AMSJ » Capital Planning in action supporting production safety

Capital Planning in action supporting production safety


In the past three articles, we have looked at the difference between OPEX (operating expenditure) and CAPEX (capital expenditure) and discussed how the CAPEX planning process is used by the business. We have followed how the process is applied, by considering a critical safety improvement project being undertaken by a major producer.

The initial phase, of our six-phase lifecycle was called the Identify Phase, where an idea is communicated, the need is assessed and if valuable to the company, it proceeds to the next assessment phase. The second phase is the Assess Phase, whichdefines the problem in more detail and clearly sets out sets out the measurement of success for the solution. The third is called the Select Phase, where a critical analysis of viable options is carried out and the solutions are ranked in order of meeting the required business objectives. By the completion of the Select Phase, the option providing the greatest benefits measured across performance, cost and schedule will be selected for implementation in the Deliver Phase.

The performance mentioned is measured across several aspects, possibly most obvious, is output. A new solution needs to provide more than the previous. If it is a new greenfield project, output will be planned for a sufficiently long future period. Another key aspect will be safety performance. If replacing an existing facility, it will need to be safer and easier to operate. Reliability comes next and is a critical consideration, as there’s no point choosing a higher production output rate, with a less reliable plant to deliver it. Other considerations include reduced running costs, lower maintenance demand, compatible and reduced logistic demands and fewer operating staff.

The project we’re using as a study, is the current siting of a plant central control room. The control room was found to be within range of hazards, which in the event of several possible process failures, the consequence may include likely fatalities. The discovery of this unacceptable risk added urgency to the planning process to rectify the situation through a capital project.

In the Deliver Phase this is where the action is seen. Things get built, changed, bought and appear on site. The Deliver Phase includes the final designing, procurement of services and components, the construction (if the project is building something) and the all-important commissioning and hand-over tasks.

From Phase to Phase, the understanding of what the best solution is, has grown. At the same time, so has the level of detail of the solution. By now, there has been enough design work done to ensure that the key details of the solution can be measured and confirmed, to meet the performance requirements. Further detailed design is still required to procure the materials and equipment needed to construct the physical solution.

As the extent of design increases, it becomes more difficult to make changes to the design, without creating knock-on effects such as time delays and cost increases. This is an important management focus in this Phase. Essential changes to ensure performance, or conformance with existing site limitations (if a brownfield project) are accepted.  Changes suggested which are based mostly on preferences, must be avoided as they are non-essential and create delay and cost increase. If demanded further into the Phase, especially when the Contractor is building the facility, such non-essential changes will be expensive.

For our Control Room relocation example, the main tasks in this phase include:

  1. Procurement of the project management organisation to manage the project.
  2. Procurement of detail design contractor.
  3. Procurement of long lead time items to be installed in the new facility.
  4. Procurement of the construction contractor.
  5. Procurement of the training service provider for the new equipment to be used by the operators.
  6. Stakeholder engagement of the operations and maintenance personnel who will be affected by the new facility.
  7. Planning of the commissioning and handover tasks, including the operations and maintenance personnel directly affected by the project.

This is just a brief, high level, list of some of the main tasks that occur during this busy phase. The planning and execution of the works is often a complex exercise and involves a range of internal and external people to deliver.

A critical task is planning the commissioning and hand over process. This is where the operators are trained in the use and maintenance of their new equipment. For an efficient hand over process, this familiarisation and training needs to happen as early as possible. Operations and maintenance staff must be part of the project delivery, as they are the custodians of the new facility. They can’t do their job safely, reliably and efficiently if they must learn how to use the changed facilities and equipment at the same time.

With the Delivery Phase complete with a new facility and trained operators, next month’s article will wrap up the lifecycle by discussing the final two phases that exist in the facility’s operational lifecycle.

Read Part One of this article Here / Read Part Two of this article Here / Read Part Three of this article Here


Our Guest author is Peter Crane from SER Solutions. SER Solutions is an independent strategy and operations management consultant, principally, to the energy and resources sectors. The Company provides clients with practical guidance and economic solutions to critical infrastructure assessment, planning and delivery. You can contact Peter hereby email or Phone

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AMSJ April 2022