Value Improving Practices PDF

CPDEP and VIPs/BPs
Chevron Project Development

and Execution Process
and
Value Improving / Best Practices
6-Oct-97 1
Value Improving Practices - Definition
Value Improving Practices / Best Practices are tools

to improve project planning and execution.
In conjunction with a structured process like

CPDEP, they can optimize:
Cost
Schedule
Performance
Safety
6-Oct-97 2
CPDEP & VIPs - Impact of VIPS
RELATIVE CAPITAL COST AS A FUNCTION OF FEL
1.2
Original Benchmark
Position 1991
1.1
Relative Capital Cost
1994
1996 1992
FEL Improvement Only
1.0
Industry Average Cost = 1.0
199 2
199 3
199 5
4
199 6
199
0.9
Upstream
FEL Improvement plus VIPs Downstream
Best Practical Good Fair Poor

FEL Rating
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Project Management Vision
High
Random Success Consistent Success

Good Projects Good Projects
Ability to Average Execution Good Execution
Make Right Mid
Decisions
Success Unlikely Random Success
Poor Projects Poor Projects
Poor Execution Good Execution
Low Mid High
Ability to Implement Decisions

in Best Way Possible
6-Oct-97 4
VALUE IMPROVING / BEST PRACTICES
for
CHEVRON PROJECT DEVELOPMENT AND EXECUTION PROCESS
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

Identify & Assess Generate & Select Develop Preferred Alternative Execute Operate &
Opportunities Alternatives Evaluate
Decision Analysis
PEP Workshop
Technology Selection Value Engineering Value Engineering Post Project Business Evaluation
-Process Simplification -Facility Optimization Assessment (GO-36)
Project Facility (IPA)
Objectives Design to Capacity Design to Capacity
-Levels for Equipment -Implement
Equipment & Material Process Hazard Analysis

Alliances
Zero Injury Techniques
Project Standards
Predictive Maintenance
HES Optimization
Reliability Modeling
Energy Optimization
IPA Pre-A/R Assessment
Constructability Review
$ $
D PFD D P&ID D A/R D D
EST EST
Legend: A/R = Appropriation Request GO-36 = A/R Form PEP = Project Execution Planning
D = Decision Point HES = Health, Environment, and Safety PFD = Process Flow Diagram
IPA = Independent Project Analysis, Inc. P&ID = Piping & Instrumentation Diagram
CPDEP Timeline/ACT- 9/15/97

Value Improving Practices (VIPs)
Decision Analysis Constructability Review

Project Execution Planning Process Hazards Analysis
Technology Selection Zero Injury Techniques
Project Facilities Objectives Predictive Maintenance
Value Engineering Reliability Modeling
Design-to-Capacity IPA Pre-A/R Assessment
Equipment & Material Alliances Post Project Assessment (IPA)
Project Standards Business Evaluation (GO-36)
HES Optimization
Energy Optimization
6-Oct-97 6
CPDEP & VIPs - VIP Definitions
Decision Analysis - DA and D&RA are processes to compare and decide among various alternatives by quantifying the
risks and uncertainties inherent in the financial outcomes (i.e., NPV, ROR) of the alternatives.
Project Execution Planning - A tool for strategic planning whose purpose is to maximize the probability of project
success. It facilitates alignment and decision-making, promotes team building, addresses who, what, why, when,
where and how, identifies issues and action items, assures communications, consistency, coordination and control, and
has a high impact on project outcome.
Technology Selection - Starting with the business driver, this process is used to select and evaluate alternative
technologies. Technologies may range from new processing types to equipment selection. Using a selection panel
and evaluation criteria aligned with the business driver, the various technologies are researched, developed and
evaluated .
Project Facilities Objectives - This tool is used to determine the type of facility that is to be designed and constructed.
There are nine evaluation characteristics. These characteristics range from capacity to expandability, and
maintainability to plant life. Each characteristic is placed into one of four categories ranging from category 1 (low
cost) to category 4 (high cost).
Value Engineering - Using a structured creative process, this tool uses functional analysis of the project components to
identify potential areas for improvements and suggests recommended improvement options.
Design to Capacity - This tool optimizes the capacity needed to meet the design conditions stated in the business
objectives. Equipment is identified as one of three levels ranging from level one (low cost) to level three (high cost).
Equipment & Material Alliances - Long-term and mutually beneficial relationship between owner and one supplier /
contractor based on performanc, trust, respect, and commitment. There is no competitive bidding.
6-Oct-97 7
Project Standards - Industry standards are used as the starting point for standards. Then limited Chevron incremental
specifications are added as a supplement.
HES Optimization - The HES Risk Management process is used to identify, assess, and develop plans to maximize value
by managing significant risks. Four risk areas are included: personnel & public health/safety, environmental, financial
(due to HSE incidents), and public concern. Risk reduction measures (prevention or mitigation) are evaluated on a
cost benefit basis to ensure efficient resource allocation.
Energy Optimization - A methodology for optimizing capital cost, operating cost and operability of process unit, utility
system or manufacturing site by identifying the most economical levels of heat recovery and power generation by
integrating thermodynamic analysis, economics data, and conceptual design.
Constructability Review - This tool uses construction knowledge in the planning, design and construction of facilities.
Several formal reviews and checklists are used to ensure issues are identified early.
Process Hazards Analysis - Process Hazards Analysis addresses the various design and safety reviews performed by a
project team. These include the normal design/safety reviews and the design/safety reviews required by regulation.
The process defines a roadmap for performing the various analyses at the appropriate time.
Zero Injury Techniques - Techniques that produce excellent safety performance on construction projects: safety pre-
project / pre-task planning, safety training orientation, safety incentives, alcohol / substance abuse program, accident
and incident investigation.
Predictive Maintenance - Using advances in instrumentation and sensor technology to monitor machinery performance
and make repairs prior to failure. The characteristics monitored include: heat, lubrication, vibration, noise.
6-Oct-97 8
Reliability Modeling - This tool uses computer modeling to simulate the reliability of a facility. The model required data
for mean failure times and repair times for equipment. Use of model canhelp predict operating factors and is used in
the selection of key equipment.
IPA Pre-A/R Assessment - An assessment of project progress and quality, performed in CPDEP Phase 3. Rates project
against IPA database of similar projects. The assessment establishes the FEL Index, recommends project contingency
based on known information, rates project cost estimates, and recommends schedule. The FEL Index is required for
GO-36 on projects over $25MM.
Post Project Assessment (IPA) - A collection of end-of-job data. It is conducted at the end of Phase 4 and i s performed by
IPA. The Downstream assessment uses the IBC data collection form while the Upstream assessment uses the new
IPA data collection form. Assessments help to improve estimates for future projects, and the cost ratios developed
help with Class 0 and 1 cost estimates for future projects.
Business Evaluation (GO-36) - An evaluation of achieved project success, measured against: original project objectives,
economic measures, realized economics, plant performance, and product/price forecasts vs. actual. The GO-36 form
defines the timing and objectives. Normally the first evaluation is in two years or at full production.
6-Oct-97 9
Decision Analysis
Decision Analysis
6-Oct-97 10
Decision Analysis - Definition
DA and D&RA are processes to compare and decide

among various alternatives by quantifying the
risks and uncertainties inherent in the financial
outcomes (i.e., NPV, ROR) of the alternatives.
6-Oct-97 11
Decision Analysis - Abstract
DESCRIPTION: DA and D&RA are processes to compare and decide among various alternatives by quantifying the risks
and uncertainties inherent in the financial outcomes (i.e., NPV, ROR) of the alternatives.
APPLICATION: DA can be applied during any phase of CPDEP when a decision among one or more alternatives is
required. DA is often used during Phase 1 to study viability and identify economic drivers of a concept. Also, DA is
often used during Phase 2 to quantify the risks and select among the various alternatives.
DETAILS: A DA study involves a multi-discipline work team to analyze the problem and recommend a decision. A
decision review board periodically reviews the work team output and provides guidance. The DA process consists of
four key steps which include:
Framing the problem to assess the initial situation.
Sensitivity analysis to determine ranges of outcome for the alternatives.
Probabilistic analysis to determine ranges of outcome for alternatives.
Appraisal to evaluate the quality of the decision and the value of gathering additional information.
A DA study is typically led by an experienced facilitator.
COST & BENEFITS: Numerous DA studies have been conducted by all of the major Chevron opcos. The scope of the
decisions has ranged from small projects costing less than $1 MM, to large capital projects costing several hundred
million dollars overall. Typical duration and cost of DA range from less than one day and a few thousand dollars to
several months duration and exceeding $1 MM.
CONTACT:
M. T. (Mani) Vannan, (CTN) 842-8306, (e-mail: MTVA)
PRODUCTS AND SERVICES:
Decision Analysis Flowchart (SP-14)
ON-LINE RESOURCES:
CPDN Decision Analysis/Decision Quality Page
CPTC E&S Risk Management Page
External On-Line Resources
6-Oct-97 12
Project Execution Planning
Project Execution Planning
6-Oct-97 13
Project Execution Planning - Definition
A Project Execution Plan is a tool for strategic

planning whose purpose is to maximize the
probability of project success.
Facilitates Alignment and Decision-Making
Promotes Team Building
Addresses Who, What, Why, When, Where and How
Identifies Issues and Action Items
Assures Communications, Consistency, Coordination
and Control
High Impact on Project Outcome
6-Oct-97 14
Project Execution Planning - Abstract
DESCRIPTION: PEP is a tool for strategic planning - a means to get all project stakeholders to work as
a team in order to plan and make decisions that will determine the project's path and success. It
facilitates communication and decision-making, defines issues and risks, and defines answers to the
classic questions of Who, What, Why, Where, and How.
APPLICATION: The process creates active involvement of the key stakeholders and the project team in
project planning and alignment. PEP focuses on developing the project strategies that support the
Company's strategic, business, and project execution objectives.
DETAILS: A plan is first produced in the earliest stages of a project and then kept up-to-date, always
reflecting the latest developments and business conditions. It is a guide for everyone involved with
the project. PEP is done with input from everyone involved in the project. The PEP Workbook makes
it easy for a project team to implement a structured process to identify unresolved issues and develop
strategies to address these issues. The strategies then form the basis for the plan details.
COST & BENEFITS: For large projects, the process requires a series of three facilitated workshops.
Experience confirms that the time spent in strategic planning is well spent. Most of the causes of cost
overruns and schedule delays have their roots in issues that can be and should have been addressed
early.
This structured planning process enables the project team to capture these issues early in the planning
process and develop strategies to mitigate the consequences.
CONTACTS:
R. K. (Bob) Fujimoto, (CTN) 842-9298, (email: BFUJ)
N. J. Lavingia, (CTN) 842-9868, (email: NJLA)
Implementation Guide G-10: Project Execution Planning Workbook (G-10)
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Project Execution Planning - Process
Steps in the Process:
1. Frame the Project

2. Planning the Project
3. Planning the Execution Phase
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1. Frame the Project
Business Objectives
Project Execution Objectives
Scope of Work
CPDEP Implementation Plan
6-Oct-97 17
2. Planning the Project
Risk Management Plan

Organization Plan
Milestone Schedule
Funding Plan
Contracting Plan
6-Oct-97 18
3. Define the Plan for Execution & Control
Safety Management Plan
Quality Management Plan
Cost Management Plan
Schedule Management Plan
Information Management Plan
Design Management Plan
Material Management Plan
Drilling/Construction Plan
Start-up Management Plan
Security Management Plan
Special Factors Management Plan
6-Oct-97 19
1. FRAME THE PROJECT
A2 Project Execution A3 Scope of Work A4 CPDEP
A1 Business Objectives
Objectives Implementation Plan
2. PLANNING THE PROJECT
B1 Risk Management B5 Contracting Plan

Plan B2 Organization Plan
B3 Milestone Sched
B4 Funding Plan
3. PLANNING THE EXECUTION PHASE

C1 Safety Management Plan C5 Information Management C6 Design Management Plan C10 Security Management
Plan Plan
C2 Quality Management C7 Materials Management C11 Special Factors

Plan Plan Management Plan
C3 Cost Management Plan C8 Drilling/Construction

Management Plan
C4 Schedule Management
Plan C9 Startup Management Plan
6-Oct-97 20
A. Framing the Project
A2 Project A4 CPDEP
A1 Business Execution Implementation
Objectives Objectives Plan
A3 Scope of
Work
6-Oct-97 21
B. Planning the Project
B1 Risk B2 Organization B5 Contracting

Mgmt Plan Plan Plan
B3 Milestone
Schedule
B4 Funding
Plan
6-Oct-97 22
C. Planning the Execution Phase
C1 Safety C5 Infomation C6 Design C10 Security
Mgmt Plan Mgmt Plan Mgmt Plan Mgmt Plan
C2 Quality
C7 Materials C11 Special
Mgmt Plan
Mgmt Plan Factors Plan
C3 Cost
Mgmt Plan C8 Drilling /
Construction
C4 Schedule Mgmt Plan
Mgmt Plan
C9 Startup
Mgmt Plan
6-Oct-97 23
Technology Selection
Technology Selection
6-Oct-97 24
Technology Selection - Definition
A formal, systematic process that:

Searches for New Technology
Applies to Processes & Major Equipment
Gives Competitive Advantage
Overcomes Not-Invented-Here Syndrome
6-Oct-97 25
Technology Selection - Definition
A formal, systematic process by which an Opco or

project searches for and acquires technology which
may be superior to that currently employed in its
operations.
Technology is acquired from all sources, including

other divisions within the company and from outside
the company.
6-Oct-97 26
Technology Selection - Abstract
DESCRIPTION: This is a formal, systematic process by which a project searches for technology which
may be superior to that currently employed and improves our competitive advantage.
APPLICATION: Ideally, Technology Selection is started very early in Front-End Loading for process
selection. Technology selection can also be used for equipment and materials selection.
DETAILS: The 1994 Corporate Strategic Plan reinforces the importance of technology by stating that the
Corporation needs to "ensure that technology is used to our competitive advantage".
In Front-End Loading, decisions made can have a major impact on the financial success of the
project. Technology chosen without a well thought-out plan can lead to cost overruns, longer
schedules (especially start-up), and lost opportunities in the marketplace.
The basic process involves commissioning a technology selection team which goes through several
basic steps of information gathering, speculation, analysis, development, and presentation.
COST & BENEFITS: Technology selection is developed from discussions with benchmark companies
and internal teams that have used a technology selection process. Some projects have already used a
systematic selection process like the El Segundo Acid Plant or incorporated innovative outside
technology such as Tengizchevroil Demercaptanization.
CONTACTS:
G.W. (Gary) Fischer, (CTN) 842-5514, (e-mail: FISC)
P.C. (Peter) Schmidt, (CTN) 242-5161, (e-mail: PECS)
Implementation Guide G-18: Technology Selection (G-18)
6-Oct-97 27
Technology Selection - Ranking Criteria
TECHNOLOGY SELECTION
POTENTIAL RANKING CRITERIA
(Determined by Project Objectives)
FINANCIAL WEIGHTING TECHINOLOGY WEIGHTING

FACTOR FACTOR
Rate of Return Degree of Commercialization
Net Present Value Process Risk
Life Cycle Cost License Fees
Capital Constraints Cost of Additional Development
Low Cost Producer Time to Implement
Yield Advantage
ENVIRONMENTAL/SAFETY LICENSOR
Emissions Experience with the Technology
Incident Rate Ability to do Total Process Scope
Potential Future Liability Experience with Retrofits
OPERABILITY OTHER
Feedstock/Rate Variability
Product Specification
Ease of Handling Upsets
MECHANICAL
Reliability
East of Maintenance
Utility Requirements
Plot Space Constraints
East of Retrofit
6-Oct-97 28
Technology Selection - Selection Process
CPDEP
Identification
of Asset Needs
Deliver
Technology
Identify Select Identification

Continue Continue
Opportunity Alternative(s) Implement of New
Evaluation Implementation Opportunities
Develop Acquire / develop Assess

Opportunity
Acquire Data Technology Technology Against Targets
Identification
Plan
Recommend Recommend
Evaluation Technology Implementation Implementable Operations
& Scope Plan Plan Technology Review
Select
Identification of Acquire / Execute Operate &
Technology
Technology Develop Technology Measure
Acquisition
Opportunities Technology Plan
Alternative(s)
Plan
Technology Planning Process
6-Oct-97 29
Technology Selection - Selection Process
DECISION
MAKERS
Identification
Identify Continue Select of New
Implement Continue
Opportunity Evaluation Alternative(s) Opportunities
Implementation
Develop
Opportunity Acquire / develop Assess
Technology
OPERATIONS Identification
Acquire Data
Plan Technology Against Targets
AND
Recommend Recommend
DELIVERABLES Evaluation Technology Implementation Implementable Operations
AT MAJOR & Scope Plan Plan Technology Review
REVIEWS
Select Acquire / Execute

WORK Identification of Operate &
Technology Develop Technology
TEAM Technology Measure
Acquisition Technology Plan Plan
Opportunities
Alternative(s)
6-Oct-97 30
Technology Selection - Benefits
Identifies new technologies that will increase

value of project
Identifies technology needs early enough to allow
for developing that technology so it will impact a
project
Provides additional alternatives for consideration
in CPDEP Phase 2
6-Oct-97 31
Project Facility Objectives

Project Facility Objectives - Definition
A practice that establishes what quality facility is

needed to meet business goals.
Defines nine or more quality characteristics of the

facility
Sets criteria for those characteristics
Sets a project philosophy for marginal investment
decision-making, design allowances, redundancy,
sparing philosophy, and room for expansion.
6-Oct-97 33
Project Facility Objectives - Abstract
DESCRIPTION: PFOs establish the characteristics of the facility needed to meet business goals. It sets
criteria for facility reliability, expandability, automation, life, expected stream factor, likelihood of
expansion, production rate changes with time, product quality, and product flexibility. PFO can be
used to set a project philosophy for marginal investment decision-making, design allowances,
redundancy, sparing philosophy, and room for expansion.
APPLICATION: PFOs should be used on projects of any size and initiated prior to "manning-up" the
project.
DETAILS: Overall objectives are set early based on information provided by the SBU funding the work.
Included in these can be conceptualized descriptions of the expected stream factor, facility life,
likelihood of expansion, projected production rate changes with time, product quality, product
demand, feedstock availability, feedstock type, degree of commercialization of the technology, etc.
These determine the redundancy/sparing philosophy, allowances for future expansion or changes,
etc., of facilities necessary to meet the business goals. This process establishes the Project Facility
Objectives. PFOs should be revisited during the latter stages of project development. They should
also be used to orient new members of the project team.
COST & BENEFITS: Initial use of this tool requires only a few hours. PFO help bring all members of
the project team into alignment through discussion and consensus. This helps keep the cost of the
project down by eliminating needless extra conservatism often designed into a project at lower levels.
CONTACTS:
6-Oct-97 34
Communication tool
Should be revisited during subsequent quality/viability reviews.
Include input from all disciplines
Business, engineering manufacturing, technical, human resources,
transportation, safety, etc.
Four design categories
Range from low cost, relatively simple, short-lived plants to high
cost, complex units
The PFO exercise is often done in conjunction with a

Process Simplification Value Engineering Study.
Project Facility Objectives - Characteristics
There are nine or more evaluation characteristics:

reliability likelihood of expansion
expandability production rate changes with time
automation product quality
life product flexibility
expected stream factor
Each characteristic is assigned one of four categories
ranging from Category 1 (low cost) to Category 4 (high
cost).
Generally, a Category 4 plant costs 30% more than a
Category 1 plant
6-Oct-97 36
Project Facility Objectives - Categories
RANGE from CATEGORY I TO CATEGORY IV
CAPACITY Designed for specific capacity Over capacity expected
PLANT LIFE 2-5 years 20 + years
PRODUCT QUALITY Meets specifications at one set of Exceeds specifications

conditions
FLEXIBILITY Little with limited turndown A lot with high turndown
MARGINAL INVESTMENT Not considered even if high Could be less than project payout
CRITERIA payout
EXPANDABILITY Easier, open plot plan

Difficult, tight plot plan
RELIABILITY Sparing to keep plant up, 95% +
Sparing for orderly shutdown operating factor
only, less than 80% operating
CONTROLS factor. Complex, highly automated
MAINTENANCE Simple, labor intensive Good accessibility, no major

maintenance costs contemplated
Little maintenance facilities, high
maintenance costs
6-Oct-97 37
Project Facility Objectives - Table 1
TABLE I
PROJECT FACILITY OBJECTIVES - ONSHORE FACILITIES
PERFORMANCE CHARACTERISTICS OF VARIOUS DESIGN CATEGORIES
Category I Category II Category III Category IV
PROCESS
CHARACTERISTICS
Capacity Designed for a specific capacity with Designed for a specific capacity and Designed for multiple, but similar Designed for multiple feedstocks
one feedstock and one set of operating feedstock with allowances for different feedstocks at a given feedrate. and feedrates as well as start-of-
conditions. No capacity allowance for operating conditions and deterioration of Difficult to replace major equipment run and end-or-run conditions;
deterioration of mechanical integrity or mechanical integrity. If operated outside sized with overcapacity. hence overcapacity expected in
process performance over the life of the stated conditions, capacity may be most cases.
plant. impaired.
Product Quality Designed to meet product specifications Expect to meet product specifications Expect to meet product Designed with assurances that
at given set of conditions only. though when operating outside stated specifications. Difficult to replace product specifications will be met;
conditions may have to compromise on major equipment impacting quality; hence exceed quality requirements
rate or other parameter. No specification designed conservatively. at design conditions.
overcapacity provided.
Unplanned Flexibility No planned (or designed) flexibility to Only minimal flexibility to meet off Moderate flexibility and turndown. Broad flexibility and large
handle off design conditions. design conditions. Additional Additional expenditures necessary to turndown. Future expenditures
Additional expenditures likely as expenditures likely as process utilize full capacity of that probably minimal even to realize
experience gained. Very limited turn requirements change. equipment conservatively designed. most major equipment maximums.
down.
Marginal Investment Not normally considered even when Consider only for high payout. Not less than base project investment Limited by Corporate capital
Criteria high payout. criteria including consideration of "hurdle"; i.e., earning power could
usable plant life.. be less than that of base project.
Long plant life and/or early full
capacity needed.
PLANT
CHARACTERISTICS
Expandability Tight plot space with low first cost Tight, low first cost debottlenecking may Somewhat more open space to Open plot with provision to isolate
orientation. Debottlenecking and be difficult. Consideration may be given improve accessibility and permit sections for maintenance. Room
modifications to improve or change to potential future changes to improve modest changes for debottlenecking for process and capacity
performance may be difficult if possible performance. and product improvement. modifications.
at all.
6-Oct-97 38
TABLE I
PROJECT FACILITY OBJECTIVES - ONSHORE FACILITIES
Reliability Sparing limited to applications Sparing generally limited to applications Spares applied for orderly shut Spares, etc., applied in most
necessary for an orderly shutdown. necessary for orderly shutdown or where down, in services known to need applications to maintain basic
Stream factor is <80%. experience with similar services indicates frequent maintenance and requiring plant operations at or near design
frequent plant outages for repairs are plant outages, or necessary to keep conditions during component
likely. Consideration given to imposing the plant in a "ready" position while maintenance. Industry standard
special conditions on particular equipment repairs are made. Consideration equipment and minimal sparing
as an alternative to sparing, installing given to imposing special conditions applied to sections that are
bypasses, etc. Stream factor on particular equipment as an intended to optimize plant
85-90%. alternative to sparing, etc., or if the performance but do not impact
equipment is non-redundant and basic product out-turn. Stream
critical to the basic plant operation. factor 95+%.
Stream factor 90-95%.
Controls and Data Simple. Intended for operating at Simple. Intended for primarily operating Moderate number of control loops; Complex with sophisticated
Provisions design case only. Heavy reliance on at design conditions. Some recognition of reliance on operators reduced during systems. Less reliance on
operating personnel. No provision for needs for operating modestly outside normal operations. Sufficient operators especially out in the
specified turn down, optimization, or design case. Heavy reliance on operating equipment and data collection for field. Sufficient equipment for
troubleshooting. Minimal data personnel. Connections provided for troubleshooting and frequent continuous, or nearly continuous
collection. temporary hookups of instruments for optimization studies. Extent of this optimization and performance
trouble-shooting/optimization studies. equipment tempered by knowledge studies, including variations of
Minimal data collection. and experience with the process. process variables. Extensive data
collection, handling & retention.
Provision of or for computer
information and/or control.
Maintenance Minimal, if any, maintenance facilities Maintenance facilities installed only Maintenance facilities and Need for temporary maintenance
included in the original plant. where experience with this type of plant accessibility for mobile equipment facilities minimized and
Accessibility for mobile equipment may dictates. Accessibility for mobile provided where experience with this accessibility for wide use of
be limited. Major maintenance equipment may be limited. Major type of plant dictates. Space also mobile maintenance equipment
expenditures may be necessary if plant maintenance expenditures may be provided for difficult maintenance provided. Justifications for
is to continue operation more than 2-5 necessary if plant is to continue operation jobs during normal life of unit. facilities based on anticipation of
years. High maintenance costs. more than 4-6 years. a long plant life. Major
maintenance costs not
contemplated over a long plant
life.
Life 2 - 5 years. 5 - 10 years. 10 - 20 years 20+ years.
6-Oct-97 39
TABLE II
PROJECT FACILITY OBJECTIVES - OFFSHORE FACILITIES
PROCESS
CHARACTERISTICS
Capacity Designed for a specific production Designed for a specific production curve Designed for multiple, but similar Designed for a various production
curve capacity with one reservoir capacity and reservoir stream with some production curve scenarios at a given curves and feedrates as well as
stream and one set of operating allowance for different operating feedrate. Difficult to replace major changing operating conditions;
conditions. No capacity allowance for conditions (i.e. changing GOR, API equipment sized with overcapacity. hence overcapacity expected in
deterioration of mechanical integrity or gravity, moisture) and deterioration of most cases.
process performance over the life of the mechanical integrity. If operated outside
plant. stated conditions, capacity may be
impaired.
Product Quality Designed to meet product specifications Expect to meet product specifications. Expect to meet product Designed with assurances that
(i.e. BS&W, Salt (PTB), H2S) at one However, when operating outside stated specifications. Difficult to replace product specifications will be met;
set of given conditions only (i.e. conditions may have to compromise on major equipment impacting quality; hence exceed quality requirements
pressure, temperature, flow). rate or other parameter. No specification designed conservatively at design conditions.
overcapacity provided.
Incremental Investment Not normally considered after Consider only for high payout items Payout is not less than base project Limited by Corporate capital
Criteria feasibility phase even when high payout before the appropriation request is investment criteria including "hurdle"; i.e., earning power could
since capital money is limited and submitted. consideration of usable plant life and be less than that of base project.
changes in project scope could as long as additional capital is This might be done when longer
negatively impact the schedule. available. plant life and/or early full capacity
is needed.
FACILITY
CHARACTERISTICS
Operating Flexibility No planned (or designed) flexibility to Only minimal flexibility to meet off- Moderate flexibility and turndown. Broad flexibility and large
handle off-design conditions (capacity design conditions. Additional Additional expenditures necessary to turndown. Future expenditures
or product quality). Additional expenditures likely as process utilize full capability of that probably minimal even to realize
expenditures likely as experience requirements change. equipment conservatively designed. most major equipment maximums.
gained. Very limited turn down.
Expandability Tight deck area with low first cost Tight, low first cost oriented Somewhat more open to be able to Open deck area with provision to
orientation. Future debottlenecking debottlenecking may be difficult. improve future accessibility and isolate sections for maintenance.
and modifications to improve or change Consideration may be given to potential permit modest changes for Room for process and capacity
performance may be difficult if possible future changes to improve performance. debottlenecking and product modifications and still maintain
at all. improvement. Once these changes accessibility.
are made then accessibility could be
impaired.
6-Oct-97 40
TABLE II

Reliability On-line installed sparing limited to Sparing generally limited to applications Spares applied for safety Spares, etc., applied in most
applications necessary for safety and necessary for safety issues or where considerations in services known to applications to maintain basic
availability considerations. Uptime experience with similar services indicates need frequent maintenance and facility operations at or near
(facility availability) factor is <80%. frequent facility outages for repairs are requiring facility outages, or design conditions during
Critical spare parts are stocked or likely. Consideration given to imposing necessary to keep the facility in a component maintenance. Industry
readily available. special conditions on particular equipment "ready" position while repairs are standard equipment and minimal
as an alternative to sparing, installing made. Consideration given to sparing applied to sections that are
bypasses, etc. Uptime factor is 85-90%. imposing special conditions on intended to optimize plant
particular equipment as an performance but do not impact
alternative to sparing, etc., or if the basic product out-turn. Uptime
equipment is non-redundant and factor 95+%.
critical to the basic facility operation.
Uptime factor 90-95%.
Controls and Data Simple. Few prealarms, and Simple with some rangeability. Intended Moderate number of I/O's tied to an Complex with sophisticated
Provisions instrumentation provided only for for primarily operating at design integrated sophisticated system; systems. Complete integration of
critical systems and safety. Heavy conditions. Some recognition of needs for reliance on operators in the field all functions to a central control
reliance on operating personnel (use operating modestly outside design case. reduced during normal operations. area (DCS). Minimum reliance
local control panels). No provision for Heavy reliance on operating personnel for Sufficient equipment and data on operators in the field.
optimization or troubleshooting. No straight forward tasks such as collection for troubleshooting and Sufficient equipment for
data collection. starting/stopping pumps manually. frequent optimization studies. continuous, or nearly continuous
Systems are less sophisticated to match Prealarms and PLC (programmable optimization and performance
level of expertise of personnel available. logic controllers) generally installed. studies, including variations of
Facility may not be manned. Connections Extent of this equipment tempered process variables. Extensive data
provided for temporary hookups of by knowledge and experience with collection, handling & retention.
instruments for trouble- the process
shooting/optimization studies. Minimal
data collection; some SCADA
applications; use exterior master control
panels.
6-Oct-97 41
TABLE II

Maintainability Minimal, if any, maintenance facilities Maintenance facilities installed only Maintenance facilities and materials Need for temporary maintenance
included in the original facility. For where experience with specific/critical handling provided where experience facilities minimized and
routine maintenance provide limited systems dictates. More hoist capability with this type of facility dictates. accessibility for wide use of
winch capacity and monorail. No provided. Major maintenance Maintenance Facilities tend to be maintenance equipment provided.
padeye or workshop and minimal layout expenditures may be necessary if plant is permanent with more laydown area, More cranes (2-3 pedestal, >40
area. Major maintenance expenditures to continue operation more than 8-10 workshops, and cranes. Space also ton) installed. Justifications for
may be necessary if plant is to continue years. provided for difficult maintenance facilities based on anticipation of
operation more than 2-5 years. High jobs during normal life of unit. a long facility life. Major
maintenance costs. Maintenance may maintenance costs not
be provided by nearby platforms, contemplated over a long facility
shorebases, or vessels life.
Life 2 - 5 years; facility needed temporarily. 5 - 10 years 10 - 20 years 0-30+ years; to match predicted
production curves.
Compliance Compliance for retrofitted areas. Compliance for retrofitted areas and Compliance for all process Full compliance for entire facility.
Meets corporate (Policy 530) and opco environmental equipment. Implements equipment. Implements Safety in Implements API RP 14J and API
guidelines. API RP 14C. Designs guidelines in all areas. RP 75.
Constructability No formal constructability program. Some concepts used periodically or too Selected concepts applied regularly. All concepts consistently
late to be of use. Limited project support. considered, evaluated, and
implemented. Lessons learned
from previous projects are applied.
Full project support from field
personnel and design, operations,
and maintenance management.
6-Oct-97 42
Value Engineering
Value Engineering
6-Oct-97 43
Value Engineering - Definition
A creative and organized method for optimizing the

cost and performance of a facility.
Improve decision making in design and

construction
Obtain lowest life-cycle cost without reducing
quality
6-Oct-97 44
Value Engineering is a disciplined method used

during design aimed at eliminating or modifying
items that do not add value to meeting the
projects business needs.
or
A creative, organized method for optimizing the cost

and performance of a facility with the goal of
obtaining the lowest life-cycle cost without
reducing quality
6-Oct-97 45
A multi-discipline, systematic, and proactive process

that is targeted at the design itself. The objective
is to use VE to develop an item or facility which
will yield the least life-cycle cost or provide the
greatest value, while also meeting all functional,
safety, quality, operability, maintainability,
durability, and other criteria established for it.
Value Engineering - Abstract
DESCRIPTION: VE is a creative, organized approach to optimizing cost and/or performance of a facility
or system. A study team identifies items which may not add value or are not aligned with the basic
project objectives. VE is conducted during Front-End Loading, CPDEP Phase 3.
APPLICATION: VE, for maximum benefit, should be conducted during process development as process
simplification and later on in FEL for facility optimization. VE studies have been conducted on
projects as small as $100,000. VE has been used on refinery, chemical plant, environmental, and
upstream projects, both domestically and internationally.
DETAILS: A Value Engineering Study brings together a multi-discipline team in which most of the
members are not directly associated with the project at hand. This brings a fresh perspective with no
preconceived paradigms. The study team works under the direction of an experienced facilitator. It
follows an established set of procedures to completely review the project in an orderly manner,
making sure customer requirements are fully understood and reflected in a cost-effective solution.
COST & BENEFITS: For very small projects, VE studies can be conducted in as little as four hours; for
medium-sized projects, two to three days; for large projects, one week. Cumulative benefit to cost is
on the order of 90:1.
CONTACT:
N.J. (Nick) Lavingia, (CTN) 842-9868, (email: NJLA)
J. J. (Jay) MacDonald, (CTN) 842-8197, (email: MJOJ)
P. (Paul) Redden, (CTN) 842-5056, (email: PERE)
Implementation Guide G-21: Value Engineering (G-21)
Value Engineering Study
6-Oct-97 47
Value Engineering
VE is not
Substituting something lower in quality and cost

(Quality often increases)
Saving money by not meeting all requirements
Just doing a good job
Brainstorming
6-Oct-97 48
Value Engineering - Questioning Requirements
Projects often set requirements that exceed real needs
Traditional cost reduction tries to minimize the cost of meeting

these requirements
Value Engineering:
- Questions the project requirements
- Advises the project of the high cost of those requirements
- Proposes cost-saving alternatives
Value Engineering is a partnership
- Engineer and customer are partners in creative thinking
Value Engineering - Facilities Example

6-Oct-97 50
Value Engineering - Facilities Example

6-Oct-97 51
Value Engineering - Construction Example

6-Oct-97 52
Value Engineering - Construction Example

6-Oct-97 53
Value Engineering - Examples of VE Results
VALUE
WORK OF WORK POTENTIAL SAVINGS
PROJECT REVIEWED REVIEWED SAVINGS ACCEPTED COMMENTS
Mobile 863 Offshore Platform $85MM $5.1MM $1.0MM VE performed too late
Facility Topsides
Tengiz Project KTL-3 On-shore $690MM $160MM ? Project on hold

Facilities Facilities
(CPDEP Phase 1-2)
Minas Phase 3R On-shore $92MM $10MM ? Project Team studying

Waterflood Project Facilities recommendations
(Caltex)
Alba Phase II Facilities $50MM $9MM ? Recommendations

Expansion Under Review
Okan Upgrade Offshore

Platform $50MM $4.8MM $1.2MM New ideas adopted
Expansion
Saudi Aromax Offplot $300MM $60MM $38MM Project approval

(CPDEP Phase 2-3) Offsite pending
Green Canyon 205 Topsides $60MM $6.7MM ? Recommendations

Under Review
6-Oct-97 54
Value Engineering - Study Types
Process Simplification Value Engineering

Review main processes
Performed after conceptual
Facilities Optimization Value Engineering

Reviews P& IDs, equipment and layout
Performed after feasibility
Construction Value Engineering

Reviews detailed construction methods and specifications - aim to
reduce construction time, improve quality, reduce materials cost,
increase productivity
Performed in Phases 3 and 4
Value Engineering - The 7 Step Process
1. Information
Understand project
Determine customers needs
Define basic function (Functional Analysis)
Define areas of opportunity (Cost model)
2. Idea Generation
Brainstorming (creative thinking)
Develop all alternatives
3. Narrowing
Brief elaboration of ideas
Disposition decision for each idea
6-Oct-97 56
4. Evaluation and Selection

Review Advantages & Disadvantages
Choose best ideas
VE Study ends and Project Team takes over
6-Oct-97 57
5. Development
Prepare detailed design and estimate of best alternative
6. Decision
Present best alternative to decision-makers
Help make decision
Define basic function (Functional Analysis)
Define areas of opportunity (Cost model) } Updated
7. Implementation
Obtain commitment to implement best alternative
6-Oct-97 58
Step 1
Information
Questions Step 2
Idea Generation
What is it?
What does it do? Questions Steps 3 & 4
Steps of
What must it do?
What are the basic What else will do
Narrowing, Evaluation
& Selection Value Engineering
and secondary the job? (perform Questions Step 5
functions? the same basic Development
function)? What does each cost?
Will each perform the Questions Step 6
Techniques
basic function(s)? Will it work?
Decision
Techniques
Use good human Will it meet all the Step 7
relations Techniques Techniques
Use good human requirements? Implementation
Get all the facts relations What do I do now?
Get information from Eliminate! Use good human Make presentations
What is needed? Align with project
the best sources relations Who has to approve - Written proposals plans
Try everything
Obtain complete Put $ on each idea it? - Oral w/ illustrations Implementation
Over-simplify
information Evaluate by (Brief & pertinent)
Modify and refine What are the imple-
Define the function(s) Use creative comparison mentation problems? Explain before and
Perform function Refine ideas after
techniques What are the costs?
evaluation Use services of What are the savings? Explain advantages

(brainstorm)
experts and disadvantages
No negatives allowed Techniques
Use your own Present facts quickly,
judgment Use good human concisely & convinc-
relations ingly
Gather convincing Explain impleme-
facts mentation problems
Work on specifics, Suggest further meet-
not generalities ing follow-up!
Translate facts into Remove road blocks
meaningful actions Use good human
Prepare summary relations
proposal
Develop alt. plans
VALUE ENGINEERING PROCESS
IDEAS
DESIGN SUGGESTIONS IMPLEMENT
PROS
DROPPED IDEAS STUDY FURTHER
COMBINED IDEAS DROP
FUTURE IDEAS OTHER
More Discussion CONS
&
SPECULATE
CHOOSE
WINNERS
NARROW EVALUATE
6-Oct-97 60
Value Engineering - Paradigms
Paradigms Create Poor Value:

Weve always done it that way!
We dont have enough time or budget to really study the
problem any further
Those making decisions are not knowledgeable of all aspects
of a process or life cycle
Stakeholders/users have not been consulted
We must satisfy some key executives whim
The scope/objective was never clearly defined
Decision makers are afraid of legal implications of being
innovative
Value Engineering - Terminology
Function of a component or design:

- Its purpose or intended use
- Customer requirements (Needs vs. wants)
Value
- What customer gets for their money
- The ratio of cost to worth
Worth
- The minimum cost to achieve the customers
essential requirements
Value Engineering - The Value Equation
Cost
Value =
Worth
What is the Function of the Pencil?
What is the function of the Eraser?
Wooden
Pencil
CHEVRON
What is the function of theWood?
What is the function of the Lead?
6-Oct-97 64
FAST Diagram - Pencil Example
Component Function(s) B S Cost
Pencil Rp400
Eraser Rp50
Band Rp30
Body Rp90
CHEVRON
Paint Rp30
Logo Rp20
Lead Rp180
Chalk Rp50
6-Oct-97
96-06-10 65 28
FAST Diagram - Definition
HOW WHY
DESIGN
CONSTRAINTS
CRITICAL
OUTPUT INPUT
BASIC SEQUENTIAL PATH
HIGHER FUNCTION FUNCTION LOWER
FUNCTION FUNCTION
CONCURRENT
OR
SAME
LATER PRIOR SUPPORTING
SCOPE TIME SCOPE
LIMIT FUNCTION LIMIT
Identify functions, not equipment.

Breaks large complex problem down into manageable pieces to facilitate evaluation.
Good basis for brainstorming.
Look for non-value adding steps; Functions that you Do and then Undo:
Cool off, then heat.
Solidify, then melt.
Let down, then repressure.
Dissolve, then dry.
Store, then retrieve.
Use in conjunction with cost information.

& !

& & &
"#$""
%% # !

&

6-Oct-97 67
($ !

$
-,**
#%
#'
$(
#'
'
#' #'
)*** +,** ,**
#''
$''"
.****
6-Oct-97 68
Value Engineers Ask
PRIMARY
Can it be done differently?
SECONDARY: ESSENTIAL
Is it really needed?
SECONDARY: NON-ESSENTIAL
Is is really needed?
Can we afford it?
Does it add value?
FAST Diagram - Gravier HVAC Example
F.A.S.T. DIAGRAM
Gravier Street HVAC Project
HOW? WHY?
$2,600M
$1,600M $2,000M $510M $85M
Tenants Cool
Provide Distibute Transport Induce HVAC
Work Air
Heat Air Air Outside Needed
Air
$1,000M
$1,600M
Control $70M $40M $35M
Temp Provide Filter Air Mix Exhaust

Cooling Air Air
$130M
$130M
Return
Pump Air
Chilled
Air
F.A.S. T. = Functional Analysis System Technique
6-Oct-97 70
FAST Diagram - N. Nemba Example
F.A.S.T. Diagram
North Nemba Extension - Alternative 1
Profit Scope of Project Scope of Project Opportunity
Produce
Transport Pressurize Separate Cool Well
Ship Oil to North
Oil Oil Oil/Gas/Water Fluids
S. Nemba Nemba
$7000 $900 $890 $1300
Reservoir
Import Gas
Pipeline=$7000 Clean Prod
Scrubber=$87 Water
$190
Compress
Transport Compress Flare Gas
Dehydrate Gas Transport
Conserve Injection Gas Jacket=$
Gas IP=$8850 Well Fluids
Gas Gas HP=$16821 Tips=$260
$1880 LP=$500 $
$
Engineering
Generate Provide Provide House Support
$
Power Services Utilities Workers Topsides
$6590 $1860 $2616 $4000 $72,000
Company
Expense
$
Project Objectives:
Prod. Capacity = 40,000 BOPD, 145 mmscfd Project Costs:
Spare Capacity = about 25% Major Equipment Cost = $44 MM
Injection Capacity = 200 mmscfd @ 5500 psig Project Value Reviewed = $150 MM
10% safety factor on Production Curves Total Project Value = $350 MM
Reliability: Oil = >95%, Gas = >90%
Life = 10 to 20 years
Complete project in 27 months after AFE - Feb 2000 July16, 1997
Economics: 20% ROR,
6-Oct-97 71
FAST Diagram - Big Oil Example
F.A.S.T. DIAGRAM
BIG OIL PROJECT
How Why
MEET COLLECT
REMOVE STABALIZE SEPARATE
CRUDE PIPELINE WELL
MERCAPTANS CRUDE LIQUID/VAPOR
SPECIFICATIONS PRODUCTION
6%
DESALT COMPRESS
CRUDE VAPOR
TREAT
SWEETEN
PRODUCED
GAS 13%
WATER
DESIGN CRITERIA
PROJECT FACILITY
OBJECTIVES
DRY
9 ITEMS
GAS
K.I.S.S. 19%
FRACTIONATE
LIQUIDS
REUSE BOUGHT
EQUIPMENT
CLAUS - 22%
TREAT
SCOPE MEET NEW SCOT - 15% ACID GAS 38% SCOPE
LINE PIPELINE SCHEDULE SULFUR HANDLING - 1% LINE
6-Oct-97 72
FAST Diagram - Example
6-Oct-97 73
Value Engineering - Savings Opportunities
Process Opportunities
Heat then Cool
Pressurize then Depressure
Raise then Lower Elevation
Condense then Evaporate
Freeze then Thaw
Speed up then Slow Down
Store then Deliver
6-Oct-97 74
Value Engineering - Software Tools
1. Value Engineering Facilitation And Reporting

Assists with idea collection and reporting
Microsoft Access 7.0
2. MS Excel Spreadsheet
Simple to use
Note: Software is NOT a substitute for good facilitation
6-Oct-97 75
Design-to-Capacity
Design-to-Capacity
Design-to-Capacity - Definition
A systematic process to evaluate the maximum

capacity of each major piece of equipment. Helps
prevent the compounding of safety factors.
Eliminates Excess Capacity (Fat)

Specifies Design Factor
Reduces Equipment Cost
Design-to-Capacity - Abstract
DESCRIPTION: Often, equipment is specified with a "design factor". These factors can result in
oversized equipment or systems and can be compounded as the design passes from engineering
discipline to discipline and on to suppliers. These factors add investment cost but may not provide a
return if this "extra capacity" is not fully utilized. This Value-Improving Practice (VIP) reduces the
"excess fat" that does not meet project objectives.
APPLICATION: Design-to-Capacity can be applied to grass root and retrofit projects, process plants, off
plot facilities, and production facilities.
DETAILS: Design-to-Capacity is a two-step process. The first step is to determine the overall facility
design factors early. The second step is to choose how much design flexibility is required for each
major piece of equipment or system. Different equipment types or parts of the plant may be built to
different levels of conservatism. This step is done after the preliminary process flow diagrams are
developed.
COST & BENEFITS: Design-to-Capacity can save up to 15% of the capital cost. In the past, this costly
over capacity was automatically built in without any discussion or input from the business side. The
over capacity adds investment cost but may not provide a return if this "extra capacity" is not fully
utilized.
CONTACTS:
Implementation Guide G-07: Design-to-Capacity (G-07)
6-Oct-97 78
Design-to-Capacity
Often equipment is specified with a design factor
Design factors can result in oversized equipment or

systems.
Design factors can compound as the design passes from
one engineering discipline to another and then on to
suppliers.
Design factors add investment cost and may not
provide a return if the extra capacity is not fully
utilized.
6-Oct-97 79
Design-to-Capacity
Saves capital costs

Forces an examination of capacity and
expandability
Reduces excess capacity to cover sloppy design
Facility may not have extra flexibility or
robustness to handle variations in operations
6-Oct-97
96-06-10 80 43
Design-to-Capacity
LEVEL OBJECTIVES/CHARACTERISTICS
LEVEL 1 LEVEL 2 LEVEL 3

Build a facility that only needs to Build a facility with just Build a facility with additional
operate at well defined, enough flexibility to operate flexibility to operate at the
unchanging conditions over its easily at nameplate capacity for limiting design case, or handle
total life. This tighter, but less most design cases. It may future unknown operating
capital expensive design might require minor debottlenecking requirements. There is high
take longer to start-up or could to handle unforeseen variations assurance that the facility with
require minor debottlenecking to in operating conditions or to meet and exceed the nameplate
reach nameplate capacity. This operate above nameplate. requirements. The facility will
facility could have trouble be easier to start-up, but will
handling unforeseen operating have a higher capital cost.
conditions not considered in the
original design.
The incentive to build this type of The incentive to spend the The incentive is that the excess
facility is the lower capital cost. It extra capital cost is to provide capacity will allow for quickly
is ideal for situations where the additional flexibility for future adapting to changing operating
operating conditions are well overcapacity or changing conditions. Excess capacity is
defined and not likely to change. conditions. planned for.
6-Oct-97 81
Design-to-Capacity - Overall Level Objectives
LEVEL 1 LEVEL 2 LEVEL 3
OBJECTIVE/ Build a facility that only needs to operate Build a facility with just enough Build a facility with additional flexibility that
CHARACTERISTICS at well defined, unchanging conditions flexibility to operate easily at nameplate can operate at the nameplate capacity required
over its total life. This tighter, but less capacity at most design cases; would at the limiting design case, plus future unknown
capital expensive design might take probably require minor debottlenecking to operating/feed/product requirements. There is
longer to startup or could require minor handle unforeseen variations in high assurance that the facility will meet
debottlenecking to reach nameplate feed/product specifications or to provide nameplate capacity, be easier to operate and
capacity. This facility could certainly minimal overcapacity. startup, but will require more capital.
have trouble handling unforeseen The incentive here to spend a little more The incentive here is that capacity requirements
processing conditions not considered in money initially is that some additional will be met quickly over varying process
the original design. flexibility can pay out, as in providing conditions and potential overcapacity is
The incentive to build this type of facility some future overcapacity which could be provided; however, this additional flexibility
is that it is less expensive and the risk is utilized. costs more initially.
low of not eventually making nameplate
capacity because processing conditions do
not change and are well defined.
CONSIDERATIONS: Range of feed stock variations does not Product rates are sensitive to feed stock Range of feed stock variations may have a
FEED STOCK/PRODUCT have significant impact on throughput and quality/yield or conversion. The likely significant impact on throughput and yield. The
QUALITY/ yield. Feed stock is available and not combinations are predictable and can be design basis can bracket the anticipated
YIELD/CONVERSION expected to change over the facility life. incorporated into the design. operating cases; however, there is sufficient
Or product quality/yield/ conversion is Alternatively, the products can be blended likelihood of additional cases that are not
secondary to throughput and does not or are processed further to meet product predictable at this time that have to be
significantly effect profitability. specs without the need for additional accommodated. This uncertainty warrants
process flexibility designed into the additional design conservatism in the form of
facility. larger design factors.
DEGREE OF
COMMERCIALIZATION Proven process. New Process
FINANCIAL Potential loss is low if capacity or product High potential loss if capacity objectives are not
quality is not met. met.
DESIGN GUIDELINE Design all major equipment with no Design all major equipment with modest Design all major equipment with liberal
additional capacity design factors to just capacity design factors (10%) to ensure capacity design factors (25%) to ensure that the
meet 100% of the process requirements. that the equipment operates at the limiting equipment operates over a broad range of likely
conditions and somewhat beyond. conditions and provides for future unknown
The design factors are intended to allow flexibility.
for some uncertainties in physical The design factors are intended to allow for
properties as well as process variations. large uncertainties in physical properties and
process variations.
6-Oct-97 82
Design-to-Capacity - Level Objectives for Equip.
Table to come.
6-Oct-97 83
Equipment & Material Alliances
Equipment & Material Alliances
6-Oct-97 84
Equipment & Material Alliances - Definition
Long-term and mutually beneficial relationship

between owner and one supplier / contractor based
on:
Performance
Trust
Respect
Commitment
No Competitive Bidding!
6-Oct-97 85
Equipment & Material Alliances - Definition
A long-term business commitment between a supplier and customer

dedicated to lowering total costs and/or increasing revenues. It is
characterized by joint problem solving and process improvement, high
levels of trust, respect, cooperation, and mutual benefit.
An Alliance must also include the following elements:
Shared Business Objectives

Strategies to Accomplish the Objectives
Metrics to Measure Progress
Ongoing Customer/Supplier Team Work and
Communication
6-Oct-97 86
Equipment & Material Alliances - Abstract
DESCRIPTION: "Equipment Supplier Alliances" (ESA) is defined as Chevron's project-specific, long-term,
mutually beneficial relationship with one qualified supplier of highly engineered equipment. With this process
the supplier is involved "up front," developing a long-term association based on performance, trust, respect, and
commitment.
APPLICATION: Can be used for highly engineered equipment, larger orders of "like" equipment/materials, and
critical path equipment/material.
DETAILS: Most equipment is purchased by traditional methods, i.e., competitive bid. ESA is a relatively new way of
acquiring engineered equipment for a specific project. An expert team of Chevron personnel, suppliers, and
contractors produces a well-designed, well-scoped, and cost-effective specification. Working with suppliers
during the project's early planning stages translates into:
a) acquiring better equipment and systems design, b) meeting critical path equipment deliveries, and c) ensuring
quality fabrication and installation of equipment.
An innovative approach to the purchase of highly engineered equipment, ESA's roots lie in the common goal of
Chevron: continuous improvement.
COST & BENEFITS: There is some up-front effort to identify the equipment or materials where this process is
effective and the apply the ESA process. In all cases where this process has been used, there have been
significant savings that far outweigh the cost of implementation.
CONTACT:
G.W. (Gary) Fischer, (CTN) 842-5514, (e-mail FISC)
D. S. (Doug) Moore, (CTN) 842-9730, (e-mail: DSMO)
K. C. (Ken) Ettinger, Team Leader, CRTC Quality Assurance, (CTN) 242-3731, (email: KCET)
CSQIP Manual For a copy, contact W. L. (Bill) Desmond, CTN 894-1208, (email: BLDE)
Implementation Guide G-08: Equipment Supplier Alliances Manual (G-08)
6-Oct-97 87
Equipment & Material Alliances - Benefits
Mutually Beneficial Relationships

Long-term Commitment
Best Suppliers
Lower Total Cost of Ownership
Cost Savings
Improved Efficiencies
Increased Opportunity for Innovation
Continuous Improvement
6-Oct-97 88
Total Cost of Ownership - Iceberg Model
More easily
Delivery
identified Engineering Costs
Procurement Costs
Construction Costs
Inspection and Testing
Permitting Costs/Fee
Op Ex Bid prep costs

Legal Costs Late drawings Training Costs
Down Time Engineering redesign Maintenance Costs
Obsolescence Shop quality Lost Sales
Switching Customers Equipment delays Environmental Accidents/Fines
Performance Problems Construction delays Inventory Costs Settlements
PSM documentation Poor Plant Layout
Change orders
Equipment interface
6-Oct-97 89
Equipment & Material Alliances - Process Steps
Perform Internal
Business Analysis
Assemble
Pre-Kickoff Data Orient The Team
And Information
Supplier
Selection
Phase
Perform Industry
Analysis
Negotiate And Evaluate
Establish Criteria
Award Agreement Suppliers
Process
Improvement Form Alliance Develop Detailed Measure And Report
Execute Plans
Phase Improvement Team Business Plans Progress
6-Oct-97 90
Project Standards
Project Standards
6-Oct-97 91

A process to acquire and use project standards that

minimize project cost and improve
communications between project engineers and
pre-qualified vendors.

DESCRIPTION: Engineering standards and specifications can affect manufacturing efficiency, product
quality, operating costs, and employee safety. The cost of a facility is increased by the application of
traditional Chevron specifications that exceed the actual needs of the specific facility to be designed.
APPLICATION: These standards are applicable to all projects and locations.
DETAILS: The Minimum Project Standards are comprised of three types of documents: Supplemental
Information for API specifications, Chevron Specifications, and Data Sheets.
Where an industry standard exists, Chevron presents requirements as a supplement, including a
recommendation for Chevron's selected owner preference.
Where no industry standard exists, Chevron creates stand-alone documents.
Minimum Project Standards are different from the "gray" manuals. They were developed for
technical personnel who have a working knowledge of the subject to help minimize vendor
inspection and testing requirements. As such, it is assumed that vendors are pre-qualified and that
their quality assurance programs have been endorsed by Chevron.
COST & BENEFITS: The development of these standards were to eliminate over- and under- designed
equipment and facilities, optimize Life Cycle Costs, and prevent incidents. Equipment purchased
using Minimum Project Standards costs 3-5% less than traditional Chevron standards.
CONTACT:
F. M. (Fred) Schleich, (CTN) 242-7230, (email: FMSC)
Implementation Guide G-14: Project Standards (G-14)
6-Oct-97 93
Project Standards
Engineering Standards & Specifications Affect:
Manufacturing Efficiency
Product Quality
Operating Cost
Employee Safety
Increased cost results from standards that exceed

actual needs.
6-Oct-97 94
Project Standards
Chevron is taking steps to align company

specifications with industry standards:
Reduce challenges associated with one-off equipment
Take advantage of industry experience
The initiatives presently working are:

Capital Projects Sourcing Team
Downstream Minimum Project Standards
CRINE initiative in U.K.
6-Oct-97 95
HES Optimization
HES Optimization
6-Oct-97 96
HES Optimization - Definition
The HES Risk Management process is used to identify,

assess, and develop plans to maximize value by managing
significant risks. Four risk areas are included:
Personnel & public health/safety
Environmental
Financial (due to HSE incidents)
Public concern
Risk reduction measures (prevention or mitigation) are
evaluated on a cost benefit basis to ensure efficient
resource allocation.
6-Oct-97 97
HES Optimization - Abstract
DESCRIPTION: The HSE Risk Management process is used to identify, assess, and develop plans to maximize
value by managing significant risks. Four risk areas are included: personnel & public health/safety,
environmental, financial (due to HSE incidents) and public concern. Risk reduction measures (prevention or
mitigation) are evaluated on a cost benefit basis to ensure efficient resource allocation.
APPLICATION: HSE Risk Management is performed during process design and site selection to identify HSE risks at
a high level. Risks are screened and quantified for use in deciding between project alternatives. During front
end loading, Risk Management tools are used to further define and evaluate individual HSE risks.
Recommendations for risk reduction are prepared and evaluated using cost benefit analysis. During execution,
risk management is used to perform HSE evaluation of changes in the project.
DETAILS: HSE Risk Management is a suite of tools and processes that starts with Event Identification to allow
proactive, rather than reactive, risk reduction. Risks include air, waste, water, groundwater, ecological, safety,
fire and health. Tools include structured brainstorming (What If), checklists, design reviews and inherently safer
design criteria. Risk Assessment allows a project to screen out low risk events to concentrate resources on
those that are truly significant, based on event consequence and frequency. Risk screening matrices and
quantitative risk assessment guidelines are provided. Also included are HSE strategy tables help design teams
identify a range of risk reduction alternatives. Cost Benefit Analysis spreadsheets are used to quantify risk
reduction in order to obtain the greatest risk reduction for each dollar spent. Additional details and examples
can be found at http://www.hou281.chevron.com/CPTC/home/riskman/index.htm
COSTS & BENEFITS: Tools are available thru the Company intranet at no cost. Training courses and facilitators are
available. Use of these tools meets some of the requirements of Policy 530 - Safe Operations, Pollution
Prevention and Property Transfer as well as API RP 75 and 750. HSE Risk Identification exercises can vary
from day for a small project in the feasibility stage to many days for a large, integrated plant with well
developed P&IDs. Risk screening limits the number of risks the project must consider for reduction to the those
that are truly significant. Cost benefit analysis is used to compare risk reduction alternatives to maximize the risk
reduction per unit cost. Some applications have found that 80% of the risk reduction was achieved at 40-50% of
the total cost.
CONTACT: W. D. (Don) Couch (CTN) 242-3000, (WDCX)
6-Oct-97 98
HES Optimization - Definition
A creative organized approach whose objective is to reduce risks and

project costs. This process will:
Develop project HES objectives

Identify significant permitablity issues and market based solutions.
Identify significant (environmental, ecological, health, safety, fire and
accidental releases) risks that need to be mitigated during the design.
Develop options to reduce emissions and discharges.
Develop options to reduce fire, safety and accidental releases.
Identify industry and company standards that will be used
Identify technologies that can help meet HES objectives
Develop recommendations to meet project HES objectives cost
effectively
6-Oct-97 99
HES Optimization - Techniques
Develop Project HES Objectives

Options to Reduce Emissions/Discharges
Identify Industry/Company Standards
Identify Technologies to Meet Objectives
Identify Permitability Issues and Solutions
Identify Significant Risks that Need to be
Mitigated During Design
6-Oct-97 100
HES Optimization - Process
Identify Concerns
What-If brainstorming
Checklists
Review technologies and processes
Assess Risks
Assign qualitative risk scores to each event
Perform consequence/frequency modeling, if necessary
Identify Alternatives
Scope range of alternatives to prevent/mitgate risk events
Cost Benefit Analysis
Assign costs to risk reduction alternatives
Incorporate in economic analysis and compare design options
6-Oct-97 101
HES Optimization - Upstream HES Process
PHASE 1 PHASE 2 PHASE 3 PHASE 4 PHASE 5
Identify and Assess Select Alternative(s) Develop Alternative(s) Execute Operate and Evaluate
Opportunity
Deliverables
List of health, Detailed H&S, environmental, and HES

environmental & public concern risks evaluation of
safety risks Recommended risk mitigation & changes
Quantified value prevention
of HES risk for
each project
alternative
What If Event What If/Checklist Process HES Cost

Tools & Processes
Identification for Waste Minimization Benefit

air, waste, water, Qualitative Risk Assessement Analysis
groundwater, fire,
Guidelines for QRA/PHA MOC
ecological, safety,
health risks
HES Strategy Tables
Checklists HES Cost Benefit Analysis
Screening risk
matrices
Cost Benefit
tools to valueHES
risks
Drivers
Policy 530 (Pollution Prevention, Safe Operations, Property Transfer)

API RP 75 & 750
International Regulations, OSHA PSM 1910.119, EPA RMP Rule
HES Optimization - Program Components
Project Development Phases

FEE Det. Eng. Fab. Transp. Install Hookup/ Operate
Startup
Processes to ID Qualit. Risk Checklists/Ops Pre- Fab Safety Pre- Transport Pre-installation Pre-startup Regular Risk
Hazards & Risk Scenario Review/ What if Review/ Review/ Review/ Review/ Assessments/
Reduction Assessment Checklists/ Checklists/ Checklists/ Checklists/ Checklists/
Recommendations What if What if What if What if What if
Identify Hazards Conceptually for Detailed for all Detailed for Fab Detailed for Detailed for Detailed for Detailed for
for: all phases phases Transp. Install. Hookup / Startup Ops. Ongoing
Methods to * Model Tests * Change Design * Safety Program * Safety Program * Safety Program * Safety Program * Operating
reduce/ * Design Standards * Timely * QA/QC * Weather * Weather * Weather Procedures
control risk * Change Concept Regulatory & * Training Forecasts Forecasts Forecasts * Safety
Permitting * Timely * Training * Training * Training Programs
Approvals Regulatory & * Timely * Permit to
Permitting Regulatory & work
Approvals Permitting *
Approvals Maintenance
* QA/QC
* Training
Monitoring MOC MOC MOC MOC MOC MOC MOC
Audit Audit Audit Audit Audit Audit
Communication Hazard Register Hazard Register Hazard Register Hazard Register Hazard Register Hazard Register Hazard
Register
6-Oct-97 103
HES Optimization - Risks and Impacts
PROJECT RISK TYPES

PRIMARY TYPES OF RISK TYPES OF IMPACT
PERSONNEL/PUBLIC
SAFETY
Technical
- Reserves,
- Reservoir,
- Drilling Operations, ENVIRONMENT
- Well Completions,
- Facility Design,
- Facility Construction,
- Facility Transportation,
- Facility Installation,
- Operability, Maintainability
FINANCIAL
Business
- CAPEX
- OPEX
- Schedule
- Product Price
PUBLIC CONCERN
Figure 1-1
6-Oct-97 104
Energy Optimization
Energy Optimization
6-Oct-97 105
Energy Optimization - Definition
A methodology for optimizing capital cost, operating

cost and operability of process unit, utility system
or manufacturing site by identifying the most
economical levels of heat recovery and power
generation by integrating:
Thermodynamic Analysis
Economics Data
Conceptual Design
Energy Optimization - Abstract
DESCRIPTION: Energy Optimization is a way to identify, understand, and optimize energy use for the operating lifetime
of a project.
APPLICATION: Energy often represents the largest element of the ongoing operating costs once a project is completed.
With project lives at 30 years or beyond, energy operating costs must be an important project consideration, starting at
the early stages of project development. Energy Optimization provides a methodology for understanding and then
optimizing energy use.
DETAILS: Projects afford a unique opportunity to address and improve energy performance of the site and facility.
Energy considerations appear throughout CPDEP. Unlike some of the other VIPs, Energy Optimization can not be
conducted and completed in a three day workshop. Energy Optimization is not a stand alone process, instead it must
be woven into normal project activities such as objective setting, process design, equipment specification and
selection, detailed design, and operating philosophies and practices. Energy measurement and management systems
must be installed to track project performance against pre-established metrics. Tools such as Steam System Models,
Fuel System Models, Pinch Analysis, FEL Energy Checklist, etc. are utilized to properly size utility systems and
optimize process design . Early involvement of specialists (CXTC, local, contractors) can quickly lead to a cost
effective and reliable design. Specialists should also be used to assist in the development of specifications and the
purchase of large equipment such as gas turbines, boilers, compressors, pumps and furnaces.
COST & BENEFITS: Integrating Energy Optimization into the process design, selecting the best alternatives, and using
proven tools will optimize the capital and energy costs over the entire operating life of the project.
CONTACTS:
Nick Brancaccio, NGBR (CTN) 242-2350
Lee Larson, LLRS (CTN) 842-9084
Jerry Moffitt, GMOF (CTN) 894-0792
Rick Johnson, DEJO (CTN) 842-8135
Gerald Sing, GLSI (CTN) 842-8706
Implementation Guide G-xxx
6-Oct-97 107
Energy Optimization - Energy Tools
Specific tools have been developed to improve

energy use:
Pinch Analysis
Steam & Electric System Models
G2 MESA program
Fuel System Model
Yield & energy Process
Energy Web Site: http://go.chevron.com/resources/energy/index.html
6-Oct-97 108
Energy Optimization - Energy Tools
The energy tools are used in conjunction with these

VIPs and BPs:
PFOs
Design-to-Capacity
Value Engineering
Specialists Involvement
FEL Checklists
Steam Measurement Best Practice
Fuel Measurement Best Practice
6-Oct-97 109
6-Oct-97 110
Constructability Review - Definition
Analysis of the design by experienced construction

managers, to reduce cost and time during the
construction phase. Optimum use of construction
knowledge and experience in
Planning
Design
Procurement
Field Operations
to achieve overall project objectives.
6-Oct-97 111
Constructability Review - Abstract
DESCRIPTION: Construction Industry Institute (CII) defines "constructability" as "the optimum use of
construction knowledge and experience in planning, design, procurement, and field operations to
achieve overall project objectives".
APPLICATION: The concept of "constructability" should be implemented on all projects.
DETAILS: "Constructability" drives the project to excellence in design and execution. Critical to project
success, implementation begins in Front-End Loading with a focus on assessing construction
viability, cost variance from the ideal and identification of costly or fatal flaws due to regulatory,
environment, site, or infrastructure restrictions.
Prior to funding, the Construction Manager is brought on the project team to champion
constructability and to participate in final scope development. A project-specific constructability
process is developed and integrated into the Project Execution Plan.
COST & BENEFITS: The cost for implementing a constructability process on a large project will vary.
The cost could range between $50,000-$150,000 depending on the resources available and the
uniqueness of the project. Constructability can be implemented in a small projects group similarly.
The return on the time spent ranges from 5-20% of total project cost. A major benefit is elimination
of rework and delay in the construction and start-up schedules.
CONTACTS:
Jay MacDonald, (CTN) 842-8197, (email: MJOJ)
P.E. (Paul) Redden, (CTN) 842-5056, (email: PERE)
Lesson Learned No. 42: "Constructability Resources - What's Available"
Constructability Study
6-Oct-97 112
Constructability Review - What, When, Who
Project schedule and cost is improved on projects

that:
Perform constructability continuously in Phases 2 to 4

Perform constructability reviews early enough to affect
the design
Include construction experts on project team
Include the fabrication/construction contractor during
design
6-Oct-97
96-06-10 113 52
Constructability Review - Things to Review
Constructability reviews address:
Trade-offs of materials vs. fabrication costs

Fabricator/contractor capabilities for handling materials
Getting construction experts buy-in on costs & schedule
Relationships between contractors
Relationships of heavy lifts, module sizes, transportation,
special site features, etc.
6-Oct-97
96-06-10 114 53
Process Hazards Analysis

Process Hazards Analysis addresses the various

design and safety reviews performed by a project
team. These include the normal design/safety
reviews and the design/safety reviews required by
regulation. The process defines a roadmap for
performing the various analyses at the appropriate
time.
6-Oct-97
96-06-10 116 57
Process Hazards Analysis - Abstract
DESCRIPTION: PHA serves as a roadmap to plan appropriate hazards reviews at a time that optimizes
contribution and impact to the project. By coupling the normal design reviews with mandated
reviews, the projects are able to avoid unnecessary duplication and comply with regulations (OSHA
1910).
APPLICATION: PHA is intended to provide sufficient background information to permit a project team
to identify, assess, and plan activities related to a Process Hazard Analysis.
DETAILS: OSHA's Process Safety Management Rule (29 CFR 1910.119) mandates minimum criteria
for review of a project during project development and for the review of changes to the design that
might affect the safe operation of a facility. The rule is performance-based and charges the owner and
designer with the responsibility of performing the quality and quantity of reviews appropriate to
determine and evaluate the hazards of the process being reviewed. PHA provides a roadmap that
assists the project team in planning PHA-related reviews, the purpose of each review, the data
required to perform the review, the resources required, the expected results, and a suggested timing
for the reviews.
COST & BENEFITS: By coupling the normal design reviews with mandated reviews, projects are able
to avoid unnecessary duplication and comply with the regulations.
CONTACT:
G.W. (Gary) Fischer, (CTN) 842-5514, (email: FISC)
R. K. Fujimoto, (CTN) 842-9298, (email: BFUJ)
Implementation Guide G-15: Guide for Integrating Process Hazard Analysis into Facility Type
Projects (G-15)
6-Oct-97 117
Process Hazards Analysis - Definition
The various analysis address issues of:
Hazards of the Process

Identification of Previous Incidents
Engineering / Administrative Controls
Consequences of Failure of Controls
Facility Siting
Human Factors

Identify & Assess Select Develop Execute Operate and
Opportunities Alternative(s) Alternative(s) Evaluate
Preliminary Preliminary Safety Safety in Design Review of changes

Hazard Review in Design Review Review to facility
Process Objectives Shutdown Insurance/Fire (Management of
Analysis Objectives Protection Review Change)
Environmental Analysis HAZOP Review
Objectives Relief System Begin
Analysis Review Management of
Control Objectives Front End Change Process
Analysis Engineering Alarm Objectives
Qualitative Risk Operability & Review
Analysis Safety Review Pre Start-up
API 14C Review Safety Review
What if? Review API 14C Review
Preliminary Quantitative Risk
HAZOP Analysis
Quantitative Risk
Analysis
6-Oct-97 119
REVIEW/ANALYSIS PURPOSE
Preliminary Hazards Early identification of process hazards to facilitate process

Review selection and site location.
Environmental Objectives Set basis for project environmental requirements.

Analysis
Process Objective Analysis Rigorous process flow diagram review to assist in

development of PFDs and to ensure a proper process design
basis.
Control Objective Analysis Rigorous control system review to enable development of

the control system design.
Shutdown Objectives Rigorous review of safety shutdown systems to confirm the

Analysis control system design basis.
6-Oct-97 120
Relief System Review Review of new and/or existing relief systems to determine that
the design basis provides for maximum credible scenarios.
Front End Engineering Audit of hazards or operability issues to provide design

Operability & Safety guidance in Execution Phase and identify high impact cost
Review issues for the A/R estimate.
Safety in Design Review Audit of design for compliance with Chevron Safety in
Design guidelines.
Insurance/Fire Protection Audit design to ensure the design provides cost effective fire
Review protection to meet Chevron and Insurance carrier standards.
Rigorous line-by-line analysis to identify hazards and

HAZOP Review
operability problems for critical systems that could
compromise a systems ability to achieve process objectives
and/or safety requirements.
6-Oct-97 121
What If? Review A process for identification of hazards and operability

problems in utility and non-critical systems that could
compromise a systems ability to meet process objectives
and/or safety requirements.
Management of Change Ensure changes made to the process after the formal process
hazards analysis do not introduce new uncontrolled hazards.
Alarm Objective Analysis Rigorous review of alarm system to finalize set points and
alarm priorities.
Pre Start-Up Safety Review A formal audit to ensure that all PSM documentation and
elements are in place/completed.
6-Oct-97 122
6-Oct-97 123
Zero Injury Techniques - Definition
Techniques that produce excellent safety

performance on construction projects:
Safety Pre-Project / Pre-Task Planning

Safety Training Orientation
Safety Incentives
Alcohol / Substance Abuse Program
Accident and Incident Investigation
6-Oct-97 124
Zero Injury Techniques - Abstract
6-Oct-97 125
6-Oct-97 126
Predictive Maintenance - Definition
Using advances in instrumentation and sensor

technology to monitor machinery performance and
make repairs prior to failure.
Characteristics monitored:
Heat
Lubrication
Vibration
Cracking
Noise
6-Oct-97 127
Predictive Maintenance - Benefits
Benefits of Predictive Maintenance:
Increase availability confidence

Fewer unscheduled shutdowns
Lower parts inventory costs
Lower maintenance costs
6-Oct-97 128
6-Oct-97 129
Reliability Modeling - Definition
Computer simulation to explore relationships

between maximum production rates and design
and operational factors:
Product Quality
Yield / Capacity
Production Transitions
Maintenance Practices
Safety / Environmental
6-Oct-97 130
Reliability Modeling - Abstract
DESCRIPTION: Reliability Modeling is the use of computer simulation to explore the relationships between the
maximum production rates and design and operational factors such as quality, yield, production transitions,
maintenance practices and requirements, capacity, and safety and environmental concerns. This tool can help
determine the value of sparing, bypass, and alternative operating modes contemplated in the design and factor it into
the Life Cycle Cost.
APPLICATION: Most applications will be FEL. It can also be used during operations to evaluate and influence
maintenance practices on production availability. It is often done by a third party, such as IPA, and may employ the
MAROS software.
DETAILS: The Reliability Modeling Process has five distinct steps:
1. Understand the facility under consideration.
2. Data collection on facility, equipment, and failure rates.
3. Data analysis and computer modeling.
4. Case runs and review.
5. Discussion of results.
The information needed includes:
Process description
PFDs with major equipment identified
Equipment list with sizes, capacities, and vendor/ supplier information including the make and model numbers
COST & BENEFITS: The cost of a reliability modeling study will range from $25-50M depending on the complexity of
the facility/process being reviewed. Cost is a function of data collection efficiency and the number of cases or
alternatives to review. A 10:1 return on investment is not uncommon.
CONTACTS:
G.W. (Gary) Fischer, (CTN) 842-5514, (email: FISC)
J. E. (Joan) Ranallo, 842-8368, (email: JERA)
Implementation Guide G-17: Reliability Modeling (G-17)
6-Oct-97 131
What is Reliability Modeling?

For Downstream, IPA supplies SAGE computer
program for Chevron use
For Upstream, the MAROS computer program from
Jardine Associates is used
Provides estimates of annual production and on-stream
time
Evaluates the interaction of installed spares, repair
times and equipment failure rates on the process
production capacity
Can help decide what equipment to spare and how to
minimize downtime
Reliability Modeling - vs. RCM
Reliability Modeling Reliability Centered Maintenance
Reviews impact on total facility Reviews one piece of equipment

Highlights areas of opportunity Identifies how to improve
Allows unlimited What-If cases operating factor
Model can easily be updated Reviews how to decrease
Highlights impact on revenue maintenance expense
stream Develop contingency plans in the
Determines overall plant or facility event of a failure
operating factor Determine how to mitigate failures
Contact the CRTC Materials and

Equipment Engineering Unit for
additional information on RCM
(John Stout 510 242-7208)
Reliability Modeling - Process Steps
Key Steps to the Process:

Introduction and Understanding of Project & Reliability Modeling
Process
Planning for Information Gathering
Data Accumulation
Failure Rates
Repair Times
Data Base Comparisons
Generate Computer Model
Run Model, Generate Alternate Cases, Analyze What -if
Situations
Analyze and Summarize Results
Document and Issue Report
Reliability Modeling - Data Needed
Data Sheet Input Items
Operating Rate (Units/Hour)

Scheduled Outages-Frequency (#/Year)
Scheduled Outages-Duration (Hours)
Equipment Description (Model #)
Equipment Failure Rate (#/Year)
Equipment Repair Time (Ave... & Max.) (Hours)
Reliability Modeling - Process Flow
Place Equipment Failure Rates &

in Functional Blocks Equipment Repair Times
System Availability
Generalized Evaluator
(S.A.G.E.)
Flow Diagram Annual Production "Real" Plant

& System Projections, Operating
Configuration EQuip. Utilization Factor
Reliability Modeling - Benefits
Benefits:
Quantifies Operating Factor
Provides a Tool for What if Cases
Provides data to justify Capital Expenditures
Identifies areas for Reliability Centered Maintenance
(RCM)
Reliability Modeling - Applications
Typical reliability modeling applications:
Optimize system availability and reliability

Estimate system downtime / availability
Evaluate life-cycle costs and CAPEX vs. OPEX tradeoffs
Determine equipment sparing philosophy and
redundancy
Optimize logistics and manpower for
maintenance/operations
6-Oct-97 138
Reliability Modeling - MAROS Studies
Upstream Reliability modeling studies performed

using the MAROS software:
Alba
Britannia
Green Canyon 205
Gorgon
Cabinda Oil Storage, Pumping, and Loading System
Escravos Tank Farm
6-Oct-97 139
Reliability Modeling - Impacts
Comments from recent modeling effort:
Helps frame the alternatives

Quantifies the issues in terms of NPV
Has impact on design, material selection,
operation, and maintenance
Good reliability data is crucial
6-Oct-97 140
6-Oct-97 141
IPA Pre-A/R Assessment - Definition
An assessment of project progress and quality,

performed in CPDEP Phase 3. Rates project
against IPA database of similar projects.
Establishes FEL Index
Recommends project contingency based on known
information
Rates project cost estimates
Recommends schedule
FEL Index required for GO-36 on projects over
$25MM
6-Oct-97 142
IPA Assessment - Pacesetter Performance
Pacesetter Performance
is achieved with
State-of-the-Art FEL
6-Oct-97 143
IPA Assessment - Front-End Loading
Front-End Loading (FEL) is a structured, up-front,

planning process for developing a detailed definition of the
scope of a capital project to meet business objectives.
It is proven to save money, shorten schedule, improve
results.
It asks:
Who
What
Where
When
Why
How
6-Oct-97 144
IPA Assessment - Components of FEL
(Refining and Chemicals)
Project FEL
Site Engineering Execution
Factors Definition Plan
Index
Soils Data Engineering tasks Project objectives/mission

Detailed scope
Equipment layout Feedstock/product Team participants & roles

properties
PFDs Integrated schedule
Environmental
H&MBs Critical path items
requirements P&IDs Identification of shut-
One-line elec. downs for tie-ins
Health & safety diagrams Overtime requirements
requirements Major equipment
specs Plans
Cost estimate Commissioning
Startup
Participation/buy-in of: Operation
Operations Manpower
Maintenance Quality assurance
Business
Contracting strategy
Who
How
Cost/schedule controls
6-Oct-97 145
(Pipeline Projects)
Site Engineering
Project FEL
Execution
Factors Definition Plan Index
Route Definition Engineering tasks Contracting strategy

Detailed scope Who
Terrain Fluid/gas properties How
Pipe and coating Pipeline methods
Conditions specs. Team participants & roles
Cost estimate Integrated schedule
Regulatory Hydraulic
Critical path items
Issues Calculations Identification of shut-downs for

Line tie-ins
Logs/hydrotesting
Community Pump Station
Overtime requirements
Relations Requirements
Plans
Commissioning
Startup
ROW Issues Participation/buy-in of: Operation
Operations Staffing

Health & safety Maintenance Quality assurance

Business
requirements Cost/schedule controls
6-Oct-97 146
(Upstream Projects)
Permits/
Reservoir
Definition
Regulatory
Reviews
Design
Status
+ Project
Execution Plan
FEL Status
Reservoir Environmental Engineering Tasks Team Participants/

Delineation Requirements/ Detailed scope Roles
Permitting Concept selection
Seismic (2-D, 3-D) Structural Contracting Strategy
Health and Safety analysis/ design
Drilling Program Reviews (HAZOPS) P&IDs Integrated Schedule
Major equipment
Government specifications Plans
Regulations
Participation/Buy-in Cost/Schedule Controls
Business
Operations
6-Oct-97 147
IPA Assessment - FEL Index Calculation
Plot Plans/ Equipment
Configuration
Soils &
Hydrology
Site
Factors
Sum 4 = ___
Environmental
Requirements
Health and
Safety
Project Execution
Planning
Engineering
Definition
FEL Index
6-Oct-97 148
IPA Assessment - FEL Index
3.0
3.5
Over Commitment
4.0
Best Practical
4.5
5.0
4
Good
5.5
6.0
Fair
6.5
2
7.0
Poor
7.5
1
8.0
8.5
Screening
0
1
9.0
6-Oct-97 149
IPA Assessment - FEL Improvement
Absolute Cost is Related to Front-End Loading

1.2
Relative Capital Cost (Industry Avg = 1.0)
1.1
FEL Improvement Only

Industry Average Cost
1
0.9
Best Practical Good Fair Screening Study

0.8
FEL Rating
6-Oct-97 150
IPA Assessment - Best Practical FEL Index
FEL SCALE VALUE=4 SCALE VALUE=1
CATEGORY SCALE VALUE=3 SCALE VALUE=2
COMPONENT (LEAST WELL-DEFINED) (MOST WELL-DEFINED)
Plot Plans Block layout not considered Block layout of major Detailed layout of major equipment Definitive (final) layout of all
Equipment in developing cost estimate equipment. Space reqmts. and large piping. Based on: (a) equipment (major & minor) &
Configurations derived from factors for equipment dimensions derived large piping; one-line drawings
analogous processes. from analyses of H&M balances; for smaller piping. Based on (a)
and (b) access reqmts. & specific equipment dimensions derived
placements worked out in from analyses of H&M balances:
conjunction with plant & (b) access reqmts. & specific
operations/maintenance. placements worked out in
conjunction with plant
operations/maintenance.
Soils & Hydrology Site-specific soils & Site-specific soils & Data from a small set of site Soil borings are complete &
Data hydrology data not explicitly hydrology data not borings (or nearby borings if it is results known & accounted for in
considered in estimate available, but general area known that site conditions change cost estimate for exact site
preparation. conditions are known & very slowly) is available & locations where equipment will
information has been information has been accounted be placed.
accounted for in developing for in developing cost estimate.
cost estimate.
SITE
FACTORS
Environmental Environmental requirements Site-specific regulations Site-specific regulations identified All necessary permits have been
Requirements not explicitly considered in identified & incorporated & incorporated into design; issued; or, permits have been
estimate preparation. into design but limited appropriate agencies have been applied for and relevant agencies
contact with appropriate kept informed; permit applications have indicated that they are
agencies. have been filed. satisfied that all criteria have
been satisfied (i.e., issuing of
permits is pro forma); or, it has
been incontrovertibly established
that the project does not need
permits.
Health & Safety Health & safety issues not No formal reviews but Limited HAZOPS review has been Detailed HAZOPS review (based
Requirements explicitly considered in generic health & safety conducted (perhaps by the project on final or near-final P&IDs and
estimate preparation. standards for site & team in consultation with plant detailed equipment layouts) have
technology identified & operations) & site- been conducted & the
incorporated into design. specific/technology-specific recommendations addressed in
standards identified & incorporated the design & cost estimate.
into the design.
6-Oct-97 151
IPA Assessment - Measuring FEL
Guidance for Measuring Front-End Loading (continued)
FEL SCALE VALUE=4 SCALE VALUE=1

CATEGORY (LEAST WELL-DEFINED) SCALE VALUE=3 SCALE VALUE=2
COMPONENT (MOST WELL-DEFINED)
Project Execution Plan Core project team Core project team in Core project team in place;
PROJECT None exists in place; contracting place; contracting strategies contracting strategies identified;
EXECUTION strategies identified; identified; major task detailed & integrated schedule
PLANNING major milestones sequencing established & established which incorporates
established. critical path items identified. equipment delivery dates,
interferences, & resource
loadings
User/Plant No involvement Little plant Even though plant input is only on Plant operations is deeply
ENGINEERING Input other than expressed involvement other than an as-needed basis, a thorough involved, normally on a day-to-
DEFINITION general interest review of conceptual review of the process design & day basis, including conducting a
design. detailed layout has been conducted. thorough review of the process
design & detailed layout.
Types of Engineering General location & site Prelim. process design Completed process design Approved P&IDs
Tasks Completed conditions Prelim. P&IDs Complete P&IDs Plot plans issued for
Block flow diagram Prelim. major equipment construction
sizing One-line electrical diagrams
Prelim. major equipment list Completed engineering data
Prelim. layout of on-plot Detailed plot plans
Facility capacity equipment sheets
Economic analysis (on-and-off-plot)
Off-plot description
Portion of Total Less than 1% 1 to 5% 15 to 30% >50%

Engineering Completed
6-Oct-97 152
IPA Assessment - Overall FEL Index
Chevron Chevron
1996 Benchmark
(Best Possible) FEL Index

3 4 5 6 7 8 9
Best Industry
Class A
Practical Average
6-Oct-97 153
IPA Assessment - Downstream & Upstream
Chevron
Chevron
Downstream
Downstream
Benchmark
1996
1991
(Best Possible) FEL Index

3 4 5 6 7 8 9
Chevron Chevron
Best Practical Class A Upstream Upstream
1996 Benchmark
6-Oct-97 154
Post Project Assessment (IPA)
Post Project Assessment (IPA)
6-Oct-97 155
Post Project Assessment - Definition
A collection of end-of-job data.
Conducted at end of Phase 4

Performed by IPA
Uses IBC data collection form (Downstream)
Uses new IPA data collection form (Upstream)
Helps to improve estimates for future projects

Cost ratios developed help with Class 0 and 1 cost
estimates for future projects
6-Oct-97 156
Post Project Assessment - Data Collected
Materials costs
Fabrication costs
Transporation costs
Company expenses
Contractor expenses
Actual schedule
Safety performance
Lessons learned
6-Oct-97 157
Business Evaluation (GO-36)
Business Evaluation (GO-36)
6-Oct-97 158
Business Evaluation - Definition
An evaluation of achieved project success, measured

against:
original project objectives
economic measures
realized economics
plant performance
product/price forecasts vs. actual
GO-36 defines timing and objectives.

Normally first evaluation is in two years or at full production
Use GO-36 Part 5
6-Oct-97 159
Business Evaluation - Primary Objectives
The primary objectives of the Project Business Evaluation Review are to:
Improve the decision-making process used within Chevron for investing

capital
Identify possible insights that will benefit development of business plans
Provide an opportunity to assess future plans for the facilities
Provide feedback to those experts who provided assessments in the initial
Decision & Risk Analysis
The Project Business Evaluation Review is conducted after one or two years of
operating data are available, or as soon as appropriate production and market
response are realized. A multifunctional team with third party participation is
recommended to conduct the review and enhance learning and sharing.
Subsequent reviews should become part of the normal business planning
process.
6-Oct-97 160
Business Evaluation - Team
A Business Evaluation Team should consist of:
Project management
Multifunctional team
3rd Parties
6-Oct-97 161
Business Evaluation - Project Data
A Business Evaluation requires the following data:
AR Estimate
Values from the original AR based on the expected case.
Typical Values to Date
Values that are typical of recent operation or an average of results
since start-up, whichever best represents the general business.
% Change from Expected Value
The ratio of typical value divided by the expected value in the AR.
Updated Estimate
If the % change from the expected value is significant, an updated
estimate should be prepared.
6-Oct-97 162
Business Evaluation - Project Performance to Date
Provide a brief summary of the project performance. If the project outcome is

significantly different from that projected in the AR, state the reasons for the
difference. Summarize the insights gained about the various elements of the
business including:
Supply versus demand balance
Customer trends
Competitor response
Technology applications
Operating cost
Regulations
Separate these insights into:

Findings for the specific business
Observations that generally apply to a broad array of business
6-Oct-97 163
Business Evaluation - D&RA Review
Summary of lessons learned from the major elements of the

project D&RA:
Decision and Risk Analysis Review

Project Framing
Assessing Business Situation
Alternative Identification
Alternative Selection
Action Plan
6-Oct-97 164
Summary - CPDEP and VIPs/BPs
CPDEP and Value Improving/Best Practices can

help achieve pacesetter project performance:
Faster
Cheaper
Better
Safer
6-Oct-97 165
CPDEP and VIPs/BPs - Exercise
Exercise 1:
The scope of work on a project was divided into two

contracts - an onplot contract and an offplot contract. The
onplot contractor designed the facility, which included
storage tanks for the products. The offplot contractor
transported the products from these tanks into another set
of tanks 2 miles away at a marine terminal. The products
were then loaded to a tanker for shipment. Also, each tank
was equipped with three 50% pumps.
6-Oct-97 166
Exercise 2:
A new plant was designed with three buildings - an

administration building, a cafeteria building, and a
guard building. Each building had a separate
foundation and dedicated HVAC system.
6-Oct-97 167
Exercise 3:
The first process plant was designed with two 65%

trains and was operating for two years. the second
plant was under construction and was also
designed with two 65% trains. The third plant
was on the drawing board and it was also designed
with two 65% trains.
6-Oct-97 168
Exercise 4:
An offshore platform was designed with three 50%

gas turbine generators. Each generator was
equipped with a waste heat recovery unit.
6-Oct-97 169
Exercise 5:
At a remote oil field, several miles of pipe racks

were installed with 20-foot spacing for supports.
Regardless of the pipe size, every pipe rack had
20-foot support spacing.
6-Oct-97 170
Exercise 6:
An electrical substation was designed with two sets

of 15 MVA switch gear. The reason for using two
instead of one larger one was that the facility had
standardized on 15 MVA switch gear. The
detailed calculations included several spare pumps
in determining the connected load.
6-Oct-97 171

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CPDEP and VIPs/BPs

Chevron Project Development

Value Improving / Best Practices

Value Improving Practices / Best Practices are tools

In conjunction with a structured process like

Best Practical Good Fair Poor

Random Success Consistent Success

Low Mid High

Ability to Implement Decisions

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

Equipment & Material Process Hazard Analysis

CPDEP Timeline/ACT- 9/15/97

Decision Analysis Constructability Review

DA and D&RA are processes to compare and decide

Project Execution Planning

A Project Execution Plan is a tool for strategic

Steps in the Process:

1. Frame the Project

1. Frame the Project

2. Planning the Project

Risk Management Plan

2. PLANNING THE PROJECT

B1 Risk Management B5 Contracting Plan

3. PLANNING THE EXECUTION PHASE

C2 Quality Management C7 Materials Management C11 Special Factors

C3 Cost Management Plan C8 Drilling/Construction

A. Framing the Project

B1 Risk B2 Organization B5 Contracting

A formal, systematic process that:

A formal, systematic process by which an Opco or

Technology is acquired from all sources, including

FINANCIAL WEIGHTING TECHINOLOGY WEIGHTING

Identify Select Identification

Develop Acquire / develop Assess

Technology Planning Process

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

Select Acquire / Execute

Identifies new technologies that will increase

Project Facility Objectives

A practice that establishes what quality facility is

Defines nine or more quality characteristics of the

The PFO exercise is often done in conjunction with a

There are nine or more evaluation characteristics:

CAPACITY Designed for specific capacity Over capacity expected

PLANT LIFE 2-5 years 20 + years

PRODUCT QUALITY Meets specifications at one set of Exceeds specifications

FLEXIBILITY Little with limited turndown A lot with high turndown

EXPANDABILITY Easier, open plot plan

MAINTENANCE Simple, labor intensive Good accessibility, no major

Life 2 - 5 years. 5 - 10 years. 10 - 20 years 20+ years.

Category I Category II Category III Category IV

Category I Category II Category III Category IV

A creative and organized method for optimizing the

Improve decision making in design and

Value Engineering is a disciplined method used

A creative, organized method for optimizing the cost

A multi-discipline, systematic, and proactive process

Substituting something lower in quality and cost

Saving money by not meeting all requirements

Just doing a good job

Projects often set requirements that exceed real needs

Traditional cost reduction tries to minimize the cost of meeting

Tengiz Project KTL-3 On-shore $690MM $160MM ? Project on hold