apua New Guinea (PNG) occupies the eastern portion
of the island of New Guinea, which is the second largest island in the world. New Guinea is one of the islands in a string of islands that make up the region known as Oceania, located east of Indonesia and north of Australia. With its mountainous terrain, coastal lowlands, and tropical climate, PNG is located in one of the more logistically remote areas of the world. During the previous two decades, PNGs growth in GDP was outpaced by population growth, causing the countrys economy to struggle. Energy consumption increased 54% from 1980 to 1998, but energy production (mostly oil) increased more than 5000% during the same period. Oil pro- duction in PNG has continued to increase and reached 67 500 bpd in 2001. At that time, the country was consuming approximately 15 000 bpd of oil 1 . With approximately 345.2 million bbls of proved oil reserves, the country was well positioned to strengthen its economy by exporting its excess production. However, one thing the country did not have was an oil refinery. To capture opportunities for exporting oil not consumed in the country and to increase the marketability of the oil prod- ucts, PNGs government approved the construction of a 32 500 bpd nameplate capacity refinery near the capital city of Port Moresby, a refinery that would become the first in the country. The project, which was initiated in the Autumn of 2002, included 28 storage tanks and one butane sphere to store the various oil products extracted in the refinery. CB&I, an international engineering, procurement and construction (EPC) company, was asked to build these tanks on a lump- sum turnkey basis (Figure 1). CB&I has had a continuing presence in Papua New Guinea since the 1980s. These previous experiences greatly contributed to CB&Is ability to hire skilled workers quickly, ensure on time delivery of all materials needed and, despite a tight schedule, complete the project four weeks ahead of schedule in October 2003. Engineering: designing the project The new refinerys 28 tanks were designed to store products such as crude oil, unleaded gasoline, naphtha, jet fuel, kerosene, and diesel. The CB&I Dubai office, responsible for designing all the tanks, had to take into account each product stored when designing the separate storage tanks, beginning first and foremost with the need to maximise safety and minimise environmental risks. Other critical influences include product conditions, such as temperature, vapour pressure and viscosity, as well as weather and site-specific Reprinted from HYDROCARBON ENGINEERING SEPTEMBER 2004 Think tanks Ali Ashtiani, Frank Robinson and Barbara Weber, CB&I, USA, use a recently completed project in Papua New Guinea to highlight key considerations when executing a large engineering, procurement and construction project in refinery tanking. Figure 1. Construction of storage tanks in Papua New Guinea. 57-62 2/9/04 9:09 Page 57 conditions. Since the area is seismically active, the tank designs were based on the requirements for building struc- tures that might experience an earthquake of the magnitude and duration that could occur at a Zone 4 site. The type of roof used on petroleum storage tanks pre- sents another important design consideration. Tanks at refineries are generally fixed roof tanks, external floating roof tanks and internal floating roof tanks (Figure 2). If vapour pressure is less than 1.5 psia, open top tanks or fixed-roof tanks work well. Fixed-roof tanks greatly reduce the risk of fire and limit the amount of vapour that evapourates, when compared with open top tanks. However, if the vapour pressure is higher than 1.5 psia, the space between the product and the roof exposes the liq- uid to high evapourative losses. Additionally, the probability of a combustible gas mixture increases for certain volatile petro- leum products. For this reason, products that have a vapour pressure higher than 1.5 psia generally use a floating roof design (Figure 3). The design of the tank also affects its operational costs and future maintenance costs. For example, if a floating roof design is used, the mechanical stability of the floating roof is critical. The floating roof must remain balanced to prevent it from tilting or sinking. For volatile products, such as gasoline, pressure is applied to limit the evapouration of the product. Low pressure tanks designed for pressures up to 15 psig can be used for these products. For highly volatile products that require a design pressure greater than 15 psig, such as butane, the storage tank is designed as a spherical pressure vessel (see sphere in foreground of Figure 4). Procurement: ensuring on time deliveries Securing the materials to build 28 storage tanks in a region as remote as Papua New Guinea can provide logistical chal- lenges for the most seasoned EPC contractor. Virtually all the material needed for the project had to be obtained and shipped from outside the country. The project team had to locate the best source for purchasing each item needed to build the tanks and then determine the most cost-effective means of getting the material to the location in time to meet the construction schedule. The team decided the best way to handle these logistics was to divide the task into three sepa- rate procurement activities, one of which was focused on procuring the steel needed to build the tanks. This activity was handled out of the CB&Is Dubai office. Approximately 5000 mt of steel was required to erect the Reprinted from HYDROCARBON ENGINEERING SEPTEMBER 2004 Figure 3. Large diameter floating roof tank. Figure 2. Fixed roof tank, external floating roof tank and an internal floating roof tank. 57-62 2/9/04 9:09 Page 58 tanks and the sphere. To get the best price on this quantity, the steel was ordered all at once. CB&I worked directly with the steel company to secure the required amount of plate steel and ensure the timely delivery of the shipments. Any delay on receiving these shipments would directly impact the teams ability to complete the project on schedule. Although ordered in bulk, the steel was shipped to two separate loca- tions: the steel for the tank bottom, roof and thinner shell plates was shipped directly to Port Moresby, while the thicker steel plates for the tanks and the sphere were shipped to the port of Cigading and delivered to the nearby shop in neigh- bouring Indonesia, where the pre-fabrication work was being handled. When the shipment of steel arrived in Port Moresby, the project team faced yet another challenge. The ship, which carried 3500 mt of steel, had to be unloaded. Port Moresby had never received a shipment that large and did not have the necessary resources to unload it. The project team provided additional person- nel to help unload the material, which took a full week to complete. During that week, the ship had to leave and then return to port sev- eral times to allow other vessels to enter, unload their cargoes and depart on schedule. This was one of many occasions that the pro- ject team had to find a resourceful solution to a bottleneck that threatened to delay the pro- ject. Other material purchases were divided between CB&Is Jakarta and Perth offices. Since most of the pre-fabrication work was being handled in Cilegon, items needed for pre-fabrication work, such as flanges and small pipes, were ordered through the Jakarta office. The remaining gaskets, bolts, valves, etc. were ordered in Perth and shipped directly to Port Moresby. Each office that handled the procurement also handled the necessary shipping arrangements, while customs and ground trans- portation logistics were handled locally by the project team. Delays and associated demurrage charges often occur when companies try to import materials into countries in Southeast Asia without proper management of the shipping documentation. To meet aggressive project schedules, con- tractors must be familiar with all custom requirements and be adept at handling the required documentation. The project team for the Papua New Guinea refinery tanks paid careful attention to these details and were able to import all of the needed materials without encountering any delays or addi- tional charges. Construction: hiring crews When a contracting company is awarded a project in a coun- try other than their home country, the company has three options for hiring the needed crews. They can subcontract the work, they can relocate crews from other regions, or they can directly hire local workers. There are advantages and disadvantages to each of these options, including the expense incurred in relocating crews, the loss of control experienced in subcontracting and the risk associated with direct hire. As they evaluate these options, contractors must determine the option that works best for the current project and with the companys organisational structure. CB&I elected to perform the project using a mixture of international and locally hired employees. Because of their previous experience, CB&I had the ability to re-hire indi- viduals that worked for the company on earlier projects and who already knew and understood the companys work processes and safety culture. In PNG, both the hiring and the training of the local crews were expedited because of the companys experience in the region. Only 48 hours after the arrival of CB&I in the country, news had circulated throughout the local community that CB&I was back. Word-of-mouth and minimal radio announcements replaced the need for a formal recruiting program. Experienced local craftsmen who had worked on previous projects for the company showed up at the site, ready to work on the new project. Others heard about the project and also arrived seeking an opportunity to secure one of the positions. To meet the tight schedule require- ments, project management knew they needed to hire indi- Reprinted from HYDROCARBON ENGINEERING SEPTEMBER 2004 Papua New Guinea (PNG) occupies the Eastern portion of the island of New Guinea, the second largest island in the world. Figure 4. Construction of butane sphere (foreground). 57-62 2/9/04 9:09 Page 59 viduals who were focused, committed, and willing to work hard. One of the project conditions was the requirement to hire locals from the villages surrounding Port Moresby, where unemployment is high. Candidate names were sup- plied and individuals were interviewed about their past experiences and skills. As a result, approximately 25% of the crew was hired from the local area. The majority of the other crewmembers were from nearby Philippines and Australia. Just as time was saved in the recruiting process because of CB&Is previous experience in the country, even more time was saved in the training program. While some crew members were new to CB&I and the task at hand, most were experienced. Many had worked on previous CB&I projects, they had been trained by CB&I, they were comfortable with the work environment and culture and they had the necessary skill sets to get the job done with lit- tle refresher training. Formal safety training was provided for all crewmembers, but all other training was provided on the job and the project was able to commence without delay. Experienced craftsmen mentored and coached their novice counterparts and veteran superintendents were able to move the project schedule along even as new recruits were building the necessary skill sets. The training was supplemented by the energy and resourcefulness of the crew. When the project team faced potential project delays and bottlenecks in the construc- tion process, similar to those faced during the procure- ment process, they were able to respond with quick and agile solutions. One potential bottleneck was created by the amount of pre-fabrication work required for the pro- ject. To keep the project on schedule, the team created its own fabrication shop on site to handle the overflow. The plan worked well and the potential bottleneck was elimi- nated. During the construction process, the work flowed smoothly among the crews. The experience, cohesion, and versatility of the crews enabled the management team to be flexible in their assignments. For example, the mechanical crew became the painting crew once the erec- tion process was completed. By keeping many of the same individuals and rotating them to different assignments, the work proceeded faster and training time was minimised. The crewmembers were already familiar with each other, they were knowledgeable about the project and the sur- rounding area, and they had sufficient skills and training to adapt easily from one assignment to the next. In fact, this recruiting and training program worked so well that the team was able to beat the project schedule and do so with- out incurring a single recordable injury. Conclusion The 28 storage tanks and sphere for Papua New Guineas first refinery were built on a tight 10 month schedule. CB&Is ability to complete the project four weeks ahead of that schedule provides an excellent example of the benefits that can be realised by using the EPC model to synchronise all the components of large or complex projects in remote loca- tions. By effectively training local labour, reducing hand-offs and eliminating redundancies, EPC companies that have developed the internal processes and systems to effectively manage these projects real time can deliver cost effective solutions for their customers. References 1. Asian Pacific Economic Cooperation (APEC): Energy Issues and Trends, Papua New Guinea, November 2002.________________ Reprinted from HYDROCARBON ENGINEERING SEPTEMBER 2004 57-62 2/9/04 9:09 Page 60