Practical Risk Management with Primavera Risk Analysis – Working with An Oil and Gas Industry Project

The Practical RMP with Primavera Risk Analysis course is used by risk management practitioners around the world, including PhD candidates pursuing their doctorates. Professionals from construction, software, EPC (engineering, procurement and construction), space and other industries use this course.

Currently, I received questions on its usage on in the oil and gas (O&G) industry. The question is on practical applicability in that industry. The Practical RMP course is industry transparent and uses its own project and builds-up step-by-step from risk planning, identification to risk monitoring and tracking. Along with the theory, you will learn to do risk management in a practical, hands-on manner. The later part, hands-on, is crucial.

Coming to the Oil and Gas industry, the Practical RMP course can be used and the risk management concepts can definitely be applied. For this article, I’m going to take a sample risk management plan. This is a .plan file as called in Primavera Risk Analysis (PRA) software tool. 

The .PLAN file

This plan is taken from the provided sample plans available in PRA tool. When imported to the software, it pops-up a message about cost uncertainty in this oil and gas project. 

Uncertainties can come in various ways:

• Duration uncertainty
• Cost uncertainty
• Network uncertainty, among others.

You can learn more on these uncertainties in this article. All these uncertainties can be modelled. 

Analyzing the .PLAN file 

Now that we have imported this file, we need to have a quick look on the plan, which is shown below. 

As shown:

• We have a number of activities under the heading “A” such as Civils, Buildings, Structural Steel & Painting, Mechanical Equipment Supply etc.
• Each of these activities have the cost shown – minimum fixed cost, maximum fixed cost and most likely fixed cost.
• For example, the ‘Structural Steel & Painting’ activity has minimum fixed cost of $900,000, maximum fixed cost of $1,100,000 and most likely fixed cost of $1,300,000.

The resources are fixed cost for these activities and the cost uncertainty has been shown for each. The default probability distribution has been used for them. 

The overall project statistics is shown below. This is can be seen by going to Plan menu > Plan Information … > Statistics tab.  

As you can see, the total planned cost is $19.123 M (million) and the planned finish is 31 October, 2025. I’ve changed the date of the plan. Also, you would have noticed that there are 7 resources, in total, for this cost plan.

Risks as Part of the .PLAN file

This plan is somewhat different compared to the other sample plans available. This is because the risks are added as part of this cost plan. 

The risks have probabilities associated, along with modelling numbers. This is because only risk can have uncertainties as they are in the future and they are uncertain. Activities are planned and will be executed. But they do have uncertainties and hence the modelling.

The risks associated with this cost plan along with the probabilities are shown in the below figure. 

As shown above three risks are directly plan of the plan, not the risk register! There are:

• Material supply problems with 10% chance.
• Key personal availability with 25% chance.
• Design complexity underestimated with 20% chance.

In addition, each of these risks has minimum, most likely and maximum fixed cost. 

Running the Cost Analysis

Next, with this available plan (I’ve made some changes), we will run the risk analysis with respect to cost. This can be done by going to Risk menu > Run Risk Analysis … option. We will use the default parameters while going through analysis and will use the Monte Carlo simulation.

Post analysis, the Latin-Hypercube simulation (a modified version of Monte Carlo), we have the following representation.  

Analyzing the above report, one can say the following:

• The chance of meeting the estimated planned budget of $19.123 is hardly 11%.
• To have a 50% chance the budget has to go up and it has to be $19,679 M. In order to have 100% chance, the budget has to be $22, 249 M.
• Do note that the risks are included in the analysis and they are also impacting the final cost.

Conclusion

As we just learned, any kind of O&G project can be used for risk analysis using the Primavera Risk Analysis software tool. This is a special and advanced project with only the cost aspects. For duration too, the PRA software can be used.

You need not have any apprehension about it. If you are keen to learn detailed and end-to-end risk management with a software tool, then Practical RMP course is the right fit for you.

References

[1] Online Course: Practical RMP with Primavera Risk Analysis, by Satya Narayan Dash. 

[2] eBook: I Want To Be A RMP, 2nd Edition (Updated), by Satya Narayan Dash.