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Understanding Complexity in Large-Scale Infrastructure Projects

This presentation explores the intricacies of managing large-scale infrastructure projects from a project management perspective. It emphasizes the inherent complexities associated with design and execution, influenced by institutional contexts and multiple risk factors, including geopolitical, market, institutional, industry, and natural risks. The analysis discusses the fundamental elements of complexity, drawing on real-world examples from the oil and gas sector, and examines how various domains of complexity (technical, institutional, commercial) affect project outcomes. Insightful for professionals in project management and infrastructure development.

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Understanding Complexity in Large-Scale Infrastructure Projects

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  1. Complexity (in Large Scale Infrastructure Projects) Donald LessardMIT Sloan School of ManagementInfrastructure meets Business PDW2009 AoM MeetingsChicago, August 2009dlessard@mit.edu

  2. What’s the field? • Project management • Infrastructure • Design and management of complex organizations (that deeply interact with institutional context)

  3. Complexity as fundamental element • Critical to understanding, designing, and managing in these domains • These domains provide rich environments to ground, push development of fundamentals

  4. Risks associated with project outcomes Geopolitical risks Market Risks • War • Trade disruption • Energy security • Carbon regime Institutional Risks • Prices • Exchange rates • Interest rates • Carbon price Industry/Competitive • Political • Financial • Regulatory • Legal • Demand • Supply • Competition • Infrastructure Natural Risks • Geology • Weather Project Risks • Technology • Partners • Contractors • Execution

  5. Sources of major failures in projects

  6. Project characteristics giving rise to complexity Complexity is an emergent property of system, but can/must model bottom up • # of components, interfaces (moderated by similarity) • Difficulty/novelty of individual components • Coupling of components • Dynamism of components

  7. TICA Domains of complexity – Oil and Gas • Institutional • # stakeholders • Track record, difficulty • Alignment • Uncertainty re position, relationship • Technical • # subsystems • Distance from frontier • Coupling • Uncertainty • Commercial • # markets involved • Market structure • Market volatility • Market access • Architectural • Task sequence, overlap • Modularity • Pace • Flexibility Technical, Institutional, and Commercial are inherent in the project. Architectural depends on operator experience and choices

  8. Performance code 2 3 4 5 6 4 6 8 10 12 14 16 18 20 Performance vs. Compound Complexity Gorgon Gorgon Kashagan Kashagan Thunderhorse Thunderhorse Pearl Pearl Sakhalin II Sakhalin II 6 6 South Pars South Pars Agbami Agbami Oil sand projects Oil sand projects Tengiz Tengiz Snohvit Snohvit Asgard Asgard Performance Bonga Bonga 5 5 Ormen Ormen Lange Lange Karachaganak Karachaganak Shah Shah Deniz Deniz Kristin Kristin Tangguh Tangguh 4 4 Caratinga Caratinga - - Baracuda Baracuda Preliminary results Moho Moho Bilondo Bilondo Plutonio Plutonio Erha Erha Mexilhao Mexilhao Sakhalin I Sakhalin I 3 3 ACG ACG Albacora Albacora Leste Leste BTC BTC CPC CPC Blue Stream Blue Stream Kizomba Kizomba Girassol Girassol Na Na kika kika In In Salah Salah Malampaya Malampaya Atlantis Atlantis 2 2 Oryx Oryx Holstein Holstein Rasgas Rasgas exp. exp. Chad project Chad project Mad Dog Mad Dog Diana Hoover Diana Hoover Marlin Marlin Burullus Burullus Scarab Scarab 1 1 4 4 6 6 8 8 10 10 12 12 14 14 16 16 18 18 20 20 Complexity (Tech X Institutional)

  9. Payoffs?

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