Gorgon Project's Management and Performance - Case Study Example

Gorgon shipped its first cargo in March 2016 Name Institution Course Date Contents Contents 2 Executive Summary 3 Introduction to the Project 4 Stakeholder Analysis 4 Gorgon Project Management 7 Critical Analysis of the Project Outcome 8 Conclusion 9 References 10 Appendices 11 Executive Summary This report has critically analyze and evaluate the Gorgon project, one of the largest and most expensive projects in Australia. The paper will detail out how the project was managed and performed. The Australian government budgeted about $37 billion for the Gorgon project but the amount was not enough for the completion and it ended up utilizing about $54 billion. Instead of being completed in 2014, the project experienced some delays and the first shipment took place in March 2016. The report has conducted a project stakeholder analysis to determine the major participants and their contribution. The primary stakeholders of the Gorgon project included the Australian Government, Shell, ExxonMobile, Chubu Electric Power, Osaka Gas, and Tokyo Gas among others. A plan was put in place to ensure effective contribution and communication between stakeholders. The project management involved division of the megaproject into subprojects which simplified the overall operation. Critical analysis showed that the project was faced with so many challenges such as lack of coordination and supplier involvement, lack of employee motivation, unnecessary administrative work, geographical and logistical complexities etc. These problems led to project delay and cost overrun. Although the project failed to complete in time and on budget, it was successful in enabling gas shipment to other countries. Introduction to the Project Chevron is one of the largest energy companies in Australia that supplies natural gas in the country and other outside regions (Chevron Australia, 2008). The company won a project contract to develop Gordon gas fields, infrastructure and natural gas plant on Borrow Island. Chevron’s Gorgon LNG project is among the largest and most expensive resource projects in Australia. The purpose of the project was to massively expand the energy production for both Chevron and Australia (Business Council of Australia, 2013). According to the estimation done, on completion, the project will generate about $60 billion to the national GDP. The main objective of the project was to expand energy production to meet the rising global demand. The project has been an important pillar of Australia’s economy and unlocking this energy will put the country in a position to meet its future demands. The project began in 2009 with an estimated budget of $54 billion and was expected to be completed in 2014 but this never happened (Business Council of Australia, 2013). Cost blow-outs as well as time delays have been integral part of the megaproject. However, Gorgon was able to ship its first cargo in March 2016. This report will incorporate a critical analysis of Gordon project. The paper will describe its stakeholders, how the project was managed to completion and it will determine whether the project was a success or a failure. Stakeholder Analysis Stakeholders are an integral part of any project since they facilitate the entire work be it in financial funding, physical construction, or offering project deliverables etc. These stakeholders have the power to influence the outcome of a project. According to stakeholder’s theory, the operations and activities of any company should be carried out in a way that would satisfy the needs of the stakeholders (Hyvari, 2006). The primary goal of any company is to make profit and satisfy the stakeholders’ needs. The Gorgon project has involved many participants who have sacrificed their time and resources to design, develop and deliver the predetermined outcomes (Ellen, 2014). The principle stakeholders in the Gorgon project included the surrounding community, the Chevron Company, the Australian subsidiaries of ExxonMobile, Shell, Chubu Electric Power, Osaka Gas, West Australian Enterprises, Quarantine Management System, Tokyo Gas and the Australian government. Their responsibilities were as presented in the table below (Sainsbury, 2009). Name Stakeholder Roles and Responsibilities Chevron Company Project Organization Manages the entire project, organizes the participants, resource distribution and lead the project to the right direction Australian subsidiary of ExxonMobile Client/Supplier Chevron’s partner and contributor. Offers financial and technical support to the project. Shell Limited Supplier/Contributor Offers civic works such as reinforcing, concrete placement etc. Acts as the supplier of the end product to the end users. Chubu Electric Power Supplier/Contributor Provide electric work throughout the entire project duration, from high voltage services to electrical installation wok. Osaka Gas Supplier/Contributor Provide engineering and design work and act as the transportation media of the natural gas to the retailers and end-users. Quarantine Management System Environmental Contributor/stewardship Ensure the project meets all the environmental standards. Assess the project frequently to ensure no breach of contract. Tokyo Gas Project contributor/Supplier Provide engineering work and design services to ensure proper project execution. Transportation of end product to the Asian countries. Australian Government Sponsor Offers financial support and build and maintain public trust and confidence. In addition to the mentioned stakeholders, the Gorgon project involves other providers in areas of health, education and economic development to ensure the project meets all the ethical standards put in place. Other stakeholders included land owners near the Gorgon area, sub-contractors and other casual workers (Business Council of Australia, 2013). Throughout the project, all the stakeholders were kept informed of the progress of the work and positive relationship was maintained between participants. Chevron developed a Stakeholder Engagement Plan that depicted where, how and why the stakeholders should meet and engage. Gorgon Project Management To ensure smooth transition from operation to operation, the Gorgon project was divided into small projects that were allocated time of completion (Flyvbjerg, Bruzelius and Rothengatter, 2003). The mini-projects included upstream scope, the downstream scope, carbon dioxide injection, LNG sales and marketing, and domestic gas sales. The upstream scope included four major activities; the drilling eight high-rate development wells at the field and about ten wells at the Jansz Field; development of subsea gas gathering system that would direct gas from the field to Barrow Island; development of pipelines that would run from the Barrow Island and tie to the gas treatment plant; and creation of another gas pipeline that ties to the Bunbury Natural Gas pipeline and runs from Borrow Island to West Australia mainland (Gordon Project, 2012). The downstream scope involved the development of facilities such as a three-train processing plant, domestic gas processing plant, condensate storage, marine facilities, operations and maintenance buildings and workforce accommodation village (Gordon Project, 2012). The carbon dioxide injection project was the core mission of the entire project and involved the design and construction of facilities that would allow the injection and storage of carbon dioxide known as Dupuy formation deep beneath the Island to minimize emission. Participants such as Shell and Osaka gas signed a contract to market and supply the gas to customer countries (Gordon Project, 2012). The entire project was expected to complete in 2014 but was completed in 2016 and its costs and timeframe blew out. The project was originally budgeted at $37 billion but finally cost more than $55 billion (Ellen, 2014). The Gorgon project is characterized by geographical, environmental and logistical complexities. Borrow Island is hundreds of mile away from the labor supply and the gas-fields are further out to sea. As a result, these complexities contributed to the deviation of the project from plan (Ellen, 2014). Also, high Australian dollar, high wages, whether delays as well as low employee productivity caused the delay and cost out-run. Delays in the project’s timeline came in the form of unloading and reloading, cranes and wind-speed, unnecessary paper work and suppliers not abiding to specifications (Ellen, 2014). Critical Analysis of the Project Outcome The Gorgon project has attracted media attention as a result of the many challenges that have occurred over the years (Chevron Australia, 2008). The cost overlap and delays witnessed in the project were caused by several factors. The most critical factors that caused these challenges include lack of supplier involvement, poor productivity due to lack of employee motivation, poor coordination of activities and geographical challenges (Business Council of Australia, 2013). The project was characterized by poor coordination of activities starting from unloading and reloading operations which took longer than expected. Employees complained of frequent changes of plans which led to double-handling and triple-handling resulting to delay. Also, there were added layers of administration which slowed the work up (Ellen, 2014). For instance, it was claimed that even a simple matter such as having access to bolts required unnecessary paper work (Gorgon Project, 2012). In addition, the employees were not motivated to work towards the predetermined goals. They were exposed to poor working standards and rules and policies that were inconsistent and obstructive. Some suppliers did not oblige to the specifications that led to rework. This was attributed to poor supplier-company relationship and lack of their involvement (Ellen, 2014). Although the project was faced with these challenges it was successful in ensuring shipment of its first cargo. Conclusion From the project, it evident that things did not go as planned which led to delays and cost overruns. This was attributed to factors such as poor productivity, lack of supplier involvement, geographical and logistic complexities, and unnecessary administrative work. Taking the place of a project manager, Chevron had the responsibility of ensuring good work flow and preventing delays and costs. I have learnt that it all comes down to the project manager. Poor project management result into failure. Therefore, it is important to access the condition of a project and establish which activities do not contribute to the larger picture. These activities should conversely be eliminated to prevent delays. For instance, Chevron should have eliminated the unnecessary administrative work to save on cost and speed up work. Also, employees play a major role in project success. It is important for managers to pay attention to their needs and ensure that they are motivated. Employee motivation may come in the form of high wages, conducive working environment, involvement in decision making, and promotion. In addition, to minimize the changes of delay, it is important to establish effective risk management practices early on in the project to address any issue that may affect project operations. References Ellen, B 2014, What is Happening on Chevron’s Gorgon Project? A Preliminary Report to the International Workers’ Federation, pp. 6-35. Flyvbjerg, B., Bruzelius, N & Rothengatter, W 2003, Megaprojects and Risk: An Anatomy of Ambition, Cambridge, Cambridge University Press. Business Council of Australia 2013, Securing Investment in Australia’s Future: Report of the Project Costs Task Force, BCA: page 3. Chevron Australia 2008, Gorgon Project: Draft Terrestrial and Subterranean Baseline State and Enviromental Impact Report. Expert Reviewer's Report, pp. 1-13. Hyväri, I 2006, Project management effectiveness in project-oriented business organizations. International Journal Of Project Management, 24(3), 216-225. Gorgon Project 2012, Gorgon Project; Big Picture Emerges. Frontier, Chevron Australia. Retrieved from https://www.chevronaustralia.com/docs/default-source/publications/frontier_spring_2012.pdf?sfvrsn=4 Sainsbury, M 19th August 2009, "Australia signs $50bn gas deal with China". The Australian. Retrieved 2009-08-20. Appendices Appendix 1. Gorgon project management and design Read More