Risk in oil and gas construction projects (Dissertation Sample)

Risks in Oil and Gas Construction Projects
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Literature Review
This section reviews previous researches conducted by engineering scholars concerning the impending risks in oil and gas construction projects. It is apparent that contractors should analyze various risks in order to formulate viable solutions during construction of projects. This may include risks associated with project management, project type, external environmental, design, contract or operational risks. This implies that the nature of the risks varies in regards to the construction operation being undertaken. A research conducted in 2003 [7] states that project construction risks are always noticeable and engineers should work on time to eliminate them. The author emphasizes on external environmental risks that affect project initiations. Political risks are evident because of the rapid variations in the world’s political scenery, which expose repercussions for oil and gas firms. Alternatively, the political risks can be both positive and negative including possible disruption of fuel provisions, vital commodities and transport links.
Another political risk concerns the failure of the local administering to provide or maintain infrastructures such that there are frequent loss of energy, water, telecommunication lines, mobile and digital connections, road, and rail and air interruption [7]. These affect the flow of resources to the sites where workers may be forced to wait for many days before finishing one phase of extraction. For instance, engineers can budget for the project or design the blueprint, but the project fails to commence due to government approval. Such risks are political risks that arise from administrative interferences. This entails the legal aspects that all projects must accept before undertaking any work. The legal procedures might be long and time-consuming leading to a shortage of resources required [3]. Political risks emanate from the legislators who enact laws. These laws hinder engineering operations because of the stringent regulations imposed on workers. Another external environmental risk is the use of sub-contractors. Some sub-contractors perform shoddy works, which might threaten the reputation of an engineering firm. It is also likely that sub-contractors mismanage funds intended for construction works by engaging in improper usage of the funds. Political risks are an external environmental risk because they give an added advantage to rival firms that may capitalize such challenges. It is also apparent that some regulations and laws do not favor the work of oil and gas construction projects, for instance, regulations regarding the sharing of revenues derived from the project with the neighboring communities [3]. This affects the construction works because the firms invest resources that should offer them lucrative returns. Some regulations also insist that construction firms should hire the locals who are qualified enough to work in the oil and gas construction projects. Regulations and laws determine the operations of oil and gas projects because of the government involvements. It is essential to observe all the stipulations concerning oil and gas construction projects to avoid disturbances from authorities. The government’s fiscal policies can also be a foundation of risks on projects. This is because multinational oil corporations normally face the risk of deviations in interest rate and high tax strategy, which may arise due to adjustments in government policies. The researcher recommends that such risks may be reduced by maintaining good relationships with the government, using local workers and suppliers.
External environmental risks also include physical destruction and damage associated with the works. Frequent destructions and damage of equipment can slow operation works since they attract extra expenses [7]. Oil and gas construction projects work with predetermined budgets that must be followed in the entire task. Physical damage and destruction also consumes time allocated for the completion of the project. This aspect can lead to accidents at the site if not handled at the appropriate time. It is also apparent that environmental risks arise from the effects of the environs such as pollution, health problems or dereliction of land [3]. Drilling holes on earths cause pollution that affects the local communities and workers. As a result, these can cause health problems associated with the drilling or the method of excavation used at the site. Another probable effect is the dereliction of land that causes accidents to workers, animals and locals after the completion of the project. Derelict lands also act as breeding spots for mosquitoes if not filled immediately after operation. Environmental effects are the considerations that government agencies use to enact strict regulations or impose huge fines on engineers.
According to Thompson [9], design risks are always present because of the internal operations that do not consider all the concepts. These risks emanate from failed or insufficient internal production processes, systems and people. The risks also cause accidents due to human errors during the preparation of the project. For instance, the incomplete design scope undermines the strength of the oil and gas project. This implies that a project with an unfinished design makes the work difficult to apply at the site leading to several mistakes that might cause accidents. Human errors and omissions are common risks because they involve the use of information technology, software and hardware techniques. Such errors bring about the low quality of work, cost overruns and insufficient configuration controls. This is because they are exposed to IT-based errors that may originate from hackers, mischievous interference and employee disruption [9]. The intrusions hinder the progress of projects by restricting access to vital project information that prevents the successful delivery of a project. Design risks can also originate from incomplete specifications when a key employee or designer fails to cover all terms associated with the project. The designs used should show the correct specifications in order to ensure that the development of the project meets the reguired engineering standards. This is also connected to errors and omission risks where an individual forgets about crucial stipulations in the project. Oil and gas construction projects work on strict measurements that must relate to other areas to ensure smooth operations. Failure in one area of the design affects the entire project caused by the lack of compatibility of equipment or technique used. Thompson [9] further states that design changes at the last minute are other risks common in oil and gas construction projects. The author claims that changes in weather conditions, techniques and financial constraints can cause design changes. Design changes also emanate from technological changes. This is because changes in technology bring about the extensive reshuffle and the demise of all activities at the site. Oil and gas companies should prepare for new ways of sketching their designs since the rapid growth of IT is also risky to emerging firms. This means that the project starts afresh from the initial stages to match the changes noticed. It can demotivate workers or incur huge expenses leading to unsuccessful completion of the work [9]. Design changes should be communicated to all parties to prepare them for new instructions before the commencement of the project. This is because a design provides the overall structure of executing the work. As a result, any slight changes pose new challenges that need proper scrutiny before been approved by the management. Information technology concepts hired should also detect errors at initial stages to avoid future challenges of changing the entire design work.
There are also risks associated with project management models. Project management risks are internal challenges brought about by mismanagement and lack of defined strategies. For instance, improper ways of communication show incompetency of the management to deal with matters arising. There should be coordination between the management and workers at all levels of operations because this enhances a working relationship. In oil and gas projects, project management risks causes come in the form of peoples’ approaches and principles, physical environment and other operational activities [1]. For instance, highlighting the objectives of a project provides is a clear method of executing the work. This implies that objectives are guidelines that show workers the expected target to realize. Objectives must be drafted before the start of the work to ensure that all protocols and resources are available. As a result, there must be methods set to define the objectives such as periods and available resources. Oil and gas companies should set intentions that help in reducing expenses and improving performance of the firm. This also ensures that all tools and policies applied to promote the achievement of the objective. Successful project management must have objectives that are measurable, exact, possible and realistic and time bound (SMART) to facilitate an easy transition of models [1]. Another challenge of project management involves the lack of the executive managers’ support. This implies that if the executive managers do not support operational managers and other junior staffs, then the project might face challenges. The support of the executive managers is vital because it promotes coordination and flow of activities [1]. This provides direction in the organizations since all workers are able to receive approvals from the senior management. This is because they ensure that the distribution and utilization of resources is appropriate by allocating equal budge...