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Risks of majority projects in Oil and Gas industry

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Xiaoxi Gu

on 3 April 2014

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Transcript of Risks of majority projects in Oil and Gas industry

Typology of Oil & Gas projects
and associated
Course present to Marion
Group consist of:
Oil and gas industry supply chain
Image courtesy of: www.Davidwood&associates.com
Majority projects of O&G industry
Hydraulic Fracturing: ‘Fracking’
Image courtesy of : http://greenplug.nu/.

Hydraulic Fracturing for Shale Gas
Also known as ‘Fracking’ and was first used for gas extraction in 1947 by Halliburton co.
Fracking is used in recovering unconventional gas
More than 50,000 wells were drilled in 2013 in the USA
80% of all American gas wells drilled in the next decade will require Fracking
Image courtesy of: http://vaplonline.com
Scale of Fracking projects
Fracking programme or project?
Pre-development phase
Development phase
Drilling Phase
Reclamation Phase
Challenges and risks for Oil and Gas projects
Time management – Projects cannot be given specific time bands
Delmon, Jeffrey. Project finance, BOT projects and risk. Kluwer Law International, 2005.
Special challenges associated with Fracking
Excessive water use
Groundwater protection
Waste water management
Air emissions
Site construction impacts
Seismic activity
Overall risk breakdown for Oil and Gas Projects
Proposed risk breakdown structure for an oil and gas project
Courtesy of: Department of Management and Production Engineering, Turin, Italy .

Typology proposal
The branch of knowledge that deals with classes with common characteristic
(Canadian Oxford Dictionary, 2004, p. 1684)

Typology proposal
Key theme’s throughout the oil and gas sector highlighted under two classifications ;

- BOT (Build, Operate & Transfer)

- Public/Private Partnerships

Figure 1. A project-based management typology of public-private partnership projects. (Source: Facal et al, 2008, p.101)

Typology proposal-validation
Case Study (1) – Algerian exploration wells project
Project mandate – Construction of two exploration wells
Project definition goals (airstrip e.t.c)
Challenges; Extremely hard formation.
Operations staff from all Schlumberger technology segments, drilling strategy
End Project report - first well was completed 4 days ahead of schedule, non- productive time (NPT) 7%

Case Study (2) Case Study: Wildcat Well Project
Project mandate – Drill complex ‘ultradeepwater’ wildcat well
Challenges; no established supply chain , an unfamiliar regulatory environment
Creation of risk register, operations support center (OSC), a new build, using an unfamiliar rig.
End Project report – 72 Million net oil pay
Perceptions of the probability of injury if a hazardous event occurred

Workers’ perceptions of how “safe” other industries/activities are

Kathryn Mearns, Rhona Flin (1995) Risk perception and attitudes to safety by personnel in the offshore oil and gas industry: a review
Marine environment Risks

Hurricanes and tsunamis
------ damage drilling platform, drilling vessel, other equipment and workers victims

Generally speaking, a large amount of investment in offshore fields is more than $2 billion, any sinking accident will lose enormous.

E.g. September 9-10th, 1965 (Betsy)

September 9-10th, 1965 (Betsy)
Offshore and coastal oil installations, along with public utilities, reported unprecedented damage
Sources: http://www.wunderground.com/blog/JeffMasters/archive.html?year=2008&month=08 (2014)

Blow out and spilled risks
Explosion risks
Mohammad, etl (2013) Explosion modeling and analysis of BP Deepwater Horizon accident

Pipeline Transport
Transportation of goods through a pipe. Liquids and gases are transported in pipelines and any chemically stable substance can be sent through a pipeline.

Types by transport pipeline by function
There are three types:
Risks and Challenges
Risks to the public from hazardous liquid and gas transmission pipeline---Fire, Explosion
Some releases can cause environmental damage, impact wildlife, or contaminate drinking water supplies.
Significant economic effects
Natural gas releases pose a primarily acute hazard. If an ignition source exists, a release of gas can result in an immediate fire or explosion near the point of the release.

Transportation Incident Statistics
Comparison (2005-2009)
www.manhattan-institute.org (2014)
California State Fire Marshal. 1993. Hazardous Liquid Pipeline Risk Assessment. Office of the State Fire Marshal, Pipeline Safety Division, Sacramento, California. 187 pp.
Canadian Oxford Dictionary. (2004). Toronto, ON, Canada: Oxford University Press.
Center for Disease Control – National Center for Health Statistics for 2003. Online data summary. Availble :http://www.cdc.gov/nchs. Charbeneau, [Online]. [2014, March 6th]
R. J. 2003. Models for Design of Free-Product Recovery Systems for Petroleum Hydrocarbon Liquids. American Petroleum Institute, Publication 4729. Washington, D.C. August 2003.
Charbeneau, R. J., R. T. Johns, L. W. Lake, and M. McAdams. 2000. Free-product recovery of petroleum liquid hydrocarbon liquids. Ground Water Monitoring and Remediation 20(3):147-158.
Summer 2000. Couch, J. A. and J. C. Harshbarger. 1985. Effects of carcinogenic agents on aquatic animals: an environmental and experimental overview. J. Environ. Sci. Health, Part C, Environ.
Crawford, T. 2013, , what-is-hydraulic-fracturing [Homepage of Green Plug District], [Online]. Available: http://greenplug.nu/hydraulic-fracturing-what-is-hydraulic-fracturing/ [2014, March 2nd].

Observational Reflection
Various electronic resources accessed
Mass media outlets considered
Homogeneity , regarding peer-to-peer information circulation
Exploratory analysis of research
Extensive use of university resources
Overall risk breakdown for Oil and Gas Projects
The typology classifications led to three main major projects identified and their risks;

Hydraulic fracturing



Typology proposal-validation
(Right-of-Way Line Pipe Only 2005-2009)
Pipeline, off-shore extraction and hydraulic fracturing are prominent projects
B.O.T and private/public partnerships
Individual Projects pose different but also shared risks
Oil and gas projects tend to be capital intensive and unclear in project scope prior to initiation

Olajide Olanipekun G20615505
Xiaoxi Gu G20571217
Yangzhi Min G20496598
Mark Lewis G20503926
For gas transmission pipelines, the predominant failure causes for line pipe are corrosion, material/weld failures, and excavation damage.
Causes of Gas Transmission Pipeline Significant Incidents
Today`s Outline
Oil and Gas Industry Overview
Projects Risks and Challenges;
Case Study

Cost management – Very capital intensive, cost cannot be exact and may not always deliver a return on investment

Objectives can change frequently as industry is very subjective to market changes.

Project scope may be unclear until such time as geological requirements are assessed.
Effects on the Environment
Are there other typology classifications that could be considered?
Other major projects within the Oil and Gas Industry that could be considered?
What further challenges and risks could be considered within the identified Oil and Gas Projects?
B.O.T and Public/Private partnerships
Delmon, Jeffrey. Project finance, BOT projects and risk. Kluwer Law International, 2005.
De Marco, Alberto, and Bagilya Karsybayeva. "Influence Of Environmental Risk On The Financial Structure Of Oil And Gas Projects." American Journal of Applied Sciences 10.1 (2013).
Delmon, J. Project finance, BOT projects and risk. Kluwer Law International, 2005.
EnergyFromShale 2014, , The Challenges of Hydraulic Fracking
The Challenges of Hydraulic Fracturing The Challenges of Hydraulic Fracturing [Homepage of energyfromshale.], [Online]. Available: http://www.energyfromshale.org/environment [2014, March 6th].
Global Exchange 2014, , Press Release [Homepage of Global Exchange], [Online]. Available: http://www.globalexchange.org/html [2014, March 1st].
Hinde, D. 2012. PRINCE2 Study Guide, John wiley & sons
Hughes, B. 2014, , Hydraulic fracturingSave Reference [Homepage of Baker Hughes], [Online]. Available: http://public.bakerhughes.com/shalegas/fracturing.html [2014, March 5th].
Mazouz, B., Facal, J. And Viola, J., 2008. Public-private partnership: Elements for a project-based management typology. Project Management Journal, 39(2), pp. 98-110.
Müller, R., Glückler, J. and Aubry, M., 2013. A Relational Typology of Project Management Offices. John Wiley & Sons, Inc.

Pipeline and Hazardous Materials Safety Administration (PHMSA). 2008. PHMSA Pipeline Incident Statistics. Website: http://primis.phmsa.dot.gov/comm/reports/safety/PSI.html.
Project Management Institute 2014, , Knowledge Centre [Homepage of Project Management Institute], [Online]. Available: http://www.pmi.org/html [2014, March 15th].
Sharma, C., 2009. Use and impact of e-resources at Guru Gobind Singh Indraprastha University (India): a case study. Electronic Journal of Academic and Special Librarianship, 10(1), pp. 1-8.
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