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Think tanks
Ali Ashtiani, Frank Robinson and Barbara Weber, CB&I, USA, use a
recently completed project in Papua New Guinea to highlight
key considerations when executing a large engineering,
procurement and construction project in refinery tanking.

apua New Guinea (PNG) occupies the eastern portion To capture opportunities for exporting oil not consumed in

P of the island of New Guinea, which is the second

largest island in the world. New Guinea is one of the
islands in a string of islands that make up the region known
as Oceania, located east of Indonesia and north of Australia.
With its mountainous terrain, coastal lowlands, and tropical
climate, PNG is located in one of the more logistically remote
areas of the world.
During the previous two decades, PNGs growth in GDP
was outpaced by population growth, causing the countrys
economy to struggle. Energy consumption increased 54%
from 1980 to 1998, but energy production (mostly oil)
increased more than 5000% during the same period. Oil pro-
duction in PNG has continued to increase and reached
67 500 bpd in 2001. At that time, the country was consuming
approximately 15 000 bpd of oil1. With approximately
345.2 million bbls of proved oil reserves, the country was well
positioned to strengthen its economy by exporting its excess
production. However, one thing the country did not have was
an oil refinery.
the country and to increase the marketability of the oil prod-
ucts, PNGs government approved the construction of a
32 500 bpd nameplate capacity refinery near the capital city
of Port Moresby, a refinery that would become the first in the
country. The project, which was initiated in the Autumn of
2002, included 28 storage tanks and one butane sphere to
store the various oil products extracted in the refinery. CB&I,
an international engineering, procurement and construction
(EPC) company, was asked to build these tanks on a lump-
sum turnkey basis (Figure 1).
CB&I has had a continuing presence in Papua New
Guinea since the 1980s. These previous experiences greatly
contributed to CB&Is ability to hire skilled workers quickly,
ensure on time delivery of all materials needed and, despite
a tight schedule, complete the project four weeks ahead of
schedule in October 2003.
Engineering: designing the project
The new refinerys 28 tanks were designed to store products
such as crude oil, unleaded gasoline, naphtha, jet fuel,
kerosene, and diesel. The CB&I Dubai office, responsible for
designing all the tanks, had to take into account each product
stored when designing the separate storage tanks, beginning
first and foremost with the need to maximise safety and
minimise environmental risks. Other critical influences
include product conditions, such as temperature,
vapour pressure and viscosity, as well as
weather and site-specific

Figure 1.
Construction of
storage tanks in
Papua New
Guinea.

Reprinted from HYDROCARBON ENGINEERING SEPTEMBER 2004

57-62 2/9/04 9:09 Page 58
conditions. Since the area is seismically active, the tank
designs were based on the requirements for building struc-
tures that might experience an earthquake of the magnitude
and duration that could occur at a Zone 4 site.
The type of roof used on petroleum storage tanks pre-
sents another important design consideration. Tanks at
refineries are generally fixed roof tanks, external floating roof
tanks and internal floating roof tanks (Figure 2).
If vapour pressure is less than 1.5 psia, open top tanks or
fixed-roof tanks work well. Fixed-roof tanks greatly reduce the
Figure 2. Fixed roof tank, external floating roof
tank and an internal floating roof tank.
Figure 3. Large diameter floating roof tank.
Reprinted from HYDROCARBON ENGINEERING SEPTEMBER 2004
risk of fire and limit the amount of vapour that evapourates,
when compared with open top tanks.
However, if the vapour pressure is higher than 1.5 psia,
the space between the product and the roof exposes the liq-
uid to high evapourative losses. Additionally, the probability of
a combustible gas mixture increases for certain volatile petro-
leum products. For this reason, products that have a vapour
pressure higher than 1.5 psia generally use a floating roof
design (Figure 3).
The design of the tank also affects its operational costs
and future maintenance costs. For example, if a floating roof
design is used, the mechanical stability of the floating roof is
critical. The floating roof must remain balanced to prevent it
from tilting or sinking.
For volatile products, such as gasoline, pressure is
applied to limit the evapouration of the product. Low pressure
tanks designed for pressures up to 15 psig can be used for
these products. For highly volatile products that require a
design pressure greater than 15 psig, such as butane, the
storage tank is designed as a spherical pressure vessel (see
sphere in foreground of Figure 4).
Procurement: ensuring on time
deliveries
Securing the materials to build 28 storage tanks in a region as
remote as Papua New Guinea can provide logistical chal-
lenges for the most seasoned EPC contractor. Virtually all the
material needed for the project had to be obtained and
shipped from outside the country. The project team had to
locate the best source for purchasing each item needed to
build the tanks and then determine the most cost-effective
means of getting the material to the location in time to meet
the construction schedule. The team decided the best way to
handle these logistics was to divide the task into three sepa-
rate procurement activities, one of which was focused on
procuring the steel needed to build the tanks. This activity was
handled out of the CB&Is Dubai office.
Approximately 5000 mt of steel was required to erect the
57-62 2/9/04 9:09 Page 59
Figure 4. Construction of butane sphere (foreground).
tanks and the sphere. To get the best price on this quantity,
the steel was ordered all at once. CB&I worked directly with
the steel company to secure the required amount of plate
steel and ensure the timely delivery of the shipments. Any
delay on receiving these shipments would directly impact the
teams ability to complete the project on schedule. Although
ordered in bulk, the steel was shipped to two separate loca-
tions: the steel for the tank bottom, roof and thinner shell
plates was shipped directly to Port Moresby, while the thicker
steel plates for the tanks and the sphere were shipped to the
port of Cigading and delivered to the nearby shop in neigh-
bouring Indonesia, where the pre-fabrication work was being
handled.
When the shipment of steel arrived in Port Moresby, the
project team faced yet another challenge.
The ship, which carried 3500 mt of steel, had
to be unloaded. Port Moresby had never
received a shipment that large and did not
have the necessary resources to unload it.
The project team provided additional person-
nel to help unload the material, which took a
full week to complete. During that week, the
ship had to leave and then return to port sev-
eral times to allow other vessels to enter,
unload their cargoes and depart on schedule.
This was one of many occasions that the pro-
ject team had to find a resourceful solution to
a bottleneck that threatened to delay the pro-
ject.
Other material purchases were divided
between CB&Is Jakarta and Perth offices.
Since most of the pre-fabrication work was
being handled in Cilegon, items needed for
pre-fabrication work, such as flanges and
small pipes, were ordered through the
Jakarta office. The remaining gaskets, bolts,
valves, etc. were ordered in Perth and
shipped directly to Port Moresby. Each office
Reprinted from HYDROCARBON ENGINEERING SEPTEMBER 2004
that handled the procurement also handled the necessary
shipping arrangements, while customs and ground trans-
portation logistics were handled locally by the project team.
Delays and associated demurrage charges often occur
when companies try to import materials into countries in
Southeast Asia without proper management of the shipping
documentation. To meet aggressive project schedules, con-
tractors must be familiar with all custom requirements and be
adept at handling the required documentation. The project
team for the Papua New Guinea refinery tanks paid careful
attention to these details and were able to import all of the
needed materials without encountering any delays or addi-
tional charges.
Construction: hiring crews
When a contracting company is awarded a project in a coun-
try other than their home country, the company has three
options for hiring the needed crews. They can subcontract the
work, they can relocate crews from other regions, or they
can directly hire local workers. There are advantages and
disadvantages to each of these options, including the
expense incurred in relocating crews, the loss of control
experienced in subcontracting and the risk associated with
direct hire. As they evaluate these options, contractors
must determine the option that works best for the current
project and with the companys organisational structure.
CB&I elected to perform the project using a mixture of
international and locally hired employees. Because of their
previous experience, CB&I had the ability to re-hire indi-
viduals that worked for the company on earlier projects
and who already knew and understood the companys
work processes and safety culture. In PNG, both the hiring
and the training of the local crews were expedited because
of the companys experience in the region.
Only 48 hours after the arrival of CB&I in the country,
news had circulated throughout the local community that
CB&I was back. Word-of-mouth and minimal radio
announcements replaced the need for a formal recruiting
program. Experienced local craftsmen who had worked on
previous projects for the company showed up at the site,
ready to work on the new project. Others heard about the
project and also arrived seeking an opportunity to secure
one of the positions. To meet the tight schedule require-
ments, project management knew they needed to hire indi-
Papua New Guinea (PNG)
occupies the Eastern portion of the
island of New Guinea, the second
largest island in the world.
57-62 2/9/04 9:09 Page 60
viduals who were focused, committed, and willing to work
hard. One of the project conditions was the requirement to
hire locals from the villages surrounding Port Moresby,
where unemployment is high. Candidate names were sup-
plied and individuals were interviewed about their past
experiences and skills. As a result, approximately 25% of
the crew was hired from the local area. The majority of the
other crewmembers were from nearby Philippines and
Australia.
Just as time was saved in the recruiting process
because of CB&Is previous experience in the country, even
more time was saved in the training program. While some
crew members were new to CB&I and the task at hand,
most were experienced. Many had worked on previous
CB&I projects, they had been trained by CB&I, they were
comfortable with the work environment and culture and
they had the necessary skill sets to get the job done with lit-
tle refresher training. Formal safety training was provided
for all crewmembers, but all other training was provided on
the job and the project was able to commence without
delay. Experienced craftsmen mentored and coached their
novice counterparts and veteran superintendents were
able to move the project schedule along even as new
recruits were building the necessary skill sets.
The training was supplemented by the energy and
resourcefulness of the crew. When the project team faced
potential project delays and bottlenecks in the construc-
tion process, similar to those faced during the procure-
ment process, they were able to respond with quick and
agile solutions. One potential bottleneck was created by
the amount of pre-fabrication work required for the pro-
ject. To keep the project on schedule, the team created its
own fabrication shop on site to handle the overflow. The
plan worked well and the potential bottleneck was elimi-
Reprinted from HYDROCARBON ENGINEERING SEPTEMBER 2004
nated.
During the construction process, the work flowed
smoothly among the crews. The experience, cohesion,
and versatility of the crews enabled the management team
to be flexible in their assignments. For example, the
mechanical crew became the painting crew once the erec-
tion process was completed. By keeping many of the same
individuals and rotating them to different assignments, the
work proceeded faster and training time was minimised.
The crewmembers were already familiar with each other,
they were knowledgeable about the project and the sur-
rounding area, and they had sufficient skills and training to
adapt easily from one assignment to the next. In fact, this
recruiting and training program worked so well that the
team was able to beat the project schedule and do so with-
out incurring a single recordable injury.
Conclusion
The 28 storage tanks and sphere for Papua New Guineas
first refinery were built on a tight 10 month schedule. CB&Is
ability to complete the project four weeks ahead of that
schedule provides an excellent example of the benefits that
can be realised by using the EPC model to synchronise all
the components of large or complex projects in remote loca-
tions. By effectively training local labour, reducing hand-offs
and eliminating redundancies, EPC companies that have
developed the internal processes and systems to effectively
manage these projects real time can deliver cost effective
solutions for their customers.
References
1. Asian Pacific Economic Cooperation (APEC): Energy Issues and
Trends, Papua New Guinea, November 2002.________________