IPMA International Project Management Association
26 November 2018 / 9:00

Projects and Project Management in Chemical Industry

The Chemical industry is with a global turnover of approximately 3.5 Trillion USD a significant industry. After a period of stagnation in 2016, since the year 2017 the industry is growing again. According to data of the German Chemical Industry Association, about 62% of that turnover is generated in Asia, 19% in Europe and 13.5% in the USA. German companies spent 15 Billion Euro for investments in their plants, half of them in Germany, the other half abroad. The investment means are used for R&D, renewal, expansion or investment in new facilities and equipment. R&D projects aim at new technologies and products, fulfilling customer specifications, new requirements and regulations as well as strategic objectives of the manufacturers. Project management is typically based on global standards, agile practices are injected or combined in order to cope with the many challenges and changes of the project context. CAPEX projects are typically based on EPC (Engineering-Procurement-Construction) Contracts, which means a general contractor is in charge of turnkey solutions and partners with sub-contractors for construction etc. Global competition imposes high pressure on solution providers, their timelines and budgets. Stephen Mulva, Director of the Construction Institute of the University of Texas at Austin, recently formulated the need for an “Operating System 2.0”, with the following impact: 35% cost reduction, 50% cycle time reduction, 60% better ROCE, 250% more projects, plus 300% more profit for OS2 providers. This may sound like heaven, but only with a combination of several measures this impact can be achieved. New approached to project management are needed for the EPC Business in Chemical Industry. One is certainly the “Front End Engineering Design (FEED)”, which means that the basic engineering is performed right after the Conceptual design or Feasibility study. The design focuses on technical requirements as well as rough investment cost for the project. It can be divided into separate packages covering different portions of the project. The FEED package is used as the basis for bidding the Execution Phase Contracts (EPC, EPCI, etc) and is used as the design basis. A good FEED will reflect all the clients project specific requirements and avoid significant changes during the execution phase. FEED Contracts usually take around 1 year to complete for larger sized projects. During the FEED phase there is close communication between Project Owners and Operators and the Engineering Contractor to work up the project specific requirements. Partnering approaches, alliance contracts and flat supply chains are other approaches to be used for significantly reducing project time and cost. Digitalisation supports as well, for example through a digital twin of the plant, “Building Information Modelling (BIM)”, automated processes, data mining and analytics. Modularisation of plant solutions, standards as well as design reuse and standardization are additional approached to improve the bottom line. However, without motivated and competent people project performance won´t improve. On top of technical and contextual competences, social competences for communication, collaboration and stakeholder engagement are success-critical.

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Reinhard Wagner

Author of this post

Reinhard Wagner has been active for more than 30 years in the field of project- related leadership, in such diverse sectors as Air Defense, Automotive Engineering, and Machinery, as well as various not-for-profit organizations. As a Certified Projects Director (IPMA Level A), he has proven experience in managing projects, programmes and project portfolios in complex and dynamic contexts. He is also an IPMA Certified Programme and Portfolio Management Consultant, and as such supports senior executives in developing and improving their organizational competence in managing projects. For more than 15 years, he has been actively involved in the development of project, programme and portfolio management standards, for example as Convenor of the ISO 21500 “Guidance on Project Management” and the ISO 21503 “Guidance on Programme Management”. Reinhard Wagner is Past President of IPMA and Chairman of the Council, Honorary Chairman of GPM (the German Project Management Association), as well as Managing Director of Tiba Managementberatung GmbH.