5 EPC EPC vs. EPCM Lump-Sum approach “Cheapest is Best” mentality Larger $ value of projects/contracts >>>>>>> Higher $ value of L.D.’s, Liabilities & RisksAll risks on Contractors shoulders (Material price hikes, Exchange Risk, Unknown site conditions,New Technologies etc.)High Contingencies built in as a resultLack of Control/Quality/Schedule
6 EPC TYPE CATEGORY NEGATIVE EPC CAPEX Generally higher capital cost, due to dual contingencies.RISKCurrency risk if long-term cover. (years )Claims are high probability.SCHEDULEContractor will not accelerate if LD’s > acceleration costs.LD’s become contentious issue.Optimism in schedule performance.EXECUTIONPlant completion/ handover often problematic.Client/Contractor relationships.Construction subs often poor performers, due to low prices.DESIGNClient /PMC can’t easily re-engineer improvement/optimization.Engineering responsibility fragmented.Client has less control over detailed design.COMMERCIALProtracted bidding phase & contract negotiation.Low costs drive towards poor quality equipment/materials.Late delivery of project..Loss of revenue to client.PEOPLENeeds very high calibre Client/PMC Team.Contractor always working in his own best interests.
7 EPCM TYPE CATEGORY POSITIVE EPCM (Cost – re) CAPEX Lower CAPEX is possible, due to less contingency.RISKEliminate 1/2 cycles of bidding from schedule.Can allow schedule to be prioritised.SCHEDULEGood quality subcontractors possible.Wider contractor bid slate with high calibre E & C co’s.EXECUTIONCan rollover FEED into detail design.Long lead procurement can be released earlier.DESIGNAchieves optimal design solution.Can introduce enhancements/optimization.Protection of Intellectual Property.Engineering is seamless.Restricted to qualified process designers.COMMERCIALClient usually has stronger buying power.PEOPLEGood quality project management team (PMT)Extension of Clients project team.
8 Oil & Gas - Forecasted Projects, Investments in the GCC Countries (2010-2014) 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
9 Summary Advantages of EPCM over EPC Lower Cost ,eg potential saving of 15-25% on above $290 BillionBetter control of Quality,Better control of Schedule,Owner gets what he wantsEtc.