Comprehensive Risk Identification and Prioritization for Engineering, Procurement, and Construction (EPC) Projects: A Case of Karoon Oil and Gas Exploitation Company

Document Type : Original Article

Authors

1 Assistant Professor, Department of Energy Economics and Management, Petroleum University of Technology, Tehran, Iran.

2 M.Sc. student, Department of Energy Economics and Management, Petroleum University of Technology, Tehran, Iran.

10.48308/jimp.14.4.257

Abstract

Introduction and Objectives: One of the prominent contract types for project execution is the Engineering, Procurement, and Construction (EPC) method, which serves as a mechanism for transferring project activities and associated risks to contractors. Given the significance of risk assessment in oil and gas projects, particularly for contractors, the primary objective of this research is to identify and rank the risks surrounding EPC projects in Karoon Oil and Gas Exploitation Company. Additionally, this study seeks to propose effective strategies for managing these risks.
 Methods: The research methodology consists of several stages. Initially, relevant risks in EPC projects are identified, extracted, and categorized through a literature review and expert opinions. At this stage, the research team compiled a list of potential risks by reviewing scientific sources and conducting interviews with experts in the oil and gas industry. Subsequently, a fuzzy Delphi method, based on the insights of five experts and 15 criteria, was applied to select the key risks. The experts' opinions were collected and analyzed using fuzzy numbers to reach a relative consensus on the primary risks. In the next stage, the selected risks were assessed and ranked using a fuzzy analytic hierarchy process (FAHP) based on their probability of occurrence and severity of impact. To enhance the accuracy of expert evaluations and minimize subjective biases, a fuzzy system was employed, utilizing fuzzy numbers instead of precise values to represent expert opinions.
Findings: The results of this study reveal that the key risks in the company's EPC projects, ranked in order of priority, include inflation rate, employer pressure to halt execution, rising equipment costs, delays in financial payments, the presence of incompatible factors and the use of substandard materials, deficiencies in initial design, and ineffective engineering management. These findings help contractors recognize and plan for the management of major risks. Additionally, a scenario-based cognitive map has been developed to address the identified risks, allowing contractors to devise appropriate strategies for risk mitigation. By identifying and prioritizing these risks, contractors can formulate scenario-based strategies to manage them effectively, thereby reducing the likelihood of adverse consequences in Karoon Oil and Gas Exploitation Company. This cognitive map serves as a roadmap for contractors in managing risks in EPC projects. For instance, recommended strategies include meticulous planning, contract management, financial management, procurement management, and stakeholder management. The primary goal of these strategies is to prevent potential challenges in project execution.
 Conclusion: This study underscores the critical importance of risk assessment in EPC projects. Contractors must identify major risks and implement appropriate management strategies to mitigate potential challenges. Analytical tools such as the fuzzy analytic hierarchy process and scenario-based cognitive maps significantly aid contractors in this regard and play a crucial role in the successful execution of EPC projects.

Keywords

Main Subjects

References

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Journal of Industrial Management Perspective
Volume 14, Issue 4 - Serial Number 56
Issue in Progress
2024
Pages 257-292

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