=Paper=
{{Paper
|id=Vol-2098/paper27
|storemode=property
|title=Effective Distribution of Financial Resources of
the Megaproject
|pdfUrl=https://ceur-ws.org/Vol-2098/paper27.pdf
|volume=Vol-2098
|authors=Nina I. Plyaskina
}}
==Effective Distribution of Financial Resources of
the Megaproject==
https://ceur-ws.org/Vol-2098/paper27.pdf
Effective Distribution of Financial Resources of
the Megaproject
Nina I. Plyaskina1,2
1
Institute of Economics and Industrial Engineering of SB RAS,
2
Novosibirsk State University, (Affilation-ID 60002049), Novosibirsk, Russia
pliaskina@hotmail.com
Abstract. The object of this study is a long-term capital-intensive in-
vestment megaproject with many participants and high risks of imple-
menting their projects. The length of procedures for harmonizing in-
vestment projects of participants and the difficulty of coordinating their
actions to achieve the megaproject’s goals necessitate the creation of an
adequate resource management tool. A step-by-step algorithm is pro-
posed. The algorithm was tested on real economic information of the
East Siberian Oil and Gas Complex megaproject and showed its ability
to work. The general applicability of the algorithm is demonstrated.
Keywords: Network model · Megaproject · Resource allocation · Step-
by-step algorithm
1 Statement of the Problem
For oil and gas companies, the problem of developing new regions with complex
geological and natural conditions is urgent. In this regard, the importance of
large innovative projects for the integrated development of oil and gas fields and
the effective use of the main hydrocarbon transportation is growing. In order
to choose an effective strategy for the implementation of innovative projects,
a toolkit is needed to evaluate a variety of alternative combinations of new
investment projects and schemes for their financing. The object of this study
is the strategy for the implementation of a major investment megaproject. An
example of such a megaproject is the development of the East Siberian Oil and
Gas Complex (ESOGC) [9,10].
It is assumed that the development of the megaproject is presented in the
form of an oriented graph Gij without contours [2]. The duration tij of the
performance of each work (i, j) of the network model Gij is a random vari-
able whose allocation parameter includes the investment resources cij allocated
for this work. For each work (i, j) the lower boundary a(i, j) (optimistic time)
Copyright c by the paper’s authors. Copying permitted for private and academic purposes.
In: S. Belim et al. (eds.): OPTA-SCL 2018, Omsk, Russia, published at http://ceur-ws.org
316 N. I. Plyaskina
and the upper boundary bij (pessimistic time) of the execution time are given.
The works of the megaproject Gij are grouped according to the projects Gk ,
1 ≤ k ≤ n ,where n- is the number of projects in the model. Each of the Gk
projects has a deadline Dk of its end, as well as the minimum and maximum
permissible probability of completion of the project during this period (P ∗ and
P ∗∗ accordingly).
The main idea of the problem of allocating resources between n projects is
to increase the probability of their completion in the target time frame Dk for
given initial volumes of the megaproject Gk investment resources C. If any of the
projects Gk at the time t ≥ 0 can not be completed within the prescriptive time
with an acceptable probability, then a redistribution of the remaining investment
Pn
resources Ck (t) between the projects of Gk .
k=1
2 Formal Description of the Network Model
We introduce the notation: C - the initial volume of investment resources of the
megaproject for the implementation of all projects;
Ckt - investment resources (budget) allocated to the k-th project at the moment
t ≥ 0, Ck0 = Ck ;
Tk (Ckt ) -the random duration of the k-th project on the basis of the budget
allocated to it Ckt ;
Dk - the target date for the implementation of the k-th project;
(i, j)k ∈ Gk - work(i, j) included in the k-th project;
cijk - budget allocated for the implementation of work (i, j)k of the project Gk ;
cijk min -the minimum budget value, allowing to perform the work (i, j)k ;
cijk max -the maximum budget value, allowing to perform the work (i, j)k ;
ηk - priority coefficient (degree of importance) of the k-th project.
As the objective function, the sum of the products of the priority project
coefficients and the probabilities of their completion in the appropriate legislative
terms is used. It is necessary to determine the values at which the objective
function is maximal:
Xn
{ηk Pk (Ckt )} → max, (1)
k=1
Pk (Ckt ) = P (t + Tk (Ckt ) ≤ Dk )
under conditions
Pk∗ ≤ Pk (Ckt ) ≤ Pk∗∗ , 1 ≤ k ≤ n (2)
Xn Xn
Ckt = Ck (t) (3)
k=1 k=1
where
n
P
C ≤ Ck - initial volume of investment resources of the megaproject for
k=1
Effective Distribution of Financial Resources of the Megaproject 317
realization of all n projects;
Pk (Ckt ) = P (t + Tk (Ckt ) ≤ Dk ) - the probability of completion of the k-th
project on time Dk with the allocated budget Ckt ;
Pk∗ = Pk (Ckt∗
) - the probability of completion of the k-th project on time Dk
∗
with the allocated investments Ckt ;
∗∗ ∗∗
Pk = Pk (Ckt ) - the probability of completion of the k-th project on time Dk
∗∗
with the allocated investments Ckt ;
Ck (t) - the remaining unused investment resources for the k-th project at time
t ≥ 0.
The proposed algorithm for solving the problem (1)-(3) is based on the PERT
(Program Evaluation and Review Tecnique) method. The PERT method is gen-
erally intended for the calculation of schedules that have certain structures set
by unambiguous technological processes. The activity time spans are assumed
to follow a general Beta distribution [5,1,3,7,8].
The traditional PERT method uses only the activity time means to calcu-
late the critical path, reducing the stochastic model to a deterministic model. In
PERT, three time estimates are required for each activity. The time estimates
represent a pessimistic time, an optimistic time, and a most likely time for dura-
tion of the activity. The method assumes that the sum of the mean completion
times of activities on the critical path is normally distributed. This allows the
calculation of the probability of completing the project within a given time pe-
riod. A single critical path is thus calculated and relied upon, where in reality,
there may be numerous possible critical paths that exist. For a large network
plan the probability that any given path could be the critical path may be very
small.
PERT method yields results which are biased high. If network has multiple
parallel paths with relatively equal means, PERT calculations will be consider-
ably biased [6]. As a result, the time to complete a project calculated by the
traditional PERT method is almost always too short [11].
In accordance with the PERT method, the solution of problem (1)-(3) is
divided into two stages. The basic and auxiliary problems are constructed, for
the solution of which an algorithm is developed.
3 Resolving the Problem of Resource Allocation for
Network Projects
3.1 Approval
For all projects Gk , 1 ≤ k ≤ n, we solve the auxiliary problem with p = Pk∗ and
p = Pk∗∗ [2]. As a result, we obtain the values of Pk∗ , Pk∗∗ and the budget values
∗ ∗∗
Ckt and Ckt . Let us write the dependent between Pk (Ckt ) and Ckt :
Pk (Ckt ) − Pk∗ ∗
Ckt − Ckt
=
Pk∗∗ − Pk∗ ∗∗ − C ∗
Ckt kt
318 N. I. Plyaskina
and expressing Pk (Ckt ), we substitute in the objective function in the form
n
Pk ∗∗ − Pk∗ Pk ∗ · Ckt
∗∗
− Pk∗∗ · Ckt
∗
X
∗∗ − C ∗ · η k · Ckt + ∗∗ − C ∗ · η k → max
Ckt k Ckt k
k=1
We denote by
Pk ∗∗ − Pk∗ Pk ∗ · Ckt
∗∗
− Pk∗∗ · Ckt
∗
∗∗ − C ∗ · η k = αk , ∗∗ − C ∗ · η k = βk
Ckt k Ckt k
and we transform the objective function of the original model (1) - (3) to the
form (4)
Xn
{αk · Ckt + βk } → max (4)
k=1
Since the value of βk does not depend on Ckt , the objective function (4) will be
simplified and we obtain the following model:
n
X
{αk · Ckt } → max (5)
k=1
with the previous limitations (2) and (3).
3.2 Algorithm for Solving the Main Problem
The problem (5) with constraints (2) and (3) is solved using the step-by-step
algorithm.
At the first step, we allocate for each remaining unfinished project the corre-
sponding minimum budgetary volume Ck t∗ . Let’s designate the remaining bud-
get ∆Ct . We order the sequence {αk } in decreasing order. We denote the new
ordinal numbers of this sequence by symbols f1 , . . . , fn . In the second step, we
set j = 1 and compute γj = min{(C ∗∗ fj ,t − C ∗ fj ,t ), ∆Ct }. At the third step for
the project, we determine its final budget C fj ,t . We are correcting the remaining
budget ∆Ct in the fourth step.
If ∆Ct = 0, then finish the calculation. Otherwise, then j = j + 1 and the
condition j ≤ n is satisfied, then we continue the calculations with γj . Until we
completely disassemble all the cases.
The optimality of the algorithm follows from the presence of a monotonically
decreasing sequence {αfj }, and also from the allocation to each next project fj
at the step of the maximum possible additional budget γj from the ∆Ct budget
left at the disposal of the company.
3.3 The Formulation and Algorithm for Solving the Auxiliary
Problem
Let consider an auxiliary problem for the case of one project:
for the given ”reliability” p of the project G, 0 < p < 1, find the minimum value
Effective Distribution of Financial Resources of the Megaproject 319
of the allocated budget C and values that satisfy
X
M inC = M in cij (6)
{i,j}
with constraints
P (T (C) ≤ D) = p, (7)
cij min ≤ cij ≤ cij max (8)
In the first step, we determine the values of C1 , C2 and C3 . We solve problem
(6)-(8) for C = C1 , C = C2 and C = C3 (see [4]).
As a result of solving this problem, we obtain the project reliability values
p1 , p2 and p3 . Compare the values of p1 and p2 : if ∀ε ≥ 0, p1 − p2 < ε, then
finish the execution of the algorithm, otherwise go to the next step. Analyzing
the inequality p1 < p < p3 , if it is satisfied, then go to step 2, otherwise to step
3. At the final stage of the algorithm, the value C = C3 is the minimum budget
that ensures the ”reliability” p of this project.
4 Implementation of the Algorithm
To solve the problem, we developed a step-by-step algorithm that is implemented
using C ++ methods in the programming environment of Microsoft Visual Stu-
dio. The algorithm was tested on real economic information and showed its
ability to work. The distribution of investment resources for the construction of
the seven sectors of the East Siberia-Pacific Ocean (ESPO) oil pipeline, which
is the basis for the formation of the ESOGC megaproject was considered.
5 The Network Graph
The network graph of the construction and operation the ESPO pipeline is
presented in the form of projects the construction of seven pipeline sections 1.1-
1.7 (Fig. 1). Each of pipeline sections is described by the unified module of the
technological sequence of work and directive events. Triangles denote the unified
network modules of sections of the oil pipeline (1.1 Taishet - Ust-Kut, 1.2 Lensk
- Ust-Kut, 1.3 Lensk - Olekminsk, 1.4 Olekminsk - Aldan, 1.5 Aldan-Tynda, 1.6
Tynda - Skovorodino, 1.7 Skovorodino - Nakhodka).
The unified module of the pipeline is given in Fig. 2. The unified pipeline
module reflects five stages of the project: 1. development of feasibility study
(feasibility study) - work (1,2); 2. examination and approval of the feasibility
study - work (2,3); 3. preparation of the pipeline route - work (3,4); 4. construc-
tion of the linear part of the pipeline (1st phase) - work (4.6) and installation
of pumping station (PS) (1st phase) - work (4,5); 5. construction of the linear
part (2nd phase) - work (6.8) and installation of the PS (2nd phase) - work
(6.7). The network graph geographically reflects the sections of the pipeline
passing through the three oil and gas bearing areas of the East Siberian Oil
320 N. I. Plyaskina
ϭ͘ϭ ϭ͘ϳ
ϭ ϲ ϴ ϭ ϲ ϴ
ϭ͘Ϯ
ϭ ϲ ϴ
ϭ͘ϯ
ϭ ϲ ϴ
ϭ͘ϰ
ϭ ϲ ϴ
ϭ͘ϱ
ϭ ϲ ϴ
ϭ͘ϲ
Ϭ
ϭ ϲ ϴ
Fig. 1. Network model of construction and operation of the oil pipeline Eastern Siberia
- Pacific Ocean
and Gas Complex (ESOGC) mega-project: Krasnoyarsk region (Taishet - Ust-
Kut); The Republic of Sakha Yakutia (Lensk - Olekminsk, Olekminsk - Aldan,
Aldan - Tynda); Irkutsk region and the Far East (Lensk - Ust-Kut, Tynda -
Skovorodino, Skovorodino - Nakhodka).
6 Results
The universal method presented in this paper was used to calculate a more real-
istic duration for the construction of the seven sectors East Siberia-Pacific Ocean
oil pipeline. Basic input data and calculated results of the resource allocation
problem for network projects are presented in Table 1.
ϱ ϳ
ϭ Ϯ ϯ ϰ ϲ ϴ
Fig. 2. The unified module of the pipeline
Effective Distribution of Financial Resources of the Megaproject 321
The initial volumes of investment resources of the megaproject were adopted
in the amount of 11.861 bn rubles. The optimal allocation of resources for the
pipeline section projects is determined on condition that the project are com-
pleted within the deadlines. The work schedule and the dynamics of investment
distribution have been constructed.
Table 1. Input data and calculated investment volumes for pipeline sections at
C=11.861 bn. Rub
Project number/
indicators 1 2 3 4 5 6 7
Pk∗ 0.5 0.55 0.4 0.3 0.5 0.4 0.3
Pk∗∗ 0.8 0.75 0.7 0.6 0.9 0.7 0.7
∗
Ckt 923 1115 1667 2589 709 812 3685
∗∗
Ckt 998 1224 1749 2699 743 863 3744
ηk 0.4 0.6 0.7 0.8 0.4 0.5 0.9
Ck 948 1115 1749 2699 743 863 3744
7 Conclusion
The problem of allocating investment resources between the pipeline construc-
tion projects is being solved. This problem is to increase the probability of com-
pletion of projects in the target dates for initial volumes of resources. To solve
the problem, a step-by-step algorithm is proposed. Based on the technologi-
cal sequence of the pipeline construction, an appropriate network schedule was
formed. The volume of investments for each section of the pipeline is calculated.
Given the initial volumes of investment resources of the megaproject in the
amount of 11.861 bn rubles. The optimal allocation of resources between the
pipeline sections is determined, provided that they are completed within the
target dates. The schedule of work execution and the dynamics of investment
distribution have been constructed.
The obtained results show the effective of the proposed method to calcu-
late the resource allocation between subprojects and realistic completion time
for specified project implementation deadlines. The suggested method can be
recommended for use by project managers in order to allocate resources and
prevent possible abandonment of project completion deadlines.
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