Managing Risk of Refinery Megaproject

based on ISO 31000 and PMBOK

 

SECOND EDITION

By Arie Wisianto

Jakarta, Indonesia

 


 

Abstract

In order to improve national energy security and the competitiveness of the refinery industry, PT Pertamina (Persero) implements the Refinery Development Master Plan (RDMP), which is consist of revamping 4 units of existing refineries and building 2 units of new grass root refinery. In this paper we will discuss risk management for the RDMP project based PMBOK and ISO 31000 RDMP.

RDMP Project management is divided into two stages, namely project development and project execution, risk management has been implemented since the project initiation until commissioning startup. The process of risk management referring to PMBOK are plan risk management, identify risks, qualitative risk analysis, quantitative risk analysis, plan risk responses, implement risk responses and monitor risks. We determined risk limit for project 5% of investment costs, while the ongoing stage is 5% of the current year’s budget, those number represented our risk appetite. Furthermore, the risk identification stage followed by qualitative risk analysis obtained 170 risk events with 21% in the categories of strategy & planning aspect, 4% compliance aspect and the remaining 54% operations / infrastructure aspect. This is in line with the theory that stated at the project development stage having higher risk than at the execution stage, and the top risk category is related to business strategy risk, namely the business scheme (tolling or merchant), getting the right partner, project financing, land acquisition, most of the top risk are risk owned by Project Development Department.

The quantitative risk analysis (QRA) stage has two tasks, namely numerical simulation of project economics and numerical simulation of cost & schedule. Once of the overall project risks can be seen from the QRA results, probability of completed project duration P80 for RDMP Balikpapan project is 58 months while P50 is 57 months and P90 is 59 months.

To assess the effectiveness of risk management and project management, a maturity assessment has been carried out with results of level 2.65 of scale 5 for project management and 3.3 of scale 5 for project risk management.

When implementing project risk management, we use for both PMBOK and also ISO 31000 frame work, this feels very complementary. As an example the need for risk maturity as a review of risk management implementation, mandate & commitment and the existence of a Risk Management Policy, the principles and risk management framework of ISO 31000 are very beneficial. On the other hand, emphasizing positive and negative risks, links with the knowledge areas and other process groups by PMBOK are very helpful in integrating project risk. When conducting risk management Pertamina equipped with web-based Enterprise Risk Management System (ERMS) to facilitate data and communication processes.

From the discussion it can be concluded that ISO 31000 and PMBOK complement each other in carrying out project risk management, quantitative risk analysis can describe overall risk of the project, maturity assessment helps measuring the effectiveness of risk management and gap analysis, risk management information system is very necessary in carrying out risk management

Key words: RDMP, QRA, maturity assessment, overall risk, tolling, merchant, ISO 31000, PMBOK

JEL code: O22

Introduction

Refinery and Petrochemical Megaproject PT Pertamina (Persero) aims to increase refinery capacity from 1 million barrels per day to 2 million barrels per day, the project consists of revamping Cilacap refinery, Balikpapan refinery, Balongan refinery, Dumai refinery and building of new refineries in Tuban and Bontang. Project risk management is carried out since the initial stage of project development to the end of project execution. As a reference for project risk management generally refers to the PMBOK framework, but this has limitations where risk management starts after the project charter, while our megaprojects have been exposed risk since pre project stage.

The project development stage (before project charter) and early work scope of megaproject have been exposed to major risks including business decisions risk, project financing risk, establishment of subsidiaries risk, land acquisition and site preparation risk. It takes 2 to 3 years before the EPC contract starts where hundreds of millions of dollars have been spent for pre project work. Our experience with reference to the ISO 31000 standard and the combination with the PMBOK standard as a reference for risk management provides complementary benefits so that project risks before and after the charter project can be managed according to standards.

In this paper I will explain how Pertamina takes a combination of principles, frameworks and process from ISO 31000 combine with process taken from PMBOK that can complement each other so that megaproject risk management can be carried out effectively and efficiently.

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Editor’s note: Second Editions are previously published papers that have continued relevance in today’s project management world, or which were originally published in conference proceedings or in a language other than English.  Original publication acknowledged; authors retain copyright.  This paper was originally presented at the 8th Scientific Conference on Project Management in the Baltic States at the University of Latvia in April 2019.  It is republished here with the permission of the author and conference organizers

How to cite this paper: Wisianto, A. (2019); Managing Risk of Refinery Megaproject based on ISO 31000 and PMBOK; presented at the 8th Scientific Conference on Project Management in the Baltic States, University of Latvia, April 2019; republished in the PM World Journal, Vol. VIII, Issue IV, May.   Available online at https://pmworldlibrary.net/wp-content/uploads/2019/05/pmwj81-May2019-Wisianto-managing-risk-of-refinery-megaproject.pdf

 


 

About the Author


Arie Wisianto, PMP®, PMI-RMP®, CMRP®, CRP®

Jakarta, Indonesia

 

 

Arie Wisianto has extensive experience in the oil and gas industry, with more than 28 years spent with state-owned oil and gas company PT Pertamina (Persero). He has worked across multi disciplines from upstream, midstream and downstream. He currently serves the Megaproject Directorate of Refining and Petrochemicals as Project Risk Manager. He has been certified as a Professional Project Manager (PMP®), Professional Project Risk Manager (PMI-RMP®), Professional Reliability Maintenance (CMRP®) and Certified Risk Professional (CRP®). Arie earned his BS in mechanical engineering from the Sepuluh November Institute of Technology (ITS) and the Master of Management in Corporate Finance from Sriwijaya University; he has published more than 25 papers at several conferences.

Arie can be contacted at: arie.wisianto@pertamina.com