Interface management development strategy to improve time performance in the existing oil and gas production modification project on the natuna block

Darussalam, Muhammad; Rarasati, Ayomi Dita; Ichsan, Mohammad Article Interface management development strategy to improve time performance in the existing oil and gas production modification project on the natuna block Global Business & Finance Review (GBFR) Provided in Cooperation with: People & Global Business Association (P&GBA), Seoul Suggested Citation: Darussalam, Muhammad; Rarasati, Ayomi Dita; Ichsan, Mohammad (2024) : Interface management development strategy to improve time performance in the existing oil and gas production modification project on the natuna block, Global Business & Finance Review (GBFR), ISSN 2384-1648, People & Global Business Association (P&GBA), Seoul, Vol. 29, Iss. 6, pp. 98-113, https://doi.org/10.17549/gbfr.2024.29.6.98 This Version is available at: https://hdl.handle.net/10419/306016 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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Introduction Oil and gas industry projects are complex and multidisciplinary infrastructure projects, usually defined as the construction of offshore oil and gas production facilities. Several oil and gas project are already in Received: Nov. 8, 2023; Revised: Dec. 8, 2023; Accepted: Jan. 6, 2024 † Corresponding author: Mohammad Ichsan E-mail: [email protected] operation. The development is a modification of the existing installation to increase production in the field. The Government of Republic of Indonesia is trying to increase production needs to fill the gap in domestic oil and gas demand. It leads to pushing the target of field development projects so that they are available on time. The head of the Working Group on Upstream Oil and Gas Trade (SKK Migas), Amien Sunaryadi, said that there are fifty upstream oil and gas projects (oil and gas) to start production in the next few years GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 6 (JULY 2024), 98-113 pISSN 1088-6931 / eISSN 2384-1648∣Https://doi.org/10.17549/gbfr.2024.29.6.98 ⓒ 2024 People and Global Business Association GLOBAL BUSINESS & FINANCE REVIEW www.gbfrjournal.org for financial sustainability and people-centered global business1) Interface Management Development Strategy to Improve Time Performance in The Existing Oil and Gas Production Modification Project on the Natuna Block Muhammad Darussalama, Ayomi Dita Rarasatia, Mohammad Ichsanb† aDepartment of Civil Engineering, University of Indonesia, Depok, Indonesia bManagement Program, BINUS Business School, Bina Nusantara University, Jakarta, Indonesia A B S T R A C T Purpose: Interface management is an effort to overcome interface problems considering that projects in the oil and gas industry are mega projects that involve many parties. This study aims to develop an interface management strategy by identifying interface problems and looking for which interface problems affect time performance on the existing oil and gas field development project in the Natuna Block. Design/methodology/approach: This research is divided into 4 stages, where the first is archive analysis and continued with expert validation, the third is a pilot survey & questionnaire of respondents, and the last is an expert validation. Factor analysis was carried out after expert validation, then validity and reliability tests were carried out with the help of SPSS software. Findings: There are 38 interface problems with nine categories namely, participants, methods/processes, practices, resources, management, information, environment, laws and regulations as well as bids and contracts. Research limitations/implications: This study has limitations in a specific project in specific area with certain product and a context of time/schedule performance. Originality/value: The results of the data analysis will be used to develop a strategy for the development of interface management for the existing oil and gas field modification project in the Natuna Block. Keywords: Problem factors for interface management, Interface management, Time performance, Existing oil and gas field optimization project, Natuna Block ⓒ Copyright: The Author(s). This is an Open Access journal distributed under the terms of the Creative Commons Attribution Non-Commercial License (https://creativecommons.org/licenses/by-nc/4.0/) which permits unrestricted non-commercial use, distribution , and reproduction in any medium, provided the original work is properly cited. Muhammad Darussalam, Ayomi Dita Rarasati, Mohammad Ichsan 99 2018-2027 (Wicaksono, 2018). However, in the last 2 years (2019-2020), 8 of 17 oil and gas development projects have been delayed from the predetermined onstream program. This phenomenon deserves special attention. Table 1 shows the phenomenon of oil and gas projects experiencing delays. The delayed schedule for these projects was due to a lack of coordination between related parties, such as platform delays, administrative issues, lack of buyers, material delays and others. Interface management is an attempt to overcome the problem of lack of coordination between the parties, given that projects in the oil and gas industry are mega-projects involving many parties. Natuna is one of the national's oil and gas block area that is watched by the government immensely close. This block has been developed and modified by several projects to achieve goal productivity. Interfacing beetween parties in this area is more complex. So, Interface Management (IM) is implemented in this bussiness process. According to Shokri, the Interface Management System (IMS) is defined as a systematic approach to the efficient identification and management of interfaces (especially critical ones) throughout the project life cycle, to facilitate the alignment process between the parties. interested in defining the features of the interface, the responsibilities of the parties involved and the time required for things to be transmitted (Shokri et al., 2012). The IMS framework will be executed through five main steps: 1. Identification: Initial step to identify possible interfaces among stakeholders in the project. 2. Documentation: Interface information is collected and registered. This information should inform interface characteristics, stakeholder involved, deadlines, required documents, etc. This step of this process is ongoing during the entire IMS. 3. Transfer/Issuance of packages: After contract has been awarded, all interfaces identified, and documented information are being transferred to the appropriate party. 4. Communication: Related stakeholder should communicate with each other due to issuance of the Interface Agreement to manage the issue effectively. All jurisdiction in this step will be managed by Interface Manager and involve all related stakeholders. 5. Closing: All stakeholders involved should agree to consider that the interface has been completed as per agreement on the accuracy, efficiency, completion of the information/tasks and the results submitted. Even if the formal IM has been achieved, the many parties are involved in the implementation of a project cause unexpected problems. Stakeholders, such as the operations team, the project team, the planning team, the procurement team, and external parties, both from the government and from the service companies involved in the project, can cause problems, as mentioned, lack of mutual trust, and inefficient communication can lead to hostility between the parties. If this happens, the project has the potential for delays, cost overruns, problem solving will be No Project Initial Target Final Target 1 Merakes Q4 2020 Q1 2021 2 Tangguh Train 3 Q3 2020 Q1 2021 3 Suban Compression Aug 2019 Oct 2019 4 Buntal-5 Nov 2019 Feb 2020 5 Bukit Tua Pashe-3 Nov 2019 Q2 2020 6 YY Jul 2019 Q4 2019 7 Ario-Damar-Sriwijaya Phase 2 Jun 2019 Sep 2019 8 Temelat Nov 2019 Des 2019 Table 1. Indonesian oil and gas projects that are experiencing delays GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 6 (JULY 2024), 98-113 100 difficult, legal proceedings and project quality cannot be achieved (Huang et al., 2008). Moreover, the problems in IM are explained that are as follows: insufficient contracts and specifications, financial problems, environmental problems and other things. Of course, it is very easy to understand that if the contract does not adequately explain and the expected specifications are not clear, then coordination problems will arise between the parties involved (Huang et al., 2008). There will be a different understanding of the content of the contract, so that the work will be limited and cause project delays. II. Literature Review A. Formal Management Interface Interface Management (IM) is defined as information management, coordination, and responsibility across physical, contractual, and organizational boundaries, which are referred to as interfaces (Nooteboom, 2004; Wideman, 2022). This point could be: 1. Physical - Physical interactions between components 2. Functional - Functional Requirements between systems 3. Contracts - Interactions between subcontractors/ suppliers 4. Organization - Exchange of information between disciplines 5. Knowledge - Exchange of general information between parties 6. Resources - Points of dependency between equipment, material, and labor suppliers Interface is formed in the process of interrelation and interaction between various organizations and stakeholders (Brown, 1983). Organizational interfaces are interrelationships between interdependent entities. Meanwhile, Project Management Office functions to manage multi projects and strategies, control and monitor project performance, develop project management competencies and methodologies, perform organization learning, and manage interface and bring value to the organization (Hobbs & Aubry, 2008; Ichsan et al., 2023). In 1967, the concept of IM was first introduced using a systems approach to analyze points of contact between relatively autonomous interacting organizations, and the corresponding inter-organizational issues and their application were described in aerospace and power generation projects (Wren, 1967). Define the following criteria to identify situations when IM is most useful (Morris, 1983): 1. The aims and objectives of an enterprise bring about the need for different groups to work closely together; 2. The environment is complex or rapidly changing; 3. This technology is uncertain or complex; 4. Companies change quickly; And 5. Companies are organizationally complex. Several studies emphasize that implementing IM at the early stages of a project will result in higher performance in terms of scope, cost, and schedule (Caglar & Connolly, 2007; Chen et al., 2007; Nooteboom, 2004). IMS is defined as a systematic approach to identify and effectively manage interfaces (especially critical ones) through the entire project life cycle, with the aim of facilitating the alignment process between stakeholders by defining the characteristics of the interfaces, the responsibilities of the parties involved, and the delivered time required for them (Shokri et al., 2012). The IMS Framework will be executed through five main steps: 1. Identification: This step includes identifying as many interfaces as possible in the project. 2. Documentation: Interface information is defined in this step. This information includes interface characteristics, parties involved, deadlines, required documents, etc. It should be mentioned that this step is an ongoing process throughout the entire IMS. Muhammad Darussalam, Ayomi Dita Rarasati, Mohammad Ichsan 101 3. Transfer/Issuance of packages: When the contract has been awarded, all interfaces identified and documented information is being transferred to the appropriate parties. 4. Communication: During this step, the parties will start communicating with each other through the issuance of an Interface Agreement, in order to manage the interface effectively. This step will be executed under the jurisdiction of the Interface Manager and involve all interacting parties. 5. Closing: The interface is considered complete if all parties involved agree on efficiency, accuracy, completion of information/tasks and results delivered. Several project in Natuna is the object of the researched national oil and gas company that has implemented the concept of this IMS. As in the first step, the company identifies the needs of the relevant stakeholders which are recorded in the interface register document where the document contains; 1. Originator: The party that issued the document. 2. Responding Party: The party that must respond to the document. 3. Issue issue date. 4. The area that becomes the interface issue. 5. Issue title. 6. Deliverable points. 7. Document state. 8. The target date of the document was responded to. B. Implementation of Interface Management in the Natuna Block Even though the formal IM has been carried out, the large number of parties involved in implementing a project causes unexpected problems to arise if the project is still not running. Parties involved such as the operations team, project team, planning team, procurement team and external parties both from the government side as well as from service companies involved in the project can cause problems as mentioned as follows: lack of good cooperation, limited mutual trust, and ineffective communication can lead to hostility between the parties. If this happens, the project has the potential to experience delays, cost overruns, problem resolution will be difficult, court proceedings and project quality will not be achieved (Huang et al., 2008). Furthermore, the problems in IM were explained as follows: insufficient contracts and specifications, financial problems, environmental problems and other things (Huang et al., 2008). Of course it is very easy to understand if the contract does not explain enough as well as the expected specifications are not clear, coordination problems will arise between the parties involved. There will be a different understanding of the contents of the contract, so that the work will be constrained and has the potential to cause project delays. One of the real challenges in increasing national oil and gas production is the condition of oil and gas wells that have passed the peak period and limited reserves. The development of old wells is carried out to maintain pressure in the reservoir so as to increase the production life of the well. Several developments have been carried out by modifying production facilities so that the pressure in the reservoir can be maintained and the production life of the reservoir increases. Based on Presidential Regulation 22 of 2017 concerning the National Energy General Plan, the government includes a program of activities to accelerate the completion of natural gas projects, one of which is the East Natuna Block. Currently, Hub Timur's oil and gas production continues to decline following the depletion of the reservoir in the last three years. To increase field production and recovery, it is necessary to reduce the suction pressure of the compression system at the North Belut Central Processing Platform (NB CPP). Reducing the suction pressure at North Belut CPP will be beneficial to increase recovery and extend the life of the North Belut well. By reducing the compression system on NB CPP, it is hoped that GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 6 (JULY 2024), 98-113 102 an increase in oil and gas production will be obtained. The project is targeted to be on-stream at the end of 2020 where the previous target was early 2021, so there is a need for acceleration in this project. The project is also one of the objects of this research. C. Effectiveness of Interface Management Implementation Effectiveness is a measurement to assess the achievement of predetermined goals (Handayaningrat, 2006). If the goals or objectives that have been previously set are successfully achieved, then it is said to be effective. Conversely, if the goals that have been previously set are not achieved or are not in accordance with the targets set, then it is said to be ineffective. The concept of effectiveness is also defined as a measure that gives an idea of how far the target can be achieved. This understanding of effectiveness is more output oriented while the problem of using input is less of a major concern. If efficiency is related to effectiveness, even though there is an increase in effectiveness it is not necessarily an increase in efficiency (Sedarmayanti, 2009). So, the measurement of the effectiveness of the IM implementation is based on the main objective of implementing the IM. Managing interfaces in the early stages of a project will result in higher performance in terms of scope, cost, and schedule (Caglar & Connolly, 2007; Chen et al., 2007; Nooteboom, 2004). Thus, the indicators to measure the effectiveness of IM implementation are seen from scope, cost performance and time performance. Research was conducted on the relationship between project complexity, IM implementation and the effectiveness of IM implementation (Ahn et al., 2017). The effectiveness of the implementation of IM is defined as the satisfaction of the respondents towards the implementation IM. Therefore, a subjective measure of the effectiveness of IM implementation, namely Respondent Satisfaction with IM, is used in this study. Models such as the "Subjective Rating" have been widely used as a surrogate measure of the actual effectiveness of a system or practice in an organization (Gatian, 1994; Pothukuchi et al., 2002). During the interview, respondents were asked to give their subjective rating of their current IM practices on a 5-point scale: "How satisfied are you with your current interface management implementation on the project?" (1 = very little; 2 = a little; 3 = somewhat; 4 = big; and 5 = very big). D. Interface Management Issues Many researchers have provided various approaches to investigate, identify, and classify interface problems in various types of projects. Many researchers have identified, reviewed, and reported on interface problems in various countries in various types of projects through comprehensive literature reviews, pilot studies, interviews with industry experts and questionnaires in various countries without applying statistical tools (Al-Hammad, 1990, 1993, 1995, 1996, 2000). A research study on Iran's oil mega refinery on ongoing projects to identify the main causes of interface problems and their effect (impact) on project completion through a questionnaire. Other researchers identified problem factor interfaces in different construction projects using qualitative and quantitative statistical approaches using two statistical tools such as factor analysis and multiple regression models (Mortaheb et al., 2010). Then in the mass rapid transit system (MRTS) development project, the factors that cause conflict IM by applying statistical tools in two stages (Huang et al., 2008; Ku et al., 2010). The first stage, literature review, pilot studies and face-to-face interviews with experts from the industry to identify interface problems. The second stage, developing a survey questionnaire. This approach is considered appropriate for this research because it combines qualitative and quantitative research methods. This increases confidence in getting results. Using either method could result in finding invisible variance that might otherwise Muhammad Darussalam, Ayomi Dita Rarasati, Mohammad Ichsan 103 have been overlooked through use of a single method (Hewage, 2007). Mixed methods research can provide stronger conclusions because the data is viewed from multiple perspectives (Pole, 2007). One method can provide a deeper understanding, a wider viewpoint and they confirm or complement each other. On the other hand, a multi-perspective approach was presented to investigate the causes of interface problems in various construction projects (residential construction, offshore construction, and commercial construction) by using the cause-and-effect diagram (C&E) method (Chen et al., 2008). C&E diagram was proposed by Kaoru Ishikawa in 1968. This method identifies and categorizes the level of implications of each problem cause by using a hierarchical prepared approach as: main causes, minor causes, and sub-factors. He categorizes interface management problems in 6 categories; participants, methods, resources, documentation, project and environmental management. In 2013, there was research that grouped problems in interface management into 6 categories with 47 problems identified from various previous studies. Where the categories are; management factors, information factors, contract & bid factors, legal & regulatory factors, technical factors & field issues as well as various other factors (Weshah et al., 2013). In this study, there were 38 problems selected. Then these problems will be grouped into 9 categories where these problems will be tested for their relevance to time through a questionnaire prepared to answer the first research question. 1. Participant The participants are actors of the construction project. Between individuals or organized parties, they carry out certain activities that are correlated, because the activities themselves depend on or are competitors or the components of the product or the subsystems that they produce. Interactions between different people / participants are inevitable and must be well coordinated to prevent various conflicts and underperformances of the project (Chen et al., 2008) and part of the interface problems caused by participants are as follows: 1. Lack of communication between parties 2. Lack of coordination between parties 3. Slow decision-making 4. Delays in requesting changes, permits, and sending design drawings and approvals 2. Method/Process The design process / method used will be different to meet customer requirements, to manage the adequacy of the technical solution and to plan and manage the design process. The chosen design method affects the interface not only in the design phase, but also in production, construction and operation and maintenance. Construction methods and processes are mainly specified in the design document through a certain degree of flexibility, which allows contractors to select familiar and/or economical construction methods and processes for their field of work. The construction method defines the interfaces that appear in the construction (Chen et al., 2008). For example, when arranging of pipes, the "flange to flange" method is preferred in the offshore area. The welding process of the pipe is carried out at workshop to reduce 'hot work' on field, so as to minimize the occurrence of accidents that lead to damage to the installations in the field due to the danger of a fire triangle element if the welding work is performed. Improper methods and processes that increase the number of interfaces make the management of the interface more difficult to control in the field and worsen the management of the interface itself. Some of the problems caused by the method / process in the management interface are the following: 1. Business processes that are not effective and efficient 2. Low design quality 3. There is no planning document for each process discipline 4. The method used is not in accordance with the needs GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 6 (JULY 2024), 98-113 104 3. Practice In mega-projects, a complicated construction process is one of the causes of construction and assembly problems. Thus, in practice, this process is often ignored. The quality of the interface is largely compromised when the quality of construction work is low. For example, improper application during welding causes the joints between the pipes to crack easily, so that when the hydrotest test is performed, it fails, so that reworking takes place. The different elements of the construction works if they do not comply with each other will be the cause of the low tolerance standards. In practice, many activities do not meet working standards, even if the plan documents have been completed. This will have problems with the quality of the results, resulting in a rework. Some IM issues in practice as reference (Chen et al., 2008), are as follows: 1. Ignoring construction and design on assembly and fabrication 2. Poor quality of construction work 3. Poor design of work order and handling methods 4. Resources Various resources are used to support the achievement of project objectives in the construction process. Traditionally, the resources for construction included labour, materials and equipment. In mega projects, the need for technology in terms of using software is also taken into account as one of the tools to facilitate communication with its users (Chen et al., 2008) and it also raised resource problems arising in IM are as follows: 1. Lack of worker skills 2. Delays in delivery and procurement of materials 3. Not well defined equipment used 4. Inadequate technology in the equipment used 5. Poor quality software in the equipment used or incompatible software 5. Management Management is the process of planning, organizing, executing, coordinating, monitoring, forecasting and exercising control (Wideman, 2022). The interface issues can appear in this area (Chen et al., 2008; Weshah et al., 2013), including the following: 1. There is no project coordinator 2. Inaccurate planning and scheduling estimates 3. Inaccurate cost estimates 4. Inaccurate estimate of material requirements 5. Inaccurate estimation of labor needs 6. Information Information includes all company data and document resources, which can consist of separate text, images, audio or numeric forms related to the project. Often interface problems arise with regard to information. Several previous researchers (Weshah et al., 2013; Zhang et al., 2022) include information as factor with several problems such as: 1. Inaccurate information 2. Obstruction of the circulation of information 3. Unclear reporting structure and responsibilities 7. Environment Environment defined as the broad setting of a construction project and the problem that affect the construction of the project directly but have nothing to do with the project itself (Chen et al., 2008; Zhang et al., 2022). The turbulency of environmental as the level of uncertainty and the highly variable events that occur in the environment where a particular industry operates are related to contingencies affect the dynamic capabilities significantly (Ichsan et al., 2023; Turulja & Bajgoric, 2019). It consists of not only weather and geological conditions of the jobsite, but also local regulations, building codes and trade union practices, materials and labor availability on the market, and cultural diversity of participants. But regarding local regulations will be put into another factor in this paper, this interface issue in this factor are: 1. The unavailability of resources in the surrounding environment Muhammad Darussalam, Ayomi Dita Rarasati, Mohammad Ichsan 105 2. Drastic changes in resource prices 3. Misunderstanding due to differences in culture, habits and behavior 4. Unforeseen conditions on the ground 5. Inaccurate weather forecast information 8. Laws & Regulations This factor consisted of the ability to translate laws and regulations in their application to the project. Often lack of experience in this area creates obstacles in the execution of a project (Huang et al., 2008; Weshah et al., 2013). Interface issue that arise in this factor are: 1. Lack of clear standard operating procedures of the company 2. Lack of experience with company codes 3. Lack of experience with applicable local laws, government regulations 4. Lack of experience with government audit protocols and procedures put in place 9. Bid & Contract Several previous researchers (Huang et al., 2008; Weshah et al., 2013; Zhang et al., 2022) grouped this factor consisted of interface problems concerning the "bid and contract" which appears in the invitation to bid and contract execution. While contract types are divided into fixed price and time & materials where a fixed price transfers risk to vendors of time & materials will likely be better defined and more successful than a fixed price project because the buyer has an incentive to control scope and costs (Krishnaswamy & Rathinasamy, 2015). Choosing a contract type strategy is very important because it can cause some interface problems 1. Vague contract details and poorly written contracts 2. The type of contract does not match the nature of the project 3. Lack of vision of a solid contract strategy early in the project phase 4. Lack of clear system requirements for completion 5. Lack of clear requirements in the RFP (request for proposal) documents from companies for bidders III. Research Methodology A. Variable Study & Expert Validation Table 2 shows as many as 38 problems were selected and grouped according to archive analysis and review of previous research literature that affect the effectiveness of IM implementation in terms of time (variable Y). The opinions of experts have an important role in this research, where their opinions are used as material for consideration and validation of research results. The criteria for experts in this research are those who have more than 20 years of experience on the Natuna Block offshore oil and gas project in the field of IM with a minimum of a bachelor's degree. There are 5 experts who validate these variables. Based on the results of expert validation, No Problem Interface Management Reference X.1 Participant (Chen et al., 2008) 1 Lack of communication between parties (Al-Hammad, 1993, 1995, 2000; Ayudhya, 2011; Choong, 2019; Huang et al., 2008; Ku et al., 2010; Yeganeh et al., 2019) 2 Lack of coordination between parties (Al-Hammad, 1993, 1995, 2000; Ayudhya, 2011; Choong, 2019; Huang et al., 2008; Ku et al., 2010; Yeganeh et al., 2019) 3 Slow decision-making (Al-Hammad, 2000; Ayudhya, 2011; Choong, 2019; Huang et al., 2008; Ku et al., 2010; Yeganeh et al., 2019) 4 Delays in requesting changes, permits, and sending design drawings and approvals (Al-Hammad, 1993, 1995, 2000; Ayudhya, 2011; Choong, 2019; Huang et al., 2008; Ku et al., 2010; Yeganeh et al., 2019) Table 2. Dimensions and indicators interface management issues as dependent variable GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 6 (JULY 2024), 98-113 112 the ball unfinished so there is a need for a clear management decision hierarchy and RAM/RACI. In managing interfaces to all stakeholders in all areas it is expected to minimize the impact of delays. From the procurement side, maintaining the material delivery schedule is also very important considering the domino effect on construction work which can cause delays. Then from the management point of view, in estimating needs, they must use appropriate techniques and calculation methods because the effect during procurement and difficulties in sending material to offshore areas is very high. VII. Suggestion a. 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