Analysis of Risk Management in the Gorgon Gas Expansion Project

This project delves into the risk management strategies employed in the Gorgon Gas Expansion project, a significant undertaking in Western Australia. It begins with a background of the project, highlighting its scale, location, and economic impact. The core of the project focuses on project risk management, including risk assessment, identification, and mitigation strategies. The analysis examines various risks, including environmental risks (seismic activity, gas venting, and pollution), individual risks (worker safety and health hazards), and geopolitical and legislative risks. The project explores how Chevron addresses these risks, including the use of quantitative risk assessment and safety protocols. The project also discusses the importance of integrating risk management into the overall project planning and execution to ensure the successful completion of the project. The case study provides an in-depth analysis of the project's risk management practices and their effectiveness in managing potential issues.

Project Risk Management

Table of Contents
Background of the project..........................................................................................................3
Project Risk Management..........................................................................................................6
Project Control system.............................................................................................................11
Critical evaluation....................................................................................................................12
Conclusion................................................................................................................................13
Bibliography.............................................................................................................................15

Background of the project
The project Gorgon Gas Expansion is heading forward to entre in its second stage of the
expansion. The location of this project is located 150 kilometres towards the western coast of
Australia. This project is being looked forward to create hundreds of employment
opportunities in the area. The Gorgon project is one of the important and largest gas projects
in the world. This is also one of the costliest projects which are expected to cost $69 billion.
This project has already provided employment opportunities to nearly 10000 people at the
time of the construction itself of the processing facility which was undertaken at Barrow
Island situated in the west of Karratha. This project has emphasised on employment
generation for local people as well as to accelerate growth and development in the country.
This project also aims to accelerate the growth of west Australia and bring it on track again.
This project has the ability to secure the future supply of gas in the country and will also
enhance future business opportunities in the Western Australia (Collard, 2018).
Image Source: (Collard, 2018).

The stage two is part of the original Gorgon Development Plan which aims to expand the
subsea gas network in order to maintain the long term supply of natural gas on the Barrow
Island. The second phase of the drilling is expected to start in a year and the completion may
take nearly four years according to the sources. Under this project seven new wells are
expected to be drilled which will be nearly thousands of metres below the sea level in the
field of Gorgon, whereas, four other drilling will be undertaken in the fields of Jansz-lo
which is further 44 miles out to the sea. It is also being said that through this process it is also
important to make investments in both the infrastructure as well as in the development of
local skills and capabilities. The benefits of this project are expected to reach to other
industries of Australia like the local project management, drilling, infrastructure, etc.
(Economic times, 2018).
Image Source: (MAREX, 2018).
The first production began in the year 2016 and hence it is expected to be completed in the
next four years that is by 2020. The third train of the expansion started its operations in the
last year. The project includes the operations of three trains that is 15.6 million ton per annum
(MTPA) LNG plant which is situated on the Barrow Island. This also includes a gas plant

which has the capacity of supplying 300 terajoules of gas on a daily basis to the western part
of Australia. This project also falls under the world’s largest carbon dioxide injection projects
which aim to reduce the greenhouse gas emissions by nearly 40 per cent (MAREX, 2018).
Satellite image of the Gorgon LNG Plant on Barrow Island
Image Source: (Harvey, 2018).
Since the very inception of the project more than 250 cargoes through tankers have been sent
to Asia. Gorgon is operated through a joint venture between different organizations namely
by “Chevron, ExxonMobil (25 per cent), S Tokyo Gas (1 per cent) hell (25 per cent), Osaka
Gas (1.25 per cent), and JERA (0.417 per cent)” respectively in the order of their partnership
(Harvey, 2018).

Image Source: (LNG World News, 2018).
This case study aims to examine this project from different angles especially from the
prospect of project risk management. The case study will examine the identification of risk
by the organization as well as analyse and evaluate the efforts taken by the organization in
order to manage the risks attached to the project. As it is a drilling process which is related to
the supply of gas it is very important that the organizations pay attention to every minute
details as well as take all the necessary precautions in order to avoid any kind of risks or
danger.
Project Risk Management
Project Risk Management
Exploring gas requires well managed construction facilities supported by the required
infrastructure, drilling as well as production activities or injection wells. All this activities
require a lot of caution and hence, it is very important that different type of risks is assessed
in the very beginning of the project. In undertaking all these activities related to gas
exploration highly advanced technology is required and also requires huge capital investment

(Total, 2014). Hence project risk management becomes very important by organizations.
Project risk management in simple terms can be understood as the process of identifying the
risks, analyzing the nature of the risk and then making strategies to overcome those risks in
the life cycle of the project. Risk management should be an integral part of the planning
process of the project in order to plan in advance about the controlling measures to control or
reduce the negative impact of risks attached to the project. Risk can be defined as anything
that has the ability to negatively impact the project, its duration, its performance as well as its
budget. If the risk becomes realty they become issues of the project. Hence, in order to avoid
this project risk management is adopted so that risks can be dealt with before they take the
shape of issues of the projects (Sadgrove, 2015). Project risk management should be
integrated in the management system of the organization in order to develop a culture of
assessing risk beforehand in every project undertaken and developing a sense of
responsibility among the employees as well as other stakeholders of the organization. Two
different ways of integration has been suggested by Alena Labodová in her work
“Implementing integrated management systems using a risk analysis based approach”. The
first way is through introducing the individual systems and then undertaking the integration
process of the separate management systems till then. The second way is developing as well
as implementing integrated management system in an organization (Labodová, 2004).
Risk Assessment
Risk assessment is an important activity under project risk management. In order to
successfully implement project risk management as well as successfully complete the project
without any issues it is very important to assess different risks. Hence, risk assessment should
be laid down in the legislative procedures of the organization or the project being undertaken.
Many different approaches as well as techniques are there that helps in the assessment of
risks as well as in the assessment of different types of hazards that can damage the

environment or human beings (Kirchsteiger, 2002). In order to integrate risk management
system in the management system it is very important to develop proper communication as
well as knowledge. Also proper guidelines regarding the selection of risks techniques need to
be adopted by the management system (Cagliano, Grimaldi, & Rafele, 2015).
It is important to know that why so much emphasis is being given to project risk management
by almost every field of the industry. The answer to this question is that project risk
management is directly related to the performance of the business or project. A proper risk
management has the ability to enhance the performance of the project by reducing the hurdles
to the projects. Risk assessment hence, helps the managers to know that what type of
problems or risk are going to be faced throughout the life cycle of the project and hence,
accordingly necessary actions are taken at a very early stage (Junior & Carvalho, 2013). Also,
project risk management or assessing the risk beforehand and integrating it with project
planning helps in improving or enhancing the project’s performance by helping to complete
the project on time and within the expected budget (Zwikael & Sadeh, 2007). Zwikael and
Ahn (2011) has also said that project risk management helps to moderate the relationship
being shared between the risk level of the project as well as the success of the project. The
author in his research has also mentioned that a moderate level of effort taken towards risk
management help in a greater way to the success of the project (Zwikael & Ahn, 2011).
Three most important risks attached to the project
Environmental Risk
Quantitative Risk Assessment (QRA) and risk tolerance criteria are being used by Chevron in
order to assess the risk attached to the projects undertaken by the organization. As the
organization deals in oil and gas exploration it poses serious threat to environment as well as
human life. One of the major risks attached to this project is the environmental risk. Gas
exploration imposes risk like seismic risk as well as drilling risk. At the time of drilling there

are risks of gas venting out and impacting the environment very negatively. This may even
contaminate land as well as water and if any seismic activity occurs then there are chances
that local land may subside. Also emission of different toxic pollutants may contaminate the
environment negatively affecting the flora and fauna of the local area. Also such activities are
highly towards adding greenhouse gases in the environment (Barclays, 2015). Hence, this
project may impact the environment if any flaw takes place in during the lifecycle of the
project. Hence, it becomes important to assess environmental risk in the very beginning of the
project. Chevron in order to avoid such incidents in the projects undertaken by the
organization has adopted Quantitative risk assessment system through which the organization
is able to develop numerical estimates related to the frequency as well as the potential
accidents that can take place depending upon the nature of the project. This is done by the
organization on the basis of the engineering evaluation or by using mathematical techniques
(Chevron, 2013). Hence, it can be said that the executives at Chevron uses quantitative
decision making tools in order to assess as well as to fight the environmental risks attached to
the Gorgon gas expansion project (Reinhardt, Mandelli, & Burns, 1999).
Individual risk
Gas exploration has several negative and hazardous impacts on the human health especially
the employees working over the project. The employees or the workers of the gas exploration
project are the first ones at risk of any fatality caused due to release of any toxic gas or any
seismic activity, fire breakout, malfunction of any structure, etc. caused due to drilling
activities or by undertaking the activities of gas exploration (Institut National De Sante
Publique, 2015). Also if any major mishap does not take place there are chances of minor
impacts on the health of workers because of the nature of the drilling taken place by the
organization. Hence, it is very important to pay caution at every day work at an oil or gas
exploration site. Some of the projects may also have negative impact on the genetics of

people and may be carried forward to the following generations and may cause physical or
mental impairment among people. Hence, it is very necessary to include workers safety in the
risk management of the organization (Epstein, 2017).
Chevron has taken several efforts to against individual risk so, that any human being is not
affected because of the projects of the organization. Some of the strategies adopted by the
organization in order to manage individual risk effectively include managing as well as
developing a culture of same work environment; The organization has also undertaken
materials as well as equipments management in order to ensure that the working environment
is proper and safe to undertake work. Also the organization ensures occupational hygiene so
that if workers by any chance come across any toxic pollutants during the time of drilling or
undertaking exploration activities then it is not passed on to other workers or is not spread
outside the site of the project. This also ensures that the worker is safe and protected from
harmful impacts of toxic pollutants (Chevron, 2018).
Geopolitical and legislative risk
Geopolitical risks in simple words can be understood as the impact of the physical features of
the earth, climate, topography as well as human political activity. International relationship
also has an impact on the results of the organization and if the relationship turns negative for
the company than this acts as risk to the success of the project (Energy Collective, 2018).
Depending upon the geographical or other features of the site of the project there are chances
that new legislation may come up any time. And hence, the organization has to speculate
such moves of the political parties and has to include this in their risk assessment. Any
change in climatic condition may bring new legislations and the direct impact of which falls
on the gas exploration project. Hence, it becomes necessary to integrate the geopolitical risk
in the risk management of the company. The impact of political or legislative decisions can

also be seen on the economy sometimes which may directly impact the demand and supply as
well as the prices of the product. So, this cannot be avoided (Karasalihovic, 2006).
Chevron understands this and hence the company has already integrated the geopolitical as
well as legislative risk in its risk management procedures. Chevron’s risk management
process aims to assess a range of geopolitical risks as well as legislative and legal risks in
order to assess them properly and then be prepared. Gas as well as oil exploration are
activities which involves high risk of environmental damage and hence at regular intervals
legislations as well as regulations are released in order to protect the environment as well as
the life of people. Chevron always keeps a track of updates related to climate policies which
may have a potential implication on the production of Chevron. And, depending upon this
Chevron make changes in the portfolio management of the company so that the organization
as well as the project is risk ready (Chevron, 2018).
Project Control system
The success of the project highly depends on its project management control system.
Designing the appropriate project control system is a very important task in front of the
project managers. One of the major reasons for emphasising so much over the project
management control system is that to a great extent it helps to avoid failures in the project
adopted and also it helps in enhancing the performance of the project. There are different
components of project control system namely project estimation, project budget, EVPM that
is Earned Value Management System, controlling cost, project scheduling, and performance
measurement. Project estimation is the initial step of a project control management which is
followed by project budget in which all the stakeholders of the project participate actively.
EVPM is a technique that is used by the project managers in order to measure the
performance as well as growth of the project. Cost controlling is another important

component of project control system as it is very important to keep a constant check over the
expenditures of the project. Project scheduling relates to the time schedule related to the
project it majorly focuses on the completion date of the project. Performance measurement is
one of the greatest components of project control system as it helps the project managers to
quantify the success of the project on the basis of the three constraints namely time, cost and
performance (Brown, 2018). Project control systems are generally in line with the strategy of
the project. Project control system can be understood as a mathematical order of the project
which deals with every single aspect of the project (Homer, 2004).
The Gorgon Gas project has also given all the details of the project according to the project
management control system of the project. The case has provided about the investment that is
the budget of the project as well as the completion date of the project which is the most
important component of the project (Economic times, 2018).
Critical evaluation
On the basis of the above explanation it can be said that risk management can be
characterized in five different stages. The first stage is related to the identification of the risk
by the project manager, this is followed by the second stage that is analyzing the risk that is
its intensity, its impact, etc. The third stage of risk management is related to the evaluation of
risk on the basis of its magnitude. This stage is followed by the fourth stage and that is
dealing with the risk with the help of proper planning. The fifth and the final stage of risk
management are related to the reviewing and monitoring of the risk (Kloosterman, 2016).
About the Gorgon gas project it can be said that the organization Chevron undertaking the
drilling of the gas has successfully completed its first stage of expansion and is now entering
in its second phase. The total budget of the project is $69 billion and the budget of the second
phase of the project is $18-$20 billion. The project was started in the year 2016 and is