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How to build an LNG operations team

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How to build an LNG operations team

How to build an LNG operations team

Much of the public debate surrounding the early stages of a proposed LNG project focus on the flurry of activity in the run-up to FID. Putting together an operations team receives scarce publicity despite being one of the most important steps to a successful project. What organisational planning and staff training is needed, not only to ensure the smooth day-to-day running of the project, but to manage the complex handover from the development and construction workforce to the long-term operational team? Once commissioned how should the separate technical, commercial and shipping units interact with each other and external counterparties? And, crucially, how should individuals and teams be trained to manage these processes? After all, as Faisel Al Suwaidi, chairman and chief executive of Qatargas, said in his key note address to the World Gas Conference in Buenos Aires this year; projects are about people. With many LNG projects in the pipeline and steady growth still projected a new generation of project operators will be needed to run these facilities. And with only a limited number of senior LNG managers with experience in managing each of the links in the LNG supply chain, companies are challenged to build effective teams through a combination of recruiting capable personnel and developing such capability internally. We address in the first part of a two part article, from a people development perspective, what you need to do to get a project operational and sustain it.
Prerequisite experience The ability to build a top-class operational team for an LNG project is fundamental to attracting investment. A senior project finance banker told Gas Strategies that commercial banking teams need to meet and know all the project leaders on a planned project before committing lending. As the source explains, We will only provide lending to the best project companies in the world. This is chiefly because these companies have the balance-sheets to support expensive projects in the first place, but also because they have access to the best LNG operations personnel, a major component to guaranteeing the long-term success of the project. With most LNG projects run as joint ventures, accessing this expertise from within the partner group is key. But with all partners unlikely to be similarly expert in LNG operations, building and sharing capability from individual companies to project joint ventures is crucial in producing and sustaining excellence for the life of an LNG project. Early preparation is crucial with most operators allowing at least two years to recruit and train personnel and to establish the fundamental operating processes in the early project planning phase. Bert Christoffels, the asset manager of the Sakhalin liquefaction plant and oil terminalin Prigordnoye, said when he first joined the Sakhalin project in March 2004 he started focusing on the three Ps; the plant, the procedures, and the final P, people. We really focused on recruitment because people are the most important asset; the kit outside is there, the procedures you can write, but the only thing you can differentiate is people, he said. Mark Mallett, vice president of engineering and operations at the Freeport LNG regasification terminal in Texas, brought in three senior operations personnel the terminal manager, the operations superintendent

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How to build an LNG operations team

Control room at Sakhalin LNG

and the maintenance superintendent at the very beginning of the projects detailed engineering phase so they would be heavily involved in the details of how the terminal was built. The management team needed years of preparation, not only for training purposes, but so they could develop a strong enough understanding of the facility to write the day-to-day terminal operating and safety procedure manuals for future staff after commissioning. Of course, project teams are unlikely to remain in place for the 20-year life of a project and developing capability is only half the battle succession planning, retention of corporate memory and capability is what underpins the long-term success of such projects. Operators first look for people with prior LNG experience in order to minimise the training process. Sakhalin Energy, for example, aimed to recruit ten highly experienced people for each shift, all with different backgrounds and experiences. Strong communication skills are essential as the smooth operation of a facility depends on the efficient interaction between the different shipping, commercial and operational units. This is especially important given the diversity of nationalities working on a typical LNG project. As part of the recruitment process for the Sakhalin project applicants communication skills and proper behaviours, especially in relation to safety, were examined through extensive interviews and Myer Briggs testing. Sakhalin held over 1000 interviews Christoffels said, and I remember, for example, the operations manager was the tenth person [we interviewed]; he was the only one with sufficient capabilities and experience. This rigorous recruitment process obviously proved successful, while other projects lose about 10-15% of their staff post start-up, Sakhalin has lost only 3-4%. For management positions in the Sakhalin and Qatargas projects the operators moved beyond their host countries and recruited staff from other LNG plants, oil refineries or gas projects across the world. Abdelkader Haouari, Qatargas expansion start-up manager, needed to recruit a workforce of between 700 to 800 people, using head-hunters and local agencies, and many people were brought in through personal connections. Christoffels, who was previously employed to manage the optimisation and first stage of de-bottlenecking at the Oman LNG plant, hired several people from his old workplace to work on Sakhalin, since the project was de-manning. But people with specific LNG experience are in short supply. ConocoPhillips, which holds a 50% interest in the general partnership managing the Freeport LNG venture, had the right to appoint all three of the most

Gas Strategies 2010

SOURCE: SAKHALIN ENERGY

How to build an LNG operations team

senior positions for the Freeport project. However, although ConocoPhillips could draw from a wide pool of staff, only one of the three people employed had any LNG terminal experience. There really isnt a lot of domestic, US LNG terminal vaporisation experience available anywhere, explains Mallett. Freeport LNG instead recruited people with cryogenic experience and as the company is based in Freeport, Texas, near a large industrial area, it had a huge pool of potential local candidates to pick from just through running advertisements in the paper. In contrast the Yemen LNG project had to source and train a longterm operational workforce of 700 staff and first-line operators in a country where there was no previous expertise in the LNG business or a flourishing industrial sector. At the liquefaction end of the value chain, such a challenge is not uncommon. The location of the project affects the recruitment process not only in terms of ready access to experienced staff, but also the appeal of the site itself. The Freeport site was desirable because it is not on a deserted lease out in West Texas, but within a short commute of a local city. Luring personnel to Yemen or the remote island of Sakhalin can be more challenging. Training Operations personnel, particularly those without previous LNG experience, need to be trained in how to handle and manage natural gas and its main characteristics and properties and are trained in all aspects to do with safety and the continuous operation of the plant and its control systems. The training and procedures building process can be extensive; with the Qatargas 2 project, there were more than 200,000 hours of training for operations personnel, 250 specialist vendor programmes and more than a 1000 new procedures that were developed, Ching Thye Khoo, the chief operating officer of the Qatargas 2 facility said. As Qatargas did not have the internal resources to train 700 people in-house it hired Training Partners Limited (TPL), a contractor used by ExxonMobil, one of the ventures shareholders, to train staff. Staff were educated about the Qatargas facilities, underwent extensive safety training and vendors who supplied material to Qatargas also offered training so employees could apply the many new technologies used throughout the plant. Many smaller LNG projects combine external training with in-house courses to provide a personalised training programme for operating staff. Jorge Ciacciarelli, the chief of Repsols Canaport regas terminal said that following safety and environment training, each person was given their own development plan in accordance with their personal profile, whether in management skills or in LNG business. One of the external course providers used in the basic training of Canaport staff was the US-based Gas Technology Institute (GTI). These cd-rom self-study courses offered by GTI are becoming increasingly popular with terminal operators all over the world. But oil and gas players with an expanding portfolio of global LNG assets are also now developing their own training centres to enhance the exchange of knowledge and expertise already held within the company. For example, Spains Enags opened a training school at the end of October where its own managers, unit chiefs and technical experts will run courses from Spain. Developing organised career programmes within a company helps ensure the expertise does not leave with the people, particularly when operating longterm projects. We see our clients increasingly looking to integrate training, both external and internal, into an organised corporate programme especially in the field of developing commercial people says Clova Bullen who manages people development and training at Gas Strategies. To staff the proposed Gladstone LNG (GLNG) project in Queensland, Australia, partners Santos and Petronas have launched a $50 million plan to generate up to 100 new apprenticeships and trainee positions to help deliver the CBM-to-LNG project. It is estimated that up to 6,000 workers will be needed for the development of GLNG, including 1,000 permanent operational staff in Queensland and a target of around 300 indigenous employees. The duo are investing in new diesel mechanics, electricians and electrical instrument apprenticeships, plant operations traineeships, a potential new LNG curriculum for Queensland

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How to build an LNG operations team

secondary schools and in university scholarships for both under-graduate and post-graduate scholars, as well as a $4 million training package to support the development of indigenous GLNG jobs. Similarly Yemen LNG set up its own training facilities in the capital Sanaa to develop a local, technical workforce with the skills to run the LNG plant immediately after the launch of the project in 2005. This included a 30-month $37 million programme run by twenty full-time staff to recruit and train 300 young Yemeni graduates to become plant technicians. Many operators of both regasification and liquefaction projects said the opportunity to practise on a plant operations simulator prior to start-up was an invaluable training tool. Similar to the way pilots practise responses to emergency situations on a flight simulator, operators could test their reactions in different operational situations. Some sponsors even arrange project swaps to give staff practical experience of operating a fullycommissioned project before the end of their training. Freeport LNG, for example, entered into an agreement with Trunkline, a company already operating an LNG receiving terminal in Lake Charles, Louisiana, to train their staff. We sent our people over to their terminal for two weeks to train and brought about 10 of their staff over to our terminal to help with commissioning and start-up, Mallet explains. We also sent some people to ConocoPhillips LNG liquefaction plant in Kenai Alaska to get some training there. As LNG projects near completion staff also begin to put theoretical training into practice through regular visits to the project site. Towards the end of the training programme Sakhalin LNG started placing its operational personnel into the commissioning and start-up organisation. Every time a very experienced person would be teamed with one or two young national graduates to form commissioning groups so people could become familiar with the plant before start-up, Christoffels explained. Any construction set-backs at the project can actually be used to the advantage of the operational teams. We had a little draw-back in Sakhalin as the pipeline took a little longer [to construct], says Christoffels.To speed up the commissioning process, it was decided to import an LNG cargo so we couldplay aroundand test the plant with our own operations and maintenance crew. Hand-over to operational team Passing the baton from the development and construction workforce to the operational team can be one of the most challenging aspects of managing any project. Capturing and transferring highly-detailed and specific knowledge of a plant, its machinery, its suppliers and commercial contracts can be a complex, subtle process. In Freeport LNG as Mallett remained head of the project before, during and after start-up he could ensure the full transfer of knowledge between the construction and operational team using a top-down approach. He had to ensure a smooth transition because as vice president of operations and engineering any disputes from either team ended with me. In contrast, Abdelkader Haouari, Qatargas 2 expansion start-up manager handed his helmet to the permanent operations manager once Qatargas 2 was fully operational. All the people up to management level, except me as manager the foreman, the engineers, the supervisors, operators, technicians move with the facilities when we hand over, he explains. As everyone under his management had been working on the plant for the past three years stayed with the assets, their knowledge stays with the plant. This is the strategy we adopted in Qatargas to ensure safety continuity throughout long-term operations. Operations personnel are often embedded into inspection and construction teams as a project nears startup so that final testing, pre-commissioning and commissioning are all primarily handled by the operations team. This can be through an informal process as in Christoffels management of the Sakhalin handover, or a more structured approach, as with Qatargas 2. We started working together at one site, using the one bus, one canteen approach, explains Christoffels. Its very simple when people eat and drink together they start talking to each other. In

Gas Strategies 2010

How to build an LNG operations team

Training centre at Sakhalin LNG

addition to weekly management meetings to review progress and manage training the teams attended meetings and working groups, and soon, the glue starts forming. To pre-empt any potential problems the handover was run through the flawless programme, a Shell Global Solutions Flawless Start Up intellectual property programme that evaluatesrisks in areas such as competence, tightness, operability, complexity etc. and works structurally on the mitigation of these risks to avoid futureproblems. Similarly, the operations team working in Nigeria LNG plant, based on an island, is forced by geography to work and socialise together and that tends to break down barriers, says Chima Ibeneche, managing director of Nigeria LNG. This informal communication process is vital in strengthening links between the technical and commercial operating units, because that is when people really begin to work as one mega team, rather than being only dedicated to the structured team that they belong to, he explains. Haouari, meanwhile, adopted a highly structured approach, Long before the handover, a workshop is conducted with all parties the construction contractor, the project management team and the expansion start-up team to set out clear roles during the different phases, from construction and precommissioning to commissioning and start-up, he says. The red line that divided all of this was the mechanical completion. Before the mechanical completion the expansion start-up team only supported the construction team. But from mechanical completion onwards the expansion start-up team took on the permit to work and the whole team had to be on site, with everybody supporting them. Everyday, before we do any task, we hold a tool-box talk, Haouari says. This is when the supervisor communicates to his team what they are responsible for that day. For example, if the goal is to start a gas turbine, we have to determine who will be involved in this activity. We discuss what we are going to do and the appropriate steps to carry out the task in the safest and most efficient way. Once the start-up teams deliverables are met and the project becomes 100% operational it is subject to a full month-long inspection by the permanent organisation, who then finally take it over. We had to make sure what we were giving them is what they expected, Haouari explains, a process which was made easier given his past experience as manager of the permanent operations group. However it was still an impressive feat; Qatargas 2s 7.8 mtpa fourth train had 1023 systems or sub-systems compared to the 200 systems usually seen on a 5mtpa train and had more than 800,000 different tests that had to be done through commissioning.

Gas Strategies 2010

SOURCE: SAKHALIN ENERGY

How to build an LNG operations team

Interaction between the commercial and operations teams The technical target during the operational phase is to maintain the reliable and continual production of LNG and maximise contract volumes. But commercially, that is only half the battle; to ensure that the value of these volumes is maximised and costs managed requires a very different set of commercial activities and capabilities. It takes an extraordinary level of collaboration between the separate operational units; in the Qatargas 2 project for example there are around 200 commercial agreements to manage. Ching Thye Khoo has likened integrating these different teams to lining up the planets. Again the answer is: start early, says Christoffels. He had started working with Sakhalins commercial director, who he knew from another project, on the plants annual delivery programme by 2005, and then recruited an old colleague from Oman LNG as the annual delivery plan manager. All the commercial ship and customer planning was ready by the end of 2005/beginning of 2006. The trick to the on-going management of these plans is to hold regular meetings and talk to the shipping people to ensure the challenges of each team are understood, he said. Sakhalin reviews its operational implementation plan, originally drawn up in 2004, on a monthly basis. However problems will not always be covered in the manual and although intensive training ensures staff can flag problems early, some issues may need to be handled on the spot. In this instance having the right people with the right expertise is crucial. Even a relatively small project, such as Freeport LNG, with only 50 employees based at the terminal site, requires constant hands-on management. A big part of my job now is walking up and down the hall talking to people; talking to the commercial, legal and financial people and translating what theyre saying into things for our operators to do, explains Mallett. All sponsors stress the need for intensive and regular communication to coordinate between commercial customers, pipelines and shipping. The most important thing in scheduling is communicationwe have focused on improving communication throughout the year says Leen van den Ende, the general manager of shipping & commercial operations at Sakhalin Energy. Van den Ende has 15 people in his operational team who are together managing nine ships, and holds daily meetings with commercial operations teams and colleagues at the plant, in addition to weekly meetings with all stake-holders including LNG and crude-oil scheduling teams, plant operators and the port marine department. Sakhalin LNGs ship operators manage a very busy shipping schedule, with a ship loading every other day. With the challenging location in regards to weather and the relative short distance to our customers, Van den Ende said, the schedule changes frequently. Sakhalin needs particularly streamlined communications between its ship and plant operators to deal with this hectic schedule and the team has used the first year of the plants operations, as an exercise to fine-tune the process. Technical challenge and risk, such as weather, is clearly fundamental to margins, but effective commercial management is required to optimise ongoing value to projects says Peter Thompson, a Manager at Gas Strategies who regularly works with LNG projects on commercial organisational and procedural development projects. Market understanding, risk assessment and counterparty relationships are key to delivering this and the combination of commercial procedures and processes and people development can also support the creation and retention of value. Proactive price review or market change management will increase a projects revenue. Ensuring the people in a commercial team, supported by structured procedures, are able to manage risk and opportunity underpins the long-term efficiency and value in an LNG project. It is natural to pay a great deal of attention to preparing technical staff for operations and risks but often commercial people are expected to learn as they go along, added Thompson. Companies who approach commercial people development in a structured way, however, have reaped additional reward from doing so through being able to adapt their business to changing markets and proactively and effectively managing risk and opportunity. Successful LNG project commercial teams stay sharp and prepared through commercial fire drills and readiness training, to develop responsiveness and test the robustness of contractual procedures.

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How to build an LNG operations team

On-going training and staff welfare After investing years in training operational staff, the challenge is to retain them. A good salary and benefit package is an obvious incentive, as well as ensuring decent housing and, potentially, schooling, onsite for employees and their families. Yemen LNG, for example, hired a welfare team in Balhaf to improve the standards of living among workers and 25 people in security (as well as 600 military personnel) to ensure the safety of its staff and plant. Career development is a key way to maintain interest and commitment to project operations. For instance, the Sakhalin LNG shipping team offers people very diverse career development in shipping in general, says Leen van den Ende. We use Shell, as our shipping advisor, to provide a range of courses in shipping, chartering and operations and staff are sent to Shells shipping offices to get to know the business. We also send staff to our Russian ship owners for trainingboth in their offices and onboard of the ships. This strategy appears to be working well; so far van den Ende has only lost one colleague from his shipping operations team. On the Qatargas 2 project, Haouari said particular attention is given to the personal development of the more promising individuals. When working in teams and spending a lot of time with each other, we are able to quickly identify the flyers those who have the commitment and talent to rise above challenges and take charge when necessary. Among the many responsibilities of the start-up organisation, it is imperative that we develop individuals, paying special attention to the flyers, who will eventually drive the entire team for long-term operations well after the expansion group has departed. Although any IOC or integrated company, such as Repsol, Shell or ExxonMobil, can offer employees expansive opportunities in career development, for smaller companies and one-terminal operators lack of career mobility is a disadvantage. Freeport LNG, with a smaller team and less flexibility to provide career advancement tries to attract and retain the best people by offering slightly better pay and benefits than competitors, and to keep staff interested by moving them around laterally within the organisation. A larger project, such as Qatargas 2, may offer more scope for development but its a big challenge to maintain a staff of 700. The key to maintaining such a large and diverse team is open communication and easy access to management; Haouari, sends out regular e-mails and bulletins and holds daily meetings with management staff who cascade information through the proper channels to ensure all staff are kept informed and up to date. Out of his 700-strong team, Haouari has only lost 40 people since start-up. There is of course always the threat that staff will be poached by other project developers, particularly as managers tend to bring their best senior staff with them when they leave. Ship operators, much in demand, have huge potential for job-hopping. Shipping really is an international business so if you train people well and they are good at their job they can easily be picked up by international shipping companies around the world, says van den Ende. But in the wake of the financial crisis, with many companies laying staff off, the need for competitors to steal rivals employees has fallen. The future and localisation It is important for every country to have a strategy to ensure a continuous supply of people to run its businesses. Some countries have short-term strategies, and they dont prepare for ongoing operations, says Haouari. Its a matter of strategy and long-term planning. A clear indication of operational needs and how you are going to fill the positions of the future is required. You must prepare people. Qatargas is currently embarking on a grand scheme of Qatarisation; the plan to recruit local people. Qatargas plans to recruit 30 operators every year and train them through an individual development programme to the level of plant operator. The system helped us a great deal in Qatargas 1. With this new project we are obliged again to fill positions with ex-pats and continue with the Qatarisation process, Haouari said. Similar local training programmes are well known in Nigeria LNG, and now virtually all operations and commercial personnel are Nigerian. Similar programmes are being implemented in Yemen and Sakhalin

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How to build an LNG operations team

and are planned in Papua New Guinea and Australia, although LNG projects of the future will still broadly be operated by multinational teams. In light of this one area of training that could be strengthened is the de-westernisation of the training process; how operators translate a western European way of thinking to suit the local environment, especially as few LNG plants are located in the west. With future projects in Russia, for example Christoffels says, we need to adjust the training to take into account the way Russian education works. However, localising project staffing may have its limits; just as a project starts with many expats, sponsors may want todays locals to become tomorrows expats. We are a pioneering LNG company and we have been training people for the past 10 years, so we suspect that new LNG plants will be desirous of taking some people from our project. And we wouldnt mind too much because its the natural thing for people to try to borrow from those who are ahead of them, says NLNGs Ibeneche. Several of NLNGs shareholders have consciously moved locally recruited staff into international positions around the world, and they may not necessarily return to Nigeria. Countries such as Trinidad & Tobago for example recognise that they have a vast diaspora of people in the oil & gas industry that they want to continue to be welcomed abroad, just as they welcome other expats at home. Few operators think finding new technical staff with the relevant skills and experience to operate LNG projects will be a problem in the future. Even the shipping industry, where experienced LNG operators are already in short supply, seems secure. At the moment LNG is new to Russia but Russian shipping companies are putting a lot of effort into training people and are operating LNG tankers now within consortia with Japanese ship owners so there is a lot of cross training going on, says van den Ende. Although we need to make sure we recruit enough people on time and that we spend enough time on training, he adds. There are quite a lot of young people interested in joining the industry we havent seen a problem with that. The issue is more that you need people with the right skills. But while plans to secure and retain technical operations personnel are proving successful, building a commercial operations team remains a significant challenge. On the commercial side, where experience is even more valued and often harder to retain, creative, proactive and adaptable training programmes are the only solution to bring a new generation of operations personnel up to speed and to meet the demands of a growing, and increasingly sophisticated, industry.

This article was published in LNG Business Review, December/January 2010. LNG Business Review is published by Gas Strategies. To subscribe to LNG Business Review, please contact Matthew Shelton on +44 (0)20 7332 9981 or e-mail: m.shelton@gasstrategies.com Note: This article has been edited. Part two in the February issue of LNG Business Review looks at building a successful commercial operations team managing risk.

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