Quantitative Risk-Analysis Process of Oil and Gas Upstream Service Contracts
Publication: Practice Periodical on Structural Design and Construction
Volume 27, Issue 2
Abstract
Contracts are a means to allocate the scope of work and associated risks to the owners and contractors involved. In case of megaprojects, because there is much at stake, identifying risk factors of megaprojects and estimating their likelihoods and consequences are vital. Likewise, analyzing how the contract risks are shared between parties and predicting the possibilities of achieving the contract goals are important practices as well. This paper, through an exploratory research, describes a risk-analysis procedure and the results of applying probabilistic risk analysis (PRA) techniques on the new Iranian upstream contract framework for a real-world gas megaproject. Such a process consists of (1) gathering and reporting all risk factors affecting construction schedule, cost, internal rate of return (IRR), and gross and net revenue; (2) eliciting and debiasing expert judgments; (3) building a mathematical model to implement Monte Carlo simulation; and (4) providing the probability distribution function (PDF) of project financial parameters. Results of this paper are of interest to practitioners involved in contractual negotiations as well as those who are responsible for developing financial framework of upstream service contracts.
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Data Availability Statement
Some or all data, models, or code generated or used during the study are proprietary or confidential in nature and may only be provided with restrictions. These items include the name of the project that was used as a case study and its actual price and the cost of the contract.
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Practice Periodical on Structural Design and Construction
Volume 27 • Issue 2 • May 2022
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© 2022 American Society of Civil Engineers.
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Received: Jun 9, 2021
Accepted: Dec 2, 2021
Published online: Feb 11, 2022
Published in print: May 1, 2022
Discussion open until: Jul 11, 2022
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