Front-end loading, scope definition critical to success of refinery projects
Bring together a project manager, contractor and consultant for a discussion on refining projects, and they will agree on many things, starting with the importance of front-end loading (FEL) and scope definition.
Petrochemical Update hosted experts from each of these three fields for a webinar this week. Kane Hittle, Vice President & Project Manager at HollyFrontier El Dorado Refinery in Kansas, summed up the consesus when he said that FEL and scope definition are “critically important to a project’s success”.
A revamp of an existing unit may require more study and definition than a grassroots unit that is mostly independent of other areas of a facility, Hittle said, but “the importance cannot be understated of front-end loading”.
Patricia Griffith, Senior Expert – Capital Productivity & Infrastructure at McKinsey, and Michael Van Swol, Vice President Project Delivery at Jacobs, both emphasized the importance of execution planning in the FEL phase. Van Swol noted that projects succeed when the execution plan comes under scrutiny, “and then making sure that we’re building the right project and the process scheme is firm, it’s well understood, it’s adopted by the client organization – including operations and maintenance folks.”
He added, “When we don’t do these things properly or we find out during execution that there was a bit of misalignment in either the business drivers or the process scheme or even the execution approach, it just leads to not meeting the expectations of the projects and misalignment and potentially even recycling of work, and that just leads to budget or cost and schedule pressures or extensions.”
Critical parts of project execution
All three speakers agreed that the project-execution plan must include a safety definition. In an existing operation such as El Dorado, Hittle said this would include knowing when different execution phases are going to take place, which contractors are going to be in the area, and when major events such as heavy lifts will be taking place.
Van Swol noted that refining portfolios today are full of turnaround projects and other programs in existing facilities. Another aspect that has traditionally been ignored in the FEL phase but is increasingly becoming a part of the conversation is around staff comfort and convenience, he noted. This includes sanitation facilities, water facilities, lunch rooms, telecommunications and Internet.
Griffith noted that owners are often overly reluctant to interfere with a contractor’s work, preferring to delegate the work in the beginning and then neglecting to follow up. She said owners should be more forthcoming, arguing that their involvement in a project does “not necessarily interfere with the contractor’s work, but rather helps or supports them and enables them to actually deliver projects that are more effective or efficient.”
According to Griffith, another oft-forgotten element of project execution is field productivity. She argued that most owners bring safety into their execution plan but on productivity they “do not really have much of an understanding or interest in increasing the productivity of contractors.”
Using El Dorado as an example, Hittle said productivity could be improved by providing a good definition of what the owner expects to be going on in the area that might affect the project.
“Turnarounds or activities that we know are going to happen during project execution – define those as well as possible and make plans around them. Also, give a good definition of our safety requirements, our work-permitting requirements and anything else we might do to impact the contractor’s productivity – the better the understanding that both parties can have around those things the better can plan for productivity issues."
Choosing the right team
Another point of consensus in the webinar was that choosing the right team is of even greater importance than choosing the contractor itself. Hittle emphasized the importance of getting a commitment early on from experienced personnel, in order to get their input at the stage of front-end definition, and not just later on when the project enters the detailed design and execution phase.
Griffith recommended defining each team member’s role from the beginning, and Van Swol added that it is critical owners fully understand their role in the project.
“Where we see it go wrong is when some clients underestimate the amount of effort or commitment it will take for the FEL phase to be successful; then we see decisions not being made, potential recycling of decisions, and just generally the time it takes to get through the stage-gate process just seems to take longer,” van Swol said.
“What we like to see with our owners is that they fully understand. We like to identify their activities on the schedule so there is little ambiguity of where those commitments lie from a timeframe perspective, and then work towards making sure their obligations are clearly understood and that there’s no confusion around who’s going to do what at what time.”
Selecting the right culture
The other major consideration in selecting an EPC contractor should be around whether there is a culture fit, according to Hittle. El Dorado typically runs projects that are in the $50-$100 million price bracket, and it must ask of an EPC: "Do they perform those types of projects or can they scale up [from expertise in smaller projects] or scale down [from mega-projects] to perform these types of projects as well?”
There is never one best fit, he said, noting that other factors include: size of the project, complexity, and whether it is a revamp or a grassroots project.
According to Van Swol, addressing critical factors for a particular project is equally important to identifying the right skillset. Greenfield projects are a little easier to predict, he said. In projects such as debottlenecking or operational improvements, owners must plan properly for how they are going to engage with the contractor in the field.
“How do we need to plan for that in the FEL phases? And how do we provide a commercial framework to accomplish those goals without having some kind of a contractual breakdown?” he said.