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| The Cost of Risks Risks bear cost, which does not naturally come to many people. If risks are only identified but not quantified, they become gut feels; if risks are identified and assessed but not responded with mitigating actions, they continue to be threats. When appropriate risk responding actions are taken to reduce risks severity levels, the actions often than not require extra resources, being time or money, or both. It is therefore paramount that identified risks be analyzed and quantified, and one of the scientific methods is to use @RISK simulation package which is designed to simulate real project risk scenarios. Typical projects carry a risk register in which risks in most cases have discrete characteristics, the @RISK binomial or discrete distribution can easily quantify total cost of project risk impacts, and total cost of implementing risk responding action plans. The cost and benefit analysis following the Monte Carlo simulation can provide management with an important decision criteria. Further more, project cost estimates and project schedules always carry inherent risks which in most cases reflect the bounded continues probability distribution function (PDF). Using appropriate PDF in @RISK, the project contingency / reserves / escalation (cash-flow based) can be simulated to support project budget acquisition process. Risks are costly and intrinsic to projects; without them the projects are not interesting and exciting. To understand risks, quantify risks and manage risks are integral part of project management, @RISK simply makes project managers’ life easier. |
Integrating Quantitative Risk Analysis into STABView Well Planning Software using @RISK Planning the drilling and completion of deviated and horizontal wells can be a difficult and complex task. The well planner can be faced with the possibility of encountering wellbore instability and lost circulation while drilling, sand production while producing or fault reactivation while injecting. Advanced Geotechnology a consulting and software team in Weatherford International has developed a software package called STABView™ that addresses drilling, completions and production problems. The software was first released in 1997 and has since been used for analyses on hundreds of projects in a variety of geological settings from around the world. Advanced Geotechnology first used STABView for quantitative risk analysis (QRA) for problems of hole stability and sand production using @RISK in 1998. In 2008 we plan to release a commercial version of STABView with a QRA module. The presentation will focus on how @RISK developer tools have been integrated into STABView, and provide examples of the new QRA capabilities and outputs from typical sample cases. |
A Refined Approach for Defining Construction Project Uncertainty Jason L.G. Mewis, P.Eng. Risk analysis is a term or concept that that has many different meanings to many different people. Often projects include some form of qualitative risk planning, brainstorming or mitigation but few do true quantitative risk analysis at the budgeting phase. Many experts concur that if you don’t do some sort of quantitative analysis, you’re not really doing risk analysis at all and in a lot of cases you may even be wasting your time.
Using knowledge and training from the PMI, AACE and Palisade combined with solid experience as a project manager and senior engineer in the heavy industrial sector, Jason has developed a new approach which is being adopted by industrial companies and organizations such as the Canadian Department of National Defence. The process is used for doing project risk analysis for quantifying uncertainty on capital construction budgets. What is unique about the approach is a dual S-Curve concept used for quantifying Contingency separate from Risk Reserve on the project. The analysis also yields Schedule Contingency and incorporates concepts such as Escalation and Cash Flow modelling.
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Project Cost Estimate Analysis Using RISCOR David Brady, P. Eng., PMP® Suncor Energy is a fully integrated oil and gas company that has announced over $20 Billion dollars of new construction over the next 4 years. This is in addition to the over 4 Billion dollars spent in the past 4 years and about 2 Billion dollars presently underway. To accomplish this, Suncor Major Projects has implemented a risk program that covers all aspects of qualitative and quantitative risk management. A major part of this is the use of Palisade’s @RISK© program as the Monte Carlo simulation tool for our proprietary RISCOR© program to analyze our estimates. This presentation will demonstrate how Suncor has used @RISK© to develop their RISCOR© program to effectively analyze estimates from project values of less than 1 Million dollars to our Voyageur project which is estimated at 11.6 Billion dollars. The presentation will review how we actually implement @RISK© from inputting estimate data per cost code, adding the risk ranges, incorporating specific risks, calculating contingency, summary sheets, presentation graphs, tornado diagrams, and statistics necessary to fully analyze the estimate.
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Large Capital Projects: Mark Robson When taking on large capital projects, organizations reach a point when there is so much capital and market sentiment invested in the project, that it becomes very complex to back away from it -- It's reached the point of no return. Often the reasons why an organization wants to cancel a project are related to escalating costs or the extended payback periods -- This is also the point of no return. The key to avoiding this double entendre is having a model that projects the cash flows of the project on a risk adjusted basis from the engineering phase through to the end of a long period of operation. If build right, the tool produces early warnings for EPC, market, schedule and commercial contract risks that would materialize in the future thus allowing management more flexibility to act today. The challenge you face is building this tool when the number @RISK distributions grows well into the 100's. This session will highlight some of the approaches we've developed to make the construction and management of these tools manageable.
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Business Strategy for Alberta Oil Sands Development: A Risk Analysis Model Coim Janakiraman This presentation will attempt to highlight the business Strategies suitable for Alberta 0il sands development: extraction, processing, upgrading and marketing. Oil processing chain, project management, is a complex undertaking and the discussion will strive to describe Monte Carlo procedure needed to implement state-of-the-art simulation techniques. It is an enormous challenge and to succeed, by means of risk analysis modelling, involves understanding the nature of business associated with oil sands. Alberta oil sands companies have sharply increased their spending, in the next decade alone up to $100 billion in new projects, to expand production and capitalize on high energy prices. However, there are business strategies companies can adopt to realize more value from their large projects for growth. The first step is to recognize the riskier and more technically complex nature of projects today. Second, the development strategy should consider how to optimize the risk profile. The risk analysis model design discussed addresses the technical, operating, commercial execution and stakeholders’ risks right from the start. Lowering project risks will also improve available financial options. The final step described in the risk analysis design of the project takes a hard look at the integration of engineering, economics and environment to reduce risk reduction and enable smooth operation. The application of these tools can yield cost reduction of 25 per cent or more and decrease the uncertainty in the final cost of the project.
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