Veco - DMS Energy Forum: Debates
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Transcript Veco - DMS Energy Forum: Debates
1st PMI AGC Energy Forum: DMS Debates :
Project Owner should increasingly adopt the
EPCM Model over the EPC Model
By Dr. F. G. Abbosh
Hilton Abu Dhabi , Wednesday 2nd June 2010
Project Owner should increasingly adopt
the EPCM Model over the EPC Model
EPC vs. EPCM
(Definitions ,already given)
OVERVIEW OF PREVAILING EXECUTION
STRATEGIES LAST 5 DECADES
In 70’s
In 80’s
In 90’s
In 2000’s
Post 2010
: Separate Contracts
: EPCM
: EPC
: EPC
: ??
OVERVIEW OF PREVAILING EXECUTION
STRATEGIES LAST 5 DECADES- Cont.
Contractor Selection
• Single Source :
10%
• Competitive/Open bid : 15%
• Competitive /Short-Listed : 75%
Contracting Strategies
•
•
•
•
Reimbursable EPCM
Reimbursable EPC
Lump Sum EPC
Others (mixed/multi)
: 5-10%
:5%
: 75-85%
: 5%
EPC vs. EPCM
EPC
Lump-Sum approach
“Cheapest is Best” mentality
Larger $ value of projects/contracts >>>>>>> Higher $ value of L.D.’s,
Liabilities & Risks
All risks on Contractors shoulders (Material price hikes, Exchange
Risk, Unknown site conditions,New Technologies etc.)
High Contingencies built in as a result
Lack of Control/Quality/Schedule
EPC
TYPE
EPC
CATEGORY
NEGATIVE
CAPEX
Generally higher capital cost, due to dual contingencies.
RISK
Currency risk if long-term cover. (years )
Claims are high probability.
SCHEDULE
Contractor will not accelerate if LD’s > acceleration costs.
LD’s become contentious issue.
Optimism in schedule performance.
EXECUTION
Plant completion/ handover often problematic.
Client/Contractor relationships.
Construction subs often poor performers, due to low prices.
DESIGN
Client /PMC can’t easily re-engineer improvement/optimization.
Engineering responsibility fragmented.
Client has less control over detailed design.
COMMERCIA
L
Protracted bidding phase & contract negotiation.
Low costs drive towards poor quality equipment/materials.
Late delivery of project..Loss of revenue to client.
Needs very high calibre Client/PMC Team.
Contractor always working in his own best interests.
PEOPLE
EPCM
TYPE
EPCM
(Cost –
re)
CATEGORY
CAPEX
POSITIVE
Lower CAPEX is possible, due to less contingency.
RISK
Eliminate 1/2 cycles of bidding from schedule.
Can allow schedule to be prioritised.
SCHEDULE
Good quality subcontractors possible.
Wider contractor bid slate with high calibre E & C co’s.
EXECUTION
Can rollover FEED into detail design.
Long lead procurement can be released earlier.
DESIGN
Achieves optimal design solution.
Can introduce enhancements/optimization.
Protection of Intellectual Property.
Engineering is seamless.
Restricted to qualified process designers.
COMMERCIAL
Client usually has stronger buying power.
PEOPLE
Good quality project management team (PMT)
Extension of Clients project team.
Oil & Gas - Forecasted Projects,
Investments in the GCC Countries (20102014)
KSA: $110bn (by 2019: $267bn to be invested)
Iraq: $70bn (mostly oil field development +
infrastructure upgrade + pipelines)
Kuwait: $35bn (10 Oil Field + 25 Refinery)
UAE: $30bn (12 for Petrochemicals/Refining + 12
Offshore + 6 onshore)
Bahrain: $17bn (12 for oil field + 5 Refinery)
Oman: $14bn (7 Petrochemical/Refinery complex
+ 3 Oil + 4 Gas distribution)
Qatar: $10bn (5 Gas Field development + 5
Refinery)
A TOTAL INVESTMENT of Approx. $290 Billion
Summary Advantages of EPCM over EPC
•
•
•
•
•
Lower Cost ,eg potential saving of 15-25% on above $290 Billion
Better control of Quality,
Better control of Schedule,
Owner gets what he wants
Etc.