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Abstract
Engineering, Procurement and Construction (EPC) is an advanced contracting method in which a single party is responsible to complete all the components of the project and further commission it and handover to the client within a predefined cost and agreed timeline. Failure to which, EPC contractor has to pay heavy penalties. There are many risks for both the parties in this arrangement. Proper risk analysis and management is very important for this type of contract which dominates a project's success or failure. In this research an effort has been made to identify, analyse and quantify rationally risks of oil and gas sector EPC projects. For this purpose a model has been proposed to assess and quantify risks involved in the process. Proper mitigation measures have also been proposed for all the critical risks to successfully complete a project from the contractor's prospective in the oil and gas sector.
Key Words: EPC, FIDIC, Oil and Gas Sector, Risk Analysis and Management
1. Introduction
The operational and fundamental structure of projects has significantly changed in the last ten years as globalization became more prominent, the construction industry being multifaceted has especially gone through major changes. In conventional approaches of contracting, it is difficult for the owner to assign responsibility for the delay or cost overrun as a number of stakeholders are involved. To overcome this discrepancy an advanced approach has been introduced known as Engineering, Procurement and Construction (EPC). In EPC projects a single party is obliged to deliver a complete facility to a developer who need to only 'turn a key' to start operating the facility. In addition to delivering a complete facility, the contractor must deliver the facility for a guaranteed price by a guaranteed date and it must perform to the specified level. Failure to comply with any requirements will usually result in the contractor incurring monetary liabilities (Damian M., 2011). In these projects, largest engineering and construction risks are transferred to the contractor. This type of contract requires an excellent project definition, but it ultimately guarantees a well- defined cost and completion time. The EPC type of contracting method is ideal for owners and developers because the capital cost is fixed at the start and the risk is placed onto...