Project Risk Mgt at Linde Engineering. ECRI Sponsors Meeting - PowerPoint PPT Presentation

Project Risk Mgt at Linde Engineering. ECRI Sponsors Meeting London, June 2018 Andreas Soellner

What is our business ? 2

Financial highlights by division Operating margin increased in both divisions 3

Integrated Gases and Engineering model Synergies built on strong engineering foundation 4

Linde Engineering Core competence is the treatment of gases Hydrogen Oxygen Air Liquefaction Rare gases Hydrocarbons Nitrogen Separation Natural gas Carbon monoxide Tail gases Carbon dioxide Thermal Cracking Exhaust fumes Synthesis gas Olefins Components Standardised plants EPC plants Services 5

Engineering Division 2017 order intake by plant type 6

Linde Engineering Operations and sales offices St. Petersburg Moscow Aldershot Samara Dresden Pullach/Schalchen Hésingue Pfungen Blue Bell Dalian Tulsa Seoul Tehran Holly Springs Hangzhou Abu Dhabi Vadodara Houston Al-Chubar Kolkata Kuala Lumpur Major operating entities Pulogadung, Jakarta Entity Location Employees as Comments of 10/2017 Total LE 6,167 Johannesburg LEHQ Pullach/Germany 1,855 Engineering Schalchen/Germany 774 Manufacturing LEDD Dresden/Germany 426 Engineering Engineering operations LENA USA 484 Engineering Representative & sales offices LEH Hangzhou/China 227 Engineering LED Dalian/China 419 Manufacturing LEI India 987 Engineering 7

Air Separation Plants Product portfolio — Modular air separation plants, standardised and pre-fabricated — Customised air separation units, individually designed to meet customer-specific demands Key features — 3,000 plants built in 80 countries, thereof 400 plants owned & operated by Linde Gases — Highly energy efficient plants — High safety and quality standards — Superior plant availability and low life-cycle cost 8

Hydrogen & Synthesis Gas Plants Product portfolio — Production of hydrogen, CO, CO 2 , synthesis gas, ammonia and methanol from any hydrocarbon feedstock — Syngas processing plants (gas separation and purification) Key features — 500 plants built worldwide, more than 100 plants operated by Linde Gases — Entire process chain for small, medium and large scale production and treatment of synthesis gas and H 2 /CO — Utilisation of all petrochemical feedstock, from natural gas through heavy oil to coal — Highly efficient process (e.g. ammonia) 9

Petrochemical Plants Product portfolio — Steam cracking: cracking furnaces and olefins separation/purification — Refinery and steam cracking integration — Acetylene, butadiene and aromatics (BTX) recovery — Olefins: Oxidative Coupling of Methane (OCM) — Polyolefins (polyethylene & polypropylene) — Linear Alpha Olefins — Complex revamp — Technical services for operation petrochemicals plants Key features — Comprehensive portfolio for olefin production and derivatives — Linde olefins technology recognised as leading — Excellent market position and key references — New products/technology development 10

Natural Gas Plants Product portfolio — Natural gas processing — Liquefaction of natural gas — Liquefied Natural Gas (LNG) regasification terminals and bunkering — LNG satellite stations (Cryostar) — On-board re-liquefaction of natural gas (Cryostar) Key features — Leading in the area of small- to midscale LNG plants — Covering the full LNG value chain — Manufacturer of cryogenic key equipment 11

Enterprise Risk Management – Project Risk Management CORPORATE RISK MANAGEMENT Linde Gas Linde Engineering Linde Group, Corporate Centre Region 1 Region 2 ENTERPRISE RISK MANAGEMENT technology financial IT risks risks risks LE, within Finance HR market project risks risks risks PROJECT RISK MANAGEMENT technical commercial risk management project responsibility by Project Manager (HAZOP, safety reviews, risk management SIL, … ) supported by Project Risk Manager proposal 1 project 1 project 2 project ... 12

8 Objectives of Commercial Project Risk Management • management of the risk assessment process • ensure the availability of suitable reporting tools • provide risk management support for risk owners across LE • facilitation/coordination/reporting of risk assessments • monitor and ensure progress on follow-up actions identified in the project risk workshop (within responsibility of Sales / Project Manager) • oversight/review of risk assessments prepared by others (e.g. project managers) • provide risk and performance metrics • promote a risk aware culture and an appropriate risk balance within LE 13

Risk Management Method based on Project Criticality project size < 10 Mio. € ≥ 10 Mio. € ≥ 40 Mio. € ≥ 100 Mio. € ≥ 500 Mio. € project 0 1 2 3 4 criticality E, EP EPC method estimate simplified risk risk register register 14

Risk Management Process What’s new in our process ? risk monitoring 5 • standard reports • KPI‘s 1 risk planning • 5 RWS • participants of RWS • timing of RWS 4 risk handling • job sheets • follow up of mitigation measures 2 risk identification • standard risk register • focus on mitigation action • responsibility and due date risk analysis 3 • human factor • voting system 15

Risk Workshops per Risk Category • • standards & requirements HSE concept Engineering & Technology • • technical design concept commissioning & start-up concept • • LDs & make-good other technology & conceptual design • design of existing plant (revamps only) risks • • layout concept technology & conceptual design opportunities • contract concept • change order concept Contractual & Commercial • terms of contract • commercial & contractual opportunities • other contractual & commercial risks • cultural & heritage • social environment Project Environment • weather & climatic conditions • geological risks • economical & business environment • other environmental risks • political environment • project environment opportunities • project execution concept • time schedule Project Execution & • organization • other project execution risks Management • internal performance • project execution opportunities • external performance • (pre-) commissioning and test run • procurement • logistics Procurement & Logistics • inspection & expediting • procurement & logistics opportunities • construction concept • site installation & temp. facilities Construction • performance of construction • other construction risks • construction opportunities subcontractor(s) or partner(s) • brownfield risks 16

Participants of the Risk Workshop Project Manager Sales Project Manager Execution Project Risk Manager Estimator Project Control Manager Project Discipline Manager Experts Contract Manager Engineering Manager Construction Manager Procurement Manager * extendended number of participants wih criticality 4 17

The new Risk Register is at the core of the LE Project Risk activities Proposal phase Execution phase Mitigation Risk / Contingency Risk Contingency measures calculation update Workshops risk measur probabilit risk impact risk level date of risk ID risk title risk description applic management measure DRI due date e y (post observation "type " (post MM) (post MM) able status MM) - Cost has to be considered in Lightning warnings and heavy rain might estimate - A.B./GCP - 19.05.2017 302002Heavy rainfall and thunder lead to disruption during construction risk - Time has to be considered in ongoing Possible Moderate medium yes 27.04.17 - B.C./CPP - 30.05.2017 storms with wind gusts work and therefore to productivity loss factor schedule - C.D./CPCA - 30.09.2017 and delays during construction. - Include contract bad weather clause 0 – 0.02 Probability Impact not relevant Negligible Minor Moderate Serious Major 0.02 – 0.2 0 - 0,05 Mio € Negligible low Very 0 % - 5 % Very Unlikely Unlikely 1 15 150 1500 9000 0.2 – 1 0,05 - 0,5 Mio € Minor medium 5 % - 15 % Unlikely Unlikely 5 50 500 5000 30000 1 – 5.5 high 0,5 - 5 Mio € Moderate 15 % - 25 % Possible Possible 10 100 1000 10000 60000 5.5 – 40 very high 5 - 50 Mio € Serious 25 % - 50 % Likely Likely 20 200 2000 20000 120000 extreme > 40 > 50 Mio € Major 50 % - 80 % Probable Probable 30 300 3000 30000 200000 Risk level mEuro Semi-quantitative expert assessment of Risk mapping matrix remaining risk after successful mitigation 18

Risk Workshop approach Decision Making Voting Tool: • an anonymous voting system makes participants independent from others in decision making • differences in risk view become easier visible (in case of high variances) • input optional, no obligation to vote when no profound judgement possible 19