Managing the Pre-commissioning and Commissioning Phase in EPC Contract

Developing oil refining and petrochemical industry is an index for success of each country’s industrialization because it is a spearhead industry with an essential role that widely influences many aspects of the national economy. Vietnam is one of the leading countries in Southeast Asia, after China, Indonesia and Malaysia, having large crude oil reserves.

The project to build Dung Quat Oil Refinery is a national key project in oil and gas field that is of great significance for social and economic development in Vietnam’s Central region in general, and Quang Ngai Province in particular. Investment in the construction of Dung Quat Oil Refinery will help facilitate domestic crude oil processing, step by step to ensure energy security and reduce reliance on petroleum imports, and contribute to boosting national industrialization and modernization.

In order to minimize the interfaces and reduce any conflicts between the separated Contractors and the Owner during executing a grass root refinery project, Owners normally prefer to award and sign an EPC contract with an EPC contractor.  An EPC contract is generally applied for developing a Refinery project, in case of problems or disputes happen during the project execution, then these problems and disputes shall be resolved in accordance with stipulated clauses in the signed contract, Dinh Van Ngu made a case study which objectives were to:

1. study organization,  roles and responsibilities of EPC contractors;

2. study executed and controlled the pre-commissioning and commissioning phase in accordance with the signed Contract; 

Conclusion

To ensure a successful implementation of this phase of the Project, Owner must have full support from its Stakeholder and the Government. The Owner must have a strong leadership and commitment from senior management throughout the execution of the project. The availability and competency of the Project Management core team also contribute an important factor during the initial/ preparation phase when the rest of the team will be mobilized. As many cost-schedule trade-off are may be required, Owner must prepare a strong financial status and willing to accept or compromise some commercial terms.

The results from this study have identified that the Managing of Pre-commissioning and Commissioning phase play important roles of Project. In this report, the Author’s real experiences lead to identifying the most important key success in managing EPC pre-commissioning and commissioning phase such as follows:

1. Safety system and site safety team: it is essential for the success of commissioning phase that the Safety system must be in place. During the commissioning phase, there are still many activities that belong to the construction phase. This makes lots of interfaces,  confusion and complexity while carrying out different type of activity in a area for example pipe welding activity being carried out on pipe rack/ structure while below the pipe rack, people performs loop checks for instrumentation or leak test for sectional of piping, etc. Due to such activies, there are more potential risk of incident like falling objects, electrical short-circuit, working at height. Therefore the site safety inspection team is vital for keeping safe situation at site.....To ensure the work is in good order and workers strictly follow safety requirements, management of each parties including subcontractors must strongly commit to implement safety procedures at work, having enough and adequate Protective Personal Equipment for every worker; Site safety team should go around the unit routinely to check and identify any potential safety problem and stop such action from happening. If necessary, a penalty shall be imposed for every party who gets their staff violate such safety procedures.

2. Organizational structure that fits to the Commissioning phase: To have a suitable organization with full authority at site and proper coordination procedures is a key for success of commissioning stage. During the construction phase, EPC and Owner team may have different organization structure to manage mainly subcontractors’ activities but when the commissioning phase started, the organization must be modified accordingly due to nature of the commissioning works. It should note that both EPC and Owner must nominate the Commissioning Manager position who will take sole responsibility and single contact point for any decision making related to the commissioning.

3. Qualified and experience commissioning staff in all disciplines: having experienced staff who has several commissioning assignments will be the key for success. They will share their experience with the rest of the team and also advice on how to avoid similar commissioning problems that they faced with in other projects. The experienced staff will lead the team to conduct the required activities because they know exactly what to do and how to do it following the general commissioning procedures and guidelines. It will take a significant time and effort for any new staff to figure out the procedures and handle plant activities for his first time therefore having experienced staff in the team will help to reduce risk of schedule slippage, avoid common problems and failures and help the team do it right first time.

4. Approval authority for site team for any additional work: During the commissioning of the plant with such complex like Dung Quat refinery, there are lots of activities that can not refer to that of the contract’s requirements or many new issues may raise, site modifications and new engineering problem findings are very common and such matter must be discussed and resolved quickly to move the project forwards. For that reason Commissioning manager and its team must be authorized to take the decision cross the table without any delay. If for any problem, item that has some deviations from the contract the Commissioning team have to report to several authority level for final approval, it will be very costly due to waiting time before proceeding further. Sometimes the cost of delay due to pending approval (normaly from the Owner site) has mush more significant than the cost of the required changes in design or commissioning method itself.

5.  Availability of Utilities: service water, electricity, instrument air, plant air, nitrogen, steam and some chemical for chemical cleaning, passivation of piping must be available at anytime in sufficient quantity to meet the commissioning requirement. It was experienced that during the commissioning phase of Dung Quat refinery project, there were several electrical cut-off from the EVN net work that make the commissioning activity interrupted and delayed the overall schedule. Service water must be also continuously supplied to the refinery site at designate pressure and flow rate. This water will be used for line flushing, cleaning, hydrotest of tankage and piping section. The most consumption of such water is for hydrotest of takage, where the Project has more than 50 tanks and each of those tank needs to filled up with water for certain period then water will be pumped to other tank repeat the same kind of test. For this reason, the water supply was sometimes reached 30.000- 50.000 m3 per week for the period of two to three months.

6. Work Permit System: Having proper Work Permit System in place will ensure that work activities are in good order and sequence. It will make sure a good channel of communication of several parties working in the same area or sharing the same equipment. Work permit will ensure the review of readiness stage before conducting any work at that section, interfaces will be managed to avoid conflict of interest and rework, due to this level of control, safety will be improved.

7.  Coordination between EPC team and OWNER's team: Owner team will normally support EPC team for any commissioning activities. Any misunderstanding between the two parties may have impact to the schedule, that’s why a clear coordination procedure must be agreed and implemented.

8. Roles of daily coordination meetings: there are many activities happen daily and new activities raise that require discussion and agreement before conducting the work.

9. Equipment availability: commissioning equipment like crane, vaccum trucks, portable pumps, instrument portable devices, tools, analyzers, etc. must be available at any time for commissioning needs.

10. Maintenance workshop& its equipment readiness: this will ensure that many broken part of the equipment, material, etc. can be repaired at the site workshop to save time of commissioning.

11. Commissioning Spare parts; Tools & Materials availability: any spare part missing like flanges, gaskets, bolt and nuts, mechanical seal, thermo couples, etc. that may takes months to get it delivered at site therefore commissioning spares must be kept in sufficient quantity at site.

Procedures and systems, if not already in place, will be implemented to control and minimize the spare parts and materials inventory to improve profitability. However the refineries long term production output and efficiency will be considered when determining basic needs and critical spares that must be available for unforeseen breakdowns.

The availability of spares remaining from the commissioning activities and those ordered as two year operating spares as part of the EPC contract work will form the basis for the initial stock.

Before deciding which spares are required, criticality allocation and quantity/stocking level determination will be made as indicated below:

- Review and quality check the Spare Part Interchangeability List.

- Evaluate long lead items

- Repair/Replace philosophy

- Identification and lists of proprietary items.

- Aggregation of similar and standardized items across equipment (to ensure optimization of supply).

- Check warranty implications of using existing stocked components as spares against new equipment.

- Opportunities for alternative contract arrangements (Vendor stocking of spares, spares sharing, maintenance service contracts etc.).

12. Ready stage from Construction phase- Mechanical Completion: for any section of Plant or unit, it must be mechanically complete before any commissioning activities but note that between sections, there may be some overlapped activities of construction and commissioning can do in parallel.

13. Detailed level III, IV schedule for each Section and each disciplines: this will help the team know exactly what to do next for each area, each disciplines and can plan ahead and prepare for incoming activities.

14. Vendor technical representatives availability: there are many major equipment that EPC staff does not have a specialized knowledge to commission the equipment first time that’s why it is mandatory to have vendor representative at site to support and advice on commissioning and start-up of such equipment like compressors, turbines, fired heaters, boilers, major motors, major pumps, etc.

15. Quick resolution of Punch list and outstanding technical issues: from a public source of data, it is known that there are over 100.000 punch list items found by EPC and Owner team  during the plant check and inspection against specifications and requirements. It requires lots of time, effort, manpower and cost for fixing, correcting, replacing, etc. such items. This is considered as most time impact for the plant completion.

16. Availability of Commissioning procedures: without procedures, commissioning work may be delayed, prohibited and more chance for mistake.

17. Access of Project database and Vendor document: these document must be available for reference, guidelines and also used for making procedures.

18.Roles of good document control.

19. Rotation of shift work round- the- clock concept: Commissioning work is very time consuming and happen in continues manner so the activities must be taken 24 hour a day and shift work is required.

20.  Availability of sub-contractors: they will provide manpower, tool, and equipment for commissioning therefore it is important to mobilize subcontractors to work at site.

21. Impact of weather conditions: any rain, thunder storm, flood of water at site will impact to the schedule. The commissioning if cannot avoid from raining/ bad weather season, EPC and Owner must be aware and prepare for that to minimize damages due to flooding or storm. As well as ensuring suitable condition and schedule to work during the bad weather season.

Ongoing for further discussions, I want to have identified the following areas of critical importance to the safe and efficient operation of the Dung Quat refinery:

·         Power system reliability

·         Serious problems in Demineralized Water Plant and Condensate Treatment Plant

·         Commissioning and lack of availability of many on-stream analyzers

·         Inadequate functioning of Dung Quat Refinery Laboratory, and the Laboratory Information System

·         Problems of performance and reliability of certain machines and valves – e.g. Crude and Resid Pumps

·         Problems of performance and reliability of equipment, instruments and communication systems on Single Buoy Mooring (SBM)

·         Required change-out of incorrectly specified steam traps

·         Organization of Harbor Operations to meet the required berth occupancy

·         Construction Non-Conformance Reports (NCR)/defects

·         Insufficient availability of 2 year operational spares, and incomplete parts/materials database for the operation of Dung Quat refinery warehouse;

·         Training and other,…

The initial assessment will consider items such as those above to ensure timely correction of operational and maintenance issues that affect the ongoing refinery operation.

Finally, with the limit time, the author was not discussed all the problems in Pre-commissioning and Commissioning phase in the thesis. Author wants all readers and colleagues have practical suggestions and comments for the thesis are more effective.

Abstract

In the process of industrialization and modernization in Vietnam, the construction of Dung Quat Oil Refinery is considered an extremely important step to lay a foundation for the spearhead industry of the country. Capitalized at over 2.5 billion USD, the Dung Quat Oil Refinery Project will effectively meet the demands on jobs, shifting the economic structure, increasing the State budget and developing other services of the locality during the construction and operation periods. The construction of Dung Quat Oil Refinery also encourages domestic and foreign investors to invest in Dung Quat Economic Zone in the fields of chemical industry, engineering, manufacturing and installation industry, ship building and repairing, steel refining and laminating, transport, electronics, processing and other industries. With its scale and significance Dung Quat Oil Refinery is considered the heart of Dung Quat Economic Zone.

The formation and implementation of the project on Dung Quat Oil Refinery, the first of this kind in Vietnam, have lasted many years and experienced through different periods and with various forms of investment. The decision to build Dung Quat Oil Refinery with Vietnam’s own investment in 2003 showed the great determination of the Vietnamese Party and State in the strategy to ensure national energy security and promote national industrialization and modernization. Deeply aware of the project’s significance and with responsibility of an investor, Vietnam National Oil and Gas Group has been concentrating all sources on the management and supervision of the project to ensure construction of the refinery to be completed on schedule, safely and with high quality.

This study will also discuss on point of view and how to managing the pre-commissioning and commissioning phase for the EPC contract of DungQuat refinery project that can be happened during the project execution phase.