By: Kartikay Sharma --
27 March, 2014
India imports close to 3/4th of its crude oil requirement. As the import bills on crude oil is constantly rising, the Indian Oil and Gas sector could potentially attract investments to the tune of USD 80 billion over a period of next five years. The major activities where this investment will go are Refining, Petrochemical, Pipeline, Storage, Exploration and Production. These expansions are throughout the value chain, which includes exploration, production, refining, petrochemicals etc. As the industry is a high risk industry and its projects are highly technical and cost intensive, there are certain challenges which are common to the construction of such mega projects. The article discusses these challenges, impact and their mitigation strategies which can be used by the operator and the contractor. ? Land Acquisition: It continues to be one of the main challenges which are faced by the EPC sector across industries. The Oil and Gas projects usually need large areas, especially pipelines which run across the country. ? Impact: Oil and Gas industry in particular is massively impacted by land acquisition issues. These issues tend to delay the projects by many months, which then lead to an increase in the initial estimated cost of the project by a fair percentage. ? Quality Concerns: Oil and gas being a very high risk industry, quality becomes a very essential factor in a project. Hence, it becomes essential that the material and services used are of the best possible quality and the project designs are accurate and in line with the client requirements. ? Impact: Quality issues directly impacts the schedule and cost of the oil and gas projects. At most times these issues lead to loss of very valuable man-hours as labor cost forms a considerable component of any oil and gas project. ? Procurement: Procurement can sometimes decide the fate of a project in oil and gas industry. With procurement taking strategic importance slowly in the industry, it becomes important that the correct practices are followed in this space so that the project is completed on time and in budget. ? Impact: Underdeveloped procurement practices can lead to the procurement team purchasing raw materials and services at relatively higher rates. Also the inefficient procurement practices can lead to quality issues if the vendor from where the raw material is purchased is not properly analyzed on certain critical parameters.