Uncertainty management in Statoil (Risk and opportunity management) NSP 18 September 2001

Requirements for uncertainty management in development projects AR005 - Project development in Statoil Classification requirements for cost estimates and schedules Practical guidance document Recommended practices for uncertainty management in development projects

Presentation content Uncertainty management trough project phases and decision gates The qualitative uncertainty management process The quantitative uncertainty management process Presentation to management at decision gates Findings and recommendations

Uncertainty management trough project phases and decision gates DG 0: Decision to start feasibility studies (BoM). DG 1: Decision to start planning (BoK). DG 2: Provisional project sanction (BoV). DG 3: Project sanction (BoG). DG 4: Start operations (BoD).

The qualitative uncertainty management process Tools : Lotus Notes PIMS Uncertainty identification Continuous process Uncertainty response control Uncertainty assessment Uncertainty response action

Presentation to management at decision gates (I)

The quantitative uncertainty management process The quantitative uncertainty management process consists of performing uncertainty analysis on the value chain. A value chain includes all the variables that affect the cash flow. Each uncertainty in the value chain is described with a probability distribution and linked to the economical model. Dependencies between variables are taken into account. Uncertainty in project economy is calculated through Monte-Carlo simulations.

Principle poster of the value chain analysis

Presentation to management at decision gates (II) The numbers in brackets correspond to different scenarios

Qualitative vs. quantitative uncertainty management Continues process Information flow Uncertainty management is a continues process through all decision gates and project phases Quantitative value chain analysis is mainly performed at important decision gates.

Project ranking and portfolio management

Findings and recommendations The qualitative uncertainty management process The project management team must have ownership and actively support the uncertainty management process Uncertainty management must be established as a continuous process integrated in project management Uncertainty management must be delegated to the line of responsibility High focus and effort should be given to the implementation phase. A person responsible for facilitating the process should be appointed to secure sufficient attention Uncertainty management must be on the agenda in regular meetings Uncertainty management must focus on the total value chain and the lifetime perspective to secure an overall management of risks and opportunities A practical detailing and structure is needed in order to reduce the number of uncertainties uncertainty management must be supported by efficient methods and tools. Experience transfer from other projects is important

Findings and recommendations The quantitative uncertainty management process Keep the analysis simple Treat uncertainties on an aggregated level One person must be appointed to coordinate the process Challenge the input from the different disciplines and search for dependencies Make sure that the input corresponds to the uncertainty suppliers view (everybody is not familiar with statistics and statistical definitions) Present the results from the analysis to the project and explain in simple terms the value chain and the effect of each input on the totality as a quality assurance of the model Get a second opinion on the model to avoid effects of subjective interpretations Use benchmarking to quality assure the results

Findings and recommendations Presentation to management at decision gates Keep the presentation simple Focus on findings, conclusions and recommendations Highlight assumptions and framework conditions Structure the presentation Do not only present numbers and statistics Make sure that the presentation is understood