BEST PRACTICES IN PROJECT MANAGEMENT

ADVANCED SERIES

Managing projects in an economic crisis

What should project managers think of
when implementing projects in an uncertain economic environment

Prepared by: Harjono Zainal Abidin MENTOR Project Management Sdn Bhd Project Managers to Energy Industry Kuala Lumpur, Malaysia URL www.mentor-solutions.com.my E mail harjono@mentor-solutions.com.my

Harjono Zainal Abidin QUORUM Oil & Gas Sdn Bhd

THE FIRST STEP

Planning process
Business environment - Range of external factors that may influence the project Regional & Global scale - political & socio-economic factors

Areas of Uncertainty
Economic Crisis Peak Oil

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MENTOR Project Management Sdn Bhd

STANDARD PRACTICE Framework

PROCESSES KNOWLEDGE AREAS

Refer Project Management Insitute www.pmi.org

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Planning Process Activities

IDENTIFY ANALYSE/FORMULATE

MONITOR/RE-ASSESS

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PROJECT: NEW OIL Co. BUSINESS

Energy projects timeline
30 years experience level?

Work Program & Budget

estimate of the production barrels potential value.$$$

Planning for projects beyond 2010.

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NEW OIL Co. BUSINESS PLAN

Project Life Cycle
Short View
Manpower & Equipment Cost per day Million barrels per day

Long View

EXECUTION
Production
Procurement Construction Installation

Project 1 Oil Field

Resources

PLANNING
Legal & Regulatory Feasibility Studies Exploration Development Engineering

Project 2 Gas Field Project 3 Oil Field

1st Oil
Start Revenue

INITIATION
Entrepreneurship Politics & Economics Funding

CONTROL
Monitoring

CLOSE-OUT
Hand-over to Production

2005
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2010

2011

2012

2013

2014

2015

2010

2020

2030

2040

2050
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QUORUM Oil & Gas Sdn Bhd

PROJECT REVENUE
Million barrels per day

Production

Revenue depends on estimate of Total Recoverable Reserves 800 Million bbls

Total Reserves

And the value of a barrel of oil! 1 Barrel = USD X ? Select Conservative median or most likely plan Based on USD70 per barrel of oil Benchmark Gold USD 30 per gram in 2009.

Million USD

Revenue

Total Revenue

(+) 0
Total Expense Cost CAPEX

(-)
2010
19-Oct-2010

NOTE: As of 15-Oct-2010 Oil USD83 per barrel Gold USD 41 per gram variations to be continuously monitored
2040 2050
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2020

2030

WORK PROGRAM & BUDGET

YEAR
Holding Co EXPENSE Administration Human Capital Regulatory Exploration & Development Maintenance REVENUE Production Oilfield A Oilfield B Oilfield C TREASURY Sovereign Wealth Fund Subsidiaries Refinery Tank Farm Petrochemicals Port Utilities Power Water Communications Other Essential Svs

2010

2020

2030

2040

2050

$$$

$$$

$$$

$$$

$$$

Cost $ Millions

Best Median Worst

PLANNING CASE STUDIES

Enables Management to make well-informed decisions with restraint Not overly ambitious
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SCENARIO: HEAD FAKE

Source:

Oil Head-Fake Update 2010

300
Global Recession Triggers Price Collapse Charles Hugh Smith www.oftwominds.com

2015 USD300 bbl Hope revealed as Illusion Depletion of supergiant oilfields 2013 USD150 bbl Supply drops below demand

250

We are here!
2010 USD85 bbl
Massive stimulus drives demand up Oil exporters pump max to maintain revenue, price collapses

200

2008 USD150 bbl

Global speculation drives price up

Oil Price USD per barrel

150

100

2014 USD125 bbl Hope of new prod & tech miracles

50
2007 USD50 bbl

2009
USD85 bbl Global recession drives price down

2011 - 2012 USD25 bbl Global recession destroys demand

2007
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2008

2009

2010

2011

2012

2013

2014

2015
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MENTOR Project Management Sdn Bhd

PEAK OIL?

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GLOBAL OIL & GAS PRODUCTION

Million Barrels Per Day

Oil Production

Natural Gas Liquids Polar Deepwater Heavy Oil Regular Oil

Oil Price USD per bbl

Source: Association for the Study of Peak Oil & Gas PostPeakLiving.com

80

We are here! 80 Mbpd

60 60 Mbpd 40

20

0 1930
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1940

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050
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MENTOR Project Management Sdn Bhd

Origins of Financial/Economic Crisis

Wars

Oil Price

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ECONOMIC CRISIS?

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