Sei sulla pagina 1di 92

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Petroleum Development Oman L.L.C.


Document Title: Project Engineering Code of Practice

Document ID

CP-117

Document Type

Code of Practice

Security

Unrestricted

Discipline

Project Engineering

Owner

Engineering Project Delivery Manager

Issue Date

June 2012

Revision

5.0

Page 1

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


This page was intentionally left blank

Revision: 5.0 Effective: June 2012

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.

Page 2

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Document Authorisation

Authorised For Issue June 2011

Page 3

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

ii Revision History
Revision No. 5.0 Date June 2012 Author(s) Paul Sanders UEP/5 Anton Brouwer/ Mike Turberville Anton Brouwer/ Mike Turberville Austin Isaac UEJ1 Ohi Aikhoje, OTE4 Scope/Remarks Update to reflect changes in processes and standards, and to make the document more accessible. Update/roll-out Major Update to reflect improvements in processes and standards in Project Delivery implemented since the last revision Alignment with Opportunity Realisation Process, Minimum Standards and Global Processes. Incorporates comments from engineers, CFDHs and recommendations from external reviews and audits.

4.0 4.0

January 2011 May 2010

3.0

June 2004

2.0

April 1999

1.0

August 1998

Paul Hagemeijer, Initial issue. OME1

Note: Originally conceived as an ERD and then

Jyoti Kumar Das, converted to a Code of Practice under the new PDO Policy Cascade OT1/32 Graham Bolam, UEII Various Project Engineers

iii Related Corporate Management Frame Work (CMF) Documents


The related CMF Documents can be retrieved from the Corporate Business Control Documentation Register.

Page 4

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

TABLE OF CONTENTS
i Document Authorisation...........................................................................................................3 ii Revision History .....................................................................................................................4 iii Related Corporate Management Frame Work (CMF) Documents.........................................4 1 Introduction..............................................................................................................................9 1.1 Purpose..............................................................................................................................9 1.2 Target Audience.................................................................................................................9 1.3 When and how should CP-117 be applied?........................................................................9 1.4 Scaling the CP-117 requirements.....................................................................................10 1.5 Reference documents.......................................................................................................10 1.6 Document Owner..............................................................................................................10 1.7 Document Hierarchy.........................................................................................................10 2 Opportunity Realisation Process ..........................................................................................12 3 Project Delivery Organisations within PDO...........................................................................14 3.1 Asset Directorates, Central Project Delivery and Functional Directorate.........................14 3.2 Delegated Project Delivery Responsibilities.....................................................................14 3.2.1 Central Concept Engineering Team...........................................................................15 3.2.2 FEED Office...............................................................................................................15 3.2.3 Central Project Delivery.............................................................................................15 3.3 Asset - CPD - Function Relationship................................................................................15 3.3.1 Facilities Engineering Leadership Team (FELT)........................................................15 3.3.2 Corporate Functional Discipline Heads (CFDH) Forum.............................................16 4 Project Governance and Assurance .....................................................................................17 4.1 Project Governance..........................................................................................................17 4.2 Project Assurance.............................................................................................................18 4.2.1 Pre-DG4 Assurance...................................................................................................18 4.2.2 Post DG4 Assurance..................................................................................................18 4.2.3 Project Controls and Assurance Plan.........................................................................19 4.2.4 Assurance Activities Post DG4..................................................................................20 5 Key Project Activities............................................................................................................21 5.1 Front End Loading (FEL)..................................................................................................21 5.1.1 Concept Engineering..................................................................................................22 5.1.2 Basis for Design (BFD)..............................................................................................23 5.1.3 Front End Engineering and Design (FEED) and Project Specification......................24 5.2 Project Execution Planning (PEP)....................................................................................25 5.3 Risk and Opportunity Management..................................................................................26 5.4 Operations Readiness .....................................................................................................27 5.5 Management of Change...................................................................................................27 6 Project Execution Activities...................................................................................................29
Page 5

6.1 Detailed Design................................................................................................................29 Printed 27/06/12 CP-117 Project Engineering Code of Practice
The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

6.2 Procurement.....................................................................................................................30 6.3 Construction......................................................................................................................30 6.3.1 Construction Definition...............................................................................................30 6.3.2 Construction Objectives.............................................................................................31 6.3.3 Construction Planning................................................................................................31 6.3.4 Mechanical Completion..............................................................................................32 6.3.5 Pre-Commissioning....................................................................................................32 6.4 Commissioning and Start-Up............................................................................................33 6.4.1 Commissioning..........................................................................................................33 6.4.2 Pre-Start-up Audit......................................................................................................34 6.4.3 Ready for Start-up (RFSU)........................................................................................35 6.5 Project Close Out.............................................................................................................35 7 Contracting and Procurement...............................................................................................36 7.1 Contracting.......................................................................................................................36 7.1.1 Contracting Governance Structure............................................................................36 7.1.2 Contracting and Procurement Activities & Deliverables............................................37 38 7.1.3 Contract Owner, Holder & Contract Engineer Responsibilities..................................40 7.1.4 Tendering Process Pre Contract Award.....................................................................40 7.1.5 Execution Process Post Contract Award....................................................................42 7.2 Procurement, Materials Management & Logistics............................................................43 7.2.1 Procurement..............................................................................................................43 7.2.2 Vendor List Control....................................................................................................43 7.2.3 Inventory Management..............................................................................................44 7.2.4 Logistics Services......................................................................................................44 8 Project Services....................................................................................................................46 8.1 Planning and Scheduling..................................................................................................46 8.1.1 Definitions..................................................................................................................47 8.1.2 Schedule Development..............................................................................................48 8.1.3 Existing Assets and Integrated Activity Planning.......................................................50 8.2 Cost Estimating................................................................................................................51 8.2.1 Capex Estimates........................................................................................................51 8.2.2 Cost Estimate Preparation, Assurance and Approvals..............................................52 8.2.3 Project Cost Estimates Build......................................................................................52 8.2.4 Base Estimate............................................................................................................53 8.2.5 Contingency - Cost Risk Assessment .......................................................................53 8.2.6 Future Market & EPC Premium.................................................................................54 8.2.7 Cost Analogues and Benchmarking...........................................................................54 8.2.8 Estimate Data Collection............................................................................................54 8.3 Project Controls ...............................................................................................................55
Page 6

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

8.3.1 Introduction................................................................................................................55 8.3.2 Management of Cost .................................................................................................55 8.3.3 Management of Progress...........................................................................................56 8.3.4 Management of Change.............................................................................................56 8.3.5 Management of Risk..................................................................................................57 8.3.6 Reporting....................................................................................................................57 8.3.7 Project Close Out Reporting......................................................................................58 8.4 Project Assurance ............................................................................................................58 8.4.1 Estimate and Schedule Assurance Reviews..............................................................58 8.4.2 Programme Build.......................................................................................................58 9 Quality Assurance.................................................................................................................59 9.1 Discipline Controls and Assurance Framework (DCAF)...................................................61 10 HSE in Projects...................................................................................................................63 10.1 Introduction.....................................................................................................................63 10.2 Application......................................................................................................................65 10.2.1 Mandatory HSE Deliverables...................................................................................65 10.2.2 Applicability..............................................................................................................65 10.2.3 ALARP Decisions Context.......................................................................................66 10.3 Process Safety Management..........................................................................................67 10.3.1 Statement of Fitness................................................................................................68 10.3.2 DEM1 Mandatory Process Safety Design & Engineering Requirements.................68 10.3.3 DEM-2: Process Safety Basic Requirements...........................................................69 10.4 Contractor HSE Management.........................................................................................70 11 Information Management....................................................................................................71 11.1 Project Management System (iPMS).............................................................................72 12 Finance in Projects..............................................................................................................73 12.1 Role of Finance in Project Governance.........................................................................73 12.2 The Role of Finance within the Project...........................................................................73 13 Value Improvement Practices.............................................................................................75 13.1 Opportunity Framing.......................................................................................................75 13.2 Lessons Learned.............................................................................................................76 13.3 Value Engineering..........................................................................................................76 13.4 Benchmarking of Project Performance...........................................................................76 13.4.1 Project Metrics.........................................................................................................77 13.5 Technical Standards Challenge......................................................................................78 13.6 Availability Assurance / Reliability..................................................................................79 13.7 Constructability...............................................................................................................80 13.8 PEP-PER........................................................................................................................80 13.9 LIRA................................................................................................................................80 14 Project Resourcing and Allocation......................................................................................81
Page 7

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

15 Technical Standards............................................................................................................82 15.1 Technical Standards Framework....................................................................................82 15.2 DEM1..............................................................................................................................82 Appendix 1 CP-117 Mandatory Requirements.....................................................................83 Appendix 2 Governing documentation, References and Tools.............................................84 Appendix 3 Abbreviations....................................................................................................92

Page 8

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

1 Introduction
1.1 Purpose
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

1.2

Target 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)

1.3

When 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 Nonmandatory 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.

Page 9

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

1.4

Scaling 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.

1.5

Reference 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.

1.6

Document 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 learnings 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.

1.7

Document 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. PDOs strategic objectives are indicated in the Diagram below:

Page 10

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

PDOs 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:

Page 11

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

2 Opportunity Realisation Process


Support: UCI, UEP The Opportunity Realisation Process (ORP) is PDOs 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 goals from the outset. Taking good quality decisions and involving the right people in a clear governance structure. Safeguarding the value across 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: 1. Project is given Permission to Proceed. 2. Project is told to Stop. (Project is dropped because it is not economic, is not aligned to PDOs strategic objectives, or does not have sufficient resources). 3. 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.

Page 12

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


The objective of each Decision Gate is as follows: Phase Identify Assess Select Define Gate DG1 DG2 DG3 DG4 Objective Do we understand what were starting? Do we understand how to exit, if required?

Revision: 5.0 Effective: June 2012

Have we identified a full range of strategies and scenarios? Have we selected the optimum alternative? Is 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
Initiate Project: Generate ideas. Verify alignment with business strategy, establish potential value and decide whether to fund and staff.

Assess
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
Select the best concept solution: Assess the best concept for delivering value from the Project and indicate why other choices are not preferred.

Define
Define the selected concept: Define technical scope, cost and schedule for Final Investment Decision.

Execute
Deliver the promise: Deliver an asset consistent with the forecast scope, cost and schedule. Leads to handover decision to user for Operate phase.

Operate
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.

Page 13

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

3 Project Delivery Organisations within PDO


Support: UEP

3.1

Asset Directorates, Directorate


Asset Directorates

Central

Project

Delivery

and

Functional

PDOs Projects are delivered through a matrix organisation. 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 PDOs 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.

3.2

Delegated Project 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.

Page 14

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


3.2.1 Central Concept Engineering Team

Revision: 5.0 Effective: June 2012

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. 3.2.2 FEED Office The Front End Engineering Design (FEED) of projects with an estimated CAPEX above $100mln shall, 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. 3.2.3 Central 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).

3.3

Asset - 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:

3.3.1

Facilities 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).

Page 15

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

The FELT meets on a monthly basis to share learnings and discuss project delivery and engineering issues (either ad hoc or long term strategic in nature) that require to be addressed through a common, unified approach. In particular it develops, agrees and reviews the progress against the Project Delivery Improvement plans. The FELT has five main roles and responsibilities: 1. The FELT is responsible for influencing Policies and generating Strategies: Given the FELT overview of the entire project delivery within PDO, the FELT is uniquely placed to provide key steer to the organization in the form of Policy and Strategy recommendations, and translating these into Codes of Practice. 2. The FELT has accountability for Project Delivery: All projects in PDO report via the FELT members. The FELT is jointly responsible for project delivery within PDO. This responsibility includes accountability for annual spend, and project schedules. The FELT is responsible for setting realistic project targets (budget and schedule). One important aspect of this accountability is to jointly agree staff moves to make the best use of scarce engineering resources across the various assets and projects. Another important aspect of this accountability is the FELT ownership of the corporate risks relating to project delivery. 3. The FELT is responsible for disseminating information and driving initiatives: The FELT forum is one of the most effective for disseminating information and knowledge within the organization given the mixture of Assets, major Projects, Function and Line in the FELT membership. The FELT has a responsibility to drive the cross-fertilization of lessons learned and best practices. When new initiatives are rolled-out, the FELT members have responsibility to drive the implementation throughout PDO. 4. The FELT is a sounding board: The FELT provides an accessible sounding board to listen to new ideas, challenges, suggested changes, etc. coming from the rest of the organization (e.g. CFDH forum). 5. The FELT is an early warning system for the Managing Director and TDG: The FELT informs the MD and TDG of issues that are surfacing within the organization, and provides advice as to how best to deal with these issues. The FELT is the conscience of the organization. 3.3.2 Corporate Functional Discipline Heads (CFDH) Forum The CFDH Forum is chaired by the Engineering and Operations Functional Director (UEOD) and made up of the Project Delivery Manager (UEP), all Engineering CFDHs and the CFDHs for Operations / Commissioning and Start up (UOP) and Maintenance (UOM). The CFDH Forum meets on a monthly basis to share learnings and discuss engineering issues (either ad hoc or long term in nature) that require to be addressed through a common, unified approach. In particular it develops and reviews progress against the Functional Engineering Capability Improvement plan and the annual Functional Engineering Business Plan. The CFDHs provide the technical assurance to projects which forms the back-bone of the Decision Controls Assurance Framework (DCAF). They also assess the competency levels of the various disciplines, particularly the Technical Authority Level 2 (TA2).

Page 16

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

4 Project Governance and Assurance


4.1 Project Governance
Support: UEP Project Governance is defined as steer, supervision, support and assurance: Steer: giving direction to the Project Team; encouraging the Project Team to put the right emphasis on the right decisions, deliverables and activities. Supervision: the body providing the governance supervises the quality and robustness of the Teams output. Support: the DE/DRB can provide assistance to the Project Team through expert knowledge and/or providing funds and/or resources. Assurance: the management of a range of activities that collectively inspire confidence in the emerging decisions.

Governance is the responsibility of the DRB, chaired by the DE, up to and including Final Investment Decision (FID, usually the end of Define). After FID, the DRB members may change for continued Governance throughout Execution and Start-up, up to and including the Post Investment Review. The DRB, together with the Business Opportunity Manager (BOM), is responsible for ensuring that Quality Decisions are made throughout the ORP stages.

For Major Projects in CPD the governance Line of Sight runs from the Project Manager via the BOM and CPDM to the DRB. The PDO Technical Director (TD) acts as the Decision Executive (DE). For all other projects, the governance Line of Sight runs from the accountable Project engineer / leader via a Head of Projects and/or the Asset Engineering Manager to the relevant Asset Director (GD, OND, OSD, UID), who is also the DE.

Page 17

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC 4.2 Project Assurance


Support: UEP

Revision: 5.0 Effective: June 2012

Project Assurance is defined as the management of a range of activities that collectively inspire confidence in the emerging decisions to be taken by the DE. It also provides an independent view to the DE and the Shareholders on the status of the project and the suggested actions to be taken by the Project team. All Shareholders are invited to participate in key reviews as part of the annual assurance review planning. 4.2.1 Pre-DG4 Assurance Up to DG4 the Assurance of all Projects with a total estimated Capex above $100mln is vested in a Decision Review Board (DRB), chaired by the Decision Executive (DE) with representation from UEOD, and other Asset Directorates and Functional Directorates. The DRB endorses the Project Control and Assurance Plan (PCAP) and the Decision-Based Roadmap, and advises the DE on key decisions; especially the decision to proceed with a project to the next phase. The DE holds single point accountability. In addition, the DRB: Gives mandate to the project team and BOM. Assigns Resources Reviews key project documents and activities (e.g. Risk Management Plan) Meets on a quarterly basis (or more often, if required). Monitors progress on audit and review actions follow-up and closure, particularly those from VARs. Ensures all stakeholders remain fully aware of key issues and project progress. Provides a forum for the BOM and Project Manager to seek help in resolving issues.

The DRB structure in PDO recognises two levels: DRB1, chaired by the TD for all projects with a total estimated CAPEX above $200mln (i.e. all projects in CPD). UCI is the secretary of DRB1 pre-DG4. DRB2, chaired by the Asset Director, for projects with a total CAPEX above $100mln and less than $200mln. The DRB composition and frequency of DRB meetings is defined by the DE. Minutes are taken by a nominated secretary from the Asset.

The pre-DG4 assurance process for smaller projects shall take place within the existing Asset Management structure. Projects with CAPEX less than $100mln can also be covered by a DRB2 if justified by the risk profile or strategic nature of the project. 4.2.2 Post DG4 Assurance Post DG4 and FID the Assurance of projects with an estimated CAPEX above $100mln continues to be vested in the DRB1, again chaired by the DE, but now with representation from Asset and Functional Directorates, including UEOD. At DG4, the DE appoints the DRB members for the Execution phase. The DRB, chaired by the Decision Executive:
1

Confirms the mandate of the project team.

Page 18

This used to be called the PDAB CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


Owns the high level Risks and appropriate Risk Response. Provides resources to ensure the project is sufficiently manned.

Revision: 5.0 Effective: June 2012

Carries accountability for effective project assurance post DG4/FID. Meets quarterly (or more often, if necessary). Verifies compliance with and approves deviations from the Project Control and Assurance Plan (PCAP). Monitors progress on audit and review actions follow-up and closure, including those from VAR4 and Project Execution Reviews. Ensures all stakeholders remain fully aware of key issues and project progress. Provides a forum for the Project Manager to seek help in resolving issues.

While the DE has single point accountability, other DRB members retain shared ownership for the quality of the decisions. The DRB structure in PDO recognises two levels: DRB1, for projects with total CAPEX of more than $200mln (i.e. all projects in CPD) with TD as DE. Other DRB1 members include the Asset Director (deputy DE), UEOD, and other Asset and Functional Directorate representatives. UEP is the secretary of DRB1 post DG4. DRB2, for projects with total CAPEX of more than $100mln, but less than $200mln with the Asset Director as DE. Other DRB2 members include members of the Directorate Leadership Team, a UEP representative and an Engineering Manager from a different Directorate. The latter to ensure cross asset exchange of learnings and challenge. Minutes are taken by a nominated secretary from the Asset. A key member of the DRB is the Operations representative. Representatives from other Functions such as HSE, Legal, Well Engineering, etc. should be invited to DRBs as required. The assurance process for smaller projects shall take place within the existing Asset Management structure. Projects with Capex less than $100mln can also be covered by a DRB2 if justified by the risk profile. For projects where the costs are dominated by well activities the DE may decide that the DRB will be achieved through existing Well Delivery assurance bodies, and chose not to constitute a separate DRB. 4.2.3 Project Controls and Assurance Plan For all Projects with CAPEX in excess of $20mln, the Project Team shall prepare and implement a Project Controls & Assurance Plan (PCAP). The PCAP contains the Discipline Control and Assurance Framework (DCAF)-based deliverable QA/QC process with responsible Technical Authorities (TAs) for each deliverable. The PCAP also specifies specific additional assurance events required for the project. The PCAP shall be approved by the DE and updated at the start of each new project phase. At the end of each phase the DE must check that the PCAP deliverables have been actioned and signed off across the applicable disciplines.

4.2.3.1

Assurance Activities Pre-DG4 Support: UPV, UEP3, UEP5

Page 19

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

The Value Assurance Review (VAR) process is owned by the Petroleum Engineering Directorate (UPD) and coordinated via Value Assurance Advisor (UPV). VARs provide key Project Assurance prior to decision gates. VARs shall be held for all projects in excess of $100mln towards the end of each ORP phase. The VAR provides independent assurance to the DE that the opportunity is ready to proceed to the next phase. The Estimate and Schedule Assurance Review (ESAR) process is owned by the Functional Head of Project Services (UEP3). ESARs provide independent assurance that the project cost estimate and schedule accurately represent the project scope and risks to project delivery are compliant with ORP requirements. ESARs are held prior to VARs and are mandatory for the following projects: Prior to DG3 for all projects with CAPEX exceeding $200mln Prior to DG4 for all projects with CAPEX exceeding $100mln. Projects of lower Capex with a large degree of complexity or a high risk/uncertainty profile should also be subject to ESAR. The ESAR process is described in more detail in section 8.4.1. The Project Health Check (PHC) process is owned by the Project Engineering Function (UEP5) and is recommended to be carried out as a self assessment by the project team to assess the status of the project against a predefined set of questions. An approved PHC facilitator shall guide the team. 4.2.4 Assurance Activities Post DG4 Support: UEP2, UPV, UEQ The Project Execution Review (PER) process is owned by the Engineering and Operations Director (UEOD), and coordinated via the Project Engineering Function (UEP2). The PER provides independent assurance to the DE that the project is under control and is being delivered in line with DG4 promises. PERs shall be held on an annual basis for projects with Capex in excess of $200mln. Projects of lower Capex with a high execution risk should also be subject to PER. The Pre-Start-Up Audit (PSUA) is owned by the Engineering and Operations Director (UEOD) and is coordinated via the CFDH Production Operations (UOP). A PSUA shall be held for all projects to confirm to the DE that the project is ready to proceed to the Operations phase. A VAR5 shall be held on projects with CAPEX in excess of $200mln, approximately 1 year after the on-stream date when a full TECOP look-back picture has emerged and performance testing has been completed. An overview of the mandatory requirements is given in Appendix 1.

Page 20

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

5 Key Project Activities


Although there are many activities and deliverables required for successful Project Delivery, the five key activities are as follows: 1. Front End Loading. 2. Project Execution Planning. 3. Risk and Opportunity Management (TECOP). 4. Operational Readiness and Assurance. 5. Management of Change.

5.1

Front End Loading (FEL)


The essence of Front End Loading is to ensure that the maximum value has been built into the Project during the early phases of design to be set-up for success in execution. As the graph below shows, value is built into the Project during the phases Identify, Assess, Select and Define and can only be safeguarded or eroded during Execution.

The early phases (until the end of Define) of the project are the opportunity for Value Creation. This is where the Value Improvement Practices (VIPs) should be applied and attention given to producing quality deliverables. The Execute phase focuses on Safeguarding the Value.

Page 21

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

5.1.1

Concept Engineering Support: UEP2 Concept Engineering is the pre-DG3 engineering activity in support of Project Development and is closely integrated with the subsurface Field Development Planning for Oil & Gas developments. Key deliverables are as per the Discipline Control and Assurance Framework (DCAF, see section 9.1), and the Project Specific Control and Assurance Plans (PCAPs). The main deliverables are summarized below per ORP phase: Identify Project Initiation Note Decision-Based Roadmap Risk and Opportunity Management plan Stakeholder Engagement Plan Assess Feasibility Study Report Level 1 CES Map of solution space Stakeholder Engagement Plan Ranked Decision Criteria/ Value Drivers Select Field Development Plan* Concept Selection Report (CSR) ALARP Demonstration Execution and Contracting Strategy Preliminary PEP/PES Level 2 Cost Estimate and Schedule Basis for Design
(*Except for infrastructure projects)

More detailed deliverables are given in DCAF. Concept Engineering shall take place in line with PR-1358 - Procedure for Concept Selection and Preparing Basis for Design and the key steps are hard-wired in iPMS. Key focus areas for concept engineering are: Clarity on Project Objectives and Value Drivers. Effective use of Value Improvement Practices (VIPs) such as Opportunity Framing, Risk and Opportunity Management, Concept Identification, Urban Planning, Concept Selection, Benchmarking, Value Engineering, Contracting Workshops, Constructability Reviews, PEP-PER, LIRA, etc. Use of the VIPs can be scaled to reflect the size and complexity of the project. Further requirements around VIPs are detailed in section 13. Standardization of approach and solutions: replication wherever possible. QA/QC in line with DCAF and PCAP. Concept Engineering will take place in the Asset and Infrastructure Directorate Concept teams for small and conventional projects, whilst unconventional (EOR and Sour) and major projects with an estimated Capex in excess of $200mln will take place in the Central Concept Team. PDO concept engineers can receive technical support from a Concept Engineering Services Contractor (CESC) as appropriate. This provides a means to get Third Party Support for niche applications where the capability and / or capacity are not available within PDO or the CESC contractor. Management of the CESC contract takes place within the Central Concept Team with UEP2T as Contractor Holder and CFDH Concept as Contract Owner. The Field Development Plan (FDP) and Basis for Design (BFD) are key deliverables of the Select phase. Since the FDP will usually be completed before the Concept Select Report (CSR) is finalised, it is recommended that the Subsurface Team engage with the DRB at completion of FDP to obtain approval for the FDP, prior to the stage gate
Page 22

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

approval that is DG3(a), to allow completion of the CSR and commencement of the BFD. 5.1.2 Basis for Design (BFD) Support: UEP2 All projects shall have a BFD. For all projects requiring engineering definition (FEED) the BFD shall be completed prior to DG3. The development of the BFD shall be completed in-house by PDO staff. In case of a shortage of internal resources or specialist technical skills the Asset or Project Team may use external contractor resources or outsource a specific aspect of the BFD but the activity shall always be led by a competent and authorised PDO engineer, and the BFD shall be approved at TA2 level (as per DCAF). During preparation of BFD, the concept in the approved Concept Selection Report is further developed to obtain a cost estimate for the project to an accuracy of +25% / -15% (Level 2). This should also define all system and equipment requirements so that FEED and Detailed Design can progress smoothly, and also forms the basis for the approved Project schedule. To achieve the above the minimum information required to be finalised and documented is given in PR-1358 - Procedure for Concept Selection and Preparing Basis for Design. Standardisation opportunities shall be explored and a project standardisation philosophy justified and documented. In addition, baseline values should be defined and agreed for Management of Change (PR-1247). At the end of the BFD all major Process, Control, Safeguarding, Instrument and HSE philosophies shall be finalised. Where the design involves high pressure or toxic fluids, reviews such as HAZID, course HAZOP, QRA, FEA and dispersion study shall be conducted to develop Plot Plan and Equipment Layouts. For major projects a System Availability study shall be conducted to finalise the equipment sparing. A Value Engineering check for projects between $5 100mln and a proper facilitated Value Engineering Review for projects exceeding $100mln shall be carried out prior to DG3, incorporating the BFD. The BFD is the basis for starting any FEED and is to be endorsed by the Concept team. The Project team takes over the project at the end of BFD and the Project Team Lead will be responsible for Cost and Schedule control against the agreed baseline values beyond this point. i.e. any changes beyond this point shall be subjected to Management of Change (PR-1247). Certain VIPs may be applicable during the Select phase. See Section 13 on VIPs. 5.1.2.1 Close-out of the Select Phase Support: UEP2 At the end of the Select phase of the project, there should be a formal close-out of the pre-DG3 project activities, capturing lessons learned (positive and negative) and recording the key technical and commercial aspects of the project so far including key decisions. The Project Engineer responsible for the BFD is responsible for the pre-DG3 close out report, in accordance with PG12b Capital Project Close-out Report.

Page 23

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

5.1.3

Front End Engineering and Design (FEED) and Project Specification Support: UEP1 The Front End Engineering Design develops the requirements of BFD into design deliverables leading to a Project Specification. The transition from Select into Define at DG3 is a key milestone in the Project Delivery lifecycle. It is critical that the project retains continuity of key staff, budget and understanding of any outstanding (sub-surface) risks. The FEED shall not start until the DE mandates it, usually when the BFD and other key Select deliverables have been approved and fully signed off. The BFD should not contain extensive holds on information, or outstanding concept selection choices. The FEED start is also dependent on completion of any key recommendations from the VAR3/DG3. The FEED shall: provide a sound technical basis for the Execution Phase (Detailed Design, Procurement and Construction) with minimal uncertainties; provide a basis for a Cost Estimate with +15% / -10% accuracy (Level 3); provide a firm schedule for the Execution phase; identify all the risks/opportunities and sensitivities.

During the FEED all assurance reviews to meet technical integrity shall be completed, such as: HAZID, Design Review, HAZOP, QRA, FEA, PDMS Model reviews (3 stages), SAFOP and IPF. 3D Model Reviews or 2D General Arrangement reviews shall consider, as a minimum, process issues, safety issues (QRA, SIMOPS, etc) maintenance and operational accessibility (including manual handling), constructability (equipment handling requirements and access for construction) and escape routes (on ground and at platforms). An update of the Risk and Opportunity Management Plan shall be made shortly after kick-off of the FEED phase and a risk register maintained during the Define phase to track the Risk Mitigations. Those risks/opportunities that cannot be closed out before execution phase should be mitigated and transferred to the execution contractor for management (see section 5.3). It is important to have PDO approved facilitators/leaders for HAZID, Design Review, HAZOP, IPF and Value Engineering. It is the responsibility of the Project Engineer to ensure close out of all action items resulting from various reviews and maintain the records for the same. The FEED shall deliver a Project Specification which will require only addition of vendor specific information and construction related details. For a detailed list of deliverables and activities to be covered in FEED reference is made to the list of deliverables in DCAF. During this stage, extensive vendor communication needs to be established so that the Process design takes into consideration the most probable scheme in any vendor package. A black box approach, where minimum information on vendor packages are provided, shall be avoided. All interfaces with vendor packages shall be finalised to avoid major changes during Detailed Design. The FEED shall also ensure that all PDO Environmental and Sustainable Development requirements are met. A HOLDS list shall be maintained and any residual holds shall be transferred to the Project Team for management through the execution phase. In FEED stage, specifications for all major equipment and Long Lead items shall be developed. Depending on the procurement strategy these shall be used for procurement by PDO or the contractor.
Page 24

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

All changes to the recommendations of the BFD shall be subjected to rigorous Management of Change to track possible Project Cost and Schedule impact (see Section 5.5) In PDO, all FEED for projects exceeding $100mln in total estimated Capex are carried out by default by the in house FEED office, if capacity exists, using the FEED office Management system and standards. Smaller project FEEDs are typically outsourced. See also Section 3.2.2. All outsourced FEEDs for projects exceeding $20mln shall be subject to an independent FEED review.

5.2

Project Execution Planning (PEP)


Support: UEP5 Planning a project properly and taking it methodically through the various ORP Phases from Identify and Assess all the way through to the Operate Phase is key to the successful outcome of any Project in terms of Value, Cost, Schedule and Quality. The Opportunity Realisation Manual (ORM) sets out a rigorous approach to planning and managing the opportunities and projects throughout the different phases. This approach shall be documented from early in the project (i.e. at the start of Select as a Project Execution Strategy) and shall be developed into a preliminary project-specific Project Execution Plan prior to DG3 and a final Project Execution Plan prior to DG4. The Project Execution Plan is a live document which shall also be updated during the Execution phase as necessary, particularly after contract award. At DG4 the Project Execution Plan (PEP) shall describe in sufficient detail, to the Project team and the project stakeholders, how the project will be executed. The PEP should cover all key project activities, resources and third party contractors involved directly or indirectly in the delivery process. In particular it sets out what internal project controls and external assurance steps will be put in place to ensure the desired outcome as promised at DG4/FID. The PEP should include a realistic P50 ( i.e. 50% probability of finishing before scheduled completion date) and P90 (i.e. 90% probability of finishing before scheduled completion date) project schedule at sufficient level of detail (minimum level 3) to show the inter-dependencies and logical sequence of the various project activities and milestones. The PEP shall also describe the proposed/approved procurement and contracting strategy, and specific plans with respect to project reporting, project resourcing, risk management, HSE and Quality management, Information management, Interface management, subcontract management, Operations Readiness and Assurance, Commissioning and Start Up, Project Hand over and Close out, etc, all of which are needed to ensure delivery against the FID Promise. To develop the Contracting and Procurement strategies the Project team shall conduct a supply chain management workshop and contracting strategy and tactics workshops with appropriate input from all relevant Functions and stakeholders. The typical standard contents of a Project Execution Plan can be found in Project Guide 10a and examples of best practice Project Execution Plans are available in iPMS (see section 11.1). The Project Manager or Project Lead engineer is responsible for the preparation of the preliminary PEP (Pre DG3) and final Project Execution Plan (pre DG4) and ensures the necessary approvals are in place as per the Discipline Control and Assurance Framework. The PEP is a live document and shall undergo updates as the project progresses, particularly at the end of FEED and Detailed Design stages, to reflect any change in strategies required due to developments in the previous phase. In PDO all EMC/ODC projects with a total estimated CAPEX exceeding $5mln (excluding materials) shall have a specific Project Execution Plan, prior to proceeding to the execution phase. For EMC/ODC projects of smaller size a portfolio generic Execution Plan can be prepared.

Page 25

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

All other projects shall have their own specific Project Execution Plan. Note that the PEP is scalable depending on the size and complexity of the Project.

5.3

Risk and Opportunity Management


Support: UEP31 Risk and Opportunity Management concerns the identification and subsequent management of both Threats and Opportunities that might apply to a Project (or portfolio of small projects), and ensures that the risk levels are kept as low as practicable (ALARP) and that the opportunities are exploited to the fullest. Risks are uncertain events which, if they occur, would have a negative impact on the project objectives (e.g. cost, schedule, etc.). Opportunities are similar to Risks except the consequences for the Project objectives are positive. Risks are identified, usually during a risk workshop, in each of the five TECOP types: 1. Technical Risks 2. Economic Risks 3. Commercial Risks 4. Organisational Risks 5. Political Risks Each Risk is categorised by the probability (likelihood) of occurrence multiplied by the severity of the consequence, and the Risks are ranked in a Risk Assessment Matrix (RAM) that allows the Risks to be prioritised relative to one another. Once Risks have been identified and ranked, the decision can be made as to whether or not the Risks can be accepted, transferred, mitigated or avoided. (This is also known as the 4-Ts: Take, Transfer, Treat, Terminate). All projects should have a Risk and Opportunity Register. For Projects above $50mln this is Mandatory. For Projects above $50mln the Risk Register shall be maintained in EasyRisk. In the Risk Register all Risks and Opportunities shall be recorded, assessed, assigned an owner, and possible mitigation steps and timing. The Risk Register shall be regularly reviewed and updated, particularly at the start of each Project phase. The specifics of how the Risk Management process will be conducted by an individual project (or portfolio of smaller, similar projects) are documented in the Project/Portfolio Risk Management Plan and/or the Project Execution Plan (PEP), specifically:

The ongoing process of identification, review and (re)assessment of risks relative to project objectives, roles and responsibilities that enable risk management, how risks will be managed, and how and when risks will be reviewed, reported and communicated. As part of assurance, the project team must also be able to demonstrate that The Risk Register is being regularly reviewed and updated, and the risk environment and the effectiveness of actions taken to manage identified risks are being evaluated on an ongoing basis and The risks in the Risk Register are reflected appropriately in the project cost estimates and schedules, including mitigation and Opportunity cost and schedule impacts. The development of the Risk Register, Risk Management Plan and RAM is the responsibility of the Project Manager. These deliverables are owned by the Business Opportunity Manager, and endorsed by the Decision Executive.

Page 26

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC 5.4 Operations Readiness


Support: UOP4

Revision: 5.0 Effective: June 2012

Operations Readiness (OR) is a focused, proactive and systematic approach to successful commissioning, start up and normal operation of a new facility. The Operations Readiness process in PDO is detailed in PR-1612 - Operations Readiness The purpose of OR is to assist Operations and Engineering Teams to collaborate and ensure that Operations requirements in Engineering Projects are made sufficiently clear, are of a high quality and are met in a timely manner. It is expected that following the prescribed methodology will ensure that: OR aspects and concepts are integrated into all phase of a Capital project. Support Project Manager to deliver the project to the Asset Owner in compliance with the minimum Operations Excellence standards. Ensure Future Asset Owner is fully prepared to receive, operate and maintain the facilities. Right first time commissioning and start-up is achieved. Reduction in changes / modification to design in the latter stages of projects. Specified operational performance over the lifecycle of the Asset can be realized. The OR process includes important sub-processes: Flawless Project Delivery (FPD), which is mandatory for all projects >$100mln. Commissioning and Start-Up (CSU) (PR-1159 - Commissioning and Start-up) Total Reliability (TR) and Technical Integrity (TI) (CP-114 - Maintenance & Integrity Management Code of Practice) Logistics and Infrastructure (L&I)

5.5

Management of Change
Support: UEP3 Management of Change is an important factor in ensuring that projects are completed on time and within budget. Changing the project scope, other than developing and defining the scope throughout the Select and Define phases and carrying out the detailed engineering during the Execute phase, should be discouraged in principle and by definition. Strict scope management should be applied in order to safeguard the schedule, the cost and the quality of the project. Any change of scope, or the transfer of scope from one contractor to another (or one project to another) is subject to formal change control. Proposals for changing the project baseline documents, scope, quality, schedule and cost, should be strictly controlled at any point in time in the project once the Select Phase has been completed. All projects shall adopt the Management of Change (MOC) procedure PR1247. The procedure: Describes the process for controlling and managing technical change during the concept definition and execute phases of PDO projects. Sets out a series of key Baseline Value Drivers (BVD) for the projects which shall be developed during conceptual Select phase and approved by the DRB at Decision Gate 3 (DG3). If a change occurs through DEFINE an updated set of BVDs are approved at DG4. These Value drivers are normally captured in the Field Development Plan, the Concept Select Report, the Basis for Design and the Project Specification CP-117 Project Engineering Code of Practice
Printed 27/06/12

Page 27

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Describes a structured method of assessing and approving or rejecting changes against these parameters. A change to the Baseline Value Drivers will either increase or erode the value of the project and is therefore subject to the MOC. All changes are documented in a Change Proposal Form. Defines Approval Levels associated with the varying degrees of change. Sets up the Change Review Panel consisting of senior project personnel that meets regularly and acts as the Stage Gate screening and approval body for change impact. The Panel will review every Level 3/2/1 change proposal and ensure that all implications of the change are considered before being accepted or rejected. Periodically, the Panel reviews the list of Level 4 change proposals.

The Project Change Coordinator (usually appointed from Project Services) maintains the Project Management of Change process.

Page 28

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

6 Project Execution Activities


The Project Execution phase commences from FID and usually starts with Detailed Design and Procurement before moving into Construction, Pre-Commissioning, Commissioning/Start-up and Initial Operations. Note that each of these activities may overlap:
FID Detailed Design LL Procurement Procurement Construction Pre-commissioning Commissioning Start-up As-built / Close-out Hand-over

The PEP, Risk and Opportunity Management and Management of Change (as described in Section 5) continue to be applied and updated during the Execute phase, while the Operations Readiness becomes increasingly important.

6.1

Detailed Design
Support: UEP In the Detailed Design phase the Project Specification developed during FEED shall be further detailed to the level which is needed for procurement, fabrication/construction, testing, commissioning and handover. For deliverables to be produced in this phase refer to SP-1134 - General Specification for Detailed Design and Engineering of Oil and Gas Facilities. Key assurance and design reviews are carried out during the Detailed Design phase, after incorporating any changes to the FEED design basis and actual vendor design data. It is important that the vendors participate in these reviews so that any assumptions made in the design are corroborated by them and all controls and safeguarding issues in vendor packages are addressed to PDOs satisfaction. It is important that minimum changes are made to basic schemes, philosophies, material, strategies etc in the Detailed Design. Any such changes shall be subject to rigorous Change Control. When the Detailed Design deliverables are developed to a reasonable level of detail, a Constructability Review shall be done with participation from experienced construction personnel. For Green field projects this may be done in a 3D PDMS model review. In Brown field projects a site review in addition to a 3D model review will be required. For major or complex projects, the benefits of 4D modelling should be evaluated. During the Design the contractor will be expected to set up a Material Management System including tracking, receipt, handling, storage and preservation and installation. The use of Radio Frequency ID (RFID) tagging is recommended. It is important to set up a Commissioning Team at the early stages of Detailed Design and involve them in the review of Process schemes and participate in reviews such as HAZOP to ensure the requirements of Commissioning are incorporated in design to enable Flawless Start up. For large complex projects early commissioning planning input is required in the Front End phase of the project, as the commissioning by systems may determine the packaging of the facilities scope in FEED and subsequent execution phases.

Page 29

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

The Detailed Design scope shall also include development of Commissioning and Start up procedures, Operating and Maintenance manuals, setup of the Construction Completion Management System (CCMS), SAP Plant Maintenance System, HSE case, Safety Critical Elements, etc. Close-out of the Detailed Design phase includes handover of these deliverables to the Operator in the correct data format.

6.2

Procurement
Support: FPO The Procurement phase may begin before Detailed Design, particularly for Long Lead materials and equipment. However, the other procurement will commence during the Detailed Design phase and continue into Construction. Procurement is discussed in more detail in Section 7 and the Quality Assurance and Control aspects are discussed in Section 9.

6.3
6.3.1

Construction
Construction Definition Support: UEP In PDO construction activities are usually contracted out to third party companies. The size of construction scopes/projects varies from the very small plant modifications to multi-million dollar construction projects, involving a large workforce and construction periods of three or more years. Contracting mechanisms vary depending on size and complexity of the work ranging from agreed day rates to lump sum prices. Key Construction activities include but are not limited to the following:

Input in design and confirmation of work scope. Site establishment including offices, lay down, specialist storage, welfare facilities, local fabrication areas, workforce accommodation (e.g. onshore camp) supply base and staging points. Set up and maintenance of Material management system including tracking, receipt, handling, storage and preservation and installation. Identification and recruitment of competent contractors and resources and where applicable the development of local content strategies and plans. Construction sequencing and planning competencies of personnel. and resource loading, including levels and

Job hazard analysis and Development of Construction methodologies e.g. stick build versus modularisation strategies. Development of work packs and inspection and testing plans. Fabrication of structures, piping and installation of major items of equipment e.g. vessels, compressors. Specification and procurement of specialised installation/construction equipment e.g. heavy lift equipment. Logistics associated with the mobilisation of personnel, equipment and materials. Mechanical completion leading on to Pre-commissioning of all utility and process systems (Refer to sections 5.6 onwards for Mechanical Completion and Commissioning definitions). Following pre-commissioning, handover to the Commissioning and Startup (CSU) Team for live commissioning , start up and operations.

Page 30

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


6.3.2 Construction Objectives Support: UEP -

Revision: 5.0 Effective: June 2012

Overall: To construct the Project as per the approved design drawings, specifications and standards in a manner that ensures the overall project objectives are met, typically including specific targets set for cost, schedule , HSE, quality and local content: Safety: To design and construct the facility in a manner that minimises risk to the construction workforce during construction and ensures a safe and orderly start up on completion. Schedule: To develop and pursue a proactive, realistic and sufficiently detailed execution plan in line with overall project objectives that effectively utilises available design deliverables labour, materials and equipment in the most efficient manner. Quality: To maintain rigorous quality assurance and control on all construction activities, to ensure full compliance with project technical specifications and standards and allow timely and efficient (pre)commissioning and start up, as per overall schedule. Cost: To execute the project within budget and to continuously look for the most cost effective implementation options. Local Content: To meet the Project local content requirements and support the development of local capability. Management of Change: To manage and control changes which occur during construction (e.g. site queries/clashes) to minimise impact on Cost, Schedule, Quality and other project objectives.

6.3.3

Construction Planning Support: UEP3 For reliable project execution planning a Level IV Detailed Construction Schedule shall be prepared soon after the start of the detailed design. This level IV is typically prepared by the main Construction contractor, shall cover all subcontractor construction activities, shall be fully aligned and integrated with the design and procurement schedule and be fully resourced with man-hours and materials from which a progress S curve can be constructed. Estimated construction durations shall be based on proven local productivity levels and realistic resourcing levels. It is vital that a Level IV Schedule is produced before work starts on site and that the plan is adequately reviewed by all the disciplines to ensure it is a realistic and robust plan. The absence of a detailed level IV plan is an indication of poor project planning and control and delays and re-work can be anticipated. The Level IV Schedule is used by the Contractor in planning, executing and controlling his work. A Level IV Schedule can also be used in planning work to be implemented during a plant shutdown. These detailed schedules typically consist of thousands of activities and are updated at least weekly and in some cases daily. The Contractor on medium to large Projects should be reporting against the following Key Performance Indicators (KPIs) weekly but certainly monthly:


Page 31

Progress % actual versus planned (this is physical progress NOT cost progress). Construction milestones achieved versus planned. Direct man-hours achieved versus planned. Indirect man-hours to direct man-hours ratio. Cost Latest Estimate versus planned and commitment. CP-117 Project Engineering Code of Practice
Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

For the more complex projects the Contractor should also produce a Level V Schedule which gets down to job card level (see below) and includes all the man-hours, materials, tools and equipment needed to do a particular task. For complex multidiscipline construction scope, particularly in large Brownfield type projects it is good practice to plan the entire construction scope at Job Card or Job Pack level. A Job Card or Job Pack would contain the following information: AFC Drawings/Engineering requirements. Safety Statement/Risk assessment 9toolbox Talks). Permit to Work requirements (including isolation requirements). Material requirements. Scaffolding/Rigging support. Construction/Execution Check sheets (Quality (QC) Requirements). System Construction handover requirements/punch lists. It is important when pre-qualifying construction contractors to make sure they have the capability in terms of experienced personnel, systems, labour and equipment to undertake the scope of work being requested. As a tool to help manage construction safety risks, Shell has introduced a set of Wisdom packs. These wisdom packs are intended to be used as a job hazard checklist, specific for the upcoming work phase (e.g. trenching, pipe installation, cable terminations). Each sheet has links to applicable Control Framework manual sections, Life Saving Rules guidance, typical do and dont examples, training material applicable to the activity, typical risks/hazards associated with the activity and cross-business information related to the activity. Sheets are developed for activities in both the construction and fabrication sites and will be updated on an ongoing basis as deemed necessary. 6.3.4 Mechanical Completion Support: UEP Mechanical completion is a milestone achieved when all specified construction work is complete and acceptance inspection and physical testing is satisfactorily performed and documented. Typically, inspection and testing activities performed to achieve mechanical completion will be carried out on a single discipline basis, by construction work packs, building to systems / subsystems. Such activities will not require equipment or systems to be energised, but may include bench calibration of instruments, electrical insulation tests, electrical continuity tests, hydro testing of pipes and integrity testing of valves. Mechanical completion will be documented on check sheets known as A check sheets, which will be generated and managed by the Completions and Certification Management System (CCMS) to ensure that asset integrity can be verified and demonstrated. On achievement of mechanical completion, responsibility for the facility will transfer from those responsible for construction to those responsible for precommissioning and commissioning. 6.3.5 Pre-Commissioning Support: UEP Pre-commissioning activities undertaken after mechanical completion, but prior to commissioning, are to prove and validate the functioning of equipment. Such activities could involve the introduction of fluids into systems, but not hydrocarbons.
Page 32

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Typically, pre-commissioning activities will verify that documentation to support mechanical completion is in place, and not repeat work carried out to achieve mechanical completion. Such activities are carried out on a single discipline basis, by system / subsystem, and require equipment or systems to be energised, but do not require the introduction of process fluids. Activities include instrument loop checks, panel function tests, energising electrical equipment and running motors without loads. They are documented on B check sheets, which will be generated and managed by CCMS to ensure that asset integrity can be verified and demonstrated. At the start of pre-commissioning, CCMS needs to be ready, operational and maintained up to date and the commissioning Permit to Work (PTW) System activated. Normal dump flushing is typically a construction activity but specialist flushing and cleaning, e.g. chemical and hydraulic cleaning, drying, oxygen freeing etc, falls within the integrated Commissioning Teams responsibility - see SP-2051 - Specification for Flushing, Pressure Testing, Pickling and Sensitive Leak Testing of Mechanical Equipment and Piping.

6.4

Commissioning and Start-Up


Support: UOP4 The key principles for Commissioning and Start-up are outlined in SP-2113 Specification for Commissioning and Start-Up (Key Principles). The management, technical preparation and subsequent execution of facility pre-commissioning and commissioning activities, up to the point where the facility is ready for Start-up is described in PR-1159 - Commissioning and Start-up, which also covers start-up and testing of the facility to achieve steady-state operations and handover to the future asset owners organisation. It addresses preparation and execution of commissioning and related activities for all types of developments, i.e. oil, gas or power generation projects, Greenfield or Brownfield etc, along with execution considerations related to the execution strategies adopted.

6.4.1

Commissioning Support: UEP, UOP4 These activities are those undertaken after pre-commissioning to dynamically verify functionality of equipment and to ensure that systems, or facilities forming part of a system, are in accordance with specified requirements to bring that system into operation. Typically, commissioning activities undertaken after pre-commissioning will be carried out on a system basis by a multidiscipline team of engineers and operations staff under simulated conditions. Commissioning responsibility may necessitate nitrogen and helium testing, which shall normally be executed by specialist contractors and supported by the commissioning personnel. The Commissioning Start-up (CSU) Team will start up and operate the nonhydrocarbon systems during commissioning activities until these systems are fully proven and provisional handover to Operations can be carried out. For hydrocarbon systems, provisional handover will take place after all pre-commissioning and commissioning activities have been completed up to the point of hydrocarbon introduction. The Operations group takes responsibility for the introduction of hydrocarbons, the Start-up activities and operation of hydrocarbon process systems. Co-ordination between the Operations and CSU is essential and particularly so on Brownfield sites. In this instance, a Commissioning Leader may report to an asset owner for the duration of CSU activities. The Commissioning plan and Start-up sequence shall be developed for the Integrated Production System (IPS) during the Front-end Engineering Design (FEED) and detailed

Page 33

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

design; with clear distinction between non-hydrocarbon systems (e.g. firewater, utility air, sewage etc) and hydrocarbon systems (e.g. process system, fuel gas, drains/vents etc.) At some point commissioning requires the introduction of fluids (process or nonprocess) and operation of the system. This will be documented using a procedure which shall be compiled specifically for the project and provide for signature on completion of each step. The procedure shall form part of the Commissioning Management System (CCMS) to ensure that asset integrity can be verified and demonstrated. 6.4.2 Pre-Start-up Audit Support: UEP, UEQ, UOP4 For all projects, a pre-Start-up Audit (PSUA) shall be carried out prior to introduction of hydrocarbons. The PSUA shall be carried out by an independent Function-led review team, including representation from Operations, Engineering and HSE. UOP is the process owner for PSUA and co-ordinates all PSUAs in PDO. The audit shall verify key items such as: Facilities are constructed as per design; Operations philosophy is complied with; Asset Integrity Process Safety (AI-PS) requirements have been met and a Statement of Fitness has been signed; Necessary vendor support is identified and scheduled; Operations staff are sufficiently trained and competent; Operations Management System (OMS) is operable and ready for steady-state operations; Commissioning imperatives are in place and complied with; Project assurance in place; HSE-MS is in place. The Pre-Start-up Audit will be used to demonstrate the operational readiness of the facilities and systems.

Page 34

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


6.4.3 Ready for Start-up (RFSU) Support: UOP4, UEQ, UEPI, MSE4

Revision: 5.0 Effective: June 2012

RFSU is considered as the point when all activities necessary to support the introduction of hydrocarbons, including all utility and process utility, safeguarding and shutdown systems have been pre-commissioned, commissioned and integrity verified. The verification of readiness for the introduction of hydrocarbons shall require the contractor / project and the asset owner to agree that all systems, facilities, processes, skills and procedures required to control, safeguard and support the introduction of well fluids / hydrocarbons for live process systems testing, and subsequent production operations, are available, proven and commissioned (function checked and/or dynamically tested). All projects shall provide proof of verification of Asset Integrity Process Safety by means of a Statement of Fitness document prior to start-up. All the items in this section are executed under the umbrella of Operations Readiness and Assurance (OR&A) See separate section on this subject.

6.5

Project Close Out


Support: UOP, UEP3, UEPI Project Close Out is the formal process of recording technical and commercial completion of a project. The Project Engineer responsible for a project shall initiate the Project Close Out process after completion of construction. It is the responsibility of the Project Engineer to co-ordinate and ensures that all the activities indicated in PR-1150 - Project Close Out Procedure and Work Instruction are completed and the Project Close Out Certificate (PCC) is endorsed by all signatories that includes:

SAP TECO transaction -Technical completion of project. Acceptance signature of completed facility by Asset Manager List of Surplus Material. Fixed Assets Created, Fixed Assets Made Redundant & Fixed Assets Data Acceptance. As Built Drawing Acceptance, in the correct data format. Details of Outstanding charges & unsettled claims (if applicable). WBS Level 4 and 5 Close Out (including Design project close out). Complete project file with all project data in the correct data format. DEM1 compliance report. In addition, for all projects >$20mln, the Project Engineer shall produce a formal Project Close-out Report, detailing the above aspects and any relevant lessons learned.

Page 35

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

7 Contracting and Procurement


7.1
7.1.1

Contracting
Contracting Governance Structure Support: FPO In PDO all Contracting and Procurement of 3rd party services and materials shall be in full compliance with the requirements stipulated in CP-129 Contracting and Procurement Code of Practice and in accordance with GU-425 Contracting and Procurement Guidelines and PR-1233 Contract & Procurement Procedure. The governance structure around Contracting and Procurement is provided through 2 different bodies, these are: Minor Tender Board limit for Goods Procurement above $130k and for Services above USD 50k to maximum of $2.5mln except for Government Gas requirements the maximum limit is $650k. Major Tender Board for all proposals above $2.5mln except for Government Gas requirements above $650k. Procurement and Contracting Steering Committee (PCSC) for all proposals above $10mln

The Role of Tender Boards is to ensure the following: Representative, qualified, suitable Vendors are invited to bid. Bids are evaluated comprehensively and fairly. The process of contracting is conducted ethically and transparently. Contracts awarded at best commercial value to Company. Awards are in accordance with Company objectives. There is consistency of Contract award and implementation. It is important that Ethics is maintained throughout the entire Contracts process and in accordance with GU-529 Statement of General Business Principles.. The Project team mandate is to ensure that all essential internal as well as external project specific approvals are obtained in time to meet the planned project delivery schedule. Following is a summary table of MTBC approval requirements. For full procedural details please refer to PR1233 Contract & Procurement Procedure.. Contract Stage Pre Tender Contract Strategies Tender Lists Company Estimate Technical Disqualification Technical & Commercial Evaluation Model Company Estimate alterations Opening Commercial Bids CP-117 Project Engineering Code of Practice
Printed 27/06/12

Referral Requirement

Page 36

Tender Period

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


Commercial Clarifications

Revision: 5.0 Effective: June 2012

Contract Stage Contract Award

Referral Requirement Failed Tender and CallIn the Tender Bond Negotiation results Contract Awards Revised ACV Limits Suspension/Termination Annual reviews over USD 10 Million Changes

Variations to Contract

Contract Execution

Significant changes to Terms & Conditions New scope Extensions of Time Claims exceeding Review Limit

7.1.2

Contracting and Procurement Activities & Deliverables Support FPO The table below lists at summary level the Mandatory Contracting & Procurement activities and deliverables per project phase. This is important in order to ensure that: The scope of Contracting and Procurement strategy and implementation activities for all phases of a project are defined and applied with the intent of delivering goods and services on agreed schedule and at a commercially competitive price without jeopardising the quality. Market capability and capacity, category opportunities and local content requirements are fully addressed in the acquisition of goods and services.

Page 37

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Capital Projects C&P Mandatory Activities & Deliverables: Identif y


** General Market Analysis up to date / revised.

Assess
** Identify major factors that influence the project Execution strategy. ** Identify standardization and repeatability opportunities across the project portfolio including category options. ** Identify ICV opportunities

Select
** Assign Project CP support personnel. ** In depth and current market analysis completed. ** Develop Project Contracting Strategy aligned with project drivers including standardization and repeatability opportunities. ** Select appropriate ICV options ** Identify Procurement List of Major Long Lead equipment and critical materials. ** Concept Executability realistic assumptions (demand & supply). ** Commence Internal & External approval & governance process. ** Prepare Contract Plan. ** Provide input into Project Execution Plan. ** Stakeholder engagement and acceptance of strategy.

Define
** CP team fully established and ready for execute. ** Contracting strategy updated. ** Define Scope of Work for execution contracts. ** Risk-based tactics developed for main contracts. ** Define ICV targets ** Prepare Post-Award Contract Management Plan. ** Compile ITT document. ** RFQ & Award Long Lead items & Mobilize early works. ** Prepare Tender Evaluation Plan with approved Technical Evaluation Model.

Execute
** Award Contract(s). ** Conduct Kick off meetings. ** Manage, control & report Execute contract(s) delivery and performance against the Contract Management plan. ** Milestone schedule compliance. ** Budget (ACV) compliance. ** Manage and control contract variations and correspondence. ** Advice on resolution of contractual issues/ claims. ** ICV promises achieved and communicated. ** Proactive contractor management managed at all levels. ** Claims management

Operates
** Implement CP Transition Plan. ** Provide input into Project close-out report and Lessons Learned. ** Maintain all project warranties.

Activitie s

Page 38

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC Identif y Assess


** CP Objectives and CP Assessment of feasible concept under consideration. ** Project Category Assessment (to be finalized after Contracting Strategy Workshop).

Revision: 5.0 Effective: June 2012

Select
** Pre-Award Contracting Activities clearly defined and dates allocated. ** Project resourced. ** Governance in place.

Define
** Project Contracting & Procurement Strategy. ** Pricing Scheme from Contract Tactics Workshop. ** Post Award Contract Management Plan. ** ITT, Evaluation Reports & Award documentation. ** Long Lead items & early works Contracts. ** Project Execution Plan.

Execute
** Execute Contract(s). ** Contract Management Documentation and Close out Plan for major contracts. ** Contracts & Procurement Transition Plan.

Operates

Delivera bles

Page 39

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

7.1.3

Contract Owner, Holder & Contract Engineer Responsibilities Support: FPO Three key roles are associated with managing contracts:

Contract Owner: o Integrity management of the contract by having level of authority to direct contracting process to protect overall Company & Asset objectives. o o Legally responsible for all aspects of the control of the contract. Should attend Tender Board presentations to support Contract Holders.

o Should at all times be aware of HSE and Quality issues in each contract. Contract Holder: Shall have single point responsibility for: o Activity management of the Contract and verification that controls are in place. o Advising contractor and/or contractor personnel of activities requiring their action. Contract Engineer. o Shall support and provide Commercial advice to the Contract Holder during the development and implementation of contracts. Contract Holdership Scheme: It is mandatory for all Contract Holders & Contract Owners to attend the Contract Holdership Course and to get assessed and certified for competency. Appointments of Company personnel: The Contract Owner shall nominate in writing a competent Contract Holder to manage the contract. The Contract Holder shall nominate the Company Representative and the Company Site Representative if required. The responsibilities delegated to them shall be well defined in writing and the Contractor shall be informed of the same. The Contract Engineer shall be nominated by his supervisor based on competence. For further procedural details please refer to the PR-1233 - Contract & Procurement Procedure (CPP). 7.1.4 Tendering Process Pre Contract Award Support: FPO The tender process shall be carried out in compliance with the PR-1233 - Contract & Procurement Procedure (CPP) and is summarised as follows: Planning & Scheduling o The Contract Holder shall prepare the pre & post contract plan & schedule. Development of Contracting Strategy o Contracting Strategies shall be developed for contracts with an estimated value in excess of US$10 million. The Contract Holder is responsible for the development of the Strategy and has to seek Tender Board endorsement. PCSC (Procurement and Contracting Steering Committee) approval is required prior to visiting Tender Board.
Page 40

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


These Contracting strategies shall clearly identify; o

Revision: 5.0 Effective: June 2012

The top five solution attributes or objectives that the project will strive to achieve referred to as the Value Drivers (and derived from the Project Drivers). Alternative contract scenarios/options for delivering the project requirements.

o o

Tactics Workshop to identify the contract pricing structure to be utilised. The output will be in the form of a Contracting Quilt see example below showing possible different contracting options for various Capital Project phases: PDO Projects Portfolio Contracting Strategy

Selection of Tenderers o There are various options for selecting Tenderers to participate in a tender such as PDO Public Tender (PPT), Prequalification, Registered contractors, Pre-select and Unregistered contractors. The default approach is PDO Public Tender. The option is selected based on the Preliminary Cost Estimate and Risk Profile of the contract. o The Contract Holder shall seek Tender Board endorsement of the selected Tenderers.

Tender Document Preparation o The Tender & Contract documents are prepared by the Contract Holder and Contract Engineer. o The Contract Holder has the overall responsibility. o The Contract Engineer shall be the single focal point for all correspondence with the Tenderers at the pre-contract award stage.

Tender Period o The Tender document has to be issued only to the approved Tenderers. o The Contract Holder has to ensure that all Technical queries from Tenderers are clarified.

Page 41

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

o All Tenderers have to be informed equally of any changes in the tender document in the form of addenda. o The Contract Holder has to arrange for pre-tender submission meetings and Site meetings if necessary. o The Contract Holder has to prepare the Technical Evaluation Model and the Contract Engineer has to prepare the Commercial Evaluation Model. o The Models have to be presented to Tender Board for endorsement. Tender Evaluation o The Contract Holder carries out the Technical Evaluation and the Contract Engineer carries out the Commercial Evaluation. Results of evaluation with award recommendation are to be presented to Tender Board for endorsement. 7.1.5 Execution Process Post Contract Award Support: FPO Post contract award processes are covered in PR-1233 - Contracting and Procurement Procedure. Post Contract award the Contract holder shall be aware of the following steps and minimum requirements: Mobilisation o The Contract Holder is responsible for ensuring that the Mobilisation is carried out in accordance with Contract and HSE Procedure PR-1171 and that Contractor Quality and HSE management Plan are approved and in place. o Contract Holder has to ensure that the Kick-off meetings (Internal & External) are held. o The Contractor cannot start work unless the HSE Commencement Certificate is issued. Execution o The Contract Holder has to manage the progress of the work, the performance of the Contractor and has to be competent in identifying & managing contract risks and claims. o The Contract Holder has to monitor spend against approved contract value (ACV) and timely address MTBC in case of foreseeable overspend. o The Contract Holder has to minimise the changes in contract and claims. o For contract above $10M the Contract Holder has to ensure that Annual Reviews are prepared and presented to Tender Board. Completion and Close out o On completion of the contract, the Contract Holder has to ensure that the Completion certificates, the Site Restoration Certificates and the Final Account are issued, As-Built drawings & data are received from the contractor and the Contract Holder has to prepare the final performance report of the contractor.

Page 42

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

7.2
7.2.1

Procurement, Materials Management & Logistics


Procurement Support: FPO Procurement of both materials and services are covered in PR-1233 - Contracting and Procurement Procedure. There are four Procurement Options that a project may decide to adopt as part of its procurement strategy, namely: 1. EPC Projects: Contractor is fully responsible for all aspects of projects procurement requirements. In this case, PDO involvement is limited to providing technical support and other relevant clarifications on the materials requirements. However, PDO may decide (depending on the approved contracting strategy) to place the Purchase Orders (POs) of the long lead items then novate the POs to the EPC Contractor at the award time. In addition, PDO may opt to Tender the long lead items during the pre-award phase then handover, at post award, the Tender to the EPC Contractor who places and manages the PO. In all cases management fees for placing the PO are included in the EPC Lump-Sum Price. 2. EpC (small p) Projects: This is similar to option 1 but PDO is responsible for procurement of the critical items. For this type of work, PDO shall arrange procurement of such materials and free issue to the contractor for installation as appropriate. 3. EMC/ODC Projects: Contractor performs procurement on behalf of PDO. For this type of jobs, the respective contractor is expected to use PDO SAP/IX2 systems to perform both the Sourcing (Tender) and Procurement of materials. PDO will pay the material supplier (not the contractor) directly after the successful processing of goods receipting in SAP. Good receipting and transportation of materials to contractors storage sites or work locations will be done via PDOs nominated LSP (Logistics Service Provider). 4. Stock and Project specific items: PDO C&P Organisation performs the procurement. This is mainly for standard or project specific items that need to be stored at PDO logistics warehouses, prior to being (free) issued to contractors. For stock items, the project pays for the material at the time of goods issue to the project, while ordering of materials as project items requires upfront payment by project at time of goods receipting.

7.2.2

Vendor List Control Support: FPO, UEQ The Approved Vendors, Manufactures Equipment (AVME) list is mandatory to all assets and projects in PDO. In order to provide vendor registration transparency and clarity PDO has developed and implemented a formal framework including but not limited to CP-129, PR-1233, GU364, GU398, Vendor Registration and Complaints Board (VRCB) and AVME listing : A listing of approved vendors, manufactures who supply products and/or services to PDO Assets with Product Group Service Codes (PGSC). The listing is maintained and managed by FPM / FPS, although the CFDHs are the custodian/authorized approvals to register/deregister the vendors from the AVME list. Prior to inclusion within the AVME/PGSC (used interchangeably) listing the applicant vendor must be formally approved and capabilities verified.

Page 43

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

A Vendor Registration and Complaints Board has been established in order to implement and operate a formal framework of Vendor registration transparency, evaluate received complaints and review, approve/reject registration and suspension/de registration requests (prior to submission to the Tender Board). A yellow, red card system has been developed and is being implemented to manage issues associated with non-performing Vendor and/or Manufacturer. 7.2.3 Inventory Management Support: FPC3 CP-193 - Inventory Management provides a mandatory set of guidelines pertaining to stock levels determinations to ensure that PDO inventory levels are maintained at an appropriate level consistent with both Company and accounting policies and required customer service levels. DEP 70.10.90.11 Gen Spare Parts provides guidelines for the management of spares. In PDO, all commissioning & insurance spares shall be treated as Property, Plant & Equipment and orders placed by project under CAPEX. Initial and normal operation spares shall be ordered under stock account as OPEX and users will be charged on consumption basis. 7.2.4 Logistics Services Support: UWL Logistics services comprise the following: Cargo haulage and handling services, including water haulage, loading/unloading and rigs & well test units moves. Warehousing storage and preservation of all types of material including special projects material. For further details please see PR-1858 Procedure for Material Handling, Storage and Preservation Passenger Commuting by land and air, including scheduled and chartered flights, international land transport, directors land transport and interior land transport (villages). Fleet Management including pool and permanently allocated vehicles, ad-hoc and specialised and emergency vehicles. With the exception of materials storage & handling (warehousing) and some coastal driving activities, all logistics services are contracted out. Logistics employees in UWL are responsible for managing and monitoring these contracts. The contractors are responsible for executing the logistics services in accordance with PDOs contract terms and conditions. Materials storage and handling is managed directly by Logistics, although warehouse/yard labour resources are contracted out. More details on Logistics can be found in CP-132 - Logistics Services - CoP. 7.2.4.1 Fourth Party Logistics (4PL) Support: UWL PDOs Cargo Haulage strategy has the primary objective of reducing km driven through better load utilization, and reduction of logistics costs through consolidating Primary (PDO) and Secondary (Service Contractors) Logistics and managing all cargo operations (including rig moves) via a contractor consortium working on behalf of PDO, who will in addition, integrate the system nationally and regionally so that other companies and governmental agencies can take advantage of it. This strategy is known as fourth party Logistics, 4PL.
Page 44

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

All cargo haulage and related activities, such as Rig moves and all EMC-ODC materials transportation are channelled into the 4PL by default. For all those services not covered within 4PL scope, customers have to obtain a waiver by filling in a waiver form available on the Logistics website and get it signed by the Logistics CFDH unless otherwise stated in any other project strategy development.

Page 45

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

8 Project Services
Support: UEP3 Project Services will provide resources, processes, systems and tools to deliver: Robust estimates that allow for the uncertainties of our complex reservoirs and novel development options in a volatile market. Realistic achievable plans that still provide challenge to our project teams. Effective controls that manage the work and show where we are and future possibilities. Valid up to date project management information that allow informed management decisions. Useful close-out processes that capture the lessons and data for future improvement. Benchmarking against our peers to demonstrate top quartile performance. Active project wide risk management and analysis. Baselined cost and schedule that enables active change management; impact of changes to be communicated and understood. Application and consistent use of Standards, Guides, PCSPs and adherence to PDO business processes.

The CFDH for Project Services is the TA1 for the above areas and is responsible for the setting and maintenance of the associated standards and processes. Once their competence is proven, the TA1 appoints TA2s who sign off all their Project Services documents specified as such in DCAF. Project teams are required to have the above subject areas covered as appropriate to the current project phase, with suitably competent staff, either directly or as part of a matrix, as agreed with the CFDH. Depending on the organisational make up of the project team, responsibility for Information Management may also reside with Project Services on a day to day basis, while under the overall management of the Engineering and Operations Information Management office (UEPI), as described in section 11.

8.1

Planning and Scheduling


Support UEP31 Failing to Plan is Planning to Fail (Alan Lakein) The objective of work planning is to develop a schedule for the project that is: o o o o o realistic, yet challenging; transparent with regard to understanding the critical path and the possible impact of project risks; at the appropriate level of detail to enable effective monitoring and control; owned by the Project Team and approved by their Decision Review Board (DRB); and based on historical performance norms, yet taking into account as best as possible the impact of current market, location factors and any other resourcing constraints.

Projects should develop an integrated schedule during the Assess phase, which will be refined as the project progresses through Select and Define. It should be based on appropriate lower level schedules and used as the basis for all progress measurement
Page 46

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

plans and reports. It should reflect all project activities needed to realise the project objectives at the appropriate level of detail. It is essential that the basis on which any schedule is made is clearly defined and recorded, so that any consideration of the schedule is in the context of these qualifications. In particular, decision makers should be made fully aware of any limitations or risks inherent in such plans. 8.1.1 Definitions Planning: Laying out the course of action, including all interfaces, studies, surveys, reviews, decisions, approvals etc, to achieve the desired objective. Scheduling: Incorporating time and resources into the plan to form a schedule network from which control mechanisms can be derived. Work Breakdown Structure (WBS): A deliverable-oriented hierarchical decomposition of the work to be executed by the project team to accomplish the project objectives and create the required deliverables. 8.1.1.1 Work Breakdown Structure Typical steps in developing the WBS are: o o o o o divide the assets to be delivered into components (e.g. facilities, offplot, pipelines etc); identify the activity types that need to be done on each of the assets (concept definition, design, procure etc); map the activities and assets to identify unique activities that need to be managed; define work packages for these individual activities (e.g. design compressors) or groupings of them (e.g. design topsides); and it may be helpful to break down the activities by project phase.

The design of the WBS should be a collaborative effort between the Project Engineers, Project Services, Supply Chain and Finance as these parties have a vested interest in ensuring that the WBS is adequate to meet their needs for planning, monitoring and control. Other factors that may influence the design of the WBS are the: o o o the project Contracting Strategy; standard cost structures used in SAP; granularity of cost data required for asset definition in the financial system.

PDO will develop local standard WBS templates that are suited to the type of projects executed. Use of standard WBS templates, where possible, facilitates the comparison and benchmarking. 8.1.1.2 Costs, Time and Resources (CTR) The Costs, Time and Resources (CTR) required to execute the work package activities in line with the proposed execution strategies should be estimated, and should be captured on CTR sheets. It is important that the basis for the estimates is clearly recorded. The CTR sheets are combined to form a CTR catalogue, which forms the basis for monitoring and controlling the work at a later date. The CTR sheets and catalogue also provide clear documentation of the project scope, and provide a mechanism for communicating and gaining agreements with the customer.

Page 47

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


8.1.2 Schedule Development

Revision: 5.0 Effective: June 2012

Previous similar project plans and templates may be used to help develop a new project schedule. The normal steps in developing a schedule are: o Activity Definition: identifying the specific schedule activities that need to be performed to produce the various project deliverables, using the WBS as an input; Activity Sequencing: identifying and documenting dependencies among schedule activities, creating a precedence network; Activity Resource Estimating: estimating the type and quantities of resources required to perform each schedule activity (CTR development); Activity Duration Estimating: estimating the number of work periods required to complete individual schedule activities (CTR development); and Schedule Development: analysing activity sequences, durations, resource requirements and schedule constraints to create the project schedule determining the start and finish dates for the project activities.

o o o o

8.1.2.1

Planning Levels Schedules for controlling and monitoring large projects are produced to different levels of detail. Level 1 Summary Schedule (also called Project Management Schedule) Includes the main functional activities (e.g. design, procurement, fabrication, construction, commission) for the total duration of the project for the main hardware items (onshore plant, pipelines) as well as significant business activities (e.g. approvals, strategy formation, marketing etc) and any key milestones (e.g. FID, first production). This level of schedule usually fits on a single page and is often used in project status reports as a simple tool for conveying overall schedule status. This level of schedule is not detailed enough to show the true critical path but often a high-level, simplified depiction of the critical path will be shown on this schedule to help communicate which elements of the project the critical path runs through. Level 2 Integrated Master Schedule This is a network-driven schedule, which breaks the project down by phase and elements and identifies the contractor interfaces. The critical path should be made visible and major milestones should be identified. This schedule sets the framework for detailed schedules and resource scheduling. Level 3 Detailed Integrated Schedules for Major Project Phases Separate Level 3 schedules are typically prepared for the major phases of a project, such as engineering and procurement, construction and system testing, and commissioning, start-up and performance testing. This level of schedule provides a more detailed representation of the activities, interfaces and milestones involved within these phases of the project and is better suited for monitoring progress versus plan. Often this level of schedule is maintained by the owner, as the owner is in the best position to fully appreciate the interfaces of the various owner and contractor resources, and the involvement of the owner and partner organisations in such things as approvals and operations support and handover. Levels 4 and 5 Work Lists and Detailed Schedules These levels of detailed planning and scheduling usually lie within the contractors domain and are used for planning, executing and controlling the contractors work. They are used for detailed planning, such as the scheduling of work to be implemented during a plant shutdown or the scheduling of work in a fabrication yard. These detailed

Page 48

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

schedules may consist of thousands of activities and are typically updated at least weekly and in some cases daily. 8.1.2.2 Activity Planning Tools Specialised project management software is widely used to assist with schedule development and control. PDO has selected Primavera P6 as the standard project management software for projects and allows Integrated Activity Planning. The project management software uses the schedule model and various analytical techniques, such as the critical path method, to calculate the early and late start and finish dates, and scheduled start and finish dates for the uncompleted portions of project schedule activities. The project management software makes the critical path activities for the project visible. Activities within the Planning Tool are assigned to specific calendars (e.g. 5 day week, 7 day week, 24 hrs working) to ensure the activity durations from the CTR catalogue are accurately translated into the correct start and finish timings in the planning software. The project team should review and validate the schedule logic and the critical path prior to the project schedule being finalised and accepted as the performance target for the project. 8.1.2.3 Optimisation The project management software also provides the functionality to evaluate options for accelerating the schedule, using techniques such as crashing and fast tracking. The impact of resource constraints can also be evaluated using techniques such as resource levelling. The project team should be closely involved in any such schedule optimisation exercise to ensure that the schedule stays grounded in reality. 8.1.2.4 Risk Analysis Schedule risk analysis is used to evaluate and communicate the possible range of schedule outcomes taking into account the impact of project opportunities and risks. The basic premise of schedule risk analysis is that the project team estimates not only the most likely activity durations, but also the likely range of activity durations based on the identified project opportunities and risks. These likely ranges of activity durations are then modelled using the scheduled risk analysis software. The software uses Monte Carlo simulation techniques to predict the expected (~P50) activity durations, as well as the P10 and P90 durations (see 8.3.5). This allows the project team to consider and communicate a range of possible project schedule outcomes instead of just a single schedule outcome. This analysis also helps the team evaluate what risk mitigation and avoidance strategies and tactics can be used to improve the chances of a desirable schedule outcome. Any schedule risk analysis should be carried out before cost risk analysis. This is because schedule drives cost and not vice versa. The standard software that PDO has selected for schedule risk analysis is Primavera Risk (previously Pertmaster). Schedule risk analysis shall be carried out for all projects >$100mln. 8.1.2.5 Checks and Reviews The following checks should be applied when performing scheduling activities: o the project objectives are clearly stated and understood by those preparing the schedule (e.g. project policies, strategies, philosophies, objectives and constraints); there is an appropriate WBS for the project and it has been used as the basis for organising the schedule. The WBS is logical and it avoids overlapping activities; CP-117 Project Engineering Code of Practice
Printed 27/06/12

Page 49

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


o o o o o o

Revision: 5.0 Effective: June 2012

project approval processes are defined in the schedule, including Company, partner and statutory approvals, and permits and consents; the project scope and the basis for the schedule development are well defined and documented; the overall project duration and key activity durations are benchmarked against Company (and, if required, external) experience; key resource constraints (e.g. drilling rigs/ shutdowns) have been considered in the schedule development, including shutdown timings; the schedule logic and constraints are realistic; the resulting critical path is logical and correct. The activities just off the critical path (e.g. activities with less than 1 month of float) have been evaluated to determine how small changes in their durations or logic could impact the critical path; several key interim milestones have been identified so that they can be used during the life of the project to aid in progress measurement; a schedule risk analysis has been performed and is closely linked to the key risks in the project risk register; representatives from all segments of the project team are involved in the schedule development; each schedule is peer reviewed to ensure accuracy and completeness; and a team of knowledgeable engineering, construction and project control individuals, including the designated Project Manager, should be assembled to review the schedule.

o o o o o

A formal Estimate and Schedule Assurance Review (ESAR) shall be completed prior (3-4 weeks) to VAR 3 for all projects with a total Capex greater than $200mln (including drilling), and at least prior to VAR 4 for projects with a Capex larger than $100mln. 8.1.2.6 Owners Schedule Development Responsibilities To properly plan and control a project, substantial effort is required from the owner as well as the contractor. Typically, only the owner has full knowledge of the full scope of work, as the owner is usually responsible for undertaking some activities such as frontend development and study work, surveys, organisational, commercial and other management activities. The owner is usually responsible at the back end of the project for commissioning, start-up and handover to the operating organisation and therefore a full project overview is usually not obtainable outside the owner organisation. Commissioning is usually driven by system completion, hence the structure of the schedule must have the flexibility to change from a construction/ area to commissioning/ system focus. Regardless of the contracting strategy, the owner should develop and maintain an overall project schedule of sufficient detail to allow the full project scope to be properly planned, monitored and controlled. This should be at least a Level 2 schedule. The owner should specify the content, format and organisation of the more detailed schedules required of the contractors so that the monthly updates of the owners schedule and subsequent schedule analysis can be performed as efficiently as possible. 8.1.3 Existing Assets and Integrated Activity Planning When implementing a project on an existing asset, the project management task is to: o integrate the new project activities with the other approved activities to be executed on the asset, taking account of resource constraints; and CP-117 Project Engineering Code of Practice
Printed 27/06/12

Page 50

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


o prepare the detailed execution procedures.

Revision: 5.0 Effective: June 2012

Primavera P6 allows all the activities on an Asset to be integrated into one plan.

8.2
8.2.1

Cost Estimating
Capex Estimates The quality of an estimate is largely determined by the following: the project scope definition or development scenario being considered should be as complete and as accurate as possible. a well-considered and sufficiently detailed Project Execution Assessment/ Strategy (PES)/PEP as appropriate for the development phase, should be available even in preliminary format for early estimates; the associated risks and opportunities of the project should be recognised and reflected in the estimate; complete and correct local cost data, at an appropriate level of detail, should be available covering: o o o o o equipment; bulk materials; labour and engineering services; drilling rigs and services; other relevant data should also be sought such as: o import restrictions; duties and taxes applicable; local content targets etc.; and

Support: UEP32

adequate contingency levels, based on the risk profile of the project and historical performance data, are being used.

All estimates should correspond to the requirements for the ORP stage and the defined accuracy levels, which are highlighted in the below table. ORP Stage DG1 DG2 DG3 DG4 Type 0 1 Preliminary 2 Final 2 3 4 Accuracy (target) +40%/-25% +25%/-20% +20%/-15% +20%/-15% +15%/-10% +10%/-5% at end of Identify phase at end of Assess phase at end of Select phase at end of BFD phase at end of Define phase During 'Execute' phase Engineering prepared

Table: ORP stage vs. Estimate Accuracy Target Be aware that immature engineering deliverables are a major risk for under-estimating the true costs of a project. The DG3b estimate must be based on a signed off Basis for Design. Whilst the above table is a guide, the real accuracy of the estimate should be assessed by either performing a TECOP analysis or executing a probabilistic risk assessment (see 8.2.5). Any estimate that is classified as Type 3 should for at least 70% of the build-up be supported by costs coming from Frame Agreements, Bids, Quotes, etc. to secure the
Page 51

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

robustness at DG4. Only a Type 3 estimate endorsed by the Technical Authority (TA) is suitable for a Budget proposal, request or award. 8.2.2 Cost Estimate Preparation, Assurance and Approvals The Cost Estimating applications CES, Capco$t and CCES are used in PDO by the engineers and cost estimators to produce their estimates for Oil & Gas projects. In 2012 Front End cookbooks to assist the estimation in early phases of a project will be developed. For off-plot flowlines and well hook-up work, annual catalogues are produced by the Function for engineers to use. Well Engineering maintains a Well catalogue with actual Drilling & Completion cost/duration per field/cluster for future wells in the same area. All estimates require assurance reviews and approvals before presentation to the DRB or Tender Board authorities as outlined in the table below. ORP Stage Estimate Type Purpose of estimate Estimating Tool Cost Contingency Estimated by Assurance Indentify & Assess DG1
Type 0 Identify opportunity

Identify & Assess DG2


Type 1 Compare opportunity

Select DG3a
Type 2 (initial) Select option

Select DG3b
Type 2 (final) Costs aligned with BfD go forward to FEED Capco$t TECOP, Proby >$100 Project/ Function Estimator ESAR3 >$ 200mln Function AT2

Define DG4
Type 3 Budget proposal or TB Contract Award Contractor quotes TECOP, Proby >$100 Project/ Function Estimator ESAR4 >$50mln Function TA2

Execute
Type 4 Changes

CES + cookbooks TECOP Concept/ Process Eng

CES + cookbooks TECOP Concept/ Process Eng

Capco$t TECOP Project/ Function Estimator ESAR Peer

Contract data TECOP Project Estimator Project estimator Project/ Asset TA2

NA NA Project/ DCAF Asset TA2 endorsement Table: Estimate overview preparation & assurance

Please note project teams must schedule their assurance reviews at least 3 months in advance with the UEP/3 Function. 8.2.3 Project Cost Estimates Build A Capital cost estimate is built up from the following components (see diagram): and use various type of money, for example: Constant Value Money (CVM), Money of the Day (MOD) or Real Terms (RT).

Page 52

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

9: 0 01

M n g en a a em t R s rv isn t ee e o u e inPD . sd O In t n flaio E CPe iu P rmm C nin e c o t g ny M r e F co s ak t a t r A wne llo a c s

5: 0 05 1: 0 09 B se(M rk t a a e a ju d d ste )

E u lC a c o c s q a h ne f ot ex e in o b in low c ed g r e g er 9 % h n eth t c t 0 c a c a os w b ex e ed ill e c ed Bs ae

Id n e tifie S o e d cp (in l. O n rs c we Cs ) o ts

Diagram: Build-up of Project Estimate The 50/50 estimate contains the following cost categories: Base estimate (incl. Allowances, Provisional Sums and Owners Costs) Future Market (market factor by indices) Contingency EPC Premium Inflator (Escalation) 8.2.4 Base Estimate The Base Estimate is first calculated in Estimate Date Money (EDM), which is NOT the date an estimate is compiled, but the date when the estimation database was last re-baselined. EDM is then converted to the Money of the Day (MOD) by application of inflation indices referenced to the Cost Reference Date (CRD). The Base estimate also includes allowances, usually expressed as percentages, to allow for the known unknowns for example design growth that could occur in future phases. The Base Estimate is recorded in $US and MOD. Within a Base estimate some equipment quotes may be in another currency, these should be converted to $US using the prescribed exchange rates. To establish MOD costs the phased estimate is converted with specified inflation factors. Both Exchange rates and inflation factors are confirmed each year by UEP/32 in the Programme Build guidelines. 8.2.4.1 Base Estimate - EMC-ODC work Cost Estimates for the Integrated Engineering and Construction Services (EMC-ODC contractors) are produced by the Contractors. Company cost estimators are tasked with the verification and endorsement of these cost estimates, to support for the Project Engineers approvals. The EMC-ODC contractor will produce all estimates for work >$50k in the web based application Contract Cost Engineering System (CCES), maintained by the Function. 8.2.5 Contingency - Cost Risk Assessment To achieve a 50:50 cost estimate in a project & pro-forma estimates Contingency is added to the Base estimate. Contingency is to cover for scope omission errors that may emerge in the next project stage and any as yet unidentified risks. Contingency should in general decrease in the
Page 53

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

later project stages as the scope definition and execution strategies become more mature. All estimates including type Updated 2 shall be subject to a deterministic cost risk assessment covering the Technical, Economics, Commercial, Organisation and Political (TECOP) risks. This exercise is mandatory and is supported by the Function. The risks and opportunities identified through the TECOP exercise are input to the deterministic accuracy and contingency tool maintained by the Function. For type 3 & 4 estimates with cost larger than $100mln a Monte Carlo simulation shall be carried out by the Function, in order to predict the cost probability distribution. A deterministic TECOP assessment shall also be run in parallel as a check on these probabilistic results. 8.2.6 Future Market & EPC Premium As the Base estimate is for a specific scope and for a specified duration the costs for commodities over time may fluctuate because of market movement. To compensate for fluctuations of volatile markets a Future Market allowance is introduced to the estimate. Future Market indices are applied to the phased Base estimate. The Function monitors published market trends and determines the Future Market indices to be used on Company estimates. Lastly an EPC contracting premium is added that is determined by the Function and FPB (Contracting & Procurement). These factors, Future Market and EPC Premium, are published in the Programme Build guidance note once approved by the Contracting Tender Board (TBC). 8.2.7 Cost Analogues and Benchmarking Estimators often use various analogues to establish the costs of estimated items with reference to a suitable metric (for example weight). Analogues metrics are often referenced to Quantities (Qty) and Unit of Measurement (UoM) used for Progress Management of the Plan and Schedule. Benchmarking is executed on project activity level, either by internal or with external projects, which is not a normal estimator responsibility. The project team must provide clear benchmarks for references at ESARs and PEER reviews. 8.2.8 Estimate Data Collection It is key that the Company estimating systems are kept live with feedback from ongoing and completed projects. Many projects are completed by lump sum contractors who are reluctant to share costs information, therefore the provision of detailed feedback of costs data must be included in the tender instructions. The WBS, CTR and C5 contract price breakdown structure (incl. Procurement details) for any project or contract shall be developed in such a way that at various milestones through the project life actual cost are fed back to the Function to update their estimate databases for future projects/contracts. This requirement is valid for any EPC, EpC, EC and E or C Contracts, and single Purchase Order (PO). Additionally Quantities tables used for the management of progress shall be maintained and fed back at various quantity updates/milestones to the Function. See Project Guide 60 Data Collection procedure that describes this process in more detail.

Page 54

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC 8.3


8.3.1

Revision: 5.0 Effective: June 2012

Project Controls
Introduction The key focus areas of Project Controls are Management of Costs; Management of Progress; Management of Risk & Opportunities; Management of Change; Project Reporting; Project Closeout; Management of Resources. Each is covered in a separate section below. Project Controls provide a series of processes, based on these six focus areas, which assist in executing a project in the most efficient and economical way. Secondly, but not less importantly, project controls provide the mechanism to inform management at any point in time during the project about the actual status of the project, both in cost and time, so that, if required, corrective actions can pro-actively be prepared and ultimately exercised in a timely fashion. The Project Controls Plan (PCP) documents the minimum standards of project controls systems and processes required to manage the project and provide a clear and concise explanation of how project controls shall be implemented on a project including all key references to applicable project procedures, standards and guidelines.

Support: UEP31, UEP32

8.3.2

Management of Cost Support: UEP32 Cost control during any phase of a project comprises the setting up of the cost procedures and systems and the monitoring and the reporting of the actual project expenditure and commitments against the approved project budget. The early identification and registration of deviations together with the following of trends enables project management to control the project. All project activities should be broken down into controllable items. For Cost Control purposes it is important that Cost Estimates shall be carried out in accordance with the approved Cost Breakdown Structure (CBS).This will ensure that the data can be retrieved for Cost Control purposes in a systematic manner. Regular reporting of the Value of Work Done, Commitments and assessment of the cost of work remaining should detect any potential over or under expenditure in good time for proper management action. Project progress is continuously monitored, in physical and financial terms. In addition to these primary objectives of cost control throughout the various phases of a project, it should provide data for:

Capital expenditure phasing reflecting the anticipated progress of the Value of Work Done. Cash flow forecasts, based on the expenditure phasing taking due account of the payment conditions. A breakdown of the value of the final fixed assets. Future estimating and planning purposes. Contingency management is a key part of cost control. As change occurs, contingency should be run down and trended to ensure the correct amount of contingency is maintained. At 6 monthly intervals the remaining project contingency must be re-

Page 55

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

assessed to ensure there are sufficient project funds available to pay for the probable outstanding risks. PDO uses SAP to hold the financial data of all its projects, including budget, VOWD and forecasts. It is important that SAP is maintained by the Project team to accurately reflect the latest cost status of all projects, even if the detailed cost control is managed in other systems. 8.3.3 Management of Progress Support: UEP31 Schedule control is essential to project success, enabling measurement and report progress relative to the promises made. An effective control system will also provide timely warning of variances to inform stakeholders and allow remediation. Schedule control requires scope and execution control. Signs that the schedule is deviating from plan is usually evidence that the scope and execution are not under control and/or that external circumstances have not been fully understood and accounted for. The basic requirements on schedule (or cost) control are: establish milestones and targets; measure actual performance, typically monthly; analyse performance and trends; update the forecast; compare forecast to target; analyse and communicate variances or trends to allow corrective actions; and repeat the cycle, checking for effectiveness of earlier actions.

Although schedule control is most prominent after Final Investment Decision (FID), it is also required in earlier phases when significant time is consumed and promises (e.g. on the FID date) are already made. 8.3.4 Management of Change Support: UEP3 Management of Change is a key activity in Project Controls and is described in Section 5.5. All projects >$US50 million will adopt the Management of Change (MOC) procedure PR1247. The procedure: Describes the process for controlling and managing technical change during the concept definition and execute phases of PDO projects. Sets out a series of key Baseline Value Drivers (BVD) for the projects which shall be developed during conceptual Select phase and approved by the DRB at Decision Gate 3 (DG3). If a change occurs through DEFINE an updated set of BVDs are approved at DG4. These Value drivers are normally captured in the Field Development Plan, the Concept Select Report, the Basis for Design and the Project Specification Describes a structured method of assessing and approving or rejecting changes against these parameters. A change to the Baseline Value Drivers will either increase or erode the value of the project and is therefore subject to the MOC. All changes are documented in a Change Proposal Form. Defines Approval Levels associated with the varying degrees of change.
Page 56

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Sets up the Change Review Panel consisting of senior project personnel that meets regularly and acts as the Stage Gate screening and approval body for change impact. The Panel will review every Level 3/2/1 change proposal and ensure that all implications of the change are considered before being accepted or rejected. Periodically, the Panel reviews the list of Level 4 change proposals. The Project Change Coordinator (usually appointed from Project Services) maintains the Project Management of Change process. 8.3.5 Management of Risk Support: UEP31 Risk and Opportunity Management is a key activity in Project Controls and is described in Section 5.3. Risk Management involves the identification of the risks and opportunities on the project and ensures that the risk levels are kept as low as practicable (ALARP) and that the opportunities are exploited to the fullest. The process includes: o o A risk work shop at a predefined stage of the project to identify the risks and opportunities, Assessing the severity of risks against the Risk Assessment Matrix (RAM a two dimensional grid of scaled probability and impact for the various consequences) The systematic recording of the identified risks & Opportunities in a Risk Register, Reviewing the risks for mitigation actions and the possibility of utilising opportunities, Implementing the mitigation actions identified according to the plan Periodically reassessing the risk register and communicating the status to the stakeholders

o o o o

The risk management plan or the Project Execution Plan should explain in detail how Risk Management will be conducted by the specific project. The information held in the Risk Register will be used as the inputs to the quantitative (probabilistic) cost/ schedule risk analysis and to ensure more realistic targets are set. The development and maintaining of the Risk Management Plan, Risk Register and the RAM are the responsibility of the Project Manager. 8.3.6 Reporting Support: UEP31, UEP32 Project Reporting shall provide a true and honest reflection of the status of the project at the cut off date by reporting of all cost and scheduling elements plus the main project highlights and areas of concern (without unnecessary details) and including forecasts and remedies. For Large (>$50mln) and Major (>$200mln) projects, the project team shall issue a progress report on a monthly basis, including a Project One Pager that shall be stored on Project Livelink. All reports must be approved by the project manager before issue. For specific Flagship Shell projects, each quarter the Shell Business One templates shall be completed and loaded into the Shell system.

Page 57

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


8.3.7 Project Close Out Reporting Support: UEP31, UEP32

Revision: 5.0 Effective: June 2012

It is important for continuous upgrading the quality of PDOs projects in general on estimating, planning and controls in particular that all learnings are collected and shared at the end of each distinct phase of the project to the Function Project Services. Feedback of this data is the responsibility of the project team. A Project Close Out Report shall be produced for all projects above $50mln during the Execution phase before the project team disband. The Function will review the project Close Out reports to secure consistency across all reports.

8.4
8.4.1

Project Assurance
Estimate and Schedule Assurance Reviews Support: UEP32 A formal Estimate and Schedule Assurance Review (ESAR) should be done prior (3-4 weeks) to VAR 3 for all projects with a total Capex greater than $200mln (including drilling), and at least prior to VAR 4 for projects with a Capex larger than $100mln. For specific projects < $100mln a peer review can be considered. The ESAR review format will follow the Shell ESAR guideline. Project teams are responsible for informing the ESAR coordinator in the Function, at least 3 months prior to when an ESAR review is required. Function is responsible for appointing a team from suitably experienced personnel and to prepare a draft ToR. The ESAR leader shall be TA2 rated.

8.4.2

Programme Build Support: UEP3 All projects provide input to the Programme Build each year. Project teams must ensure their schedule, costs and resources are realistic and achievable and that their updates are in line with the Programme Build cost assumptions (Escalation, Exchange rates and Market factors). For major projects >$US200M the update must include a probabilistic (Monte-Carlo) re-assessment of the Schedule and Cost contingency that is linked to the latest project risks and opportunities. To tie in with Programme Build Functional assurance, the project update exercise must be completed by end March each year. The Project Services Functional team is responsible to assure the project schedules and cost estimates created for each years Programme Build by the Asset and Project teams: Have been developed in line with PDO procedures & guidelines. Are achievable both individually and collectively (including that Company manpower is sufficient). Have taken into account the contractors capability and experience.

Page 58

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

9 Quality Assurance
Support: UEQ PDOs requirements for Quality Management Policy PL-15 and; Management have been defined within Quality

CP-190 - Quality Management System for Project Delivery: Ensures that quality is applied and consistently implemented in PDO projects by supporting the ORP to provide a standardised Governance, Assurance and Delivery process and give direction to Project Management). SP-1122 - Project Quality Assurance Plans: Details the minimum requirements for preparation and implementation of Project Quality Plan (PQP) for all projects. SP-1171 - Specification for Quality Assurance Requirements for Product and Service: Provides instructions which combined with the PQP specify the Companys minimum requirements for Quality Assurance in all contracts and purchase orders and provides guidelines on the contents and development of a Contract Quality Plan and Quality Control Plan. SP-2061 Technical Authority System: Provides information on Technical Authorities (TA) system operates by PDO. However, the existence of a good management system does not in itself guarantee a quality product; this has to be accomplished via a combination of technical competence and, most importantly, adherence by all contributors to the system. The commitment and active involvement of the functional leadership team(s) in developing and maintaining the project Quality Management System (QMS) is therefore essential for the system to be effective. The BOM/PM/PE has overall responsibility for quality and its implementation at every stage of the project. The BOM/PM/PE should ensure that the project QMS is reviewed at regular intervals ensuring its continuing suitability, adequacy and effectiveness. Where repetitive projects (portfolio of projects) are covered within a single contract scope, a single QMS / PQP may be developed (see CP-190, sections 2.4, 2.6, 2.7), underpinned by level 3, 4 documents / deliverables. Suitability is judged by its ability to sustain current performance. Adequacy is judged by its ability to deliver the project that satisfies requirements, standards and regulations. The review output should include decisions and actions related to the improvement of the effectiveness of the project QMS, its processes and related resource needs. Further responsibility and authority include; Ensuring that project quality requirements are addressed and included within the PEP; CP-190 Appendix 1, 2 and 4. SP-1122. Establishing, implementing and maintaining the project QMS including quality strategy and PQP; CP-190 section 2.3, SP-1122 and DCAF. Establishing the budget, resource estimate for quality and ensuring that appropriate quality resources are available within their respective project team and contractors organisations in order to achieve PDOs Quality Policy & Objectives: Identifying the objectives and providing the infrastructure and quality resources, clearly defining Roles & Responsibilities and motivating personnel to improve the processes and product. CP190 section 2.3, 2.6 and 2.8. Ensuring that project quality requirements are included within contract documents and that contractors, subcontractors and vendors comply with project QMS requirements. CP-190 all sections, SP 1122 and SP1171.

Team development to ensure all project personnel are aware of quality responsibilities. CP-190 section 2.9. Page 59 Printed 27/06/12 CP-117 Project Engineering Code of Practice
The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Promoting a consistency of approach & sharing learning across projects and for promoting continuous improvement within their project organisation. Planning for future preventative actions (identify, collect, store, update, retrieve and review information). CP-190 section 2.7, 2.11, 2.12, 1.13 and 2.15. Taking the appropriate action necessary to address quality issues impacting project delivery including document reviews, and corrective and preventive actions are completed in a timely manner (Delivering the project by complying to standards and developing, implementing fit for purpose processes). CP-190 section 2.12, 2,13, 2.14 and 2.15. Making use of available quality related information to evaluate options and make decisions. CP-190 all sections. Identifying and implementing quality KPIs and applying rewards/penalties as applicable under established contracts. CP-190 section 2.13 and Appendix 5. Written procedures shall be developed in order to adequately control the quality of the work and to ensure compliance with all aspects of the work and applicable codes, standards and legislative requirements. Procedures required to complete the works shall be made available at the point of use prior to commencement of the relative section of the Work.

Page 60

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

9.1

Discipline Controls and Assurance Framework (DCAF)


Support: UEQ2 Compliance with DCAF is mandatory for all Projects and Assets within PDO. However, it is possible for a Project to justify not using DCAF for Projects under $20mln in value, but this should be CAPEX and TECOP Risk based and auditable, and approved by the CFDH (TA-1). An example of where DCAF may not apply is a like-for-like replacement of a piece of equipment. The intension of the DCAF framework / process is to detail and standardise the way PDO executes Quality Control (QC) and Quality Assurance (QA) across all PDO technical disciplines through each ORP phase. It is a simple and structured approach, scaled at the Project (PCAP) and Asset (ACAL) level focusing on business-critical deliverables (control points) and Assurance: Controls are routine, risk-based, 'internal' steps to confirm the effectiveness of a prescribed process. Assurance is an objective and independent review to ensure objectives are met, and policies, procedures and processes are adhered to. The four Key components of DCAF are:

Discipline Standards (DS): Defining the controls and Tools of a discipline, these have been defined by the Functions (CFDH). CFDH is responsible for the discipline standards, local rules and appointment of Technical authorities. Discipline Authority Manual (DAM): A list which records who can sign what. Reference SP-2061 - Technical Authority System. Project / Asset Controls and Assurance Plan (PCAP / ACAP) template: A plan listing, of what needs to be quality assured and controlled. Project / Asset Controls and Assurance Schedule (PCAP / ACAP) template: A template that translates the PCAP/ACAL into a resourced schedule of Quality Control and Assurance activities / events. Each Discipline has a Standard (DS), which lists the decisions and deliverables that the Discipline head contributes to in each phase of the Opportunity Realisation Process (ORP), plus the required authority-level for sign off for the Discipline decisions and deliverables in a precise and auditable manner.

Page 61

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

There is no pre-ordained scaling in DCAF. Controls and tools for each discipline have been base-lined by the Functions (CFDH), but scaling / applicability is left to the Project or Asset, as ultimate accountability for Controls and Assurance resides with the line of site of that project or Asset. The Business Opportunity Manager (BOM), Project Manager (PM) or Asset Manager (AM), dependent on phase/gate, is responsible for the full day-to-day management of the Opportunity (Project) or Asset and is responsible (supported by disciplines) for the PCAP/ACAL framing and maintenance. The BOM/PM/AM or delegate uses the standard PDO template to draw up the PCAP/ACAL (Mandatory Assurance events and specific controls, including deviations). This shall be a team effort with all the required disciplines attending. DCAF works by assigning accountability (ATA) for an overall decision or deliverable to a single discipline (Competence based Technical Authority SP2061) whilst recognizing that the contribution from other disciplines (responsibilities, RTA) may be a control in their own right, finally DCAF acknowledges that other disciplines may have an impact and therefore may need to be consulted and/or informed (C/I). In signing off on a business-critical element and/or deliverable the individual is: ATA Signing as being ultimately accountable for the control: Control Point owner, accountable for exercising the right Controls are properly identified/ implemented by qualified individuals. May not claim full competence in all aspects, but he or she is considered to be responsible enough to pull in necessary counsel to take on the accountability Signs off the end control deliverable. RTA - Signing as being responsible for their respective Discipline input into the Control Point on behalf of their Discipline: Shares in the accountability, personally accountable for their input/action, the role of an RTA is to QC and sign-off the input of his/her Discipline into the Control Point (deliverable/decision), he/she must fully understand the requirements (CoP/SP/PR/DEP) and deliverables to be produced and ensure the Discipline Standard is properly implemented. C/I - Most Decisions and Deliverables are multi-disciplinary, signing as being consulted and/or informed states that you have read the document and any known discrepancies, impacts have been highlighted and discussed with the RTA/ATA. PCAP/ACAL adherence will be required to be submitted to the DRB at each DG in order to proceed to the next gate. Where controls have not been achieved, the BOM, PM, AM will require to demonstrate (endorsed by CFDH as applicable) that the control has been mitigated and will not impact the Project progression, delivery and Asset integrity.

Page 62

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

10 HSE in Projects
10.1 Introduction
Support: MSE4 Getting HSE (Health, Safety and Environment) right in projects means identifying the risks, managing them, and being able to demonstrate that they are under control. To do so, the right organisation, plans and resources need to be in place. The business expectation for effective management of HSE risks and opportunities is set out in the PDO HSE Policy (PL-04) and supporting HSE Management System (CP-122). In practice this involves working to deliver benefits and reduce impacts through our operations. Meeting this commitment requires a particular mindset: one where we balance short and long term interests; integrate economic, environmental and social considerations into business decisions; and regularly engage with our many stakeholders. An HSE Technical Authority must be appointed by the Project Manager. He or she shall establish, maintain and execute the appropriate HSE studies and/or activities in order to adequately identify, assess, and document the HSE risks of the project, in line with the HSE Management System (CP-122). It is important to recognise that the HSE Function and Technical Safety Engineering Discipline do not operate in isolation from the Project Team, the existing Asset team or the wider community in which the Project is operating. Integration of the HSE Technical Authority into the Project Team is essential to ensure that risks and opportunities are identified and managed early. The activities and deliverables required to ensure that HSE risks and opportunities are appropriately managed will vary depending on the Project. The following table lists the mandatory HSE activities for every project.

Page 63

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Identify Identify an HSE Technical Authority Ensure major HSE Risks are identified, assessed & managed during initiation and first framing of the project Provide HSE input into DCAF deliverables including risk management and stakeholder engagement and assurance plans

Assess Confirm/identify HSE Technical Authority Ensure major HSE Risks are identified, assessed & managed during scoping, feasibility assessment and short listing of project concepts Provide HSE input into DCAF deliverables including risk management and stakeholder engagement & assurance plans, GHG & Energy Management, Feasibility Report and logistics & infrastructure assessments Conduct Safety Risk Studies defined in the HSE Plan Define HSE roles in the project organisation

Select Confirm/identify HSE Technical Authority Ensure major HSE Risks are identified, assessed & managed to ALARP during further scope detailing and concept selection Provide HSE input into DCAF deliverables including Concept Selection Report, Basis for Design, GHG & Energy Management, and logistics & infrastructure strategies

Define Confirm/identify HSE Technical Authority Ensure major HSE Risks are identified, assessed & managed during Basic Design of the selected concept Provide HSE input into DCAF deliverables including Basic Design & Engineering Package, GHG & Energy Management, operations procedures and logistics & infrastructure plans

Execute Confirm/identify HSE Technical Authority Ensure major HSE Risks are identified, assessed & managed during Detailed Design, Construction, Commissioning & Start-up Provide HSE input into DCAF deliverables including GHG & Energy Management, operations procedures, content of the project handover to operations and logistics & infrastructure plans

Conduct Safety Risk Studies defined in the HSE Plan Define HSE roles in the project organisation

Conduct Safety Risk Studies defined in the HSE Plan Define HSE roles in the project organisation Assess & manage the HSE consequences of scope & design changes Develop Project HSE leadership / Goal Zero program Include HSE contracting procurement in &

Conduct Safety Risk Studies defined in the HSE Plan Define HSE roles in the project organisation Assess & manage the HSE consequences of scope & design changes Execute Project HSE leadership / Goal Zero program Include HSE in Pre Start Up Audit

Table: Mandatory HSE Activities by Project Phase Project HSE Assurance shall be provided through Technical Authority contributions to formal Design Reviews, Stage Gate reviews (VARs and PERs), Peer Reviews (2 nd and 3rd party) and Audits (Level 1 Project HSE MS Audits and Pre Start Up Audits) contributing to the Decision Gate process.

Page 64

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC 10.2 Application


Support: MSE4

Revision: 5.0 Effective: June 2012

The application of the full suite of HSE activities presented in DCAF is designed for major capital projects. Some of the activities will not be applicable to smaller projects. 10.2.1 Mandatory HSE Deliverables The mandatory HSE deliverables are summarised below and correspond with deliverables identified by DCAF: The HSE activities and deliverables shall be documented in the HSE Plan, which shall ensure that the Project complies with the requirements of the HSE Management System (CP-122) and with DCAF where appropriate. All risks shall be identified as early as possible in the project. A Hazards and Effects Register (refer to SP-2062) shall aid the active management of these risks. throughout the design phases, such that they are reduced to tolerable and ALARP levels at handover to the operators. HSE shall be integrated into project decisions and associated project deliverables. A HSE Philosophy document shall be developed to identify all the relevant and agreed external and internal requirements, including regulatory constraints. The FEED and Detailed Design shall be subject to a HAZOP (refer to PR1696) to formally and systematically assess the process hazards and a subsequent IPF Classification (refer to DEP 32.80.10.10-Gen) to determine the SIL of any identified instrumented protective functions. An ALARP Demonstration Report or Design HSE Case (refer to SP-2062) shall be developed to demonstrate the integrated decisions taken by the project to reduce risks and mitigate consequences to ALARP levels. This shall first be used to support Concept Selection (DG 3) and subsequently developed to support the Final Investment Decision (DG 4). The Report/Case shall be updated during the Execute phase to a final deliverable to provide design information into the operating Asset. Prior to introduction of hydrocarbons, the Statement of Fitness (refer SP-2062) shall be signed by the Asset Director. The Operations HSE Case (refer to SP-2062) shall be maintained throughout the operating life of the asset. The Performance Standards for Safety Critical Elements (SCE) must be developed during the Define phase to confirm that each selected SCE has been designed according to the relevant Shell DEPs, PDO specifications, and HEMP studies (refer to SP-2062). The Performance Standards should mature further during the Execute phase and shall verify that the SCEs have been constructed as designed. The Performance Standards will evolve into Operate phase Performance Standards before project handover. An Impact Assessment and the resulting Environmental, Social & Health Management Plan are required to minimise negative impacts and optimise positive benefits (refer to GU-447).

10.2.2

Applicability It is essential that at the beginning of each project phase, the Business Opportunity Manager/Project Manager reviews the HSE activities with an HSE Technical Authority to determine and agree on the studies and deliverables that are required, their timing and scope as applicable to that Project. Not all the studies in DCAF will be applicable, depending on the nature of the Project. The following may apply to some Projects: a low degree of complexity and novelty of the project; CP-117 Project Engineering Code of Practice
Printed 27/06/12

Page 65

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


Revision: 5.0 Effective: June 2012

straightforward context of the design decisions (type A in the Diagram Framework of Risk Based Decisions below); maturity of the location; no high risk issues (e.g. hazardous process, H2S, social unrest or environmentally sensitive location, Green House Gas emissions exposure or their abatement); specific scope issues (e.g. brownfield /greenfield); small projects such as maintenance, expansion or technology changes as well as abandonment of existing facilities or process units; and accelerated (fast track) projects where project stages are combined.

Project size/cost is not the major indicator of HSE scope; rather the key driver is the exposure to specific HSE risks. For example, a small project within an existing plant that cannot impact outside the existing fence-line may not require an Impact Assessment. This is not however always the case. Brownfield projects and a few plant modifications may be small projects but they can often have complex HSE issues associated with simultaneous operations (SIMOPS) layout, noise, additional effluent streams, etc. Accelerated projects may combine project phases that will affect the timing and scope of the HSE activities. For such cases, reduction of HSE scope should be regarded with caution, as the company assurance requirements will remain. 10.2.3 ALARP Decisions Context In the context of Process Safety Management the term Unusual Risk is used to describe a type of risk identified for a project, arising from novelty of technology, geology or location that represents factors that may affect the success of the project. The Diagram Framework of Risk Based Decisions below illustrates how novel or challenging projects require decisions based on a variable mixture of company or societal values. This differs from the traditional codes and standards or good practice and engineering judgement, which form the basis of engineering decisions for established or familiar projects. Type A (technology based) decisions are those involving well-understood hazards and proven solutions. Type B decisions involve less well-understood hazards where established good practice has to be supplemented by more detailed risk analysis techniques, especially to address the uncertainties of novel aspects of designs. Type C (judgement based) decisions are those involving hazards that may create Societal Concerns.

Type A decisions may characterise a small upgrade project in an existing location designed to existing codes and standards. The requirements for assurance studies or ALARP justification may be reduced in these cases. However, many of the projects undertaken in recent years have required a large number of Type B or C decisions, and the HSE analysis required to support such decisions is significant. Projects involving the application of new technology or applying proven technology in new applications need special attention; risk studies (quality, safety, environment, operability, etc.) and sign off on highest level (TA-1 or delegated TA-0).

Page 66

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Diagram: Framework for Risk Based Decisions

10.3 Process Safety Management


Support: MSE4 Process Safety Management is the prevention and mitigation of unplanned releases of highly hazardous process fluids, including natural gas, volatile crude oil, LPG, and Hydrogen Sulphide (H2S). Process Safety Management is achieved by concept selection and definition, engineering, procurement and construction, as well as later during the Operate phase. The Project Manager is accountable for the project meeting the Process Safety requirements. Guidance on Process Safety requirements is available in GU-648 and individual deliverables are embedded in the CMF and DCAF system. The accountabilities of the Project Manager include: Identifying and documenting Severity Five and High Risk process hazards for new and existing assets. Reducing identified process risks As Low As Reasonably Practicable (ALARP). Managing the competence of employees in HSE (Process Safety) Critical Positions identified in HSE Cases. Managing the fitness to work of employees. Verifying that Contract Holders monitor the HSE (Process Safety) requirements of the contract that are relevant to the competence and fitness to work of contractor staff. Providing supervision of HSE (Process Safety) Critical Activities appropriate to the complexity of the activity including multiple concurrent tasks, and nonroutine and unexpected activities; and the competence of the individuals performing the activity. Developing a Statement of Fitness for the assets before starting or commissioning a new asset or a modification to an existing asset. Establishing Technical Integrity in design and construction. Designing and constructing new assets and making modifications to existing assets in line with DEM1 engineering specifications identified in GU-611. Meeting Process Safety Basic Requirements (PSBRs) relevant to onshore operations. CP-117 Project Engineering Code of Practice
Printed 27/06/12

Page 67

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


Revision: 5.0 Effective: June 2012

Creating and making available the documentation for Safety Critical Equipment (SCE). Performing Pre-Start Up Audits (PSUA) for new assets and for modifications to existing assets.

10.3.1

Statement of Fitness The purpose of the Statement of Fitness is to uniformly and consistently ensure that key Asset Integrity Process Safety activities and deliverables have been completed and verified by competent persons ensuring that hydrocarbons can be introduced safely with an acceptable level of risk (ALARP). The Statement of Fitness is an asset level business record required by the PDO HSE Management System (CP-122) and further defined in the PDO HSE Case specification (SP-2062). For the majority of projects, it is included in the Operations HSE Case and signed by the Asset Director, but may in some cases be a stand alone document as shown in Table below. The key elements identified for the Statement of Fitness are: Process Safety Risks have been identified and documented and are managed to ALARP; Employees or Contractors executing HSE Critical Activities are competent and fit to work; Safety Critical Equipment meets its Technical Integrity requirements, and modifications are complete and have been authorised as specified by Management of Change CP-206; The design and construction of new assets and modifications to existing assets meet design and engineering requirements (DEM1); Process Safety Basic Requirements are met; and Procedures are in place to operate Safety Critical Equipment within its Operating Limits
Business Control Signatory Frequency

Type of Statement of Fitness (SoF) New asset Restart following modifications

SP-2062, SoF in HSE Case For major modifications (material changes): SP2062, SoF in HSE Case For planned shutdowns: PR1721, SoF form

Asset Director Asset Director

Prior to introduction hydrocarbons Prior to introduction hydrocarbons on Prior to introduction hydrocarbons

of of

Operations Manager behalf of Asset Director

of

Table: Types of Statement of Fitness for Projects 10.3.2 DEM1 Mandatory Process Safety Design & Engineering Requirements A PDO Specification or PDO-adopted DEP shall be designated as DEM1 if it contains a minimum of one statement relating to prevention of, or managing risk associated with, a Process Safety related incident significantly contributing to a preventative control or mitigating measure for Severity Five or High Risk hazards to People, Environment, Assets or Reputation. The shall statements that refer to Severity Five or High Risk hazards are shown as SHALL [PS] and these are mandated requirements. SHALL [PS] statements are mandatory unless a deviation is approved by the discipline engineering TA-1 or chief engineer (delegated TA-0). Deviations shall be
Page 68

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

submitted in accordance with PR-xxxx Procedure for Deviation from Standards (still under development) and require supporting ALARP assessments that: Demonstrate at least an equal standard of control as the SHALL [PS] requirement (e.g. if the SHALL [PS] required an engineered control, then the derogation should also rely on an engineered control rather than a procedural control or PPE). See the Hierarchy of Control in CP-122; Be supported by a suitable and sufficient risk assessment; and Demonstrate that the risk to people, assets, environment and reputation is no greater than would have been achieved through adoption of the SHALL [PS] requirement.

10.3.3

DEM-2: Process Safety Basic Requirements The purpose of the Process Safety Basic Requirements (PSBR) is to prevent reoccurrence of known major Process Safety incidents by focussing on their main causes and key barriers. The eight identified PSBRs applicable to onshore oil and gas facilities are: Safe Siting of Portable Buildings: Portable blast-resistant modules shall be rated for a peak side-on over-pressure of at least 55 kPa with a duration of at least 100 ms. Their location shall be assessed and approved in accordance with DEP 34.17.10.33-Gen. Their design shall be in accordance with DEP 34.17.10.33-Gen. All other portable buildings shall be located in accordance with DEP 34.17.10.35-Gen. Permit To Work (PTW): The PDO Permit To Work system (refer to PR-1172) shall be applied. Management of Change (MoC): All project changes (process, procedural and organisational) shall be managed in accordance with MoC procedures i.e. CP206, PR-1247. The effectiveness of the MoC system of the project shall be subject to a tiered approach ranging from daily monitoring to less frequent selfassessments. The effectiveness of the MoC system shall be included in external project assurance. Avoid Liquid Release Relief to Atmosphere: In accordance with DEP 80.45.10.10-Gen., a risk assessment shall be performed and demonstrate ALARP for any atmospheric relief streams that might include toxic, flammable, or combustible liquids to determine the appropriate safeguards to prevent hazardous releases to atmosphere. Avoid Tank Overfill Followed by Vapour Cloud Release: Identify all storage tanks containing fluids that have the potential to overfill resulting in a vapour cloud explosion and design safeguarding in accordance with DEP 34.51.01.31Gen. and DEP 32.80.10.10-Gen. Examples of such fluids are natural gas liquids (condensates) and crude oils with a Reid Vapour Pressure RVP > 2.5 psi. Avoid Brittle Fracture of Metallic Materials: Design all unfired pressure vessels, heat exchangers, piping, piping components and valves (including control valves) or rotating equipment, containing liquefied gas or compressed flammable low molecular weight hydrocarbon gas, in accordance with DEP 30.10.02.31-Gen. Alarm Management: The alarm management system shall be designed in accordance with the work process defined in DEP 32.80.10.14-Gen. Sour Hydrocarbons (H2S): The facilities design & engineering, operating organisation, procedures and PPE shall be classified and developed in accordance with SP-1190 and PR-1078.

Page 69

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC 10.4 Contractor HSE Management


Support: MSE1, MSE2, MSE4

Revision: 5.0 Effective: June 2012

In accordance with Contract HSE Management requirements (refer to PR-1171 Parts I & II), each contract shall be subject to a risk assessment at the contract strategy phase. This high level HSE risk assessment shall categorise the contract in terms of Low, Medium or High, in line with the PDO Risk Assessment Matrix (refer to CP-122). Contracts categorised as Medium or High Risk shall necessitate a fully fledged HSE evaluation of the potential contractors using the HSE capability questionnaire. Each proposed contractor shall be required to provide information to support their HSE capability. As part of their submission the contractor shall provide both historical and current HSE performance. The questionnaire and supporting submission shall be reviewed in line with predetermined criteria agreed by the Tender Board. The subsequent scoring will band the contactors within their capability. The overall scoring system is detailed below: Maximum score 280 Green Banded Contractors > 178 Amber Banded Contractors score between 103 and 177 Red Banded Contractors <103 In principal only companies in Green and Amber band shall be allowed to tender for Medium and High risk contracts. In the case of Amber banded contractors, the Contract Holder (CH) shall develop a strategy and plan for mitigating the shortfalls. This shall identify extra costs to be incurred in mitigating the shortfalls, e.g. additional PDO personnel, the possible decrease in HSE performance and the CH shall quantify the increased exposure to PDO by taking on the contractor. During the strategy phase, the contract mode shall be assessed. The contract mode shall be set at mode 1, 2 or 3 in accordance with the following definitions: Mode 1 means the contractor operates within the PDOs HSE Management System (HSE MS). The contractor provides people and tools for the execution of the work under the supervision, instructions and PDO HSE MS. The contractor has a Management System to provide assurance that the personnel for whom they are responsible are qualified and healthy for the job and that the tools and machinery they are providing are properly maintained and suitable for the job. Mode 2 means the contractor operates within its own HSE MS that interfaces with the PDOs HSE MS and is required to report HSE performance data including incidents to PDO. The contractor executes all aspects of the job under its own HSE Management System, provides the necessary instructions and supervision and verifies the proper functioning of its HSE MS. PDO is responsible for verifying the overall effectiveness of the HSE management controls put in place by the contractor, and assuring that both the PDOs and the contractors HSE MS are appropriately compatible. Mode 3 means the contractor operates within its own HSE MS that has no interfaces with the PDOs HSE MS and is not required to report HSE performance data including incidents to PDO. However, this does not exclude the possibility that PDO may wish to guide and influence HSE performance under the contract.

Page 70

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

11 Information Management
Support: UEPI Designing and managing a project is a business activity that delivers two main assets, the physical asset and the Information Asset This Information Asset exists in 2 forms: Documents (printed or electronic): to be read by people e.g. Reports, Specifications. Data: to be manipulated by tools e.g. Spare Parts, Tag Register & Maintenance Routines. Proper implementation of Project IM achieves two main objectives and serves two masters: The Project Team: Support for the engineering processes that deliver the physical asset (i.e. design, review, approval, and handover between phases) Operations (Maintenance, Engineering): Delivery of the information asset itself (i.e. final handover to Operations). The Information Asset is created in the same way as the Physical Asset and must be designed, specified, implemented, controlled and handed over with the same attention to detail and quality as the Physical Asset it represents. It will support commissioning, start-up, maintenance, Operations, and future engineering activity, and is the responsibility of the project team to deliver. The recently (Q42010) established central Engineering and Operations Information Management office (UEPI) sets the standards and processes to be used by projects, and provides the resources, support and assurance to carry out these processes on behalf of the project. Some of those resources will reside in a back office while others will be co-located with the project team. PDO engineering function has adopted an Information Management (IM) strategy that delivers a common framework for IM practice in PDO based on Shell DEP 82.00.10.30-Gen Engineering Information Specification (EIS) This strategy, and the Document and Drawing Management requirements for Projects are defined in the specifications SP-2065 - Document Management for Projects and SP-2047 - Preparation & Content of Engineering Drawings. The various tools used in Information management (which are a requirement for all new projects) are: Livelink (Document Management System) Assai (Document Control System) IDB (consolidation, quality checking and loading tool) AHA4P (Engineering Data Warehouse)

Page 71

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

11.1 Project Management System (iPMS)


Support: UEP3 PDO uses a customised version of the Shell integrated Project Management System (iPMS) to deliver to users a project roadmap aligned with the Opportunity Realisation Manual and Opportunity Realisation Process. iPMS provides quick access to standard project processes, governing documents, templates, examples and tools. It is updated and maintained by UEP3 with PDO corporate project management knowledge. When used in conjunction with the Project Assurance Plan, and DCAF, it is scalable for all projects. iPMS additionally links to project specific deliverables once they have been created. It is accessed via the PDO Intranet under Applications on the PDO home page.

Page 72

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

12 Finance in Projects
In PDO, the Finance contribution to projects is delivered through: Establishing and implementing a risk based controlled project environment, aimed at achieving business objectives, providing honest, timely, objective and transparent Management and Financial Information and promoting effective risk management. Providing guidance on Finance/ Accounting implications in accordance with established internal and external Accounting Policies & Procedures. Ensure compliance with PDOs internal controls including compliance with Corporate Management Framework, Company Policies Work Practices, Discipline Control & Assurance Framework, Procedures and Guidelines as defined by Corporate Finance and International Accounting Standards. To ensure that all Investment Decision Manual requirements are followed, support all Investment Proposals and assure that proper due diligence and independent review have been performed. Thorough understanding and disclosure of economic assumptions, contingencies, risks and accounting, contractual, insurance, tax and treasury implications. Independent challenge as custodian of the Business Controls and Assurance framework.

12.1 Role of Finance in Project Governance


Support: FBE The relevant Finance Manager has access to key assurance processes (such as cost and schedule reviews, VARs and peer reviews) and decision-making bodies such as the DRB. Within PDO the Business Finance Manager sits on all DRB1 panels, and the Directorate Finance Manager performs the same role for respective DRB2 scope projects. Finance is the custodian of the investment decision (Capital Budgeting or EBP) process. In line with this, each investment proposal (EBP) requires the support of the Finance line reporting to or supporting the person submitting the proposal. In the crucial phase around FID (firming up the entire project budget), Finance has a specific accountability for sign-off on control, accounting, treasury and tax aspects of the proposal, and co-ordinates the overall capital budget and requests for revision / approval of the capital budget by shareholders.

12.2 The Role of Finance within the Project


Support: FBP Within a project, Finance is accountable: For rolling out and implementing a risk based financial and project control framework; To ensure management information systems are fit for purpose and produce the relevant project cost/progress information required for the project, managers and functional directors to manage their business effectively in order to comply with budget, forecast, bottom line, cash flow and expenditure requirements and also complying the requirements of Central Finance. To provide accurate, timely and quality project management information on actual performance, VOWD, budgets, Latest Estimates and Contingency Draw Downs both within the Project Team as to other stakeholders. Monitor CP-117 Project Engineering Code of Practice
Printed 27/06/12

Page 73

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

performance against set target KPIs and the promise in the Investment Proposal and ensure potential overruns are highlighted and addressed. To promote effective risk-based decision taking. To ensure that all Investment Decision Manual requirements are followed, support all Investment Proposals and assure that proper due diligence and independent review have been performed. Thorough understanding and disclosure of economic assumptions, contingencies, risks and accounting, contractual, insurance, tax and treasury implications.

For Major stand alone projects, the Project Finance Manager (PFM) is part of the Project Management Team and will have a functional reporting line to the Business Finance Manager. For smaller projects executed in the Line, the Finance Manager for the respective Directorate assumes this role across multiple projects (and usually delegates a senior management accountant as focal point). An integrated approach to cost management, work planning, finance, and contracting and procurement will strongly contribute to a well controlled project environment. In reality, these activities are often split between the Project Services organisation and the Finance organisation. In addition, the Project Finance will provide project teams with a robust set of global standard processes, controls and tools supporting effective project execution: Procedures defining the global project execution process and control requirements. Tools and instructions supporting the process & control requirements o o o o o Budget Management Management of Invoices Project Cost Allocation Exchange Rate Application Manual Of Authorities

Page 74

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

13 Value Improvement Practices


Support: UEP2 What distinguishes VIPs from other Best Practices is that each VIP has a measurable and statistically demonstrated effect on cost, schedule, and/or reliability of the constructed facility. VIPs are also different from other practices, such as team building or partnering, in the following ways: Each VIP must follow a distinct and defined work process. The VIP is not merely a detailed review of some portion or aspect of a project. The results of VIPs exercises must be documented so that the project team is accountable for incorporating those results into the project. The manner in which these VIPs will be used on any project is dependent on scale, but all projects should discuss the following list with the Value Improvement Co-ordinator (currently UEP2), who will advise which VIPs should be undertaken by the project, and thus included in the Project Controls and Assurance Plan (PCAP). The main VIPs in use in PDO are as follows: Opportunity Framing Lessons Learned Value Engineering Benchmarking of Project Performance Technical Standards Challenge Availability Assurance / Reliability Constructability PEP-PER The Value Improvement Coordinator can also provide guidance on other VIPs available (e.g. First Contact Meeting), and give guidance on who in PDO can provide the VIP support.

13.1 Opportunity Framing


Support: UPV, UEP5 Opportunity Framing (OF) is a process to align the project team, and their Decision Executive (DE) and Decision Review Board (DRB) on the purpose, perspective, and scope of the Opportunity. All projects >$100mln shall carry out Opportunity Framing or (re)Framing prior to each Decision Gate to ensure alignment for the next phase. OF achieves such alignment by having a structured dialogue between relevant stakeholders and disciplines, resulting in a standard set of deliverables that form the basis of the project plan, which can be seen as the contract between team and their governors (DE/DRB).

Page 75

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

13.2 Lessons Learned


Support: UEPI1 The aim of the Lessons Learned process is to ensure that projects repeat successful behaviour from the past whilst avoiding making the same mistakes. Lessons Learned should be captured at key moments in the project lifecyle, for example: VAR3 / DG3 VAR4 / DG4 End of Detailed Design (with contractor) VAR5

The Lessons Learned are captured in a number of ways, the most important of which being updates to procedures and standards (where required). Other methods of capture include the Lessons Learned database, video story capture, project close-out documentation, knowledge networks, etc. This VIP enables learnings from previous and current projects to be applied in order to increase value, and provides assurance that projects have taken on board the opportunities for improvement and best practices.

13.3 Value Engineering


Support: UEP2 Value Engineering (VE) is the systematic application of recognized and structured techniques which; Identify the primary function of a design, product or service, Establish a monetary value for that function, and Provide the necessary primary and supplemental necessary secondary function(s) reliably, at the lowest overall cost. Value Engineering (VE) is therefore concerned with increasing value by removing unnecessary cost without loss of function. It differs from the traditional approach to cost control in that it focuses on achieving value rather than simply reducing cost. Value Engineering is a review tool that can be used at various stages during the project development from Identify/Assess phase to Execute phase, depending on the project needs. However there should be appropriate information available so that the review would be beneficial. Thus value engineering is mostly applied at select phase and mid of define phase (BFD stage). Note that as for the project investment, the highest flexibility for implementing Value Improvement changes is at the identify/assess and select phases where there is more influence on the project specification and design. In subsequent phases there will be a high resistance to changes and significantly higher cost impacts, therefore the aim and focus of Value Engineering in various project phases varies. However there should be appropriate information available so that the review would be beneficial. Value Engineering as a specific Value Improvement Practice is best applied within the Select and Define phases. The principles and process of this VIP need to be applied to all projects. The VE needs to be applied in such a way as to be fit for purpose for the scale and complexity of the project. How the VE is applied is agreed as part Project Assurance Plan.

13.4 Benchmarking of Project Performance


Support: UEP2
Page 76

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Project Benchmarking is a structured process that is used to add value to a project by comparing a specific project to projects of similar characteristics executed by the industry. The objective of Benchmarking of Project Performance is to compare PDO projects against other projects, using both qualitative and quantitative aspects, in order to learn, improve and implement best practices. On a project level, benchmarking of project performance assesses: Project practices, compared to the standard defined in the CoP, and Project metrics (cost, schedule and first year production), compared to metrics from projects (internal and external to PDO) of similar size and complexity. In addition, by continuous benchmarking of PDO projects, we can improve the effectiveness of our practices defined in this CoP in order to achieve top quartile performance in project delivery. NOTE: benchmarking does not replace effective project management practices but provides a degree of confidence in the work being done. 13.4.1 Project Metrics Project benchmarking assesses project metrics related to EP business priorities: Effective Project Delivery - setting realistic schedule targets and meeting them. The key metrics here are schedule duration and schedule slip (%). Competitive Cost Structure - setting competitive cost targets and achieve better than industry average cost performance. The key metric here is $/BOE. Production & Operational Excellence setting realistic production targets and meeting them. The key metric is production attainment (%). Different projects should focus on different metrics: repeat projects should focus on beating the performance of the competition, whilst first-off projects should focus on delivering as per promise. PDO faces the following special challenges with respect to benchmarking: The need to benchmark the delivery of a large number of small brown-field projects on a portfolio rather than a per project basis. Many projects carry CAPEX of less than $20mln. The unconventional and novel nature of its major projects, i.e. sour and steam projects in a desert environment, without many regional or worldwide analogues. There are 3 different types of external benchmarking conducted at DG3, FID, and after start-up.
Ps r ae ct ee t P ee rpv oc st i C O ls u o t e

Pacesetter (DG3) benchmarking helps the team set define phase targets by providing project definition status in the form of front end loading factors (reservoir, facilities, and wells) and provides recommendations to close the gaps before FID. It also provides performance information in cost & schedule. Prospective (FID) benchmarking provides project team and stakeholders objective info about the status of the project and its underlying risks. It also provides performance benchmarks for cost, schedule, project controls, operability, and predicted outcomes.
Page 77

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Closeout (after start-up) benchmarking provides actual project outcomes (including production attainment) and lessons learned in order to improve future projects. PDO uses independent external benchmarking in the following manner: 1. Project CAPEX > $500mln - Mandatory External Benchmarking for all projects 2. Project CAPEX between $100mln and $500mln - Mandatory External Benchmarking campaigns of all projects in this category at 3 yearly intervals. This will provide regular snapshots, and will enable long-term tracking of project delivery performance for the portfolio of medium sized projects. 3. Sample of (10) small (brown field) projects to be benchmarked at 3-yearly intervals to track project delivery of small projects portfolio (close out benchmark only)

13.5 Technical Standards Challenge


Support: UEP1 A Technical Standards Challenge shall be performed on all projects > $100mln. For smaller projects consideration should also be given to performing a Technical Standards Challenge on project clusters (a group of similar scope projects). The Technical Standards Challenge involves an evaluation of the specific needs of a facility before it is designed. Engineering standards and specifications can affect manufacturing efficiency, product quality, operating costs, and employee safety. However, the application of codes, standards, and specifications sometimes exceeds the business needs of a facility and unnecessarily increases cost. The objective of the Technical Standards Challenge is to meet the facilitys needs by employing the minimum required standards. Project teams should ensure an appropriate balance between the value of the standards and specifications being used for the project and the facility requirements for health, safety, environment, operations, and maintenance. When procuring equipment a unique process design during early development of a technology often demands equipment that is built according to a specific design specification. However, procurement of equipment meeting a specific design specification is undoubtedly more expensive and time-consuming than buying similar equipment off-the-shelf. Therefore, project teams should review all pertinent design standards before deciding what standards to use on a project. This involves developing a set of minimum required standards and specifications that combine elements of existing and customised standards to meet the needs of the facility. PDO baseline standards are detailed on wallchart GU-611 - PDO Engineering Standards & Procedures. This wallchart represents the starting point for the challenge process. Any proposed deviations to PDO baseline standards shall be subject to PR-1247 Project Change Control & Standards Variance. The Technical Standards Challenge shall consist of a preliminary review during the Concept phase, followed by a comprehensive structured review during early FEED (Define) phase. Key actions/tasks shall include the following:
Page 78

Conduct a structured, multidisciplinary review. Involve or solicit comments from key service contractors, vendors, and suppliers. Eliminate standards, specifications, and procedures not applicable to the project. Agree on precedence of company and industry standards and specifications. CP-117 Project Engineering Code of Practice
Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


Revision: 5.0 Effective: June 2012

Where feasible, replace general specifications with preferred alliance vendor model numbers. Simplify applicable standards, specifications, and procedures: Remove extra wording (boiler plate text) and use standardized datasheets. Eliminate duplication from international and national standards. Minimise cross-referencing with the intent that each standard or specification is standalone.

Challenge remaining standards and specifications for which there is no clear value-justified basis and evaluate the costs and benefits of company standards on a life cycle basis. The structured Technical Standards review should involve interactive meetings attended by representatives from the engineering disciplines, operations, maintenance, and construction. Consideration should be given to inviting key contractors and vendors. The review should eliminate the standards and specifications that are not applicable to the project, and the team should achieve consensus on the precedence of company and industry standards and codes.

Understand what we are getting into look wide Whats feasible options?

Focus in and evaluate best and do -able options culminating in Concept Selection

Prepare to lock into an investment

Implement the opportunity

Deliver the value

Diverg T ent hink ing IDE IFY NT @AS E S SS S LE E CT DE FINE

C onverg Think ent ing E E UT XC E O RATE PE

Prelim ry ina TSreview

S tructure Multid discipline review

Define prim sc ary ope Formreview team R eview / rank applicable standards Determ m umstandards and ine inim spec ations ific Produc m e atrix of Scope vs Spec ations ific FUNCTIONALITY vs VALUE OPERATING COSTS AI-PSM & HSE ISSUES CLIMATIC ISSUES QUALITY OF PRODUCT

CONTRACTORS VE NDORS S UPPLIE RS

Technical Standards Challenge

13.6 Availability Assurance / Reliability


Support: UEP2 The Availability Assurance / Reliability VIP is tied to the project delivery schedule and is the main control mechanism of the Project Team on the future availability performance and Life Cycle Value of the facilities. The Availability model is the red thread of the process which is carried through all project phases to enable the assessment of the impact of proposed design changes
Page 79

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

and to evaluate the impact of new information produced during the project development. The Availability Assurance process is initiated during the Identify & Assess or Select phase of a new project and continues in the subsequent phases.

13.7 Constructability
Support: UEP2 The Constructability VIP is intended to ensure optimum use of construction knowledge and experience in planning, design, procurement and field operations to achieve the overall project objectives. This VIP ensures that construction considerations are identified and properly incorporated throughout the full course of a project, in line with the project success criteria.

13.8 PEP-PER
Support: UEP2 The Project Execution Planning using Project Execution Risk (PEP-PER) tool is a VIP for evaluating and managing execution-specific risk in major projects from early in Select with further follow-up in the Define phase. The VIP focuses on prevention of major execution risks as well as mitigation of risk events that may occur.

13.9 LIRA
Support: UWL The Logistics, Infrastructure and Resource Assessment tool is a VIP for evaluating and managing logistics and infrastructure risks for capital projects. Further guidance can be found in PG-19 Capital Project Logistics.

Page 80

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

14 Project Resourcing and Allocation


Support: UEP4 The Function (UEOD), through its skillpool managers UEP4 (Engineering), UOP5 (Operations) and UOP5M (maintenance), is responsible for the timely resourcing of the Assets and major project teams with competent engineering and operations staff, for the control of engineering and operations staff positions and job group levels (baskets), for coordination of the job group evaluation by HRD3, and for managing the competence and personal development of its staff. The size and structure of the Project and Asset organisation and each position within (and any subsequent changes to the organisation, including staff moves and changes in reference indicator) requires prior Functional (UEOD) approval and shall be recorded by the skillpool manager. As the project matures and new resource requirements are becoming clearer, the Project manager shall submit for Functional review/approval a proposed project organigram with additional position request, in accordance with PR1088 - Organisational & Staff Changes Process Control, including a ramp up/ down plan and indication of core and non-core positions, as per the Guidelines for use of Manpower Services, held by the Skillpool manager. It is vital that this is planned sufficiently in advance to take account the length of time required to recruit suitable staff for key positions. In the design of the Project organisation the Project manager shall be guided by the generic project organisation templates, developed and maintained by UEP3, for the different phases of Project delivery. Job description templates are prepared by the relevant CFDH and held by the Skill Pool Managers. The Project Lead shall use these templates to form a Job Description appropriate to project needs. The skillpool managers are responsible for resourcing the projects teams, (including the coordination of external recruitment through MOR or by the HR Directorate or by using the Manpower Service Contracts, held by the MPS Contract Holder UEP2T. Final staff selection is the responsibility of the relevant CFDH or nominated deputy. An internal matching panel, comprising members of the Facilities Engineering Leadership Team (FELT) or Production Leadership Team (PLT) is arranged and chaired by UEOD respectively on a regular basis. This panel reviews the matching proposals made by the skillpool manager and the CFDHs from both a pan-PDO business perspective as well as an individual staff development point of view. UEOD (or as delegated to his Skillpool managers) can force a decision in case of nonalignment between Matching panel members. All staff and position moves shall require Functional (UEOD, skillpool manager and CFDH endorsement) as per PR-1088.

Page 81

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

15 Technical Standards
15.1 Technical Standards Framework
Support: UEP1 The PDO Engineering & Technical Standards hierarchy consists of the following elements: PL (Policy) - Statement of PDO's attitude in response to a business need - provides the course of action stating intentions and principles Mandatory CP (Code of Practice) - Translates a policy into practical activities to be executed repeatedly - Provides rules and an overview of the required Procedures & Guidelines Mandatory SP (Specification) - Prescribes requirements to be fulfilled by a product, process or service in line with a Code of Practice - Provides rules and an overview of the required Procedures & Guidelines. DEM1 denotes that the SP contains AI-PSM elements Mandatory (see section 5.2.4.2 hereafter). PR (Procedure) - Formal description for executing an activity to achieve a result in accordance with the specification - Describes the purpose & scope of an activity and the specific way the activity is to be performed to achieve a satisfactory result Mandatory DEP (Shell Design & Engineering Practice) - Sets the recommended standard for good design and engineering practice and thereby achieves maximum technical and economic benefit from standardisation. DEM1 denotes that the DEP contains AI-PSM elements Mandatory when DEP is specified. GU (Guideline) - Advises on how an activity or task is best performed Non-Mandatory EP95 & EP-2005 Shell EP Business HSSE Control Framework PDO baseline standards are detailed on wall chart GU-611 - PDO Guide to Engineering Standards and Procedures. This wall chart represents the starting point for the challenge process. Any proposed deviations to PDO baseline standards shall be subject to PR-1247 Project Change Control & Standards Variance Procedures. For Value Improvement Practice (VIP) Technical Standards Challenge see section 16.6.

15.2 DEM1
Support: UEP1, MSE4 DEM1 is mandatory for all projects and guidelines can be found in GU648 Guideline for Applying Process Safety in Projects. DEM1 is discussed in more detail in Section 10.3.2.

Page 82

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Appendix 1 CP-117 Mandatory Requirements


The following table indicates the Mandatory activities required scaled to project (Capex) size. If a project is relatively small in Capex terms, but requires a higher level of Project Management, governance, planning and controls (e.g. due to complexity, strategic value, etc.) then the Project Manager is responsible to decide in which category the project falls and have this endorsed by the Decision Executive. (N.B. not applicable for FCPs).

Page 83

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Appendix 2 Governing documentation, References and Tools


NOTE: All documents are available via the following links: PDO governing documents: http://sww4.pdo.shell.om/CMFportal/Default.aspx Reference documents: http://sww-ipms.shell.com/ipms/standards-and-guides.htm The following standards, procedures, codes of practice and guides are referenced by Chapter as follows: 2 Opportunity Realisation Process

PDO Governing Documents ORM and Supporting Documents Opportunity Realisation Guide (ORG). Reference Information: ORM Website Tools: iPMS 3 Project Delivery Organisation

PDO Governing Documents FELT Charter, CFDH Forum Charter (in preparation) Reference Information Project Guide 11 Project Organisation Tools UEOD and UEP website 4 Project Governance and Assurance

PDO Governing Documents DRB in the CMF DCAF Reference Information Project Guide 11 Project Organisation Project Guide 2a Project Assurance Project Guide 2B Project Execution Review Project Guide 2c Estimate and Schedule Assurance Review PDO VAR Website Shell Value and Project Assurance Website Tools PHC Tool DCAF Tool 5 5.1 5.1.1 Key Project Activities Front End Loading (FEL) Concept Engineering

PDO Governing Documents


Page 84

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


PR-1358 - Procedure for Concept Selection and Preparing Basis For Design Reference Information Concept Selection Handbook 5.1.2 BFD

Revision: 5.0 Effective: June 2012

PDO Governing Documents PR-1358 - Procedure for Concept Selection and Preparing Basis For Design Reference Information Concept Selection Handbook 5.1.2.1 Close-out of the Select Phase Reference Information PG12b Capital Project Close-out Report 5.1.3 FEED

PDO Governing Documents PR-1728 - Preparation of Project Specification for FEED Office Reference Information FEED Office Engineering Management System Tools PDMS 5.2 Project Execution Planning (PEP)

PDO Governing Documents Opportunity Realisation Manual Reference Information Project Guide 7 Project Premise Project Guide 10a Project Execution Strategy and Planning Tools iPMS 5.3 Risk and Opportunity Management

PDO Governing Documents CP-131 - Risk and Opportunity Management Reference Information Risk Management Resources Tools Easy Risk 5.4 Operations Readiness and Assurance

PDO Governing Documents PR-1612 - Operations Readiness and Assurance PR-1159 - Commissioning and Start-up PR-1809 Production Measurement Management system CP-114 - Maintenance & Integrity Management Code of Practice Reference Information
Page 85

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


PG 14 Capital Projects Operations Readiness PG14a Operations Readiness Tools Operations Readiness Portal, ORSAT 5.5 Management of Change

Revision: 5.0 Effective: June 2012

PDO Governing Documents PR-1247 - Project Change Control & Standards Variance Procedures Reference Information PG 06 Capital Project Controls & Management of Change Tools Change Control System Cost and Planning Toolbox 6 Managing Project Execution

6.1 Detailed Design PDO Governing Documents PR-1134, Specification for Detailed Design of Oil & Gas Facilities Tools PDMS 6.3 Construction

Reference Information PG 17a Constructability PG 17b Construction Management Shell Wisdom Packs 6.4 Commissioning and Start-Up

PDO Governing Documents PR-1159 - Commissioning and Start-up SP-2051 - Specification for Flushing, Pressure Testing, Pickling and Sensitive Leak Testing of Mechanical Equipment and Piping SP-2113 - Specification for Commissioning and Start-Up (Key Principles) Awaiting Issue PR-1073 - Gas Freeing, Purging & Leak Testing of Process Equipment (Excluding Tanks) PR-1809 Production Measurement Management system Reference Information PG 14 Operations Readiness Tools CCMS ORAKLE 6.5 Project Close Out

PDO Governing Documents PR-1150 - Project Close Out Procedure Reference Information Project Services and Finance Handover 7
Page 86

Contracting and Procurement CP-117 Project Engineering Code of Practice


Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


7.1 Contracting

Revision: 5.0 Effective: June 2012

PDO Governing Documents CP-129 - Contracting and Procurement - CoP PR-1233 - Contracting and Procurement Procedure GU-425 - Contracting and Procurement Guidelines (CPG) PR-1171 - Contract HSE Management Part II - Mandatory for Contractors & Contract Holders PR-1171 - Contract HSE Management Part I - Mandatory for PDO Personnel involved in Contract Management PR-1171 - Contract HSE Management Part II - Mandatory for Contractors & Contract Holders GU-529 - Statement of General Business Principles SP-1262 - SP-1262 - PCI 001 GC for Goods & Services, Rev D 201003 Tools Omnicon (used for Pre-Award contract administration), ProCon (used for Post-Award contract administration) IX2 (used for Purchase Order administration both pre and post award) SAP 7.2 Procurement, Materials Management & Logistics

PDO Governing Documents CP-129 - Contracting and Procurement - CoP CP-193 - Inventory Management PR-1233 - Contracting and Procurement Procedure GU-425 - Contracting and Procurement Guidelines (CPG) DEP 70.10.90.11 Gen Spare Parts Vendor List Control (AVME or PGSC List) GU-364 Vendor Registration Guidelines GU-398 Guidelines on Scope and Areas Covered during Vendor/Contractor Evaluation and Assessment SP-1262 PCI 001 GC for Goods & Services, Rev. D 201003 PL-12 - Logistics Policy CP-132 - Logistics Services CoP SP-2024 - Logistics Management System PR-1858 Procedure for Material Handling, Storage and Preservation Reference Information PG 19 Capital Project Logistics Tools IX2 8 8.1 Project Services Planning and Scheduling

PDO Governing Documents GU-484 - Planning and Scheduling Guidelines Reference Information Shell Project Guide 04 Capital Project Scheduling Shell Project Guide 03 Integrated Activity Planning Tools Primavera Primavera Risk Analysis 8.2 Cost Estimating

PDO Governing Documents


Page 87

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


GU-469 Capital Project Estimating (update underway) Reference Information Shell Project Guide 06 Cost and Schedule Risk Analysis guide (ref. PG-03) Tools CES, Capco$t, CCES Type 1 Cookbooks (under development) Contingency and Accuracy Tool @Risk 8.3 Project Controls

Revision: 5.0 Effective: June 2012

PDO Governing Documents GU-667 Project Controls Plan Reference Information Further guidance is available in many external texts the Guide to the Project Management Body of Knowledge (PMBOK) from Portfolio Management and Integration (PMI) is perhaps the most widely used. Shell Project Guide 06 Project Control Tools SAP, Primavera, Excel 8.3.2 Management of Cost

Reference Information Shell Project Cost Reporting Procedure PSM-I-U-001182-FA-6180-0020 Shell Cost Contingency Procedure PSM-I-U-001182-FA-6180-0021 Shell Value of Work Done Procedure PSM-I-U-001182-FA-6180-0022 Shell Earned Value Management Procedure PSM-I-U-001182-FA-6180-0025 Shell Cost Management Procedure PSM-I-U-001182-FA-6180-0028 Shell Management of Invoices Procedure PSM-I-U-001182-FA-6180-0044 Tools SAP, Dassian 8.3.3 Management of Progress

PDO Governing Documents GU-484 Planning and Scheduling Guidelines Project One-Pagers Reference Information Shell Progress Management Procedure PSM-I-U-001182-FA-6180-0011 Tools Primavera 8.3.4 Management of Change

PDO Governing Documents PR-1247 Project Management of Change 8.3.5 Management of Risk

PDO Governing Documents CP-131 Risk and Opportunity Management (to be updated)
Page 88

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Reference Information PG 20 Capital Project Risk Management Shell Project Process Project Cost & Planning Risk Procedure : Cost & Schedule Risk Analysis Tools Easyrisk 8.3.6 Reporting

Reference Information PG 06 Capital Project Controls & Management of Change Cost and Planning Toolbox Shell Business One project reporting Tools PDO Project One Pager Shell Major Projects Business One 8.3.7 Project Close Out Reporting

PDO Governing Documents PR-1150 Project Close-out Reference Information Project Guide 12b Project Close Out Report procedure 8.4 8.4.1 Project Assurance Estimate and Schedule Assurance Reviews

Reference Information Shell PG 02c Capital Project Estimate Schedule & Assurance Review (ESAR) 9 Quality Assurance

PDO Governing Documents PL-15 - Quality Management Policy CP-190 - Quality Management System for Project Delivery SP-1171 - Specification for Quality Assurance Requirements for Product and Service SP-1122 - Project Quality Assurance Plans PR-1866 Quality Auditing Procedure Reference Information ISO Standards PG 13 Quality Assurance & Control Tools Variance and Audit Tracking System 9.1 Discipline Controls and Assurance Framework (DCAF)

PDO Governing Documents PDO DCAF SP2061 Technical Authorities System Reference Information User Reference Guide Tools DCAF Tool
Page 89

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


10 HSE in Projects

Revision: 5.0 Effective: June 2012

PDO Governing Documents PL-04 HSE Policy CP-122 Health, Safety and Environment Mgmt System - CoP CP-206 Management of Change - CoP SP-1190 Design for Sour Service Specification SP-2062 Specifications for HSE Cases PR-1078 Hydrogen Sulphide Management Procedure PR-1171 Contract HSE Management Part I and II PR-1247 Project Management of Change Procedure PR-1696 HAZOP Procedure PR-XXXX Procedure for Deviation from Standards (still under development) DEP 30.10.02.31-Gen. Metallic materials - Prevention of brittle fracture in new assets DEP 32.80.10.10-Gen. Instrumented protective functions (IPF) DEP 34.17.10.33-Gen. Design of blast resistant onshore buildings, control rooms and field auxiliary rooms DEP 34.17.10.35-Gen. Siting of onshore occupied portable buildings DEP 34.51.01.31-Gen. Vertical steel storage tanks - Selection design and construction (amendments/supplements to EN14015) GU-447 Integrated Impact Assessment Guidelines GU-611 PDO Guide to Engineering Standards and Procedures Reference Information GU-648 Guide for Applying Process Safety In Projects PG-01 Capital Project HSSE & SP Management Tools DCAF 11 Information Management

PDO Governing Documents SP-2065 - Document Management for Projects SP-2047 - Preparation & Content of Engineering Drawings Reference Information PG 15 Capital Project Information Management IM Toolbox Tools Livelink, Assai, AHA4P 11.1 Project Management System (iPMS)

PDO Governing Documents ORM Tools PDO iPMS 12 Finance in Projects

PDO Governing Documents Manual of Business Authorities Reference Information FBM Business Finance Website FBC Capital Budgeting Shell Global Procedures
Page 90

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC


13 Value Improvement Practices

Revision: 5.0 Effective: June 2012

Reference Information Opportunity Framing Resources Value Engineering Resources PG 16 TQ for Capital Projects, including Benchmarking PG 19 Capital Project Logistics 14 Project Resourcing and Allocation

PDO Governing Documents CP-152 - Resourcing and Leadership Development CoP CP-174 - Omanisation CoP CP-180 - Recruitment Code of Practice PR-1088 - Organisational & Staff Changes Process Control Contracting / Agency Staff PR 1784 GU-642 Generic Project Staffing Requirements Reference Information PG 11 Capital Project Organisation 15 Technical Standards

PDO Governing Documents GU-611 PDO Engineering Standards & Procedures PR-1247 Project Change Control & Standards Variance Reference Information GU-648 Guide for Applying Process Safety in Projects EP95 & EP-2005 Shell EP Business HSSE Control Framework

Page 91

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.

Petroleum Development Oman LLC

Revision: 5.0 Effective: June 2012

Appendix 3 Abbreviations
BOM CFDH DE EMC ODC CAPEX PS PG TECOP ORP ORM ORG DG FCP CCET DSC FEED FELT PCAP VAR PEP FID VIP DCAF BfD $ mln Business Opportunity Managers Corporate Functional Discipline Head Decision Executives Engineering Management Contractors Offplot Development Contractors Capital Expenditure Project Standard Project Guide Technical, Economical, Commercial, Organizational and Political Opportunity Realization Process Opportunity Realisation Manual Opportunity Realisation Guide Decision Gate Field Change Proposals Central Concept Engineering Team Development Study Centre Front End Engineering Design Facilities Engineering Leadership Team Project Control and Assurance Plan Value Assurance Review Project Execution Plan Final Investment Decision Value Improvement Practice Discipline Control and Assurance Framework Basis for Design Denotes USD unless otherwise stated million

Page 92

CP-117 Project Engineering Code of Practice

Printed 27/06/12

The controlled version of this CMF Document resides online in Livelink. Printed copies are UNCONTROLLED.