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Effective project management: Value of technical and economic feasibility studies

A project is a temporary endeavour, having a defined beginning and end (usually constrained by date, but can be by funding or deliverables), undertaken to meet particular goals and objectives, usually to bring about beneficial change or added value. The temporary nature of projects stands in contrast to business as usual (or operations), which are repetitive, permanent or semi-permanent functional work to produce products or services —Wikipedia

THERE are thus several types of projects. Some can be as small as dispatching a mail by post and others can be as large and as complex as building a mega nuclear power plant. Projects could include new product development, market penetration and construction projects such as hotels, multi-dwelling residential buildings and estates, commercial buildings(i.e markets, shopping malls, office complex), oil and gas projects such as offshore production platforms, compression platforms, floating production, storage and offloading vessels (FPSO), onshore production flow stations, LPG/LNG processing plants, storage and distribution facilities, power plants, oil products storage terminals and depots, distribution and transmission pipelines, refineries and much more. For capital projects to stand a chance of successful completion, a project must have a competent project manager who will oversee the development of an effective project management plan. The project management process must also start at the very early stages of idea conception.

According to the Project Management Institute, project management is defined as “The art of directing and coordinating human and material resources throughout the life of a project by using modern management techniques to achieve predetermined objectives of scope, cost, time, quality and participation satisfaction”.  The management of construction projects, particularly large capital projects require knowledge of modern management as well as an understanding of the design and construction process.

Projects have a specific set of objectives and a number of constraints. Because the programming of capital projects is influenced by market demands and resource constraints such as capital, cost of funds, lending terms, regulatory requirements, and skill availability, the concept selection process associated with planning and feasibility studies sets the priorities and timing for initiating various projects in meeting the overall objectives of the company or business owner. Good project managers always start by considering a number of options or strategies for achieving the stated objectives within established boundaries.

Instead of commencing execution of a project based on the first concept conceived together with the initiating idea, the best strategy is to develop a number of coarse options that are potential concepts to be adopted subject to confirmation by a number of studies and analysis. Usually, about three to six options may be considered and each one subjected to technical and economic feasibility analysis, formulation, risk analysis, research, specification, modification, decision analysis, early constructability assessment, procurement strategy assessment, schedule impact and others.

Consider the building of a new cement factory in Nigeria outside of the major oil producing states. Although the proposed site may have adequate deposits of limestone and other minerals that are key raw materials in the production of cement, there are other factors which might kill the project if not given adequate consideration. One such factors is source and type of fuel for power generation.

The cost of power could mean the difference between profits and loss. Before finalizing the scope and technical definition for the plant, it is important to decide the type of power system that will be built into the factory specifications. Will they be gas powered turbines or diesel powered generating sets or multi-fuel turbine systems or some other alternative? If gas turbines are chosen, based on lower cost of gas when compared to diesel, how is the source of gas guaranteed?

Is there a gas transmission pipeline in close proximity to the plant or would the company be expected to install one? Even when a gas pipeline network exists, what happens when there is no supply from the source gas producing facilities? If you have agreements in place for gas supply with the contractors, what-if there is a two year delay in completion schedule and another company takes up your share of gas, what happens when you eventually complete the project?


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