CPDEP and VIPs/BPs
Chevron Project Development and Execution Process and Value Improving / Best Practices
6-Oct-97
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Value Improving Practices - Definition Value Improving Practices / Best Practices are tools to improve project planning and execution. In conjunction with a structured process like CPDEP, they can optimize: • Cost • Schedule • Performance • Safety
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CPDEP & VIPs - Impact of VIPS RELATIVE CAPITAL COST AS A FUNCTION OF FEL 1.2 Original Benchmark Position 1991
t s o C l a t i p a C e v i t a l e R
1.1 1994 1996
1992
FEL Improvement Only
1.0 Industry Average Cost = 1.0
1 1 9 9 1 9 9 4 1 9 9 2 1 9 3 9 9 9 5 6
0.9
Upstream Downstream
FEL Improvement plus VIPs
Best Practical
Good
Fair
Poor
FEL Rating 6-Oct-97
3
Project Management Vision High
Ability to Make Right Decisions
Random Success
Consistent Success
• Good Projects
• Good Projects
• Average Execution
• Good Execution
Mid Success Unlikely
Random Success
• Poor Projects
• Poor Projects
• Poor Execution
• Good Execution
Low
Mid
High
Ability to Implement Decisions in Best Way Possible
6-Oct-97
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VALUE IMPROVING / BEST PRACTICES for CHEVRON PROJECT DEVELOPMENT AND EXECUTION PROCESS Phase 1 Identify & Assess Opportunities
Phase 2 Generate & Select Alternatives
Phase 3 Develop Preferred Alternative
Phase 4 Execute
Phase 5 Operate & Evaluate
• Decision Analysis • PEP Workshop • Technology Selection • Project Facility Objectives
• Value Engineering -Process Simplification
• Value Engineering -Facility Optimization
• Design to Capacity -Levels for Equipment
• Design to Capacity -Implement
• Equipment & Material Alliances
• Process Hazard Analysis
• Post Project Assessment (IPA)
• Business Evaluation (GO-36)
• Zero Injury Techniques • Project Standards • Predictive Maintenance • HES Optimization • Reliability Modeling • Energy Optimization • IPA Pre-A/R Assessment • Constructability Review $ EST
D
PFD
Legend: A/R = Appropriation Request D = Decision Point
$ EST
D
P&ID
GO-36 = A/R Form HES = Health, Environment, and Safety IPA = Independent Project Analysis, Inc.
D
A/R
D
D
PEP = Project Execution Planning PFD = Process Flow Diagram P&ID = Piping & Instrumentation Diagram CPDEP Timeline/ACT- 9/15/97
Value Improving Practices (VIPs)
6-Oct-97
•
Decision Analysis
•
Constructability Review
•
Project Execution Planning
•
Process Hazards Analysis
•
Technology Selection
•
Zero Injury Techniques
•
Project Facilities Objectives
•
Predictive Maintenance
•
Value Engineering
•
Reliability Modeling
•
Design-to-Capacity
•
IPA Pre-A/R Assessment
•
Equipment & Material Alliances
•
Post Project Assessment (IPA)
•
Project Standards
•
Business Evaluation (GO-36)
•
HES Optimization
•
Energy Optimization
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CPDEP & VIPs - VIP Definitions Decision Analysis - DA and D&RA are processes to compare and decide among various alternatives by quantifying the risks and uncertainties inherent in the financial outcomes (i.e., NPV, ROR) of the alternatives. Project Execution Planning - A tool for strategic planning whose purpose is to maximize the probability of project success. It facilitates alignment and decision-making, promotes team building, addresses who, what, why, when, where and how, identifies issues and action items, assures communications, consistency, coordination and control, and has a high impact on project outcome. Technology Selection - Starting with the business driver, this process is used to select and evaluate alternative technologies. Technologies may range from new processing types to equipment selection. Using a selection panel and evaluation criteria aligned with the business driver, the various technologies are researched, developed and evaluated . Project Facilities Objectives - This tool is used to determine the type of facility that is to be designed and constructed. There are nine evaluation characteristics. These characteristics range from capacity to expandability, and maintainability to plant life. Each characteristic is placed into one of four categories ranging from category 1 (low cost) to category 4 (high cost). Value Engineering - Using a structured creative process, this tool uses functional analysis of the project components to identify potential areas for improvements and suggests recommended improvement options. Design to Capacity - This tool optimizes the capacity needed to meet the design conditions stated in the business objectives. Equipment is identified as one of three levels ranging from level one (low cost) to level three (high cost). Equipment & Material Alliances - Long-term and mutually beneficial relationship between owner and one supplier / contractor based on performanc, trust, respect, and commitment. There is no competitive bidding. 6-Oct-97
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CPDEP & VIPs - VIP Definitions Project Standards - Industry standards are used as the starting point for standards. Then limited Chevron incremental specifications are added as a supplement. HES Optimization - The HES Risk Management process is used to identify, assess, and develop plans to maximize value by managing significant risks. Four risk areas are included: personnel & public health/safety, environmental, financial (due to HSE incidents), and public concern. Risk reduction measures (prevention or mitigation) are evaluated on a cost benefit basis to ensure efficient resource allocation. Energy Optimization - A methodology for optimizing capital cost, operating cost and operability of process unit, utility system or manufacturing site by identifying the most economical levels of heat recovery and power generation by integrating thermodynamic analysis, economics data, and conceptual design. Constructability Review - This tool uses construction knowledge in the planning, design and construction of facilities. Several formal reviews and checklists are used to ensure issues are identified early. Process Hazards Analysis - Process Hazards Analysis addresses the various design and safety reviews performed by a project team. These include the normal design/safety reviews and the design/safety reviews required by regulation. The process defines a roadmap for performing the various analyses at the appropriate time. Zero Injury Techniques - Techniques that produce excellent safety performance on construction projects: safety preproject / pre-task planning, safety training orientation, safety incentives, alcohol / substance abuse program, accident and incident investigation. Predictive Maintenance - Using advances in instrumentation and sensor technology to monitor machinery performance and make repairs prior to failure. The characteristics monitored include: heat, lubrication, vibration, noise.
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CPDEP & VIPs - VIP Definitions Reliability Modeling - This tool uses computer modeling to simulate the reliability of a facility. The model required data for mean failure times and repair times for equipment. Use of model canhelp predict operating factors and is used in the selection of key equipment. IPA Pre-A/R Assessment - An assessment of project progress and quality, performed in CPDEP Phase 3. Rates project against IPA database of similar projects. The assessment establishes the FEL Index, recommends project contingency based on known information, rates project cost estimates, and recommends schedule. The FEL Index is required for GO-36 on projects over $25MM. Post Project Assessment (IPA) - A collection of end-of-job data. It is conducted at the end of Phase 4 and i s performed by IPA. The Downstream assessment uses the IBC data collection form while the Upstream assessment uses the new IPA data collection form. Assessments help to improve estimates for future projects, and the cost ratios developed help with Class 0 and 1 cost estimates for future projects. Business Evaluation (GO-36) - An evaluation of achieved project success, measured against: original project objectives, economic measures, realized economics, plant performance, and product/price forecasts vs. actual. The GO-36 form defines the timing and objectives. Normally the first evaluation is in two years or at full production.
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Decision Analysis
Decision Analysis
6-Oct-97
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Decision Analysis - Definition DA and D&RA are processes to compare and decide among various alternatives by quantifying the risks and uncertainties inherent in the financial outcomes (i.e., NPV, ROR) of the alternatives.
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Decision Analysis - Abstract DESCRIPTION: DA and D&RA are processes to compare and decide among various alternatives by quantifying the risks and uncertainties inherent in the financial outcomes (i.e., NPV, ROR) of the alternatives. APPLICATION: DA can be applied during any phase of CPDEP when a decision among one or more alternatives is required. DA is often used during Phase 1 to study viability and identify economic drivers of a concept. Also, DA is often used during Phase 2 to quantify the risks and select among the various alternatives. DETAILS: A DA study involves a multi-discipline work team to analyze the problem and recommend a decision. A decision review board periodically reviews the work team output and provides guidance. The DA process consists of four key steps which include:
Framing the problem to assess the initial situation. Sensitivity analysis to determine ranges of outcome for the alternatives. • Probabilistic analysis to determine ranges of outcome for alternatives. • Appraisal to evaluate the quality of the decision and the value of gathering additional information. • A DA study is typically led by an experienced facilitator. COST & BENEFITS: Numerous DA studies have been conducted by all of the major Chevron opcos. The scope of the decisions has ranged from small projects costing less than $1 MM, to large capital projects costing several hundred million dollars overall. Typical duration and cost of DA range from less than one day and a few thousand dollars to several months duration and exceeding $1 MM. CONTACT: •
M. T. (Mani) Vannan, (CTN) 842-8306, (e-mail: MTVA) PRODUCTS AND SERVICES: Decision Analysis Flowchart (SP-14) ON-LINE RESOURCES: CPDN Decision Analysis/Decision Quality Page CPTC E&S Risk Management Page External On-Line Resources 6-Oct-97
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Project Execution Planning
Project Execution Planning
6-Oct-97
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Project Execution Planning -
Definition
A Project Execution Plan is a tool for strategic planning whose purpose is to maximize the probability of project success. • Facilitates Alignment and Decision-Making • Promotes Team Building • Addresses Who, What, Why, When, Where and How • Identifies Issues and Action Items • Assures Communications, Consistency, Coordination and Control • High Impact on Project Outcome
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Project Execution Planning -
Abstract
DESCRIPTION: PEP is a tool for strategic planning - a means to get all project stakeholders to work as a team in order to plan and make decisions that will determine the project's path and success. It facilitates communication and decision-making, defines issues and risks, and defines answers to the classic questions of Who, What, Why, Where, and How. APPLICATION: The process creates active involvement of the key stakeholders and the pr oject team in project planning and alignment. PEP focuses on developing the project strategies that support the Company's strategic, business, and project execution objectives. DETAILS: A plan is first produced in the earliest stages of a project and then kept up-to-date, always reflecting the latest developments and business conditions. It is a guide for everyone involved with the project. PEP is done with input from everyone involved in the project. The PEP Workbook makes it easy for a project team to implement a structured process to identify unresolved issues and develop strategies to address these issues. The strategies then form the basis for the plan details. COST & BENEFITS: For large projects, the process requires a series of three facilitated workshops. Experience confirms that the time spent in strategic planning is well spent. Most of the causes of cost overruns and schedule delays have their roots in issues that can be and should have been addressed early.
This structured planning process enables the project team to capture these issues early in the planning process and develop strategies to mitigate the consequences. CONTACTS: R. K. (Bob) Fujimoto, (CTN) 842-9298, (email: BFUJ) N. J. Lavingia, (CTN) 842-9868, (email: NJLA) PRODUCTS AND SERVICES:
Implementation Guide G-10: Project Execution Planning Workbook (G-10) 6-Oct-97
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Project Execution Planning -
Process
Steps in the Process: 1. Frame the Project 2. Planning the Project 3. Planning the Execution Phase
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Project Execution Planning -
Process
1. Frame the Project • Business Objectives • Project Execution Objectives • Scope of Work • CPDEP Implementation Plan
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Project Execution Planning -
Process
2. Planning the Project • Risk Management Plan • Organization Plan • Milestone Schedule • Funding Plan • Contracting Plan
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Project Execution Planning -
Process
3. Define the Plan for Execution & Control • Safety Management Plan • Quality Management Plan • Cost Management Plan • Schedule Management Plan • Information Management Plan • Design Management Plan • Material Management Plan • Drilling/Construction Plan • Start-up Management Plan • Security Management Plan • Special Factors Management Plan 6-Oct-97
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Project Execution Planning -
Process
1. FRAME THE PROJECT A1 Business Objectives
A2 Project Execution Objectives
A3 Scope of Work
A4 CPDEP Implementation Plan
2. PLANNING THE PROJECT B1 Risk Management Plan
B2 Organization Plan
B5 Contracting Plan
B3 Milestone Sched B4 Funding Plan
3. PLANNING THE EXECUTION PHASE C1 Safety Management Plan
C6 Design Management Plan
C10 Security Management Plan
C2 Quality Management Plan
C7 Materials Management Plan
C11 Special Factors Management Plan
C3 Cost Management Plan
C8 Drilling/Construction Management Plan
C4 Schedule Management Plan
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C5 Information Management Plan
C9 Startup Management Plan
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Project Execution Planning -
Process
A. Framing the Project
A1 Business Objectives
A2 Project Execution Objectives
A4 CPDEP Implementation Plan
A3 Scope of Work
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Project Execution Planning -
Process
B. Planning the Project B1 Risk Mgmt Plan
B2 Organization Plan
B5 Contracting Plan
B3 Milestone Schedule
B4 Funding Plan
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Project Execution Planning -
Process
C. Planning the Execution Phase C1 Safety Mgmt Plan C2 Quality Mgmt Plan C3 Cost Mgmt Plan C4 Schedule Mgmt Plan
C5 Infomation Mgmt Plan
C6 Design Mgmt Plan
C7 Materials Mgmt Plan
C10 Security Mgmt Plan
C11 Special Factors Plan
C8 Drilling / Construction Mgmt Plan C9 Startup Mgmt Plan
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Technology Selection
Technology Selection
6-Oct-97
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Technology Selection -
Definition
A formal, systematic process that: • Searches for New Technology • Applies to Processes & Major Equipment • Gives Competitive Advantage • Overcomes Not-Invented-Here Syndrome
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Technology Selection - Definition A formal, systematic process by which an Opco or project searches for and acquires technology which may be superior to that currently employed in its operations. Technology is acquired from all sources, including other divisions within the company and from outside the company.
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Technology Selection - Abstract DESCRIPTION: This is a formal, systematic process by which a project searches for technology which may be superior to that currently employed and improves our competitive advantage. APPLICATION: Ideally, Technology Selection is started very early in Front-End Loading for process selection. Technology selection selection can also be used for equipment equipment and materials materials selection. DETAILS: The 1994 Corporate Strategic Plan reinforces the importance of technology by stating that the Corporation needs to "ensure that technology is used to our competitive advantage".
In Front-End Loading, decisions made can have a major impact on the financial success of the project. Technology chosen without a well thought-out plan can lead to cost overruns, longer schedules (especially start-up), and lost opportunities in the marketplace. The basic process involves commissioning a technology selection team which goes through several basic steps of information gathering, speculation, analysis, development, and presentation. COST & BENEFITS: Technology selection is developed from discussions with benchmark companies and internal teams that have used a technology selection process. Some projects have already used a systematic selection process like the El Segundo Acid Plant or incorporated innovative outside technology such as Tengizchevroil Demercaptanization. CONTACTS:
G.W. (Gary) Fischer, (CTN) 842-5514, (e-mail: FISC) P.C. (Peter) Schmidt, (CTN) 242-5161, (e-mail: PECS) PRODUCTS AND SERVICES: Implementation Guide G-18: Technology Selection (G-18)
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Technology Selection - Ranking Criteria TECHNOLOGY SELECTION POTENTIAL RANKING CRITERIA (Determined by Project Objectives) FINANCIAL
Rate of Return Net Present Value Life Cycle Cost Capital Constraints Low Cost Produce Pr oducerr ENVIRONMENTAL/SAFETY Emissions Incident Rate Potential Future Liability OPERABILITY Feedstock/Rate Feedstock/Rate Variability Product Specification Specification Ease of Handling Upsets MECHANICAL Reliability East of Maintenance Maintenance Utility Requirements Plot Space Constraints East of Retrofit
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WEIGHTING FACTOR
TECHINOLOGY
WEIGHTING FACTOR
Degree of Commercialization Process Risk License Fees Cost of Additional Development Time to Implement Implement Yield Advantage LICENSOR Experience with the Technology Ability Ability to do Total Process Scope Experience with Retrofits OTHER
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Technology Selection -
Selection Process CPDEP
Identification of Asset Needs Deliver Technology Phase 1
Identify Opportunity
Phase 2
Select Alternative(s)
Continue Evaluation
Opportunity Identification
Phase 3
Evaluation & Scope
Identification of Technology Opportunities
Recommend Technology Plan
Select Technology Acquisition Alternative(s)
Recommend Implementation Plan
Acquire / Develop Technology Plan
Identification of New Opportunities
Continue Implementation
Implement
Develop Technology Plan
Acquire Data
Phase 5
Phase 4
Acquire / develop Technology
Implementable Technology
Execute Technology Plan
Assess Against Targets
Operations Review
Operate & Measure
Technology Planning Process 6-Oct-97
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Technology Selection Phase 1
Selection Process
Phase 2
Phase 3
Phase 5
Phase 4
DECISION MAKERS Identify Opportunity
OPERATIONS AND DELIVERABLES AT MAJOR REVIEWS
WORK TEAM
6-Oct-97
Select Alternative(s)
Continue Evaluation
Opportunity Identification
Acquire Data
Evaluation & Scope
Identification of Technology Opportunities
Develop Technology Plan
Recommend Technology Plan
Recommend Implementation Plan
Select Technology Acquisition Alternative(s)
Acquire / Develop Technology Plan
Identification of New Opportunities
Continue Implementation
Implement
Acquire / develop Technology
Implementable Technology
Execute Technology Plan
Assess Against Targets
Operations Review
Operate & Measure
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Technology Selection -
Benefits
• Identifies new technologies that will increase value of project • Identifies technology needs early enough to allow for developing that technology so it will impact a project • Provides additional alternatives for consideration in CPDEP Phase 2
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Project Facility Objectives
Project Facility Objectives
Project Facility Objectives -
Definition
A practice that establishes what quality facility is needed to meet business goals. • Defines nine or more quality characteristics of the facility • Sets criteria for those characteristics • Sets a project philosophy for marginal investment decision-making, design allowances, redundancy, sparing philosophy, and room for expansion.
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Project Facility Objectives -
Abstract
DESCRIPTION: PFOs establish the characteristics of the facility needed to meet business goals. It sets criteria for facility reliability, expandability, automation, life, expected s tream factor, likelihood of expansion, production rate changes with time, product quality, and product flexibility. PFO can be used to set a project philosophy for marginal investment decision-making, design allowances, redundancy, sparing philosophy, and room for expansion. APPLICATION: PFOs should be used on projects of any size and initiated prior to "manning-up" the project. DETAILS: Overall objectives are set early based on information provided by the SBU funding the work. Included in these can be conceptualized descriptions of the expected stream factor, facility life, likelihood of expansion, projected production rate changes with time, product quality, product demand, feedstock availability, feedstock type, degree of commercialization of the technology, etc. These determine the redundancy/sparing philosophy, allowances for future expansion or changes, etc., of facilities necessary to meet the business goals. This process establishes the Project Facility Objectives. PFOs should be revisited during the latter stages of project development. They should also be used to orient new members of the project team. COST & BENEFITS: Initial use of this tool requires only a few hours. PFO help bring all members of the project team into alignment through discussion and consensus. This helps keep the cost of the project down by eliminating needless extra conservatism often designed into a project at lower levels. CONTACTS:
R. K. (Bob) Fujimoto, (CTN) 842-9298, (email: BFUJ) N. J. Lavingia, (CTN) 842-9868, (email: NJLA)
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Project Facility Objectives • Communication tool • Should be revisited during subsequent quality/viability reviews.
• Include input from all disciplines • Business, engineering manufacturing, technical, human resources, transportation, safety, etc.
• Four design categories • Range from low cost, relatively simple, short-lived plants to high cost, complex units
The PFO exercise is often done in conjunction with a Process Simplification Value Engineering Study.
Project Facility Objectives -
Characteristics
• There are nine or more evaluation characteristics: •
reliability
•
likelihood of expansion
•
expandability
•
production rate changes with time
•
automation
•
product quality
•
life
•
product flexibility
•
expected stream factor
• Each characteristic is assigned one of four categories ranging from Category 1 (low cost) to Category 4 (high cost). • Generally, a Category 4 plant costs 30% more than a Category 1 plant
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Project Facility Objectives -
Categories
RANGE from CATEGORY I TO CATEGORY IV CAPACITY
Designed for specific capacity
Over capacity expected
PLANT LIFE
2-5 years
20 + years
PRODUCT QUALITY
Meets specifications at one set of conditions
Exceeds specifications
FLEXIBILITY
Little with limited turndown
A lot with high turndown
MARGINAL INVESTMENT CRITERIA
Not considered even if high payout
Could be less than project payout
EXPANDABILITY
Easier, open plot plan Difficult, tight plot plan
RELIABILITY
CONTROLS
Sparing for orderly shutdown only, less than 80% operating factor.
MAINTENANCE
Simple, labor intensive
Sparing to keep plant up, 95% + operating factor Complex, highly automated Good accessibility, no major maintenance costs contemplated
Little maintenance facilities, high maintenance costs
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Project Facility Objectives -
Table 2
TABLE II PROJECT FACILITY OBJECTIVES - OFFSHORE FACILITIES PERFORMANCE CHARACTERISTICS OF VARIOUS DESIGN CATEGORIES
Category I Minimal, if any, maintenance facilities included in the original facility. For routine maintenance provide limited winch capacity and monorail. No padeye or workshop and minimal layout area. Major maintenance expenditures may be necessary if plant is to continue operation more than 2-5 years. High maintenance costs. Maintenance may be provided by nearby platforms, shorebases, or vessels 2 - 5 years; facility needed temporarily.
Category II Maintenance facilities installed only where experience with specific/critical systems dictates. More hoist capabilit y provided. Major maintenance expenditures may be necessary if plant is to continue operation more than 8-10 years.
5 - 10 years
10 - 20 years
Compliance
Compliance for retrofitted areas. Meets corporate (Policy 530) and opco guidelines.
Compliance for retrofitted areas and environmental equipment. Implements API RP 14C.
Compliance for all process equipment. Implements Safety in Designs guidelines in all areas.
Full compliance for entire facility. Implements API RP 14J and API RP 75.
Constructability
No formal constructability program.
Some concepts used periodically or too late to be of use. Limited project support.
Selected concepts applied regularly.
All concepts consistently considered, evaluated, and implemented. Lessons learned from previous projects are applied. Full project support from field personnel and design, operations, and maintenance management.
Maintainability
Life
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Category III Maintenance facilities and materials handling provided where experience with this type of facility dictates. Maintenance Facilities tend to be permanent with more laydown area, workshops, and cranes. Space also provided for difficult maintenance jobs during normal life of unit.
Category IV Need for temporary maintenance facilities minimized and accessibility for wide use of maintenance equipment provided. More cranes (2-3 pedestal, >40 ton) installed. Justifications for facilities based on anticipation of a long facility life. Major maintenance costs not contemplated over a long facility life. 0-30+ years; to match predicted production curves.
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Value Engineering
Value Engineering
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Value Engineering - Definition A creative and organized method for optimizing the cost and performance of a facility. • Improve decision making in design and construction • Obtain lowest life-cycle cost without reducing quality
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Value Engineering - Definition Value Engineering is a disciplined method used during design aimed at eliminating or modifying items that do not add value to meeting the project’s business needs. or… A creative, organized method for optimizing the cost and performance of a facility with the goal of obtaining the lowest life-cycle cost without reducing quality 6-Oct-97
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Value Engineering - Definition A multi-discipline, systematic, and proactive process that is targeted at the design itself. The objective is to use VE to develop an item or facility which will yield the least life-cycle cost or provide the greatest value, while also meeting all functional, safety, quality, operability, maintainability, durability, and other criteria established for it.
Value Engineering - Abstract DESCRIPTION: VE is a creative, organized approach to optimizing cost and/or performance of a facility or system. A study team identifies items which may not add value or are not aligned with the basic project objectives. VE is conducted during Front-End Loading, CPDEP – Phase 3. APPLICATION: VE, for maximum benefit, should be conducted during process development as process simplification and later on in FEL for facility optimization. VE studies have been conducted on projects as small as $100,000. VE has been used on refinery, chemical plant, environmental, and upstream projects, both domestically and internationally. DETAILS: A Value Engineering Study brings together a multi-discipline team in which most of the members are not directly associated with the project at hand. This brings a fresh perspective with no preconceived paradigms. The study team works under the direction of an experienced facilitator. It follows an established set of procedures to completely review the project in an orderly manner, making sure customer requirements are fully understood and reflected in a cost-effective solution. COST & BENEFITS : For very small projects, VE studies can be conducted in as little as four hours; for medium-sized projects, two to three days; for large projects, one week. Cumulative benefit to cost is on the order of 90:1. CONTACT:
R. K. (Bob) Fujimoto, (CTN) 242-1252, (email: BFUJ) N.J. (Nick) Lavingia, (CTN) 842-9868, (email: NJLA) J. J. (Jay) MacDonald, (CTN) 842-8197, (email: MJOJ) P. (Paul) Redden, (CTN) 842-5056, (email: PERE) PRODUCTS AND SERVICES:
Implementation Guide G-21: Value Engineering (G-21) Value Engineering Study 6-Oct-97
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Value Engineering VE is not… • Substituting something lower in quality and cost (Quality often increases)
• Saving money by not meeting all requirements • Just “doing a good job” • Brainstorming
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Value Engineering - Questioning Requirements • Projects often set requirements that exceed real needs • Traditional cost reduction tries to minimize the cost of meeting these requirements • Value Engineering: - Questions the project requirements - Advises the project of the high cost of those requirements - Proposes cost-saving alternatives
• Value Engineering is a partnership - Engineer and customer are partners in creative thinking
Value Engineering - Facilities Example
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Value Engineering - Facilities Example
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Value Engineering - Construction Example
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Value Engineering - Construction Example
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Value Engineering - Examples of VE Results PROJECT
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WORK REVIEWED
VALUE OF WORK REVIEWED
POTENTIAL SAVINGS
SAVINGS ACCEPTED
COMMENTS
$1.0MM
VE performed too late
Mobile 863 Offshore Facility
Platform Topsides
$85MM
$5.1MM
Tengiz Project KTL-3 Facilities (CPDEP Phase 1-2)
On-shore Facilities
$690MM
$160MM
?
Project on hold
Minas Phase 3R Waterflood Project (Caltex)
On-shore Facilities
$92MM
$10MM
?
Project Team studying recommendations
Alba Phase II
Facilities Expansion
$50MM
$9MM
?
Recommendations Under Review
Okan Upgrade
Offshore Platform Expansion
$50MM
$4.8MM
$1.2MM
New ideas adopted
$38MM
Project approval pending
Saudi Aromax (CPDEP Phase 2-3)
Offplot Offsite
$300MM
$60MM
Green Canyon 205
Topsides
$60MM
$6.7MM
?
Recommendations Under Review 54
Value Engineering - Study Types • Process Simplification Value Engineering • Review main processes • Performed after conceptual
• Facilities Optimization Value Engineering • Reviews P& ID’s, equipment and layout • Performed after feasibility
• Construction Value Engineering • Reviews detailed construction methods and specifications - aim to reduce construction time, improve quality, reduce materials cost, increase productivity • Performed in Phases 3 and 4
Value Engineering -
The 7 Step Process
1. Information • Understand project • Determine customer’s needs • Define basic function • Define areas of opportunity
(Functional Analysis) (Cost model)
2. Idea Generation • Brainstorming (creative thinking) • Develop all alternatives 3. Narrowing • Brief elaboration of ideas • Disposition decision for each idea
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Value Engineering -
The 7 Step Process
4. Evaluation and Selection • Review Advantages & Disadvantages • Choose best ideas
VE Study ends and Project Team takes over
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Value Engineering -
The 7 Step Process
5. Development • Prepare detailed design and estimate of best alternative
6. Decision • Present best alternative to decision-makers • Help make decision • Define basic function
(Functional Analysis)
• Define areas of opportunity
(Cost model)
}
Updated
7. Implementation • Obtain commitment to implement best alternative
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Step 1
Information Questions
• What is it? • What does it do? • What must it do? • What are the basic and secondary functions?
Step 2
Idea Generation Questions
• What else will do the job? (perform the same basic function)?
Steps of Value Engineering
Steps 3 & 4 Narrowing, Evaluation & Selection
Questions
Step 5
Development
• What does each cost? Questions • Will each perform the basic function(s)? • Will it work? Techniques • Use good human • Will it meet all the Techniques relations requirements? • Use good human • Get all the facts • What do I do now? relations • Use good human • Get information from • Eliminate! • What is needed? relations the best sources • Who has to approve • Try everything • Put $ on each idea • Obtain complete it? • Over-simplify • Evaluate by information • What are the imple• Modify and refine comparison • Define the function(s) • Use creative mentation problems? • Refine ideas • Perform function • What are the costs? techniques • Use services of evaluation • What are the savings? (brainstorm) experts • No negatives allowed Techniques • Use your own judgment • Use good human relations • Gather convincing facts • Work on specifics, not generalities • Translate facts into meaningful actions • Prepare summary proposal • Develop alt. plans Techniques
Step 6
Decision Techniques
Step 7
Implementation
• Make presentations • Align with project - Written proposals plans - Oral w/ illustrations • Implementation (Brief & pertinent) • Explain before and after • Explain advantages and disadvantages • Present facts quickly, concisely & convinc ingly • Explain implemementation problems • Suggest further meeting follow-up! • Remove road blocks • Use good human relations
VALUE ENGINEERING PROCESS IDEAS
DESIGN SUGGESTIONS
PROS
IMPLEMENT STUDY FURTHER
DROPPED IDEAS COMBINED IDEAS
DROP
FUTURE IDEAS
More Discussion
OTHER
CONS
& SPECULATE
CHOOSE “WINNERS” NARROW
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EVALUATE 60
Value Engineering - Paradigms Paradigms Create Poor Value: • We’ve always done it that way! • We don’t have enough time or budget to really study the problem any further • Those making decisions are not knowledgeable of all aspects of a process or life cycle • Stakeholders/users have not been consulted • We must satisfy some key executive’s whim • The scope/objective was never clearly defined • Decision makers are afraid of legal implications of being innovative
Value Engineering - Terminology • Function of a component or design: - Its purpose or intended use - Customer requirements
(Needs vs. wants)
• Value - What customer gets for their money - The ratio of cost to worth
• Worth - The minimum cost to achieve the customer’s essential requirements
Value Engineering - The Value Equation
Cost Value
= Worth
What is the Function of the Pencil?
What is the function of the Eraser? Wooden Pencil
N O R V E H C
What is the function of theWood?
What is the function of the Lead?
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FAST Diagram - Pencil Example Component
N O R V E H C
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Function(s)
B
S
Cost
Pencil
Rp400
Eraser
Rp50
Band
Rp30
Body
Rp90
Paint
Rp30
Logo
Rp20
Lead
Rp180
Chalk
Rp50
65 28
FAST Diagram - Definition HOW
WHY DESIGN
CONSTRAINTS OUTPUT
BASIC FUNCTION
HIGHER FUNCTION
SCOPE LIMIT
• • • •
•
LATER
SAME PRIOR TIME
SEQUENTIAL FUNCTION
CONCURRENT OR SUPPORTING FUNCTION
Identify functions, not equipment. Breaks large complex problem down into manageable pieces to facilitate evaluation. Good basis for brainstorming. Look for non-value adding steps; Functions that you Do and then Undo: Cool off, then heat. • • Solidify, then melt. Let down, then repressure. • Dissolve, then dry. • • Store, then retrieve. Use in conjunction with cost information.
INPUT LOWER FUNCTION
SCOPE LIMIT
CRITICAL PATH
FAST Diagram - Definition
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FAST Diagram - Definition
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68
Value Engineers Ask • PRIMARY • Can it be done differently?
• SECONDARY: ESSENTIAL • Is it really needed? • Can it be done differently?
• SECONDARY: NON-ESSENTIAL • Is is really needed? • Can we afford it? • Does it add value? • Can it be done differently?
FAST Diagram - Gravier HVAC Example F.A.S.T. DIAGRAM Gravier Street HVAC Project HOW?
Tenants Work
WHY?
$1,600M
$2,000M
$510M
Provide Heat
Distibute Air
Transport Air
$2,600M
$85M
Cool Air
Induce Outside Air
HVAC Needed
$1,000M
Control Temp
$1,600M
Provide Cooling
$70M
Filter Air
$40M
Mix Air
$35M
Exhaust Air $130M
$130M
Pump Chilled Air
Return Air
F.A.S. T. = Functional Analysis System Technique
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FAST Diagram - N. Nemba Example F.A.S.T. Diagram North Nemba Extension - Alternative 1 Profit
Ship Oil to S. Nemba
Scope of Project
Scope of Project
Transport Oil $7000
Pressurize Oil $900
Separate Oil/Gas/Water $890
Import Gas Pipeline=$7000 Scrubber=$87
Conserve Ga s
Engineering $
Transport Injection Ga s $
Compress Ga s HP=$16821
Generate Power $6590
Provide Services $1860
Dehydrate Ga s $1880
Provide Utilities $2616
Cool Well Fluids $1300
Opportunity
Produce North Nemba Reservoir
Clean Prod Water $190
Compress Ga s IP=$8850 LP=$500
Flare Gas Jacket=$ Tips=$260
House Workers $4000
Transport Well Fluids $
Support Topsides $72,000
Company Expense $
Project Objectives: Prod. Capacity = 40,000 BOPD, 145 mmscfd Spare Capacity = about 25% Injection Capacity = 200 mmscfd @ 5500 psig 10% safety factor on Production Curves Reliability: Oil = >95%, Gas = >90% Life = 10 to 20 years Complete project in 27 months after AFE - Feb 2000 Economics: 20% ROR,
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Project Costs: Major Equipment Cost = $44 MM Project Value Reviewed = $150 MM Total Project Value = $350 MM
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FAST Diagram - Big Oil Example F.A.S.T. DIAGRAM BIG OIL PROJECT
How
MEET CRUDE PIPELINE SPECIFICATIONS
REMOVE MERCAPTANS
Why
STABALIZE CRUDE
SEPARATE LIQUID/VAPOR
DESALT CRUDE
COMPRESS VAPOR
TREAT PRODUCED WATER
SWEETEN GAS
COLLECT WELL PRODUCTION
6%
DESIGN CRITERIA PROJECT FACILITY OBJECTIVES 9 ITEMS
13%
DRY GAS
19%
K.I.S.S. FRACTIONATE LIQUIDS REUSE BOUGHT EQUIPMENT
SCOPE LINE
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MEET NEW PIPELINE SCHEDULE
CLAUS - 22% SCOT - 15% SULFUR HANDLING - 1%
TREAT ACID GAS
38%
SCOPE LINE
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FAST Diagram - Example
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Value Engineering - Savings Opportunities
Process Opportunities
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• Heat
then
Cool
• Pressurize
then
Depressure
• Raise
then
Lower Elevation
• Condense
then
Evaporate
• Freeze
then
Thaw
• Speed up
then
Slow Down
• Store
then
Deliver
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Value Engineering - Software Tools 1. Value Engineering Facilitation And Reporting • Assists with idea collection and reporting • Microsoft Access 7.0
2. MS Excel Spreadsheet • Simple to use
Note: Software is NOT a substitute for good facilitation
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Design-to-Capacity
Design-to-Capacity
Design-to-Capacity - Definition A systematic process to evaluate the maximum capacity of each major piece of equipment. Helps prevent the compounding of “safety factors”. • Eliminates Excess Capacity (Fat) • Specifies Design Factor • Reduces Equipment Cost
Design-to-Capacity - Abstract DESCRIPTION: Often, equipment is specified with a "design factor". These factors can result in oversized equipment or systems and can be compounded as the design passes from engineering discipline to discipline and on to suppliers. These factors add investment cost but may not provide a return if this "extra capacity" is not fully utilized. This Value-Improving Practice (VIP) reduces the "excess fat" that does not meet project objectives. APPLICATION: Design-to-Capacity can be applied to grass root and retrofit projects, process plants, off plot facilities, and production facilities. DETAILS: Design-to-Capacity is a two-step process. The first step is to determine the overall facility design factors early. The second step is to choose how much design flexibility is required for each major piece of equipment or system. Different equipment types or parts of the plant may be built to different levels of conservatism. This step is done after the preliminary process flow diagrams are developed. COST & BENEFITS: Design-to-Capacity can save up to 15% of the capital cost. In the past, this costly over capacity was automatically built in without any discussion or input from the business side. The over capacity adds investment cost but may not provide a return if this "extra capacity" is not fu lly utilized. CONTACTS:
R. K. (Bob) Fujimoto, (CTN) 842-9298, (email: BFUJ) N. J. Lavingia, (CTN) 842-9868, (email: NJLA) PRODUCTS AND SERVICES:
Implementation Guide G-07: Design-to-Capacity (G-07)
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Design-to-Capacity Often equipment is specified with a “design factor” • Design factors can result in oversized equipment or systems. • Design factors can compound as the design passes from one engineering discipline to another and then on to suppliers. • Design factors add investment cost and may not provide a return if the “extra capacity” is not fully utilized.
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Design-to-Capacity • Saves capital costs • Forces an examination of capacity and expandability • Reduces excess capacity to cover “sloppy” design • Facility may not have extra flexibility or robustness to handle variations in operations
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Design-to-Capacity LEVEL OBJECTIVES/CHARACTERISTICS LEVEL 1
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LEVEL 2
LEVEL 3
Build a facility that only needs to operate at well defined, unchanging conditions over its total life. This tighter, but less capital expensive design might take longer to start-up or could require minor debottlenecking to reach nameplate capacity. This facility could have trouble handling unforeseen operating conditions not considered in the original design.
Build a facility with just enough flexibility to operate easily at nameplate capacity for most design cases. It may require minor debottlenecking to handle unforeseen variations in operating conditions or to operate above nameplate.
Build a facility with additional flexibility to operate at the limiting design case, or handle future unknown operating requirements. There is high assurance that the facility with meet and exceed the nameplate requirements. The facility will be easier to start-up, but will have a higher capital cost.
The incentive to build this type of facility is the lower capital cost. It is ideal for situations where the operating conditions are well defined and not likely to change.
The incentive to spend the extra capital cost is to provide additional flexibility for future overcapacity or changing conditions.
The incentive is that the excess capacity will allow for quickly adapting to changing operating conditions. Excess capacity is planned for.
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Design-to-Capacity - Level Objectives for Equip.
Table to come.
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Equipment & Material Alliances
Equipment & Material Alliances
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Equipment & Material Alliances - Definition Long-term and mutually beneficial relationship between owner and one supplier / contractor based on: • Performance • Trust • Respect • Commitment • No Competitive Bidding!
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Equipment & Material Alliances -
Definition
A long-term business commitment between a supplier and customer dedicated to lowering total costs and/or increasing revenues. It is characterized by joint problem solving and process improvement, high levels of trust, respect, cooperation, and mutual benefit. An Alliance must also include the following elements: • Shared Business Objectives • Strategies to Accomplish the Objectives • Metrics to Measure Progress • Ongoing Customer/Supplier Team Work and • Communication
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Equipment & Material Alliances -
Abstract
DESCRIPTION: "Equipment Supplier Alliances" (ESA) is defined as Chevron's project-specific, long-term,
mutually beneficial relationship with one qualified supplier of highly engineered equipment. With this process the supplier is involved "up front," developing a long-term association based on performance, trust, respect, and commitment. APPLICATION: Can be used for highly engineered equipment, larger orders of "like" equipment/materials, and
critical path equipment/material. DETAILS: Most equipment is purchased by traditional methods, i.e., competitive bid. ESA is a relatively new way of
acquiring engineered equipment for a specific project. An expert team of Chevron perso nnel, suppliers, and contractors produces a well-designed, well-scoped, and cost-effective specification. Working with suppliers during the project's early planning stages translates into: a) acquiring better equipment and systems design, b) meeting critical path equipment deliveries, and c) ensuring quality fabrication and installation of equipment. An innovative approach to the purchase of highly engineered equipment, ESA's roots lie in the common goal of Chevron: continuous improvement. COST & BENEFITS: There is some up-front effort to identify the equipment or materials where this process is
effective and the apply the ESA process. In all cases where this process has been used, there have been significant savings that far outweigh the cost of implementation. CONTACT:
G.W. (Gary) Fischer, (CTN) 842-5514, (e-mail FISC) D. S. (Doug) Moore, (CTN) 842-9730, (e-mail: DSMO) K. C. (Ken) Ettinger, Team Leader, CRTC Quality Assurance, (CTN) 242-3731, (email: KCET) PRODUCTS AND SERVICES:
CSQIP Manual For a copy, contact W. L. (Bill) Desmond, CTN 894-1208, (email: BLDE) Implementation Guide G-08: Equipment Supplier Alliances Manual (G-08) 6-Oct-97
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Equipment & Material Alliances -
Benefits
• Mutually Beneficial Relationships • Long-term Commitment • Best Suppliers • Lower Total Cost of Ownership • Cost Savings • Improved Efficiencies • Increased Opportunity for Innovation • Continuous Improvement
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Total Cost of Ownership More easily identified
“Iceberg Model”
Delivery Engineering Costs Procurement Costs Construction Costs Inspection and Testing Permitting Costs/Fee
Op Ex
Bid prep costs
Legal Costs
Late drawings
Training Costs
Down Time
Engineering redesign
Maintenance Costs
Obsolescence
Shop quality
Lost Sales
Switching Customers
Equipment delays
Environmental Accidents/Fines
Performance Problems
Construction delays
Inventory Costs Settlements
PSM documentation
Poor Plant Layout
Change orders Equipment interface
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Equipment & Material Alliances -
Process Steps
Perform Internal Business Analysis Assemble Pre-Kickoff Data And Information
Orient The Team
Supplier Selection Phase
Process Improvement Phase
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Perform Industry Analysis
Negotiate And Award Agreement
Evaluate Suppliers
Establish Criteria
Form Alliance Improvement Team
Develop Detailed Business Plans
Execute Plans
Measure And Report Progress
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Project Standards
Project Standards
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A process to acquire and use project standards that minimize project cost and improve communications between project engineers and pre-qualified vendors.
DESCRIPTION: Engineering standards and specifications can affect manufacturing efficiency, product quality, operating costs, and employee safety. The cost of a facility is increased by the application of traditional Chevron specifications that exceed the actual needs of the specific facility to be designed. APPLICATION: These standards are applicable to all projects and locations. DETAILS: The Minimum Project Standards are comprised of three types of documents: Supplemental Information for API specifications, Chevron Specifications, and Data Sheets.
•
Where an industry standard exists, Chevron presents requirements as a supplement, including a recommendation for Chevron's selected owner preference.
•
Where no industry standard exists, Chevron creates stand-alone documents.
Minimum Project Standards are different from the "gray" manuals. They were developed for technical personnel who have a working knowledge of the subject to help minimize vendor inspection and testing requirements. As such, it is assumed that vendors are pre-qualified and that their quality assurance programs have been endorsed by Chevron. COST & BENEFITS: The development of these standards were to eliminate over- and under- designed equipment and facilities, optimize Life Cycle Costs, and prevent incidents. Equipment purchased using Minimum Project Standards costs 3-5% less than traditional Chevron standards. CONTACT: F. M. (Fred) Schleich, (CTN) 242-7230, (email: FMSC) PRODUCTS AND SERVICES: Implementation Guide G-14: Project Standards (G-14)
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Project Standards Engineering Standards & Specifications Affect: • Manufacturing Efficiency • Product Quality • Operating Cost • Employee Safety
Increased cost results from standards that exceed actual needs. 6-Oct-97
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Project Standards Chevron is taking steps to align company specifications with industry standards: • Reduce challenges associated with one-off equipment • Take advantage of industry experience
The initiatives presently working are: • Capital Projects Sourcing Team • Downstream Minimum Project Standards • CRINE initiative in U.K.
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HES Optimization
HES Optimization
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HES Optimization - Definition The HES Risk Management process is used to identify, assess, and develop plans to maximize value by managing significant risks. Four risk areas are included: • Personnel & public health/safety • Environmental • Financial (due to HSE incidents) • Public concern Risk reduction measures (prevention or mitigation) are evaluated on a cost benefit basis to ensure efficient resource allocation.
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HES Optimization - Definition A creative organized approach whose objective is to reduce risks and project costs. This process will: •
Develop project HES objectives
• •
Identify significant permitablity issues and market based solutions. Identify significant (environmental, ecological, health, safety, fire and accidental releases) risks that need to be mitigated during the design.
•
Develop options to reduce emissions and discharges.
•
Develop options to reduce fire, safety and accidental releases.
•
Identify industry and company standards that will be used Identify technologies that can help meet HES objectives
• •
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Develop recommendations to meet project HES objectives cost effectively
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HES Optimization - Techniques • Develop Project HES Objectives • Options to Reduce Emissions/Discharges • Identify Industry/Company Standards • Identify Technologies to Meet Objectives • Identify Permitability Issues and Solutions • Identify Significant Risks that Need to be Mitigated During Design
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HES Optimization - Process • Identify Concerns • What-If brainstorming • Checklists • Review technologies and processes
• Assess Risks • Assign qualitative risk scores to each event • Perform consequence/frequency modeling, if necessary
• Identify Alternatives • Scope range of alternatives to prevent/mitgate risk events
• Cost Benefit Analysis • Assign costs to risk reduction alternatives • Incorporate in economic analysis and compare design options 6-Oct-97
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HES Optimization - Upstream HES Process PHASE 1
PHASE 2
PHASE 3
PHASE 4
PHASE 5
Identify and Assess Opportunity
Select Alternative(s)
Develop Alternative(s)
Execute
Operate and Evaluate
s e l b a r e v i l e D
• List of health, environmental & safety risks • Quantified value of HES risk for each project alternative
• Detailed H&S, environmental, and public concern risks • Recommended risk mitigation & prevention
• HES evaluation of changes
s e s s e c o r P & s l o o T
• What If Event Identification for air, waste, water, groundwater, fire, ecological, safety, health risks • Checklists • Screening risk matrices • Cost Benefit tools to valueHES risks
• What If/Checklist Process • Waste Minimization • Qualitative Risk Assessement • Guidelines for QRA/PHA • HES Strategy Tables • HES Cost Benefit Analysis
• HES Cost Benefit Analysis • MOC
s r e v i r D
Policy 530 (Pollution Prevention, Safe Operations, Property Transfer) API RP 75 & 750 International Regulations, OSHA PSM 1910.119, EPA RMP Rule
HES Optimization - Program Components
Project Development Phases Transp. Install
FEE
Det. Eng.
Fab.
Processes to ID Hazards & Risk Reduction Recommendations Identify Hazards for: Methods to reduce/ control risk
Qualit. Risk Scenario Assessment
Checklists/Ops Review/ What if
Conceptually for all phases * Model Tests * Design Standards * Change Concept
Detailed for all phases * Change Design * Timely Regulatory & Permitting Approvals
Pre- Fab Safety Review/ Checklists/ What if Detailed for Fab
Monitoring
MOC
Communication
Hazard Register
MOC Audit Hazard Register
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* Safety Program * QA/QC * Training * Timely Regulatory & Permitting Approvals
MOC Audit Hazard Register
Hookup/ Startup
Operate
Regular Risk Assessments/ Checklists/ What if Detailed for Ops. Ongoing * Operating Procedures * Safety Programs * Permit to work * Maintenance * QA/QC * Training MOC Audit Hazard Register
Pre- Transport Review/ Checklists/ What if Detailed for Transp. * Safety Program * Weather Forecasts * Training
Pre-installation Review/ Checklists/ What if Detailed for Install. * Safety Program * Weather Forecasts * Training * Timely Regulatory & Permitting Approvals
Pre-startup Review/ Checklists/ What if Detailed for Hookup / Startup * Safety Program * Weather Forecasts * Training
MOC Audit Hazard Register
MOC Audit Hazard Register
MOC Audit Hazard Register
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HES Optimization - Risks and Impacts PROJECT RISK TYPES PRIMARY TYPES OF RISK
TYPES OF IMPACT PERSONNEL/PUBLIC SAFETY
Technical - Reserves, - Reservoir, - Drilling Operations, - Well Completions, - Facility Design, - Facility Construction, - Facility Transportation, - Facility Installation, - Operability, Maintainability
ENVIRONMENT
FINANCIAL
Business - CAPEX - OPEX - Schedule - Product Price
PUBLIC CONCERN
Figure 1-1
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Energy Optimization
Energy Optimization
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Energy Optimization - Definition A methodology for optimizing capital cost, operating cost and operability of process unit, utility system or manufacturing site by identifying the most economical levels of heat recovery and power generation by integrating: • Thermodynamic Analysis • Economics Data • Conceptual Design
Energy Optimization - Abstract DESCRIPTION: Energy Optimization is a way to identify, understand, and optimize energy use for the operating lifetime of a project. APPLICATION: Energy often represents the largest element of the ongoing operating costs once a project is completed. With project lives at 30 years or beyond, energy operating costs must be an important project consideration, starting at the early stages of project development. Energy Optimization provides a methodology for understanding and then optimizing energy use. DETAILS: Projects afford a unique opportunity to address and improve energy performance of the site and facility. Energy considerations appear throughout CPDEP. Unlike some of the other VIPs, Energy Optimization can not be conducted and completed in a three day workshop. Energy Optimization is not a stand alone process, instead it must be woven into normal project activities such as objective setting, process design, equipment specification and selection, detailed design, and operating philosophies and practices. Energy measurement and management systems must be installed to track project performance against pre-established metrics. Tools such as Steam System Models, Fuel System Models, Pinch Analysis, FEL Energy Checklist, etc. are utilized to properly size utility systems and optimize process design . Early involvement of specialists (CXTC, local, contractors) can quickly lead to a cost effective and reliable design. Specialists should also be used to assist in the development of specifications and the purchase of large equipment such as gas turbines, boilers, compressors, pumps and furnaces. COST & BENEFITS: Integrating Energy Optimization into the process design, selecting the best alternatives, and using proven tools will optimize the capital and energy costs over the entire operating life of the project. CONTACTS:
Nick Brancaccio,
NGBR
(CTN) 242-2350
Lee Larson, LLRS Jerry Moffitt, GMOF Rick Johnson, DEJO Gerald Sing, GLSI PRODUCTS AND SERVICES:
(CTN) 842-9084 (CTN) 894-0792 (CTN) 842-8135 (CTN) 842-8706
Implementation Guide G-xxx 6-Oct-97
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Energy Optimization - Energy Tools Specific tools have been developed to improve energy use: • Pinch Analysis • Steam & Electric System Models • G2 MESA program
• Fuel System Model • Yield & energy Process
Energy Web Site: http://go.chevron.com/resources/energy/index.html
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Energy Optimization - Energy Tools The energy tools are used in conjunction with these VIPs and BPs: • PFOs • Design-to-Capacity • Value Engineering • Reliability Modeling • Specialists Involvement • FEL Checklists • Steam Measurement Best Practice • Fuel Measurement Best Practice 6-Oct-97
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Constructability Review
Constructability Review
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Constructability Review -
Definition
Analysis of the design by experienced construction managers, to reduce cost and time during the construction phase. Optimum use of construction knowledge and experience in • Planning • Design • Procurement • Field Operations
to achieve overall project objectives.
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Constructability Review -
Abstract
DESCRIPTION: Construction Industry Institute (CII) defines "constructability" as "the optimum use of construction knowledge and experience in planning, design, procurement, and field operations to achieve overall project objectives". APPLICATION: The concept of "constructability" should be implemented on all projects. DETAILS: "Constructability" drives the project to excellence in design and execution. Critical to project success, implementation begins in Front-End Loading with a focus on assessing construction viability, cost variance from the ideal and identification of costly or fatal fl aws due to regulatory, environment, site, or infrastructure restrictions.
Prior to funding, the Construction Manager is brought on the project team to champion constructability and to participate in final scope development. A project-specific constructability process is developed and integrated into the Project Execution Plan. COST & BENEFITS: The cost for implementing a constructability process on a large project will vary. The cost could range between $50,000-$150,000 depending on the resources available and the uniqueness of the project. Constructability can be implemented in a small projects group similarly.
The return on the time spent ranges from 5-20% of total project cost. A major benefit is elimination of rework and delay in the construction and start-up schedules. CONTACTS:
Jay MacDonald, (CTN) 842-8197, (email: MJOJ) P.E. (Paul) Redden, (CTN) 842-5056, (email: PERE) PRODUCTS AND SERVICES: Lesson Learned No. 42: "Constructability Resources - What's Available" Constructability Study 6-Oct-97
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Constructability Review -
What, When, Who
Project schedule and cost is improved on projects that: • Perform constructability continuously in Phases 2 to 4 • Perform constructability reviews early enough to affect the design • Include construction “experts” on project team • Include the fabrication/construction contractor during design
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Constructability Review - Things to Review Constructability reviews address: • TradeTrade-off offss of of mate materia rials ls vs. vs. fabric fabricati ation on costs costs • Fabric Fabricato ator/co r/contr ntract actor or capab capabilit ilities ies for for handl handling ing mate materia rials ls • Getting Getting constru constructi ction on expe experts rts buybuy-in in on on costs costs & schedu schedule le • Rela Relati tion onsh ship ipss betw betwee een n con contr trac acto tors rs • Relati Relations onship hipss of heavy heavy lifts, lifts, modul modulee sizes, sizes, tran transpo sporta rtatio tion, n, special site features, etc.
6-c0t6--9 107 6-9O
1 14 53
Process Hazards Analysis
Process Hazards Analysis
Process Hazards Analysis Process Hazards Analysis addresses the various design and safety reviews performed by a project team. These include the normal design/safety reviews and the design/safety reviews required by regulation. The process defines a roadmap for performing the various analyses at the appropriate time.
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1 16 57
Process Hazards Analysis - Abstract DESCRIPTION: PHA serves as a roadmap to plan appropriate hazards reviews at a time that optimizes contribution and impact to the project. By coupling the normal design reviews with mandated reviews, the projects are able to avoid unnecessary duplication and comply with regulations (OSHA 1910). APPLICATION: PHA is intended to provide sufficient background information to permit a project team to identify, assess, and plan activities related to a Process Hazard Analysis. DETAILS: OSHA's Process Safety Management Rule (29 CFR 1910.119) mandates minimum criteria for review of a project during project development and for the review of changes to the design that might affect the safe operation of a facility. The rule is performance-based and charges the owner and designer with the responsibility of performing the quality and quantity of reviews appropriate to determine and evaluate the hazards of the process being reviewed. PHA provides a roadmap that assists the project team in planning PHA-related reviews, the purpose of each review, the data required to perform the review, the resources required, the expected results, and a suggested timing for the reviews. COST & BENEFITS: By coupling the normal design reviews with mandated reviews, projects are able to avoid unnecessary duplication and comply with the regulations. CONTACT:
G.W. (Gary) Fischer, (CTN) 842-5514, (email: FISC) R. K. Fujimoto, (CTN) 842-9298, (email: BFUJ) PRODUCTS AND SERVICES:
Implementation Guide G-15: Guide for Integrating Process Hazard Analysis into Facility Type Projects (G-15) 6-Oct-97
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Process Hazards Analysis - Definition The various analysis address issues of: • Hazards of the Process • Identification of Previous Incidents • Engineering / Administrative Controls • Consequences of Failure of Controls • Facility Siting • Human Factors
Process Hazards Analysis Phase 1 Identify & Assess Opportunities
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Phase 2 Select Alternative(s)
Phase 3 Develop Alternative(s)
• Preliminary Hazard Review • Process Objectives Analysis • Environmental Objectives Analysis • Control Objectives Analysis • Qualitative Risk Analysis
• Preliminary Safety in Design Review • Shutdown Objectives Analysis • Relief System Review • Front End Engineering Operability & Safety Review • API 14C Review • What if? Review • Preliminary HAZOP • Quantitative Risk Analysis
Phase 4 Execute
• Safety in Design Review • Insurance/Fire Protection Review • HAZOP Review • Begin Management of Change Process • Alarm Objectives Review • Pre Start-up Safety Review • API 14C Review • Quantitative Risk Analysis
Phase 5 Operate and Evaluate
• Review of changes to facility (Management of Change)
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Process Hazards Analysis REVIEW/ANALYSIS
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PURPOSE
Preliminary Hazards Review
Early identification of process hazards to facilitate process selection and site location.
Environmental Objectives Analysis
Set basis for project environmental requirements.
Process Objective Analysis
Rigorous process flow diagram review to assist in development of PFDs and to ensure a proper process design basis.
Control Objective Analysis
Rigorous control system review to enable development of the control system design.
Shutdown Objectives Analysis
Rigorous review of safety shutdown systems to confirm the control system design basis.
120
Process Hazards Analysis REVIEW/ANALYSIS Relief System Review
Review of new and/or existing relief systems to determine that the design basis provides for maximum credible scenarios.
Front End Engineering Operability & Safety Review
Audit of hazards or operability issues to provide design guidance in Execution Phase and identify high impact cost issues for the A/R estimate.
Safety in Design Review
Audit of design for compliance with Chevron Safety in Design guidelines.
Insurance/Fire Protection Review
Audit design to ensure the design provides cost effective fire protection to meet Chevron and Insurance carrier standards.
HAZOP Review
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PURPOSE
Rigorous line-by-line analysis to identify hazards and operability problems for critical systems that could compromise a system’s ability to achieve process objectives and/or safety requirements.
121
Process Hazards Analysis REVIEW/ANALYSIS What If? Review
Management of Change
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PURPOSE A process for identification of hazards and operability problems in utility and non-critical systems that could compromise a system’s ability to meet process objectives and/or safety requirements. Ensure changes made to the process after the formal process hazards analysis do not introduce new uncontrolled hazards.
Alarm Objective Analysis
Rigorous review of alarm system to finalize set points and alarm priorities.
Pre Start-Up Safety Review
A formal audit to ensure that all PSM documentation and elements are in place/completed.
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Zero Injury Techniques
Zero Injury Techniques
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Zero Injury Techniques - Definition Techniques that produce excellent safety performance on construction projects: • Safety Pre-Project / Pre-Task Planning • Safety Training Orientation • Safety Incentives • Alcohol / Substance Abuse Program • Accident and Incident Investigation
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Zero Injury Techniques - Abstract
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Predictive Maintenance
Predictive Maintenance
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Predictive Maintenance -
Definition
Using advances in instrumentation and sensor technology to monitor machinery performance and make repairs prior to failure. Characteristics monitored: • Heat • Lubrication • Vibration • Cracking • Noise 6-Oct-97
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Predictive Maintenance -
Benefits
Benefits of Predictive Maintenance: • Increase availability confidence • Fewer unscheduled shutdowns • Lower parts inventory costs • Lower maintenance costs
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Reliability Modeling
Reliability Modeling
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Reliability Modeling -
Definition
Computer simulation to explore relationships between maximum production rates and design and operational factors: • Product Quality • Yield / Capacity • Production Transitions • Maintenance Practices • Safety / Environmental
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Reliability Modeling -
Abstract
DESCRIPTION: Reliability Modeling is the use of computer simulation to explore the relationships between the maximum production rates and design and operational factors such as quality, yield, production transitions, maintenance practices and requirements, capacity, and safety and environmental concerns. This tool can help determine the value of sparing, bypass, and alternative operating modes contemplated in the design and factor it into the Life Cycle Cost. APPLICATION: Most applications will be FEL. It can also be used during operations to evaluate and influence maintenance practices on production availability. It is often done by a third party, such as IPA, and may employ the MAROS software. DETAILS: The Reliability Modeling Process has five distinct steps:
1. Understand the facility under consideration. 2. Data collection on facility, equipment, and failure rates. 3. Data analysis and computer modeling. 4. Case runs and review. 5. Discussion of results. The information needed includes: Process description • PFDs with major equipment identified • Equipment list with sizes, capacities, and vendor/ supplier information including the make and model numbers • COST & BENEFITS: The cost of a reliability modeling study will range from $25-50M depending on the complexity of the facility/process being reviewed. Cost is a function of data collection efficiency and the number of cases or alternatives to review. A 10:1 return on investment is not uncommon. CONTACTS: G.W. (Gary) Fischer, (CTN) 842-5514, (email: FISC) J. E. (Joan) Ranallo, 842-8368, (email: JERA) PRODUCTS AND SERVICES: Implementation Guide G-17: Reliability Modeling (G-17) 6-Oct-97
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Reliability Modeling What is Reliability Modeling? • For Downstream, IPA supplies SAGE computer program for Chevron use • For Upstream, the MAROS computer program from Jardine Associates is used • Provides estimates of annual production and on-stream time • Evaluates the interaction of installed spares, repair times and equipment failure rates on the process production capacity • Can help decide what equipment to spare and how to minimize downtime
Reliability Modeling - vs. RCM Reliability Modeling
Reliability Centered Maintenance
•
Reviews impact on total facility
•
Reviews one piece of equipment
•
Highlights areas of opportunity
•
•
Allows unlimited “What-If” cases
Identifies how to improve operating factor
•
Model can easily be updated
•
•
Highlights impact on revenue stream
Reviews how to decrease maintenance expense
•
•
Determines overall plant or facility operating factor
Develop contingency plans in the event of a failure
•
Determine how to mitigate failures Contact the CRTC Materials and Equipment Engineering Unit for additional information on RCM (John Stout 510 242-7208)
Reliability Modeling -
Process Steps
Key Steps to the Process: • Introduction and Understanding of Project & Reliability Modeling Process • Planning for Information Gathering • Data Accumulation • Failure Rates • Repair Times • Data Base Comparisons
• Generate Computer Model • Run Model, Generate Alternate Cases, Analyze “What -if” Situations • Analyze and Summarize Results • Document and Issue Report
Reliability Modeling - Data Needed • Data Sheet Input Items • Operating Rate • Scheduled Outages-Frequency
(Units/Hour) (#/Year)
• Scheduled Outages-Duration • Equipment Description
(Hours)
• Equipment Failure Rate
(#/Year)
• Equipment Repair Time (Ave... & Max.)
(Hours)
(Model #)
Reliability Modeling -
Process Flow
Place Equipment
Failure Rates &
in Functional Blocks
Equipment Repair Times
System Availability Generalized Evaluator (S.A.G.E.)
Flow Diagram & System Configuration
Annual Production Projections, EQuip. Utilization
"Real" Plant Operating Factor
Reliability Modeling - Benefits Benefits: • Quantifies Operating Factor • Provides a Tool for “What if” Cases • Provides data to justify Capital Expenditures • Identifies areas for Reliability Centered Maintenance (RCM)
Reliability Modeling -
Applications
Typical reliability modeling applications: • Optimize system availability and reliability • Estimate system downtime / availability • Evaluate life-cycle costs and CAPEX vs. OPEX tradeoffs • Determine equipment sparing philosophy and redundancy • Optimize logistics and manpower for maintenance/operations
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Reliability Modeling -
MAROS Studies
Upstream Reliability modeling studies performed using the MAROS software: • Alba • Britannia • Green Canyon 205 • Gorgon • Cabinda Oil Storage, Pumping, and Loading System • Escravos Tank Farm
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Reliability Modeling -
Impacts
Comments from recent modeling effort: • Helps frame the alternatives • Quantifies the issues in terms of NPV • Has impact on design, material selection, operation, and maintenance • Good reliability data is crucial
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140
IPA Pre-A/R Assessment
IPA Pre-A/R Assessment
6-Oct-97
141
IPA Pre-A/R Assessment - Definition An assessment of project progress and quality, performed in CPDEP Phase 3. Rates project against IPA database of similar projects. • Establishes FEL Index • Recommends project contingency based on known information • Rates project cost estimates • Recommends schedule
FEL Index required for GO-36 on projects over $25MM 6-Oct-97
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IPA Assessment - Pacesetter Performance
Pacesetter Performance is achieved with
State-of-the-Art FEL
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IPA Assessment - Front-End Loading • Front-End Loading (FEL) is a structured, up-front, planning process for developing a detailed definition of the scope of a capital project to meet business objectives. • It is proven to save money, shorten schedule, improve results. • It asks: – Who – What – Where – When – Why
6-Oct-97
– How 144
IPA Assessment - Components of FEL (Refining and Chemicals) Site Factors
Soils Data
Equipment layout
Project Execution Plan
Engineering Definition
Environmental requirements Health & safety requirements
Engineering tasks – Detailed scope – Feedstock/product properties – PFDs – H&MBs – P&IDs – One-line elec. diagrams – Major equipment specs – Cost estimate
Project objectives/mission
Team participants & roles
Integrated schedule – Critical path items – Identification of shutdowns for tie-ins – Overtime requirements Plans – –
Participation/buy-in of: – Operations – Maintenance – Business
– –
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FEL Index
Commissioning Startup Operation Manpower Quality assurance
Contracting strategy – Who – How
Cost/schedule controls
145
IPA Assessment - Components of FEL (Pipeline Projects) Site Factors
Route Definition
Project Execution Plan
Engineering Definition
Engineering tasks Detailed scope – Fluid/gas properties – Pipe and coating specs. – Cost estimate – Hydraulic Calculations – Line Logs/hydrotesting – Pump Station Requirements
Terrain Conditions Regulatory Issues Community Relations ROW Issues
– –
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Health & safety requirements
Team participants & roles Integrated schedule Critical path items Identification of shut-downs for tie-ins – Overtime requirements – –
Plans Commissioning Startup – Operation – Staffing – Quality assurance – –
Participation/buy-in of: Operations Maintenance – Business –
Contracting strategy Who How – Pipeline methods
–
FEL Index
–
Cost/schedule controls
146
IPA Assessment - Components of FEL (Upstream Projects)
Permits/ Regulatory Reviews
Reservoir Definition
Reservoir Delineation
Seismic (2-D, 3-D)
Environmental Requirements/ Permitting
Design Status
Drilling Program
Health and Safety Reviews (HAZOPS) Government Regulations
6-Oct-97
+
Engineering Tasks – Detailed scope – Concept selection – Structural analysis/ design – P&IDs – Major equipment specifications Participation/Buy-in – Business – Operations
Project Execution Plan
FEL Status
Team Participants/ Roles
Contracting Strategy
Integrated Schedule
Plans
Cost/Schedule Controls
147
IPA Assessment - FEL Index Calculation Plot Plans/ Equipment Configuration
Site Factors
Soils & Hydrology Environmental Requirements
Sum
4 = ___
Health and Safety
Project Execution Planning
Engineering Definition
FEL Index 6-Oct-97
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IPA Assessment - FEL Index 3.0 3.5
Over Commitment
4.0
5
4.5
Best Practical
5.0
4
Good 5.5 6.0
3
Fair 6.5 7.0
2
Poor 7.5 8.0
1
8.5 0
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1
Screening
9.0
149
IPA Assessment - FEL Improvement Absolute Cost is Related to Front-End Loading ) 1.2 0 . 1 = g v A 1.1 y r t s u d n I ( t s 1 o C l a t i p a C0.9 e v i t a l e R
0.8
FEL Improvement Only Industry Average Cost
Best Practical
Good
Fair
Screening Study
FEL Rating 6-Oct-97
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IPA Assessment - Measuring FEL Guidance for Measuring Front-End Loading (continued) CATEGORY
PROJECT EXECUTION PLANNING
ENGINEERING DEFINITION
FEL COMPONENT Project Execution Plan
User/Plant Input
Types of Engineering Tasks Completed
Portion of Total Engineering Completed
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SCALE VALUE=4 (LEAST WELL-DEFINED)
None exists
No involvement other than expressed general interest
General location & site conditions Block flow diagram Prelim. major equipment list Facility capacity Economic analysis Less than 1%
SCALE VALUE=3
SCALE VALUE=2
SCALE VALUE=1 (MOST WELL-DEFINED)
Core project team in place; contracting strategies identified; major milestones established.
Core project team in place; contracting strategies identified; major task sequencing established & critical path items identified.
Core project team in place; contracting strategies identified; detailed & integrated schedule established which incorporates equipment delivery dates, interferences, & resource loadings
Little plant involvement other than review of conceptual design.
Even though plant input is only on an as-needed basis, a thorough review of the process design & detailed layout has been conducted.
Plant operations is deeply involved, normally on a day-today basis, including conducting a thorough review of the process design & detailed layout.
Completed process design Complete P&IDs One-line electrical diagrams Detailed plot plans (on-and-off-plot)
Approved P&IDs Plot plans issued for construction Completed engineering data sheets
Prelim. process design Prelim. P&IDs Prelim. major equipment sizing Prelim. layout of on-plot equipment Off-plot description 1 to 5%
15 to 30%
>50%
152
IPA Assessment - Overall FEL Index
Chevron Benchmark
Chevron 1996
FEL Index
(Best Possible) 3
4
Best Practical
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5
6
Class A
7
8
9
Industry Average
153
IPA Assessment - Downstream & Upstream
Chevron Downstream Benchmark 1991
Chevron Downstream 1996
FEL Index
(Best Possible) 3
4
Best Practical
6-Oct-97
5
Class A
6
7
Chevron Upstream 1996
8
9
Chevron Upstream Benchmark
154
Post Project Assessment (IPA)
Post Project Assessment (IPA)
6-Oct-97
155
Post Project Assessment -
Definition
A collection of end-of-job data. • Conducted at end of Phase 4 • Performed by IPA • Uses IBC data collection form (Downstream) • Uses new IPA data collection form (Upstream) • Helps to improve estimates for future projects • Cost ratios developed help with Class 0 and 1 cost estimates for future projects
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156
Post Project Assessment -
Data Collected
• Materials costs • Fabrication costs • Transporation costs • Company expenses • Contractor expenses • Actual schedule • Safety performance • Lessons learned
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157
Business Evaluation (GO-36)
Business Evaluation (GO-36)
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158
Business Evaluation -
Definition
An evaluation of achieved project success, measured against: • original project objectives • economic measures • realized economics • plant performance • product/price forecasts vs. actual
GO-36 defines timing and objectives. • Normally first evaluation is in two years or at full production • Use GO-36 Part 5
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Business Evaluation -
Primary Objectives
The primary objectives of the Project Business Evaluation Review are to: •
Improve the decision-making process used within Chevron for investing capital
•
Identify possible insights that will benefit development of business plans
•
Provide an opportunity to assess future plans for the facilities
•
Provide feedback to those experts who provided assessments in the initial Decision & Risk Analysis
The Project Business Evaluation Review is conducted after one or two years of operating data are available, or as soon as appropriate production and market response are realized. A multifunctional team with third party participation is recommended to conduct the review and enhance learning and sharing. Subsequent reviews should become part of the normal business planning process.
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Business Evaluation -
Team
A Business Evaluation Team should consist of: • Project ma manage agement • Mult Multif ifu unctio ction nal team team • 3rd Parties
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Business Evaluation - Project Data A Business Evaluation requires the following data: • AR Estimate • Values Values from from the the orig origina inall AR base based d on the the expect expected ed case. case. • Typical Values to Date • Values Values that that are typical typical of of recent recent operati operation on or an average average of results results since start-up, whichever best represents the general business. • % Ch Change ange fro from Ex Expect pected ed Valu Valuee • The ratio ratio of of typical typical value value divided divided by by the expected expected value value in the the AR. • Updated Es Estimate • If the the % change change from the expect expected ed value value is is signific significant, ant, an updated updated estimate should be prepared.
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Business Evaluation -
Project Performance to Date
Provide a brief summary of the project project performance. If the project outcome is is significantly different from that projected in the AR, state the reasons for the difference. Summarize the the insights gained about about the various various elements of the business including: • Supp Supply ly vers versus us dema demand nd bala balanc ncee • Customer trends • Competitor response • Tech Techn nology logy app applica licati tio ons • Operating cost • Regulations Separate these insights into: • Find Findin ings gs for for the the spec specif ific ic bus busin ines esss • Observ Observati ation onss that that gene genera rally lly appl apply y to a broad broad array array of of busin business ess
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Business Evaluation -
D&RA Review
Summary of lessons learned from the major elements of the project D&RA: • Decision and Risk Analysis Review • Project Framing • Assessing Business Situation • Alternative Identification • Alternative Selection • Action Plan
6-Oct-97
164
Summary - CPDEP and VIPs/BPs CPDEP and Value Improving/Best Practices can help achieve pacesetter project performance:
• Faster • Cheaper • Better • Safer
6-Oct-97
165
CPDEP and VIPs/BPs - Exercise Exercise 1: The scope of work on a project was divided into two contracts - an onplot contract and an offplot contract. The onplot contractor designed the facility, which included storage tanks for the products. The offplot contractor transported the products from these tanks into another set of tanks 2 miles away at a marine terminal. The products were then loaded to a tanker for shipment. Also, each tank was equipped with three 50% pumps.
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CPDEP and VIPs/BPs - Exercise Exercise 2: A new plant was designed with three buildings - an administration building, a cafeteria building, and a guard building. Each building had a separate foundation and dedicated HVAC system.
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CPDEP and VIPs/BPs - Exercise Exercise 3: The first process plant was designed with two 65% trains and was operating for two years. the second plant was under construction and was also designed with two 65% trains. The third plant was on the drawing board and it was also designed with two 65% trains.
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CPDEP and VIPs/BPs - Exercise Exercise 4: An offshore platform was designed with three 50% gas turbine generators. Each generator was equipped with a waste heat recovery unit.
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CPDEP and VIPs/BPs - Exercise Exercise 5: At a remote oil field, several miles of pipe racks were installed with 20-foot spacing for supports. Regardless of the pipe size, every pipe rack had 20-foot support spacing.
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