Abstract
Abstract The management of risk is one of the most important issues facing the oil and gas industry today. This paper will focus on the need for risk management in the oil and gas industry. A typical project from a major oil and gas producer has been selected and its typical risks identified. The risks are analysed and modelled in the CASPAR (Computer Aided Simulation for Project Appraisal and Review) program. The paper distinguishes between pure risk and spread risk for forecasting the economic parameters of different risk scenarios. The increasing pace of change, customer demands and market globalisation all put risk management high on the agenda for forward thinking companies. It is necessary today to have a comprehensive risk management strategy. Having a process in place to identify, analyse and manage risks is paramount. The oil and gas industry is fraught with risk and it is necessary for these risks to be assessed continuously. In this paper, the authors examine the downstream risks inherent in the oil and gas industry and differentiate between the more manageable/quantifiable pure risks such as construction, health and safety and project management and the less manageable spread risks associated with war, terrorism and market demand which affect the price of oil and gas.
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