15-Month Executive MBA 2010 Course: Project Management Authors: Abhik Tushar Das (20104001) Ajay Cecil (20104002)

PMC Report: Construction of a Marine Tank Farm

School of Petroleum Management, Gandhinagar, Gujarat, India www.spm.pdpu.ac.in Comments: spm_pdpu_emba10@googlegroups.com

Contents:

The authors would like to thank Mr. ANAND KUMAR SINGH (Energy Risk Professional) for his sincere efforts towards guiding them through the project in terms of Project Risk Management. Abhik Tushar Das / Ajay Cecil

1. Project Charter 2. Project Objectives 3. Technical Details 4. Project Organization Structure 5. Work-Breakdown-Structure (WBS) 6. Network Diagram (PERT/ CPM) 7. Project Risk Management 8. Microsoft Project Applications 9. Conclusions 10. Key Findings

All facts and data used in this report are hypothetical and do not correlate to an actual project. The sole purpose of this report is to demonstrate understanding of concepts learnt in the course titled Project Management in Oil & Gas.

Project Charter:

Trade is an important facet in the economic development of any nation. The ASSOCHAM STUDY ON PETROLEUM TRADE for the period FY 1999-00 to 2006-07 has found that petroleum products exported by India have been growing at a whopping rate of 73 per cent for last three years with the value of oil exports expected to surpass its imports in next six years. Petroleum is emerging as the largest foreign exchange sector in India with 16.2 per cent share petroleum exports are expected to exceed US$ 20 billion in FY07. To facilitate this trade, it is essential to supplement our ports with custom-bonded storage warehouses to reduce ship turnaround time and help exporters reduce inventories at their manufacturing locations thus reducing transaction cost. This project envisages constructing a marine tank farm near the port of NHAVA SHEVA (JNPT) which will cater to the numerous chemical/ petrochemical industries in the MIDC (Maharashtra Industrial Development Corporation) as also to the two PSU refineries (BPCL and HPCL) located at Mumbai. The Marine Tank Farm would be spread over an area of 5acres and have a cargo capacity of 100000 kilolitres with a receiving/ discharging capacity of 200 kilolitres per hour (pumping rate). The tanks farm will be designed to store hazardous liquid cargo (Class-A Storage) and will conform to best-in-class safety standards. The tank farm shall have an access from NH4B which is a spur from NH 4 which links four of the 10 most populous Indian cities - Mumbai, Pune, Bangalore and Chennai. NH 4 constitutes roughly 90% of the Golden Quadrilateral's Mumbai-Chennai segment and hence the tank farm is strategically connected to highly industrialized cities. The tank farm is also in proximity to Mumbai, the financial hub of India and caters to JNPT which is spread over 10 square kilometres (2,500 acres) handling bulk consignments of 7.88 million tons per annum. The port handles 65% of India's container traffic has an average berthing period of 37 hours which is considered very long. Hence the tank farm is expected to cater to high business volumes.

Project Objectives:

The project objectives can be listed as;

Project area: 5 acres

Project location: Off-NH4B (NHAVA SHEVA Port, JNPT, NaviMumbai)

Shell Capacity: 100000 kilolitres

Project Type: Turnkey contract

Project construction deadline: 36 months

Project Cost: US$ 200 million

Project Location:

Project Area

Technical Details:
The technical details for construction can be detailed as; Material of construction is Mild Steel Type of Tank: Floating Roof tanks (20 nos) Diameter of Tanks: 20 meters (largest tank) Height of Tanks: 12 meters (highest tank) Tank foundation: Reinforced Concrete piling with Bitumen and sand surfacing Associated pipelines: 2650 meters (diameter 100mm and 200mm NB) Material of Storage: Petroleum derivatives (non-reactive) Design guidelines: OISD-STD-105/ OISD-RP-108/ OISD-STD-110/ OISD-STD-112/ OISDSTD-113/ OISD-STD-114/ OISD-GDN-115/ OISD-STD-117/ OISD-STD-118/ OISD-STD119/ OISD-RP-149/ OISD-STD-156/ OISD-GDN-166/ OISD-RP-167 Tank construction method: Jack-up method Tank Foundation Details:

Project Organization Structure:

Project Director

Project Manager

Project Management Team

Resource Management Team

Risk Management Team

1. Technical Manager 2. Communication Manager 3. Personnel Manager 4. Project Administrator 5. Mechanical Engineer 6. Civil Engineer 7. Electrical Engineer 8. Draftsman 9. Safety Manager 10.Contractors

1. 2. 3. 4. 5. 6. 7. 8.

Finance Manager Accountant Purchase Manager Transportation/ Logistics Manager IT Manager Systems Manager Metrics Analyst Contract Manager

1. Configuration Manager 2. Scheduler 3. Estimator 4. Senior Consultant (vendor) 5. Senior Consultant (customer) 6. Insurance Consultant

PMIs Standard for Portfolio Management:

Work Breakdown Structure (WBS):

Work breakdown structure (WBS), in project management and systems engineering, is a deliverable oriented decomposition of a project into smaller components. It defines and groups a project's discrete work elements in a way that helps organize and define the total work scope of the project. Preconstruction Activities: 1. Develop Technical Specifications 2. Contractor Solicitation 3. Pre-construction Meetings 4. Acquisition of Permits and Licences 5. Construction Agreements with vendors, suppliers and sub-contractors 6. Land surveys/ Aerial Photographs/ Soil Tests Construction Preparation: 1. Clearing of Site/ Demolition 2. Land excavation/ filling 3. Levelling 4. Ground water removal Resource Acquisition: 1. RFQ/ Tendering 2. Vendor Selection 3. Ordering 4. Delivery 5. Testing 6. Payments 7. Construction Equipment hiring Construction: 1. Excavation 2. Piling 3. Tank Foundation 4. Plate welding Testing and Handover: 1. NDT Testing for Welding joints 2. Hydro test of Tank 3. Handover to operations

Tank Construction pictorial representation:

Some Pictures:

Network Diagram:

Precedence Table: Task No. 1137 138 139 140 141 142 Project Activity Recurring Morning Meetings (Daily Activity) Duration (days) Daily 27 5 15 20 7 6 3 9 4 2 5 60 30 7 3 15 5 7 3 35 4 6 25 4 2 3 1 Phase Predecessor

Preconstruction Activities Develop Technical Specifications Contractor Solicitation Acquisition of Permits and Licences Construction Agreements with vendors, suppliers and sub-contractors 143 Land surveys/ Aerial Photographs/ Soil Tests 144 Construction Preparation 145 Clearing of Site/ Demolition 146 Land excavation/ filling 147 Levelling 148 Ground water removal 149 Resource Acquisition 150 RFQ/ Tendering 151 Vendor Selection 152 Ordering 153 Delivery 154 Testing 155 Payments 156 Construction Equipments Hiring 157 Construction 158 Piling 159 Tank Foundation 160 Plate Welding 161 Testing and Handover 162 NDT Testing for Welding joints 163 Hydro test of Tank 164 Handover to operations Total Project Duration: 126days Activity Nos:

1 139 140 141 141 138 143 146 146 145 139 150 150 152 153 154 144 149 156 158 159 157 160 160 163

Network Diagram (Critical Path Method):

Abbreviations: Critical Path: Non Critical Path: Dummy Path: Node:

Project time (Early/ Late finish):

Project Evaluation & Review Technique (PERT):

Optimistic Time of completion: t0 Most Likely Time of completion: tl Pessimistic Time of completion: tp Expected Time of completion: te
t0 3 12 15 tl 5 15 20 tp 7 21 60 te Std Dev Variance

Task No. Project Activity 138 Preconstruction Activities 139 Develop Technical Specifications 140 Contractor Solicitation 141 Acquisition of Permits and Licences Construction Agreements with vendors, suppliers and sub142 contractors Land surveys/ Aerial Photographs/ 143 Soil Tests 144 Construction Preparation 145 Clearing of Site/ Demolition 146 Land excavation/ filling 147 Levelling 148 Ground water removal 149 Resource Acquisition 150 RFQ/ Tendering 151 Vendor Selection 152 Ordering 153 Delivery 154 Testing 155 Payments 156 Construction Equipments Hiring 157 Construction 158 Piling 159 Tank Foundation 160 Plate Welding 161 Testing and Handover 162 NDT Testing for Welding joints 163 Hydro test of Tank 164 Handover to operations

5 0.666667 0.444444 15.5 1.5 2.25 25.83333 7.5 56.25

5 4 2 3 1 4 20 5 1 12 3 2 2 3 5 22 1 2 1

7 6 3 4 2 5 30 7 3 15 5 7 3 4 6 25 2 3 1

10 7 5 6 5 7 60 8 7 20 6 8 5 7 7 35 4 4 3

7.166667 0.833333 0.694444 5.833333 3.166667 0.5 0.5 0.25 0.25

4.166667 0.5 0.25 2.333333 0.666667 0.444444 5.166667 0.5 0.25 33.33333 6.666667 44.44444 6.833333 0.5 0.25 3.333333 1 1 15.33333 1.333333 1.777778 4.833333 0.5 0.25 6.333333 1 1 3.166667 0.5 0.25 4.333333 0.666667 0.444444 6 0.333333 0.111111 26.16667 2.166667 4.694444 2.166667 0.5 0.25 3 0.333333 0.111111 1.333333 0.333333 0.111111

Here critical path is: 139-140-142-150-152-153-154-155-158-159-160-163-164

Computation of Event Times

Task No. Project Activity Duration (D) 138 Preconstruction Activities 139 Develop Technical Specifications 5 140 Contractor Solicitation 15 141 Acquisition of Permits and Licences 20 142 Construction Agreements with vendors, suppliers and sub-contractors 7 143 Land surveys/ Aerial Photographs/ Soil Tests 6 144 Construction Preparation 3 145 Clearing of Site/ Demolition 146 Land excavation/ filling 4 147 Levelling 2 148 Ground water removal 5 149 Resource Acquisition 150 RFQ/ Tendering 30 151 Vendor Selection 7 152 Ordering 3 153 Delivery 15 154 Testing 5 155 Payments 7 156 Construction Equipments Hiring 3 157 Construction 158 Piling 4 159 Tank Foundation 6 160 Plate Welding 25 161 Testing and Handover 162 NDT Testing for Welding joints 2 163 Hydro test of Tank 3 164 Handover to operations 1 TEi 0 5 0 20 20 20 26 30 30 27 57 57 60 75 80 35 87 91 97 122 122 125 TLi 0 5 49 20 69 69 75 79 79 27 57 57 60 75 80 84 87 91 97 122 122 125 TEj 5 20 20 27 26 23 30 32 35 57 64 60 75 80 87 38 91 97 122 124 125 126 TLj 5 20 69 27 75 84 79 85 84 57 88 60 75 80 87 87 91 97 122 125 125 126 Total Float Free Float Independent Float 0 0 49 0 49 61 49 53 49 0 24 0 0 0 0 49 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -49 0 -49 -49 -49 -49 -49 0 0 0 0 0 0 -49 0 0 0 0 0 0

For Critical Tasks: TF=FF=IF=0

Critical Path
Activity Nos Activity Name 139 Develop Technical Specifications 140 Contractor Solicitation 142 Construction Agreements with vendors, suppliers and sub-contractors 150 RFQ/ Tendering 152 Ordering 153 Delivery 154 Testing 155 Payments 158 Piling 159 Tank Foundation 160 Plate Welding 163 Hydro test of Tank 164 Handover to operations t0 3 12 5 20 1 12 3 2 3 5 22 2 1 tl 5 15 7 30 3 15 5 7 4 6 25 3 1 tp 7 21 10 60 7 20 6 8 7 7 35 4 3 Weightage te 5 15.5 7.166667 33.33333 3.333333 15.33333 4.833333 6.333333 4.333333 6 26.16667 3 1.333333 131.6667 Std Dev 0.666667 1.5 0.833333 6.666667 1 1.333333 0.5 1 0.666667 0.333333 2.166667 0.333333 0.333333 Variance 0.444444 2.25 0.694444 44.44444 1 1.777778 0.25 1 0.444444 0.111111 4.694444 0.111111 0.111111 57.33333

Expected Project Duration (days) Expected Project Variance Activities to be monitored Scheduled completion of project (days) Probability of completion within 120 days

131.6667 57.33333 44.44444 RFQ/ Tendering 120 -1.54079 0.061684 6%

Project Risk Management:

Risk likelihood is the probability that a potential risk factor will actually materialize. It is expressed numerically between: never happen (0) will happen (1) Risk likelihood table: S No. 1 2 3 Qualitative Low Medium High
Composite Likelihood Factor (CLF)
Activity Nos Activity Name Likelihood of Failure Weight-1 (Finance) Weight-2 (Manpower) Weight-3 (Technology) 139 Develop Technical Specifications 0.1 0.05 0.05 0.2 140 Contractor Solicitation 0.3 0.05 0.055 0.05 142 Construction Agreements with vendors, suppliers and sub-contractors 0.5 0.01 0.0025 0.03 150 RFQ/ Tendering 0.5 0.2 0.05 0.05 152 Ordering 0.1 0.0025 0.01 0.01 153 Delivery 0.7 0.05 0.03 0.055 154 Testing 0.7 0.0025 0.25 0.2 155 Payments 0.3 0.05 0.05 0.05 158 Piling 0.3 0.055 0.05 0.25 159 Tank Foundation 0.5 0.2 0.2 0.05 160 Plate Welding 0.7 0.25 0.2 0.05 163 Hydro test of Tank 0.9 0.03 0.05 0.0025 164 Handover to operations 0.5 0.05 0.0025 0.0025 Project CLF (max value) 1 1 1 CLF 0.03 0.0465 0.02125 0.15 0.00225 0.0945 0.31675 0.045 0.1065 0.225 0.35 0.07425 0.0275 0.35

Quantitative 0 to 0.20 0.21 to 0.50 0.51 to 1.00

Composite Impact Factor (CIF)

Activity Nos Activity Name 139 Develop Technical Specifications 140 Contractor Solicitation 142 Construction Agreements with vendors, suppliers and sub-contractors 150 RFQ/ Tendering 152 Ordering 153 Delivery 154 Testing 155 Payments 158 Piling 159 Tank Foundation 160 Plate Welding 163 Hydro test of Tank 164 Handover to operations Project CLF (max value) Cost impact Weight-1 (Financial) Time impact Weight-2 (Schedule) 0.1 0.7 0.5 0.7 0.3 0.5 0.3 0.3 0.1 0.7 0.1 0.7 0.7 0.3 0.1 0.5 0.1 0.5 0.5 0.7 0.5 0.7 0.9 0.7 0.3 0.7 0.1 0.9 CIF 0.28 0.56 0.36 0.3 0.28 0.28 0.22 0.22 0.56 0.56 0.5 0.42 0.34 0.56

Low Minor Likelihood Moderate Significant High

RCR = Impact * Likelihood

0.1 0.3 0.5 0.7 0.9

RCR (Risk Consequence Rating)

0.714

Since the RCR of the project is 0.64, it is a moderately risky project and hence can be executed with proper safeguards. # for detailed calculations, please refer to the attached MS Excel worksheet.

MS Projects Applications:
Project Overview:

Critical Tasks:

Project Resources:

Conclusion:
The tank farm project, which is supposed to be a very lucrative project in terms of future business prospects, faces immediate project implementation challenges in terms of high risk of failure. Also the project envisages to be completed in 4months, would face a delay of a fortnight, where only a remote possibility of completion (6%) within the timeframe announced by the promoters. Although a detailed cost analysis was not undertaken due to resource constraints, it can be safely concluded that adequate safeguards should be implemented to mitigate project risks. In case of cost over runs due to delays in project implementation, a cost-benefit-analysis should be performed to ascertain the benefits of employing more man-hours during for the project vis-a-vis the cost of capital and the opportunity cost of completing the project before time. Contractors can be given commensurate benefits based on early completion of project.

Key Findings:
The key findings in the project can be summarized as; 1. 2. 3. 4. 5. Lucrative business prospects Project deadline would be breached by a fortnight (inclusive of holidays) Project risk is high (RCR=0.714) High risk due to critical activities like Piling & Plate Wielding Mitigation required for the above activities which would significantly reduce risk exposure 6. Manpower deployment to increase at the fag-end of the project (phase- 4/5) 7. RFQ/ Tendering process has to be critically monitored for smooth project execution 8. Due to high project risk, equity should be preferred over debt for capital infusion as high cost of capital (debt) could make the project unfeasable