Case Study : Saudiaramco Gas Project

Topics: Saudi Arabia, Project management, Construction Pages: 5 (1272 words) Published: March 11, 2013
PMI® Case Study
2004 PMI Project of the Year

Saudi Arabia’s growing economy needs energy to supply the domestic industry and the kingdom’s national electric power generating plants. While oil is abundant, greater utilization of Saudi Arabia’s natural gas resources for these domestic uses would release oil for export. Background

In 2000, Saudi Arabia’s total gas sales totaled 3.9 billion standard cubic feet per day (SCFD), but were forecast to grow to 8.6 billion SCFD by 2009. New production capacity was needed fast. In 1999, Saudi Aramco gave the green light for an estimated $2 billion investment in the Haradh Gas Project.

Haradh would cover most of the eastern province of Saudi Arabia, and send gas to customers in central Saudi Arabia and the capital of Riyadh, 300 kilometers away. The site of the processing plant was barren desert, 180 kilometers from the nearest outpost of civilization, and 10 kilometers from the nearest road. Summer temperatures often reach 52 degrees Celsius.

The plant needed raw material: 87 gas wells would tap the resource from the desert, and 680 kilometers of pipeline would bring it to the plant from three different fields. Turning raw gas into a commercial product also requires high voltage electricity, which involved constructing substations and running hundreds of kilometers of lines out to the gas fields.

Perhaps most important, the plant needed people. A permanent city—a virtual oasis in the desert—would provide housing and recreation for the 1,000 employees and contractors. Due to its remote location, people and supplies would have to be airlifted, requiring construction of an 8,000-foot airstrip qualified to land a Boeing 737.

Finally, the processed gas and liquid hydrocarbons would reach the market via 395 kilometers of cross-country pipeline.
Company executives cite the original contracting document, which defined the mix of contracts best suited to accomplish the project objectives, as a key to the project’s success. When they received the award, each contractor developed a detailed execution plan describing in detail how they would integrate work under engineering,

procurement and construction phases, and manage interfacing with other contractors.

Integrating the objectives of project management at the construction agency, and at the operations staff as the “owner” of the project, was the driving philosophy in selecting the project team. To avoid these conflicts, project engineers worked with plant operations and maintenance as a single team from the beginning through start-up. With agreement on the teams, the project was fast-tracked from the outset. The Haradh Team chose to institute a “Zero Change Policy,” freezing the design process at three months before initiation. Schedules and costs began to fall, (all for the better) and kept falling through the project.

The project employed a Lump Sum Turn Key (LSTK) contracting
package philosophy. LSTK gave tremendous autonomy to the
individual contractors to achieve their objectives, and put tremendous responsibility on the project team to focus on the areas where the contractors’ work dovetailed into other contractors’ work. This led to concentration on preventing problems early, and developing or implementing work-around plans, if needed.

The detailed systems outlined in the LSTK contracts were used for scheduling, progress measurement, analysis and control, but were organized to fit Saudi Aramco’s code of accounts for monthly invoicing and reporting. These in-house controls created a high level of funding and expenditure control. Monthly cost and schedule reports were sent to lower level management and a summary was sent to the highest levels of management. Everyone was kept in the loop.

By successfully defining the scope of the project early, and then managing changes meticulously, costs were rigorously controlled and change orders amounted to less than 2...
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