Applicability of Strategic Engineering in Floating Production Storage Offloading (FPSO) Project Execution

Floating Production Storage and Offloading (FPSO) units are pivotal assets in offshore oil and gas production, yet the execution of FPSO projects is inherently fraught by significant risks due to their complexity, large scale, and the substantial financial investment due to their high capital cost. These projects typically demand billions of dollars in investment upfront, making any delays in the delivery timeline potentially catastrophic to the financial model, resulting in considerable losses. The conventional project management methodology for FPSOs follows the Engineering, Procurement, and Construction (EPC) approach: the phases are executed sequentially with minimal overlap. Although this method involves risk identification, monitoring, and mitigation, it is largely reactive, focusing on managing risks after they arise, rather than proactively eliminating them at the beginning. This thesis investigates the potential of applying “Strategic Engineering” principles to FPSO project execution to eliminate or mitigate these risks more effectively and identify new opportunities for enhancing project performance. By integrating advanced risk management frameworks with innovative engineering methodologies, this research proposes a shift from reactive to proactive risk management. Through the analysis of case studies and empirical data, the study identifies key risk factors such as cost overruns, schedule delays, and execution inefficiencies. It introduces an alternative strategic procurement and construction model, grounded in statistical analytics, which leverages historical project data to predict and mitigate risks before they manifest. A significant portion of the research is dedicated to the collection and analysis of historical data from FPSO projects. This data was used to evaluate critical project paths, identify recurring bottlenecks, and pinpoint risks that could potentially delay the delivery of FPSO units. Once these risks were identified, strategies for mitigating them were developed. The study also explored the best practices for collecting and analyzing historical data to yield meaningful insights for future projects. Central to the study is the introduction of the "Meccano" approach, which identifies the fundamental elements affecting the critical path of FPSO projects, categorizes and clusters them to facilitate more effective management. By focusing on these "basic elements" (in the early stages of the project), this approach allows for more efficient risk management, even before engineering completion. To further reduce project duration, the study also engaged with suppliers of critical items, such as piping, to assess how improvements in their delivery schedules could be achieved. The "Meccano" approach advocates for a departure from the traditional sequential execution of EPC projects. Instead, it promotes a model of PCE (Procurement, Construction and Engineering), where supply and fabrication of critical items are prioritized and launched at the beginning of the project, thus eliminating the need to wait for the completion of engineering phases. This approach results in more efficient and streamlined project execution, with the potential to significantly reduce the FPSO delivery timelines risks. The "Meccano" approach was applied in three key areas of FPSO project execution: 1. Local Content Optimization: The study demonstrates how fine-tuning the local content requirements could minimize the local content penalties (applied to Brazilian project). 2. Early Construction Activities: By initiating construction activities earlier in the project timeline, this approach mitigates delays that typically arise from waiting for engineering or procurement completion and allows a steadier workload for the construction yard. 3. Early Procurement Activities: The research emphasizes the importance of engaging suppliers early in the process to ensure the timely delivery of critical components, reducing the risk of procurement-related delays. The findings of this research suggest that “Strategic Engineering” not only mitigates risks in FPSO projects but also creates new opportunities for innovation and value creation. By focusing on early risk identification and adopting a proactive project execution strategy, this research contributes significantly to the field of FPSO project management. It provides practical tools and insights for project managers, enabling them to improve the reliability, efficiency, and overall execution of FPSO EPCI (Engineering, Procurement, Construction, and Installation) projects. In conclusion, this thesis offers a comprehensive framework for applying Strategic Engineering to FPSO projects, demonstrating that it is possible to both reduce risks and enhance project outcomes. The proposed model allows for greater flexibility and responsiveness in project execution, ultimately leading to more resilient project execution which protects the FPSO delivery. This approach represents a paradigm shift in FPSO project management, moving away from traditional, reactive methods (EPC) and towards a more dynamic, proactive strategy: PCE (Procurement, Construction, Engineering).