Abstract
Engineering, Procurement, and Construction (EPC) contractors with lump-sum turnkey contracts have recently been suffering massive profit losses due to re-works and schedule delays in offshore oil and gas EPC megaprojects. The main objective of this research is to develop and implement a detail engineering completion rating index system (DECRIS) to assist EPC contractors to optimize fabrication and construction works schedules while minimizing potential re-work/re-order. This is achieved through adequate detail design development and results in minimizing schedule delays and potential liquidated damages (i.e., delay penalties). The developed DECRIS was based on findings from an extensive review of existing literature, industry-led studies, expert surveys, and expert workshops. The DECRIS model is an evolution, and improvement of existing tools such as the project definition raking index (PDRI) and front-end loading (FEL) developed specifically for the early stage of engineering maturity assessment (i.e., planning, basic design, and front-end engineering design (FEED)), prior to EPC projects. The DECRIS was evaluated and validated with thirteen sample as-built offshore megaprojects completed recently. When the DECRIS was applied to the completed projects post-hoc, a correlation (R-squared 0.71) was found between DECRIS scores and schedule/cost performances. This is much superior to the PDRI-Industrial model’s correlation (R-squared 0.04), which was primarily devised for owners’ basic engineering or FEED completion assessment. Finally, as a means of further validation, project schedule and cost performance of an ongoing project was predicted based on the correlations found on the thirteen completed projects. The resultant predicted schedule and cost performance was well matched with the current project performance status. Based on the accuracy of the DECRIS model found in the validation, said model is an effective prospective tool for EPC contractors to manage their engineering and procurement/construction risks during the initial detail design stages.
Highlights
Crude oil was historically supplied solely by onshore reservoirs until the 1970s, when these reservoirs were found to be insufficient to meet the growing global oil and gas demand
The detail engineering completion rating index system (DECRIS) methodology follows the project definition raking index (PDRI) approaches in its development, which has been proven through existing literature to develop a simple assessment model to solve a complex project problem
According to the comparison between actual results and DECRIS prediction, researchers found that a construction labor hours increase rate of 8.26% and a construction duration delay of 177 days are similar with 7.99% and 235 days predicted in the DECRIS model
Summary
Crude oil was historically supplied solely by onshore reservoirs until the 1970s, when these reservoirs were found to be insufficient to meet the growing global oil and gas demand. To combat lower revenues and increase profits, major oil companies have placed a great deal of attention on cost-saving strategies in these early stages for offshore oil and gas projects [3]. These strategies are often poorly planned and implemented, leading to inadequate resource allocation, and improperly accelerated design and construction. A tight schedule usually forces the EPC contractor to concurrently design and construct the project, hoping to meet the owner’s deadline and avoid costly liquidated damages This concurrent design and construction, unless well planned, may lead to a costlier option due to a catastrophic ripple effect when the final design is significantly different from the partially complete design when construction started. The offshore oil and gas EPC contractors have recently reported massive profit losses over US$ 10 bn as shown in Figure 1, between 2013 and 2015, after being awarded many EPC projects since 2010
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