Uncertainties No Project Wreck BP Application

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Uncertainties - No Project Wreck - BP Application

• Context, Uncertainties, Project Wrecks
• Value Assurance Process
• Capital Value Process (CVP)
• ALERT (Risks Opportunity Assessment Tools)
• DELTA
• Examples
• Kepodang No Wrecks Indicators (gtUS300 M)
• Compressor Reconfiguration (ltUS10 M)
• Mad Dog Project Risk Management

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Context

• BP world wide major projects capital
• Major investment require commitment to
  shareholder value
• Shareholder value is maintained by credible and
  rigorous assurance processes
• A process to deal with uncertainties (risks and
  opportunities) is established

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Committed Values/ Project Promises/ KPIs

• Project Scope (reserves, capex, Dcost)
• Milestones (CVP schedule)
• Economic Value (NPV, IRR,CE)
• 12 Month Production (net reserves, start-up
  efficiency, daily production)
• Informed project uncertainties

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Project Uncertainties

• Risks
• Anything that can erode the project values
• Opportunities
• Anything that can increase the project values
• MANAGE THEM EARLY

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Project Value Creation Chasing Opportunities
Develop deliver the Project Right
Select the Right Project
Optimum Project Definition/Execution
Optimum Project Selection
Poor Project Definition/Execution
Sources of Value

APPRAISE
SELECT
DEFINE
EXECUTE
OPERATE
Gate
Gate
Gate
Gate
Gate
DSP
DSP
DSP
DSP
DSP
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Project Life Cycle Influence vs. Risks
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Uncertainties (Risks Opportunities)

• Six key groupings
• Country Regulatory Issues
• Markets Commercial Context
• HSE
• Technical Challenge
• Project Definition Execution Complexity
• Operability/Production Ramp-up
• IF NOT WELL MANAGED, THEN ..

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Project Wrecks

• If project value (I.e NPV) deviates more than 15
  of its target (Cost Risks)
• If project execution schedule deviates more than
  15 of its plan (Schedule Risks)
• If one year operability and production is lower
  than 85 of its plan
• If more than 15 of HSE targets are not achieved
  or a fatality happens.

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Treatment of Risk Opportunities
To Avoid Project Wrecks..

• Identify
• Scope via sensitivity
• Manage
• Monitor
• React to changes
• Lesson Learnt

How to get assurance
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Value Assurance Processes -TOOLS

• Capital Value Process (CVP)
• A process to provide assurance that BP will do
  the right capital project and do the project
  right
• ALERT
• A process to provide assurance that BP will
  assess and manage key uncertainties (risks
  Opportunities) to maintain the project values.

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Capital Value Process

• Projects are divided into stages, each
  corresponding to a key decision point.
  
  (
  For subsurface projects an initial ACCESS stage
  applies)
• Each stage has a Gate that must be passed, which
  forces the Gatekeeper and the project team to
  make appropriate decisions.
• These decisions, the rationale behind them, and
  any uncertainties are captured in a Decision
  Support Package (DSP).
• The activities required within each stage are
  necessary to develop information required for the
  DSP.
• Successful implementation requires appropriate
  supporting behaviors (e.g. effective
  cross-functional teams generating constructive
  challenge).
• A process that has the flexibility for the
  content to vary according to project size and
  complexity.
• Assurance provides confidence that projects will
  deliver distinctive business results
  (benchmarking, peer reviews, etc.).

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Capital Value Process
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CVP - Key Roles

• Project Team
• Single Point Accountability (SPA) - (e.g. Project
  General Manager, Business Venture Manager, Asset
  Development Manager, etc.)
• Gatekeeper (e.g. BUL)

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COST DEVELOPMENT PROCESS
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SCOPE WELL DEFINED/WELL-SCOPED
THIS IS WHAT WE WANT !!!
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SCOPE CREEP AND/OR POOR ESTIMATE
AVOID THIS WRECK !!
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When Are Schedule Risk Analyses Performed?
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Understand Our Probabilistic Schedule
THIS IS WHAT WE WANT !!!
critical 63
OPTD
MOST
PESS
10
12
16
P10 11.3 weeks P50 13.1 weeks P90 15 weeks
Start
Activity A (12 weeks)
Finish
Activity B (10 weeks)
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10
18
OPTD
MOST
PESS
critical 37
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Behavior of Example Schedule Activities
THIS IS WHAT WE WANT !!!
Triangular mean of B (81018)/3 12
Activity B drives finish after 16 weeks
Triangular mean of A (101216)/3 12.7
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Peer Reviews
Appraise Peer Review
Select Peer Review
Mid-Term Peer Review
Operate Peer Review
Pre-Sanction Peer Review
For subsurface projects an initial ACCESS stage
applies
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ALERT

• Asset business development uncertainty
• Leveraging opportunities
• Early holistic assessment
• Risk mitigation , and
• Team ownership of Inputs Findings

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ALERT - Holistic Early Uncertainty Process

• Value based approach captures Upsides
  opportunities as well as development risks
• Initiated during CVP Appraise Stage, before
  potential opportunities are discounted
• Updated during Select Define
• Team driven in 1.5 day Workshop
• Break-out sessions to develop risks /
  opportunities
• Feedback - enhance future Workshops

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ALERT Workshop Products

• ALERT Traffic Lights spreadsheet
• Tornado value-driver diagrams
• Contribution to uncertainty ranking
• Boston Squares
• Value envelope curve

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Templates available for Upstream/ Gas Power and
Downstream (Refining/ Chems) reflecting some
different factors mainly under Technical
Challenge.
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Top Level Contribution to Mean Value
Market/Commercial Context
Health, Safety Environment
Project Definition Execution Complexity
Technical Challenge
Country Issues
Operability/Production Ramp-up
-20.0
0.0
20.0
NOTE This chart indicates which factors
contribute most to the difference between the
mean result of the ALERT analysis and the
original base case NPV. Distributions
which are symmetrical around 0 will show little
contribution on this chart.
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Overall
14.0
E05
T01
C05
E04
E06
T09
C10
Contribution to Value
E11
Y03
Y05
C07
H01
H02
T05
X09
Y02
Y04
0.0
X06
Y07
Y09
T03
X02
X11
T04
X01
Y01
H03
T08
E07
Y06
T07
H04
T10
X05
X07
T06
X04
T02
H05
-14.0
0
50
100
Ability to Effectively Mitigate
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This shows the potential range of value created
or eroded by the issues raised. THIS IS
PRE_MITIGATION. Mitigation should move the curve
to the right ie capturing/ assuring more
value. It is ABSOLUTELY NOT a rigorous NPV
analysis and should be used with caution. It does
give a good idea of the possible range (width) of
value outcomes
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ALERT Key Benefits

• Multi-functional approach
• Interface using a common value based approach
• Basis for prioritising focus
• Enables to assess and mitigate Uncertainties
  early
• Effective tool for building Team Integration
• Enables BP Group to compare Uncertainty Profiles
  between Development Options identify systemic
  risks across BUs

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The Conclusion

• BP project management is not about building
  production facilities. BP goal is to build
  sustaining businesses.
• Killing a project is not considered as a failure
  but project wreck is a failure.
• Class A/ gold standard project performance
  equals to deliver the project promises I.e KPIs
  .

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Further contact

• M. Tavip Sunandar
• mtavips_at_bp.com
• Note
• Utilizing any part of this presentation slides
  for any other commercial or non commercial
• presentation must request permission and
  approval from M. Tavip Sunandar
• Thx