Benchmarking on Major Gas Pipeline Projects

 

For my second professional example of benchmarking in projects I am drawing on the context of major oil and gas pipelines.  Specifically pipelines from Azerbaijan to Europe.  I was involved in facilitating a series of front end planning workshops; advising on project best practices and investment analysis in support of the Finance Memorandum being presented for the Financial Investment Decision (FID).

My personal story of facilitating the front end planning workshops was a great example of how the benchmarking process can make a huge difference to the project outcomes.  I led the workshops in the main project team offices in London.  The key representatives of the team (Project Manager, Project Services Manager, Lead Engineers, Operations Representative, Environmental and Safety Leads) were all present in a meeting room overlooking Paddington Station. The atmosphere was tense but positive – we were assessing readiness and looking for gaps. My role was to listen and lead – particularly to listen for the quietest voices – and there were several moments when I probed for more information and we identified some critical items that needed more attention to reduce the risk of delays.  I’m happy to say the project moved smoothly into detailed design and is in effective operation today.

This front end planning result became part of a benchmarking supplement; supporting the Financial case used to seek approval for the Investment in the pipeline project.  To illustrate this I have examples of three benchmarks that were presented.

Front End Planning  – The first benchmark was the Project Definition Rating Index (PDRI) and the results of the front end planning workshops.  The benchmark showed the PDRI for the portfolio of oil and gas pipelines from Azerbaijan through Georgia to Turkey and the progression through the planning phase to Final Investment Decision to an acceptable level of definition.  The comment included in the finance submission stated: “The completed FEL Self Assessment using CII Project Definition Rating Index (PDRI) tool. The overall score of 240/1000 (Lower score is better) indicates the project is well positioned for entering Execute Stage. This score is within the range for projects approaching final sanction”

Schedule –  The second benchmark for the pipelines (metres/spread day) had the project seeking sanction compared to company references. These comparative benchmarks are based of reference projects, assessed for their comparability by the project team and validated by the PMO/Central team.  The comment included in the finance submission stated: “The pipeline has a low Metres/Day lay rate due to the terrain, brownfield working and numerous work locations. The line to be replaced is not continuous, requiring the move around of the total spread numerous times.“ This explained why the project had a slower projected rate than the comparative benchmarks

Cost –  The third benchmark was cost per inch-km; an industry standard metric for benchmarking of pipelines.  The  project seeking sanction was benchmarked against company references. The comment included in the finance submission stated:  “The pipeline cost is higher than the benchmarks; due to more complex work scope, brownfield working, interrupted work sequence and terrain challenges.“This explained why the project has a more expensive projected rate than the comparative benchmarks.

These three benchmarks were core to the benchmarking supplement in support of the Investment case and I believe, represent an example of best practice in using benchmarking.

I am sure you will have your own professional examples of project benchmarks, please share any that you think would be of interest to this community.  For my next blog on the subject of benchmarking  I will share my third professional example of benchmarking at work – in the context of major infrastructure projects.