06/12/2012

GROUP 17

PROJECT PEGASUS

NAIR, ROHIT CHANDRASEKHARAN | 51231896 SON, CHANG HWAN | 51231722 SURESH KUMAR, TILAK | 51232891

CAPITAL EXPENDITURE REQUEST PROJECT DATA CER Number: Title: Cost: Expenditure Flow: 1EPCM2012 Project Pegasus USD 123,050,000 USD 60,015,000 (1st Year) USD 63,035,000 (2nd Year) Pilot Scale Date: Location: Completion Date: Business Team: Business Project: 05/12/2012 Aberdeen 25/07/2014 Penguin Engineering Engineering, Procurement & Construction Management (EPCM)

Project Category:

SUMMARY PROJECT DESCRIPTION Project Pegasus is a pilot scale project for recovering the heavy oil from the block 25/11 of Grane Field. The project shall involve engineering, procurement and construction management of developing the facilities associated with the project. Statoil has awarded Project Pegasus to Penguin Engineering. Penguin Engineering is an engineering, procurement and construction company operating predominantly with the offshore industry based in North Sea. The company has been contracted for developing a pilot scale facility in the view of extracting heavy oil from Grane field in block 25/11 which is at 180km off Norwegian coast at water depth 127m in North Sea. Grane field has been developed with 31 production well and 4 injection wells, with a production rate of more than 200,000 bbl / day. The pilot facilities shall be tested in the well 36, which is scheduled to be drilled by the Statoil in 2013 such that the well is available for production of heavy oil using the pilot facilities. Business case had been developed based on evaluation of key factors schedule, feasibility, cost, risk, technology and applicability for heavy oil recovery enhancing. SUMMARY PROJECT BENEFIT Internal Rate of Return and Net Present Value have been evaluated for the period of 17 years. Internal Rate of Return: Net Present Value: APPROVALS 22% USD 38,113,092

This project has complied with all the environmental and safety criterias in accordance with the codes and standards of the company, regulation bodies, and the government policies.

05/12/2012 DATE

Issued for Approval DESCRIPTION 1

Project Team PREPARED

Project Manager REVIEWED

CEO APPROVED PENGUIN EPCM

CONTENTS
1. 2.
2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. 2.9. 2.10. 2.11.

BACKGROUND .....................................................................................................................5 BUSINESS CASE ....................................................................................................................6

PROJECT SCOPE ................................................................................................................................................................... 6 STRATEGIC CONTEXT ........................................................................................................................................................ 6 COMMERCIAL CASE ............................................................................................................................................................ 6 OPTIONS CONSIDERED ..................................................................................................................................................... 6 CAPITAL COST ...................................................................................................................................................................... 6 HIGH LEVEL PROGRAM MILESTONE ............................................................................................................................ 6 HIGH LEVEL RISK ................................................................................................................................................................ 7 HSE 7 PROJECTS TARGETS ........................................................................................................................................................... 7 PROJECT RISKS .................................................................................................................................................................. 7 CRITICAL SUCCESS FACTOR:......................................................................................................................................... 7

3.
3.1.

OPTION GENERATIONS AND APPRAISAL ..............................................................................8

TECHNOLOGY APPRAISAL AND SELECTION .............................................................................................................. 8 IN-LINE SUBSEA SEPARATION UNIT ......................................................................................................................... 8 SUBSEA SEPARATOR UNIT ........................................................................................................................................... 8 APPRAISAL AND SELECTION ....................................................................................................................................... 9 FIELD SELECTION............................................................................................................................................................. 10 SEALION FIELD ROCKHOPER ................................................................................................................................ 10 GRANE FIELD STATOIL ............................................................................................................................................ 10 APPRAISAL AND SELECTION .................................................................................................................................... 11 OPTION APPRAISAL ........................................................................................................................................................ 13

3.1.1. 3.1.2. 3.1.3. 3.2. 3.2.1. 3.2.2. 3.2.3. 3.3.

4.

STAKE HOLDERS................................................................................................................. 14

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5.
5.1. 5.2. 5.3. 5.4. 5.5. 5.6. 5.7. 5.8.

PROJECT EXECUTION PLAN ................................................................................................ 16

PROJECT DESCRIPTION ................................................................................................................................................. 16 PROJECT OBJECTIVES ..................................................................................................................................................... 16 PROJECT SCOPE ................................................................................................................................................................ 16 PROCUREMENT STRATEGY .......................................................................................................................................... 16 SCHEDULING PLAN .......................................................................................................................................................... 16 ORGANIZATIONAL CHART ............................................................................................................................................ 17 QUALITY ASSURANCE MANAGEMENT ...................................................................................................................... 17 HSE MANAGEMENT ......................................................................................................................................................... 17

6.
6.1. 6.2. 6.3. 6.4.

RISK MANAGEMENT STRATEGY ......................................................................................... 18

RISK IDENTIFICATION ................................................................................................................................................... 18 RISK ANALYSIS .................................................................................................................................................................. 18 RISK MITIGATION ............................................................................................................................................................ 19 RISK REVIEW ..................................................................................................................................................................... 19

7. 8. 9.

PROJECT WORK BREAKDOWN STRUCTURE......................................................................... 20 PROJECT SCHEDULE ........................................................................................................... 21 ESTIMATED BUDGET .......................................................................................................... 22

10. RISK REGISTER ................................................................................................................. 24 11. REFERENCE ...................................................................................................................... 25

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LIST OF FIGURES
Figure 1: Total World Oil Reserves ..................................................................................................... 5 Figure 2: Light Oil Production from North Sea ................................................................................... 5 Figure 3: A Typical Inline Phase Splitter............................................................................................. 8 Figure 4: A Typical Subsea Separator ................................................................................................. 8 Figure 5: Sealion Field ....................................................................................................................... 10 Figure 6: Grane Field ......................................................................................................................... 11 Figure 7: Probability Tree Diagram ................................................................................................... 12 Figure 8: Stakeholders Matrix .......................................................................................................... 14 Figure 9: Grane Field Development Organizational Chart ................................................................ 17 Figure 10: Risk Matrix ....................................................................................................................... 19 Figure 11: Mitigated Risk Matrix ...................................................................................................... 19 Figure 12: Work Breakdown Structure .............................................................................................. 20 Figure 13: Project Schedule ............................................................................................................... 21 Figure 14: Estimated Budget.............................................................................................................. 22

LIST OF TABLES
Table 1: MVDM For In-Line Separation Units ................................................................................... 9 Table 2: MVDM For Subsea Separator ............................................................................................... 9 Table 3: Sealion Field Information .................................................................................................... 10 Table 4: Grane Field Information ...................................................................................................... 10 Table 5: Field Pros & Cons Evaluation ........................................................................................... 11 Table 6: Development cost of projects .............................................................................................. 11 Table 7: Decision Tree for Selected Options ..................................................................................... 12 Table 8: Summary of Technology Evaluation ................................................................................... 13 Table 9: Summary of Field Evaluation .............................................................................................. 13 Table 10: Stakeholder Analysis ......................................................................................................... 15 Table 11: Risk Identification.............................................................................................................. 18 Table 12: Risk Probabilities ............................................................................................................... 18 Table 13: Risk Impact ........................................................................................................................ 18 Table 14: NPV & IRR Calculation .................................................................................................... 23 Table 15: Risk Register ...................................................................................................................... 24

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1. BACKGROUND Light crude oil resources are decreasing throughout the world, especially in North Sea and Gulf of Mexico, which were are developed in the early days. This causes operators to implement enhanced oil recovery techniques to maintain production rates of their respective fields. This has forced the operators to explore other opportunities. Heavy oil and extra heavy oil constitute for 40% of the total world oil reserves. But extracting this heavy oil has always been a difficult task. Presently thermal recovery techniques are being used successfully to recover heavy oil. But using this technology has its own disadvantages. Thermal recovery technique is not environmental friendly as it pollutes its surrounding environment and also it is difficult to implement this technology offshore, causing the operators to look for a better technology. The major problem the operators encounter while extracting heavy oil is that the viscosity of heavy oil is very high and it doesnt flow as easily as the light crude oil does. Also the processing and separation of heavy oil is another difficult task. It requires high capacity separators topside, which is less feasible economically. Figure 1: Total World Oil Reserves

Figure 2: Light Oil Production from North Sea

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2. BUSINESS CASE 2.1. PROJECT SCOPE The scope of our project is to identify the best technology available for recovering the vast reserves of heavy oil available. It also involves setting up the pilot scale facility at a feasible location to test the efficiency of the technology being used as quickly as humanly possible. 2.2. STRATEGIC CONTEXT The global energy demand is on the rise and majority part of this energy demand is expected to come from fossil fuels. The resources of heavy oil are twice that of conventional light crude oil. Penguin Engineering in tie up with FMC technologies have come with a new and innovative technology, which will be implemented to a pilot scale facility to establish the feasibility of heavy oil extraction 2.3. COMMERCIAL CASE The project has to make use of a new and innovative technology for heavy oil extraction in integration with an already existing topside facility. The light crude oil resources are getting depleted and there is an increase in demand of heavy oil around the world. Using the technology, Penguin engineering expects to increase the oil production rate by 1000 bbl/day. 2.4. OPTIONS CONSIDERED The project has considered technological and field options, which were thoroughly evaluated and the best among them was selected for developing the pilot scale facility. The field options that were considered are: Sea Lion Field off the coast of Falkland Islands Grane Field in the Norwegian Continental Shelf. The technological options that were evaluated are: In-line Subsea Separation Unit Subsea Separator After detailed evaluation it was determined that Grane field fits the company strategy best and Inline Subsea separation technology was the best suited for the development of the project. 2.5. CAPITAL COST The cost of the project has been estimated to be around USD 88,050,000 with a contingency of a further 35,000,000. 2.6. HIGH LEVEL PROGRAM MILESTONE Key completion dates should be maintained for achieving complete project in time. Completion of System Engineering 25/ 04/ 2013 Letter of Award for In-Line Separator 24/ 05/ 2013 Completion of System Integration Test 25/ 04/ 2014 Completion of Installation 04/ 07/ 2014 Hand-over 25/ 07/ 2014 6 PENGUIN EPCM

2.7. HIGH LEVEL RISK The use of new technology for the recovery of Heavy oil is a critically important aspect of this project. As the evaluation of the recovery and profits associated with it is highly debatable due to lack of field proven data. The calculations are estimated on based on assumptions that the technology is highly reliable for the recovery of oil and the facilities commissioned would deliver expected recovery. 2.8. HSE To provide and maintain safe, healthy working conditions for delivering highly reliable, zero harm, operationally safe engineering solutions. 2.9. PROJECTS TARGETS 2.10. 2.11. Set up the pilot scale facility within 20 months of sanctioning project Increase production 1,000 bbl/day Project CAPEX is maximum USD 123.05 New available technologies would be deployed to tackle problems experienced in previous projects. PROJECT RISKS Cost Low: The accuracy of estimated costs are low as limited engineering data is available. This means that the total cost of the project has low percentage accuracy and therefore will be more susceptible to variation in cost. Time High: Scope change and problems with technology acquirement and reaching a conclusive agreement among stakeholders. Quality High: Subsea project require for high level of quality due to huge cost in work over. CRITICAL SUCCESS FACTOR: The entire project to be carried out in environmental friendly manner and shall be a zero harm work area. Project execution to be as per the planned project schedule. Quality of the project and reliability of the product & equipments to be of high standards. Facilities to demonstrate a complete operational capability. Increase in the recovery of oil.

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3. OPTION GENERATIONS AND APPRAISAL 3.1. TECHNOLOGY APPRAISAL AND SELECTION Various technological options were considered and after careful evaluation and analysis two technologies were selected. Various decision-making tools are being employed for selecting the best technology among them. 3.1.1. IN-LINE SUBSEA SEPARATION UNIT An Inline subsea separation unit is considered because of its wide scale applicability and flexibility. It can be easily incorporated into an existing field. It is cost effective. Different in-line units are being used for the separation of water sand and gas from the oil. This considerably reduces the viscosity and increases the flow rate. Different inline separation units being used are Inline Desander it is used for removing the sand from the flow line. Sand removal reduces the viscosity to a great extent and thus helps in easier flow of hydrocarbons through the flowline. Inline Phase Splitter- it is used for separation gas from the hydrocarbon mixture. The gas that is separated is then injected into the reservoir for increasing reservoir pressure and thus increasing the flow rate. After all the oil has been recovered, all the gas injected can be recovered and then sold. In-line Electrocoalescer- Separates water from the oil mixture. The oil separated is transported for storage. Separated water is sent for water injection in the well reservoir. Figure 3: A Typical Inline Phase Splitter

3.1.2. SUBSEA SEPARATOR UNIT Subsea separator unit is another technology option that is considered. The main function of the subsea separator unit is to separate the gas, sand, and water from the oil and pump it up to topside unit. It is an all in one integrated unit and is a relatively new technology. Figure 4: A Typical Subsea Separator

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3.1.3. APPRAISAL AND SELECTION Multi-variable decision-making tool is being employed for finding the best technological option for project PEGASUS. Table 1: MVDM For In-Line Separation Units Attributes Sub attributes Weights (a) 0.5 0.5 0.5 0.1 0.2 0.5 0.3 0.1 0.3 Score (b) 10 Strategic Fit Programme Time Risk Cost Time Quality Cost of Development Benefits 30 50 X X X X X X X 70 90 60 25 35 60 10 35 15 5 21 Total 30 Score (b) Overall Score

5 21 62

Table 2: MVDM For Subsea Separator Attributes Sub attributes Weights (a) 0.5 0.5 0.5 0.1 0.2 0.5 0.3 0.1 0.3 Score (b) 10 Strategic Fit Programme Time Risk Cost Time Quality Cost of Development Benefits 30 X X X X X X X 50 70 90 50 15 35 50 14 15 21 3 21 Total 25 Score (b) Overall Score

3 21 54

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3.2. FIELD SELECTION 3.2.1. SEALION FIELD ROCKHOPER Table 3: Sealion Field Information Location Block No. Water Depth Discovered Estimated Recovery Cost for Developing Plateau Oil Production Rate Peak Oil Production Rate Participants Off Falkland island coast 14/10-2 2700m Rockhopper in 2010 355.6 million barrels USD 875,000,000 Estimated up to 70,000bbl/d Rockhopper (100%) Figure 5: Sealion Field

3.2.2. GRANE FIELD STATOIL Table 4: Grane Field Information Location Block No. Water Depth Discovered Estimated Recovery Cost for Developing Plateau Oil Production Rate Peak Oil Production Rate Participants 185 Km west of Haugesund Block 25/11 350m By Hydro in 1991 700 million barrels of oil 150 to 200 million 200,000bbl/d 243,000bbl/d Stat oil (36.67%) Petoro (28.94%), ExxonMobil Exploration & Production Norway (28.22%) ConocoPhillips Skandinavia (6.17%) 10 PENGUIN EPCM

Figure 6: Grane Field

3.2.3. APPRAISAL AND SELECTION Two field options were evaluated based on the pros & cons, cost of development and the profits based recovering the cost of development by the additional recovery of oil using the inline separation technology are as shown below. Table 5: Field Pros & Cons Evaluation GRANE FIELD SEALION FIELD PROs: PROs: Existing topside and subsea facilities Lower logistic costs Availability of field data for comparison Applicability of EOR techniques Schedule Low CAPEX CONs: Production loss due to intervention Design limitations Unlimited design specifications as it is a relative green field

CONs: Political tension Topside and subsea facility needs to be constructed No data for establishing the benefit of technology Longer schedules Higher logistic cost Higher CAPEX Technical limitation due to water depth

Table 6: Development cost of projects Project Grane Field Sealion Field Development Cost USD 82,400,000 USD 882,400,000 11 Additional Recovery 1,000 bbl/day 1,000 bbl/day PENGUIN EPCM

Table 7: Decision Tree for Selected Options Project Best Case Income: (1,100 bbl/day x 16 years x 365 x price per barrel)= US$ 655.2 million Probability:0.2 Income: (1,100 bbl/day x 25 years x 365 x price per barrel)= US$ 1,023.82 million Probability:0.2 Base Case Income: (1,000 bbl/day x 16 years)= US$ 595.68 million Probability:0.6 Income: (1,000 bbl/day x 25 years x 365 x price per barrel)= US$ 930.75 million Probability:0.6 Worst Case Income: (900 bbl /day x 16 years x 365 x price per barrel)= US$ 536.11 million Probability:0.2 Income: (900 bbl/day x 25 years x 365 x price per barrel)= US$ 837.67 million Probability:0.2

Grane Field

Sealion Field

Note: Oil production data for both Field is assumed due to lack of available data. Oil price is 102 USD/bbl available in www.oil-price.net Figure 7: Probability Tree Diagram

The figure above shows the probability tree diagram and the comparative studies, which are being used to determine the best field option for project development shows Grane field as the most feasible option among the two. Thus Penguin Engineering is planning to develop its pilot scale facility at Grane Field.

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3.3. OPTION APPRAISAL After employing various analysis tools for determining the best technological and field option for setting up the pilot scale facility, the best among them was selected using the summary of appraisals. Table 8: Summary of Technology Evaluation Cost Efficiency Technological status Inspection and Maintenance Flexibility Safety issue Lead time In-line separation unit 40 million 10-15 % increase in reservoir output Newly developed ROV Highly Flexible No potential safety issue 7 months Subsea separator unit 90 million 5-10 % increase in reservoir output Relatively new technology ROV Relatively low on flexibility because of its bulky nature No potential safety issue 12 months

Table 9: Summary of Field Evaluation Project Attribute Estimated increase oil recovery Sealion Field 1000bbl/d Grane Field 1000 bbl/d

Estimated cost

USD 923,050,000

USD 123,050,000

Estimated schedule Risk associated - Political Factor - Reservoir Data 3rd party involvement

21 months*

21 months

YES UNKNOWN Yes

NO KNOWN Yes

Estimated value Benefit to company - Increase production - Generate profit Does it fit for Companys strategies

$ 930.75 million

$ 595.68 million

Yes Yes Yes

Yes Yes Yes

* align with field development schedule in 2016.

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4. STAKE HOLDERS The important stakeholders who influence the project were identified in the matrix given below. The stakeholders position in the matrix shows the importance and the influence they have in the project. Strategy for each group also included. Key player group should be involved with project and monthly meeting with each party will be held. Shareholders in the project field are categorized with active consultation group due to their importance in the project. They should be included in the information loop and their feedback will be clarified or rectified as much as possible. Project management team will maintain interest in subcontractors. Their work progress will be monitored regularly; package lead and inspector will report any commercial / technical issue. Norwegian government and local community will be informed when it is required Figure 8: Stakeholders Matrix

HIGH

Impact

Maintain Interest 1. Umbilical Manufacturer 2. Pipeline Manufacturer 3. Installation Vessel Contractor 4. Insurance Company 5. Subcontractors Keep Informed 1. Norwegian Fisherman Federation 2. Coastguard 3. Norwegian Government 4. Media/Technical Societies

Key Players 1. Stat oil 2. Penguin Engineering 3. FMC 4. Verification Agency Active Consultations 1. Mitchel Thevor 2. Conoco Phillips 3. Petoro 4. Exxon Mobil

LOW

Importance

HIGH

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The table below shows what each stakeholder expect from the project and how it is going to be addressed by PENGUIN Engineering. Table 10: Stakeholder Analysis STAKEHOLDER Statoil % OWNERSHIP 60% NEED Highly reliable technical solutions with goal zero practice in project execution. Effective planning and scheduling of project management. Conoco Philips 10% Commercially viable evaluation of the technology for future project. EXPECTATION Recovery of Heavy Oil efficiently, timely & environmentally friendly Recovery of Heavy Oil efficiently, timely & environmentally friendly Recovery of Heavy Oil efficiently, timely & environmentally friendly Recovery of Heavy Oil efficiently, timely & environmentally friendly Complete project within time and budget Delivery the product in time Develop the project within regulation No Environmental pollution Minimize impact in their industry

Michel Thevor

20%

Exxon Mobil

10%

Penguin Engineering

NA

FMC Norwegian Government Norwegian Environmental Protection Agency Norwegian Fishermens Federation Coastguard

NA NA

NA

Highly reliable and timely project execution. Dispatch project team to site Field development plan will be submitted for approval All safety standards will be adhered to. Related issue (Environmental Impact) will be shared and discussed Required information (offshore work schedule) will be shared and discussed Work progress to be monitored closely Work progress to be monitored closely Any feedback to be clarified Required information to be shared Required information to be shared 15

NA

NA

Prevent any kind of offshore accident

Installation Contractor Subcontractors Verification Agency Insurance Company Media/Technical Societies

NA NA NA NA NA

Complete the work in time Delivery the product in time Verify engineering work Project information to be shared Project information to be shared occasionally PENGUIN EPCM

5. PROJECT EXECUTION PLAN 5.1. PROJECT DESCRIPTION The reserves of untapped heavy oil reserves are huge and our project aims at evaluating the best possible technique to extract heavy oil using the most advanced technology options available in the market and to conduct a feasibility study for future expansion of the field. Our project is a pilot scale facility in the Grane field 185km from the city of Haugesund, Norway. The project will be able to demonstrate the benefit of using the proposed technology and also the scope of future expansion of a field. For this project an existing topside facility of the contracting company will be used and the subsea technology proposed will be integrated into an already existing field. 5.2. PROJECT OBJECTIVES The principal objectives of the project team are hiring unproven technology and incorporating into existing facilities for enhancing the production in mature fields. Key objectives are addressed as below. Building a pilot scale facility for extraction of heavy oil Using new and innovative technology incorporating with an existing topside facility. Integrating the technology to an already existing subsea facility Commissioning of project with maximum CAPEX $ 123.05 million Completing the project as fast as humanly possible Increasing the production by 1000 bbl/d 5.3. PROJECT SCOPE The principal scope of the project team is to engineering, procurement, test, installation management, commissioning and provide for assistance in start-up and maintenance for the pilotfacilities. Key activities of project scope are addressed as bellows; Evaluating the field options available for building the pilot scale facility Selecting the best possible technology option for pilot scale facility development Procurement of technology and other essential requites (Umbilicals, risers, pumps) Installing pilot scale facility Modifying topside as per requirement Commissioning the project 5.4. PROCUREMENT STRATEGY Procurement activities for Project PEGASUS shall be handled by Project group. They will perform the requisition, budding and commercial evaluations. Technical evaluations will be performed by engineering group. All activities are supported by the QA/QC and HSE group. The Long LeadEquipments will be tracked to complete in time. The subcontract requirements will be defined by the Project team in early stage and will be included as activities in the project schedule. Especially, in-line separator package, pipeline and umbilical will be closely monitored and managed by the site representative together with the QA / QC group and respective engineering group. 5.5. SCHEDULING PLAN The Long Lead-Equipment will be scheduled depends on progress monitoring so that critical activity could be completed in time. Due to the challenging delivery schedule, it is important for Penguin Engineering to ensure key milestones on the agreed dates. A tendering schedule is described in section 7.0. It is important to forecast milestone activities and ensure they are completed on time. 16 PENGUIN EPCM

5.6. ORGANIZATIONAL CHART The project organizational chart for Project FEGASUS is portrayed in figure below. The chart helps to understand each groups role and decision structure. The project director ensures that the project link to corporate management, ensure project key resources to be allocated to achieve the project objectives. The project management team will consist of a Project Manager, Project Deputy Manager, QA/QC Manager, HSE Manager and Installation Manager. They will maintain the overall project control and resolving internal / external conflicts. Commissioning team will be involved early stage of the project to minimize production downtime. Figure 9: Grane Field Development Organizational Chart

5.7. QUALITY ASSURANCE MANAGEMENT The quality of the product delivered is of the highest importance and Penguin Engineering maintains and operates a quality assurance management system fully compliant with the intent of ISO 9001:2008 standards. Quality Assurance Plan and Inspection Test Plans will be developed specifically for Project PEGASUS. 5.8. HSE MANAGEMENT Health, Safety and Environmental performance are core values and will be managed as an integral part of our project to benefit stakeholders. Health, Safety and Environmental will be managed based on the Project HSE Philosophy as below. Carry out monitoring tentative various hazards and safety issue to eliminate all incidents. Comply with all environmental, health and safety laws and regulations Make health, safety and environmental friendly ways with the primary aim of project execution

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6. RISK MANAGEMENT STRATEGY A comprehensive risk management strategy has been developed to ensure that the key parameters to the success of the project are not just overlooked. This also ensures that the evaluation of the potential risks, their effects and their impact using three steps: Risk Identification. Risk Analysis. Risk Mitigation. 6.1. RISK IDENTIFICATION The potential risks were identified during the project based on the evaluation of the various parameters such as technicality, financial, project resources, etc. involved within the project over the range of cost, time and quality. Table 11: Risk Identification Tender / Contract 1. Schedule. 2. Scope of Supply. 3.Delay in Funds 4. Inflation & Oil price. 5. Regulations. Engineering 1. Schedule. 2. Lack of field data. 3. Interface management. 4. Human Resources. 5. Design errors. Fabrication 1. Schedule. 2. Quality. 3. HSE. 4. Test failure. Installation 1. Schedule. 2. Weather downtime. 3. Topside modification. 4. Accidents. 5. Vessel Mobilization. Commissioning 1. Schedule. 2.Topside modification 3.Human Resources 4. HSE. 5. Technical errors.

6.2. RISK ANALYSIS The risk analysis is carried by assigning values for the risk identified to determine the category of impact and probability. These values were multiplied to give the resultant risk i.e. Exposure = Probability x Impact. A measure to manage each risk is applied to develop a mitigated risk value. The original and mitigated risks are presented on a block diagram of impact versus probability. The categories that the risk impact and probabilities are shown below: Table 12: Risk Probabilities Category High Medium Low Definition Likely to occur Possibility of occurrence Unlikely to occur Table 13: Risk Impact Category High Medium Low Cost > 2 million 500K to 2million <500 K Time > 2months 1 to 2 months < 1 months 18 Safety > 5 LTIs 3-5 LTIs <3 LTIs Assigned Value 3 2 1 PENGUIN EPCM Assigned Value 3 2 1

Risk matrix after risk assessment has been carried out as shown below: Figure 10: Risk Matrix

M Impact

1 L Probability

5 M

9 H

6.3. RISK MITIGATION Risk mitigation has been effectively worked out to keep the as low as reasonably practicable (ALARP). A matrix with the mitigated risk has been developed as shown below. Figure 11: Mitigated Risk Matrix H M Mitigated Probability L 0 1 4 L Mitigated Impact 0 4 15 M 0 0 0 H

6.4. RISK REVIEW It is very important to carry out risk reviews regularly to evaluate the risks associated with the project and if new risks are identified, they need to be evaluated for their impact and their consequences. The risks that were identified at the beginning of the project have to be reevaluated to looked if it was initial evaluated effectively and have been successfully mitigated. This activity shall be carried out quarterly with an objective reduce the possibilities of an event. A risk register has been developed for this project at Section 9.0

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7. PROJECT WORK BREAKDOWN STRUCTURE The work breakdown structure has been used for arranging project schedule and estimating budget within execution plan. Figure 12: Work Breakdown Structure

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8. PROJECT SCHEDULE The schedule has been developed as shown below and the critical path has been identified and shaded in RED. Figure 13: Project Schedule

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9. ESTIMATED BUDGET The cost breakdown of the project is shown in the table below. The main costs are the engineering costs, installing and commissioning costs. The sum total of the above mentioned three would give you the CAPEX of the project. Figure 14: Estimated Budget Engineering Subsea Separation Unit - In-Line Desander - In-Phase Separator - In-Line Electrocoalescer Pipeline Carbon Steel X65 Riser Umbilical - Umbilical Termination Unit Flying Leads Topside Control Equipment - Subsea Control Unit - Subsea Power Communication Unit - Hydraulic Power Unit - Topside Umbilical Termination Unit Logistics Installation (40 Days) - Pipe laying Vessel - Installation Vessel - Vessel Mob/Demob Cost ($) - ROV Commissioning - Topside Control - Hydrostatic Testing Total Contingency - 40% Estimated Budget with contingency Unit 5 % of Overall Project Cost Lump Sum 1 1 1 1 13 km 10km 5 Nos, 30m Lump Sum Grane Field $ 4 million $ 40 million Total Cost $ 4.2 million $ 40 million

$ 1.3 million $ 750,000 $ 850,000/km $ 125,000 $ 13 million

$ 1.3 million $ 750,000 $ 8.5 million $ 125,000 $ 13 million

Lump sum 1 Vessel / day 1 Vessel / day per each trip 1 Work Class/day 1 Observation/ day Lump Sum

$ 4.9 million $200,000/DAY $200,000/DAY $ 1 million $45,000 $15,000 $900,000

$ 4.9 million $ 4 million $ 4 million $ 4 million $ 2.4 million

$900,000

$ 88.05 million $ 35 million $ 123.05 million

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Table 14: NPV & IRR Calculation Variable Cost Production (bb/day) 0 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Taxable Income US$0 US$9,287,500 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 US$37,210,000 Book Value of Asset US$123,050,000 US$92,287,500 US$69,215,625 US$51,911,719 US$38,933,789 US$29,200,342 US$21,900,256 US$16,425,192 US$12,318,894 US$9,239,171 US$6,929,378 US$5,197,033 US$3,897,775 US$2,923,331 US$2,192,499 US$1,644,374 US$1,233,280 Value of Net Capital Income Tax cash flow Allowance US$0 US$0 (US$123,050,000) US$9,228,750 US$0 US$9,287,500 US$6,921,563 (US$6,442,500) US$43,652,500 US$5,191,172 US$4,241,438 US$32,968,563 US$3,893,379 US$5,971,828 US$31,238,172 US$2,920,034 US$7,269,621 US$29,940,379 US$2,190,026 US$8,242,966 US$28,967,034 US$1,642,519 US$8,972,974 US$28,237,026 US$1,231,889 US$9,520,481 US$27,689,519 US$923,917 US$9,931,111 US$27,278,889 US$692,938 US$10,239,083 US$26,970,917 US$519,703 US$10,470,062 US$26,739,938 US$389,778 US$10,643,297 US$26,566,703 US$292,333 US$10,773,222 US$26,436,778 US$219,250 US$10,870,667 US$26,339,333 US$164,437 US$10,943,750 US$26,266,250 US$123,328 US$10,998,563 US$26,211,437

Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Fixed Cost US$123,050,000 US$0 US$0 US$0 US$0 US$0 US$0 US$0 US$0 US$0 US$0 US$0 US$0 US$0 US$0 US$0 US$0 Oil Price Production days per year Income Tax Rate Depreciation Discount Rate

Total Cost

Revenue US$0 US$9,307,500 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000 US$37,230,000

Depreciation US$30,762,500 US$23,071,875 US$17,303,906 US$12,977,930 US$9,733,447 US$7,300,085 US$5,475,064 US$4,106,298 US$3,079,724 US$2,309,793 US$1,732,344 US$1,299,258 US$974,444 US$730,833 US$548,125 US$411,093 US$308,320

US$0 US$123,050,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 US$20,000 102 USD/bbl 365 days/year 30% 25% 15%

Net Present Value Internal Rate of Return

USD 38,113,092 22%

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10. RISK REGISTER After the various risks associated with project PEGASUS were identified, a risk assessment was carried out. After assessment, various mitigation techniques were used for reducing. Table 15: Risk Register
Ref. No. Description of Risk Risk Assessment P I E L L L M M L M L L M M L M L L L L M L L M L L M M M H H H H H L M M M M H H H M H H H H H H H H 2 2 3 6 6 3 6 1 2 4 4 2 6 3 3 2 3 6 3 3 6 3 3 6 Risk Management Time Proper tendering schedule and procedures Proper Planning Considering Weather Incentive for LOW LTI Dispatch expediter Proper Identification & Documentation Contact in advance Frequent Project Management Review Cost Contingency Evaluation of the project based on an average oil price Routine Assessment Contingency Alternative Financial Source Monitoring Project Progress Insurance Add Reimbursable Man-hour Quality Inspection Procedure / 3rd Party Inspection Marine Warranty Surveyor Safety Detailed Commissioning Procedures Emergency Response Plan Redundancy in Safety Equipment Integrity Management SSIV Integrity Management Protection Structure Mitigated Risk Assessment MP MI MR L L L L M L L L L L L L M L L L L M L L M L L M L L M M M M M L M M M M M M M L M M M M M M M M 1 1 2 2 4 2 2 1 2 2 2 2 4 2 2 1 2 4 2 2 4 2 2 4

1. 2. 3. 4. 5. 6. 7. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 1. 2. 3. 4. 5. 6. 7.

Delay in Tendering Weather Downtime Accidents Late Delivery of Equipments Delay in Approvals Vessel Mobilization Delay Poor Management Inflation Oil Price Accuracy in Cost Estimation Unexpected Cost Delay in Funds Project Delay Accidents Change in Scope Fabrication defect Installation defect Human Errors Oil spill Safety Equipment failure Loss of integrity Blowout Pipeline/Riser failure External factors

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11. REFERENCE BASS, R.M., 2006. Subsea Processing and Boosting-Technical Challenges and Opportunities, Offshore Technology Conference, - 2006. CAVANAGH, J., 2012. Project Management Lecture Note. Aberdeen: John Cavanagh. COWIE, D., SCHMOLL, J.K., SUTTON, J.E., ROBERTSON, D.S. and ROBINSON, S.A., 1994. Investigation Of A Novel Facility Design Concept For Heavy-Oil North Sea Development, Offshore Technology Conference, - 1994. EUPHEMIO, M., OLIVEIRA, R., NUNES, G., CAPELA, C. and FERREIRA, L., 2007. Subsea Oil/Water Separation of Heavy Oil: Overview of the Main Challenges for the Marlim Field-Campos Basin, Offshore Technology Conference, - 2007. FMC TECHNOLOGIES, Available: http://www.fmctechnologies.com/en/SeparationSystems/Technologies/InLineTechn ologies.aspx. GILL, H., ALNAHDI, A.A., FARID, U., MORRIS, R.D. and OMIDIYA, A.B., 2011. Engineering a Successful Sour, Heavy Oil Test in a Sensitive Offshore Environment in Saudi Arabia, SPE Heavy Oil Conference and Exhibition, 12-14 December 2011, Society of Petroleum Engineers. HANNISDAL, A., WESTRA, R., AKDIM, M.R., BYMASTER, A., GRAVE, E. and TENG, D.T., 2012. Compact Separation Technologies and Their Applicability for Subsea Field Development in Deep Water, Offshore Technology Conference, - 2012. SUBSEA SEPARATION AND PROCESSING OF OIL, GAS & PRODUCED WATER PAST, PRESENT AND FUTURE WHY WE NEED IT NOW, . Available: http://www.forum.rice.edu/past-events/past-forums/.

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