Abstract
Billion-dollar investments are quite common in oil and gas industry and owners generally prefer engineering, procurement, construction (EPC) contracts since they would like to minimize their risks and guarantee the most consistent project cost and shortest timeline scheme. Considering the size of contracts, owners are unsurprisingly seeking an ideal tender awarding method to avoid deviation from project schedule or budget and get the maximum benefit for them. They may prefer to award the EPC contract directly (i), have a front-end engineering design (FEED) study done first and award the EPC contract afterwards (ii), or set up a convertible contract and convert it to EPC after an open book cost estimate (OBCE) process (iii). It is a question of concern which option for large-scale oil and gas projects is the most favourable. As a case study, outcomes of a project which was administrated with a conversion type of contract will be reviewed in detail, and a number of principles based on lessons learned will be listed. Thus, the authors aim to provide a verifying approach for the interpretation of EPC conversion type contract management based on analysis of the distinguishing features of large-scale oil and gas projects.
Highlights
Oil and gas companies should invest in several projects every year
Considering the negative consequences of mistakes that could be made during the investment period of such projects, owners are unsurprisingly investigating for the correct contract strategy which fits well with their project objectives
Responsibilities, interfaces between phases, management policies are all evolved around that decision which certainly means that contract strategy has an important impact on the project schedule and the budget [2]
Summary
Oil and gas companies should invest in several projects every year This is inevitable for them as there are so many forcing factors like new environmental regulations, operational requirements, modernization, renovation, profitability, etc. Some of these projects cost more than billion-dollars. Contract strategy refers to organizational and contractual policies which are selected for the execution of a specific project [1]. It is one of the key parameters which has significant effects on the project. Responsibilities, interfaces between phases, management policies are all evolved around that decision which certainly means that contract strategy has an important impact on the project schedule and the budget [2]
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