"But I didn't plan this"
The cornerstone of construction projects are resources such as time and budget. However, to optimize these resources, a fundamental shift in how we plan projects is needed, which in itself is an investment – the one not many are willing to bargain for. And there lies the paradox that stifles innovation in construction project management.
While working on a project within the Oil & Gas industry, I’ve heard one rather interesting and insightful story.
One of the biggest oil industry company Chevron started the Gorgon gas project, located on Barrow Island in Western Australia. This massive undertaking focused on Class A Nature Reserve and was expected to add $65 billion to the Australian GDP over the following 30 years.
The Gorgon field was discovered in 1980 by West Australian Petroleum Pty Ltd, a joint venture of Ampol Petroleum and Caltex (Chevron). Constructing the world’s largest modular LNG plant began 29 years later. This project is operated by Australia Chevron and is a joint venture of Chevron, ExxonMobil, Shell, Osaka Gas, and Tokyo Gas. Offshore facilities that imply a subsea gas gathering system are located about 65km off the west coast of Barrow Island. Hydrocarbons from the field are transported to Barrow Island by subsea pipelines. Onshore facilities include a three-train, 15.6 million tons per annum LNG processing plant, domestic gas processing plant, two LNG tanks, four condensate storage tanks, marine facilities including a 2.1 km materials offloading facility (MOF) and 2.1 km long LNG jetty, operation and maintenance buildings, workforce accommodation village – Butler Park and carbon dioxide removal and injection facilities. A huge project. An interesting thing about this endeavor is a Carbon Dioxide Injection Project. Proper facilities are injecting and storing
reservoir CO 2 into a deep reservoir unit, known as the Dupuy Formation, which is located 2km beneath Barrow Island. This should reduce greenhouse gas emissions from the Project by approximately 40 percent. All in all – pretty impressive.
In 2009, the project cost was estimated to be US$ 37 billion and it was expected to be operational in 2014. In 2012, cost overrun was 40% (US$52 billion) and in 2014 the cost increase from US$52 billion to US54 billion. Following this, Gorgon started exporting LNG in 2016. The first train started production in march and was running at 65 percent capacity, and the second train started 6 months later, running at almost 90 percent of capacity. Both of the trains suffered a suspension of production, for, as they say, improving the train’s capacity and reliability. In March 2017, a joint venture led by Chevron Australia had begun production of LNG from Train 3. Now, in 2020, Gorgon’s No.2 production train has been shut down for some time due to reparation work on weld defects in its propane heat exchangers, also No.1 and No.3 trains awaiting inspection of cracks in their heat exchangers.
Unpredictable circumstances had a big impact on the outcome of the project. One of the main reasons behind the failure were the strong Australian dollar, poor productivity at the remote Barrow Island site off Western Australia, high labour costs, and unfavourable weather.
For example, there was employee accommodation presented a challenge. Barrow Island is a Class A nature reserve and therefore Australia has enacted a law on the limited number of people who can reside on it. That number was lower than the number of workers that Chevron needed on the construction site, so they came up with an idea of offshore accommodation. They bought accommodation vessels for more than a thousand construction workers. Those vessels were unlike any other in terms of complexity and size, and of course money. This unforeseen situation cost Chevron a lot. Does such a solution pay off for someone? I guess not, but there were no other options. This unfortunate event led to an even greater budget overrun. Storage of material came up as a problem at one point. Since the work was delayed and the new material was arriving, there was less and less space for its storage, which caused several other problems. Also, technical problems with the sealing of valves and corrosion issues that required the replacement of some valves and the replacement of some equipment have delayed CO 2 storage.
Gorgon’s Project is emitting millions of tonnes of CO 2 that should be sequester. For which they will need to pay $55million a year. Probably there were other (smaller) things that got on the way for this project, which is inevitably part of every project.
Encountering difficulties during the project could only level up the stress that is already present and put pressure on employees which are almost always a good recipe for failure at some point. By the failure, in this case, I don’t mean that project will never be done or has some issues which prevent it from being realized, rather than a significant departure from what was originally planned.
Dealing with situations that are not directly related to the project and work on a construction site while all the eyes are upon those, could be a good distractor and could lead you to make mistakes where you are the most reliable.
Every project is different and such as that it requires a different approach while planning. But there are always some omissions that could occur due to unforeseen circumstances. A complex and unusual project is much more susceptible to these risks. That’s why strong management and a long time for planning, going through every possible scenario, thinking of all the risks that could befall one project are bringing you closer to success. Being a few steps ahead of the event gives you full control over the situation. Having a prepared reaction to any trouble that could happen will going to help you to keep your course and focus on your goal.
It usually seems like the opening day of the construction site is the beginning of the project, but it shouldn’t be true. There should be months, or even in some cases years, of planning and elaborating, which of course include decomposition of the project to the slightest parts so that every one of them could be considered and covered.
Mistakes and oversights could happen even to the biggest one, as we can see from the example above. But being flexible and willing to adopt new ways of thinking, learning from your mistakes will only make you bigger.
As Chevron did.