Page 37 - Industrial Plants

the capital efficiency in large projects is not fully
satisfactory. Differences are wide in the public and
private sector, in National Oil Companies (NOC) and
joint stock companies, and among the field of activities
[3].

In oil and gas projects two major contracting
approaches are used:
1. The single source LS contract basis, after a phase
of project shaping (Design and Build or EPC
LS(TK))
2. The multiple source Design-Bid-Build or EPCm/
reimbursable style, in which engineering,
procurement and construction are executed by
different parties with only limited LS portions and
interparties responsibility.

The main factors affecting the possible execution Figure 5 Alternative Contracting Schemes KPI
scheme are: Notes:
• Definition of project scope Standard deviation is wide: there are very good and very bad projects in
• Owner skilled resource availability both categories
• Technology maturity Russian oil and gas projects performances is worse than average (source
• Project schedule IPA, 2012)
• Geographic area
• Contractors market situation
• Owner project risk management methods EPC LS performs better in what can be called “hard
• Local legislation requirement targets” (cost, schedule, quality/performance).
• Local content requirement There is a solid background of this result though a
• Project financing requirement warning shall be raised that this result has statistical
significance but every project has its own background,
Naturally the legacy technical development and project history and peculiarity.
execution background of each country affects
significantly the selection. Actual performance of EPCm/Reimbursable contracts
Russian Oil&Gas companies’ projects are largely is somehow worse than EPC LS(TK) Contracts mainly
executed on a design, bid, build scheme (EPCm/ for the following reasons:
EPs+Cm), though with some increasing trend in • Improper/incomplete Front End Loading (actually
implementation of EPC LS(TK). EPC Contractors validate Front End during
Overseas Oil & Gas companies project contracting bidding phase and price relevant risk)
scheme are more diverse but with a large predominance • Lower capability of Owners in managing project
of EPC LS(TK), especially for megaprojects (>1 Billion execution risks (Contractor organization is
US$) normally more project risk management
The two main families of contracting approaches have conversant)
some statistical difference in their outcomes. Usually • Insufficient owner organization, not fully and

IndustrIal Plants - May 2017
35