Mission Command - alternative project management

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The employment of the traditional project management approach (Detailed Command) is on the rise across all industries, but so is the number of project failures.

Mission Command is an alternative philosophy of management, with centralised intent and decentralised execution that is particularly suitable for complex project management. The successes of the British Military over the last two decades have flowed from embracing Mission Command, could this be the key to improving project success in other industries?

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Mission Command - alternative project management

  1. 1. MISSION COMMAND ALTERNATIVE PROJECT MANAGEMENT (IT’S NOT ABOUT THE BOK) MARK RICHARDSON APACHE NORTH SEA PROJECTS GROUP MANAGER 14 MAY 2014
  2. 2. Certain statements in this presentation may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 including, without limitation, expectations, beliefs, plans and objectives regarding production and exploration activities. Any matters that are not historical facts are forward-looking and, accordingly, involve estimates, assumptions, risks and uncertainties, including, without limitation, risks, uncertainties and other factors discussed in our most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K available on our website, http://www.apachecorp.com/, and in our other public filings and press releases. These forward-looking statements are based on Apache Corporation’s (Apache) current expectations, estimates and projections about the company, its industry, its management’s beliefs and certain assumptions made by management. No assurance can be given that such expectations, estimates or projections will prove to have been correct. Whenever possible, these “forward-looking statements” are identified by words such as “expects,” “believes,” “anticipates” and similar phrases. Because such statements involve risks and uncertainties, Apache’s actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward- looking statements. Unless legally required, we assume no duty to update these statements as of any future date. However, you should review carefully reports and documents that Apache files periodically with the Securities and Exchange Commission. Cautionary Note to Investors: The United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable, and possible reserves that meet the SEC's definitions for such terms. Apache uses certain terms in this presentation, such as “BO resource,” “BO Potential” and other similar terms that the SEC guidelines strictly prohibit Apache from including in filings with the SEC. “BO Resource,” “BO Potential” and other such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and amendments thereto, available from Apache at www.apachecorp.com or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, Texas 77056 (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov FORWARD LOOKING STATEMENTS
  3. 3.  Apache North Sea Limited  Apache Projects  Traditional Project Management Approach  Traditional Project Management Performance  Mission Command  History  Principles  Implementation  Discussion & Questions 4 AGENDA
  4. 4. 5 APACHE NORTH SEA
  5. 5. SAFETY PERFORMANCE Company Improvement Notices Prohibition Notices Maersk (all sections) 13 3 Talisman 10 1 Shell U.K. Limited 8 6 CNR 8 1 Marathon 7 0 Petrofac Facilities Management 5 0 Total E&P 4 0 Chevron 4 0 Taqa 3 0 Nexen 3 0 BP 2 0 Premier Oil 2 0 Apache 2 0 Sources: OGUK Benchmarking 2013 Data and HSE http://www.hse.gov.uk/notices/notices
  6. 6. 7 2013 PRODUCTION Forties Beryl Area Nelson Scott Nevis S Telford Buckland Ness Maclure Bacchus 0 500 1,000 1,500 2,000 2,500 3,000 MBOE/ D 0 20 40 60 80 100 120 140 Gas Oil
  7. 7. 8 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% APACHE MARATHON TULLOW PERENCO BHP CENTRICA ENQUEST BRIDGE NEXEN DANA COP TAQA RWE BG CHEVRON ITHACA PREMIER SHELL TOTAL BP TALISMAN MAERSK CNR E.ON 2013 PRODUCTION EFFICIENCY 1 3 5 7 9 11 13 15 17 19 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 OperatorRanking Source: OGUK Production Efficiency Task Force Data Pack
  8. 8. Forties Acquis ition 2003 2004 2005 2006 2007 2008 2009 2010 2011 MNSL Acquis ition 2012 2013 Running Costs 130 180 186 226 226 236 198 208 253 365 428 Other Capital 683 9 19 35 22 26 23 24 48 33 1250 64 84 ITS Capital 28 158 214 176 253 226 156 202 263 271 323 Drilling Capital 23 185 240 133 260 210 198 367 527 553 476 Cum. Spend ($ million) 683 873 1415 2091 2647 3412 4106 4681 5507 6583 7833 9086 10397 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 0 200 400 600 800 1,000 1,200 1,400 CumulativeSpend$million AnnualSpend$million 9 EXPENDITURE
  9. 9. 2003 2004 2005 2006 2007 2008 2009 2010 2011 MNSL Acqui sition 2012 2013 Oil & Gas Revenue 273 472 1275 1355 1399 2103 1369 1605 2185 2771 2728 Total Spend -873 -542 -675 -557 -765 -694 -576 -826 -1076 -1250 -1254 -1311 Current Tax Liability -41 35 -310 -504 -439 -1091 -360 -599 -1235 -1097 -880 Cumulative Rev less Spend less Tax Liability -641 -677 -388 -94 102 419 853 1034 908 -342 78 616 -2,000 -1,500 -1,000 -500 - 500 1,000 1,500 2,000 2,500 3,000 $million 10 REVENUE STREAM
  10. 10.  Apache North Sea Limited  Apache Projects  Traditional Project Management Approach  Traditional Project Management Performance  Mission Command  History  Principles  Implementation  Discussion & Questions 11 AGENDA
  11. 11. 12 Projects Group Manager Mark Richardson Topsides Kevin Duncan Subsea Paul Williams Project Services Richard Stark Construction Willie Ferguson Systems Kieran Marr Develops & FASP Neil Rogerson THE PROJECTS TEAM
  12. 12. 13 THE DELIVERY PROCESS identity process and control quick reference stage summaries How to... CP1 CP2 CP3 CP4 CP5 CP6 PROJECTS DELIVERY MANUAL 100 - General philosophy and approach 200 - Broader Project Management Topics 300 - Specific methods and tools
  13. 13.  FASP topsides installed - Hook up and commissioning now 99% complete.  Forties Charlie Deep Gas Lift - Commissioned and two wells brought on line.  Beryl's Subsea Campaign - Reinstating shut-in subsea production from S66/S64 plus N10 and S59, correcting integrity faults, laying a new pipeline and installing a new Skene umbilical. FASP FC Deep Gas Lift Compressor Skene Subsea Umbilical Replacement 2013 PROJECTS
  14. 14.  Aviat Fuel Gas Tie-back - FEED completed.  Nevis Ness - Concept select phase completed.  Bacchus - Third well hooked up and commissioned.  Tonto Field – New field brought on through Forties.  Forties Delta Controls System ‘Delta V’ upgrade - Complete with wells now being cut over.  Beryl Alpha Rig 2 Reinstatement Project - Completed and now drilling. Bacchus Third Well Tie-in Delta V Equipment Room Reactivated Drilling Rig Ness Nevis Tie-back Aviat Schematic 2013 PROJECTS
  15. 15.  Apache North Sea Limited  Apache Projects  Traditional Project Management Approach  Traditional Project Management Performance  Mission Command  History  Principles  Implementation  Discussion & Questions 16 AGENDA
  16. 16. 17  Definition Project management is the application of processes, methods, knowledge, skills and experience to achieve the project objectives.  General A project is a unique, transient endeavour, undertaken to achieve planned objectives, which could be defined in terms of outputs, outcomes or benefits. A project is usually deemed to be a success if it achieves the objectives according to their acceptance criteria, within an agreed timescale and budget. 171717 Source 1 : http://www.apm.org.uk/WhatIsPM Source 2: http://projectjedi.wordpress.com/2012/04/30/a-brief-history-of-project-management/ TRADITIONAL PROJECT MANAGEMENT
  17. 17. STAGE GATE PROCESS Defer, Delay or Do Nothing
  18. 18. 19 RISK MANAGEMENT Probability Cost/Time P50 Flyvbjerg – Optimism Bias EstimateVariance Time 4.0 X 0.25 X 1.0 X McConnell - Uncertainty People, not Process Deliver Projects
  19. 19.  Apache North Sea Limited  Apache Projects  Traditional Project Management Approach  Traditional Project Management Performance  Mission Command  History  Principles  Implementation  Discussion & Questions 20 AGENDA
  20. 20. 21 Source: KPMG 2013 PROJECT MANAGEMENT SURVEY REPORT  There has been a significant increase in project activity in the past two years across all sectors of the economy.  However failure rates are increasing – with survey results showing that only one-third of projects are delivering the desired outcome. 2010 2012 Consistently on Budget 48% 33% Consistently on Time 36% 29% Consistently Delivering Stated Deliverables 59% 35% KPMG 2012 SURVEY OF PM PRACTICES IN NEW ZEALAND
  21. 21. 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% > $5bn < $5bn 2011 E&P Projects with >50% Budget Overruns 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 1997 2005 2011 % of E&P Projects with >50% Budget Overruns ◤ Capital spend has tripled in the past 10 years to reach $500-600 bn. ◤ Oil and gas projects failed to meet their original objectives in 78% of cases. ◤ 60% of the failures suffered severe operability problems 2 years after they entered production. 2222 Source: SBC Capital Projects Survey 2012 SBC 2012 GLOBAL OIL AND GAS PROJECT PERFOMANCE
  22. 22. 23 US $BN Endeavour* TAAS-YURYAKH* Medco* NLNG*** Centrica* GDFSuez* Maersk* Ecopetrol* OMV PTTEP* Suncor* Lukoil** Woodside* Petronas* Talisman Anadarko Hess Devon BGGroup Apache ConocoPhillips BP Statoil Shell Chevron Legend Major NOC Independent Mega developers (average > $4bn) Large developers (average < $4bn) 2323 Source : Company 10-K & 20-F, Rystad, SBC Capital Projects Survey 2013 Note: * from Rystad **Global development cost expenditure was used for Lukoil *** 2012 value only SBC 2013 SURVEY PARTICIPANTS
  23. 23. 24 Source: IHS Upstream database; US PPI Index – Only projects exceeding $1bn (in 2011 US$) were considered, representing an average of 14 projects per year PROJECT DELAYS AND SEVERITY OF DELAY 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2003200220012000 Yearsofdelay %oftotalprojectsdelayed 201220112010200920082007200620052004 Average delay 2 to 5 years More than 5 years 1 to 2 years
  24. 24. 25 Disappointing performance COST ESCALATION SCHEDULE SLIPPAGE LIFECYCLE VALUE 13% 38% 50% >40% 18% 20 - 40% 14% 10 - 20% 14% 5 - 10% 9% 0 - 5% 46% >40% 17% 20 - 40% 26% 10 - 20% 17% 5 - 10% 7% 0 - 5% 33% Projects capture largest proportion of life cycle value Significant value left in various forms A non-negligible part of long-term value not captured Source: SBC Capital Projects Survey 2013 2013 OIL AND GAS GLOBAL PROJECT PERFORMANCE
  25. 25. 26 Central project management function Formal stage-gate review process 92% 80% 5-10 years ago>10 years ago <5 years ago Source: SBC Capital Projects Survey 2013 STAGE GATE PROCESS AND CENTRALISED PROJECTS
  26. 26. 27 8% 8% 6% GovernanceSupply chain 20% 28% 30% People & organisation . Safety & environment  Technical & economic challenges  External stakeholders  Talent availability  Training/development  Skill pool management  Availability & quality of critical equipment and engineering services  Contracting & procurement approach  Decision-making  Expectations and targets  Risk management / assurance  Framing and FEL Source: SBC Capital Projects Survey 2013 2013 PROJECT CHALLENGES Complexity
  27. 27.  Apache North Sea Limited  Apache Projects  Traditional Project Management Approach  Traditional Project Management Performance  Mission Command  History  Principles  Implementation  Discussion & Questions 28 AGENDA
  28. 28. 5/15/2014 29APA BLUE WHITE MISSION COMMAND
  29. 29. WHAT IS MISSION COMMAND? Mission command is a command approach that is based upon the exercise of local initiative within the framework of command intent. This is enabled by an appropriate delegation of authority that allows subordinate commanders the latitude to plan and conduct operations based upon their understanding of the local situation
  30. 30. MISSION COMMAND HISTORY  Carl von Clausewitz - ‘On War’ (published posthumously 1832)  Field Marshal Von Moltke - Father of ‘Auftragstaktik.’ “Obedience is a principle, but the man stands above the principle.”  Auftragstaktik - Senior commanders should not order more than was absolutely necessary but should ensure the goal was clear. In case of doubt, subordinate commanders should seize the initiative  1986 - Field Marshal Bagnall KCB GCB CVO MC* - Introduces principles of Auftragstaktik to UK Military doctrine and influences NATO doctrine. Doctrine becomes known as ‘Mission Command.’ and is adopted by US Military  Successfully deployed in all operations since 1986
  31. 31. British Army’s Field Publication, Volume 2, Mission Command: ‘The Army's philosophy of command is described in British Military Doctrine and has three enduring tenets: timely decision making, the importance of understanding a superior commander's intention, and, by applying this to one's own actions, a clear responsibility to fulfil that intention. The underlying requirement is the fundamental responsibility to act (or, in certain circumstances, to decide not to act) within the framework of the commander's intentions. Together, this requires a style of command, which promotes decentralised command, freedom and speed of action, and initiative.’ BRITISH MILITARY MISSION COMMAND
  32. 32. 33 US Forces Mission Command Principles:  Build cohesive teams through mutual trust  Create shared understanding  Provide a clear commander’s intent  Exercise disciplined initiative  Use mission orders  Accept prudent risk MISSION COMMAND PHILOSOPOHY British Military Tenets:  Timely decision making  Understanding the senior leader’s intent  Responsibility to fulfil that intent Leadership Requirements:  Decentralised decision making (formal delegation/empowerment)  Freedom (and speed) of action  Initiative
  33. 33. HOW DOES MISSION COMMAND DIFFER? Mission Command Detailed Command Probabilistic Assumes War/Project is Deterministic Unpredictable Predicable Disorder Accepts Order Uncertainty Certainty Decentralisation Leads to Centralisation Spontaneity Coercion Informality Formality Loose Rein Tight Rein Self-Discipline Imposed Discipline Initiative Obedience Cooperation Compliance Acceptable Decisions Faster Optimal Decisions but Later Ability at all Levels Ability Focused at the Top Implicit Communication used Explicit Vertical and Horizontal Vertical Interactive Linear Organic Organisation type Hierarchic Ad Hoc Bureaucratic Delegating Leadership Styles Directing Transformational Transactional Art of Delivery Appropriate for Science of Delivery Conduct of Operations Technical and Procedural Tasks
  34. 34.  The Commander retains ultimate responsibility  Genuinely empowers their people  Trust is essential  Leadership at all Levels  Action in accordance with commander’s intent MISSION COMMAND IMPLEMENTATION
  35. 35. The Commander:  Briefs his intent to 2 levels down  Explains the limitations, e.g. time, boundaries, mission, tasks, resources  Allocates resources  States WHAT is to be achieved, not HOW it is to be achieved  Gives decision-making criteria The Subordinate Commander:  Understands role in commander’s plan 2 levels up  Devises his own plan in achieving the commander’s intent  Asks for more resources if needed, but offers back resources not needed  Briefs his subordinates 2 levels down MISSION COMMAND PROCESS
  36. 36. 37 COMMAND, CONTROL AND COMMUNICATION Source: http://www.fas.org/irp/doddir/army/adrp6_0.pdf Leadership Command Control Communication
  37. 37. 38 “… Never tell people how to do things, tell them what to do and they will surprise you with their ingenuity”  Sense of urgency  Devolved decision making  Best answers win  Respect, integrity and trust BEHAVIOURAL REQUIREMENTS  Leadership  Responsibility, accountability and authority
  38. 38. y = 102,948,194x-0.4120 R² = 0.5327 0 20,000,000 40,000,000 60,000,000 80,000,000 100,000,000 120,000,000 0 5 10 15 20 25 CostperMaximumNumberofWellConnections(USD) Maximum Number of Well Connections Non-Deepwater Subsea Tiebacks Cost per Well (subsea only projects) Eng, Mat, Inst North Sea Asia/Australia Africa ss_only Precision Range +/- ss_only Trend Some points on this chart may be obscured by others with near-identical values. Outlier with y > 120,000,000 is not shown. Bacchus Project 4 Wells BACCHUS BENCHMARKING
  39. 39. 40 FASP $54,865/Tonne FASP 4.8% FASP AWARD WINNING EFFICIENCY
  40. 40. ‘It Works in Practice, but does it Work Theory’ 41
  41. 41.  Apache North Sea Limited  Apache Projects  Traditional Project Management Approach  Traditional Project Management Performance  Mission Command History Principles Implementation  Discussion & Questions 42 AGENDA
  42. 42. 43 PROJECTSd e l i v e r y a t p a c e Recommended Reading:  ADRP 6.0 Mission Command (www.fas.org/irp/doddir/army/adrp6_0.pdf)  British Army Doctrine (https://www.gov.uk/government/uploads/.../ADPOperationsDec10.pdf)  Transforming Command: The Pursuit of Mission Command in the U.S., British and Israeli Armies (http://www.amazon.co.uk/Transforming-Command- Pursuit-Mission-British/dp/0804772037)

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