A STUDY ON PROJECT DELIVERY SYSTEMS USED
IN THE OFFSHORE OIL AND GAS DEVELOPMENT PROJECTS
AHMAD SHUKRI BIN ABD GHANI
A project report submitted in partial fulfilment of the
requirements for the award of the degree of
Master of Science (Construction Management)
Faculty of Civil Engineering
University Teknologi Malaysia
MARCH 2005
ii
SUPERVISOR’S DECLARATION
“I/We* hereby declare that I/we* have read this thesis and in my/our*
opinion this thesis is sufficient in terms of scope and quality for the
award of the degree of Master of Science (Construction Management)”
Signature
: …………………………………………
Name of Supervisor : Dr. Mohamad Ibrahim Bin Mohamad
Date
: ………………………………………….
iii
I declare that this thesis entitled “A Study On Project Delivery Systems Used in
the Offshore Oil and Gas Development Projects” is the result of my own research
except as cited in references. The project report has not been accepted for any degree
and is not concurrently submitted in candidature of any other degree.
Signature
:
……………………………………….
Name of Candidate :
Ahmad Shukri Bin Abd Ghani
Date
……………………………………….
:
iv
Dedicated to my family and friends
I am grateful to know and to learn from all of you.
v
ACKNOWLEDGEMENT
In preparing this thesis, I was in contact with many people, academicians and
practitioners. They have contributed towards my understanding and thoughts. In
particular, I wish to express my sincere appreciation to my main thesis supervisor
Professor Madya Dr. Mohamad Ibrahim, for encouragement, guidance, critics and
friendship. Without his continued support and interest, this thesis would not have
been the same as presented here.
I am very grateful to my wife and children for their patience and
understandings during my study. I wish to thank you to my childhood friend Ir.
Mohd Khir and wife, for their support and hospitality they provided during my last
semester of the course.
My sincere appreciation also extends to all my colleagues and others who
have provided assistance at various occasions, in particular, Mr. Paul Pandian
(Sarawak Shell Berhad); En. Shamsudin Dosak, En. Wan Azhar Wan Abdullah and
En. Nawawi Husaini (Nippon Oil and Exploration Ltd.); Pn. Rosnah Jamaludin
(Malaysia Shipyard and Engineering). Their views and tips are useful indeed.
vi
ABSTRACT
A project delivery system is a way of organising the contractual relationship and
management of a development project. There is no perfect delivery method for every
project. But, choosing and tailoring the right project delivery method to the needs of
the user is a crucial task. In the offshore oil and gas development project, a project
delivery method would mean organising the contractual relationship and
management of the design, construction, transportation, installation, hook-up and
commissioning of the offshore oil and gas platform facilities. Although the majority
of the practitioners are satisfied with the performance of current approach, i.e. the
‘traditional’ method, a considerable numbers also feel that, in order to overcome
some of the shortcomings, such as, long overall project durations, split
responsibilities and the requirement of greater coordination and control. In theory,
package deals (EPC) approach is capable of overcoming the aforementioned
limitations of the traditional method. However, in practice, the weaknesses of
package deals (EPC) approach are more apparent than its strengths. The main reason
is mainly due to the structure of the industry, which is towards specializations, thus
more suitable for traditional approach. As such, the Bills of Quantities (BOQ)
contract or sometime known as ‘accelerated traditional approach’, would be more
appropriate as alternative for improvement. The approach has the ability to shorten
the overall project duration while maintaining the advantages of the traditional
method. In conclusion, there is no absolute answer for the right choice of project
delivery methods for used in offshore oil and gas delivery projects. In practice,
variations exist across different projects. The choice is very much depends on the
project requirements, particularly the schedule.
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ABSTRAK
Sistem pelaksanaan projek merupakan cara susunatur hubungan kontrak
antara parti-parti yang terlibat, serta pengurusan hubungan sesuatu project. Tiada
suatu cara perlaksanaan yang sempurna dan tepat untuk setiap projek, tetapi
pemilihan dan penyesuaian cara pemilihan projek yang baik dan mengikut keperluan
pengguna adalah penting. Di dalam projek pembangunan minyak dan gas luar pantai,
cara perlaksanaan project bermaksud mengatur hubungan kontrak antara parti-parti
yang terlibat dan pengurusan plan dan reka-bentuk, pembinaan, pengangkutan,
pemasangan dan pelaksanaan kerja-kerja awalan untuk segala kemudahan untuk
pengeluaran minyak dan gas di luar pantai. Walaupun kebanyakan pendapat berpuas
hati dengan pencapaian pendekatan sekarang iaitu secara ‘Tradisional’, namun
terdapat juga sebilangan besar pendapat yang merasakan pendekatan sekarang perlu
dibaiki dan digubah bagi mengatasi beberapa kelemahan, seperti, jangka masa projek
yang panjang, pembahagian tanggung-jawab dan keperluaan kawalan projek yang
besar. Secara teori, pendekatan ‘pakej’ (EPC) seharusnya dapat mengatasi
kelemahan-kelemahan di atas. Namun, dari segi amalan, kelemahan pendekatan
secara ‘pakej’ (EPC)’ adalah lebih jelas daripada kelebihannya. Ini mungkin
disebabkan kerana struktur industri yang menjurus kepada pengkhususan, yang lebih
sesuai dengan kepada pendekatan ‘Kontrak Bill Kuantiti’. Pendekatan ini
mempunyai daya untuk menyinkatkan jangka masa projek dalam masa yang sama
memelihara kelebihan pendekatan ‘tradisional’. Sebagai rumusan, tidak ada satu cara
perlaksanaan kontrak yang sempurna untuk semua projek pembangunan minyak dan
gas di luar pantai. Pilihan yang seseuai bergantung kepada keperluan projek itu
sendiri, lebih-lebih lagi trahadap jadual projk yang telah ditetapkan.
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TABLE OF CONTENTS
CHAPTER
TITLE
PAGE
DECLARATION
DEDICATION
ACKNOWLEDGEMENT
ABSTRACT
ABSTRAK
CONTENTS
CHAPTER 1
CHAPTER 2
INTRODUCTION
1.1
An Overview of Malaysia Oil and Gas Industry
1
1.2
Problem Statement
3
1.3
Objectives of the Study
3
1.4
Scope and limitation of the Study
4
1.5
Research Methodology
4
OFFSHORE OIL AND GAS PLATFORMS
2.1
Introduction
6
2.2
Offshore Oil and Gas Activities
6
2.2.1 Exploration
7
2.2.2 Development Phase
8
2.2.3 Production Phase
8
2.2.4 Summary of Offshore Oil and Gas Activities
9
ix
2.3
Offshore Oil and Gas Development Projects
10
2.4
Offshore Platforms
10
2.4.1 Drilling Platforms
11
2.4.2 Production Platform
12
2.4.3 Quarters Platform
13
2.4.4 Flare / Vent Platform
13
2.4.5 Bridge and Helideck
14
2.4.6 Self-contained Platform
15
Components of Offshore Platforms
18
2.5.1 Jacket
18
2.5.2 Piles
19
2.5.3 Topsides Facilities
19
2.5
2.6
CHAPTER 3
Sequence of Activities in Offshore Oil and
Gas Development Projects
20
2.6.1 Design of Offshore Platforms
21
2.6.2 Construction of Offshore Platforms
22
2.6.2.1
Jacket and Piles Fabrication
23
2.6.2.2
Topsides Modules Fabrication
25
2.6.3 Transportation and Installation
25
2.6.4 Offshore Hook-up and Commissioning
27
PROJECT DELIVERY METHOD FOR OFFSHORE
OIL and GAS DEVELOPMENT PROJECTS
3.1
Introduction
28
3.2
Definition of Project Delivery Systems
29
3.3
Importance of early selection of Project Delivery
Systems
29
x
3.4
Type of Project Delivery Methods used in
Offshore Oil and Gas Development Projects
30
3.4.1 Traditional Method
31
3.4.1.1
Advantages of Traditional
Method
3.4.1.2
32
Disadvantages of Traditional
Method
3.4.1.3
33
Implementation of Offshore
Development Project based on
Traditional Method
3.4.1.4
34
Organisational Relationship
under Traditional Method
3.4.2 Package Deal Method
3.4.2.1
36
Characteristics and scope of
responsibility
3.4.2.2
37
Advantages of Package Deal
Method
3.4.2.3
38
Disadvantages of Package Deal
Methods
3.4.2.4
35
39
Implementation of Offshore
Development Project based on
Package Deal Method
3.4.2.5
41
Organisational Relationship
under Package Deal Method
3.4.3 Bills of Quantities (BOQ) Contracts
3.4.3.1
Implementation
of
43
44
Offshore
Development Project based on
BOQ Approach
3.4.3.2
45
Organisational Relationship
under Package Deal Method
48
xi
3.4.4 Alliancing (Partnering)
3.4.4.1
Benefits of Alliancing
(Partnering)
3.4.4.2
3.6
CHAPTER 4
CHAPTER 5
50
Drawbacks of Alliancing
(Partnering)
3.5
49
51
Selecting the suitable Contracting Strategy
52
3.5.1 Selection Criteria
52
3.5.2 Selection Process
53
Summary
54
METHODOLOGY
4.1
Introduction
56
4.2
Research Process
56
4.3
Identifying Problem Area
57
4.4
Literature Review
57
4.5
Questionnaire Survey
58
4.6
Data Analysis
59
4.7
Summary of Research and Methodology
60
DATA ANALYSIS AND DISCUSSIONS
5.1
Introduction
61
5.2
Response to survey
62
5.3
Survey Results and Analysis
63
5.3.1 Current / Common Approach of Delivery
System
63
5.3.2 Criteria for Selecting Project Delivery
System
65
5.3.3 Limitation of Traditional Method of
Project Delivery System
68
xii
5.3.4 Alternative Delivery System
5.3.4.1
70
Effectiveness of Package Deal
Approach in overcoming the
disadvantages of Traditional
Method
5.3.4.2
71
Performances of Package Deal
Approach in Offshore
Development Projects
5.3.4.3
Acceptability of Package Deal
Approach in Practice
5.3.4.4
74
75
Effectiveness of BOQ Contracts
in overcoming the disadvantages
of Traditional Method
5.3.4.5
77
Performances of Package Deal
Approach in Offshore
Development Projects
5.3.4.6
Acceptability of Package Deal
Approach in Practice
5.4
CHAPTER 6
79
Summary
81
82
CONCLUSION
6.1
Introduction
84
6.2
Major Findings
84
6.3
Conclusion
88
6.4
Recommendation for Future Research
89
REFERENCES
APPENDICES 1 – 2
xiii
LIST OF TABLES
TABLE NO.
5.1
TITLE
Project delivery systems used in Offshore Oil and Gas
Development Projects in Malaysia
5.2
76
Benefits of Bills of Quantities in offshore oil and gas
development projects
5.8
74
Factors contributed to limitation of using package deal
approach in offshore development contracts
5.7
72
Performance of package deal approach in previous offshore
development projects
5.6
69
Extent of package deal approach in overcoming the traditional
method’s weaknesses
5.5
66
Factors contribute to the concern of traditional method of
delivery system
5.4
64
General criteria for selection of project delivery system for
offshore oil and gas development
5.3
PAGE
78
Performance of BOQ contract approach in previous offshore
development projects
80
xiv
5.9
Factors that limits the use of BOQ contract approach in the
offshore oil and gas development projects
81
xv
LIST OF FIGURES
FIGURE NO.
TITLE
2.1
Summary of phases of offshore oil and gas activities
2.2
Typical steel-piled self-contained drilling / production
platform
2.3
34
36
Typical offshore development project schedule based on
package deal approach
3.4
21
Typical organisation relation based on traditional
approach
3.3
17
Typical offshore development project schedule based on
traditional approach
3.2
9
Typical project schedule for offshore oil and gas
development projects
3.1
PAGE
41
Typical organisation relation based on EPCC package
deal approach
43
xvi
3.5
Typical offshore development project schedule based on
BOAQ approach
46
3.6
Typical organisation relation based on BOAQ approach
48
4.1
Five ordinal measure of Likert Scale
58
4.2
Flow-chart of Research and Methodology process
60
5.1
Composition of respondents by organisation
63
xvii
LIST OF APPENDICES
APPENDIX NO.
TITLE
PAGE
1
Response to unstructured interview
92 - 95
2
Data analysis of Questionnaire Survey
96 - 104