OPMG

Shell Exploration & Production

2006 EDITION OPPORTUNITY AND PROJECT MANAGEMENT GUIDE

identify & assess

select

define

execute

operate

Restricted
This document will be maintained live on the Shell EP intranet site. The Web-based document will be the
controlled version. Copies or extracts of this manual, which have been download from the website, are
uncontrolled copies and cannot be guaranteed to be the latest version. Further electronic copies can be
obtained from the Global EP Library, Rijswijk.

This document is classified as Restricted. Access is allowed to Shell personnel, designated Associate Companies
and Contractors working on Shell projects who have signed a confidentiality agreement with a Shell Group
Company. ‘Shell Personnel’ includes all staff with a personal contract with a Shell Group Company. Issuance of
this document is restricted to staff employed by a Shell Group Company. Neither the whole nor any part of this
document may be disclosed to Non-Shell Personnel without the prior written consent of the copyright owners.

Copyright 2006 SIEP B.V.

The copyright of this document is vested in Shell International Exploration and Production B.V., The Hague, The
Netherlands. All rights reserved. Neither the whole nor any part of this document may be reproduced, stored
in any retrieval system or transmitted in any form or by any means (electronic, mechanical, reprographic,
recording or otherwise) without the prior written consent of the copyright owner.

Design by Graphics, Media & Publication - Rijswijk/P04883

EP Number EP 2006-5500
Revision 0.0
ECCN Not subject to EAR-No US content
Author EPT - OE, Capital to Value - Robin Hutchinson and Henk Wabeke
Approved By Matthias Bichsel
Owner Matthias Bichsel, Executive Vice President, Technical
Document type Business Control Document - Company Standard
Distribution EP Leadership Forum All Staff in project-related functions
Available as downloadable copy for all staff

Publication History
EP Number Date Extent of Revision Approved by
EP 2001-5500 Nov 2001 First Issue of OPMG, complete rewrite of PMG EP 96-3000 Robin Hutchinson
EP 2001-5500 Jan 2005 Chapter 2 rewritten, clarifying role of the DRB. John Darley
EP 2006-5500 Jun 2006 Chapters 1-3 of EP 2001-5500 re-written Matthias Bichsel
revision 0.0

Other chapters in the OPMG expected to be revisied to complete EP 2006-5500

Chapter Title
4 Project Controls
5 Project Activities and Deliverables - per Phase
6 Opportunity Realisation Process (ORP) Toolbox

Other C2V Publications

Document Title EP Number Approved By
OF Opportunity Framing Facilitator’s Handbook EP 2003-9107 Peter D.A. Baruch
VE Value Engineering EP 2004-9016 Philip Tudhope
CI/CS Development Concept Identification and Selection EP 2005-9014 Henk Wabeke and
Facilitator’s Handbook Niels van Dijk
PHC Project Health Check EP 2005-9047 Henk Wabeke and
Qassim Kitany
ORP Opportunity Realisation Process EP 2006-5501 Matthias Bichsel
 Contents |

1
INTRODUCTION TO THE GUIDE

1.1 BACKGROUND 9

1.2 PURPOSE AND APPLICABILITY 10

1.3 STRUCTURE 11

1.4 DOCUMENT CONTROL 12

1.5 LINKS 12

2
OPPORTUNITY REALISATION PROCESS (ORP)

2.1 WHAT IS THE ORP? 15

2.1.1 Principles of the ORP 15

2.1.2 Non-Shell Operated Ventures 15

2.2 ROLES AND RESPONSIBILITIES 16

2.2.1 Governance Roles 16

2.2.2 Project Team Roles 17

2.2.3 Dialogue 17

2.3 PROJECT GOVERNANCE 18

2.3.1 Decision Review Board (DRB) and Project Delivery Assurance Board (PDAB) 18
2.3.2 Project Governance versus Decision Authority 21
2.3.3 The Mandate of the Decision Executive and the Executive Vice President 21

2.4 MAXIMISING AND SAFEGUARDING THE VALUE OF THE OPPORTUNITY 22

2.4.1 Opportunity Framing 22

2.4.2 Front-end Loading 23
2.4.3 Benchmarking 24
2.4.4 The Value Assurance Reviews (VARs) 24
2.4.5 The Project Assurance Plan 26
2.4.6 Decision Quality 27

2.5 SUCCESS FACTORS 28

APPENDIX A: GUIDANCE ON DRBS 30

A.1 Attributes of a successful Decision Review Board 30

A.2 Typical Focus Areas for DRBs 30
A.3 DRB Responsibilities 32

APPENDIX B: EXAMPLE PROJECT RISK CLASSIFICATION 34

APPENDIX C: TYPICAL ROADMAP FOR A HYDROCARBON PROJECT 45

APPENDIX D: GENERIC PROJECT ASSURANCE PLAN (PAP) 36

» CONTENTS CONTINUES OVER PAGE

Opportunity and Project Management Guide RESTRICTED | 1

Contents |

3
PROJECT STRATEGY

3.1 HOW ARE WE GOING TO GET THERE? 41

3.1.1 Framing and Planning the Opportunity 41

[Link] Framing 41
[Link] Planning: The Roadmap 42
[Link] The Nested Roadmap 46
[Link] Transitional Ownership 48
[Link] Integrated Value Chain Projects 48
3.1.2 Sustainable Development 49
[Link] Definition 49
[Link] Responsibilities for Implementation 50
[Link] Required Deliverables 50
[Link] Joint Venture Opportunities 51
3.1.3 Asset Reference Planning 51
[Link] Definition 51
[Link] How and When to prepare 52
[Link] Content 52
[Link] Links 53
3.1.4 Project Execution Planning 53
[Link] Definition 53
[Link] Preparation 53
[Link] Document Structure 54
[Link] Content 54
3.1.5 Operations Philosophy 61
[Link] Definition 61
[Link] How and When to prepare 61
[Link] Content 62
[Link] Operational Readiness and Assurance (OR&A) 63
[Link] Links 64
3.1.6 Contracting and Procurement 65
[Link] The ‘Big Rules’ 65
[Link] Market Intelligence 66
[Link] The Contract Management Standard 67
[Link] Strategy and Tactic Selection 68
[Link] Standard Forms of Contract 72
[Link] Reward Structure 72
[Link] Contractor Qualification 75
[Link] Market Approach 76
[Link] Procurement 76
[Link] Links 79
3.1.7 Technology Planning 80
[Link] Links 81

2 | Opportunity and Project Management Guide RESTRICTED

 Contents |

3
» PROJECT STRATEGY

3.2 RISK MANAGEMENT 82

3.2.1 Risk Management in Each ORP Phase 82

3.2.2 Risk Management Process - Tools and Implemetation 84
3.2.3 Categories of Risk 85
[Link] Technical 85
[Link] Economic 86
[Link] Commercial 86
[Link] Organisational 86
[Link] Socio-political, including Reputation and External Affairs 86
3.2.4 Links 91

3.3 ASSURANCE AND VALUE IMPROVEMENT 92

3.3.1 Governance Frameworks 92

3.3.2 Types of Assurance 93
3.3.3 Making a Project Assurance Plan 94
3.3.4 Links 98

3.4 FINANCE 99

3.4.1 Business Controls and Assurance 99

[Link] The Role of Finance in Project Governance 99
[Link] The Role of Finance within the Project 99
3.4.2 Finance Support Activities 100
[Link] Level of Finance Support in the ORP Phases 100
[Link] Level of Finance Support in Business Processes 101
3.4.3 Project Finance 102
3.4.4 Links 104

» CONTENTS CONTINUES OVER PAGE

Opportunity and Project Management Guide RESTRICTED | 3

Contents |

3
» PROJECT STRATEGY

3.5 PEOPLE 105

3.5.1 Leadership 105

3.5.2 Values, Attitudes and Behaviours 105
3.5.3 Organisation 106
[Link] Structure 106
[Link] Types 107
[Link] Pre-FID 107
[Link] Post-FID 108
[Link] Influences 108
[Link] Project Manager 109
[Link] Other Personnel 109
3.5.4 Resourcing 109
3.5.5 Roles and Responsibilities 110
[Link] Business Opportunity Manager 110
[Link] Project Manager 111
[Link] The Operations Manager 111
3.5.6 Skills and Competenties 111
3.5.7 Links 113

3.6 NON-SHELL OPERATED VENTURES 114

3.6.1 Types of NOVs 114

3.6.2 Approach to Management of NOVs 114
3.6.3 Governance of NOVs 115
3.6.4 Strategy Development 116
3.6.5 Application of Shell Standards 117
[Link] Shell General Business Principles and HSE Policy 117
[Link] Standards and Processes 118
3.6.6 Managing the Joint Venture 122
3.6.7 Technical Support Aids 123
3.6.8 Links 123

SEPARATE VOLUMES

4 PROJECT CONTROLS
5 PROJECT ACTIVITIES AND DELIVERABLES, PER PHASE
6 ORP TOOLBOX

4 | Opportunity and Project Management Guide RESTRICTED

OPMG
Contents |

2006 EDITION OPPORTUNITY AND PROJECT MANAGEMENT GUIDE

CHAPTERS 1-3

Opportunity and Project Management Guide RESTRICTED | 5

Chapter 1 | Introduction to the Guide
1
INTRODUCTION TO THE GUIDE

1.1 BACKGROUND

1.2 PURPOSE AND APPLICABILITY

1.3 STRUCTURE

1.4 DOCUMENT CONTROL

1.5 LINKS
Chapter 1 | Introduction to the Guide

Capturing opportunities and delivering world-class projects is fundamental

to the EP business. Part of Shell’s competitive edge must be our ability to
win new business against tough competition, deliver the value associated
with those opportunities and maximise the value of projects in our existing
portfolio. Quite simply, outstanding project delivery is fundamental to Shell EP’s
long-term sustainability.

Projects have always presented the rewarding challenge of implementing

innovative technical and commercial solutions, often in remote locations or in
new countries. We must continually raise our game because the sheer scale
and complexity of recent and future projects, the new and tougher commercial
and operational environments, and stakeholder demands, continue to increase
the challenge. Wholesale changes in our industry, including the threat from
new competitors, are increasing competitive pressure.

It is important that we draw fully on the Shell Group’s project history to provide
a best-in-class way to develop and deliver projects that is applied consistently
across the globe, with maximum synergy and standardisation between
Downstream, Gas & Power and EP projects. Critically, we must all understand
clearly our respective roles in specific projects, and continuously improve our
overall performance and delivery capability.

We have developed the Opportunity Realisation Process (ORP) and the

Opportunity and Project Management Guide (OPMG) to fulfil this role. The
Opportunity Realisation Process is the framework for maturing business
opportunities, whilst the Opportunity and Project Management Guide is the
supporting best practice guide for everyone involved in project delivery – from
shaping the opportunity to delivering the hardware.

Please take time to read the OPMG: it is the way we deliver projects. Be clear
what is mandatory and what is recommended. And be a champion for the
value that applying this common approach brings.

Malcolm Brinded
Executive Director, Exploration and Production

8
 Background | 1.1

1.1 BACKGROUND
The first EP Project Management Guide (PMG) was produced in 1986, much of it based on the
lessons from developing the North Sea. It was then totally revised in 1996 to take account of changes in
information technology, changes in the thinking around contracting strategies, and the development of
the EP Business Model. Both of these guides were heavily biased towards the Execute phase of projects
and were seen largely as guides for field engineers; there was little attention for subsurface, wells and
commercial issues.

The second revision to the PMG followed in 2001 after a number of reviews of failed projects highlighted
that the reason that many had not delivered the value expected was not through poor execution, but
through poor decisions or failure to act in the front-end. The third issue was therefore called the
Opportunity and Project Management Guide to move some of the focus away from the building stage to
the very front end. It introduced the Opportunity Realisation Process (ORP) as the umbrella process by
which all opportunities in EP are progressed from idea to realised value1.

This fourth issue of the (O)PMG is an update rather than a revision. The structure remains the same and
much of the content is as it was. The update has three drivers:
− to reflect the EP Global Process and Minimum Standards, created since 2001, as well as capturing
developments in other processes or thinking;
− to sharpen the wording, so it is clearer what must be done and what is optional; and
− to reflect changes in processes and responsibilities resulting from the ESPRIT project improvement
effort in 2004 and 2005.

The OPMG describes how EP does projects. However, projects are also done in the Group for
Downstream and Gas & Power, and many of the larger projects in the EP portfolio are integrated EP/GP
projects. These other projects use different terminologies and have different requirements, but the systems
are broadly similar in many other ways.

It is a long-term objective that these systems become more aligned, so there is a single Shell way of doing
projects, and this update has taken the first steps along that path by adopting some of the Downstream
standards (e.g. on capital cost estimating, scheduling, project controls) as those in EP, and by introducing
generic principles such as the Line-of-Sight.

1. Consistent application of the OPMG requires a common project management system. iPMS has been developed as the standard within
Shell; it fully mirrors the OPMG and covers all phases. When deployed on a project, it provides links to all the references in the OPMG,
links to any project-specific activities and controls (standards, processes etc.) and access to project deliverables. Use of iPMS is therefore a
primary means of following the OPMG

Opportunity and Project Management Guide RESTRICTED | 9

Chapter 1 | Introduction to the Guide

1.2 PURPOSE AND APPLICABILITY

The OPMG is the governing document within EP for managing project development and delivery. It
contains the Opportunity Realisation Process (Chapter 2), which is the overall process for the development
of all opportunities, but then establishes what has to be done within the ORP to get a successful outcome.
In EP Projects, this needs the orderly evolution of surface and subsurface requirements, from tentative
information available at the time of discovery, through appraisal and development, to the start-up and
handover of a fully functioning, proven facility with supporting infrastructure.

Because the ORP covers all phases of opportunity development and all aspects (technical and non-
technical), the OPMG is relevant to all technical and non-technical staff involved in turning an
opportunity into value. It fills two roles:
− establishing the single way EP delivers projects – consistently, across EP, with a single terminology;
− providing guidance – as to how these things may be done.

The OPMG provides an overview of what is required, so it is complete in the breadth of its coverage, but
does not provide complete depth. It is a guide to managing projects, but is not a technical manual for
scope definition.

It makes extensive use of references and links to where detailed information can be found. It is therefore a
primary document against which project assurance is carried out, and the starting point for development of
courses in the Shell Project Academy and for structure in iPMS.

The guide depends for its success on being used by people working in integrated teams. To bring projects
to a successful conclusion, this update further emphasises the need for early involvement of the non-project
professional:
− the eventual Operator;
− Finance;
− Supply Chain;
− Sustainable Development;
− External Affairs; and
− other non-project disciplines.

The guide is relevant to all projects but is biased towards larger-scale projects. On smaller projects, certain
activities or deliverables may be done at a corporate level, or may be too trivial for the project in question.
It is important that these activities/deliverables are carefully considered before being dismissed, as it is often
these seemingly lesser issues that become the cause of problems.

Chapters 2 and 3 are relevant for all types of project or opportunity and at all phases; Chapters 4 and 5 are
written more towards a hydrocarbon development project than, say, an IT or civil infrastructure project,
but the principles remain valid.

The guide is also applicable to Non-Shell Operated Ventures (NOVs). The Operator will have its own
project management system and terminology, but it should contain similar elements to achieve the same
objectives as the OPMG (refer to Chapter 3 Section 3.6).

This update uses ‘shall’, ‘should’ and ‘may’ in the following context:
- ‘shall’ indicates a mandatory requirement and dispensation can only be granted by the relevant authority
(‘must’ is used similarly);
- ‘should’ indicates a recommendation;
- ‘may indicates a possible course of action and is optional.

10 | Opportunity and Project Management Guide RESTRICTED

 Structure | 1.3

1.3 STRUCTURE
The guide has a hierarchical structure with different chapters being targeted at different audiences.

Chapter 2 – Opportunity Realisation Process

This is the ORP – the governing process. It defines the phases an opportunity goes through in its
development, how it progresses from phase to phase, and how Governance should be done.

Chapter 3 – Project Strategy

This covers project strategy and is targeted at senior project leadership (i.e. Business Opportunity
Manager, Project Manager, Operations Manager etc.) with their Decision Review Boards and other senior
stakeholders. They are responsible for giving the project shape – what are we trying to do, how, and who
will do it. It covers:
− How are we going to get there?;
− risk management, including risk to reputation;
− assurance and value improvement;
− finance;
− people; and
− NOVs.

Chapter 4 – Project Controls

This covers control of traditional project management aspects, and is targeted at project practitioners:
− work planning and schedule control
− cost estimating;
− economic analysis;
− contracting and procurement;
− quality management;
− health, safety, security and enviroment;
− information management;
− change management;
− reporting, monitoring and analising,
− assurance and,
− stakeholer management and social performance.

On a big project, many of these aspects will be managed by Project Services or discipline professionals, but
all project engineers need to be aware of what is required.

Chapter 5 – Project Activities and Deliverables, per Phase

This describes work and deliverables per phase of the ORP, and again is targeted at project practitioners:
For each phase, the purpose of the activity, its deliverables, key steps and guidance are given (for a typical
hydrocarbon project), and links are made to the EPBM and technical Global Processes.

Some work activities have been picked out to be described separately: Well Delivery, Geomatics and
Logistics. Each well is a small application of the ORP and wells are drilled in every phase of the ORP, so
the Well Delivery Process is easier described on its own – and only then from the perspective of a Project
Manager for whom wells are part of their project.

As Geomatics and project logistics considerations occur across the ORP, they have also been described on
their own.

Opportunity and Project Management Guide RESTRICTED | 11

Chapter 1 | Introduction to the Guide

Chapter 6 – ORP Toolbox

This contains:
− list of abbreviations;
− glossary of terms; and
− example documents.

1.4 DOCUMENT CONTROL

The OPMG is owned by the Executive Vice President Technical, with custodianship delegated to the
C2V Team in EPT. The document will be maintained live on the Shell EP intranet site. The web-based
document will be the controlled version and revision announcements will be made on the web. Copies or
extracts that are downloaded or printed are uncontrolled and cannot be guaranteed to be the latest version.

1.5 LINKS
iPMS
[Link]

12 | Opportunity and Project Management Guide RESTRICTED

2
OPPORTUNITY REALISATION PROCESS

2.1 WHAT IS THE ORP?

2.2 ROLES AND RESPONSIBILITIES

2.3 PROJECT GOVERNANCE

2.4 MAXIMISING AND SAFEGUARDING THE VALUE OF THE

OPPORTUNITY

2.5 SUCCESS FACTORS

APPENDIX A – GUIDANCE ON DRBS

APPENDIX B – EXAMPLE PROJECT RISK CLASSIFICATION

APPENDIX C – TYPICAL ROADMAP FOR A HYDROCARBON PROJECT

APPENDIX D – GENERIC PROJECT ASSURANCE PLAN (PAP)

Chapter 2 | Opportunity Realisation Process

The ORP divides the realisation of a business opportunity into five logical
phases. See figure 2.1.1. A Decision Gate punctuates each phase, and
decisions drive all activities and deliverables. It is front-end loaded, placing
emphasis on the first three pre-execution phases to identify and maximise the
value of the opportunity. The emphasis during Execution is on value protection
and realisation.

Figure 2.1.1 ORP Phases and Decision Gates

VALUE IDENTIFICATION VALUE REALISATION
IDENTIFY & ASSESS SELECT DEFINE EXECUTE OPERATE
1 2 3 4 5

Initiate Demonstrate Select best Define the Deliver the Operate and
opportunity feasibility concept solution selected concept promise evaluate
Generate ideas. Have we looked for delivering Technically (scope, - an asset consistent Maximise return to
Verify alignment wide enough at value from the cost, schedule) or with forecast shareholders.
with business risks, different opportunity, and commercially (JVA, scope, cost & Protect Licence to
strategy, establish development make apparent JOA, country entry) schedule and Operate
potential value and options, realisations, why other choices for final investment proven
decide whether to outcomes? are not preferred. decision. Note that a performance or;
fund, staff - Is there at least For new business, ‘commercial FID’will - a deal consistent
one solution that this selected typically not coincide with the Term sheet
will work in most, commercial with a technical FID: or;
perhaps all, of the concept leads to a at the signing of a - a well or;
realisations? mandate to JOA the technical - etc. Leads to
- Do we understand negotiate project may still be in (ownership)
what we take Assess or Select acceptance by user
forward into SELECT for Operate

Performance
Front-end Loading Project Execution Optimisation

Value Assurance Review Decision Gate Pre Start - up Audit

Application of the ORP to any opportunity requires:

– Adherence to principles (Section 2.1)
– Clarity on Roles and Responsibilities (Section 2.2);
– Exercising Governance (Section 2.3); one element of which is providing
– Assurance on the value of the opportunity (Section 2.4); all of which needs
to be underpinned by critical
– Success Factors (Section 2.5)

14 | Opportunity and Project Management Guide RESTRICTED

 What is the ORP? | 2.1

2.1 WHAT IS THE ORP?

The Opportunity Realisation Process (ORP) is the over-arching framework for maturing all business
opportunities from initial idea to value realisation. The use of this framework is mandatory for all capital
projects in EP with a total gross cost over $20 million.

The ORP provides guidelines and rules for developing and executing new business opportunities.
It requires regular checks and decision points to ensure that opportunities are rigorously evaluated,
defined and executed. The process is front-end loaded, to ensure that the value of the opportunity can be
maximised and the opportunity set up for success before execution, with the emphasis during the later
phases on value protection and realisation.

2.1.1 Principles of the ORP

– The ORP has five defined phases, each punctuated by a Decision Gate, at which the Decision
Executive (DE), supported by members of the Decision Review Board (DRB) decides whether to
stop, hold, recycle or proceed, and seeks endorsement for this decision at the appropriate level, if the
decision is outside his/her personal mandate. Each phase has clear decisions, deliverables and decision
requirements (determined through Opportunity Framing and articulated in the Roadmap and Project
Assurance Plan).
– There is clear Governance for the opportunity/project. Governance is vested in the DRB, chaired by
the DE. Governance includes steer, supervision, support and assurance.
- Governance does not automatically imply Decision Authority -defined as the authority to endorse
without further referral- which always resides in organisational positions, but which can be delegated
to the DE.
- The DE is single point accountable for the quality of the decisions, and can authorise those within
his/her mandate.
– Project risks are actively and transparently managed.
– A Project Assurance Plan is developed to maximise and safeguard project value, and to ensure safe and
effective execution in line with the investment proposal.
– It is clear how the project will be funded and resourced at the start of each phase.
– Staffing needs are clearly defined, with a focus on integration of required skills and disciplines.

It is important to note that the ORP is a framework. There are a number of mandatory stages and
events, but the depth and degree of activity undertaken at each phase will depend on the nature of the
opportunity, and its size, cost and associated risks. In this way, the process – and particularly its project
assurance elements – are scaleable.

2.1.2 Non-Shell Operated Ventures

The ORP and the OPMG have been written from a 100% project-perspective, and thus are applicable
to any project that Shell E&P has a stake in; whether it is Shell-operated or not. The Shell shareholder
representatives on a Non-Shell Operated Venture (NOV) have a (shared) role in defining the strategy
and direction of the venture, as well as overseeing its successful delivery. They do this by influencing the
Operator to apply the principles and practices of the ORP, by providing specific tasks on behalf of the
Venture, and, in specific cases, by executing work at Shell’s own expense. Whilst it can be challenging to
achieve ORP/OPMG compliance from a ‘remote’ position, it is the responsibility of the Shell Team to
ensure that the intent of the ORP is applied and that all mandatory governance and assurance standards or
equivalent are in place.

Opportunity and Project Management Guide RESTRICTED | 15

Chapter 2 | Opportunity Realisation Process

2.2 ROLES AND RESPONSIBILTIES

The role of management is to help shape, guide and progress the opportunity through good project
governance, which includes rigorous planning and project assurance.

The process is driven by a Decision Executive, supported by a Decision Review Board of key managers
with the right expertise, and there is clear Line of Sight from the Board to the Project Team. This Line of
Sight means that individuals are clear about their roles and where decisions are taken. It brings ownership
and accountability to the process and ensures that work is not duplicated or decisions not taken.

Figure 2.2.1 Essential Features of the ORP

Line of Sight Dialogue, driven by decisions; focus on deliverables

Stop/hold/recycle
Board
VAR,
prior to
Decision Review Board decision
- significant stakeholders in the decision gate
CEO
with complementary skills Decision
- chaired by the DE (toll) Gate
- covering Technical, Economic, Commercial,
Organisational and Political - Societal aspects
Executive Director

Mandate, Agreed
agreed with DRB deliverables
Executive Vice President to support the
decision
Arrows indicate
structured dialogue
Decision
DRB
Executive Integrated project team works in agreed frame:
- to produce agreed deliverables;
- maximising and safeguarding project value through
agreed reviews and value improving practices
Project Team - in support of next agreed decision

There are six key roles in the Opportunity Realisation Process:

2.2.1 Governance Roles

– Executive Vice President – the EVP has overall accountability for the project to the Executive Director.
EVP’s have full mandate within their own Business (which they can delegate for a specific project) to
waive any/all mandatory events and/or deliverables except Group Audits and Estimate and Schedule
Assurance Reviews (ESARs).
– Decision Executive (DE) – single-point accountable for the opportunity/project (to the next person in
the line of sight) and is chair of the DRB. Authorises those decisions within his or her mandate and
champions others to the required authority level. Although ultimately accountable for the quality of
the emerging decisions, the DE should reflect the views and expertise of the whole DRB in his/her
proposed decisions.
– Decision Review Board (DRB) – DRB members (with complementary skills to those of the DE)
support the DE and the Project Team with content expertise and resources, as well as supporting the
emerging decisions.

16 | Opportunity and Project Management Guide RESTRICTED

 Roles and Responsibilities | 2.2

The role of the DRB is to help progress an opportunity and maximise its value, through:
– Taking an active interest in, and explicitly approving the Opportunity Roadmap and the Project
Assurance Plan , that ‘frame’ the opportunity and set out key deliverables and events
– Providing guidance and support to the Project Team through dialogue and engagement
– Evaluating the opportunity at key milestones and Decision Gates
– Reviewing the quality of the proposed decision; and
– Owning the decision when made.

The DRB does NOT have any automatic authority to make decisions. This authority resides in the Line
unless delegated (see ‘Project Governance vs. Decision Authority’, section 2.3.2). The focus of the DRB is
forward-looking, towards the key decisions to be taken and to the ‘evidence’ that will be required to make
these decisions.

2.2.2 Project Team Roles

– Business Opportunity Manager (BOM) – responsible for articulating and protecting the Business Case.
The BOM focuses on business delivery, particularly the commercial and financial elements.
For example, the BOM is responsible for the Project Initiation Note (PIN) and the proof of
commercial and financial feasibility and will write the Group Investment Proposal (GIP).
– Project/Development Manager (PM) – responsible for delivering the (technical) elements of the
opportunity and running the (technical) team.
– Operations Manager (OM) – represents the future owner of the opportunity, and is responsible for the
long-term running of the operation in order to generate value.
One individual may, at times, carry two roles, or roles on more than one project.

Figure 2.2.2 Example DRB and Project Team for typical ‘hardware’ type project

Executive VP, then Corporate Approvals Authorisation

DE supported by DRB
Governance,
Decision Executive (Opportunity Owner), with relevant Project Delivery,
Value Assurance
Operations, Commercial, Legal, Finance, etc members as appropriate

Opportunity / Responsible for articulating and

protecting the Business Case Basic Work, Quality Assurance
Project Team roles
Business
Responsible for Opportunity
Manager Responsible for the Note: In the early phases of
the technical operational EPB/GP projects, the role of future
performance of performance of the owner can be taken by ‘project
the project Project/ Future Owner facilities; owner delivery’. The Project/ Develop-
(but see note) Development (Operations during Operate ment Manager will then have a
Manager Manager) predominantly commercial role.
Wells Sub Facilities Operations
Surface

The diagram does not imply organisational hierarchy; e.g. wells or subsurface staff may report to either BOM or PM.

2.2.3 Dialogue

The ORP requires effective dialogue between the Project Team and the DRB to create an environment for
quality decision making. The term ‘dialogue’ is chosen deliberately to represent interactive discussion and
work sessions, not one-way presentations or reports. Best practice can require the Team and the DE/DRB
to meet (perhaps virtually) as often as twice each month. The meetings should be recorded to capture all
decisions and discussion.

Opportunity and Project Management Guide RESTRICTED | 17

Chapter 2 | Opportunity Realisation Process

2.3 PROJECT GOVERNANCE

Project governance, in the context of the ORP, is defined as steer, supervision, support and assurance:
– Steer: giving direction to the Opportunity/Project Team; encouraging the Team to put the right
emphasis on the right decisions, deliverables and activities.
– Supervision: the body providing the governance is close enough to the Team to actually be able to
judge the quality and robustness of the Team’s output.
– Support: the DE/DRB can provide assistance to the Team through expert knowledge and/or providing
funds and/or resources (generally having a “stake” in the progress of the opportunity).
– Assurance: the management of a range of activities that collectively inspire confidence in the
emerging decisions.

Under the ORP, governance is vested in the DRB, chaired by the DE, up to and including Final
Investment Decision (FID, usually the end of Define). After FID, the Project Delivery Assurance
Board (PDAB) replaces the DRB throughout Execution and Start-up, up to and including the Post
Investment Review.

2.3.1 Decision Review Board (DRB) and Project Delivery Assurance Board (PDAB)

The key first step is the appointment by the EVP of the DE, who will than propose DRB-members and
the BOM, PM and OM.

For each opportunity or project1 seperate DRBs shall be constituted. This should be a multi-functional
team, external to the opportunity/project team, collectively charged with Governance – steer, supervision
and support, and assurance of the quality of the (proposed) decisions. This includes evaluating the status of
an opportunity/project at key milestones in its lifecycle and assessing recommendations of the opportunity/
project team before those are passed to the Decision Authority2.

The DRB provides assurance to the Decision Authority (and other stakeholders) that the decision proposed
has sufficient quality (refer also to Section 2.4.6) and has been tested against an appropriate range of
outcomes under external uncertainties (e.g. price scenarios, subsurface outcomes). DRBs are intended to
govern the multi-disciplinary decisions. They do not need to be involved in every decision and should not
replace line responsibility.

A project/opportunity will only mature as fast as the key decisions are being made. Making quality
decisions at speed demands ongoing guidance, direction and challenge given to the project team. This
comes from the DRB and is colloquially referred to as “dialogue” (refer to Figure 2.3.1). It is critical to the
success of DRBs.

In evaluating the recommendations of the opportunity/project team, the DRB must review and understand
the remaining risks and the mitigation plans. Appendix A.2 lists some typical issues that the DRB should
consider at the various Decision Gates. Options for the DRB and other subsequent decision makers are:
– proceed to the next phase;
– continue work in the current phase;
– return to a previous phase;
– place an opportunity/project on hold; and
– change participation or terminate and divest.

1 Membership of the DRB is quite likely to be the same for a number of projects within any of the Global or Regional Businesses. This is
desirable from an efficiency and portfolio perspective.
2 The Decision Authority is taken to be the person or corporate entity mandated to endorse decisions without further referral. Mandates
are spelled out in the Manual of Authorities (MoA). Refer also to Section 2.3.2.

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 Project Governance | 2.3

The DRB is chaired by the DE, the person who owns the project/opportunity and holds single point
accountability (to the next person in the line of sight) in that phase. As we exist in a multi-functional
organisation and are faced with complex decisions with many facets, the DE is flanked by knowledgeable
individuals from outside the project team, who are either (a) going to be significantly impacted in the
long or short term or (b) have a significant expertise regarding the decision to be made. The DRB will be
made up from that small group of people who have a major stake in the outcome and/or are able to add
significant value because of their expertise3.

Figure 2.3.1 Typical EP Project: Indicative Decision Authorisation Levels

ORP phases IDENTIFY & ASSESS SELECT DEFINE EXECUTE O
FID DG4

CEO, Conf Normal line

communication

Info, frame
is omitted for
clarity

Concept Select
e.g. appraisal e.g. long
DG3
well leads
e.g. RLT
Info, frame

Info, frame

Feasibility e.g. export

DG1 DG2 route

DRB PDAB

Work Team
Milestone Decisions: ORP Decision Gates and
VARs
other major decisions identified during framing

Notes:
1 Decision levels shown are indicative: for example EP CEO may choose to be the authority for a concept selection decision.

2 Decisions, and their authorisation levels (unless clear from the MoA), have to be agreed as part of signing off framing.

3 Normal line communication should take place, next to the dialogue with DRB and authorisation/approval bodies

While the DE has single point accountability (to the next person in the line of sight), other DRB members
retain shared ownership for the quality of the decisions. For major projects the functional expertise
holder for project delivery4 shall be represented on the DRB from Select onwards. Agreement needs to be
reached on a case-by-case basis as to whether this will be via the Global Technical Partner or a Regional
representative.

Best practice is to select a few permanent members with flanking skills to those of the DE, especially in the
commercial, technical and operational expertise areas. Representatives from functions e.g. HSE, Legal, can
be invited on a needs-be basis.

3 A special role is reserved for the Finance function. Finance has a role in Business Governance, and from that role can appoint a
representative onto the DRB.
4 EPT-P for projects in EP.

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Chapter 2 | Opportunity Realisation Process

The Decision Executive, and indeed other members of the DRB, may change as the opportunity/project
progresses and different areas of experience and expertise are required. Care is needed to get agreement
on the composition of the DRB before entering each new phase (refer to Section [Link] on Transition of
Ownership). The structure and composition of the DRB must be formally endorsed for each phase.

DRBs should be kept small: best practice is 3 to 5 persons – although for integrated projects they may have
to be larger. As a minimum, they should include the line managers of the Business Opportunity Manager,
the Project/Development Manager and the Future Owner. DRB members should have the time and
knowledge to convene and participate. Typically they should not be set at Executive VP level. For routine
EP projects the OU-management team accountable for the opportunity/project appoints the DE who in
turn sets DRB membership for each phase; for very large integrated projects with GP and Downstream,
the Executive VPs must agree this. The Regional Finance Directors will decide on a case-by-case basis their
need to have representation on the DRB.

The philosophy of an integrated DRB governing an integrated opportunity/project team shall be applied to
cross-business opportunities as well.

Effective DRBs have been observed to exhibit the following characteristics:

- Active, positive leadership by DE
- All members are actively engaged and well prepared throughout the ORP
- A wide range of views and opinions are discussed, whilst key issues are kept in focus
- Knowledge and experience from across the Company is applied to decisions
- Decisions are made by the DE and do not have to be unanimous; however the DRB will support the
decisions once made
- Each member considers the work of the DRB to be critical to success
- Each member of the DRB is chosen for their expertise and value-add which means they may well come
from outside the OU- or technical organisation leadership team
- DRBs exist ‘high’ enough in the organisation to place the opportunity in a broader context, ‘low’
enough to have frequent and effective dialogue with the Team, and are small enough to be efficient and
effective

However, to avoid bureaucracy and project delays, decision authority for certain project elements can and
should be delegated to the Decision Executive. Authority is normally delegated by the Executive Vice
President and should be spelt out in a written mandate.

See Appendix A for further guidance on DRBs.

Project Delivery Assurance Board (PDAB) and the Project Execution Review Team process
(PERT, Global Process 24)
Where the DRB governs a project up to and including FID, the PDAB governs from FID onwards, up to
and including the VAR 5 (PIR). The DRB assures that the value of the decisions around project definition
(“making the promise”); the PDAB assures the realisation of this value during project execution (“delivering
the promise”). The role of the PDAB and the PERT process are extensively covered in Global Process 24.

As with DRBs, it is expected that for major projects the functional expertise holder for project delivery will
be represented on PDABs, either via the Global Technical Partner or a nominated Regional representative;
PDABs should also include representation of the Regional Production and Technical Directorates.
In the same way as integrated projects need single, integrated DRBs, they also require single, integrated
PDABs, particularly for integrated EP/GP projects.

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 Project Governance | 2.3

For projects where the costs are dominated by well activities, the DRB may decide that the remit of the
PDAB will be achieved through existing Well Delivery assurance bodies, and so choose not to constitute a
separate PDAB: care needs to be taken not to duplicate, but still to achieve the intent of the PDAB.

2.3.2 Project Governance versus Decision Authority

Membership of the DRB and the Opportunity/Project Team does not bestow any immediate authority.
These are project roles, not organisational positions, and individuals are appointed to these roles for the
value they can add to the quality of decisions, not for their authorisation levels.

Individuals in the DRB are appointed for their value-add to the assurance of the emerging decisions, not
necessarily for their authorisation levels for those decisions. The split between assurance and authority is
easily noticeable at FID, when project assurance is provided by the DRB, whilst authority will reside with
the EP/GP EVP, the CEO or the Board. For earlier decisions, assurance will also typically be provided by
levels below the authority level, i.e. the one that can endorse decisions without further referral.

Approvals of decisions (and of deviation from mandatory practices) shall happen in accordance with the
relevant MoA, Technical Authority systems and the Investment Decision Manual. DRB members should
act as sponsors for the team recommendations at the appropriate levels as per the MoA.

2.3.3 The Mandate of the Decision Executive and the Executive Vice President (EVP)

By making the DE single point accountable for the opportunity, the ORP bestows responsibility as well
as authority. The DE has complete discretion over non-mandatory practices. He/she can also propose
deviations from mandatory requirements to the relevant authority but is expected to make a compelling
case why such a deviation should be allowed. The DE is expected to consult the fellow DRB members but
can, in the interest of (the progress of ) the opportunity, act on his/her own (subject to relevant approvals as
mentioned above).

In order to avoid bureaucracy and project delays, it is best practice for relevant authorities to delegate
elements of their decision authority for the particular project to the DE. Particularly effective is when
Executive Vice Presidents delegate (elements of ) their authority on the project and spell this out in a
written mandate. As an example, the DE, if delegated, would be authorised to combine or skip (global)
VARs, as it is within the mandate of the EVP to do so.

Overall accountability always resides in the line. Establishing a clear Line of Sight at the outset ensures all
members of an opportunity or project understand who holds decision authority at each phase.

Executive Vice Presidents have full authority over all mandatory events and deliverables, with the exception
of Group/Partner audits and Estimate and Schedule Assurance Reviews (ESARs).

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Chapter 2 | Opportunity Realisation Process

2.4 MAXIMISING AND SAFEGUARDING THE VALUE OF THE

OPPORTUNITY
The value of an opportunity can be maximised by:
– minimising lifecycle costs;
– minimising realisation times;5
– maximising production rates and volumes (recovery and facilities availability);
– securing the best possible market terms; and
– securing or enlarging the Licence to Operate (LtO)6.

There is tension between these Value Drivers, and the team with their DRB should focus on the trade-offs.
There are several overlapping strategies and practices that address value protection/maximisation and all
contribute to project (value) assurance. This section discusses:
– Opportunity Framing (Section 2.4.1)
– front-end loading (Section 2.4.2), which advocates focus on protection and improvement practices
during the first three phases of a project;
– benchmarking (Section 2.4.3), which advocates comparison of key metrics and practices with other
(best-in-class) projects;
– VARs (Section 2.4.4), which provide independent counsel to the DRB prior to tollgates;
– PAP (Section 2.4.5), which plans all (mandatory and optional) events that will contribute to assurance
from a risk-based perpective; and
– the Decision Quality Tool (Section 2.4.6), which provides a framework to assess the quality of
emerging decisions.

2.4.1 Opportunity framing

Opportunity Framing helps the Project Team to plan the work and deliverables for each phase of the ORP,
by determining what needs to be done and what decisions need to be taken at the next Decision Gate.
It asks the questions:
– Where are we now?
– Where do we want to be?
– How are we going to get there?

Figure 2.4.1 Key Attributes of Opportunity Framing

1. Where are 2. Where do we

3. How are we going to get there?
we now? want to be?

Opportunity Framing is a mandatory part of the ORP and shall be undertaken at the start of the
opportunity, and then revisited at every Decision Gate or major change to the project. Framing the
opportunity will help determine membership of the project team and DRB.

The Opportunity Roadmap

One of the main deliverables from the Opportunity Framing is the Opportunity Roadmap. This is a high
level plan that brings together the principal aspects of the opportunity into a single diagram. The Roadmap
serves as part of the contract between the Project Team and the DE/DRB. By agreeing it at the start of
each phase, the DE/DRB is giving the Project Team its mandate to proceed to the next Decision Gate.

5 But not at the expense of short-cuts in the ORP without recognition, understanding and acceptance of the risks associated with this by the
decision makers (DRB).
6 Licence to Operate means the explicit and implicit agreements with Government and society that the Company must respect to enable a
sustainable business operation.

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 Maximising and Safeguarding the Value of the Opportunity | 2.4

The Roadmap establishes:

– What activities should be undertaken when, including:
- The timeline, with dates for key milestone decisions
- The Decision Gates;
- Any intermediate decision points between Decision Gates
- The Focus Items that form the essential work at each phase.
- The Deliverables required to support the decisions.
– Who will manage the opportunity, including:
- Membership of the Decision Review Board, including the Decision Executive.
- The required skills and competencies for the Project/Opportunity Team at each phase.
– How the quality of the process will be assured, including:
- Ongoing Dialogue between the DRB and Project Team
- Lessons learnt during each phase
- The Project Assurance Plan, the main elements of which must be shown on the Roadmap.

2.4.2 Front-end Loading

The best timing for maximising the value of project is during the first three ORP phases. The emphasis on
these phases is known as Front-end Loading (FEL).
Without proper attention to the quality of work in the front end of a project, the project will almost
certainly fail to meet its objectives. The influence of FEL on a project that has been built up from analysis
of many projects is shown diagrammatically in Figure 2.4.2.

Figure 2.4.2 Influence of Front-end Loading on Project Outcomes

Value Identification Value Realisation

Good Project Good Project
Definition Execution
A Good project definition and execution

B Good project definition and poor

Poor Project project execution
Execution
Value

Poor project definition and good

C project execution
Poor Project
Definition D Poor project definition and poor
project execution
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
Identify Select Define Execute Operate
and Assess

In simple terms, FEL is the practice of taking sufficient time and employing enough competent people
in the early phases of the project to assess properly the opportunity, identify its value drivers, identify
risks and uncertainties, align objectives with all major stakeholders and achieve high quality front-end
engineering deliverables (Field Development Plan, Asset Reference Plan, Contracting Strategy, Project
Execution Plan, Basis for/of Design), prior to starting execution. Too often in the past, failure to meet
objectives has been blamed on poor execution but, when analysed properly, very often the problems in the
Execute phase have arisen because of poor preparation in the first three ORP phases. This may have been
because insufficient time and/or funds were allowed, because objectives were not clear, because risks were
not properly recognised and managed or because of a failure to bring the right competences to the front-
end thinking and planning.

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Chapter 2 | Opportunity Realisation Process

It is imperative that adequate funds are available for this work prior to the FID. Dependent on the nature
of the opportunity, some 10 to 20% of total project engineering expenditure can be expected to take place
ahead of FID in order to prepare for a first-class execution outcome. However, FEL is not an invitation for
excessive studies or numbers of people. It is far more about having the appropriate competence available
at the right time and applying the appropriate tools, with the right data, in a timely and competent
fashion.

The comments above are not intended to mean that so-called “fast-track” projects cannot be pursued, but
that the ORP principles must still be observed and the extra risks associated with such projects must be
spelled out to the DRB and accepted by them in a formal way.

For non-Shell operated projects, we may be forced into decisions without the FEL we would normally
require. The likelihood of this happening should be assessed during framing sessions, and internal work
planned accordingly. In such circumstances, teams should use their influence to adhere as closely as possible to
the principles of the ORP, and articulate clearly non-compliances and attendant levels of risk to the DRB.

2.4.3 Benchmarking

There are three elements to Benchmarking. To assure adequate FEL, projects must be ‘health-checked’
during the first three phases and prior to FID7. This health-checking is not only quantitative to compare
routine project metrics against the EP-portfolio, but also to evaluate the completeness and quality of front-
end work, by assessing critical dimensions of a project. In EP, this is achieved through compliance with
Global Process 21 (Benchmarking of Project Performance) which offers a dedicated tool for each of the
first three phases: the Project Health Check (PHC).

An extra benchmarking requirement for very large projects is the ESAR, a (cost) estimating and schedule
assurance review performed by parties outside the project team. An ESAR is mandatory for projects >$500
million (total) in each of the Identify & Assess, Select and Define phases, and for projects >$200 million
(total) at least in the Define phase prior to FID. Finally, External Benchmarking is mandatory for projects
>$500 million (total) at least once, prior to FID. Commercial benchmarking consultants such as IPA may
assist in this benchmarking, as may databases from partners.

2.4.4 Value Assurance Reviews (VARs)

Before the major Decision Gates, a VAR is conducted as an independent assessment of the project.
These help give the DRB confidence that the opportunity team has done everything necessary to take
the decision – that all the significant risks, opportunities and uncertainties have been identified and
can be managed, and that work has been completed to the necessary quality so that the project is not
unnecessarily exposed. VARs are performed to assist the DRB in coming to a conclusion as to whether the
project is ready to proceed to the next stage/phase.

The VAR does not constitute the decision and does not remove the responsibility for the quality of the
decision from the DE/DRB. Nor do they remove the responsibility for normal QA/QC by the line.

7 For EP projects, Global Process 21 Benchmarking of Project Peformance; for OGP (Downstream) executed projects, PVP5 – External
Benchmarking. These also address the requirements for internal vs. external benchmarking.

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 Maximising and Safeguarding the Value of the Opportunity | 2.4

VAR Teams are external to the work team and the DRB. The formal VARs that are mandatory on any
opportunity with a total cost of US$20 million and over are mapped and described below8. VARs on
projects with a total cost of less than US$200 million will normally be performed by the Regions. VARs
on projects with a total cost greater than US$200 million or judged to be of major strategic importance or
complexity will be led by the SIEP Value Assurance Services (VAS) Team.
For most hydrocarbon opportunities, the VAR framework will apply as shown in Figure 2.4.39. VARs
will normally take place so as to allow opportunity/project teams time to address VAR recommendations
(dependent on the size of the project, perhaps 6 to 8 weeks before a decision to proceed is required).

Figure 2.4.3 The Position of VARs in the ORP

IDENTIFY & ASSESS SELECT DEFINE EXECUTE OPERATE

Basis Design, Commission

Project Feasibility Concept Project
for Construct Pre Performance Operate
Initiation Study Selection Spec
Design Commision Test

Pre
VAR 1 VAR 2 VAR 3 VAR 4 Start-up VAR 5
Audit

Decision Decision Start-up?

Gate 1 Gate 3 Select Transfer Asset
Decision Decision Hand
Case for Concept? Custody
Gate 2 Gate 4 Final over Asset
Action?
Feasible? Investment? Ownership?

FID
GIP
Project Project
Feasibility Field Development Post Investment
Initiation Execution
Report Plan Review/Close-out
Note Plan

The nature of the individual VARs is illustrated by the “kite” in Figure 2.4.4. It should be noted that the
VAR is part of Governance and its intention is not therefore to duplicate or replace any of the reviews the
project should undertake of itself to maximise and protect value.

Figure 2.4.4 The VAR Kite

VAR 1 Initiation Do we understand what we’re starting?
1
VAR 2 Feasibility Have we looked wide enough?
2

3
VAR 3 Concept Have we selected the optimal alternative?
Selection

VAR 4 PreFID
4
Is everything in place to ensure success?

VAR 5 PIR What did we learn?

8 For more detail, refer to EP2005-5305: EP Value Assurance Guide.

9 EP2005-5305 gives greater detail how the VARs are applied to Acquisition and Divestment opportunities, and Exploration.

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Chapter 2 | Opportunity Realisation Process

2.4.5 The Project Assurance Plan

The Project Assurance Plan (PAP) sets out an agreed series of activities and deliverables that are,
collectively, designed to ensure the quality of the emerging decisions at each phase of the opportunity/
project. The exact content of the PAP will depend on the nature of the opportunity.

Responsibility for the Project Assurance Plan

The PAP is the responsibility of the Project Team, with the Business Opportunity Manager (BOM)
accountable for its creation and delivery during the early phases, and the PM taking an increasing role in
Define and Execute. However, the DE/DRB is expected to take an active role in shaping the Plan and must
approve it.

Creating the Project Assurance Plan

There are three elements in a Project Assurance Plan.
1. Key deliverables – there are a number of plans, reports and other documents that are mandatory
elements of the ORP. In creating the PAP, the BOM and DRB must first address these deliverables and
determine how they are applicable to their opportunity.

2. Key assurance events – the PAP must include the mandatory assurance events under the ORP (such
as Value Assurance Reviews before each Decision Gate), as well as any events required by other
Governance frameworks that apply to the opportunity (such as EP Global Processes).

3. Discretionary assurance events – in addition to the mandatory deliverables and events, there is a
number of discretionary activities and tools, known collectively as Value Improving Practices (VIPs).
In developing the PAP, the DE/DRB and Project Team should consider which discretionary events can
contribute to the value of the opportunity, but should avoid ‘overloading’ the PAP unnecessarily.

For a generic Project Assurance Plan, see Appendix D.

Scaling the Opportunity

To manage value improvement and assurance effectively, the content of the PAP should be risk dependent.
Whilst Governance requirements cannot be avoided, the scale of those deliverables and activities should
be appropriate to the opportunity – for example, standard reports and plans could be a single page for
some projects, but run to several hundred pages for others. Similarly, the scale and number of discretionary
activities will vary according to the opportunity.

A current best practice on how to assess the risk level for a project10 is given in Appendix B. The project is
given a dimensionless score for the horizontal axis of Figure 2.4.5, taking into account Capability, Business
Environment, Project, Technology and Experience/Learning:
– Organisational capability: based on independent assessments, such as the annual Activity/Discipline
Health Checks.
– Business environment: approvals, views of key external stakeholders, local content, GEC, presence in
country, import/export regulations, receivables risk, disputes/legacy issues, work permits.
– Project/technology specific risks: technical/technological (subsurface, surface, execution, HSE),
operational/organisational, economics/commercial, political, social, reputation, security.
– Experience/learning: demonstrable uptake of lessons learned.
A next step is for businesses/Directorates to classify their projects, based on cost and risk, as shown
in Figure 2.4.5.

10 Inherent in such an approach is the existence of an active risk management system. This is a mandatory requirement within the ORP,
described for EP in Global Process 20 (for OGP (Downstream) projects, PVP 4 – Risk Management).

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 Maximising and Safeguarding the Value of the Opportunity | 2.4

Figure 2.4.5 Project Classification by Cost and Risk

Cost ($ min)
>500 Level 1 Level 1 Level 1

200 - 500 Level 2 Level 1 Level 1

50 - 200 Level 3 Level 2 Level 2

<50 Level 3 Level 3 Level 2

0 35 80 Risk Score

2.4.6 Decision Quality

An underlying principle of the ORP is the ability to take good decisions. While the outcome of a
decision taken under uncertainty is, by its nature, uncertain, DE/DRBs and opportunity/project teams
should do the utmost to ensure that the best decision is taken in the circumstances. Good decisions can
be characterised by having six attributes11 and teams and DRBs should use these when making their
deliberations. The attributes are:
- Having the right context (“frame”).
- Using meaningful and reliable data.
- Choosing from creative and do-able alternatives.
- Understanding the values and trade-offs between these alternatives.
- Using logically correct reasoning.
- Ensuring that there is commitment to action.

More details on this framework can be found in Chapter 6.

Figure 2.4.6 Attributes of a quality decision

Appropriate
Problem Frame 1
10 0
80
Commitment to Meaningful,
60 Reliable
Action 6
40 Information 2
20
0

Logically Creative
Correct Alternatives 3
Reasoning 5

Clear Values &

Trade-Offs 4

11 After Strategic Decisions Group, SDG.

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Chapter 2 | Opportunity Realisation Process

2.5 SUCCESS FACTORS

The consistent use of the ORP and its associated behaviours will deliver world-class projects. The process is
underpinned by 10 success factors that should be pursued by opportunity/project teams and their DRBs if
they are to obtain all the value that the process has to offer.

Figure 2.5.1 ORP Required Behaviours

World Class Projects

Value Focused

Project Management

Team Based

Decision Driven

Consistency

Full Lifecycle

Compliance and Buy -in

Benchmark

Customisation

Lessons Learnt
Opportunity Realisation Process

1. Value Focused
Teams should maintain focus on the opportunity key value drivers12. ORP phases 1 to 3 (Identify &
Assess/Select/Define) focus on identifying and maximising value through scope definition and execution
planning, referred to as Front-end Loading (FEL). Phases 4 and 5 (Execute/Operate) focus on maintaining
and realising value. From past experience at Shell, it is critical for teams to consider the true commerciality
of the opportunity in all its aspects. Linking the opportunity and its commercial decisions with the
“traditional” project decisions (e.g. schedule, execution strategy) much earlier than was often the case is
then crucial if the optimum value is to be realised.

2. Project Management
Project management is defined as the application of knowledge, skills, tools and techniques to project
activities in order to meet or exceed stakeholder needs and expectations for a project. Project management,
which applies structured cost, schedule and quality processes to all work activities, should be seen by all
involved as applicable to all the ORP phases, not just Phase 3 – Define and Phase 4 – Execute.

3. Integrated, Team Based

The use of correctly constituted, multi-functional opportunity/project teams is essential for arriving at
the quality of deliverable that will, firstly, allow decisions to be made to move forward with the project
and will, secondly, maximise the value of the opportunity. Involving the right competences and the right
stakeholders at the right time enhances project outcomes. A more detailed definition of what is meant by
“team based” is given in Figure 2.5.2.

4. Decision Driven.....Not Activity Driven

In general, only do the work necessary to support the next milestone decision. The use of ORP enhances
communication between opportunity/project teams and the DRB that results in improved quality of input
to the DRB (decision quality). The process is driven by decision check points.

12 Value drivers (UTC, lead-time, production rates...) and related and relevant value measures (NPV, VIR, availability...) typically become
the selection criteria for most, if not all, decisions. Work teams should agree these selection criteria up front with their DRB.

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 Success Factors | 2.5

Figure 2.5.2 Multi-functional Teams

UNACCEPTABLE FAIR ASPIRED

– Work team comprised of basically one – Work team involves most functions – All functions are actively involved
functional group in the framing of the opportunity
– Most functional groups are represented and in the development activities;
– Work is done in consultation with others in the work including geoscientists, geologists, well
then moved to the next group engineering, facilities engineering,
– Opportunity/project manager operations, marketing, R&D, projects,
– Opportunity/project manager has not and some key members have planning, etc
been assigned been assigned
– An opportunity/project manager and
– Contractors are somewhat aligned – Contractors are in good alignment key members are assigned
with each functional group they are with each functional group they are
working with working with – Contractors involved are aligned with
the team
– Stakeholder dialogue is limited and – Key Stakeholders are being engaged
reactive and issues identified – Transition plans are in place to move to
the next phase

- Stakeholders are engaged, their support

is secured, and no issues threaten
project execution.

5. Consistency and Dialogue

Consistent use of the ORP and the related tools, and the practice of dialogue between the team and DRB,
improves efficiency, fosters improved communication and defines the “Shell Way”. The behaviour of the
individuals in the DRB amongst themselves and towards the work team is one of the most important
critical success factors toward efficient and balanced maturation of opportunities. DRB members remain
accountable for their own responsibilities, which they should discharge in consultation with their fellow
Board members. As a Board, they must give directions to the work team. Most of all, they must be prepared
to support the team through regular dialogue.

6. Full Lifecycle
When making either technical or commercial decisions, always consider the full lifecycle of an opportunity
from identification through value realisation in the operating phase to end of life and disposal.

7. Compliance and Buy-in

With management understanding and commitment, more rapid deployment of the process within
companies will enable quicker and widespread improvement in project performance. This will allow
improved efficiencies through use of common language and process across the whole of Shell EP.

This also requires that expectations and accountabilities are clearly stated for those involved in realising
opportunities – at DRB and opportunity/project team levels.

8. Benchmarking Performance and Sharing Lessons Learnt

Process performance, as well as cost and schedule performance, needs to be benchmarked and the rate of
improvement measured. Sharing lessons learnt across the organisation will create synergies and improve
overall process performance.

9. Customisation
ORP is a generic process, but the plans and Roadmap (activities, milestones, specific decisions etc.) are
tailored by each team to meet the specific needs of their project/opportunity. The process should be used in
conjunction with and build on existing Company systems.

10. Lessons Learned

The ORP requires that teams show that they have learned the appropriate lessons from previous similar
situations. Research shows that those teams that are open to learning from external sources do much better
than those that think they “know it all”.

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 Chapter 2 | Opportunity Realisation Process

APPENDIX A GUIDANCE ON DRBS

A.1 Attributes of a Successful Decision Review Board

Effective DRBs have been observed to exhibit the following characteristics:

– Active, positive leadership by DE
– All members are actively engaged and well prepared throughout the ORP
– A wide range of views and opinions are discussed, whilst key issues are kept in focus
– Knowledge and experience from across the Company is applied to decisions
– Decisions are made by the DE and do not have to be unanimous; however the DRB will support the
decisions once made
– Each member considers the work of the DRB to be critical to success
– Each member of the DRB is chosen for their expertise and value-add which means they may well come
from outside the OU- or technical organisation leadership team
– DRBs exist ‘high’ enough in the organisation to place the opportunity in a broader context, ‘low’
enough to have frequent and effective dialogue with the Team, and are small enough to be efficient and
effective

A.2 Typical Focus Areas for DRBs

Leading to Feasibility (during Assess)

– Ensure that the problem/opportunity is appropriately framed:
– is it framed broadly enough to capture all values and opportunities?
– is it framed narrowly enough to be solvable in the available time?
– Ensure that the right people are involved on the decision teams (DRB, working team and expert
resources) and that appropriate funding is in place.
– Ensure that the values (measures of success) are properly described and that the values used for making
the decision are consistent with the measures used to judge the ongoing attractiveness of the asset and
aligned with the measures used to judge the contributions of the people involved in managing and
executing the decision.
– Ensure that integrated decisions have been made regarding key options, giving full consideration of
economic, environmental and social impacts, balancing short term priorities and long term needs, and
with awareness and consideration of stakeholder interests.
– Ensure that the planning (including cost and resources) for the next phase is in place.

Major questions to address are:

1) Is the Business Case compelling enough to continue?
2) Is the project frame (scope) correct?
3) Have the significant risks been identified and are they manageable?
4) Do we have the right resources devoted (people and $$)?
5) Do we have a management plan for key stakeholders?

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 Guidance on DRBs | 2.A

Leading to Concept Selection (during Select)

– Encourage the team to develop a broad range of alternatives which represent multiple different ways of
creating and extracting value from the opportunity.
– Balance the “do-ability” of an alternative and the potential value created from the opportunity.
– Encourage the team to understand the trade-offs between different alternatives rather than focusing on
which is the “best” alternative.
– Encourage full consideration of economic, environmental and social impacts, balancing of short term
priorities and long term needs, awareness and consideration of stakeholder interests.
– Look for hybrids, taking the best of several alternatives, rather than simply selecting the
“best” alternative.
– Understand the implications of selecting each alternative and ensure that the selected alternative is the
optimum based on the frame values and decision criteria.
– Ensure that planning (including cost and resources) for the next phase is in place.

Major questions to address are:

1) What are the critical uncertainties and risks and how are they managed?
2) Have the appropriate range of alternatives been considered?
3) Is technology being appropriately considered?
4) What is the selection criteria for picking an alternative?
5) Why was the recommended alternative selected?
6) What are the Project Execution Plans for Define?
7) Do we have the right resources devoted (people and $$)?
8) Why is a decision needed now?
9) If more than one option is being carried, why is this?
10)Have benchmarking and lessons learnt been applied?

Leading to FID (during Define)

– Ensure that the resources are available to implement the decision and that appropriate performance
metrics are in place to support the implementation.
– Ensure that the appropriate implementation planning has been done by the team and that the project
execution is consistent with the unit’s Business Plan.
– Understand the FEL benchmarking score and its impact on the project schedule, budget and
contingency.
– Understand how the project cost and schedule estimates compare with industry averages, and that
appropriate targets have been established.
– Review the Value Assurance Review and ensure that the project team’s responses and actions to address
the issues raised are appropriate/adequate.

Major questions to address are:

1) Is this project strategically aligned with the Business Plans?
2) Is the project ready to be funded (best practicable FEL index)?
3) What are the economics, risks and sensitivities?
4) What other risks are not included in the analysis and how are they being mitigated?
5) Have benchmarking and lessons learnt been applied?

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Chapter 2 | Opportunity Realisation Process

A.3 DRB responsibilities

The DRB collectively is responsible for:

– Explicitly approving framing output and ensuring the team is set up for success: also ensuring the
opportunity frame is appropriately revisited and revised.
– Providing guidance, direction, challenge and support to the team through dialogue and engagement at
decision points or whenever needed.
– Evaluating the status of the opportunity at key milestones and Decision Gates, and providing final
assurance that:
- opportunity/project objectives and priorities are clearly articulated and documented, and are based
on current business information and strategy;
- opportunity/project scope, budget, timing and schedule are realistic, achievable and meet
business needs;
- decision and risk analysis assumptions, i.e. Business Case is sound;
- economic, social and environmental aspects are addressed in an integrated manner, short term
priorities and long term needs are balanced, and that there is awareness and consideration of
stakeholder interests;
- appropriate execution planning and value improving practices are being applied; compliance with
the Company assurance framework (Group and other policies, standards and processes – ORP,
Group Investment Guide, OPMG, global processes, etc.);
- VARs, audits and peer reviews have been used to support key project decisions (including follow-up
and close-out);
- remaining TECOP risks and mitigation plans are understood and appropriate; and
- funds and resources are identified and available.
– Reviewing the quality of the proposed decision.
– Owning the decision when made.

Individual DRB member responsibilities

– Supporting the DE by contributing expertise within the DRB; taking (discipline) decisions within
their remit and consistent with DRB recommendations.
– Support the team with knowledge, which can include resourcing the team with appropriate expertise
from a staff pool under their control or influence
– Escalating significant differences of opinion with the DE up the (functional) line, such that they can
be resolved at Executive Vice President (EVP), Executive Director or even Executive
Committee level.

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 Guidance on DRBs | 2.A

Responsibilities of the Decision Executive, as chair of the DRB

The DE is the sponsor (owner) of the opportunity. He/she stands outside the project team and champions
the project through the various stages of the maturation process. In addition to normal responsibilities for
delivery of the value from the business opportunities in their portfolio, the DE’s responsibilities are:

– Agreeing the mandate for the DRB with relevant EVP(s). This includes articulating the Decision
Authority for each tollgate decision if not already expressly defined in the MOA13.
– Getting the right people on the DRB and agreeing this with the relevant EVP(s) taking into
consideration skills mix and time commitment against the background of the main project challenges
along the opportunity lifecycle. Specifically this includes appropriate representation of the future
owner(s) of the opportunity.
– Leadership of the DRB, ensuring its effectiveness in all aspects of its role:
- setting its agenda and action tracking;
- ensuring the opportunity/project team provide accurate, timely and clear pre-reading to the DRB;
- maintaining effective communication between all stakeholders; and
- ensuring clear steer and guidance to the team.
– Sponsoring the VARs, approving the Terms of Reference and ensuring findings have been
adequately addressed.
– Raising critical DRB issues to respective authority levels (e.g. resolving conflicting value drivers).
– Communicating DRB outcomes to the relevant EVP(s).
– Providing assurance that the Group Investment Proposal (GIP) meets corporate requirements.
– Setting the mandate for the opportunity/project team for the next phase.

13 Whilst the Decision Authority for Decision Gate 4 (FID) is usually adequately defined through the financial dimensions of the
commitment to be made on the project, Decision Authority at other Decision Gates is less well defined. As a rule of thumb, teams
are advised to seek endorsement of their decisions one level below that required for the next Decision Gate. If the FID decision needs
authorisation from the EC and Board, the Concept Select Decision should be endorsed by the Executive Director(s) and the Feasibility
Decision by the Executive Vice President(s).

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 Chapter 2 | Opportunity Realisation Process

APPENDIX B EXAMPLE PROJECT RISK CLASSIFICATION

At the beginning of each project and after each Decision Gate, risks are assessed in the following categories
– Capability, Business Environment, Project, Technology and Learning.
While a Risk and Opportunity Register will be maintained for most projects, these are often complex and
project specific, hence use is made of a standard Risk Assessment Form, as shown below:

Risk Assesment form

Risk Category Description High Medium Low Score

As agreed by T&OE and Region based on Foundation Performance

Asset
Assessments, Activity and Discipline Health Checks and results from SI- 15 10 5
Capability SFAR and HSE-MS audits.

Business If a number of the following are present score High: New entry, Venture
Not Under Operational Control, political/fiscal instability, dysfunctional
Environment Government processes (e.g. licensing, customs), history of delayed
10 5 0
payments, disadvantaged compared to competition.

Specific Subsurface risks: Data quality/quantity, HCIIP, 20 15 5

Project recovery mechanism, drilling, completion.

Surface risks: 10 5 0
Data quality and quantity, greenfield / brownfield, metocean.

Execution Risks: 10 5 0
Schedule, procurement, operations, HSE, logistics, customs.

Environmental/SD risks: 10 5 0
Sensitive habitats, archaeological sites, flaring, by -products e.g. sulphur.

Economics/Commercial: Marginality.
Maturity and/or stability of agreements, product quality/value, fiscal 10 5 0
terms, taxation.

Other:
Technology Review of potential technology types, their maturity and impact (+ ve and - ve) 10 5 0

Has learning from previous projects and VARs been incorporated in this
Learning assessment? (Yes = 0, No =5)

Risk Has this assessment been based upon a peer reviewed Risk Register?
Assessment (Yes = 0, No =10)

Total Score

Project Classification by Cost and Risk

Cost ($ min)
>500 Level 1 Level 1 Level 1

200 - 500 Level 2 Level 1 Level 1

50 - 200 Level 3 Level 2 Level 2

<50 Level 3 Level 3 Level 2

0 35 80 Risk Score

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 Typical Roadmap for a Hydrocarbon Project | 2.C

APPENDIX C TYPICAL ROADMAP FOR A HYDROCARBON PROJECT

The decision box represents key management

Many projects need additional
decisions and serves to delineate phases.
intermediate reviews in a phase.
The decision can be to proceed, exit, or recycle.

Phase 1
Identify & Assess Phase 2 Phase 3 Phase 4 Phase 5
Select Define Execute Operate
1a Basin/Trend 1b Lease/Connection 1c Exploration Plan 1d Delineation Plan

Stop, Hold, Recycle Stop, Hold, Recycle Stop, Hold, Recycle Stop, Hold, Recycle Stop, Hold, Recycle Stop, Hold, Recycle Stop, Hold, Recycle Stop, Hold, Recycle Stop, Hold, Recycle Stop, Hold, Recycle New Opportunities

Asset Asset Asset Asset Asset Asset Asset Asset Asset

Decision Makers Executive/sponsor Executive/sponsor Executive/sponsor Executive/sponsor Executive/sponsor Executive/sponsor Executive/sponsor Executive/sponsor Executive/sponsor
The decision makers consists of
individuals responsible for the
Continue Final
framing of the opportunity and Opportunity Approve Approve
Approve
Approve Commit FDP Proceed
Investment
Handover Post
Work in Bid to Preferred Investment
having the authority to approve Exploration Feasibility Accepted or Ball Out Commissioned
Basin/ PIN Decision
the work plan.
Identified Trend
Recom. Plan Report Concept Asset Review

DOCUMENTATION & SIGN-OFF

DOCUMENTATION & SIGN-OFF

DOCUMENTATION & SIGN-OFF

DOCUMENTATION & SIGN-OFF

DOCUMENTATION & SIGN-OFF

DOCUMENTATION & SIGN-OFF

DOCUMENTATION & SIGN-OFF

DOCUMENTATION & SIGN-OFF

Drill Interim Review(s) Interim Review(s)
Drill Appraisal
Appraisal Wells
Evaluate Evaluate Bid on Drill Wells Prepare Execute Operate Field and
Primary Activity Scope of Lease(s) Lease/ Exploration Identify Refine FDP
Project Approved
Start-up and
Operate Field
Identify New
The primary activities completed Opportunity of interest Concession Well Refine Selected Specification Development Opportunities
Identify Preferred Prepare Basis For
by the work team in each phase. Concept Concept Design (BFD)
Attractive Finalise Business
Concepts Proposal Package
FAVOR

POTEN RVES IDENTIFI

LEASE

POTENERVES IDE
Concept

RESE

DEVELO
Bid/Concession
Deliverables at Major Reviews Basin/Trend Exploration Project Initiation Functional Production &

FIRST
APPROPMENT PLA
Field Development Plan

RES
Selection
A

Assessment Recommendation Plan Note (PIN) Feasibility Business Facility & Wells Project Metrics
BLE AS

TIAL CO
Identifies the required deliverable(s) Report Report (FDP) Proposal

ACQU

TIAL C NTIFIED

OIL/G
that will enable the decision. Package

VED F
SUCC ELL

APPRO CT
SESSM

502F Business Case/Final PEP

IRED

PROJE
MMERC
OMM

AS
& Project Spec

IELD
W
ESSFU

VED
EN

ERCIA

ED

N
IAL
T

L
Opportunity Team Leader Opportunity Team Leader Opportunity Team Leader Opportunity Team Leader Opportunity Team Leader Opportunity Team Leader Opportunity Team Leader Project Manager Project Manager Asset Manager
Work Team
The multifunctional work team
carries out the work under the
guidance of the project manager
or team leader. Expectations
BASIN/TREND BID/CONSESSION EXPLORATION PLAN PROJECT INITIATION NOTE FEASABILITY REPORT FDP BUSINESS PROPOSAL
of the decision team are met
ASSESSMENT RECOMMENDATION
through frequent communication
– Expected Value – Preliminary Reservoir – Subsurface – Preliminary – Expected Value – Drilling Plan – Final Concept Facilities Design and Bussines Plan
& alignment of goals.
– Basin Model – Prospect Mapping – Description Interpretation Reservoir – Detailed Economics – Well Designs Definition Construction – Profit
– Exploration – Geologic Risk Description – Deterministic & – Develop/Plan (Project Specification) – Royalties
– Expected Value – Risk Assessment Drilling Program – Fluid Characteristics – Subsurface and – Geological Model Probabalistic Analisys Reservoir Targets Development – Capex
– Geological – Well Locations – Geological Model Surface Development – Reservoir Simulation – Permitting – (Final Project Drilling & – Opex
– Stategic Fit – Political – Well Design – Recovery Factors Options Model – Strategic Fit – Well Cost Estimates Execution Plan) Completion Plans – Benchmarking
– Business Planners – Environmental – Drilling Costs – Reservoir Continuity – Scenario Tree – Rig Availablity – Objectives – Taxes
– Competition – Technical – Testing/Coring – Contact Levels – Economics – Recovery Mechanism Plan for next Phase Drilling & Schedule – Scope Operating Plan – Forecast
– Parnership – Legal/Regulatory Programs – Well Deliverability – Well Types/Locations – Material Services – Schedule – Reservoir Management – Roce
– Cost – (Preliminary Project
Focus Items Plan for next phase
– Economic – Schedule Timeline
– Contracting Plan – Expected Value
– Well Flow Performance
– Completion Technology Execution Plan)
Requirements
– Rig Specifications
–
–
Cost
Approvals
–
–
Evaluate Synergies
Operation Staffing
– Manpower

Focus items provide a checklist – Expected Value – Environmental – Schedule – Objectives – Operations – Design – Develop Logistics Field Operations
of key activities, ensuring the – Economic Permits – Screening – Preferred – Cost – Completions – Procurement – (Marine/Aviation)
quality of the work is Assumptions – Expected Value Economics Plan and Costs for Development – Schedule – Logistics – Maintenance & Service Reservoir
commensurate with the next – Economic Model Next Phase Concept – Contracting – Expected Value – Construction Contracts Management Plan
milestone decision being made. – Production Forecast – Strategic Fit – Initial Development – Subsurface Strategy – Commissioning – Document
– Capital Cost – Partnership/ Options SD – Surface – Front End – Strategic Fit – Contracting Strategy Management Strategic Fit
– Operating Costs Operating HSSE & SP – Contracting Engineering – HSE – Operatorship
Agreements – Strategic Fit Stakeholder Strategy – Human Resources – Initial Concept (BFD) – Quality Plan For Next Phase – Expansion
– Contract/ – Partnership assessment – Regulator/Legal – Risk – Produces Fluid – Planning/Cost – Divestment
– Strategic Fit Negotiation Farm-in/out Approval – Improvement Characteristics Management Post-Project Review – Marketing Plan
– Partnership Details – External Environment – ALARP – SD – Capacity – Information – Partnership
Agreements – Funding Constraints Demonstration – HSSE & SP – Requirements Management HSE case Farm-In/Out
– Contract/ – Exposure – Apraisal Drilling – Stakeholder – Design Criteria – Human Resources – Internal Environment
Negotiation/ – Players in Area Program Engagement – Design Basis – Risk Management – Technology Fit
Bid Details – Portfolio Analisys – Preliminary Facilities – Improvement Plan
– Funding Constraints Plan for Next Phase – Design – SD, Reputation Reputation Management
– Exposure Plan for Next Phase – Contracting Plan – HSSE & SP
Toolbox – Players on Area – Cost Estimates – Stakeholder HSSE & SP Performance
A variety of tools are available – Portfolio Analisys Engagement
to help progression through a
particular phase. They assist the teams
to maximise value of an opportunity.
(These are examples, a full list of
applicable tools are available in – Oportunity Framing – Technology Planning – Project Execution – Lessons Learned
Chapter 6.) – Technology Planning – Project Execution Planning Planning (Final) Reporting
– Oportunity Framing – Project Execution Planning – Value Engineering – Value Engineering – Reservoir Uncertainty
– Technology Planning – Decision Risk Analysis – Constructability – Constructability
– Project Execution Planning – Value Engineering – Project Standards
– Project Risk Management – Constructability – Decision Risk Analysis – Project Risk
Assurance Reviews (VARs) – Decision Risk Analysis – Project Standards – Contracting Strategy Management
Value VARs support the – Project Execution Planning – Contracting Strategy – Project Risk Management
decision to move to the next – Cost Estimating – Project Risk Management – Reservoir Uncertainty
phase. They provide decision – Project Assurance – Reservoir Uncertainty – Cost Estimating
makers with assurance that – Cost Estimating
decisions are sound (both
technically & commercially)
and deliver maximum value from
the opportunity. (Note: The Pre – Project Initiation Review – Feasibility Review – Concept Selection and – Final Investment Decision Review – Pre Start-Up Audit – Post Investment Review
Start-up Audit is not formally a Development Plan Review
VAR but is so important that it is
included with them.)

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 APPENDIX D GENERIC PROJECT ASSURANCE PLAN (PAP)
ORP PHASE
IDENTIFY ASSESS SELECT DEFINE EXECUTE OPERATE
FUTURE OPPORTUNITIES

36
DECISION / DECISION GATE INITIATE? FEASIBILITY? CONCEPT SELECTION FID? START-UP? WILL FOLLOW THEIR
1 2 3 4 OWN ROADMAP

|
Project Initiation Note (PIN) Concept Selection Report Basis for Design Project Specification Commissioned Facilties Engineering/ Updated As-Built Data
Vendor Data
Hydrocarbon Maturation Plan Feasibility Study Field Development Plan Updated Field Development Plan Updated Field Development Plan Updated Field Development Plan
Reservoir & Well Surveillance Reservoir & Well Surveillance Plans Reservoir & Wells Surveillance Updated R & W Surveillance
Strategy Procedures Procedures & Plans
Prelim. Asset Reference Plan Asset Reference Plan Updated Asset Reference Plan Updated Asset Reference Plan
Project Execution Assessment Project Execution Strategy Project Execution Plan (PEP), incl. Updated PEP Close-out Reports
PM system
Operations Assessment Operations Philosophy Operations Strategies & Operating Plans & Procedures Updated Operating Plans &
Requirements Procedures
“Wells” projects also require OF Wells Execution Assessment Well Engineering Strategy Well Basis for Design Well Completed Wells Well Data Updated Wells Intervention Plans &
report and PIN Engineering Execution Plan Procedures
SD strategy reflected in project SD strategy: optimal concept Updated SD strategy Updated SD Strategy Operations SD Strategy
objectives demonstrated
Key Deliverables (ref. OPMG Chapter 2) Note: Contracting Assessment Prelim. Contracting Strategy Contracting Strategy, Tactics, Operations Contracting Strategy and Updatd Operations Contracts
Some of the deliverables may not be applicable, Management Plan Contracts
depending on the scale and type of the project.
Preliminary HSSE/SP assessment ALARP demonstration EHSIA, Health Risk Assessment HSE Cases, ESH Management Plan Operations HSE-MS and Case,
HSSE/SP plan
Opportunity Framing Report and Updated Framing and Roadmap Updated Framing and Roadmap Updated Framing and Roadmap
Roadmap
Integrated Project Plan (level 1) Integrated Project Plan (level 2) Integrated Project Plan (level 3) Detailed Execution Plans (level 4)

Opportunity and Project Management Guide

Cost Estimate Capex (+40% / -25%) Cost Estimate Capex (+25% / -15%) Cost Estimate Capex (+15% / -10%) Cost Estimate Capex (+10% / -5%)
Opex Estimate (%Capex) Prelim Opex Estimate (Prelim ABCM) Updated Opex Estimate (Updated Updated Opex Estimate (Updated Opex Actuals (Updated ABCM)

MANDATORY DELIVERABLES
ABCM) ABCM)
Plans and Costs for Next Phase Plans and Costs for Next Phase Group Investment Proposal RFAs Operating Budgets
Risk & Opportunity Management Updated Risk & Opportunity Updated Risk & Opportunity Updated Risk & Opportunity Updated Risk & Opportunity
Plan Management Plan Management Plan Management Plan Management Plan
Stakeholder Engagement Plan Stakeholder Engagement Plan Stakeholder Engagement Plan Stakeholder Engagement Plan Stakeholder Engagement Plan
Assurance requirements included in Project Assurance Plan (PAP) PAP PAP PAP Operating Assurance Plans
OF Roadmap
Opportunity Framing Report & Opportunity Framing Report & Opportunity Framing Report & Opportunity Framing Report & Endorse Dashboard Agree corrective Project Close-Out, PIR; VAR5 ToR and
Roadmap PIN; VAR1 ToR Roadmap Feasibility Report PAP; Roadmap FDP/Concept Sel. Report Roadmap GIP; PAP, PEP VAR3 Close- action plans VAR4 Close-out; PERT Close-out
Decision Review Board
(DRB) Project Delivery
VAR1 Close-out; VAR2 ToR PAP; VAR2 Close-out; VAR3 ToR; out; VAR4 ToR; Project Resourcing; ToR and Close-out; Operations
Deliverables which Project Resourcing Group Investment Proposal (GIP) Resourcing
require explicit Assurance Board (PDAB)
approval from DRB/ Risk & Opportunity Management Plans for the full project, incl. Contingency plans on Key Risks
PDAB/WDB
Well Delivery Plan and Technical Optional board meeting to approve Endorse the proposed well concept Endorse the detailed well design, Endorse the Well Programme Endorse Release docs & approve
Well Delivery Board (WDB)
(as applicable)
Assurance Plan feasibility and WDP 2 WDP 3 and WEEP changes to Operating Envelope;
AARs

Governance Frameworks, other than the EP

Technical Function may put further assurance
demands on the project (e.g. EPB, EPX,
Gas&Power, Downstream, SGSi, Partners,
Government, etc.)

Value Assurance / Project Execution Reviews VAR 1 (SIEP Led) VAR 2 (SIEP Led) VAR 3 (SIEP Led) VAR 4 (SIEP Led) GIP Review PERT (SIEP Led) VAR 5 (SIEP Led)
(Functional Support)
Estimate and Schedule Assurance Review (Note: ESAR (> $500 mln.) (Peer Assist ESAR (> $500 mln.) ESAR (> $200 mln.)
ESARs are carried out in the context of GP #21) mode)
Minimum Standards (Note: T&OE Minimum
Standards are mandatory and set broad policy
in 14 areas. These require auditable and owned Minimum Standards do have relevance for projects: for example the organisation in which the project is executed, shall have a Technical Authority System.

RESTRICTED
systems to be in place and tend to be directed Minimum Standards underpin each step of the Global Processes throughout all phases. Peer-Assisted Activity Healthchecks (once every two years)
at Functional/Discipline assurance, not Project
Assurance. Healthchecks
#1: Hydrocarbon Resource Volume Refer to ARPR process for Reserves Challenge (RRCS/RCAN)
Management
#7: Integrated Reservoir modelling, and Integrated Modelling Review (0), Integrated Modelling Review
GP #8: Well and Reservoir Surveillance (1), (5). (These include other Global (5). (These include other Global
Processes, e.g. GP #4 GAP and GP Processes, e.g. GP #4 GAP and GP
#5 HDP) #5 HDP) WRS Strategy Review
#9 Well Delivery Process (Ref. ABC Feasibility Review Conceptual Well Design; Technical Well Value Challenge; Programme Drill the Well on Paper; AAR Post Production Review
Guide) (Note: Assurance on well Endorsement Endorsement
programme may take place on an
annual programme).
#12: Operations Readiness and Formal assurance is covered by VARs 1-4 Pre Start Up Audit, incl. TR Post Production Review
Assurance, and GP #16: Technical Operations Final Acceptance Audit
Integrity (FAA)

MANDATORY ASSURANCE
#19 Opportunity Framing (OF) OF workshop (event)

Technical Global Processes:

#21: Benchmarking of Project Project Health Check (externally led) PHC (externally led) PHC (externally led) Benchmarking: Benchmarking every other year

compliance verification, e.g. audits)

Performance, and GP #22: (>$500 mln.: external); (>$200
Benchmarking of Operations mln.: Shell wide);

Assurance Events as called for in the

Performance
#24: Project Execution Reviews (PERT) see above
Other Global Processes (Note: Assurance events Initial HAZID Main HAZID Course HAZOP Main HAZOP
for Global Processes in Finance, HR, IT, SCM and
EA are not included in the PAP (Note: These apply
generally to the Organisation in which the project is
matured/executed).
Only specific HSSE assurance events are shown.
(Note: HSSE and SP requirements for compliance
with Group HSE Policy, Group Security Standard
and HSSE related standards are met through the
Assurance Events (Note: Covers QA on deliverables and quality of decision making, NOT

implementaion of a HSE-MS).

Healthchecks Self-Assessment Discipline Healthchecks (once a year). Self-Assessment Activity Healthchecks (every two years)

#1: Hydrocarbon Resource Volume Portfolio Review (Lifecycle

Management unconstrained)

GP #4 Geophysical Acquisition and

Covered in GP #5 HDP and #7 IRM
Processing
Concept Identification Workshop Select Plan Workshop Concept
GP #5 Hydrocarbon Development Planning Integrated Feasibility Review; VOI Select Workshop and/or Integrated
Review FDP/Concept Review
Integrated Modelling Reviews (2),
#7: Integrated Reservoir modelling Volumetrics Review Integrated Modelling Review (2), (3), (4)
(3), (4)
Operations Philosophy Review,
#12: Operations Readiness and Assurance,
Operability Review incl. OR&A, TR incl. OR & A Benchmark Opex and OR & A Plan Review incl. TR/TI TR Reviews (TRR) TRRs FAIR
MIMS and GP #16 Technical Integrity
Production data
#13 Production Forecasting PTL on P&IDs Start-up PTL

#14 Production System Optimisation Verify Forecast vs. Design Capacity

Logistics Infrastructure and Resource
#17 Logistics Management Logistics Review Logistics Review
Assessment
#19 Opportunity Framing Re-Frame Re-Frame Re-Frame
#20 Risk Management Risk Management Workshop Risk Management Workshop Risk Management Workshop Risk Management Workshop
Minimum Standards and Technical Global Processes

#23 Practices Worth Replicating Consult PWR

#25 Technology Planning BTM and/or SMART Fields Review

Subsurface Review Waterflood Assist Subsurface Review Waterflood Assist Subsurface Review Waterflood Assist Subsurface Review Waterflood Assist
Subsurface TLVC Subsurface Review
(screening) (development) (commissioning) (operations)
Wells See GP #9 (High, Medium and Low scaling in application)
Basis for Design / PS Discipline
Assists “Design-to-Capacity”; Design
Field Engineering Discipline Assists Field Engineering Discipline Assists
DISCRETIONARY VIPS / REVIEWS

Integrity sign-off by Technical

Value Creation, Improvement and Delivery

Authority (Chief Engineer)

SD Workshop and/or HSE
Workshop
Surface Contracting & Procurement Strategy Contracting & Procurement Tactics
Contracts Audit
Workshop Workshop; PMS Review
Value Engineering Value Engineering
Value Improving Practices

FEED Review PEP Review

Existing Asset Capability Review Existing Asset Technical Integrity
(brownfield projects) Review (brownfield projects)
Refer to menu of discretionary reviews in
Discipline Reviews and Peer Assists
OPMG
Pre-construction HSSE audit
HSE-MS, Security Policy and Social
Other

HSSE Review HSSE Review HSSE Review HAZARDS and Effects Register HSSE Review
Performance
Review
 Generic Project Assurance Plan (PAP) | 2.0

This generic PAP is applicable for Projects with total Capex > $ 500 million, and Capex > $ 200 million
if medium or high risk. PAPs for smaller/less risky projects should be developed on the basis of the type of
project and the risk profile. For such projects, mandatory assurance events are still required, however, their
scale will be smaller and significantly fewer discretionary items would be applicable.

The template PAP is shown on the opposite page. The three elements of a PAP are; the (mandatory) key
deliverables, the (mandatory) key assurance events, and the discretionary assurance events. A large portfolio
of discretionary value improvement practices exists, and can be found in the OPMG. They range from
discipline peer reviews to design optimisation practices (Value Engineering, Design-to-Capacity), SD/HSE-
workshops etc. The sheer size of these tables may appear daunting at first glance. However, it must be
realised that it takes several years to bring an opportunity from Identify to Operate. The Select phase alone
may take as long as two years. Use of judgment is key in determining the number of VIPs and the level,
breadth and depth of assurance activities. Conscious choices on scope and depth should be made on a risk-
based analysis. The DE/DRB is expected to take an active role in setting the appropriate level of assurance,
and must approve the PAP.

Although quite some effort has been spent in trying to make the PAP exhaustive, the template should
never be taken as substitute for thinking. Teams, and their DE/DRB’s, are expected to tailor the PAP
template both in terms of applicability on any given project, and in terms of scale of each deliverable and/
or event.

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Chapter 3 | Project Strategy

38 | Opportunity and Project Management Guide RESTRICTED

3
PROJECT STRATEGY

3.1 SCOPE AND METHOD

3.2 RISK MANAGEMENT

3.3 ASSURANCE AND VALUE IMPROVEMENT

3.4 FINANCE

3.5 PEOPLE

3.6 NON-SHELL OPERATED VENTURES

39
Chapter
Chapter 3
3 || Project
Project Strategy
Strategy

Project strategy gives the project shape. It Figure 3.0.1 Project Strategy

gives logic, structure and meaning to both the

scope of the project and to the methods that Project
will be used to complete the journey, manage Strategy

the risks and maximize the value along the

way, whilst making good use of money and Project Controls

people. In a hierarchy model, project strategy

governs the project controls and the project Project Activities and Deliverables

activities and deliverables.

All dimensions of project strategy contain mandatory elements. We recognise

five dimensions to project strategy:
− How are we going to get there? (3.1); the basic what and how in all
phases;
− Risk Management (3.2); what might go wrong and what we are going to
do about it;
− Assurance and Value Improvement (3.3); recognising the different value
drivers and protecting and improving the value we get from
the opportunity;
− Finance (3.4); having the financing, budget and approvals for the project;
and
− People (3.5); having the right people at the right time.

These are the focus areas for the senior levels involved in a project. Timely
attention to these dimensions is the principal means of achieving the desired
levels of front-end loading. Most strategic decisions should be made no later
than the end of the Select phase and the expected deliverables from the first
two phases of the Opportunity Realisation Process (ORP) indicate the nature of
the strategic thinking required.
For this reason, an integrated, multi-functional team is needed very early in the
ORP and certainly by the Select phase. Reservoir, well, field and operations
engineers all have a major contribution to make at this stage. In addition,
marketing staff, corporate affairs and others may have significant input,
dependent on the nature of the opportunity. It is an essential aspect of project
strategy to identify and obtain the necessary skills to ensure the quality of the
strategic planning deliverables.

All the above applies equally well to Non-Shell Operated Ventures (NOVs). The
difference with operated ventures is that strategy needs to be directed through
the operator. The Shell team manages by ‘remote control’. This is further
discussed in section 3.6.

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3.1 HOW ARE WE GOING TO GET THERE?

Successful projects require high-level definitions of the (technical) “what” and the “how”. The ORP takes
three perspectives to achieve this:
– the Asset Reference Plan: the Business Opportunity Manager’s long-term Business Case for the Asset;
– the Project Execution Plan: how the Project Manager intends to deliver the project; and
– the Operations Philosophy: how the Operations Manager intends the Assets to be operated.

These three should co-exist in the context of a Sustainable Development Strategy, which describes the
project’s credentials against the Group’s Sustainable Development principles.

These high-level plans can be supported by other plans with more detail. For example, the Project
Execution Plan addresses the Contracting and Procurement (C&P) strategy, but this will often be defined
in more detail in a C&P Plan. This section of the OPMG covers the three highest-level deliverables
above, but also discusses some of the other underlying plans, in particular C&P, Operational Readiness &
Assurance and Technology Planning. However, before any of these plans can be developed, the opportunity
needs to be framed and planned.

3.1.1 Framing and Planning the Opportunity

[Link] Framing
Opportunity Framing1 is a structured approach to defining and understanding an opportunity. It is the
starting point for the team’s planning of a robust decision-driven journey to achieve a declared goal. As
its name suggests, the ‘frame’ resulting from the Opportunity Framing provides the boundary for all of
the project team’s work leading to the next Decision Gate – exactly what is going to be done, (and what
is not), why, how and by whom. It provides the contract between the project team and the DRB, and the
output can be used as the basis for the Project Initiation Note (PIN).

The key attributes of Opportunity Framing are:

– Taking in several, distinctly different, perspectives of the opportunity (“Where are we now?”).
– Defining success at several future milestones of the opportunity (“Where do we want to be?”).
– Planning the decision driven road to success, facilitated by a true dialogue between the
opportunity/project team and its DRB (“How are we going to get there?”).

Figure 3.1.1 Key Attributes of Opportunity Framing

1. Where are 2. Where do we

3. How are we going to get there?
we now? want to be?

1 Refer to T&OE Global Process 19 Opportunity Framing and the Facilitator Handbook EP 2003-9107.

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Chapter 3 | Project Strategy

Any opportunity, whatever its size or scope, benefits substantially from the framing process. Framing
addresses (with the relevant Opportunity Framing modules in parentheses):
– the project context (Project Challenge, Business Context);
– the project focus (Opportunity Statement);
– the stakeholders – who they are and what their interests are (Stakeholder Analysis);
– the drivers that affect the value of the opportunity – setting priorities between conflicting drivers and
understanding trade-offs between alternatives (Value Drivers and Critical Success Factors);
– identifying issues across all of TECOP2 (Opportunities and Threats);
– defining success (Definition of Success); and
– planning the way forward by understanding the decisions in each phase and then defining what work
has to be done to produce the evidence to enable the decisions to be made (Decision
Hierarchy, Roadmap, including the Project Assurance Plan).

With this understanding of the opportunity, the composition of the opportunity/project team and the
DRB make-up can be defined.
Opportunity Framing shall be undertaken right at the outset of the opportunity and should be revisited at
every Decision Gate or major change, internal or external to the project/opportunity.

Framing of projects in Non-Shell Operated Ventures (NOVs) needs to achieve two objectives:
1) Framing the opportunity to ensure the appropriate work is done through the operator to
assure value.
2) Understanding the exposure to Shell (that may come from lack of competence of the operator or
non-aligned value drivers or priorities) so that the strategy and tactics for Shell’s involvement can be
determined, including activity plans and resource models.
Hence the framing is best approached first from a 100% project/venture ownership perspective, and then,
after this holistic framing, several modules can be repeated both from an Operator’s and from Shell’s
perspective (e.g. in combination with a SWOT analysis for each of the participating companies), in order
to fully understand any possible tension and/or leverage in the partnership and to establish the foundation
of the strategy and tactics towards that partner3.

[Link] Planning: The Roadmap

One of the major deliverables from the Opportunity Framing is the plan to achieve success – the
Opportunity Roadmap. This is the highest level plan covering the first four of the five phases4 of the ORP
lifecycle. The Roadmap brings together the principal aspects of the opportunity plan into a single diagram
that can be used by all levels in the organisation, both inside and outside the opportunity/project team.
The Roadmap serves as part of the “contract” between DRB and the opportunity/project team.

The Roadmap is developed at the very outset of the opportunity and is updated when the framing is
revisited. Figure 3.1.2 illustrates the information that is to be captured on the Roadmap, while a typical
oil-related exploration and development opportunity is shown in Chapter 2, Appendix C. The Roadmap
is a high-level document and does not replace the need for the opportunity/project team to generate more
detailed plans showing all TECOP activities, as described in Chapter 4.1.

2 Technical, Economic, Commercial, Organisational/Operational and Political-Societal.

3 This can range from hands-off, to review and challenge, seconding-in staff, execute-on-behalf, to a full shadow team undertaking
independent (and Shell 100% funded) work.
4 Phase 5 Operate, is not normally addressed in any detail although key aspects such as Operational Readiness and Assurance, flawless
start-up, first oil/gas and Post Investment Review (VAR 5, “PIR”) will always be addressed.

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Figure 3.1.2 Elements of the Roadmap

1

IDENTIFY & ASSESS SELECT DEFINE EXECUTE OPERATE

6 6

2 3 3
12 4
13 13
11 10

5 5 5 5

7
Performance
Front-end Loading Project Execution Optimisation

Value Assurance Review Decision Gate Pre Start - up Audit

The ORP and the Roadmap are not intended to be overly prescriptive and opportunity/project teams
should customise the Roadmap to suit each individual opportunity. While a customised Roadmap should
follow the logic of the ORP phases, it is essential that the team develops a Roadmap that illustrates its own
particular decision-making needs and timing, as well as the deliverables and activities needed to get to the
Decision Gates. In agreeing the Roadmap, the team and DRB are agreeing:

1. Timeline: Dates for key milestone decisions (Decision Gates and intermediate decisions) and milestone
events (permit submissions, first oil), agreed at the framing and endorsed by the DRB, should be shown.
The timeline is best added as the last item on the Roadmap, i.e. after all the decisions, deliverables and
supporting activities are clearly understood, to help avoid becoming unnecessarily time driven. The ORP
is a decision-driven process, not an activity-driven process: until Execute activities are undertaken only in
order to obtain the necessary decisions at the appropriate times. These will always include the preparation
of plans and cost estimates for the next phase. During the Execution phase itself, activities are undertaken
so as to meet the project objectives5.

2. Decision Review Board: Membership of the DRB shall be shown on the Roadmap, indicating the
Decision Executive (DE). The DE is the owner of the opportunity, external to the opportunity/project
team, and has single point accountability for the opportunity at that stage. He/she chairs the DRB. Refer to
Section 2.3.1.

3. Decision Gates: The broad nature of the Decision Gates, and common supporting documents, are:
End of Identify: do we understand what we’re starting? Strategic fit? Should we invest money, resources?
The decision is supported by the PIN.
End of Assess: have we looked wide enough, both in terms of external uncertainties as well as
(development) concepts? Is there at least one solution that is feasible in most, preferably all, outcomes?

5 It is often found that some execution activities need to be started in an earlier ORP phase than the phase that produces the deliverables
that they contribute towards (e.g. Government approvals). These should be mapped in the relevant phase in which they start and perhaps
coded in the phase colour to which the deliverable belongs.

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Chapter 3 | Project Strategy

The decision is supported by the Feasibility Report. Note that thinking tends to be divergent up to this
point, whilst the team should try and become convergent from this point onwards.
End of Select: have we selected the right concept, and are we prepared to invest in further definition of the
concept? This decision is supported by the Field Development Plan and Concept Selection Report.
End of Define: are we ready to commit to execution? This decision is supported by the Group
Investment Proposal.
End of Execute: are we ready to start up operations? This decision is supported by the pre start-up audit.

4. Intermediate Decision Points: many opportunities require important intermediate decisions between
the Decision Gates. These should be articulated and captured on the Roadmap.

5. Lessons Learnt: The Lessons Learnt should be captured at the end of each phase while people are still
around and the lessons are fresh in everyone’s mind. The Project Health Check6 is the recommended tool
to systematically collect these lessons, and some will become Practices Worth Replicating7. The major
lessons should be captured with the eventual requirements of the VAR 5 (Post Investment Review) in
mind. This will save much unnecessary work at a later stage.

6. Value Assurance Reviews: Refer to Section 2.4.4.

7. Project Assurance Plan: One of the required behaviours within the ORP is value-focus. This focus
is achieved by the application of reviews, assists and other Value Improving Practices (VIPs) at the right
time in the opportunity lifecycle. VIPs are used to both enhance and protect value, and include the
incorporation of Practices Worth Replicating and lessons learnt from other projects. These must be planned
for from the outset and captured in a plan to be agreed by the DRB, with the scheduling of at least the
main ones shown on the Roadmap.

8. Focus Items: The focus items form the essential work for the project – the activities to be undertaken,
choices to be made and issues to be addressed – so that the team can produce the deliverables to enable the
next milestone decision.

9. Opportunity/Project Team: A guiding principle for ORP application is the use of correctly
constituted, multi-functional opportunity/project teams to arrive at the quality of deliverable that
will, firstly, allow decisions to be made to move forward and will, secondly, maximise the value of the
opportunity. Engaging the right team competencies at the right time and in the right manner (via
functional matrix, or core) enhances project outcomes. It is essential to plan the required experience and
competence into the plan and illustrate the involvement of the most significant players on the Roadmap
by stage/phase – both technical and commercial. In Identify & Assess and Select, it is important to obtain
the input of those whose experience is largely in Define, Execute and Operate with regard to technical and
commercial issues but, just as essentially, with regard to implementation strategy (e.g. Contracting Strategy,
Project Execution Plan) and cost and schedule. If at all possible, the inputs in these early stages should be
from the future Project and Asset Managers.

6 The Project Health Check (PHC) is a purpose-built tool to assess the health of a project in any of the first three phases, whilst collecting
good/best practices for other projects to benefit from. The PHC is the qualitative part of the mandatory Global Process on Benchmarking
and can be obtained from the C2V Team.
7 Practices Worth Replicating is EP Global Process 23.

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Figure 3.1.3 Key deliverables in each ORP Phase (for a typical large EP Project)8
ORP PHASE

IDENTIFY ASSESS SELECT DEFINE EXECUTE OPERATE

DECISION FUTURE OPPORTUNITIES
GATE INITIATE? FEASIBILITY? CONCEPT SELECTION FID? START-UP? WILL FOLLOW THEIR
OWN ROADMAP
Project Initiation Note Concept Selection Basis for Design Commissioned Updated As-Built Data
(PIN) Report Project Specification Facilties Engineering/
Vendor Data
Hydrocarbon Feasibility Study Field Development Updated Field Updated Field Updated Field
Maturation Plan Plan Development Plan Development Plan Development Plan
Reservoir & Well Reservoir & Well Reservoir & Wells Updated R &
Key Deliverables (ref. OPMG Chapter 2) Note: Some of the deliverables may not be applicable, depending on the scale and type of the project.

Surveillance Strategy Surveillance Plans Surveillance W Surveillance

Procedures Procedures & Plans
Prelim. Asset Asset Reference Plan Updated Asset Updated Asset
Reference Plan Reference Plan Reference Plan
Project Execution Project Execution Project Execution Plan Updated PEP Close-
Assessment Strategy (PEP), incl. PM system out Reports
Operations Operations Philosophy Operations Strategies Operating Plans & Updated Operating
Assessment Prelim. OR&A Plan & Requirements Procedures Plans & Procedures
“Wells” projects also Wells Execution Well Engineering Well Basis for Design Completed Wells Updated Wells
require OF report Assessment Strategy Well Engineering Well Data Intervention Plans &
and PIN Execution Plan Procedures
MANDATORY DELIVERABLES

SD strategy reflected SD strategy: optimal Updated SD strategy Updated SD Strategy Operations SD

in project objectives concept demonstrated Strategy
Contracting Prelim. Contracting Contracting Strategy, Operations Updated Operations
Assessment Strategy Tactics, Management Contracting Strategy Contracts
Plan and Contracts
Preliminary HSSE/SP ALARP demonstration EHSIA, Health Risk HSE Cases, ESH Operations HSE-MS
assessment Assessment Management Plan and Case, HSSE/SP
plan
Opportunity Framing Updated Framing and Updated Framing and Updated Framing and
Report and Roadmap Roadmap Roadmap Roadmap
Integrated Project Plan Integrated Project Plan Integrated Project Plan Detailed Execution
(level 1) (level 2) (level 3) Plans (level 4)
Cost Estimate Capex Cost Estimate Capex Cost Estimate Capex Cost Estimate Capex
(+40% / -25%) (+25% / -15%) (+15% / -10%) (+10% / -5%)
Opex Estimate Prelim Opex Estimate Updated Opex Updated Opex Opex Actuals
(%Capex) (Prelim ABCM) Estimate (Updated Estimate (Updated (Updated ABCM)
ABCM) ABCM)
Plans and Costs for Plans and Costs for Group Investment RFAs Operating Budgets
Next Phase Next Phase Proposal
Risk & Opportunity Updated Risk Updated Risk Updated Risk Updated Risk
Management Plan & Opportunity & Opportunity & Opportunity & Opportunity
Management Plan Management Plan Management Plan Management Plan
Stakeholder Stakeholder Stakeholder Stakeholder Stakeholder
Engagement Plan Engagement Plan Engagement Plan Engagement Plan Engagement Plan

Assurance Project Assurance Plan PAP PAP PAP Operating Assurance

requirements included (PAP) Plans
in OF Roadmap

10. Deliverables: The deliverables required to support the various decisons will be captured on the
Roadmap. Typical key deliverables for a major EP hydrocarbon project are shown in Figure 3.1.3.
Opportunities in NBD, Gas & Power, Exploration and non-Shell operated opportunities will require other
deliverables, for example Negotiation Strategy, Stakeholder Engagement Plans, Reputation Plans (which
are also needed for many ‘routine’ EP projects). The need for these will be specified during Opportunity
Framing.

The level of definition of these deliverables will be governed by the risk profile of the project. The key is to
reduce residual uncertainties to the level acceptable to support the end-of-phase decisions; in particular the
decision to proceed to the next phase and associated commitments.

8 The content of these deliverables is covered in more detail in Chapters 3, 4, 5; for Downstream projects reference should be made to OGP
Governance – Project Development and Implementation OG.03.30540

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Chapter 3 | Project Strategy

The required level of maturity of key deliverables at the Final Investment Decision (FID) Decision Gate
should be clearly defined and agreed with the DE/DRB at the beginning of ‘Define’.

11. Mandate: Agreeing the output of the Opportunity Framing with the DE/DRB at the beginning of
each phase defines the “operating envelope” for the team and the activities to be performed by them. It will
spell out the givens for that phase, plus the assumptions and boundary conditions, and authorises the team
to proceed. This gives the team its mandate.

12. Opportunity Statement: The Opportunity Statement should be developed during the Opportunity
Framing exercise and clearly posted within the Roadmap as a constant reminder to the team and DRB
what the opportunity truly is. It should be clear and concise, and capture the full lifecycle of
the opportunity.

13. Dialogue: The ORP requires effective dialogue between opportunity/project team and DRB to create
an environment for quality decision making (refer to Section 2.3). The DE/DRB approves the frame,
which, amongst other things, means that they agree to the decisions that the team is going to prepare for
them, the deliverables that will underpin these decisions, and the work activities that will go into these
deliverables. However staffing, funding, timing, risk management, stakeholder management and selection
criteria etc. also require a meeting of minds between the team and the DRB.
Best practice can require the team and the DE/DRB to meet as often as twice per month with the
understanding that either the team or the DRB may need to call for unplanned meetings. The meetings
should be formally recorded. The nature of these engagements will vary, and will depend on the issues/
events at hand (where decisions or interventions are needed from the DRB), or the need for steer and/or
help (as expressed by the team). The ORP uses the word “dialogue” very consciously; the engagements
are not meant to be one-way presentations or report-outs, but interactive work sessions. They are not for
regular progress updates, nor to resolve normal line issues, nor to create additional bureaucracy. The DRB
reviews the quality of the emerging decisions. Although the DRB-members can make decisions within their
personal mandate, the headline decisions usually have to be referred up to a Decision Authority at a
higher level.

[Link] The Nested Roadmap

“Nesting” allows teams to break complicated opportunities into manageable and understandable
components. These “nested” Roadmaps should however align with the top-level overall Roadmap.
For example, an Exploration New Venture undertaking may interpret the ORP phases as:
– Identify: Screen opportunities, do studies
– Assess: Assess volumes and value
– Select: Mature: secure mandate for final negotiations
– Define: Negotiate detailed terms, execute due diligence, prepare investment decision
– Execute: Acquire acreage, sign licence agreement
But this may be followed by another application of the ORP to carry out exploration, which may in turn
lead to another cycle for the development project. However, these three cycles are just part of the overall
business opportunity as shown in Figure 3.1.4.

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Figure 3.1.4 Exploration Opportunity

Overall Opportunity “Nested”Roadmaps in exploration
and development

ID & Assess Select Define Execute Operate

Illustrative only: links need to

Screen & Exploration be established by the team.
Mature Negotiate Acquire
Assess (New Ventures)

Discovery

Exploration ID &
Select Mature Drill
Assess

Development ID &
Assess Select Mature Execute Operate
Project

Similarly an overall opportunity Roadmap for a complex integrated undertaking may be broken down into
subsidiary Roadmaps for different parallel parts of the work. Figure 3.1.5 shows an example of possible
nested Roadmaps for a brownfield growth opportunity9. In these circumstances, it is essential that the
teams working the subsidiary elements fully understand the linkages between constituent parts (e.g. so that
the impact of commercial decisions on the technical project are fully appreciated).

Figure 3.1.5 Brownfield Growth Opportunity

Overall Identify
Select Define Execute Operate Level 1
Opportunity & Assess

Commercial Seek Agree

Negotiate
Build the Operate the
Roadmap partner Rel. ships Venture Venture
MOU HOA JOA
Project FID
Level 2
Technical Identify
Select Define Execute Operate
Roadmap & Assess

Illustrative only: links need to

be established by the team.
Government Appraise Prepare Submit Obtain Nested Roadmaps require
approvals nested DRB’s!

Roadmaps are designed to be used for a single opportunity, not for portfolio management. However, the
potential impact of other opportunities on the opportunity under consideration (and vice versa) can be
illustrated by the same principle of nested Roadmaps. As a rule, the components of a complicated project
or a portfolio have to be understood by themselves before the links (required precursors, possible unlockers,
spin-offs) can be clearly mapped and understood.

9 New business opportunities often go through the ORP phases several times, at different levels of definition. There may be a strategic
partnership deal that is Identified & Assessed, (Concept-)Selected, Defined and entered into; followed by a new venture undertaking
within the new partnership; followed by a project within the new venture.

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Chapter 3 | Project Strategy

[Link] Transition of Ownership

Ownership of the opportunity will change as it progresses through the ORP. Smooth transitions require:
1) There is only one owner of the opportunity at any time. That person will lead the DRB as
the DE (refer to Section 2.3.1). Changes of ownership do not necessarily have to coincide with
a major Decision Gate; in fact, there are good arguments against such practice (refer also to
Section 5.3.2).
2) Participation within the opportunity/project team and on the DRB starts well before the
changes of ownership. While ownership transfer is “instantaneous”, participation should ramp
up and ramp down. In particular, future owners of the opportunity (exploration, development,
operations) should be engaged early and take an increasing involvement in both the opportunity
/project team and the DRB.
3) For complex integrated projects there must be a single integrated DRB for the overall
opportunity (the compostion of which may change as the opportunity progresses). Integrated
projects require integrated DRBs; nested Roadmaps require nested, overlapping DRBs.

It should be emphasised that point 2 above refers to the owner of the business opportunity. For an EP
project, this may be NBD, Exploration, or a Regional Technical or Production Directorate.
For EP projects with an integrated surface/subsurface technical team, there is usually a change in leadership
of this team as the emphasis shifts from subsurface study to delivery of wells and facilities. This can occur
during Select or Define, though best practice suggests completion of Basis for Design as the preferred point
of formal handover from a “developer” to a “deliverer”– but the formal point of transfer is less important
than smoothness of the transition. Refer to Section 5.3.2.

[Link] Integrated Value Chain Projects

Integrated opportunities/projects between EP and GP are, and will continue to be, a major growth
component for Shell. They specifically require:
– the opportunity is run as one integrated project with a clearly defined lead Business and Line of Sight
– integrated Opportunity Framing with all businesses represented as required and clear definition of the
integrated nature of the opportunity/project at the Identify & Assess stage;
– one integrated DRB (then PDAB) consisting of EP and GP stakeholders;
– one Business Opportunity Manager
– integrated VARs;
– common opportunity/project databases (i.e. one data source) and common project
management tools;
– a single risk register together with a single reputational issue register;
– compliance with both the ORP and specific guidelines of respective businesses for project
development (e.g. Project Developers Guide in GP);
– aligned and streamlined submissions to both GP and EP corporate entities (e.g. GPLT,
EPB LT, EPLT, EC).

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3.1.2 Sustainable Development

[Link] Definition
Concerns about environmental and social challenges have translated into greater stakeholder expectations
for business. In response, the Shell Group is committed to contribute to Sustainable Development, based
on a compelling Business Case that includes maintaining its licence to operate and grow.

Sustainable Development requires that project teams integrate the social, environmental and financial
aspects of all decisions and their consequences, and consider these aspects when calculating “value”.
Integrated decision-making requires:
− full consideration of economic, environmental and social impacts;
− a balance between short-term priorities and long-term needs; and
− an awareness and consideration of stakeholder interests via engagement and understanding.

Shell recognises seven principles of Sustainable Development as illustrated in Figure 3.1.6

Figure 3.1.6 Sustainable Development Principles

M A X I M U M VA L U E C R E AT I O N

Better Decision Making

Environmental
Performance Economic Performance Social Performance
Performance
Elements

SD Generate Deliver value Protect the Manage Respect and Benefit Work with
Principles profitability to customers environment resources safeguard Community stakeholders
people

Key
All Business Engineering Engineering Tech HSE, Contracting Business
Contributors disciplines Opportunity (Process, (e.g. Process Engineering and Opportunity
Manager, Seismic, Mechanical (Process, Procurement Manager,
Project Wells, Civil Reservoir Civil, Wells, (C&P), HR, Project
Manager, Pipelines), Pipelines), Pipelines), Logistics, Manager,
Finance, Logistics, Environmen- Field OHS, Engineering, HR, External
Government C&P, Env tal Advisor Security Social Affaires
Advisor HR, C&P Performance Advisor
Advisor

All projects must be able to articulate how they are honouring each of these principles.

Decision Review Boards (DRBs) and Opportunity/Project Teams should do their utmost to ensure the
quality of any decision. The principles of Sustainable Development impact most of the attributes that
result in a quality decision: context, data, alternatives, values and trade-offs, logic and commitment (refer
also to Chapter 6 Decision Quality).

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Chapter 3 | Project Strategy

[Link] Responsibilities for Implementation

The overall responsibility and accountability for project performance, including Sustainable Development,
rests with the Business Opportunity Manager, who is responsible for performance against the Business
Case. Therefore the Business Opportunity Manager must take an active role in integrating social,
environmental and broader economic aspects into the Business Case, and identifying and resourcing the
required activities.

The Project Manager and Operations Manager have major Sustainable Development roles as part of their
responsibilities for technical and operational performance. It is the responsibility of the DRB to assure
that adequate information is provided and an integrated decision is made, which is only possible with the
contributions of all disciplines.

[Link] Required Deliverables

Sustainable Development is an integral part of our business, so certain ORP deliverables have specific
objectives with respect to Sustainable Development; some other deliverables are produced purely for
Sustainable Development reasons. Table 3.1.1 specifies how the Sustainable Development objectives can be
addressed or included in deliverables.

Table 3.1.1 Sustainable Development Deliverables

DELIVERABLE ORP PHASE
Identify Assess Select Define Execute Operate

Demonstrate (in the indicated document) that

social, environmental and broader economic risks CSR PEP
and opportunities throughout the total lifecycle are PIN FR ARP ARP CSU
being managed, and how this has contributed to Op’s Ph Op’s Ph
maximising the value of the opportunity

Objectives of the opportunity reflect social,

environmental and broader economic risks and √ U
opportunities

Statement of conformance with Shell general

business principles and Group minimum standards √ U U U U

Sustainable Development strategy (to manage

issues and opportunities) √ U U

Demonstrate that the optimal development concept

has been selected, consistent with identified
social, environmental and economic risks and √
opportunities

Social, environmental and broader economic input

PEP, SCH, SCH,
to other project documentation, plans and reviews CER,
RR RP, RP, RR PIR
RR
RR RR

Stakeholder engagement, issue management and Refer to Reputation Management (Chapter [Link])
other reputation management requirements
ESHIA and associated requirements Refer to control processes – HSE (Chapter 4.6)

Social performance requirements Refer to control processes – Social Performance (Chapter 4.6)

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KEY:

√ Required Deliverable PEP Project Execution Plan

ARP Asset Reference Plan PIN Project Initiation Note

CER Country Entry Report PIR Post Implementation Review

CSR Concept Selection Report RP Resource Plan

CSU Commissioning and Start-up Plan RR Risks and Opportunities Register

FR Feasibility Report SCH Project Schedule

Op’s Ph Operations Philosphy U Updated version is required

Sustainable Development aspects shall be integrated into each relevant plan (such as in C&P, HSSE, social
performance and other plans as appropriate) and then be summarised in a brief Sustainable Development
chapter in the key project document at each ORP phase. However, the project may decide to produce a
complete Sustainable Development Plan for convenience, for example, where this would aid dialogue with
key stakeholders.

[Link] Joint Venture Opportunities

The Shell General Business Principles state that we have a responsibility to “seek mutually beneficial
relationships....in joint ventures and to promote the application of these principles in so doing. The ability
to promote the application of these principles effectively will be an important factor in the decision to
enter into or remain in such relationships”.

The responsibilities specified above also relate to Shell’s Sustainable Development principles in Joint
Venture (JV) opportunities and any conflicts must be dealt with at the appropriate level (usually the DRB).
Further information relating in particular to Health, Safety and Environment (HSE) requirements is
provided in the Group standard Management of HSE in Non-Shell Operated Joint Ventures.

3.1.3 Asset Reference Planning

[Link] Definition
The Asset Reference Plan (ARP) is the principal mandatory management tool by which assets are
effectively and efficiently managed throughout their life.

The ARP’s objectives are to:

− optimise asset planning, subsurface studies, facilities design and equipment selection;
− define the boundaries of the asset for business planning and operational management;
− integrate the various business process strategies into a single coherent business plan; and
− assess critical decision points throughout the asset lifecycle.

The ARP is therefore owned by the Business Opportunity Manager (refer to roles in the project team in
Chapter 2).

ARPs reflect the impact on cash flow and profitability of the activities, resources, policies, standards, threats
and opportunities that can affect the asset during its operational life by means of the quantification and
categorisation of the above with reference to technical integrity, deferment, servicing and support.

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The ARP documents assumptions and uncertainties, and summarises the growth and development
plans for an asset. The plan commences with the identification of an opportunity (e.g. from the point of
acquisition of a licence block) and continues throughout the asset lifecycle until decommissioning
or disposal.

During the early phases of development, the evolving ARP will reference key development documents that
contain, among other things, data relating to the Field Development Plan.

[Link] How and When to Prepare

The ARP for a new development should be produced in draft/outline during the Select phase, and in full
during the Define phase, i.e. after the Field Development Plan has been produced and the Development
Concept has been selected. The ARP will be updated, revised and added to as the ORP phases progress and
is a key element in the transfer of an asset from one management group to another.

The ARP for a new development that will be tied back to an existing asset will normally be absorbed in the
“host” asset’s ARP.

Responsibility for the initial preparation and approval of an ARP rests with the Business Opportunity
Manager for a greenfield opportunity, who is effectively operating as an Asset Manager until the project is
handed over to the future owner at steady state. The Project Manager and the whole of the project team
will contribute to the ARP.

Once an asset enters operation, the updating of the ARP becomes an essential part of the business planning
process and development of the annual review of reserves, work programme and budget.

[Link] Content
The content of a typical ARP is listed in Table 3.1.2.

Table 3.1.2 Typical ARP Content

Business Plan Subsurface Asset

Management Summary Reservoir Strategies and Surveillance

Area/Asset Summary Well Engineering and Well Integrity

Technology Plan Growth Potential

Key Activities/Short-term Challenges Future Prospects and Opportunities

Value Drivers and KPIs (Field) Development Plan/Table of Planned Studies

Business Improvement Plan Operations Strategy

Income and Expenditure Analysis Production Operations

Income Maintenance and Inspection

Expenditure Underwater

End-of-field Projections Manning

Sensitivities Logistics

Surface Asset HSSE and Social Performance

Mandate/Licence Decommissioning

Location Appendices

Description Project Screening Values

SWOT NPV

ARP Base Case Sales Contracts

ARP Base Case Events Plan Tax

Alternative Scenarios Asset Economics

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[Link] Links

Global Process 2 Asset Reference Planning

[Link]

3.1.4 Project Execution Planning

[Link] Definition
The Project Execution Plan (PEP) is the document that describes in detail how the project is to be
delivered. All projects shall have a PEP in Define. The PEP is owned by the Project Manager.

The PEP evolves from the Project Initiation Note (PIN), which in turn is based on the initial Opportunity
Framing, and which kicks the project off. The PIN is the most prominent document in Identify.
During Assess, when Feasibility is established, the PIN transforms into a Project Execution Assessment
(PEA), normally a section in the Feasibility Report. The PEA simply looks at the feasible execution
approaches for different potential development options, and understands local/global constraints
and requirements.

In Select, when strategic and conceptual choices are made, the PEA evolves into a Project Execution
Strategy (PES), usually a section in the Concept Selection Report (CSR). The PES captures strategic
choices around execution of the selected concept, which means that it also details how the Basis for Design
(BfD) and the Project Specification (PS) will be executed.
Having chosen the concept and the strategy for Define, the PES is detailed out into the Project
Execution Plan.

The PEA/PES/PEP will give support to, and ensure coherence between, the various project decisions and
will allow all parties involved in a project to work as an integrated team. In some businesses (e.g. GSP) the
Project Execution Plan in the Execute phase is called a Project Implementation Plan (PIP). In other areas,
the whole chain of PEA/PES/PEP/(PIP) are called PEP1, PEP2, PEP3, PEP4, reflecting the different levels
of detail and attention areas as the project moves through the process

The PEP serves as:

− a “reality check” to ensure that project plans and decisions are in alignment with the current
business objectives;
− a tool for communication and decision making, for defining issues and risks, and for developing
answers to the classic questions of What? Why? When? How? Where? and Who?; and
− documentation of the plans, successes and lessons learnt for a project.

[Link] Preparation
For large projects, many of the parts of the PEP are stand-alone plans, and the PEP document is simply an
overview of these plans.

During Phase 2 – Select, the PESs will place far more emphasis on the strategic elements of the plan
(objectives, contracting strategy, human resources and organisational requirements, the risks and potential
value improvement) than on the project management aspects. During this phase it is important to develop
a first definition of the work breakdown structure, as it serves as a framework for the cost estimate, project
schedule, contracting strategy and the project team’s organisational structure. Developing the PES will also
cover detailing the contracting and organisational requirements for Front-end Engineering Design (FEED).

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During Phase 3 – Define, the final PEP is prepared, where the execution plans and project controls are
further developed and the project management aspects will receive much more attention. By the end of
this phase, when a project is ready for full funding, the PEP is essential to ensure that business and project
objectives have been well defined, the scope of work is clear and agreed by all stakeholders, and that plans
are in place to manage risk, organisation, contracts, design, procurement, construction, safety, cost, quality,
schedule and flawless start-up.

The PEA/PES/PEP should be prepared by project engineering professionals, with support from a multi-
discipline team. While progressing an opportunity, the team transforms from an opportunity team,
with emphasis on petroleum and well engineering functions, to a project team, with emphasis on field,
operations and maintenance engineering. Early involvement of project management professionals in
assessing the execution environment, formulating the strategies and developing the execution plan is
absolutely key to successful project execution.

[Link] Document Structure

The PEP document can be divided into three major parts, with various sections, which reflect the OPMG
structure:
− Part 1: Project Strategy covers topics from Chapter(s 2 and) 3.
− Part 2: Project Controls covers topics from Chapter 4.
− Part 3: Project Work/Deliverables covers topics from Chapter 5.

This high-level structure is discretionary; teams are encouraged to build a framework of documentation
that suits their particular circumstances.

[Link] Content
In the following guide to PEP content, the headings and sequence are discretionary.

Summary
An outline of the project and the purpose of the PEP, sufficiently detailed to enable the reader to decide if
they require to read the rest of the PEP.

Introduction
Describes any specific key assumptions that impact on the PEP and the project:
− background and history;
− objectives and targets;
− milestones;
− team mission; and
− value drivers.

The majority of these will have been developed during the Opportunity Framing.

Project Scope
Briefly describes the background and scope of the project with extracts, diagrams, figures etc from the
Field Development Plan (FDP), PS and other relevant documents. This section provides the reader with
sufficient information to understand the PEP without excessively duplicating information. Typically, the
following project particulars, expressed in terms of quantified goals and objectives, should be included:

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− Subsurface Engineering: summary of reservoir development considerations (characteristics, plan and

modelling) from the FDP.
− Surface Facilities: summary of the selected development concept from the FDP describing the main
facilities/systems to be provided to fulfil the objectives and including relevant location maps, layout
and process flow schemes. For large projects with complex on/offshore elements, a description of the
interfaces should be included.
− Well Engineering: summary of drilling scope (well design, completion design, well services and well
services organisation) from the FDP.
− Operations: summary of operational development scope (Operations Philosophy, ARP, materials and
services contracts) from the Operations Philosophy document; typical OR&A (Operations Readiness
and Assurance) topics are described in a dedicated PEP section.

Project Execution Strategy

Describes the execution strategy for carrying out the work for the project scope. Explains the requirements
and considerations for the design, construction, commissioning, start-up and handover elements of
the project:
− Design: describes the design strategy and explains how the FEED (BfD and PS) and detailed design
will be managed to ensure its timeliness, cost effectiveness and quality. It further explains how
constructability will be built into the design and what elements of design might be placed with
construction contractors.
− Construction: describes the construction scope, objectives, strategies and planning. Explains what
elements are to be prefabricated, how transportation, installation and hook-up will take place, and how
construction will be managed to ensure that time, cost, quality and HSE objectives will be met.
− Commissioning: briefly describes the responsibilities, the Integrated Commissioning Plan, the
maintenance requirements and the completion and final acceptance criteria.
− Start-up and Handover: highlights the elements that will be covered by a handover manual.

This section is further complemented with cost, planning and organisational data in the next three
sections of the PES/PEP. This provides a concise overview of the initial requirements of the key project
management elements for setting up the project. Contracting, procurement, logistics and infrastructure
specifics are described in relevant sections.

Project Schedule
Describes the objectives and strategies of the project schedule and will include both the Opportunity
Roadmap and the Level 1 integrated project plans with major project milestones and assumptions. This
plan should be prepared in accordance with Chapter 4.1 – Work Planning. A schedule risk analysis should
also be included and, in addition to the base schedule, a description of other possible scenarios. The Level 2
schedule should be included as an appendix.

The PEP should highlight cross linkages between contracts, e.g. output from the design contractor, to suit
fabrication/procurement/installation bidding, and critical interfaces between project elements, e.g. surface
facility plans and well engineering plans or upstream and downstream plans.

Cost and Funding

This section covers the project cost estimate and how funding against this estimate will be obtained
and allocated.

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Describes the Work Breakdown Structure (WBS) and gives an overview of the project costs (Capex from
e.g. Capcost, CES and Opex from e.g. OPE$T) and includes the Level 1 cost estimate (a more detailed
Level 3 estimate may be included as a separate appendix). The estimate should be compatible with the
chosen WBS, be phased by year and include all necessary allowances and contingencies. The accuracy of
the estimate will vary with time but should follow the rules of cost estimating (Chapter 4.2). A plan to
obtain the necessary funding for the project should be included, together with a financial breakdown of the
project at Request for Approval (RFA) level, sometimes referred to as Approval for Expenditure (AFE).

The RFAs in the commitment plan should correspond to the major commitments, composed of
packages of activities, as determined by the contracting strategy. Each RFA shown may cover one or more
commitment, and each commitment in turn can represent either a single activity or several activities. The
total of the RFA amounts should be the same as the project budget proposal. The commitment plan could
be either in a tabular format or overlaid on the planned expenditure S-curve.

Some projects are financed externally – either we choose to or our partners may – and lenders’
requirements can significantly impact project execution. This is discussed in more detail in Chapter
3.4, but project execution planning at all stages (the PEA, PES and PEP) should make clear what the
consequences are and how they are being managed, if this financing route is taken.
During Select, this section of the PES will not have all the detail above; costs will be preliminary to the
level allowed by the level of scope definition.

The importance of the WBS should not be underestimated. It provides the framework for consistency
across the:
− cost estimate;
− schedule;
− contracting strategy; and
− team’s organisational structure.

Organisational Plan
Describes the organisation in line with the complexity of the project, the WBS and the proposed contract
and procurement strategy. It should make primary roles, responsibilities and accountabilities clear for the
key individuals both inside the team and external (assurance). A manpower histogram and organisation
charts across the project life should be included. As required, the charts can cover several project phases,
e.g. Select, Define, Execute and during handover. This section further describes the location of the work
and required facilities, e.g. office space, IT requirements.

Third-party Approvals
Describes all third-party technical and financial approvals and their timing needed throughout the
project duration.

Risk Management
Describes the risk and opportunity management process and gives an overview of the key project risks
and opportunities.

As part of the preparation for the PES/PEP, major risks to the successful execution of the project must
be identified and assessed in accordance with Chapter 3.2. The PEP should record the major identified
hazards and contingency measures that the project team intends to take to remove or minimise these risks.
They should be reflected in the cost estimate and/or the project schedule, and if necessary some allowance
made in the contingencies.

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The PEP should state how the project team intends to manage the risks on an ongoing basis, and how
higher authorities outside the team are going to be kept appraised of the important risks, consequences and
mitigation actions.

Sustainable Development Strategy

Describes the strategy for balanced delivery against all of the SD principles and thence project-specific SD
objectives, deliverables and management mechanisms. The following sections (Reputation Management,
HSSE and Social Performance) will provide detail of how the social and environmental aspects will be
managed, but this section gives the highest-level objectives and management activities.

Reputation Management (including Stakeholder Engagement)

Describes the adopted tools and processes for Reputation Management. Reputation Management
includes Reputation Issue Identification and Management, Media Relations, Stakeholder Engagement,
Communications, Social Investment, Brand, Shell General Business Principles Implementation and Crisis
Management. Clearly the scope of these activities will vary depending on the scope and nature of the
project/opportunity.

Health, Safety, Security, Environment and Social Performance

The HSSE and SP section of the PEP shall:
− document the project’s HSSE and SP Policy, Objectives, Strategies, and Targets;
− give an overview of the project’s HSSE and SP Management System(s) or Management Plan(s);
− document the project’s detailed HSSE and SP Activity Plan, which identifies and schedules the
deliverables to be produced at each project phase;
− briefly describe the key HSSE and SP deliverables;
− give an overview of the key HSSE and SP Issues for the project;
− describe the approach to management of contractor HSSE and SP and prevailing influence; and
− identify the project’s HSSE and SP Audit and Review schedule.

HSSE Deliverables per ORP Phase are identified in Section 4.6. The detail of the documentation should
be in keeping with the complexity and level of risk associated with the project.

Contracting and Procurement

Describes the contracting strategy, together with a description of the contracting process and the schedule
to be followed for successful award of the major contracts. Consideration of the C&P strategy in the PEP
is one of the principal mechanisms for management to assess the soundness of the proposed project before
commitments are made.

The contracting strategy is defined as the combined plan for all major contracts within a project, with
respect to the decision on commercial form, method of contractor selection and combination and
interfacing of activities. Preparation of the contracting strategy should start during Phase 2 – Select, and
best practice is to hold a contracting strategy workshop with facilitation from a C&P expert. This should
be summarised in a contracting quilt (Chapter 3.1.6) with key risks/opportunities identified in the PES.

As the project moves through Define and the PEP is drafted, the C&P section needs to highlight the
prequalification/tender/award process to be followed and a timetable for achieving the scheduled major
contract award dates.

The section further describes the procurement strategy together with a description of the procurement
process and a schedule for successfully achieving all the procurement activities on the project. This also
covers the critical procurement scope (including early procurement requirements (e.g. list of long-lead
items), the procurement plan, procurement procedures and describes the requirements for
project insurances.

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The procurement strategy should be developed jointly with the C&P department. The strategy should
reflect corporate procurement policies (i.e. global procurement, e-procurement etc.) and host government
and/or partner requirements, as well as identify what will be provided in-house and what others will
procure. A schedule should be developed to identify the key milestones for the critical material deliveries
based on vendor data and Required on Site (ROS) dates.

The procurement strategy should also consider the provision of equipment training for operations staff and
the possibility of healthcare contracts, where the maintenance of the equipment for a specified period is
included in the vendor’s scope. Vendor assistance during construction, commissioning and start-up should
be addressed including the strategy for obtaining it.

Quality
Describes how quality will be assured throughout the project lifecycle. In the PEA/PES this may simply
refer to the PEP, but as the project moves into Define it must address in more detail the:
− policy;
− objectives;
− Quality Management System;
− standards and quality assurance;
− quality control;
− technical integrity verification; and
− audits and review.

In describing these, consider the following steps:

− establish what the customer’s needs are;
− plan how to achieve them;
− assess what activities and products are critical;
− allocate responsibilities and define appropriate controls (including audit and review);
− check methods/results and correct any mistakes;
− keep records to document all the above; and
− recommend improvements.

For larger projects this is usually documented in a stand-alone Project Quality Plan, generated late in
FEED but based on thinking captured in the PEP.

Operations Readiness and Assurance

Describes how the OR&A process will be followed in all phases of the project. First considerations are
given are given to OR&A during the Assess phase, so both the PEA and PES have to describe how
operations planning will be incorporated into execution planning (refer to Chapter 3.1.5).
This covers the:
− “start-up without flaws” process;
− Integrated Commissioning Plan;
− final acceptance criteria;
− operations and maintenance;
− handover to the asset team;
− final construction and commissioning; and
− completion.

Most of the initial data would be available from the Operations Philosophy document.

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Logistics and Infrastructure

Describes the project’s location, its supply routes and distances, and the overall scope of the logistics
services. Further provides a description of the logistics business opportunities (i.e. extend the utilisation of
existing contracts, share vessels/helicopters), describes what infrastructure and support is needed in the field
and how air, road and marine transport are being utilised. Includes a short and a medium-term
Logistics Plan.

Human Resources
Describes and maps the positions for the project organisation charts as defined in the organisational
plan section. This includes identification of the required skill levels/disciplines for the key positions in
the organisation and their description, e.g. purpose, responsibilities, accountabilities and experience/
qualifications required. The position descriptions should also address the occupational health hazards of the
job. Further explains how:
− staff planning is actively managed (local and/or international);
− timing of when positions are required/filled; and
− where staff are to be resourced from (Shell and/or contractor).

Control of Change of Scope

Describes the technical change management process – what is subject to change control and how it is
enacted (refer also to Chapter 4.8).

Control of Schedule and Cost

Describes the different levels of schedule planning (Roadmap, Levels 1, 2, 3, 4 schedules), planning
responsibilities, and reporting and progress analysis methods for the various elements of the work (design,
procurement, construction, commissioning) (refer also to Chapter 4.1).

Describes the cost control mechanisms that will be put in place for Execute. This should cover
requirements for e.g. cost recovery, budget and cost control, business controls and governance, tax etc.,
and clearly link to the roles and responsibilities defined in the organisation section. It also covers the cost
reporting process and responsibilities (refer also to Chapter 4.2).

Information Management/Information Technology

Describes the strategic approach to Information Management (IM), Information Technology (IT) and
applications across all phases of the project. Defines how all project-related information (documents and
data) will be identified, controlled and delivered, and how a complete and accurate handover to Operations
will be achieved. For larger projects this may result in a stand-alone IM/IT plan covering document
management, data management, knowledge management, information security, intellectual property and
data privacy.

Describes the project interface management and communications plans with respect to joint venture
partners, corporate management, government, other major stakeholders, project team and contractors that
will be captured to support the execution processes and fulfil the information requirements for
handover. Describes:
− how opportunity/project IM relates to the operating business model of the client;
− how information requirements for the opportunity/project and Operations are to be identified
and agreed;
− how information is to be structured, with reference to Company standards and templates for
documents and data;
− how information is to be planned, specified, expedited and delivered;

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− how information is to be captured, stored, shared, retrieved and discarded;

− how the opportunity/project will communicate with its supply chain and stakeholders;
− how information is to be handed over between opportunity and project phases and finally to
Operations; and
− specific intellectual property and information security issues.

Describes the tools required to support the project interface management and communications plans, with
respect to joint venture partners, corporate management, government, other major stakeholders, project
team and contractors, including:
− telecommunications services;
− computing and software applications;
− hosting services;
− IT security; and
− plans to include distribution and control arrangements of information deliverables.

Lessons Learnt
Describes briefly, per relevant topic, which lessons learnt have been implemented from other projects. It
also describes the measures that the team will put in place to capture and share lessons per phase for use by
other projects.

Project Management Systems

Describes the business principles, the project Assurance/Governance Framework (including DRB and
PDAB), the integrated Project Management System (iPMS), planning and cost controls, change control,
the manual of authorities, the Technical Authorities Plan, reporting and interface management. In the case
of large and complex projects, describes the value defence considerations.

Project Assurance Plan

Usually a stand-alone document serving as a quality plan during Identify & Assess and Select, and kept
during Define and Execute to capture and plan the main assurance events. Covers timing for VARs,
PERTs, all other reviews (including partners), value improvement practices, multi and single discipline
reviews and assists, audits.

Other PEP Chapters

For specific large and complex projects there is a need to add project-specific topics, e.g.:
− New Venture Set-up: describes the objectives of the new venture and includes a summary of the
Venture Set-up Plan, which creates the corporate environment for the project execution to thrive.
− Export Controls: applies in particular for projects carried out in Generally Embargoed Countries
(GECs), currently e.g. Cuba, Sudan and Iran. The topic describes the specific issues/requirements
affecting the project and describes the necessary mitigation measures.
− Local Content: in agreements between Shell (/partner(s)) and local governments, a percentage target
for Local Content (LC) (the use of local companies and manpower for the project) is being applied.
Describes the LC Plan, which covers the LC strategy, assessment of local companies and estimated LC
targets for the project.

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3.1.5 Operations Philosophy and Operational Readiness & Assurance (ORA)

[Link] Definition
The Operations Philosophy is owned by the Operations Manager (refer to roles in the project team,
Chapter 2) and provides the framework to ensure facility and well design matches how the asset is to be
operated, maintained, staffed etc. It is essential that the mandatory Operations Philosophy is developed in
parallel with concept selection to ensure this alignment exists.

An Operations Philosophy consists of a series of concise statements that spell out both the operational
intent and high-level functional requirements. This is to make sure that:
− the production process will be as simple as possible;
− all facilities will be “fit for purpose”, recognise the existing infrastructure and the legal, contractual and
critical production requirements;
− all facilities will be within operational and maintenance competence of existing staff, given that they
are provided with appropriate training, except where an alternative is proved to be more cost effective
or of lower risk;
− all production plant will be simple to maintain, easy to monitor and will be self-regulating within the
design operating envelope to ensure minimum risk to personnel, and the community;
− the process will seek to reduce undesirable environmental, social and public health impact to
ALARP; and
− operational and maintenance experience is fed back to new opportunity designs.

[Link] How and When to Prepare

To provide the required guidance for project definition during FEED it is essential that the Operations
Philosophy is completed in the Select phase and contains sufficient definition of operational intent and
functional requirements across the full suite of operational activities.

In the case of a new operational activity or operating environment, an initial operations assessment should
be completed in the Identify & Assess phase to clearly define the options and key criteria to be considered
both in concept selection and in developing the Operations Philosophy.

To ensure that operational intent and functional requirements have been correctly translated and
incorporated into key project documentation (BfD, the Invitations to Tenders (ITTs) for FEED and
Execute, and purchase orders for equipment), it is essential that all key project documents are reviewed
for conformance with the Operations Philosophy and any non-conformances documented and approved.
During this work it is important that due consideration is given to the level of ‘SMART-ness’ that the
facilities and wells should achieve.

After completion of the project and a suitable period operating the new facility, the actual modus operandi
should be reviewed against the intent as defined in the Operations Philosophy and lessons learnt captured
for future projects.

It is important when developing an Operating Philosophy to pay particular attention to:

− the philosophies adopted for other projects within the venture/region;
− potential joint venture sensitivities and areas of conflict;
− ensuring that all statements are sufficiently concise and easily interpretable; and
− ensuring that the document is stand-alone without further reference.

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[Link] Content
An Operations Philosophy typically has the following structure and content:
− Part A – scene setting, including venture/project description and captures aspects, which directly
impact the philosophy
- Section 1: Introduction and Purpose of the Document
- Section 2: Scene Setting and Business Environment
- Section 3: External Factors and Local Conditions
- Section 4: Binding Decisions (management decisions already made)
- Section 5: Definition of Success and KPIs
− Part B – Philosophy statements for project input
- Section 6: HSE in Operations
- Section 7: Specific Operations Requirements
- Section 8: Operations Readiness and Assurance
- Section 9: Operations Contracting and Procurement
- Section 10: Organisational Strategy and Design
- Section 11: Operations Management Systems
- Section 12: Brownfield Acquisition Issues, Transition of Operations
- Section 13: Uncertainties and Major Risks
- Section 14: Operating Costs
− Part C – Appendices
- Actions resulting from the Operations Philosophy.
- Key supporting documents.
- References to other documents.
- List of abbreviations.

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[Link] Operational Readiness and Assurance (OR&A)

Figure 3.1.7 The OR&A Process and Deliverables

DG 1 DG 2 DG 3 DG 4 DG 5
SELECT DEFINE EXECUTE OPERATE
IDENTIFY/ASSESS
ORP PHASES Operability of Definition of Ops Archieve a Sustainable Realise
Venture Ops Aspects
Concept Requirements Operatable System Value

Ops Framework Ops Philosophy Operations Steady State

Readiness for Lessons
DELIVERABLES (Preliminary Ops (Organisation Requirements Operations
Operations Learned
Philoshopy) Strategy OR&A Plan) Achieved
Sponsor/Project Sponsor/Project Project Team, OR&A Team,
Project Team Operations
TEAM Leader Senior Leader Senior Startup Team,
OR&A Team Organisation
Operations Rep Operations Rep Operations Organisation
1 Identify OR&A Create the OR&A Detail OR&A Deploy OR&A Team in Design Team.
OR&A activities, mobilise plan, create CTR plan, update CTR Manage compliance reviews
MANAGEMENT experienced and mobilise and mobilise
resources. Review experienced experienced OR&A
and integrate resources. Review Team. Peer review
deliverables in and integrate and integrate
PIN/feasibility deliverables in deliverables
study concept selection in FEED/ITT
and in project
specifications
2 Identify Develop Define Operations Prepare for Operations –Post imple-
OPERATIONS Operations Operations requirements – Operability and maintainability mentation
framework mode(s) per – Availability reviews review
Preliminary concept model review – H/C production management/ – Validation of
Operations Operations – Update process/procedures FID
philosophy philosophy functional – Integrity and verificantion promise
– Venture aspect – Operating requirements management/process/ – Feed back
– Operations options – Develop key procedures lessons
modes – Functional O&M strategies – Award operators contract learned
Requirements requirements – Define – Deploy management systems – Operate
and boundaries Operations prior to Precommissioning and evaluate
management the asset to
system ensure perfor-
mance and
3 Create operators Update risk Update risk Update risk register, build and
maximum
RISK/HSE risk register; register, HSE-MS deploy HSE/MS
return to
register and prepare HSE/MS development
venture
integrate development
with project risk
register
4 Identify OPEX Prepare OPEX Define OPEX Update OPEX model and forecast
COSTS drivers estimates (high-level forecast (detailed ABCM)
ABCM) (detailed ABCM)

5 Develop Define Identify/mobilise integrated

ORGANISATION organisational organisational Commissioning and Startup Team.
Strategy (high level) structure in detail Recruit, mobilise and train
Operations organisator
6 Identify handover Agree handover – Run Operations readiness review
COMMIS- Requirements requirements – Prepare and execute pre startup
SIONING/ acceptance acceptance audit
STARTUP/ criteria, criteria, – Final acceptance audit after
HANDOVER commissioning commissioning steady rate
strategy imperatives

OR&A is a Global Process (Global Process 12) that prescribes the key steps to be taken in the opportunity
and project development phases in order to ensure that:
− wells and facilities, support processes and systems are designed and built taking into account the
lifecycle safety critical, production critical and integrity critical requirements;
− “right first time” commissioning and start-up leading to a cost effective and quick ramp up to planned
target production levels using “Flawless Start-up” is possible; and
− wells and facilities, support processes and systems, staff and organisation are truly ready for sustainable,
steady-state commercial operation at handover of ownership from the project team to the operations
function and perform in accordance with the Group Investment Proposal (GIP) promise.

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OR&A is an integral part of project delivery and starts in Identify & Assess. Though prime accountability
for OR&A lies with the Project Manager of the project team (refer to Chapter 2), the Operations Manager
and Business Opportunity Manager also have major responsibilities and accountabilities, through the
development of an OR&A Plan and for the provision of sufficient funds and resources to execute
the plan.

A well-executed OR&A process will not only contribute substantially to an effective and efficient project
delivery, but also to an effective implementation of operations excellence, starting at the “Flawless Start-up”
and stretching to include the abandonment of wells and facilities. The process is outlined in Figure 3.1.7.

The process focuses on ensuring that the Operations requirements are clearly defined up front and
incorporated into all the relevant project documentation including PEP, ITTs etc. This starts with the
Operations Philosophy in the Select phase, with further definition in the Define phase through the
development of detailed strategies and requirements for the full suite of operational activities.

The availability of an OR&A resource, early enough in the ORP and of sufficient seniority and experience,
is critical to successful implementation of the process and is the responsibility of the Operations Manager.
In many cases it will be the Project or Operations Manager, but may also be provided from within the
project delivery organisation (EPT-P).

OR&A assurance activities should be incorporated into the overall Project Assurance Plan to ensure that
the intent of the OR&A process is delivered. These activities are at various levels of intensity, from simple,
activity-specific peer reviews to major cross-functional reviews such as pre start-up audit, and include:
− OR&A gap analysis or Health Check based on the OR&A framework and specified in the OR&A
Plan;
− OR&A peer reviews based on the OR&A framework and specified in the OR&A Plan;
− OR&A input to Project Execution Reviews (PERTs);
− Pre Start-up Audit (PSUA); and
− final acceptance audit.

In the case of the PSUA, it is recommended to conduct an internal Operations Readiness Review of all
critical areas 3 to 6 months before the final PSUA. The PSUA can build on this earlier review and serve as
a formal verification of close-out of actions identified.

[Link] Links

Operational Readiness and Assurance: Team Area in EP-Projects

[Link]

Global Process 12 Operational Readiness and Assurance

[Link]

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3.1.6 Contracting and Procurement

[Link] The “Big Rules”

Creating the right environment in which contractors and vendors can perform successfully is key to project
delivery. The way in which we contract will determine the success of the goods and services that are 80 to
90% of project costs.

Third parties are contracted to provide materials, services and expertise that we cannot provide ourselves
and selecting the correct C&P strategy for the opportunity is one of the most important strategic
management decisions. The strategy should address the provision of:
− services (e.g. drilling, engineering, construction, logistics);
− materials; and
− equipment.

Each individual contract or purchase order within the overall C&P strategy will have its own tactics
that address:
− commercial form;
− risks;
− method of contractor selection; and
− interface management.

Capital C&P across EP is summarised in a set of “Big Rules”, which are considered to be best practice.
They should be used by all C&P professionals. The rules make use of tools and methodologies detailed in
the CP Toolkit. They are to:
− apply the strategy and tactics methodology on all projects involving contracts over $50 million;
− develop contract risk assessments involving the contractor community;
− use the model terms and conditions where available, deviating only in accordance with the guidelines;
− rigorously pursue contractor qualifications – define and strictly adhere to mandatory requirements;
− use and contribute to the market intelligence capability;
− ensure C&P staff have a functional line to the C&P team in EPT-P;
− use Global Framework Agreements, where available, to the degree that local conditions allow; and
− develop post-award contract management plans.

To ensure that C&P considerations are properly addressed early in significant projects:
− C&P discipline resources should be engaged from VAR 2 onwards, for example at the re-framing of
the project at the start of Select;
− the strategy and tactics should be addressed at the earliest possible time in the project lifecycle,
generally in ORP Phase 2 – Select, and then updated with time as more information becomes
available; and
− for significant projects (value >$200 million), the strategy and tactics should be developed with the
C&P resources supporting the project.

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[Link] Market Intelligence

The availability of external and internal information on contractors and the markets in which they operate
(market intelligence) is key to the selection and delivery of optimum contracting strategies. The market
intelligence effort in support of major EP projects is co-ordinated by the C&P team in EPT-P.

This team’s objectives are to:

− identify issues that impact on contracts, or potential contractors – particularly at a global scale – so
that contracting strategies can be better framed and managed;
− know at least as much, and preferably more, than the contractor about the details of its global business
with Shell;
− package information that increases the potential for maximising Shell’s global leverage when awarding
and managing contracts;
− develop relationships and networks across Shell that help transfer knowledge and best practice faster.

This team should be contacted when making decisions involving international contractors, and feedback
should be provided on contractor performance so that this can be used in future decision making across
the Shell Group.

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[Link] The Contract Management Standard

The Minimum Standard for C&P offers a set of roles and responsibilities for steps in the process, which
are charted in Figure 3.1.8 (SCM = Supply Chain Manager).

Figure 3.1.8 Minimum Standard Template

Contract Contract
Approve Execute/Lead Contribute/Support SCM
Owner Holder
Define contract/project objectives
Understand the need, scope, business drivers and boundary conditions
Formal appointment of key personnel (contract holder/contract engineer)
Develop an overall Scope Delivery Plan
Analyse and engage stakeholders
Understand spend, cost drivers and total cost of ownership
Strategy and Tactics

Assess market capacity and capabilities to deliver scope

Assess contracting risks and response; compile and maintain risk register (including HSE)
Analyse business requirements and develop contracting alternatives
Select project/campaign strategy (multiple categories); compile strategy report
Select strategy and compile strategy report for category, including global strategies
Obtain strategy endorsement
Update overall Scope Delivery Plan
Develop preliminary contract scope and define boundaries
Select contract form, reward mechanism and KPIs (align with GCM where applicable)
Establish criteria for identifying potential tenderers
Determine the acquisition/market approach
Identify the company management resource requirements
Allocate the risks (including HSE) between company and contractor
Compile tactics report
Set criteria to assess capability of tenderers (e.g. approved listings, prequalificiation etc)
Apply criteria to determine final tenderer’s ability to manage contract risk (including HSE)
Validate tenderer’s capabilities
Select final tenderers
Obtain tactics and bid list endorsement(and/or negotiation mandate with criteria)
Sourcing and Award

Prepare tender docs, utilising model T&Cs, in accordance with approved contract tactics
Ensure pricing mechanism supports detailed scope of work
Develop tender evaluation model (technical)
Develop tender evaluation model (commercial)
Issue tender document and manage/control tender process
Negotiate contract (if approved for negotiation)
Evaluate tender (technical)
Evaluate tender (commercial)
Assess tenderer’s qualification and update risk register as appropriate
Integrate agreed changes into text of contract documents
Select contractor and obtain award endorsement
Ensure legal execution/award of contract with key risks resolved prior to commencement

Confirm/appoint ALL company key personnel

Conduct a kick-off workshop including contractor’s HSE management requirements
Manage and control contract change
Measure and improve contract performance
Establish and gain approval of the Contract Management
Plan Implement and maintain the Contract Management Plan P
Delivery

lan, report and expedite deliverables

Maintain financial control and processes (incl RtP) to enable timely payment to contractor
Identify and initiate contract change
Review performance and report
Confirm all deliverables gained from the contract
Prepare and agree final account
Release securities
Appraise contractor performance and feedback
Appraise strategy, contract and performance for future learning

As well as reinforcing the need to perform the basic steps in the contract process using tried and tested
tools, methodologies and global best practice, these standards set minimum competence requirements for
contract owners, holders and C&P practitioners. The standards are available in the CP Toolkit and
represent a control framework that should be integral to the overall project management control framework.

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[Link] Strategy and Tactic Selection

In developing contracting strategy and tactics, divide the project’s scope into optimal sizes with appropriate
payment mechanisms, so that the market can deliver what we need. In doing this, explicit consideration of
risks (who will manage and who will bear) is key.

The range of contracting options in a project is wide and the options chosen for a particular opportunity
will depend on the size and nature of the opportunity, the location, available (Company) manpower
and expertise, etc. Project contracts can span the full range of options, from the utilisation of regular
call-off contracts to unique, one-off, specifically designed agreements. These specific contracts can range
from covering a specialised project element (an electronic as-built survey of a facility) to a total lifecycle
service (procure and operate an FPSO). There are no restrictions on the form of contract other than those
imposed by ethical, political and legislative considerations. Use a contract strategy that meets the project’s
objectives, is robust and adds more value than any alternative strategy over the lifecycle.

Operators can have a tendency to transfer risks to contractors that the contractors cannot manage (nor
be expected to manage), and the contractors sometimes accept these without fully realising the dangers.
When thinking about strategies and tactics, fair and balanced distribution of risk should be central to the
approach. Ensure that the party to whom the risk is allocated is the best one to carry it.

Development of the project’s contracting strategy, including explicit contract risk management for
significant projects, should start during ORP Phase 2 – Select. The strategy and tactics work should be
completed and approved as required by the project schedule, but no later than Final Investment Decision
(FID) (except for Operating phase contracts, the strategies for which are sometimes developed during ORP
Phase 4 – Execute).

Contracting Strategy
The contracting strategy development process identifies the workscopes to be executed in house and
those that are better out sourced. All key stakeholders contribute to the process, ensuring robustness
and ownership of the strategy, but C&P involvement is essential to ensure that global learning and best
practices are brought to bear. Market forces, driven by global demand and supply fluctuation, dynamic
stakeholder viewpoints and the “frontier” nature (technology, size, location) of many of our projects, mean
that we have to carefully plan and evaluate strategies on a lifecycle basis. Best practice is that this is done by
a multi-disciplinary team in a workshop, with professional C&P staff. A robust strategy requires a detailed
understanding of:
− what the markets can do for us;
− the degree of competition;
− the political and regulatory environment; and
− local content requirements.

The starting point for developing a project contract strategy is the overall work breakdown structure,
showing key activities plotted against key scopes of work. Using this matrix, we can plot the individual
scope elements and how the work will be packaged to go out to the markets. The process involves:
− identifying and ranking value drivers;
− assessing stakeholders’ needs;
− identifying and analysing risks;
− assessing “criticality” of the scope;
− analysing strengths, weaknesses, opportunities and threats of various strategic options; and
− developing a Contracting Quilt.

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The Contracting Quilt is a useful tool to promote discussion and resolution of the overall contracting
approach for the project. A simple example of a Contracting Quilt, showing the packages of work that
are to be separately contracted, is shown in Figure 3.1.9. (The associated pricing mechanisms that are also
shown are normally developed as part of the tactics.)

Figure 3.1.9 Example of Contracting Quilt for Offshore Field Development

Function

Design

Procure

Fabricate

Transport

Install

Inspect

Hook-up

Commission
Hardware/Function
Matrix - Offshore Field
Development

Lump
Jacket Schedule of sum
Rates

Schedule of rates
Lump Lump
Module Support Frame
Hardware

sum sum

SoR/ Lump
Topsides Reimbursable sum

Day rates
BOAQ
Lump Lump Lump Day
Pipelines sum sum sum rates

Note that the work breakdown structure used for contract strategy development should be the same as the
one used for planning and as the basis for the cost estimate and control.

Development of local capabilities and meeting local content requirements is becoming an increasingly
important driver in forming the contracting strategy and subsequent tactics. It is essential that these aspects
are properly understood in a contracting strategy workshop.

Contract Tactics
Contract tactics are developed for individual contracts but within the context of the entire strategy quilt.
Tactics work identifies the type of contract that will be let, how risk will be apportioned and managed,
what the payment mechanism will be, how contracts will be managed and develops a plan for tendering
and award. The process involves:
− detailed review of the contract scope;
− contractor engagement to test the viability of the envisaged contract;
− detailed risk assessment (refer to Figure 3.1.10);
− assessment of the reward structure; and
− determination of the management and basic control requirements.

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Figure 3.1.10 Risk Assessment

Dimension Who How Managed

Impact

Likelihood

Overall

Shell

Contractor

Contract Form

Reward Structure

Contractor Qualification

Market Approach

Management
Risks
Opportunities
Objectives

Major projects, with their large commitments, have considerable scope for innovative contracting and such
strategies and tactics need to be carefully reviewed and agreed with management to ensure that they do not
conflict with other Company interests. The manner in which the contracting objectives are to be achieved
will depend very much on local circumstances.

The contracting strategy should seek a balance between the conflicting desire for a minimum number
of contracts (and hence fewer interfaces to manage) with the contractor’s competence for performing
the activities. The contract plan in the PEP, summarising strategy and tactics, is one of the principal
mechanisms for management to judge the soundness of the proposed project before any commitments
are made.

Contracting Models used in EP

There are three fundamental contracting-out models, each having a different management demand for the
Company. They can be used in combination on large projects.

There is no demonstrable value advantage associated with any model as each has its drawbacks. The key is
to understand:
– what needs to be done;
– who is capable of doing what;
– what the risks are and how they can be managed (mitigation and recovery);
– how the contractor can be motivated; and
– the value offered by the chosen option for your project’s situation.

Activity-related Contracts
The workscope is contracted out as a number of activity-related contracts (e.g. detailed design, installation
etc.) and the Company assumes the responsibility for interfaces. This approach requires the largest amount
of Company management effort but use can be made of a managing contractor under the direction of a
smaller Company team and key staff can be provided by manpower agencies.

This approach tends to put activities in sequence (i.e. fewer parallel efforts) and thus tends to have a longer
overall delivery time. Often it is considered safer as scope definition is more reliable and contractors are
asked to perform only within their field of core expertise. Client risk relates to interfaces, contractor risk
relates to performance. The client needs a sizeable team with a comprehensive engineering capability; 100
to 200 staff will be required for larger, complex projects.

Bundled Activity Contracts (e.g. Engineer, Procure, Construct and Install (EPCI))
Here, a large contractor is engaged to execute all or a sizeable part of the project’s scope. An EPCI
contract may include several phases, each with its own pricing mechanisms. A key feature of the EPCI is
that the contractor is responsible for interface management and delivery of a system, and the client then

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integrates the systems to complete the facility. The contractor now has responsibility for system interface
management with the client assuming the system’s integration risk. In a lump sum world, the contractor
also has significant financial risk and adversarial behaviour can result when things go badly. The client team
typically needs 20 to 50 staff to monitor contractor performance.

In an EPCI environment, the contractor is given a defined starting point and has to achieve a defined
result. Since the contractor has complete responsibility for both managing and executing the work
(involving design responsibility), the Company, as client, may have little need to be involved directly in
the management of the work. However, this largely depends upon the type of work and the method of
payment chosen, as well as on experience and the competence of the contractor.

This type of contract is often awarded on a lump sum basis and this model is seen by some as the ideal
contracting form. This is not always the case, and recent external benchmarking showed mixed contracts
(engineering and procurement on a reimbursable basis with construction and installation on predominantly
fixed prices) to be the most cost effective. The same baseline performance assessment of Shell projects, by
Independent Projects Analysis (IPA), also showed that simple contracts with modest incentives (or none)
yielded better results than highly incentivised, complicated contracts.

In any EPCI approach, and especially the lump sum, there should be sufficient contractors capable of
carrying out the scope if we are to obtain genuinely competitive bids.

The attraction of a turnkey approach is that it reduces the number of Company staff required for the
project to an absolute minimum, but the workscope and specification should be defined in minute detail.
This is often difficult to do. In this environment, the contractor bears a major financial responsibility, and
often a substantial financial risk. When faced with this situation, it is important to make sure that the
contractor can best manage and bear the risk. It should be emphasised that changes made after a turnkey
contract has been let will almost always involve significant additional costs and may promote some poor
behaviour from both client and contractor. Note that EPCI and lump sum are not synonymous, and that a
turnkey contract is not necessarily a lump sum contract.

Alliance Structure
Contractors and clients become partners and the contract is designed to align objectives and value drivers.
These are contracts in which contractors and client share the risks and rewards, therefore this is a shared
risk model with the client picking up the consequences of performance outliers. The client team can be as
small as 5 to 20 staff and the key challenge here is to keep the incentive mechanism evergreen.

Client and contractors work together using their joint skills and resources. There is an initially agreed
target value and schedule acceptable to both the client and the contractors. Thereafter, both parties have
the objective of beating the targets by performing well. Both parties become shareholders in the contract,
sharing the rewards (for example savings under target costs) and risks (plant performance) on an agreed
basis. There are usually some predetermined limits, beyond which the client assumes total liability for cost
overrun or reaps the benefit of rewards beyond those originally envisaged.

These types of contracts tend to fail when the incentive mechanism becomes meaningless, so attention
should be given to setting realistic targets and having review mechanisms at a senior level such that the
appropriate adjustments can be made. Alliances are critically dependent on balanced distribution of risks
and their consequences, and this often makes creating the incentive mechanism very difficult. They are not
suitable for contracts where there are high degrees of uncertainty and work best when there will be long-
term relationships.

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[Link] Standard Forms of Contract

Several model forms of contract have been developed for different types of contract. These are in the
CP Toolkit and should be used whenever possible. They enable the effort associated with document
preparation to be reduced, and mean we all use and develop a shared view of best practice and make it
easier for contractors to work with us.

The models reflect differing degrees of complexity for the work to be done. Simple forms are used for low-
value, low-risk activities and complex forms are used for major works with significant risk.

The suite of model contracts ranges from Minor Services Contracts (MSCs) to the Turnkey/EPCI model:
− MSCs are relatively simple; a typical MSC has 17 or 18 articles addressing essential areas only such as
liabilities and disputes;
− the Turnkey/EPCI model contains all 43 articles of contract provision;
− in between these two extremes there are models for design, fabrication, on and offshore pipelay etc.;
and
− as the risk and complexity of the scopes of work grow, so provisions are added.

The models all reflect the requirements of the Contractor HSE Management Standard.

3.1.6..6 Reward Structure

The four basic methods of contractor remuneration in use are:
− fixed price;
− unit rate (based on output);
− day rate (based on resource provision); and
− reimbursable.

They are summarised in Figure 3.1.11.

Figure 3.1.11 Overview of Reward Structures

Type Fixed Proce Unit Rate Day Rate Reimbursable

Scope Activities
Fully Resources
Definition defined, but Undefined
Defined defined
not quantities

Advantages Contractor productivity Contractor productivity Flexible to client Very flexible to client
and completion incentivised requirements requirements
incentivised

Smaller client Flexibility to Competitive rates can Rapid deployment

management team redetermine be established
quantities

Disadvantages Longer lead time to Needs more intensive No contractor incentive Expensive to manage
place client management to optimise resource
use
Expensive to change No contractor
incentives to optimise
resources or
productivity

Payment Milestones, % progress Periodic measured Periodic measure of Monthly payment

Method measure applied to quantities, or quantities recorded as supported by detailed
price, or single final remeasured contract consumed schedules and invoice
payment value applied to documentation
progress %

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In principle, any permutation of the contract form and reward structure is feasible to cater for the needs of
a particular contracting situation.

Fixed Price
The distinguishing feature of a fixed price (or lump sum) contract is that the contractor is responsible
for performing and completing the work as defined in the scope of work. For fixed price contracts to be
successful, they require:
− a scope of work with which both Company and contractor are very familiar;
− a precise definition of what needs to be done, by when, and the quality required;
− minimal scope changes;
− a well-defined and reasonable split of risk between Company and contractor;
− timely availability of company-supplied materials/services (if applicable); and
− a detailed mechanism for agreeing the effects of changes to time and cost (e.g. schedules of rates for
agreed variations).

These requirements imply a significant amount of project planning and definition prior to tendering and
evaluation, and can require a long lead time before a contract can be awarded.

Note that the use of fixed prices in “frontier” situations should be avoided (frontier here refers to new
technology, a new environment or a scale that has not been seen before).

Unit Rate
In unit rate contracts, rates are fixed for specific items of measurable work and the contract price is then
determined by measurement of the work actually performed. The fundamental characteristic of this type
of contract is that although the overall quantity of work is unknown at the time of contract signature, the
type of work is defined. Unit rates should always relate to the achievement of an output task (e.g. cost per
weld mm, rate per metre of trench dug).

For unit rate contracts to be effective, they require:

− sufficient project definition to provide a reasonable description of the scope of work and an
approximation of the quantities involved;
− coverage of all work elements including those that may be required to cover change (e.g. additional
materials, skills or equipment) as these may be difficult to negotiate after the contract has been
awarded;
− clear definition of indirect costs included in the agreed rates;
− care in supplementing unit rates with day rates, as this may result in contentious or duplicate charges;
− timely availability of company-supplied materials/services/deliverables; and
− accurate measurement of the quantity and quality of the work as it is completed.

Bill of Quantities (BOQ) contracts are a form of unit rate contract in which measured (firm or
approximate) quantities help define the scope of work. BOQ contracts list all the elements and quantities
of work to be performed in a standard format and to a standard level of detail. In Bill of Approximate
Quantities (BOAQ) contracts, the final price is based on the actual quantities measured upon completion.
Make sure that the timing of company-supplied deliverables (drawings, materials, specialist services) is
assured and matches the contractor’s plan. These contracts are particularly useful for managing overlap
between design and construction activities, and can be converted to fixed price once design is completed
and quantities firmed up.

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Payments are derived by applying the unit rates to measured output. This is usually done monthly and
involves considerable work on both the contractor and Company sides. Alternatively, payment can be
made on a percentage progress basis but against a contract value that is periodically re-measured from the
detailed design output.

Day Rate
Day rate contracts are similar in pricing form to unit rate contracts, however the contractor’s remuneration
consists of a fixed rate per time period (day or hour) for the provision of a resource. Hourly rate contracts
are commonly used for design services. Daily rates often occur in the context of consultancy work, drilling
or offshore construction where the contractor is to provide the main item of equipment, such as a person,
a drilling rig or a construction lay-barge. Day rates place the pricing risk of a resource with the contractor,
but do not encourage the contractor to utilise the resource efficiently or effectively. It is important where
possible to establish expected service levels on the quality, timeliness, safety or technical performance of
the resource.

Reimbursable
The main characteristic of the reimbursable contract is that all direct and indirect expenditures incurred by
the contractor in the execution of the contract are paid on the basis of actual cost without an overlay for
profit. Usually, incentives are included in the contract to provide a profit for the contractor if performance
criteria are met. Such incentives should be paid over the life of the contract at specified milestones,
providing the agreed performance objectives (time, cost, quality and HSE) are met. The reimbursable cost
elements should include only the actual costs incurred and any fixed elements such as “percentages for
overheads” should be discouraged.

Reimbursable cost contracts require detailed and elaborate cost management and, like day rates, do not
ensure that the contractor is making efficient use of his resources. All the uncertainties for both time and
cost are borne by the Company and, unless incentives have been built into the contract, the contractor has
little direct motivation to complete the work efficiently. Sufficient data should therefore be made available
to allow regular comparison of performance against plan, and efficiency metrics identified to gauge
performance compared with industry benchmarks.

Purely reimbursable contracts should only be used in very rare circumstances and where there is no
alternative, as the intensive Company management control coupled with the limited incentive for the
contractor to manage himself provides the Company with relatively low added value. However, for high
risk/uncertainty circumstances, or for some project elements (e.g. procurement), it may be appropriate.

Effectiveness of Incentives
Industry benchmarking suggests that incentives are not effective, and certainly not free, although this is
countered by those in Shell with successful incentive contracting experience.

Incentive arrangements should be incorporated into a contract only if there are clear, quantifiable benefits
from doing so and if the contractor can manage the relevant risks. The aim for all incentive schemes
should be to drive performance in an area that is critical to the success of the project and creates a win-
win situation for both parties. They are not a replacement for good project control by the owner team,
although this is how they have sometimes been used. Incentives agreed with prime contractors should
be applied “back-to-back” with subcontractors or key employees whenever possible. All parties need to
understand the objective and work together to achieve it.

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The most usual form of incentive is to link bonus payments to achievement of the required performance
parameters, with HSE, cost, time and plant performance being the most common. Incentives are best
kept simple and negotiated after the contract has been awarded so that they are above the contractor’s base
proposal. The proposed use of incentive schemes should be agreed with the Tender Board before inclusion
in the contract.

There are negative incentives, such as Liquidated Damages (LD), which are an assessment of the direct cost
to the Company if contract completion is delayed (excluding any consequential cost such as revenue loss)
and are often used. The ability and the will to apply the LD clauses will depend on the circumstances of
the contract but they often give rise to dispute. Whilst they can appear useful in concentrating the mind of
contractors, bids will almost always include some financial provision for them, be this extra money to cover
potentially required acceleration or the full exposure. Furthermore, negative incentives have to be kept
evergreen. Once targets have been missed and the damages incurred, the contractor’s incentive is sometimes
to “cut his losses” rather than complete the job.

[Link] Contractor Qualification

We only want to employ contractors who are truly capable of carrying out the workscope and we should
be rigorous in our assessment of contractor capability. It is a Big Rule that we “rigorously pursue contractor
qualifications – define and strictly adhere to mandatory requirements”.

Whilst this may seem obvious, our partners, for a variety of reasons, may have differing views of capability.
To support data gathering, use should be made of market intelligence services available in the Global
Technical Partners.

This work has to start at the strategy selection phase because a contracting strategy should be developed
that the contractor (and vendor) community is capable of delivering. Work at this stage is related to
confirmation that there is a reasonable pool of contractors such that there is genuine competition and that
there will be capacity in the markets so that services can be provided when they are needed. Refer to the
Strategy section of the CP Toolkit for more detail.

The complete qualification process is as follows (more detailed information for each of the steps in the
process is available in the CP Toolkit):
− Compile Long and Short List
Select a limited number of contractors/vendors from the available resource base who, from the Company’s
perspective, are potentially capable of technically and commercially performing the planned contract.
− Prepare and Issue Prequalification Package; Develop Evaluation Procedure
Assess potential tenderers with respect to technical capability, capacity, experience and financial
strength. This involves preparing and sending a questionnaire specifying the contract and related
project-specific requirements. In some cases, the Company may wish to verify resources available to the
contractors/vendors by means of interviews and/or carrying out visits to premises/plant.
− Evaluate Responses and Compile Tender List
Assess the responses to questionnaires submitted by the potential tenderers against the evaluation
procedure to compile a short list of tenderers (tender list).
− Obtain Support and Communicate Results
Gain the project stakeholders’ support and obtain the appropriate internal and external approvals of
the recommended tender list.

The detailed work described above is usually done after the strategy and tactics selection phase but in line
with the contracting plan, such that the contract can be let in line with the Project Execution Plan.

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[Link] Market Approach

Ideally, we wish to let contracts in a healthy and competitive market place so that we can choose the best
value for money among a group of capable contractors. When there is competition we can have confidence
that we are paying the market price. However, we may choose in some circumstances (or have no
alternative in others) to source from a single provider, which will involve some element of negotiation. The
sections below give some attributes of these alternative ways of approaching the market.

Competitive Tender
− supports competition law;
− demonstrates value for money through establishing a competitive price;
− is responsive to market movements; and
− stimulates competitors to improve productivity and the use of technology.

There are a number of different variants on competitive tender, including open tender (the public
advertisement for interested contractors) and online bidding, which is a reverse auction by contractors for
a piece of work over the internet. In normal circumstances, after receiving a competitive bid we do not
try to subsequently negotiate it down further – this, over the long term, is a self-defeating strategy that
encourages contractors to include contingencies in their bid price.

Single Source
− close relationships can be established which can bring performance benefits;
− the cost of tendering can be avoided;
− can be faster, but should follow a clear negotiation plan;
− possible price reductions through economies of scale if using a mobilised contractor;
− value for money is not easy to demonstrate; and
− can be cheaper if long-term leverage is achieved and is less prone to market fluctuations.

[Link] Procurement
Procuring materials to the correct specification, quantity, quality and price, and delivering them to the
worksite on time is one of the most critical project activities. It impacts not only the project’s completion
date but also on the lifetime performance of the facility. Note that:
− between 20% and 60% of a project’s cost will be expended on materials;
− invariably one or more of the materials will be on the critical path of the project;
− late, damaged or under-ordered materials can cause delays during construction giving rise to delay and
claims from contractors; and
− malfunctioning equipment or materials will delay start-up and may impact long-term performance.

Different circumstances require fit-for-purpose procurement strategies, sometimes exploiting Shell’s global
leverage through reverse auction tendering to get the lowest price from a number of bidders, whilst at other
times entering into alliances with small local companies. Selecting the optimal procurement strategy is key
to getting what you want when you need it at the market price. It is essential that the strategy:
− fully supports the overall Company objectives;
− is consistent with existing group and Operating Unit (OU) procurement and logistics strategies
and policies;
− is consistent with the project’s contracting, commercial and other relevant strategies;
− clearly addresses materials which have long-lead times and bulks. Here you should think about
options for assigning purchase order or contract from Shell to contractor and free issue, as these two
approaches have different implications for the construction contractor.

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Particular attention needs to be paid to Shell’s global procurement strategies so as to maximise the benefits
of the Company’s global position (refer to details of the Spend Categories that are managed globally).

Procurement covers a wide range of activities from development of procurement strategies up to and
including the payment of invoices. The main activities involved are:
− investigating potential synergies within the Shell Group including pan-project leverage opportunities
and global category management;
− establishing a purchasing organisation and administration system (if required);
− establishing a project vendor list and determining the market approach, such as sealed tendering or
reverse auction;
− issuing budget enquiries, preparing spend analysis and counter estimates;
− creating a purchasing plan, and establishing standardisation and variety control policy and processes
such as spare parts management;
− establishing and managing the transactional process from prequalification through to order placement
and close-out;
− establishing desk and field expediting and inspection processes;
− managing purchase order variations and cancellations;
− ensuring goods receipt and invoice processing procedures are in place; and
− reporting spend in the Management Information System.

A project-specific procurement strategy should be established at the earliest opportunity. This would
normally mean in ORP Phase 2 – Select. Questions that should be asked in developing a procurement
strategy are:
− do we own it already? If not ...
− can we barter it inter or ex-Company? If not...
− can we buy it second-hand? If not...
− will a lease deal prove a better total cost of ownership result?

Optimise the Balance Between Total Cost of Ownership and Value Creation
When purchasing equipment and materials, we need to consider the total lifecycle. It is not just about the
initial purchase price; it is also the cost of ownership, operating, maintaining and disposing of what we
have bought. It is also about value and this translates to performance. As well as looking at costs, we need
to know how often we will have to maintain, what the maintenance burden is in terms of effort, shutdown
(production loss), specialist equipment and spares, and what we will have to pay for after sales support.

We should beware of over-specification – review standards and specifications to ensure maximum

uniformity of materials and equipment. Additional requirements over and above the normal external
industry standard can be expensive. The involvement of vendors in the early stages of design can help with
lifecycle considerations but use should be made of the operational experience within Shell. This is a prime
responsibility of the Operations Manager role in the project team. Where the vendor can add much in
terms of design, consider the use of functional specifications.

Maximise Leverage
Shell’s global C&P initiatives should be part of the project’s consideration in developing its procurement
strategy. Acquisition synergies with other projects (including those of other business entities) should be
pursued. Use should be made of existing agreements where appropriate, particularly the internationally
negotiated Group agreements. Global Framework Agreements, where available, should be used to the
degree that local conditions will allow. “Use” can range from applying contract forms and structures and
using rate information to full deployment of the agreement.

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These agreements provide benefits in terms of:

− agreed terms and conditions;
− leveraged prices;
− security of supply;
− Total Cost of Ownership (TCoO) benefits from global standardisation; and
− lower acquisition costs and lead times arising from reductions in man-hours spent on the tendering
process and technical and commercial clarifications/evaluations (for both Company and the vendors).

Optimise Use of Online Procurement Tools

The goal of using web-enabled tools in procurement is to gain transactional efficiencies, obtain true market
prices for the goods and services we acquire and improve intelligence so that we can make more informed
decisions. The tools available are:
− Online Bidding (OLB): robust tendering with a competitive edge;
− Requisition to Pay process (RtP): web-based order and pay efficiency, utilise online catalogues shared
with vendors;
− Management Information System (MIS): who we spend our money with, where and on what, fed by
RtP; and
− Group Contract Management System (GCMS): online contract drafting/repository and active
management of contract/claims.

Project teams should make sure that they are familiar with the above and ensure that their benefits are
realised in C&P strategies and tactics.

The Procurement Environment

Depending on the maturity of the Company, materials procurement and logistics will be influenced by
the following:
− Is there an existing materials function?
− Do they normally procure engineering materials?
− Are they experienced in and do they have the procedures and resources for engineering procurement?
− Do they have standard, well-tried logistics procedures and resources?
− The political environment and commercial influencers:
− Host governments are keen to maximise local content. The use of local procurement and logistics
capability and local vendors is a good way to meet this aspiration. Local content considerations vary
from location to location. Guidance on what needs to be considered is available in the CP Toolkit.
− If the project is being funded, then there will be expectations as to where percentages of the monies
loaned will be spent. If an EPCI strategy is chosen, the bid document should specify specific country
or regional requirements in this regard.

Procurement Approaches
Procurement by the Company
Many OUs are fully set up to procure materials for engineering projects and for operations (drilling,
production and maintenance). In considering the procurement strategy, the Project Manager should check
that the supply department has the resources, experience and procedures to give adequate attention to a
possible high peak load of procurement on top of the priorities of the operation’s base load. With today’s
customer/supplier relationships, it might well be that the OU Procurement Department can provide a
lower TCoO than external sources, and this needs to be carefully examined.

If an OU has a well set-up project team, integrated with an experienced supply department, and if
critical materials items can be identified, then schedule advantages may be possible by using the in-house
capability. This can be decided by comparing the alternative schedules.

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Procurement via a Consultant/Managing Contractor

Most large consultants have competent procurement departments. Use can be made of these services
but the required involvement of the client team needs to be fully specified in the tender document.
Involvement will vary depending upon what is being bought. For bulks there will probably be no
involvement. For some equipment, there may well be control over the bid list, award or how the
procurement is done. In special circumstances, the specification of a single source vendor may be
appropriate. Interfaces and responsibilities will need to be firmly defined, as will the handling of vendor
data. Do not pay for such services on a “percentage basis” and beware of incentives that drive poor
procurement practice or performance (for example, if incentives encourage engineering man-hour
reduction, do not be surprised if bid lists are short and technical evaluation shoddy).

Procurement as Part of a Lump Sum EPIC or Turnkey Contract

Procuring this way removes many client/contractor interfaces and allows the contractor to make use of his
skills and experience. Some contractors see their procurement capability as a performance differentiator,
a way in which they can improve their competitive position, and specification of the client/contractor
interface is required. Almost always, some control over the contractor’s actions is prudent. It would be
very risky for any EPIC or turnkey contractor to be allowed to purchase without agreement on a list of
approved vendors for equipment critical to plant performance or impacted by a variety of
control considerations.

It is possible to reap the benefit of global category management in a lump sum environment by specifying
precisely what is to be done in the spend segments concerned. This can be done by the use of Shell frame
agreements or the acceptance of assigned orders placed by Shell. Where we control what is purchased, it is
possible to make this part of the scope reimbursable, with Shell paying the contractor for his procurement
efforts separately from the cost of the goods. Some lump sum contracts have had up to 50% of their value
associated with reimbursable procurement elements, which is a good way of managing material pricing risk.

[Link] Links

Contractor HSE Management Standard

[Link]
contractor_management.html

CP Toolkit
[Link]

Spend Categories
[Link]

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3.1.7 Technology Planning

Technology planning establishes the key technologies needed for project realisation and whether those
technologies already exist or whether they need development and, if so, how they would be developed in
order to realise the opportunity. Identification of the technology requirements should be carried out from
the outset of the opportunity even if only at a very high level during the Identify & Assess phase. Since
concepts will mature as the opportunity is progressed, the team should revisit the technology needs during
subsequent phases (i.e. Select and Define phases).

The Business to Technology Mapping (BTM) process should be used for the identification of technology
needs where this is feasible. Consult the BTM website for further details. For certain projects, there may
not be enough data available for a meaningful BTM, while in many OUs the BTM process has been used
to prepare Company-wide technology plans for the eventual realisation of the portfolio opportunities.
Opportunity/project teams will then only need to review these BTMs to see whether it captures their
particular technology needs. If not, they will need to examine how they can put their requirements in place
and what impact this has on the timescale of the opportunity.

For selecting technologies, the opportunity/project team should consult the Global Technology Catalogue.
This lists technologies that are in a development stage as well as those that are in deployment.

Poor management of technology can be a significant factor in failing to achieve opportunity objectives.
The consequences of failing to manage the risks associated with the development and introduction of
a new technology can be severe and the anticipated financial gain has to be significant in order for the
risk to become attractive. The successful use of new technology can often result in benefits beyond the
financial gain: Shell can enhance its reputation against its peer group and enable access to opportunities by
positioning itself as a “leading edge” technology company.

The Technology Readiness Level (TRL) tollgate process (Figure 3.1.12) that is used in technology
development can help teams in managing the risks.

Figure 3.1.12 TRL Process

Discovery Development Deployment

Concept Selection Proof of Concept Testing

Project Development Deployment Deployment

Approved Approved Approved Complete

2 5 8 9

For each technology, it is known in what stage of development it is today and when it will be ready for
deployment. Teams can use this knowledge during the early phases of the opportunity realisation (ORP
Phases 1 to 3) by developing:
– a base case of technologies that are in early deployment (TRL 9 to 10) now; and
– a few options using technologies that are in a development stage (TRL 6 to 8) or even a discovery stage
(TRL 3 to 5) now, but that will have a significant impact on the project if available on time.

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For new technologies options, the technology maturation path (Figure 3.1.13) can be monitored. Prior to
FID, a new technology can be included in the base case if it matures successfully.

Figure 3.1.13 Technology Maturation Management

IDENTIFY & ASSESS SELECT DEFINE EXECUTE OPERATE

TRL 9-10

Base Case FID

Options
TRL 6-8

Technology
Maturation
Path
TRL 0-5

Time

[Link] Links

BTM website
[Link]

Global Technology Catalogue

[Link]

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3.2 RISK MANAGEMENT

Section 3.1 addresses “how we are going to get there”, scope and method of the project’s “journey”. This
section deals with the dangers along the way. Effective management of risks is fundamental to making good
decisions, avoiding things going wrong and being able to capture opportunities. Risk management should
therefore be very high on the agenda of project leaders and their higher authorities in the decision-making
hierarchy.

Risks are those factors that could influence whether the project meets business objectives. These objectives
are not just “internal” to the project – e.g. cost, schedule, production, HSE, social performance – but
should include global Shell objectives, such as reputation. Risks tend to be thought of as events with a
negative outcome (threats), but the approach to managing risks should be applied to those with a positive
outcome as well (opportunities).

The management of risk requires that:

− risks are identified;
− their likelihood and consequence assessed;
− responses are planned and implemented; and
− there is an ongoing process of monitoring, appraisal and reassessment, leading to improvement.

It also requires communication and understanding of the risks at the appropriate levels in the organisation,
and it needs enabling tools. Collectively, the process, the organisational arrangements (roles and
responsibilities) and the tools are the Risk Management System (RMS) for the project.

EP projects must put in place a functioning RMS in accordance with T&OE Global Process 20 Risk
Management. Risk Management should be a standing agenda item of DRB meetings.

An area of increasing complexity and importance is risk to reputation and this section deals in some detail
with the strategic approach to reputation management and involvement of external affairs.

3.2.1 Risk Management in each ORP Phase

The focus in RM changes as the opportunity moves through the ORP, as shown in Figure 3.2.1. In
the earlier phases it is about allowing good decision making – with ranges of outcomes, associated with
risk, being well understood – while in the later phases it is about avoiding things going wrong. Risk
Management is not only about avoidance and minimisation, it is also about consciously taking risks.

During Identify & Assess, risk management is relatively high level in order to form an overall opinion
about the feasibility of the project. The questions to be addressed at this stage are:
– what are the main risk areas?
– to what extent could they influence our options?
– to what extent could they influence the project outcome?
– are the risks manageable?
– do any of these risk areas need further analysis before we decide to spend more money on the project?;
and
– are there any showstoppers?

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Figure 3.2.1 – Risk Management in each ORP Phase

IDENTIFY/ASSESS SELECT DEFINE EXECUTE OPERATE

Identify major risk Identify and assess Focus risk Risk management Continued risk
areas and use for risks for all options identification ensure asset management
assessment puposes and consider when on more detailed delivery during
selecting option execution and as promised operational phases
operational levels
? DECISION

Feasability Select Option FID Startup

Have all risks Select option with Are we ready to Are all risks
RM FOCUS been identified? best value-risk manage managed?
are they manageable? balance execution risks?

Monitor
1 identify Appraise and 6 CLOSE RISK (depending on reassessment)
REVIEW Reassess The process loop repeats itself for each identified
2 Assess (Feedback)
5
risk during all phases of the opportunity lifecycle
Note

VALUE 3 7
CREATION Plan Responses Improve

NOTE:

WORK
4 ‘Feedback’ only applies when the response user is another
person than the Risk Owner, eg in the case of a Risk Owner
PROCESS Implement implementing, for instance, a procedure to mitigate a certain
Responses risk where the user of the procedure may wish to offer
feedback on its practical effectiveness and/or efficiency.

Many of these will be commercial in nature, but it is important not to underestimate risks (impacts)
to cost/schedule associated with technical capability – either in terms of technology development or
local content aspirations. This is especially significant as it is often during this stage of the project that
expectations among major stakeholders (e.g. host Governments) are set. These questions need to be
answered before a decision can be taken to proceed into the Select phase and spend more money on the
project.

During Select, risk management is still relatively high level, addressing the specific risks for each of the
identified development options. The purpose is to allow a balanced decision as to which option to select,
weighing the value of each option and the risks (and opportunities) attached. Quantitative analysis may
be required to enable good decision making. Communication of risks to the most senior decision makers,
with a genuine understanding of their likelihood, impact and ranges of outcome, is especially important at
this stage. Failure to do so in the past has resulted in unwelcome surprises for leadership, the potential for
which were well understood by project teams.

During Define, risk management becomes more detailed, homing in on the selected option. During this
phase, risk management not only addresses the risks to be managed during the Define phase itself, but also
addresses the risks associated with the Execute and Operate phases. During this and the following phases,
risk management becomes more and more operational. Risk management is not so much about identifying
and assessing risks in order to allow good decision making, but rather about avoiding things actually going
wrong or missing opportunities.

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3.2.2 Risk Management Process – Tools and Implementation

The overall governing document is the Statement on Risk Management. For projects, the required steps are
specified in Global Process 20 Risk Management as follows:

Identify
Identify the risks, assign owners and capture in risk register.

Assess
Assess severity in terms of likelihood and consequence to allow priority setting and focused response
planning. Consequences should be assessed in terms of impact on people, assets, environment, reputation
and financial loss, although this list can be extended/subdivided to explicitly cover production loss, legal,
information etc.

Plan Response
Ensure appropriate responses are put in place with due regard for severity and ALARP principle, and record
in risk register. These may use any or all of the four Ts (Take, Treat, Transfer or Terminate) and include
measures to mitigate the risk and to contain/recover from the consequences in the event of occurrence.

Execute Response
Feedback (only in cases where the person providing the response is not the same as the risk owner)
Monitor, Appraise, Reassess
− monitor and appraise the effect of the risk response, improve effectiveness by adjusting procedural or
implementation practices; and
− regularly reassess risk severity, adjust risk responses accordingly and close the risk if no longer relevant.

Improve
Global Process 20 Risk Management gives guidance on scalability to ensure that the process works
effectively; too coarse and risks are missed, too fine and the process becomes completely overloaded. Best
practice is to have an identified Risk Co-ordinator, full or part time, to manage the system, ensuring
follow-up on responses, consistency etc. Communication is essential and software such as Easy Risk (the
currently recommended package for risk management) helps considerably. It enables simple functionality
to get a consistent and balanced perspective of risks across TECOP and across a portfolio of projects; it can
also share (filtered) risk management information up, down and across the organisation. It can therefore
significantly improve performance of the last four steps of the process.

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3.2.3 Categories of Risk

This section highlights those risks which normally have an impact on EP field development projects. The
RMS should address both internal and external risks. Internal risks can, by definition, be largely controlled
by the project whereas the outcome of managing external risk will likely have a much higher level of
uncertainty. Risks must be managed across the TECOP spectrum (refer to Figure 3.2.2).

Figure 3.2.2 Categories of Risk

T
Subsurface Infrastructure
Surface Scope
ECHNICAL Tecnology Function
Operational HSE

E
Life Cycle Costs Terms PSC
CONOMIC Schedule & Phasing Exit Strategy
Valuation Metod Currency

C
PSC & Fiscal Regime Legal
OMMERCIAL Contracting Competition
Financing Market

O
Structure Recourses
Competencies Systems
RGANISATIONAL Procedures IT
Knowledge Management

P
Government Reputation
OLITICAL Stakeholders Community
Employment Locality

While TECOP is often used as a structure for identifying and classifying risk, it is important to recognise
that risks rarely stem from a single dimension and almost never impact only one of them. A contractor
going bankrupt may be identified as a technical and/or a commercial risk, and the impact may also be seen
as technical, commercial and operational. A fatality during an activity on a fabrication site as a result of
a technical risk impacts not only the site (through the authorities closing down the site temporarily) but
could also escalate to project delay, with possible defaults in a supply agreement (commercial), and make
the headlines with “Shell” included (socio-political). TECOP as a structure is therefore useful, but not
enough. It is best practice to introduce an extra dimension in which to identify and classify risk, usually
some breakdown of the project into components (hardware/contract/location/etc.), and/or the value drivers
and critical succes factors of the plan

[Link] Technical
The technical risks are prominent when project risks are discussed. They are usually captured by concepts
such as expectation curves for reserves, the inclusion of design margins in the definition of the facilities
required plus additional time (float) in the project schedule. Value of Information (VOI) calculations are
used to determine what benefits would be produced (for example, drilling another appraisal well) in terms
of the information gained, with respect to the decisions made, relative to a specific design concept or range
of concepts. Audits and peer reviews are often used to assess the magnitude of the risk, which are balanced
by the potential gains that would accrue to the project.

Technology
When the use of new technology is also involved, the implications of failure usually weigh heavily and
the required gain has to be significant to make the risk attractive. It is particularly important that the
consequences of failure or delay in the procurement of the new technology should be fully accounted for in
the project execution plan.

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HSE
HSSE risks are among the major threats to an opportunity, due to the potential impact on people, assets,
environment, reputation, cost, and schedule. Section 4.6 discribes the approach to managing HSSE in the
ORP by identifying, assessing and effectively managing HSSE risks to ALARP. Major HSSE risks should
be listed in the Risk Register, and a more detailed listing of HSSE risks should be maintained in the HSE
Hazard Register as part of the HEMP process.

[Link] Economic
For project economics, the main financial risks are associated with higher Capex/Opex and failure to make
the promised date and/or production. Project economics can be tested against various sensitivities such as
oil price and delay to schedule in discovering the implications on the financial return of the project.

[Link] Commercial
Contracting
The use of contractors to provide goods and services introduces risk to a project and requires careful
management. One of the main methods of reducing risk is to pass it to a third party, who may be better
qualified to assume the risk. However, there will be a cost associated with this, as the third party will expect
to be rewarded for the assumption of the risk.

The assessment of the capabilities of contractors and their selection is a key factor in managing commercial
risk. In particular, the financial health of the contractor should be reviewed for all key contracts. The
implication of a main contractor going into liquidation can be significant and should be considered at an
early stage in the contractor prequalification exercise. This task is usually delegated to the Finance function,
which should have the necessary skills to review the financial health of a contractor.

Contractors manage a major part of the HSSE and Social risks on behalf of the project and other issues
and risks associated with contractors are discussed in Section 3.1.6. These risks can substantially escalate if
the contractor is not aligned with company requirements.

Legal
It is a requirement that project business is conducted in accordance with the laws of the country in which the
Company is operating, and the terms of any concession or licence agreement in which the project is executed.
Projects often, however, carry out their work in a number of countries during procurement. This can
give rise to a risk of conflict between different legal systems and add significant risk to the project. For
example, work being done in the USA can often cause legal complications. Professional legal advice should
be sought early in the development of the project execution strategy if the project has an international
dimension, and a section of the PEP should be included on the legal aspects.

[Link] Organisational
The main organisational risks are associated with organisational structures, roles and capabilities. These
risks become most pronounced during key transitions, for example from Select to Define, from Define to
Execute and especially from Execute to Operate.

[Link] Socio-political, including Reputation and External Affairs

Social
Social perfomance risks overlap into other areas of TECOP risks, and potentially relate to, for example:
– contractor & staff impacts during construction, cultural impact (e.g. prostitution), community health
and safety impacts (e.g. HIV/AIDS, Road safety), impact on indigenous peoples, noise, nuisance;
– local content (labour, procurement), inward migration (e.g. squatters);
– revenue distribution (e.g. tax); and
– boom-bust impact on local economy (inflation, housing prices/availability, labour market, etc).

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Social aspects may also introduce other project risks (e.g. limitations on technical complexity, local
operational and maintenance capacity). Each of these items has the potential to affect cost, schedule, and/
or reputation, and hence needs to be identified and managed.

Reputation
All aspects of our business performance are potential Reputation issues. Reputation risks can significantly
impact project performance - including cost, schedule and potentially loss of licence. Furthermore, they
can detrimentally impact other Shell Group business activities, including both existing operations/markets
and future opportunities for growth. Hence it is essential to identify and mitigate such risks throughout the
ORP, in particular at the earliest opportunity. Reputation issues should be identified and managed as part
of the Risk and Opportunities Management System (or in a separate Issues Identification an Management
System, which is recommended for projects with significant reputational issues).

External Affairs
External Affairs tools that the Business Opportunity Manager and Project Manager should be aware of are:
– Issue Identification and Management;
– Media Relations, and in particular the mandatory Group Media Relations Protocol;
– Stakeholder Engagement;
– Communications;
– Brand;
– SGBP Implementation;
– Crisis Management; and
– Social Performance.

Risk to reputation can only be managed by managing the threats or issues that create the risk. Identifying
these potential issues involves recognising gaps between stakeholders’ expectations of the Company and
what they perceive we do. This, in turn, requires engaging proactively with stakeholders to understand
their expectations and concerns so responses can be planned. Stakeholders to be engaged may include:
– partners;
– shareholders;
– contractors;
– suppliers;
– national and local Government representatives;
– members of local communities;
– local businesses; and
– local, national and international Non-Government Organisations (NGOs) with a particular interest.

The first step in the process is to identify who they are. These issues can arise from generic or project-
specific areas. The response may require a change in our plans (e.g. a pipeline routing), a change in the way
we communicate our performance (e.g. the creation of the Shell Report to communicate with concerned
stakeholders), or regrettably sometimes an “agreement to disagree”. Typical measures that can be taken
depending on likelihood and consequence are shown in Figure 3.2.3, while Chapter 4 gives guidance on
how to do this.

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Figure 3.2.3 – Issues Priority Matrix

Stakeholder Media
Engagement Issues Relations
Priority
Matrix

Proactive
High Continuous Active attention management
Monitoring & preparation

Likelihood
Medium Periodic Continuous Active attention Social
Communication
Assessment Monitoring & preparation Performance

Periodic Periodic Continuous

Low
Assessmen Assessment Monitoring

Low Medium High

Reputation Crisis
Planning Consequence Management

Projects must develop an overall stakeholder engagement plan, which shows how they will:
– during Identify & Assess, identify key stakeholders and develop the planned, selective engagement
which is critical to success;
– during Select and Define, engage with the stakeholders. Engagement is a key part of impact
assessment, and an important contribution to project design and planning decisions. Moving into the
Execute phase, engagement should increasingly draw on local knowledge to build up relationships and
to assist in the management of construction and operational challenges; and
– During Execute and Operate, it is necessary to maintain relations, learn about concerns before they
escalate, and act as a good neighbour.

External Communications and Media Relations

External communications shall also comply with the Group Media Relations Protocol (in EP the Media
Relations Process), which provides rules for managing contacts with the media. This should ensure that we
do not inadvertently publicly disclose information that should first have been sent to the stock exchanges
on which the Parent companies are listed, and that information that we disclose publicly is accurate. There
may be disclosures required under stock exchange regulations to which the project team should contribute.

Brand
Rules exist for the use of the Pecten and due consideration should be given early in the new business
maturation process to compliance, particularly in new ventures and Non-Shell Operated Ventures (NOVs).
Local brand and communications focal points must approve potential layouts and designs for co-branded
or joint-branded ventures.

SGBP Implementation
The Shell General Business Principles (SGBP) are to be applied in all projects. Particularly in the case of
NBD projects, alignment must be reached on SGBP at the earliest stage of negotiations, particularly with
JV partners and Government stakeholders. The Group Joint Venture Guidelines require that JVs apply
the SGBP, including non-operated JVs, though guidance is available from the function heads on the
acceptability of equivalent wording.

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 Risk Management | 3.2

Alignment on SGBP must be reached with contractors and suppliers, including suitable safeguards to
ensure compliance.

Crisis
Every project shall be covered by a Crisis Management System. Usually the project will link into an
existing asset’s Crisis Management System. In the case of a new country entry, a Crisis Management Plan,
compliant with Group (and EP as necessary) requirements shall be established.

Deliverables
Table 3.2.1 lists the reputation management considerations for each ORP phase. They are to be addressed
unless it can be demonstrated and accepted by the DRB that the deliverable is not applicable to the
particular opportunity or project.

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Chapter 3 | Project Strategy

Table 3.2.1 Reputation Management Deliverable

DELIVERABLE ORP PHASE
IDENTIFY ASSESS SELECT DEFINE EXECUTE OPERATE

Reputational risks and issues are fully understood

√ U U U U U
at the appropriate level

Reputation Plans are appropriate and effective,

√√ U U U U
and fully address “Licence to Operate” issues

Exit strategy √ U U U U
Reputation management input to project CSR, LP,
FR PEP,
documentation, plans and reviews PIN PEP, CSU, PIR
GIP FDP
FDP OPR

STAKEHOLDER ENGAGEMENT

Stakeholder identification and mapping √ U U U U U

Stakeholder Engagement Plan √ U U U U
Key stakeholders have been engaged and are
aligned with project plans for the Concept
Selection and Project Definition phases.
√ √ U U U
Stakeholder considerations are reflected in the
lifetime feasibility and development concept
assessments and selection.
Key stakeholders support for Project Execution
and Operations has been secured. Stakeholder
√ U U
considerations are reflected in the Project
Execution and Asset Reference Plans.
ISSUES IDENTIFICATION AND MANAGEMENT

Reputation issues should be identified and

managed as part of the Risk and Opportunities
Management System or separate IIM system √ U U U U U
(second alternative is recommended for projects
with potentially significant reputation issues).
COMMUNICATIONS AND MEDIA RELATIONS

Exit strategy, high-level media responses √

Full communications plan – key messages, media
√ U U U
material etc.

BRAND

Brand management plan – Newcos or NOVs √ U U U

SGBP

SGBP Implementation Plan √ √ U U U

Crisis Management

Crisis Management Plan √ U U

KEY:

√ Required Deliverable LP Logistics Plan

CSR Concept Selection Report OPR Operations Preparedness Review

CSU Commissioning and Start-up Plan PEP Project Execution Plan

FDP Field Development Plan PIN Project Initiation Note

FR Feasibility Report PIR Post Implementation Review

GIP Group Investment Proposal U Updated version required

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3.2.4 Links

Brand
[Link]

Communications
[Link]

Crisis Management
[Link]

EP 2005.0000
[Link]
rol%[Link]

External Affairs
[Link]

Global Process 20
[Link]

Group Joint Venture Guidelines

[Link]

Group Media Relations Protocol

[Link]

Issue Identification and Management

[Link]

Media Relations Process

[Link]

Statement on Risk Management

[Link]

Social Performance
[Link]

Stakeholder Engagement
[Link]

Shell General Business Principles

[Link]

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Chapter 3 | Project Strategy

3.3 ASSURANCE AND VALUE IMPROVEMENT

After addressing the projects ‘journey’ in section 3.1 and Risks along the way in 3.2, this section deals
with Assurance: managing a range of activities that, together, inspire confidence that the journey will be
succesful. It expands on the outline given in Chapter 2 Section 2.4.

To inspire confidence, the project team shall draw up a Project Assurance Plan (PAP) and use the plan to
guide the range of activities to identify, protect and enhance value. Many types of such activities exist, and
most serve equally well for protecting as for enhancing value. This section will not maintain a distinction
between the two.

The Business Opportunity Manager is accountable for the creation, maintenance and execution of the PAP,
but the Project Manager and Operations Manager will be responsible for many of the activities within it.
The DE/DRB is expected to take an active role in setting the PAP and must approve it.

3.3.1 Governance Frameworks

The PAP is driven by the relevant Governance framework; EP projects are driven by the EP Governance
framework, Downstream projects by the Downstream framework and so on. At a higher level, both types
of project must comply with the Shell (Group) Governance framework.

A Governance framework is the set of policies and standards, processes and practices that, collectively,
dictate how business will be conducted. Within EP, there will be overlapping frameworks, as Figure 3.3.1
illustrates. OU policies and standards will provide another overlay. Multi-business projects will be governed
by a multitude of Governance frameworks, all with policies, standards, processes and practices that make
demands on the project.

Figure 3.3.1 Various Governance Frameworks

Group, e.g.
Function, e.g. SGBP, A&R
Function, e.g. Finance
Group HSE

EP e.g. VARs

EPB EPX

EP - HSE
EP Technical Function
GP
“Minimum Standards”, e.g. ORP
“Global Processes” e.g.
Risk Management,
Project Health Check,
OR&A….

OU -policies & standards

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Teams drawing up a PAP should take full recognition of the applicable Governance frameworks they
will be working under, as these will contain the mandatory and discretionary activities for Assurance. To
assist EP teams, the OPMG has made up a template that is considered to comply with the EP Technical
Function Governance Framework, in that it takes full recognition of the Value Assurance Review (VAR)
process plus the Minimum Technical Standards, the (T&OE) Global Processes, and recommended best
practices such as Front-end Loading (FEL) and Realise the Limit (RtL). The template can be found in
Chapter 2 Appendix D. Within Downstream at a similar level there are the mandatory Project Value
Practices and Project Guides10.

3.3.2 Types of Assurance

Assurance can be provided in many ways (refer to Figure 3.3.2):

− audits, which simply check compliance against a given rule set;
− reviews, which inspect the offered evidence for fitness-for-purpose;
− assists, where outsiders to the project team offer expertise and best practices;
− Value Improving Practices (VIPs), which are simply proven ways to do things; and
− basic quality assurance and quality control, which may be performed by an individual behind
a work station.

Figure 3.3.2 Dimensions and Types of Assurance

Business and
Types of Project Management Assurance EP-Technical Function
Assurance
activities Assurance Framework
Project – Minimum Standards
PSUA Assurance
audits – Global Processes
JV Partner VAR’s – HSSE-MS Requirements
(Technical) Discipline Assurance

reviews
PEP Activity Health
reviews ESAR PERT PHC review Checks

Peer Senior Disc. Peer

assists Assists RtL counsel reviews

VIPs FEL Benchmarking

QA/QC Discipline Appropriate

QA/QC tools

Discipline Assurance takes the form of Capability Assurance and uses tools such as Activity and Discipline
Health Checks and process reviews, which are carried out in the context of a function, discipline or
organisation. They are not related to a single opportunity/project and are therefore not covered in the
OPMG. As they influence the PAP, the project should tailor the PAP to the discipline strengths and
weaknesses as established by the Activity Health Check. In the case of a single project venture, where the
JV is built around the project, Project Assurance and Capability Assurance are combined. Conversely, in
multi-project companies the disciplines provide the Capability Assurance.

10 The EP Global Processes can be found at [Link] and the Minimum Standards at
[Link] The Downstream PVPs and PGs are listed in OG.03.30540 – OGP
Governance: Project Development and Implementation. There is considerable commonality between the two groups (though also some
necessary differences) and it is intended that the iPMS will eventually be the repository of the one, single, overall suite relevant to project
realization.

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3.3.3 Making a Project Assurance Plan

A fit-for-purpose PAP will not only maximise the chance of securing success for the current project, it
will ensure that learnings are taken forward to subsequent projects. It also provides transparency to the
organisation as to what will be done to assure value ahead of each Decision Gate. An appropriate, formally
approved plan will also avoid unnecessary tasks and rework.

Project NOVs must also have a PAP. Most or all of the activities under the PAP will be executed by the
Operator, with or without Shell involvement. The project PAP will be the starting point for the Shell
representative to develop the Shell Assurance Strategy. The standard tools in this strategy are isolated checks
and reviews, Independent Project Reviews (IPRs), secondees, work on behalf of the Operator/JV and/or
shadowing the work of the Operator with a separate, Shell staffed (and funded) team.

As described in section 2.4.5, there are three elements in a PAP: Deliverables, Assurance Events and
discretionary Value Improving Practices. The choice of discretionary elements as well as the shape and
content of all elements of the PAP are a function of the nature of the project and the organisation that tries
to realise the project. How to give shape and size to the content of the PAP is described below.

Content
The content of the PAP should reflect:
− the Governance framework(s) that the project is operating under;
− the capability of the organisation as established by (e.g.) the Activity Health Check;
− the levels and types of risk being managed by the project

To derive the PAP, or start any other improvement effort, a generic best practice process can be applied.
This has five key sequential steps:
− identification of value creation areas and value drivers;
− identification of performance indicators for the value creation areas and value drivers;
− setting improvement objectives (e.g. Technical Limit Goals);
− analysis of the Critical Success Factors (CSFs), the successful management of which enables the
improvement goals to be achieved; and
− making improvement plans and securing the gains.

Identification of value drivers and CSFs is a specific part of the Opportunity Framing process. This enables
the forming of the PAP.

Step 1: Value Creation Areas and Value Drivers

Identify the primary areas of the opportunity or project, which if managed or done better can create more
value for shareholders. In a hydrocarbon development, typical primary value creation areas might be as
shown in Figure 3.3.3.

Figure 3.3.3 Example Value Creation Areas Across ORP

IDENTIFY ASSESS SELECT DEFINE EXECUTE OPERATE

- Contract Terms - Exploration results - Reservoir Appraisal - Recovery Mechanism - Supply Chain - Safety
- Bid Terms - Seismic Interpretation - Technology Innovation - Technology Efficiency - Enviroment
- Regional Geology - Upside scope - Markets Deployment - Change Management - Plant Uptime
- Analoque field - Development - Scope of Facilities - Scope of Facilities - Engineering & Labour - Operating &
and developments scenarios - Contracting Strategy - Contracting Strategy Productivity Maintenance
- Market - Competitive - Schedule - Supply Chain - Design, - Strategies
Positioning - Lifecycle Costs - Schedule Manufacturing & - Inspection Strategy
- Stakeholder - Portfolio Synergies - Capital Costs Construction Quality - Contracting
Assessment - Stakeholder - Operating Costs - Project Organisation - Resource Intensity /
Engagement - HSSE & SP - HSSE & SP Manning
- HSSE & SP - HSSE & SP

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Having established the primary value creation areas, identify the value drivers for each. Value drivers are
those key elements that drive the end result in the value creation areas. Some primary value creation areas
are better separated out into subsidiary ones because they have different drivers; for example, lifecycle cost
above separates into capital cost and operating cost, with key value drivers as shown in Figure 3.3.4.

Figure 3.3.4 Example Value Drivers

CAPITAL COSTS OPERATING COSTS
Scope Scope
Contract Costs Contract Costs
Procurement Costs Logisitcs Costs
Project Management Costs Operations Management Costs
Schedule Material / Equipment Selection
Growth (Change) Management Consumables Costs

The team should focus on those value drivers that can be expected to provide large proportions of the
expected added value. They are therefore areas of the project where assurance will be important, and where
improvement effort will have the greatest effect.

Step 2: Performance Indicators

Performance indicators can be used to set targets for performance achievement in the various areas of
the business and for each phase of the ORP. They are important in identifying both what one wants to
achieve (the target) and what one is achieving versus the target. They should be developed when sensible
and useful for the identified value drivers, and many commonly used indicators are already available. If a
simple measurable indicator cannot be described, it is probably not useful to create a complex or qualitative
measure instead.

Indicators are said to be lagging indicators if they are measuring past recorded performance, e.g. Reserves
Replacement Ratio (RRR). Leading indicators measure parameters that can indicate likely future outcomes
or performance, e.g. the % of scope for recovery volumes that is underpinned by projects, or the decrease
in weld defects in a pipeline project. Project teams should make use of a balanced set of both to ensure
lessons are learned from past efforts and that flags are raised and opportunities identified going forward.

Indicators are used to measure performance at various levels. A selection of the most important indicators
can be made to assist reporting to the DRB and accountable Director.
Performance indicators should be selected with due regard to those used externally in the industry,
especially those used in benchmarking studies that Shell commonly participates in. Refer Global Process 21
Benchmarking of Project Performance.

Step 3: Improvement Objectives

Set improvement targets against performance indicators in the value creation areas or value drivers. Setting
improvement targets through technical limit goals is invaluable in providing a focus for the team in
pursuing the achievement of its vision. However, they should never be used as the basis of cost or schedule
commitments outside the project team.

A technical limit goal (refer to Figure 3.3.5) can be seen as an extremely ambitious goal that reflects perfect
performance.

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Chapter 3 | Project Strategy

Figure 3.3.5 The Technical Limit Concept

RTL and Business Improvement

A Strech Target Actual Improvement

Creating the right “tension”
“Pulls” up performance
10% improvement per year
Improvement

5% improvement per year

“Pushing” up
performance

Time

To achieve perfect performance, people will have to perform in ways they never imagined possible by:
− forging new relationships;
− using unproven technology/methods;
− designing out things that may go wrong;
− seeking analogues from outside the oil industry; and
− thinking out of the box.

Technical limit goals are often set at three levels in the improvement process hierarchy:
− the overall opportunity or project level, e.g. NPV gain or onstream date;
− the level of the value creation areas – generating technical limit goals in each area that will add up to
the overall “stretch”, e.g. cost reduction target;
− the level of the value drivers – generating technical limit goals against the value drivers associated with
each value creation area that will build up to the individual value creation area technical limit goals,
e.g. technical limit drilling times or recovery factors.

Step 4: Critical Success Factors

Analyse the selected value drivers and identify the issues that, if managed well, would move the team
towards achievement of its targets or, conversely, if managed badly, would destroy value. These are the
CSFs. They should be managed successfully if the business opportunity or project is to achieve its stated
objectives (e.g. value, cost, schedule, quality, HSE).
For instance, taking schedule as a value driver, the CSFs could be:
− well defined project specification;
− timely design deliverables;
− timely material deliveries;
− quality of planning;
− quality of contractors; and
− industrial relations climate.

Each of the issues should be analysed to see whether there are already adequate plans in place to address
them or whether there is an opportunity to develop/improve the plans.

It is important to note that CSFs change with time as the opportunity or project moves through different
ORP phases.

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Step 5: Drawing up the PAP and Securing the Gains

The PAP does not have a pre-described format. Teams, organisational units or functions may generate
local, specific plans aimed at delivering more value in specific areas. A good approach is to provide focus
by listing the main deliverables that have to be produced (in each phase) and to recognise the Governance
framework that the project is working under.

The deliverables and the Governance framework will put explicit, mandatory demands on the project.
Examples (in the EP Technical Function) are:
− VARs;
− demands from the Minimum Standards, for example compliance with ORP; and
− demands from the T&OE Global Processes, for example:
- Opportunity Framing (Global Process 19)
- Risk Management (Global Process 20)
- Project Health Check (Global Process 21)
- Project Execution Reviews (Global Process 24) etc.
Refer to Chapter 4 Section 4.10 for further details.

Steps 1 to 4 above will give good guidance on where to put emphasis. The same four steps will then help
to generate the rest of the plan. We know:
− where value needs to be protected/improved;
− how to measure (KPIs);
− the targets (TL) and therefore the gap we need to close; and
− the critical success factors to close the gap.

There is a long list of possible activities to help assurance:

− Peer Assists; These are specific pieces of staff work carried out by expert support staff from, for
example, the Global Technical Partners or members of other teams within the same organisation. They
are used to bridge gaps in skills, numbers or both and they can be used to accelerate critical pathwork
to allow schedules to be met without reducing quality.

− Discipline and Integrated Reviews; These are targeted reviews carried out by discipline specialists or
integrated teams of experts. They are used to provide knowledgeable challenge and external perspective
to critical technical and commercial analyses and decisions made in the course of the project. Not
everything should be subject to peer review; an intelligent risk-based approach should be taken.

− Application of Technical Limit Methodology; Application of the technical limit methodology has been
applied to each of the main activity areas though the vehicle of Realise the Limit. This is one of the
principal methods used in EP to identify ways to increase the value of an asset or opportunity.

− Process Workshops; A number of the T&OE Global Processes recommend holding specific workshops
or facilitated peer assists at given stages of the process as best practice. These are to enable specific
pieces of work to be completed in a collaborative, efficient and value adding way- refer to individual
processes for details. Examples would be:
- Concept Selection Review;
- Front-end Loading Review;
- Operations Philosophy Workshop;
- Value Engineering Workshop;
- Technology Mapping;

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Chapter 3 | Project Strategy

- Technical Asset Integrity Review;

- BfD/BOD Review;
- FEED Review;
- Layout Methodology;
- Well Value Challenge;
- Contracting Strategy; and
- Predictive Maintenance Review etc.

− Benchmarking; Measuring performance through Key Performance Indicators (KPIs), and comparing
these with analogue projects internally or externally to the Company, provides crucial insights. These
can be used to recognise gaps as well as best practice, but it is of relatively little value unless it leads to
some action. Benchmarking is a Global Process in EP (Global Process 21).

In addition to the process given above, there are a number of other routes by which value creation ideas
can be generated for inclusion in the PAP, for example:
− review of analogue projects (technical/commercial terms aspects) inside and outside Shell;
− competitive intelligence;
− use of global networks;
− review of Practices Worth Replicating database;
− review of Value Assurance Services learnings database;
− review of VAR 5 reports on analogue projects;
− foundation performance assessments;
− RtL peer assists; and
− use of other global technical partners assists.
A team member should be made responsible for overall co-ordination and monitoring of PAP
implementation; for large projects a dedicated Assurance Manager is best practice.

Regular reporting on progress versus the goals to the DRB is recommended. Those engaged in delivery
of improvement plans should be given sufficient dedicated time to fulfil this important responsibility. It
is crucial that project management gives visible recognition to staff that follows through improvement
processes and plans.

3.3.4 Links

Global Process 19
[Link]

Global Process 20
[Link]

Global Process 21
[Link]

Global Process 24
[Link]

Realise the Limit

[Link]

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3.4 FINANCE
This section deals with Finance for the project’s “journey”. The Finance contribution to projects is
delivered through:
− independent challenge as custodian of the Business Controls and Assurance framework;
− specific project Finance support activities; and
− in some projects, dedicated project Finance effort is required where third-party project financing
is necessary.

3.4.1 Business Controls and Assurance

In EP, Finance is accountable for defining and ensuring an effective business control and assurance
framework, is in place taking into account the business environment and risks. This is in support of
achieving business objectives through provision of objective and transparent management information to
all levels in the organisation and the promotion of effective risk management in all key business decision
processes.

[Link] The Role of Finance in Project Governance

In order to discharge these accountabilities across the project lifecycle, Finance has mandated access to key
assurance processes (such as cost and schedule reviews, VARs and peer reviews) and decision-making bodies
such as the DRB and PDAB.

Finance owns the investment decision process. In line with the Investment Decision Manual, each
investment proposal and each proposal to commence negotiations requires the support of the Finance line
reporting to or supporting the person submitting the proposal. In the crucial phase around FID, Finance
has a specific accountability for sign-off on control, accounting, treasury and tax aspects of the proposal.

In addition to these specific Finance areas, Finance support is required on the entirety of the
proposal covering:
− objectivity – true balanced 50/50 base case, including:
− cost;
− schedule;
− economics; and
− contingencies;
− completeness – both upsides and downsides, including risk and uncertainty analysis; and
− transparency – concise, stand-alone document.

[Link] The Role of Finance within the Project

Within a project, Finance is accountable:
− for a controlled project environment;
− to provide objective and transparent project management information; and
− to promote effective risk-based decision taking.

The Project Finance Manager (PFM) is part of the Project Management Team and, in line with Group
practice, will have a functional reporting line, usually to the Regional VP Finance or the Business
Finance Manager.

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Good co-ordination and strong integration of the strategic decision-making and the control processes
is critical in ensuring a controlled project environment. In particular, 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 order to discharge the above accountabilities, the PFM will need to have a thorough understanding of
these processes and preferably experience in at least one other discipline than Finance.

The PFM is accountable for timely and correct reporting of budget, actuals and latest estimates in line with
Group and external accounting standards.

3.4.2 Finance Support Activities

Finance support activities increase during the lifetime of a project.

[Link] Level of Finance Support in the ORP Phases

Finance supports the project team in all phases of opportunity maturation through a number of
specific activities.

Identify & Assess and (Concept) Select Phases

Direct Finance involvement prior to DG3 is normally limited. Prior to DG3, the Finance line (or the
Finance DRB member if there is one at that phase of the opportunity) will decide when it is required to
appoint a dedicated PFM. That decision will be based (among others) on an assessment of complexity,
anticipated investment levels and risks of the project. Finance will review the economics and cost estimates
produced to ensure projects are viable.

Finance involvement ensures that auditable generic systems are in place for capturing cost and time writing
by technical professionals, and that expense procedures are followed by the opportunity identification
team. At this stage, a generic cost control and compliance framework is usually sufficient although study
costs may still be significant in their own right and therefore should be monitored and reported.

In many venture arrangements, accurate and auditable cost collection from the earliest stage will allow for
efficient future cost recovery from project partners and/or host governments.

Define Phase (up to FID)

In this phase the project scope is developed in detail including cost estimates and Project Execution
Plans. Ultimately, at FID, there will be a fully defined and agreed scope of work, a budget cost estimate
and a baseline project schedule for inclusion in the investment proposal. It is recommended that a PFM
is appointed during Define for each project over US$200 million (total if operated, Shell share if non-
operated). This PFM role can be a full-time or a part-time role depending on size and complexity of the
project. The dedicated PFM for larger projects should ideally remain in place for the duration of the
project and will seek accreditation within the Shell Project Academy.

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Specific Finance activities in the lead-up to FID depend on the type of project and whether the project
is executed within an existing OU or through the set-up of a newly formed JV. If a new JV is set up,
then Finance will be involved in the venture set-up activities and the negotiations of the shareholder/JV
agreements (refer to Joint Venture Guidelines). If the JV is formed through an incorporated company,
then generally more effort is required to consider fiscal structuring and financing options. The Group’s
preference in that case is to use shareholder financing instead of third-party project financing.

For all projects leading up to FID, Finance will have a key role in the co-ordination of the investment
proposal. The investment proposal will have input from all project team members and in many cases it
is efficient to request the PFM of the project to co-ordinate input. This will ensure compliance with the
Investment Decision Manual.

Execute (post-FID)
During the Execute phase for a Shell-operated project, most (if not all) business processes as outlined below
are the responsibility of the Finance department. During this phase, there will be a full or part-time PFM
with an adequately resourced Finance organisation to carry out the activities outlined below.

[Link] Level of Finance Support in Business Processes

The Finance activities described below assume that the Group is the operator of the project and that Group
procedures and systems can therefore be applied. In a non-operated venture where the Group is a partner,
most Finance activities relate to shareholder assurance – challenging the Operator to demonstrate that cost
and schedule plans are reasonable and acceptable. It is especially relevant for large projects to ensure that
the Operator is adopting best Group practice where possible.

Business and Financial Controls

The PFM is the custodian of the financial and business control framework. For projects, this includes:
− Manual of Authorities;
− Tender Board composition; and
− commitment control procedures.

Governance, Risk and Assurance

The PFM will play an integral role in the management of business risks in the Project Leadership Teams,
including the establishment and maintenance of an appropriate risk control framework (refer to Section
3.2) and risk-based integrated assurance plan (including internal and external audits, refer to Section 3.3).

Planning, Target Setting and Budgeting

The PFM is in the Project Leadership Team and accountable for the financial integrity of the planning and
target setting processes. This requires an active involvement in and co-ordination with cost and planning,
and the cost estimating activities and the budgets that are derived from them. The PFM will also be
responsible for ensuring that the resulting plans and budgets are recorded in the appropriate corporate
systems to enable performance to be reported against them.

Performance Management and Appraisal

In the project, the PFM supports the BOM and PM to:
− install and maintain focus in regular project performance reviews;
− pursue opportunities for improvement; and
− intervene to mitigate potential downsides.

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The PFM will ensure that focus is maintained on value delivery and KPIs in the project. Finance will
report timely, relevant, accurate and compelling management information on actual performance to date
and will be actively involved with the business in the preparation of forecasts against plans and budgets.
The PFM is responsible in the project to ensure that the aggregate expenditure estimates meet
Minimum Standards.

Accounting
This includes project accounting and financial accounting for Group, statutory and fiscal purposes. An
important area in the context of projects is capital and fixed assets accounting, including the recording of
value of work done.

Reporting
This includes the preparation and development of reports to Group, partners, host Government, fiscal
authorities, project cost reporting against annual as well as full project lifecycle costs. A critical part of this
is the reporting of latest estimates.

Treasury/Cash Management
This includes the timely flow of funds from Shell and its partners in the project to the project company
in line with the Joint Operating Agreement (JOA) to ensure continuity, and to maximise and protect
shareholder value through professional management of monetary assets (cash, investments), liabilities
(loans), dividend policy and FX exposure.

Insurance and Contract Compliance

This includes the management and administration of the project’s insurance programme, including the
handling of insurance claims and the closing out of all contracts including change orders and
outstanding claims.

Taxation
The PFM is responsible in the project leadership teams to ensure maximum delivery of value to the project
by tax specialists.

Supply Chain Management (SCM)

Large projects will typically have a dedicated project Supply Chain Manager , but where a project lacks any
significant contracting angles this accountability can also be combined with the Project Finance Manager
role. The role of Finance/SCM is to drive supply chain benefits delivery via effective category management
and contract management. Projects will be subject to the existing Regional or JV (as appropriate) Tender
Board processes and controls.

If a project has its own Tender Board, it will typically be chaired by the PFM who will also give advice
on the financial aspects of contracts as they are drafted, and ensure that the link is made between “supply
chain savings” and the actual financial results. The size of the project will determine if SCM specialists are
resourced into the project.

Economics
Finance will ensure the quality of data and assumptions used by the economists in order to enable objective
ranking of opportunities. Finance will be actively involved in peer reviews of economic models.

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SAP
This includes the selection and planning of the ERP system that will be used to manage the project’s
activities, administration and reporting; SAP Blueprint is EP’s preferred system. The PFM is also
responsible for ensuring that the system’s administration work is done effectively and efficiently to allow
business transactions to be recorded accurately in SAP.

3.4.3 Project Finance

When a project is “project financed”, it is secured only by the future cash flow and other assets of that
project. The borrower is usually set up as a special purpose vehicle that consists only of the project’s assets.
Ideally lenders to the project would have no recourse to the sponsors. However, there is often an element of
recourse, especially during the construction phase, which is required to attract third-party financing.

Shell’s preferred way of funding a project is by way of own funds (through shareholder loans or equity).
The requirement for Shell to consider project finance generally only arises in projects where other joint
venture partners are unable or unwilling to provide their share of the cash calls directly by shareholder
loans or equity.

Project finance will have an impact throughout the entire project cycle from project inception and JVA
development until the debt is ultimately repaid. It is important to involve project finance expertise (via the
PFM) at the early stages of project discussions.

Identification and Assessment Phase

If project finance is likely to be required, then it is important to get input on the feasibility of project
finance. The likely risk allocation should be understood and the structure that will be required by lenders
before entering into discussions with partners. In addition, input on the financing process and impact on
the project timeline, including major financing milestone requirements, is key to correctly estimating the
impact of project financing and generating realistic expectations when funds will be available from
third parties.

Partner Negotiations
It is important to understand likely lender requirements in negotiating with the National Oil Company
(NOC) and the Joint Venture Partners (JVPs). Due to the enhanced position of the resource holders,
NOCs are continually pushing more risks to the International Oil Company (IOC) partners. This can
take several forms such as the IOC sponsor co-lending, supporting the NOC obligations for completion
support and providing back-stop financing support. Including experienced Finance persons who are
familiar with the market will minimise the potential for onerous terms being passed to the IOC.

Contracting
Project financing can have a significant impact on the contracting strategy. Major project lenders will want
to see experienced, creditworthy contractors and preferably one turnkey contractor. If there are multiple
contractors and/or if there is questionable creditworthiness, lenders may well seek sponsor support until
the project is completed and operating. In projects where financing liquidity is crucial and export credit
agencies are required, contractors may be forced to procure from specified countries and this could have a
cost impact. It will be necessary to obtain financing input during the Engineer, Procure, Contract (EPC)
strategy discussions, bidding and contract negotiation to ensure that proper provisions are included that
will ensure the financing requirements will be met.

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Execution and Operation

Lenders are relying on the completion and performance of a “single” asset and subsequent cash flow
generated for the repayment of their loans. Therefore, lenders will require certain controls and reporting
during the construction and operating phase that sponsors often find quite onerous. It is important to have
a clear understanding of precedents, current market conditions and requirements of lenders to ensure that
the project ends up with the least amount of lender control as possible.

However, it is also important to understand that there will be certain requirements that are not negotiable
and time should not be wasted on these areas. To avoid these pitfalls, it is important to have an experienced
project finance person negotiating this documentation with lenders.

Project Team Time and Management

There will be additional time and resources required if project financing is involved. Depending on the size
and complexity of the project, this could be quite substantial. Often the project team, which may consist
of secondees of the various sponsors, will need to include 3 to 6 finance people to complete a project
financing arrangement. Once financial completion has occurred, this number will decrease but the team
will continue to require resources to interface with lenders and monitor the loans.

In addition to the increased finance activity, there can be a considerable call on management and
other resources time to meet the project finance requirements. Technical, environmental, marketing
and insurance are just a few of the areas that will be affected by the reporting, due diligence and other
requirements of project finance lenders. Significant time is often required by the project team to engage
and present to the various lending stakeholders (which may involve Government institutions and
multi-laterals).

The time and effort to put project finance in place is often underestimated, putting a considerable
strain on resources. With the trend of lenders seeking more rather than less information and a greater
understanding of the underlying project (especially in such areas as the environment), the requirements
need to be incorporated in the overall planning of the Project.

3.4.4 Links

Investment Decision Manual

[Link]

Joint Venture Guidelines

[Link]

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3.5 PEOPLE
This section deals with the people who will make the project’s “journey” a success. The industry, aspiring
significant growth, is short of experienced project professionals. It is also, particularly in Europe and North
America, facing an age-demographic challenge.

Effective management of the people dimension requires:

− inspirational leadership;
− the right values, attitudes and behaviours;
− effective organisation models;
− resourcing; and
− clear and complementary roles and responsibilities.

3.5.1 Leadership

The Shell Leadership Framework provides the Group with a common language and a basis for assessing
and identifying the development needs of leaders. The framework can be applied to staff across all levels of
the organisation to deliver leaders at all levels.

A fundamental requirement of good project management is clear delegation of tasks and the appropriate
authority to empower and motivate the staff in their achievement. The leader’s function is to support and
encourage people in carrying out their tasks rather than to direct and control them.

3.5.2 Values, Attitudes and Behaviours

“Enterprise First” means maximising value for Shell through a common purpose, shared values and behaviours.
“Enterprise First” is about actions, not words, and although the words below will give a good feeling for the way
of acting and thinking that “Enterprise First” describes, it is something that really just needs to be done.

The Executive Committee has defined the key behaviours that might lead to an “Enterprise First” culture
as leadership, accountability and teamwork. This means that for each area we:
Leadership
− build shared vision;
− set clear priorities and reduce complexity;
− motivate, coach and develop; and
− focus on customers, Governments, key stakeholders.
Accountability
− grasp opportunities with energy and take on tough challenges;
− know the rules and stick to them; and
− reward success and address failures.
Teamwork
− get the right skills and use them all;
− strive for the right balance, neither cosy nor hostile; and
− ensure there are good communications between all team members.

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Shell’s core values can be summarised as:

Honesty and integrity:
− tell the truth, no matter what;
− fully address the situation, do not just choose selected truths; and
− adhere to the spirit and the letter of the Shell General Business Principles.
Respect for people:
− treat people as the key enabler of business success;
− no bullying;
− communicate on the issues that concern people; and
− provide an environment where people can grow.

Some useful theories, models and tools exist that can assist in putting the “Enterprise First” behaviours
into practice:
− McClelland’s Motivational Needs Theory to support people motivation;
− Belbin’s Team Roles and Myers Briggs’ Type Indicator to support teamwork, getting the right skills and
using them;
− Tuckman’s model for team development to support teamwork; and
− Shell’s own learning resources.

3.5.3 Organisation

[Link] Structure
The organisational structure used to realise a business opportunity varies for the type of project and across
the opportunity realisation phases. Whilst moving through the phases, it is vital that all skill pools that
have a significant involvement in later phases are involved in the project at earlier phases.

The fundamental principle underpinning organisational structure is single point responsibility and
accountability for specified deliverables with clear and unambiguous delegation. The organisational
structure will depend primarily on the:
− key deliverables for the phase (WBS);
− contracting strategy and contractor competency;
− project challenge (location, size, complexity);
− individual competency and experience;
− need for dedicated functional support; and
− local stakeholder requirements.

The WBS needs to be developed as early as possible. The WBS will, during the early phases of the
opportunity, include both hardware headings (e.g. wells, topsides, onsite and concept selection of
plant solutions, environmental/Sustainable Development aspects etc.) and non-hardware headings (e.g.
marketing, Government/JVP approvals etc.). It should be appreciated that deliverables in the front-end
phases (Select/Develop) are engineering studies and that only after concept selection will the WBS become
primarily hardware driven.

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[Link] Types
There are two basic types of organisation:
− The matrix organisation, in which the manpower resources required for the project are supplied on
demand by the various line functions and the Project Manager co-ordinates their contributions. This is
the most common approach for small jobs where a full-time, dedicated team is not justified.
− The project organisation (a dedicated project team) in which the manpower resources are dedicated
to the project and are under the direct control of the Project Manager. This is common for larger
activities or projects where a full-time presence can be justified.

In practice, a hybrid between the two basic types is the norm. Project Managers will establish team
positions for realising the deliverables and functional support if this requires full-time, dedicated resources,
and rely on matrix support for areas that do not require full-time resources or areas that require scarce
discipline expert support.

Projects are, in particular, vulnerable on the interfaces between components and transitions between phases.
There is also a risk in obtaining timely external approvals for the design, construction and installation of
wells and facilities from host Governments. These risks may warrant dedicated project resources to ensure
seamless interfaces and transitions, timely delivery and avoid unexpected delays and cost increases.

[Link] Pre-FID
A typical large integrated project organisation in the pre-FID phase (Qatar GtL) is shown in Figure 3.5.1.
It contains branches for delivery of sub-projects as well as functional support branches.

Figure 3.5.1 Typical Integrated Project Organisation Pre-FID

Project
Director
(BOM)
Deliverables Functional Support

Upstream Downstream Commercial/ HSE/SD Asset HR

Project Project Finance Manager Manager Manager
Manager Manager Manager

Upstream Downstream Commercial/ HR

Team Team Finance Team
Team

The organisational structure of the branches responsible for the delivery of the BfD and project
specifications of the upstream and downstream facilities is shown in Figure 3.5.2.

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Chapter 3 | Project Strategy

Figure 3.5.2 Organisational Structure Pre-FID upstream and downstream

Upstream Project Manager

Subsurface Offshore Facilities

Well Delivery Manager Engineering Manager Manager

Well Delivery Team Subsurface Team Offshore Facilities Team

Downstream Project
Manager

Implementation Project Services

FEED Manager Resident PM
Manager Manager

Project Services
FEED Team Resident PM Team
Team

[Link] Post-FID
The emphasis of the organisation in the post-FID phase shifts from the design towards delivering the
hardware. Implementation management to achieve the specified cost, schedule and quality becomes the
main focus of attention. There may be multiple, geographically widespread construction/fabrication sites
that require separate construction management and supervision teams, with local project services support.
Towards the end of the implementation phase, integration of equipment packages and systems becomes the
focus of attention, with the creation of hook-up and commissioning/start-up teams. At the same time the
project team is engaged on the preparation of the handover documentation using the as-built data from site.

Project teams, especially in the earlier phases and towards handover, experience many staff changes.
Continuity of knowledge can be a critical factor despite well ordered data management systems. The
continuity aspect should be incorporated into the organisation [Link] organisational design should
make allowance for provision of development positions.

Development positions allow the new recruits/inexperienced engineers to get exposure to the “coal face” of
facility engineering, providing them with the hands-on exposure that will later pay its dividend in terms
of HSE integrity and constructability of the designs in which they are involved. Development positions
are most effective and rewarding for the incumbents if they are appended from a part of the organisation
in which experienced engineers are involved. This will allow for mentorship and on-the-job coaching in a
team environment. Graduates/young engineers in development positions are often valuable resources due
to their enthusiasm, energy and uninhibited ideas and suggestions.

[Link] Influences
The contracting strategy has a significant influence on the organisational structure after the completion of
the BfD. The project challenge (the maturity of the area in which the asset will be located, Government
requirements, size, complexity) will influence the contracting strategy and influence the organisational
needs. Contractor capability/track record to deliver as promised, particularly when working in the
constraints of a JV, also has a major influence on the level of monitoring and control the project team has
to apply to assure cost, schedule and quality.
Other factors influencing organisational structure can be:
− required competencies vs. those available locally (internally and externally
− individual competencies; and
− physical location of the team.

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Activities that are essential to the success of a project will receive most attention. For instance, use of a
totally new technology will require more management attention than a well-tried and tested technology,
and critical path activities in the Project Plan will need more attention than activities with substantial
float. The activities and sub-activities need to be examined for all of their criticalities such as safety, cost,
schedule, resources, quality etc, and the organisation structure and responsibilities shaped to manage these.

[Link] Project Manager

The design of an organisation starts with identification of the positions required to achieve the required
deliverables, starting from the top. The single point responsibility principle mandates a Project Manager/
Director. The level of the Project Manager can be approximated by the total $ billion spend (s.g. 2-1 for
projects <$1 billion; s.g. A-B for projects >$1 billion).

Other considerations besides spend can influence this level, such as maturity of the location, complexity
of the project, political sensitivities and reputation, or additional roles/responsibilities such as shareholder
representation.

[Link] Other Personnel

In order to achieve consistency of approach in identification of the required positions, it is important to
use job names from the Shell People Job Catalogue, though this may not always be acceptable in
JV settings.

3.5.4 Resourcing

Application of, and compliance with, the ORP requires that, amongst others, staffing needs are clearly
defined, with a focus on integration of required skills and disciplines, and that it is clear how the project
will be funded and resourced at the start of each phase. The mobilisation requirement for the key team
members should be noted on the ORP Roadmap and a fully detailed mobilisation and demobilisation plan
is to be developed with the origin of all staff defined.

Open Resourcing (OR) is the web-based system through which the various Shell businesses advertise their
vacancies within Shell and is a process directly between applicants and job holder. Positions can be posted
on OR at any time during the year. Managed Open Resourcing (MOR) is used for numbered category
positions, and the final selection of applicants to positions is done by a matching panel, balancing the
needs of the business with an individual’s preferences and development. There are three rounds of MOR
per year, in February, June and October.

OUs and service companies prioritise resource demand using their approved Business Plan.
Where appropriate, placement will be used to direct resources to the priority opportunities.
In case of the need for assistance with resourcing, contact local or global skill pool managers.

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3.5.5 Roles and Responsibilities

Figure 3.5.3 Typical EP Project: Roles and Responsibilities

Executive VP, then Corporate Approvals Authorisation

DE supported by DRB
Governance,
Decision Executive (Opportunity Owner), with relevant Project Delivery,
Value Assurance
Operations, Commercial, Legal, Finance, etc members as appropriate

Opportunity / Responsible for articulating and

protecting the Business Case Basic Work, Quality Assurance
Project Team roles
Business
Responsible for Opportunity
Manager Responsible for the Note: In the early phases of
the technical operational EPB/GP projects, the role of future
performance of performance of the owner can be taken by ‘project
the project Project/ Future Owner facilities; owner delivery’. The Project/ Develop-
(but see note) Development (Operations during Operate ment Manager will then have a
Manager Manager) predominantly commercial role.
Wells Sub Facilities Operations
Surface

The ORP requires an ongoing dialogue between opportunity/project teams and their DE/DRB with the
overall aim of improving decision quality. The roles and responsibilities of the DRB and Project Team are
covered in Chapter 2.

As for the work team, all our opportunities/projects encompass three distinct roles to a greater or lesser
degree: the Business Opportunity Manager, the Project Manager and the Operations Manager. These are
separate roles and require different skill sets. They may be discharged by one or more persons, and one
person may discharge a combination of these roles if the opportunity so allows and that person has
the skills.

[Link] Business Opportunity Manager

All opportunities are commercial in nature and are founded on a Business Case. The BOM is responsible
for articulating and protecting the Business Case. The BOM focuses on the business delivery with
particular focus on commercial aspects and on integrating the technical work into the business/commercial
environment. The role is heaviest in the early stages of the ORP, but should not get lost when the
opportunity moves into Define and Execute and the focus changes to cost and schedule.

Typical responsibilities of the BOM are to:

− lead/co-ordinate the team’s perspectives in the dialogue with the DRB;
− build the resource plan (costs and manpower) for the next phase;
− manage external contacts (government, partners);
− create the PAP; and
− write the Group Investment Proposal.

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[Link] Project Manager

Most opportunities have a Business Case dependent on developing and delivering a (technical) piece of
work, which is handed over to another party to operate. The Project Manager role is that of delivering this
integrated technical scope. This can be a major piece of hardware, but also technical study work in support
of a commercial deal.

Typical responsibilities for the Project Manager are most of the standard ORP deliverables:
– (Technical) Feasibility Report;
– (Technical) Concept Selection Report;
– Field Development Plan;
– Project Execution Plan;
– Etc.

[Link] The Operations Manager

The Operations Manager represents the future owner of the hardware, but the model also works for
commercial products like JVAs. In such cases, the Country Chair or the designated Shell representative will
hold the Operations Manager role.

The future owner will be responsible for generating value from the realised project and therefore has a
very important role to play in the project team. As the output will still be seen as project deliverables, the
Operations Manager usually reports to the Project Manager prior to FID. Post FID, the OM may well
report to the Functional Line (Operations). The Operations Manager will also have a functional reporting
line to the organisation that will operate the asset and will have access to the Business Opportunity
Manager on issues where technical and operational demands appear to be in conflict.

On the basis of single point responsibility for deliverables for the phase, the organisation is further broken
down into branches responsible for delivery and branches responsible for functional support, such as
Project Services, Finance, HR, HSE, External Affairs, Contracting & Procurement, Asset Management and
any other specific functional support required (e.g. Construction Management).

Positions with single point responsibility for the delivery of facility engineering studies or hardware items
will require Project Engineering skill pool resources to manage the delivery in accordance with the OPMG
and integration across disciplines and functional support. Positions with responsibility for project services,
cost, schedule and QA will require Project Services skill pool resources. Facility engineering studies and
hardware delivery also require support from resources from the process and discipline engineering skill
pools to define the scope of work and verify compliance with requirements.

3.5.6 Skills and Competencies

Project engineering professionals usually have a graduate degree or equivalent professional qualification in
an engineering discipline, and 6 to 8 years working experience in their base engineering discipline prior
to joining the Project Engineering skill pool. During their engineering discipline period, they will be
occasionally involved in projects and carry single point responsibility for delivery against a specified cost,
schedule and quality, most likely for an item of packaged equipment. Skill and competency development
during this period is the responsibility of the employee, their Line Manager and the relevant engineering
discipline skill pool manager.

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Graduate staff recruited with the long-term objective to broaden them into Project Engineering will be
engaged in an engineering discipline for their first two assignments. During these assignments they will
receive the basic training on introduction to projects, foundation learning and gain experience in their
work assignments.

For project professionals, the Shell Project Academy Competency Ladder comprises four levels from JG6
to JGSE.

Accreditation against the competency levels and the differentiation between job grades within these levels is
defined in the Shell Project Academy, which consists of five elements:
− Grow (experience);
− Educate (learning);
− Mentor (mentoring and coaching);
− Accredit (assessment and accreditation); and
− Support (networking and community).

Figure 3.5.4 The Shell Project Academy

LEA
CE RN
RIEN IN
P E G
EX
ED
UC
OW AT
GR E
TION
NET

COMPETENCE
WO

DITA

DEVELOPEMENT
IT

AND
SUP
RKIN

CRE
RED

APPLICATION
POR

& AC
ACC
G&

T
COM

ENT

MENTOR
ESSM
MUN

ASS
ITY

MENTORING & COACHING

The Shell Project Academy will provide a fully integrated system for staff to develop their competence
towards successful application thereof in their project roles. The Academy will develop Project Engineering
skills at every project phase and at all levels. Audiences cover the whole project lifecycle and include all
project engineering professionals (including Project Services engineers) as its core audience, as well as
business leaders in project Governance roles and “non-project professionals” in key project roles (such as
Finance Manager, Senior Development Planner, Head of Well Engineering etc.).

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3.5.7 Links

Belbin’s Team Roles

[Link]

local or global skill pool managers

[Link]

Managed Open Resourcing (MOR)

[Link]

Open Resourcing (OR)

[Link]

Shell Leadership Framework

[Link]

Shell Project Academy

[Link]

Shell’s own learning resources

[Link]

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3.6 NON-SHELL OPERATED VENTURES

Shell invests over 40% of its EP Capex via NOVs and they account for over 30% of Shell’s EP equity
production. Ensuring the projects delivered by the NOVs are effectively managed is critical to meeting our
business promises. Successful NOVs provide an effective means of leveraging scarce resources, and there is
great value to be realised extracting lessons and experience from working with other Operators.

The principles described in this section are generic to all NOVs, although there are many different
NOVs with different issues and requirements that require case-specific approaches to maturing business
opportunities, and each Region has:
− its own distinct legal environment;
− distinct Joint Operation Agreement (JOA) models;
− a mixture of incorporated and unincorporated joint ventures, each with different requirements; and
− new and legacy JV agreements.

3.6.1 Types of NOV

A joint venture is a co-operation between two or more partners to achieve common goals. or does not have
a Technical Services Agreement (TSA) these can take many forms as described in the Group Joint Venture
Guidelines.

Usually one partner has operational control of these ventures by:

− having sufficient equity in the JV to be able to carry most operational decisions;
− being the appointed Operator in an unincorporated JV;
− being the appointed contractor in a Production Sharing Contract (PSC); and
− being the Technical Advisor through a Technical Services Agreement to the JV.

Where Shell is not the nominated Operator, or does not have operational control, these cases are referred
to as NOVs.

There is another group of Joint Ventures where the operatorship changes, with one company responsible
for the project during early project phases and then another company taking over responsibility for the
Execution or Operation phase. These transfers of operatorship pose particular challenges.

3.6.2 Approach to Management of NOVs

The key documents in defining Shell’s approach to NOVs are the Group Joint Venture Guidelines and the
EPBM Process EP.05 – Govern Non-operated Ventures. These explain:
− why we enter Joint Ventures;
− the overall risk-based approach we take to managing them; and
− what is expected of the Shell team managing the NOV.

In simple terms, Shell has a role in defining the strategy and direction of the venture, and thereafter the
Operator is responsible for executing the agreed work programme. We need to ensure that the Operator
is properly and efficiently managing the business on our behalf and will set up a Shell Asset Team to do
this. This team should do everything practical to support the Operator, as long as it does not harm our
long-term interests. In some countries this support is a legal obligation. However, this needs to be balanced
against attracting additional liabilities by involving ourselves in the Operator’s management.

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The Asset Team role is to represent Shell’s interests, including:

− governance and assurance of the venture;
− influence of the JV in the direction that Shell wants to go; and
− support of the Operator in operating the venture on our behalf.

The scope and size of the Asset Team is determined mainly on the basis of perceived risk of the
opportunity failing to deliver the business result, and our ability to influence the outcome. The level of risk
is dependent on a number of factors, one of which is the Operator capability and experience. Comparing
the Operator’s project processes, practices and resourcing against the OPMG is one part of assessing this
capability and the Asset Team should strive to ensure that the Operator has a system that will achieve at
least the same level of deliverables.

The Asset Team can improve project performance in NOVs by devoting resources to opportunity
identification and technical challenge, followed by influencing the Operator to realise the potential of these
opportunities, which are often overlooked. Without the distraction of daily pressures, and with access to
Shell’s technology and experience in project delivery, Shell staff are well placed to think longer term, and to
anticipate the impact of current activities, highlighting opportunities and issues to the Operator that either
add value to the project or prevent value erosion.

3.6.3 Governance of NOVs

How the Shell Team provides governance to an NOV is set out in EPBM Process EP.05 – Govern Non-
operated Ventures. Applying this to project development and delivery within an NOV (rather than
managing the whole JV), the team is expected to:
− Establish and document a strategy to govern the project that has been developed in accordance with
the NOV Strategy Framing Module (available from EP Projects). As part of strategy development,
the team will review applicability of Group and EP principles, policies and standards, and learn from
others who have, or are, working with the same Operator and co-venturers.
− Develop this strategy on the basis of a thorough, documented risk assessment applying risk
management (Global Process 20). Carry out a self-assessment to ensure JOA obligations are
understood, monitored and executed as intended.
− Resource itself in line with the approved strategy and risk assessment.
– Ensure that the other requirements of the ORP are applied, i.e.:
- a DRB shall be in place;
- a PAP shall be in place, articulated at the overall (100%) project, with an overlay detailing the Shell
involvement in each assurance activity, deliverable or event.
- VARs shall be conducted in accordance with the OPMG (equivalent JV audits/reviews to the Shell
VAR process can be considered if they achieve ownership of results. However, the Shell-specific
areas, Governance, commercial strategy etc. of the project still need to be separately reviewed);
- a Shell independent risk, cost and schedule assessment is prepared as appropriate (refer to Chapter
4 Section 4.10);
- post-sanction, a PDAB shall be in place during the Execute phase.
− Exercise audit rights in accordance with Shell’s rights under the JOA.

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3.6.4 Strategy Development

A key part of the framing for NOVs is to develop the strategy for influencing the Operator, using the
NOV Strategy Framing Module, available from EP Projects. One element of this strategy is the level of
Shell involvement.

In order to make informed decisions on the level of Shell involvement required, the opportunity needs to
be well understood in terms of:
− understanding the technical and commercial scope and inherent risk;
− value at risk to Shell;
− Operator competence and experience;
− opportunity for Shell to learn;
− the degree of strategic alignment between Shell and the partners; and
− the ability to influence the Operator and protect Shell’s interests from the outside via a strong JOA.

Larger regional issues need to be considered, such as:

− possible transfer of operatorship;
− other fields in the area which could tie back to new infrastructure
− Shell’s reputation in the region, and
− the Operator’s relationship with the host Government, which may affect how the host Government
views Shell in other opportunities.

During the Opportunity Framing, SWOT and risk analysis are used to generate levels of involvement in
various parts of the project. These can include:
− a full shadow Shell team undertaking independent work;
− work undertaken by Shell on behalf of and paid for by the JV;
− Shell participation in the Integrated Project Team with either Project Managers or technical staff;
− ad hoc challenge and reviews of the Integrated Project Team work by Shell; and
− a completely hands-off approach with no Shell involvement.

The balance between excessive Shell costs for independent work (while still paying Shell’s share of the
Operator’s Joint Venture costs) and protecting/increasing value for Shell in large, complex ventures with
significant project execution challenges needs to be carefully assessed. There is a large difference between
Shell doing work as part of the venture (at venture cost) and Shell doing the same work with a shadow
organisation (at Shell cost). Even if the costs are recovered from the venture, there is still an opportunity
cost of using Shell resources in the venture as opposed to elsewhere.

Figure 3.6.1 is an example showing how the nature of engagement or intervention may vary depending
on the risk assessment conducted during the strategy framing session. Influencing plans with resources
identified are generated for all high and some medium risk activities. These levels of involvement are
reviewed and amended as the project progresses.

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Figure 3.6.1 Nature of Engagement and Intervention

LOW MEDIUM HIGH

“React and ensure compliance” “Collaborate with operator and partners” “Actively lead the operator and partners”

Key characteristics/requirements: In addition to “LOW” requirements: In addition to “LOW” & “MEDIUM”

requirements:
– Review/approve annual budgets – Reactive due diligence activities
Monitor performance by ‘bottom line’– – Focused/specific influencing strategy
quarterly (except production– monthly) – Engage at OPCOM level and at
technical level– strategic level – Develop “Shell view” on asset–
– Engagement with partners beyond JOA intervention by exception opportunities and preferred plans
requirements by exception
– Limited engagement by Shell with – Engage at all (3) levels: EP/strategic,
– Ensure right of audit is included in JOA external stakeholders licence/OPCOM, technical working
and conduct audits as appropriate level
– Active HSSE sharing and learning
– Ensure regulatory requirements (e.g. – External engagement –e.g. government
SEC reserves, HSSE local requirements) – Agree common value assurance/ stage-
met, and provide sufficient support to gate process with partners – Focus on operator’s weak areas
assure such compliance
– Monitor performance monthly – Heavy, early, involvement in concept
– Check alignment with SGBP, Shell HSSE development/selection and decision-
Policy– if out of line: look to divest – Some dedicated NOV technical staff making -significant own, or joint,
(~2-3)allocated to the asset– possible studies
– Focus on engagement at OPCOM level short- term secondment of staff in key
areas. – Frequent review of performance–
–Accept operator strategy for the financial and operational metrics–
asset(s), check compliance only, report – Draw on functional staff pools to ensure delivery
by exception resource specific initiatives/projects
– Greater allocation of dedicated Shell
(technical) staff to asset, preferably
in integrated teams otherwise for
“shadow” work

– Second Shell staff to operator in order

to drive progress and performance

3.6.5 Application of Shell Standards

The application of Group policies and standards in JVs is determined by the degree of influence Shell has
over the JV. Some are always applicable, particularly those related to SGBP and HSE Policy.

[Link] Shell General Business Principles and HSE Policy

The Shell General Business Principles require that Shell companies seek mutually beneficial relationships in
Joint Ventures and promote the application of the business principles. The ability to promote the principles
effectively is an important factor to enter into or remain in the Joint Venture.

The Shell HSE Policy requires that we use our influence to promote the policy in NOVs, and the Group
Annual HSE Council provides additional substance as to how this should be done.

There are three possible approaches to SGBP and HSE Policy for Joint Ventures:
− the preferred position is that the NOV adopts the Shell general business principles and HSE Policy for
the Joint Venture;
− failing that, the Joint Venture should have its own statement of general business principles and HSE
Policy that is the same in all material respects to that of Shell; and
− if neither of the first two positions are achievable, the minimum requirement is that Shell promotes the
general business principles and HSE Policy in Joint Ventures.

Opportunity and Project Management Guide RESTRICTED | 117

Chapter 3 | Project Strategy

In existing NOVs, the extent of what the Shell Company can achieve will depend on the constitutive
documents of the Joint Venture company and any shareholder agreements. In the case of unincorporated
Joint Ventures, it will depend on the Joint Venture agreement or JOA. If the JV itself cannot be prevailed
upon to adopt appropriate policies, the other co-venturers should be urged to do so and, if possible within
the terms of the agreement, the Shell team should make support for further agreement conditional
upon this.

Specific requirements such as policy adoption, HSSE data submission and target setting cannot be enforced
on NOVs. The approach is one of active encouragement, but the Shell Company needs to avoid taking
on any additional exposure of a legal or reputational nature, or instigating anything that may complicate
relationships with NOV co-venturers.

Further discussion and practical guidance on the subject of SGBP and HSE Policy as applied to NOVs can
be found in Appendices 12 and 13 of the Shell Group HSE Management System Guide.

[Link] Standards and Processes

Shell standards can be applied to a greater or lesser extent in NOVs depending on the JOA, the Operator
and other factors.

The flowchart in Figure 3.6.2 provides guidance on how Shell standards and processes should be applied
to Joint Ventures. Where non-conformances arise, guidance is provided on how to resolve these issues,
including:
− escalation;
− reporting exceptions as part of the Business Assurance Letter process; and
− divestment of the JV.

In Joint Ventures where operatorship will transfer between two partners, extra attention to the systems and
processes to be adopted is required. If Shell is to be the Operator during the Production phase, we should
ensure that the facilities design will meet our requirements. This may require detailed technical discussions
regarding Shell’s key policies and standards in order to assess whether the requirements are being adequately
reflected in the facilities design.

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Chapter 3 | Project Strategy

Figure 3.6.2 Application of Shell Standards and Processes in JVs

This area typically applies to unincorporated Start

JVs and Incorporated JVs that are under Shell This area typically applies to unincorporated JVs
A and Incorporated JVs both not under
control; plus the Shell Governance and TSA
activities undertaken for JVs that are not under operationalcontrol (nuoc)
operational control
Is the
SHELL work done OPERATOR
by Shell or the
Operator?
C B
Includes
Apply Risk-based framework to identify focus
Governance,
areas and learning opportunities for Shell.
support to the
Highlight mandatory issues such as SGBP
Operator and
and HSE policy.
Technical Service
Agreement (TSA)
activities Is
D the work G
Assess the Operator activity afocus
YES NO No further
deliverables,compare area or learning
action required
with Shellsystems opportunity
and processes. for Shell?

Are
deliverables
and processes
YES equivalent to those in NO
All Shell Shell and/or inter-
systems and national, industry
processes apply E standards? F
Identify proposals for Use influencing tactics;
Are improvement and including escalation
there any present to Operator within Shell and
Practices Worth Operator's organisation.
NO Replicating that could YES
improve Shell systems
and processes?
Are
proposals
YES NO
accepted by the
Operator?

Does
Shell want YES
Monitor and
confirm to pursue the issue
implementation further?

Share good NO
practices
and learning
with Is the
the relevant risk acceptable
Shell YES NO
for Shell to remain
community in the JV?

The risk is
Does
unacceptable
NO it warrant J to Shell -
YES
an exception in
divest asset
the Business
I Assurance
Letter?
Include an
Accept the "exception" in
status and the Business
This is where the move on Assurance Letter
"value added" from
theShell NSOV team Many issues
End End is mainly achieved End End End end up here End End End

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 Non-Shell Operated Ventures | 3.6

Symbol Notes
This flowchart outlines the process for compliance with Shell standards and processes in cases where the JOA is
A already in place and the JV is already established.
In the case where the JOA is under negotiation, the process EP.41 “Develop New Business” of the EP Business Model
V4 outlines the requirements.
Periodically review risk assessment to refresh focus areas. Include issues arising from audits and reviews. Document
issues that have been closed out to provide an audit trail.
B For NOVs this risk assessment and the response to the identified key risks forms the basis of the NOV strategy for the
JV. Refer to Chapter 4 of the Opportunity Framing Facilitator’s Handbook and EP.05 – Govern Non-operated Ventures
for more guidance on developing an NOV strategy.
T&OE Global Processes 19 and 20 apply for Opportunity Framing and Risk Management.
Note where the JV has a Standard Service Agreement (SSA) with SIEP to provide technical and other support, Shell
standards and systems apply in the similar way to JVs under operational control.
C Shell can be the Technical Advisor to a JV without having operational control. In such cases Shell systems and
processes would normally apply to the JV.
The Shell Corporate Management System outlines Shell’s view on how an Operator should manage a JV on behalf
D of partners. When assessing the deliverables from an Operator, the Shell NOV team will use the Shell systems and
processes as reference standards, good practices to compare with the Operator’s deliverables.
The focus of the NOV Team in Shell will be to assess the Operator’s work in the light of the decisions to be taken and
E
the risk-based framework that Shell has developed for its interest in the JV. Are they fit for purpose? Are adequate
business controls in place?
The ability to influence the Operator is one of the key competencies necessary when working NOVs; this is normally
best achieved by undertaking solid technical analysis within Shell prior to presenting the suggestions to the Operator.
Starting with a good strategic alignment within the JV concerning each co-venturer’s objectives is one good way to

F minimise the possibility of issues arising that require escalation.

There are other approaches that can also be taken. These can include pressing for a vote at the Management
Committee or attempting to link globally with another issue where the Operator wants a concession from Shell etc.
The degree of escalation will depend on the severity of the issue under consideration.
Frequent staff turnover on the Shell side has been identified as a significant barrier to effective influencing of the
Operator.
If the work activity is not a focus area and it has not been identified as a learning opportunity for Shell, no further
action is required with respect to assessment of the Operator deliverables.
G
There will still be requirements for Shell with respect to discharging Shell’s obligations under the JOA including
payment of the partner share of the joint account expenses.
Deciding whether to pursue the issue further with the Operator will require a reassessment of the risk assessment to
H decide if the issue could really add value or prevent value erosion. If the issue is more of a “nice to have”, escalation
is likely to be counter-productive.
Specific guidance on how to report exceptions can be obtained from the Business Assurance Letter (BAL) focal point in
each Region.
In arriving at an assessment as to whether an issue is a qualification, individuals need to apply an honest, subjective
self-appraisal as to the adequacy of the controls concerned, which may also include a judgement on the materiality
of the potential qualification at an asset, regional or business level. In this context, materiality is considered as to how
an auditor would rate compliance with the statement concerned. Statements should not be qualified if a “Low” or
“Medium” severity is anticipated (refer to Shell internal audit severity ratings and definitions).
Assurance providers need to focus on reporting material issues. Advice and guidance on what may be considered
material enough for a qualification can be obtained from your own line focal point as well as the EP focal points
referred to above.
I If there are any issues that arise that could potentially lead to a qualification against any statement at the regional,
EP and/or Group level, then it is expected that these will receive prompt management attention, irrespective of the
Assurance Collection Tool (ACT) reporting dates. The line should also ensure that a corresponding remedial action
plan is in place for all qualifications.
Any qualifications and exceptions should be reported in a clear and concise manner that will enable an uninformed
third party to quickly grasp an understanding of the importance of the issue under consideration. Should any
significant qualification arise during the course of preparing your submissions that you consider warrant early
attention of senior management, then you are encouraged to contact them at the earliest opportunity (a “no surprises”
approach).
The Group Joint Venture Guidelines provide additional guidance to the risk-based approach that should be adopted,
J including examples of some circumstances when Shell should consider withdrawing from a JV.

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Chapter 3 | Project Strategy

3.6.6 Managing the Joint Venture

All those involved in the venture leadership team should be familiar with the rights and influence points
that Shell, the Operator and other partners have. Understanding how these rights could be applied to
increase our influence is essential and we should exercise these rights as and when necessary.

The key challenge is firstly to understand clearly what rights we have as the non-operating partner, but
then to consider how we wish to exercise them most effectively. Understanding how the Operator and
other partners can use their rights to negatively impact our interest also needs to be understood.

Influence can generally be best achieved by developing good working relationships with the Operator’s
team. For this reason it is particularly important to have staff continuity.

At each stage of the ORP there will be a slightly different focus for the NOV Team, which may include
seconding Shell staff into the Operator’s project team. Figure 3.6.3 shows typical technical deliverables at
each phase of the ORP that may be developed by the Shell NOV Team.

Figure 3.6.3 Typical Technical Deliverables

NON SHELL OPERATED VENTURES

creating value (expectations) assessing the value value delivery
IDENTIFY & ASSESS SELECT DEFINE EXECUTE OPERATE

assess do ability assess readiness prepare execution deliver promises deliver value

Risk assessment at Updated Shell NOV Updated Shell NOV Updated Shell NOV
Venture set-up Governance Strategy Governance Strategy Governance Strategy

Shell NOV System Selection FEED Technical Review project

Governance Strategy technical Assurance Assurance execution progress

Technical input to FDP review PEP review Assess local content,

Agreements HSE and SD aspects
Draft contracting Review and assess of Execute activities
Review Technical strategy review OR&A plan
Support Agreements Review and assess
Shell independent risk, Shell independent risk, OR&A plan
cost and schedule cost and schedule
assessment assessment Updated Shell
independent risk, cost
Provide GIP advice to and schedule
Regions with respect assessment
to engineering & PM,
risk, cost and schedule
ranges

This approach assumes a single project type of JV rather than a multi-asset business. A pragmatic approach
should be adopted in line with the strategy developed to identify the key focus areas.

Co-venturer liaison can occur on several levels, depending on the phase of the ORP and the nature of the
business. These meetings include progressively more senior management within Shell and the Operator
organisation, and may include the following:
− monthly meetings with prime contractors – one representative from co-venturer to attend;
− quarterly roll-up for the entire project – Shell shareholder representative to attend;
− quarterly meeting of a Joint Management Team or sponsor group – attendees to include:
− project organisation leadership team;
− Shell decision executive representative; and
− senior management from each of the main contractors;
− twice per year meeting between Shell accountable director and co-venturers.

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 Non-Shell Operated Ventures | 3.6

The extent to which Shell can influence the Operator is determined partly by the formal agreements and
the interaction between the Operator and Shell, and all levels in the organisation. These issues can limit the
effectiveness of the technical influencing efforts.

3.6.7 Technical Support Aids

The following reports will aid the technical support that EP Projects provide to the Regions for NOVs:
− EP Projects NOV Management Guide provides the high-level framework for managing NOVs during
project development and execution. A cornerstone in the guide’s preparation has been the adoption of
the NOV strategy framing. The guide is a tool for a standardised approach to managing the challenges
presented by the NOV aspect of Shell’s EP business.
− Best Practice Guide for Secondees examines Shell’s previous experiences with secondment. Key
learnings gained from interviews with former secondees are described. The report will help projects
develop their strategies for preparing, placing and supporting secondees.
− Joint Operating Agreement Technical Review Process identifies the key technical provisions
recommended for new JOAs. The report contains actions and technical recommendations reviewed by
the legal, tax, finance and commercial teams.
− Organisation Effectiveness documents the outcome of a survey conducted to ascertain the effectiveness
of the EP Projects NOV Team in assisting the Regions with managing the technical aspects of NOV
projects.
− EP Projects NOV Process Roadmap provides practical guidance in managing NOVs during project
development and execution. It highlights the key focus areas and deliverables for the Operator and the
Shell team during the development of an NOV project from Phase 2 to 4 of the ORP.
− EP Projects NOV Livelink Site provides additional support for NOVs.

3.6.8 Links

EP Projects NOV Livelink Site

[Link]
html?func=ll&objId=653931&objAction=browse&sort=name

EPBM version 4.0 EP Business Model

[Link]

Global Process 20
[Link]

Joint Venture Guidelines

[Link]

EP - HSS SP and E Policies and Standards (the White Book)

[Link]

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Chapter 3 | Project Strategy Non-Shell Operated Ventures | 3.6

3.6.8 Links (continued)

Group HSE Management System Guide

[Link]

HSE Policy
[Link]

SGBP
[Link]

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Shell Exploration & Production

2006 EDITION OPPORTUNITY AND PROJECT MANAGEMENT GUIDE

CHAPTER 4
identify & assess

select

define

execute

operate

Restricted
 p
This document will be maintained live on the Shell EP intranet site. The Web-based document will be the
controlled version. Copies or extracts of this manual, which have been download from the website, are
uncontrolled copies and cannot be guaranteed to be the latest version. Further electronic copies can be
obtained from the Global EP Library, Rijswijk.

This document is classified as Restricted. Access is allowed to Shell personnel, designated Associate Companies
and Contractors working on Shell projects who have signed a confidentiality agreement with a Shell Group
Company. ‘Shell Personnel’ includes all staff with a personal contract with a Shell Group Company. Issuance of
this document is restricted to staff employed by a Shell Group Company. Neither the whole nor any part of this
document may be disclosed to Non-Shell Personnel without the prior written consent of the copyright owners.

Copyright 2006 SIEP B.V.

The copyright of this document is vested in Shell International Exploration and Production B.V., The Hague, The
Netherlands. All rights reserved. Neither the whole nor any part of this document may be reproduced, stored
in any retrieval system or transmitted in any form or by any means (electronic, mechanical, reprographic,
recording or otherwise) without the prior written consent of the copyright owner.

Design by Graphics, Media & Publication - Rijswijk/P04883

EP No. EP 2006-5500
Revision 0.0
ECCN Not subject to EAR-No US content
Author EPT - OE, Capital to Value - Robin Hutchinson and Henk Wabeke
Approved By Matthias Bichsel
Owner Matthias Bichsel, Executive Vice President, Technical
Document type Business Control Document - Company Standard
Distribution EP Leadership Forum All Staff in project-related functions
Available as downloadable copy for all staff

Publication History
EP No. Date Extent of Revision Approved by
2001-5500 Nov 2001 First Issue of OPMG, complete rewrite of PMG EP96-3000 Robin Hutchinson
2006-5500 June 2006 Chapter 4 re-written Henk Wabeke

Other chapters in the OPMG expected to be revisied to complete EP 2006-5500

Chapter Title
1-3 Introduction to the guide / Opportunity Realisation Process (ORP) / Project Strategy
5 Project Activities and Deliverables, per Phase
6 Opportunity Realisation Process (ORP) Toolbox

Other C2V Publications

Document Title EP Number Approved By
OF Opportunity Framing Facilitator’s Handbook EP2003-9107 Peter D.A. Baruch

ORP Opportunity Realisation Process EP2006-5501 Henk Wabeke

VE Value Engineering EP2004-9016 Philip Tudhope

CI/CS Development Concept Identification and Selection EP2005-9014 Henk Wabeke and
Facilitator’s Handbook Niels van Dijk
PHC Project Health Check EP2005-9047 Henk Wabeke and
Qassim Kitany

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 Contents |

4
PROJECT CONTROLS

4.1 WORK PLANNING AND SCHEDULE CONTROL 13

4.1.1 Definitions 13
4.1.2 Work Breakdown Structure 14
[Link] WBS Levels 15
[Link] Costs, Time and Resources 15
4.1.3 Schedule Development 15
[Link] Planning Levels 16
[Link] Activity Planning Tools 17
[Link] Optimisation 17
[Link] Risk Analysis 17
[Link] Checks and Reviews 18
[Link] Owner’s Schedule Development Responsibilities 18
4.1.4 Existing Assets and Integrated Activity Planning 19
[Link] Prioritise Activities 19
[Link] Multi-activity Planning 19
4.1.5 Schedule Control 21
4.1.6 Schedule Data Feedback 23
4.1.7 Links 23

4.2 COST ESTIMATING AND COST CONTROL 24

4.2.1 Capex Estimating 24

[Link] Accuracy 24
[Link] Class of Estimates 26
[Link] Group Estimating Tools 26
[Link] Components of a Capital Cost Estimate 27
[Link] Purpose of Estimates 33
[Link] Stretch Targets 34
[Link] Assurance 34
4.2.2 Opex Estimating 35
4.2.3 Cost Control 36
[Link] Work Breakdown Structure 37
[Link] Monthly Cost Forecast Updates 37
[Link] Contingency Management 38
[Link] Exchange Rates 38
[Link] Scope and Change Management 38
4.2.4 Cost Data Feedback 39
4.2.5 Links 39

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» PROJECT CONTROLS

4.3 ECONOMIC ANALYSIS 40

4.3.1 Principal Steps for Economic Analysis of Projects 40

[Link] Step 1 – Production Profile 40
[Link] Step 2 – Capital Expenditure for Field Development 41
[Link] Step 3 – Operating Expenditure for Operating Field 42
[Link] Step 4 – Annual Net Cash Flow 42
[Link] Step 5 – Discounted Cash Flow 43
[Link] Step 6 – Cumulative Cash Flow 44
[Link] Step 7 – Profitability Indicators 44
[Link] Step 8 – Sensitivities 45
4.3.2 Economics Requirements in GIPs 45
[Link] Economic Metrics 45
[Link] Uncertainty and Risk Analysis for Larger Projects 46
[Link] Description 47
4.3.3 Links 47

4.4 CONTRACTING AND PROCUREMENT 48

4.4.1 Pre-award 48
[Link] The Pre-award Process 48
[Link] Commercial Challenge 49
[Link] Contract Document Preparation 49
[Link] Evaluation 50
[Link] Award 50
4.4.2 Post-award 50
[Link] Claims 51
[Link] Insurance Claims 52
[Link] Close-out 52
4.4.3 Procurement 52
[Link] Lifecycle 52
[Link] Best Practice 53
4.4.4 Links 56

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» PROJECT CONTROLS

4.5 QUALITY MANAGEMENT 57

4.5.1 ISO 9000:2000 57

4.5.2 Opportunity/Project Quality Plan 58
[Link] Project Quality Policy 58
[Link] Roles and Responsibilities 59
[Link] Critical Systems and Activities 59
[Link] Additional Criteria 59
4.5.3 Activities Through the ORP 60
[Link] Identify and Assess 61
[Link] Select 61
[Link] Define 61
[Link] Execute 62
[Link] Operate 62
[Link] Abandon 62
4.5.4 Process: Design, Construct and Modify Facilities 63
[Link] Basic Quality Objectives 63
[Link] Specification Control 63
[Link] Interface Control 64
[Link] Change and Deviation Controls 64
[Link] Design Review 65
[Link] Design Verification and Validation 65
[Link] Design Contractor Appraisal and Evaluation 65
[Link] Operational Readiness and Assurance 65
[Link] Weight Control 65
[Link] Construction Management 66
[Link] Handover to Commissioning 66
[Link] Commissioning Control 66
[Link] As-built Drawings 66
[Link] Handover to the Asset 67
4.5.5 Well Delivery Process 67
4.5.6 Supply Chain Management 67
[Link] Supplier Appraisal 67
[Link] Procurement Control 68
[Link] Quality Control 68
[Link] Materials Control (Procurement) 68
[Link] Appraisal and Use of Inspection Contractors (Execution Phase) 68
[Link] Supply Chain Assurance Plan 68
[Link] Attributes 69
4.5.7 Practices Worth Replicating 69
4.5.8 Links 70

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» PROJECT CONTROLS

4.6 HEALTH, SAFETY, SECURITY AND ENVIRONMENT 71

4.6.2 Management of Contractors 74

4.6.3 The Hazards and Effects Management Process 74
[Link] Engineering 75
[Link] Operations 75
4.6.4 Risk Assesment 75
4.6.5 Risk Tolerability 77
4.6.6 Demonstrating ALARP 77
4.6.7 Security Risks 78
[Link] Threat Assessment 78
[Link] Vulnerability 79
[Link] Impact 80
[Link] Currency 80
4.6.8 Emergency Response (ER) 80
4.6.9 HSSE Deliverables in the Various Phases of the ORP 80
4.6.10 Links 81

4.7 INFORMATION MANAGEMENT 82

4.7.1 Information Management Roadmap 82

[Link] Identify and Assess 82
[Link] Select 83
[Link] Define 84
[Link] Execute 85
[Link] Operate 86
4.7.2 Applications Management 87
[Link] Project Information Model 87
[Link] Identify and Assess, and Select 88
[Link] Define 88
[Link] Execute 88
4.7.3 IT Infrastructure 89
[Link] Define 89
[Link] Execute 90
4.7.4 Links 90

4.8 CHANGE MANAGEMENT 91

4.8.1 Detection and Ownership 91

[Link] Detection of Changes 91
[Link] Ownership: An Element of Governance 92
4.8.2 Authorisation 92
4.8.3 Implementation 92
4.8.4 Transition Management 93

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4.9 REPORTING, MONITORING AND ANALYSING 94

4.9.1 Reporting 94
[Link] Principles 94
[Link] Objectives 95
[Link] Deliverables 95
[Link] Portfolio Reporting 95
[Link] Additional Reports 95
[Link] Frequency 96
4.9.2 Monitoring and Analysing 96
[Link] Qualitative and Quantitative Analysis 96
[Link] Project Assurance Plan 96
[Link] Performance Indicators 96
4.9.3 Sample Reports 98
[Link] Progress Against Plan 98
[Link] Gantt Chart 98
[Link] Progress S-curve 99
[Link] Milestones, Waterfall Charts 100
[Link] Cost Performance 100
[Link] Washing Line Graph 101
[Link] Cost S-curve 102
[Link] Deliverables Reporting 103
[Link] Resourcing 105
[Link] Risks and Opportunities 106
[Link] Presentation 106
4.9.4 Links 106

4.10 ASSURANCE 107

4.10.1 Required Activities 107

[Link] Detection of Changes 107
[Link] Ownership: An Element of Governance 107
[Link] Project Execution Review (PERT) 108
[Link] Operations Readiness and Assurance (OR&A) 109
[Link] (Quantitative) Benchmarking of Project Performance 109
[Link] Qualitative Benchmarking of Project Per4formance through the Project Health Check (PHC) 109
[Link] Other Audits and Reviews 109
4.10.2 Discretionary Activities 110
[Link] Value Improving Practices 110
4.10.3 Links 111

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CHAPTER 4

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Chapter 4 | Project controls
4
PROJECT CONTROLS

4.1 WORK PLANNING AND SCHEDULE CONTROL

4.2 COST ESTIMATING AND COST CONTROL

4.3 ECONOMIC ANALYSIS

4.4 CONTRACTING AND PROCUREMENT

4.5 QUALITY MANAGEMENT

4.6 HEALTH, SAFETY, SECURITY AND ENVIRONMENT

4.7 INFORMATION MANAGEMENT

4.8 CHANGE MANAGEMENT

4.9 REPORTING, MONITORING AND ANALYSING

4.10 ASSURANCE
Chapter 4 | Project Controls

Project Controls provide the framework within Figure 4.1 Project Triangle
which the work is performed (refer to Figure 4.1).
They take into account the strategies formed for Project
the opportunity as per Chapter 3 and then are Strategy

used to control the day-to-day work deliverables

of the project as per Chapter 5. Project Controls

The OPMG recognizes the following Project Work and Deliverables

Project Controls:
− work planning and schedule control;
− cost estimating;
− economic analysis;
− contracting and procurement;
− quality management;
− health, safety, security and environment;
− information management;
− change management;
− reporting, monitoring and analysing,s and
− assurance.

These processes are inter-dependent: the details of the work plan, for example,
depend on the contracting strategy and tactics. Using these processes in
an integrated way is therefore one of the cornerstones of successful project
management.

The OPMG gives an overview of the Project Controls to present a common

approach and provide guidance. The majority of controls are covered in
greater detail in Shell documents and websites referenced throughout the text.

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. However, such references
should be used with care as terminology, as well as certain approaches/
methodologies, are sometimes different and can cause confusion. In case of
discrepancies, the OPMG governs.
 Work Planning and Schedule Control | 4.1

4.1 WORK PLANNING AND SCHEDULE CONTROL

Failing to Plan is Planning to Fail (Alan Lakein)

Work planning takes the project strategies in Chapter 3 and develops detailed activity networks with
timelines and resources to realise these strategies. The objective of work planning is to develop a schedule
for the project that is:
– 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 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.

Further detailed guidance is given in Project Guide 3B Principles of Project Scheduling, which is applicable
to all projects (available through iPMS).

4.1.1 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

Opportunity and Project Management Guide RESTRICTED | 13

Chapter 4 | Project Controls

4.1.2 Work Breakdown Structure

To avoid the schedule becoming an enormous number of activities with unclear correlation between them,
it should be based on a WBS. Creation of the WBS is a critical part of the scope management process, as
the WBS organises and defines the total scope of the project.

The WBS subdivides the project work into smaller, more manageable pieces of work, with each descending
level of the WBS representing an increasingly detailed definition of the project work. The planned work
contained within the lowest-level WBS components, which are called work packages, can be scheduled,
cost estimated, monitored and controlled.

Once developed, the WBS should be consistently applied to project documents and asset data, including
the project schedule, cost estimate and progress/cost control reporting documents. Typical steps in
developing the WBS are:
– divide the assets to be delivered into components (e.g. jacket, topsides, 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.

The primary consideration in developing a WBS should be ensuring that it is fit for purpose. Increasing
levels of detail in the WBS will, up to a point, enhance the ability to plan, manage and control the work.
However, excessive detail can lead to non-productive management effort and inefficient use of resources.
The project team should seek a balance between too little and too much in the level of WBS detail. The
level of WBS detail should also consider the contracting strategy and what level of cost detail will be
available from the contractors.

Other factors that may influence the design of the WBS are the:
– standard cost structures used in SAP Blueprint; and
– granularity of cost data required for asset definition in the financial system.

Individual operating regions may choose to develop local standard WBS templates that are suited to
the type of projects that they execute. Use of standard WBS templates, where possible, facilitates the
comparison and benchmarking of similar projects and also the development of standard cost
estimating tools.

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[Link] WBS Levels

In a simple example, the highest Level 0 of the asset breakdown may be a single development, which in
SAP is termed Project Definition.

This may be subdivided into Level 1 major hardware components (SAP: Project Types) such as:
– drilling platform;
– production platform; and
– pipelines.

These in turn may be divided into Level 2 main components, then into Level 3 systems and finally
into Level 4 tagged equipment items. Branches need only go to the level of detail necessary for effective
management of the work. An asset breakdown to Level 3 would normally be adequate. However, the
breakdown to tagged equipment items is useful for Capex and Opex cost estimating/reporting purposes,
and for planning and scheduling procurement and construction.

The activity breakdown is usually based broadly on the EP Business Model (EPBM).

[Link] Costs, Time and Resources

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 as; for example, the duration of an activity may be
affected by both the number and capability of resources assigned, and may change with different
execution strategies.

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.

4.1.3 Schedule Development

Previous similar project plans and templates may be used to help develop a new project schedule. The
normal steps in developing a schedule are:
– 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.

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Chapter 4 | Project Controls

[Link] Planning Levels

Schedules for controlling and monitoring large projects are produced to different levels of detail. A
hierarchy of several levels is needed for management to control a large project or a series of smaller projects,
either of which may have more than 50,000 sub-activities.

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 (e.g. platform, pipelines or onshore plant)
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 contractor’s domain and are used for
planning, executing and controlling the contractor’s 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 schedules may consist of thousands of activities and are typically updated at least
weekly and in some cases daily.

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[Link] Activity Planning Tools

Specialised project management software is widely used to assist with schedule development and control.
Shell has selected Primavera P3e as the standard project management software for major upstream and
downstream development projects. Microsoft’s Project is also available and acceptable for use on smaller,
less complex projects but many Regions specify P3E for all levels of project planning to allow 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.

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.

[Link] 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”. This mitigates against unrealistic resource
availability assumptions (e.g. early start schedules which often assume “instantaneous” changes in resource
levels that are clearly unmanageable). Such resource levelling often results in a project duration that is
longer than the preliminary schedule, but might be compensated for by taking resources from non-critical
activities. The project team should be closely involved in any such schedule optimisation exercise to ensure
that the schedule stays grounded in reality.

[Link] 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.

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 Shell has selected for schedule risk analysis is
Pertmaster’s Risk Expert.

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Chapter 4 | Project Controls

[Link] Checks and Reviews

The following checks should be applied when performing scheduling activities:
– 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;
– 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/pipelay vessels) 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.

A formal Estimate and Schedule Assurance Review (ESAR) should be done prior to each of Value
Assurance Reviews (VARs) 2, 3 and 4 for all projects with total Capex greater than $500 million (including
drilling and regardless of Shell share), and at least prior to VAR 4 for projects larger than $ 200 million.

[Link] Owner’s 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 front-end 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.

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 owner’s schedule
and subsequent schedule analysis can be performed as efficiently as possible.

While it may be possible to automate the monthly update of the owner’s schedule by having it linked to
the more detailed contractor schedules, it is recommended that this technique be used cautiously, as such
links are difficult to maintain and it may be difficult to understand which changes in the contractors’
schedules are driving the changes in the owner’s schedule. The owner’s scheduler needs to be able to fully
understand what is changing in the contractors’ schedules and how these changes are impacting the critical
path of the overall project schedule.

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4.1.4 Existing Assets and Integrated Activity Planning

When implementing a project on an existing asset, the project management task is to:
– integrate the new project activities with the other approved activities to be executed on the asset, taking
account of resource constraints; and
– prepare the detailed execution procedures.

The execution of projects on existing assets has a significant potential impact on Shell’s overall
performance, especially in the areas of production attainment and Health, Safety and Environment (HSE)
exposure. Global Process 03 Integrated Activity Planning provides guidance on this topic.

[Link] Prioritise Activities

The parties involved in compiling an integrated plan for an existing asset will each have their own goals
and targets:
– asset holder - production targets;
– activity manager - schedule and cost targets; and
– resource holder - utilisation targets.

In order to agree on an optimum integrated project or activity plan, they need to establish criteria for
prioritising approved activities. Typical priority ranking criteria (not in any order of importance) are:
– impact on income (e.g. production deferment);
– HSE benefits;
– technical integrity;
– increased oil/gas production; and
– prospect UTCs (e.g. $/BOE).

Setting priorities allows planners to fit projects into the overall asset, resource and activity work plans.
Once the priority of the project has been established, the project activities should be assigned and activity
milestones identified. The use of resources should be optimised in the context of total cost of ownership,
e.g. balancing resource utilisation with shutdowns and costs.

The Integrated Activity Plan (IAP) for each asset can in turn be reviewed and amended by Operating Unit
management to align the asset IAP with corporate strategies, objectives and overall resource constraints.
During these reviews, it is often necessary to make changes to the IAPs. This will in turn force changes to
ripple down through the hierarchy of individual plans. Thus the integrated planning process is a “bottom-
up” followed by a “top-down” process.

[Link] Multi-activity Planning

Creating a multi-activity plan allows a manager to roll up and integrate a number of individual activity
plans, each of which incorporates different constraints. This manager could be:
– a Project Manager who has a number of smaller projects to manage and control;
– the Asset Manager who has to control various maintenance, drilling and engineering activities on a
facility; and
– the Resource Manager controlling the activities of a limited resource pool (e.g. seismic interpreters or
drilling rigs).

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Chapter 4 | Project Controls

The multi-activity plan can be used to smooth resource usage or to assess “what if ... ?” scenarios.
The steps involved are an extension of those previously discussed under schedule development for
preparing an activity network:
– time analyse the activity networks to determine the critical activities and the float on non-critical
activities;
– revise or optimise the network for a different completion date. This may require some sequential
activities to be rescheduled into parallel activities;
– re-analyse the network for resources and time, using different combinations of activities and logic until
the required resource/time constraints are met (refer to Figure 4.1.1);
– discuss and agree the multi-activity schedules with affected asset holders; and
– once agreement is reached, produce a project baseline schedule for the new project(s) (refer to Figure
4.1.2). These can include projections such as milestone charts and S-curves of man-hours, value of
work done, percentage completion etc, against which progress will be monitored and controlled.

Figure 4.1.1 Schedule Analysis

Resource
Project 1 requirements
Multi-project bar chart

Initial multi-project Total

schedule results available
Project 2 in an unachievable
resource requirement
Project 3

Project 4

Project 5

Time Time

Resource
Project 1 Levelling resource to requirements
Multi-project bar chart

suit total available Total

requires change to available
original project
schedule

Project 5

Time Time

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Figure 4.1.2 Project Schedule

% WT progress
activities
of total to date
overall progress curve

100
x x x x x 13.6 16.3

x x x x x 14.2 68.4
80
Key:
plan
x x x x x 11.0 70.9 actual

percentage progress
forecast
60
x x x x x 18.3 64.5

x x x x x 14.8 33.9
40

x x x x x 18.6 6.2

20
x x x x x 9.5 45.3

totals 100 43.8

0
2005 2006 time now 2007

O N D J F M A M J J A S O N D J F M A M J J A S O N D
early start x x x x x x x x x x x x x x x x x x x x x x x x x x x
late start x x x x x x x x x x x x x x x x x x x x x x x x x x x
target plan x x x x x x x x x x x x x x x x x x x x x x x x x x x
actual progress x x x x x x x x x x x x

The multi-project plan reflects the boundaries and constraints within which the Project Manager has to
execute the project.

4.1.5 Schedule Control

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.

Details on Schedule Control can be found in Project Guide 6 (accessible through the iPMS) whilst external
advice can be found in Section 6 of the PMBOK.

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 steps on schedule (or cost) control are:

– establish 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.

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Chapter 4 | Project Controls

Project Guide 6 (accessible through iPMS) provides a typical breakdown of what aspects of the project
need to be controlled in which phase of the project. The Project Control Plan should be part of the Project
Execution Plan (PEP) and should contain:
– organisational issues (including roles and responsibilities);
– the WBS;
– reporting (both within the project and into the project);
– systems and procedures; and
– interfaces.

A few of the key principles and concepts of schedule control are summarised below.

Monthly Schedule Updates

The basic process for schedule control is to measure and analyse actual performance and progress, and then
use that information as the basis for regularly updating the project schedule. Typically, and on a monthly
basis, the project team is responsible for developing and updating the integrated project schedule (Level 2
schedule) and also the more detailed Level 3 schedules for the major phases of the project.

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 owner’s schedule and subsequent schedule analysis can
be performed as efficiently as possible.

The monthly schedule updates should show the current schedule in relation to the baseline target schedule.
Typically, the format of the schedule updates also shows the percent complete for each of the activities.

The most important aspect of the monthly schedule update is that it clearly communicates to the project
team and other stakeholders the current forecast of the project completion date or other key milestones
such as first production. The schedule activities need to be logically linked such that any slippage in critical
path activities results in a corresponding slippage in the project completion or first production date.

A schedule contingency activity should be added to the Company deterministic plan to provide a forecast
50/50 date. This activity duration should be run down as the risks of the project reduce.

Progress Measurement and Tracking

The project team needs to develop and agree on progress measurement procedures with the contractors
prior to commencement of the work. The progress measurement must be based on physical progress
on deliverables.

Planned progress as a function of time for the major components of the project should be agreed upon
with the contractor(s). The planned progress for each major component should be depicted as an S curve
and these S-curves should be updated monthly to show actual progress versus the planned progress.

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Milestone Tracking
An excellent method of monitoring a project schedule is to establish several interim milestones in the target
project schedule and then track the actual performance in accomplishing these milestones. Examples of
interim milestones are:
– critical drawing delivery;
– award of critical contracts;
– critical equipment delivery;
– critical fabrication;
– erection or installation events; and
– first production.

These interim milestones should be selected and established prior to FID and then monitored throughout
the project execution phase.

Monthly comparisons of milestone dates are a useful way to follow trends and slippages, especially in the
initiation phases of projects.

4.1.6 Schedule Data Feedback

It is important for the continuous upgrading of the quality of Shell projects in general and the project
estimating and control systems in particular that all relevant data regarding cost and schedule are gathered,
recorded and fed back at the end of each distinct phase of the project to the Project Services group in the
service companies. Feedback of this data is a responsibility of the project team.

4.1.7 Links

External Advice
[Link]

Global Process 03
[Link]

Principles of Project Scheduling

[Link]

Project Guides:
[Link]
(select: OGP Management System; select: Project Guides)

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Chapter 4 | Project Controls

4.2 COST ESTIMATING AND COST CONTROL

This section considers the aspects of capital cost (Capex) and operating cost (Opex) estimating for
opportunities and projects.

4.2.1 Capex Estimating

This section outlines the Group Cost Estimating Policy and is applicable to all business sectors. The
consistency and quality of estimates is vital to the businesses. The quality of an estimate is largely
determined by the following:
– the associated risks and opportunities of the project should be recognised and reflected in the estimate;
– the project scope definition or development scenario being considered should be as complete and as
accurate as possible. A significant part of the total capital expenditure of a project can be ownerís costs,
which are often overlooked. A separate Project Guide covers these aspects;
– a well-considered and sufficiently detailed Project Execution Assessment/Strategy (PES)/PEP or Project
Implementation Plan (PIP), as appropriate for the development phase, should be available even in
preliminary format for early estimates;
– complete and correct local cost data, at an appropriate level of detail, should be
available covering:
– equipment;
– bulk materials;
– labour and engineering services;
– offshore installation and hook-up services;
– fabrication yards, drilling rigs and services;
– other relevant data should also be sought such as:
− import restrictions;
− duties and taxes applicable;
− local content targets;
− etc.; and
– adequate contingency levels, based on the risk profile of the project and historical performance data,
are being used. For example, an analysis of cost growth in one of the regions during 2005 showed
a fairly consistent cost growth of 30% between Gate 1 (Initiation) and Gate 4 (Final Investment
Decision (FID)).

[Link] Accuracy
The quality of an estimate should not be confused with its accuracy. Within the Shell Group, the accuracy
of an estimate is defined as the percentage range, above and below the 50/50 estimate, of the 10/90
estimate and the 90/10 estimate, and is illustrated in Figure 4.2.1. In this diagram, the accuracy range
about the 50/50 estimate is +a2%/-a1%. While a1 may be equal to a2, this is not necessarily the case.

Since there is an 80% chance of the final expenditure being within the accuracy range quoted, the accuracy
of the estimate is said to have an 80% confidence range.

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Figure 4.2.1 Expenditure Estimate Accuracy

Probability of estimate overrun

90%

50%

10%
-a1% + a2%
Accuracy

under expenditure over expenditure

Estimate in money
The 50/50 or P50 estimate has a 50% confidence level (i.e. there is an equal chance that the as
built cost of the project will show an over or under expenditure) and is the median of the range of possible
final expenditure outcomes. It is obtained from the base estimate, including allowances, plus
the contingency.

The 10/90 estimate is that estimate which has a 10% chance of final expenditure being less than the estimate
and a 90% chance of final expenditure being greater than the estimate (the 90/10 estimate is the reverse).

The overall estimate breakdown is illustrated in Figure 4.2.2.

Figure 4.2.2 Percentage Chances of Cost Deviation

90/10 90 % Chance that

cost will not be exceeded

50/50 Equal Chance of cost

exceeding or being lower
Contingency
Base
10/90 Activity Allw. 90 % Chance that
cost will be exceeded

Identified
Scope

The 50/50 estimate should be used as the basis for the analysis of development economics and, at FID, as
the target for project expenditure. While it is usually also used for budget setting, a higher confidence level
(e.g. 90/10 estimate) may be used for business reasons.

The 90/10 estimate is usually used for a sensitivity analysis of field development economics.

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Chapter 4 | Project Controls

[Link] Class of Estimates

Cost estimates of progressively increasing accuracy are required at every stage of the Opportunity
Realisation Process (ORP) and provide the basis for economic analyses, management decisions, budgets
and cost control. The level or type of estimate required and its accuracy are predominantly determined
by the purpose of the estimate, the maturity of the project and the quality of data available with which to
prepare the estimate.

While the accuracies quoted are indicative, for more detailed estimates (Levels 3 and 4) a cost risk
analysis should be performed, which will define the accuracies as an output of the analysis. In special
circumstances, where such an analysis is waived, the accuracies tabulated here may be used.

For EP projects the following levels of estimate can be distinguished:

Level Typical Accuracy Description Project

1 +40/-25% Screening At end of Identify & Assess

2 +25/-15% Study At end of Select

3 +15/-10% Budget At end of Define

4 +10/-5% Control During Implementation

For Gas & Power (GP) and Downstream projects, the following types of estimate can be distinguished:
Type Typical Accuracy Description Project

0 > +/-30% Preliminary Order of Magnitude At end of Pre-scouting

1 +/-30% Order of Magnitude At end of Scouting

1 +/-30% Updated Order of Magnitude At end of FED 1/Basis of Design

2 +/-20% Study At end of FED 2/Basic Design

3 +/-10% Budget At end of FED 3/Definition

4 +/-5% Budget Control During Implementation

[Link] Group Estimating Tools

The following estimating tools are the current Shell Group standards. It is expected that they be used
throughout the Group unless project-specific issues dictate otherwise. This ensures consistency of methods
and enables competing projects to be compared on a consistent basis.

CES
Used for Level 1 and 2 estimates, for both offshore and onshore EP projects including drilling.

CAPCO$T
Used for all estimates prior to the budget control estimate for onshore process facilities for all
business sectors.

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Detailed Estimating Tool

An evaluation is currently ongoing to identify a suitable third-party estimating tool to allow detailed
estimating for preparing budget and control estimates at Levels 3 and 4 (in conjunction with CAPCO$T
for onshore facilities). At Level 4, the tool will enable estimates to be produced from a Material
Take-off (MTO).

GDPT and GoM Planning Tool

These tools are used for development planning purposes to prepare Level 1 EP estimates for deepwater
prospects. Cost Estimating System (CES) and these tools are compatible.

@RISK
This is the recommended tool for performing cost risk analyses.

Custom Spreadsheets
It is recognised that many custom made spreadsheets and other tools for specific discipline or service
contract estimates exist within the Group. These can sometimes be valuable and are acceptable, provided
that the group estimating principles are followed, including verification of developed estimates. Custom
spreadsheets should have an identified focal point responsible for regular maintenance and updates.

Estimators should be aware of the limitations of such tools, particularly when used by non-discipline
experts or when transferred between Regions.

[Link] Components of a Capital Cost Estimate

A capital cost estimate consists of a number of elements, namely the base estimate (including allowances),
contingency, market adjustment and escalation. More detailed descriptions and discussion are contained in
Project Guide 3A.

Base Estimate
This is the estimate based on the defined project scope, including ownerís costs and the development/
activity allowances, but excluding contingencies, market adjustment and escalation. The base estimate is
in Constant Value Money (CVM) and its reference date must be quoted. Note that for some estimates,
predominantly in EP in the early phases of development, the base estimate includes the market adjustment,
which directly converts the estimate to Money of the Day (MOD).

Allowances
Activity or development allowances are integrated into the base estimate to cater for statistically known
unforeseen elements, such as:
– bulk material growth;
– minor quantity increases;
– rework;
– inefficiencies;
– etc.

Allowances are determined by historical project performance data and remain the responsibility of the Cost
Engineer. For brownfield and revamp projects, higher allowances are recommended for scope growth that
typically occurs. The primary reason for such increases is that the scope definition during these preliminary
phases is focused on the primary change(s) being made to the facility. In reality it is common that such
changes have an impact on other equipment and connections both upstream and downstream of the
change (due to condition of the equipment, pressure rating changes etc.). For typical values, refer to Project
Guide 3A.

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Chapter 4 | Project Controls

Contingency
Contingency is added to the base estimate to allow for incomplete project definition and specific project
risks to bring the estimate to a 50/50 level. It covers implementation changes and field changes but does
not normally include major scope changes, such as changes in throughput or concept/layout, unless these
are well defined risks and intentionally included in the project cost risk analysis. Note that such scope
ranges are only ever considered for EP projects. Contingency generally decreases over the project phases as
the scope definition and execution strategies mature.

Contingencies can be assessed in either of two ways, deterministically or probabilistically.

Estimates of Type 0, 1 or 2 should normally adopt the deterministic method described below since, due
to the lack of project definition and the inability to fully identify and quantify associated risks, a full
probabilistic cost risk analysis cannot be done. Where such an analysis has been performed, this should be
used to determine contingency and accuracy.

For any Type 3 estimate of a project with a total Capex of greater than US$ 200 million, a full probabilistic
cost risk analysis should be performed to determine both the contingency and accuracy of the estimate. In
special circumstances, where such an analysis is waived, the deterministic method should be used.

For smaller projects (<US$ 200 million), which are generally brownfield or revamp projects at existing
assets, the deterministic method can be used, although a full cost risk analysis is preferable.

Deterministic Method for Assessing Contingency

The assessment of contingency should take into account the generic risk profile of the project, based on
Technical, Economic, Commercial, Organisational and Political (TECOP) aspects of the project.

For the purposes of the cost estimate, the TECOP aspects are broken down into individual topics, as
shown in Figure 4.2.3, and, in consultation with the project team and specialist advisors, a score of 1 to 5
for each TECOP category (1 being low risk, 5 being high risk) is assigned. The scores are then multiplied
by the category weighting to achieve a weighted score and these are summed to arrive at an overall score of
between 10 and 50. The weightings are intended to reflect the relative cost influence of each
TECOP aspect.

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 Cost Estimating and Cost Control | 4.2

Figure 4.2.3 Weighted Scores

Score Weighting
Topics that Underlie Weighting
Category Low Risk (1) High Risk (5) (1 to 5) Score
Cost Risk B
A (A x B)
Technical Project Location Heartland New Frontier

Climate Temperate Arctic

Onshore Environment Level/Open Swamp/Mountainous

Offshore Environment Shallow Water Ultra Deepwater

Subsurface Well Defined with Based on Seismic Only

Good Well Coverage 4
Scope Definition at Well Defined Poorly Defined
Project Phase
Existing Infrastructure Good/Reliable Non-existent

Project Complexity Simple Complex

Technology Conventional New/Unproven

Economic Schedule Realistic/Risked Aggressive/Unrealistic

PSC/Buyback Terms Favourable Unfavourable

1
Local Wage Inflation Similar to OECD Significantly Higher
than OECD
Currency Single Major Currency Multi-currency, including
Minor Currencies
Commercial Operatorship Group Operated NOV with
Inexperienced Operator
Contract Strategy Optimum, Determined Undefined
via Workshop
Contractor Competition >4 Bidders Single Source
2
Contractual Interfaces Single Contractor Many Contractors

Risk Ownership Contractually Clear Unclear and

and Appropriate Inappropriate
Local Content None High (>50%)
Requirements
Organisational Cross-business Integration Single Business/ Multi-business
(Note 1) Region
Number of Locations Single Location Multi-location (>3)
during Execution 1
Project Team Competence Good Poor
and Continuity
Political Geographic Politics Stable Chaotic/Civil Unrest

Host Government Passive Active/Obstructive

Involvement
Joint Venturer Involvement Passive Active/Obstructive

Permitry Minimal Major Effort with

Unclear Requirements
2
NGO/Environmental No issue Major Issues

Community Issues No issue Significant Investment

Industrial Relations Good Militant Trade Unions

Reputational Issues Standard High Profile

Total
Notes:
(1) Organisational issues affect ownerís costs primarily (refer to Project Guide 2).
(2) It is not recommended that the average score of the topics per category is made.
(3) If a category has certain topics that are irrelevant (e.g. subsurface or water depth for downstream),

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Chapter 4 | Project Controls

Figure 4.2.4 (EP Projects) and Figure 4.2.5 (GP/Downstream Projects) are plots of contingency percentage
versus weighted score. The contingencies are higher for EP projects due to the increased uncertainty
associated with subsurface activities and activity durations (such as drilling and offshore installation).
Offshore GP projects (e.g. FLNG), which contain a significant EP content, should normally adopt the EP
contingency plot.

The resultant contingency should be applied, although in specific circumstances a modification (up or
down) can be made, provided it is fully justified and agreed by the project DRB.

EP Score
Figure 4.2.4 EP Contingency Percentage versus Weighted Contingency
60%

50%
Level 1
40%
Contingency

Level 2
30%
Level 3
20%

10%

0%
10 20 30 40 50

Risk Score

Figure 4.2.5 GP/Downstream Contingency Percentage versus Weighted Score

G&P Downstream Contingency
50%

40%
Type 0
Contingency

30%
Type 1

20%
Type 2

Type 3
10%

0%
10 20 30 40 50
Risk Score

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 Cost Estimating and Cost Control | 4.2

Probabilistic Cost Risk Analyses

A probabilistic cost risk analysis can be a powerful tool and one major benefit is to focus the teamís
attention on the potential upside and downside of the quantities and rates, and what might cause these
to change. The model can indicate where the major uncertainties in a project are, what their cumulative
impact is, and where mitigation should be concentrated. Project Guide 3C, Cost and Schedule Risk
Analyses, provides detailed guidance on the process, and the major steps and key issues are
reproduced below.

While the risk management process results in a risk strategy and risk management plan, it does not fully
provide the information required for cost risk analyses, since the outcome in terms of cost and schedule
impacts are not sufficiently quantitative to be directly modelled. It is strongly recommended that a separate
workshop and/or interview session be undertaken to build the model. Ideally, a Cost Engineer, who is
independent and not a project team member, leads this and the subsequent risk analysis. It is important to
recognise interdependencies (or correlations) between potential events, as well as the cost impact of each
event. Failure to do so will lead to an incorrect estimate and estimated accuracy .range.

The model is constructed using a holistic approach whereby the overall cost impact of each potential event
is determined. Next to all the identifiable risks being modelled, there are two other inputs required:
– A schedule risk analysis should always be performed prior to the cost risk analysis, since ìschedule
drives costî and not vice versa. The schedule distribution should be translated into a cost risk input
distribution (usually based on cost per month under or over run) and added to the model. Note that
it is important to filter out any schedule impacts that have already been costed in the building of the
main model.
– All projects encounter events that were unforeseen during development and execution, and are not
included in the cost risk model. Such events are described as ìunknown-unknownsî and a separate
distribution added to the model. The range of the distribution is a matter of judgement and will
be greater for ìNew Frontierî type projects, and should be determined by the Cost Engineer in
consultation with the project team and other relevant persons. The deterministic TECOP profile can
be used as a guide in determining the ìunknown-unknownsî risk profile.

Having built the model, a Monte Carlo simulation should be run which will produce a cost risk
distribution for the project, from which the 50/50, 90/10 and other estimate values can be obtained (refer
to Figure 4.2.6.) Before the final issue of the results, it is recommended that the results are checked to
determine whether the outcome appears reasonable. Comparison with, for example, the accuracies and
contingencies obtained by the deterministic method would highlight any obvious anomalies, which can
then either be explained or corrected. However, simply changing the model to meet expected (or desired)
results, without understanding the underlying reasons for the discrepancy, is not acceptable.

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Chapter 4 | Project Controls

Figure 4.2.6 Total Project Cost

Total Project Cost
100%
Probability of NOT Exceeding

50%

Base Cost: 50/50 Cost: 90/10 Cost:

$295 million $364 million $470 million

0%
200 250 300 350 400 450 500 550 600 650
$ Million

Market Adjustments
For cost estimators, whose role is to provide estimates for the Capex spend for all prospects and projects, it
is vital that a consistent approach is adopted for handling market uncertainties that is appropriate for each
business but that provides the following:
– A realistic assessment of Capex for a given scope in a specific execution timeframe with risks (including
market) and accuracy bands properly assessed and reported.
– A consistent philosophy for assessing and ranking long-term prospects and opportunities.

It is very important that the estimator does not speculate on market movements but adopts a standard
approach. It is also important that Project Managers, commercial teams and decision makers understand
the basis for the estimates that are developed and why they may change over time.

In general terms, the philosophy for market adjustments is as follows for all business sectors (EP, GP and
Downstream), but specific guidance will be provided on an annual basis on market scenarios and the
Engineering/Procurement/Construction (EPC) market:
– Projects with FID within 2 years. These projects should be estimated based on current market
conditions, with short-term forecasts utilised where available.
– Projects >2 years from FID. For these projects, economic screening and portfolio ranking estimates
should be estimated using market conditions consistent with the economic revenue assumptions. This
is based on the premise that market conditions are correlated to oil and gas price (with a time lag)
and, since long-term revenue assumptions can be significantly different to current prices, ensures that
good prospect opportunities are not lost due to an onerous market with low revenue assumptions (or
conversely, to ensure that poor opportunities are not chased in a favourable market with high
revenue assumptions).

For business planning estimates (and often for economic sensitivity analysis), current market conditions
should be used with short-term forecasts, where available.

For any project subject to a bid or negotiation in the short term (e.g. licence bidding, NOC negotiation),
estimates should be based on current market conditions, with short-term forecasts utilised where available.

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EPC Contractor Market

When demand is high, EPC contractors become more selective regarding the customers they are prepared
to serve, the projects that they are prepared to bid on, the degree of commercial/financial risk they are
prepared to shoulder, and the premium they will seek for carrying the risks assigned to them. Significant
bid mark-ups, compared to Company cost estimates, particularly in New Frontier locations, can occur.
The phenomenon is particularly acute when there is a limited number of bidders and/or a tight execution
schedule. Advice on the current situation, and how to incorporate the climate in cost estimates, will be
provided annually.

Escalation
Once the project estimate of the required confidence level has been established, the expenditure of cost
over time can be determined. This expenditure profile should reflect not only the durations associated with
design, procurement, construction etc. of the individual hardware items but also the various lead times as
dictated by the overall project schedule.

Each estimate is specified in a certain base currency, usually either US dollars or the currency of the
country where the facility will be erected. However, certain activities and sourcing associated with the
project may be executed in currencies different to the base currency.

MOD estimates are necessary for the forward planning of capital expenditure, setting budgets and input to
the economic model. In order to arrive at an MOD estimate (if it is not directly derived by the assessment
of market adjustment, see above), the various elements of the currency basket are adjusted for escalation
with their own percentage, depending on the forecasted progress/expenditure curve for the specific
element, and then converted to one currency applicable to the specific location. Group planning can advise
exchange rates and specific country inflation rates for specific years. If these are not available for specific
countries, then the estimates should be converted to the base currency at the current exchange rate and
Purchasing Power Parity assumed.

Note: Purchasing Power Parity assumes that there is a constant real terms exchange rate between currencies
that, in MOD terms, changes in proportion to the differences in escalation rate.

[Link] Purpose of Estimates

Cost estimates can be used for a number of purposes, the most common being as follows.

Concept/Process Selection
These estimates are used to compare alternative options during the Identify & Assess and Select phases. It
is important that the Cost Engineer works closely with the other members of the project team (Concept
Engineer, Subsurface Engineer, Well Engineer) during these phases.

Usually only technical scope is estimated on the assumption that ownerís costs and, perhaps, Outside
Battery Limits (OBL) scope are similar for each case. The choice of market scenario is normally
unimportant, provided that the estimates being compared are consistent.

It is important that these estimates are not quoted as total project estimates or used in economic
evaluations, since the scope estimated is not the full project scope and the market scenario selected may
be inappropriate.

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Chapter 4 | Project Controls

Economic Evaluations
During the definition stages of the project (pre-FID), the project is subjected to stage gate approvals.
The estimate at these key points is used as an input into the economic evaluation of the project, which
often determines whether the project will progress to the next phase. Economic evaluations mid-phase are
sometimes also required for portfolio ranking exercises.

It is important that the full scope (including ownerís costs and OBL) is included in the estimate. For long-
term projects with >2 years to FID, market conditions consistent with the revenue assumptions are to
be used.

Business Planning
The annual Business Plan encompasses a 10-year forward plan and includes projects both less than and
more than 2 years from FID. In order to avoid inconsistencies, all estimates should be prepared using
current market conditions. It is important that the full scope, including ownerís costs and OBL, is
included in the estimate.

Budget Setting
At FID, the estimate is used to set the project budget, which is quoted in the Group Investment Proposal
(GIP). Unless otherwise agreed by the business, budgets are set using the 50/50 estimate, although the
90/10 estimate should also be quoted in the GIP. However, particularly for large projects, the additional
sum that comprises the 90/10 estimate (sometimes referred to as ìoverrun allowanceî) is sometimes reserved
by management to cater for project overruns. Its release normally requires a separate GIP.

The estimate (and GIP) should include the full scope for the project, including ownerís costs and OBL.

Counter Estimates
Counter estimates can be prepared to check estimates prepared by others e.g. operating companies
or engineering contractors for the total or parts of scope. In this instance, the same scope and market
assumptions as the estimate to be checked should be incorporated.

Company Estimates for Commercial Tenders

These estimates are used for comparing the bids received from the contractors and, sometimes, for use
in ìopen bookî negotiations with a specific contractor. In both cases, just the contract scope should be
estimated, using current market conditions with no contingency (i.e. the base estimate).

[Link] Stretch Targets

It is good practice to establish stretch targets on cost and schedule as a challenge to the team to perform
better than the 50/50 estimates.

In order for stretch targets to remain a stimulating challenge and not become a demoralising burden, there
needs to be a clear distinction between the teamís ìcontractî with management (i.e. the 50/50 estimate) and
the stretch targets. The ìcontractî should be based on comparable benchmarking (i.e. outcomes achieved
by others either externally or internally) whereas stretch targets should be established that will challenge the
team to do things in more effective ways than previously.

[Link] Assurance
All projects with a Capex exceeding US$500 million should have an independent ESAR prior to VAR 2,
VAR 3 and VAR 4.

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 Cost Estimating and Cost Control | 4.2

For projects with a Capex between US$100 and US$500 million, an ESAR is required prior to VAR 4.
All GP and Downstream estimates should follow the verification and approval process in line with the
Global Solutions Project (GSP) Business Group Management Manual.

4.2.2 Opex Estimating

Formerly, economic models relied on a simple ratio of Capex to define the associated lifecycle operations
costs and 2% to 8% was commonly used. This gave two distinct problems:
– there was no real accuracy and comparison between Capex/Opex in concepts; and
– there was a discontinuity in the lifecycle at start-up, with no real baseline with which to measure
operations performance.

For Levels 1 and 2 cost estimating, CES now incorporates algorithms based on percentage Capex
(dependent on the hardware items) that are sufficient at this level for economic evaluation. However,
ideally at ORP Phase 3 and no later than Phase 4, activity-based costing of the Asset Reference Plans
(ARPs) should be employed. This provides a comparable level of rigour to the Opex estimate as that given
to the Capex. The methodology includes:
1 Personnel requirements:
– identify owner and contractor personnel required per operation request activity per asset (onshore and
offshore).

2 Resource tariff rates developed for:

– personnel (onshore and offshore) both Company and contractor;
– equipment and materials:
- subsurface/surface facilities;
- movables/consumables; and
- decision support/telecom/ICT;
– maintenance/operations;
– services:
- subsurface/surface facilities; and
- transport/utilities/supply base;
- product export/transport;
- deferment; and
- BOE x No. days x production rate.

3 Cost activities:
– collate 1 and 2 into an activity cost model and categorise:
- personnel;
- materials;
- services; and
- deferment.
Note: The deferment assumptions usually represent double cost penalties. These include:
- safeguarding technical integrity;
- preventative and corrective maintenance;
- production operations;
- surplus capacity;
- field development; and
- vtechnical and other support.

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Chapter 4 | Project Controls

4 Cost of operations per annum:

– collate costs in 3 against scheduled activities per annum.

5 Planning assumptions:
– document planning assumptions in terms of:
– personnel;
– materials;
– services; and
– deferment.

The more accurate the Opex model the better. Note, however, that its key use at the concept selection
stage (ORP Phase 2) is for comparative purposes, so absolute accuracy is not required. However, there is
the increasing need to improve the accuracy of Opex estimating in order not to affect project economics
adversely and increasing emphasis is being given to its accuracy at FID. By the time detailed design is
nearing completion, the updated ARP should be providing a detailed, costed operations plan against which
actual performance can be measured over the first two years of operation.

4.2.3 Cost Control

Cost control is essential to project success. It measures and reports actuals relative to the promise made.
An effective control system provides timely warning of variances, to inform stakeholders and allow
remediation. Details on cost control can be found in Project Guide 6, whilst external advice can be found
in Section 7 of the PMI Guide to the PMBOK.

Cost control requires scope and execution control. Signs that the costs are 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 steps on cost or schedule control are:

– establish 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 cost control is most prominent after FID, it is also required in earlier phases when significant
money is spent (for example on Front-end Engineering Design (FEED)). Project Guide 6 provides a
typical breakdown of what aspects of the project need to be controlled in which phase of the project.
The Project Control Plan should be part of the PEP and should contain organisational issues (including
roles and responsibilities), the WBS, reporting (both within the project and into the project), systems and
procedures, and interfaces.

In terms of tools, Shell has standardised on SAP. For the larger stand-alone projects, some additional
tools are typically used to supplement SAPís cost control and reporting functionality. The Project
Engineering Management System (PEMS) is one such tool, developed jointly by Shell and Rider Hunt,
and recommended as the cost control tool of choice for large projects (>US$ billion). Other customised
database tools, such as CCRT and SCCA, have been developed by various parts of Shell to provide
standard cost control and reporting capabilities for smaller projects.

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 Cost Estimating and Cost Control | 4.2

A few of the key principles and concepts of cost control are summarised below.

[Link] Work Breakdown Structure

One of the primary considerations for the design of the WBS for a project should be what is needed to
adequately monitor and control the project. Ideally the WBS will be developed early in the project lifecycle
and then used throughout as a consistent basis for organising the project cost estimate and schedule. At the
latest, the WBS should be finalised during the Define phase, taking into consideration the level of detail
required for estimating, monitoring and controlling the project.

When managing projects in SAP, it is key that the WBS/network activity and contract structures for a
project are developed with input from Finance and Supply Chain, and approved by the Project Manager
prior to any commitments being made.

Finalising and freezing the WBS during the Define phase will ensure that the WBS used for developing
the funding cost estimates is consistent with the WBS used for cost control during execution. This is
critical since a major element of cost control is comparing the latest cost forecast to the budget. If the WBS
used for the funding estimate is not consistent with the WBS that will be used for cost control, then the
funding estimate needs to be recast or reorganised according to the cost control WBS.

[Link] Monthly Cost Forecast Updates

The basic process for cost control is to measure and analyse actual performance and progress, and then
use that information as the basis for regularly updating the expected final cost of the project (Estimate
at Completion). Typically, the Estimate at Completion is updated monthly. Project Guide 6 provides a
detailed methodology that should be used for calculating the Estimate at Completion, which is automated
in the SAP forecasting system.

It is important for reimbursable type contracts to take into account the actual performance and
productivity of the contractor in determining the Estimate at Completion. One technique for measuring
and analysing performance is the Earned Value technique, but this should only be used for activities >20%
and <80% complete.

Another aspect of the monthly cost forecast update is re-looking at the phasing of the project expenditure,
as the expenditure phasing is important for purposes of stewarding the capital budget that is allocated on
a calendar year basis. The SAP and P3E systems have the ability to be linked together to provide phased
forecasts that show these annual and full project forecasts. The annual phasing view is important for the
Company to predict their overall Capex requirements and optimise new opportunity phasing.

The project teamís primary focus during the monthly cost control process needs to be on accurately
updating the final cost of the project and understanding how that compares to the overall cost target or
budget. The ultimate goal of cost control is to complete the project at a total cost that is within the overall
cost promise that has been made to the Company in the Group Investment Proposal. Accurate monthly
updates of the Estimate at Completion provides the project team with the timely notification that is
needed to allow corrective actions to be formulated and implemented when project performance is not
as expected.

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Chapter 4 | Project Controls

[Link] Contingency Management

One component of the monthly update of Estimate at Completion is determining what contingency to
include. As the project progresses, the inherent risks associated with the project should be reducing as work
is performed, actual costs are known etc. Therefore the amount of contingency that is included in monthly
updates of the Estimate at Completion should also be reducing to reflect the decrease in cost uncertainty
that is associated with the reduction in project risks. It is poor practice to retain all of the original
contingency until the very end of the project, or to decrease the contingency too quickly just because the
project is experiencing some early cost growth.

One method of reducing contingency over time is to just apply the original contingency percentage to only
the remaining work, since the Value of Work Done (VOWD) does not require a contingency. Another
method is a contingency run-down curve, where the contingency percentage to be applied to the cost
forecast is reduced over time by a predetermined run-down curve.

On major projects, the project contingency may be controlled by the PDAB and only released to the
Project Manager when justified.

[Link] Exchange Rates

Cost control of a project should be exercised in an agreed currency. Adopting ìfrozenî exchange rates,
being those that prevailed when the budget appropriation was approved, should prevent the effect of
fluctuating exchange rates from masking the true cost performance on a project. The effect of exchange
rate fluctuations on the actual project costs should be reported as a separate exchange rate variation item.

In a multi-project environment this exchange rate allowance is managed centrally by Finance. The budget
is set at the exchange rate appropriate at time of approval but project forecasts are calculated at the
approved annual Business Plan rates and may change through the project lifecycle.

[Link] Scope and Change Management

It is critical that a project has a well-defined and effective process for minimising and managing scope
changes and other types of changes that occur during the life of a project, e.g. design changes, execution
changes etc.

It is important that the cost control system identifies cost increases that are due to conscious decisions by
the project team to make changes in the project scope, design or execution. These types of cost increases
must be differentiated from cost increases that are due to things outside of the project teamís control, such
as unexpected changes in market conditions or poor contractor performance.

Cost increases due to significant scope or execution changes should result in a corresponding increase in
the approved budget for the project.

Cost increases due to minor scope execution changes may not result in a corresponding increase in
the approved project budget, as some level of change is usually accounted for in the allowances or
contingencies of the funding estimate.

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4.2.4 Cost Data Feedback

It is important for the continuous upgrading of the quality of Shell projects in general, and the project
estimating and control systems in particular, that all relevant data regarding cost and schedule are gathered,
recorded and fed back at the end of each distinct phase of the project to the Project Services group in the
service companies.

Feedback of this data is a responsibility of the project team.

4.2.5 Links

Project Guides:
[Link]
(select: OGP Management System; select: Project Guides)

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Chapter 4 | Project Controls

4.3 ECONOMIC ANALYSIS

Economic analysis is usually a key input to any decision to progress an opportunity. In particular, it is a
fundamental part of a GIP. This section outlines current requirements for a GIP and the basic steps in the
economic analysis.

An economic evaluation of an investment opportunity is an assessment of costs and benefits. The degree
of detail or sophistication varies depending on the decision to be made, the size of the investment and
its complexity. While simple tools may be acceptable for screening studies, full economics are required
for GIPs. These must reflect the fiscal and contractual terms applicable to the project, and incorporate
uncertainty/risk analysis across the TECOP spectrum. Certain economic indicators and associated
analyses of risk/uncertainty must be presented in GIPs. These are specified in the EPS/EPF Note on GIP
Guidelines, but the local or regional economics team will provide details of the requirements for economic
evaluations and the recommended tools and techniques. Further guidance can be found in the Investment
Decision Manual and the Global EP Economics Knowledge Base.

4.3.1 Principal Steps for Economic Analysis of Projects

The principal steps for calculating the relevant project cash flows and assessing the economic attractiveness
of a project in EP are to determine:
– production profile;
– capital expenditure for field development;
– operating expenditure for operating field;
– annual net cash flow;
– discounted cash flow;
– cumulative cash flow;
– profitability indicators; and
– sensitivities.

The steps above are expanded upon below using the economics of a field development decision as
an example.

[Link] Step 1 – Production Profile

Taking the draft Field Development Plan as a basis, the reference case production profile for the field
and income stream is derived. This assessment must take into account the expected reservoir conditions,
the optimum ultimate recovery from the reservoir, and the likely oil and gas conservation requirements.
Also, any immediate or future need for reservoir pressure maintenance, secondary recovery or for stricter
environmental requirements must be considered (refer to Figure 4.3.1).

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 Economic Analysis | 4.3

Figure 4.3.1 Example Production Profile

bbl/d
50,000

30,000

10,000

0
5 10 15 20
Years

When selecting the plateau production level, allowance should be made for any national depletion policy
of the host government concerned.

[Link] Step 2 – Capital Expenditure for Field Development

An estimate of the total capital expenditure is required for the development of the field and its phasing.
The capital expenditure peak usually precedes the production peak although the two profiles may well
overlap. At the earliest stage (the first economic assessment of a venture), the profiles may not be perfect,
but they should be as accurate as possible. During later economic assessments, the profiles for capital
expenditure and production should be refined in light of the latest available information (refer to
Figure 4.3.2).

Figure 4.3.2 Example Capital Cost Profile

200
$ Million

100

0
5 10 15 20
Years

Exploration Drilling Offtake

Platforms Facilities Add. capital investment

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Chapter 4 | Project Controls

[Link] Step 3 – Operating Expenditure for Operating Field

Once the capital expenditure profile has been established, the future operating costs of the project can be
estimated. For the GIP, these should be based on the Asset Reference Plan. Potential Capex/Opex trade-
offs should be considered at all times. Due to its earlier phasing, Capex increases/decreases have a greater
impact on project value than Opex increases/decreases. The location, complexity, capital cost and phasing
of the facilities to be installed, together with safety and environmental factors, have to be taken
into consideration.

Other important aspects of operating costs in the case of a field development are, for example:
– total foreseeable number and locations of producing wells (and gas or water injection wells);
– future costs associated with artificial lift; and
– future costs for stricter environmental requirements.

The estimate of operating costs should be refined at each subsequent economic assessment, taking account
of the latest available information.

[Link] Step 4 – Annual Net Cash Flow

Using the operating expenditure estimates with the fiscal and contractual terms, and general economic
parameters (price, inflation, exchange rates), the annual net cash flow for the project can be calculated.
This is the total net amount of cash accruing to the Company each year, after allowing for all cash outlays
for the project and payments to the Government in the form of taxes and/or special contractual payments,
such as profit share or profit participation etc.

Income
The gross income is obtained from the expected volumes of oil, natural gas and natural gas liquids
production, and the estimates of the respective future selling prices. A set of up-to-date Project Screening
Values (reference selling prices) that are to be used in economic evaluations are advised by SIEP each year.

Expenditure
The expenditure takes into account the exploration and appraisal expenditure, the capital expenditure
(Capex) and future operating costs (Opex) as described above. Note that for base case economic analysis,
costs and expenditure are always based on a 50/50 estimate.

The amount of any taxes and royalties payable to a Government should also be deducted. If royalties
are taken in kind they are deducted directly from gross production, in which case the gross income is
calculated “net of royalty”. If royalties are paid in cash they are included as expenditure.

Taxation payments are subject to the provisions of the tax legislation applicable to the project and to any
further agreements between the project company and the Government.

Cash Flow
The net cash flow is obtained by deducting all expenses, taxes and contributions due
to the Government (giving due regard to the timing of such payments) from the gross income estimated
for the venture. The total net cash flow calculated in this manner forms the basis for further economic
analysis of the project (refer to Figure 4.3.3).

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 Economic Analysis | 4.3

Figure 4.3.3 –Example Cash Flow

100

80

60

MOD cash flow

40
Annual cash surplus $ million

20 R.T. cash flow

0
5 10 15 20 Years

-20

-40

-60

-80

-100

Loss of Purchasing Power Return of investment Repayment of investment Investment

[Link] Step 5 – Discounted Cash Flow

The starting point for the assessment of the project’s attractiveness in economic terms is the annual net
cash flow in MOD and local currency. But the cash flow that is the basis for the calculation of economic
metrics and for comparison and ranking of projects globally is the real-term cash flow in $US. This is
calculated from the MOD local currency cash flow by first converting to $US using an appropriate MOD
exchange rate, and then converting to real terms using an appropriate $ deflation factor, as advised from
time to time by SIEP.

In order to derive the key economic parameters of Net Present Value (NPV) and Value Investment Ratio
(VIR), discount the real term $US cash flow at the advised Reference Discount Rate.

In GIPs, NPV and VIR are required to be shown for the base case and for a range of sensitivities that test
the range of potential outcomes. Economic indicators are required for the range of PSVs advised by SIEP.

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[Link] Step 6 – Cumulative Cash Flow

A useful tool for comparison purposes is the cumulative cash flow, which is the progressive sum of the
annual cash flows. The discount rate at which the present value real terms cash surplus of a project
equals zero is called the project’s earning power (or internal rate of return). Figure 4.3.4 shows example
cumulative cash flow curves where the annual real terms net cash flow has been discounted at zero
(undiscounted) and at the Group Reference Discount Rate.

Figure 4.3.4 Cumulative Cash Flow

Project X Cashflow Shell Share, PSV RV-RT Base Case
250.0 1,000.0

200.0
800.0

150.0
600.0

Cum. cashflow ($ mln RT)

100.0
Annual cashflow ($ mln RT)

400.0
50.0

0.0 200.0

- 50.0
0.0

- 100.0
- 200.0
- 150.0

- 400.0
- 200.0

- 250.0 - 600.0
2004 2009 2014 2019

RT Cash Flow RT Capex CUM Cash Flow 7% DR CUM Cash Flow 0% DR

[Link] Step 7 – Profitability Indicators

The profitability indicators derived from the cumulative cash flows and most frequently used in
practice are:
– discounted ultimate cash surplus (= NPV) at different PSVs and discount rates;
– payout time;
– exposure or cash-sink level;
– earning power;
– VIR or Profitability Index – PI = NPV/PV Capex both discounted at the cost of capital;
– exposure (depth of the cash sink);
– breakeven price (the oil price required to yield an NPV of 0 at a specified discount rate); and
– present value unit technical costs (at x% discount rate) = (real terms Capex + Opex discounted at x%)
÷ (production discounted at x%).

Note: Projects are ranked by VIR.

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[Link] Step 8 – Sensitivities

In a sensitivity analysis, each key input parameter of the cash flow is varied in turn around its base case
value in order to judge the impact. Examples of sensitivity analyses are to calculate for a 90/10 Capex
estimate or for Opex +25%. Others might be to calculate for the effect of delaying production by a year or
for a ±20% variation in production rates and recovery.

The results of the sensitivity analysis can be graphically represented in a “tornado chart” or a “spider
diagram” (refer to Figure 4.3.5).

Figure 4.3.5 Sensitivity Analysis

50

40
Ca
pex
End-points (fa
cili
NPV (at screening rate) $ mln

30 at 10/90 ties
) s
values ve
ser
Re
20

Opex
10
Wel
lcost
0

-10
End-points
at 90/10
-20 values

-30
-40 -30 -20 -10 0 10 20 30 40
Percentage change in parameter

In such diagrams, the required profitability indicator is plotted against the percentage change for each
input parameter in turn. It is important that the range of uncertainty shown for each parameter is wide
enough to encompass the 10/90 and 90/10 points.

4.3.2 Economics Requirements in GIPs

The basic requirements for any Group Investment Proposal are to be found in the Investment Decision
Manual. For EP, the relevant economic indicators and uncertainty analysis are as detailed below.

[Link] Economic Metrics

The key economic indicators for any project base case are:
– NPV, VIR and Real Time Earning Power (RTEP) at the specified Project Screening Value (PSV) prices;
NPV, both undiscounted and discounted at the Group Reference Discount Rate
– RT payout time and maximum exposure at PSV RV-RT
– UTC and breakeven price, both undiscounted and at the Group Reference Discount Rate.

The base case will normally be a discrete scenario close to and representative of the project Expected
Monetary Value (EMV).

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Chapter 4 | Project Controls

In addition, these metrics are required for relevant key project sensitivities at the ranking value price, PSV-
RV; sensitivities should be specific to the project, but will always include a high Capex case and low and
high reserves cases that span the appropriate range of outcomes.

All GIPs should include two plots:

– the standard cash flow graph, showing annual RT Capex, and annual undiscounted RT cash flow in
Shell share terms at PSV-RV, together with cumulative cash flows, both undiscounted and discounted
at the Group Reference Discount Rate; and
– a graph showing NPV and VIR as a function of oil (or gas) price (oil price range is $15 to 45bbl and
gas price range is $2 to 7MMbtu).

In all GIPs, the impact of the proposal on financial statements is required. Specifically, the impact on cash
is to be tabulated for 5 years ahead from:
– operations;
– capital expenditure;
– cash surplus;
– NIBIAT; and
– capital employed.

For very large projects, the impact on EP and/or Group ROACE should be shown.

[Link] Uncertainty and Risk Analysis for Larger Projects

For those projects considered above EP Executive Director level, there is additional uncertainty and risk
analysis required for the economics, as follows:
– An analysis of project uncertainty generating NPV and VIR distributions at PSV grid prices, based on
assumptions about key project uncertainties that are fit for purpose and honour relevant subsurface
and cost analyses. From these distributions, the likelihood of specified levels of profitability can
be derived.
– The impact of uncertainty in individual key parameters on the NPV and VIR distributions should
be described and the selection justified by benchmarking – for example against appropriate analogues
(cost, reserves etc.), as should the impact of any optimisation and mitigation measures.
– The type of analysis to derive NPV and VIR distributions may be based on a sufficient number
of discrete project realisations that span the uncertainty range (typical in most field development
planning/concept selection analyses). Alternatively, it may be based on Monte Carlo type analysis
where derived relationships between NPV and key project parameters (generated from economic
models) are combined probabilistically to generate an overall NPV distribution, or the NPV
distribution is derived from a combination of both these analytical approaches.
– In the economics grid, alongside the base case economics the economics of specific low-low, low and
high scenarios should be included at PSV RV-RT, based on the range of potential project NPVs and
representing approximate P95, P85 and P15 NPV outcomes. NPV and VIR metrics need to be shown.
Based on the derived NPV distribution, an estimate of the likelihood of achieving a positive NPV
should be provided (at PSV RV-RT).
– Key sensitivities should be shown on a spider or tornado plot, with end points for each parameter
reflecting roughly its P85 and P15 values. The key sensitivities included will vary according to the
nature of the project and others must be included as appropriate.

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[Link] Description
The narrative should fully describe the selected base case and underlying key assumptions, for example:
– key reserves parameters;
– production;
– Capex and Opex;
– price differences compared with PSVs; and
– exchange rates.

The important risks and uncertainties associated with the project, including both threats and upsides,
should be described. Include a description of flexibility and response plans in place to mitigate the
downsides and capture the upsides. If appropriate, reference any analogues used (cost and reserves) and/or
lessons learned from benchmarking other similar projects and how they have been applied.

4.3.3 Links

Investment Decision Manual

[Link]

EPS/EPF note on GIP guidelines

[Link]
=name

Project Guides:
[Link]
(select: OGP Management System; select: Project Guides)

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4.4 CONTRACTING AND PROCUREMENT

Contracts and procurement account for the majority of project spend, so it is essential that they are
properly set up, awarded and managed. To achieve this they should follow the steps below:
– develop Contracting and Procurement (C&P) strategy and tactics;
– pre-qualify tenderers;
– invite tenders;
– evaluate and award; and
– contract management.

Chapter 3 covers the first two steps of the above. This section covers what should be done to put the
contracts and purchase orders in place, and then manage them. Chapter 5 gives more detailed hints and
tips on typical contracts in the various project phases, such as detailed design, construction etc.

It is best practice to use model terms and conditions whenever they are available, and to make contracts
as simple as possible, though not simpler. Complicated, highly incentivised contracts typically yield worse
results compared to more straightforward contracts with a risk balance between client and contractor that
is roughly in line with the size of the respective balance sheets. Post-award contract management plans
should be in place prior to award.

Contracting and procurement tends to be subject to a local rule set that can have significant schedule
implications. Project teams should make themselves fully conversant with these rules, plan for them and
maintain a dialogue with the authorities in order to avoid surprises and identify blockers well up front.
It is, for example, good practice to engage the authorities during the development of the C&P strategy
and tactics, well before requesting authorisation to approach the market for a particular contract. In some
environments, the approval of the C&P strategy is a mandatory step.

4.4.1 Pre-award

[Link] The Pre-award Process

The key activities leading to awards are shown below (refer to the CP Toolkit for more detail):

Document Preparation – develop Invitation to Tender (ITT) package;

– develop technical and commercial evaluation plans; and
– prepare company estimate.

Tender – issue ITTs;

– manage clarifications/qualifications;
– receive bid documents; and

Evaluation – evaluate technical proposals (including all qualifications);

– manage clarifications;
– develop a short-list of tenderers for commercial evaluation; and

Award – prepare Tender Board award recommendation;

– obtain all internal and external approvals;
– sign contract with successful contractor; and

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Within the project there should be a standardised, clear and formal process around tender preparation,
tendering and award. Often this will be in place within the Region, Operating Unit or Global Technical
Partner but mega projects or New Ventures will have to develop them.

A transparent and well documented tendering process ensures auditability and protects Shell’s position.

All new projects should use the Global Contract Management System (GCMS) to manage their
portfolio of contracts. This will reinforce the contract management standard and provide a mechanism
for developing the contract documentation and the control framework around post-award contract
management.

[Link] Commercial Challenge

The commercial challenge is the way in which a Tender Board (or other commercial approval body) verifies
that all procedural requirements, commercial and business considerations, and the interests of shareholders
and stakeholders, have been properly addressed. The commercial challenge:
– ensures that the proposer thinks about what is being asked for, resulting in better thought-out, more
clearly justified proposals;
– gets senior staff involved, who have a better and wider overview;
– ensures that fewer mistakes are made (or repeated), resulting in a better chance of getting an
optimum solution;
– maintains connection with global initiatives within Shell (e.g. category management, e-procurement);
– provides a clear and transparent process which demonstrates integrity and fairness; and
– drives objectivity and competitiveness.

[Link] Contract Document Preparation

Invitation to Tender
Model forms are available from the CP Toolkit. It is recognised that local deviations to the terms and
conditions will be required.

Experienced and knowledgeable CP staff should help to prepare the tender document to ensure that the
most appropriate form of contract is being used. Major contracts typically comprise the following sections,
which should be appropriate for the scope and risk profile under consideration:
– Section I Form of Agreement
– Section IIA General Conditions of Agreement
– Section IIB Special Conditions of Agreement
– Section III Schedule of Prices
– Section IV Scope of Work
– Section V Administration Instructions
– Section VI Health, Safety and the Environment
– Section VII Quality Management
– Section VIII Technical Specification
– Section IX Drawings and Documents
– Section X Materials, Equipment, Services and Facilities Provided by Shell
– Section XI Contractor’s Plans.

Drawing up an ITT is a team effort, which needs planning and assurance. Particular care should be taken
that boundaries are well defined and that the management of interfaces is well described in terms of scope
and accountability.

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Contract Controls
The following key contract controls should be built into the ITT:
– Communication – formal communication routes should be established between the contractor and the
Company Representative.
– Clearly defined roles and responsibilities – the document should define the roles and responsibilities of
the contractor and the project team.
– Measuring progress and evaluating payment – the mechanisms for reporting progress and translating
this towards payment should be built into the contract documentation from the tender stage on.
All progress reporting mechanisms should include a formal plan for the contract (in the form of a
precedence network with CTR catalogues) and agreed milestones.
– Managing change – the mechanisms for agreeing the cost/time consequences of changes should be
specified in the contract.
– Audit rights – the document should define the audit rights.
– Sub-contracts – contractors are required to impose similar control procedures on their sub-contractors
and vendors.

[Link] Evaluation
Prepare a Tender Evaluation Procedure, including selection criteria, prior to the issue of the ITT, in order
to ensure that the proposal submitted by the tenderer contains the information in a format and structure
that enables transparent and objective evaluation.

The procedure should be finalised and lodged with the Tender Board prior to the bid closing date. Total
Cost of Ownership (TCoO) considerations should be applied when making award recommendations. After
evaluation, the proposed award is presented to the Tender Board for approval.

[Link] Award
After approval, the tender package is converted into a contract document, ensuring that all
pre-award proposals, representations, clarifications, deviations, alternatives and revisions have been
properly incorporated.

Unilateral documents such as tenderers’ clarifications should not be included. Instead, pre-award issues
should be worked into all relevant clauses of the contract. If an interim agreement has been used, its
validity should be monitored. Documentation such as insurance certificates, parent company guarantees
and bank guarantees should be obtained, and the authority of the person signing the document should
be checked.

4.4.2 Post-award

Contract management is the process by which the intrinsic value of the contract is secured and that the
contract’s contribution in the success of the venture is realised. There should be a control framework around
the contract(s) to effectively manage contract deliverables. Both Shell’s and the contractor’s technical and
commercial personnel should fully understand the contract and what is required to make it work.

In administering the contract, ensure that any weaknesses of the contractor recognised at the tender stage
are taken into account and that the Company’s efforts are directed appropriately. The authority of the
Company Representative should be established in writing to the contractor.

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It is best practice to embed the post-award Contract Management Plan in a working session, with
commercial and technical staff from Shell and the contractor present. Such a workshop plays a similar role
as an Opportunity Framing workshop, in that it aligns staff and builds a common forward plan.

The following elements are typically addressed during the workshop (refer to the CP Toolkit for the detail
associated with each element):
– Definition of roles and responsibilities of individuals in the contract relationship. Of particular
importance is the definition of authority levels, for example the approval of field changes. Often,
devolution of authority to working levels prevents burdensome administration and prevents claims and
counter-claims. Transparency should come with devolution to minimise the risk of collusion between
Shell supervisory staff and the contractor.
– Definition of communication protocols, including claims procedures.
– HSE management framework.
– Tracking and approvals of deliverables.
– Definition and management of interfaces.
– Measurement VOWD and detailed invoicing/payment procedures.
– Management of change.
– Management and measurement of local content.
– Performance assessment, possibly linked to incentive payments.

[Link] Claims
Situations can arise where disputes become entrenched and a serious claim situation emerges. When
dialogue and collaboration is lost, project personnel will start to manage the dispute rather than manage
the project and deliverables. It is therefore best practice to try and isolate the dispute from the
ongoing work.

When managing claims, ensure that:

– contractors are treated fairly;
– claims are resolved expeditiously;
– Shell’s position is protected; and
– future relationships with contractors are not jeopardised.

Claims are often best managed by those not involved in the management of the situation leading to the
claim. Often the problem arises through the Shell and contractor organisations, which can be a further
threat to the management of the project as relationships become strained.

A claim may arise out of a contract interpretation or it may be extra-contractual (e.g. the contractor may
ask for an ex-gratia payment). The claim’s legitimacy should be established in a defined time and, if not
legitimate, should be rejected. Early identification and accurate recording and compilation of all relevant
factors are essential to successful claim evaluation. Any proposal to settle a claim outside the terms of the
contract should be advised to the relevant Tender Board. Legal advice may often be necessary before a
claim is finally accepted, settled or rejected.

For all claims:

– assess the worth and merit of each claim – do not be too dismissive too soon;
– consider getting advice on strategy and assistance with resolution;
– utilise external claims specialists as required; and
– involve legal assistance if there are contract interpretation issues or the situation is escalating.

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[Link] Insurance Claims

A procedure for pursuing insurance claims should be put in place and a focal point appointed for making
and pursuing any claim. Documentation of the claim (what happened and the cost of remedying the
problem) should be to a high standard. Initiate a claim immediately if there is cause to believe that the
issue may be covered by insurance, even if it is possible that the policy deductible may exceed the size of
the final cost of the claim.

[Link] Close-out
It is the Company Representative’s responsibility to ensure that a project is properly administered until
such time as the contract is formally closed out. This is particularly important in the period immediately
following completion of the physical work, as this is when those staff who have been closely involved with
the running of the contract begin to disperse.

Close-out activities include:

– finalising payments (base scope, variations, claims, Liquidated Damages (LD) and other liabilities);
– obtaining a close-out certificate for payment obligations;
– identifying at what point the insurable risk changes from the project (contractors’ risk) insurance
to operating insurance;
– determining commencement dates for maintenance guarantees; and
– capturing lessons learned for future contracts.

4.4.3 Procurement

[Link] Lifecycle
The lifecycle of the process is:

– Specification:
- design;
- assessment of what is available in the market;
- detail of requirement; and
- preparation of requisition.

– Assessment of TcoO:
- purchase price;
- commissioning/start-up spares/operations spares;
- vendor representatives for construction/commissioning/operations;
- associated charges, e.g. transportation/duties;
- uptime;
- consumables; and
- maintenance.

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– Purchase:
- sourcing/tendering/PO management;
- ordering;
- expediting;
- third-party inspection;
- factory testing;
- administration/inspection/invoice handling;
- storage; and
- issue.

– Installation:
- construction;
- installation;
- inspection;
- site acceptance;
- commissioning;
- training; and
- surplus disposal.

– Operation:
- start-up;
- operate;
- maintain;
- modify;
- spares management; and
- performance monitoring.

– Disposal:
- decommission;
- salvage;
- recycle;
- modify;
- scrap; and
- sell-off.

[Link] Best Practice

Integration with Engineering/Operations
Procurement should be carried out with the help of competent C&P staff who are:
– fully aware of the technical and commercial factors;
– in continuous communication with the engineers; and
– aware of the project end goals.

The buyers should maintain links with the Global procurement efforts and use the procedures that align
with corporate standards.

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Requisition and Order Planning

Requisition and order planning and scheduling should start as early as FED with respect to long lead items.
The Required on Site (ROS) date for each item should be determined from the project schedule. It is then
possible to work back (using typical lead times for each item, transportation durations, allowances for
bidding, evaluations, approvals and awarding) to the date when each requisition should be produced. This
is usually the main factor for determining the detailed engineering schedule and procurement activities that
will fall on the project’s critical path. A spreadsheet or other program (such as Microsoft Project, SAP etc.)
should be used to schedule and monitor all milestones and deliverables for all requisitions on a project.

Quality of the Requisition

Major purchase orders are team efforts, and should receive adequate management attention from staff
with the requisite overview of the project needs and the commercial awareness to spot gaps or flaws in the
requisition documentation. Innovation should be clearly flagged from the outset. Spare parts (including
insurance spares), vendor representatives, and future maintenance and operational assistance, all complete
with costs, are best dealt with at this stage, rather than negotiated after the award of the purchase order
when there is little or no bargaining power left. The philosophy on contingency quantities for bulk
materials (e.g. pipe, valves, cable) should be clearly addressed and monitored in the requisitioning process.

Quality of Evaluation
Evaluation of bids is a team effort. Delays often occur in the evaluation and award of major/critical
purchase orders because of:
– low quality of the requisition leads to low quality of the bids; and
– low quality of the evaluation plan.

The latter often manifests itself by inadequate handling of the multi-disciplinary aspects of the assessment,
plus poor management of the dependencies (of related orders or activities). Major purchase orders should
have formal evaluation plans with a detailed schedule and identified resources. Best practice is to plan team
events to comprehensively assess groups of related bids in a workshop-style setting, with firm end dates.

Web-enabled Procurement Tools (electronic tendering facilitates working across different project
locations, allowing access to the enquiry and tender documents on line)
On-line bidding forces a very transparent and good quality tender assessment process, and has great
potential for cost reduction.

Conditions of Purchase
Shell EP maintains a comprehensive set of standard conditions of purchase plus all their associated forms,
and projects should apply these. These are available in the CP Toolkit. Project, country or JV specific
conditions can supplement the standard.

Realistic Delivery Times

The delivery times offered by vendors are often optimistic due to their attempts to make an acceptable
offer to the project, which in turn is eager to hear good news. It is better to ask for the best delivery time
prior to advising the vendors of the ROS dates, and based on this information negotiations to arrive at the
ROS dates are more realistic.

Payment Schedules
Whereas cash neutral milestones are preferred for contracting, this is not so for procurement. Self-funding
of (at least large parts of ) the production provides a natural and essential incentive for vendors to pay
priority attention to the purchase orders. Generous milestone payments, including where against certain
guarantees, have a high risk of diverting the vendor’s attention to those clients who pay upon completion.
Vendors who argue strongly against a reasonable level of self-funding could be in financial difficulties.

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Quality Manufacturing
The project quality plan should be used to define the level of activities necessary to ensure quality
(conformance to specification) for all procured items. The activities required will need to be based on
the experience of each vendor’s performance (possibly available from audits and SIEP and not necessarily
on whether they are ISO 9000 approved) and on the criticality of the items. The level of attention could
vary from a full team (resident engineer and inspectors) for a major compressor to acceptance of the
vendor’s own QA/QC system for bulk materials. Quality should be applied to the full deliverable, from
original design drawings through to packing to prevent damage. Quality control and expediting will have
conflicting drivers and therefore should be managed within a single control framework.

Expediting and Delivery

The vendor documentation (needed to complete detailed design) and the actual materials should arrive
by or before the planned dates. Financial incentives can be used, but with care, for critical items. Group
experience with incentives is mixed and there is a concern that they simply add to the overall price. For
many vendors there appears to be a communication gap between the commercial and manufacturing sides
of their organisations, and it may be sufficiently effective to constantly expedite materials with regular site
visits/telephone calls to check that key activities have taken place to demonstrate that the project team is
serious about the required delivery date.

Some purchase orders may be so critical as to require a resident engineer in the vendor’s works and
for items considered critical, it is recommended that the senior line managers (project/engineering/
procurement) establish a personal relationship with the vendor’s senior management at an early stage in the
proceedings, sometimes before award of the purchase orders.

Change Management
The technical change management process should be applied to control purchase order changes. Weak
documentation of change leads to significant problems when closing out commercial aspects of the
purchase order. Both cost claims and schedule claims (to avoid LD) from the vendor can be very difficult
to rebut, particularly if key staff have left the project.

Factory Acceptance Testing

It should be a condition of the purchase order that the Factory Acceptance Testing (FAT) uses the project’s
equipment commissioning procedures (and checklists) as a record of FAT, as this avoids the duplication of
work during the on-site commissioning phase. The engineers responsible for commissioning the equipment
should supervise FAT (alongside work package engineers, if necessary) to ensure they receive hands-on
experience of the equipment and any residual issues that may need to be addressed on site. Operations staff
who may become involved with the equipment should also attend. Residual action items from the FAT
need to be added to site punch lists so that they are not overlooked.

Vendor Representatives
The cost of vendor representatives on a major project will be significant, running into several million
dollars. The terms of service need to be spelled out in the original requisition and costs obtained and built
into the tender evaluation. For administration, legal and tax purposes, separate purchase orders may have
to be issued for vendor representatives.

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Vendors should be engaged in the planning for involvement of their representatives at site during
construction, commissioning and start-up operations so that they buy into the plans and can be monitored
against them. Administrative procedures for call-up of vendor representatives and control of their costs
should be put in place.

Third-party Inspection
An inspection agency may well be needed to inspect materials and equipment manufacture in the vendor’s
works. The costs for such services need to be carefully monitored and strictly controlled.

Spare Part Ordering and e-SPIR

It is not unusual for the purchase of spare parts to become a critical path activity with respect to
commissioning or operations (or both). There should be a fully defined plan for the ordering of
commissioning, initial operation, steady state operation and insurance spares, as follows:
– defining spare requirements;
– developing the procurement plan and the resources to fulfil it;
– preparing interchangeable spare parts sheets (e-SPIR);
– ordering and expediting spares;
– controlling costs and managing payments; and
– receiving and managing spares.

The roles and responsibilities with regard to spare parts selection and procurement are covered in detail in
DEP 63.

Purchase Order Close-out

There should be a plan for the technical and commercial close-out of purchase orders and its
implementation requires careful monitoring, as this can be an onerous task if not adequately planned and
resourced.

Agreement is needed on the amount of purchase order documentation to be passed to Operations (rather
than archived or destroyed) and a clear transfer of the responsibility for warranties management needs to
take place.

Avoidance and Disposal of Surplus

A surplus avoidance and disposal policy and plan should be developed and implemented early so that
minimum costs are incurred due to surplus.

4.4.4 Links

CP Toolkit
[Link]

DEP 63
[Link]

Project Guides:
[Link]
(select: OGP Management System; select: Project Guides)

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4.5 QUALITY MANAGEMENT

One of the prime objectives of opportunity/project delivery is to assure and improve the business integrity
of the asset. Quality can play a significant part in achieving this objective though the rigorous application
of a system for business management (Quality Management). The underlying theme of strong Governance
is an essential element of the Opportunity Realisation Process (ORP).

In the majority of significant major incidents (irrespective of whether they are financial, safety or
operational by nature), there were inherent weaknesses in, and lack of commitment to, the management of
quality throughout the business processes.

Quality management comprises dynamic and multi-attribute characteristics, anchored on a business system
structure composed of:
– top management leadership;
– people empowerment;
– product realisation;
– continuous improvement; and
– customer focus.

For any opportunity/project to function effectively there should be a clear and well thought out framework
of business controls applied to each phase of the ORP. Quality management is one of these controls. It
provides a structure that is aimed at assuring compliance with all opportunity/project requirements.

Quality management is the management of success and the elimination of failure. The opportunity/project
quality management system should account for both hardware and processes.

4.5.1 ISO 9000:2000

This standard has a wide applicability and is therefore written in a general way. Not all the elements of the
standard will apply to a particular opportunity/project, but all opportunities/projects should have a Quality
Assurance (QA) input and a quality plan.

Quality is established and sustained by understanding the customer’s needs and the process and activities
through which they are to be satisfied. The critical activities are documented to clarify responsibilities and
records are kept to allow the process to be audited. Most quality assurance activities can be summarised as:
– establishing what the customers’ needs are;
– planning how to achieve them;
– assessing what activities and processes are critical;
– allocating responsibilities and defining appropriate controls;
– checking methods/results and correcting any mistakes;
– keeping records to document all the above; and
– recording lessons learned to enable continual improvement.

With respect to “customer’s needs”, it is clear that the Asset Manager’s “need” is asset functional integrity.
If the Asset Manager also has line management accountability for all opportunity/project outcomes then
the “need” will also encompass project HSE, cost and schedule outcomes in line with opportunity/project
objectives. If the position does not have these other accountabilities then another appropriate line manager
will have this “need”. The Project Manager will have both “needs”.

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4.5.2 Opportunity/Project Quality Plan

The Project Quality Plan (PQP) is generally developed during the Define phase of the ORP and
is applicable to the workscope carried out during the execution phase. However, depending on the
complexity of the project and the risk rating, the principles of the PQP can be equally applied to the earlier
ORP phases. The Opportunity Roadmap partly satisfies this requirement (refer to Chapter 2 of the ORP).

Every opportunity/project should have a Quality Plan, usually as an integral part of the Project Execution
Plan. The depth and breadth of the Plan will be determined by the risks to be mitigated, and scope and
complexity of the opportunity/project that is being progressed through the ORP phases.

The Opportunity/Project Quality Plan addresses the management system, business controls, and
governance activities that assure the quality of the end deliverable. It is linked to each phase of the ORP.
The Quality Plan should be developed around the ISO 9000 model shown in Figure 4.5.1.

Figure 4.5.1 ISO 9000 Project Management Model

Management System Continual

Improvement

Management
Responsibility
Customer Requirements

Customer Satisfaction
Resource Measure
Management Analysis &

Outputs
Product
Inputs
Realisation Product
Service

Information Flow
EPBM
Value Adding Activities

The purpose of the Quality Plan is to provide all personnel involved on a project (both project team and
other stakeholders) with details of how quality management is applied to all activities during the execution
of the project’s scope of work. It builds on the project activities outlined in the PEP, to provide assurance
they are executed in compliance with specified technical requirements and specifications.

Where relevant, the PQP will be supported by lower tier quality plans, procedures and/or work
instructions specific to discrete parts of the project.

Characteristics of the Opportunity/Project Quality Plan should include the following, as a minimum,
based on risk and complexity of the opportunity/project:
– Project Quality Policy;
– roles and responsibilities in quality management; and
– critical systems and activities.

[Link] Project Quality Policy

As a strategic issue, the quality policy should be approved by the Opportunity Decision Review Board at
Gate 4 and its effectiveness should be reported monthly via the Project Dashboard.

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The policy sets out the quality objectives and strategies in measurable terms. For example:
– QA/QC provisions are defined and planned.
– Contractors’/suppliers’ quality management systems are measured for effectiveness in delivering against
project objectives.
– Use of national and international quality standards is maximised in support of work activities.

[Link] Roles and Responsibilities

This sets out the opportunity/project quality management accountabilities within a Responsibility
Accountability Contribute Inform Execute (RACIE) chart utilising the EPE Competence Management
System (CMS), or EP/OP iPMS format and templates.

It also illustrates and describes the organisational structure and broad organisational responsibilities.

[Link] Critical Systems and Activities

This identifies critical systems and activities and sets out the most important individual responsibilities for
their assurance (risk evaluation should be in accordance with Group guidelines utilising TECOP). A system
or equipment item will be critical if it safeguards the integrity of the facility or impacts upon its ability to
meet its performance objectives. An activity can be critical by reason of its importance to the success of
the project or through risks associated with it. For instance, an activity will be safety critical if it involves
identifying, assessing, controlling or recovering from a hazard – examples are designing a pipeline and
building that pipeline.

It also maps and describes the quality interfaces within and between the main project functions (e.g.
design, procurement, construction) and departments (e.g. Petroleum Engineering, Well Engineering, Field
Engineering, Operations, Contractors) and how these will be managed.

These processes are described in EPBM version 4 which incorporates Group Initiatives such as the T&OE
Global Processes.

[Link] Additional Criteria

There are other key criteria which should be considered, as follows:

Design Management including Technical Integrity

This sets out the design development process including Technical Authorities and Technical Integrity
process that should be applied throughout the opportunity/project. These should be in accordance with the
requirements of Global Process 16 Integrity Assurance, and Minimum Standard No. 11 Technical Integrity
and Minimum Standard No.12 Technical Assurance.

A Technical Assurance Plan is required for each phase of the ORP.

Supply Chain Management

This sets out the process that should be applied throughout the opportunity/project. These should be in
accordance with the requirements of EP No. 13 Manage Supply Chain.

Construction and Commissioning

This sets out the process that should be applied throughout the construction and commissioning stages.
These should be in accordance with the requirements of the EP No. 63 for Wells and EP No. 64
for Facilities.

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The critical activities can be described in a table like Figure 4.5.2.

Figure 4.5.2 Examples of Tables used in an Opportunity/Project Quality Plan

Project Activity Responsibility Matrix

No Activity Standard & Procedure Deliverable Primary Support Comment
Responsibility

Project Execution Strategy

Activity Element Strategy Deliverable Responsibility Support

Procurement

Detail Design

The table should include details of responsibilities, standards, methods of verification and records.
Activities should be controlled wherever possible by reference to specific EP documents, which define the
standard to which the activity is to be performed.

The Opportunity/Project Team Leader should confirm the activity is within the competence of the
individuals or team doing it, or whether any special training or assistance is required. Those responsible
for activities should avoid imposing excessive controls, which infringe on the area of competence of the
staff involved. Records should be kept verifying the completion of critical activities. Often contractors
and vendors are required to retain much of the quality documentation for their product (e.g. welding
radiographs) and their responsibilities in this area should be spelled out in contracts and purchase orders
(refer to Global Process 18 Information Management).

4.5.3 Activities Through the ORP

The minimum quality requirements are identified by each phase, as identified within the ORP, and some
activities may continue through each phase and will be required to be revisited, maintained and/or revised
as necessary.

These requirements are dealt with in more detail in the EP Projects Quality Roadmap (where generic
examples of documents and structures can be found) and within the Technical Assurance
Framework (TAF).

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The minimum quality requirements that should be addressed for each phase of an opportunity/project are
outlined below.

[Link] Identify and Assess

– screen new opportunities for quality aspects;
– identify TECOP quality risks and opportunities;
– identify quality aspects in national and venture regulatory and legislative requirements;
– identify quality risks in:
- appraisal phase;
- subsurface studies;
- wells and subsea studies;
– provide QA input to:
- Project Initiation Report;
- Feasibility Report; and
– identify customer quality requirements in Stakeholder Engagement Plan.

[Link] Select
– review lessons learned and incorporate as necessary;
– develop preliminary Project Quality Plan;
– define quality policy, objectives and strategies;
– provide QA input to:
- Venture/Project Execution Plan;
- Preliminary Field Development Plan;
– provide QA requirements in design ITT documentation;
– provide QA input to contract strategy;
– define quality clauses in contract specification; and
– participate in prequalification of contractors and suppliers.

[Link] Define
– provide QA input to basis for design;
– define QA requirements for FEED;
– provide QA input to design reviews;
– develop overarch Quality Plan to address requirements in Execute phase;
– develop Technical Integrity Verification Scheme;
– provide QA input to:
- detailed design;
- risk register;
- Schedule and Resources Plan;
- finalised Field Development Plan;
- detailed design;
- technical authorities and technical deviations process;
- change control;
– identify quality requirements in interface control;
– identify third-party verification involvement;
– provide quality requirements in fabrication contractor ITT documentation;
– provide QA input to contractor’s tender evaluation;
– establish equipment criticality ratings;
– assess and pre-qualify contractors and suppliers; and
– review Contractor Execution Plan.

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[Link] Execute
– maintain risk and opportunity register;
– provide quality input to detailed design reviews;
– provide quality input into change management process;
– develop final Project Quality Plan;
– develop quality management system;
– develop quality activity plans;
– review contractor’s Execution Plan;
– review contractor’s Quality Plan, inspection and quality documentation;
– provide quality input to vendor assessment;
– establish equipment criticality rating;
– establish QC surveillance of contractors and suppliers;
– evaluate and appoint vendor inspection contractor;
– maintain quality requirements in permits and consents register;
– establish non-conformance structure and tracking system;
– implement audit and review programme;
– monitor implementation of TIV scheme;
– establish and implement vendor inspection programme;
– develop inspection and test plans for use by QC;
– establish and implement factory acceptance testing schedule;
– establish compilation of records for mechanical completion, certification quality records;
– maintain quality input to lessons learned database;
– establish and implement flawless start-up programme;
– complete preparation for handover to operations:
- finalise mechanical completion certificates;
- provide quality input to:
- pre start-up audit;
- start-up plan;
- operating philosophy;
– complete handover certificates for permits and consents; and
– carry out operations preparedness readiness review.

[Link] Operate
– complete handover documentation and records;
– maintain flawless start-up programme;
– maintain permits and consents;
– review lesson learned; and
– provide quality input to post-implementation audit.

[Link] Abandon
– review lessons learned from previous projects;
– provide quality input to:
- abandon risk register;
- pre-qualification of contractors;
- assessment and selection of contractors;
- contractor audits, and
- pre-abandon audit.

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4.5.4 Process: Design, Construct and Modify Facilities

[Link] Basic Quality Objectives

Before a design can be started, key parameters and objectives should be defined in the overall Field
Development Plan (FDP) or Asset Reference Plan (ARP):
– performance requirements, e.g. throughput, product and waste-stream specifications;
– production availability;
– sustainable development, environment and safety;
– statutory requirements;
– operability and maintainability;
– field or plant life expectancy;
– extendibility;
– flexibility; and
– compatibility with existing facilities.

[Link] Specification Control

Equipment and materials should be specified in accordance with Group Standards (Design Engineering
Practices (DEPs)), Company standards or project specifications. Where manufacturer’s standards allow a
lower quality of design or manufacture than specified in the Company or Group standards, the lifetime
cost of accepting such standards should be evaluated before being considered for acceptance and there
should be a challenge of the standards.

Quality requirements in a specification include the following:

– functional specification of performance, operational/maintenance requirements and
environmental conditions;
– regulatory codes and standards;
– essential additional QC requirements;
– Group standards;
– documentation requirements; and
– submission of a Quality Plan.

Specification control consists of ensuring that each specification:

– is complete and has been verified;
– complies with other specifications;
– is compatible with interfacing specifications; and
– contains the necessary quality requirements.

All specifications and standards should be rigorously vetted to ensure their applicability to the product in
mind. Excessive specification is costly, leads to delays and does not ensure that the product is fit for the
purpose intended.

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[Link] Interface Control

Major interfaces exist between:
– disciplines;
– contractors;
– structures;
− modules;
− projects;
− operations and maintenance;
− commissioning; and
− users and sponsors.

It is important to:
− establish controls;
− clearly define workscopes;
− use common design specifications;
− document major interfaces;
− use interface control drawings; and
− nominate responsible individuals.

An Information Management Plan and Document Distribution Matrix should be prepared early in the
project to ensure drawings, specifications etc. are distributed to the correct people as they are prepared for
review and, if necessary, approval. This ensures interfacing disciplines receive the necessary information in
time for proper review and prevents operational staff from being confronted with batches of drawings or
completed designs at a late stage in the project.

A document and drawing numbering system should also be established.

[Link] Change and Deviation Controls

Change can only be controlled when there is a clear definition of the baseline. As the project moves from
concept to detailed design and construction, the data that is “frozen” should be agreed with the future asset
holder and clearly defined. The current agreed configuration should be summarised and maintained in
a controlled document such as a Design Data Book. Each parameter should be formally agreed with the
future asset holder, and the document then represents the design “baseline” for future change control.

The opportunity/project should adopt a formal change and deviation control procedure whereby proposed
changes are carefully reviewed to establish all resultant effects on other designers/disciplines before approval
to proceed is given. This review should take into account TECOP.

Proposed changes which would modify a basic design concept, have HSE implications, increase cost or
adversely affect schedules should be referred to management for authorisation.

All technical deviations should be approved by the designated Technical Authority. Deviations from
specification should be controlled and a deviation register kept for handover to the asset holder.

A sample of a Technical Deviation Request form is held on the EP Projects LiveLink site under
Engineering and Projects (Aberdeen).

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[Link] Design Review

Design reviews include:
− discipline and inter-disciplinary checks carried out to confirm progress, verify completed work and
identify problem areas;
− formal reviews carried out for specific technical purposes, e.g. HAZOP, hazard analysis; and
− milestone reviews carried out by experienced and independent engineers to confirm the project
can advance from one stage to the next, e.g. from concept to detailed design or from design to
construction. (The Value Assurance Review (VAR) process provides part of this requirement but
additional reviews may be necessary.)

[Link] Design Verification and Validation

Design verification and validation should be carried out by experienced and independent engineers
(internal or external) to confirm the project can advance from one stage to the next e.g. from concept to
detailed design or from design to construction. (The VAR process provides part of this requirement but
additional reviews may be necessary.)

These should include as a minimum, the following:

− regulatory requirements pertinent to each location;
− adherence to performance standards;
− EP technical Minimum Standards;
− Group standards; and
− design software.

[Link] Design Contractor Appraisal and Evaluation

Prospective design contractors should be appraised before being invited to tender. Appraisal should include
the contractor’s:
− HSE performance and record;
− experience and expertise;
− competency and resources;
− past performance record;
− business (quality) management system; and
− technological ability.

A Quality Plan should be included in every design contract. Specific requirements for the quality system
and plan, and the agreed Quality Plan, will be incorporated into the contract.

[Link] Operational Readiness and Assurance

Operational Readiness and Assurance (OR&A) (Global Process 12) is a mandatory process on projects over
$100 million with the following objectives:
− Assurance wells and facilities are designed and built taking into account lifecycle operations
requirements.
− Assure “right first time” commissioning and start-up leading to a cost-effective and quick ramp-up to
target operations level (flawless start-up).

[Link] Weight Control

For offshore projects, weight targets should be set early in the design in order to establish allowable
tolerances. As information becomes available, the trends can be used to assess the significance of deviations
and corrective action taken.

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[Link] Construction Management

The project team should carry out a comprehensive assessment of all proposed contractors and suppliers.
The assessment should consider the following:
– business (quality) management systems;
– experience;
– expertise;
– qualifications of their quality personnel;
– past record with similar contracts/orders; and
– reputation.

When selecting a contractor the following attributes should be applied:

– the job specification includes QA requirements;
– the tender list is restricted to formally approved contractors with satisfactory quality systems;
– tenderers submit quality plans with the tender;
– a Quality Plan is required; and
– contractor’s QA is self-implemented but monitored by the project team.

[Link] Handover to Commissioning

On handover of each completed system or subsystem to commissioning, a construction dossier should
have been compiled that includes all information on that system (e.g. as-built drawings, test results, factory
acceptance test outcomes, mechanical completion, vendor documents and data etc.).

[Link] Commissioning Control

It is necessary to verify that the Installation:
– has been constructed as designed;
– meets its performance specification;
– is safe and reliable for operation; and
– design limits have not been violated.

This is particularly important when modules constructed at a number of locations are brought together
on site. Mechanical completion of systems should be confirmed by the completion of checklists prior to
handing the system over for commissioning.

Incomplete minor items should be recorded on punchlists. Commissioning should be executed using pre-
agreed procedures and checklists.

On handover to Operations for start-up, the package of information transferred into the operations records
will include:
– handover certificates and completed checksheets;
– agreed punchlists of minor items to be completed after handover; and
– records of equipment running trials.

[Link] As-built Drawings

The final outcome of the engineering process should be captured on accurate as-built drawings and the
process for obtaining these should be rigorously reviewed and monitored.

A QA check of the following is required:

– completeness of as-built drawings, records and specifications;
– availability of vendor documentation for all equipment; and
– operating and maintenance procedures against experience gained during commissioning.

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[Link] Handover to the Asset

On handover, the information transferred to the asset owner should undergo an audit or review, depending
on project complexity. As a minimum, the following aspects should be quality checked:
– mechanical completion is finalised and punchlist items identified and agreed;
– handover certificates, including all Lifetime Quality Records, technical deviations and concessions, are
complete;
– Verification Scheme fully addressed and understood by the Asset Team;
– FAT records of equipment running trials records are complete;
– completeness of as-built drawings records and specifications;
– vendor documentation for all equipment including, Operating Manuals and spares lists are complete;
– operating and maintenance procedure updates following commissioning experience;
– closure of pre start-up audit actions and HAZOP action closure pertinent to operational activities; and
– completeness of training and records.

4.5.5 Well Delivery Process

The Global Well Delivery Process (WDP) is described in Chapter 5.6 and it explicitly addresses quality
management in all phases of well delivery.

Copies and a summary of the Global WDP, the EPT Wells Management Framework Document and the
EPT Wells Business Plan are available online via the EPT Wells intranet website.

4.5.6 Supply Chain Management

In general most projects will expend circa 85% of Capex with suppliers, sub-contractors or service
providers. It is therefore essential that stringent, robust and effective methods are established to assess,
monitor and control contractors, sub-contractor, suppliers and service providers at a very early stage in the
project life.

The focus should be determined by the perceived and actual risk to the project and measures established to
ensure effective delivery of all commodities, services and materials.

[Link] Supplier Appraisal

Restrict the tender list to suppliers whose capability has been previously established with regard to:
– quality systems;
– technical know-how;
– production capacity/capabilities;
– financial status; and
– safety record.

All suppliers on a tender list should be operating a satisfactory business (quality) system, preferably in
accordance with ISO 9000:2000. However, a comprehensive quality assessment of all proposed suppliers
and sub-suppliers should be carried out prior to issue of a purchase order or contract award for all critical
items based on a risk assessment.

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[Link] Procurement Control

The opportunity/project should ensure that tender documents and purchase orders are complete. A
supplier Quality Plan should be embodied in each major purchase order. The QA and QC inspection
requirements should be incorporated in purchase orders and match the criticality of the items to
be supplied.

[Link] Quality Control

Suppliers/sub-suppliers should take full responsibility for the QC of their products. Performance may be
monitored through any or all of the following activities:
– periodic evaluation of the quality system;
– surveillance by resident or visiting inspectors;
– witnessing of inspection and tests;
– review of QC documentation; and
– audit of QC procedures.

The project should decide on the level and extent of control measures which should be determined by the
criticality rating and by the associated project risk.

[Link] Materials Control (Procurement)

The project should ensure control over material and equipment by ensuring that all material and
equipment is clearly identified:
– verified as conforming to specification;
– properly documented and recorded; and
– properly preserved and stored.

[Link] Appraisal and Use of Inspection Contractors (Execution Phase)

The project should evaluate the level of third-party inspection required. Inspection contractors may
be engaged to verify the quality of supplier products. The project team should establish whether the
contractor has the competence, resources and integrity to fulfil the task

[Link] Supply Chain Assurance Plan

The supply chain is part of the Opportunity/Project Assurance Plan and includes details needed by
contractors, suppliers and sub-suppliers etc. It should identify QC and inspection requirements, and all
regulatory and Inspection Authority involvement.

All project requirements should be included in the EPC, Engineering, Procurement, Installation,
Commissioning (EPIC) and other contracts and purchase orders in order that the contractors, suppliers
and sub-suppliers etc. are aware of the required involvement of an authority, and in the design reviews and
any inspection and test plans in order that they can include for their review and inspection requirements.

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[Link] Attributes
– Identify criticality ratings.
– Controls and procedures for supply chain activities defined.
– Interface arrangements of contractors/suppliers conform to the project specifications.
– Quality requirements included in the project specifications form part of the tender documentation.
– Evaluation of supply chain QA/QC content and requirements.
– Ensure orders placed directly or indirectly for materials, equipment and services are placed with the
most suitable and approved sources.
– Supporting documentation is provided in accordance with the applicable technical specifications and
programme.
– All contractors and suppliers perform quality surveillance and audits on their sub-suppliers and their
sub-contractors.
– Inspection and test plans, procedures and method statements in place for inspection and audit
activities, and to record test results.

4.5.7 Practices Worth Replicating

Learning from others requires three major steps:

– retrieval and selection of lessons learned from previous projects;
– implementation of lessons learned from previous projects into present project; and
– capture the lessons learned from the present project after each major project phase, prompted by the
Project Health Check (PHC).

The Practices Worth Replicating (PWR) system supports the capture and dissemination of good and bad
practices. It contains categories for each recognised technical discipline and multi-disciplinary project
practices.

To facilitate learning from others, the PHC and the project management area in PWR are structured along
the same lines as the OPMG.

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4.5.8 Links

Engineering and Projects (Aberdeen)

[Link]

EP No. 63
ADDRESS REQUIRED FOR EP 63

EP No. 64
ADDRESS REQUIRED FOR EP 64

Global Process 16
[Link]

EP No. 13 Manage Supply Chain

ADDRESS REQUIRED FOR EP NO. 13 MANAGE SUPPLY CHAIN

EP Projects Quality Roadmap

ADDRESS REQUIRED FOR EP PROJECTS QUALITY ROADMAP

EPBM Version 4
ADDRESS REQUIRED FOR EPBM VERSION 4

EPT Wells intranet website

[Link]

Global Process 12
[Link]

Global Process 18
[Link]

Minimum Standard No. 11 Technical Integrity

ADDRESS REQUIRED FOR MINIMUM STANDARDS NO. 11 TECHNICAL INTEGRITY

Minimum Standard No.12 Technical Assurance

ADDRESS REQUIRED FOR NO.12 TECHNICAL ASSURANCE

Technical Assurance Framework

ADDRESS REQUIRED FOR TECHNICAL ASSURANCE FRAMEWORK

Project Guides:
[Link]
(select: OGP Management System; select: Project Guides)

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4.6 HEALTH, SAFETY, SECURITY AND ENVIRONMENT

Exemplary HSSE performance is essential for maximising project value. Critical success factors include:
– clear and unequivocal leadership commitment to HSSE;
– early understanding of project risks and opportunities;
– making all staff and contractors accountable for HSSE, with a shared commitment to continuous
improvement; and
– maintaining a clear focus on HSSE in contractor management.

These factors contribute to establishing a culture where HSSE excellence is the norm and is a core value of
all staff and contractors.

HSSE management is an integral part of successful project management and HSSE considerations should
shape the ORP and drive design. The concept of front-end loading (described in detail in Chapter 2) is
equally applicable here. A clear focus on HSSE from the earliest stages of the project, including timely
initiation of studies, provides a firm foundation for managing HSSE risks throughout the project lifecycle.
4.6.1 Managing Health, Safety, Security and Environment
The Shell Group requires that OUs have a systematic approach to HSSE management with effective
internal controls to manage HSSE risks and facilitate compliance with the Group HSE Policy and
Commitment, the Group Security Standard and HSSE-related standards identified in the annual
assurance statements. In EP these requirements will be met through the implementation of the EP HSE
Management System (HSE-MS), which is an integral part of the EP Business Management System (refer
to Figure 4.6.1).

Figure 4.6.1 Elements of the HSSE-MS within the EP Business Management System (BMS)

EP Business Management System (BMS) Leadership and Commitment

EP Business Management System (BMS)

HSE Control Framework (EP 2005-0100)

HSE Control Framework (EP2005-0100) Policy and Strategic Objectives
HSE Competence (EP 2005-0120)
Organisation, Responsibilities
HSE Competence (EP2005-0120)
Resources, Competency
HEMP (EP 2005-300)
HEMP (EP2005-0300) Risk Management
HSE Controlling Document Mgmt
(EP
HSE 2005-0140)
Controlling Document Management (EP2005-0140)
Processes, Assets
and Standards

HSE Planning (EP 2005-0102)

HSE Planning (EP2005-0102) Planning Corrective Action

Incident Investigation and Reporting

Incident Investigation and Reporting (EP2005-0170)
Implementation
(EP 2005-0170) (Reporting & Monitoring)

HSE Control Auditing (EP2005-0180) Assurance

HSE Auditing (EP 2005-0180) (including Management review)

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In many cases, projects will be able to work within the existing OU HSSE-MS. However, new ventures
and major projects will need to develop and implement their own project HSSE Plan, focusing on those
requirements which are unique to the project, calling on the relevant parts of the controlling management
system for general/common HSSE requirements.

Table 4.6.1 shows the HSSE deliverables at different stages in the project lifecycle.

Table 4.6.1 HSSE Deliverables in the ORP

DELIVERABLE ORP PHASE
IDENTIFY ASSESS SELECT DEFINE EXECUTE OPERATE
Project HSSE Activity Plan 1 √ U U U U
Project HSSE Policies and Objectives √ U
HSE Premises √ U U
Project HSSE Strategies and Targets √ U U U
HSE Philosophy √ U
HSSE input to project documentation, plans and PEP, RP,
PEP, RP, RR,
reviews, reflecting the findings of HEMP (including RR, BOD, LP, RR,
CER, SSR, CSR, OP,
ESHIA) deliverables for the current ORP Phase FR,RR ARP, OP, CSU, OPR, PIR
PIN, RR FDP, CDP,
FDP, PS, FPA, PHR
Sched.
Sched.
Legal Requirements
Overview of legal requirements per project phase √ U U U
Regulatory Compliance Plan (including permits
and consents) √ U

Regulatory Compliance Plan (including permits

and consents) √ √ U U

Third-party permits and approvals required for

current phase are in place and plans for future √ √ √ √ √ √
requirements are adequate
HSSE Management Plans, Management System and Case
Specific HSSE plans and procedures (Company
plans and Company approved contractor plans, √ √ √ √ √
as appropriate)
Facility Design HSE Case (including bowtie
analysis, MOPO) P √

Construction HSE Case (including bow tie

analysis, MOPO) √

Pre-construction HSSE Audit √

Operations HSE Case (including bowtie analysis,
MOPO) √ U

Operations HSE-MS (or amendments to existing

Operations MS) √ U

Operations Procedures and Manuals (including

PTW, JHA) √ U

Operations HSSE Training Programme √ U

MS Audit Report(s) and Management Review
Report √ √

Technical HSSE Deliverables

HAZID (Initial, Main, Construction) Initial Main Constr.
HSSE Hazards and Effects Register √ U U U
HAZOP 2 Coarse Main U
Major Hazard Assessment Report P PerC √
HSE Performance Standards √ U
ALARP Demonstration (including Risk Assessment 3) P √ U
Layout Study PerC P √
HEMP studies requiring preliminary work in the
define phase, project dependent (e.g. FIREPRAN, P √
HAC, FRCS)

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 Health, Safety, Security and Environment | 4.6

DELIVERABLE ORP PHASE

IDENTIFY ASSESS SELECT DEFINE EXECUTE OPERATE
HEMP studies, project dependent (e.g. FEA,
EERA, ESSA, EPR, SCA, PSM, SIMOPs Study) √

Action items from HEMP studies tracked to closure √

Health Management
Strategic Health Management Plan, including
local health facilities and medical emergency B √ U
response
Human factors engineering (human error reduction
and human efficiency improvement in design) PerC P √

Health Risk Assessment (Design) B PerC P √

Health Risk Assessment (Construction) √
Health Risk Assessment (Operations) √ U
Emergency Response, Security, Logistics
Emergency Response Plan P √ √ √ √
Security Philosophy P √ U
Security Assessment P U √ U
Logistics Risk Management Plan (Execution,
Operations) P √ Exec √ ops

Environmental, Social and Public Health (ESH)

Project ESH Profile √
High-level ESH Assessment, including Resource √ PerC
ESH Impact Assessment (including Baseline Study) TOR and √ CO
ESH Management Plan (ESH MP) Scope √ U
ESH MP Actions in Design and Contractor Plans √
Input to Contracting and Procurement Deliverables
HSSE Input to Local Capacity Assessment √
HSSE Input to Preliminary Contract Strategy and
Tender Specs √

HSSE Input to Approved Contractor/Supplier List

(Pre qualification) √ √

HSSE Input to Contract Clauses and Specifications √

Contractor Selection Considers HSSE Performance √

KEY:
√ Deliverable OP Operations Philosophy
ARP Asset Reference Plan OPR Preliminary version is required
B Baseline version is required P Preliminary version is required
BOD Basis of Design PEP Project Execution Plan
CDP Concept Definition Proposal PerC Preliminary documentation is required per
CER Country Entry Report concept (i.e. covering each concept)
CO Closeout Report is required PHR Pre-handover Review
CSR Concept Selection Report PIN Project Initiation Note
CSU Commissioning and Start-up Plan PIR Post-implementation Review
EERA Escape, Evacuation and Rescue Analysis PS Project Specification
EPR Explosion Protection Review PSM Process Safeguarding Memoranda
ESSA Emergency Systems Survivability Analysis RP Resource Plan (including organisation chart
FDP Field Development Plan and manpower estimate)
FEA Fire and Explosion Analysis RR Risks and Opportunities Register
FIREPRAN Fire Prevention Analysis SCA Structural Consequence Analysis
FPA Facilities Pre-start-up Audit Sched Project Schedule (identifying critical paths
FR Feasibility Report and key uncertainties)
FRCS Flare and Radiation Contour Study SIMOPS Simultaneous Operations
HAC Hazardous Area Classification SSR Site Selection Report
LP Logistics Plan U Updated version is required

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Notes:
1. An activity plan that identifies and schedules deliverables to be produced at each project phase, may
include social performance.
2. Final HAZOP is not listed as mandatory, but may be required at the end of detailed design if
significant changes have occurred following the main HAZOP.
3. The chosen risk assessment methodology should be appropriate to the project. For example, QRA is
only mandatory if it is a legal requirement, or if necessary to justify a specific ALARP decision.

4.6.2 Management of Contractors

Contracted work accounts for 70 to 75% of EP’s total exposure hours and much of this work involves high
HSSE risks. This is reflected in Shell’s HSSE performance statistics, which include fatalities, accidents and
incidents involving contractors.

EP2005-0110 specifies requirements – including roles and responsibilities – for contractor HSSE
management. Key elements can be outlined as follows:
– Effective HSSE contractor management is based on knowing the HSE risks of the contract scope,
evaluating the contractor’s capability to manage these HSE risks and addressing associated weaknesses
in the contractor’s system. These requirements provide a sound basis for assessing contractor HSSE
capabilities during pre–qualification and bid evaluation.
− Once a contractor has been selected, the contractor is required to develop and implement the contract
HSSE Plan. Contract holders should establish and maintain clear lines of communication with the
contractor, including regular meetings to address HSSE issues and performance. Implementation of
this HSSE Plan and execution of the work should be monitored, and results used to steer contractor
performance improvements.
− Contractor HSSE performance should be analysed and opportunities for improvement identified,
implemented and verified.

4.6.3 The Hazards and Effects Management Process

The Hazards and Effects Management Process (HEMP) lies at the heart of the HSSE–MS and can be
summarised as the following steps:
− identify HSSE hazards and potential effects;
− evaluate risks;
− record hazards and effects;
− compare with objectives and performance criteria;
− establish risk–reduction measures, including emergency preparedness and recovery; and
− maintain a documented demonstration that major HSSE risks have been reduced to be ALARP.

EP95–0300 gives an overview of HEMP while EP2005–0300 describes EP requirements for applying
HEMP in the business.

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In terms of scope and application:

− HEMP shall be applied to all activities over which the Company has operational control, and shall
cover the entire lifecycle of the asset or operation.
− Work undertaken by a contractor, and under the contractor’s management system, shall have the
requirement for an equivalent HEMP approach expressly stated in the contract.
− The HSSE HEMP shall be applied to:
- major accident and HSSE hazards;
- workplace–related HSSE hazards;
- environmental aspects and effects;
- social aspects, including health implications for surrounding communities; and
- security risks.

A range of tools and techniques are available to support and guide the HEMP process. These include:
− HAZOP;
− health risk assessment; and
− environmental, social and health impact assessment.

As an opportunity develops, the emphasis of HEMP shifts from a focus on identification and coarse
assessment in the early stages to the assessment of inherent hazards and evaluation of options
during design.

[Link] Engineering
During the engineering design stages, HEMP concentrates on engineering–specific control and recovery
measures, and developing procedural control and recovery mechanisms where these are required. This
emphasis on design also addresses construction risks.

[Link] Construction
Construction execution presents its own risks and requires rigorous application of HEMP, focusing on
HSSE management of contractors and applying tools such as Construction Risk Assessment, Job Hazard
Analysis (JHA) and Permit to Work, backed up by intensive audit and inspection programmes.

[Link] Operations
During the operations phase, HEMP will focus on operational controls using bowtie type analyses and
JHA as key tools to provide input to the Operations HSE Case(s).

4.6.4 Risk Assessment

The Shell Group Risk Assessment Matrix (refer to Figure 4.6.2) should be used to assess the risks
associated with HSSE hazards. This assessment should take account of perceptions of risk by internal and
external stakeholders. The RAM is based on the concept of applying experience of events or incidents in
the past to predict risks in the future, and consists of the following steps:
− identify the consequences if the hazard is released;
− estimate the severity of consequences for each consequence;
− estimate the likelihood of each consequence;
− determine the risk rating associated with each consequence; and
− implement the required control measures.

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Figure 4.6.2 The Risk Assessment Matrix

Consequences Increasing likelihood

Severity A B C D E

Evironment

Reputation
Never Heard of Has Happens Happens

People

Assets
heard of in... happened more than more than
in... industry in our once per once per
industry industry year in our year in our
company location

Slight healt Slight Slight effect Slight impact

effect/injury damage Apply controls specified
1 in HSE-MS

Minor health Minor Minor effect Limited

effect/injury damage impact
2

Major health Localised Localised Considerable

effect/injury damage effect impact Demonstrate control
3 HSE-MS & Hazard
Control Sheets

PTD or 1 to Major Major effect National

3 fatalities damage impact
4

More than 3 Extensive Massive International

fatalities damage effect impact Demonstrate control
5 HSE- Case

KEY:

Blue = Low risk Apply controls specified in HSSE-MS

Yellow = Medium risk Demonstrate control, HSSE-MS and hazard control

Red = High risk Demonstrate control, HSSE Case

Note: This needs to be replaced with the new RAM guide – it is complete but being reviewed by Legal.
Note for techwriters: check for consistency against section 3.2 when it has been written.

Risks from the identified hazards and controls should be further assessed where necessary using a variety of
approaches. These are:
− approaches prescribed in relevant regulatory requirements;
− approaches prescribed in internationally recognised codes and standards;
− established good industry practice;
− qualitative HEMP studies and expert judgement; and
− quantitative HEMP studies.

All projects are required to demonstrate that HSSE risks associated with medium and high-risk hazards are
both tolerable and have been reduced to ALARP.

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4.6.5 Risk Tolerability

Tolerability of Risk
The principle that HSSE risks shall be tolerable and reduced to ALARP is central to applying HEMP and
managing HSSE in projects. In practice, a range of other considerations, including company values and
societal expectations, influence the decision-making process. The relative importance of the various risk
control methods, e.g. codes and standards, engineering judgement and company and societal values, can
vary in determining whether risks are tolerable and thus influence decision making. The extent to which
decisions are based on technical or value judgement will be influenced by factors such as stakeholder
perceptions and the novelty and uncertainties surrounding the development.

High Risk
Risks falling into this region are intolerable. The activity must be ruled out as a matter of principle, unless
it can be fundamentally modified so that the associated risks are reduced and fall into one of the
lower regions.

Medium Risk
Risks in this region are characterised by the types of risks that people are prepared to tolerate in order to
secure certain benefits, in the confidence that the risk is worth taking.

Low Risk
Risks falling into this region are characterised by the types of risks that people regard as insignificant or
trivial in their daily lives. Typically they are risks from activities that are inherently not very hazardous
or they are risks from hazardous activities that are being fully controlled. The effort necessary to further
reduce the risks is likely to be disproportionate to the additional benefits.

4.6.6 Demonstrating ALARP

Demonstrating ALARP is:

− a mandatory requirement of the SIEP minimum environmental standards; and
− drives project design, ensuring that the decision-making process is transparent and systematically
addresses the full spectrum of business risks.

The ALARP process shall be applied to all “high” and “medium” HSSE risks. It is defined as:

The process of demonstrating that risks are controlled to ALARP involves balancing the risks against
the effort (time, trouble and cost) of controlling the risks. If it can be shown that any additional
effort is grossly disproportionate to the resulting reduction in risks, then the risks are controlled
to ALARP.

Controlling risks to ALARP means meeting legal requirements and other agreed tolerability criteria (e.g.
Shell/industry standards) and going beyond them to the extent that is reasonably practicable. The ALARP
criteria applied in the effort/benefit balance should embrace the full range of risks, i.e. risks to people,
assets, the environment, Company reputation and society at large.

Demonstrating ALARP requires the identification and assessment of a range of options for addressing
specific risks. Figure 4.6.3 illustrates how this works in practice, using an example where five potential
options have been identified for controlling a risk.

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Figure 4.6.3 Example ALARP Assessment

Cost

Legal Limit

Risk

1 2 3 4 5
Options
− Option 1 does not achieve legal requirements and is not acceptable.
− Options 2 and 3 reduce the risk more than Option 1, and achieve legal requirements. However, levels
of residual risk are still higher than Options 4 and 5.
− Options 4 and 5 reduce risks further. Option 4 incurs modest incremental costs whereas Option 5
incurs significant incremental costs.
− It follows that Option 4 is ALARP.

4.6.7 Security Risks

It is essential that security is included in projects, new ventures and re-entries from the outset of the
planning process to avoid potentially expensive mistakes and costly add-on protective measures later in the
development and production phases. The project team must demonstrate compliance with Shell Group
security policies and requirements as well as international and country legislation. The Group Security
Standard outlines the objectives and principles that shall be followed.

Against this background, the project team should identify and assess security risks during all stages of the
project lifecycle, implementing controls as appropriate. Individual and travel security, and security-related
aspects of interaction with the local community should be given special attention. It is the responsibility
of the individual and the supervisor to address the topic prior to any trip. The Project Manager should
have assurances that a positive framework has been established for managing interaction with the local
community and the proper security aspects for the Company/community interface are in place.

Security risks are a combination of threats, vulnerabilities and their potential impact. They will vary
according to the country, locality and type and nature of business operations. They should be continually
reassessed for currency.

[Link] Threat Assessment

Security threats include error, malicious activities, petty, serious, violent and organised crime, militant
activism, civil disorder, terrorism and armed conflict. Inadequate public security services may also increase
the problems.

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The project team should start by assessing potential and actual threats in the environment where they
intend to operate before designing security arrangements to protect people, property, information and
reputation. This requires obtaining extensive information from as many sources as possible to help identify
and evaluate threats. Corporate Security (SI-SY) has analysts who can provide security threat assessments
for possibly all regions/countries in the world.

During reconnaissance trips by the project team, a member of SI-CAS should join the party in order
to gather security information locally. This team member will, if appropriate, approach local sources,
including security services (military, intelligence or police) to be informed about:
− existing trends regarding malicious practices, crime, militant activism, extremism, terrorism, labour and
civil unrest, civil war and armed conflict;
− potential for violence;
− past incidents;
− human rights records of military, paramilitaries, local and national police and terrorists;
− quality of security services;
− judicial capacity;
− religious, ethnic or indigenous conflict;
− threat targets; and
− regional and international trends (drug trafficking, border conflicts, cross-border organised crime etc.).

[Link] Vulnerability
Vulnerabilities to security threats include predictable routines, certain types of operations, exposures,
weaknesses and deficiencies that could be exploited by criminals and others. Assessing the vulnerability of
visiting and, at a later stage, permanently-based expatriate and national staff is paramount. Finding and
selecting secure accommodation should have priority.

Identifying the capabilities of national and local public security services to maintain and, if necessary,
restore law and order lawfully and effectively will help companies to decide how to develop their own
security framework, including the type of guarding arrangements.

The security team member should be involved in due diligence investigations in order to establish the
reputation of companies that may become linked to Shell’s project. The investigations may look at a
company’s background and reputation, senior executives, associates and other businesses in which the
executives may be involved.

The following subjects should be given attention from a vulnerability point of view:
− Does the local government demonstrate security responsibility for the project, Company staff and
future assets?
− Does the profile of the contractor(s) impact on the security profile of the project?
− What kind of security management system should be developed from the outset?
− Is it possible to contract reputable and reliable guard companies? (SI-SY should assist in selecting and
contracting the proper company.)
− Which type of contingency plans should be developed as a first priority (evacuation, kidnap)?
− Which type of liaison with authorities, including security services, and local communities should be
developed from the outset?
− What kind of physical security arrangements (perimeters, gates, access control, lighting, CCTV,
intruder detection etc.) are assessed necessary during the construction phase and later when operations
have started?
− What should be the frequency of security reviews?

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[Link] Impact
Impact is the effect of a security incident on the business. It involves both direct and consequential costs, as
well as potential damage to reputation.

[Link] Currency
Keeping up with often complex, changing political, economic, social and military situations is critical to
effective business operations. The ability to assess an operating environment can have a major impact on a
company’s short and long-term operations as well as on the security of its personnel and assets. It may also
affect relations with local community and government officials.

The quality and currency of threat assessments will be improved by sharing them with other organisations.
However, the quality and value of such information depends to a large extent on the way it is handled and
used. The confidential nature and sensitivity of some of the material and its sources needs to be known
and protected. Failure to respect this basic principle will result in only publicly available information being
provided, and worthwhile networking opportunities will be denied.

Making a threat assessment is like taking a snapshot, as immediately afterwards the picture may change.
Therefore, a regular update of the threat assessment is required to help the ongoing risk assessment process
in maintaining the adequacy and proportionality of the protection measures.

4.6.8 Emergency Response (ER)

Requirements for ER should be addressed systematically during project planning and execution. A planned
response is necessary for a wide range of credible emergency events, with trained resources and suitable
equipment. Responsibilities for ER should be clearly defined, including contractor roles and responsibilities
at work sites.

Many countries have specific oil spill response and other emergency legislation that should be implemented
before activities begin. Some specialised services, such as spill response vessels, well control specialists
and others require additional arrangements prior to operations. Shell maintains contracts with major
organisations that provide emergency response services that can be cascaded to other regions. Locations
without basic medical response services (including first aid) require planning to ensure adequate medical
services are available.

4.6.9 HSSE Deliverables in the Various Phases of the ORP

Table 4.6.1 specifies the HSSE deliverables in each ORP phase. Some of these deliverables are mandatory,
as per applicable governing documents such as Shell General Business Principles (SGBP), Group Minimum
Standards or the applicable HSE-MS.

Mandatory deliverables are required to be completed prior to the completion of the ORP phase indicated in
Table 4.6.1, unless the deliverable is not applicable to the particular HSSE risks of the opportunity or project.
Any such omissions should be approved in accordance with the organisation’s Technical Assurance System.

An HSSE Advisor should be consulted to:

− establish the mandatory practices; and
− make a risk-based determination of whether actions should be brought forward in the schedule, or
additional actions/studies included.

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The Shell Group maintains a comprehensive suite of documents to support effective HSSE management.
Refer to the Links shown in Section 4.6.10 for a list of standards, guidance documentation and tools that
are available to support development of HSSE deliverables.

4.6.10 Links

Assurance
[Link]

Corporate Security
[Link]

EP2005-0110
[Link]

EP2005-0300
[Link]

EP95-0300
LINK REQUIRED FOR EP95-0300

HSSE excellence
[Link]

Implementation
[Link]

Leadership and Commitment

[Link]

Organisation, Responsibilities, Resources and Competency

[Link]

Planning
[Link]

Policy and Strategic Objectives

[Link]

Processes, Assets and Standards

LINK REQUIRED FOR HSE Controlling Doc Mgt EP2005-0140

Risk Management
[Link]

Project Guides:
[Link]
(select: OGP Management System; select: Project Guides)

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4.7 INFORMATION MANAGEMENT

Information forms the basis for plans and designs. An early start and successful approach to Information
Management (IM) is paramount to successful project delivery. It may minimise risks that could otherwise
adversely impact the overall schedule and/or cost.

4.7.1 Information Management Roadmap

As projects produce a vast amount of electronic information, there is a significant opportunity to:
− speed up delivery by pro-active management of critical data and document flow through all ORP
phases;
− reduce contract variations in projects by specifying deliverables correctly up front in engineering,
procurement or construction as well as integrated services contracts; and
− improve design review processes by adopting effective document control and using standard progress
reporting structures.

The following activities are minimum requirements and prerequisites for successfully executing EP
Business Model Activity EP-64 and Global Process 12 Operations Readiness and Assurance, and
Global Process 18 Global Information Management in projects:
− Develop a PIP. With the team, identify information types from the Project Information Plan Template
for project execution and subsequent operation and maintenance. Define lifecycle properties.
− Identify project IM resources. Define roles, recruit resources and estimate costs to enable the timely
delivery of IM, including single point accountability for IM in each phase.
− Write the IM section of the Project Execution Plan. Embed the critical project IM processes and
specifications in the Project Execution Plan.
− Stipulate contract clauses. Invoke the critical processes and specifications, including the requirements
of the latest version of the Engineering Information Specification, EIS DEP [Link], in all
contracts delivering information and associate delivery to payment schedules.
− Use the IM/IT Toolbox. Where applicable, make full use of the generic items.

Information is embedded in all phases of the ORP. The IM challenge is focused on the subsurface and
wells domain during the early ORP phases of the opportunity, and then shifts to surface engineering
and operations during the later phases of the project. The challenge spans both data and documents that
need to be planned and organised within each phase, and shared or handed over at many different points
throughout the opportunity and project lifecycle.

This section describes, at a high level, the key IM solutions and activities executed on a project.

[Link] Identify and Assess

– Document Deliverables
- opportunity framing report, including risk register;
- forward plan; and
- data summary, including well results (if applicable).

– Data Deliverables
- remote sensing data (if available, may include seismic, magnetic, gravity surveys etc.);
- well data (if applicable); and
- preliminary subsurface models (volumetric, static, dynamic).

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– IM Activities
- assess IM opportunities and risks;
- develop a high-level Project Information Plan;
- manage seismic and well data;
- host key decision documents; and
- host subsurface models.

– IM Roles. These roles and supporting teams may be part time or placed centrally, based on
opportunity size:
- IM Lead;
- Document Controller; and
- Data Controller.

– IM Systems
- document repository;
- seismic data project repository;
- well data project repository; and
- integrated subsurface model.

[Link] Select
– Document Deliverables
- development option evaluation;
- concept selection report;
- draft Field Development Plan; and
- risk register.

– Data Deliverables
- range of subsurface models;
- seismic data;
- well data;
- process model; and
- range of economic models.

– IM Activities. Reassess IM opportunities and risks, and review/update the Project Information
Plan from the previous phase. Develop, based on the PIP, the IM section for the preliminary
Project Execution Plan:
- subsurface;
- surface facilities; and
- economics.

– IM Roles. These roles and supporting teams may be part time, based on opportunity size:
- IM Lead;
- Document Controller; and
- Data Controller.

- IM Systems
- document repository;
- process engineering model;
- seismic project repository;

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Chapter 4 | Project Controls

- well project repository;

- integrated subsurface models (static and dynamic);
- surface models; and
- economic models.

[Link] Define
– Document Deliverables
- Basis for Design (BfD) Report;
- Final Field Development Plan;
- Project Execution Plan; and
- specifications and contractual agreements for managing Front-end Engineering and Design (FEED).

– Data Deliverables
- engineering design definitions;
- final subsurface models;
- final surface/urban planning design;
- all seismic data and final interpretations;
- all well data;
- process model; and
- final economic models.

– IM Activities
- reassess IM opportunities and risks, and review/update the Project Information Plan from the
previous phase;
- establish document and data requirements for FEED;
- schedule and embed FEED information deliverables in FEED contracts using the EIS;
- schedule and embed information deliverables from the well delivery programme;
- manage and quality control delivery of FEED information by applying the generic data and
document control procedures;
- develop PIP section for well delivery, execution and production, including monitoring strategy for
SmartField implementation;
- embed wells, facilities and production IM design and deliverable requirements in the BfD document;
- hand over FEED information and BfD documentation to the Execute Team; and
- management reporting on status of all above deliverables.

– IM Roles. These roles and supporting teams may be part time, based on opportunity size:
- IM Lead;
- Document Controller; and
- Data Controller.

– IM Systems
- document repository;
- document control application;
- process engineering model;
- smart P&ID tool;
- surface 3D model design tool;
- engineering data warehouse;
- project management tools;
- seismic project repository;
- well project repository; and
- integrated subsurface model (static and dynamic).

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[Link] Execute
– Document Deliverables
- specifications and contractual agreements;
- detailed design deliverables; and
- operational readiness and assurance documents.

– Data Deliverables
- detailed engineering design data;
- HSE statistics;
- initial operational data set;
- final subsurface models (including revisions made during development drilling);
- all seismic data and final interpretations; and
- all well data (including development wells).

– IM Activities
- reassess IM opportunities and risks, and review/update Project Information Plan from the
previous phase;
- establish document and data requirements for detailed design, construction, commissioning
and operations;
- schedule and embed these information deliverables in engineering using the EIS;
- schedule and embed relevant information deliverables in well delivery contracts;
- manage and quality control delivery of information needed for the execute and operate phases by
applying the generic data and document control procedures;
- develop IM architecture, processes and systems for the operated phase and specify requirements in the
ITT documentation for integrated service and well service contracts being let for the Operate phase;
- execute the gradual handover of project information to the operate organisation as information
becomes available; and
- deliver effective management reporting on status of all above information deliverables.

– IM Roles. These roles and supporting teams may be part time, based on opportunity size:
- IM Lead;
- Document Controller; and
- Data Controller.

– IM Systems
- document repository;
- document control application;
- process engineering model;
- smart P&ID and instrument design tool;
- surface 3D model design tool;
- engineering data warehouse;
- project management tools;
- well portal and subsurface 3D model;
- plant safety and distributed control system; and
- enterprise resource planning system (SAP) to populate for Operate phase.

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[Link] Operate
– Document Deliverables
- specifications and contractual agreements for managing integrated services and well services
contractors, spares procurement and other key activities;
- Production Plan;
- Integrity Management Plan;
- Information Management Plan;
- Permits Management Plan;
- project lessons learnt; and
- plant optimisation studies.

– Data Deliverables
- production and WRM data;
- final subsurface models (“evergreen” with revisions made in response to WRM);
- all seismic data and final interpretations;
- all well data (including development and producing wells);
- maintenance data;
- future scheduling as well as historical maintenance and inspection records;
- HSE statistics;
- change management records, including updates to asset register and attributes;
- process engineering flow scheme and instrumentation data;
- surface 3D model;
- safety system; and
- distributed control system configuration data.

– IM Activities
- establish document and data management processes to ensure efficient operations and
maintain integrity;
- install and operate reservoir, production and integrity management information systems accordingly;
- manage quality of engineering information needed to support operations;
- manage historical production information; and
- make this information available to optimisation study and campaign maintenance planning activities;
and ultimately for decommissioning purposes.

– IM Roles. These roles and supporting teams may be part time, based on opportunity size:
- IM Lead;
- Document Manager; and
- Data Controller.

– IM Systems
- document repository;
- process engineering model;
- smart P&ID and instrument design tool;
- possibly surface 3D model design tool;
- engineering data warehouse;
- production and maintenance planning tools;
- well portal and subsurface 3D model;
- WRM data portal;
- plant safety and distributed control system;
- enterprise resource planning system (SAP); and
- corrosion management system.

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4.7.2 Applications Management

The Exploration and Production (E&P) Information Technology (IT) strategy is to establish a standardised
application portfolio, with global hosting and support. This rationalised global application portfolio
should be used by the projects to specify the software application baseline. The Portfolio Management and
Integration (PMI) group governs applications selection and any deviations from the PMI standards should
be declared upfront and signed off by the relevant PMI Portfolio Manager.

The project is required to budget for its usage of software application licenses, and the hosting/delivery
cost. Any deployment plans and project budget requirements should be communicated with the EP-CIO
office to allow co-ordinated planning and delivery.

[Link] Project Information Model

Applications are the core toolkit of software used by project and operational teams. As part of the Project
Information Plan, the project should define how applications will be used and how information will flow
between them in a Project Information Model.

The Project Information Model maps the information flow through each phase of the ORP for:
− subsurface and well engineering;
− facilities engineering;
− production and maintenance; and
− finance and contract management.

Information models do not differ much between projects due to the standardised applications portfolio.
Projects that do not use the standardised portfolio (e.g. non-Shell-operated ventures) require considerable
effort and dedicated resources to develop a new information model from scratch.

The applications of the operational environment are effectively the target tools of the operational facility
into which the project will ultimately migrate its processes and information. Once the target architecture is
clear, the information model for the project can be created. This model will be improved during the define
phase as the interaction with execution contractors becomes clear.

A Project Information Model is required both for project activity information (e.g. finance data) and for
technical asset information (e.g. equipment design properties). A model for activity information enables the
successful control of the project whereas a model for technical information is critical for asset management
throughout the entire lifecycle.

The following activities are minimum requirements to develop the Project Information Model:
− define the applications, their role and associated blueprints or templates to be used;
− define project and operational information requirements for inclusion in contracts;
− define data ownership and master data (if duplicated in different databases);
− define data validation and quality control points and mechanisms;
− define data transfers mechanisms; and
− define any data formats not addressed in the EIS.

Application templates are required to exchange data effectively within the project applications
environment. Applications templates are basefile configurations or blueprints that define the structure and
naming conventions to ensure that a common language and structure is used across the
applications portfolio.

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[Link] Identify and Assess, and Select

– Activities
- Assess constraints to identify whether the standard PMI portfolio can be used.
- If this is not the case, develop a dedicated application management strategy and pursue approval
with CIO.

[Link] Define
– Activities
- define the Operational Information Model and embed in the Project Information Plan;
- define the target operational applications, their role and templates to be used;
- develop the initial Project Information Model and embed in the PIP;
- define the initial project applications, their role and templates to be used;
- define data ownership and master data (if duplicated in different databases);
- define data validation and quality control points and mechanisms;
- define any data requirements not addressed in the EIS;
- define data transfer mechanisms;
- assess application management requirements and plan the organisation accordingly;
- organise delivery of applications and templates with the EP-CIO; and
- identify key areas of duplication that require synchronisation.

– Roles
- The project application’s architect and delivery staff will typically come from the regional IT Team
and be assigned to the project for its duration.
- The Applications Team will train project staff in the use of the selected project applications.

– Systems
- organise delivery of applications and templates with EP-CIO;
- define data transfer mechanisms; and
- identify key areas of duplication that require synchronisation.

[Link] Execute
– Activities
- define the final Project Information Model;
- embed in the Project Information Plan;
- organise delivery of applications and templates with EP-CIO; and
- test and gradually start migration to operational systems.

– Roles
- The project application’s architect and delivery staff will typically come from the regional IT Team
and be assigned to the project for its duration.
- The Applications Team will train project staff in the use of the selected project applications.

– Systems
- organise delivery of applications and templates with EP-CIO; and
- test and gradually start migration to operational systems.

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 Information Management | 4.7

4.7.3 IT Infrastructure

IT infrastructure is the hardware and networks that enable communication and exchange of data,
including:
– Global Infrastructure (GI) computers and desktop software;
– Telephones;
– cable and satellite networks;
– faxes; and
– video conferencing etc.

The IT4 Shell Strategy is to deploy a standardised Global Infrastructure Desktop and Global Infrastructure
Hosting (GI-D and GI-H) in projects where possible. IT infrastructure deployment shall be co-ordinated
with the EP-CIO office in accordance with EP Business Model Process EP-24. EP-CIO governs
infrastructure design and any deviation from the GI standards must be declared upfront and signed off by
the relevant EP-CIO office.

The investment strategy is that IT general hardware, hosting and delivery costs are included in the central
IT overhead and tariff rates. This includes specific connectivity, such as fibre-optic links or satellite
connectivity, which should be included in the EP-CIO budget and plans.

The project will need to consider its IT infrastructure requirements – both during execution and operation,
and plan delivery to support its other activities. The nature of the project and its ability to tap into existing
infrastructure has a large impact on the IT resources required. Project infrastructure support needs can
range from part-time support in well-populated areas with an existing Shell presence, to a dedicated IT
infrastructure development organisation in Greenfield sites. Challenges also exist in achieving timely
hardware delivery, connectivity and support into temporary or third-party locations; these needs should
therefore be identified and addressed early. Typically, opportunities/projects during Identify and Assess, and
Select, rely on existing infrastructure in the OU or the Centre.

[Link] Define
– Activities. The IT architecture to support the operations philosophy should be described and built
into the design so that the operations philosophy can be realised. The IT Plan (appendix to the PIP) to
support the project during execution should be created and should address the following:
- IT steering committee;
- project and operational requirements in support of the Project Information Plan;
- scope, functional areas, organisational boundaries and geographical locations;
- IT infrastructure design, including application architecture;
- resource plan; and
- timing of key deliverables.

– Roles
- The project IT support staff will typically come from the regional IT Team and be assigned to the
project for its duration.

– Systems
- delivery of infrastructure to support project activities.

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[Link] Execute
– Activities. The IT Plan should be executed to deliver the following:
- IT architecture design;
- acquire, implement and operate computing and telecommunication services;
- acquire, implement and operate applications and IM services;
- provide end-user support (Helpdesk, request management);
- manage IT (demand, contracts, Service Level Agreements (SLAs), costs);
- manage information security; and
- establish disaster recover and business continuity plans.

– Roles
- The project IT support staff will typically come from the regional IT Team and be assigned to the
project for its duration. They will be reabsorbed into the regional IT organisation at the conclusion
of the Execute phase.

– Systems
- delivery of infrastructure to support activities during the Execute phase; and
- delivery of operational IT infrastructure to support the Operate phase.

4.7.4 Links

Engineering Information Specification

[Link]

EP Business Model Activity EP-64

IS WEB ADDRESS REQUIRED?

Global Process 12 Operations Readiness and Assurance

ADDRESS REQUIRED FOR GLOBAL PROCESS 12

Global Process 18 Global Information Management

ADDRESS REQUIRED FOR GLOBAL PROCESS 18

IM/IT Toolbox
[Link]

Project Information Plan Template

[Link]

Project Guides:
[Link]
(select: OGP Management System; select: Project Guides)

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 Change Management | 4.8

4.8 CHANGE MANAGEMENT

Changes are one of the biggest threats to project progress, but changes can contain opportunities as
well. The wider consequences of a change are often not foreseen, under-estimated or, at the very least,
unwelcome and therefore largely ignored.

To protect the project from any adverse effects of change, and to capture opportunities that changes may
bring, change needs to be managed.

Changes can be internal, team-driven (often technical) or external (driven by the environment). Each needs
early detection and assessment by the owner and relevant authorisation.

4.8.1 Detection and Ownership

The practices below will detect and control changes, but only if all team-members are sufficiently aware
of the possible wider consequences of their decisions or uncertainties. The possible effects of small
composition changes on material selection is a good example.

[Link] Detection of Changes

Changes are often poorly managed because they are not recognised for what they are until it is too late; by
the time the team realises that a change is called for, or has imposed itself, related decisions have already
been taken and acted upon, and undoing these causes further disruptions.

The simple practice of routinely splitting the projects issues, decisions and attributes into “as-is” and
“maybe” can help the early detection and control of change (refer to Figure 1.8.1). Best practice is for the
whole project team to adopt this extremely simple mental model.

Figure 4.8.1 Maybe, Control and As-is Practice

“As-is” “Maybe”

_ _
Givens –(decisions already taken) Focus decisions
_
_ Tactics (decisions for later)
Assumptions control _
Un-resolved uncertainties
_ _
Boundary Conditions Questions

Under “As-is”, the project team routinely lists their decisions already taken, as well as the governing
assumptions the team is working under. Any unresolved issue, study of alternatives or suggestions for
improvement are pictured in the “maybe” domain. Any issue that is resolved or decision that is emerging in
the “maybe” domain is subject to control before it can enter the “as-is” world.

Team meetings, Technical Authority systems and the dialogue with the DRB, should reflect this distinction
between agreed scope and assumptions on the one hand and unresolved issues on the other.

The sharing of all updates on decisions and assessment of uncertainties should be routine in team
meetings, and the updates should be reflected in the “as-is” world.

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[Link] Ownership: An Element of Governance

Ownership of subject areas is when all conceivable subject areas in a project are assigned to named
individuals, who are expected to keep the overview and act as early-warning systems. Ownership of
the technical areas is by routine per discipline, but ownership of the integrated areas (e.g. Sustainable
Development (SD), FDP, framing output and also equipment packages) and commercial areas (terms and
conditions) is often left unallocated.

Ownership of a subject area implies that the owner is able at any point in time to articulate the “as-is” and
the “maybe” world for that area. It does not necessarily imply decision authority. There is a fundamental
difference between Project Governance, which is vested in the DRB and delegated on the basis of subject
areas into the team, and Decision Authority, which is vested in the line (and subject to systems like Manual
of Authority (MoA) and Technical Authority [TA])

4.8.2 Authorisation

Financial authority is usually defined in the MoA, and Technical Authority is captured in a TA system. A
good TA system typically has three levels of authority:
− Level one can approve deviations from standards (discipline head or project manager of sufficient
seniority and after suitable challenge and documentation).
− Level two can approve changes within standards (usually s.g. three professionals).
− Level three can approve changes within documents (s.g. four professionals).

A good TA system resolves the tension between discipline and business authority by assigning ultimate
authority on technical subjects with a single representative from the business/project line.

Particular care needs to be taken in the authorisation of integrated, multi-disciplinary deliverables and
decisions, as well as the authorisation of assumptions around uncertainties (e.g. gas composition). Typically,
decision authority of integrated decisions lies one level up from single-discipline decisions, and the
authority on assumptions is vested with the subject-matter expert.

The system of authorities must be approved by the DRB and detailed in full view of all stakeholders.

4.8.3 Implementation

Typically, the Project Manager chairs weekly team meetings with change management as a fixed item on
the agenda and implementation starts after this meeting has taken full ownership of the change. There are
three overlapping reasons for accepting an internally driven change:
− significant improvement in safety;
− significant improvement in functionality over costs; and
− accumulated value of the change far outweighs the cost and schedule implications.

Change proposals are rejected, accepted or kept pending during further assessment. An audit trail must be
kept at all times and the DRB must be kept informed during the regular dialogue.

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Implementation of internally driven changes is then routine, i.e. part of the “as-is” world.
Implementation of externally imposed changes is often much harder. Ownership, assessment and authority
are often less well defined or absent. This makes the change that much harder for the team to detect, assess
and accommodate. Successful external change management needs:
− a clear and compelling case for change;
− a capacity to deal with the change (people, organisation, culture);
− a clearly articulated vision that the team expects to be able to meet; and
− actionable first steps.

4.8.4 Transition Management

Externally imposed changes often need a shift in emphasis from change management to transition
management. This is beyond the scope of the OPMG.

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4.9 REPORTING, MONITORING AND ANALYSING

One of the Opportunity/Project Manager’s roles is to monitor and analyse project performance, and to
act and report on the findings. An essential element of this is the completeness and quality of project
reporting. The whole of the activity is known as the management control loop and this is shown in
Figure 4.9.1.

Figure 4.9.1 Management Control Loop

Report

Management
Act Control Loop Monitor

Analyse

Reporting, monitoring and analysing project performance against the project objectives is necessary to
allow the Project Manager to take timely and effective corrective action if required. The DRB, PDAB and
other key stakeholders (including the members of the Project Team) need to be satisfied that adequate
project progress is being made and that there is adequate cost, quality, HSSE and risk control.

4.9.1 Reporting

Reporting performance to key stakeholders is crucial in effective project control. Project progress should be
reported to the DRB during the Identify and Assess, Select and Define phases, and to the PDAB during
the Execute phase. Reporting project progress against the commitments made at FID is also needed in
order for senior management to provide support to the Project Manager, if required. Partners and host
Government agencies are also key stakeholders in the project who need to be satisfied that adequate project
progress is being made and controls are in place.

[Link] Principles
The principles of progress reporting are that:
− all data should originate from single sources, such as contractor’s progress reports, which in turn should
be scrutinised for quality to ensure the accuracy of what is being reported;
− each report should consider the audience for whom it is written;
− reports should be brief and use pictures, tables or graphs, which are preferable to lengthy descriptions;
− reports should highlight both the positive and negative variance of cost, time and other performance
measures against the project objectives and the reasons for this;
− key issues and concerns are highlighted as they arise, and the measures planned to address them are
outlined; and
− reports should be produced and distributed on time.

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[Link] Objectives
Progress reports provide a systematic and disciplined means of progress measurement. The objectives of
reporting are to:
− clearly identify the current status of work;
− compare actual achievement with the targets;
− focus on critical areas, risks and key concerns;
− propose solutions or actions for problems or concerns identified; and
− permit effective management control and corrective action by producing reports regularly
and promptly.

[Link] Deliverables
The key deliverables for each phase of the ORP have been set out in Chapter 2 and reporting in each phase
should be structured against progress towards these deliverables. For example:
− preparation of the feasibility study report during the Identify and Assess phase;
− the Field Development Plan and Concept Selection Report during the Select phase; and
− the Project Execution Plan during the Define phase.

Post-FID, the management control loop requires the team to:

− set up a physical scope progress and cost measurement system which allows:
- comparison of actuals versus forecasts (budgets); and
- lookaheads against time/budget remaining.
− set up a project risk management system which allows:
- the maintenance of a risk register;
- the tracking of prevention and remediation actions; and
- the tracking of individual risks in the risk assessment matrix.
− set up HSE, security and a sustainable development system which allows:
- the setting of performance targets;
- monitoring of performance;
- investigation of incidents and accidents; and
- the tracking of follow-up actions from investigations, audits and reviews.
− set up quality plans which allow the setting and monitoring of targets and the tracking of follow-up
actions; and
− set up an Operational Readiness Plan with targets, actuals and tracking of remedial actions.

The emergence of the Integrated Project Management System (IPMS) provides access to procedures and
guides to help set up these points for project monitoring and control.

[Link] Portfolio Reporting

At the moment of writing, Group reporting on large projects is in transition from the Project Dashboard,
which can capture actuals versus the FID promise per project, towards Portfolio Reporting which will allow
the monitoring of the opportunity funnel as well as the individual projects.

[Link] Additional Reports

Contracting companies carry out the majority of project work during the Execute phase. It is therefore key
that the requirements for contractor reports are included in the tender and contract documents, and that
they are clearly explained to contractor management in the contract kick-off meetings.

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Other forms of reporting, such as weekly e-mails and third-party reports, are very much OU specific
and depend on agreements made between the various parties. In a multi-project environment, there is a
movement towards integrated work management systems, which allow all parties to read the status of all
OU projects from a common computerised database. This minimises the effort and cost of producing
paper reports.

[Link] Frequency
Reporting frequency to parties outside the Project Team is generally monthly, and based on updated
planning and scheduling data. Internal (team) reports are often generated weekly, and form part of the
agenda of the projects internal weekly progress meeting, at which deviations to planned progress and
newly-arising issues and concerns should be examined. The reporting requirements should be defined in
the relevant CTR in the Identify & Assess (I&A), Select and Define phases, and specified in the Project
Execution Plan for the Execute phase.

The project reporting procedures should be in place on day one of the pertinent phase. This puts the
project team into the routine of writing the reports and streamlining the process while the activity levels
are still quite low. As the activity level picks up, aspects such as presentation style, content, timetable,
distribution etc will all have been established and production of the reports will be routine.

4.9.2 Monitoring and Analysing

[Link] Qualitative and Quantitative Analysis

The Project Manager needs to monitor project performance both in a quantitative sense and a qualitative
sense. The quantitative aspects are covered under the monitoring of actual performance against planned
performance. The qualitative aspects can be covered by assessing the project practices against those set out
in this OPMG.

Understanding how well the project is complying with Shell Group best practices, as set out in this
OPMG, must be undertaken using the Project Health Check Tool. The PHC is at the core of Global
Process 21 Benchmarking of Project Performance. The PHC enables self-assessment, aligns project teams
and embeds best practices. It will also help project teams and external peers prepare for major reviews such
as VARs, peer assists, partner reviews etc.

[Link] Project Assurance Plan

An important part of the monitoring process is the programme of peer assists, audits and reviews for
the project, including VARs and Project Execution Reviews (PERTs) (refer to Section 4.10). Part of the
manager’s monitoring duties is ensuring that this is proceeding as planned and that actions identified as a
result of the assists, audits and reviews are being captured, actioned and closed out.

[Link] Performance Indicators

Performance Indicators (PIs) assess how well the project performs against performance norms. They need
to be easy to calculate, to act as a counter-check against the mass of data available/generated in the normal
reporting process.

PIs can be developed at different levels within a project. Execution supervisors should be encouraged to
develop a number of key PIs for their own activities in order to monitor performance.

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PIs should only be developed for activities, or groups of activities, for which there is (or for which we
would like to have) a norm. It should also be clear what constitutes good versus bad performance. Drilling
costs per day is a notoriously bad norm because if it goes down it may be that we drill with cheaper rigs
and materials, whilst if it goes up it may mean that we drill faster (and put more steel in the ground
per day).

Over time the PIs can be built up into trends, which can also be used as input data for benchmarking on
future projects.

Some of the common project performance indicator reports that may be needed at different phases of a
project are:

Phase Project PI Reports

Well Engineering Drilling – ft/day

Completions run

Design Progress % S-curves actual versus planned

Design milestones achieved versus planned
Deliverables – produced versus planned of:
− approved for construction drawings;
− as-built drawings;
− equipment specifications and datasheets; and
− vendor information.
Design changes
Direct man-hours – productivity
Indirect man-hours – direct man-hours ratio
Cost – LE versus planned

Procurement Requisitions issued – number issued versus planned, value versus planned
POs delivered versus required onsite dates
Spares requisitions issued and delivered versus planned, value versus planned
Cost – LE versus planned, commitment
Construction Progress % S-curves actual versus planned
Construction milestones achieved versus planned
Direct man-hours achieved versus planned
Indirect man-hours – direct man-hours ratio
Man-hours carryover to offshore (if applicable)
Cost – LE versus planned, commitment
Commissioning Progress % actual versus planned
Direct man-hours achieved versus planned
Indirect man-hours – direct man-hours ratio
Non-productive man-hours
A&B checksheets completed
System/subsystem handover acceptance – SACs actual versus target
Punchlist – numbers outstanding
Cost – LE versus planned
Operations Readiness Manuals and documents prepared versus planned
Recruitment – actual versus planned
Training/competence assessment – actual versus planned
Contracts awarded – number versus planned
Operational spares procured
Cost – LE versus planned
HSE LTIs/TRCs/FACs/MTCs/NIIs or high-potential incidents
LTIF/TRCF/TROIF actual versus target
Activities completed versus HSE plan

Quality Management Assurance plan progress – audits and reviews completed versus planned
Action register status – number of actions outstanding
Permits and approvals – obtained versus planned

Project Team Numbers versus establishment positions

Cost – LE versus planne

Risk Management Number of high risks on the risk register

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4.9.3 Sample Reports

Some of the aspects for consideration with respect to project reporting are:
− Can paper reports be minimised by using electronic data reporting?
− Are reports tailored to the needs of the recipient?
− Are the reports easily interpreted?
− Do the reports highlight problems?
− Is a fixed reference agreed against which long-term performance can be monitored?
− To what action is the report expected to lead?
− Are the reports structured to its audience by activity, field, licences etc?
− Could words and figures be replaced by graphs, tables or photos?
− Have standard reports been considered?
− Have suitable reporting systems been specified in contracts to allow straightforward integration of
contractors’ reports into Shell reports?
− Is the quantity of reporting commensurate with the scale, complexity and risk of the project?

[Link] Progress Against Plan

To help the Opportunity/Project Manager keep track of costs, time and use of resources, a number of
reports and control tools are commonly used to identify deviation from the original plan. Project controls
are designed to focus on one or more of the three major components of an activity, i.e.:
− cost;
− schedule; and
− performance (resources and quality).

By establishing a regular reporting system, the Project Manager can track the progress of a project and
detect any variance from the plan.

[Link] Gantt Chart

Schedule performance is reported in the form of a Gantt Chart (refer to Figure 4.9.2).

A baseline schedule is developed for the project and “frozen” for reporting purposes prior to the start of
execution. During the execution phase of the project the actual progress/performance figures are entered on
the chart, together with an estimate of the time required to complete the project. These are displayed as a
second line below the frozen baseline.

Figure 4.9.2 Gantt Chart

Project Schedule vs Plan

Activity J F M A M J J A S O
Original plan
OICOIIO Time
now
IICOIICO
Actual
OCIOICII performance

ICCOIIOO % Complete Forecast

to complete
IIOIOCIO % Remaining

Time now

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 Reporting, Monitoring and Analysing | 4.9

The dependencies between the activities are retained and hence the knock-on effect of changes of
one activity onto the others is shown. The critical path to project completion is shown and moves
with slippages.

[Link] Progress S-curve

Figure 4.9.3 shows a project broken down into its main activities, with a bar indicating the planned
duration of the project. The chart may also show key milestones.

Figure 4.9.3 Overall Schedule Progress

activities % WT progress
overall progress curve
of total to date
100
x x x x x 13.6 16.3

x x x x x 14.2 68.4
80
Key:
x x x x x 11.0 70.9 plan
actual

percentage progress
forecast
60
x x x x x 18.3 64.5

x x x x x 14.8 33.9
40

x x x x x 18.6 6.2
20
x x x x x 9.5 45.3

totals 100 42.0

0
1994 1995 time now 1996

O N D J F M A M J J A S O N D J F M A M J J A S O N D
early start x x x x x x x x x x x x x x x x x x x x x x x x x x x
late start x x x x x x x x x x x x x x x x x x x x x x x x x x x
target plan x x x x x x x x x x x x x x x x x x x x x x x x x x x
actual progress x x x x x x x x x x x x

The planned physical progress for each activity provides the percentage weightings between the activities.
On a monthly basis, the progress is summated per sub-activity to the activity level. The weighting factors
per activity are then applied to derive an overall project progress, which in Figure 4.9.4 is shown as 42%.
The percentage progress can also be drawn as an S-curve, as indicated on the right-hand side of the chart.
The progress of individual activities can be depicted by shading of the horizontal bars, as shown in
Figure 4.9.4.

In a table below the curve, the planned and actual progress figures can be listed. Where planning
sensitivities have been run, i.e. using earliest and latest activity start times, these can be included in the
table for reference or could be shown as an envelope around the plan line on the curve.

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[Link] Milestones, Waterfall Charts

Reporting progress against project milestones can be shown as a binary Yes or No (whether the milestone
has been achieved on the target date or not). A milestone waterfall chart, such as that shown in Figure 4.9.4,
can be useful as it not only shows whether the milestone has been achieved but also provides a forecast of
achievement. The interrelationship between key project activities on the schedule can also be seen.

Figure 4.9.4 Milestone Waterfall Chart Milestone Waterfall Chart

Milestone Date

Mar-03
Dec-02

Dec-03
Sep-03
Apr-01

Apr-02
Oct-00

Oct-01

Oct-02
Jan-01

Jan-02

Jun-03
Jul-01

Jul-02
Sep-00

Dec-00

Mar-00

Jun-01

Sep-01

Dec-01

Mar-02

Host Fab Award Jun-02

Hull AFC Dwg
Topside AFC Dwg
Sep-02
Cut 1st Steel (hull)
Spud 1st Well
Begin Export Lay Dec-02
Complete 1st Well
Host Arrival Mar-03
Host Moored
Risers Installed Jun-03
Umbilicals Installed
Handover
Sep-03
1st Oil

Dec-03

[Link] Cost Performance

The normal method of calculating and reporting cost progress is based on a VOWD basis, but this may
vary depending on the deliverables of the project or the phase that the project is in. VOWD is defined
as the value of goods and services received, regardless of whether or not they have been paid for. With
the introduction of systems, such as SAP Blueprint, much of the cost reporting can be produced in a
standardised way.

Cost performance is also reported in tabular format, as shown in Figure 4.9.5:

− The left-hand columns compare Latest Estimates (LEs) to the 50/50 Group Investment Proposal to
answer the question “will we finish within total budget?”.
− The centre columns compare commitments and VOWD to Approved for Expenditure (AFE) funds to
date to answer the question “are we spending within project funds?”.
− The right-hand columns compare VOWD for each year against annual business plans to answer the
question “are we spending within annual target?”.

This form of table can be used at different levels using the WBS and summated up to the highest
project level.

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Figure 4.9.5 Cost Report

PROJECT SUMMARY REPORT - (SHELL OPERATED, £

Will we finish within Are we spending within Are we spending within

total budget project funds annual target
Total Total Total Total Total Total Antipated 200Z 200Z 200Z 200Z
50/50 OX EBP Anticipated Delegated Commit- VOWD Over/ OV EBP Actual 03 EBP Anticipated
50/50 Final Cost Funds ments To Date Under (Y.T.D.) VOWD (Annual) Final Cost
GIP to Date Spend (Y.T.D.)
Construction

xxxx xxxx xxxx Conceptual design xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Project Management xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Onshore Plant xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Substructure xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Topsides xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Template / Tspt / Install xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Pipeline / Landfall xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Sub Total Construction xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Drilling xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Sub Total Drilling xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Total (Excl Contingency) xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx 50/50 Contengency xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx Total (incl. 50/50 Contengency) xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxx 90/10 Contengency (Optional)

xxxx Total Project: Capex

[Link] Washing Line Graph

A “washing line” graph, as shown in Figure 4.9.6, can help present in a simple, visual way changes to
individual budget line items in relation to the original Group Investment Proposal and any subsequent
budget revisions.

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Chapter 4 | Project Controls

Figure 4.9.6 Budget Changes “Washing Line”

Project - Changes to Date

340,000

330,000 32,149
4,759
1,504
320,000
3,438
4,444
310,000
(000's)

300,000
295,600 540 11,914
5,400
290,000

280,000

270,895
270,000
25,935

260,000
l 't s es ll
AF
E
tua re
gm ile ion dfa illin
g nc
y FC
IP/ cep sho an t+P sid lat ge tA
G n On M ke Top nstal + Lan Dr
ntin rre
n
nal Co roj Jac SI ine Co Cu
igi P
O/ el
Or Pip

[Link] Cost S-curve Increase Decrease GIP (Incl Contingency) AFC (Incl Contingency
In Figure 4.9.7 several key cost numbers are given. Along the top of the figure is the budget amount,
comprising the control estimate plus a contingency amount. The VOWD and the current commitment
are reported on a monthly basis. The commitment level goes up in steps as major commitments (typically
contracts or purchase orders) are awarded.

For each activity the VOWD is reported and compared against the originally planned VOWD curve.

Figure 4.9.7 Cost S-curve

Project/BI:
35
Budget revision

Current approved budget

30 Latest cost estimate

Original budget
Current control estimate
Contingency

25 Original control estimate

D
W
VO
Original planned completion

Current planned completion

d
ne
Cost US$ m

20 lan
n tp
Commitments rre
Cu

D
W
15 d VO
ne
lan
lp
na
igi
Or D
V OW
10 al
tu
Ac

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Start Now

Time in months

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[Link] Deliverables Reporting

Deliverables reporting may give a more meaningful insight into project progress than just scope, cost
or time percentage reporting (refer to Figure 4.9.8). When the progress S-curve is relatively flat, a small
slippage in percentage terms may hide the fact that crucial deliverables on the critical path are late. Metrics
for, say, the design stage should include design deliverables that are required to allow fabrication to start
against an agreed plan and particular attention should be paid to the number of design changes being
generated once fabrication has started.

Figure 4.9.8 Deliverable Progress

100

90
Planned Deliverables
80

70

60

50

40 Actual Deliverables
30

20

10
Time now
0
Start project phase eg design End of Phase

At the end of a project, again the S-curve is shallow but a small change in % progress can mean a large
difference in project completion date.

Figure 4.9.9 gives an example of the level of detail required to monitor and control the hook-up and
commissioning phase of a large Floating Production, Storage and Offloading (FPSO) project. Performance
metrics (supplementing the PIs given in Chapter [Link]) would be needed for the project team to fully
understand progress and concerns, even in EPIC contracts, for activities such as:
− hook-up, spool welding and fit-up;
− electrical, instrument and telecom cable pulling, glanding and terminating;
− hydrotest packs prepared and completed;
− reinstatement packs prepared and completed; and
− pre-commissioning checksheets.

Opportunity and Project Management Guide RESTRICTED | 103

Chapter 4 | Project Controls

Figure 4.9.9 Number of Pre-commissioning Checksheets

Number of Pre-commissioning Check Sheets

3000

2500

Identified

2000

1500

Issued
Complete
1000

500

0
1 1 01 1 1 1 01 01
/0 /0 3/ /0 /0 /0 6/ 6/
22 13 8/ 24 14 /5 /2 /1
6/ 7/ 8/ 9/ 10 10 11

Figure 4.9.10 shows an end-of-project metric of system acceptance certificates handed over versus plan,
which provides an indication of hydrocarbons start-up date.

Figure 4.9.10 System Acceptance Certificates

System Acceptance Certificates Handover Rundown Curve

90

80

70
Actual Complete
60

50

40
Target
30

20

10

0
ct ov c n b r r y n l ug p ct
-O -N -De -Ja -Fe -M
a -Ap a -Ju -Ju -A -Se -O
15 15 15 15 15 15 15 15
-M 15 15 15 15 15

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 Reporting, Monitoring and Analysing | 4.9

[Link] Resourcing
Resource performance should be reported for activities that are manpower intensive, such as hook-up and
commissioning.

The planned cumulative manpower usage profile can be plotted against the total actuals. In reporting both
hook-up and commissioning hours, a distinction is usually made between the following classifications:
− Direct hours – those hours spent directly on the job (e.g. erecting steel, welding, pulling cable,
painting etc.).
− Indirect hours – those hours spent supporting the direct hours (e.g. scaffolding, moving materials to
the site, providing temporary utilities such as lighting/power/water etc.).
− Non-productive hours – those paid hours not spent on either direct or indirect activities (e.g. attending
safety meetings, meal breaks, permit delays or site shutdowns etc.).

Each of the above classifications is estimated and then actuals are measured against plan. Labour
productivity is measured as the ratio of actual direct hours to planned direct hours for the work achieved.
Growth in man-hours, for example as a result of work that has been previously inadequately accounted for
or rework as a result of quality deficiencies, should also be reported and monitored.

Figure 4.9.11 shows the performance and forecast man-hours to commission an FPSO project. The lower
curve tracks the man-hours to complete essential commissioning work in the dry dock and at the quayside,
prior to departing for the offshore location. The upper curve tracks total commissioning man-hours against
the target first-oil date. The graph shows that the productivity in executing the commissioning scope
offshore is greatly reduced compared to working inshore. However, the decision to depart the yard for the
offshore installation often involves external factors, such as weather or resource availability. There may be a
trade-off between maximising the work onshore versus an early departure and consequent lengthy offshore
completion. Such a metric is critical in helping project management come to an informed decision.

Figure 4.9.11 Performance Indicator Trend – Example of Commissioning Man-hours Forecast Towards End of
Onshore Construction Phase
90,000
Commissioning Manhours – Start Offshore
Inshore/Offshore Work Installation - P50
80,000

70,000

Target Inshore First Oil Target - P50

Completion
60,000

Total Achieved
50,000

Essential Inshore Scope

40,000

30,000

20,000

10,000
-Ja
n ar ay -Ju
n
28 -M -M 27
19 08

Opportunity and Project Management Guide RESTRICTED | 105

Chapter 4 | Project Controls

[Link] Risks and Opportunities

As well as describing project risks and opportunities in the reporting narrative, these can be visually
presented on the standard matrix of Global Process 20 Risk Management. Arrows can be used to indicate
the amount the likelihood and/or severity have been influenced.

[Link] Presentation
As well as written reports, visual presentations to OU, regional and GTP senior management and
partners may well be necessary. These should address key factors and not descend into detail unless
absolutely necessary.

An example of such presentation is shown in Figure 4.9.12.

Figure 4.9.12 Example Project Progress Summary Presentation

Description 2 x 4 legged drilling platforms, 1 x 4 legged production platform,

Brownfield module & interconnecting pipelines
Projects Shell Equity Project Status
0.50 HSE Cost Value Schedule Staff Stake- Prod Avail. & Con- Local QA Risk &
Delivery Holders Ops Readiness racting Content Issue
ABC Phase Mgmt

EXECUTION G G G G A A G A G G G

Capex (USD mln) Current Year Total Project Schedule

100% Shell Share 100% Shell Share 1st Production
GBP Rev 0 100 50 400 200 Oct-0Y
GIP Rev 1 120 60 500 250 Oct-0Y
LE 100 50 500 250 Oct-0Y

Project Manager: UVW Well Engineer: XYZ

Status
– Module –P vs A: 46% vs 46%. Platform 1 Topsides –59% vs 59%. Platform 1 Substructure–96% vs 92% (float available)
– Platform 2 TS –P vsA: 15% vs16%.Platform 2 SS –40% vs 48%.Platform 3 –37% vs 42%.
– Awarded module Compressor Recovery, HP Flare System, Fuel Gas and Produced Water Treatment packages.
– Separate brownfieldproject deferred to beyond current year, new concept to be put in place, who leads, what timeframe?
– Environmental Management Plan approved by regulator on 14/12.

Issues as of Today
– Drilling problems wells on platform 1. Will complete one at best. Changes in drilling schedule, possibly only Platf2 wells
– Uncertain availability of installation barge, Late procedure submission, Transportation barge confirmation
– New HUC contractor mobilisation: old contractor appear to obstruct roll over of (some) staff
– Carry over scope of separate brownfieldproject not handed over properly
– Fabricator supplied delivery late, risking increased offshore scope

4.9.4 Links

Global Process 20 Risk Management

[Link]

Project Health Check Tool

[Link]

Project Guides:
[Link]
(select: OGP Management System; select: Project Guides)

106 | Opportunity and Project Management Guide RESTRICTED

 Assurance | 4.10

4.10 ASSURANCE

4.10.1 Required Activities

Assurance activities apply universally to all projects of Cost-and-Risk Levels 1, 2 and 3, though the exact
application of assurance requirements varies between them . Generic requirements for assurance events for
projects with Level 1 Risk profile are included in Appendix D, Chapter 2. For projects of Level 2 Risk,
it is best practice to start from this standard list of assurance requirements and scale down/customise the
discretionary part for the specific project.

For small (repeat) projects in a mature organisation/business environment, a specific scaled down version
of the generic assurance requirements is included in Chapter 6, which also includes a generic Project
Assurance Plan (PAP) for Non-Shell Operated Ventures (NOVs).

The project DRB shall approve the specific Project Assurance Plan, which reflects the applied scaling and
selection of discretionary assurance events.
This section provides further detail on specific mandatory assurance events as well as a menu of
discretionary Value Improving Practices and Reviews.

[Link] Value Assurance Review (VARs 1 to 5)

Requirements for VARs for Level 1 projects are described in the Global EP Value Assurance Guide,
which also provides guidance on the assurance requirements for Non-Shell Operated Ventures (NOVs).
For the latter, the Shell NOV team shall carry out a Shell-only review in combination with a JV VAR
on the project. The Shell-only review covers Shell specific aspects (TECOP) with focus on commercial,
economics, agreements, and other elements of the project where Shell may have a different view from
the Operator.

Value assurance reviews on Level 2 projects follow the local/Regional process. Level 3 projects do not
require VARs and have technical reviews as appropriate.

Project teams are required to maintain a tracking system of status and close-out of recommendations from
all significant reviews and provide regular updates to the Decision Executive (DE), DRB, or PDAB.

Close-out of VAR recommendations/actions is assessed in the subsequent VAR or PERT. In addition, EP

Regions are required to populate and track action status in the global database (“Fountain”) for the key
findings and recommendations arising from VARs and other key audits and reviews. For more information,
consult the EP Regional Fountain focal point.

The VAR4 shall include a review of the (draft) Group Investment Proposal (GIP). The final GIP requires
review by the appropriate EP Functions in order to obtain “Functional Support”.

[Link] Estimate and Schedule Assurance Review (ESAR)

Costs and schedules have a major impact on project feasibility and concept selection – and the ability to
influence project Capex is largest in the front-end of ORP (Identify & Assess and Select phases). In the
Define phase, the influence over costs is less as the concept and contracting/execution strategies have been
mostly selected.

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Chapter 4 | Project Controls

However, project costs can increase significantly during the Define and early Execute phases, when cost-
reduction opportunities have largely disappeared. This is often caused by unrealistic estimates of costs and
schedules. For this reason, for projects with total Capex exceeding US$500 million, an independent ESAR
is required prior to VAR 2, VAR 3 and VAR 4. The prime objective of ESARs is to assess the quality and
robustness of the project cost estimate and schedule. The ESAR provides input to the respective VAR and
Decision Gate.

ESARs do not replace the need for active line management and local/regional reviews of project cost
estimates and schedules.

ESARs also aim to provide assurance that schedules and cost estimates are compliant with the principles
of the respective guidelines and to ensure consistency for all major projects throughout the Shell portfolio.
The VAR Team will use the ESAR results as input in the assessment of the business decision at Decision
Gates 2, 3 and 4 for major projects, which is then provided to the DRB as an integrated assessment
and advice.

For all projects with total Capex exceeding US$200 million, the execution of an ESAR is mandatory prior
to VAR 4 (for DG4, FID) in support of the cost and schedule estimates in the GIP.

The execution of an ESAR is also required prior to major exploration VARs, acquisition VARs and
other cost/schedule estimates prepared for negotiation or bidding purposes (e.g. for entering into a new
opportunity), providing the potential prospect/project Capex exceeds US$500 million (refer to Global
Exploration Assurance Framework and Execution of ESARs (no link available at moment of writing)
for guidance).

[Link] Project Execution Review (PERT)

Global Process 24 Project Execution Reviews (PERT) assure project performance during the Execution
phase against commitments made at the Final Investment Decision. The PERT, as part of the assurance
process, provides an independent assessment of project performance and assures the project is being
controlled in accordance with best practices within the Company, and in compliance with the Minimum
Standards and relevant Global Processes.

The PERT process provides opportunities for the sharing of experiences between project management
practitioners through the review. Outcomes of PERTs include observations and recommended actions
supporting any project improvements. A set of project performance attributes is also reported at the
conclusion of a PERT to the PDAB.

For major projects (>$200 million (50/50 estimate of total project Capex)), the Functional Head of
Project Delivery will be represented on PDABs, either via Global Technical Partner representative or a
nominated Regional Representative. PDABs also include representation of the Regional Production and
Technical Directorates and should be integrated covering all project elements. For projects with Capex
<$200 million, where the costs may be dominated by well activities, the DRB may decide that the remit of
the PDAB will be achieved through (existing) well delivery assurance bodies, and choose not to constitute
a separate PDAB. A similar approach may be taken for major modification projects in production/
maintenance. Care needs to be taken not to duplicate, but still to achieve the intent of the PDAB.

The frequency of PERTs will vary according to location, maturity and project complexity. The frequency is
set by the PDAB according to project risk level, which generally follows the requirements as for VARs. It is
best practice to conduct PERTs as a minimum once a year and linked to key decisions/project milestones.

108 | Opportunity and Project Management Guide RESTRICTED

 Assurance | 4.10

[Link] Operations Readiness and Assurance (OR&A)

In the Execute Phase, the ORP process includes a Pre Start-up Audit, which takes place after mechanical
completion and pre-commissioning of the process facilities. The purpose of the Pre Start-up Audit
(PSUA) is to verify compliance of the production system on paper and hardware against specifications
and standards prior to introduction of hydrocarbons and readiness for handover to operations. The PSUA
includes verification of follow-up and status of actions from the process HAZOP and other HSSE reviews.

Cross-functional review of the project OR&A plans is covered by the respective VARs 1-4 during
Identify&Assess, Select and Define Phases and in PERTs during the Execute Phase.

Once steady state operations have been achieved, a Final Acceptance Audit is carried out before
formal handover of the project hardware (subsurface models, facilities, wells, infrastructure) to the
Operations Manager.

[Link] (Quantitative) Benchmarking of Project Performance

The requirements for benchmarking are defined in Global Process 21 Benchmarking of Project
Performance. The process deals with both Qualitative Benchmarking and Quantitative Benchmarking.
Qualitative Benchmarking is executed through the questionnaire of the Project Health Check (see
[Link]). For Quantitative Benchmarking of projects with total Capex less than US$200 million,
benchmarking of cost, schedule and production against other projects in that Region will be sufficient.
Between $200 million and $500 million quantitative benchmarking should be performed against the full
Shell portfolio of projects. For major projects with total Capex exceeding US$500 million, the use of
external benchmarking (e.g. through partner data or by Independent Project Associates Inc.) is required
prior to VAR 4. This is also required for the GIP Functional Support by the Functional Head of
Project Delivery.

[Link] Qualitative Benchmarking of Project Per4formance through the Project Health Check (PHC)
The PHC compares project performance at every ORP phase with recommended practices, and is one of
the requirements of Global Process 21. It does this in the compliance/project strategy, project control and
project deliverables areas of ORP to support key decisions.

PHCs are available as self-assessment for projects with total Capex less than US$200 million and in peer-
assist mode for projects with total Capex exceeding US$200 million. For Level 1 projects in the Define
or Execute phases, the PHC in peer-assist mode will be led by a representative of the Head of
Project Delivery.

Using the Healthchecker tool, separate questionnaires are available for each of the health checks, for each
of the ORP phases, except the Operate phase. The results of the health check are depicted as rose plots
showing performance against the various range statements, scoring a value of 0 to 5 for each element where
a score of 3 is the Minimum Standard and a score of 5 denotes a practice worth replicating (refer to the
Project Health Check Teamleader’s Handbook).

[Link] Other Audits and Reviews

During the lifecycle of the opportunity/project, additional reviews and/or audits may be imposed on the
project by the DE, DRB/PDAB, Functional Head of Project Delivery or by the organisation in which the
opportunity/project is being carried out (e.g. reserves audit, major project review, Health Checks, etc.). Ad
hoc reviews may also be required to address unforeseen issues. In order for the project to be fully prepared
for such ad hoc audits and reviews, the regular execution of documented PHCs is essential. The Technical
Global Processes and HSE Control Framework also include mandatory assurance events for subsurface,
wells, facilities, and Operations activity areas and HSSE. These specific assurance events are included in the
generic assurance requirements for Level 1 projects in Appendix D, Ch.2.

Opportunity and Project Management Guide RESTRICTED | 109

Chapter 4 | Project Controls

The Business Opportunity Manager and Project Manager have a Duty of Care for their people, systems,
documents and controls and should demonstrate to the DE and DRB/PDAB that everything possible has
been done to:
– provide a safe/healthy working environment;
– protect the environment/communities; and
– safeguard the value of the project.

Such demonstration may also be required in a court of law, e.g.:

– in the event of litigation by a third party;
– in case of an internal/external accident investigation; and
– in the event of a Business Control Incident.

The PEP should be regularly updated and audited for effectiveness of controls.

Further information can be found in EP Business Audit and Review Services Guide, (Link not available at
moment of writing) which sets the corporate audit and review requirements for OUs, including projects.

4.10.2 Discretionary Activities

Discretionary assurance requirements cover any type of review or audit which the project, OU or Region
may consider to carry out, based on a risk assessment, addressing:
– key uncertainties (e.g. subsurface);
– main risks (e.g. events that may impact functionality, costs and/or schedule); and
– opportunities (e.g. for cost reduction, schedule acceleration, increase in production and/or
enhanced value).

[Link] Value Improving Practices

Discretionary assurance activities should include a selection of Value Improving Practices (VIPs) and
reviews which clearly add value or mitigate risk. Reviews can take place on any key project deliverables
in any of the ORP Phases. All project assurance activities shall be included in the Project Assurance Plan
(PAP). A menu of possible assurance activities is shown below against TECOP categories. For small
projects, reviews should be combined where possible to reduce resource requirements.

– Technical:
- static/dynamic model and volumetrics review;
- concept identification/selection review;
- FDP/Subsurface review;
- BfD review;
- Project HSSE Plan review;
- Quality Systems audit (vs. ISO 9000);
- HEMP review;
- PEP review;
- peer reviews (in any of the technical areas);
- VIPs;
- Reserves/Volumetrics review;
- construction readiness review;
- After Action Review (AAR);
- Close-out Review (COR);

110 | Opportunity and Project Management Guide RESTRICTED

 Assurance | 4.10

- Production Performance Review (PPR);

- lessons learnt review; and
- uncertainty, risk and opportunity management review
- operability reviews (OR&A, TR/TI)
- FEED review
- Value Engineering
- IRM reviews (2), (3), (4)
- BTM/Smart field review.

– Economic:
- economic model review;
- GIP review; and
- Post Investment Review (PIR).

– Commercial:
- contract strategy review;
- contract audit (e.g. major EPC contract);
- commercial review (e.g. prior to Strategy VAR/VAR 1 and Transaction VAR/VAR 4);
- market/marketing review (e.g. domestic gas, Liquefied Natural Gas (LNG) etc.);
- due diligence review (e.g. for acquisition); and
- financial review/audit (e.g. Joint Venture (JV) accounting, NOVs).

– Organisational:
- manpower review;
- logistics review/LIRA;
- transportation review (e.g. for helico, fixed wing, boats); and
- site capability review.

– Political-societal:
- sustainable Development review;
- HSSE review/HSSE Management System (HSSE-MS) audit;
- legal review;
- joint venture audit (e.g. as required in the Joint Venture Operated Asset (JVOA)); and
- stakeholder management review.

4.10.3 Links

Audit and Review Services Guide

Address of EP BUSINESS AUDIT AND REVIEW SERVICES GUIDE, EP 00-2021, SEPTEMBER
2000 not available at moment of writing

Execution of ESARs
In preparation by Project Services

Opportunity and Project Management Guide RESTRICTED | 111

Chapter 4 | Project Controls

4.10.3 Links (continued)

Global Exploration Assurance Framework

[Link]
012%[Link]?Link=/ep/exploration/finance%20legal/level%202%20epf-x%20department%201
%20of%2012%[Link]

Global Process 21
[Link]

Global Process 24
[Link]

Healthchecker
[Link]

Pre Start-up Audit

[Link]

Regional Fountain
[Link]

Regional process
[Link]

Teamleader’s Handbook
[Link]
=name

Value Assurance Guide

[Link]

Project Guides:
[Link]
(select: OGP Management System; select: Project Guides)

112 | Opportunity and Project Management Guide RESTRICTED

OPMG
Shell Exploration & Production

2006 EDITION OPPORTUNITY AND PROJECT MANAGEMENT GUIDE

CHAPTER 5
identify & assess

select

define

execute

operate

Restricted
 This document will be maintained live on the Shell EP intranet site. The Web-based document will be the
controlled version. Copies or extracts of this manual, which have been download from the website, are
uncontrolled copies and cannot be guaranteed to be the latest version. Further electronic copies can be
obtained from the Global EP Library, Rijswijk.

This document is classified as Restricted. Access is allowed to Shell personnel, designated Associate Companies
and Contractors working on Shell projects who have signed a confidentiality agreement with a Shell Group
Company. ‘Shell Personnel’ includes all staff with a personal contract with a Shell Group Company. Issuance of
this document is restricted to staff employed by a Shell Group Company. Neither the whole nor any part of this
document may be disclosed to Non-Shell Personnel without the prior written consent of the copyright owners.

Copyright 2006 SIEP B.V.

The copyright of this document is vested in Shell International Exploration and Production B.V., The Hague, The
Netherlands. All rights reserved. Neither the whole nor any part of this document may be reproduced, stored
in any retrieval system or transmitted in any form or by any means (electronic, mechanical, reprographic,
recording or otherwise) without the prior written consent of the copyright owner.

Design by Graphics, Media & Publication - Rijswijk/P04883

EP No. EP 2006-5500
Revision 0.0
ECCN Not subject to EAR-No US content
Author EPT - OE, Capital to Value - Robin Hutchinson and Henk Wabeke
Approved By Matthias Bichsel
Owner Matthias Bichsel, Executive Vice President, Technical
Document type Business Control Document - Company Standard
Distribution EP Leadership Forum All Staff in project-related functions
Available as downloadable copy for all staff

Publication History
EP No. Date Extent of Revision Approved by
2001-5500 Nov 2001 First Issue of OPMG, complete rewrite of PMG EP96-3000 Robin Hutchinson
2006-5500 June 2006 Chapter 5 rewritten Henk Wabeke

Other chapters in the OPMG expected to be revisied to complete EP 2006-5500

Chapter Title
1-3 Introduction to the guide / Opportunity Realisation Process (ORP) / Project Strategy
4 Project Controls
6 Opportunity Realisation Process (ORP) Toolbox

Other C2V Publications

Document Title EP Number Approved By
OF Opportunity Framing Facilitator’s Handbook EP2003-9107 Peter D.A. Baruch

ORP Opportunity Realisation Process EP2006-5501 Henk Wabeke

VE Value Engineering EP2004-9016 Philip Tudhope

CI/CS Development Concept Identification and Selection EP2005-9014 Henk Wabeke and
Facilitator’s Handbook Niels van Dijk
PHC Project Health Check EP2005-9047 Henk Wabeke and
Qassim Kitany

2 | Opportunity and Project Management Guide RESTRICTED

 Contents |

5
PROJECT ACTIVITIES AND DELIVERABLES, PER PHASE

5.1 ORP PHASE 1: IDENTIFY & ASSESS 11

5.1.1 Venture Generation 11

[Link] Objectives 12
[Link] Description of Activities 12
[Link] Key Deliverables 12
[Link] Top Tips 12
5.1.2 Exploration 13
[Link] Objectives 13
[Link] Description of Activities 13
[Link] Key Deliverables 13
[Link] Top Tips 13
5.1.3 Initiation 14
[Link] Objectives 14
[Link] Description of Activities 14
[Link] Key Deliverables 15
[Link] Top Tips 16
5.1.4 Appraisal 16

[Link] Objectives 16

[Link] Description of Activities 17

[Link] Key Deliverables 18

[Link] Top Tips 18

5.1.5 Feasibility 19
[Link] Objectives 19
[Link] Description of Activities 19
[Link] Key Deliverables 22
[Link] Top Tips 22

5.2 ORP PHASE 2: SELECT 24

5.2.1 Objectives 24
5.2.2 Description of Activities 24
[Link] Reframing 24
[Link] Decision Analysis 25
[Link] Planning 25
[Link] Subsurface Activities 26
[Link] Wells Activities 26
[Link] Surface Activities 26
[Link] Cost Estimating 26

» CONTENTS CONTINUES OVER PAGE

Opportunity and Project Management Guide RESTRICTED | 3

Contents |

5
» PROJECT ACTIVITIES AND DELIVERABLES, PER PHASE

5.2.3 Key Deliverables 26

[Link] Updated Opportunity Framing and Roadmap 26
[Link] Field Development Plan 27
[Link] Concept Selection Report (CSR) 27
[Link] Preliminary Asset Reference Plan 27
[Link] Operations Philosophy 28
[Link] Project Execution Strategy 28
[Link] Contracting Strategy 28
[Link] Funding Proposal for Define 28
5.2.3 Top Tips 28
5.2.4 Links 29

5.3 ORP PHASE 3: DEFINE 30

5.3.1 Basis for Design 30

[Link] Objectives 30
[Link] Description of Activities 31
[Link] Key Deliverables 31
[Link] Top Tips 33
5.3.2 Project Specification 33
[Link] Objectives 33
[Link] Description of Activities 34
[Link] Key Deliverables 36
[Link] Top Tips 39
5.3.3 Well Delivery Process 40
5.3.4 Updates to ARP, FDP and PEP 40
[Link] Objectives 40
[Link] Description of Activities 41
[Link] Key Deliverables 41
[Link] Top Tips 41
5.3.5 Group Investment Proposal 41
[Link] Objectives 41
[Link] Description of Activities 42
[Link] Key Deliverables 42
[Link] Top Tips 42
5.3.6 Links 43

4 | Opportunity and Project Management Guide RESTRICTED

 Contents |

5
» PROJECT ACTIVITIES AND DELIVERABLES, PER PHASE

5.4 ORP PHASE 4: EXECUTE 44

5.4.1 Detail Design 44

[Link] Objectives 44
[Link] Description of Activities 45
[Link] Key Deliverables 47
[Link] Top Tips 51
5.4.2 Procurement/Expediting/Factory Testing and Acceptance 51
[Link] Objectives 51
[Link] Description of Activities 51
[Link] Key Deliverables 53
[Link] Top Tips 53
5.4.3 Fabrication and Construction 53
[Link] Objectives 53
[Link] Description of Activities 54
[Link] Key Deliverables 54
[Link] Top Tips 54
5.4.4 Offshore Transportation and Installation/Hook-up 54
[Link] Objectives 54
[Link] Description of Activities 54
[Link] Key Deliverables 60
[Link] Top Tips 60
5.4.5 Mechanical Completion, Pre-commissioning and Handover to Operations 61
[Link] Objectives 61
[Link] Description of Activities 61
[Link] Key Deliverables 62
[Link] Top Tips 62

5.5 PERVASIVE PROCESSES 63

5.5.1 Well Delivery Process (WDP) 63

[Link] Objectives 63
[Link] Description of Activities 63
[Link] Deliverables 63

[Link] Top Tips 64

[Link] Links 64

» CONTENTS CONTINUES OVER PAGE

Opportunity and Project Management Guide RESTRICTED | 5

 O
Contents |

5
» PROJECT ACTIVITIES AND DELIVERABLES, PER PHASE

5.5.2 Geomatics 64
[Link] What is Geomatics? 64
[Link]. How Does Geomatics Support Project Delivery? 65
[Link] Technical Authority (TA) and HSE Criticality 68
[Link] Geomatics in the EP Business Model 69
[Link] Links 69
5.5.3 Logistics and Infrastructure 70
[Link] Introduction 70
[Link] Logistics Elements of the ORP 71
[Link] The Project Logistics Plan 71
[Link] The Project Logistics Strategy 72
[Link] Logistics Handover 72
[Link] Infrastructure 72
[Link] Links 73

SEPARATE VOLUMES

1 INTRODUCTION TO THE GUIDE

2 OPPORTUNITY REALISATION PROCESS (ORP)
3 PROJECT STRATEGY
4 PROJECT CONTROLS
6 ORP TOOLBOX

6 | Opportunity and Project Management Guide RESTRICTED

OPMG
Contents |

2006 EDITION OPPORTUNITY AND PROJECT MANAGEMENT GUIDE

CHAPTER 5

Opportunity and Project Management Guide RESTRICTED | 7

Chapter 5 | Project Activities and deliverables, per Phase
5
PROJECT ACTIVITIES AND DELIVERABLES, PER PHASE

5.1 ORP PHASE 1: IDENTIFY & ASSESS

5.2 ORP PHASE 2: SELECT

5.3 ORP PHASE 3: DEFINE

5.4 ORP PHASE 4: EXECUTE

5.5 PERVASIVE PROCESSES

Chapter 5 | Project Activities and deliverables, per Phase

Project Activities and Deliverables outlines the work Figure 5.0.1

Project Activities and Deliverables
in each phase of the Opportunity Realisation Process
(ORP) for a typical hydrocarbon opportunity. It also Project
Strategy

lists the key deliverables that should be produced.

Many of these activities and deliverables are applicable Project Controls

to other types of project. Project Activities and Deliverables

The most prominent work activities are shown in Figure 5.0.2 below. Each of
them is described in detail in the EPBM and several elements of them may also
be governed by the EP Global Processes. This chapter briefly describes these
activities and places them in the context of the ORP, highlighting how they
enable decision-based planning.

PHASE 1 PHASE 2 PHASE 3 PHASE 4 PHASE 5

IDENTIFY & ASSES SELECT DEFINE EXECUTE OPERATE

Venture Generation Detailed Design Start-up

Exploration Procurement Production

Initiation Construction Maintentance

Appraisal Appraisal Basis for Design Commissioning Inspection

Feasability Concept Selection Project Specification Prepare for operations Reservoir Management

Well Engineering Well Engineering Well Engineering Well Engineering Well Engineering

Geomatics Geomatics Geomatics Geomatics Geomatics

Logistics Management Logistics Management Logistics Management Logistics Management Logistics Management

As the OPMG is projects focused, portfolio management is not discussed and

exploration is only discussed as far as it generates development projects.
Each of the phases, exept Operate, is covered in one Section. Operate is not
covered by the OPMG. Pervasive processes like Well Engineering, Geomatics
and Logistics are discussed in Section 5.5.
The chapter is descriptive, rather than pre-scriptive. For a good understanding
of mandatory versus optional activities and events, readers should refer to
chapters 2, 3 and 4.
The emphasis throughout is on a multi-discipline approach to developing and
realising the opportunity with Petroleum, Well, Field and Operations Engineers
jointly contributing.

Links:
EPBM v4 [Link]
 ORP Phase 1: Identify & Assess | 5.1

5.1 ORP PHASE 1: IDENTIFY & ASSESS

Identify & Assess is the first phase of the Opportunity Realisation Process (ORP) but is often portrayed as
two phases.

Identify ends with a conscious decision that the opportunity is worth assessing. That decision is labeled
Decision Gate 1 (DG 1). Prior to the decision, Value Assurance Review (VAR) 1 poses the questions:
– do we understand what we’re getting ourselves into?
– should we spend resources in assessment of this opportunity?

The purpose of the Assess phase is to demonstrate that the opportunity is feasible. Feasibility means that
there is a high enough likelihood of success in a wide enough range of possible external outcomes. It does
not mean that success is guaranteed!

Feasibility is assessed on a distinct set of criteria. Alignment between the team, the Decision Review Board
(DRB) and the approval authority on these assessment criteria is critical.

Some projects, undertaken for reasons of safety, operational flexibility etc, may not appear to have any
quantifiable economic value, and are consequently not susceptible to straightforward economic analysis.
In such cases, the decision whether to proceed or not is made on other grounds, the main economic factor
here being the cost of not pursuing and implementing the project.

At DG 2 we decide whether the opportunity is feasible and worth the additional investment to select a
preferred development option. If it is not, the opportunity is kept on hold, recycled or terminated. DG 2
marks the widest span of our thinking: after DG 2 we increase the depth of the analysis, but narrow the
width as fast as we can.

The Identify and Assess phase is characterised by divergent thinking:

– spotting opportunities;
– understanding the range of possible subsurface realisations;
– developing the range of potential development options;
– identifying show-stopping risks; and
– formulating an appraisal strategy which will lead to risk reduction.

Formulation of exit strategies for later stages is part of the appraisal.

5.1.1 Venture Generation

[Link] Objectives
The objective of venture generation is to align partners and other stakeholders behind a structure (the
venture) that will act as the vehicle for conducting new business.

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Chapter 5 | Project Activities and deliverables, per Phase

[Link] Description of Activities

Venture generation starts with the creation of venture concepts, be they incorporated or unincorporated.
Preliminary concept studies are performed to develop ideas further and to decide which ones to take
forward. This first step is usually captured in a Project Initiation Note (PIN), followed by a VAR 1 for the
whole project, which can be seen as a VAR 2 for the Venture Generation process (refer to nested Roadmaps
in Section 3.1.1).

The next step is the selection of the preferred venture concept and the development of the venture
prospectus (describing what the venture will cover) and the venture Business Plan (describing what the
venture will actually do). This step can be seen as the select phase of the venture generation process. It
is broadly aligned with the project feasibility phase, and it is good practice to conduct a VAR 3 level of
scrutiny on the VG process together with a VAR 2 level of scrutiny on the actual project.

Similarly, defining the venture in more detail (roles, decision making/voting, legislation etc.) usually runs
parallel with the Select phase for the project, and the key contracts like Joint Venture Agreement (JVA)
and Joint Venture Operating Agreement (JVOA) are signed at the end of project concept select, i.e. prior
to major commitments being made on behalf of the venture in preparing the basis for design and project
specification. Although this rule of thumb, whereby the commercial process runs one phase ahead of the
technical maturation, is indicative rather than absolute, the principle is sound and wider divergence should
be cause for concern.

[Link] Key Deliverables

Venture Identification Study – Preliminary Concept Study
Performed to develop ideas. Select the best concepts to take forward and provide input into the PIN,
which should bring venture generation to feasibility level.

Venture Prospectus
Describes the structure and remit of the emerging venture. Used predominantly to obtain initial alignment
between prospective partners.

Venture Business Plan

Describes the amount of business the venture plans to engage in.

Venture Set-up Plan

Establishes control frameworks and finalises the deal.

[Link] Top Tips

Establish a nested Roadmap that describes the decisions and activities in both the technical as well as the
commercial maturation path.

Engage potential partners at the earliest opportunity in the development of these Roadmaps, as
Opportunity Framing and Roadmapping are key alignment tools.

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5.1.2 Exploration

[Link] Objectives
The objectives of exploration are to:
– acquire exploration acreage/licences/permits; and
– explore within an acquired licence to demonstrate the potential for economically recoverable volumes
of hydrocarbons.

[Link] Description of Activities

Acreage/Licences
Acquisition of acreage/licences is described within the EPBM. Using the principle of nested Roadmaps,
it recognises:
– Identify and Assess (possible acreage/licences, as far as the ensuing project is concerned);
– Select (mature possible acreage and licences, bid);
– Define (negotiate, close deal); and
– Execute (acquire acreage).

Exploration
Execute exploration activities are described within the EPBM. Using the principle of nested Roadmaps,
we recognise:
– Identify and Assess (set up exploration venture, prepare exploration programme, and acquire and
process data);
– Select (evaluate and rank plays and prospectivity);
– Mature (mature selected prospects and prepare exploration well proposal); and
– Execute (drill exploration well(s), re-evaluate prospectivity leading to drilling, revise exploration
programme, and/or farm down, and/or relinquish, or hand over to appraisal).

[Link] Key Deliverables

The most important deliverable into a project is the well file(s). For the complete list of deliverables, refer
to the EPBM

[Link] Top Tips

Assess the project’s possible scope in the context of past, planned and possible future exploration.

Assess the emerging project against the demonstrated accumulation, or against the full licence, or
across owned and third-party or open licences, which may yield fundamentally different business and
project proposals.

Assess exploration prospectivity, which may yield different outcomes depending on the inclusion or
exclusion of existing assets and/or projects.

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Chapter 5 | Project Activities and deliverables, per Phase

5.1.3 Initiation

[Link] Objectives
The objectives of initiation are to:
– reduce the technical and commercial uncertainties sufficiently to establish whether further prospect
development is justified; and
– alert the organisation of the arrival of the opportunity at the first Opportunity Realisation Process
(ORP) Decision Gate (preceded by VAR 1).

Appraisal drilling may be necessary to reduce the uncertainties. The main deliverable is a PIN and the
activities are shown in Figure 5.1.1.

Figure 5.1.1 – Initiation Activities

Project Decision
Opportunity Appraisal Economic to move into
Initiation VAR 1
Framing Drilling Screening Feasibility
Note
Stage

DG 1

Subsurface
Studies

Well, Subsea
& Surface
Studies

Business
Plan

[Link] Description of Activities

Opportunity Framing
The opportunity must be framed in accordance with Global Process 19. The Opportunity Framing output
is the first “contract” between the work team and the DE/DRB. Approving the framing output is the first
act of Governance that the DE/DRB does. The decision-based Roadmap is the most prominent document
in the Opportunity Framing output, as it summarises:
– the key milestone decisions;
– the “evidence” required to make those decisions; and
– the work required to collect the evidence.

Appraisal Drilling
Chapter 5.1.4 describes the objectives, activities, deliverables and top tips of appraisal.

Subsurface Studies
The appraisal information will lead to enhancement of the existing reservoir model. This will support
a major reduction in the uncertainty of recoverable volumes, together with a determination of fluid
compositions, wellhead pressures and temperatures, required recovery mechanisms, likely reservoir drainage
requirements and production profiles.

Wells and Facilities Studies

The subsurface activities support initial studies of both development well and subsea/surface facilities
requirements. In conjunction with the latter, a more thorough technical review is conducted of any

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Operating Unit or third-party infrastructure that may have processing or transportation potential. This
review also addresses the potential effects of other prospects in the area.

Economic Screening
The wells and facilities studies support the preparation of high-level
(+40%/-25%) development cost estimates. These, together with the indicative tariffs, operating costs,
production profiles and oil/gas prices, allow screening economics to be undertaken, normally across a range
of realisations (refer to Global Process 05).

Updating the Business Plan

In parallel with the above technical work, the existing Business Plan is updated and enhanced. In addition
to the previous topics, the Business Plan should now include a:
– co-venturer interface plan that addresses the nature of the relationships between Shell and any
co-venturers, and the way in which these will be managed in order to optimise the business
objectives; and
– strategy for the management of interfaces with regulatory bodies.

During this stage, further discussions should take place with:

– co-venturers, to discuss possible development plans and to identify any major differences or issues;
– owners of processing or transport infrastructure, to assess their interest and potential constraints; and
– the Regulatory Authority, to promote dialogue from an early stage on such issues as recoverable
reserves, development options, Health, Safety, Security and Environment (HSSE) aspects, operatorship,
equity and use of existing facilities.

[Link] Key Deliverables

Project Initiation Note
The initiation activities allow an improved assessment of the technical, economic and commercial viability
of the prospect. If the indications are positive, a PIN is written to gain management support for further
development work. Before the PIN is presented to management, VAR 1 is carried out.

The PIN should be a concise document and, for a normal hydrocarbon opportunity, typically contains:
– a summary of the volumes and the development effort against the history to date;
– an introduction with background, objectives and project scope;
– an analysis of the volumes, discovered and undiscovered, in the wider basin (i.e. not necessarily limited
to the acreage held);
– a description of the commercial environment;
– an opportunity statement;
– a description of the development options and notional economics
– a project Roadmap;
– a description of the organisational issues, especially Governance (a key concept in Governance is
the line-of-sight, which demands a straight organisational line between the CEO and the Business
Opportunity Manager, with all intermediate positions identified and authority levels assigned);
– opportunities and threats, including HSSE and reputation; and
– a list of the key stakeholders, their stake and an outline plan of how to address this stake.

Value Assurance Review 1 (VAR 1)

VAR 1 is held to evaluate the work done before a decision is taken on moving into the Assess phase. The
VAR supports the decision making and does not replace it.

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Chapter 5 | Project Activities and deliverables, per Phase

[Link] Top Tips

Conduct a VAR 1 immediately once a quality Opportunity Framing has been delivered. Conduct the
VAR 1 just on the Opportunity Framing output and on some preliminary economics. This practice will
ensure that:
– a quality Opportunity Framing (and a VAR 1) are done in the first place;
– a DRB is established and the Opportunity Framing output becomes the basis of the “contract”
between the team and DRB; and
– the DG 1 decision is well articulated and well noted by management, and, to some extent, marked
and celebrated.

Establish the decision authority for DG 1 unambiguously in the organisation. For new business
development, a single DRB is appropriate (at EVP/VP level), and for new opportunities in existing assets
the Asset Team Leader should be authorised to make DG 1 decisions.

Articulate the DG 1 decision clearly, then collect the evidence required. The prime purpose of DG 1
is to decide on staffing and funding, and to check for strategic alignment. Such a decision may well
be possible on scant evidence. Postponing DG 1 will allow the collection of more evidence and reduce
uncertainties, but may not alter the case for action.

Conduct a VAR 1 sooner rather than later. The earlier the organisation is forced to take a position on an
opportunity, the better.

5.1.4 Appraisal

[Link] Objectives
Appraisal is the process of gathering information with the objective to support feasibility and/or concept
selection. For example, appraisal wells are drilled to delineate a field to assess commerciality and/or
support a decision on a field development concept. Appraisal usually entails the actual drilling of a well(s),
but could also be limited to (re-)shooting or (re-)interpreting/(re-)processing seismic data or just the
procurement of information.

Appraisal drilling is the prime example of information gathering for E&P development projects. As such it
occurs typically in the Assess and Select phases. However, the principles below apply to any type of project
and/or level of decision, and “appraisal” in the generic sense may occur at any stage in a project.

[Link] Description of Activities

Justification of the Information Gathering through “Value of Information” Analysis
All projects face uncertainties. The Value of (extra) Information (VOI) lies in the fact that extra
information resolves or reduces uncertainty. This allows quality decisions to be made and/or prevents
poor ones.

The fact that VOI is linked to both project uncertainty and project decisions helps us to understand the
VOI analysis. Information only has value if it impacts decisions.

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Table 5.1.1 below presents some examples of uncertainty and related decisions.

Table 5.1.1 – Project Uncertainty/Project Decision

PROJECT PROJECT UNCERTAINTY PROJECT DECISION

A Field extent Development option (multiple platforms or subsea tiebacks)

B Field commerciality Development option (develop or not)

C Fluid characteristics (corrosive or not) Development option (premium or carbon steel pipelines)

D Rock properties Well design options (slotted liner, screens or gravel packs)

Identification of the project uncertainties and the related project decisions is the start of any VOI analysis.
The next step is to use the “matrix method” to derive the value of perfect information as follows:
– order uncertainties and options in a matrix;
– assign the (so-called “priori”) probabilities for the different realisations; and
– calculate the value (typically Net Present Value (NPV)) of the scenarios in the matrix.

Subsequently:
– calculate weighted NPVs for both project options taken without information. Identify which is the
preferred decision without information;
– calculate weighted average NPV for a scenario where the appropriate decision can be taken assuming
we will have perfect information; and
– the difference between the informed decision and the preferred decision without information is (by
definition) the value of perfect information.

For the uncertainty/decision listed in Item A of Table 5.1.1, refer to Table 5.1.2.

Table 5.1.2 – Example of Project Uncertainty/Project Decision

PROJECT UNCERTAINTY AND ASSOCIATED PROBABILITIES

Extended field – 70% Compact field – 30% Weighted NPV

Multiple platforms $200m -$50m 140-15 = $125m

Subsea tiebacks $140m $100m 98+30 = $128m

Informed decision Multiple $200m Subsea $100m 140+24 = $164m

The value of perfect appraisal/information to make an informed decision is $39m or $36m, depending
on which uninformed decision was preferred (not necessarily the one with the highest weighted NPV;
other considerations such as low downside exposure could play a role). These examples are for perfect
information gathering.

Calculating the value of imperfect appraisal/information can be done but requires some detailed
mathematics. Best practice is to consult an expert user of the methodology.

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Chapter 5 | Project Activities and deliverables, per Phase

Execution of the Information Gathering Activity

As appraisal rarely provides perfect information, it is essential to distinguish between information that you
seek, and the data that you actually gather. Many different types of data can lead to the information you
seek, and perfection will come at a price. To build on the above example, information on field extent can
be obtained through:
– drilling a single well (details in one point only, possibly cheap);
– drilling multiple wells (expensive, but far better field cover);
– obtaining high quality dedicated seismic (excellent field cover, but lack of detail); and
– a raft of other specialised methods, all with their own levels of reliability and cost.

[Link] Key Deliverables

Understanding
Although intangible, this is the most important deliverable. A good value of appraisal/information analysis
is worked on by the full team, because it has to involve full lifecycle thinking. It will result in a better,
sharper understanding of the uncertainties facing the project, and their link to and impact on upcoming
project decisions.

Appraisal Strategy
The justification and recommendation needs to be documented for approval by the relevant decision
makers.

Data Acquisition Plan

The data acquisition plan needs to specify data processing and subsequent use of the results.

[Link] Top Tips

Use a VOI analysis as input into your decisions on information gathering, and as a tool to facilitate the
team’s understanding of the project’s fundamental uncertainties and decisions. Do not use it to make
decisions on your behalf (i.e. “we will acquire data if the VOI is positive”).

Move away from focus on the data acquisition method (i.e. “how can we justify cutting a core”) to first of
all identifying the required information. It may be that other data acquisition methods provide more value
for money.

Other companies might have different NPV discount factors and a different appreciation for risk. This will
affect their view of value. Appraisal might destroy value by disproving a potential upside, which is not a
good idea if you are considering to farm out.

5.1.5 Feasibility

[Link] Objectives
The objectives for this phase are to:
– determine the range of possible development concepts in the context of the project uncertainties and
demonstrate technical feasibility of these concepts;
– determine if there is at least one development concept within this range that is technically and
economically viable, and commercially attainable for most realisations within the uncertainty range;
– determine which development concepts will be carried forward in the Select phase; and
– deliver a feasibility report that documents the results from the work done during the Feasibility phase,
and allows a transition from divergent thinking to convergent thinking.

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[Link] Description of Activity

Opportunity Framing
The project should be (re-)framed in accordance with Global Process 19, incorporating findings and
conclusions from the project Initiation phase. Particular attention should be paid to (re)defining criteria
for the Feasibility and Select gate decision as input to determining the level of detail required in the work
activities. During the framing, the team should decide how to perform the activities during the Feasibility
phase.

Subsurface: Build Realisations

During this stage the team must identify the key subsurface uncertainties. From these uncertainties the
team should construct credible and coherent, and distinctly different, subsurface realisations that together
span the possible outcomes of the subsurface uncertainties. The team should establish the technical limit
recovery factors for the opportunity. Static and dynamic reservoir models should be built to a level of detail
that supports evaluation of the development concepts in each realisation against the assessment criteria.

Subsurface, Wells and Surface Engineering: Define Development Concepts

In parallel with the building of realisations, the integrated team should define the development concepts
available for the project.

Development concepts will have:

Subsurface elements:
– well pattern;
– reservoir energy management; and
– (sequence of ) recovery mechanism(s).

Wells elements:
– well type;
– completion type; and
– sand control.

Surface elements:
– gathering;
– treatment; and
– export.

Each element will have several options. In order to provide contrast to the analysis, the options should
be chosen such that they are mutually exclusive and collectively exhaustive, meaning that they help to
articulate the choice and that they span the range of possible options. This practice helps to test the values
and trade-offs for various development alternatives.
The Well Engineering Team should distinguish between concept choices that are dependent and
independent of the subsurface development. For choices independent of the subsurface uncertainties, the
Well Engineering Team can test feasibility of various concepts ahead of subsurface development (i.e. rig
availability, tieback points, sand control etc.).

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Chapter 5 | Project Activities and deliverables, per Phase

Commercial Discussions
In accordance with the Business Plan developed in the Initiation stage, the following discussions
are pursued:

With co-venturers:
– the potential development plans;
– operatorship; and
– the required joint or unit operating agreements.

With owners, the potential processing and evacuation facilities, with a view to establishing:
– the feasibility of using these facilities;
– the modifications that may be required;
– possible timing constraints; and
– indicative prices/tariffs.

The Best Development Concept for Each Realisation: Build Scenarios

In order to provide contrast, and think widely enough, optimum development concepts should be defined
for each of the realisations. At this stage, these development concepts should be distinctly different,
each most closely meeting project objectives for that particular realisation. This means that choices
on the number of wells, drainage patterns and reservoir energy supply will have to be considered. The
combination of one realisation with one development concept is called a scenario.

Testing Feasibility: Evaluating the Scenarios at Screening Level

Feasibility must be demonstrated through evaluating the scenarios. First the team should aim to eliminate
concepts through inspection or high-level screening. This is to avoid unnecessary detailed work to
demonstrate what is in reality already known. The remaining development concepts should then be
screened over all realisations against agreed assessment criteria. The aim is to demonstrate at least one
concept that is technically and economically viable, and commercially attainable. Figure 5.1.2 illustrates.

Figure 5.1.2 – Demonstrating Feasibility

Development Concepts: Wide enough?

1 2 3 4

“Solution Space”
A
At least one Concept that will
work in most Realisations?
B
Realisations

C Scenario

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If such a concept cannot be found at this stage, either a new concept should be developed or the team may
discover that the uncertainties are too large to find a feasible concept. The latter often triggers additional
activities to reduce those uncertainties that prevent the team from deciding on a feasible concept(s).

Economic Screening
The technical and commercial work completed during this stage allows for Level 1 and 2 cost estimates,
tariffs and production profiles for all development concepts under consideration to be prepared which, in
turn, are used for updated economic screening runs.

Skill Screening
For all development concepts under consideration, a screening against required skills and future availability
of skills should be performed.

[Link] Key Deliverables

The work conducted in the Feasibility stage is captured in the Feasibility Report, which should
demonstrate that at least one technically and commercially viable option exists. In addition, an initial
ranking of the development concepts studied will support a recommended shortlist of options – ideally, no
more than two or three – to be carried into the Select phase.

Typically, the main contents of a Feasibility Report are:

– framing report, resulting from the framing at the start of the Feasibility phase;
– the data, its source and quality on which the feasibility work is based;
– an updated subsurface interpretation;
– an updated list of key uncertainties and updated risk register;
– the subsurface realisations used to capture the key subsurface uncertainties and their main
characteristics;
– an option table listing the key concept choices and the options considered under each;
– key features of the development concepts, including HSSE aspects;
– documented screening of the development concepts against clearly established criteria leading to a
ranked list of concepts;
– an updated volumetric overview for the project, including ranges;
– an updated hydrocarbon maturation plan for the project;
– key issues and objectives for the Select phase, including a data acquisition plan if applicable to facilitate
the Select decision;
– a scope and programme for the Select phase, including activities, timings, resources and costs; and
– cost estimates at Level 1 (screening: + 40%/-25%).

[Link] Top Tips

Enter the Feasibility phase with a clear view of the ranges of outcomes under uncertainties and the ranges
of options under concept decisions.

Get DRB approval on the assessment criteria and weighting to be used.

Look wide enough without going into too much detail. Looking too wide has the inherent risk of keeping
too many options open and leads to unnecessary work, as too many scenarios have to be evaluated. Initially
look wide enough to consider all distinctly different options and realisations, but then narrow down
quickly such that only a limited number of scenarios need to be evaluated.

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Chapter 5 | Project Activities and deliverables, per Phase

Ruthlessly apply Mutually Exclusive, Collectively Exhaustive (MECE) to both realisations and their
outcomes, and development concepts with their options. This practice provides useful contrast to provide
clarity and depth of insight, and supports the principle of ‘wide enough’. Often, by articulating the choices
and their options MECE, the best solution presents itself without the need for further analysis.

Celebrate ‘wide enough’ as the transition point between divergent and convergent thinking. It is best
practice to agree with the DRB which realisations and development concepts will not be taken into the
Select phase. Refer to Figure 5.1.3, Global Process 05 and CI-CS Team Leader’s Handbook.

Figure 5.1.3 – Planning for Select

Drop this
Development Concept

Development Concepts

Ignore this
Realisation
Subsurface Realisations

Agree with DRB what Options are

going to be evaluated against
what Realisations in the Select Phase

Feasible Dev Scenario

Key Figures for each Scenario

NPV; VIR;Production forecast; Marginal scenario
Opex; UDC; UTC,
Meets project objectives
No go scenario

5.1.6 Links

CI-CS Team Leader’s Handbook

[Link]
browse&sort=name

EPBM
[Link]

Global Process 05
[Link]

Global Process 19
[Link]

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5.2 ORP PHASE 2: SELECT

Select is the most important phase in the ORP. In it, the single concept that will be used to realise the
opportunity is evolved from the several possible concepts in the Feasibility Report. If more than one
concept is to be put forward, the DRB must be involved.

It is the phase in which most strategic decisions on how the project will be executed and operated
are made.

The decision-driven nature of the ORP is most prominent during the Select phase, as the Select decisions
are the most prominent ones in the project. Being decision driven rather than activity driven yields the
biggest benefits during Select.

For a typical hydrocarbon project, the phase is governed by Global Process 05, with the activities being
described in EP 60.04, 61.05 and 61.06 of the EPBM.

5.2.1 Objectives

The objectives of the Select phase are to get all strategic decisions of an opportunity approved by the
appropriate authority. The word strategic is used loosely, as the nature of the decisions to be taken is often
dictated by time schedules, lead times for Government approvals and contracting tactics.

5.2.2 Description of Activities

[Link] Reframing
As the team is likely to have grown during and after feasibility, and perspectives will have shifted, it is best
practice to reframe the opportunity. The emphasis of the reframing should be on the focus decisions, i.e.
the choices to be made during Select. The technical choices will have been identified during Feasibility, and
will fall under subsurface, wells and surface concepts.

The level at which the decisions will have to be made during Select may still be open for discussion. For
example, on sand control one possible decision is whether or not to have it installed subsurface. But the
decision may also be articulated as a choice between internal versus external versus slotted liner versus no
sand control; it may also transpire that this particular decision can be postponed to Define.

The framing should identify all other choices to be made, be they Technical, Economic, Commercial
or socio-Political (TECOP)). Best practice is to brainstorm all conceivable decisions in at least two
dimensions, for example following the molecules along the flowpath and brainstorming TECOP for
reservoir-, inflow-, vertical flow-, horizontal flow-, processing- and export-decisions.

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Chapter 5 | Project Activities and deliverables, per Phase

[Link] Decision Analysis

Once the decisions have been listed, each set of decisions can be framed in turn. It is best practice to build
such a decision framework prior to starting off large chunks of subsurface modelling work. For each set of
decisions, a structured frame will address the:
– right pitch/articulation of the decision;
– context with givens/assumptions and boundary conditions for that decision;
– MECE options open to us;
– selection criteria to be used to land that decision;
– depth of evidence required for that decision;
– work that needs to be done to assemble the evidence; and
– realisations that the emerging decision will be tested against.

Refer also to Figure 5.2.1.

Figure 5.2.1 – Decision Template

1. Articulate the Decision: 2. List the Givens:

We want to decide ......................................................................

.................................................................................................

4. The selection 5. The (depth of) the required

criteria are: evidence is:

•………………………
•……………………… (Deliverable) 3. List the alternative choices:
•………………………
The MECE Options are:
_
_
_
6. The work that has to go into the deliverable: _
What Who When _
_
_
_ 7. What “realisations”are you
_ going to test your decision
against?

It is best practice to assign owners to each decision, to share the decision framework with the DE/DRB
and get their endorsement. It is also best practice to use the decision template for major deliverables. For
example, the Field Development Plan (FDP) should have an owner, an agreed depth and breadth presented
as a list of contents and a common view on what work activities will be required to build the
complete plan.

[Link] Planning
Once all sets of decisions and the key deliverables have been framed, the team should establish hierarchy
and sequence, and use this to plan the work activities in a detailed activity plan (such as a Gantt chart).
Having shared the decision framework with the DE/DRB, it will be easier to obtain resources, funding and
management attention for the work ahead.

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[Link] Subsurface Activities

All subsurface modelling work should be linked to a decision (as a “choice yet to be made”) or a
deliverable. Although some exploratory modelling should be allowed, it is best practice to reassess the
workload at frequent intervals for its relevance to the decisions that are still outstanding.

Appraisal activities described in Section 5.1.4 may well continue during this phase, dependent on the
opportunity objectives and timing.

[Link] Wells Activities

Selection/definition activities for wells are described in detail in the Well Delivery Process (Global
Process 09). Concept decisions are typically well type, completion type and sand control strategy, but
also execution decisions (dry/wet wellheads, rig type, batch drilling yes/no) and future intervention/
maintenance strategies).

[Link] Surface Activities

The surface options are usually well understood in terms of hardware, but sometimes less so in terms
of project execution/contracting, and future operations and maintenance. Operations and maintenance
philosophies must be decided upon during Select. This will include decisions on manning, availability/
uptime, sparing philosophies, logistics etc. Further details can be obtained from Global Process 12.

Contracting strategies should be in place by the end of Select.

[Link] Cost Estimating

Cost estimates must be prepared to Level 2 (+25%/-15%).

5.2.3 Key Deliverables

As all key deliverables during Select have a strategic dimension, they are discussed in more detail in
Chapter 3.

[Link] Updated Opportunity Framing and Roadmap

It is best practice to reframe the opportunity at the start and at the end of the Select phase, as:
– perspectives will have changed;
– more detail for the Define and Execute phases will be visible;
– new stakeholders will have been identified;
– existing stakeholders will have changed their position; and
– most important of all, the team will have gained an improved perception of the timeline.

During Select, the team will be under considerable pressure to “declare themselves” and an up-to-date
Roadmap will help to manage the many stakeholders that the team will be faced with.

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Chapter 5 | Project Activities and deliverables, per Phase

[Link] Field Development Plan

The FDP should describe the full development of the field down to the technical limit recovery factor and
including abandonment. Best practice is to portray past production, developed reserves, and all firm and
notional projects as tranches of reserves with increasing cumulative recovery factor and Unit Technical Cost
(UTC), against the sum total of the Gas Initially In Place (GIIP) or Stock Tank Oil Initially In
Place (STOIIP).

The FDP should make it clear which of the tranches will be taken forward as firm projects into Define,
and how and if these projects will cater for follow-up projects.

The FDP should clearly indicate where the economic and technical cut-offs are located, and what the key
levers are to move the economic cut-off closer to the technical limit.

Typical content of an FDP is:

– exploration and appraisal history and status;
– structural configuration and reservoir description;
– reservoir modelling and subsurface development schemes;
– summary of proposed development for firm projects and for the later, notional projects;
– reserves and production;
– production technology and well engineering;
– economics;
– operations philosophy including manning, availability, logistics and services;
– engineering data;
– risk assessment;
– Capex, Opex and schedule estimates;
– summary of Concept Selection Report (CSR); and
– summary of Project Execution Plan (PEP).

[Link] Concept Selection Report (CSR)

The CSR articulates the choice for the best concept in terms of the subsurface, the wells and the surface.
It clarifies the context in which the decision has been made, the data that have been used, the alternatives
that have been studied, and the values and trade-offs between alternatives. It documents the overall
reasoning and it underpins the case for action (i.e. it makes the case for proceeding now). Where the FDP
takes a Field lifecycle perspective, the CSR only addresses the concept of the project that is to be taken
forward. The CSR forms the basis for the engineering activities in the Define phase.

[Link] Preliminary Asset Reference Plan

The Asset Reference Plan (ARP) sets out the way in which the asset will be managed through its operating
life and contains a comprehensive set of information on planned production profiles, availability levels,
revenues, operating and maintenance activities, resource requirements and costs.

The ARP builds on the FDP and will contain an outline of future development and improvements that
will not as yet form part of the project being taken into Define. In many respects, the ARP is similar to the
FDP, but it takes the perspective of the permanent asset, not only the development.

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 ORP Phase 2: Select | 5.2

During Select, a preliminary ARP which sets out the structure of the document, captures the asset data
from the project environment and makes clear links between the STOIIP/GIIP, the project or projects and
the permanent asset will be sufficient. For more details, refer to Section 3.1..

[Link] Operations Philosophy

The operations philosophy can be a stand-alone document but can also be taken up in the FDP and/or
ARP and PEP. For more details, refer to Section 3.1.

[Link] Project Execution Strategy

The PEP is the most important document in the Define phase and it is good practice to establish its
contours already in the Select phase. This document is called the preliminary PEP or the Project Execution
Strategy (PES). For more details, refer to Section 3.1.

[Link] Contracting Strategy

The contracting strategy should be ready in outline during Select, as Contracting and Procurement can
form an integral part of the selection of the concept. For more details, refer to Section 3.1.

[Link] Funding Proposal for Define

Where Select studies are often funded through annual studies budgets, Define activities usually require
separate funding proposals. These will differ per Operating Unit.

5.2.4 Top Tips

Co-locate a multidisciplinary team and establish the Governance structure including the key roles of not
only the Business Opportunity Manager, Project Manager and Operations Manager but also the Decision
Executive (DE) and DRB in the beginning.

Appoint individuals to the key roles of DE/DRB, Business Opportunity Manager, Project Manager and
Operations Manager with relative disregard for organisational structures. Often the most appropriate
individuals are parented by widely different parts of organisations such as study centres, Operations, Gas &
Power, Contracting and Procurement, Global Technical Partners etc.

Obtain earliest sign-off from the DRB on the:

– development concepts to be studied;
– realisations to test the concepts against;
– selection criteria to be used (selection criteria often have to be articulated in more detail as the work
goes on and the options land closer together).

Avoid advocacy of single options. Instead, aim for alignment on selection criteria to be used and show the
recommended option in the context of alternatives.

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Chapter 5 | Project Activities and deliverables, per Phase

5.2.5 Links

EP 60.04
[Link]

EP 61.05
[Link]

EP 61.06
[Link]

Global Process 05
[Link]

Global Process 09
[Link]

Global Process 12
[Link]

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 ORP Phase 3: Define | 5.3

5.3 ORP PHASE 3: DEFINE

The objective of ORP Phase 3 – Define (or Concept Definition) is to translate the project concept
into a structured and costed plan. This project plan must contain sufficient level of detail to enable the
decision whether to proceed or not, as the Define phase ends with the Final Investment Decision (FID)
which is, traditionally, seen as the point of no return. (Increasingly, International Oil Companies (IOCs)
commit themselves on much lower levels of definition, often no more than an outline FDP or Master
Development Plan (MDP). Although contracts with Governments on the basis of MDPs may still have
some escape clauses, in reality, if only from a reputational standpoint, they are seen as binding. Once
taken, the Company is committed; all major contracts are awarded and the project promise is made to all
stakeholders.)

The Define phase is the last major opportunity to add value to the project. After FID, the emphasis will be
on value protection.

The deliverables from Define also form the basis of handover to the execution contractors. The level of
detail must therefore be commensurate with the risk levels that the Company wants to offload onto these
contractors. In general, it is best practice to minimise the risk, as most contractors will be less equipped
than the Company to carry the type of risks our industry faces and will therefore charge large premiums.
As a rule of thumb, the ratio of risk carried/transferred should be in line with the ratio of the size of
respective balance sheets.

The main deliverables of Define are the Basis for Design (BFD) and the Project Specification (PS).
Together they are commonly referred to as Front-end Engineering Design (FEED).

5.3.1 Basis for Design

This activity should be performed by an in-house team, perhaps supplemented by contractors. It is best
practice to develop and deliver the Basis for Design (BfD) still under the accountability of the front-end
Opportunity Development Manager, although the majority of staff working the BfD may well report
functionally to the Project Execution Manager. This practice reflects the need for progressive involvement
of execution staff.

The BfD translates the CSR into the technical basis for the PS. The BfD is a compilation of project data
from the Select phase and finalises the translation from the field development perspective during Select
into a project definition perspective.

[Link] Objectives
The objective of the BfD is to compile the project data from the Select phase into a baseline document on
which the PS can be built. The BfD should be specific enough to allow the PS to be tendered, even though
the PS may be developed in-house.

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Chapter 5 | Project Activities and deliverables, per Phase

[Link] Description of Activities

The BfD is best compiled collaboratively between members of the Concept Select Team and the FEED
Team, under the accountability of the Development Manager.

The activity is started by a reframing exercise which sets the strategy for execution of the PS, focuses on the
deliverables at the end of the BfD and identifies those activities that will have to be performed in parallel
to the BfD (e.g. soil investigations, permit applications, Metocean data acquisition, PS contract
documents etc.).

The project is at its most vulnerable during BfD. Scope, and therefore cost, as well as project philosophies
and strategies are yet to be defined. It is of prime importance that execution staff are progressively involved
with the translation from a field development into a project definition and that formal handover of
accountability from the Development Manager to the Execution Manager is a planned and managed event.
Best practice is formal handover on the delivery of the BfD.

[Link] Key Deliverables

A BfD collects all input as follows:

– a description of the opportunity, setting the scene for the project, chosen location, existing
infrastructure, development plans (surface and subsurface), outline project schedule and scope of the
facilities, including production profiles;

– oil and gas feed characteristics/fluid compositions, included reservoirs, PVT data and associated
properties e.g. wax, sulphur, mercury. All well test data;

– export specifications, including product specifications for oil and gas exports, delivery conditions e.g.
pressure and temperature limits. Tie-in philosophies. Emission limits and waste disposal e.g. water
disposal restrictions;

– environmental data e.g. Metocean or weather conditions, water depths, tides etc, wind data;

– geotechnical design data for the platforms and facilities and pipelines;

– overall design philosophy, setting the development philosophy, design life, intervention philosophy,
sparing philosophy, security, and any fabrication or installation constraints;

– an overview of the surface facilities with more detailed descriptions of each section of the facilities and
pipelines covering process systems, utilities, future facilities requirements, layouts and structural design
features. Material selection, control, automation and metering would also be covered. Availability
targets would be set;

– HSSE requirements, including a statement of commitment to the business principles, strategic HSSE
objectives, regulations, conceptual HSSE case, HEMP tools and processes, HSSE and environmental
issues registers;

– operations and maintenance requirements, manning philosophy, control centre, maintenance

philosophy and availability plan, Smart field philosophy;

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 ORP Phase 3: Define | 5.3

– project execution requirements, work breakdown, contracting, design, procurement, fabrication

and installation, commissioning and start-up, handover, concurrent operation, local content, new
technology plan; and

– design codes and standards for all disciplines covering Operating Unit standards, local legislation and
Shell group standards.

The BfD activity will then produce the following discipline outputs:
– Process: Philosophies (e.g. process design, utility design, operation, safeguarding). Study reports (e.g.
process simulations, process safety). PFD’s (Process Flow Diagrams), with Heat & Material Balance.
UFD’s. Preliminary process and utility P&ID’s and Cause &Effect diagrams. Data Sheets for process
equipment and long lead items. Equipment List. Line List.

– Materials/Corrosion: Materials/Corrosion design philosophy. Materials selection report covering all

proposed equipment and providing information on any operational constraints implied by the
selections made.

– Mechanical: Mechanical design philosophy. Study reports (driver selection, equipment sizing).
Mechanical data sheets. Input to layouts.

– HVAC: HVAC design philosophy.

– Electrical: Electrical design philosophy. Study reports (e.g. electrical load schedule) Single line diagram.
Switchroom layouts. Preliminary hazardous area drawings. Input to layouts.

– Control and Instrumentation: Philosophies (e.g. process control, emergency shutdown, fire & gas,
metering, earthing, HIPPS, utility requirements). Study reports and drawings (e.g. layout studies for
instruments, control room, racks, F&G detection, cable trenches). Input to layouts.

– IT Infrastructure Design: Telecoms, SCADA, RT/CAO design philosophies. Study reports (e.g. system
feasibility, reliability, control & equipment room layouts, radio path profile, antennae location layouts).
Equipment list (e.g. cabinets & equipment units). Input to layouts.

– Civil/Structural Design: Onshore - Site survey reports (topographical, soils). Philosophies (e.g.
buildings, drainage, access). Preliminary designs for foundations & piling, underground services,
paving & roads, concrete structures including buildings, site preparation & earthworks layouts.
Preliminary BOQ. Offshore - Site survey reports (metocean, soils). Philosophies (e.g. requirements
for accommodation & non-accommodation areas, temporary refuges, temporary facilities). Study
reports (jacket configuration, in-place analysis, fatigue analysis, load-out analysis, launch/lift analysis,
accidental damage analysis, foundation/piling design, topside design, architectural requirements).
Jacket framing and elevation drawings, topsides primary structural layout drawings. Weight control
report and preliminary MTO.

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Chapter 5 | Project Activities and deliverables, per Phase

– Pipelines: Onshore - Study reports (e.g. route selection, hydraulic sizing, material selection, thermal
expansion, leak detection, pigging requirements, ESD valve requirements). Plot plan for overall route.
Pipeline data sheet. Operating philosophy. Preliminary MTO. Offshore - Study reports (e.g. route
selection, hydraulic sizing, material selection, stress & buckling analysis, stability analysis, upheaval
buckling, weight coating, installation & trenching). Overall schematic drawing, field layout, route
drawing, including platform approach, Bathometric profile of pipeline route. Pipeline data sheet.
Operating philosophy. Preliminary MTO.

– Subsea Design: Philosophies (e.g. control, well intervention requirements). Subsea/topsides block
diagrams. PFD’s and P&ID’s (e.g. overall system, wellheads & manifold, hydraulics, chemical
injection). Layout drawings (e.g. field architecture, topsides routing). Input to layouts.
Preliminary MTO.

– Piping & Layouts: Philosophy (e.g. manual drawings vs 2D vs 3D CAD). Study reports (e.g. cranage
facilities and other bulk-handling operations, construction philosophy, block model review). Block
model, incorporating preliminary steelwork structure, equipment envelopes, escape routes, building
envelopes, envelopes for main piping, HVAC and cable rack runs, preliminary road layouts, etc. Site/
plot plans or overall platform layouts.

– HSE: Listing of regulatory HSE requirements. HSE objectives and performance criteria (e.g. risk
control, loss prevention and evacuation systems). Study reports (e.g. technical risk assessment,
environmental assessment, coarse HAZOP report). Preliminary Hazard and Effects Register.
Preliminary P&ID’s of fixed fire-fighting system. Input to layouts. Preliminary MTO.

– Operations: Listing of regulatory operational requirements. Operations philosophy. Definition of the

operations to be performed, quantified in terms of manpower, services and logistical requirements.
Identification of mechanical handling requirements. Philosophies for isolation, commissioning,
operating (including start-up and shutdown) and maintenance. Input to layouts.

[Link] Top Tips

Start at the end; agree up front the execution strategy of the PS and the detailed BfD deliverables with the
future executors of the project.

List all technical decisions (choices still to be made) during the BfD, including the options still open, the
selection criteria to be used, the width and depth of evidence to be collected, and agree these decision
frameworks with the execution staff prior to starting work. Examples could be design capacities, number of
trains, sharing and sparing....

Enlist the help of the execution staff for the preparation of key deliverables such as PEP, ARP and
operations philosophy.

Establish a transparent Technical Authority system, with all documents classified and all staff (Shell and
contractor) accredited at a defined level.

Keep the BfD evergreen until start-up, and then embed the BfD in the ARP. Ownership of the BfD during
PS and Execution should remain with the development function, and the BfD should feature as the key
change control document. Changes brought about by later phases should undergo the challenge of the
development function. This practice will ensure continued involvement of the development function and
guarantee an audit trail for the project scope, cost and schedule.

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 ORP Phase 3: Define | 5.3

Conduct a value engineering exercise on the emerging concept, ideally already at the end of Select. Take all
ideas into the BfD for an appropriate level of engineering scrutiny and verification. Alternatively, conduct
the value engineering exercise during the BfD and take all ideas into the PS as separate ideas to be verified
by the design contractor. It is good practice to incentivise the contractor to close out all value engineering
ideas and achieve the cost savings or value improvements.

5.3.2 Project Specification

This activity develops the design of the facilities to the point where the +15%/-10% Execution budget
estimate can be prepared and detailed design can start.

[Link] Objectives
The main objective of the PS is to define the project design to a level of detail that allows the Invitation
to Tender (ITT) to be issued. The PS should be prescriptive enough to invite bids that can be assessed for
technical compliance and commercial attractiveness with the minimum of clarifications.

A second objective of the PS is to allow enquiries/tenders for Long Lead Items (LLIs). A third objective
is the establishment of Capex, Opex and production profiles as well as estimated lead time to first
production. This data will be at the core of the Group Investment Proposal (GIP).

[Link] Description of Activities

Although in theory the PS is the technical conclusion of the front-end loading process, which aims to
create value, in practice the emphasis will already be on value realisation and protection, and scope changes
will not be welcome.

The PS usually starts with a tender process, although in-house execution (e.g. by EPT-Projects) is
becoming more common. Where capability exists, this is the recommended practice, as the tender process
is time consuming. It can also be prone to erroneous selection criteria, occasionally awarding a PS to a
cheap, but incapable, design contractor. When tendering a PS, it is best practice to conduct a rigorous
prequalification exercise. Reimbursable contracts are recommended over lump sum contracts, although
it is recognised that (Government) partners may favour the latter. Complicated linkages between the PS
contract and the main (EPC) contract rarely make a difference. Tendering is done on the basis of the BfD
and a very detailed list of deliverables.

After award, it is best practice to integrate the members of the client team with those of the contractor, and
to kick off with a joint framing exercise which should deliver an agreed, very detailed list of deliverables on
which the detailed precedence planning network is built.

The activity is then led by Process Engineering, which finalises the PEFS, UEIDs and equipment lists,
including the heat and mass balances. The materials selection comes next, after which most disciplines can
work in parallel with proactive co-ordination. Refer to Figure 5.3.1 for an overview of a typical PS.

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Chapter 5 | Project Activities and deliverables, per Phase

Figure 5.3.1 – Simplified Overview of a Typical Project Specification workflow

S DEFINE EXECUTE

Engineering Design Information

Pipelines
Routing Philosophies
Sizing Functional
Basis for
Specs Project
Design
Specification
Electrical
Routing
Sizing
HSEQ
Equipment Requirement
Process Mechanical Procedures
List
activities Routing
PFDs etc Sizing Long lead
Items

Control and Manpower

Instruments and service
estimates

VAR 4
Heat and Civils and and ITT
Mass Structural Capex
Balance estimate

Materials Other
Selection disciplines Opex
estimate Input to
economic
Major analysis
Equipment

Planning and
Layouts Schedules
Materials
Equipment Plant and
Arrangements Equipment
MTO Estimates
Availibility Production
assessments Profile

All disciplines must develop their technical definition and information to a level which allows a +15/ 10%
estimate, and which can provide the basis for the ITT and the selection of the detailed design executor,
whether this is an internal organisation or a contractor. All disciplines are to provide the required technical
definition for the procurement of long lead items.

All data contained within the approved PS must demonstrate a clear auditable trail, and all available
references are to be identified and made available for information purposes to the full project team.

The Project Manager/Team Leader is responsible for the development of the PS, but may delegate to an
appointed focal point. This focal point is likely to be a senior member of the Project Engineering Team and
will draw on all the necessary project discipline expertise, and that of other external specialists, as required.

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 ORP Phase 3: Define | 5.3

It is good practice to schedule a formal review of the PS, linked to formal acceptance by the owner. As a
minimum, such a review should:
– verify the PS against the BfD;
– check closeout of all change requests;
– check for completeness;
– check for implementation of all HSSE/Sustainable Development (SD) actions and recommendations;
– check the PS for compliance against the Technical Authority system;
– assess conformance to the risk management system (i.e. have all risk mitigation actions been
engineered in?); and
– check for alignment with the updated ARP, FDP and PEP.

[Link] Key Deliverables

The example content list below is taken from a PS for an offshore platform:

1.0 Introduction
1.1 Scope
1.2 General Description Of Platform

2.0 Platform Design Parameters

2.1 Functional Requirements
2.2 Overall Operating Philosophy
Operation of production system, Reliability, Operating and control philosophy, Safety, Maintenance
& Inspection, Manning, Supply, Simultaneous operations.
2.3 Main Design Parameters
Nominal maximum throughput, Gas quality, CITHP, Design life, Coordinates, Water depth.
2.4 Drilling Requirements
Number of wells, rig type and location, Well system surface facilities, Workover and well servicing,
Well performance testing.

3.0 Jacket And Topside Structure

3.1 General
Design philosophy & code, Description of jacket & topsides, Location, Environmental data (wind,
waves, current, marine growth, tide/surge levels, temperature)
3.2 Topsides Structural Design
Deck level definitions, Decking materials, Jacket interface definition, Installation methodology,
Stabbing arrangement & stabbing pin impact force criteria, minimum loading conditions to
be analysed
3.3 Jacket Structural Design
Installation vessel type, Topside & appurtenance loading requirements, Jacket description, Jack-up rig
types, Pile and conductor sizes, Piling arrangement, standard to be used for analysis and cases to
be covered
3.4 Foundation Design
Soil conditions, Pile size and penetration, Required hammer size
3.5 Platform Corrosion Control
Defined for jacket and appurtenances above, in and below splash zone

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Chapter 5 | Project Activities and deliverables, per Phase

4.0 Process And Utility Systems

4.1 General
Overall process description, Utilities description
4.2 Process Design Parameters
Reservoir data, gas composition, C7+ characterisation, PVT test data, Trace element analysis,
Condensate chemistry, Formation water analysis, Hydrate formation curve, Production profiles,
pressure decline & flowing temperature, FTHP v’s flowrate, Liquid production, Sand production,
Pipeline back pressure
4.3 Process Systems
Wellhead flowlines and manifold, Metering, Hydrate and corrosion inhibitor, Pig launcher,
Test separation
4.4 Utility Systems
Vent system, Drains system, Diesel system, Service water system, Firewater system, Inert gas,
Hydraulic system

5.0 Pipelines And Risers

5.1 General
5.2 Codes/Guidelines
5.3 Riser/J-Tube Details
Location, Pipeline/topsides code interface, Material, Pigging criteria, Design parameters
5.4 Corrosion Control
External, Internal, Monitoring
5.5 Topsides Facilities
Pig launcher, ESD Valves
5.6 Offshore Interface
5.7 Pressure Testing/Pre-Commissioning
Hydrostatic pressure testing, Pre-commissioning,

6.0 Equipment
6.1 General
6.2 Mechanical Handling
Crane specification
6.3 Fresh Water Supply
6.4 Future Equipment
6.5 Wellhead
Kill facilities, Annulus manifold/monitoring
6.6 Test Manifold And Separator
6.7 Sand Filters
6.8 Helicopter Facilities
6.9 Facilities Building
Temporary overnight shelter, Switch gear room, Local Control Centre, Battery room.
6.10 Equipment List

7.0 Electrical Power Supply And Distribution

7.1 General
72 Generation
73 Vital and Emergency Services
7.4 Main Services
7.5 Lighting

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 ORP Phase 3: Define | 5.3

7.6 Low Voltage Switch Gear/MCC

7.7 Crane
7.8 Generators
7.9 Navigation Aids
7.10 Power Distribution And Configuration

8.0 Telecommunications
8.1 General
System selection criteria, Current platform design
8.2 System Design
Liferafts and lifeboat, Alarm system, Telephones, Platform radio communication, Marine
communication, Aeronautical communication, Crane operator’s radio, Data/telemetry,
Metocean station
8.3 Power Supplies
8.4 JackUp Facilities

9.0 Instrumentation And Control

9.1 General
9.2 Control Philosophy
9.3 Controls And Emergency Shutdown Systems
Local controls, Hydraulic controls, Metering, Pipeline integrity monitoring, High integrity pressure
protection system, Emergency shutdown system, Remote shutdown, Local shutdown, Post emergency
shutdown, F&G/ESD interface, Emergency depressurization

10.0 Safety Systems

10.1 General Requirements for segregation of safe and hazardous areas, platform layout, fire & blast
protection, F&G detection, ESD, emergency depressurisation, Fire fighting, Muster
points, Evacuation
10.2 Area Classification
10.3 Escape Routes
10.4 Fire And Gas Detection And Alarm
Fire zones, Fire detection, Gas detection, Manual alarm call points, Platform alarms
10.5 Fire Protection
Passive fire protection, Active fire protection, Firemans kit
10.6 Safety Appliances
Lifebuoys, Life jackets, Helicopter rescue equipment
10.7 Survival Craft
10.8 First Aid And Life Support Equipment

11.0 Platform Orientation And Layout

11.1 General
11.2 Platform Orientation
Rational for selected orientation
11.3 Layout Configuration
11.4 Heating And Ventilation

12.0 Weight Control

12.1 General
Reference to weight control report.

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Chapter 5 | Project Activities and deliverables, per Phase

[Link] Top Tips

A fully integrated team approach to the PS preparation should be followed.

Start at the end; develop a detailed list of deliverables (at document level) and use this for precedence
network planning. Establish a document control system.

List all technical decisions (choices still to be made) during the PS, including the options still open, the
selection criteria to be used, the width and depth of evidence to be collected, and agree these decision
frameworks with the full team prior to starting work. Make all outstanding decisions fixed agenda items
during team meetings.

Establish a transparent Technical Authority system, with all documents classified and all staff (Shell and
contractor) accredited at a defined level.

Assign ownership of all key documents (including the BfD) to single individuals. It is the owner’s role to
ensure document consistency (between disciplines) and completeness (against agreed contents).

Establish early on the potential need for Opex and availability estimating models (the ARP can be used as
a tool to develop an insight into the production and maintenance areas). In general, the predictive qualities
of such models are poor; on the other hand, absence of models generally leads to an underestimate of Opex
and an overestimate of availability/uptime. Best practice is the use of models with significant discounts for
the early production years, perhaps supplemented by other models.

Clearly distinguish between project management roles and responsibilities, and design (BfD, PS). The
latter will concentrate on delivering the design (documents, specifications) and the former will deal
with commercial aspects (tender board), planning and reporting, and finalising the ARP, FDP and PEP.
There will be many overlaps, for example cost or time consequences from discussions with vendors and
assessment of bids. As the PS is often developed by others (contractors or EPT-P), ensure the project
management requirements (progress reporting, vendor follow-up, main contract prequalification activities,
handovers etc.) are clearly spelled out and agreed between the PS Team and Project Management Team.
Co-location of the two teams is again strongly recommended. Single individuals can have roles in
both teams.

Exercise rigorous change control. The moment the PS has been approved by the owner, it becomes a
controlled document and the BfD ceases to be one.

Build a 3D model. Where possible, replace a 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 firefighting equipment. During FEED engineering it should be agreed which level of detail
is to be included in the 3D CAD model. The level of detail should allow all the key layout decisions to be
verified against the safety, operations and maintenance requirements whilst not including excessive detail.
The model may form a deliverable to the EPC contractor for further detailing during detailed design. 2D
deliverables may be produced directly from 3D CAD models where these are more appropriate, e.g. in the
construction phase.

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 ORP Phase 3: Define | 5.3

5.3.3 Well Delivery Process

This activity delivers the well technical specification and execution plan/drilling programme. Well
engineering is a parallel activity to FEED, often executed by a separate Well Engineering Team.

The Well Delivery Process (WDP) is the ORP scaled down to a single well. The WDP is very prominent
during Define, where it deals with the development wells. It is equally relevant during Identify & Assess
and Select, for exploration and/or appraisal, and for abandonment. A summary of the WDP has been
taken up in Section 5.5.

5.3.4 Updates to ARP, FDP and PEP

These documents should have had their initial version completed during Select. During this phase the:
– PEP is reviewed, further detailed and finalised;
– FDP is updated with any latest information; and
– ARP is expanded with the design information and operations details as developed.

[Link] Objectives
The objectives of these three key documents are to establish and safeguard three fundamentally different,
but overlapping, perspectives on a (portfolio of ) asset(s). Specifically the:
– ARP takes a surface asset perspective post-project, and describes how the asset will be operated,
maintained and possibly be further developed. The ARP has a surface and wells operations and
maintenance bias, records broad reservoir management strategies, but otherwise refers to the FDP for
detailed subsurface issues and strategies;
– FDP takes a subsurface asset development perspective. It describes how the full resource volume
could be recovered up to the technical limit, it identifies the potential projects and the associated
technologies that could realise this recovery, it establishes the economic cut-off and defines the firm
project(s) in enough detail for the development concept(s) to be chosen and defined towards a firm
investment proposal. Although normally complete at the end of Select, it is subject to review during
Define to take account of the well and facility design finalisation, up-to-date subsurface information
and final economic analysis. In support of the ARP, it should in particular finalise the well test
requirements and general reservoir surveillance needs;
– PEP takes a project execution perspective. During Select it is written at a strategic level (and commonly
titled Project Execution Strategy) but during Define this is expanded to a comprehensive plan.

All three documents are live and interlinked. Together, they represent the core of project management,
governing the design effort that is captured by the BfD and PS, and ensuring a lifecycle
perspective throughout.

[Link] Description of Activities

The activity starts with the assignment of owners. Good practice is to reflect the recommended team roles
of Business Opportunity Manager, Project Manager and Operations Manager. The Business Opportunity
Manager owns the FDP, the Project Manager owns the PEP and the Operations Manager owns the ARP.
All three documents will already exist in some form at the start of Define, and need to be updated and
populated. The next step is to agree detailed content lists and identify content contributors. Then comes
the construction of the documents, progress monitoring and eventually sign-off, usually by the owners.
Change control is key and all three owners should be involved in all changes.

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Chapter 5 | Project Activities and deliverables, per Phase

[Link] Key Deliverables

The deliverables are updated versions of the existing ARP, FDP and PEP. (Also refer to Section 3.1)

[Link] Top Tips

Start at the end; agree at the outset detailed contents lists for all three documents and avoid overlaps and
duplications.

There is no hierarchy between the three documents. They represent three necessary, but different,
perspectives and should complement each other with interlinks and references, rather than contain
duplications or overlaps.

Keep it simple and transparent – clarity of thought is represented by brevity, not volume.

Keep the documents modular and assign owners per module.

Make version/change control routine, for example during team meetings.

5.3.5 Group Investment Proposal

This document is prepared and submitted to obtain funds to execute the project. Inputs to the GIP are:
– the CAPEX and OPEX estimates;
– lead times;
– achievable production profiles; and
– revised economic projections.

[Link] Objectives
The objective of the GIP is to seek organisational approval for the planned commitments, including the
financing structure.

[Link] Description of Activities

The activity is described in detail in the Investment Decision Manual (IDM) which recognises two
distinct approvals:
– the organisational approval, which captures consent based on a position in an organisational unit in
the Group; and
– corporate approval, which captures authorisation for a particular company to enter into a transaction,
the related contracts and other legal documentation.

The IDM only deals with the former and teams are advised to investigate the local requirements for the
latter. The IDM provides the decision levels (local, regional, business and group) and templates. Note that
decision levels are based on Shell share of 50/50 MOD. In the case of unusual risk, higher authorisation
levels may be required.

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Preparation of the GIP is a joint exercise by the team and the Finance function. The templates have three
of four signature boxes, dependent on the decision levels:
– Supported – this represents functional (i.e. Finance) support;
– For Submission (to the Board) or approval (if within the delegated authority) – this represents line
approval (Chief Executive, Executive Director or Executive Vice-President);
– Sponsor – this represents Executive Director support (>$200 million); and
– Initiator – best practice is to name the Business Opportunity Manager, who bears responsibility
towards the DE for the content of the proposal, and for the DE to countersign as chair of the
governing DRB.

Signing the GIP signifies compliance with the Group Control Framework, which recognises the external
regulatory and legal environment, and contains the Group and business standards, particularly the
Governance standards and its section on decision making. Responsibility for compliance resides in the line,
from the Business Opportunity Manager, up the line of sight to the DE and on to the Executive Director.

Simply put, the DE signing off the GIP indicates that all bases have been covered, including HSSE and
SD. The GIP is a clear opportunity to take a step back for reflection from an HSSE perspective.

[Link] Key Deliverables

The GIP templates are available from the EP Finance website.

[Link] Top Tips

The GIP is a team effort and will require strong business leadership from the Business Opportunity
Manager, who is expected to do most of the writing.

Agree up front with the DE which functional support needs to be sought and in what form. As the DE
will be held accountable for business compliance, they may want to seek support in certain exposure areas.
Such support should be given by email, and should always be labelled as support (not authorisation). The
principle of the line of sight denies the option of dilution of accountability (a RACI table may help).

It is best practice to articulate the project’s SD credentials in Section 1 of the GIP (The Proposal:
Management Summary).

It is best practice to demonstrate a clear step back for reflection from an HSSE perspective, for realism and
do-ability of the investment proposal (Section 6 of the GIP template).

5.3.6 Links

GIP templates
[Link]

Investment Decision Manual

[Link]

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Chapter 5 | Project Activities and deliverables, per Phase

5.4 ORP PHASE 4: EXECUTE

The Execute phase delivers the asset to the asset owner, ready for start-up. The phase can last several years
and includes numerous areas of very diverse expertise. This section covers the various execution aspects at
only a fairly high level.

Most Execute activities are carried out in the first instance by contractors: the challenges to the client/
owner are to choose the right contracts and contractors, and to select the right method of management,
control and supervision of those contracts and contractors.

The more activities are combined in a single contract, the more management of interfaces is vested
with the contractor and, in theory, the smaller the owner’s team can be. Similarly, the simpler the
reimbursement method is, the smaller an owner’s team can be. In practice, however, scarcity of competent
contractors, overheated markets and local content considerations may all force the owner to award to less
than fully competent parties. The business imperative to aim for project progress usually outweighs any
reservations about contract or contractor’s shortcomings and to compensate for this, additional company or
directly hired staff will be required.

It is best practice to re-evaluate each contract post-award, for example by listing all deliverables against
all required competencies, and then to tailor the team to suit this capability analysis and the criticality of
the deliverables. It is also best practice to openly discuss such considerations with the contractor, whilst
ensuring that the assignment of Shell staff is not taken as a lessening of the contractor’s responsibilities. The
roles and responsibilities of the owner’s representatives therefore need to be clearly established and shared
with the contractor.

It is bad practice to try to save costs by understaffing the owner’s teams.

5.4.1 Detail Design

[Link] Objectives
The primary objective of detail design is to translate the project specification into instructions for:
– procurement;
– fabrication and installation;
– commissioning and start-up; and
– operation (operating manuals).

There can be several secondary objectives, such as:

– permitting and certification;
– third-party approvals (e.g. Marine Warranty Surveyors (MWSs));
– integration of vendor packages into the design package;
– support for safety case; and
– delivery of the as-built packages.

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[Link] Description of Activity

Detail design includes all typical design disciplines including:
– process;
– mechanical;
– civil;
– structural;
– architectural;
– pipeline;
– electrical;
– instruments (automation and control);
– HVAC; and
– telecoms.

From an activity point of view, detail design includes:

– producing:
– calculations;
– drawings;
– material requisitions;
– procurement;
– HSSE;
– QA/QC;
– operations; and
– support for certification and third-party approval (such as MWSs).

Included in the detail design process could be:

– HAZOPs;
– IPF reviews;
– desktop HSSE reviews;
– safety case;
– writing or updating an Environmental Impact Assessment; and
– conducting constructability reviews.

Brownfield Sites
Detail design for brownfield sites should optimise the existing plant and the project scope. A brownfield
design is therefore always prone to scope growth and liable to suffer from poor as-built information on
existing facilities. Brownfield projects tend to require a plant shutdown to allow tie-ins. These are usually
planned months in advance and often the start and end dates cannot be changed. Brownfield design is
therefore best conducted in the same physical location as the construction site to allow for site visits and
meetings, and a large amount of communication between the detail designer, the construction contractor
and the operations department.

Construction and Installation

Detail design should proceed in consideration of the available methods for construction and installation.
For example, offshore developments can be installed as an integrated structure or as individual modules;
onshore construction can cover a complete spectrum from fabricating completely offsite and installing as
modules, through to a stick build approach where the fabrication occurs completely on site. All approaches
have their pros and cons relating to cost, schedule, available manpower and expertise etc. A construction
philosophy should form part of the PEP prior to the start of detail design, and a constructability review
during detail design will confirm that the proposed design meets the construction requirements/assumptions.

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Chapter 5 | Project Activities and deliverables, per Phase

Interfaces
During detail design, design engineers will typically interface between disciplines and:
– have technical communication with vendors including review/approval of vendor documents, periodic
visits to review production, attendance at Final Acceptance Tests (FATs);
– have communication with construction answering site queries, changing details for easier construction,
agreeing substitutions requested by site, commenting on deviations requested by site;
– receive technical information from the drilling group on wellhead layout, well sizes;
– receive technical information from the well design group on flowrates, compositions etc; and
– have interfaces with the operations representatives throughout the detail design covering layouts,
operability issues and maintenance issues (e.g. access for equipment removal, access for men).

Reviews
Requirements for formal design reviews should be specified in the contract. These reviews can be external
using the expertise of another contractor, for example a specialist lifting or weighing contractor, or internal.
Examples of internal reviews are design reviews by the construction group or desktop HSE reviews
by specialists.

Support Continuity
It is usually necessary to retain the detail design contractor to provide continued engineering support
during the remainder of the Execution phase. Follow-on engineering is best kept as a separate part of the
contract so that the main detail design part can be contractually closed out. The scope of the follow-on
phase can include:
– the completion of the detail design scope such as removal of holds caused by late vendor data;
– finalisation of vendor data receipt and purchase order close-out;
– answering site queries with the provision of design changes if necessary;
– preparation of hook-up and commissioning documentation and procedures, and the operating and
maintenance deliverables;
– preparation of as-builts and maintenance of design technical integrity; and
– close-out of subcontracts and purchase orders.

As part of follow-on engineering, key design staff or project engineers are sometimes seconded to the
fabrication/construction sites, after Approved for Construction (AFC) issue, to expedite the response to
site queries.

Contracts
Detail design contracts can be part of several contractual set-ups, a stand-alone design contract or part of
an EPC/EPIC contract. Stand-alone contracts are rare. There are so many interfaces to detail design that
at least part of procurement is best included in the scope. It is almost always preferable to award the detail
design as a component of the main contract to a consortium around the main construction contractor.

Payment can be lump sum, progress payments or reimbursable. Poorly defined brownfield projects,
where early engagement of the construction contractor is deemed prudent, suit reimbursable payments.
Greenfield projects tend to be better suited to lump sum payments combined with progress payments.

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[Link] Deliverables
Typical deliverables prepared by each discipline during detailed design are as follows:

Process
Preliminary detailed design: Same documents as for conceptual design, plus - Calculations (e.g. process
design, firewater deluge, foam, sprinklers, etc.) Final Cause & Effect diagrams. Datasheets (e.g. control
valves, relief valves, fire & safety equipment). Final P&ID’s for process and utility systems. SAT charts.
Engineering studies (e.g. blowdown, venting & flaring, availability & sparing, surge analysis, maintenance
manning levels).

AFC package: Documents above, plus - SAFE charts and ESD diagrams. Lists of chemical and
utility users.

Commissioning & Operations Package: Input to commissioning plan (e.g. commissioning system
descriptions, performance test specification, temporary facilities design.). Input to the Operating
Procedures Manuals. Input to the Design Databook. As-built handover deliverables.

Materials/Corrosion
Preliminary detailed design: Same documents as for conceptual design, plus engineering studies (e.g.
material selection, welding & NDE, fracture mechanics, external and internal corrosion protection,
insulation). Specifications (e.g. materials, welding, NDE, inspection). Consultancy to other disciplines on
above aspects.

AFC package: Documents above, plus - Specification (e.g. insulation, fire protection coatings, corrosion
coatings). Procurement specifications (e.g. cathodic protection, corrosion monitoring, coatings, fabrication
welding & NDE).

Commissioning & Operations Package: Input to commissioning plan. Input to the Design Databook.
As-built handover deliverables. Maintenance and Operating Procedures Manuals which should include
Corrosion Management Manuals for individual parts of the system for the reference of field staff during
their everyday work. These manuals should relect the operational constraints and requirements implied
by the materials and corrosion design philosophy chosen and also provide frontline maintenance and
operational requirements for all assets.

Mechanical
Preliminary detailed design: Same documents as for conceptual design, plus philosophies (e.g. noise/
acoustic protection, craneage, maintenance). Engineering reports (e.g. noise control, mechanical handling).
Calculations (e.g. thermal rating design)

AFC package: Documents above, plus - Data sheets, specifications and requisitions (e.g. pressure vessels,
heat exchangers, tanks, packaged equipment). Final bulk MTO.

Commissioning & Operations Package: Input to commissioning plan. Maintenance procedures. Input to
Operating Procedures Manual. Input to the Design Databook. As-built handover deliverables.

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Chapter 5 | Project Activities and deliverables, per Phase

HVAC
Preliminary detailed design: Same documents as for conceptual design, plus calculations, PFD’s, P&ID’s,
Cause & Effects drawings, natural ventilation study, 3D CAD input, GA’s, elevations and sections, layouts
for plant room, schedule of equipment, preliminary MTO.

AFC package: Documents above, plus - Specifications (e.g. wind-tunnel test). Datasheets, specifications
and requisitions for long lead items, ductwork, equipment, etc.). Final bulk MTO.

Commissioning & Operations Package: Input to commissioning plan. Maintenance procedures. Input to
Operating Procedures Manual. Input to the Design Databook. As-built handover deliverables.

Electrical
Preliminary detailed design: Same documents as for conceptual design, plus calculations (e.g. sizing
& rating of cables and equipment) Studies (e.g. electrical load schedule, switchroom and cable racking
layouts). Single line diagrams. Interconnection diagrams (e.g. schematics & interconnections). Hazardous
Area drawings. 3D CAD input. Layouts (e.g. cable racking, power and earthing, lighting and small power).
Preliminary bulk MTO.

AFC package: Documents above, plus - Study (e.g. electrical protection). Block interconnection diagrams.
Layouts (e.g. switchroom, cable racking, trace heating, nav aids). Schedules (cable, distribution boards,
transits). Datasheets, specifications and requisitions (e.g. motors, cables, equipment, bulks). Design of
temporary power supplies. Final bulk MTO.

Commissioning & Operations Package: Input to commissioning plan. Maintenance procedures. Input to
Operating Procedures Manual. Input to the Design Databook. As-built handover deliverables.

Control & Instrumentation

Preliminary detailed design: Same documents as for conceptual design, plus calculations (e.g. sizing
of control valves, flow instruments, relief valves). Studies (e.g. system reliability & availability). Block
diagrams (e.g. process control - DCS/SCADA, fire & gas, ESD, earthing, power distribution, hydraulic
distribution, cabling). 3D CAD input. GA’s. Interface sheets (with piping, civil, vessels, etc). Logic
diagrams (e.g. process control, ESD, F&G, interlocks). Layout studies and drawings (e.g. control
& equipment rooms, cable rack routing, F&G study, cable trench study, annunciators & consoles,
computer graphics). Schedules (e.g. i/o’s for DCS/ESD/F&G, power distribution, utility consumption)
and termination schedules (packaged equipment, junction boxes, marshalling boxes, systems cabling).
Preliminary bulk MTO.

AFC package: Documents above, plus - Logic diagrams (e.g. instrument connections, junction box
connections, power distribution, earthing, utilities). Loop diagrams (e.g. process control - DCS/SCADA,
ESD, F&G, HIPPS) Installation details (e.g. hook-up details for process instruments, pneumatic/
hydraulic/electric, tracing, transits, equipment mounting). Datasheets, specifications and requisitions
(e.g. DCS, ESD, F&G, fiscal metering, wellhead control, HIPPS, analysers, cables, local panels, valves,
packaged equipment, general instrumentation). Final Bulk MTO.

Commissioning & Operations Package: Input to commissioning plan. Maintenance procedures. Input to
Operating Procedures Manual. Input to the Design Databook. As-built handover deliverables.

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IT Infrastructure
Preliminary detailed design: Same documents as for conceptual design, plus Equipment lists. Reports
(e.g. reliability & availability). Block diagrams (e.g. system, wiring). 3D CAD input. Layout drawings.
Schedules (e.g. field equipment, circuit & connections). Termination schedules (field equipment, junction
boxes, miscellaneous equipment). Preliminary bulk MTO.

AFC package: Documents above, plus - Datasheets, specifications, requisitions (packages systems,
temporary communication facilities, intersite communication facilities, on-site network systems, broadcast
systems, miscellaneous materials, equipment, bulks, installation & testing). Equipment mounting details.
Final bulk MTO.

Commissioning & Operations Package: Input to commissioning plan. Maintenance procedures. Input to
Operating Procedures Manual. Input to the Design Databook. As-built handover deliverables.

Civil/Structural: Onshore
Preliminary detailed design: Same documents as for conceptual design, plus calculations (e.g. piperacks,
steel structures, building structures, PAU’s & PAR’s, foundations, concrete structures, drainage).
Specifications (reinforced concrete, piling, fireproofing, gates, fences, underground services, roads, tank
foundations, architectural aspects) 3D CAD input. GA’s, elevations and sections. Layouts. Preliminary
bulk MTO.

AFC package: Documents above, plus - calculations (pipe supports). Schedules (e.g. manholes, doors,
windows). Temporary works requirements. Datasheets, specifications, requisitions (civil and structural
bulks, architectural fixtures and fittings). Installation details. Final bulk MTO.

Civil/Structural: Offshore
Preliminary detailed design: Same documents as for conceptual design, plus primary steel structural
design and drawings (e.g. GA’s, frames and bracing plan, launch runners, leg nodes, lift & cast nodes,
conductor guides, bridges, flare boom). Secondary steel design (e.g. access and sea escape, boat landings,
fenders, stair towers, corrosion protection). Installation details (lifting arrangement, sling laydown and
grouting platform, floatation tanks, installation aids, preliminary seafastening design). Architectural GA’s
and layouts. Preliminary bulk MTO.

AFC package: Documents above, plus - Detail drawings (e.g. walkways, access ladders, helideck, mudmats,
leg storage, grouting arrangement, cathodic protection, pile and conductor guide details and sleeves,
spreader beams, rigging laydown platforms). Schedules. Datasheets, specifications, requisitions (e.g. long
lead materials, castings, anodes, architectural fittings). Final bulk MTO and weight report.

Commissioning & Operations Package: Input to commissioning plan. Maintenance procedures. Input to
Operating Procedures Manual. Input to the Design Databook. As-built handover deliverables.

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Chapter 5 | Project Activities and deliverables, per Phase

Pipelines: Onshore
Preliminary detailed design: Same documents as for conceptual design, plus Calculations (sizing, wall
thickness, allowable elastic radii). Analyses (e.g. expansion & anchoring requirements, earthquake design,
floatation/sinkage, thermal expansion, blasting stresses, subsidence, stresses at bends, installation stresses,
pipe transportation/handling/ storage, road/rail crossings). Overall routing drawing. Layouts (e.g. above
ground installation, block valve stations). Preliminary bulk MTO.

AFC package: Documents above, plus - Detail drawings (e.g. typical crossings, right of way details).
Datasheets, specifications, requisitions (e.g. linepipe, actuated ball valves, sphere tees, induction formed
bends, cathodic protection, concrete coating). Installation specifications (e.g. field joint coating, cleaning,
gauging, hydrotesting). Final bulk MTO.

Commissioning & Operations Package: Input to commissioning plan (e.g. vacuum drying). Maintenance
procedures. Input to Operating Procedures Manual. Input to the Design Databook. As-built
handover deliverables.

Pipelines: Offshore
Preliminary detailed design: Same documents as for conceptual design, plus study reports (e.g. pigging
requirements, crossings, leak detection, corrosion and cathodic protection, steel grade and wall thickness
selection, landfall selection, riser routing, seabed preparation),. Plot plans (e.g. platform approach,
bathometric profile of route, shore crossing elevations and layout, pipeline and cable crossings). Layout
drawings (e.g. riser drawings). Preliminary bulk MTO.

AFC package: Documents above, plus - Detailed drawings (e.g. shore crossing, laydown target areas,
riser and supports, cathodic protection, subsea tee’s, subsea tie-ins, piggyback clamps). Datasheets,
specifications, requisitions (e.g. linepipe and riser material, bends, fittings, buckle arrestors, anodes, ball
valves). Installation specifications (e.g. field joint coating, landfall installation, diving & ROV services,
cleaning, gauging, hydrotesting). Final bulk MTO.

Commissioning & Operations Package: Input to commissioning plan (e.g. vacuum drying). Maintenance
procedures. Input to Operating Procedures Manual. Input to the Design Databook. As-built
handover deliverables.

Subsea Design
Preliminary detailed design: Same documents as for conceptual design, plus study reports (e.g. control
system integration, loadout and installation, material selection, availability/reliability/maintainability).
Calculations (e.g. weights, hydraulic response times, pressure differentials, valve closure torques, gas lift
data). Analyses (hydraulic fluids, chemical injection). GA’s & elevations (e.g. structures, manifold, control
skid). Preliminary bulk MTO.

AFC package: Documents above, plus - Analyses (e.g. pipe stresses). Detailed drawings (e.g. topsides
hang-offs, control skid). Datasheets, specifications, requisitions (e.g. equipment, bulk materials, umbilicals,
control system). Installation procedures (e.g. installation, diving & ROV services, cleaning, gauging,
hydrotesting). Final bulk MTO & weight report.

Commissioning & Operations Package: Input to commissioning plan (e.g. functional test). Inspection and
maintenance procedures. Input to Operating Procedures Manual. Input to the Design Databook. As-built
handover deliverables.

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Piping & Layouts

Preliminary detailed design: Same documents as for conceptual design, plus studies (e.g. multi-discipline
plant layout). Analyses (e.g. pipe stress). Specifications (e.g. piping classes). Schedules (e.g. lines, tie-ins).
Sketches (e.g. nozzle orientations). Layout drawings (e.g. site, platform, equipment layouts, escape routes).
Preliminary detailed model (including primary & secondary structural steel, equipment envelopes, building
envelopes, envelopes for main piping, HVAC and cable rack runs, preliminary road layouts, escape
routes, etc.).

AFC package: Documents above, plus - Detailed model. GA’s (e.g. piping, plant sequence build).
Isometrics (e.g. fabrication iso’s, system iso’s, stress iso’s). Layouts (e.g. module penetrations). Datasheets,
specifications, requisitions (e.g. pipe, fittings, valves, supports, special items). Construction specifications
(e.g. fabrication, installation, flushing, cleaning, hydrotesting of pipework). Final bulk MTO.

Commissioning & Operations Package: Input to commissioning plan. Maintenance procedures. Input to
Operating Procedures Manual. Input to the Design Databook. As-built handover deliverables.

HSE
Preliminary detailed design: Same documents as for conceptual design, plus Study reports (e.g. detailed
HAZOP, ergonomics study). Philosophies (e.g. HSE, F&G detection & alarm, explosion & venting,
escape & evacuation). P&ID’s of fixed fire protection. Cause & Effects diagram (fire & gas). Schedules
(firefighting & safety equipment). Safety layouts (e.g. fire & safety equipment, escape routes, area
protection/ fire zones). Preliminary bulk MTO.

AFC package: Documents above, plus - Study reports (Final HAZOP, including vendor packages, Fire &
explosion analysis, Emergency system survivability analysis, Escape, evacuation, rescue analysis, Health
risk assessment, Ergonomics study). Isometrics (fire protection system). Layouts (e.g. signs, passive fire
protection mark-ups, F&G detection, firewater system). Datasheets, specifications, requisitions (e.g. safety
& fire protection equipment). Design of temporary facilities for testing. Final bulk MTO.

Commissioning & Operations Package: Input to commissioning plan. Maintenance procedures. Input to
Operating Procedures Manual. Input to the Design Databook. Input to HSE Case for Asset, including
final Hazards and Effects register. As-built handover deliverables.

Operations
Preliminary detailed design: Same documents as for conceptual design, plus Study reports (e.g. manning
assessment, operability & maintainability review, impact on existing operations assessment).

AFC package: Documents above, plus - study reports (e.g. operational impact of tie-ins, decommissioning
philosophy, simultaneous operations philosophy, methodology for plant leak testing and/or drying,
commissioning spares, temporary facilities and consumables, offshore work minimisation study). Analyses
(e.g. RCM analysis, detailed manning level study, integrated production system analysis). Operator
Training Plan. Operations Reference Plan.

Commissioning & Operations Package: Operating procedures manual, including black start. Input to
commissioning plan, including initial introduction of hydrocarbons. Maintenance procedures, amended in
line with RCM analysis.

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Chapter 5 | Project Activities and deliverables, per Phase

[Link] Top Tips

Structure the tender documents such that the bidders are forced to consider all aspects of detail design:
– design;
– procurement;
– reviews;
– follow-on;
– as-builts; and
– support of permits etc.

The detail design effort is almost invariably underestimated by the bidders, so the owner is best advised to
avoid false comparisons of bids by inserting fixed placeholder amounts for all poorly defined activities like
factory acceptance witnessing, expediting and follow-on engineering that will be reimbursable.

Aim for a mix of lump sum progress payments (AFC packages, purchase order close-outs, manuals,
permits) and reimbursement (witnessing, expediting and follow-on engineering) to incentivise project
progress while avoiding false bid comparisons.

Agree clear roles and responsibilities for the owner’s team with the contractor.

Establish a strict Technical Authority system and rigorous change control. Typically, all detail design
decisions are within the authority of the contractor and all changes to the project specification have to be
approved by the owner’s team.

5.4.2 Procurement/Expediting/Factory Testing and Acceptance

[Link] Objectives
The objectives of procurement, including expediting and factory acceptance are to get the right materials,
in the right condition, with the right certificates and other vendor data, on site at the right time.

[Link] Description of Activity

It is best practice to integrate the detail design and procurement teams as there will be technical interface
issues for the design team, commercial issues for the project/procurement team, and inspection and
expediting by the procurement team.

Vendor List
EP contracts will often specify a project vendor list from which the contractor should select vendors. This
list ensures commonality of equipment on site, and/or use of existing agreements between the company
and vendor. Contracts typically allow contractors to propose alternative vendors for Company approval.

Documentation
Getting good quality and timely vendor documentation is always a problem. It is normally one of the last
vendor deliverables and as such, frequently has very little money attached to its receipt, typically 10%. In
all contracts, the Company should ensure that purchase orders are clear on what is required and by when,
as a lack of vendor data can delay construction and commissioning activities.

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Online Bidding
The online bidding process is covered in the CP Projects Toolkit.

Inspection
Care should be taken to ensure that the Company has adequate inspection opportunities for key pieces of
equipment. The selection of which vendors to visit is often based on the criticality of the equipment and/or
schedule constraints. Company hold points are identified on inspection test plans or the equivalent.

Long Lead Items

Ordering of long lead items prior to obtaining FID is done to meet the required project delivery date.
Purchase orders, pre or post award, can be handed over to the EPIC contractor, or the Company can
continue to manage the purchase order and the item becomes Company supply. In EPIC contracts,
contractor supply is generally preferable to Company supply. The decision on what will be long lead and/or
Company supply will be made early in the Define phase stage and will be part of the contracting strategy
section in the PEP.

Criticality
The Company or contractor may develop a list of equipment required for a project and rank the items in
accordance with their importance. The criticality can be related to the importance of the item to the overall
design achieving its target reliability or availability, or can be related to the project schedule. Items with
high criticality will typically be subject to more technical and expediting review than those items with a
lower criticality.

Spares
There are several different types of spare parts that may be ordered as part of the purchase order for a piece
of equipment:
– spares required as part of installation;
– spares required for commissioning and start-up;
– spares for the first period of operations (first year spares); and
– long-term spares (shelf spares instead of installed spares).

The project bears responsibility for the ordering of all these (the first year spares may cover a shorter or
longer period, depending on lead times). The Operations group within a project team will advise on spare
parts requirements. A typical consideration is how standardisation of equipment can allow common spares.

Contracts typically have requirements for vendors to complete Company ESPIRS forms on line. Vendors
can have difficulty using the online system, and this can delay timely information to the Company for
ordering spares.

Company Representative
The procurement role of the Company Representative (normally in the detail design office, but could
be in the Project Management Team office if different) depends on the type of contract. If reimbursable,
the role is to ensure that Company guidelines regarding the selection of vendors are followed, letters to
company tender boards are reviewed/written for approval to tender and award, and advice given to the
Company Representatives on typical supply durations. If lump sum, there may be no role for a Company
procurement specialist except to monitor and audit.

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[Link] Deliverables
The deliverables are the right materials, with the right documentation, on site at the right time, with the
rights spares etc. This can include the preparation of:
– material take-offs (MTOs);
– specifications of materials;
– material enquiries;
– technical/commercial evaluation of bids;
– desk and site expediting;
– inspection;
– factory acceptance testing;
– transport to site;
– site storage and preservation; and
– purchase orders close-out.

[Link] Top Tips

Integrate the detail design and procurement teams.

Incentivise the delivery of critical vendor data.

Transfer as many purchase orders as possible to the full responsibility of the main contractor, but only if
the contractor is better placed to manage those purchase orders. For some major equipment or specialist
items the Company may be better placed to manage the relationship with the vendor.

Align equipment warranty at least with the main contractor’s construction warranty, and where possible
beyond. Ensure the Operations organisation is staffed up and capable to take over repairs, spares and
changeouts.

5.4.3 Fabrication and Construction

[Link] Objectives
The objective of fabrication and construction is to construct components of the facilities in the most
conducive environment. Construction is when the work is executed at the site of the future facilities and
fabrication is when the environment is at some distance from the future site of the facilities, for example a
yard, dry dock or factory.

[Link] Description of Activity

The scope of construction varies depending upon whether the development is onshore, offshore or subsea,
whether it is a new greenfield development or a brownfield modification, and whether it is a major or
minor project.

Construction at a greenfield site means that there are no hydrocarbons on the site until the commissioning
stage. For a brownfield project, construction work may take place on a production plant containing
hydrocarbons, or it may take place on a shut down or depressurised production plant where residual
hydrocarbons may exist. When hydrocarbons may be present, activities will be under the control
of Operations.

Construction includes verification that the detail design specification has been satisfied, that the resulting
facilities are acceptable to the Commissioning Team and that all documentation is complete.

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Fabrication and construction cannot be covered in detail in the OPMG, but the following sections are
provided as they typically recieve too little attention.

Prequalification and Award

During the prequalification and award of contracts involving fabrication, visits are worthwhile to establish
the contractor’s QA and HSE performance on an actual job. Other important factors in fabrication
contractor selection are:
– Is the fabrication yard big enough for the job plus likely other jobs?
– Does the proposed contractor have sufficient experience on similar jobs?
– How will the job be segregated from other clients’ jobs?
– Are the material handling and storage facilities, and temperature and humidity controlled storage,
adequate?
– Can the contractor meet local content requirements?

Schedule
The published schedule of a fabrication contractor can become ensnared in negotiation tactics about claims
for money and time. Even in the absence of claims, the contractor may work to a different schedule than
published. For these reasons, it is a good idea for a Company Fabrication Team to have its own planner.
This position frequently pays for itself when Company-supplied long lead items arrive late at the fabricator,
as the Company planner can assess the true impact on the schedule and perhaps can produce an alternative
schedule that minimises the impact further, thus reducing or eliminating contractor claims. Fabrication
contracts can include a requirement that the fabrication contractor issues the native file of their schedule to
the Company, so that the Company can use the same schedule as the published contractor schedule.

Architectural/Buildings
Onshore, this covers office buildings, warehouses, workshops etc. For offshore structures, this typically
covers living quarters (including HVAC, internal coverings, fittings, kitchen equipment etc), temporary
refuges and offshore workshops. Usually, the constructor/fabricator gives too little attention and
supervision to these items, and may lack expertise. At the same time, the items may be more vulnerable to
wear and tear, and may require special protection.

Painting
A substandard paint job can have wide repercussions. The fabrication sequence may have a major impact
on the quality of the painting, e.g. by minimising damage.

Site Quality Control

Quality control is part of the scope of work of the fabrication contractor who will either use his own resources
or make use of a specialist subcontractor. In either case, it is important that QC personnel are independent of
the production department and cannot be unreasonably pressured by internal schedule and cost arguments.

Timely production of QC reports will prevent the Company being requested to approve after-the-event
fixes or repairs that cannot be confirmed because of subsequent production. The role of the Company is
important in ensuring that the contractor QC staff are performing their tasks correctly. The Company role
can be achieved by either onsite Company QC monitoring or a by a sampling and/or auditing approach.

Site HSSE
The supervision of HSSE is one of the main tasks of a Company Representative on a fabrication/
construction site. The Company will have to agree the extent of its prevailing influence i.e. does it cover
subcontractors or vendors working offsite, with and without Company Representatives at the worksite.

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Guidance for this can be sought from the Company project HSSE group. The HSSE group can also advise
on HSE issues, particular to a site. Even though a contractor may not want to report manhours on a lump
sum job, this may be required as part of his obligation to provide HSE statistics.

Included in the subject of site HSE are requirements for:

– developing risk registers;
– application of HEMP; and
– production of Job Hazard Analyses (JHA) and Job Safety Assessments (JSA).

Fabrication contracts should specify the tasks for which a contractor is required to undertake specific
hazard assessment.

The transportation, storage and usage of radioactive sources requires close HSSE monitoring.

Piping
Piping material often does not arrive at the fabrication/construction site in line with the desired order of
installation. Typically, large bore piping arrives after the small bore, which can lead to out of sequence
installation in piperacks. Even more likely is a shortage of fittings, which will mean that piping spools
cannot be completed and hydrotested in the desired sequence.

Piping which is made from some of the more exotic materials requires special fabrication techniques.
For jobs which use these pipes, special attention needs to be paid during prequalification to the previous
experience of the fabricator with similar materials. During production, the Company needs to confirm that
the required techniques are being followed. Any shortage of these pipes on the fabrication site can have a
serious schedule effect since the delivery times are long and stockists do not carry large quantities.

Due to the issues described above, adequate and organised storage and laydown space is of
vital importance.

Electrical and Instrumentation

As installation of electrical and instrument cables typically follows installation of piping, it tends to be on
the critical path on a fabrication/construction site. It also frequently coincides with the fabricator wanting
to touch up the paint on the secondary steel, making it likely that cables will be inadvertently splashed
with paint. It is best practice to keep cable and pipe routings as separate as possible. Onshore, this will
allow parallel activities.

Onshore Logistics
In remote areas, planning of onshore logistics is a major contributor to a successful project. The following
should be assessed:
– Is a temporary or permanent camp required for the construction workforce?
– What is the most appropriate method of transporting materials and equipment to site (e.g. road,
river, air)?
– Do the existing roads require upgrading?
– What are the HSSE issues with increased road usage?
– Do the existing rivers require dredging and what approvals are required? Do the rivers seasonally flood?
– What is the impact of the project on the local community? What impact will this have on the hours
and methods of work?
– Does the project add jobs for the community? If so, are the jobs temporary or permanent?
– What equipment is locally available (e.g. cranes, trucks and trailers)?

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Hydrotesting and Leak Testing

This will often be performed by subcontractors to the fabrication contractor. Both tests have HSE
implications. For offshore platforms, the Company usually requires leak testing to be performed after
offshore installation, even if performed at the fabrication yard (to allow for possible movement during
transportation and installation).

Preservation
This is required to ensure that equipment, plant systems and areas are maintained in good condition in
accordance with specification and manufacturers’ requirements, and protected against any external factors.
Equipment must be adequately protected from leaving the vendor’s works until such time as it is required
to be put into service. Preservation must include:
– the specification which the vendor is required to provide for transportation and storage of the
equipment at site;
– the procedures for storage at site until required for installation by the fabricator. The procedures
should cover such items as the provision of power supplies for heated cabinets, air conditioning for
sophisticated electronic equipment and periodic shaft rotation to protect bearings;
– the procedures for equipment during fabrication when it is potentially exposed to adverse weather,
construction debris, paint spray etc.; and
– during pre-commissioning some of the initial preservation has to be removed and the procedures need
to cover the reapplication of preservation, where necessary, and maintenance routines established to
cover the transportation and hook-up phase.

The Commissioning Team has a vested interest to assume an early responsibility for preservation, and to
ensure it is provided and maintained until handover to the Operations Maintenance Team.

Preparation of As-built Drawings

One of the responsibilities of the fabricator/constructor is to mark up the AFC drawings to show the as
constructed state. Typical marked up information would include actual dimensions or show unfinished
work. The actual amendment of the AFC drawing and issuing as an as-built revision is normally the
scope of the detail designer. Not all drawings issued AFC are as-built; only those drawings that will be
maintained post installation are as-built.

Weight Control and Weighing

The fabrication contractor is normally required to keep track of the weights of his fabricated items. This is
especially important for offshore installed scopes of work, but can also be important for onshore modules
where there are constraints on crane capacities.

Fabrication contracts typically require the contractor to produce a weight control procedure for Company
approval. This procedure details how weights will be estimated and the level of contingency used at the
various stages of fabrication. For major offshore lifts, two weighings are often specified, one at completion
of the main structural framing and the final weighing at just before completion. Weight control is for all
disciplines and includes paint.

Mechanical Completion at Fabrication Site

Mechanical completion is the stage at which it is confirmed that the fabricator has fully completed his
scope in line with the design. Progress payments may be linked to this point.

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Load-out and Seafastening

Load-out is frequently undertaken by a specialist subcontractor to the fabrication contractor. There are
several ways to load out a structure or a module onto a barge. Lifted load-out allows transportation by
ship as an alternative to a barge. Outside bodies such as MWSs are often involved in approving load-out
procedures and calculations. Load-out will typically be the subject of a JHA to demonstrate the control
and safety of the activity, including a recovery plan if the load-out has to be stopped part way through the
activity. Information required before load-out will include:
– an accurate estimate/measurement of the weight to be loaded out;
– information on tide variation at the wharf side;
– information on clear water depth at the wharf side; and
– estimated duration of the load-out.

Immediately following load-out, the structure will be fastened to the deck of the barge. Such seafastening will be
designed for the loads during sea transportation. Calculations and details will usually be approved by the MWS.

Construction Contracts and Payment

Construction contracts are frequently part of an EPC/EPIC contract and are typically lump sum, unit rates
(measured) or a combination. Lump sum contracts will also have a full set of unit rates to accommodate
scope changes. The contracts will also include day rates for manpower and equipment supply.

Company Organisation at Contractor’s Construction Site

The size of the owner’s team and their roles and responsibilities will be dictated by the contract, the
capabilities/experience of the contractor and the general state of affairs of the project, for example in
terms of number of design changes, ETA of materials etc. Although the role of the owner’s team will be
straightforward in areas such as progress reporting, change order approvals, sign-off/acceptance of interim
deliverables, test reports etc., their role in matters of HSSE tends to require a more subtle approach.

Often, the Company’s expertise and standards in matters of HSSE will exceed those of the contractor. The
Company will want to influence the contractor’s HSSE performance without taking over management
responsibility. This will require a relationship of openness and trust between the Company’s and
contractor’s HSSE professionals. Note that the Company HSSE person in the design office may well be
a different person to that required on site. In the design office, HSSE is more concerned with HAZOPs,
Safety Cases, desktop HSE reviews, constructability reviews etc., while on site HSSE is more about work
safety, HAZID analyses (JHAs and JSAs) and training of workforces.

[Link] Deliverables
The deliverable is the facility, as physically complete and tested as possible, prior to transport and/or
prior to functional testing during pre-commissioning. Physical completeness and physical testing will
include leak/hydrotesting for piping, circuit tests, loop tests for Electrical and Instrumentation and all
civil/structural tests and certifications etc. Although it may be helpful to equate construction/fabrication
completion with physical completeness and pre-commissioning activities with functional testing and
acceptance, in practice the split between physical and functional will not be so clear cut. As a rule, projects
should try and complete as many pre-commissioning activities as possible as early as possible – especially
before load-out and transport. For example, the HVAC system in the living quarters should probably be
energised and tested before a load-out. Generators should probably be fully functionally tested before
transport. Deliverables therefore need to be described in detail, per discipline, per function. This is
particularly crucial if different contractors are employed for fabrication and hook-up/commissioning.

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[Link] Top Tips

Describe in the contracts, in detail, per function/discipline, the preconditions for load-out/transport
leading to the end of construction (often labelled mechanical completion). Tie significant progress
payments to these events.

Assign preservation to named individuals, both in the contractors and in the Company teams, as too often
major damage is incurred by insufficient attention being paid to this topic (e.g. seawater in 316L leads to
compressor bearings damaged and weather ingress in living quarters).

Do anything and everything that can be done onshore/inshore prior to load-out and transport offshore
or to a remote site. This may include introducing hydrocarbons, for example testing compressors with gas
from an onshore grid.

5.4.4 Offshore Transportation and Installation/Hook-up

[Link] Objectives
The objective of transport, installation and hook-up is to ensure the facility is in its final location, ready for
the remainder of pre-commissioning and start-up.

[Link] Description of Activity

Offshore transportation and installation contracts are typically one contract and are sometimes part of
an EPIC contract. The contract should specify minimum standards of vessels and procedures required by
the Company. The Company project installation group will advise on the requirements, supplemented by
STASCO if required. The Company will typically hire an MWS and/or require the contractor to do so.
The MWS will check and approve marine procedures, including load-out, for insurance purposes.

Offshore Transportation
The usual method of transportation is on a barge towed behind a tugboat, but transportation by ship is
also common. The transportation contractor will have weather forecasts covering the route, and will have
safe havens identified along the route for possible periods of excessively bad weather.

Offshore Installation
Offshore installation is normally well enough defined and of a stand-alone nature that it can be carried out
on a lump sum basis. The jacket, topsides and pipeline installation may be awarded to a single contractor, or
split between different contractors, if warranted by project timing (e.g. a long pipeline to be installed a season
ahead of the jacket installation) or by available barge resources (e.g. pipeline installation by specialist barge).

Site Surveys
The offshore structure will be installed within a specified tolerance at a set of specified co-ordinates. Care
should be taken when specifying and interpreting the co-ordinates as there are different co-ordinate systems
in use.

Company Organisation at Contractor’s Offshore Sites

During offshore installation it is normal practice to have Company Representatives and Company
surveyors onboard. Installation representatives are often specialist personnel hired for the installation
period.

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Offshore hook-up
Hook-up covers activities required to connect systems and equipment after installation at site to make the
installed systems operable.

The hook-up contract should be awarded in time for the hook-up contractor to review the detail design
contractor’s arrangements towards the end of AFC design. The hook-up contractor’s input needs to be
controlled to ensure any proposed changes are justifiable, given the late stage of the design. Input should
be sought on hook-up spool arrangements, pre-installation of hook-up cabling, gangways and stairways
etc. The hook-up contract can also be used to supply any additional engineers and technicians that may be
required for the project’s commissioning and initial operations teams.

Hook-up planning includes:

– system reviews;
– identification and design of temporaries;
– development of hook-up plans;
– procedures, including handover procedures;
– development of hook-up base scope; and
– award and mobilisation of hook-up contractor.

Hook-up job cards are developed from the design drawings and data, and a continual review is necessary of
work that might be brought forward from the site/offshore scope into the onshore scope of work. During
yard fabrication, the hook-up contractor should prepare job cards and a schedule for the site/offshore
workscope, together with the necessary work procedures. Towards the end of fabrication they need to
perform an audit of the fabrication completion and punch list verification. Any outstanding fabricator
scope needs to be prepared as job cards and included into the site hook-up programme.

To minimise the site/offshore hook-up duration, systems should be completed and commissioned onshore
(including simulation tests) to the maximum extent possible.

Hook-up Logistics
Offshore hook-up activities require a detailed planning effort, which will include an assessment of the
required manhours for each task. Hook-up is usually constrained by the number of people that can either
be accommodated offshore or transported to site on a daily basis. Depending on the set-up, offshore hook-
up work is typically 20% to 30% as efficient as equivalent onshore work, so there is a big incentive to
complete as much work onshore as possible.

Hook-up activities sometimes coincide with drilling activities. This concurrent work has to be rigorously
controlled when the drilling work involves the possibility of having hydrocarbons on the worksite.

Company Organisation at Contractor’s Offshore Hook-up Site

During offshore hook-up it is normal practice to have Company Representatives offshore.

[Link] Deliverables
Deliverables will include all preconditions for the remainder of pre-commissioning to commence. This will
include:
– hydrotests/weld inspections of hook-up piping;
– circuit/loop tests of offshore installed cabling;
– authenticated final co-ordinates of the installation; and
– as-built drawings.

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[Link] Top Tips

Describe, in detail, individuals’ roles and responsibilities during this hectic period, including conditions for
handovers:
– the installation contractor may be accountable during installation and hook-up;
– the Project Manager may become accountable during pre-commissioning;
– the Operations asset owner during commissioning; and
– the Drilling Supervisor during drilling (perhaps for part of the facilities).

Safety is best served by standard procedures and clear lines of authority. When roles change, procedures
should stay the same (e.g. permit to work).

Conduct standard onboard training for each individual who has to enter the site:
– vendor representatives;
– senior managers;
– government authorities; and
– third-party inspectors etc.

5.4.5 Mechanical Completion, Pre-commissioning and Handover to Operations

[Link] Objectives
The objective of mechanical completion is to deliver the physical asset.

The objective of pre-commissioning is to deliver the functional asset without the introduction of
hydrocarbons, permanent energising or pressurising of a system.

The objective of commissioning is to prove that all plant systems function as per design, before being
handed over to the user.

[Link] Description of Activity

Commissioning consists of a number of stages progressing from the development of the commissioning
strategy and preparation of the commissioning plan, through to start-up and testing of systems initially
with inert and then with production process fluids. The transition between mechanical completion and
pre-commissioning is at times not very distinct, but the transition between pre-commissioning and start of
commissioning is. The Operations asset owner assumes ultimate authority, hydrocarbons can be introduced
and systems can be permanently energised/pressurised.

For offshore topsides, pre-commissioning and commissioning will take place at both the onshore
fabrication yard and the offshore installed site. Topsides can leave the onshore fabrication yard with some
systems being mechanically complete except for a punch list of outstanding work that could not
be completed.

It is likely that pre-commissioning and commissioning will be taking place concurrently on different
systems, for example at a fabrication site, hydrocarbon piping can be being pre-commissioned at the same
time as utilities are being commissioned.

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Mechanical Completion Phase

Mechanical completion is the stage at which it is confirmed that the fabricator has fully completed his
scope in line with the design. The fabrication/construction groups are responsible for completing activities
up to mechanical completion. Individual systems will often be assessed for mechanical completion (rather
than the complete process) to allow for progressive completion of fabrication scope of work. Typical
activities in achieving mechanical completion of a system include:
– systematic conformity checks;
– static de-energised tests;
– flushing and cleaning of piping;
– hydrotesting of piping; and
– all necessary spare parts and commissioning equipment, tools etc available.

Commissioning group activities during the mechanical completion phase will include:
– ensuring that commissioning priorities are taken into account in detailed planning and execution of
mechanical completion work;
– assisting in the assurance that the contractor’s mechanical completion documentation is compatible
with the project documentation; and
– monitoring and reviewing outstanding punch list items in order to advise the project of those
items that should be cleared at the mechanical completion acceptance stage, in order to fulfil
commissioning requirements.

Pre-commissioning Phase
Pre-commissioning encompasses all the required checks, tests and proving of a system that can be
implemented without the introduction of hydrocarbons into the process, or the permanent energising or
pressurising of a system. It commences with verification of construction mechanical completion. Typical
activities in achieving pre-commissioning of a system include:
– cleaning of piping;
– nitrogen/helium leak testing of piping;
– function testing of E&I control systems;
– final alignment and coupling of rotating equipment;
– testing of fire and gas facilities;
– energising and testing of switchboard;
– subsystem function tests;
– performance of leak tests at rated pressure;
– electrical checks – cable continuity, earthing, bonding;
– calibration of instruments;
– instrument loop tests; and
– stroking of control valves.

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The pre-commissioning requirements are normally defined by the commissioning team, and the pre-
commissioning checklists form part of the handover documentation for systems being handed over from
construction to commissioning. Preparation for pre-commissioning includes:
– checking vendor data;
– preparing commissioning procedures;
– preparing test equipment/procedures;
– checking project documentation;
– assembling relevant project reference data; and
– checking individual systems.

For each identified system the following needs to be prepared:

– detailed commissioning procedure;
– checklist for every test;
– system test report; and
– commissioning dossier.

Commissioning Phase
Commissioning activities will include:
– obtaining all permits and formal approvals required prior to commencing commissioning and includes
identifying/specifying temporary facilities required for commissioning;
– specifying required specialist supplier assistance;
– co-ordinating commissioning activities;
– executing commissioning activities as detailed in the commissioning procedures;
– monitoring and clearing outstanding commissioning punch list items;
– compiling handover documentation;
– updating and maintaining the completion system;
– obtaining formal approval from Operations to enable test runs of hydrocarbon systems with
hydrocarbons; and
– undertaking full function checks and test runs.

The following issues need to be taken into account when preparing for commissioning:
– personnel may be unfamiliar with the facilities;
– the facilities may be commissioned in stages;
– temporary commissioning connections are sometimes introduced;
– commissioning often proceeds concurrently with construction and production activities;
– responsibility for the plant transfers from one group of individuals to another; and
– commissioning will take place by system, while construction may have progressed by area or by
discipline (eg piping) making co-ordination difficult.

Handover to Operations
Preparation for handover to Operations is preparing for transfer of responsibility for the facilities from the
commissioning team to the operating team, documented by a handover certificate. This includes:
– updating the operating procedures to incorporate changes that may have occurred during construction
and commissioning;
– obtaining any final agreements with the regulatory bodies that all relevant regulations have been met
and that the facilities may be put into operation; and
– preparing the agreed data and documentation for facilities handover, including the handover certificate.

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Completion and handover is a major milestone for both the project team and the asset holder. Normally,
an independent review is held as a means of verifying that the project team has completed the work
satisfactorily to date, can complete the remaining activities without undue risk and that the asset holder is
ready to receive the product.

Pre Start-up Audit

As a control mechanism it is mandatory for major projects to conduct a pre start-up audit. The audit
should seek to verify that:
– the facility was constructed as per design;
– design integrity has been maintained since AFC issue;
– checks being performed during pre-commissioning are adequate to demonstrate the system integrity; and
– operations are sufficiently prepared to undertake the normal running of the facility.

Project Close-out Activities

The following tasks need to be performed as part of the project close-out:
– finalisation of as-built drawings (transferring of red line mark-ups from site), including all
commissioning changes;
– project documentation completion and handover. This requires a detailed data management plan,
including document types, retention needs, retention times, access requirements etc. Provided such
a plan is in place, an Electronic Data Management System (EDMS) can greatly assist in the formal
transfer process;
– agreement on the final punch list, the budget to complete the punch list work and identification of
who will carry it out;
– materials and spares reconciliation, including disposal of surplus items or handover to operations;
– close-out of contracts and purchase orders, including settlement of claims;
– preparation for the Post Implementation Review (PIR), also labelled VAR 5, which should include the
project Health Checks prepared during the first three project phases, and the main learnings of the
PERT process during Execute. The PIR/VAR 5 should be conducted upon the achievement of stable
production;
– preparation of a cost analysis (e.g. Cost Reporting Manual);
– controlled run-down and demobilisation of personnel; and
– budget and financial close-out, including payment of withholding amounts.

[Link] Deliverables
Refer to Section [Link].

[Link] Top Tips

Aim for continuity of staff. Early involvement of pre-commissioning staff is crucial, provided roles and
responsibilities are clearly established. Individuals can change roles during the project, for example a
mechanical construction supervisor may become a commissioning supervisor. The advantages of continuity
of staff outweighs any concerns about conflicts of interests.

Aim for integrated teams. Although the responsibilities of owner/client and contractor need to be kept
separate, the nature of the work demands that the individuals work as one integrated team. It is best
practice to keep the team the same even though the leadership and accountability changes from, for
example, installation contractor to project manager to commissioning supervisor.

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5.5 PERVASIVE PROCESSES

Some key processes occur in several phases of the ORP, and are best dealt with on their own. This section
gives a brief description of three of them: Well Delivery, Geomatics and Logistics.

5.5.1 Well Delivery Process (WDP)

[Link] Objectives
The intent of the WDP is to improve wells- and therewith business performance. To assist in meeting this
intent, the WDP provides a common framework to guide the way we select, plan and execute well and well
services projects. This framework has been constructed from proven, successful practices drawn from the
regions and industry as a whole. The WDP is modelled on the ORP and recognises the same phases. The
text below has been taken from the brochure: ABC of WDP, which is accessible through the WDP website
[Link]

[Link] Description of Activities

The WDP has five phases:

Phase 1 (Identify and Assess) is a divergent and creative phase to identify field/well concept options and
opportunities, long lead requirements, provisional economics and a high-level project plan.

Phase 2 (Select) is intended to select the concept well design with the maximum value, provide functional
requirements for the well and the economic justification.

Phase 3 (Define) is when the detailed well design, technical specification and programme are generated.
Drilling-the-Limit (DtL) techniques are used to optimise the plan.

Phase 4 (Execute) is when the well operation is carried out, using DtL techniques with the aim to deliver
as promised, or better.

Phase 5 (Operate) is when handover documentation is completed, performance is reviewed against promise
and the resultant learnings are shared.

[Link] Deliverables
Phase 1 deliverables are: Project Overview and Objectives (PIN); Resource requirements (PIN); key risks,
-business and technical- (PIN); WDP timeline and assurance plan (PIN); Conceptual well design options
and level 1 cost estimates; technology plan; preliminary schedule and long-lead issues.

Phase 2 deliverables are: Recommended conceptual well design and basis of selection; level 2 cost
estimate; updated risk and opportunity register; functional specifications (target details, pore pressure plot,
evaluation requirements etc); updated WDP execution and assurance plans; preliminary well schematics;
preliminary contract strategy.

Phase 3 deliverables are: Well objectives; Technical Limit well design; Detailed design; well schematic; Pore
pressure plot; Targets and trajectory; Detailed cost estimate; Materials; Draft programme; Evaluation Plan;
Vendor programmes; Detailed risk and opportunity register; Permit information.

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Chapter 5 | Project Activities and deliverables, per Phase

Phase 4 deliverables are: Final detailed well programme, Drill-the-well-on-paper (DWOP) targets; daily
drilling reports; Well status diagram.

Phase 5 deliverables are: Well results; Well performance summary; learnings; Vendor summaries;
Communication Plan.

[Link] Top Tips

The WDP, like the ORP, is scaleable. A number of dimensions can be adjusted to achieve an effective plan.

Use the Identify and Assess phase to be creative, learn from other disciplines and communicate your
design requirements

Use the Assurance plan to communicate requirements to leaders and technical support departments

Use technical reviews to obtain meaningful second opinions

Demand quality conceptual design parameters before proceeding to the Define phase

Get the subsurface and Execution teams involved

Submit the right information to the Decision review Board to obtain high quality, timely decisions.

[Link] Links

Well Delivery Process

[Link]

5.5.2 Geomatics

[Link]. What is Geomatics?

The main elements of Geomatics are geodesy (or co-ordinate reference systems (CRS)), land and marine
surveying and positioning, mapping and Geographical Information Systems (GIS), remote sensing (satellite
imagery) and the management of geographical or co-ordinate information (geo-information). Geomatics
teams manage and apply a comprehensive range of geo-information types on behalf of opportunity /
project teams and asset owners. This, combined with field operations expertise, equips them for a critical
role providing technical support and overview for successful management of project interfaces and delivery.

EP cannot function without maps. The currency of maps is geo-information and most maps are produced
via GIS. GIS enables accurate, versatile, and powerful project frameworks, ‘digital to physical’ links, and
subsurface/surface integration. More than 80% of information in EP can be attributed to a geographical
location, area or route. Reliable co-ordinate information (X, Y, Z or lat, long, height/depth) is not only
a critical back-bone of project design and delivery, it is also a powerful means of integration across the
business. This is borne out by tremendous growth in the access to, and use of, geo-information and GIS –
not only in EP but also other areas of the business. However, there are associated risks that can easily be
overlooked - but which can be critical to HSE, integrity, and project delivery. The geo-information itself
- and its attendant integrity and positioning risks - must be managed carefully and this is a responsibility
of Geomatics.

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Geomatics is a discipline in the Geoscience skillpool. However, Geomatics teams in the regions, OUs and
new ventures work with project engineers, HSE advisors and field operators as much as they do with sub-
surface and well engineering colleagues. The organisational home of Geomatics teams in the regions and
OUs varies and largely depends on local business focus. Well established teams provide Geomatics support
to projects in existing regions and OUs whereas support to new ventures is usually provided by SIEP’s
Geomatics team.

EP.18 (‘Manage Geomatics’) is a level 1 process in the EP Business Model (EPBM) and sets a consistent
framework of procedures and standards for the execution of Geomatics activities worldwide. EP.18 is not
a stand-alone process – it is linked to other main EPBM processes. This reflects the role of Geomatics
supporting various EP activities (such as project delivery and well delivery) but also reflects the HSE and
business criticality of many aspects of EP.18. Key contacts for Geomatics can be accessed via the EP.18
link in section 5.6.4 (‘Teams, role descriptions’).

[Link]. How Does Geomatics Support Project Delivery?

Although Geomatics has the framework of EP.18, there is no ‘one size fits all’ blueprint for support to field
development or de-commissioning projects. The types and level of support required are influenced by
many factors apart from basic project parameters such as location (onshore, offshore or deepwater), size,
complexity and interfaces. These other factors include venture/project set-up, contracting philosophy,
extent of Shell-supplied information to tenderers and contractors (e.g. surveys) and main contractor
capability to manage the Geomatics-related elements of delivering the project (e.g. surveying, positioning
and as-built mapping).

Figure 5.5.1

IDENTIFY & ASSESS SELECT DEFINE EXECUTE OPERATE

Project Feasability Concept Basis For Project Design and

Initiation Study Selection Design Specification, Construct
Teder/Award

Location map, Acquire Site analysis and Review survey Input to tender,
(collate all additional data selection (based requirements and award (technical Commission
existing data such as site on identified risks input to proposed specifications, Start Up Opera to
and local survey, remote e.g. [sub-] surface engineering scope of work, Handover Asset
knowledge and sensing and 3rd hazards and design CRS), permits and
identify party data restrictions) base maps.
information Monitor survey and positioning
gaps) operations, QC as-built
co-ordinates and issue to all
relevant parties (e.g. national
mapping and charting
agencies).

GIS
Geo-information and GIS Data as project matures

80% of all EP data has a geographical element

GIS continuously circulating and changing GIS

Data Data

Points and dotted lines on a preliminary map Update project and corporate database(s) as basis for asset management
(potential sites and routes) and follow-on activities e.g. rig moves, pipeline, inspection, subsidence
Find the hazards before they find you monitroring, ‘phase 2’ developments
If you can’t map it, you can’t manage it

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Chapter 5 | Project Activities and deliverables, per Phase

Experience of supporting many projects leads to the recommendation that Geomatics input to a multi-
discipline project team is best when provided on a ‘first in and last out’ basis, and led by a dedicated (full
or part-time) project surveyor, preferably on a formal basis such as a service level agreement which spells
out the responsibilities between Geomatics and the project. Due to the scope and nature of Geomatics
support, close working relationships and open communication lines are essential with other members
of the multi-discipline project team. The following diagram and descriptions illustrate some typical
Geomatics inputs during stages of the opportunity/project life-cycle:

Identify
Geomatics advice must be sought at project identification stage to ensure that teams begin working from
a correct and clearly defined co-ordinate framework and geo-information base. Geomatics support at
identify includes:
– definition of geodetic (CRS) parameters for the area of interest, verification of existing data and
resolution of co-ordinate discrepancies (wells, boundaries etc);
– provision of an integrated geo-information database;
– provision of topographic (land), hydrographic (marine), infrastructure and concession maps, derived
from corporate and third party data sources;
– analysis of existing or readily available remote sensing data (satellite imagery);
– advice on future Geomatics inputs (e.g. costs of required surveys), capabilities and resourcing;
– hazard search (desktop study using GIS analysis tools (e.g. restrictions, obstructions, bio-diversity or
areas of special interest, licence blocks, etc);
– input to preliminary project plans and cost estimating (e.g. pipeline route distances).

Assess and Select

Geomatics input to assess and select aims to provide better understanding of local conditions and early
identification of risks for the project team, leading to better risk management and mitigation. Examples
include:
– new data capture – (baseline survey, positioning support for benthic and environmental assessment,
seabed survey (e.g. to verify location and status of existing infrastructure), land survey, remote sensing
data and 3rd party map sources);
– geo-hazard analysis (also input from Geophysics and Geotechnical) for later Invitation to Tender
(ITT), including high resolution site surveys of well/platform locations;
– help to reconcile sub-surface and surface targets for site assessment of proposed locations (e.g. new well
locations from Drilling Location Request (DLR));
– surveys of environmentally sensitive features and areas, such as coral reefs, river crossings, wildlife
habitats and forestry (with project / OU Environmental Advisors);
– high resolution satellite or airborne imagery (e.g. for ‘due diligence’ process);
– digital terrain and seafloor models, elevations and profiles;
– land-use and land ownership (and access restrictions);
– other third party, government or partner-sourced data (e.g. utilities, telecoms cables, shipping lanes,
military exercise areas etc);
– provisional layouts and route design (taking account of future activities e.g. rig positioning), number of
pipeline/cable crossings, etc.

This data is captured in a structured geo-information database, using GIS for visualisation, integration and
analysis to further understand risks and constraints associated with sites and routes of interest. Support
by Geomatics at these stages ensures comprehensive identification of survey and positioning requirements,
as well as early assessment of identified risks and hazards. This is particularly important for preparation of
field development plans, project execution plans and ITT documentation.

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Define
In define, Geomatics support includes, but is not limited to:
– technical specifications (e.g. data models for pipelines and as-builts) and input to proposed project
execution plan and scope of work;
– definitive specification of target locations, plus tolerances both for installation and as-built surveys (and
possible retention payments for delivery of specified as-builts);
– support to project team in pre-qualification, bid clarification and bid review, including technical,
commercial and (where required) HSE assessments of tenderers and nominated sub-contractors;
– provision of controlled and correct geo-information databases and base maps;
– quality and integrity checks of geo-information in proposed design and engineering drawings,
particularly those that involve interfaces (e.g. construction / drilling);
– support to project team submissions of map and co-ordinate documentation to regulatory agencies for
approvals;
– specialist advice on survey and as-built mapping aspects of project activities (e.g. initiation and
laydown of pipelines, pipeline out-of-straightness, riser installations, and careful handling of overage of
cables or umbilicals with respect to future activities such as rig moves);
– advise project on need for other specialist input for planning (e.g. metocean statistics);
– monitor how other future possibilities could influence design layout (e.g. prospects that could be tied
in later and 3rd party applications).

Execute
Depending on the nature of the project, Geomatics input to execute may be extensive. Excellence in
surveying, positioning and project geo-information management is essential for successful and incident-free
project delivery. Examples of input at this stage include:
– review of main contractor’s and sub-contractor’s Geomatics–related documentation (e.g. survey
procedures, final design (AFC) drawings);
– mobilising, briefing and debriefing of survey teams and survey representatives;
– monitor progress and technical and HSE compliance, and ensure that Geomatics-related contractual
requirements are met;
– careful maintenance and handling of critical project geo-information between phases of the work (e.g.
debris clearance surveys, site/crossing preparation, lay, trench, protection from scour/fishing impact,
installation of structures/wells, cables and umbilicals, tie-ins, dropped objects or wet-stored objects etc);
– technical advice for vessel and barge anchoring and positioning;
– monitor dimensional control surveys (e.g. wellhead structures, jacket fabrication and positioning aids)
and tie-in metrology;
– as-built surveys of constructed facilities (including platform or manifold position/attitude, well slots,
subsidence benchmarks etc);
– technical support at planning, interface, HAZID and SIMOPS meetings;
– mitigation of contractual variations and claims that relate to surveying and positioning;
– QA/QC of survey results and reports, including as-built surveys.

During project close-out, all newly acquired survey data and updated geo-information will be verified,
reconciled and loaded into the project database. It will then be stored in corporate databases to enable
operation and management of the assets and provide the successful basis for follow-on work (e.g. rig
positioning to complete wells at the new asset). Reports and maps are issued to all relevant parties, as
required, including government and regulatory agencies.

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Chapter 5 | Project Activities and deliverables, per Phase

Geomatics personnel input to project review to ensure that learning points are captured for improving
future project management and execution. EP.18 procedures are also revised as required, and the EP.18
Incident Register is used to notify the global Geomatics community in order to avoid the re-cycling of
incidents or failures (see section 5.6.4).

It should be noted that many of the steps are also applicable to abandonment projects.

Operate
Geomatics teams support field operations when the project is a producing asset. Again, support varies
significantly based on the nature of the project (asset), but some examples include:
– pipeline inspections (e.g. for pipeline spanning or right of way encroachment);
– positioning of rigs at the new facilities with due attention to the integrity of assets;
– detailed surveys for additional engineering work (e.g. ‘phase 2’ (incremental) developments);
– platform tilt, settlement and subsidence surveys;
– mapping for Permit to Work process (e.g. for excavation activities);

A key responsibility of Geomatics is to update appropriate corporate (asset) databases on behalf of asset
owners during the full life-cycle of the asset up to and including the abandonment stage. It is incumbent
on Geomatics teams to keep regions and OUs aware of the critical need to capture all proposed and
completed ‘mappable changes’ that could impact on management and integrity of the assets. These
changes can be tangible or intangible, major or routine, such as:
– new pipeline, cable or other asset (e.g. facility or building);
– change of status, such as abandoning a well, burying a pipeline or cable that was previously exposed, or
re-using a former oil pipeline for water injection;
– jack-up rig spud-can footprints and structural changes to a platform’s deck outline (both factors can
constrain rig access alongside);
– change of asset owner;
– third party approvals (e.g. concession block or pipeline crossing agreements);

[Link] Technical Authority (TA) and HSE Criticality

Geomatics TA applies for several activities that can be HSE or business-critical in supporting project
delivery or operating of assets. Although TA application and specific responsibilities vary by region and
OU, Geomatics broadly has key input to, or single point responsibility for, activities such as:
– pipeline route planning and surveys;
– checking of proposed well location(s) (or DLR) as part of the well delivery process;
– positioning of temporary and permanent installations (e.g. anchors, barges, rigs, platforms and
wellheads) in pre-defined locations;
– shallow hazard identification and input to subsurface foundation survey (jack-up leg penetration and
piling);
– measuring subsidence (e.g. that caused by reservoir compaction);
– survey and mapping support to land and lease management teams;
– maintenance of maps, geo-information, satellite imagery and GIS for emergency response centres (GIS
can be the basis for applications such as oil spill trajectory modelling and vessel/vehicle tracking).

A failure in surveying, positioning or geo-information aspects of a project or other activity supported by

Geomatics can result in significant impacts across the PEAR range (people, environment,
assets, reputation).

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[Link] Geomatics in the EP Business Model

EP.18 ’Manage Geomatics’ is a live business process supporting main Geomatics activities. Its primary aim
is to provide a framework for timely, integrated and high-quality Geomatics operational support and geo-
information as recurring (and critical) project inputs during the project life-cycle, as shown below:

Figure 5.5.2
Geo-information ready for
operations stage (and base map for
phase 2 of Project 2)
Base Map
As-built Survey Data to project
and Corporate Databases

Target
QA to ensure zero
Project Operational integrity failures in Hazard Searches
Support coordinates (XYZ) and Surveys
or geo information
management

Content Management &

Technical Assurance Plan and Design Project
(e.g. FEED input)

Input to Tendering and Award

(e.g. Technical Specifications)

Best practices, learning points, and improvements from Geomatics teams worldwide are captured and
shared though the Geomatics SIGN (SKS) network forum and EP.18 Incident Register. The former
improves Geomatics global procedures and local checklists and the latter minimises any scope for future re-
cycling of integrity failures.

Geomatics personnel (including the project surveyor) who support the project team will have access to
global EP.18 procedures, global technical specifications, knowledge sharing networks and Geomatics
Principal Technical Experts and Subject Matter Experts as required.

[Link]. Links

EPBM process EP 18: Manage Geomatics:

[Link]
N&environment=6&objType=1&name=EP.18&CLASS=1&description=Manage+Geomatics&processid=-
106684483

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Chapter 5 | Project Activities and deliverables, per Phase

5.5.3 Logistics and Infrastructure

[Link] Introduction
Logistics and Infrastructure is an essential process to enable the effective and efficient project execution and
flawless start up of the facilities. The key activities of the process are early involvement in the identify &
asses as well concept selection and define stages. It secures on the right selection and design of the facilities
and infrastructure such as ports, roads, airport facilities, storage & warehousing and crane &
lifting facilities.
The Logistics part of the process focuses on challenging, planning, execution and controlling the
safe, secure and efficient flows of people, materials, and equipment including providing adequate
storage facilities for inventory and waste management. Most activities have a significant Logistics
and Infrastructure element incorporated, which represents an average cost in the order of 20% of the
Operational expenditure and 15% of Capital expenditure. In addition an undefined large proportion of
secondary logistics expenditure is embedded in EPC and other contracts. Moreover Logistics encompasses
high-risk activities reflected in incident frequency and severity (e.g. transport and lifting & hoisting
incidents). Subsequently it is essential that the Logistics Process is fully integrated in each phase of the
Opportunity Realisation.

The Logistics Management Process is outlined in a structured way in Global Process 17 ([Link]
[Link]/process17/) and mapped in further detail in the EP Business Model under EP.14 “Manage
Logistics” ([Link] Logistics activities are recognised as high-risk activities that
have exclusive EP-HSE standards, contained in the EP Business HSSE Control Framework: [Link]
[Link]/ep/corporate_support/eps_hsse/HSE%20Framework/ep%20business%20hse%20control%20fra
[Link]

– EP2005-0261 for Road Transportation HSE

– EP2005-0262 for Marine Logistics HSE
– EP2005-0263 for Air Transport HSE
– EP2005-0264 for Lifting and Hoisting
– EP2005-0151 for Medical Emergency Response
– Oil Spill Response Guidelines

It is essential for successful project delivery, and the subsequent venture set-up, that all Logistics and
Infrastructure elements are fully integrated and embedded throughout all phases of the Opportunity
Realisation. The project lead is accountable that the appropriate logistics expertise is acquired prior
to concept selection and maintained through to steady state delivery, to ensure that the logistics &
infrastructure aspects are taken into account and single point accountability for these elements
is maintained.

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Figure 5.5.2

IDENTIFY & ASSESS SELECT DEFINE EXECUTE OPERATE

Concept Design & Construct Start-up Pre Comm Ramp up Steady State
Identify Assess Concept Selection Pre-Feed Feed Prep Execute
Preparation Procure & Install Facilities & Comm Production Operations

Preliminary Logistics Logistics Logistics Incorporate Logistics Mobilise Contribution Logistics

Logistics Infrastructure HSE Operating Logistics Contribution Logistics to PSUA (Pre & Infrastructure
Site Visit & Resource Risk Strategy Requirements To contracting Staff Start-up Acceptance
Assessment Assessment in ITT audit)
(LIRA) Logistics
Organisation
Strategy Define Develop Logistics Contri-
Logistics & Logistics Contract bution
Define Infrastructure Design HSE Manage- to
Logistics & Functional Logistics CASE ment RFSU
Infrastructure Specfications Organisation
Requirements
Contribute
Define Develop Logistics in OR&A
Logistics
Logistics Execution Plan as gap-
Health
analysis;
Define
Requirements Contribution Check
Logistics
Logistics to PEP OR&A
Logistics Refine
Options Contribution Logistics Logistics Visit; Hand-
Develop Logistics Logistics
Logistics Logistics to Integrated Logistics Contracting Contractor OPEX Logistics Mobilise Contribute over of
Logistics OPEX &
Support & Contribution Impact Contribution Tactics Pre- & CAPEX Contribution Logistics to PERT Logistics
Execution CAPEX
Activities To OFW Assessment To OFW qualification Estimates To OFW Resources Facilities
Strategy Forecast

VAR1 VAR2 VAR3 VAR4 FID VAR5

Opportunity Project Opportunity Contract Pre- Refine Opportunity Commence OR&A Hand-
Seismic, Framing HSE OPEX qualification OPEX
Execution Framing Tactics Framing Develop- gap- over of
Exploration Workshop Impact & CAPEX Estimates;
Contract Workshop Workshop Workshop ment analysis; Facilities
& Appraisal Assessments Forecast CAPEX
Strategy Activities OR&A
Activity Budget
Concept visit; Operational
Development PERT Health
Check
Selection Develop Organisation Project PSUA Final
of Project Design Staff (PreStart- Acceptance
Concept Execution Mobilisation up Audit)
Plan

Preliminary Feasibility HSE Risk Develop Basis Development Tender & Develop Project Ready
Site Study Assessments Operating For Of ITT Evaluation HSE Contract For
Visit Philosophy Design (invitation CASE Management Start
Preparation to tender) up

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Chapter 5 | Project Activities and deliverables, per Phase

[Link] Logistics Elements of the ORP

Preliminary Logistics Site visit
During opportunity identification a scouting survey, as part of the feasibility study, is largely focussed
around logistics and infrastructure illustrating the potential operating environment for the seismic,
exploration, appraisal and future development activities.

LIRA
The Logistics Infrastructure and Resource Assessment (LIRA) constitute an assessment of the countries
infrastructure and available logistics resources that provide the elementary information required for the
concept selection and subsequent Project Logistics Plan. The LIRA execution is part of the “identify and
assess phase” of the OR&A process. Useful links to learn more about Logistics & Infrastructure and LIRA
details are: [Link] ; [Link]

Logistics Concepts
The development and evaluation of the various concepts includes a range of logistics support options.
The HSSE risk, specifically those for aviation and land transport, for the relevant logistics options requires
assessment and results needs incorporating in the concept selection. The consequential impact of the
selected logistics support option on the environment and local community requires incorporation in the
Integrated Impact Assessment.
The strategic requirements for Infrastructure and the Logistics Support for steady state operations must be
included in the Operations Philosophy. This includes methods for the strategic movement of goods and
people, material storage, base locations for aviation and marine operations. The Logistics costing is to be
included in the OPEX estimates.
The operational requirements for the infrastructure and the logistics in the support of the project execution
must be specified in the Project Execution Plan. This to include details on the movement of goods and
people, material storage, base locations for aviation and marine operations and transit support, such as visa,
accommodation, meet and greet services. The Logistics costing is to be included in the CAPEX estimates.

[Link] The Project Logistics Plan

The nature of the Project Logistics Plan will depend on the contracting strategy adopted in the Project
Execution Plan. The scope will need to address the various elements of the logistics activities with the
appropriate balance between central logistics services by the venture and secondary logistics by the various
project development contractors. The key logistics elements to be addressed are:
– Demand Management; incorporating the safe and secure movement of people and goods by land,
sea or air transportation, with specific attention on customer engagement, challenging, planning,
scheduling, optimising.
– The group standard iLogistics - Global Logistics Management System is to be used for the activities
mentioned above. It provide a data base of people-data as well as logistics resources.
– Logistics & Infrastructure activities are a major contributor to the safe execution of project delivery
and operations. Over 50% of the incidents are logistics related. This can be reduced considerably
by taking correct mitigation actions early on in the design and select phase and tight journey
management control.
– Inventory Management; incorporating custom requirements, the material control and administration
(such as receipt, handling, storage, preservation, dispatch QA/QC and coding, etc.) of project
materials, including commissioning spares, start-up spares, two year operating spares
– Waste Management; incorporating prevention of generating waste, consolidation and segregation
of various types of waste (domestic, oily/chemical waste, scrap steel etc) and arrange for appropriate
disposal (recycle, incineration, landfill, etc), including relevant permits and liaison with authorities.
– Logistics organisation design; incorporating key positions, complete with roles and responsibilities and
organisation transition plans for the various project phases.

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 Introduction
to the guide
Chapter 6 Opportunity & Project Management Guide

Opportunity Realisation
Process
Contents

Chapter 6 Opportunity Realisation Process (ORP) Toolbox

Strategic Processes
6.1 Introduction

6.2 Structure

6.3 Toolbox contents map

6.4 Tool Descriptions

Control Processes
Abbreviations

Glossary

Subject Index

Work Processes
Opportunity Realisation
Process (ORP) Toolbox
Contents
 Restricted to Shell personnel only

6 Opportunity Realisation Process (ORP) Toolbox

6.1 Introduction

While the processes needed to manage an opportunity remain constant, the very best
opportunity/project management is characterised by finding new ways of restructuring
those processes so that better outcomes are achieved.

Research and benchmarking shows that the use of tools aimed at improving those
processes increase the value derived from opportunities by:

• Improving decision making;

• Reducing scope;
• Increasing reliability;
• Simplifying work processes;
• Reducing rework;
• Building committed teams;
• Leveraging experience from previous projects.

The ORP Toolbox contains a series of processes, guidelines and checklists all aimed at
providing guidance to opportunity/project teams on a large number of the opportunity
realisation process elements. They have been developed and put in place to assist the
teams to obtain the best possible outcome for their opportunity and the application of
the appropriate tool at the appropriate time will, (a) avoid much reinvention of the
wheel that absorbs so much of teams’ time and energy; and (b) assist in maximising the
value of the opportunity.

The toolbox is based on current SIEP knowledge of “excellent practice” and includes
both SIEP and OU documents. The knowledge of “excellent practice” is very likely
incomplete but it is only by OUs proposing additional tools in their possession for
inclusion in the toolbox that the toolbox will be improved. The ORP toolbox can be
found at [Link]/rtl/c2v/.
Proposals for adding to it or upgrading it, should be made to the C2V team.

Chapter 6 ORP Toolbox | 1

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6.2 Structure

The toolbox is structured around the five phases of the Opportunity Realisation Process

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

Identify Select Define Execute Operate
Figure 6.1 & Assess

and the three sets of support processes captured under the headings:

Strategic Processes Control Processes Work Processes

Figure 6.2

The tools that are available to assist projects are listed under each of the above headings
in 6.3 following and are mapped against the five ORP phases to indicate the timing of
application of the tools that will provide maximum benefit. Primary phases for tool
application are shown by ● and secondary phases for their application are shown by ●.

A short description of each tool is given in Section 6.4 and the tools may be accessed on
the Shell www as previously indicated.

The tools are currently derived from the following sources:

- EP documents identified by their years and numbers (e.g. 98-5221)
- Shell Expro documents indicated by 1
- Shell UK documents indicated by 2
- Woodside documents indicated by 3
- Shell International documents indicated by 4

Tools that are considered to provide truly significant value improving practice are
highlighted in red in the tables and in the text and, in general, projects will be expected
to use these tools in pursuit of their opportunity objectives. The singling out of these
tools does not decrease the importance of the remainder of the tools available and
opportunity/project teams should examine the assistance that each has to offer in the
context of its own requirements.

Chapter 6 ORP Toolbox | 3

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4 | Opportunity & Project Management Guide

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6.3 Toolbox contents map

Strategic Process Tools

Identify &
Select Define Execute Operate
Assess

Strategy Formation

Opportunity Framing Facilitators Handbook (2000-5547)

Opportunity Realisation Process - Frequently Ask Questions
Roadmap Examples
Sustainable Development making it happen4
Asset Reference Plan Guidelines1
Operations Philosophy Checklist
Field Development Planning3
Project Execution Planning3
Project Execution Plan Checklist
Technology Planning and Selection Guide3
Contracting Strategy Guideline3
C2V Contracting Strategy Peer Assist
Non Operated Venture Management
C2V Non Operator Peer Assist
Stakeholder Consultation (95-0374)

Risk Management

Project Risk Management Guideline3

C2V Strategic Risk Management Peer Assist
Uncertainty and Risk Management in
New Frontier Projects (98-5304)
Strategies for the Management of Technical Risk on Projects3
Subsurface Uncertainty Management Guidelines3

Improvement

Improvement Process3
Value Engineering Guidelines3
C2V Value Engineering Peer Assist
Project Facilities Objectives Guide3
Design to Capacity Review Guide3
Constructability Review Guide3
Lessons Learned and Best Practice Guide3
Benchmarking Guidelines3
Benchmarking for Capital Ventures
Project Debrief Report Checklist
Engineering Benchmarks (98-5221)
C2V Technical Framing Concept Selection Peer Assist
V2V Peer Assist Guidelines
DTL Best Practice Guide
PtL Peer Assist Guidance Notes
Figure 6.3

Chapter 6 ORP Toolbox | 5

Restricted to Shell personnel only

Identify &
Select Define Execute Operate
Assess

People

Leadership & Team Building3

Typical Project Organisations
EP Skills Portfolio
Learning Guide (issued annually)
Shell Project Management: Distance Learning
Module (99-5903)
o
Upward and 360 Feedback1
Figure 6.3 Cont.

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Control Process Tools

Identify &
Select Define Execute Operate
Assess

Work Planning

Work Management Planning & Scheduling Tools

Evaluation Report (98-5342)

Cost Management

EP Cost Management (94-2000)

Cost Engineering System (CES): User Manual (97-5200)
Cost Engineering in New Frontier Projects (98-5199)
Cost Engineering Guideline for Projects3
Cost Control of Capital Investment Projects
(DEP [Link])

Contracting & Procurement

SIEP/SEPIV Contracting & Procurement Process Description

& Guidelines (97-5269/5271)
Vendor and Contractor Appraisal Policy
and Quality Management Requirement
for Suppliers1 (3114-001)
Model Tender Evaluation Procedure3
EPC Contract Evaluation Methodology
Contractor Prequalification Questionnaire

Quality Assurance

Project Quality Assurance (DEP [Link] - Gen)

Figure 6.4

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Identify &
Select Define Execute Operate
Assess

HSE

Group HSE Management System4

HSE Manual (95-0000)
Health Safety Environment Management System (99-5663)
Incident Investigation and Analysis Guide (HSE 005)
Procedure for Investigation & Reporting of Incidents1
HSE-MS Self AssessmentQuestionnaire
1
Health Hazard Management
SMS-A Contractors Guide (93-1510)
Major Accident Hazard Management Process In Expro1
Quality Systems and the SMS/Safety Case (93-1515)
Enhanced Safety Management & ESM Checklist

Information Management

Model Project Management System3

Project Procedures for Large Projects
Project Manager's Guide to Livelink

Change Management

Management of Organisational & Process Change Guide3

Monitoring/Analysing/Reporting

Cost Control of Capital Investment Projects

(DEP [Link])

Audit & Review

Project and New Venture Value Assurance

Guide (2000-5305)
Guideline for Post Investment Reviews1
Audit and Review Management System1
Guidelines for Technical Review Process1
Field Development Review Guideline (EP 59000-3,1992)
Multi-Project Engineering Review
Pre Start-up Audit Terms of Reference Figure 6.4 Cont.

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Work Process Tools

Identify &
Select Define Execute Operate
Assess

Exploration

A Guide to Management of Upstream Business

Opportunities (EP 94-0370)
Exploration Play & Prospect Evaluation
Methodologies (99-5500)
Guidelines for Single String Venture (94-1400)
Upstream Opportunities Evaluation – an integrated
approach (EP 95-2093)

Petroleum Engineering

Prospect Maturity Cycle Guideline1

Well Engineering

The Well Engineering Framework (97-5670)

Well Engineering Notebook (98-5152)
Production Operations Well Services Guide (95-1810/1818)
Management of Well Production Operations (EP 94-1133)
Well Delivery TL Process
Well Engineering Project Management Guide3
Well Engineering Management Manual3

Field Engineering

Conceptual Definition Deliverables

Guidelines for the preparation of a Basis for
Design Document3
Guideline for Preparation of a Project Specification Document3
Preparation of a Design Data Book1
Detailed Design Deliverables
Commissioning Manual1
Commissioning Procedures Index
Decommissioning Process Manual1
Guidelines for Design & Management of Production
Measurement Systems (EP 2000-5608)
Brownfield Modifications Checklist
Figure 6.5

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Identify &
Select Define Execute Operate
Assess

Operations

Operations in Projects1
Management of Well Production Operations (94-1135)
Asset Management (97-5501/5504)
Maintenance Management Guideline
(98-5200/5201/5203,5211/5215)
Guidelines for Design & Management of Production
Measurement Systems (2000-5608)
Decommission Process Manual2
Operations Philosophy Checklist
Operations Business Planning (EP 93-1000)
Figure 6.5 Cont.

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6.4 Tool descriptions

A brief outline of the contents of each tool listed in the Toolbox Map is given below.
All the tools can be accessed through the Shell wide web at [Link]/rtl/c2v

6.4.1 Strategic Process Tools

STRATEGY FORMATION

Opportunity Framing Facilitators Handbook (EP 2000-5547)

Opportunity Framing is a structured approach to understanding and defining an
opportunity, whether it is a new venture, a hydrocarbon opportunity in an existing OU
or, indeed, any sort of opportunity or issue that might arise during the course of business. It
is the starting point for a robust, decision driven process for the realisation of the opportunity.

Reviews of past opportunities show that with the pressure to deliver results there is a
tendency to jump in with both feet and execute without having a full clarity of purpose
e.g. are the team/group/stakeholders fully aligned on objectives, have the real value
drivers and critical issues been identified?
The handbook shows how to organise an Opportunity Framing Workshop that will
accomplish the following:
• Identify what an opportunity is and is not
• Identify the major value drivers behind the opportunity
• Identify the major issues, barriers and uncertainties surrounding the opportunity
• Define the opportunity scope
• Define success/critical success factors/ measures of success
• Develop a Roadmap for the opportunity
• Begin developing development options for consideration

The workshops are built around three key areas:

• Where are we now?
• Where do we want to be?
• How are we going to get there?
Opportunity Framing Workshops are held early in ORP Phase 1 Identify and Assess and
then whenever required by the opportunity but certainly at the beginning of succeeding
phases. They take from one to three days dependent on the size and complexity of the
opportunity.

Opportunity Realisation Process - Frequently Asked Questions

The document lists questions and answers that have been frequently asked and answered
by people implementing similar processes to the Opportunity Realisation Process (ORP)
described in Chapter 2 of the Opportunity and Project Management Guide. The
questions and answers are listed under General and then under each of the five phases
that the ORP covers. They are detailed here in order to assist the introduction and
application of the ORP.

Roadmap Examples
A variety of Roadmaps that have been developed either as models or as actual
Opportunity Roadmaps are collected together as a guide to supplement the OPMG
Model Roadmap and to illustrate what the end results of the Roadmapping exercise have
been for some projects.

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Sustainable Development - making it happen4 (1999)

Sustainable development is about integrating the economic, social and environmental
aspects of everything we do and balancing short-term wants with long-term needs.
The document is on the Sustainable Development Website (http:/[Link]) and
will be regularly updated. It contains:
• management framework overview
• workload examples and case studies
• tools and references
• management framework detailed steps

Asset Reference Plan Guidelines1 (UED-ARP-1998-001)

The Manage Assets Process is one of the key concepts underpinning the way Shell EP
carries out its business. Asset Reference Planning is a major component of this process,
providing the means to plan, manage and control an asset throughout its life, from
acquisition to decommissioning.

Asset Reference Planning includes activities such as developing the Asset strategy, long
term plans and activity based cost models, documenting assumptions and uncertainties,
identifying growth opportunities and they will be pursued. By applying and evolving
Asset Reference Planning, Asset Managers will ensure the effective management of their
assets and control of associated costs throughout the asset life cycle.

The guideline describes the step-by-step process for producing Asset Reference Plans and
provides examples of typical contents. Its application starts ORP Phase 1, Identify &
Assess, and continues throughout the ORP lifecycle.

Operations Philosophy Checklist

An Operations Philosophy is a series of statements that set the operational framework
against which the facility design will be performed. This checklist provides guidance as
to the content of the Operations Philosophy.

Field Development Planning3

The objective of Field Development Planning is to demonstrate that planned physical
development for a hydrocarbon resource will be optimal over its full lifecycle. This
optimisation will be over a range of uncertainties assessed as comprehensive enough to
describe all reasonable descriptions of that resource.

The guide sets out a process for Field Development Planning in order to arrive at a
documented Field Development Plan (FDP). The plan provides an evaluation of field
development alternatives together with the selection of an optimal development concept
based on subsurface scenarios (uncertainty) and field engineering options. Once
formalised, the plan is used as:
• Major input to the Basis for Design for the asset facilities
• Support to capital budget proposals
• A historical record of initial premises and uncertainties
• A basis for satisfying legislative requirements.

The guide covers

• Appraisal/Data gathering
• Reservoir description
• Fluid, Static and Dynamic modelling
• Probabilistic volumetrics

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• Deterministic Analysis
• Well modelling and design
• Development options
• Uncertainty impact assessment.

The guide is applicable from the outset of the opportunity and through all its phases.

Project Execution Planning3 (A9200-AG-032)

A Project Execution Plan is a means to get all parties involved in a project to work as a
team in planning and making decisions that will determine the project’s path and degree
of success. It is a tool for communication and decision-making, for defining issues and
risks and for developing answers to the classic questions of What? Why? Who? When?
Where? How?

The Project Execution Plan (PEP) focuses on developing the project strategies that
support the company strategic, business and project execution objectives. The PEP has
three development steps:
1 Frame the Project
2 Define the Project Planning Basis
3 Plan for Execution and Control

The beginnings of the PEP are developed as part of the Opportunity Framing Workshop
in Phase 1, Identify and Assess, and at the start of Phase 2, Select. This beginning is then
carried forward into PEP workshops in Phase 2 to confirm the Project Frame and to
define the Project Planning Basis and in Phase 3, Define, to develop the Plan for
Execution and Control.

The PEP provides guidance for everyone involved in the project (project team, decision
makers, contractors) and it must be prepared as a team effort, involving all available
experience and expertise. The process of developing the PEP is as valuable as the end product.

The guide provides a checklist of all subjects that need to be addressed by a project team
and details a structured process that facilitates identification of unresolved issues and the
development of strategies to address these issues. The strategies then form the basis for
the detailed plan.

For large projects, the process will need several workshops and expert facilitation is
strongly recommended.

Project Execution Plan Checklist

This checklist was produced as part of SIEP 96-3000, Project Management Guidelines.
Although the subjects it addresses are not as complete as OPMG Section 4.4, Project
Execution Planning, recommends and the checklist is now largely superseded by Project
Execution Planning (see above), it is still useful in complementing the above. (At a future
stage it will be fully incorporated into the latter document.)

Technology Planning and Selection Guide3

Technology planning and selection is one of the early and most important activities of
the opportunity team. It is preferably kicked-off in Phase 1, Identify and Assess, but as
the concept will mature as the opportunity is progressed the team must re-visit the
identified technology gaps and needs during Phase 2, Select, and Phase 3, Define.

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The technology may be already proven within the OU or the Group or Joint Venture
Partners or it may need to be developed or matured. Technology chosen without a well
thought-out plan leads to cost and schedule overruns and lost marketplace opportunities.

The guide provides a systematic process to select the best technology options to meet the
project objectives and improve competitive advantage. The basic steps of information
gathering, speculation, analysis, development and presentation are discussed. The guide
should be read with "Strategies for the Management of Technical Risk on Projects" (see
Risk Management below).

Contracting Strategy Guideline3

Between 80-90% of capital expenditure on EP opportunity realisation is normally made
through contracts for goods (e.g. materials/equipment) or services (e.g. seismic
surveys/drilling/design/construction). A fundamental aspect of the success or otherwise
of the opportunity realisation is the quality of the contracting strategy for these goods
and services.

The overall contracting strategy will need consideration in broad terms during Phase 1,
Identify & Assess, (and in more specific terms, of course, for the contracting strategy for
Phases 1 and 2 themselves) and then should be developed in detail in a Contracting
Strategy Workshop during Phase 2, Select.

The guide provides a consistent and structured approach to selection of the appropriate
contracting strategy for the opportunity. It describes all of the constituent issues needing
to be addressed and how to organise the workshop. Elements considered include
• Work Breakdown Structure
• Market Considerations
• Contract Activity Matrix
• Contract Management Structure
• Common Types of Contract
• Contract Design
• Risk Allocation

C2V Contracting Strategy Peer Assist

This paper briefly describes a facilitated workshop approach to developing a project
contracting strategy.
The benefits are seen as:
• a contract strategy aligned with the project objectives for the given business
environment.
• strategy developed and supported by project team
• clear contracting plan

Non Operated Venture (NOV) Management

With the increasing number, complexity and value of ventures that Shell has a large
investment in, but which are operated by others, there is a need for very careful
consideration of Shell's role as Non Operator in such ventures so as to ensure that the
value to be derived from that investment is not eroded by the Operators' performance.
The two papers in this tool firstly describe the issues surrounding NOV deepwater
ventures and then propose strategies to be adopted by Shell to manage those issues.

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While the papers are written specifically for deepwater NOVs they provide a
methodology that, in conjunction with Opportunity Framing, that can be adapted to
other types of venture, whether on land or offshore.

The essence of the approach is to evaluate the competence of the Operator and where
the venture risks lie and to formulate a strategic approach based on this evaluation. Three
strategic approaches relating to Shell's NOV involvement are described, with an
increasing involvement dependent on the level of risk.

C2V Non Operator Peer Assist

In Joint Ventures where Shell is a non-operator, governance is carried out at board
meetings, executive or operating committees and formal technical meetings. Governance
controls should cover the negotiated Joint Operating Agreement Conditions and must
meet minimum Group requirements.

The document sets out a C2V peer assist approach to developing a non-operator
governance strategy that is aligned with Shell Shareholders aspirations and developing
tactics to achieve that Strategy.

Stakeholder Consultation (EP 95-0374)

Consultation describes the process of seeking the views of interested or affected
stakeholders and engaging them in a constructive dialogue. It is required in many
business situations where decisions are being taken. Consultation aims to inform and
educate stakeholders, to identify their views and concerns and to obtain feedback about
proposals. This can help the opportunity/project team to learn through local knowledge,
to evaluate alternatives and resolve and avoid conflicts. Such an approach can help to
engender co-operation, enhance stakeholder ownership and acceptability of projects and
limit unrealistic expectations. It can also help to avoid errors and the need for costly
remedial work at a later date.

The guide provides a generic, comprehensive manual on consultation as it relates to

Environmental Assessment but its guidance and techniques are easily adaptable to any
type of consultation.
The contents of the guide are as follows:
• Why consult?
• When should consultation be undertaken?
• Who to consult?
• Tools and techniques for consultation
• Organisation for consultation
• Consultation as an integral part of Environmental Assessment
• Avoiding common problems and pitfalls
• Consultation case histories

RISK MANAGEMENT

Project Risk Management Guideline3 (A9200-RF-015)

Risk is defined as the combined effect of the likelihood of an occurrence of an
undesirable event and the severity of the impact. Risk management concentrates on
identifying and controlling the areas or events that have a potential of causing unwanted
change. Risk management is required from the very outset of the opportunity realisation
until eventual decommissioning of asset facilities. The first identification of risk will probably

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take place in the initial Opportunity Framing workshop in Phase 1, Identify & Assess.
The guide addresses:
• Risk Identification
• Risk Quantification
• Risk Response Development
• Risk Response Control
and uses the TECOP model to identify and segregate the various risks.

C2V Strategic Risk Management Peer Assist

The Strategic Risk Management Peer Assist is a structured workshop facilitated by the
C2V Team that is designed to support a venture or project team in implementing an
overall risk management process. It is primarily aimed at identifying the risks and then
preparing mitigation plans for them.

Initially, top-level project objectives are broken down into lower level, more detailed
objectives and tactics for their achievement.

Risk events are then developed for each of the detailed objectives and associated tactics.
The guide provides more details of the peer assist approach. The workshop should be
held during Phase 2, Select.

Uncertainty and Risk Management in New Frontier Projects (SIEP 98-5304)

This research document deals with factors that cause uncertainty and risk in oil and gas
field developments in both western and non-western countries. It discusses the following
challenges:
• subsurface
• deepwater
• drilling
• process
• geographical
• infrastructural
• project management
The document provides a matrix approach to addressing uncertainty and risk and is of
use during ORP Phases 1-3.

Strategies for the Management of Technical Risk on Projects3 (B2000RG089)

The risks associated with the use of new technology are one of the most frequently
mentioned issues when discussing hydrocarbon developments. Should any problems arise
with an item of new technology on a project the resultant exposure to cost and schedule
overruns and deferred/lost production can be large enough to affect seriously the viability
of the project. This OU document outlines strategies that may be used to ensure
robustness in the decision on whether to adopt an item of new technology and suggests a
number of strategies for management of any associated risk.

Subsurface Uncertainty Management Guidelines3

This OU document provides a guide on how to manage subsurface (reservoir)
uncertainty and examines probabilistic and deterministic approaches for assessing
volumetrics and ultimate recovery. The process details:
• key uncertainties that impact on the decision to be taken (Tornado analysis)
• builds and prunes decision trees
• optimises development scenarios

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• assigns risk outcomes

• calculates expected value
• compares development strategies

IMPROVEMENT

Improvement Process3 (A920-RG-561)

The Improvement Process is a structured way of identifying the Value Creation Areas
associated with an opportunity and examining the way in which increased value can be
obtained from those areas. It is at its most powerful when linked to the vision of the
team. The process has seven key steps:
• Identification of Value Creation Areas and Value Drivers
• Setting of Improvement Goals (Stretch Targets)
• Defining Performance Indicators for the Value Creation Areas and Value Drivers
• Analysis of Critical Success Factors (CSFs) to enable the Improvement Goals to be achieved
• Developing Improvement Plans for those CSFs
• Implementing and closing-out the Improvement Plans
• Measuring and banking the gains

The process can be used during any ORP phase and in any aspect of the business.
Dependent on the business activity to be improved, many of the ORP Tools will be used
in the process.

The guide discusses each of the steps in the process and the application of the ORP Tools.

Value Engineering Guidelines3

Value Engineering is an objective tool that can be used to ensure that the entire project is
technically optimised. It uses team dynamics to break the job into the functions that are
needed to meet customer’s requirements. Value Engineering analyses functions and
identifies concepts that perform the required functions in the least complex way. The
process increases value by optimising cost and functionality, not necessarily by reducing
scope. It can be applied in ORP Phases 2-4.
The Value Engineering Process has six phases:
1. Planning
2. Function Identification
3. Speculation
4. Evaluation
5. Refinement
6. Implementation
The guide discusses each of the phases in detail.

C2V Value Engineering Peer Assist

The document summarises the workshop approach to Value Engineering facilitated by
the C2V Team.
The benefits of the approach are seen as:
• invariably increased project value
• increased assurance of concept selection
• team building
• management buy-ins to the final concept
The process should be applied in ORP Phases 2 and 3.

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Project Facilities Objectives Guide3 (A 9200-RG-518)

Project Facilities Objectives (PFOs) describe the kind of facilities needed to meet the
opportunity/project objectives. The PFOs include capacity, redundancy/sparing
philosophy, expandability and other considerations that will ensure that the facilities
meet the business goals. PFOs are broken down into normally four design categories.
These categories range from low cost, relatively simple, short-lived plants to high cost
complex units. The team selects the key performance characteristics that apply to its
opportunity and then the design categories that will be applied to each of the performance
characteristics. The performance characteristics would normally include, inter alia:
• Capacity
• Product Quality
• Incremental Investment Criteria
• Operating Flexibility
• Expandability
• Reliability
• Controls and Data Provisions
• Maintainability
• Life
• Compliance
• Constructability

The guide discusses the above in detail by providing a matrix of the four design
categories against the listed performance characteristics. The process should be applies in
ORP Phase 2, Select, and then revisited at the end of each ORP Phase to ensure that
alignment is being maintained.

Design to Capacity Review Guide3

Design to Capacity evaluates the true required maximum capacity of a facility, each
component system and each piece of major equipment. Often facilities are designed with
a series of design factors that result in a larger plant than needed. This conservatism can
lead to over-capacity that the business does not need.

Design to Capacity is strongly linked to Project Facility Objectives (EP 2001-5506) and
so it is recommended that both processes be addressed together. This should occur early
in ORP Phase 2, Select, so that the facilities design is framed to meet project objectives.
There are typically three Design to Capacity levels reflecting increasing cost versus
capacity, product quality, flexibility and expandability.

The guide provides advice on the three levels and how to go about determining which
level to apply.

Constructability Review Guide3 (A 9200-RG-519)

The Constructability Review utilises the knowledge of experienced construction staff in
the early phases of the project (ORP Phase 2, Select) to identify key construction issues
that will influence the value of the opportunity. It encompasses consideration of how
size, layout, weight, construction sequence and material and equipment delivery will
affect execution methods and requires that these issues be considered during design and
construction of the facilities.

Constructability issues need to continue to be examined and addressed throughout

opportunity realisation and the guide details what should be examined in the different
phases and the benefits that Constructability Reviews will provide.

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Lessons Learned and Best Practices Guide 3 (A 9200-RG-522)

One of the frequent problems encountered in review of reasons why projects do not
meet their objectives is the failure of opportunity/project teams actively to search out the
experience of and lessons learned from similar projects in the past. The Project and New
Venture Value Assurance Review Process now requires teams to show that the lessons of
the past have been assimilated. Another problem from the past, however, is that while
copious project debrief reports have been prepared, they rarely deal with the Front End
ORP Phases and are often too long and too detailed for easy use by the following projects.

The guide recommends when and how to capture the lessons learned in a way that
makes their use by later projects both easy and of real value.

Benchmarking Guidelines3 (A 9200-RG-522))

The Project and New Venture Value Assurance Review Process requires that the
opportunity/project teams have to show that they have benchmarked their projects
against valid internal and external experience. Benchmarking both of Front End
opportunity realisation processes and of cost and schedule estimates is needed during
ORP Phase 2, Select, and Phase 3, Define, and the guide provides advice on companies
from which external benchmarking data may be obtained.

Benchmarking for Capital Ventures

The use of benchmarking in Capital ventures is seen as a critical tool for helping to drive
performance improvement in both individual projects and Shell's overall corporate
performance.
The benefits of benchmarking are seen as:
• providing a common, standard methodology for comparing Shell projects on a
worldwide basis.
• aiding the Value Assurance Process.
• facilitating the sharing of learning by making visible the linkage between superior
performance and best practices.

The document discusses the application of benchmarking to projects of different cost

ranges, the links between benchmarking and the Value Assurance Process, the different
types of benchmarking and external sources for benchmarking.
The tools should be consulted in ORP Phases 1,2 and 3.

Project Debrief Report Checklist

The document created for EP96-3000, Project Management Guideline, gives a proposed
list of contents and length for a project debrief report. It only addressed ORP Phases 2
and 3 and, given the OPMG requirement to capture the issues and lessons learned at the
end of each ORP Phase, it has now become outdated. It is included, however, as nothing
more formal has yet been created.

A major FPSO project that was completed in 1999 (Laminaria & Corallina) did capture
the issues and lessons from each ORP phase and the index of contents of that 100 page
report is as follows:

1. Introduction
2. Executive Summary
3. Phase 1 - Identify and Assess
4. Phase 2 - Select

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5. Phase 3 - Define
5.1 Introduction
5.2 Project Scope Development
5.3 Contracting Strategy, Tender and award
5.4 Project Organisation
5.5 Project Schedule
5.6 Project Cost
6. Phase A - Execute
6.1 Topsides
6.2 Hull
6.3 Jurret and Mooring
6.4 Well Construction
6.5 Subsea
6.6 Tow, Hook-up and Commissioning
6.7 Preparation for start-up
6.8 Project Schedule
6.9 Project Cost
6.10 Project Organisation
6.11 HSE
7. Phase 5 - Initial Operations
8. Summary and Lessons Learned
8.1 General
8.2 Organisational Structure
8.3 Staff
8.4 Budgets and Schedule
8.5 Tender Evaluation
8.6 Tenders and Contract Documents

(Section 6.1 subsection headings were:

• Design
• Fabrication
• Installation and Hook-up
• Inshore Commissioning)

Engineering Benchmarks (EP 98-5221)

Benchmarking has been recognised as a method that can be used to identify performance
gaps in cost, time and resource performance. The document provides Engineering
Benchmarks that can be used to analyse onshore and offshore oil and gas production &
processing facilities. The benchmarks cover:
• wells
• offshore production facilities
• onshore production facilities
• subsea production facilities
• fixed and floating substructures
• pipelines
• terminals
• infrastructure.

The purpose of the benchmarks is to:

• help to judge the appropriateness of engineering project goals
• provide a consistent basis for monitoring and comparison of engineering activity.

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The document should be consulted in conjunction with the tools “Benchmarking

Guidelines” and “Benchmarking for Capital Ventures” that are summarised in this
Improvement section and applies to ORP Phases 2-4.

C2V Technical Framing Concept Selection Peer Assist

Opportunity Framing (see Strategy Formation) frames a project across the ECOP part of
the TECOP (Technical/Economic/Commercial/Organisational/Political business
aspects). Technical Framing is an adjunct in that is seeks to frame in the T area of
business. As a result of the process, a catalogue of potential conceptual ideas/issues is
generated.

The document describes a C2V facilitated workshop on technical framing. The benefits
are seen as:
• delivery of a conceptual ideas listing
• deliverables that are practical, customised
• an integrated approach that is an excellent team builder

The approach is best applied in ORP Phase 1 before Value Assurance Review 2. It can
be applied again in ORP Phase 2 as an assurance check.

Volumes to Value: Peer Assist Guidelines

The high level purpose of the V2V Peer Assist is to:
• identify and rank opportunities and develop strategies for maximising the value of
resource volumes
• increase competencies, share good practices and further progress the shift in mindset
from resource volumes management to resource value realisation
• develop a quick cycle, peer assisted way of multidiscipline team working, that can
be spun-off to other activities

The Peer Assist addresses the following in three phases

• The lifecycle approach to hydrocarbon resource management
• Learning from others
• Evaluation and decision conservatism
• Economic, commercial, organisation and political considerations in respect of
hydrocarbon resource management
• Maximisation of value

The workshop is facilitated by the V2V Team and can address either an individual
opportunity/project or an overall OU portfolio. For a project, the workshops should be
held during ORP Phase 2, Select.

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DtL Best Practice Guide

The guide provides best-practice advice on
i) drilling the well right and ii) delivering the right well right. It includes the following:
• Drilling the Well Right
• Project kick off
• Value Challenge Workshop and Defining the Technical Limit
• Drilling the Well on Paper
• Comparison of Actual v Target Performance
• After Actions Revisions
• Enabling Environment
• Delivering the Right Well Right
• Realising the Limit Integration (V2V, C2V, DTL)
• Up-front Well Engineering
• Risk and Uncertainty Management
• Well Delivery Project Planning
• DTL and Supply Chain Management
• Post Productions Review
• Benchmarking
• Self Assessment Questionnaire
The process is applicable in all ORP Phases

PtL Peer Assist Guidance Notes

The objectives of the PtL Peer Assist are to:
• bring together the combined expertise of the Operating Units (OU) and the Group
to review a producing field from reservoir to export with the objective of identifying
short to medium term opportunities to boost production and drive down unit
operating costs.
• agree and implement a work programme that will allow these gains to be realised.

PEOPLE
Leadership & Teambuilding3
Leadership and Teambuilding are essential ingredients for the delivery of a successful
project. The guide provides some thoughts for consideration and help in exercising
leadership and pursuing team building.

Typical Project Organisations

Organisation charts show typical organisations in ORP Phases 3 and 4 for the following;
• Multi-Project Organisation
• Major Project - Design Phase
• Major Project - Fabrication Phase
• Major Project - Offshore Hook-up Phase
• Site Team
• Major Project - Alliance Contract

These charts are typical only and need to be considered together with the text of 3.11.4,
Organisational Structure, in this document.

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EP Skills Portfolio
In order to deliver breakthrough performance in an increasingly competitive world, a
new EP organisation is rapidly evolving. Functional disciplines are being merged into
asset or project-based teams where professionals are expected to operate effectively
within, and contribute to, a multi-disciplinary environment, focused on discrete
deliverables with measurable business value. The fundamental building block in EP is
‘the team’. Skills required in order to build these teams will be managed as a group of
eight skills pools. Additionally, there are core skills (Business Commercial, Team/Self )
which are required by all EP professionals.

A Skills Portfolio is a catalogue describing the competencies needed to become an

effective professional. It provides an aid for the self-development of new recruits as they
move through their first few years in the company. Because these guidelines are common
for all those who practise a given technical discipline, and because they represent
high standards, they will also help to guard the skills base from the dilution that can
sometimes characterise interdisciplinary teams.

Finally, a Skills Portfolio provides a roadmap for the design of company-provided

learning and development curricula. The creation of eight new and restructured technical
skills pools, coupled with a clearly identified need to increase the business commercial,
team/self skills of the EP Professional required a revision of the functional Skills
Portfolios (categorised previously as Petroleum Engineering, Field Engineering and
Operations Engineering). The opportunity was also taken to create additional Skills
Portfolios for technical-business areas where Skills Portfolios had not been previously
issued (for example, geology and geophysics). The Business Commercial and Team/Self
skills complement the Technical Skills Portfolios and provide a commonality across the
skills pools, reinforcing the value and direction of the new Shell.

The Skills Portfolios are to be found on the web and, besides providing a common
language and acting as a guide for determining team needs, will facilitate competence
development.

Learning Guide (re-issued every year)

This document sets out the technical and managerial training courses available to Shell staff.

Shell Project Management - Distance Learning Module (EP 99-5903)

This CD-based course is meant as a foundation course for anybody that does projects.
The module gives students an awareness and appreciation of the issues involved in
managing projects within Exploration and Production (EP).

There are two levels to the module. The main program is the Distance Learning Module
which is essentially a high-level summary of the key issues that should be understood and
remembered. Students should be conversant with the subject matter in this level before
attending any course on project management, or starting any project. It provides a
foundation for project management and will help students get more value from the
course, or help first time practitioners manage their projects.

The second level - the 'working knowledge level' contains more detailed information on
project management in SIEP. This level can be accessed both directly as well as from the
screens in the awareness level, and may be used for reference purposes or to learn about a
topic in greater detail.

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The aim of the awareness level is to give the student an appreciation of the key issues on
each topic, and a framework with which to approach these issues. Each topic will have a
discussion of the key issues - the 'learning points'. The tools and frameworks with which
to approach these key issues will then be discussed. Examples and instances of how these
frameworks and tools may be used are given. Finally, there is a short exercise to test the
student's understanding, or to draw their attention to key issues.

The module comprises eight sections, which are further sub-divided into topics. The
“map” of the contents is given below.
Introduction
to Technology
Based Learning

Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7 Section 8 Section 9

Principles of Stakeholders The Project Planning Economics Cost Managing Contract and Activity
Project and Lifecycle and Estimating Risk Procurement Management
Management Projects Scheduling

Summary Why are The Project Planning and the The Project Cost Risk Procurement Project
Stakeholders Lifecycle Work Breakdown Cashflow Estimating Organisation
Important? Structure Levels

PMG Who are the Approvals The Tax, Royalty Key Elements Types of Types of Budgeting/Value
Model Stakeholders? and Controls Work Breakdown and of Estimating Risk Contract of Work Done,
Structure (WBS) Depreciation Progress Reporting

The Assessing Summary Activity The Economic Estimating Techniques Developing Progress
Statement of Stakeholder Network and Life of a Methods for Managing the Right Reporting
Requirements Impact on Projects Critical Path Project Risk Strategy

The Cost/ Summary Resourcing Elements of Summary Summary Summary Change

Quality/ and a Project Control
Time Triangle Scheduling Cashflow

Summary Summary Project Cashflow: Health, Safety &

Taxpayer versus the Environment
Newcomer (HSE)

Economic Audits and

Indicators Reviews

Discounting QA and
QC

Discounted Summary
Cashflow

PV Profile
and Earning
Power

Summary

On completing this module, students should:

1 Understand what is a project.
2 Be able to use the time/quality/cost triangle to prompt debate on scope and purpose.
3 Understand the importance of clearly defined project objectives and requirements.
4 Be able to look at a project from the viewpoint of stakeholders and identify critical
success factors.
5 Understand and use correctly concepts essential to project management such as
scheduling, budgeting and cost management, procurement, contracting and risk
management.
6 Be aware that delivering projects successfully also involves attention to
administration, infrastructure, details, discipline, sharing of information and
experience and teamwork!

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Upward and 360o Feedback1

Upward Feedback and 360º Feedback are proven valuable tools in helping to create the
culture required for success in Shell opportunity realisation. They provide a means of
translating the team value/culture statements into day-to-day working relationships.
Managers and teams can use the value/culture statements and the feedback process to
enhance the way they work together for more effective performance and greater job satisfaction.

The document describes the facilitated/process for gathering feedback from different
people and reviewing this between those people and the one subject to the feedback.
The process can be applied in all ORP Phases.

6.4.2 Control Process Tools

WORK PLANNING

Work Management Planning and Scheduling Tools – Evaluation Report (EP 98-5342)
The report reviews potential work management and scheduling tools in relation to their
quality for use in EP business and their compatibility with SAP. The report recommends
Primavera as the best tool available at that point in time.

COST MANAGEMENT

EP Cost Management (EP 94-2000)

The document presents the EP cost management methodology and its classification
structure (EP Cost Management System - EP/COMS). The first fundamental of the
methodology is a full activity-based costing system with a common classification
structure across all designated activities in the EP Business Model.

The second fundamental is a clear depiction of accountabilities.

The third fundamental is that the methodology, although only dealing with the cost
part of corporate management systems, supplies certain key elements for the rest.
(One element is the means to introduce lifecycle considerations into Asset Reference
Planning. Another is the provision of a universal classification structure designed to be
extendable to any level of detail for use in any application).

The methodology, namely the classification structure, accountability guidelines and links
with activity management, provides the cost management tools for better forecasting,
reporting and control.

SIEP Cost Engineering System (SIEP 97-5200)

The SIEP Cost Engineering System (CES) is a fully integrated computerised system
containing both onshore and offshore EP capital and operating cost estimating methods
and data. The methods, which are designed to provide a consistent and reliable
approach to cost estimating, can be used to prepare screening study (level 1) and
feasibility study (level 2) cost estimates for use in the appraisal of exploration and
appraisal prospects and the study and ranking of opportunity development alternatives.
The methodology can also be used in estimating the value of known field developments,
which may be useful when opportunities arise for buying into existing developments.
(Note that there are changes to contingency sum allocations that are shown in the
OPMG (4.3.2, Cost Estimating) but have yet to be corrected in the CES).

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Cost Engineering Considerations in Areas New to Shell

Opening up remote frontiers and other areas of the world where Shell has not operated
before, or that have been inaccessible to international areas, presents new challenges.
One of these challenges is cost estimating, often exacerbated by the country being in
transition from a closed economy to an open economy. The challenge lies in both capex
and in opex estimating and will not be limited to defining and costing the scope of the
facilities needed to realise the opportunity, but also the negotiation of the commercial
terms for clinching the operatorship.

The document highlights the important aspects that need to be considered when
developing cost estimates and identifies linkages between technical and commercial issues
that need to be addressed.

Cost Engineering Guideline for Projects3 (A 9200-RG-248)

This OU document outlines the requirements to achieve estimating consistency for
project estimating. The framework in aligned with the Opportunity Realisation Process
and the document gives a step-by-step guide on how to prepare a cost estimate.

Because it is OU specific it needs to be read with OPMG 4.2, Cost Management, but it
provides valuable guidance on the cost estimating process.

Cost Control of Capital Investment Projects (DEP [Link]-GEN)

The DEP specifies requirements and gives recommendations fot the control of costs and
progress during the definition and execution of capital investment projects.

It covers:
• Cost coding
• Activity allowances
• Budget appropriation
• Value of Work Done
• Measurement of Progress
• Change Control
• Payment Control
• Cost Monitoring and Reporting.

CONTRACTING & PROCUREMENT

Contracting and Procurement Process Description and Guidelines

(EP 97-5269 to 5271)
This three-volume set describes the processes and practices by which SIEP and SEPIV
manage their commercial relationships with third parties providing goods and services
required to meet technical targets.

Volume 1: Is directed at all staff and carries a management overview of the process in
sufficient detail to give a general understanding of the process itself, the key players, the
process in relation to other key processes and the way in which the process seeks to
accommodate and reinforce "New Shell" values.

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Volume 2: Contains a fuller activity-by-activity description of the process and is targeted

at those for whom hands-on participation in the management of third party relationships
is part of their everyday tasks, such as Commercial Specialists and Contract Holders. It
also serves as the process description against which compliance audits might be
conducted and contains a description of the mandatory external controls that need to be
applied in the execution of the process.

Volume 3: Is targeted at users as well as contract holders. It contains guidelines with

particular focus on the commercial aspects of decision-making points in the process.

Vendor and Contractor Appraisal Policy and Quality Management Requirements

for Suppliers 1 (3114-001)
This OU document defines a policy to achieve consistent quality appraisal of vendors
and contractors and outlines working practices or strategies in order to optimise
resources for carrying out quality appraisals and the data available for users to select
suitable vendors and contractors for a particular work scope.

Model Tender Evaluation Procedure3

The evaluation and award of contracts is a fundamentally important project activity but
one that is sometimes poorly performed with consequent problems for successful
opportunity realisation.

This proven procedure was initially prepared for evaluation of Shell Expro's Integrated
Services Contract tenders in 1997 and was subsequently modified by Woodside. The
procedure suggests methodologies for both technical, commercial and personnel
competence evaluation and provides model formats and weightings for the technical
evaluation based on a major engineering contract. These can be modified to suit most
major contracts by changing the constituents to be evaluated.

EPC Contract Evaluation Methodology

This document was prepared for EP 96-3000, Project Management Guidelines, and
suggests weightings for evaluating different aspects of the tender. It is suggested that it
be consulted in conjunction with the Model Tender Evaluation Procedure (see above)
and is used to amplify or modify the latter where considered of value.

Contractor Prequalification Questionnaire

Adequate prequalification of contractors' fitness to participate in tendering will ensure
that only competent contractors will be invited to tender the work.

This document provides a typical prequalification questionnaire for an Engineering/Procurement

/Construction (EPC) Contract that can be modified to suit many different types of contract.

QUALITY ASSURANCE

Project Quality Assurance (DEP [Link]-GEN)

Quality is 'meeting agreed customer requirements' and quality management aims to do
this at lowest overall cost. Management systems should be used to assure technical
integrity, since quality failures lead to cost and schedule overruns, higher operating costs
and increased safety and environmental risk.

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The DEP provides Guidance to all staff that are setting up project management systems
and quality plans or to have to evaluate contractors' or suppliers' systems and quality
plans. (The principles described in the DEP apply to the management of any aspect of a
project (e.g. safety, environment, organisation, information, cost and schedule and are
based on ISO 9000 Standards). As noted in the OPMG text (4.5.2, The Project Quality
Plan) the DEP concentrates on the quality of the hardware deliverable and
opportunity/ project teams also need to build into the Quality Plan the opportunity
business management aspects.

HEALTH, SAFETY & ENVIRONMENT

Group HSE Management System4

Enhanced Safety Management/Enhanced Safety Management Checklist

The Enhanced Safety Management Guide is a Shell Safety Committee document issued
in 1985 (Checklist in 1989). It focuses on 11 features that are seen as essential aspects of
any safety management programme:
• Management commitment
• Policy
• Line responsibility
• Standards
• Measurement
• Targets
• Audits
• Training
• Investigation
• Motivation
The documents can be used as the basis of an opportunity HSE management and
improvement programme.

HSE Manual (EP 95-000)

The EP HSE Manual is a structured, three-volumes collection of guidelines on HSE
matters in all areas of EP operations. The guidance in the Manual is for all line
management staff and the contractors. It can be used as
• the background for the updating or preparation of OU (and opportunity/project)
documents.
• an aide memoir for particular aspects of work
• a reference on specific points or as a lead to relevant industry standards

The Manual is structured as follows:

Volume 1: HSE Management Systems

(business controls applicable to activities)

HSE Management Systems (EP-95-0100)

Management of Contractors HSE (EP 95-0110)
Competence Assurance for HSE Critical Activities (EP-95-0120)
Audit (EP 95-0130)

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Volume 2: HSE Management in Business

(applicable to execution and support activities)

Survey Operations (EP 95-0200)

Drilling (EP 95-0210)
Concept Development (EP 95-0220)
Design (EP 95-0230)
Construction and Commissioning (EP 95-0240)
Decommissioning (EP 95-0245)
Production and Maintenance (EP 95-0250)
Logistics (EP 95-0260)
General Workplace Practices (EP 95-0270)

Volume 3: Hazards and Effects Management Tools & Techniques

Overview (EP 95-0300)

Implementing and Documenting an HSE Management System and HSE Cases
(EP 95-0310)
Job Hazard Analysis (EP 95-0311)
HAZID (EP 95-0312)
HAZOP (EP 95-0313)
Physical Effects Modelling (EP 95-0314)
Permit to Work Procedures (EP 95-0315)
Emergency Response (EP 95-0316)
Hydro Sulphate in Operations (EP 95-0317)
Safe Handling of Chemicals (EP 95-0319)
Tripod - DELTA (EP 95-0320)
Tripod - BETA (EP 95-0321)
Auditkit (EP 95-0322) (compliments EP 95-0130)
THESIS (EP 95-0323) (computer based HSE case)
Human Factors (EP 95-0324)
Drinking Water Guidelines (EP 95-0330)
FIREPRAN (EP 95-0350) (fire and explosion analysis)
Fire Control and Recovery (EP 95-0351)
Quantitative Risk Assessment (EP 95-0352)
Environmental Assessment (EP 95-0370)
Social Impact Assessment (EP 95-0371)
Environmental Quality Standards (EP 95-0375)
Monitoring Air Quality (EP 95-0376)
Quantifying Atmospheric Emissions (EP 95-0377)
Environmental Quality Standards - Water (EP 95-0380)
Monitoring Water Quality (EP 95-0381)
Environmental Quality Standards - Soil and Groundwater (EP 95-0385)
Monitoring Soil and Groundwater (EP 95-0386)
Contaminated Soil and Groundwater (EP 95-0381)
Waste Management Guidelines (EP 95-0390)
Classifying Waste (EP 95-0391)
Oil Spill Dispersants (EP 95-0391)
Health Safety and Environment Management System (EP 99-5663)

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Health Safety and Environment Management System (Shell Technology EP)

(SIEP 99-5663)
This manual describes the management of occupational health, safety and the
environment by Shell Technology EP (STEP) and is included in the ORP Toolbox as a
good example of an HSE Management System Manual.
The manual provides reference to relevant HSE documentation, as well as detailing the
role of STEP personnel in implementing HSE management in both their work and the
products and services that they supply to customers.

Incident Investigation and Analysis Guide (HSE 005)

This Shell Safety and Health Committee document provides guidelines on procedures
for effective incident investigation and analysis. The approach presented in the guide
puts emphasis on those incidents with the potential for serious injury, illness, damage or loss.
The objectives of the Guide are to:
• provide line managers, HSE advisers and contractor managers with a consistent
approach to incident investigations in order to achieve a high quality of reporting
and analysis
• explain the incident investigation process and the relationship between the available
techniques and methodologies for analysis and recording
• provide a basis for developing OU specific investigation procedures and guidelines.

Procedure for Investigation and Reporting of Incidents (3138-001)

The principal objectives of this comprehensive OU document are to:
• establish the facts, circumstances and causes of incidents and to make certain that
appropriate action is taken to prevent the occurrence of similar incidents
• comply with (UK) statutory requirements
• meet OU and the Group’s wider reporting requirement
• establish the facts surrounding the incident for use in relation to potential insurance
claims or litigation.

The manual is set out as follows:

Section 1: Provides an overview of the whole incident investigation and reporting process.
It defines the objectives for the system and its scope of [Link]
is made to relevant UK legislation and related Shell standards and guidance.

Section 2: Contains the care procedures to be followed during each phase of the
process from the initial action required on discovering an incident through
to the close-out of corrective actions and the transfer of learning to others.

Appendices: Provide detailed guidance and additional procedures.

HSE-MS Self Assessment Questionnaire

The self assessment system is a tool intended for use by a company or organisational
unit. It is also can be adapted as a valuable check list for a single opportunity/project and
hence can be applied not only in ORP Phase 5, Operate, but also in other Phases where
physical activity is taking place., especially in Phase 4, Execute. It is primarily intended
to establish where the development of the HSE management system has reached and
where the gaps are so that improvement actions can be identified. The self assessment
questionnaire has been divided into eight elements:
• Leadership and Commitment
• Policy and Strategic Objectives

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• Organisation, responsibilities, Resources, Standards and Documentation

• Hazard and Effects Management
• Planning and Procedures
• Implementation & monitoring
• Audit
• Review

Health Hazard Management1 (3126-001)

This OU document describes how the Hazards and Effects Management Process is
applied to health hazards and provides a health hazard catalogue with methods of
mitigation and control.

SMS – A Contractor’s Guide (EP 93-1510)

The intent of the document is to provide contractors working for Shell with a concise
and understandable introduction to Shell’s Safety Management System with the goal of
encouraging an open relationship with contractors and with the ultimate aim of
improving the combined HSE performance.

Major Accident Hazard Management Process in Expro1 - Hazard Identification and

Assessment (EA-200)
This OU code of practice defines the hazard identification and assessment activities,
undertaken as part of a Major Accident Hazard Management Process during design and
engineering activities over the full life cycle of a facility. The objective is to arrive at a risk
level that is as low as reasonably practicable. its contents include:
• Hazard Identification and Assessment Process
• Identification and Assessment Tools and Techniques

Quality Systems and the SMS/Safety Case (EP 93-1515)

The guideline provides an understanding of the rule of hazard management in quality
based Safety Management Systems. The requirements of the Safety Case, within the
context of a Quality System based on ISO 9000, are described and the connection with
ISO 9004 explained.

Enhanced Safety Management (ESM) & ESM Checklist

These documents provide guidance on ten HSE elements that an HSE plan needs to address:

• Management Commitment • HSE Measurement

• HSE Policy • HSE Targets
• Line Management Responsibility • Training
• HSE Advice • Incident Investigation
• HSE Standards • Motivation

INFORMATION MANAGEMENT

Model Project Management System3 (A 3000-AG-033)

The objective of this OU document, which is based on an offshore project but is
adaptable to any opportunity, is to provide a structured framework for the management
of projects that will enable the project objectives to be achieved.

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The document is formatted in line with the structure of ISO 9004, Quality
Management Systems, and conforms with the five-phase Opportunity Realisation Process
and the OPMG structure of strategic, Control and Work Processes.
Its contents are:

MANAGEMENT Policy
FRAMEWORK Objectives
Strategy
Organisation

PROCESS Responsibilities
MANAGEMENT Interfaces
Processes, Procedures and Standards

SYSTEM Monitoring
ASSURANCE Audit and Review
Improvement

Project Procedures for Large Projects

The document provides a checklist for the procedures that will be needed to manage a large
project. It should be consulted in conjunction with "Model Project Management System" above.

Project Manager’s Guide to Livelink

'Livelink' is a computerised document management and collaborations tool suitable for
large, global projects.

This Shell Services International document describes how to set-up and use the 'Livelink'.

CHANGE MANAGEMENT

Management of Organisational & Process Change Guide3 (W 9000-AG-588)

Large changes to the way that an opportunity is managed may be difficult to put into
place due to people's entrenched attitudes and lack of a formal, structured change and
transition management process to assist people to accept change.

The guide provides a process for managing major changes to organisational at structure
and responsibilities and the introduction of new or significantly changed business processes.

MONITORING, ANALYSING, REPORTING

Cost Control of Capital Investment Projects (DEP [Link]-GEN)

The DEP specifies requirements and gives recommendations fot the control of costs and
progress during the definition and execution of capital investment projects.
It covers:
• Cost coding
• Activity allowances
• Budget appropriation
• Value of Work Done
• Measurement of Progress
• Change Control
• Payment Control
• Cost Monitoring and Reporting.

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AUDIT & REVIEW

Project and New Venture Value Assurance Guide (EP 2000-5305)

The EP EXCOM has made Value Assurance Reviews (VARs) mandatory for all
opportunities with a capital cost > $US 100 million or which are strategic in nature. It
is strongly recommended that VARs, even if of a more limited extent also be carried out
as part of the Opportunity Realisation Process for all significant opportunities below
$US 100 million, whether hydrocarbon opportunities or others.

The aim of Value Assurance Reviews is to provide assurance to managers and shareholders
that opportunity plans are robust in terms of financial, environmental and societal criteria.

The Value Assurance Services group in SIEP (Rijsaigk and Houston) provides an
independent VAR execution capability on behalf of the Regional Business Directorates
for the mandatory VARs and this guide describes the VAR process in a why, what, where,
who and how format.

Guidelines for a Post Investment Review1

This OU document provides more detail on the content of Post Investment Reviews
than does the "Project and New Venture Value Assurance Guide" described above. It can
be read in conjunction with the latter.

Audit & Review Management System1 (3520-001)

This OU document describes an audit and review process. It describes minimum
requirements and "best practice" for directing and performing audits and reviews, and a
structure for mapping roles and responsibilities such that gaps, overlaps and anomalies
can be identified and eliminated.

Guidelines for the Technical Review Process (0300-01)

A technical review is defined as a management control activity that comprises a formal
evaluation by experienced professional staff of a technical proposal for the purpose of
confirming (or not) that it is sound and supportable. The review may include an
assessment of the appropriateness of the technical objectives, in addition to the technical
content, of the proposed solutions.

The purpose of this OU document is to provide guidance for the management and
execution of Technical Reviews. The objective is to ensure that review effort is of high
added value and is an efficient use of resources. The document describes the Technical
Review business process and the roles and responsibilities of participants in the process.

Field Development Review Guideline (EP 59000-3, April 1992)

The review mechanism is a key management control tool and this guideline describes
how reviews should be carried out and a checklist of questions that need to be answered
for the following reviews:
• Field Development Planning (ORP Phase 2, Select)
• Front End Engineering Design (ORP Phase 3, Define)

The guideline largely focuses on the T aspect of the TECOP framework

(Technical/Economic/Commercial/Organisational/Political) and can now be seen as an
adjunct to Value Assurance Review (VAR) 3, Concept Selection, and VAR 4, Pre-FID
(see "Project and New Venture Value Assurance Guide" above).

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Multi-Project Engineering Review

This document sets out a checklist of questions for a review of a multi-project OU
engineering department. It covers:
• Management Systems
• HSE
• Staff Development
• Business Results
• Engineering Processes
• Tools and Resources

Pre Start-up Audit Terms of Reference

The document describes which Pre Start-up Audits should be STEP-led and those that
should be OU-led and sets out the objectives, the scope, the methodology, the reporting
and the follow-up for the audit.

6.4.3 Work Process Tools

EXPLORATION

A Guide to Management of Upstream Business Opportunities (EP 94-0370)

The document was produced to provide Shell Service Company (SIPM) staff with a
structured approach to executing critical activities and deliverables in the 'Manage
Upstream Business Opportunity' process. The purpose of the process is to:
• identify new opportunities for acquisition and investment
• screen and rank opportunities against group business criteria
• evaluate new business opportunities
• seek management approval
• negotiate and agree terms
• execute activities to acquire or divest in an efficient and effective manner

The process is comprehensively mapped and can be adopted to the needs of any new
venture or OU.

Exploration Play and Prospect Evaluation Methodologies (SIEP 99-5500)

The objective of the document is to disseminate best practices in the use of
methodologies and tools supporting the assessment of identified and unidentified
exploration potential with the aim of gaining business advantage from an improved and
consistent framework for managing risk and uncertainty, applied from the initial
evaluation through to the decision-making process. The advantages envisaged include:
• better discriminations and ranking of opportunities in the Exploration portfolio to
enable effective and selective exploration in a capital-constrained world
• knowing when to stop :- identifying when continued exploration of a play starts to
erode value
• early identification of acreage divestment/acquisition candidates
• identifying those prospects and work programmes that would maximise value of
information across the portfolio
• more consistent evaluation of unidentified “blue sky” potential
• promotion of “Licence to Operate”: the ability to deliver to stakeholders on promises.

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Guidelines for Single String Venture (EP 94-1400)

The document provides guidance on the setting up and management of a single string
venture and discusses:
• Preliminary Planning
• Preparation for Drilling
• Administration (Organisation/Staff/Contractors/Responsibility/Accommodation etc.)
• Finance
• Logistics and Technical Issues
• Winding up the Operation

A toolkit of management procedures and guidelines is included in the document

Upstream Opportunities Evaluation - an integrated approach (EP 95-2093)

The document describes an integrated screening approach to prospect evaluation that
links volumetric estimations through engineering to economic applications. It also
compares this approach with the precisions 'established' method of evaluating
opportunities and identifies the shortcomings of the latter method.

PETROLEUM ENGINEERING

Prospect Maturity Cycle Guideline1 (8500-002)

This comprehensive OU document was designed as a good starting point from which to
plan explorations and development of a prospect. (It has been used as the basis for
writing OPMG Sections 5.2, 5.3 and 5.4).

The document facilitates:

• Development of a prospect in a logical, co-ordinated fashion, thereby systematically
and progressively reducing commercial and technical uncertainty
• Assessment at each stage of the process, at the appropriate authority level, of the
attractiveness of a prospect and whether commitment of further resources is justified
• Synchronisation of development activities so that appropriate levels of maturity are
reached in one area before work in another area proceeds

WELL ENGINEERING

The Well Engineering Framework (EP 97-5670)

The document describes the well engineering strategy that was adopted in Shell as a
follow-up to the previous “Drilling in the Nineties” strategy.

The strategy focuses on enabling the Group to achieve world class performance through
OUs adopting appropriate elements of the strategy.

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Well Engineering Notebook (EP 98-5152)

Provides definitions/data/practices/procedures/guidance on the following well
engineering aspects:
• Conversion factors
• Derrick, mast and block line
• Tubulars, drill string design (incl capacities)
• Bits
• Hydraulics
• Pressure Control
• Stuck pipe/fishing
• Casing and cementing
• Drilling fluids
• Logging
• BOPs and Operating Systems
• Directional drilling
• Safety
• Training

Production Operations Well Services Guide (EP 95-1810 to 1818)

The prime roles of well services are to:
• Safeguard the technical integrity of all well conduits (inclusive of wellhead and
related safety equipment)
• Ensure availability (operability) of the wells to fulfil their designed
production/injection function in accordance with agreed plans
• Prepare the detailed design of the well conduits including accessories.

The Production Operations Well Services Guide consists of four volumes:

Volume 1 Well Integrity Management (EP 95-1811)

Volume 2 Aspects of Well Completion Design (EP 95-1811)

Volume 3 Well Completion Activities

Doc. 1 Completion Operations (EP 95-1812)
Doc. 2 Well Testing (EP 93-1300)

Volume 4 Well Intervention Activities

Doc. 1 Coiled Tubing Operations (EP 95-1814)
Doc. 2 Wireline Operations (EP 95-1815)
Doc. 3 Hydraulic Workover/Snubbing Operations (EP 95-1816)
Doc. 4 Pumping Operations (EP 95-1817)
Doc. 5 Hoist Operations (EP 95-1818)

Management of Well Production Operations (EP 94-1135)

Well Delivery Technical Limit Process-Discussions Document

This document forms the basis of OPMG Section 5.2.6, Well Engineering

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Well Engineering Project Management Guide3 (A 6000-AD-036)

The purpose of this OU document is to ensure that:
• Well engineering work is performed in a consistent manner and in compliance with
regulations stated standards
• Single-point responsibilities are identified
• Work is performed within the activity management loop:
Plan/Schedule/Execute/Analyse/Improve
• Risks, controls and performance measures are systematically identified and
documented for all critical aspects of work

Well Engineering Management System Manual3 (A 6000-AD-035)

This OU document describes a Management System for well engineering and has the
following main content headings:
• Introduction (Purpose/Scope etc)
• Vision, Mission, Strategy
• Process Management
• Organisation and Interface Management
• Risk Management and Performance Improvement

FIELD ENGINEERING

Concept Definition Deliverables

Provides a checklist of engineering discipline deliverables that are required to draw up the
Project Specification.

Guidelines for preparation of a Basis for Design Document3

The purpose of a Basis for Design (BFD) is to specify the design intent and preliminary
functional requirements for the selected facilities concept, modification or
decommissioning project.
It is a baseline document that stipulates the basis for Front End Engineering leading to
the development of the Project Specification.
The OU guideline serves to provide a consistent methodology and terminology for
development of a BFD deliverable. The content details will need individual
consideration for each opportunity.

Guideline for Preparation of a Project Specification Document3 (W9000-AG-590)

The objective of the Project Specification is to provide a functional description of the
necessary project hardware, including the OU's technical requirements, such that it can
be used as the basis of the detailed design. The guideline provides a detailed listing of the
contents of a Project Specification that will need individual consideration for cash opportunity.

Preparation of a Design Data Book1 (EM/079)

Detailed Design Deliverables

Provides a checklist of typical deliverables that are required to complete the detailed design.

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Commissioning Manual1 (EA/050-01 to 05)

This extensive OU document consists of five parts:
Part 1 Commissioning: Planning and Administration
Part 2 Mechanical Commissioning
Part 3 Electrical Commissioning
Part 4 Instrument Commissioning
Part 5 Commissioning Telecommunications.

It considers the requirements of a Commissioning Strategy and plan, required procedures

and commissioning dossier contents and provides detailed guidance on the
commissioning work needed for the systems headlined in Parts 2-5.

Commissioning Procedures Index

The index provides a checklist of the procedures that will need to be in place to execute
commissioning.

Decommissioning Process Manual1 (E00001)

This comprehensive OU document details the facilities decomissioning process and:
• sets out a framework identifying all elements to be managed
• provides definition of the roles, responsibilities and relationships between various
practices and the key deliverables from the process
• refers to the standards that the process should meet
• recognises the importance of documenting activities and capturing lessons to help
improve the process

Guidelines for Design and Management of Production Measurement Systems

(EP 2000-5608)
The guidelines provide a definition of the accuracy requirement with respect to
production measurement and are based on two elements:
• Value of information (or Value of Accuracy)
• Confidence in data quality.

Emphasis is given to the coherence of the measurement system in its entirety and to the
proper management of the measurement system.

OPERATIONS

Operations in Projects1 (3806-004 1.003)

The integration of the Operations and Well Engineering disciplines into projects offers
the opportunity to maximise opportunity value over field life by ensuring optimum
design and installation of facilities and plants. This will allow Operations and Well
Engineering Representatives to assist the project team to produce designs that:
• establish and meet availability, maintainability and reliability requirements at system,
sub-system and equipment level
• maximise an opportunity's value by integration of Life Cycle Cost (LCC) concepts
in design development
• minimise the requirement for re-work or carry over into the Operational phase
• establish a maintenance strategy consistent with OU policy and requirements

This OU document shows how to identify, and include, Operations and Well
Engineering best practice in projects.

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The document applies equally to the development of all plants, surface and subsea
facilities whether:
• Greenfield projects
• Brownfield projects
• Change Proposals

Document coverage is comprehensive. This does not mean that it should be applied in
its entirety. Each project should select only those parts considered relevant.

The document is structured as follows:

Section 1 Introduction
Section 2 Management Activities
Section 3 Project Activities
Section 4 Feasibility Study Activities
Section 5 Conceptual Design Activities
Section 6 Detailed Design Activities
Section 7 Construction Activities
Section 8 Commissioning Activities
Section 9 Handover Activities
Section 10 Project Resources
Section 11 Additional Information
Appendix 1 Abbreviations
Appendix 2 Glossary of Terms
Appendix 3 Bibliography

Management of Well Production Operations (EP 94-1135)

Asset Management (SIEP 97-5501 to 5504)

As the Shell Business Framework makes clear, to succeed in the global market place, the
group needs to:
• increase the focus in customers and their stakeholders, both internal and external
• increase the return on capital
• increase the level of growth beyond that of our competitors
Asset management fully supports these aspirations by enabling OUs to get the most out
of EP assets. It does this by defining assets and then making asset holders accountable for them.
The documents comprise of four volumes on Asset Management:
• An Overview (SIEP 97-5501)
Describes what Asset Management is, what its benefits are and what it entails
• The Mandate (SIEP 97-5502)
The mandate ensures that each asset holder knows what contribution 'their' assets
are supposed to make to the company and that they have the authority and
incentive 'to make it happen'
• The Service Agreement (SIEP 97-5503)
The service agreement clearly establishes the relationship between service provider
and asset holder, in particular what the deliverable is and how it is to be paid for
• The Model Operating Unit (SIEP 97-5504)
Sets out the context in which the principles established in the first three volumes
can be seen to work.

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Maintenance Management Guideline (EP 98-5200)

There are seven fundamental principles that drive the Maintenance function:
1. Planning;
2. Integration (of the different disciplines);
3. Activity definition and execution;
4. Life cycle cash flows.
5. Retain and build on the best of current practices;
6. Adhere to industry-wide maintenance and maintenance-related standards,
terminology and definitions (in particular those in BS 3811);
7. Adopt Reliability-centred Maintenance (and Reliability-centred Design) as the
planning methodology.

Consequently, the Maintenance Management Guideline (MMG) sets out to do three

things:
• give guidance in accordance with these seven principles in such a way that
Maintenance within every OU can make its full and proper contribution to
Operations and, ultimately, to EP as a whole;
• describe all maintenance activities and their relationship to other activities in the
business;
• provide a useful set of tools to help staff to undertake maintenance activities in the
most professional, up-to-date and efficient manner.

Guidelines for Design and Management of Production Measurement Systems

(EP 2000-5608)
The guidelines provide a definition of the accuracy requirement with respect to
production measurement and are based on two elements:
• Value of information (or Value of Accuracy)
• Confidence in data quality.

Decommissioning Process Manual1 (E00001)

This comprehensive OU document details the facilities decomissioning process and:
• sets out a framework identifying all elements to be managed
• provides definition of the roles, responsibilities and relationships between various
practices and the key deliverables from the process
• refers to the standards that the process should meet
• recognises the importance of documenting activities and capturing lessons to help
improve the process

Operations Philosophy Checklist

An Operations Philosophy is a series of statements that set the operational framework
against which facilities design will be performed. This checklist provides guidance as to
the content of an Operations Philosophy.

Operations Business Planning (EP 93-1000)

This document outlines the role of planning in setting a company's objectives and
strategies, how these are then used as a basis for development of Operational objectives
and strategies, and then how these can best be implemented using a management system
built on a proper understanding of the activities within Operations. The emphasis is on
managing the company's assets in the most profitable manner, over their full lifecycle
whilst ensuring single point accountability for this process at all times.

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The document develops four core strategies:

• Maximise the return on investment through improvement in performance and
cost reductions
• Create a common Operations business mentality focusing on activity definition
and execution
• Promote a planning mentality that supplements the day-to-day execution and
problem-solving concerns by integrated Operations planning
• Understand the business processes through activity analyses for the effective
application of information technology and the development of management
controls.

The document describes in generic form all the drilling, production and maintenance
activities necessary for successful fulfilment of the Operations role.

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Abbreviations

2D/3D Two or Three Dimensional

AAR After Activity Review
ACV Authorised Contract Value
AFC Anticipated Final Cost
AFC Anticipated Final Cost
AFC Approved Construction Package
AFE Approval for Expenditure
AML Activity Management Loop
ARP Asset Reference Plan
BFD Basis for Design
BOE Barrel of Oil Equivalent
BOQ Bills of Quantities
C2V Capital to Value
CAD Computer Aided Drafting
Capex Capital Cost Estimate
CAR Construction All Risks
CEM SIEP Cost Estimating Manual
CES SIEP Cost Estimating System
CESM Cost Estimating System Manual
COC Cost of Control
COMS Cost Management System
CSF Critical Success Factor
CTR Cost, Time, Resource
CVM Constant Value Money
CWOP Complete the Well on Paper
DEP Design Engineering Practice
DPC Design, Procure, Construct
DRB Decision Review Board
DTL Drilling the Limit
DWOP Drill the Well on Paper
E Environment
EA Environmental Assessment
EAS Engineering Applications Suite
EDMS Engineering Data Management System
EFC Estimated Final Cost (=AFC)
EIA Environmental Impact Statement
eP eProcurement
EP Exploration Production
EPBM EP Business Model
EPC Engineering, Procurement, Construction
EPIC Engineering, Procurement, Installation, Commissioning
EWMS Engineering Work Management System
EXCOM EP Executive Committee
FAT Factory Acceptance Test
FDP Field Development Plan
FEE Front End Engineering
FEL Front End Loading

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FID Final Investment Decision

FLE Fire, Lightning, Explosion
FPSO Floating Production, Storage, Offloading (facility)
FSPO see FPSO
GBP Group Budget Proposal
GTPL General Third Party Liability
HAZID Hazard Identification
HAZOP Hazard and Operability Review
HEMP Hazard & Effects Management Process
HS Health, Safety
HSE Health, Safety, Environment
HSE-MS HSE Management System
HVAC Heating, Ventilation, Air Conditioning
IM&T Information Management & Technology
ISO International Standards Organisation
IT Information Technology
JV Joint Venture
JVP Joint Venture Partner
KPI Key Performance Indicator
LBM Logistics Business Model
LBS Logistics Business Strategy
LTIF Lost Time Injury Frequency
MOD Money of the Day
MPR Major Project Realisation
MS Management System
MTO Material take-off
NGO Non-Governmental Organisation
NP Non Productive
NPV Net Present Value
NV New Venture
NVO New Venture Organisation
OBS Organisational Breakdown Structure
Opex Operations Cost Estimate
OPMG Opportunity & Project Management Guide
OPP Opportunity Planning Process
ORP Opportunity Realisation Process
OU Shell Operating Unit/Company
P&ID Process & Instrument Diagram
PEP Project Execution Plan
PERT Planning, Evaluation, Review Technique
PFD Process Flow Diagram
PI Performance Indicator
PI Profitability Index
PIN Project Initiation Note
PIR Post Investment Review
PI-STEP Process Industries Standard for the Exchange of Product Model Data
POSC Petrotechnical Open Software Corporation
PSC Production Sharing Contract
PSV Project Screening Value
PtL Producing the Limit

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PV Present Value
QA Quality Assurance
QC Quality Control
RFA Request for Authority
ROS Required on Site
RT Real Terms
RtL Realising the Limit
SAP Systeme, Applikations & Produkte der Dataverarbeitung (software package
for the automation of internal company processes)
SDS Shell Deepwater Services Inc
SIEP Shell International Exploration & Production BV
SMS Safety Management System
STEP Standard for the Exchange of Product Model Data
STOIIP Stock Tank Oil Initially In Place
SWOT Strengths, Weaknesses, Opportunities, Threats
T&A Tender and Award
TcoO Total Cost of Ownership
TECOP Technical, Economic, Commercial, Organisational, Political
TL Technical Limit
TOR Terms of Reference
TRCF Total Recorded Incident Frequency
UTC Unit Technical Cost
V2V Volumes to Value
VAR Value Assurance Review
VCT Value Creation Team
VIP Value Improving/Improvement Process
VIR Value Investment Ratio
VO Value of Information
VOWD Value of Work Done
VOWO Value of Work Outstanding
WBS Work Breakdown Structure
WO Work Order
WT weighting

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Glossary

Term Definition & Source

Acceptance Acknowledgement by operations that handed-over systems have

been completed, and a final punch list agreed by both parties.

Accountability State of being liable for certain actions to be taken and results
achieved. (= Responsibility + Authority)
- Business Control Guidelines FN/05 SIPC

Accrual The difference between the value of work done by a third-party

and payments to date. The difference is accounted for within
the Company’s accounts as a liability at the end of each account
closing and is reversed out at the start of the next accounting
period.

Accuracy The estimated bandwidth around a predicted or measured

result, expressed as +X%/-Y%, which will include the actual
result.

Activity The descriptive name of the unit of work (group of lower level
activities or tasks) that has to be carried out. This is a static
definition compared to the dynamic process definition of how
the work is carried out. Work to be carried out as part of a
process characterised by a set of specific inputs and tasks that
produce a set of outputs to meet customer requirements.
- Business Process Management Guideline, EP92.0945

Activity Allowance An amount of money added to a cost estimate to account for

known uncertainties e.g. weather downtime, weight growth etc.
The resulting estimate is the Base Estimate
- Cost Engineering System, EP97.5200

Activity Executor A position of delegated responsibility for the execution and

control of certain activities.
- Cost Management, EP94.2000

Agreement Two or more parties concur with a view of defining their rights
and duties.

Analyse Part of the Process Management Cycle, where critical

assessment of the work performed against the plan, schedule
and customer requirements is carried out. PIs should be
established by the Process Owner to facilitate this analysis and
provide management feedback.

Annual Review of A review of the petroleum resources (reserves) based upon

Petroleum Resources changes to the field parameters as result of exploration
(ARPR) and/or studies and cumulative production.

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Appraisal Assessment of potential capability.

Approved for Drawing package approved for construction.

Construction (AFC)

As Builts Drawing or document modified in accordance with final

installation, as commissioned.

As Constructed Drawing or document describing the physical situation of the

plant on mechanical completion and handover for
precommissioning.

Asset Anything that has value to the Company.

- Cost Management, EP94.2000

Asset Holder The position which is accorded single point accountability by

the Company chief executive for all aspects of the management,
including budgetary control, of a clearly defined asset or group
of assets, over part or all of its life-cycle in order to achieve
corporate objectives.
- Cost Management, EP94.2000

Asset Reference Plan The plan that demonstrates that all activities, resources, threats
(ARP) and opportunities for improvement to a facility’s technical
integrity have been fully evaluated and the impact on cash
flow quantified over the life cycle.

Asset Team The team of people that start-up, operate and manage the Asset.

Asset Type A grouping or classification of assets, e.g.: organisational,

external, natural, functional, stock assets, human, information,
intangible, financial, etc.
- Cost Management, EP94.2000

Audit (External) Statutory review of the Company’s books of account,

conducted by a third-party accounting firm, on behalf
of the shareholders.

Audit (Internal) The process of independent and systematic review of the

business controls of a corporate entity or joint venture, on
behalf of its management, whereby it is established that these
controls: • are complete and self-consistent; • are cost-effective
and efficient • safeguard the company’s resources, both tangible
and intangible and promote their effective use; • provide, and
protect the integrity of, required records and information;
• comply with applicable laws and regulations.
- Internal Audit - A Management Guide FNCAI SIPC

Audit Trail Documentary evidence of events and work performed which

allows an audit to be carried out.

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Author Person assigned by the Document Owner to write or edit a document.

Authorized The maximum amount that can be Contract Value spent under
a contract, without (ACV) seeking further approval for
additional expenditure under the contract from an Authorized
Signatory or the Tender Board.

Authorized Value The maximum amount that can be (AV) spent under a group of
contracts, without seeking further approval for additional
expenditure from an Authorized Signatory or the Tender Board.

Authority The right to make, on behalf of the company, decisions which

commit the Company to a course of action incurring expenditure,
deployment of resources and/or release of information.
- Business Control Guidelines FN/05 SIPC

Availability The ability of an item to perform its required function over a

stated period of time. Availability is reduced by both scheduled
and unscheduled down time (see reliability).

Base Estimate Comprises the activity estimate plus the activity allowances
(i.e. those uncertainties which are known historically to occur).
Base Estimates do not carry any contingency or overrun allowances.

Basis for Design A document which forms the basis for the preparation of the
Project Specification.

Benchmarking A means to measure a parameter, process, organisation or strategy against

others with the purpose to improve the performance of the same.

Bid A document submitted by a third-party detailing the terms and

conditions with which they will provide the goods and/or
services as required and in response to the Company’s enquiry
or tender document.

Board of Directors The group of people, appointed by the shareholders, to direct

the Company’s business. The Directors must meet at
least annually. Their powers and duty are laid out in the
Company’s Articles of Association.

Brainstorming A technique used in a group to quickly expand thinking to

include all dimensions of a problem or solution.
- Quality - Improving Our Business - EPF/52

Budget A summary of the anticipated costs of all activities on clearly

defined assets, or group of assets, in a specific time frame.
- Cost Management, EP94.2000

Budget Holder An individual to whom the authority for the operation,

administration and safeguarding of the Company asset or
activity both physically and financially has been delegated.

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Budget Item (BI) A discrete budget proposal covering a phase of a project or the
acquisition of an asset, or set of assets (part or all of a project).

Budget Sub Item A sum of money within a Budget Item required to provide or
construct an element of a project.

BUSCOM A committee of directors for a specific Business sector of the

Shell Group.

Business Area A technique used to analyse the relationship between activities,

Analysis disciplines and data entities.
(BAA) - Quality - Improving Our Business - EPF/52

Business Associate An organisation or a person with which some form of

transaction is made.
- POSC Epicentre

Business Controls The structured means used by management to obtain

reasonable assurance that the process meets company
objectives, including any link to responsibilities to
Stakeholders, e.g. organisation, policy, procedures, supervision
and audit and review.
- Business Control Guidelines FN/05 SIPC

Business Model Generic description of activities and data entities of a business

sector.

Business Principles The business principles under which the company conducts its
affairs. They apply equally to decision making as well as to
individuals behaviour expected of employees in conducting
Company business. This includes mission, vision, codes of
practice and key responsibilities to Stakeholders.
- Statement of General Business Principles CMD Shell Group

Business Process Logical sequence of inter-related activities, characterised by a

set of specific inputs and value-added tasks, that produce a set
of outputs to meet corporate and customer requirements.
[This is the dynamics of how activities are linked together or
how the activity itself is performed, following the PMC.]
- Business Process Management Guideline, EP92.0945

Business Process Technique used to analyse a process by the flow-charting of

Analysis (BPA) activities and tasks, and thereafter identifying areas to improve
business process performance.
- Quality-Improving Our Business - EPF/52

Business Process Planning, execution and control of business processes including

Management elements such as ownership, assessment, monitoring and
continuous improvement.
- Quality-Improving Our Business - EPF/52

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Business Process Technique used to radically review and organise business

Redesign processes at a macro level to bring about major performance
improvements; sometimes referred to as re-engineering.
- Business Process Redesign
- Management Handbook - HROL-SIPC

Call off Order A simplified form of order for supply of goods and services
(COO) issued against (and within the terms and conditions of ) an
existing supply agreement, contract or bulk order.

Calibration The precise measurement of control or monitoring equipment to

enable it to perform the exact requirements for which it was installed.

Capital Budget The aggregation of capital Budget items.

Capital to Value C2V is one of the four pillars of the Group’s “Realise the Limit”
(C2V) initiative. The C2V Team facilitates excellent practice in
opportunity/project realisation.

Campaign A series of planned activities executed on behalf of process

owners and asset holders.

Cash The money available for employment by the company.

- Cost Management, EP94.2000

Cause and Effect A diagram used to identify, categorise and visually record
Diagram possible causes of a problem or effect. It helps to sort out and
relate interactions among factors affecting a process.
The categories often chosen are generally related to man,
machine, methods, material and environment. (Note: also
known as the fish bone diagram).
- Quality - Improving Our Business
- EPF/52

Certificate of Certificate issued by authorized QC or QCS group after

Acceptance successful inspection and/or surveillance.

Certification Documentary confirmation of compliance with specified

standard or statutory requirement.

Change A conceptual model used to understand change, analyse the

Management Model content of change and plan and manage the process of
change. It leads to a plan for the transition which is a result of
having carefully analysed the business and capability gap
between the present and the desired future state.
- The Management of Change - SIPC-HROL/2

Claim A request for payment of a sum of money alleged to be due

under a contract.

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Code of Practice The minimum guidelines for company employees expected on

their honesty and integrity in all aspects of the business.
This includes avoiding conflicts of interest between
company and private activities; the offer, payment, soliciting
and acceptance of bribes in any form which are unacceptable.
- Statement of General Business Principles CMD Shell Group

Commissioning The testing and adjustment of an assembly, or system, and will

compromise operational testing under real or simulated
(hydrocarbon) conditions to ensure it meets all acceptable
Rules, Regulations, Codes and Standards, fulfils its intended
duty and is ready for handover to operations.
This is the overall process of bringing a new or modified
facility into service. Its prime purpose is to ensure that the
facilities function as per design intent.

Commitment An agreement to do or accept something which usually involves

amount of money to be paid or resources to be consumed at a
future time.

Company An in-house estimate for comparison against tender bids

Estimate (CE) submitted by contractors.

Company The person ultimately responsible for a contract.

Representative The Company Representative is named in the contract and can
sign variations to the contract.

Compatibility Ability of entities to be used together under specific conditions

to fulfil relevant requirements.

Complex The totality of connected Functional Assets with separate

support structures (offshore) or occupying separate land
plots (onshore) performing several useful distinct but related
functions for the EP business.
- Cost Management, EP94.2000

Computer A schedule or plan that specifies actions which may or may not be
Program taken expressed in a form suitable for execution by a computer.
- BS 3527

Concept(s) The one-or-more outlines of approaches under consideration in

order to realise value from an opportunity. Later, the selected
concept.

Concept Definition The part of Front End Engineering from the completion of the
Concept Selection Report until the production of the Project
Specification.

Concept Selection The part of Front End Engineering that leads to the Concept
Selection Report. This includes Concept Development and
Concept Optimisation activities.

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Concurrent The simultaneous execution on a live production installation of two

Operations or more activities which, due to their interaction, result in increased
operational complexity and therefore a higher level of risk.

Conflict of Interest A situation where a Company employee, employee’s family or

close friends have an interest (financial or otherwise) in a
contractor or potential contractor to the Company.

Conformity Fulfilment of specified requirements.

Constant Cost or revenue expressed on the basis of the value

Value Money (purchasing power) of money at a stated time.
(CVM)

Construction The project stage at which equipment and structures are

installed/erected.

Consumables Items which cannot be re-used.

Contingency Funds added to base cost estimates in order to take into

account the degree of uncertainty inherent in the activity.

Contract An acceptance of legal relations between two or more parties

for the transfer of goods or services for value.

Contract Centre A position of delegated responsibility to manage and coach the

Manager (CM) work/contracts within a SIEP-EPT contract centre.

Contract A limitation identified in a Contract.

Limitation - POSC Epicentre

Contractor A third-party (person or company) employed to complete a

specific task on behalf of the Company.

Control Point A point defined in an appropriate document, beyond which an

activity must not proceed without the approval
of a designated organisation or authority.

Copyright Legal exclusive right for a company to print or publish a document.

- Cost Management, EP94.2000

Core Purpose Activity or process which is the primary reason for the existence
of, and which occupies the majority of the time of, a particular
part of an organisation.

Corporate Concerning the Company as a whole.

Corporate Centre A support organisation for the CMD.

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Corporate A structured framework of controls at management level

Management ensuring that the processes are performed to requirements
System (CMS) including continuous improvement.
- Business Process Management Guideline, EP92.0945

Cost Group Categories of expenditure used for project cost allocation/

expenditure.

Critical Path An analysis of the work to be done at an early stage of the

Analysis project by clearly identifying the sequence and the inter-
dependencies of identifiable tasks.
Linking the activities on a time base will help pinpoint those
critical to the success of the process/project.
- Quality - Improving Our Business - EPF/52

Critical Success Issues or challenges that must be dealt Factor with successfully
(CSF) in order to accomplish the corporate mission/vision and achieve
the corporate objectives.
- EP Guideline on Audits and Reviews, EP93.1600

Cross-Functional Involving more than one organisational Function.

Custody Transfer Transfer of legal responsibility and ownership from one party to
the other.

Customer Person or people receiving a product, service or advice.

- Business Process Management Guidelines, EP92.0945

Data Group of facts from which inferences or conclusions can be drawn,

i.e. the raw material from which information is constructed.

Debt The money supplied by third parties for employment by the

company for a specific period of time in return for an
entitlement to receive both capital repayment and interest as
specified by the loan terms and conditions.
- Cost Management, EP94.2000

Decision Maker The individuals with the authority to approve the way forward
with respect to a specific asset, project or portfolio.

Decision Review A group of Decision Makers coming together to approve or

Board modify the proposed way forward for a specific asset, project or
portfolio.

Defect The non-fulfilment of an intended usage requirement or

reasonable expectation.

Deferment The value of production which is “lost” in a given time frame

due to reduction or cessation of the production process.

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Deliverable The output from an activity and/or process e.g. document,

data, also called product.

Delivered Term used in procurement to mean delivered to site/warehouse.

Dependability A collective term used to describe the availability performance and

its influencing factors: reliability performance, maintainability
performance and maintenance-support performance.

Design and SIEP developed engineering standards.

Engineering
Practice (DEP)

Detailed Design All design work from the production of the Project
Specification necessary to produce a commissioned asset.

Deviation A non-compliance with a formal requirement.

Deviation Request A written request from any person associated with a project,
proposing a change in design, scope, schedule or cost.

Dispute When a claim is rejected by one party but continues to be

pursued by the other.

Document Paper or other material thing providing instruction,

information, proof or evidence of anything.

Document Owner Person assigned by management as responsible for the creation,

content, issue, distribution, implementation, update and
control of a document.

Drilling the Limit DtL is one of the four pillars of the Group’s “Realise the Limit”
(DtL) initiative. The DtL Team assists well engineering teams to drill
the right well in the right way.

Effectiveness An attribute indicating that the output conforms to specified

requirements.

Efficiency An attribute indicating that the work has been carried out with
minimum use of resources.

Engineering Data The Group system for general classification and coding of
Classification Code equipment (asset hierarchy).

Engineer, Procure This is basically a modified type of turnkey contract but with
and Construct the company providing a management team to overview that of
(EPC) the Contractor.

Enquiry (or Tender) Issued to potential tenderers to obtain bids or quotations for
Document the provision of services and/or goods.

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Entity An item which can be individually described and considered,

may be an activity, process, product, organisation, asset, etc.

Equipment Item A physical asset acquired to fulfil a discrete functionality.

- Cost Management, EP94.2000

Equipment Tag The position within a Functional Asset which requires a certain
Position discrete functionality provided for by an Equipment Item.
- Cost Management, EP94.2000

Escalation Is the combined effect of general inflation and market

conditions specific to the project, the latter such as for
steel prices, rig rates, barge rates and man-hour rates.

Estimate Project cost breakdowns designated as screening (+40%/-25%),

feasibility (+25%/-15%), budget (+15%/-10%), or control
(+ 10%/-5%) estimates.

Estimate Estimate which has equal probability of over or under-run.

(50/50 Budget)

Estimate Estimate which has a 90% probability of under-run and

(90/10 Budget) 10% of over-run.

Excellent Practice A practice, process, procedure that is acknowledged as being

one of the best of its kind.

Exceptions List A list of unfinished/uncompleted items

(as attached to a handover certificate).

Execute Part of the Process Management Cycle, where the activity

executor(s) carry-out the planned/scheduled work.

External Assets Assets under the administration of an external organisation

from which the company either derives, or has the potential of
deriving, value.
- Cost Management, EP94.2000

External standard A standard (e.g. ISO, EN, ANSI, BS, API etc.) issued under
the auspices of a non-Group body.
- DEP [Link]-Gen

Facility A group of equipment used to perform a useful function for

the EP business.
- POSC Epicentre

Facility System A collection of equipment and/or systems which provides a

useful function for a facility.
- POSC Epicentre

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Facts The database used for recording and analysing maintenance

performance indicators.

Fact Sheet A document, recording all relevant details of a proposal to

invite tenders or to negotiate/award a contract, which is
used to determine whether the proposal is commercially sound.

Failure Modes A structured technique for assessing the mode of failure of a

& Effects piece of plant, system, equipment or component, together with
Analysis (FMEA) the possible causes, likelihood’s, and consequences.

Feasibility Study Study to examine if a Project Proposal is viable both technically

and economically.

Feedback Part of the Process Management Cycle, where the lessons-learned

throughout the cycle are advised to Management and the
initiating activity(ies) Process Owner, and are incorporated into the
planning and scheduling activities.
The aim is further improvement not only of this process but also
others affected by the same management or initiating activities.

Field A surface area and its underlying strata consisting of one or

more reservoirs, all of which are grouped on or are related
to the same underlying geologic structural features and/
or stratigraphic traps.
- POSC Epicentre

Field Change A change carried out (after AFC drawings) during construction,
commissioning or operations.

Field Development A formal Project Specification for sub-surface and surface

Plan (FDP) facilities and the operational philosophy required to support a
proposal for production from a new reservoir or an extension,
or any substantial supplementary schemes.

Final Investment The point at which an opportunity/project receives approval to

Decision proceed into ORP Phase 4 - Execute. This is the point where
the OU/Group makes a major expenditure Commitment.
Sometimes referred to as Prime Scope Approval.

Financial Assets Monetary assets over which the company either has control or
has passed control to a Business Associate through a trading or
investment transaction.
- Cost Management, EP94.2000

Firm Budget The approved budget which forms the basis for proceeding
with the execution phase of the project.

Firm Item A defined budget item which has been included in the
Company’s capital budget.

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Fitness for Purpose Ability of a product, process or service to fulfil a defined

purpose or set of requirements under specific conditions.
Wholly in compliance with and not significantly exceeding the
customer’s requirement.

Flow Charting A diagrammic representation of the sequence and steps of

operations in a process.
- Quality - Improving Our Business - EPF/52

Focal Point An organisational representative through which all matters on a

particular subject are channelled.

Focus Item The tasks or activities defined in Opportunity Realisation

Process phase that need to be done in order to complete the
key Deliverables for that phase.

Follow-on A phase of Field Engineering in which responses to site queries,

Engineering design and operating completions, as-built drawings are effected.

Follow-up The activity which ensures that agreed action items resulting
from an audit are implemented.
- EP Guideline on Audits and Reviews, EP93.1600

Force Field A technique used to identify the forces which help or obstruct
Analysis a desired change. It leads to assessing the driving and
restraining forces, their direction and strength. Movement in
the desired direction of change can be achieved
most readily by removing or reducing the restraining forces.
- Quality - Improving Our Business - EPF/52

Forecast Measurements in the form of a performance indicator that

ensures a 50/50% expectation (chance) of achievement.
- EP Programme Documentation EP59.0000

Form A document containing instructions between two or more

parties and once filled in and completed becomes a record.

Free On Board A legal term related to ownership of goods once custody

(FOB) transfer has taken place. For FOB, ownership passes once
the goods have been placed on board the transportation vessel.

Front End All Field Engineering activities from opportunity inception

Engineering until the production of the Project Specification.

Front End Loading The emphasis placed on the activities in the first three phases
of the Opportunity Realisation Process that enables
maximisation of opportunity value.

Function A group of similar discipline organisational units that support

a common mission or purpose.

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Provides for pooling of expertise with supervision by personnel

with the requisite knowledge.

Functional Assets Business functions or services provided by equipment items

or materials.
- Cost Management, EP94.2000

Gamechanger Research and technology contracts established to pursue new ideas.

contracts

Gate(s) The point(s) in the Opportunity Realisation Process where a

key management decision must be made before an opportunity
can progress. Otherwise known as (Milestone) Decision
Checkpoint.

General Facility A facility system which does not have explicit characteristics
System defined and therefore is not represented by a specific entity
within the model.
- POSC Epicentre

Goodwill An attitude engendered in the local community that benefits an

Operating Company in its dealings with individuals.
- Cost Management, EP94.2000

Governance Influencing to achieve best commercial and technical practices.

Group premise The planning assumptions and scenarios set by the Group to
be used for the portfolio analysis.

Grouped A combination of more than one item of equipment that is

Equipment useful to consider as one unit.
Item - Cost Management, EP94.2000

Grouped Facility A combination of more than one (Grouped) Facility,

Facility System, or (Grouped) Equipment Items that is useful
to consider as one unit.
- Cost Management, EP94.2000

Grouped Tag The position within a Functional Asset which requires a certain
Position combination of related functionalities provided for by a
Grouped Equipment Item.
- Cost Management, EP94.2000

Guideline A document which provides direction for managing a process

or an activity.
- EP Guideline on Audits and Reviews, EP93.1600

Handover The presentation of systems, with completed commissioning

documentation and punch-lists as appropriate, for transfer of
responsibility to the Operator and/or Owner.

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Hardware Item A physical component of a project, such as a jacket, a power

plant, a pipeline, with defined physical and organisational
interfaces with other hardware items.

Hazard A set of conditions in the operation of a product or system

with the potential for initiating an accident sequence.
- Quality Vocabulary BS 4778

Hazard A document that identifies possible hazards and the actions

Identification necessary to minimise risk.
Plan (HIP)

Hazard & Effects The management of a hazard (e.g. fire, erosion, toxic materials etc.)
Management ensuring that activities and appropriate procedures are in place
Process (HEMP) to identify, assess, control and recover from hazards.
- SMS Guidelines EP92.0100

Hook-up Connection of new constructed plant and systems to

utilities/feed stocks (also connection of instrumentation loops
during precommissioning).

Human Assets People employed directly or indirectly by the company to

perform activities.
- Cost Management, EP94.2000

Hydrotesting Hydraulic pressure testing of vessels, pipework and equipment

to confirm mechanical integrity.

Improve Part of the Process Management Cycle, where the process

owner identifies, coordinates and implements changes
which will make the process more effective and efficient in
meeting corporate objectives and customer requirements.

Information Assets Assets whose value is in the information they contain, not the
intrinsic value of the medium through which that information
is transmitted.
- Cost Management, EP94.2000

Infrastructure The physical facilities required to support but not necessarily

directly concerned with the Company’s production process,
e.g. offices, camp housing, etc.

Input Information, data, documentation or material etc. necessarily

required to enable execution of an activity.

Installation The totality of Functional Assets installed on a single support

structure (offshore) or occupying a single land plot (onshore)
performing several useful distinct but related functions
for the EP business.
- Cost Management, EP94.2000

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Inspection An activity such as measuring, examining, testing or gauging

one or more characteristics of an entity and comparing the
results with specified requirements in order to establish
whether conformity is achieved for each characteristic.

Intangible Assets Assets for which the value, though real, cannot readily be
measured, and for which the company frequently incurs costs.
- Cost Management, EP94.2000

Integrated The planning of a complete business process to an agreed time

Planning horizon to achieve its optimum effectiveness and efficiency
consistent with known information and agreed assumptions.

Integrated The totality of Functional Assets that combine to gather one or

Production more hydrocarbon flows from wells to sales point.
System - Cost Management, EP94.2000

Investment The money supplied by the company (acting as a shareholder)

for the permanent employment by third parties in return for a
specific entitlement such as a dividend payment.
- Cost Management, EP94.2000

Job Description A document detailing the accountabilities of a position,

it defines the responsibilities and authorities given to the
incumbent of that position.

Lessons Learned The learning by the team of what went well/badly and why
during the Opportunity Realisation Process.

Licence Block A specific tract of the earth defined by areal extent and possibly
depth (numeric depth range or stratigraphic units). The lease
parcel is the basic unit of ownership for portions of the earth;
it may be offshore or onshore.
- POSC Epicentre (Lease Parcel)

Life Cycle The totality of all phases in an opportunity’s life, from its
inception until it is no longer existant.

Line The organisational line of authority from MD down to

individual staff. Each position within the chain of command is
responsible for ensuring that their sub-ordinate(s) have the
requisite authorities and resources available to enable them to
perform their allocated tasks. Furthermore each position should
ensure adequate controls are in place to ensure that tasks are
performed as intended.

Load-Out The processes of taking materials and equipment for

construction offshore.

Local Planning The planning assumptions set by the OU and valid for the
Premise local business environment and including Stakeholder
requirements, to be used in the portfolio analysis.

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Long Term Item A budget proposal or forecast for which approval still needs to
be sought but which is included in the Company’s long-term
capital forecast.

Long-Term Budget Company budgets forecasting expenditure beyond firm budget

proposals.

Lump Sum With a lump sum contract, the Contractor is given defined
(contract) starting and finishing points and undertakes to perform the
whole of the specified work at a fixed price.

Lump Sum with Bills-of-Quantities contracts are lump sum contracts with
Bills-of-Quantities detailed bills of quantities forming a precise definition
(contract) of the scope of work.

The tendered rates provide the means of agreeing the cost of

variations and a common basis for the comparison and
analysis of competing Tenders.

Life Cycle Costs The total cost of ownership of an item of material, taking into
account all the costs of acquisition, personnel training, operation,
maintenance, modification and disposal, for the purpose of
making decisions on new or changed requirements and as a
control mechanism in service, for existing and future items.
- Maintenance Management Terms in Terotechnology, BS3811

Maintainability The ability of an item, under stated conditions of use to be

retained in or restored to a state in which it can perform its
required functions, when maintenance is performed under
stated conditions and using prescribed procedures and resources.

Maintenance The combination of all technical and associated administrative

actions intended to retain an item in, or restore it to, a state in
which it can perform its required function.
- Maintenance Management Guideline EP93.0750

Maintenance Job A procedure setting out the requirements for carrying out a
Routine particular maintenance task. It also contains relevant
specification data and HSE precautions.

Maintenance A Maintenance Reference Plan (MRP) is a set of data and

Reference Plan decisions, reflecting policies, objectives and maintenance
strategies, that presents evaluated maintenance tasks and
associated cost implications for the plant and equipment makes
up a production facility. Maintenance options and that their
priorities are chosen to safeguard technical integrity, minimise
loss of production and maximise short-term cash flow.

Management Formal evaluation by line management of the status and

Review adequacy of the Company’s-MS(s) in place in relation
to achieving the Company’s objectives and complying with the
Company’s policies.

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Management The system for managing the Company which provides for a
System structured framework of controls at all levels to ensure that
activities are executed in accordance with requirements. One of
the key requirements is for continuous improvement.

Manual A document which gives guidance and contains explanations of

rationale for the way a particular aspect is to be approached,
and where the resultant practice or method is outlined.
- DEP Publications procedural specification
DEP [Link] Gen SIPM

Manual of A document recording the commercial and financial authorities

Authorities delegated by the Managing Director to positions within the
(MOA) Company.

Material A physical asset acquired in standard measures to be used either

to make an Equipment Item or to be used as a consumable.
- Cost Management, EP94.2000

May An acceptable course of action that should be considered.

Mechanical All checking, verification and testing of the construction and

Completion installation work, performed by the respective Fabrication,
Construction, Installation and Hook-up Contractor, to confirm
that it meets all applicable Rules, Regulations, Codes and
Standards, and according to Project requirements as shown in
the drawings and documents.

The work shall be Ready For Precommissioning when

mechanical completion exists.

Mission Statement of the aims of the company identifying core

purposes, tasks and expected roles of the key Stakeholders.
Creates a unity or purpose necessary to achieve the vision.
- Country Business Planning - Group
Planning publication PL 88 R03 SIPC

Money Of the Day Costs or revenue expressed on the basis of the value
(MOD) (purchasing power) of money at the time when each cost or
revenue is expected to occur.

Morale An attitude engendered amongst its own employees which

benefits the Operating Company.
- Cost Management, EP94.2000

Must Mandatory course of action.

Natural Assets Naturally occurring assets fundamental to the EP business.
- Cost Management, EP94.2000

Network (Project) Scheduling method to determine critical paths of project.

Non-compliance Failure to follow defined procedures, instructions.

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Non-Conformance The non-fulfilment of specified requirements.

- Quality -Vocabulary, ISO 8402-1886

Objectives Goals which the company wishes to achieve over a long term.
Provides basis for judging progress and achievements.
- Country Business Planning - Group
Planning publication PL 88 R03 SIPC

Objectives Period The programme year plus four subsequent years.

Operation Those operating, maintenance and inspection activities
performed following acceptance of a system.

Opportunity A newly conceived possibility for creating wealth.

Opportunity A workshop process that defines an opportunity and enables

Framing answers to the questions:
• Where are we now?
• Where do we want to be?
• How are we going to get there?
EP2000-5547, Opportunity Framing Facilitations Handbook

Opportunity The bringing of the opportunity into actuality.

Realisation

Opportunity A five-phase, full-lifecycle process for realising an opportunity.

Realisation Process The five phases are:
(ORP) Phase 1 - Identify and Assess.
Determine potential value of the opportunity and alignment
with the business strategy.
Phase 2 - Select
Generate and select the preferred opportunity realisation concept.
Phase 3 - Define
Finalise the scope, cost and schedule for the preferred concept
and obtain project execution finding.
Phase 4 - Execute
Produce an operating asset consistent with scope, cost and schedule
Phase 5 - Operate
Start-up, operate and evaluate the asset to ensure performance
specifications and return to shareholders.
The process:
• Defines the opportunity (Opportunity Framing)
• Plans the opportunity (Roadmap)
• Maximises the value of the opportunity (Toolbox)
• Assures the value of the opportunity
(Decision-making and Value Assurance)

Opportunity A collection of excellent practice processes, procedures,

Realisation guidelines, the application of which assist the opportunity/
Process Toolbox project team to maximise value.

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Opportunity Team The team of people that implement the opportunity until
completion of selection of the preferred concept. (End of ORP
Phase 2 - Select)

Organisation How the company is structured to achieve the mission, vision

and objectives.

Organisational Organisational structures whose purpose is to perform specific

Assets sets of activities on specific assets.
- Cost Management, EP94.2000

Organisational The uniquely defined position within an Operating Company

Position or an Organisational Unit which is filled by a single individual.
- Cost Management, EP94.2000

Overrun An amount of money added to a budget, to raise the reliability

Allowance of the budget to 90/10% probability of underrun/overrun.

Patent A licence which gives the Operating Company exclusive right

to an invention of a design or process.
- Cost Management, EP94.2000

Pateto Analysis A special form of bar chart used to identify the major effects
and causes separating the “vital few” from the “useful many”
problems and helping determine which problems to solve
and in what order.
- Quality - Improving Our Business - EPF/52

Payables The money under control of the company to which a third-

party is entitled.
- Cost Management, EP94.2000

Peer Assist Assistance provided to opportunity/project/asset teams by

people external to the team in ensuring maximisation of value.

Pending Budget Preliminary or early budget produced at the beginning of the

Definition Phase of the Project.

Pending Item A budget item, included in the Company’s programme

expected to be executed as a firm item, but which is awaiting
full justification by the Company pending the finalisation of
timing and/or economic factors.

Performance These are the metrics which are short term in nature, reflect the
Indicator level of progress made tactically or operationally in optimizing
(PI) output in line with the set of standards or goals.

Performance Test The formal testing of the equipment to demonstrate

contractual guarantees.

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Phase Each of the five defined phases in the Opportunity Realisation

Process.

Plan Part of the Process Management Cycle, where what has to be

done is established and the resources needed to do the work are
identified. This is done for a given time horizon, usually more
than one year. The activity produces a document describing a
set of future intentions.

Policy A guide to managerial action which documents the course of action.

- Business Process Management Guidelines, EP92.0945

Portfolio A range of assets held by an organisation.

Precommissioning The checking, verification, testing, adjustment, calibration, etc.

of item assemblies, loops, part of systems or systems which are
required to ensure all functional and operational actions
are according to applicable Rules, Regulations, Codes and
Standards, and according to its designed purpose and intended
service including the completion of all applicable documents.
These items, assemblies, loops, part systems or systems shall be
brought to the stage of Ready For Commissioning when
precommissioning is completed. Non operational works after
mechanical completion (e.g. flushing, cleaning, loop testing
etc.) prior to commissioning.

Preliminary Cost For each work order, an initial breakdown of envisaged

Measure (PCM) activities, priced using the contract unit rates and agreed star rates.

Procedure Document describing the purpose and scope of an activity and

the specific way the activity is to be performed to achieve a
satisfactory result. An auditable series of steps defining roles,
responsibilities and tasks which transform a defined input into
a defined output.

Procedural The document that prescribes the requirements with which a

Specification (product or) service has to conform.
- ISO8402:1886

Process The method by which a process is managed. The cycle

Management comprises a Plan, Schedule, Execute and Analyse plus activities
Cycle (PMC) to Improve with a Feedback loop.
See separate definitions for each element.

Process A structured framework of controls at process to task level

Management ensuring that the process is performed to requirements
System including continuous improvement.
- Business Process Management Guidelines, EP92.0945

Process Owner A position of delegated responsibilities for the performance

(efficiency, effectiveness and adaptability) of a process.

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This requires in consultation with the process participants to:

• develop and document the process; • identify critical activities
and risks; • ensure appropriate controls are in place; • establish
performance measurements; • monitor and analyse process
performance; • identify and implement improvements
- Business Process Management Guidelines, EP92.0945

Producing the Limit PtL is one of the four pillars of the Group’s “Realising the
(PtL) Limit” initiative. The PtL Team assists OUs to maximise
production and minimise Opex.

Product The output of a process also called deliverable.

Product Flow A functional view of fluid flow. Its building blocks include
Network everything from field through pipelines and facilities to export
terminal.
- POSC Epicentre

Programme The company’s planned activity level over the next five years

Proposal including technology plans, information plans, audit plans, etc.

(PP)

Project A temporary endeavour undertaken to create a unique product

or service.

Project Project plan developed at the start of the definition phase

Development which, once approved, provides the Basis for Design and initial
Plan (PDP) execution strategy from which work can proceed with
development of the Project Specification.

Project Project Plan developed at the end of the definition phase as the
Execution Plan basis for the execution phase. The Project Execution Plan is the
(PEP) central reference document used by the Project Manager
to carry-out his job and is the principle vehicle by which others
are committed to meeting the Project deliverables.

Project Function A technique for breaking down a project into logical

Matrix manageable and controllable elements on the basis of
hardware items and project functions.

Project Management The application of knowledge, skills, tools and techniques to

project activities in order to meet or exceed stakeholders needs
and expectations from the project.

Project A technical description of that project and is the formal basis

Specification for detailed design.

Project Stages Within each ‘phase’ the project progresses through stages e.g.
Feasibility Study, Detailed Design, Construction, etc.

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Project Team The team of people that implement the opportunity from the
time of agreement on the preferred opportunity realisation
concept(s) until the handover of the commissioned asset to the
Asset Team.

Punch list A prepared list of items which require rectification or

completion before a project can be considered complete.

Purchase Goods or services obtained by way of contract.

Quality Meeting agreed customer requirements. This has been derived

from the international standard on Quality ISO 8402 which
defines quality as “the totality of features and characteristics of
a product or service that bear on its ability to satisfy stated or
implied needs”.

Quality All those planned and systematic actions necessary to provide

Assurance (QA) adequate confidence that a product or service will satisfy given
requirements for quality.
- Quality -Vocabulary, ISO 8402-1886

Quality Control The operational techniques and activities that are used to fulfil
(QC) requirements for quality.
- Quality -Vocabulary, ISO 8402-1886

Quality The activities which establish the objectives and requirements

Planning (QP) for quality and for the application of quality system elements.

Readiness & A technique used to analyse the position of individuals and

Influence Chart groups likely to be affected by the potential change. It looks
specifically at the level or degree of power in system to,
support or block change and helps focus on what work needs
to be done to create the critical energy for change.
- Quality - Improving Our Business - EPF/52

Realising the Limit The Group’s “Realising the Limit” initiative is aimed at
(RtL) maximising the value obtained from an opportunity/project/asset.
Four teams support this work:
Volumes to Value (V2V)
Drilling the Limit (DtL)
Capital to Value (C2V)
Produce the Limit (PtL)

Record A set of related data or words treated as unit.

- BS3527

Reference Direction to another information source for further details.

Reference Material A document which provides information which can act as a

basis for a manual, specification, or activity.
- Cost Management, EP94.2000

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Reimbursable There are three types of Reimbursable Cost contract:

Cost (contract) the straight reimbursable cost, the reimbursable cost plus fixed
fee and the reimbursable cost with fluctuating fee.

Regulation A standard issued by a government body or regulatory agency

with which an OU must comply.
- Cost Management, EP94.2000

Reliability The ability of an item to perform its required function over a

stated period of time which does not include scheduled down
time. Reliability is reduced by unscheduled down time only
(see availability).

Reliability A technique for determining the optimum maintenance

Centred options on the basis of consequence of failure.
Maintenance

Reliability, Fundamental design criteria.

Operability,
Maintainability
& Safety (ROMS)

Remedial Action That immediate action which is required to repair/rework/recall

etc. a non-conformance.

Required On Latest date by which materials shall be available on site for

Site (ROS) fabrication.

Reservoir One or more porous and permeable underground rock units

containing individual and separate natural accumulations of
producible fluids, confined by impermeable rock or water
barriers, and characterised by a single natural pressure system.
- POSC Epicentre

Resources Everything that is required to perform an activity upon an asset.

All costs are therefore attributable to the consumption or availability
of resources (including stand-by and surplus capacity).
- Cost Management, EP94.2000

Responsibility The state of being required to undertake specific actions.

The execution of a delegated task, activity or process.
- Business Control Guidelines FN/05 SIPC

Review See audit; in the context of this report the words audit and
review are used interchangeably.
- EP Guideline on Audits and Reviews, EP 93-1600

Risk The combined effect of probability of occurrence of an

undesirable event, and the magnitude of the event.
- Quality Vocabulary BS 4778

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Risk Aspects Those risks agreed by management requiring specific business

control e.g. Health, Safety, Environment, cost/money, data
integrity, asset integrity, reputation, employee motivation etc.

Risk The process whereby decisions are made to accept a known risk
Management or hazard or to eliminate or migrate it.
- Quality Vocabulary BS 4778

Roadmap The highest level plan for the realisation of the opportunity, set
out in a particular format.

Role The purpose and function of an entity or individual within the

organisation.

Rolling A plan of all activities affecting production which have been

Activity Plan consolidated and optimized to minimise cost and deferment.
(RAP)

Rolling Plan A plan that is continually updated and used to highlight

potential opportunities or problems and to prepare work plans.

Safety A state in which the risk of harm (to persons) or damage is

limited to an acceptable level. [A category of risk
to be managed.]

Safety Case The provision of a simple, methodical and auditable reference

document of all information relevant to the safety of the operation’s
personnel, environment and resources on an installation.
- SMS Guidelines EP92.0100

Sale A transfer of property or right from one party to another in

consideration of a sum of money.

Scatter Diagrams Diagrams used to determine if a relationship exists between two

variables and, if so, are a guide as to the nature of that
relationship. The data are plotted on a graph to identify any
correlation.
- Quality - Improving Our Business - EPF/52

Schedule Part of the Process Management Cycle, where the plan is

converted into a detailed set of tasks to be done within
a discrete period and matched to the actual resources which
will be used. A schedule should be continuously rolled forward
with a time horizon of usually no more than one year.

Schedule of Rates This type of contract agrees a unit rate for each item or activity
and is necessary when the scope and/or quantities within the
contract cannot be defined at time of contract award.

Scope of Work A description of the work to be carried out in a project

together with the deliverables, targets and constraints for each

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phase of the project. (During the life of a project the detail may
increase.)

Shareholders The money supplied by third parties (the shareholders) for

Funds permanent employment by the company in return for a specific
entitlement such as a dividend payment.
- Cost Management, EP94.2000

Shall Mandatory course of action.

Should Preferred course of action.

Shutdown This is a general term for stopping production and bringing the
facility to a safe status. It does not necessarily entail making the
plant hydrocarbon free or cleaning procedures.

Specification Document stating requirements.

Stakeholder Those parties/companies who influence the performance of the

company e.g. Shareholders, customers, suppliers, contractors,
industry bodies, local and national governments, employees etc.

Standard A document providing rules, guidelines or characteristics for

activities or their results, aimed at the achievement of the
optimum degree of order in a given text.
- ISO/IEC Guide 2:1886

Star Rate A new unit rate, agreed during the execution of a service
contract, covering an activity for which no unit rate existed
when the contract was awarded.

Start Up The stage of commissioning when the plant is started to operate

as designed. Those activities performed and documented to
ensure the successful completion of the initial start up and
process testing, by the introduction of hydrocarbons.

Statistical Process A statistical technique such as control charts used to analyse a

process or its output. It enables action to be taken when
necessary to maintain or improve the capability of the process.
- Quality - Improving Our Business - EPF/52

Stock Assets Physical assets procured or constructed either to be (part of ) a

Functional Asset, to be consumed as resources to fulfil a
business purpose, or to be disposed of as waste.
- Cost Management, EP94.2000

Strategies Framework for plans to achieve the objectives. Used as a screen

for possible plans.
- Country Business Planning
- Group Planning publication PL 88 R03 SIPC

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Supplier Person or people delivering a product, service or advice.

Targets Goals identified and agreed for the following year, subsequently
used as basis for performance assessment.
- Country Business Planning
- Group Planning publication PL 88 R03 SIPC

Tariff Rate Rate used for budgeting and costing purposes to allocate the
costs incurred in the consumption of certain resources (e.g.
staff, vehicles, warehousing, etc.) by activities on a number of
different assets for the purpose of accountability.

Task A work or job instruction necessary to carry-out part or all of

the defined activity.
- Business Process Management Guidelines, EP92.0945

Technical Integrity The technical integrity of a facility is achieved when, under

specified operating conditions, there is no foreseeable risk of
failure endangering safety of personnel, environment or asset
value.

Technical The document that prescribes the requirements with which a

Specification product (or service) has to conform.
- ISO8402:1886

Tender Board (TB) An independent management committee set up to authorise and

monitor the placing and handling of contracts in the Company.

Tenderbox The secure collection point to which bids or quotations are

sent by tenderers in response to the Company’s enquiry or
tender document.

Terms Of Reference A document that describes the work to be done, by whom it is

(TOR) to be done, to what standards and with milestone reviews and
approvals.

Term Price The declared price at which the recipient will be charged for
products received under a Term Contract.

Third Party Inspection by an agency independent of Owner of Contractor.

Inspection

Tollgating The process of regular review of R&D projects to approve

further progress and release of funds. See also control point.

Toolbox A series of processes, procedures, guidelines, checklists and peer

assist workshops that support the Opportunity Realisation
Process and whose application will enable maximisation of
opportunity value.
- Chapter 6, Opportunity & Project Management Guide.

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Trademark A distinctive mark such as the Shell pecten which helps

promote the Group’s products.
- Cost Management, EP94.2000

Turnkey (contract) A turnkey contract is a lump sum contract under which the
Contractor designs, installs and delivers the facility ready for
operation and is fully responsible for all aspects of the project.

Use Factor The proportion of total time that an item is used to perform its
required function. Utilisation is reduced by scheduled and
unscheduled down time and by standby time.

Utilities Facilities or systems e.g. electricity, water, steam, etc. which

serve process plant and/or infrastructure.

Utilisation The proportion of available running time that an item is used

to perform its required function. Utilisation is reduced by
scheduled and unscheduled down time and by standby time.

Validation Confirmation by examination and provision of objective

evidence that the particular requirements for a specific
intended use are fulfiled.

Value Potential or realised benefit of an opportunity.

Value Assurance Formal review carried out to provide assurance to management

Review and shareholders that opportunity realisation plans are robust
in financial, environmental and societal terms.
EP 2000-5305, Project and New Venture Value Assurance Guide.

Value of Work The amount of work still required to be completed expressed in

Outstanding monetary terms.
(vowo)

Value Of The amount of work completed expressed in monetary terms.

Work Done (May be more than current expenditure).
(vowd)

Variation Formal change to a contract.

Variety Control Type restriction and vendor selection; the selection of the
optimum number of sizes or types of products, processes
or services to meet prevailing needs.

Vendor Equipment or materials supplier.

Venture A part of the business managed separately within an

Operating Company.
- Cost Management, EP94.2000

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Verification Confirmation by examination and provision of objective evidence

that specified requirements have been fulfiled.

Vision Articulation of what the company intends to “be” based on the

identification of potential areas of profit and distinctive
competencies it possess. Acts as a filter for corporate options.
- Country Business Planning
- Group Planning publication PL 88 R03 SIPC

Volumes to Value V2V is one of the Group’s four pillars “Realise the Limit”
(V2V) initiative. The V2V Team assists in identifying and ranking
opportunities and developing strategies for maximising the value of
hydrocarbon resources.

Work Breakdown The work divided up into System Groups, Systems, Equipment,
Materials etc. as appropriate for the “Accuracy Class” of the
estimate to be prepared. For each activity identified by the process,
who will control it (single point responsibility) and what will be
produced is detailed. The break down will be identified in line
with data hierarchy in the cost database, and therein with the Cost
Coding Manual for Project Budget Estimating.

Work Instruction Document describing briefly and succinctly how an activity or task
is to be properly executed. A Work Instruction can only exist
where they support a procedure or activity description.

Work Order A document used to initiate work by a source external to the

(WO) company.

Work Request A document used to initiate work by the company.

Work Team The multi-functional team that identifies and asseses the
opportunity, selects an appropriate concept for its development and
defines and executes that concept.

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Subject Index

Subject Chapter Page No.

Approvals
third party approvals in Project Execution Plan . . . . . . . . . . . . . . . .3 . . . . . .12
Asset Team
definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . .3
Asset Reference Plan (ARP)
contents and description of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . .9-10
sequence of development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . .10
in concept option development (ORP Phase 2-Select) . . . . . . . . . . .5 . . . . . .26
in ORP Phase 3-Define . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .37
in ORP Phase 4-Execute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .42
Audit and Review
in HSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . .22
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .57
planning and carrying out a review . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .79-84
project verification plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .44
value assurance reviews - see Value Assurance Reviews
design reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .47
Basis for Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .30-31
Benchmarking
of Front End Loading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . .12
as a Guiding Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . .27
cost and schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .6
as quality assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .50-51
Brownfield
multi-activity (brownfield) planning . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .11-14
cost estimating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .18
evolve brownfield concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .23-24
Budgets
in Project Execution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . .12
funding plan in Project Execution Plan . . . . . . . . . . . . . . . . . . . . . .3 . . . . . .12
SIEP Capital Allocation Process . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . .55
Group budget procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . .56-58
release of funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .11
front end funding for ORP Phase 3-Define . . . . . . . . . . . . . . . . . . .5 . . . . . .27
preparation of 502F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .29,37
Capital Cost - see Cost Management
Change management
in procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .37-38
change control in design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .46
in projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .67-68
technical change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .67
business process and organisational change . . . . . . . . . . . . . . . . . . .4 . . . . . .67-68
Close-out - see Project
Coaching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . .71-72

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Subject Chapter Page No.

Commissioning
commissioning strategy in Project Execution Plan . . . . . . . . . . . . . .3 . . . . . .13
quality assurance in commissioning . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .49
HSE in commissioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .56
precommissioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .57-58
commissioning and handover . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .58-69
Operations input to . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .70
Concepts
development of concept options (ORP Phase 2 - Select) . . . . . . . . . .5 . . . . . .21-27
concept option selection report . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .24
concept definition process (ORP Phase 3 - Define) . . . . . . . . . . . . .5 . . . . . .29-38
Construction
construction strategy in Project Execution Plan . . . . . . . . . . . . . . . .3 . . . . . .13
quality assurance in construction . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .49
HSE in construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . .56
construction and pre-commissioning . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .50-58
hook-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .55-57
Operations input to . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . .70
Contracting
contracting strategy in Project Execution Plan . . . . . . . . . . . . . . . . .3 . . . . . . 13-14
description of contracting strategy process . . . . . . . . . . . . . . . . . . . .3 . . . . . . 17-30
timing for preparation of strategy . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 17
issues to be considered in contracting strategy . . . . . . . . . . . . . . . . .3 . . . . . . 21-30
common approaches to contracting . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 18-21
contracting process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 31-35
contract preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 31-33
incentive policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 23-24
commercial risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 41-42
Tender Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 33
contract controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 33-35
contract close-out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 35
Engineering/Procurement/Construction (EPC)
and Engineering/Procurement/Installation/Commissioning
(EPIC) contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 18-19
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 33
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 46-49
Alliance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 18-19
turnkey contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 19, 27
lump sum contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 24-25
unit rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 25-26
reimbursable cost contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 26-27
bills of quantities contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 27-28
dayrate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 28-29
time and material contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 29
call-off agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 30
in concept definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 34-35
design contractor appraisal and evaluation . . . . . . . . . . . . . . . . . . . .4 . . . . . . 47
detailed design contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 42-45

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construction contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 51-57

Control Processes
description of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 1-83
Corporate governance
in the Opportunity Realisation Process . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 18-22
Cost management
cost management strategy in Project Execution Plan . . . . . . . . . . . .3 . . . . . . 15
cost estimating and CTRs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 6,10
capex estimating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 15-21
opex estimating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 21-22
commitment control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 22-24
cost estimating in concept option development (ORP Phase 2-Select) . .5 . . . . . . 25-26
cost estimating in tender evaluation . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 44
Cost,time,resource (CTR)
CTRs and CTR catalogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 5-6
updating CTRs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 10-11
Critical success factors
use in Improvement Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 50-51
use in reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 82-83
Data management - see Information Management
Debrief report - see Project
Decision Making
Decision Makers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 8,18
Decision Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 6-8
Decision Review Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 18-20
description of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 18-20
decision options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 19-20
and Value Assurance Review process . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 18-19
De-commissioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 71-72
HSE in de-commissioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 57
Delegation
as part of motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 70
Design - see Field Engineering
Development
strategy note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 ......5
Economics
economic risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 41
economic analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 25-29
economic screening in Project Initiation Stage . . . . . . . . . . . . . . . . .5 ......9
ditto in project Feasibility Stage . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 11
ditto in concept option development . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 25
Empowerment
as part of motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 70-71
Environment - see Health, Safety, Environment
EP Business Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 ......4
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 ......4
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 ......2
Estimating - see Cost Management

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Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 6-8
Feasibility Report - see Project
Feasibility Stage - see Project
Field Development Plan
Contents and role in concept option development . . . . . . . . . . . . . .5 . . . . . . 26
Field Engineering
facilities studies in project Initiation Stage . . . . . . . . . . . . . . . . . . . .5 . . . . . . 9
in concept option development (ORP Phase 2 - Select) . . . . . . . . . .5 . . . . . . 24-26
design strategy in Project Execution Plan . . . . . . . . . . . . . . . . . . . .3 . . . . . . 12
quality assurance in design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 45-47
HSE in design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 55-56
technical change management . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 67
concept definition (ORP Phase 3-Define) . . . . . . . . . . . . . . . . . . . .5 . . . . . . 29-37
Basis for Design deliverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 30-31
Project Specification deliverable . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 36
detailed design (ORP Phase 4-Execute) . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 39-49
follow-on engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 45
Operations input to detailed design . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 69-70
Focus Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 6-8
Follow-on engineering - see Field Engineering
Front end engineering - see Field Engineering
Front End Loading
description of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 11-12,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 14-15
and strategy formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 1
Funding -see Budgets Glossary of terms
Health - see Health, Safety, Environment
Health,Safety,Environment (HSE)
Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 57-58
management system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 53-58
plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 53-57
HSE strategy in Project Execution Plan . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 14
in projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 53-58
in concept development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 55
in design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 55-56
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 34, 40, 42
in construction and commissioning . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 56
in well engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 56
in logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 56
Human resources - see People
Improvement Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 47-52
use in the Opportunity Planning Process . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 15-16
improvement strategy in Project Execution Plan . . . . . . . . . . . . . . .3 . . . . . . 16
use of Opportunity Realisation Process Toolbox in . . . . . . . . . . . . .3 . . . . . . 52
improvement plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 51
Information management & technology (IM&T) . . . . . . . . . . . . .4 . . . . . . 59-66
information management strategy in Project Execution Plan . . . . . .3 . . . . . . 15
project IM&T plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 59-60

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data management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 61-63

data management systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 63-64
work management systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 65-66
Initiation Note -see Project
Initiation Stage - see Project
Insurance
role in risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 45-46
claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 35
Logistics
logistics strategy in Project Execution Plan . . . . . . . . . . . . . . . . . . .3 . . . . . . 13
logistics strategy preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 34-35
HSE in logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 56
Maintenance
Reliability,operability,maintainability (ROM) engineering . . . . . . . .4 . . . . . . 46-47
Monitoring
monitoring, analysing and correcting . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 75-78
Motivation - see People
Operations
Philosophy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 10
HSE in operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 56
in concept option development (ORP Phase 2 - Select) . . . . . . . . . .5 . . . . . . 25-26
in ORP Phase 3-Define . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 37-38
in ORP Phase 4-Execute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 69-70
in ORP Phase 5-Operate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 71
Operating cost - see Cost Management
Opportunity
definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 ......3
defining of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 3-4
planning of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 5-12
maximising the value of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 14-16
assuring the value of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 18-22
statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 3,6,7,10
Opportunity Framing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 3-4
description of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 3-4
as a Strategic Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 ......3
in Venture Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 ......6
in Exploration Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 ......6
in well engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 12-13
in ORP Phase 2 - Select . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 19
in ORP Phase 3 - Define . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 30
in ORP Phase 4 - Execute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 39
Opportunity and Project Management Guide
background for . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . . 1-2
purpose of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . . 3-5
structure of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . . 7-8
Opportunity Realisation Process (ORP) . . . . . . . . . . . . . . . . . . . .2 . . . . . . 1-27
definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 ......1
mandatory nature of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 ......1

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Guiding principles for . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 24-27

deliverables from . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 6,7,10
description of ORP Phases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 ......4
ORP Phase 1-Identify & Assess . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 5-17
ORP Phase 2-Select . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 19-27
ORP Phase 3-Define . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 29-38
ORP Phase 4-Execute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 39-70
ORP Phase 5-Operate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 71
ORP Toolbox . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 . . . . . . 1-32
mapping of tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 ......8
major tools for value improvement . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 16
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 52-53
use in Improvement process . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 52-53
Opportunity Roadmap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 5-12
example of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 ......7
Organisation
organisational risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 43
organisational structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 74-76
People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 59-82
Work Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 6-8
team as ORP Guiding Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 24-26
Human Resources strategy in Project Execution Plan . . . . . . . . . . . .3 . . . . . . 15-16
consideration of performance manager position . . . . . . . . . . . . . . . .3 . . . . . . 51
integrated teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 59
elements of team building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 57-58
leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 60-62
attitudes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 62
values
motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 67-72
team composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 63-65
team development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 65-67
conflict handling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 73
organisational structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 74-76
resourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 76-78
roles and responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 78-80
skills and competencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 81-82
impact of business process and organisational change . . . . . . . . . . . .4 . . . . . . 67-68
project team communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 71
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 70
monitoring the team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 77
resourcing for commissioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 63-64
Performance indicators
use in Improvement Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 49
for control and reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 72
Petroleum engineering
in prospect evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 7-8
subsurface studies in project Initiation Stage . . . . . . . . . . . . . . . . . .5 ......9
ditto in project Feasibility Stage . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 10

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in concept option development . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 20-23

Planning
planning management strategy in Project Execution Plan . . . . . . . . .3 . . . . . . 15
inclusion of schedule in Project Execution Plan . . . . . . . . . . . . . . . .3 . . . . . . 12
work planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 1-14
planning v. scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 ......1
activity management loop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 ......2
activity network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 6-8
schedule activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 8-14
existing assets and multi-activity planning . . . . . . . . . . . . . . . . . . . .4 . . . . . . 11-13
work management systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 65-66
Pre-commissioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 57-58
Pre-start up audit
in value assurance process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 22
mandatory nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 66
Procurement
procurement strategy in Project Execution Plan . . . . . . . . . . . . . . . .3 . . . . . . 13
introduction to procurement strategy . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 17
procurement strategy preparation . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 30-33
Total Cost of Ownership (TcoO) . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 30-31
eProcurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 32
procurement process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 35-39
requisitioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 36
evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 36
manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 36-37
expediting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 37
vendor representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 38
factory acceptance testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 38
inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 38
spare part ordering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 38
disposal of surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 39
purchase order close-out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 39
quality assurance in procurement . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 48
in front end engineering (ORP Phase 3-Define) . . . . . . . . . . . . . . .5 . . . . . . 35
in EPC contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 47
in ORP Phase 4 - Execute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 49
preservation of equipment/materials . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 53-54
Project
definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 ......3
Team, definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 ......3
Management, definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 ......3
deliverables by ORP Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 ......9
lessons learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 8,27
objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 11
Exploration Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 6-8
Initiation Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 8-10
Initiation Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 9-10
Feasibility Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 10-11

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Feasibility Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 11
Specification deliverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 36
close-out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 64-66
debrief report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 ......2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 66,68-69
Project Execution Plan
contents and development of . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 11-16
in ORP Phase 2- Select . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 19
in ORP Phase 3 - Define . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 34,36
Project Specification - see Project
Quality assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 41-51
quality assurance strategy in the Project Execution Plan . . . . . . . . . .3 . . . . . . 14-15
in the procurement process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 36-37
management system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 41-44
plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 42-44
in design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 45-47
in procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 48
of business processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 50
in contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 48
Reporting
reporting of progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 11
reporting, monitoring and analysing in projects . . . . . . . . . . . . . . . .4 . . . . . . 69-78
reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 69-74
Request for Authority (RFA)
listing in Project Execution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 12
Resources - see People
Reviews - see Audits and Reviews
Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 39-46
risk analysis in Opportunity Framing . . . . . . . . . . . . . . . . . . . . . . .2 ......4
risk management strategy in Project Execution Plan . . . . . . . . . . . .3 . . . . . . 16
types of risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 40-44
Roadmap - see Opportunity Roadmap
Safety - see Health Safety Environment
Scheduling - see Planning
Spare parts
consideration as part of procurement strategy . . . . . . . . . . . . . . . . .3 . . . . . . 31
ordering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 38
Stakeholders
analysis of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 ......3
consultation with . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 ......3
stakeholder risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 43
Start-up
Strategic Processes
description of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 ......1
mandatory nature of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 ......1
Strategy Formation
description of processes involved . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 1-82
Stretch targets

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use in Improvement Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 49-50

use in estimating process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 20
Sustainable development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 5-7
as part of opportunity framing . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 ......4
Teams - see People
Technology
technology planning and risk management . . . . . . . . . . . . . . . . . . .3 . . . . . . 37-38
technical risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 41
Toolbox - see Opportunity Realisation Process
Value improving practices
use in ORP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 15-16
Value creation areas
use in Improvement Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 48
identification during Opportunity Framing . . . . . . . . . . . . . . . . . . .2 ......4
Value drivers
use in Improvement Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 47-48
identification during Opportunity Framing . . . . . . . . . . . . . . . . . . .2 ......4
in estimating process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 ......6
Value Assurance Reviews (VARs)
description of VAR process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 20-22
mandatory requirement for . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . 20
in venture generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 5-6
in project Initiation Stage (ORP Phase 1-Identify & Assess) . . . . . . .5 . . . . . . 10
in project Feasibility Stage (ORP Phase1-Identify & Assess) . . . . . . .5 . . . . . . 11
in ORP Phase 2 - Select . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 27
in ORP Phase 3 - Define . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 37
in ORP Phase 5 - Operate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 71
Venture generation
venture generation process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 3-4
Vision
in Project Execution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 11
vision framework as an element of leadership . . . . . . . . . . . . . . . . .3 . . . . . . 61-62
Well engineering
HSE in well engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 56
exploration drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 6-7
appraisal drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 ......8
well studies in project Initiation Stage . . . . . . . . . . . . . . . . . . . . . . .5 ......7
ditto in project Feasibility Stage . . . . . . . . . . . . . . . . . . . . . . . . . . .5 ......9
well engineering process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 12-16
in concept definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 24
Work Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . 1-74
description of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 ......1
Work Breakdown Structure
explanation of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 3-5
in cost management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . 15,17
Work scope
in Project Execution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . . 12

Chapter 6 ORP Toolbox | 83

Restricted to Shell personnel only

Acknowledgements

This document has been produced by the Capital to Value team (C2V) with a
Working Group, under the mandate of the Venture and Project Realisation Forum.

We would like to thank Tony Brown for his energy and determination to create
this revised project management guide which addresses the findings of
Major Project Realisation Value Creation Team, and provides a framework to
incorporate identified best practices.

We would also like to thank the Working Group members and those who reviewed
this document on behalf of the Venture and Project Realisation Forum;

Alfred de Witte (WG), John Haney (WG), Gordon Muir (WG), Wee Yiaw-Hin,
Austin Hand, Gordon Sterling, Chuck Enze, Jeff Jackson, Martin Bailey, Nigel Wright,
Wilfred Alsem, Mike Shearman, Clint French, Jay Thomas, Wim Leenders, Hein Hilhorst

The C2V team:

Agnete Johnsgaard
Keith Walters
Ian Brown
Job Labrujere
Robin Hutchinson

DOCUMENT DETAILS
Document Number: P02926
Revision: 1.0
Date of Issue: November 2001
Custodian: C2V team
Design and production by: SIEP-EPT/CS

For any queries or comments regarding this document please refer to the website,
[Link]/rtl/c2v where you can also down load the latest updates of this document.

84 | Opportunity & Project Management Guide