, chemical EOR, etc.). In addition, projects which are particularly complex, contain prototypes or new technology, or have high strategic or reputational importance may also be executed under CPD.
Pre-DG3 projects which are likely to be in the CPD portfolio should be identified and agreed between CPD and the Asset Directors during the Program Build, and will be assigned Project Engineering support accordingly. The final allocation decision will be made by the DE (in consultation with the DRB) at DG3, and endorsed by the relevant Asset Director and Technical Director (TD).
3.3Asset - CPD - Function Relationship
The matrix delivery approach described above is reliant on a strong relationship and good collaboration between the Asset, the Function and CPD. This requires clear Roles and Responsibilities, interfaces and communication lines. Two formal interactions are defined, the FELT and CFDH Forum:
3.3.1Facilities Engineering Leadership Team (FELT)
The Facilities Engineering Leadership Team (FELT) is made up of the Engineering Managers from the various assets (Oil North, Oil South, Gas and Infrastructure), the Project Managers for major projects (Rabab Harweel, Yibal Khuff, Budour), the Manager of Central Project Delivery, the Function represented by the Project Delivery Manager (UEP), and the C&P Head of Capital Projects (FPO). Other Project Managers or Functional representatives are called to attend as required. The FELT is chaired by the Engineering and Operations Functional Director (UEOD).