ARA Trading & Finance Seminar Mitigating Risk during Project Development

Transcription

1 ARA Trading & Finance Seminar Mitigating Risk during Project Development

2 Mitigating Risk during Project Development While developing a tank terminal, like with any other industrial infrastructure project, one runs risks. The commercial risks are for the commercial manager or trader to manage, typically by means of business cases. The financing risks are for the financial manager to manage through negotiating with banks and equity providers. The inherent project development risks are for the project manager to manage. In this presentation we present the main project risks and how to mitigate them. page 2

3 Mitigating Risk during Project Development Contents -The Devils Triangle - Risk for Schedule delay - Risk for Budget overruns -Structured Contracting -Structured Engineering -Structured Project Development page 3

4 The Devils Triangle A triangle with 3 sides of equal length Scope Money Time Scope Money Time If you move one of the three, at least one of the others will move as well! page 4

5 Main reasons for delay Initial steps Starting up the development The details: funding and permits Partnerships Government relations Initial steps can take years! Unclear infrastructure requirements Long discussions about next steps Long permit procedures Funding (you know better then me) Contracting ti the construction ti Long tendering process The Construction itself Defaulting contractors Don t be too optimistic: plans will always change! page 5

6 How a structured t approach will keep your schedule under control SCHEDULE Total duration: 1,5 4,5 years Phase 0: Feasibility study Few weeks Phase 1: Concept definition 2-3 months Phase 2: Funds & Permits 6-18 months Phase 3: Tendering 3-6 months Phase 4: Construction ½-2 years Phase 5: Commissioning 1-3 months Phase 6: In operation page 6

7 Terminal development project cost Cost indication: $ $ 400 per m 3 storage capacity Main cost drivers: - Size, expressed in m 3 storage capacity - Marine infrastructure - Products stored, gasoline or gasoil/fueloil - Contracting strategy location Value is determined by location, location and location page 7

8 Budget development over time $ 100 +/- 40% +/- 5% In theory: per m 3 calculation +/- 40% Concept design +/- 25% FEED design +/- 10% At contract award +/- 5% $ 0 Time In practice: Ad-hoc calculations By different consultants/engineers At management meetings $ 100 Contracted First Idea $ 0 Stick to concept design budget until contract t prices are known! page 8

9 How a structured approach will keep your budget under control SCHEDULE Phase 0: Feasibility Few weeks Total duration: 1,5 4,5 years Phase 1: Concept 2 3 months Phase 2: Funds/Permits 6 18 months Phase 3: Tendering 3 6 months Phase 4: Construction ½ 2 years Phase 5: Commissioning 1 3 months Phase 6: In operation $ $ $ Typical commitments for a $ 100 mln project $ $ mln $ page 9

10 Structured Construction Contracting Define Contracting Strategy Single or multiple contractors EPC Contract Format - Lump-sum Turn-key - Design & Construct - Unit Rates Typical Tender Process Typical EPC single contractor structure Engineer Client Pre-qualification (RfQ) EPC Request for Proposal (RfP) Proposal evaluation Negotiation Contract Award Duration: 4 6 months Your choice: risk budget & schedule Suppliers Contractor Sub Contractors page 10

11 Alternative contracting approaches EPCm(anagement Package unit approach Client Client Engineer EPCm Engineers Package 1 Package 2 Package 3 Suppliers Contractors Suppliers Suppliers Suppliers page 11

12 Structured Engineering process 1. Define your functional requirements Products stored Storage capacities Transport modes in and out Quality standard 2. Concept design By engineering company Requires 1 to 3 months Fit for single EPC contract only 3. Basic Design or FEED By engineering company or contractor Requires 3 to 6 months Required for more complex contract strategies If you want to control details/standard of design Required for Environmental Impact Assessment (EIA) 4. Construction Engineering By Construction company(ies) Concept design Layout Tank Design Process Flow Diagram (PFD) Utility Description Geotechnical Survey Basic Design or FEED FEED: Front End Engineering g Design Up to 100 drawings and documents 4. Construction Engineering Contracting Strategy determines level of engineering! page 12

13 Structured Project Development Phasing in manageable steps: Phase 0 Feasibility Study Phase 1 Concept Definition Phase 2 Funds & Permits Phase 3 Tendering Phase 4 Construction ti Phase 5 Commissioning Phase 6 In Operation One Overall Plan Updated before each stage Detailed plan for each phase: Budget approval for phase only Time schedule Staff allocation Go-nogo decision for each phase Advantages Staged budgeting Main commitment in Phase 5 Management control over main schedule Phase 0 Feasibility study Phase 1 Concept definition Phase 2 Funds & Permits Phase 3 Phase 4 Tendering Construction Phase 5 Commissioni ng Phase 6 In operation page 13

14 Structured Project Development Keep the devils triangle under control! Scope Money Time You can download the Riverlake Solutions Project Handbook from: (and we can help you to implement it ;-) page 14

15 Thank You Riverlake Solutions Project developers for Oil Terminals, SPM/CBM/FSO and Maritime Operations

16 Management contacts Jan Thijs Maatman MSc. Mining and Petroleum Engineering Since 1999 experience in contracting oil & gas Mobile Erik van Sliedregt MSc. Mechanical Engineering Since 1998 experience in marine contracting construction and production mangement Mobile Wilbert Versteeg Master of Business Sience Since 1996 experience in marine contracting oil & gas Mobile Feiko Jager MSc. Maritime Technology Since 1987 experience in oil terminal and maritime logistics Mobile page 16

17 Office Contact Sales Office Parklaan BC Rotterdam, The Netherlands Tel: Fax: Head Office 26, rue du Mont-Blanc 1201 Geneva, CH page 17