Enormous projects Saudi Aramco now a specialty for

In a global project environment where many large projects struggle to meet their cost and schedule targets, Saudi Aramco has been successfully executing its world class mega projects with ever shorter schedules, and well within budget.

By John Palmer & Timir Mukherjee

Of the five mega projects executed in the last 10 years, two were recipients of the Project Management Institute’s prestigious Project of the Year Award, and one was honored at the 2005 International Petroleum Technology Conference.

Saudi Aramco is currently executing a series of new mega projects that will help meet the world-wide energy demand increases and ensure the company’s leadership position for years to come. Huge new gas processing plants, facilities for capturing valuable petrochemical feed stock, and new crude oil production facilities are all part of Saudi Aramco’s ambitious domestic capital program to increase oil supplies and support.

Collectively, the Hawiyah, Khursaniyah, Khurais, Shaybah and Manifa programs will by 2011 increase revenue to the Kingdom, and promote the local economy by increasing oil production capacity by 2.85 million barrels per day (bpd), sales gas by 1.4 billion cubic feet per day (cfd), ethane production by 450 million cfd, and condensate by 325,000 bpd. All these projects are being executed on demanding schedules and within budget without a signifi cant increase in company personnel while expanding the Saudi Arabian procurement and construction content of the projects.

This section will explain how this is being achieved A key factor in the company’s mega-projects success has been the broad cooperation of corporate Project Management personnel with internal stakeholders and contractors to deliver these projects. The cooperative spirit means that integrated teams resolve technical issues swiftly, optimize scope, streamline design reviews and achieve full control of the quality and schedule. Another major contributor to the success of these projects has been the use of best practices – in value engineering, constructability, planning for startup, benchmarking, scope definition and control, and the formal use of lessons learned – to promote excellence.

Mega Projects

Saudi Aramco is fully dedicated to supporting Saudi Arabia’s role as the leading provider of energy to the world, and history has demonstrated its success. The company will continue to build on its achievements through innovation, solid integration and a strong will to meet future challenges. Today, the company’s mega projects are executed using international engineering firms for preliminary engineering and international EPC (engineering, procurement and construction) contractors for detailed engineering, procurement and construction, in tandem with local subcontractors. Engineered materials are purchased from international suppliers and local manufacturers when possible. Smaller projects (up to $600 million) are now predominantly engineered and built using local contractors.

Mega Project History

Saudi Aramco has a 70-year history of successful project execution. Its facilities tend to be very large compared to similar facilities worldwide. For example, the company’s recent gas-oil separation plants (GOSPs) routinely process 300,000 bpd of crude to produce oil, water, and gas from wells averaging 5,000 – 10,000 bpd each. Pipelines ranging up to 60 inches in diameter transport the oil to terminals.

Aramco Sustaining Capability

Enormous projects were the order of the day early in the company’s history, with constantly pressing needs to build new GOSPs, water injection facilities to maintain reservoir pressure, pipelines, oil stabilization units and export terminals. Major capacity expansions were built in the mid-1970s. Until the late 1970s, projects in Saudi Aramco were managed by operations organizations working through major international EPC companies.

In 1977, Aramco started managing its projects with an internal organization, using Program Management Contractors. The first mega project was a very large gas collection and distribution program – known as the Master Gas System – to eliminate natural-gas flaring at the wellhead and provide Saudi Arabia with natural gas as a commercial resource. At that time, with expenditures running about $3.5 billion per year (2002 equivalent), the Project Management organization had six general managers and 19 departments to manage the gas program and multiple smaller projects.

In 1988, Arabian American Oil Company (Aramco) became Saudi Aramco, as the original U.S. partners were bought out by the Saudi Arabian Government. This change was accompanied by increased hiring of Saudi nationals. In the late 1980s, the company started using lump-sum turnkey (LSTK) contracts for the largest projects, and local contractors for smaller projects. There were no more mega projects until the early 1990s.

Mega Projects – Top 10

Megaprojects in Saudi Aramco are generally defi ned as projects or programs exceeding $1 billion in value. The projects listed here are the company’s largest to date. Khurais Field Development (2005–2009) The Khurais program will build facilities for 1.2 million bpd of Arabian Light crude through a new Central Processing Facility (CPF), the largest of its kind in Saudi Arabia, near the town of Khurais. A new gas plant will treat the associated gas, producing 70,000 bpd of condensate and 420 million cfd of gas. The program will also provide 4.5 million bpd of seawater for injection to support the increased production from Khurais and Ghawar fi elds. The seawater injection pipeline network will consist of 920 kilometers of 48”- 60” pipe. In addition, the program will also increase the existing East/ West NGL pipeline capacity from 425,000 bpd to 555,000 bpd to manage the increased NGL produced at Khurais. Other pipeline work includes all of the oil gathering and water injection distribution and sour gas to Shedgum Gas Plant. Infrastructure work includes an air strip, residential facilities for up to 1,000 personnel, and an industrial complex to handle facility maintenance.

Manifa Field Development (2006–2011)

Under the Manifa program, Saudi Aramco plans to install central facilities at Manifa to process 900,000 barrels per day of Arabian Heavy crude oil. The Manifa Central Processing Facilities (CPF) will include gas and oil separation, wet crude handling, gas compression, gas conditioning, crude oil stabilization, produced water disposal and water injection facilities. The CPF will be designed to process 900 mbcd of crude oil, approximately 120 millions cfd of associated gas and 50 mbcd of hydrocarbon condensate will be produced as a result of this crude increment. The gas and condensate will be processed at Khursaniyah Gas Plant, and the crude will be transported to Ju‘aymah Terminal for export. This program is challenging primarily because of the location of the Manifa field in shallow water in the western Arabian Gulf, requiring a 41-km asphalted causeway and 27 drilling pads in the shallow water.

This shallow bay contains the most prolifi c shrimping area in Saudi Arabia, and all precautions will be taken to maintain this vital resource for the country. The program will include installation of four oil-producing offshore platforms with ten producing and two evaluation wells each, and seven water-injection platforms with ten water injectors each. Electric submersible pumps will provide artificial lift for production, which will be shipped without processing for multiphase fl ow transportation to the causeway and shore-based CPF.

The entire Shaybah oilfield complex had to be self-sufficient, so the scope included a Boeing 737-capable airport. There were two dominant contributing factors to these successes:

  • Communication factors: commitment from Corporate Management; CEO meetings; clear,common goals for the extended project team; lessons learned from previous projects.
  • Organizational factors: formal implementation of best practices; a culture of continuous improvement; project team continuity; and successful contracting strategies.

Many of these factors are applied to the whole project system. With the increased demand for oil, Saudi Aramco has signifi cantly increased its capital program, with six active corporate mega projects and three joint-venture mega projects. The company continues to set aggressive targets.

Factors contributing to success

The Ras Tanura Refinery Upgrade Program, started in 1991 and completed in 1998, was a watershed project in many respects. This $1.3 billion project was the first major expansion of the RT Refinery, which started refining oil in 1947. There were very few personnel in the company that had managed any mega projects, much less a complex refinery project, so experienced industry engineers were hired to help.

The company was also moving away from doing its own inspection to requiring contractors to inspect their own work. The project, though ultimately successful, was completed nearly two years behind schedule. The company learned from a multitude of mistakes on this project, so that in the future it must:

  • Assure that all stakeholders are completely aligned;
  • Provide very clear project scopes and minimize scope changes after the Design Basis;
  • Clearly state the quality requirements in the contract, not in an attachment;
  • Keep management and key technical personnel on the job for the entire project.

Another mega undertaking, the Shaybah project, was started in 1995 and completed just 36 months later, on time and on budget, despite the amazing logistical challenges of building the company’s first major project in the deep desert. Project management professionals learned from success on this project: minimal scope changes; well defined scope; tight communication internally and externally; and alignment of all stakeholders.

The last significant learning step was bench marking. A project system benchmark study of 30 projects was conducted by IPA (Independent Project Analysis) in 2000, showing that the company’s projects were taking 60 percent longer than the industry as a whole and cost almost 30 percent more. The company began to incorporate this learning into change.

Aramco Sustaining Capability

“From 1998 to 2002, several programs were instituted that made the changes permanent and actually changed the culture to one of continuous improvement.”

Improving the Program

Change started with Total Quality Management in 1994, with quality teams and enthusiasm. PM personnel were reluctant to change much until the learning from the two aforementioned projects and the bench marking hit home. From 1998 to 2002, several programs were instituted that made the changes permanent and actually changed the culture to one of continuous improvement:

  •  A lessons-learned system was established in 1995, and added to the knowledge base of project personnel. The company also joined the United States Construction Industry Institute (CII) to take advantage of their best practices and sponsored a chapter of the Project Management Institute in the Arabian Gulf. All of these changes began to increase the level of expertise. Changes have reduced average project schedules from an average of 48 months to 35 months;
  • A Value Engineering Unit was formed after early successes showed that VE could signifi – cantly reduce project costs. Five people were trained and certified, and the unit continues today;
  • Project Cost and Schedule performance targets were instituted in 1999 for on-time and on-budget completions, value engineering and value improvements. Recording value improvements (improvement ideas proposed by team members) acknowledged their contribution and provided incentives for finding ways to save money. This effort was enhanced by the advent of a balanced scorecard (BSC) for projects starting in 2002, when several other performance measures were added;
  • A standard contract schedule for quality, introduced in 2000, significantly improved project quality. Further quality improvements, especially for local construction contractors, were promoted with a project quality measure for the BSC, focusing on adherence to requirements, and in 2002, requiring conformance to ISO 9001 and related documents;
  • After several years of moderate success, asking project teams to implement CII best practices and the lessons learned program, Project Management established a Best Practices group in 2002 to formally implement these concepts. This group of experienced personnel works with project teams in formal, facilitated sessions to optimize the value of selected best practices.

The result of these changes is that average project schedules have been reduced from an average of 48 months (from start of preliminary engineering to mechanical completion) for projects started in the early to mid-1990s to an average of 35 months in 2006. About 50 new projects start each year.

On-time performance has increased from 40–50 percent in the late 1990s to 80–90 percent for the last five years.

On-budget performance (including contingency) has increased from 50–60 percent to 80–90 percent. Project quality has improved substantially, and startup time has decreased to less than one month for almost all projects.

Mega Projects

Safety performance for construction contractors has also improved substantially, with less than one lost-time incident per 10 million man-hours in each of the last four years. It is important to note that this statistic is not comparable with U.S. statistics because there are no OSHA regulations; minor injuries and off-site traffic accidents are often not recorded.

Since 1998, VE studies have saved over $2 billion – roughly 7 percent of project value, and value improvements initiated by the project team or contractors has exceeded $1.8 billion.

Further Improvement

Saudi Aramco conducted its second IPA system benchmark in early 2004 for 30 projects that started during 1999–2003. The results showed improvement from the original study in 2000, with average schedules about 25 percent longer than industry and costs about 15 percent higher. However, it identified multiple specific areas for improvement. Consequently, the company launched a Corporate Capital Program Best in Class initiative with 23 of the 24 Administrative Areas participating. Nine major improvement areas were identified, and the initiatives are all moving into the implementation phase. These initiatives are expected to have a great impact on cost and schedule performance of all Saudi Aramco projects:

  • Greater use of Innovative Contracting Strategies, which focus on converted LSTK, using reimbursable engineering and procurement and then converting to a regular lump-sum contractat 50–70 percent of detailed design;
  • Standardized Component Design. The fi rst effort was a standardized substation design using precast walls and roof with topentry electrical wiring, allowing a slab fl oor and experienced erection subcontractors. This design will save design time and about 3–4 months in substation construction;
  • Increased accountability during the design basis (IPA FEL 1 & 2) now uses a more formalized gate approval process. Since 1998, value engineering studies have saved over $2 billion;
  • Project team integration for groups of small projects based on mega project success in this area;
  • More rigorous review of plotplan layouts and equipment peripherals and instrumentation;
  • Procurement process improvements including standardized procurement systems for local contractors and requisition templates;
  • Construction productivity improvements for local contractors who employ personnel from Third World countries with limited industrial experience. The initial focus is on reducing interruptions;
  • Productivity improvement for local design contractors, focuses on construction feedback to the design process and design quality control;
  • The Integrated Project Technology initiative will increase the use of information technology (IT) for improved project processes, data management and fl ow, and for program management reporting.