The objective of ORP Phase 3 – Define is to translate the business need (purpose) into a structured and costed plan, ready for execution, defining the work needing to be performed to provide the facilities that will enable the benefits to be realized. The project plan must contain a sufficient level of detailed information to permit a decision on whether to proceed further with the activity. This Definition Phase (together with the previous Selection Phase) provides the maximum opportunity for achieving cost effective solutions. It is therefore clearly a stage (just as is the Selection Phase) for utilizing the most experienced and imaginative staff. The Define Phase has four primary deliverables:
- Basis for Design – This document is invariably developed by an in-house team, perhaps supplemented by contractors, and forms the technical basis for the development of the facilities Project Specification and the tendering of any contracts for its preparation
- Project Specification – This document develops the design of the facilities to the point where the +15%/-10% Execution Budget Estimate can be prepared and detailed design can start.
- Well Engineering Plan – The Well Engineering Plan for production wells.
- Project Execution Plan (PEP) – The preliminary PEP prepared in the ORP Select Phase is finalized.
- Execution Group Budget Proposal – This document is prepared and submitted to obtain funds to execute the project.
Other documents (e.g. Opportunity Framing Report, Asset Reference Plan etc.) are updated to reflect the latest information. The project execution organization is put in place, Concept Definition contracts are tendered and awarded and all the necessary control processes for the Execution Phase are developed or planned for development.
Plan Activities (ACT-01) in relation to ORP Phase 3 – Define may not be a ‘once through’ process, requiring several iterations before proceeding to Schedule Activities. It is important to keep the level of detail in each step consistent
and in proportion with the accuracy required of the study. The steps are not necessarily consecutive, i.e. finishing one before starting the next. They interact with each other and so there may be parallel or overlapping activities. The purpose of listing them here as distinct steps is to highlight the content of each activity needing to be undertaken.
Opportunity Framing
The opportunity should be reframed at the commencement of this phase and the Opportunity Roadmap updated both in accordance with the guidelines in Chapter 2, Opportunity Realization Process, taking account of the increasing amount of information available from the previous Select Phase deliverables:
- Field Development Plan
- Concept Selection Report
- Operations Philosophy
- Preliminary Project Execution Plan
- Preliminary Asset Reference Plan
Concept Definition
Concept Definition is defined as the engineering required to produce
i the Basis for Design for the chosen development concept and
ii the Project Specification that will be used for detailed design.
At the commencement of Concept Definition a development concept will normally have been agreed, including an identification of the facilities required. The purpose of Concept Definition, as described below, is to evolve the functional requirements for the facilities into functional specifications, which provides the level of definition necessary to generate a budget (+15%/-10% accuracy) cost estimate of Capex and Opex.
The Basis for Design Deliverable
The functional requirements for the facilities for the chosen concept(s) should be compiled into a baseline document, called the Basis for Design (BFD). The BFD identifies the start conditions for the preparation of the Project Specification. It should include:
• Brief description of the facilities
where – the (proposed) location of the facilities
why – the business need or purpose of the facilities
when – a tentative design and implementation schedule
how – a breakdown of the proposed systems to unit operation level
Definition of the boundary conditions
- feedstream/inlet conditions
e.g. oil/gas/produced water flow rate profiles, compositions, pressure, temperature, including any known daily, seasonal and yearly variations Include full PE data range - product and effluent streams/outlet conditions
e.g. water injection and gas-lift requirements, user/sales specifications for products, effluent stream limits
• Definition of the status of any existing facilities and the performance characteristics of its processes
- technical integrity status and current required design life
- operating performance and identified future requirements
- identification of other potential changes which may impact on the conceptual design
- structural integrity/capacity constraints of jackets, decks, pipelines
Definition of the requirements for the new or modified facilities
- METOCEAN and environmental data
e.g. temperatures (min/max/ambient), rainfall, humidity, wind, current, wave height, tide data, available soils data, etc. - required design life
- a systems description with any identified constraints,
e.g. design codes and standards, operating constraints, utility requirements, layout considerations, standardization - regulatory requirements
- HSE requirements
Definition of any other constraints
- which impact on the facilities
e.g. size limits imposed by transportation - which impact on the preparation of the conceptual design
e.g. data transfer requirements or choice of units - existing HSE cases
• References to any relevant study reports
e.g. hazard study, QRA, EA, Hazard and Effects Register
Following preparation, the BFD should be subject to a formal review and approval procedure. Once approved, the document should be subject to a formal change control procedure.
The Concept Definition Process (A-12.01)
The discipline and inter-discipline Concept Definition activities are geared towards studying and defining any remaining sub-options and then developing the functional specifications for the required facilities. These are compiled into a deliverable, known as the Project Specification (see below), which supersedes the BFD at the end of Concept Definition.
Figure (Concept Definition) below gives a simplified overview of the Concept Definition process. The process engineers develop the Process Flow Diagrams (PFDs), together with the Heat and Mass Balance and the initial Equipment List. The Heat and Mass Balance is used by the material and corrosion engineers to develop the Materials Selection report. From the initial Equipment List and the Materials Selection report, the major equipment/space users size their respective packages. The layouts group prepare the initial equipment layouts, together with input from Civil/Structural engineers and the Piping engineers.
Once an acceptable layout has been achieved, estimates are prepared to generate the Opex, Capex and availability forecasts. The disciplines prepare philosophies and functional specifications of the defined systems, which are compiled in the Project Specification.
Optimization of Selected Concept
During the Concept Definition, decisions on design capacity, numbers of trains, sharing or sparing of equipment, etc., should be finalized, based upon a life-cycle economic evaluation of the trade-offs between Capex, Opex, and production availability.
The selection should be made between a number of alternatives on the basis of maximizing Net Present Value (NPV). Within the local tax regime, life cycle costs should be optimized against revenue (which is a function of production availability). In order to rank these alternatives it is necessary to be able to:
- estimate Capex
- estimate Opex
- predict production availability
- economically model the inter-relationship of the factors above.
Figure (Data for Concept Definition Comparisons) below gives an overview of how these building blocks fit together to allow a comparison of development options. At the Project Specification stage, Capex estimation at Level 3 (budget), normally has an
accuracy of +15%/-10%.
Opex estimation has often historically been modelled as a percentage of Capex, plus a fixed charge per barrel of oil, or m3 of gas. This may be sufficiently accurate for screening estimates, as the NPV contribution of Opex is relatively small. However, there are many examples where projects have a lower return on investment due to unrealistic or inadequate estimation of the Opex. Thus for budget preparation purposes, the use of a proper Opex estimating tool is essential, in order to give a true picture of life cycle costs. This can be achieved by updating the preliminary Asset Reference Plan. The ARP can also be used as a tool to develop an insight into the critical production and maintenance areas, where optimization can provide significant benefits.
Availability can be predicted by developing a model of the proposed facility which describes the expected scheduled and unscheduled (maintenance and production operations) interventions. Therefore reliability and maintainability parameters should be clearly identified. Amongst others this will reflect items such as the degree of sparing of
trains and equipment. By inputting into such a model data on Mean Time To Failure (MTTF), and Mean Time To Reinstate (MTTR) for the various items of equipment or processing blocks it is possible to compute the resultant production availability from any particular option. Sources of equipment reliability data are scarce and judgement in their use is required. The most commonly used source is OREDA – Offshore Reliability Data. However, OUs are encouraged to collect their own data which reflects the environmental conditions, the maintenance strategy, and the staffing conditions within the OU.
It should also be realized that the MTTR is a function of operating philosophy for the facility (e.g. manned vs. not-normally-manned).
Build 3D model
For complex installations it is difficult for individuals to have a clear view from drawings of what the finished facility will look like, and how the individual disciplines input will interact. For that reason the use of models, either physical or electronic is often used during conceptual design.
The capabilities and resolution of commercial 3D-CAD systems have increased dramatically and it is now possible to replace the physical model with a computer generated model with a walk-through facility.
The objective of such a model is to allow all disciplines involved to check whether sound design criteria have been observed with respect to safety, constructability, operability and maintenance, e.g. accessibility (particularly for maintenance), provision of laydown areas, location of main valves, provision of adequate lifting capability, location of critical process instrumentation, routing of piping to suit the process, location of emergency stations, safe
locations of vents and drains, location of fire protection and fire-fighting equipment.
HSE aspects in Concept Definition
Hazard assessment and associated methodologies and tools are covered in the EP HSE Manual. Those to be considered during Concept Definition are as follows:
Key health and safety aspects
• ensure technical integrity of process – coarse hazop
• minimize risk of escalation from fire and explosion – hazardous area review, layout methodology
• ensure adequate provision for escape – review overall risk, including focused individual QRA as necessary
• review ergonomics of overall plant layout.
• analyse health risks – e.g. noise contour study.
Key environmental aspects
- identification of regulatory requirements and confirmation of compliance
- qualitative estimates: emission inventory, baseline studies, dispersion calculations, environmental assessment
- identify options for minimizing emissions and waste
The Hazards and Effects Register should be updated. The results of all assessments and the design of mitigating measures should be recorded. This is ultimately provided as input to the HSE case for the facility.
Project Management Aspects during Concept Definition
During Concept Definition two processes occur in parallel:
• the acquisition of resources for the Concept Definition and for ORP Phase 4 – Execute
• the completion of the Project Execution Plan and other project documentation
The following aspects should be considered as this phase commences.
Contracting Considerations with respect to Concept Definition
(Note that all comments pertaining to the use of contractors during Concept Definition can apply equally to their use at any other stage of Front End Engineering.)
Whereas the preparation of the Basis for Design is usually performed in-house (with contractor support where necessary), development of the project specification can be carried-out by contractors if required and on large projects this is the norm rather than the exception. This choice will depend on the availability of manpower and expertise in-house.
A scope of work incorporating the Basis For Design should be prepared, with all work to be carried out broken down into a series of CTRs. The following actions are then required:
- prepare an RFA to commit funds and obtain management approval
- prepare a bid list for front-end design services and obtain approval from the Tender Board or as appropriate
- issue tender, receive bids, perform technical and commercial evaluation as per Tender Board procedure
- obtain Tender Board approval of recommendation and award contract
Contract form
The form of contract is normally reimbursable.
Contractor selection
Care should be taken when selecting a front end engineering contractor as their work will have a significant influence on the eventual scope and cost of the surface facilities. In some instances a design competition between two or three contractors held to arrive at the best value engineering solution may more than amply reward the additional design cost. No matter how tight the design budget is, it is usually a false economy to cut down
the design scope at this stage. Particular attention needs to be given to the evaluation process at the end of the design competition. Points to consider when selecting contractors for Concept Definition are:
- Their experience record, in general and specific to the type of processing systems being considered.
- Their key specialists. The resumes of key Concept Definition engineering/field development specialists should be checked.
- Their cost engineering/planning experience. The preparation of cost estimate is critical in a front-end design also for comparison between options in the initial screening stages. Check the contractor’s ability, methodology and cost database for preparing feasibility study and project budget cost estimates/schedules.
- The consultant’s capability/profile of discipline resources should be reviewed.
- The contractor’s databases and methods for field development concepts/methods.
- Check their computer resources – both hardware and software.
Call-off Contracts
Where there is a regular engineering work load, it may be advantageous to set up one or more call-off contracts. It provides a quick way of farming out work, without having to go through a time-consuming bidding and assessment procedure. Often call-off contracts are established with more than one design consultant, allowing a competitive element to be maintained. This helps to avoid work load bottlenecks in a single contractor’s office and helps retain a
pool of contractors familiar with the OU design standards and practices.
The ease with which work can be farmed out in this fashion is also one of the potential dangers of these contracts. Clear in-house controls and authorization levels are required to avoid abuse. There is also no guarantee that a call-off contract for conceptual design will give the quality of cost reduction innovation that the project might require.
Prepare long delivery item requisitions
Materials and equipment with an expected delivery lead times which may affect the project completion date should be identified and requisitions for them prepared. Commitments for the long-lead items may be required at this stage.
Preparation for ORP Phase 4 – Execute
Organizational resources will need to be put in place in order to commence Phase 4 activities without delay once project sanction is obtained. Procedures for the early stages of Phase 4 will need developing and some contract tender document may need to be prepared. There may also be a need to tender and award some contracts during this stage in addition to long lead equipment items (e.g. detailed design (if not a follow-on from front end engineering), platform installation.)
The Project Specification Deliverable
The objective of the Project Specification is to provide a detailed description of the necessary project hardware, together with the Company’s technical requirements, such that it can be used as part of the tender documentation for the execution phase of the project. The Project Specification should include technical performance targets for
the project in the execution phase. These would include, for example, intervention levels, availability and operating cost targets.
Any inherent risks in the project which have been accepted should be categorized as documented. These could include for example, the risks associated with using certain new technology, the risk of building excess capacity due to production uncertainty, the risk of onset of sour production.
Inherent Risks risks are now being placed in the category of items which will not be further researched. In other words the project is now proposed to proceed to a fixed plan in full knowledge that these risks are there, are recognized by the Decision Makers, and could affect costs or viability. This does not mean that action would not be taken if new information emerges.
The project specification should include a statement of the design intent to provide a framework and guidance for the engineering contractor or in-house engineering department when preparing the design. This should summarize key elements of the design philosophy and technical specifications for the process facilities, sub-structure,
pipeline, utilities, equipment, communication facilities, infrastructure, layout etc. This will be the main source of guidance when conflicts arise between the various requirements laid down in the philosophies and standards. It will also provide guidance when any gaps are found. In particular the design intent should establish any important relative priorities. For example cost against availability or unmanned operation against complexity of controls.
Project Documentation
Project Execution Plan (PEP)
The PEP is completed in this phase in accordance with the guidelines in Project Execution Planning.
Field Development Plan (FDP)
Although in a perfect world, the FDP should have been completed in ORP Phase 2 Select, there may be aspects that require finalization in the phase due to late subsurface information or updating of well or facilities design and final economic analysis. Care is needed to ensure the continuous integration of petroleum, well and field
engineering effort to incorporate any changes to the FDP into the relevant philosophies and designs.
Asset Reference Plan (ARP)
The ARP is updated in accordance with Asset Reference Planning.
Value Assurance Reviews and Project Approvals
Value Assurance Reviews
Design reviews should be carried out to confirm and verify the design integrity of the facilities covered in the Project Specification. (These may form part of but, if not, will lead into Value Assurance Review (VAR) 4.) Other ‘special’ reviews which may be considered during Concept Definition could include:
- technology application review – have the best technologies been applied? how to reduce technological risks?
- cost reduction review – what are the main cost drivers? what can enable step reductions?
- simplification review – what areas can be simplified, without significant effect on the project NPV;
- schedule improvement review – challenge to schedule assumptions and dependencies, and contracting strategies.
VAR (Value Assurance Reviews) 4 is carried out towards the end of ORP Phase 3 as an input to the Final Investment Decision. VAR 4 challenges, inter alia, whether:
- the conceptual design work is of sufficient quality and completeness to proceed to the execution phase;
- the project execution strategy as outlined in the execution plan is optimal and conforms with the Company’s policies, especially with respect to HSE protection and technical integrity;
- the total amount of the commitment plan is within the budget;
- uncertainties in Petroleum Engineering data are either resolved or at least identified and understood;
- all identified studies which could result in changes are complete.
Project Approval
The Project Execution Plan together with the Project Specification should be submitted to OU Decision Makers for approval, together with the budget proposal for the execution phase.
Approval of the budget by shareholders and of the project execution plan by OU Decision Makers secures the funds necessary for the project and empowers the engineer to proceed with full (or partial) project implementation, obtaining step by step authorization for commitments through RFAs, as and when required.
In some instances, Government approval may also be required, and early dialogue on the propoZsed PEP can often prove very valuable.
Operations in the Define Phase
In addition to reviewing and updating the documentation prepared in the previous two ORP Phases (Identify & Assess, Select) the Operations Group, now firmly established within the project team, will be providing input to the Concept Definition (e.g. process design review, hazops, operability and maintenance requirements and access). It also needs to complete the following actions during the Define Phase with the timing for completion dependent on the needs of the project.
- Define the data standards (computing, data hand-off systems, drawing standards)
- Specify Operator training needs
- Specify Operations requirements with respect to long-lead equipment and material items
- Define the outline format for the Plant Operating Procedures Manuals (POPMS)
- Prepare the Installation Inspection Policy
- Establish inspection test methods with respect to technical integrity
- Apply the Risk Assessment Model (degradation, statistical, probabilistic models of pressure envelope and installation structure
- Select optimum equipment numbers (redundancy) in conjunction with Engineering
- Update the Asset Reference Plan