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OGP Project Services


Project Guide No. 7: Project Premise Document, Project Execution Strategy or Plan, Project Implementation Plan

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Project Guide 7
Project Premise Document Project Execution Strategy Or Plan Project Implementation Plan

Custodian: Owner: Keywords:

M. Kalappa H. Goudsmit

Shell Global Solutions, OGNL-OGP/4 Shell Global Solutions, OGNL-OGP

Project Management, execution strategy, premise, implementation plan

Confidential

This document is made available subject to the condition that the recipient will neither use nor disclose the contents except as agreed in writing with the copyright owner. Copyright is vested in Shell Global Solutions International B.V., The Hague. Shell Global Solutions International B.V., 2003. All rights reserved. Neither the whole nor any part of this document may be reproduced or distributed in any form or by any means (electronic, mechanical, reprographic, recording or otherwise) without the prior written consent of the copyright owner.

Shell Global Solutions


Shell Global Solutions is a trading style used by a network of technology companies of the Royal Dutch/Shell Group.

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Document History:

Date Sept 2003

Issue A

Reason for change Approved for Implementation

Author Name / Ref.Ind. L. Keijzer, OGNL-OGP/8

Approved Name / Ref.Ind. Signature H. Goudsmit, OGNL-OGP

The controlled copy of this document is held by Shell Global Solutions, OGP Project Support Group. All paper copies are uncontrolled.

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Table of Contents
1. 1.1 1.2 1.3 2. 2.1 2.2 2.3 2.4 3. 3.1 3.2 3.3 3.4 3.5 4. 5. 1. 1.1 1.2 1.3 1.4 2.1 2.2 2.3 2.4 2.5 3. 3.1 3.2 4.1 4.2 4.3 4.4 5. 5.1 5.2 6. 6.1 INTRODUCTION PURPOSE AND USE SCOPE PROJECT PHASES PURPOSE OF THE DOCUMENTS PROJECT PREMISE DOCUMENT (PPD) PROJECT EXECUTION STRATEGY (PES) PROJECT EXECUTION PLAN (PEP) PROJECT IMPLEMENTATION PLAN (PIP) CONTENT OF THE DOCUMENTS GENERAL PROJECT PREMISE DOCUMENT PPD PROJECT EXECUTION STRATEGY PES PROJECT EXECUTION PLAN PEP PROJECT IMPLEMENTATION PLAN - PIP RESPONSIBILITY, OWNERSHIP, RIGHT OF USE DEFINITIONS / REFERENCES PROJECT PREMISES OUTLINE OF INVESTMENT PROPOSAL - SCOPE OBJECTIVES PRIORITIES CUSTOMER / OPERATOR KEY ISSUES, RISKS MAIN ISSUES, INVESTMENT ORIGIN JV PARTNERS RISK IDENTIFICATION AUTHORITY ENGINEERING MAIN CHANGES FROM PREVIOUS REVISIONS STRATEGIC FIT AND BUSINESS CASE FEEDSTOCK, PRODUCT AND UTILITIES ECONOMICS PROJECT MANAGEMENT ORGANISATION VENTURE ORGANISATION PROJECT SITE CONSIDERATIONS PROJECT OVERALL SCHEDULE PROJECT COMMISSIONING AND START-UP TECHNOLOGY TECHNOLOGIES CAPACITIES, YIELDS, FEED AND PRODUCT QUALITY HSE & SUSTAINABLE DEVELOPMENT IDENTIFICATION OF KEY HSE AND SD ISSUES PROJECT BACKGROUND SCOPE SUMMARY OF DEVELOPMENT PLAN 6 6 7 7 8 8 8 9 10 11 11 11 11 11 11 12 13 14 14 14 14 14 14 15 15 15 15 15 16 16 16 16 17 17 17 17 18 19 19 19 20 20 21 21 21 21

APPENDIX A: TEMPLATE WITH CHECKLIST FOR PPD

2.

4.

APPENDIX B: TEMPLATE WITH CHECKLIST FOR PES 1. 1.1 1.2

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1.3 1.4 1.5 1.6 2. 2.1 2.2 2.3 2.4 3. 3.1 3.2 4.1 4.2 4.3 5.

4.

4.3.1 4.3.2

OBJECTIVES AND PRIORITIES CUSTOMER/OPERATOR UPDATE PROJECT PREMISE DOCUMENT PPD REV 1 NOMENCLATURE KEY ISSUES, RISKS, SENSITIVITIES TECHNOLOGY JV PARTNERS PROJECT EXECUTION AUTHORITY ENGINEERING COST AND SCHEDULE AND CHANGE CONTROL COST ESTIMATE PROJECT SCHEDULE DIVISION OF WORK AND RESOURCING PURPOSE CUSTOMER'S INPUT SHELL GLOBAL SOLUTIONS SERVICES CONTRACTING PURPOSE STRATEGY BUDGETS, SERVICE AGREEMENTS AND FINANCES FUNDS FORM OF AGREEMENTS FINANCES

Shell Global Solutions Services To be rendered Prior to Implementation Phase Shell Global Solutions Services In the Project Implementation Phase

21 22 22 22 23 23 23 23 24 24 24 25 25 25 26 27 29 29 29 30 30 30 31 32 32 32 32 33 33 33 33 34 34 34 34 35 36 37 37 37 37 38 40 40 40 42
38 39

27 28

5.1 5.2 6. 6.1 6.2 6.3 1. 1.1 1.2 1.3 1.4 1.5 1.6 2.1 2.2 2.3 2.4 2.5 3. 3.1 3.2 3.3 3.4

APPENDIX C: TEMPLATE WITH CHECKLIST FOR PEP AND PIP PROJECT BACKGROUND SCOPE SUMMARY OF DEVELOPMENT PLAN OBJECTIVES AND PRIORITIES CUSTOMER/OPERATOR UPDATE PROJECT PREMISE DOCUMENT PPD REV 2 and 3 NOMENCLATURE KEY ISSUES, RISKS, SENSITIVITIES TECHNOLOGY JV PARTNERS PROJECT EXECUTION AUTHORITY ENGINEERING VALUE AND WORK PROCESSES COST AND SCHEDULE AND CHANGE CONTROL COST ESTIMATE COST CONTROL PROJECT SCHEDULE CHANGE CONTROL DIVISION OF WORK AND RESOURCING PURPOSE CUSTOMER'S INPUT SHELL GLOBAL SOLUTIONS SERVICES
Strategy Change Control Procedure

2.

4.

3.4.1 3.4.2

4.1 4.2 4.3

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4.3.1 4.3.2

Shell Global Solutions Services To be rendered prior to the Implementation Phase Shell Global Solutions Services To be rendered in the Project Implementation Phase

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5.

4.4 5.1 5.2 5.3 6.1 6.2 6.3 7.1 7.2 7.3 7.4 8.1 8.2 8.3 8.4 8.5 8.6 8.7
6.1.1 6.1.2

6.

RESOURCES CONTRACTING PURPOSE STRATEGY MAJOR CONTRACTS BUDGETS, SERVICE AGREEMENTS AND FINANCES FUNDS FORM OF AGREEMENTS FINANCES PROJECT ORGANISATION AND PROCEDURES PURPOSE CORPORATE STRUCTURE PROJECT ORGANIZATION PROCEDURES QUALITY ASSURANCE PURPOSE STRATEGY QUALITY ASSURANCE REQUIREMENTS REVIEWS and AUDITS QUALITY ASSURANCE FEATURES AUDIT TRAIL INTEGRITY OF THE DESIGN HEALTH, SAFETY, ENVIRONMENT (HSE) AND SUSTAINABLE DEVELOPMENT POLICY HSE PLAN HSE FEATURES PUBLIC RELATIONS ENGINEERING PURPOSE STRATEGY Division of Work PROCUREMENT PURPOSE STRATEGY DIVISION OF WORK PRE-ORDERING LONG-LEAD EQUIPMENT ORDERING OF UNDERGROUND PIPING AND CABLES CONSTRUCTION PURPOSE STRATEGY DIVISION OF WORK COMMISSIONING, START-UP AND PERFORMANCE TESTING PURPOSE PHASES COMMISSIONING AND START-UP SCHEDULE ORGANISATION VENDOR ASSISTANCE
Application Control

43 45 45 45 45 47 47 47 48 49 49 49 50 50 51 51 51 51 52 52 53 53 54 54 54 55 55 56 56 56 57 58 58 58 59 60 60 61 61 61 62 64 64 64 64 65 66
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7.

8.

9.

9.1 9.2 9.3 9.4 10. 10.1 10.2 10.3 11. 11.1 11.2 11.3 11.4 11.5 12. 12.1 12.2 12.3 13. 13.1 13.2 13.3 13.4 13.5

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13.6 13.7 13.8 14. 14.1 14.2

SPARE PARTS DOCUMENTATION AT HAND-OVER DOCUMENTATION AT SUCCESSFUL PERFORMANCE TEST RUN POST-IMPLEMENTATION REVIEW INTRODUCTION SCOPE AND TIMING

66 66 67 68 68 68

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1. INTRODUCTION
This Project Guide (PG) is one of a series of guidance documents to assist Shell Global Solutions staff in developing and implementing capital projects. The use of PGs is a requirement for all projects executed under the responsibility of the Shell Global Solutions OGP business group as defined in OGP Governance: Project Development and Implementation (Ref 1). These guides assist project managers, project engineers and others involved in the development and implementation of capital projects to execute the project development and implementation process and to produce the required deliverables. This PG acts as a handbook for the Project Team on how and when to execute the relevant activity, and also specifies the contents and level of detail for the deliverables. It is used through appropriate phases of the project development to provide guidance, procedures and/or checklists for relevant subjects. In addition, it will assists in creating an awareness of relevant aspects of the project development and implementation process and transferring knowledge on the subject to other parties, such as project sponsors, stakeholders, contractors, etc. As the PGs are an integral element of OGPs business process for projects, maximum benefits are derived from using them in combination with the Project Development and Implementation Process and Project Value Processes.

1.1 Purpose and use


This particular Project Guide provides guidelines for the preparation of the Project Premise Document (PPD), the Project Execution1 Strategy (PES), Project Execution Plan (PEP) and the Project Implementation Plan (PIP). The purpose of the PPD is to ensure alignment of key stakeholders that are impacted by the project on the premises and requirements of the Venture on which all development will be based and assessed. This information also provides key input to the technical development as recorded in the BOD, BDP, BDEP/Project Specification. In addition it provides a key reference for initiation of many project processes such as Risk Management, Contracting and Procurement Strategy Development, Operational Implementation Planning etc. The purpose of the PES/PEP/PIP is to detail, in increasing depth as the project develops, the strategy, tactics and plans for development and implementation of the project in order to meet the premises and requirements laid down in the PPD. It should be noted that prime responsibility within the Asset Development Organisation (Ref.7) for establishing project premises, objectives & goals lies with Venture Management, whilst prime responsibility for project execution strategies, tactics & plans lies with Project Management. The PES, which is initiated in the Scouting phase and finalised in FED 1, evolves with increasing definition during the development phases of the project to the PEP at end of FED 2 and PIP at end of FED3 or FID. The PIP covers a relatively long period in time and may therefore require review and update during implementation of the project. These documents are principally required to be available to complement the proposal for and support the project development at the assurance gate reviews.

The term execution describes the whole period of development and implementation of a project.

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1.2 Scope
This Guide covers the purpose of the PPD, PES, PEP and PIP, their content, ownership, required signatures and right of use of these documents. In Appendices A, B and C provide templates for the subjects and issues to be addressed in these documents and checklist items for consideration. It shall be noted that the size of the project may determine the level of detail of the subjects to be addressed in the various documents; the principles nevertheless, apply for all projects.

1.3 Project Phases


In Project Guides, activities and deliverables are related to the phases of a project. OGP have standardised on a common nomenclature for the phases of a project that is utilised throughout this document. However it is recognised that other Shell business sectors utilise different nomenclature. Figure 1.3-1 below illustrates the relationship between OGP phase / review gate nomenclature and that used in other sectors.

Figure 1.3-1

Legend: BDEP = basic design and engineering package, BDP = basic design package, BfD = basis for design, BOD = basis of design, EPC = engineering, procurement, construction, FDP = field development plan, FEED = front end engineering design, FID = final investment decision, PEP = project execution plan, PIR = post implementation review, PS = project specification, PSA = pre start-up audit, RFSU = ready for start-up, VAR = value assurance review

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2. PURPOSE OF THE DOCUMENTS


2.1 PROJECT PREMISE DOCUMENT (PPD)
The target groups for the PPD are: The Customer The Project Venture Organisation / project team Shell Global Solutions project management, cost estimating and future work planning, preparation and tendering The PPD rev 0 - is to be considered as a high level - FED1 Entry Document stipulating the key elements prior to enter FED and under which main conditions. It is a live document that will exist throughout the development of the investment proposal into a project and ultimately, live Plant. At the end of FED1 it need updating to rev 1 and at this stage, the Project Premise Document need to be in near finished condition. This document could then be tweaked in FED2, FED3 etc. As the PPD is likely to be used to rank a project proposal amongst other investment opportunities, it need to set out clearly the premises, objectives and economics, along with a summary proposal for its Front End Development. For examples of information to be included see Appendix A. A key step in the development of the PPD and alignment of key stakeholders can be archived by use of Opportunity Framing if it has been facilitated prior to FED1. The PPD is likely to be produced not only by the Project Department in OGP, but significant and essential contributions will be delivered by the investment originating party, especially where economics and business issues are at stake. In this aspect it differs from the follow up plans such as PES, PEP and PIP where the focus will shift to development of an investment proposal where the PPD focuses on its definition. The PPD shall therefore be kept up to date as an individual document during the progression of the proposal until its final completion, and (main) changes from previous phases recorded. The Terms Of Reference (TOR) that need be developed to define the scope of work for SGSi will refer to the PPD.

2.2 PROJECT EXECUTION STRATEGY (PES)


The target groups for the PES are: The Customer The Venture Organisation / project team Shell Global Solutions project management, cost estimating and future work planning, preparation and tendering The PES should describe as early as possible in a project (at the end of the Scouting Phase, prior to FED1) the overall strategy under which the project is intended to be developed and implemented according to the template in Appendix B. The PES shall then be further refined and updated, as appropriate, by end of FED 1.

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Based on the above the purposes of the PES can be summarised as follows: Explain how Shell Global Solutions is going to execute the next project phases or if so requested, describe alternatives that Shell Global Solutions can offer for it (contract alternatives, Shell Global Solutions involvement): This information enables the Customer and SGSI to be in a better position to start planning and preparing (e.g. for tendering) for the next project phases. It will make the transition from FED1 to FED2 efficient and records the conditions under which that will happen. Provide background information for the 30% cost estimate: If basic assumptions and requirements are agreed and recorded a realistic +/-30% cost estimate and an overall preliminary schedule can be prepared. If no information is available a contingency has to be added in the cost estimate, based on the worst anticipated scenario.

2.3 PROJECT EXECUTION PLAN (PEP)


The target groups for the PEP are: The Customer The Venture Organisation / project team Shell Global Solutions project management, cost estimating and/or future work planning, preparation and tendering The PEP should describe the overall plan under which the project is intended to be executed. Rev. 0 of the PEP should be prepared during FED2, agreed by project participants, and approved by the Customer. For examples of information to be included see Appendix C. Based on the above the purposes of the PEP can be summarised as follows: Explain how Shell Global Solutions is going to execute the next project phases or, if so requested, describe alternative strategies to execute the project and indicate the preferred option (e.g. contract alternatives, Shell Global Solutions involvement): This information enables the Customer and Shell Global Solutions to be in a better position to start planning and preparing (e.g. for tendering) for the next project phases. It will make the transition from FED2 to FED3 efficient and records the conditions under which that will happen Summarise all critical actions to be done and decisions to be taken in the next project phases by all parties involved (the Customer, Shell Global Solutions or third parties): Providing this information helps both Customer and Shell Global Solutions in estimating required manpower and planning for the next project phases, optimising in this way total project cost and schedule. Provide background information for respectively the update of the +/-30% cost estimate and the +/20% cost estimate: Only if basic assumptions and requirements are agreed and recorded a realistic cost estimate and an overall preliminary schedule can be prepared. If no information is available a contingency has to be added in the cost estimate, based on the worst anticipated scenario.

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2.4 PROJECT IMPLEMENTATION PLAN (PIP)


The target groups and purposes of the PIP are the same as for the PEP. The only difference between the two documents is that the PIP contains more details than the PEP, especially for the implementation of the project (the detailed engineering, procurement, construction, commissioning, start-up and performance testing). The document is prepared at the end of the FED3 phase prior to FID and provides background for the +/-10% cost estimate. The PIP shall be considered a live document and should, during the implementation phase of the project, be kept up-to-date with the agreed project implementation strategies. Start of the fieldwork and at around 50% completion can be important milestones for release of PIP revisions to reflect actual situation and focus on the periods to come. The last issue of the PIP shall contain detailed information about the arrangements agreed for the commissioning and start-up and refer to a final Operations Implementation Plan (OIP).

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3. CONTENT OF THE DOCUMENTS


3.1 GENERAL
It is recommended to produce the documents below by project participants in their various disciplines or field of expertise and assembled by the venture, asset development or project manager. The content page of the document can serve as a vehicle to allocate the different chapters for this purpose.

3.2 PROJECT PREMISE DOCUMENT PPD


In Appendix A a template with checklist is given for the PPD. This high level document shall give a synopsis of the key issues only.

3.3 PROJECT EXECUTION STRATEGY PES


In Appendix B a template with checklist is given for the PES. The PES shall be a concise document.

3.4 PROJECT EXECUTION PLAN PEP


In Appendix C a template with checklist is given for the PEP and PIP. The main table of contents of the first 6 chapters of the PEP and PIP is equal to that of the PES. The PEP should be much more detailed than the PES. During FED1 and FED2 phases not all information mentioned in the checklist of Appendix C is already available in full detail, especially not for the chapters 10 up to and including 14. However, as far as possible all items should be covered either by definite information or by preliminary information, mentioning possible (likely) alternatives or describing what items still require resolution.

3.5 PROJECT IMPLEMENTATION PLAN - PIP


Ref Appendix C, the PIP is a further development of the PEP, and contains information which becomes available during FED3 and, for later revisions, during the implementation phase

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4. RESPONSIBILITY, OWNERSHIP, RIGHT OF USE


Table 1 indicates who is the owner of the document, who should sign them off (Shell Global Solutions and/or the Customer) and who has the right to use them. For the documents to be signed off by Shell Global Solutions the OGP Authority Matrix in the Business Group Management Manual indicates the authority to approve. Table 1 Ownership, signatures and right of use of PPD, PES, PEP and PIP Document PPD Owner Joint development by Investment Originator and/or Customer (e.g. for Chemicals the asset development manager) and Shell Global Solutions Shell Global Solutions Signing off by - Shell Global Solutions - Customer Right of use - Shell Global Solutions - Customer (no special secrecy agreement required) - Investment Originator

PES

- Shell Global Solutions - Customer

- Shell Global Solutions - Customer (no special secrecy agreement required) - Shell Global Solutions - Technical or Steering Committee of the Customer with secrecy agreement at corporate or personal level, as appropriate Before FID: - Shell Global Solutions - Technical or Steering Committee of the Customer with secrecy agreement at corporate or personal level, as appropriate After FID: - Shell Global Solutions - Customer

PEP

Shell Global Solutions

- Shell Global Solutions - Customer

PIP

Shell Global Solutions

Before FID: - Shell Global Solutions - Customer After FID: - Customer

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5. DEFINITIONS / REFERENCES

Ref.1

OGP Governance Project Development and Implementation

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Ref. 2 Project Guide 8 Project Specification Ref.3 Ref.4 Ref.5 Ref.6 Ref.7 Ref.8 Project Guide 9 BOD/BDP Project Value Process 4 - Risk Management Project Value Process 3 Contracting & Procurement Strategy Development Project Value Process 11 Operational Implementation Planning Project Guide 11 Building the Asset Development Organisation Project Value Process 2 Opportunity Framing & Project Goals Setting

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APPENDIX A: TEMPLATE WITH CHECKLIST FOR PPD

1. 1.1
-

PROJECT PREMISES OUTLINE OF INVESTMENT PROPOSAL - SCOPE


Description of investment proposal Alternatives considered

1.2
-

OBJECTIVES
Main objective of proposal / ultimate goal / market share Objectives in time, capex, Opportunity Statement. (a definition of the opportunity to gain team focus on the opportunity) Value Drivers and Critical Success Factors. (Value drivers identify what is important for increasing the value of the opportunity. They can include economic as well as soft items (e.g. reputation) and must reflect all the principles of sustainable development) Business expectations: why / sensitivity of success

1.3

PRIORITIES
Checklist: Ranking with other proposals (Third party) competition

1.4
-

CUSTOMER / OPERATOR
Principal customer Stakeholder Identification and Mapping (to identify key stakeholders who have varying degrees of influence on the project, and their issues. Identification of proactive measures to engage stakeholders) Future ownership and operating company Operating and maintenance practices

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2.

KEY ISSUES, RISKS

2.1
-

MAIN ISSUES, INVESTMENT ORIGIN


Boundaries and Givens Originating parties Definition of Success Confidentiality secrecy agreements, patents

Checklist: Previous investment proposals

2.2
-

JV PARTNERS
Identification of (potential) Joint venture partners

Checklist: list pros and cons of venturing

2.3
-

RISK IDENTIFICATION
Key Risk and Opportunities. (Rank using TECOP technical, economical, commercial, organisational, political framework to provide a structured approach to identify issues and define mitigation measures) Identification of show stoppers

2.4

AUTHORITY ENGINEERING
Checklist: Alternatives considered

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2.5

MAIN CHANGES FROM PREVIOUS REVISIONS

Background: the PPD is a quality document that exists next to the various documents such as PES, PEP and PIP; these will become extinct after use. The PPD requires to be updated as it contains the defined premises, required until completion of the full PIR, 18 to 24 months after start up. Define criteria for recording of changes Record (main) changes Initiating party and justification

3. 3.1
-

STRATEGIC FIT AND BUSINESS CASE FEEDSTOCK, PRODUCT AND UTILITIES


Feedstock / arrangements / contract opportunities Suppliers, alternate supply Delivery mode pipeline, truck, rail, ship Market share Number and types of products, marketing areas Quality specifications, off spec disposal Packaging, inventory requirements Utility requirements: supply versus self-generation

3.2
-

ECONOMICS
Scenarios Sensitivities Acid tests Value of process materials and catalysts Energy values

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Profitability criteria for trade offs capital labour materials Trade off cost versus schedule Cost on carbon

Checklist: Max capital limitation References to economic evaluation models (e.g. Cape)

4.

PROJECT MANAGEMENT ORGANISATION

4.1
-

VENTURE ORGANISATION
Company service agreements Sponsoring Steering Committee

4.2
-

PROJECT SITE CONSIDERATIONS


Proposed location and alternatives considered (list pro and contras) Synergy effects with adjacent and/or existing facilities General facilities requirements (buildings, warehouses, effluent treatment etc)

4.3
-

PROJECT OVERALL SCHEDULE


Overall schedule with FED phases and implementation / start-up Product availability requirements Schedule constraints identify critical path(s)

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4.4
-

PROJECT COMMISSIONING AND START-UP


First indicative plans with regard to Company / Organisation of (initial) operation

Checklist: Indicate upstream and downstream linked plant

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5.

TECHNOLOGY

5.1
-

TECHNOLOGIES
Technology selection Licensing parties License agreements, conditions and fees Licensors and front end engineering parties

Checklist: - Alternatives considered

5.2
-

CAPACITIES, YIELDS, FEED AND PRODUCT QUALITY


Nameplate capacity (including description of the definition used) Production early years versus mature operation Proposed availability Yields Run length Turndown requirements Feedslate and indication min and max quality Product slate and quality

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6.

HSE & Sustainable Development

6.1
-

IDENTIFICATION OF KEY HSE AND SD ISSUES


Identify key issues on health, safety and environment and sustainable development First high level identification of scope per Project Guide 1A Effluent handling and disposal requirement Required operating permits

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APPENDIX B: TEMPLATE WITH CHECKLIST FOR PES


Paragraphs that are underlined need addressing in the Rev 0 issue in scouting phase

1.

PROJECT BACKGROUND

1.1
-

SCOPE
Project title and number Project location, e.g. country/town Short description of the project (green field, grass root or revamp, type of plant, capacity) Listing of new plants/units to be constructed and main modifications to existing plants.

1.2
-

SUMMARY OF DEVELOPMENT PLAN


Purpose of the project (summary of Project Premise Document - PPD) Project history Project development (description of the next project phases) Status of planning application Ancillary facilities (neighbours) Provisions for infrastructure Significant provisions for future expansions.

1.3
-

OBJECTIVES AND PRIORITIES


Evaluate key parameters in terms of Customer's requirements on cost (capital cost, life cycle cost, operational cost), time, resources, quality, HSE, limitations existing facilities, plot space, etc. (summary Project Premises Document) Alignment between Customer and Project

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1.4
-

CUSTOMER/OPERATOR
Define Customer/Operator Shareholders Project Steering Committee Venture management

1.5

UPDATE PROJECT PREMISE DOCUMENT PPD REV 1

Background: the PPD is a quality document that exists next to the various documents such as PES, PEP and PIP; these will become extinct after use. The PPD requires to be updated as it contains the defined premises, required until completion of the full PIR, 18 to 24 months after start up. With the start of every new phase, the Project Premise Document requires updating, in case of transition FED1 to FED2 from rev 0 into rev 1. Highlight main changes and their impact of Front End Development / project execution.

1.6
-

NOMENCLATURE
Definition of special words/terminology/abbreviations used

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2.

KEY ISSUES, RISKS, SENSITIVITIES

2.1
-

TECHNOLOGY
Own technology Third party technology Licence agreements Licence contamination Technology risks Novelty of Plant and/or equipment design, automation and information technology (Development Releases).

2.2
-

JV PARTNERS
JV agreements - cost sharing Protection of know-how Disclosure of information Participation in project execution

2.3
-

PROJECT EXECUTION
Customer objectives Fast track or split phase Shell Global Solutions involvement: Selection of value and work processes

Execution/cost risks

- Modular construction opportunities considered decision point - Grass roots, local organisation

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- Project financing/financeability - IT applications E-documentation Livelink platform (incl access control), storage and recording of key project / auditable documents - Benchmarking activities through Front End Development, setting (contractual benchmark) targets Checklist: Enhancement of local business / local content requirements Simultaneous construction activities in the area

2.4

AUTHORITY ENGINEERING
- Responsible party and focal point - Timing permit applications (NB: allow sufficient time for approval of the permit applications)

3.

COST AND SCHEDULE AND CHANGE CONTROL

3.1

COST ESTIMATE
Responsible parties to prepare the estimates (i.e. on-plot, off-plot, shipping, infrastructure, financing, insurance, taxes, duties, Shell Global Solutions-services) Type and format (breakdown) of estimates Description of Owners Cost elements "Asset Breakdown", Work Breakdown Structure (WBS) Explain project's aim for low-life cycle cost Responsible party to prepare cost comparison analysis between successive estimates Justify type of estimate, e.g.50/50, 10/90 or 90/10

Checklist:

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3.2

PROJECT SCHEDULE

Great emphasis shall already be given in the earliest project phases to the detailed planning of project activities of alternative project execution strategies. Optimising sequences and minimising interfaces could considerably shorten project schedules at no extra capital cost. Concise overall schedule Prepare Front End Development schedule with forecasted expenditures per phase Describe main planning features of proposed implementation schedule(s) Define the critical steps in the overall planning of the project (e.g. permit application, long delivery items) and identify critical path elements.

Checklist:

4.

DIVISION OF WORK AND RESOURCING

4.1

PURPOSE

The purpose of a division of work is to formulate a policy for the division of activities and responsibilities between Customer and Shell Global Solutions and to translate this into resource requirements. When the project is on a new site (so called grassroots), Customer resources will initially be very limited. The site organisation is likely to be built-up concurrently with project development and hence will not be available for project duties. In such a case, Customer might wish to appoint Shell Global Solutions as the Technical Leader whereupon Shell Global Solutions will set up the required organisation for the realisation of the total project. For other projects, the assistance of Shell Global Solutions could be limited to a specific phase of the project, ad-hoc advice or the provision of resources to reinforce Customer's project team. To check if the capacity of the Customers organisation is sufficient or requires strengthening a proper listing of all his required actions and deliverables shall be done. The division of work and responsibilities between Customer and Shell Global Solutions need to be defined and agreed and relevant agreements drawn up. Separating scope out from the main EPC(M) contract(s) for implementation by the local company needs to be handled with care. When elements are removed from the main contract scope this can compromise the technical integrity of the installation and introduce complicated interface problems between the Customer and the Contractor(s) The necessary resources for the project in terms of skills of personnel and accumulated know-how adjusted to the needs of each project phase can be made available from Shell Global Solutions

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(international) staff, Customer staff, temporarily hired staff, contracted staff, and by contracting out work. Shell Global Solutions can advise Customer on the organisation and structuring of the project team.

4.2

CUSTOMER'S INPUT
- Master plan - Management policy - Local conditions/soil investigation/technical standards - Interfaces with existing plant/demarcation boundaries/BL conditions/ meteorological data/economic data - Outside plot/plant change - Planning application/permits - Tendering for Project Implementation - Contacts with local authorities - Provide staff for project teams - Installation of a steering committee - Tendering for construction and other local contracts - Agree/prepare/monitor estimates and schedules (refer Chapter3) - Project language - Approved vendor list - Terms and conditions for contracts - CAR insurance - Contractor's third party liability covered under Customer's insurance? - Preparation of monthly progress reports - Training - Build-up of organisational site organisation - Supplies of operating materials

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- Commissioning and start-up - Cost control/budgets for start-up - Funding/financing - Land acquisition o NB: Finalise land acquisitions the earliest to minimise engineering and construction changes.

- Change control - Management reviews - HSE reviews during Implementation Phases - Feedback of lessons learned during construction, commissioning and start-up to Shell Global Solutions - Performance testing - Identification of Customers risks/liabilities

4.3
4.3.1

SHELL GLOBAL SOLUTIONS SERVICES


Shell Global Solutions Services To be rendered Prior to Implementation Phase

- Scouting Studies - Basis of Design (BOD) - Basic Design Packages - Project Execution Strategies, Project Execution and Implementation Plans - Selection of Value and Work Processes - Operational Implementation Strategy and Plan - 30%, 20% and/or 10% cost estimates - Site investigations/early start of site preparation work - Development of Project standards (DEP-s versus Industry Standards) - Tendering for PS

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- Project Specification or BDEP - Procurement engineering for long lead items - E-Procurement - Pre-qualification, tendering, bid evaluation of EPC(M) Contractors and recommendation of preferred Contractor - Participation in Independent Management Reviews (IMR) (refer also to Appendix C para 8.4) - Economic assessments - Licence agreements - Shell Global Solutions services: internally aligned, costs estimated and approved via Deals Management System (DMS) procedure - Cost accounting structure for SGSi services to be structured and approved - Shell Global Solutions services to be covered under Construction Service Agreement (CSA) or Letter Agreement as amendment to existing Services Agreement. - Identification of Shell Global Solutions risks/liabilities.

4.3.2

Shell Global Solutions Services In the Project Implementation Phase

- Monitor/advise on contractor(s) activities - Selection and application of Value and Work processes - Provide (international) staff for project teams - Prepare/monitor cost estimates/schedules - Assistance to Customer during engineering, construction, commissioning, start-up and performance testing - Review/audit of work contracted by Customer to others - Steering Committee representation - Shell Global Solutions services to be internally aligned, cost estimated and approved via DMS procedure - Shell Global Solutions services to be covered under CSA or Letter Agreement as amendment to existing Services Agreement - Operational Service Agreement (OSA) for post-start-up period - Review of major changes in PS/BDEP

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- Participation in Post Investment Reviews (PIR) - Identification of Shell Global Solutions risks/liabilities.

5.

CONTRACTING

5.1

PURPOSE

The purpose of contracting is to obtain specific works, services and goods required to support the project objectives that cannot or will not be supplied by Shell Global Solutions and/or Customer.

5.2

STRATEGY

Through a structured process (identifying the most suitable contractors where necessary via a prequalification procedure - to be invited to bid for a work package, competitive or single-source tendering, technical clarification, commercial evaluation and the final ranking) the contract is awarded to the Contractor considered most attractive to execute the work. Where process technology is key, advise from the relevant Shell Group technology custodian need be sought and recorded. - Contracting workshop - Competitive or single source tendering - Pre-qualification Bidders - Contract type or if not yet decided, overview of possible contract alternatives - Required local content

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6.

BUDGETS, SERVICE AGREEMENTS AND FINANCES

6.1

FUNDS
- Required budgets from Customer for services to be rendered by Shell Global Solutions during the individual project phases. - Responsible party to initiate budgets - Timing for the preparation of 502 or similar documents

6.2

FORM OF AGREEMENTS

The role of Shell Global Solutions, its authorities, responsibilities, liabilities, lines of communication, advice and services rendered, and its remuneration are all encapsulated in an agreement to be concluded between Shell Global Solutions and Customer. Upon signature of the agreement by Customer, Shell Global Solutions will initiate all related activities covered by the Agreement.

- List agreements (to be) concluded and executive summary, such as: * * * * * * * * * Cost Contributing Agreement Construction Service Agreement Technical Support Agreement Side letter to existing Service Agreement, in case project activities are "optional services" Operational Service Agreement Joint Venture Agreements Licence Agreement Others Timing of Agreements.

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6.3

FINANCES
- Finance arrangements for disbursement of invoices - Tax/treasury/insurance/audit matters - Local tax regulations applicable for services and supply of goods

Checklist:

NB:

Procurement of long delivery items Financing Already in the first phases of the project, proper arrangements should be in place which allow Shell Global Solutions, Contractors and Vendors of long delivery items to be paid in time for work done. Loan arrangements whereby the shareholders do not guarantee the full amount of the loan should be avoided. In case such arrangements cannot be avoided a multidisciplinary task force is to be set-up in the early days of the project for the purpose of establishing a comprehensive, integrated strategy and plan to deal with and coordinate project financing.

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APPENDIX C: TEMPLATE WITH CHECKLIST FOR PEP AND PIP


1. PROJECT BACKGROUND

1.1

SCOPE
- Project title and number - Project location, e.g. country/town - Executive summary of Basis of Design or BDP, including: * * * Short description of the project (green field, grass root or revamp, type of plant, capacity) Listing of new plants/units to be constructed Modifications to existing plant/tie-ins.

1.2

SUMMARY OF DEVELOPMENT PLAN


Purpose of the project (and capture of main changes of Project Premise Document PPD from rev 1 to rev 2) Project history Project development (description of the next project phases) Changes to approved BOD, Rev. A Status of planning application Ancillary facilities (neighbours) Provisions for infrastructure Significant Provisions for future expansions ref Design Class process.

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1.3

OBJECTIVES AND PRIORITIES


Evaluate key parameters in terms of Customer's requirements on cost (capital cost, life cycle cost, operational cost), time, resources, quality, HSE, limitations existing facilities, plot space, etc. Identify developments/changes to agreed objectives. Arrange alignment meeting customer sponsor - project

1.4

CUSTOMER/OPERATOR
Define Customer/Operator. If more parties are involved define responsibilities of each party; in case of overlapping responsibilities clearly define this. Shareholders. Arrange alignment meetings with stakeholder / customer / operator / project

1.5

UPDATE PROJECT PREMISE DOCUMENT PPD REV 2 and 3

Background: the PPD is a quality document that exists next to the various documents such as PES, PEP and PIP; these will become extinct after use. The PPD requires to be updated as it contains the defined premises, required until completion of the full PIR, 18 to 24 months after start up. With the start of every new phase, the Project Premise Document requires updating, in case of completion of FED2 into rev 2 and upon completion of FED3 into rev 3. Highlight main changes and their impact of Front End Development / project execution.

1.6

NOMENCLATURE
- Definition of special words/terminology/abbreviations used.

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2.

KEY ISSUES, RISKS, SENSITIVITIES

2.1

TECHNOLOGY
Own technology Third party technology (if need be to be decided during a later Project Phase, e.g. application of CO2 removal process for LNG plants) Licence agreements Licence contamination Studies remaining to be completed after the BOD, Rev. A has been approved, including development releases. Technology risks Novelty of Plant and/or equipment design, automation and information technology (Development Releases).

2.2

JV PARTNERS
JV agreements cost sharing Protection of know-how Disclosure of information Participation in project execution

2.3

PROJECT EXECUTION
Customer objectives Fast track or split phase Shell Global Solutions involvement o o Update of results of utilized value and work processes previous phases Selection of value and work processes this phase

Modular construction: final concept

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Define project control philosophy Define measures to specify and purchase and accept of vendor packaged units, back-up documentation and agreement on engineering standards, listing of deviations; Enhancement of local business Simultaneous construction activities in the area Execution/cost risks Import restrictions Withholding tax Tax/duty exemption Substantial amounts of money can be involved resulting from local taxation requirements. Appropriate actions and organisational measures have to be stipulated to prepare a tax strategy. The objective is to have a clear identification of who pays what taxes. A study can reveal the most tax-efficient contracting strategy to be used and also to identify who are liable if the tax regime changes. Such a study should be carried out by a competent tax professional as early as possible in the project development. Contractors may gain advantage by establishing a project company in a tax shelter or a tax-advantaged location.

N.B.:

Project language Grass roots, local organisation Project financing/finance ability Interface/division of responsibilities with other Group Service Companies Provisions for site construction teams of Customer and Main Contractor in terms of housing, facilities, IT, schooling, familiarisation with different cultural, political and juridical circumstances (in particular important for remote construction sites). Provision and arrangements of benchmarking activities. IT applications E-documentation update Livelink platform with its key and auditable documents focal point

2.4

AUTHORITY ENGINEERING
Responsible party and nomination overall coordinator(s) Summary of required technical and operations permits, with schedule and application periods; and their assignment to focal points

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Timing of permit applications (NB: allow sufficient time for approval of the permit applications) Supporting (design) documents (N.B: early preparation of documents for Authorities required which do not contain information on proprietary know-how of Shell and third parties) Concept on HSE (deviations from normal standards)

2.5

VALUE AND WORK PROCESSES


Summary of status of value and work processes that have been applied during the earlier phases of front end development and a programme of the activities that need be undertaken to complete Schedule when these processes are most efficient applied and arrangement for participation;

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3.

COST AND SCHEDULE AND CHANGE CONTROL

3.1

COST ESTIMATE
Explain project's aim for low-life cycle cost Responsible parties to prepare the estimates (i.e. on-plot, off-plot, shipping, infrastructure, financing, insurance, taxes, duties, Shell Global Solutions-services) Executive summary of available capital cost estimates Identify Capex and Revex items for further cost estimates Type and format (breakdown) of estimates Timing of estimates and phasing of expenditure Responsible party to prepare cost comparison analysis between successive estimates "Asset Breakdown", Work Breakdown Structure (WBS. justify type of estimate, e.g. 50/50, 10/90 or 90/10

Checklist:

3.2

COST CONTROL
Responsible party to prepare budget cover statements for future commitments Provisions of counter-estimates Preparation of a Cost Control Management Plan.

3.3

PROJECT SCHEDULE

Great emphasis shall already be given in the earliest project phases to the detailed planning of project activities of alternative project execution strategies. Optimising sequences and minimising interfaces could considerably shorten project schedules at no extra capital cost. Describe planning features of proposed implementation schedule Define the critical steps in the overall planning of the project (e.g. permit application, long delivery items), fallback scenarios, and mitigation measures. Describe critical path analysis results of the implementation phase;

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Detailed schedule up to investment decision Responsible party to update project schedules Overall schedule, including interfaces with other Group Service Companies, deliverables of Customer and third parties, including milestones for all major activities Describe impact of agreements (to be) concluded. Describe risk in case of a stretch target completion date. Consider the impact of a potential on delay in completion on product sales contracts (a schedule contingency to be added to the sales contracts?) and trade off between schedule and cost. Progress control Justify probability of schedule (preferably linked with constructability reviews) e.g. P50

Checklist:

3.4
3.4.1

CHANGE CONTROL
Strategy

Proposals for change need to be strictly controlled and their cost/ time implications closely monitored in order to ensure that project objectives are met on time and within budget, or alternatively, that appropriate action is taken to obtain the necessary agreements on revised schedules and/or budgets. A procedure shall be in place making it compulsory that change proposals are properly screened for their impact on Operability, Safety, Health and Environmental aspects. The control of change is an important factor in ensuring that the project is completed on time and within budget. Changes to the BOD or BDP (scope changes) might affect the business objectives and may require budget resubmission. Alterations to the detailed execution of the work (Implementation changes) should be financed out of the Project Contingency Allowance. Major implementation changes should be treated as scope changes and may require a budget revision. Scope Changes are basically "forced" scope changes, i.e., they are variations to the agreed scope necessary to secure the project objectives of realising a safe and reliable operating unit. Initiatives or improvements for earning power or marketing and operations flexibility shall be carefully considered. The only legitimate reasons for Scope Changes within the authorized project budget are for: Correction of errors (in original scope). Restoration/enhancement of safety and safe operation. Changes in legislation requirements or regulations. Major cost savings.

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Late safety and operability requirements need to be addressed first through procedures, training, i.e. soft measures rather than Capex. In principle no change will be considered if the capital project facility can operate reliably for the defined turnaround cycle (between two planned shutdowns) without a forced shutdown. Changes need to be approved at senior level in Shell Global Solutions and/or Customer

3.4.2

Change Control Procedure

The most important aspects of the change control procedure are: Recognition and recording of change and reporting. Analysis of impacts on operability, safety, health and environment. Analysis of the consequences on cost and schedule. Arrangements between Shell Global Solutions and Customer regarding the responsibility for handling changes. Effective procedures for preparation, evaluation and approval of changes. Arrangements in the project organisation to ensure that change control procedures are followed by all parties involved (no unauthorised implementation of changes). All changes to Shell Global Solutions deliverables (BOD, BDP, BDEP/PS) should be verified by Shell Global Solutions skill departments prior to implementation, as design integrity may have to be guaranteed. Prompt authoritative responses to change proposals. Provision of funds.

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4.

DIVISION OF WORK AND RESOURCING

4.1

PURPOSE

The purpose of a division of work is to formulate a policy for the division of activities and responsibilities between Customer and Shell Global Solutions and to translate this into resource requirements. When the project is on a new site, Customer resources will initially be very limited. The site organisation is likely to be built-up concurrently with project development and hence will not be available for project duties. In such a case, Customer might wish to appoint Shell Global Solutions as the Technical Leader whereupon Shell Global Solutions will set up the required organisation for the realisation of the total project. For other projects, the assistance of Shell Global Solutions could be limited to a specific phase of the project, ad-hoc advice or the provision of resources to reinforce Customer's project team. To check if the capacity of the Customers organisation is sufficient or requires strengthening a proper listing of all his required actions and deliverables shall be done. The division of work and responsibilities between Customer and Shell Global Solutions need to be defined and agreed and relevant agreements drawn up. Separating scope out from the main EPC(M) contract(s) for implementation by the local company needs to be avoided, especially when the elements removed from the main contract scope can compromise the technical integrity of the installation and introduce complicated interface problems between the Customer and the Contractor(s) Where developments indicate that an adjustment is necessary, parties must get together to revise the originally agreed division of work. Interfaces must be clear and preferably at natural borders, either in time or in scope.

4.2

CUSTOMER'S INPUT
Master plan Management policy Local conditions/soil investigation/technical standards Interfaces with existing plant/demarcation boundaries/BL conditions/ meteorological data/economic data Outside plot/plant change Planning application/permits Tendering for Project Implementation

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NB: -

Contacts with local authorities Provide staff for project teams Installation of a steering committee Tendering for construction and other local contracts Agree/prepare/monitor estimates and schedules (refer Chapter 3) Project language Approved vendor list Terms and conditions for contracts CAR insurance Contractor's third party liability covered under Customer's insurance? Preparation of monthly progress reports Training Build-up of organisational site organisation Supplies of operating materials Commissioning and start-up Cost control/budgets for start-up Funding/financing Land acquisition Finalise land acquisitions the earliest to minimise engineering and construction changes Change control Management reviews HSE reviews during Implementation Phases Feedback of lessons learned during construction, commissioning and start-up to Shell Global Solutions Performance test. Identification of Customers risks/liabilities

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4.3
4.3.1

SHELL GLOBAL SOLUTIONS SERVICES


Shell Global Solutions Services To be rendered prior to the Implementation Phase

Scouting Studies Project Premise Document applicable revision Basis of Design (BOD) Basic Design Packages (BDP) Project Execution Strategy, Project Execution and Implementation Plans Operational Implementation Strategy and Plan 30%, 20% and/or 10% cost estimates Site investigations/(early start of) site preparation work Development of Project standards (DEP-s versus Industry Standards); nomination of the CD-ROM version applicable for the duration of the project Tendering Choice of Project Specification or BDEP depending on implementation strategy Summary of selected Value and Work Processes Procurement engineering for long lead items Prequalification, tendering, bid evaluation of EPC M) Contractors and recommendation of preferred Contractor Participation in Independent Management Reviews Economic assessments Licence agreements Shell Global Solutions services: internally aligned, cost estimated and approved via the Deal Management System (DMS) procedure Shell Global Solutions services to be covered under Construction Service Agreement (CSA) or Letter Agreement as amendment to existing Services Agreement. Provide staff for project and/or residence team(s) Identification of Shell Global Solutions risks/liabilities.

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4.3.2

Shell Global Solutions Services To be rendered in the Project Implementation Phase

Monitor/advise on contractor(s) activities Provide staff for project teams Prepare/monitor cost estimates/schedules Provide (international) staff for project teams Assistance to Customer during engineering, construction, commissioning, start-up and performance test Review/audit of work contracted by Customer to others Steering Committee representation Summary of selected Value and Work Processes Model reviews Operational readiness review Pre-start-up HSE review Fire Safety Review Shell Global Solutions services to be estimated and approved via Finance DMS system Shell Global Solutions services to be covered under CSA or Letter Agreement as amendment to existing Services Agreement OSA for post-start-up period Review of major changes in PS/BDEP Participation in Post Implementation Reviews (PIR) Identification of Shell Global Solutions risks/liabilities.

4.4

RESOURCES

The necessary resources for the project in terms of skills of personnel and accumulated know-how adjusted to the needs of each project phase can be made available from Shell Global Solutions (international) staff, Customer staff, temporarily hired staff, contracted staff, and by contracting out work. Shell Global Solutions can advise Customer on the organisation and structuring of the project team, in particular during the Implementation Phase. The level of expertise required in Customer's project team should be assessed, for new organisations preferably at the time the CSA is negotiated. This would be the vehicle through which Shell Global Solutions staff is transferred to Customer.

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In general it is preferable to transfer at least those staff that have been most closely involved in the PS/BDEP in order to provide continuity and in-depth knowledge of the project. Sometimes a particular skill is not required full time within the project itself, in which case such expertise may not be represented in the Customers project team. Under these circumstances the timely involvement of appropriate expertise from within Shell Global Solutions becomes even more important. Competence mappings of project teams should be prepared, indicating the required discipline competences specific for the project, and competences actual available in the team. Lacking competences, requiring decision-making or verification of documents at a higher level, could then be provided by Shell Global Solutions on an ad-hoc basis. For each of the project teams required for the individual project phases, specify the required resources. Decide whether the project team, in particular during the PS Phase, will work as a task force or in the matrix organisation. The extent of Contractor supervision needs to be defined, in particular whether a resident team in Contractor's office is required. Resourcing policy Manpower resource plan/assignment durations/Shell Global Solutions staff/Customer staff/Contractor staff Physical location of team(s) Strength and compositions of teams for: * * * * * * * * Basic Design Package Home office project management and engineering Longlisting, shortlisting of Contractors, tendering, bid evaluation, recommendation of preferred Contractor PS/BDEP Package (home office, resident) Detailed Engineering and Procurement (home office, resident) Construction Commissioning, start-up Performance tests.

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5.

CONTRACTING

5.1

PURPOSE

The purpose of contracting specific works, services and goods is required to support the project objectives that cannot or will not be supplied by Shell Global Solutions and/or Customer.

5.2

STRATEGY

Through a structured process (identifying the most suitable contractors to be invited to bid for a work package, competitive or single-source tendering, technical clarification, commercial evaluation and the final ranking) the contract is awarded to the Contractor with the most attractive package to execute the work. For the first step, establishing the contracting strategy for the project, a contracting workshop, as part of the value processes, may be considered. In case such has been applied in FED 1 phase, the strategy need be confirmed. Contracting strategy / confirmation earlier contracting strategy and / or workshop proceedings Identifying objectives to be achieved, in particular in case of incentive contracts Expression of objectives in terms of time Assessment of (quality of) resources both available and required Allocation of responsibilities Constraints Financial stability of selected Contractor Ensure life cycle requirements are incorporated.

5.3

MAJOR CONTRACTS
Preliminary list of principal contracts Scope of principal contracts Party responsible for prequalification / tendering / award / monitoring / invoicing / payment / change orders Type of contract reimbursement Single or competitive tendering Contractor selection criteria

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Target incentive contract Bonus incentive schemes need not only to focus on the achievement of intermediate milestones and the RFSU date. Customer may benefit more from linking the incentive scheme to the achievement of "sustainable products in tanks".

N.B.:

Consider utilising international contractors' operating experience in involving them actively in Customer's commissioning and start-up teams Qualitative and quantitative assessment of milestone achievements Tender Board approvals. local content

Checklist:

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6.

BUDGETS, SERVICE AGREEMENTS AND FINANCES

6.1
6.1.1

FUNDS
Application

Required budgets from Customer for services to be rendered by Shell Global Solutions during the individual project phases. Responsible party to initiate/prepare/monitor/consult budgets Align the project funding with the Work Breakdown Structure, if required back to back with Customer and / or JV partners Timing for the preparation of 502P and F Supporting documents.

6.1.2

Control

Customer is fully responsible for the control of funds. Customer may in turn request the services of Shell Global Solutions for the execution of certain project activities. Within Shell Global Solutions, the Activity Leader is then responsible for the proper execution of these services and the control of related cost within the approved budget. Checklist: List budgets to be controlled by the Activity Leader Change control procedure (see also chapter 3).

6.2

FORM OF AGREEMENTS

The role of Shell Global Solutions, its authorities, responsibilities, liabilities, lines of communication, advice and services rendered, and its remuneration are all contained in an agreement to be concluded between Shell Global Solutions and Customer. Upon signature of the agreement by Customer, Shell Global Solutions will initiate all related activities covered by the Agreement.

- List agreements (to be) concluded and executive summary, such as: * * Cost Contributing Agreement Construction Service Agreement

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* * * * * * *

Side letter to existing Service Agreement, in case project activities are "optional services" Operational Service Agreement Joint Venture Agreements Licence Agreement Others Timing of Agreements.

6.3

FINANCES
- Financing NB: Already in the first phases of the project proper arrangements should be in place which allow Shell Global Solutions, Contractors and Vendors of long delivery items to be paid in time for work done. Loan arrangements whereby the shareholders do not guarantee the full amount of the loan should be avoided. In case such arrangements cannot be avoided a multidisciplinary task force is to be set-up in the early days of the project for the purpose of establishing a comprehensive, integrated strategy and plan to deal with and co-ordinate project financing. Financial control Tax/treasury/insurance/audit matters Budgetary control Commitment and expenditure control Expenditure phasing and (3 months) roll over cash call forecasts Disbursement control Corporate ledger.

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7.

PROJECT ORGANISATION AND PROCEDURES

7.1

PURPOSE

The purpose of the project organisation is to provide a well-defined organisational structure to manage the resources allocated to the Project (manpower, know-how, time and capital). With Customer being Project Principal and budget holder, management of the Project is Customer's responsibility. However, the available resources and expertise often necessitate assistance being requested from Shell Global Solutions. Projects taking the size of a major revamp or new plant construction require the establishment of (a) dedicated project team(s) with their own management for each phase of the work. In a split-phase project with a division between the PS Phase/Implementation Phase/on-plot/offplot/procurement activities, the interfaces need to be carefully managed and a clear hand-over point must be defined in terms of completed activity (e.g. Project Specification and the 10% estimate are ready). In dividing the work, it is advisable to keep management of the relevant work synchronous with the division in scope. Independent Management Reviews are recommended. These reviews need be planned well in advance, and can be carried out e.g. at the end of the BOD and towards the end of the BDEP or PS. If a Customer will prepare the project execution strategy and plans, the responsible Activity Leader shall explain and justify the benefits of the value and work processes within the project governance structure of Shell Global Solutions.

7.2

CORPORATE STRUCTURE
- Include a block diagram showing Customer's relationship with: * * * * * * * Shareholders Advisers Authorities Shell Global Solutions Project Management Feedstock suppliers/off-takers Licensor Others

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7.3

PROJECT ORGANIZATION
Describe Project phases and their management Shell Global Solutions or Customer Project management Milestone identifying beginning/end of phases Reporting relationships/interfaces Customer/Shell Global Solutions organisation and focal points; Indicate who are the key decision makers Consider assigning a dedicated team member for matters related to financing, legal, insurances and contractual agreements Financial authorities Provide a narrative of main organisational features for each phase (e.g. task force, matrix organisation, home office, resident team) For mega-projects that include "non-traditional shareholders", consider employing the services of a reputable and experienced legal firm from the earliest stages of the project, to assist Shell Global Solutions contracting department and Customer on legal and contractual matters.

7.4

PROCEDURES
List and justify any deviations from OGs Business Process Manual Projects Management systems Administrative procedures Information systems Document commenting, control and distribution Progress/cost reporting of achievements, concerns and corrective actions: * * Contractor to Shell Global Solutions Activity Leader Shell Global Solutions Activity Leader to Customer

Project Review meetings with Customer Communication with others Lessons learned from Customer to Shell Global Solutions Activity Leader.

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8.

QUALITY ASSURANCE

8.1

PURPOSE

Quality is to be the total of characteristics that makes a project fit for the intended use, to reduce unnecessary expenditure arising from avoidable failure to achieve project objectives in the most efficient manner.

8.2

STRATEGY

In order to ensure the efficient and effective realisation of a project, it is necessary to manage quality. This will require a quality management approach that involves three elements: Quality planning Quality control Quality improvement, taking due regard of the conflict of interest between (always) Customer's requirements for long-term durability and (generally) Contractor's and Supplier's short-term involvement.

8.3

QUALITY ASSURANCE REQUIREMENTS

ISO 9000 and ISO 9001 have been set as the basic quality system requirements that shall be fulfilled by all parties involved in the execution of the Project. The services rendered by Shell Global Solutions on behalf of Customer's Project will be executed in compliance with OGs Business Group Management Manual Projects Quality guidance is available on the OG website, via the home page: http://sww-ogstaff.shell.com/OG_mgt_system/OGMS/OG-Home/Home.htm Whilst the Shell Global Solutions quality system cannot be imposed on the Customer, the principal quality steps should be equally valid for the Customer, and Shell Global Solutions can advise on the establishment of an appropriate system. Any QA/QC system put into place, should take into account the degree of expertise available within the Customer, in particular Customer's project team, and should require consultation with Shell Global Solutions whenever this is appropriate. The objectives of the QA strategy will be to assure design integrity, the optimum selection and procurement of the required materials and equipment, and the construction of the project facilities in strict compliance with the requirements of the Basic Design Package and with the Definition and Implementation phase Contracts. Adherence to project standards will be verified by control of nonconformances, by identifying areas for improvement, and by acting upon those promptly and resolutely to ensure compliance

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8.4

REVIEWS and AUDITS

Project development need be subjected to a structured programme of reviews and audits. Reviews are more generic and must be seen as an assessment against best practices and project guidelines identifying strength and weaknesses and recommendations for project execution improvement; audits are independent assessments to ensure compliance to agreed standards. Both reviews and audits need to be scheduled in the overall Project Quality Plan, which will also stipulate requirement with effect to timing and participation. The most common reviews are: Independent Management Reviews commonly executed under guidance of Shell Global Solutions, with senior project executive participation PEER reviews reviews on discipline level, likely with assistance of relevant SGSi expertise PEER groups Functional Reviews such as desktop safety studies HAZOPS IPF reviews pre start up reviews fire safety reviews

Checklist: -

List all identified reviews during BDEP/PS and Implementation phase Responsible party to initiative review(s) and for drafting terms of references Anticipated participants in the reviews Timing. Allocation of cost in budget

8.5

QUALITY ASSURANCE FEATURES


Quality assurance in design QA audits; Contractors internal QA audit schedule, Contractors quality plan Records on Corrective Action Requests, Request Technical Deviations, Non Conformance Requests Interface control Quality assurance in procurement (incl. sub vendors) Vendor appraisal Procurement control

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Inspection parties Authority inspection Quality assurance in construction Contractor appraisal Construction control Construction material control Commissioning and start-up control.

8.6

AUDIT TRAIL

An audit trail of all decisions on alternative solutions that have an effect on technical and operational matters, on the Project's economics, quality, safety and environment, should be kept up to date. Where necessary, a reference to the Project Premise Document shall be made. This will provide the rationale for the ultimate plant design.

8.7

INTEGRITY OF THE DESIGN

A procedure has to be developed for individual project phases that deal with the handling and authorisation of changes to the design intentions or deviations from agreed standards. A competent focal point should have the technical authority to approve/disapprove change and deviation requests. This focal point should have the experience and seniority to judge whether the request has been properly checked for impacts on the design integrity, operational, safety, health and environmental aspects and whether the request has to be referred to the respective Shell Global Solutions specialist department for further review. Changes to the design intentions need always Shell Global Solutions' support.

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9.

HEALTH, SAFETY, ENVIRONMENT (HSE) AND SUSTAiNABLE DEVELOPMENT

9.1

POLICY

The Group Policy Guidelines on Health, Safety and Environment require to conduct all activities on the project in such a way as to take foremost account of the health and safety of all persons working on the project and to give proper regard to the conservation of the environment. In implementing this policy, the requirement of the local legislation shall be complied with and measures for the protection of the health, safety and environment for all who may be affected directly or indirectly by the project shall be promoted in an appropriate manner. To achieve adherence to Group Guidelines and for the proper implementation of HSE/SD, the Project Guide 1A on HSE and Sustainable Development shall be followed.

9.2

HSE PLAN
Statement of policy check PG 1A Summarise available safety studies ESHA : Environmental Safety Health Assessment draft and final reports Responsible party to prepare Safety Management Plan Timing Safety ranks alongside traditional areas of productivity and quality Safety is line responsibility Employers, managers/supervisors, employees, contractors and suppliers have "Duty of Care" Self-regulated safety approach Self-regulated safety approach and line responsibility of safety may be difficult to achieve at some construction sites right from the beginning. Although this approach to be a development objective during the course of the project, appropriate measures need to be in place right at the start of construction, e.g. additional safety officers chastising the construction site.

N.B.:

Considerations such as: * * * Identifying all regulatory authorities having jurisdiction over the Project Identifying all regulations that must be complied with Identifying all permits and certificates that are needed

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* * * * *

9.3

HSE FEATURES

PG 1A HSE and sustainable development and PG 1B: HSE& Sustainable Development Management of Construction describe the minimum requirements for Shell Global Solutions involvement in areas which are of vital interest to Shell Global Solutions business and which are related to Health, Safety, Environment and Operability. Management of HSE in design/engineering/construction/commissioning Discussions with local authorities. Reporting Accidents and Safety Performance Statistics Contractors HSE plan Emergency procedures, responsiveness Training Audits, inspections Safety incentives

9.4

PUBLIC RELATIONS
Formal consultative mechanisms with environmental stakeholders and regulators to increase understanding and co-operation Meeting specific needs of the community Public Relations plan

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10.

ENGINEERING

10.1 PURPOSE
The purpose of engineering is to specify plant and equipment in sufficient detail that elements can be procured and facilities constructed in accordance with the requirements of the Basis of Design and of the Process Design/Licensing Packages. Furthermore, engineering shall deliver the documentation required to operate and maintain the plant, to satisfy authority regulations and to enable future plant developments.

10.2 STRATEGY
To achieve the project objectives, the contents of the Basis of Design need to be developed into the Basic Design Packages and further into a PS or BDEP so that a +/- 10% estimate can be made. The Project standards are agreed in this phase. Sufficient definition should be achieved to prepare for the Implementation phase in accordance with the desired contracting strategy. If pre-ordering (purchasing equipment or goods prior to final investment decision) is required, detailed engineering for the longlead items need be performed during the PS phase, and procurement terms & conditions be available. The strategy of low project life-cycle cost has to be applied as intended. Validation of BOD Identify critical non-routine engineering subjects Technology assurance Involve customers representatives in operations and maintenance during the preparation of the PEFS-s and development of the plot-plan and involve also specialists in construction during the development of the plot-plan Incorporate in the design of a grassroots project a Local Area Network (LAN), a maintenance management system, a computerised materials handling system and Computer-Aided Design package (e.g. AutoCAD) to update engineering documents Overlapping of detailed design/procurement and construction activities As built requirements handover documentation (schedule) extent of electronic documentation with pre-requisite formats and structure / software compatible solutions

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10.3 Division of Work


Division of engineering scope between Shell Global Solutions, Customer, licensors and others Interface control procedure Consider the PS Contractor deal directly with the sub license Contractors. Advantage: streamlining level of Shell Global Solutions liabilities; proper Contractor control of process engineering and technology design, thereby making effective use of Shell Global Solutions man-hours.

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11.

PROCUREMENT

11.1 PURPOSE
The purpose of procurement is to purchase materials and equipment required for the project, satisfying all technical specifications, project planning and commercial objectives.

11.2 STRATEGY
To achieve the project objectives during procurement, consideration to the below-mentioned key parameters should be given. It shall be made clear that low life-cycle cost can mean higher Capex cost. For this purpose, a set of selection criteria will be defined and agreed that justify higher expenditures versus a longer and/or more cost effective life cycle. Project organisation for procurement The Shell Group's statement of General Business Principles with respect to business integrity Project vendor list, vendor qualifications, local requirements, standardisation and resource availability, and international/local vendors Use of export credit facilities Use of MESC, EMA and/or E-SPIR 2000 (early input from Customer required to take existing stock of spare parts into consideration) Purchasing conditions Development of vendor price agreements (blanket orders for bulk materials) Corporate procurement initiatives E-procurement Electronic material management systems to be compatible with engineering design systems Commissioning/Maintenance agreements (include requirement for Vendor Service Men in equipment inquiry and consider quoted cost in bid evaluations) Negotiate maintenance support deals during purchase of e.g. rotating equipment and main instrumentation packages Sealed bid receiving and evaluation

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Assessment of tenders on the criteria of quality, price, life-cycle cost, delivery and overall performance List critical equipment and subcontract Vendor/Subcontractor proposals is required Pre-ordering of long-lead equipment Contractual arrangements on factory acceptance testing (FATs) of DCS / process control systems Procure spare parts needed during commissioning, start-up and first year of operation together with the main equipment/bulk materials Quality assurance/control requirements Importation, duties Document requirements Delivery and site handling of materials, Forwarding Agent Vendor performance feedback to Customer and Shell Global Solutions Surplus disposal (include buy-back clauses for bulk materials in inquiry and consider offered credits in bid evaluations) Procurement of last-minute items Location of material/equipment landing, harbour facilities, temporary material unloading jetty required, road transport, bridges, defiles Store spare rotors vertically in inert (N2 blanketed) containers Delivery conditions such as FOB (Free On Board) or other Discrepancy reports. packages for which verification of

11.3 DIVISION OF WORK


Responsible parties for procurement, on-plot and off-plot materials Resources Procurement offices Procedures Monitoring of procurement activities Resident inspectors and expediting

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Third party inspection and expediting agencies.

11.4 PRE-ORDERING LONG-LEAD EQUIPMENT


Responsibility to requisition/tender/evaluate/procure Assignment of purchase orders to Contractor Bridging funds required covering advanced detailed engineering and procurement work and cancellation charges, in case these activities are executed prior to EPC funds approval.

11.5 ORDERING OF UNDERGROUND PIPING AND CABLES


It should be considered to order underground piping and cable materials as early as possible, and be validated with the construction plan. This will allow early completion of corresponding construction activities and the application of paving, which is one of the prerequisites for a smooth and safe construction progress. Buy-back clauses will prevent excessive surplus materials.

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12.

CONSTRUCTION

12.1 PURPOSE
The purpose of construction is to build the Plant in accordance with the project specifications and procedures.

12.2 STRATEGY
To achieve the project objectives, the design shall be translated in actual plant. - Project organisation for the construction N.B.: experienced operating and maintenance staff shall be involved early in the construction phase

Prefabrication (included in erection contract, off-site, on-site) Modular construction (consider also the logistic restrictions for this) List of execution contractors Development of contract packages Procedure for tendering of site/erection contracts Field administration procedures International/local contractors Preference of Customer for "house" contractors Definition of mechanical completion, RFSU, scope of commissioning activities Hand-over from Contractor to Customer's construction team; Customer's construction team to Operations Sequential mechanical completion dates for systems according to logic of commissioning and start-up (several RFSU dates instead of only one RFSU for entire complex) Restricted work periods due to public holiday seasons and weather conditions Dedicated construction areas (general work permit) Special requirement from the site/Customer Interface with existing site operations/maintenance activities (e.g. shutdown, tie-ins)

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Infrastructure, construction areas, work permits, temporary facilities Early erection of warehouse, admin. buildings, training f Facilities, canteen, workshop, etc. for usage by construction organisation (consider permanent facilities to be ready for use well before start of commissioning of first utilities sections) Industrial relations: * * * * * * History Union representation Wage structures Hours of work Construction camp Effective labour relations with clear comprehensive site agreements and ongoing communication with labour leaders

Site administration Existing medical facilities Development of information package for each individual tie-in into existing facilities. Demobilisation of labour force

12.3 DIVISION OF WORK


Construction work inside / outside Plant Battery Limits Provision of utilities for construction Office, laboratory and Contractor facilities Transfer of engineering work to site Fire-fighting facilities/emergency response Entrance control Warehousing Amenities for field staff Workshop for maintenance contractors

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Safety induction for life plant and construction site Lessons learnt report from Customer to Shell Global Solutions. Change and claim control

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13.

COMMISSIONING, START-UP AND PERFORMANCE TESTING

13.1 PURPOSE
The purpose of commissioning is to prepare the plant for operation. The purpose of performance testing is to prove that the plant meets the guaranteed performance values. One of the features of the Shell Global Solutions value processes is the generation of an Operations Implementation Plan (OIP); this document addresses the same subjects as this chapter but in much more detail; where appropriate, a reference to this document can be made.

13.2 PHASES
The following phases of the commissioning and start-up activities have been identified for which the division of the scope of work, responsibilities and work procedures need to be defined between the Shell Global Solutions project teams, the EPCM contractors and the Future Operator: Cold commissioning delivery of a clean, tight, operable, safe and complete system. It includes flushing, system testing, equipment water runs, pre-punching. It concludes with Ready For Start-up for the specific block. Hand-over. It includes final punching by Shell project/operations teams and hand-over of system with the appropriate documentation Hot commissioning & Start-up. Individual systems are oxygen freed with nitrogen and filled with hydrocarbons. The units are being connected and reactions are started to produce products. Performance testing. After successful start-up, a performance test-run will be conducted to confirm that the plant achieves the specified and designed operating window.

13.3 COMMISSIONING AND START-UP SCHEDULE


The overall project philosophy is to have one integrated approach throughout Engineering, Procurement, Construction, Commissioning and Start-up, with the Start-up sequence as the starting point. Individual EPC, commissioning and start-up schedules will be established for the plant(s) to be integrated into an overall master schedule such that the optimum start-up sequence is achieved. Where applicable, agreements have to be made with (third party) upstream or downstream consumers in respect of their plant completion, commissioning and start up schedules to integrate into an overall master schedule. The overall master schedule will contain all essential elements including storage and vessel loading and unloading facilities. The Shell Global Solutions project team will define the target completion dates for utilities, storage, general facilities and process facilities that will support a logical start-up sequence and will result in a phased hand-over. Schedule milestones need be developed to monitor progress of construction work with respect to the agreed target completion dates.

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Schedule of milestone dates such as: Product in Tank (PIT), Ready for start up (RFSU). Phased hand-over, schedule and responsible parties Target completion dates for utilities, tankage and process facilities in line with logical startup sequence Arrow diagrams. Progress of construction work to be closely monitored. Earlier completion of construction may result in operations not ready to commission and take over. On the other hand, late completion of systems will compress commissioning activities.

13.4 ORGANISATION
Checklist: Division of responsibilities

Here it is very important to describe the exact roles and responsibilities of the construction team, commissioning team and Customer's operation, e.g. * * * * * Who operates commissioning? and maintains mechanically completed systems during

Customer liable for Contractors' waiting time in case a compressor needs to be started for commissioning? Start of guarantee period in case systems and in particular rotating systems are operated prior to RFSU Permit-to-work system when commissioning of systems has commenced, whereas construction activities in adjacent systems are still continuing Electrical switching of electrical feeders

Responsibility of Activity Leader up to RFSU, PIT or Plant Acceptance Responsibility shift for safety areas; switch safety reporting Resources: Customer, Shell Global Solutions, and Contractor.

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13.5 VENDOR ASSISTANCE


Identify equipment / purchase orders for which site assistance by vendor will be required. Obtain vendor assistance rates in purchase order quotations Training, where required obtain specifics in purchase order quotations.

13.6 SPARE PARTS


Traditionally it will be the EPC contractors contractual task to procure spare parts for commissioning, start-up and the first year of operation utilising the Shell GSI program E-SPIR 2000, following the DEP guidelines and local practices. Spare parts for commissioning, start-up and the first year of operations to be ordered together with procurement of main material: include in purchase order requisitions Hand-over Contractor to Customer Determine Customer (future Owner) party to review proposals and decide to purchase. Disposal of surplus materials.

13.7 DOCUMENTATION AT HAND-OVER


The following documents are classified vital for a successful and safe start-up and will be handed over by the contractor with each geographical block or operational system: As build Process Engineering Flow and Utility Schemes Instrument Safeguarding Narratives Process Control Function Specifications Alarm and Trip Setting list Design book text Electrical one-line diagrams Punch Lists Layout plot plan

And optional: Process Flow Diagrams

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Other / remaining documentation need be handed over at a predetermined date to complete the handover. Contractor drawing files/as-built drawings/inspection reports Mechanical completion verification Equipment data Vendor data, (maintenance) manuals Commissioning verification Clearing punch lists Lessons learned report from Customer to Shell Global Solutions.

13.8 DOCUMENTATION AT SUCCESSFUL PERFORMANCE TEST RUN


Certificate of Acceptance, issued by Customer to Contractor Certificate of Completion of Work, issued by Customer to Shell Global Solutions. Ensure that Performance Testrun will be carried out within the time period stated in the Agreement with the EPC (M)-contractor, even when deficiencies are expected.

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14.

POST-IMPLEMENTATION REVIEW

14.1 INTRODUCTION
A Post Investment Review (PIR) or Group Post Implementation Return 506 is the review of a project comparing actual implementation and performance against the plan as per Group Capital Budget Proposal 502 (CBP). PIR timing and report-out will be tracked in the respective Group Companys database and a report made to the original Company Approval Board and or to the CMD. Accountability for ensuring that the PIR is conducted in a timely and appropriate fashion lays with the project sponsor for the original CBP (502) or his successor.

14.2 SCOPE AND TIMING


Post Investment Reviews follow on from the stage-gate proceedings in the earlier phases of the projects lifecycle. The first PIR will be held some 2-6 months post start-up - the interim PIR this review will not only cover an assessment of the effectiveness of project execution and management issues (sometimes called post implementation reviews), but will also cover the commercial, market and economic issues prevalent at that time and forecast for the future at that date to identify at an early stage major learning which may lead to concrete actions both in connection with the project under consideration but also with respect to projects coming up through the system. The full PIR will cover the same topics, but will normally be conducted at a stage when the plant has well reached its sustained operating capacity (normally between 18 months to 3 years post start-up) when it should be possible to achieve a reasonably accurate assessment of the overall economics of the project as compared with what was planned in the budget proposal (502) Documents that need be stored on Livelink PIR databank at the time of Final Investment Decision (FID) are as follows: 1. 502 (at FID) 2. Economic evaluation models (such as CAPE) consistent with the particular 502 (ascertain that software/PCs are still compatible around that date) 3. 10% Cost Estimate 4. Definition phase gate and FID session presentations, incl MODs 5. Project Premise Document (the applicable FID revision, likely rev 3) 6. Project benchmark reports (the benchmark report at the time of FID as a minimum)