Analyzing Contingency Cost Risks in a Pipeline EPC Project Using a Monte Carlo Simulation
Publication: Journal of Pipeline Systems Engineering and Practice
Volume 14, Issue 3
Abstract
Indonesia was the eighth largest exporter of liquefied natural gas in 2021, with a total export volume of . Therefore, transporting natural gas becomes an essential program to support the increase of liquefied natural gas. Through the Cooperation Contract Contractors (CCC), a cooperation contract between government of Indonesia (GoI) and Oil Company, the government appoints the engineering, procurement, and construction (EPC) contractor to build the pipeline. However, EPC contractors are at significant risk in calculating contingency costs resulting in cost overruns. This study identified contingency risk factors, determined the most effective risks, and developed contingency costs for EPC pipeline projects. A literature review was conducted, a probability matrix for risk ranks was developed, and Monte Carlo simulation was used. The results indicated that there are risk factors significantly influencing the calculation of contingency costs for EPC pipeline projects, namely changes in the scope of work, delays in permits from the government or regulatory authorities, issues with local communities and the project environment, delays in the construction work, and the material delivery of long-lead items. Based on these factors, the contingency cost risk in a pipeline EPC project determined using Monte Carlo simulation was 14.87%. Before utilizing risk modeling, an efficiency of 4.23%, or a cost savings of $3,323,064.71, was achieved. For future research, it would be preferable to simulate more than three sample EPC projects to analyze variances in contingency costs.
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Data Availability Statement
Some or all data, models, or code that support the findings of this study are available from the corresponding author upon reasonable request.
Acknowledgments
Some parts of this study were based on the research work conducted during the thesis research at Universitas Pelita Harapan.
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Published In
Journal of Pipeline Systems Engineering and Practice
Volume 14 • Issue 3 • August 2023
Copyright
© 2023 American Society of Civil Engineers.
History
Received: May 12, 2022
Accepted: Mar 13, 2023
Published online: May 31, 2023
Published in print: Aug 1, 2023
Discussion open until: Oct 31, 2023
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