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Article: Schedule risk challenges on offshore shutdown projects

This article was published in Energy International, September 2011 issue (page 9)

Shutting down an offshore platform is a risky business; one wrong move could cost millions. Until the project is complete, the platform is not producing hydrocarbons; the shutdown effectively costs millions per day. It’s difficult to quantify, but if a platform produces 50,000 barrels per day, the cost of a single day’s delay is many millions of dollars. As an extreme example, when Hurricane Ike was about to hit the Gulf of Mexico in 2008, the anticipated loss of production caused crude oil itself to increase by $2 per barrel.

So accurately managing those risks is crucial to minimise the cost of delaying start-up. I recently assisted a shutdown project in the North Sea, helping the project team to capture the risks and uncertainties around the project schedule, and their ideas on dealing with these risks.

In all projects there is a trade-off to be had between schedule and cost (as well as quality – hence the often-quoted paradigm "pick only two … you can’t have all three"). In a shutdown project, schedule outweighs cost to such an extent that it becomes sensible to mitigate schedule risk to a much greater extent than in other projects. For example, it may be efficient to hire a set of standby resources, to cover the eventuality that certain resources are unavailable. In an ordinary project this might be considered a little extreme – it is very expensive to pay standby resources for probably doing nothing. But if the alternative is to risk keeping an entire platform shut down while waiting to procure extra resources at short notice, the standby team becomes a viable fallback option.

In our particular project (a single-well tie-back to an existing platform), the timing was also critical in another way: we were using an already-planned fixed operational shutdown of the platform to complete our tie-ins. This meant that not only did we have to make sure we completed the project quickly enough, but we could not afford to slip the start either. Effectively the entire project was schedule-driven – not just the shut-down portion. And, being a shutdown project, the base schedule was already aggressive (accelerated to make it appear more attractive, with less shutdown time, to increase chance of the project’s approval).

The risk workshop was very well attended, by the operating team as well as representatives from all the partners. The brainstorming session produced a variety of risks, which are probably common to many projects, and shutdown projects in particular:

  • Weather – although all the offshore work is planned for the late summer months, is there a chance that the campaign could be hampered by weather? This sort of risk is common – we call it interaction, because it only becomes an issue due to earlier delays.
  • Another example of interaction is where delays getting equipment offshore not only delays installation, but delay is further exacerbated by simultaneous operations (SIMOPS) issues – we cannot do the work in the planned timeframe, when we have planned to have the available workfaces and laydown areas, and postponing the work will cause conflicts with other activities on the platform, causing even more delays to actually completing the work.
  • Vessel availability – will specialist vessels such heavy transport ships and heavy-lift vessels be available when we need them? There are two potential problems here: firstly the risk that the vessels are not available within the contracted window (a vessel can get be delayed from a previous job; vessel operators have also been known to "play the market"!). Although this might not be "our risk", because the vessel operator would pay a penalty to compensate us for the delay, the schedule portion of the risk certainly is our risk and must be considered in our risk assessment. The second potential problem is the risk that although the vessel arrives when contracted, we may not be ready for it. Clearly this has cost implications, but may also result in very serious delays – the vessel will only wait for the contracted window, after which we would need to mobilise another vessel.
  • Accommodation restrictions – if we don’t manage to stick to the plan, would the beds we’ve allocated for our own offshore crew still be available? If not, our productivity will be significantly reduced. Again, earlier delays are severely compounded on a shutdown project.
  • Shutdown scope growth – will the shutdown get "hijacked" by other projects on the platform? Shutdowns being rare and expensive, a platform operator often takes the opportunity to sneak in unrelated scope, which would cause space and accommodation to be more restricted, and may cause key resources to be unavailable when we planned to use them.
  • We also identified some of the more usual risks: equipment reliability, offshore productivity, approvals, condition of existing (brownfield) equipment – which are all exacerbated by working offshore and in a shutdown environment.

These schedule challenges require careful consideration. Our risk workshop gave the team (and partners) the opportunity to discuss them, and ways to mitigate them, openly. The team considered a variety of mitigation options for the risks: building incentivisation into supplier contracts, ring-fencing personnel, early scope-freeze, contracting standby vessels and personnel, considering alternative accommodation options (a flotel or a drill-rig), more flexible sequencing of work, more extensive onshore commissioning and testing (the expense is worth it to minimise delays during hookup). The workshop produced some lateral thinking: the team considered an alternative option of floating-in equipment instead of using a heavy lift. The partnership also committed to other pre-emptive actions, such as establishing responsibility matrices, scope matrices, scope prioritisation, SIMOPs plans, laydown plans, and highlighting the importance of having an overall integrated plan.

After the risk workshop, we took the further step of building a high-level probabilistic model that allowed the risks, uncertainties and interaction to be formalised, analysed and understood. The probabilistic analysis allowed risk (and mitigation trade-offs) to be quantified – an essential step to understanding the effect of the perceived risk to the project as a whole, and ultimately to minimise the production revenue lost during the shutdown. With the probabilistic analysis the project manager was able to communicate, and justify, the benefits of spending money upfront to minimise schedule delays. It all came back to dollars at the end!