Value Adding Through Appropriate Integrated Risk Insight : Transforming Development Opportunities Into Projects.

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Value Adding Through Appropriate Integrated Risk Insight

™

:

Transforming Development Opportunities Into Projects.

G. J. Hawkins

LRMC PTY Ltd, 96 Stanley Street, Nedlands,

Western Australia 6009 Tel: +61 8 9389 6429 Fax: +61 8 9386 6948 e-mail: [email protected]

1.0 Abstract

Front End Loading is described as “taking sufficient time to properly assess an opportunity, identify value drivers, identify uncertainty to achieve a quality project solution prior to committing to major expenditure’ (Woodside Energy Ltd 2000). Opportunity and risk factors vary throughout the project lifecycle and Front End Loading (FEL) is used to influence the business and project success whilst the expenditure is relatively low. A mandatory and consistent implementation of a Risk Management System at the onset of development appraisal has the potential to improve project success.

Reflecting best strategic industry practices to support decision-making, an overview is provided of the value adding process framework, methodology, tools, constraints and significant benefits for a company wide consistent approach to opportunity and risk analysis conducted during the early project phases by an independent review team.

2.0 Introduction

Woodside Energy Ltd is a leading Australian resource company with substantial assets and a growing international reputation as a successful oil and gas explorer, developer and producer.

In 1999, Woodside introduced the Opportunity and Project Realisation Process (OPREP) for a structured and systematic approach to improved management of capital projects through enhanced decision and execution quality.

The OPREP methodology covers the project lifecycle phases and a decision milestone check point punctuates each project phase. Assurance Checks support the decision points to move to the next phase (refer Figure 1). They provide the decision makers assurance that the recommendations are sound and will deliver maximum value.

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Figure 1: OPREP Assurance Checks AC2 Feasibility Review

To confirm that resolution of uncertainties supports continuation of definition and moving to concept selection.

AC3 Field Development Plan (Concept Selection) Review

To gain confidence in support of the Field Development Plan and concept selection. Commit to resources where scope is fully defined and final business proposal is prepared.

AC4 Final Investment Decision Review

To provide support for the Final Business Proposal and provide confidence to stakeholders that decision to proceed with project execution is sound.

Risk Management supports the practice of understanding uncertainty during the production of deliverables in each project phase.

Implementation of a project risk analysis process as a mandatory ‘Assurance Check’ prior to committing to major project expenditure is a focus area to reduce project failure rates in terms of capital cost and project schedule.

The Project Integrated Risk Insight (PIRI) process, models and tools are implemented during the Select (pre AC2 / 3) and Develop (pre AC4) phases using a fit for purpose approach dependent of the level of definition. Opportunity and risk that can be quantified in terms of schedule and capital cost are modelled and the results are presented to the Assurance Review Teams and the Decision Review Board via the Opportunity / Development / Project Manager(s).

Note: Schedule risk analysis is well documented and external to the doctoral project.

Assurance Checks

Cost Estimate

12 1 2 Cost Estimate 12 Cost Estimate

SELECT

ASSESS DEVELOP EXECUTE OPERATE &

EVALUATE

2 3 4 5

Development Plan (Concept Selection)

Review

Final Investment Decision Review Pre Start Up Review Post Investment Review MANDATORY ASSURANCE CHECKS 1 ₂ Project Initiation Review Feasibility Review Benchmarking Review (FEL Assessment) 7 HSER 8 Commercial 11 Reserve Certification 9 Technical Integrity (Sub-surface) 10 3 4 5 6 1 Benchmarking Review (FEL Assessment) 7 BenchmarkingReview (Merit/Pacesetter) 7 HSER 8 8 HSER Reserve Certification 9 9 Reserve Certification Technical Integrity (Sub-surface) 10 Commercial 11 1 1 Commercial 11 Commercial Value Realisation RECOMMENDED ASSURANCE CHECKS PEER

ASSISTS 13 Peer Assists 13 Peer Assists 13 Peer Assists 13 Peer Assists 13 Peer Assists

Value Identification

HSER

8

AC1

•Is there a real under -standing of what is being initiated and of the commitments being made?

• Do we have a meeting of minds with JV partners on objectives and expectations?

AC2

•Should we enter, can we make it work? • Has the venture/project

been effectively framed and is there sufficient knowledge to start the process of selecting the concept and defining the plan?

• Are there any showstoppers, have we identified all risks and opportunities?

AC3

•Have we selected the right alternatives? • Has the optimum plan

been selected and defined?

• Have we now fully defined what we are going to do?

AC4

•Are all plans, strategies, organisations, resources and systems in place to commence execution in an optimum manner? • Have we set-up to

successfully implement our plan, should funds be released?

AC5 •Are the HSER

manage-ment systems in place and effective? • Have the staff been

adequately trained on the operation, inspection and maintenance of the facilities? • Are the start-up

procedures sufficiently complete? • Is the start-up

organisation in place?

AC6

•Did we achieve the predicted performance? • What can be learned from

the project and what further opportunities are there?

Assurance Checks

Cost Estimate

12 1 2 Cost Estimate 12 Cost Estimate

SELECT

ASSESS DEVELOP EXECUTE OPERATE &

EVALUATE

2 3 4 5

Development Plan (Concept Selection)

Review

Final Investment Decision Review Pre Start Up Review Post Investment Review MANDATORY ASSURANCE CHECKS 1 ₂ Project Initiation Review Feasibility Review Benchmarking Review (FEL Assessment) 7 HSER 8 Commercial 11 Reserve Certification 9 Technical Integrity (Sub-surface) 10 3 4 5 6 1 Benchmarking Review (FEL Assessment) 7 BenchmarkingReview (Merit/Pacesetter) 7 HSER 8 8 HSER Reserve Certification 9 9 Reserve Certification Technical Integrity (Sub-surface) 10 Commercial 11 1 1 Commercial 11 Commercial Value Realisation RECOMMENDED ASSURANCE CHECKS PEER

ASSISTS 13 Peer Assists 13 Peer Assists 13 Peer Assists 13 Peer Assists 13 Peer Assists

Value Identification

HSER

8

AC1

AC2

AC3

AC4

AC6

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The Project Integrated Risk Insight (PIRI) process described extends the boundaries of conventional thinking by including strategic thinking underpinned by a rigorous data gathering and analysis process that adds value, permits innovation, supports business proposals and Senior Management in the decision-making process leading up to a Final Investment Decision (FID). Dependent on the level of project definition, the process uses a fit for purpose selection from three Navigators (Opportunity and Risk Breakdown Structure – ORBS, Simplified Functional Analysis Systems Technique Diagram – SimFAST and Key Assumptions Analysis and Testing – KAAT), two qualitative models (Project Contingency Assessment Model - ProCAM and a Forensic Investigation Risk Model – FIRM), a Project Relationships and Influence Map (ProRIM) and a quantitative (probabilistic) Integrated Risk Insight Model (i-RIM).

Comparing the outcomes of Woodside offshore projects (post 1999) with the PIRI reviews conducted prior to the Final Investment Decision (FID) indicates delivery of complex offshore oil and gas projects within the predicted capital cost accuracy range, a notable improvement on past performance.

3.0 Project Failure

Industry benchmarking and historical data indicates a very high failure rate for oil and gas projects internationally and within Woodside.

The ‘hot spots’1 identified as increasing the potential for project failure are:

• Technical definition has not been adequately completed for the decisions being taken, too little

attention has been made to the upside and downside cases

• Too little attention in looking for innovative or aggressive angles and strategie s

• Insufficient number of staff and competencies to deliver project

• Organisation structure and interfaces are unrealistic for the project complexity

• Non-alignment of stakeholders

• Project objectives poorly communicated to project team and stakeholders

• Quality of opportunity and risk management systems is variable and / or poorly structured

• Plans are incomplete and / or not fully integrated

• Reviews have been too late

• Review teams were not independent

4.0 Project Opportunity and Risk Categories

There is a hierarchy of opportunity and risk pertaining to a project. It ranges from that which is managed at the project level and may be internal or external, through those managed at the Joint Venture level, to a corporate level. PIRI is designed to accommodate the project level.

Opportunities and risks are grouped according to categories to assist in the identification, quantification, response development and control. The risk areas have been consolidated into TECOP (Woodside Energy Ltd 1999) technical, economic, commercial, organisational and political.

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Value, Opportunity and Risk Workshops are facilitated with a requisite variety group and underpin the concept of risk management in capturing the knowledge, perception and appetite of the multi-disciplined team and supporting participants. An opportunity and risk register is prepared and a rapid ranking technique is used to prioritise focus areas.

5.0 Project Integrated Risk Insight (PIRI) Process

Project Integrated Risk Insight has been developed using structured uncertainty analysis and documented (refer Figure 2) to bridge the gap between the qualitative approach to opportunity and risk identification, scoring and ranking, and the traditional desktop reviews by individuals of capital cost estimates and extend beyond the classical cost model endorsement by modelling the uncertainty inherent to the options, configurations and scenarios being considered prior to the final investment decision. The deliverable from the analysis is an opportunity and risk report describing the le vel of project definition, supported by a calculated accuracy and contingency for the capital cost estimate.

Figure 2: Project

Integrated Risk Insight (PIRI) 5.1 Qualitative Assessment

Uncertainty assessment can never be exact; as with identification, the knowledge and perception of the multi-disciplined team and supporting participants is important in assessing the likelihood and impact. The opportunity and risks are scored according to the scope, quality, schedule and cost and ranked on a project opportunity and risk register, the primary deliverable from the workshop to the Opportunity / Project Manager.

5.2 Quantitative Analysis

Risk Quantification involves evaluating opportunities and risks and their interactions. It uses probabilistic theory combined with a rigorous and structured tool in determining a range of possible outcomes. O p p o r t u n i t y , V a l u e & R i s k I d e n t i f i c a t i o n O p p o r t u n i t y , V a l u e & R i s k Q u a n t i f i c a t i o n O p p o r t u n i t y & R i s k R e s p o n s e D e v e l o p m e n t O p p o r t u n i t y & R i s k R e s p o n s e C o n t r o l F e e d b a c k , L e a r n i n g & I m p r o v e m e n t P R O C E S S M A P Project Opportunity, V a l u e & R i s k M a n a g e m e n t P r o c e s s O p p o r t u n i t y , V a l u e & R i s k I d e n t i f i c a t i o n O p p o r t u n i t y , V a l u e & R i s k Q u a n t i f i c a t i o n O p p o r t u n i t y & R i s k R e s p o n s e D e v e l o p m e n t O p p o r t u n i t y & R i s k R e s p o n s e C o n t r o l F e e d b a c k , L e a r n i n g & I m p r o v e m e n t F e e d b a c k , L e a r n i n g & I m p r o v e m e n t P R O C E S S M A P Project Opportunity, V a l u e & R i s k M a n a g e m e n t P r o c e s s

Project Integrated Risk Insight (PIRI) Qualitative Assessment Quantitative Analysis Reporting AC12 Assurance Check Strategy, Economics, Forecasting & Optimisation

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“Value Adding through appropriate Integrated Risk Insight: TransfValue Adding through appropriate Integrated Risk Insight: Transforming Oil and Gas Development Opportunities into Projects ”orming Oil and Gas Development Opportunities into Projects ”

Decision Executive

Sponsor: Team: Facilitator:Graham Hawkins

Stop, Hold, Recycle

Sponsor: Team:

Stop, Hold, Recycle

Decision Executive Sponsor: Team: Phase 1 ASSESS Phase 2A SELECT Phase 2B SELECT Phase 3 DEVELOP Phase 4 EXECUTE Phase 5 OPERATE

Stop, Hold, Recycle

A C 2 Feasibility Review AC3 FDP Review A C 4 FID Review Production Acceptance Date Date D a t e Date Date D a t e D a t e Sponsor: Framing Team: Facilitator: Team Leader: Team: Team Leader: Team: Team Leader: Team: Team Leader: Team: Team Leader: Team: Blacktip Platform Otway Platform Otway Subsea Lambert 6 Subsea Lambert 5 Subsea GWA Platform Low Pressure Train

2nd Trunkline Angel Subsea Angel Concrete Gravity Structure Angel Jackup Pipeline Systems Modifications Echo Yodel Subsea Laminaria Phase 2 Subsea Trunkline System Expansion Project Laminaria Phase 2 Subsea AUD 1 Billion AUD 500 Million AUD 100 Million AC12 AC12 AC12 “

Stop, Hold, Recycle

Decision Executive Sponsor: Team: Phase 1 ASSESS Phase 2A SELECT Phase 2B SELECT Phase 3 DEVELOP Phase 4 EXECUTE Phase 5 OPERATE Phase 1 ASSESS Phase 2A SELECT Phase 2B SELECT Phase 3 DEVELOP Phase 4 EXECUTE Phase 5 OPERATE

Stop, Hold, Recycle

A C 2 Feasibility Review AC3 FDP Review A C 4 FID Review Production Acceptance Date Date D a t e Date

Date Date D a t e D a t e Date Date D a t e

Date D a t e D a t e Sponsor: Framing Team: Facilitator: Team Leader: Team: Team Leader: Team: Team Leader: Team: Team Leader: Team: Team Leader: Team: Blacktip Platform Otway Platform Otway Subsea Lambert 6 Subsea Lambert 5 Subsea GWA Platform Low Pressure Train

2nd Trunkline Angel Subsea Angel Concrete Gravity Structure Angel Jackup Pipeline Systems Modifications Echo Yodel Subsea Laminaria Phase 2 Subsea Trunkline System Expansion Project Laminaria Phase 2 Subsea AC12 AC12 AC12 O p p o r t u n i t y , V a l u e & R i s k I d e n t i f i c a t i o n O p p o r t u n i t y , V a l u e & R i s k Q u a n t i f i c a t i o n O p p o r t u n i t y & R i s k R e s p o n s e D e v e l o p m e n t O p p o r t u n i t y & R i s k R e s p o n s e C o n t r o l F e e d b a c k , L e a r n i n g & I m p r o v e m e n t P R O C E S S M A P Project Opportunity, V a l u e & R i s k M a n a g e m e n t P r o c e s s O p p o r t u n i t y , V a l u e & R i s k I d e n t i f i c a t i o n O p p o r t u n i t y , V a l u e & R i s k Q u a n t i f i c a t i o n O p p o r t u n i t y & R i s k R e s p o n s e D e v e l o p m e n t O p p o r t u n i t y & R i s k R e s p o n s e C o n t r o l F e e d b a c k , L e a r n i n g & I m p r o v e m e n t F e e d b a c k , L e a r n i n g & I m p r o v e m e n t P R O C E S S M A P Project Opportunity, V a l u e & R i s k M a n a g e m e n t P r o c e s s

Project Integrated Risk Insight (PIRI) Qualitative Assessment Quantitative Analysis Reporting AC12 Assurance Check O p p o r t u n i t y , V a l u e & R i s k I d e n t i f i c a t i o n O p p o r t u n i t y , V a l u e & R i s k Q u a n t i f i c a t i o n O p p o r t u n i t y & R i s k R e s p o n s e D e v e l o p m e n t O p p o r t u n i t y & R i s k R e s p o n s e C o n t r o l F e e d b a c k , L e a r n i n g & I m p r o v e m e n t P R O C E S S M A P Project Opportunity, V a l u e & R i s k M a n a g e m e n t P r o c e s s O p p o r t u n i t y , V a l u e & R i s k I d e n t i f i c a t i o n O p p o r t u n i t y , V a l u e & R i s k Q u a n t i f i c a t i o n O p p o r t u n i t y & R i s k R e s p o n s e D e v e l o p m e n t O p p o r t u n i t y & R i s k R e s p o n s e C o n t r o l F e e d b a c k , L e a r n i n g & I m p r o v e m e n t F e e d b a c k , L e a r n i n g & I m p r o v e m e n t P R O C E S S M A P Project Opportunity, V a l u e & R i s k M a n a g e m e n t P r o c e s s

Project Integrated Risk Insight (PIRI)

Qualitative Assessment Quantitative Analysis

Reporting

Project Integrated Risk Insight (PIRI) Qualitative Assessment Quantitative Analysis Reporting Qualitative Assessment Quantitative Analysis Reporting AC12 Assurance Check Strategy, Economics, Forecasting & Optimisation

“

Stop, Hold, Recycle

2nd Trunkline Angel Subsea Angel Concrete Gravity Structure Angel Jackup Pipeline Systems Modifications Echo Yodel Subsea Laminaria Phase 2 Subsea Trunkline System Expansion Project Laminaria Phase 2 Subsea AC12 AC12 AC12 “

Stop, Hold, Recycle

A C 2 Feasibility Review AC3 FDP Review A C 4 FID Review Production Acceptance Date Date D a t e Date Date D a t e D a t e Sponsor: Framing Team: Facilitator: Team Leader: Team: Team Leader: Team: Team Leader: Team: Team Leader: Team: “

Stop, Hold, Recycle

Decision Executive Sponsor: Team: Phase 1 ASSESS Phase 2A SELECT Phase 2B SELECT Phase 3 DEVELOP Phase 4 EXECUTE Phase 5 OPERATE Phase 1 ASSESS Team Leader: Team: Blacktip Platform Otway Platform Otway Subsea Lambert 6 Subsea Lambert 5 Subsea GWA Platform Low Pressure Train

Stop, Hold, Recycle

2nd Trunkline Angel Subsea Angel Concrete Gravity Structure Angel Jackup Pipeline Systems Modifications Echo Yodel Subsea Laminaria Phase 2 Subsea Trunkline System Expansion Project Laminaria Phase 2 Subsea AC12 AC12 AC12

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6.0 Project Integrated Risk Insight (PIRI) Tools

If a development / project team can come up with ‘true’ insights then developing a strategy to exploit them is a viable task. Insight gives meaning to tactics and allows objectives to be set with the knowledge that they have a better chance of being achieved. In addition, for the opportunity and risk that can be quantified and modelled we can have a better level of confidence when classifying an estimate by calculating the accuracy and contingency for complex projects.

6.1 Opportunity and Risk Breakdown Structure (ORBS Navigator)

Hillson (2002) defines the Risk Breakdown Structure as “A source-oriented grouping of project risks that organises and defines the total risk exposure of the project. Each descending level represents an increasingly detailed definition of sources of risk to the project.”

The ‘ORBS Navigator’ builds upon generic versions and is an industry specific risk breakdown structure for oil and gas developments / projects (ref Figure 3 for sample).

Figure 3: ORBS Navigator Equipment • Process • Installation LEVEL 4 Systems Drilling Completions Subsea Structures Facilities Pipeline LEVEL 3 Government Regulator Reputation Industrial Relations Shareholders Other Stakeholders Community Employment Location Structure Competencies Resourcing Execution Plan Knowledge Mgt IT Systems Procedures Processes Joint Venture Participants Contracting Legal Framework Financing Insurance Competition Economy Reserves Production Market Price Market Demand Life Cycle Cost Schedule Scope

Function Technology Health & Safety Sub-surface Surface Operational Infrastructure Environment LEVEL 2 POLITICAL ORGANISATIONAL COMMERCIAL ECONOMIC TECHNICAL LEVEL 1 Equipment • Process • Installation LEVEL 4 Systems Drilling Completions Subsea Structures Facilities Pipeline LEVEL 3 Government Regulator Reputation Industrial Relations Shareholders Other Stakeholders Community Employment Location Structure Competencies Resourcing Execution Plan Knowledge Mgt IT Systems Procedures Processes Joint Venture Participants Contracting Legal Framework Financing Insurance Competition Economy Reserves Production Market Price Market Demand Life Cycle Cost Schedule Scope

Function Technology Health & Safety Sub-surface Surface Operational Infrastructure Environment LEVEL 2 POLITICAL ORGANISATIONAL COMMERCIAL ECONOMIC TECHNICAL LEVEL 1

DEVELOPMENT / PROJECT RISK LEVEL 0

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6.2 Simplified Function Analysis Systems Technique (SimFAST Navigator)

The ‘SimFAST Navigator’ (refer Figure 4 for example) uses a well established technique from Value Engineering to develop the base from which to build up a picture of the scope of work and key cost areas. It is used to prioritise focus areas for assessment and analysis of opportunity, risk and value enhancing initiatives.

Figure

4: SimFAST Navigator

6.3 Key Assumptions Analysis & Testing Navigator (KAAT Navigator)

Royer (2002 p 38) suggests that “assumptions are introduced by organisationa l culture and, when unknowingly present in the project environment, foster incorrect perceptions and unrealistic optimism.”

The ‘KAAT Navigator’ (refer Figure 5) uses a structured approach in relating the level 3 opportunity and risk breakdown items to the main component areas of the scope of work. Assumptions are analysed for inaccuracy, inconsistency and incompleteness. The outcomes are assessed as opportunities or risks. The key assumptions (and alternatives) are tested for stability and consequences.

Figure 5: KAAT Navigator Level 3 ORBS Component Area 1 Component Area 2 Assumptions Testing Assumptions Analysis Component Area 3 Client Direct Costs Level 3 ORBS Component Area 1 Component Area 2 Assumptions Testing Assumptions Analysis Component Area 3 Client Direct Costs TRANSPORT PRODUCT $? MM COLLECT PRODUCT $? MM CONTROL FLOW $? MM Separate Product Produce Reserves

SCOPE LINE _WellheadIsolate _{SCOPE LINE}

Produce, Process and Export Oil

Equipment Equipment Equipment

Maintain Flow TRANSFER PRODUCT $? MM Equipment Hydrate Mitigation Chemicals Lay Commission Valves Maintain Integrity Inspection Maintenance Repair Construct Flowline

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6.4 Forensic Investigation Risk Model (FIRM)

This structured model provides the basis for a rigorous desktop assessment of project objectives and supporting documentation supplemented by project team interviews conducted by an independent review team. Key project areas are mapped against level 3 (systems) and level 4 (equipment) items. Information is extracted to assess the level of project definition as the basis for opportunity and risk analysis.

Complexity Constructability

Technology Other Project Documentation

Interfaces Schedule Cost Estimate Options Scope of work Objectives Complexity Constructability Technology Other Project Documentation

Interfaces Schedule Cost Estimate Options Scope of work Objectives Level 3 ORBS Level 4 ORBS Figure 6: FIRM 6.5 Project Contingency Assessment Model (ProCAM)

The project contingency assessment model is adapted from the expected value method (Mak & Picken 2000; Mak et al. 1998). ProCAM (refer Figure 7) expands upon this method to include the assessment of fixed and variable opportunities, risks and value enhancing initiatives. The outcomes of the key assumptions and analysis testing and the forensic investigation support the decisions in identifying values prior to summation of allowances to calculate contingency.

Figure 7: ProCAM ProCAM FIRM KAAT Expected Cost ProCAM FIRM KAAT Expected Cost

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6.6 Project Relationships and Influence Map (ProRIM)

Key project component areas are allocated level 4 equipment items, design and operating parameters and activities are aligned. Scope, price, duration and complexity variables are mapped against the development / project components identifying accuracy and skew whilst building in value enhancing initiatives.

Figure 8: ProRIM

6.7 Integrated Risk Insight Model (i-RIM)

Scope, procurement items and installation activities are documented. Scope, price, duration and complexity variable distributions are transferred from ProRIM and dependencies created within the model. Monte Carlo simulation is used to calculate the expected cost and allocate a confidence range to that value. Figure 9: i- RIM Installation Procure Scope Installation Procure Scope Scope Price Duration Complexity Dependency Scope Scope Price Price Duration Duration Complexity Complexity Dependency Activities

(Design, Procure, Fabrication, Installation)

Design / Operating Parameters Level 4 ORBS Project Components

Activities

(Design, Procure, Fabrication, Installation)

Design / Operating Parameters Level 4 ORBS Project Components

Value Enhancing Initiatives Skew

Accuracy

Value Enhancing Initiatives Skew Accuracy Scope Scope Price Price Duration Duration Complexity Complexity Influence Relationship Relationship

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7.0 Constraints (pre AC2 /AC3 vs. AC4)

The following points have been identified:

• The tools provide for refinement of scope but no major changes in scope or catastrophes.

• Many risks carried on the register are intangible and cannot be quantified into schedule and / or

cost metrics during the Select Phase 2.

• The relevance of the output values in the opportunity and risk report based on options may be

short lived post AC3.

• It is not any quicker to run the AC12 process prior to AC2 if analysis is required.

• Some Development / Project Teams perceive the independent review to be an audit.

• Analysis is not always possible nor is it warranted pre-AC2.

8.0 Benefits of Process / Tools

The following points have been identified:

• Provides the opportunity to test the effect of buying flexibility of design.

• Allows for consideration of pre-investment.

• Models complexity.

• Considers all aspects of offshore / onshore field development from the Client, Contractor and

Operator perspective.

• Uses consistent methodologies for comparison of configurations / options.

• Identifies key cost drivers.

• Provides an opportunity and risk adjusted capital expected cost and accuracy.

• Develops buy-in and use from internal customers and stakeholders.

• Provides valuable information to Senior Management decision-making.

• Leveraging experiences from other projects.

• Risk report provides observations and recommendations for action pre Final Investment Decision.

9.0 Applicability

Examples of applicability are new onshore / offshore oil and gas facilities, existing oil and gas field expansions, pipeline and onshore terminals, systems modifications, asset functionality, asset life extension, equipment upgrades and technology changes.

The process and tools have demonstrated improved qua lity of the information available to the decision makers from the implementation of a strategic, structured and practical process for a rigorous assessment of complex oil and gas projects. It adds new knowledge and understanding in the area of uncertainty management (value, opportunity and risk). The process has demonstrated capacity to influence opportunity and project realisation processes and practices. It demonstrates advanced professional practice and provides a record for ongoing development of the opportunity and risk analysis ‘body of knowledge’.

10.0 PIRI process and tools life expectancy

The integrated analysis process and tools have an improvement life expectancy for the majority of twenty (20) years from now until the underlying premise to sustainables and renewables is realised and the energy chain is decarbonised with energy alternatives to gas, gas enabled or renewable sources of energy. Notwithstanding, the potential for adaptation to other industries is currently under evaluation.

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interdependently built in. The process is intended to disturb and assist the development / project team in discovering and making decisions on a rational basis instead of dictating.

12.0 Acknowledgements

The material for this paper was extracted from a Doctor of Technology (DTech) thesis in Project Risk Analysis through Deakin University, Victoria, Australia. The findings are based on a selection of ten case studies conducted for three Divisions / Business Units at Woodside Energy Ltd, Perth, Western Australia. The implementation of ‘Risk Insight’™ has demonstrated and proven exposure to AUD 13.2 Billion (disclosed) Development / Projects over a three year period through 50 workshops and 20 assurance reviews.

Acknowledgement is given to Professor Peter Hodgson, Dr Richard White and Dr Julian Mote from Deakin University for their support and advice during the doctoral project.

Thanks are due to Mr Roy Thompson (General Manager, Offshore Projects) and Mr Gary Keenan (Business Manager, NWSSDD Support Services) both of Woodside Energy Ltd, Perth, Western Australia for supporting the trialling and implementation of the development / project risk management and assurance processes.

Contributions from the Woodside Energy Ltd Oil and Gas Business Units are also gratefully acknowledged.

13.0 References

Hillson, D. 2002, 'Understanding risk exposure with the Risk Breakdown Structure (RBS)', PMI Risk

Management Newsletter, vol. 4, no. 5.

Mak, S. & Picken, D. 2000, 'Using risk analysis to determine construction project contingencies',

Journal of Construction Engineering and Management, vol. 126, no. 2, pp. 130-136.

Mak, S., Wong, J. & Picken, D. 1998, 'The effect on contingency allowances of using risk analysis in

capital cost estimating: a Hong Kong case study', Construction Management and Economics,

vol. 16, pp. 615-619.

Royer, P. S. 2002, Project Risk Management: A Proactive Approach, Management Concepts, Vienna,

VA, USA.

Woodside Energy Ltd 1999, Value Improving Practice: Risk Management [Homepage of Woodside

Intranet], [Online]. [2003, May].