It is challenging to implement major industrial or research projects. Projects are both capital intensive and technically demanding, while also involving substantial risks to health, safety and the environment. Like many other large companies Elkem has therefore developed its own control system for industrial projects. This covers both new developments (Greenfield) and redevelopments (Brownfield).
When evaluating the profitability of a project, two key considerations must be made:
- What capital costs and operating costs will the project require?
- How will the markets for factor input and end products develop?
Additionally, there are mandatory permits and EHS conditions that are both afforded the highest priority for the entire service life of the project.
Desicion gate model
Elkem's model for industrial projects is a so-called "stage gate" process in which each phase has a beginning and an end and a separate budget, and we never move to the next phase before the project owner has determined that this will be done.
A development project is split into six phases as shown in the illustration above. Each phase has its own delivery with a project owner and a project manager. Within each of the six phases work will be implemented in accordance with a fixed template: Initiation, planning, implementation and completion. Each phase is completed with a decision as to whether or not to proceed.
The initial phase, the feasibility study, is very important. Here it will be determined whether the project has potential in line with Elkem's long-term strategy. It is not enough for the project to be promising if it does not fit with Elkem's strategic direction.
The feasibility study must consider the business concept and financing needs, an assessment of market conditions for products and factor input must be performed, the actual production process must be drafted and the basis for making a decision with regard to proceeding to a concept study must be prepared.
The concept study will take a closer look at the financial, market and technological directions determined in the feasibility study. The production process must be described and structural elements must be designed. For new developments the location will also be selected during this phase of the project. Assessments will also be performed in respect of EHS conditions and how the project can be implemented in practice. The study will form the basis for deciding whether to initiate a main study.
The main study will answer all relevant questions and detailed descriptions for the development and the implementation will be created. For larger projects the main study will be performed in consultation with one or more engineering companies. The accuracy requirements in the economic calculations must be narrowed down to -15/+25 percent for Greenfield investments and -10/+15 percent for Brownfield investments.
The accuracy requirements in the economic calculations are based on definitions from AACE (Association for the Advancement of Cost Engineering) and will increase for each of the six phases as the project progresses.
Before and during construction of the new development it is important to establish dialogue with all affected parties. During the construction period contractors and others with varying experience of work in process plants will be employed. EHS contingency and monitoring are therefore crucial during this phase and must be implemented in accordance with Elkem's standard requirements. The project management must conduct ongoing deviation control during the construction phase.
When the development has been constructed it must be tested before it is formally taken over by the project owner. This is often a phase involving a gradual transition to full production.
Training and measuring results
It is crucial that everyone contributing to a project is familiar with Elkem's methodology for project control, understands what all the terms mean and applies them in the same way. Elkem therefore arranges several training courses each year, in which participants gain qualifications for work at various levels and for various aspects of the development projects.
Elkem observes very large utility value from having a common project model for all large industrial projects within the company. Elkem's methodology for project control is one of the main reasons why Elkem's projects are very often implemented within budget, in accordance with the schedule, with the correct quality and with excellent EHS results.