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Lessons Learnt and Pitfalls to Avoid in: Contract Formation Contract Execution © 2012 McDermott. All Rights Reserved. Onshore Modules Construction – A Fabricator’s View

Onshore modules construction – a fabricator’s view

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Understand the important lessons learned and common pitfalls to avoid in contract formation and contract execution through this presentation told from a fabricator’s point of view. This presentation covers a discussion on contracting model, contracting strategy and project organization setup.

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Page 1: Onshore modules construction – a fabricator’s view

Lessons Learnt and Pitfalls to Avoid in:

Contract Formation Contract Execution

© 2012 McDermott. All Rights Reserved.

Onshore Modules Construction – A Fabricator’s View

Page 2: Onshore modules construction – a fabricator’s view

Early involvement of fabricators/contractors is key to the process

Greatest positive impact comes from early definition on engineering,material selection, constructability, completions, optimizedcommissioning, load-out philosophies and sea-fastening

This is probably the single biggest lesson learnt

Summary Findings

Page 3: Onshore modules construction – a fabricator’s view

Lessons Learnt- Contract Formation

Contracting Model - Owner, EPCM Contractor and Fabricator(s) Definition of roles and responsibilities – Clarity in documents and processes

Fabricator’s relationship with EPCM Contractor and Owner – Single pointresponsibility is key

Warranty obligations and remedial work executed off SE Asia – Need forrationalization

Governing Law, Dispute resolution provisions etc – Adapt to SE Asia

Is this the only sustainable contracting model? (EPC, EPCM and Supplier)

Page 4: Onshore modules construction – a fabricator’s view

Lessons Learnt- Contract Formation

Contracting Strategy Fabrication on unit rates based on

approximate quantities (BOAQ)- Gooddefinition is key

Long bidding cycle due to continuouschanges in design – Awareness of resourcesand commitment

BOAQ and models not mature enough forbidding – Risk sharing and qualifications

Materials – Fabricator’s supply usuallyrestricted to bulks – Extent of definition andscope split

Commissioning requirements, Load-outrequirements etc – Early definition andplanning

Page 5: Onshore modules construction – a fabricator’s view

Australian Requirements AQIS or higher – Definition, acceptance criteria and

specifications usually evolving throughout theproject.

Electrical equipment and installation competency –Australian certification requirements and workerslicenses for work executed in SE Asia.

Australian Industry Participation (AIP) requirements– levels of participation, early identification ofpotential and allowance in overall schedule.

Materials Specifications Top-up not readily available in SE Asia, especially

exotics and other issues such as weld procedures qualified previously or on contract material.

Lessons Learnt- Contract Formation

Page 6: Onshore modules construction – a fabricator’s view

Awareness of Fabricator’s Risks – Different from Owner or EPCM Risks Mix of work type – Balanced to reflect the work content

Materials selection and specifications

Quantity variations

Module layouts, foot-print, equipment location

Construction sequence

ROS dates for Long Lead equipment

Connection details – stiffeners, joint connections, weld details

Space requirements

Testing regimes

Acceptance criteria

Lessons Learnt- Contract Formation

Early involvement ensures better definition of scope split, and mitigation of the risks.Results in a better contracting arrangement, improved schedule certainty and possibly lower costs, to all parties.

Page 7: Onshore modules construction – a fabricator’s view

Constructability Studies Early – Impact onproductivity, cost, quarantine andschedule. Structural design to cater to fabricator’s build

sequence E.g. Pancakes Vs Roll-up

Section sizes and grades to suit existing weldprocedures, joint configurations and competencies

Standardization of components such as stiffeners,supports etc or proprietary supporting systems.

Standardization of sections and grades to allow bulkbuying and interchangeability

Design for construction - access requirements, watertraps etc.

Load-out philosophy and sea-fastening to reducevessel standby time

Lessons Learnt- Contract Execution

Page 8: Onshore modules construction – a fabricator’s view

Project Organization Set-up Adequate level of resourcing specific to each Contract – One size does not fit all

Clearly defined communication lines and roles – internally and between parties

Open and healthy relationship between parties – awareness of each other’s drivers

Engineering and Procurement Interfaces Dovetail engineering deliverables to suit fabrication requirements rather than

progress

Material deliveries to suit fabricator’s build sequence.

Allow sufficient time for checking inconsistencies in design etc.

Use of tools like PDMS to reduce fabricator’s engineering interfaces

Integrated change management process to mitigate impact of design changes on fabrication

Lessons Learnt- Contract Execution

Page 9: Onshore modules construction – a fabricator’s view

Lessons Learnt in Execution

Yard Layout and selection process Space constraints and workshop capacity – Volume driven pre-fabrication work

with large requirement for space for assembly.

Load- out philosophy to be firmed up early – by Trailers, by lifting etc and whether side load-out or front load-out.

As shipping is largely driven by requirement and sequencing in the final location (LNG plant), module layouts should allow for change in priorities and shipping sequences.

Page 10: Onshore modules construction – a fabricator’s view

Lessons Learnt in Execution

Quarantine & Build Clean Philosophy Quarantine requirements such as proximity to vegetation, seasonal impacts from

local flora and fauna, rainwater stagnation etc to be considered early.

Can be difficult to meet requirements in the tropics without being carefullymanaged.

Can be a larger issue than the fabrication itself – early planning and dove-tailinginto execution plan a must.

Designs and supplied equipment are not always quarantine sufficient/compliant.

Philosophy of build clean starts at design and procurement and not in thefabrication yard.

Page 11: Onshore modules construction – a fabricator’s view

Insulation Philosophy Material & process selection for insulation including cryogenic insulation to

minimize damage.

Avoid congestion on assembled modules by insulating more on ground.

Increase pre-fabrication to remove insulation from critical path and reduce costs.

Minimize interfaces between proprietary supports and insulation.

Lessons Learnt in Execution

Page 12: Onshore modules construction – a fabricator’s view

Construction Completion & Testing Tolerance levels up to 1mm – onerous and far more stringent than normal offshore

modules specifications

SWHU (Single Weld Hook Up) - Preparation for a global regime??

Advantages and disadvantages of testing as a train versus testing individual modules to be concluded early.

Testing - stored energy versus absolute pressure rating as a basis for exclusion zones.

Load-out & sea fastening plan to be developed early and standardized.

Internal sea-fastening is often delayed until the MWS has inspected the modules just prior to sail-away.

Lessons Learnt in Execution

Page 13: Onshore modules construction – a fabricator’s view

Summary

Clear contracting model.

Early definition of detailed requirements and specifications.

Clarity of commercial arrangements and pricing philosophy.

Early engagement with contractors to incorporate LessonsLearned into Design phase.

Design for construction and completion.

Plan Early and Engage Early to Reap benefits

Page 14: Onshore modules construction – a fabricator’s view

Our Delivery Locations in SE Asia

Batam60,000MT per annum110 hectares

Qingdao McDermott Wuchuan30,000MT per annum43 hectares