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List of figures

Figure 2-1: Distribution of oil and gas fields and related infrastructure in Niger Delta area of Nigeria Figure 1-2: Representation of risk management process. .. Figure 2-3: Frame ork for risk management tools Figure !-1: Distribution of respondents" #ob position Figure !-2: Distribution of respondents" $ears of orking e%perience Figure !-3: Distribution of respondents" age group Figure !-!: Distribution of pro#ect t$pes e%ecuted b$ respondents Figure !-&: Distribution of pro#ect ser'ices rendered b$ respondents Figure !-(: Distribution of respondents" organi)ations $ears of e%perience Figure !-*: Distribution of respondents" organi)ation"s emplo$ee si)e

List of +ables
+able !-1: Distribution of sur'e$ responses +able !-2: Results of respondents" #ob position +able !-3: Results of respondents" $ears of orking e%perience +able !-!: Results of respondents" age group +able !-&: Results of pro#ect t$pes e%ecuted b$ respondents +able !-(: Results of pro#ect ser'ices rendered b$ respondents +able !-*: Results of respondents" organi)ations $ears of e%perience +able !-,: Results of respondents" organi)ation"s emplo$ee si)e +able !--: Risk ranking for Nigerian oil and gas construction pro#ects +able !-1.: +op ten risks statistics for Nigerian oil and gas construction pro#ects

Acknowledgements /ll t0anks goes to 1od /lmig0t$ 0o b$ 0is infinite po er 0as made it possible to complete t0e researc0 dissertation successfull$. 2 attest to $our steadfast protection and guidance in m$ life. +o m$ lo'ing ife3 4aka and m$ son 5melie for perse'ering3 suffering and supporting me during t0e process of stud$ing for t0is degree and in riting t0e researc0 dissertation. +o m$ dad and mum3 Daniel and Florence3 t0ank $ou for bringing me up to t0is stage of m$ life. 6ncle 6c0e3 /unt 70ioma3 m$ brot0er 5meka and m$ best man3 70i#ioke3 it0out $ou gu$s 2 ould not 0a'e made it t0is far to reac0 t0is point of m$ life. +0ank $ou all for being a onderful famil$. 2 ackno ledge t0e close contact moti'ation3 assistance and guidance gi'en to me b$ m$ dissertation super'isor3 Dr. 1raeme 8o les. /ll t0anks to t0e entire facult$ staff in t0e 9c0ool of t0e 8uilt 5n'ironment t0at 0as assisted me during m$ sta$ at :eriot- att 6ni'ersit$. 2 gi'e special t0anks to all 0o 0as contributed as respondents to t0e researc0 dissertation. 2 0ope t0at t0is researc0 adds 'alue to $our risk management practices in $our 'arious pro#ects and organi)ations. Lastl$3 2 recogni)e all m$ friends and ell is0ers in Nigeria and 6nited 4ingdom 0o 0as been a second famil$ to me. 2 t0ank $ou for all $our kindness and lo'e.

Abstract Risk management is a 'ital decision making process t0at is useful for t0e successful deli'er$ of pro#ects carried out b$ 'arious organi)ations. :o e'er3 t0e practice is still not often carried out during t0e implementation of pro#ects in de'eloping countries; 0ic0 includes Nigeria. +0e purpose of t0e researc0 dissertation is to identif$ t0e ma#or risks affecting oil and gas construction pro#ects in Nigeria and to determine suitable risk response strategies to mitigate t0e ma#or risks. / <uestionnaire sur'e$ as carried out on emplo$ees and e%ecuti'es orking in Nigerian oil and gas construction organi)ations so as to identif$ t0e ma#or risks t0at emanate on oil and gas pro#ects 'ia statistical anal$sis. 2nformal in-dept0 inter'ie s conducted it0 top managers; ere also used to deri'e strategies so as to mitigate t0e identified risks. Results of t0e researc0 found t0at securit$ t0reats from neig0boring residents; incompetence of pro#ect team members; poor designs; late internal appro'als from clients; and poor and inade<uate tendering3 ere t0e top-fi'e ma#or risks t0at emanate in oil and gas pro#ects in Nigeria. +0e pro#ect e%ecuti'es proposed amending compulsor$ land use act and pa$ing compensation fees to o ners of ac<uired oil and gas fields; enforcing corporate social responsibilit$ =79R>3 enforcing la s on aste disposal3 staff training3 partnering3 ade<uate contractor selection3 using concurrent engineering and total <ualit$ management practices on pro#ects3 and reduction in gas flaring; as suitable strategies to mitigate t0e ma#or pro#ect risks in Nigerian oil and gas pro#ects. +0ere 0a'e been 'arious risk management researc0es on t0e management of pro#ects in de'eloping countries. :o e'er3 t0e researc0 into t0e risk management practices in oil and gas construction pro#ects in Nigeria is 'er$ significant considering t0at t0e sector is t0e most important contributor to t0e total re'enue of t0e Nigerian econom$; t0e 'olatile nature of products; and c0aracteristics of t0e pro#ect en'ironment 0ere t0e operation and

processes are carried out3 in a constantl$ c0anging d$namic en'ironment to enormous risks.

0ic0 is e%posed

Chapter 1: Introduction
1.1. Research background:

1loball$3 in t0e contemporar$ econom$3 oil and gas are 'er$ 'ital elements t0at determine economic forecasting and performance. 7rude oil plus ot0er refined petroleum products are t0e largest single article in international trade eit0er measured b$ 'alue or 'olume =9te'ens3 2..&> ?il and gas is t0e most important energ$ source and it 0as !.@ s0are in orld ide energ$ consumption and -*@ in t0e transport sector. ?il and gas infrastructures bot0 indirectl$ or directl$; pro'ide emplo$ment to a lot of people; and contribute a ma#or part of t0e orld 1ross Domestic Aroduct =1DA>. =8a#pai and 1upta3 2..*> +0erefore3 it could be argued t0at t0e orld econom$ depends on oil and gas. Nigeria is t0e most significant oil producer in Best /frica. +0e ?il and 1as Cournal =?1C>3 in 2..(3 estimated Nigeria as t0e largest o ner of natural gas reser'es in /frica and t0e se'ent0 largest orld ide =?1C3 2..( cited in 1albrait03 2..,>; it0 an estimated crude oil reser'es totaling 33.- billion barrels. 2n 2..&3 t0ere as an a'erage oil production of 2.( million barrels per da$ =bblDd>. Nigeria declared in ?ctober 2..!3 a record of natural gas reser'es to be as 0ig0 as ((. trillions cubic feet =tcf>. Eost of t0e natural gas is found in !

crude oil as free gas and because Nigeria lacks t0e e%pertise and infrastructure to produce t0e constituents of natural gas3 t0e gases are flared. +0us3 Nigeria flares !3 percent of t0e total annual natural gas produced3 t0us3 possessing t0e record as t0e countr$ t0at flares t0e most natural gas t0an an$ ot0er countr$ of t0e orld =1albrait03 2..,> 2n Nigeria3 t0e oil and gas sector 0as a ma#or influence in s0aping t0e nations econom$ because it pla$s a ma#or role as t0e prominent re'enue earner and contributes o'er ,.@ of t0e nations 1ross Domestic Aroduct. =/de usi3 1--,; DAR3 2..&> +0e ratio of oil re'enue to total go'ernment re'enue 0as increased from 2(.3 per cent to !*.& per cent from 1-*. to 2... respecti'el$3 it0 some percentage increases and decreases in bet een t0e $ears. =2bra0im3 2..,> +oda$3 t0e Nigerian oil and gas industr$ 0as a strong gro t0 rate and t0is 0as increased t0e demands for t0e construction of ne oil and gas structures and facilities 0ic0 are capital intensi'e. +0erefore3 ad'anced strategies need to be de'eloped for t0e successful implementation of t0ese pro#ects 0ic0 0a'e 0uge capital in'estment3 tig0t sc0edules3 large stake0older in'ol'ement3 comple% tec0nolog$ usage3 and 0ig0 social and en'ironmental impact. /ll t0ese c0aracteri)e t0e risks t0at oil and gas construction pro#ects are e%posed to. =+0u$et3 et al3 2..*> Risks are al a$s present on pro#ects because of t0e continuous e%posure to bot0 internal risks =construction3 design3 contractual3 financial3 personal3 stake0olders and operational risks> and e%ternal risks =en'ironmental3 social3 political3 economical3 logistical3 public and legal risks> +0e sc0edule3 cost and <ualit$ of3 pro#ects can be influenced negati'el$ b$ t0ese risks. =70aroenngam and Fe03 1---> B0en 0armful effects emanate from risk e'ents on oil and pro#ects due to unforeseen circumstances3 t0e pro#ects aims and ob#ecti'es are diminis0ed or 0alted. Risk management endea'ors to carr$ out a detailed stud$ of all t0e aspects in pro#ect management so as to de'elop an action or a mitigation strateg$ or plan for all t0e controllable and uncontrollable risk e'ents. =/0med3 et al.3 2..*> +0us3 making risk management essential to t0e successful deli'er$ of pro#ects.

&

=+0u$et3 et al3 2..*> argues t0at in t0e construction industr$3 risks usuall$ cause cost and time o'erruns on pro#ects because of t0e inabilit$ of pro#ect managers in managing pro#ect risks effecti'el$3 t0us3 dela$ing t0e planned sc0edule or e%ceeding t0e planned budget of pro#ects. :o e'er3 it 0as been re'ealed t0at t0e oil and gas industr$ 0as greater risk management e%perience 0en compared it0 t0e construction sector because e'idence 0as s0o n t0at risk management is routine it0in t0e oil and gas industr$ 0ile onl$ fe companies emplo$ it in t0e construction industr$. =Lock3 1--2 cited in 8aker3 et al3 1---> +0e benefits and opportunities risk management offer to stake0olders of oil and gas construction pro#ects are enormous; alt0oug03 t0ere are some c0allenges encountered during t0e processes and practices 0ic0 could 0inder t0e reali)ation of t0e pro#ects ob#ecti'es. +0erefore3 t0e central focus of t0e researc0 dissertation is to use risk management practices to e%plore t0e ma#or sources of risks t0at emanate 0ile construction acti'ities are carried out on oil and gas construction pro#ects in Nigeria"s oil and gas sector. 1.2. Aims and objectives of research:

+0e researc0 aims at identif$ing t0e risk factors t0at affect oil and gas construction pro#ects and deri'e suitable risk responses for t0em it0 a focus on t0e Nigerian oil and gas sector. +0e researc0 ob#ecti'es set out for reali)ing t0e aim of t0e stud$ are as follo s: 2.1 +o determine t0e ma#or sources of risks affecting oil and gas construction pro#ects in Nigeria 2.2 +o in'estigate t0e fre<uenc$ of occurrence and t0e degree of impacts of t0e identified risks in oil and gas construction pro#ects in Nigeria. 2.3 +o in'estigate if most oil and gas organi)ations carr$ out risk management practices in t0eir 'arious oil and gas construction pro#ects in Nigeria. 2.! +o determine effecti'e risk management strategies to efficientl$ mitigate t0e identified ma#or risks so as to pro'ide suitable recommendations for en0ancing risk management practices in Nigeria"s oil and gas construction pro#ects. 1. . Relevance of the research:

+0e researc0 into t0e risk management practices in Nigeria"s oil and gas construction pro#ects ill be 'aluable to upstream and do nstream oil and gas construction stake0olders =clients3 contractors3 researc0ers and all interested in'estors in t0e sector> as follo s: 1. 9take0olders ill be pro'ided it0 necessar$ information for en0ancing risk management practices. 2. 7onstruction industr$ and oil and gas industr$ stake0olders ill gain kno ledge from eac0 ot0ers e%periences and lessons learnt 3. 2t ill pro'ide in'estors it0 an insig0t of contemporar$ risk management practices and appropriate risk response strategies to adopt for future pro#ects. !. Researc0ers ill be pro'ided it0 a bod$ of kno ledge for carr$ing out future studies.

1.!.

"tructure of dissertation:

70apters 2: +0e c0apter ill consist of a re'ie of literature 0ic0 ill pro'ide useful kno ledge it0 t0e 0elp of past researc0 publications into t0e nature of pro#ects; oil and gas pro#ects; and a background o'er'ie of t0e features and c0aracteristics of t0e Nigerian oil and gas industr$ it0 emp0asis on bot0 t0e upstream and do nstream sector. +0e risk concept3 t$pes and sources of risks t0at originate in oil and gas construction pro#ects ill be in'estigated 0ile criticall$ anal$)ing t0e fre<uenc$ and impact of t0ese risks. +0e concept of risk management as practiced in oil and gas construction and t0e tools and tec0ni<ues t0at are commonl$ used ill be in'estigated. +0e secondar$ data for t0e researc0 literature ill be sourced from ne spapers3 #ournals3 books3 and electronic media. 70apters 3: +0e c0apter ill e%plain t0e s$stematic processes 0ic0 ill be used for carr$ing out t0e researc0 sur'e$ so as to determine t0e ma#or risks t0at affect oil and gas construction pro#ects in Nigeria. +0e general met0odolog$ ill 'alidate t0e c0osen researc0 instruments3 met0ods3 population sample and t0e tec0ni<ues used for anal$)ing data in t0e researc0. +0e section ill also discuss t0e researc0 delimitations and et0ical issues. 70apters !: +0e c0apter ill in'ol'e anal$)ing and discussing t0e findings from t0e researc0 sur'e$ t0at as carried out on t0e stake0olders of Nigeria oil and gas industr$ in *

'ie of determining t0e ma#or risks t0at affect oil and gas construction pro#ects; and effecti'e strategies ill be pro'ided to effecti'el$ mitigate t0e risks. 70apters &: +0e c0apter ill briefl$ re'ie t0e aims and ob#ecti'es of t0e researc0 as compared to t0e findings in t0e researc0 carried out on t0e stake0olders of Nigeria oil and gas industr$. 8eneficial and useful strategies to mitigate t0e ma#or risks ill be recommended for effecti'e risk management practices in Nigerian oil and gas construction pro#ects. /lso3 opportunities for future researc0 and researc0 limitations ill be ackno ledged.

Chapter 2: #iterature review


2.1 $rojects% risks and risk management in &igerian 'il and (as Industr):

+0e main purpose of t0e c0apter is to gi'e an o'er'ie of oil and gas pro#ects3 Nigeria oil and gas industr$3 t0e t$pes and sources of risks t0at emanate on oil and gas construction pro#ects in Nigeria it0 emp0asis on bot0 t0e upstream and do nstream sector. /lso3 t0e sub#ect risk management as practiced3 and t0e tec0ni<ues used in carr$ing out risk management processes in oil and gas construction pro#ects ill be discussed. 2.2 *ackground:

AE2 =2..!> defines a pro#ect3 as a temporar$ undertaking for creating a uni<ue product or ser'ice. +0ese uni<ue ser'ices are created 0en clients3 contractors and all stake0olders collaborate to deli'er construction acti'ities bot0 in construction industr$ pro#ects and in oil and gas sector construction pro#ects. Aro#ects are embarked on b$ companies and corporations in order to ac0ie'e a strategic ob#ecti'e or a business need. Aro#ects are relati'el$ comple%3 usuall$ 0a'e s0ort time span3 a start and finis0 date3 defined cost3 time and <ualit$ =performance> ob#ecti'es and in'ol'es

t0e collaboration of multidisciplinar$ teams orking toget0er as one team. =Roberts3 et al3 2..3> +0ere are man$ factors t0at cause dela$s to t0e successful deli'er$ of construction pro#ects as re'ie s and careful appraisals b$ lots of scientific reports and #ournals s0o it. Luu3 et al =2..,> re'eals t0at t0e dela$ factors are grouped into nine categories 0ic0 are; o ner3 contractor3 consultant3 design3 material3 orkforce3 e<uipment3 en'ironment and pro#ect related factors. +0ese are caused b$ to mention a fe b$; clients3 contractors3 consultantsDdesigners3 materials3 orkforce3 e<uipment3 go'ernment regulations and la s3 and pro#ect deli'er$ s$stem respecti'el$. /ll t0ese are potential sources of risks 0ic0 oil and gas construction pro#ects are e%posed to. /bout ,.@ of Nigeria"s capital and recurrent e%penditure and -.@ of t0e countr$"s earnings from foreign e%c0ange all come from petroleum =/de usi3 1--,> +0is came as a result of t0e first e%ploration of crude oil in 1-&(3 at ?lobiri and from t0en on ards3 crude oil sales 0as risen from ..1,! billion barrel of oil and 2.2(. billion cubic feet of gas in 1-&, to 2&.-3 billion barrels of oil3 3.,. billion barrels of condensate and 1&, trillion cubic feet of gas3 as at December3 2... =NNA73 2..,>. +0us3 making t0e oil and gas industr$ t0e strengt0 of t0e Nigerian econom$. ?il and gas construction pro#ects in Nigeria are usuall$ implemented t0roug0 #oint 'enture partners0ips 0ic0 in'ol'e multinational companies like 5%%on Eobil3 70e'ron3 +otalfina5lf3 90ell3 /gip3 9c0lumberger3 :alliburton3 etc; teaming up it0 indigenous companies like NNA73 DAR3 N5+7?3 7onoil3 /A3 etc. +0e multinational partners suppl$ 0ig0 tec0nologies and large capital needed for carr$ing out construction pro#ects 0ic0 t0e Nigerian partners still lack. +0e presence of t0e foreign partners3 e%pose t0e pro#ects to risks like financial risks3 political3 polic$ and legal risks3 differences in practices bet een foreign and indigenous partners3 etc. =+0u$et3 et al3 2..*> Nigeria"s national currenc$ =Naira> is relati'el$ eak internationall$; 0ile t0e inflation rate is <uite 0ig0. 2n t0is 'ie 3 oil and gas construction pro#ects in Nigeria pose 'arious risks 0ic0 can cause ad'erse effects on t0e nation"s econom$3 if t0ere are lapses it0 respect to good strategic and operational pro#ect implementation tec0ni<ues. -

+0e construction processes adopted in t0e oil and gas sector in'ol'es se'eral stages 0ic0 are as follo s: 7lientDo ner inception stage; Feasibilit$ stage; ?utline design stage; Detailed design stage; 7ontracts and Arocurement stage; Fabrication and 7onstruction =ons0ore> stage; :ook-up =?ffs0ore> stage; 7ommissioning stage; ?peration stage; Finall$3 assembling of a decommissioning document stage. Nigeria is internationall$ recogni)ed for its oil and gas e%ploration and production acti'ities. +0e oil and gas industr$ comprise of t o uni<ue sectors; t0e do nstream and t0e upstream sector 0ic0 are all in t0e Niger Delta region. ?il and gas construction pro#ect"s acti'ities are carried out in bot0 sectors. +0e distribution of oil and gas fields and t0e related infrastructure in t0e Niger Delta region is s0o n in figure 2-1 as follo s: +ig 2,1: -istribution of oil and gas fields and related infrastructure in &iger -elta area of &igeria. "ource .Akor and Igho% 2//20

1.

+0e upstream acti'ities are usuall$ primar$ and range from e%plorator$Ddrilling sur'e$s3 field de'elopment3 do n to t0e decommissioning stage of oil and gas construction pro#ects. /ll t0ese re<uire 0uge tec0nological and financial input. +0e do nstream acti'ities are usuall$ secondar$ and in'ol'e more of manufacturing processes 0ere crude petroleum and its related gases are transformed into final products suc0 as 0eating oil3 gasoline3 a%3 lubricants and natural gas. /lso3 intermediate products like industrial fuel3 a'iation fuel3 asp0alt3 bitumen3 petroc0emicals3 cooking gas and li<uefied natural gas are gotten during t0is stage. /ll t0ese are 'alue adding processes t0at e%pose oil and gas pro#ects to enormous risks. =2bra0im3 2..,>

11

2.

1he 2pstream "ector:

6pstream sector acti'ities in'ol'es3 t0e searc0 for prospecti'e e%plorator$ and drilling ells3 oil and gas fields 0ic0 ma$ be under ater or underground. ?peration of t0e oil ell follo s t0e former so as to reco'er and con'e$ t0e constituent ra natural gas or crude oil to t0e ground surface. +0e upstream sector is furt0er broken do n into offs0ore and ons0ore oil and gas fields. / t$pical offs0ore installation or platform is built it0 pile foundations; consists of a substructure and mostl$ fabricated it0 steel so as to support t0e topsides 0ic0 are made up of one or more deck le'els. +0e topsides comprise; compact process plants3 it0 a steel framing 0ic0 protects t0e process plants; ell0ead areas from 0ic0 pipelines carr$ing crude oil or 0$drocarbon fluids from reser'oirs terminate; production separators =for separation of t0e 0$drocarbon fluids>; compressors = 0ere gases coming from t0e separators are compressed3 purified3 dried and organi)ed for e%port; and lastl$3 a li'ing <uarters building for accommodation of t0e platform operators. =Louca and Eo0ammed /li3 2..*> /ll t0ese facilities and operations make t0e offs0ore platforms3 a 'er$ 'olatile and 0ostile en'ironment 0ic0 is sub#ect to 0ealt0 and safet$ risks of 0$drocarbon gas e%plosions 0ic0 e'entuall$3 causes a fire outbreak or in0alation of poisonous gases b$ operators due to pipe leakages. Ean$ of t0e offs0ore industr$ designs originate from t0e t$pical 1ulf of Ee%ico designs and de'elopment 0ere 1..-$ear storm e'ents are used it0 significant energ$ generating a'e periods of 13-1( seconds. =9immons and Du0ane$3 2..,> +0e Best /frican case is different; because t0e offs0ore oil fields o ned b$ Nigeria go'ernment are all in t0e 1ulf of 1uinea and t0e sea conditions in t0e offs0ore production area3 are usuall$ relati'el$ mild compared it0 man$ ot0er offs0ore production areas. +0is factor en0ances t0e use of large Floating3 Aroduction3 9torage and ?ffloading =FA9?> unit for carr$ing out offs0ore operations; and t0e fi%ed platforms can be lig0ter as compared it0 ot0er oil and gas fields like t0e Nort0 9ea and t0e 1ulf of Ee%ico. =1albrait03 2..,> +0e upstream sector 0as se'eral establis0ed in'estment opportunities t0at abound in t0e petroleum industr$ 0ic0 attract foreign multinationals to tender for future pro#ects. +0e$ are as follo s: 12

2. 7i'il orks Gconstruction of mud pits3 concrete orks at rig sites 22. 9ur'e$ing G tropical and planimetric; and sea bottom sur'e$ 222. 9eismic data collection and interpretation 2H. 7rude oil storage and transportation H. Aipelining H2. Drilling operations H22. 5%ploration and production of oil and gas products H222. 5%ploration for t0e de'elopment of local substitutes for substances suc0 as pumps3 medium pressure 'al'es3 drilling mud3 s0allo drilling e<uipment3 bits drilling cement3 fittings3 etc. 2I. Eanufacturing of consumable materials in e%ploration suc0 as e%plosi'es3 detonators3 steel casting3 magnetic tapes3 etc. =NNA73 2..,> 2.! 1he -ownstream "ector:

+0e do nstream sector of t0e Nigerian oil and gas industr$"s acti'ities in'ol'es; refining and distribution in addition to marketing of all petroleum products. +0e refining of crude oil is regulated and operated b$ t0e Nigerian go'ernment under t0e directi'es of t0e Nigerian National Aetroleum 7orporation =NNA7>. During t0e refining process3 crude oil is con'erted into end user products like dual purpose kerosene =DA4>3 automoti'e gas oil =/1?>3 base oils3 premium motor spirit =AE9>3 and bitumen. +0e marketing and distribution of petroleum products comprises t0e transfer of petroleum products from storage depots and refineries and t0e sales to t0e end users at storage tanks3 ser'ice stations and offs0ore users. +0ese are done b$ eit0er pri'ate or public companies. =NNA73 2..,> +0e do nstream oil and gas sector of Nigeria initiall$3 as regulated 1..@ b$ t0e go'ernment3 it0 t0e go'ernment o ning t0e controlling stake in almost all do nstream industr$ businesses. +0e go'ernment controlled and fi%ed t0e retail and 0ole sale prices of t0ese petroleum products. +0e reduced competition and lo le'el in'estment generated abnormalities 0ic0 ere potential sources of risks. +0e$ are as follo s: =AAAR/3 2..,>: 1. Eonopolistic practices in t0e suppl$ s$stem 2. Aetroleum products smuggling 13

3. Aoor maintenance of facilities and infrastructures !. 5%istence of subsid$ from t0e go'ernment &. 2rregularities in distribution and suppl$ of products 0ic0 generated scarcit$ of petroleum products3 long <ueues at filling3 etc. 2n searc0 of a lasting solution to t0e abo'e setbacks3 t0e Nigerian go'ernment carried out a p0ased deregulation of t0e do nstream sector 0ic0 in'ol'ed; pri'ati)ation or commerciali)ation and liberali)ation of t0e industr$. +0e pri'ati)ation as carried out b$ t0e go'ernment transferring 1..@ of all go'ernment o ned enterprises and facilities to pri'ate indi'iduals on s0are0olding grounds. +0e liberali)ation as carried out b$ t0e go'ernment in'ol'ing pri'ate compan$ participation in do nstream acti'ities b$ promotion of increased competition; eradicating monopol$; fair pricing and a'ailabilit$ of products to end users; and efficienc$ and re'i'al of t0e refineries. +0e do nstream sector 0as se'eral establis0ed in'estment opportunities t0at abound in t0e petroleum industr$ 0ic0 attract foreign multinationals to tender for future pro#ects. +0e$ are as follo s =NNA73 2..,>: 1. Aroduction and Earketing of Li<uefied Natural 1as =LN1> for domestic use 2. Eanufacturing of LA1 c$linders for domestic use3 installation of filling plants3 regulators and 'al'es3 retail de'elopment and distribution of simple3 fle%ible and less e%pensi'e gas to burners so as to encourage t0e use of gas instead of ood. 3. 5stablis0ment of processing plants and industries for t0e production of: Refined mineral oil3 grease and petroleum #ell$. 8ituminous based aterDdamp proof building materials e.g. floor tiles3 roofing s0eets3 tarpaulin3 8uilding of asp0alt storage3 blending and packing for e%portation

!. 5stablis0ment of c0emical industries e.g. distillation units for t0e production of Nap0t0a and ot0er special boiling point sol'ents used in food processing. &. 7arbon 8lack3 Linear /lk$l 8en)ene and Aol$prop$lene producing industries. 1!

(. De'elopment of A0ase 22 =A0ase 222 to commence later> in Nigeria"s Aetroc0emical Arogramme. *. +0e NLN1 Aro#ects. ,. 9mall-scale production of c0emicals and sol'ents e.g. c0lorinated met0ane3 Formalde0$de3 /cet$lene etc. from natural gas. -. 7rude oil refining it0 efficient e%port facilities. 1.. 7ompanies it0 t0e ade<uate tec0nolog$ to undertake turn around maintenance of t0e refineries. +0ere is a tremendous scope for small-scale #oint 'enture manufacturing concerns it0 foreign tec0nical partners. 11. Aroducts marketing and transportation associated it0 marketing and distribution of products; 0ic0 is a c0ain of maintenance and manufacturing businesses e.g. LA1 bottles and accessories3 lubricating oil reprocessing3 oil cans reconditioning3 etc. +0e petroleum facilities in t0e do nstream sector are classified into t0ree categories. +0e$ are as follo s =AAAR/3 2..,b>: 1. Ea#or Earketers 0ic0 are si% =(> in number 2. 2ndependent Earketers 0ic0 are se'en t0ousand3 nine 0undred and fort$ t o in number =*-!2> 3. NNA7 Eega 9tations 0ic0 comprises of fourteen =1!> retail outlets nation ide 2n Nigerian do nstream sector3 t0e disruptions 0ic0 0a'e emanated 0a'e more immediate and emergent political and domestic implications to t0e Nigerian econom$ and to t0e citi)ens as a 0ole t0an t0ose t0at occur in t0e upstream sector =40an3 1--!> +0e Department of Aetroleum Resources =DAR> is t0e regulator$ go'ernment bod$ in Nigeria oil and gas sector; t0at inspects and ensures t0at operators compl$ it0 t0e oil and gas industr$ regulations bot0 in t0e upstream and do nstream sector. =DRR3 2..(> / t$pical e%ample is; 0en an unsafe or unaut0ori)ed construction orks3 or construction orks done t0at do not compl$ it0 t0e oil and gas industr$ standards are carried out b$ oil companies. +0is could lead to DAR imposing fines on t0em or can also lead to closing do n t0e facilit$ 0ic0 ill affect t0e compan$"s corporate image as ell as t0eir financial position. 1&

/ clear understanding and kno ledge of risks3 t0e t$pes and t0e 'arious forms in 0ic0 t0e$ take in Nigeria"s oil and gas pro#ects is 'er$ essential and important for t0e successful management and deli'er$ of pro#ects. +0us3 an urgent demand is re<uired for effecti'e risk management in oil and gas construction pro#ect management in bot0 t0e upstream and do nstream sectors of Nigerian oil and gas industr$. 2.3 'verview of Risk:

Risks are usuall$ ine'itable and in0erent parts of indi'iduals" public and business life. +0ere is al a$s a probabilit$ t0at t0ings ill go contrar$ to laid do n plans. Ean$ tragedies3 incidents and disasters occur on pro#ects because people did not kno about; underestimated or ne'er kne 0o to respond to t0e risk e'ents and uncertainties surrounding t0e #ob functions t0e$ carr$ out. Risks are prominent in all aspects and at all le'els of a pro#ect"s or organi)ation"s acti'ities. =+c0anko'a3 2..2> / t$pical risk e%ample is to imagine an offs0ore platform operator smoking in t0e production process area or non smoking area in an offs0ore platform. Ne'ert0eless3 imagine a situation 0ereb$ t0e un<uenc0ed cigarette mistakenl$ falls do n and lands on t0e 0ig0l$ combustible petroleum process plantJ Definitel$3 an unpleasant result ill emanate out of t0e incident. +0e pre'ious e%ample buttresses on t0e fact t0at t0e e%istence of risks are often underestimated because people usuall$ are indifferent to ards risks. ?n t0e contrar$3 in recent times3 people can no ork it0 uncertaint$ because risks can no be managed rationall$.

Flanagan and Norman3 =1--3> re'eals t0at t0e construction industr$ is sub#ected to more uncertaint$ and risk as compared to man$ ot0er industries because t0e processes b$ 0ic0 pro#ects take from t0e initial capital in'estment appraisal stage up to t0e completion stage and operational stage are 'er$ comple%; in'ol'es a lot of time consuming design and production processes3 a lot of skilled labour force it0 different cultures and interests 0ic0 demands effecti'e co-ordination of a ide range of 'ar$ing but $et3 interrelated acti'ities. =Flanagan and Norman3 1--3> +0ese comple% acti'ities e%pose pro#ects to bot0 e%ternal and internal risks 0ic0 ma$ be controllable or uncontrollable. +0us3 t0e management of t0ese risks is t0e ke$ factor t0at makes risk management concept3 essential to t0e successful deli'er$ of pro#ects.

1(

5'en t0oug0 s$stematic researc0 it0 respect to risks and risk management can be said to be a ne approac0 to t0e business and academic orld3 t0ere still seems to e%ist enormous literature 0ic0 0a'e been ritten on t0e topics for t0e past t o decades because a lot of academic researc0 papers3 go'ernment publications3 te%tbooks3 #ournals and dissertations refer to t0e sub#ect risk and risk management. 2.4 Risk -efinition:

=7er'one3 2..(> defines risk3 as a problem 0ic0 0as not $et 0appened. +0is simple definition some 0o reall$ gets to t0e foundation of t0e issues 0ic0 pro#ect managers face 0ile performing t0eir functions on pro#ects. +0e$ deliberate on t0ese issues and tr$ to de'elop met0ods or tec0ni<ues on 0o t0e$ can a'oid t0em. 5'en bearing in mind t0e critical nature of risks and t0e probabilit$ of t0eir occurrence on pro#ects3 pro#ect managers do not reall$ gi'e issues related to risks t0e attention it re<uires3 t0e$ rat0er t0an often perform superficial assessments of t0e risk issues and t0en add a margin for t0e risk. =4iel3 et al3 1--, as cited in 7er'one3 2..(> proposes t0at t0e common risks t0at occur fre<uentl$ on most pro#ects are: 1. Lack of stake0olders commitment 2. Lo le'el top management commitment 3. Lack of understanding of tec0nical re<uirements b$ stake0olders !. 2nade<uate stake0olders in'ol'ement on t0e pro#ect &. 2nade<uate management of end users e%pectations +0e abo'e listed risk classification is more generic3 t0e ne%t section ill furt0er break t0e risks do n into more detailed categories it0 respect to t0e a$ t0e$ occur and t0eir sources on most pro#ects.

2.5

1)pes and "ources of Risks in &igerian 'il and (as $rojects:

+0e total number of potential sources and combinations of risk sources is a$ be$ond classification. Eoreo'er3 t0ere 0a'e been different t$pologies b$ different riters on risk 1*

classification and t$pes. Billiams3 =1--,>3 classifies risk sources b$ t0e nature of t0e en'ironment 0ere t0e$ originate as follo s: social en'ironment; p0$sical en'ironment; cogniti'e en'ironment; operational en'ironment; political en'ironment; legal en'ironment; and economic en'ironment. 2n oil and gas pro#ects3 social en'ironment risk sources come in t0e form of peoples" attitudes and 'alues; p0$sical en'ironment risk sources are floods3 0ig0 inds and storms3 land slides3 etc; cogniti'e en'ironment risk sources in'ol'es 0o t0e pro#ect team members percei'e risks and uncertainties; operational en'ironment risk sources can be damages or failures in installation processes3 poor designs3 etc; political en'ironment risk sources are polic$ c0anges 0ic0 ma$ generate 0ig0 ta%ation3 land ac<uisition3 etc.; legal en'ironment risk sources ma$ be disparit$ of present and ne la s 0ic0 affect pro#ects ob#ecti'es; and economic en'ironment risk sources can come in t0e form of market increases in t0e prices construction materials t0ereb$3 leading to cost o'erruns on pro#ects. =+c0anko'a3 2..2> +0e researc0 dissertation ill focus on t0e classification of risk t$pes b$ Roberts3 et al3 =2..3>; because of t0e e%plicit a$ b$ 0ic0 risks ere categori)ed it0 respect to t0e nature of risks and t0e origin of risks on pro#ects. +0e risks ill be criticall$ anal$)ed to t0ro lig0t into 0o t0e$ emanate on oil and gas pro#ects in Nigeria Roberts3 et al3 =2..3>3 proposes t0at risks s0ould be classified in t o basic a$s: 1. 8$ differentiating t0e risk it0 respect to t0e Krisk le'elL it0in a pro#ect or an organi)ation 0ic0 it impacts on. 2. 8$ t0e e%act nature of t0e risk3 t0e c0aracteristics of t0e risks3 t0e origin of t0e risks and finall$3 b$ t0e e%tent of dependenc$ or linkage of t0e risk to ot0er risks.

+0e risk classification it0 respect to t0e risk le'el is furt0er broken do n as listed belo : 1. strategic Risks; 1,

2. c0ange risks; 3. operational risks; !. unforeseeable risks +0e risk classification it0 respect to t0e nature3 c0aracteristics3 origin and dependenc$ of t0e risk to ot0ers is furt0er broken do n as listed belo : 1. kno ledge and financial risks 2. e%ternal and internal risks 3. speculati'e and static risks !. risk interdependenc$ +0e 'arious risks mentioned abo'e ill no be discussed consecuti'el$ in t0e follo ing sections to 0ig0lig0t 0ere t0e$ emanate on pro#ects. 2.5.1 "trategic risks:

+0is is t0e t$pe of risk t0at e'ol'es at t0e corporate le'el of an organi)ation or management le'el of a pro#ect and affects t0e de'elopment of a pro#ect"s strateg$. 8ro$d3 =2..1> re'eals t0at t0e construction industr$ 0as de'eloped bot0 fle%ibilit$ and good skills in problem sol'ing but lacks t0e capabilit$ of Mplanning for t0e future". =D+23 2..13 p. !> 2n Nigerian oil and gas construction pro#ects3 t0e risks due to poor strategic planning are related to t0e long term performance of t0e pro#ect e.g. risks relating to t0e de'elopment of a poor pro#ect brief or strategic pro#ect plan at t0e on set of an$ pro#ect ill lead to pro#ect team members not understanding t0e ob#ecti'es of t0e pro#ect. +0is generates conflicts3 poor <ualit$ designs and construction orks3 etc3 during t0e implementation stage of t0e pro#ect3 because t0e strategic ob#ecti'e or decisions as not effecti'el$ communicated to t0e pro#ect team members and stake0olders at t0e briefing stage of t0e pro#ect. /lso3 risks due to poor forecasting or assessment of t0e market conditions or economic c0aracteristics of t0e countr$ or t0e countries in 0ic0 an oil compan$ ill carr$out its operations is a 'ital strategic risk 0ic0 s0ould be gi'en due consideration 'ia feasibilit$ studies of prices of materials3 economic policies and stake0olders =business partners3 local communities and suppliers>

1-

2.5.2

Change risks:

+0ese are t0e t$pes of risks t0at relates to imposed or planned c0anges 0ic0 occur on pro#ects. / planned c0ange arises 0en ne strategies are formed 0ile an imposed c0ange arises due to e%ternal and internal forces. / t$pical e%ample is; during t0e design process for oil and gas structures in Nigeria3 an$ s0ortcomings it0 respect to materials3 product geometr$3 functional specifications3 etc3 e%pose pro#ects to c0ange risks 0ic0 results to e%cesses of materials being used; e%tra incurred costs due to pro#ect dela$s; resource reallocations3 additional operations and re ork. =/0med3 et al.3 2..*> +0ese internal c0anges generate operational risks 0ic0 are contrar$ to t0e strategic plan of a pro#ect. /lso3 e%ternal factors like flooding and landslides can cause c0ange risks b$ leading to losses on a pro#ect t0ereb$3 adding e%tra cost for rectif$ing t0e damages. 2.5. 'perational risks:

?perational risks are t0e risks coming from failed or inade<uate internal production processes3 s$stems and people as ell as coming from e%ternal factors or e'ents. +0ese are t0e t$pes of risks t0at relates to t0e production processes in'ol'ed on a pro#ect and in'ol'es t0e orking tec0ni<ues used b$ pro#ect team members; t0e asset base of t0e pro#ect; t0e stake0older relations0ips =0uman resources and staff de'elopment> it0in t0e pro#ect team and legal risks =contractual issues3 statutor$ obligations and liabilit$ =internal processes>. Lee3 et al.3 =2..!> re'eals t0e most fre<uent causes of accidents are due to 0uman errors. =Lee3 et al.3 2..! cited in Dastous3 et al.3 2..,> /lso3 t0e effect of e%ternal e'ents on t0e internal processes of a pro#ect =e.g. local communities3 militants and terrorist actions> all make up operational risks because t0e$ cause disruption of pro#ect acti'ities and ob#ecti'es 0ic0 causes dela$s on pro#ects; t0ereb$3 leading to time and cost o'erruns. 2.5.! 2nforeseeable risks:

6nforeseeable risks are t0e risks t0at occur because t0e$ cannot be accuratel$ forecasted before t0e$ occur because no matter 0o great a pro#ect"s planning processes could be3 t0ere is al a$s somet0ing t0at goes rong some 0ere. 9ince t0e products of t0e Nigerian oil and gas industr$ are 0ig0l$ inflammable; it is necessar$ t0at a 0ig0 degree of safet$ is ensured in bot0 t0e upstream and do nstream sector. +0ere 0a'e been se'eral accidents due to ground conditions3 fire outbreaks and air pollution. /ll t0ese 0a'e been linked to poor construction orks b$ contractors and fault$ e<uipment installation. =Rafiu3 2..&> 2.

+0erefore3 companies cater for t0is b$ building in contingencies for t0ese risks into t0e o'erall strategic plan it0 respect to time3 cost and <ualit$ ob#ecti'es for t0eir pro#ects. 2n cases 0ere t0e compan$ cannot contain t0e impacts3 like cases of flood3 fire or an$ natural disaster; companies pa$ 'er$ 0ig0 premiums to insurance companies so as to transfer liabilit$ for suc0 e'ents to t0e insurance companies because of t0e 0a)ardous nature of t0e oil and gas operations. Hariation in interest rates for bank loans3 inflation and increases in go'ernment ta%es are so common in Nigeria. 2.5.3 6nowledge and +inancial risks:

4no ledge risks are t0e risks coming from a pro#ect"s information t0at is stored using information tec0nolog$ =2+>3 soft are and 0ard are3 information management3 kno ledge management and planning. Cones =1--!> re'eals t0at most pro#ects t0at in'ol'e t0e use of information tec0nolog$ are usuall$ sub#ected to t0e risks of; slo user re<uirements; e%cess sc0edule pressure; lo <ualit$ of ork; cost o'erruns and inade<uate configuration control. =Cones3 1--! cited in 7er'one3 2..(> Eost modern companies like National 5ngineering and +ec0nical 7ompan$ Ltd3 =N5+7?>3 a subsidiar$ of NNA73 =NNA73 2..,> 0ic0 is responsible for carr$ing out engineering designs for oil and gas pro#ects; carr$ out and store most of t0eir pro#ect"s engineering designs using computer de'ices =bot0 0ard are and soft ares>. +0e$ are e%posed to 2+-based t0reats t0at ma$ come from incessant po er failures 0ic0 is 'er$ rampant in Nigeria presentl$; =70ido)ie3 2..,> 0ackers; malicious interference; and emplo$ee sabotage. /ll t0ese intrusions can 0inders t0e progress of pro#ects b$ limiting or stopping access to crucial pro#ect information t0ereb$3 not leading to t0e successful deli'er$ of a pro#ect it0 respect to time3 cost and performance ob#ecti'es. 4no ledge risks can also emanate on a pro#ect 0en one of t0e ke$ personnel lea'es t0e pro#ect it0out a substitute to co'er up for t0e important role 0eDs0e pla$s on t0e pro#ect. Aro#ect personnel usuall$ lea'e pro#ects because of; resentment3 lack or loss of aut0orit$ or po er3 lack of moti'ation or commitment3 inabilit$ to adapt to pro#ect structure or tec0ni<ues3 lack of e%pectation3 etc. ?n t0e ot0er 0and3 financial risks are t0e risks coming from t0e capital structure3 credit structure3 market structure and cost reporting structure of a pro#ect. Eore t0an &.@ of

21

pro#ects usuall$ double t0e estimate cost t0at as forecasted for t0em at t0e on set. =B0ittaker3 1--1 cited in Nafra-7abe)a3 et al.3 2..,> Ari'ate and public sector operators usuall$ are affected b$ po er pressures in t0e appointment of contractors3 sub-contractors and suppliers; in carr$ing out t0eir operations in Nigerian oil and gas pro#ects; not on merit but based on 0om t0e$ kno . =?gunsemi and /#e3 2..(> +0erefore3 more costs are incurred on pro#ects during design3 construction and operation of facilities as a result of initial; poor <ualit$ materials3 poor designs3 poor construction up orks3 etc. /lso3 0ig0 inflation rates3 increases in ta%ation and 'ariation in it0 regards to finance. 2n Nigeria3 t0e introduction of KDue as formed to reinstate and up0old a transparent3 it0 integrit$3 sustains interest rates for bank loans obtained b$ t0ese contractors3 in0ibit t0e contractors meeting it0 pro#ect demands ArocessL 0as made pre<ualification of contractors to gain popularit$ recentl$ it0 respect to contract a ard. +0e Due process s$stem spending open3 and competiti'e federal procurement s$stem t0at is dri'en

it0in pro#ect budgets and to ensure t0at t0e implementation of pro#ects are done

it0in time sc0edule3 so as to ac0ie'e 'alue for mone$ outcomes it0out sacrificing <ualit$ and standards =8udget Eonitoring and Arice 2ntelligence 6nit3 2..! cited in ?gunsemi and /#e3 2..(>. 2.5.4 78ternal and Internal risks:

5%ternal risks are t0ose risks t0at originate from a pro#ect"s surrounding en'ironment. +0e$ can to some e%tent be calculable but t0e$ are usuall$ be$ond t0e control of a pro#ect =uncontrollable>. 5%ternal risks take se'eral forms and can be broken do n furt0er as follo s: .1 2nterest rate risk: +0is is a form of financial risk t0at occurs because c0anges in interest rates affect t0e 'alue of assets and liabilities on pro#ects. =Roberts3 et al3 =2..3> 2n Nigeria3 due to t0e 0ig0 inflation rate and t0e irregularities in t0e banking sector3 oil and gas pro#ects e%perience irregular interest rate increases for3 loans and bonds recei'ed. +0is generates increases in costs of mac0ineries and e<uipments for construction and production processes mid a$ t0e duration of pro#ects and ma$ e'entuall$3 lead to budget o'erruns on pro#ects. /lso interest rates ma$ rise. 22

.2

+ime-dependent risks: +0ese are risks relating to items t0at 0a'e a fi%ed time limit on t0em. 2n Nigeria3 most oil and gas pro#ects especiall$; offs0ore pro#ects3 are usuall$ fast track pro#ects. Design orks usuall$ start immediatel$ after t0e suppl$ contracts bet een bu$ers and operators 0a'e been confirmed; it0 t0e duration of t0e pro#ect fi%ed it0in a stipulated time. =Eo0ammed /li and Louca3 2..!> Eore so3 0en claims are not made it0in t0e timescale before t0e e%pir$ of insurance policies for premiums paid for insurance co'ers on pro#ects3 t0ere is e'er$ possibilit$ t0at t0ere ill be a net profit loss on t0e pro#ect. / t$pical e%ample is t0e 70e'ron 7orporation subsidiar$3 70e'ron Nigeria Ltd. =7NL>3 0ic0 completed a Mfloat-o'er installation" at Ee#i 1as 1at0ering and 7ompression platform =117A> on t0e 5scra'os 1as pro#ect A0ase 3. 2t as t0e first of its kind3 t$pe of platform being constructed in t0e region because of t0e sc0edule ad'antages compared to installing t0e usual pre-commissioned3 integrated and single piece topsides due to t0e tig0t sc0edule deadline of t0e pro#ect. =9immons and Du0ane$3 2..,>

.3 7ompetitor risks: +0ese risks relate to c0anges it0 respect to t0e competition base. 2t could be minor or ma#or c0anges 0ic0 impact on companiesDpro#ects. Lack of Mdue processes" in contract a ard t0ereb$3 making t0e same compan$ to be inning most #obs. N5+7?3 a subsidiar$ of NNA7; =NNA73 2..,> due to t0eir strong go'ernment ties ins most of t0e oil and gas design contracts. +0is can make establis0ed competitors to decline suddenl$ t0ereb$3 seriousl$ affecting t0e successful implementation and deli'er$ of t0eir pro#ects. .! 5%posure risks: +0ese are risks associated it0 cases 0ere oil companies or oil and gas pro#ects depend on fe 'ariables or on onl$ a single 'ariable for t0eir sur'i'al. ?il and gas pro#ects are usuall$ e%posed to financial =mortgages3 insurance premiums>; p0$sical =mac0ines and e<uipment failures> and 0uman =in#uries3 ill 0ealt0 and deat0 of staff> e%posure risks. =+c0anko'a3 2..2> +0is is because of t0e 0a)ardous nature of t0e oil and gas products as ell as t0e 'olatile nature of t0e orking en'ironment 0ere oil and gas pro#ects are carried out.

23

.& 90are0older risks: +0ese are risks associated it0 cases 0ere a compan$ depends on s0are0olders e<uit$ for t0e operations. 2n Nigeria3 organi)ed corruption from politicians and soldiers 0o 0a'e looted go'ernment funds to make fortunes 0a'e enabled t0eir o ning most of t0e pri'ate indigenous oil and gas companies especiall$ in t0e do nstream sector. =5'uleoc0a3 2..&> 2f a ma#or s0are0older or a considerable amount of s0are0olders confidence declines in an$ of t0ese companies3 and 0eDs0e it0dra s t0ere s0ares3 t0ere ill be a 'er$ significant and ad'erse effect on t0e compan$"s pro#ects. 2t ma$ e'en lead to closing do n most of t0e pro#ects. .( Aolitical risks: 1o'ernment of a countr$ or of rele'ant neig0boring countr$"s fiscal policies can be a 'er$ 0uge source of risk on pro#ects. Eultinational oil companies in Nigeria usuall$ face t0e risk of c0anges in interest rates and 0ig0 ta%ation 0ic0 ma$ arise due to c0anges in go'ernment policies. +0ese risks are usuall$ managed b$ multinational oil companies 'ia strategic alliances3 insurance and partnering. =8erlin3 et al.3 2..3> +0e$ are also minimi)ed b$ maintaining good relations0ips it0 t0e go'ernment3 utili)ing local personnel and suppliers as muc0 as possible and e'ading from geograp0ical concentration. +0is en0ances a good economic relations0ip it0 t0e 0ost countr$ and increases t0e compan$"s c0ances of anticipating political and economic future c0anges. .* Legislati'e risk: +0ese are risks 0ic0 pro#ects are e%posed to because of t0e fact t0at3 go'ernment constantl$ c0anges old statutes and introduces ne statues due to e'er c0anging legislati'e decisions. +0e ne statutes ma$ not be fa'orable on a particular pro#ect it0 respect to t0e pro#ect"s en'ironment. /ccording to t0e Nigerian constitution3 all oil3 gas and minerals belong to t0e federal go'ernment. =5'uleoc0a3 2..&> 9tatutor$ re<uirements like en'ironmental legislation3 0ealt0 and safet$ legislations3 local content legislation3 impose direct c0arges on oil companies for making use of landfill aste sites3 consuming energ$3 disposing refuse3 flaring gases3 oil spillage3 etc; e'en t0oug0 t0e oil companies claim t0at t0ere pro#ect acti'ities and operations are carried out it0 0ig0 en'ironmental standards. =Borld bank3 1--&> re'eals t0at t0e Nigerian en'ironmental la s are not strictl$ enforced 0en compared to ot0er international e<ui'alent la s. 2!

., 9ecurit$ risks: +0ese are risks 0ic0 oil and gas pro#ects are e%posed to because of disruption of t0e pro#ect"s operations. ?il and gas amenities3 in'ol'ing natural gas and crude oil fields3 transportation =rail a$s3 trucks3 pipelines3 and s0ips>3 refineries and distribution s$stems are good targets for criminals and terrorists. =8a#pai and 1upta3 2..*>. +0is is because petroleum products are 0ig0l$ 'olatile3 0ig0l$ flammable3 and 'er$ to%ic and contains a lot of energ$. 2n Nigeria3 securit$ risks on oil and gas facilities are eminent in t0e Niger Delta region3 due to disturbances coming from local communities3 militants3 communit$ clas0es or ars3 etc. Recentl$3 t0ere 0a'e also been regular cases of Kkidnapping and releaseL =5 e#e3 2..*3 pp. 22,> of e%patriate oil and gas orkers on a eek basis bot0 ons0ore and offs0ore due to political reasons. +0is 0as generated international attention 0ic0 seems to 0a'e no solution $et. Eo0ammed /li3 R.E.3 =2..!> re'eals t0at t0e intrinsic risk in offs0ore installations in t0e upstream sector of oil and gas pro#ects; are conditions relating to e%plosions and t0e effects of t0eir occurrence. +0is is because an attack 0ic0 is successful on an oil and gas facilit$ or its transportation s$stem usuall$ results in interruption of gas and oil suppl$3 se'ere economic impact3 in#ur$ to staff or public3 fatal outcome and s0ut do n of operations. /ll t0ese 0a'e serious economic impact. +0us3 t0e risks accruing to t0e intentional acts b$ t0ese militants to oil and gas facilities needs to be accessed3 and appropriate emergenc$ responses and countermeasures need to be put in place. =8a#pai and 1upta3 2..*> ?n t0e ot0er 0and3 internal risks are t0ose risks t0at originate it0in a pro#ect"s en'ironment. 2nternal risks are usuall$ calculable and t0e pro#ect team 0as some degree of control o'er t0em. 2nternal risks can be furt0er broken do n as follo s: 1. ?perational process risks: +0ese are risks 0ic0 pro#ects are e%posed to because of staff una'ailabilit$3 lack of 0uman resources3 production capacit$ limit being reac0ed on a pro#ect3 and 0uman errors. 2n Nigeria3 t0ere 0as not been a ma#or or se'ere flare incident in an$ oil field. / flare stack is a long pipe 0ic0 pro#ects into t0e air it0 an ignition s$stem3 a flaring arro or an oil$ rag 0ic0 is 0oisted up t0e stack on a pulle$ and cable s$stem. Flares are primaril$ used in oilfields 2&

for 'enting e%cess gas and pressure build up coming from oil ells 0ic0 can cause 0a)ardous uncertainties and risks. =90aluf3 2..,> Co0n Nink 7ompan$3 =2..&> states t0at3 t0e fi'e common cause of flare incidents are: li<uid carr$ o'er; internal e%plosion; s$stem obstructions; ignition loss and fault$ maintenance procedures. =Co0n Nink 7ompan$3 2..& cited in 90aluf3 2..,> 1albrait03 =2..,> also re'eals t0at3 Nigeria is t0e countr$ t0at flares t0e most gas amongst an$ ot0er countr$ of t0e orld. Bit0 t0is record3 effecti'e risk management processes and practices is 'ital so as to ensure t0at t0e operational process risks 0ic0 could be generated b$ staff =poor maintenance3 s$stem obstructions>3 and en'ironmental factors =internal e%plosion due to air pressure> are put in c0eck on oil and gas fields. 2. Legal risks: +0ese are risks arising from errors in insurance policies and contracts 0ic0 pro'ide le'els of protection and liabilit$ 0ic0 are not t0e same as t0e percei'ed le'els e.g. a sudden c0ange in statute. / t$pical e%ample is t0e /lien +ort 7laims /ct =/+7/> 0ic0 gi'es 69 district courts #urisdiction for ci'il actions 0ic0 are committed in 'iolation of 69 la s and treaties 0en 'iolations occur in nations outside 69/. =4ieserman3 1---> +0is act as used 0en a group of Nigerian citi)ens c0arged 70e'ron to a federal court in 9an Francisco3 7alifornia for t0e deat0s of t o protesters b$ militar$ troops and police on 70e'ron" s Aarabe oil platform3 nine miles offs0ore of Nigeria on Ea$ 2&3 1--,. +0e$ claimed t0at 70e'ron being onl$ interested t0e profits t0e$ make; damages t0e li'es and t0e en'ironment of t0e local in0abitants. =?lsen3 2..2> 3. 9uppl$ c0ain risks: +0ese are risks t0at arise from t0e acti'ities of t0e entire suppl$ c0ain =contractors3 subcontractors3 suppliers3 etc> on oil and gas pro#ects. +oor and ?gunlana3 =2..(> re'eal t0at contractor ine%perience is among t0e top ten causes of dela$s in construction pro#ects especiall$ it0 traditional t$pe contracts. =+oor and ?gunlana3 2.., citing ?de0 and 8attanei03 2..2>. +0is disco'er$ aligns it0 t0e results from a sur'e$ b$ =Long3 et al.3 2..!> 0ere t0e incompetence of contractors ranked t0e most rampant problem in t0e industr$. +0e more effecti'e t0e suppl$ c0ain is3 t0e more t0e pro#ect depends on t0em. +0e risk of poor <ualit$ products being deli'ered and t0e risk of a break in t0e 2(

supplier"s production are usuall$ e%perienced in oil and gas pro#ects in Nigeria due to incessant po er failures and una'ailabilit$ of genuine construction materials and e<uipments. !. 7ompetence risks: +0ese are risks due to poor management and emplo$ee competenc$ on pro#ects. 2nefficient communication can lead to misunderstandings and errors 0ile poor leaders0ip leads to production losses and reduces staff confidence. 2n Nigeria3 contracts are on b$ indigenous unskilled companies eit0er because t0e compan$ o ners 0a'e =et0nic3 famil$3 religion3 group3 etc> ties it0 t0e person a arding t0e contract e.g. minister3 because Mdue process" =?kpala3 1--1> is neglected; to t0e detriment of competent multi-national companies it0 0ig0 tec0nical skill and financial patronage. +0ese results to poor <ualit$ #obs being done on pro#ects3 time and budget o'erruns. &. 7omple%it$ risks: +0ese are risks t0at arise due to t0e comple% nature of pro#ects. Dastrous3 et al.3 =1--1> re'eals t0at increases in comple%it$ of e<uipments3 s$stems3 processes and procedures used in carr$ing out pro#ects3 ill probabl$ lead to risks of tec0nological failure 0ic0 could lead to accidents. De'elopment of comple% designs for engineering pro#ects can make buildabilit$ 'er$ difficult because useful time is usuall$ asted in tr$ing to understand t0e design concept; t0at is 0$ in Nigeria3 most offs0ore platform designs are made as simple as possible. Louca and Eo0ammed /li3 =2..,> ackno ledges t0at3 due to t0e 0ostile en'ironment 0ic0 offs0ore installations are operated on3 designs s0ould be kept 'er$ simple and at t0e same time t0e safet$ and protection of assets and personnel must be considered. (. 2nformation tec0nolog$ =2+> and tec0nolog$ risk: B0ittaker3 =1--1> re'eals t0at one t0ird of most soft are related pro#ects ere terminated before t0eir nominal completion time. =B0ittaker3 1--1 cited in Nafra-7abe)a3 et al.3 2..,> +0ese are risks t0at arise due to t0e internal risks t0at ne tec0nologies and information tec0nolog$ =2+> pose on most modern pro#ects. 2n Nigeria3 oil and gas engineering design pro#ects rel$ so muc0 on 2+ and t0e pro#ects cannot run effecti'el$ it0out it. +0erefore3 failure of t0e s$stem or need for c0anges can 2*

reall$ dela$ a pro#ects functionalit$. +0e common reasons for s$stems failure in Nigeria are po er failure3 =N5A/> defecti'e 0ard are3 infection b$ 'iruses3 defecti'e soft are3 etc. +0is causes losses of s$stem records3 disruption in operational capabilit$3 time losses and can at times increase cost as ell reduce t0e <ualit$ of deli'erables because of t0e rus0 to meet up it0 deadlines to co'er up for lost time. /lso3 0ackers and sabotage is anot0er risk 0ic0 pro#ects dependenc$ on 2+ is e%posed to./lso3 not using modern practices and processes is an attribute of poor management. e.g. N5+7? O ne designs and soft ares. *. Aeople risks: +0ese are risks t0at arise 0en important indi'iduals pla$ing ma#or roles on a pro#ect lea'es and takes it0 t0em specialist operational or management kno ledge or contacts =e.g. suppliers contacts> 0ic0 adds 'alue to t0e pro#ect. +0ere is al a$s a possibilit$ t0at t0ere e%pertise ser'ice ill be used against t0ere former compan$ as a ri'al competitor in t0e ne compan$. 1ood M9uccession Alanning" b$ constant training s0ould be encouraged b$ pro#ect managers because it is common t0at pro#ect personnel lea'e before t0e end date of pro#ects. =Roberts3 et al3 2..3> 2n Nigerian offs0ore engineering operations3 t0e rong selection of pro#ect management team is usuall$ a source of people risk because t0e 2+ personnel usuall$ used on pro#ects are $oung and 0a'e little or no petroleum engineering e%perience. ?n t0e ot0er 0and3 t0e $oung petroleum engineers it0 e%tensi'e engineering field e%perience usuall$ 0a'e little or no 2+ e%perience. =80aruc0a and :olland3 2..,> . 2.5.5 "peculative and static risks: 9peculati'e risks are t0ose risks t0at cause pro#ects to; e%perience potential losses or gains3 or adds negati'e or positi'e 'alues to a pro#ect. +0is can be due to 'ariations and c0anges in t0e general market conditions it0 a potential for making a compan$ lose or gain in t0e compan$"s business ob#ecti'es. =Roberts3 et al3 =2..3> 5.g. s0are fluctuations3 in'estment in researc0 and de'elopment. ?n t0e ot0er 0and3 static risks are t0ose risks t0at consider potential losses 0ic0 pro#ects are e%posed to; and tr$ to find a'enues to protect and safeguard t0e pro#ect so as to minimi)e t0e losses. / t$pical e%ample is insurance co'er 0ic0 can c0ange o'er time and t0e degree of protection of t0e countermeasures can also differ. 5.g. are personnel 2,

insurance3 fire insurance3 public liabilit$ =conse<uential loss> and t0ird part$ insurance3 tortuous liabilit$ =professional indemnit$> insurance3 etc. Eergers and ac<uisitions 0elp spread static risks and increases a pro#ect"s resilient to risks like go'ernment fiscal polic$ c0anges or sudden statute c0anges. 2.5.9 Risk interdependenc):

2t is important to note t0at t0ese risk t$pes are interrelated and o'erlap eac0 ot0er on oil and gas pro#ects because strategic risks 0ic0 can affect pro#ect implementation are identified 0en de'eloping a pro#ect"s strategic pro#ect plan; and t0ere are so man$ c0ange risks 0ic0 can generate operational risks t0at can originate from internal and e%ternal c0anges during t0e implementation of a t0e pro#ect strateg$. /lso3 an e%ternal risk can generate risks t0at can affect a pro#ect at all risk le'els. +0ese unforeseeable risks can occur because of t0e particular risk"s Kinterdependenc$L it0 ot0er risks. / clear understanding and kno ledge of 0o risks are interconnected and t0eir interdependenc$ is important3 but t0is ill not 0a'e practical 'alue unless it is used for effecti'e risk management 0ic0 is a 'ital tool for efficient management of pro#ects. +0e a$ good pro#ect managers t0ink about risk management is b$ focusing on 0o to mitigate risks so as to ac0ie'e t0eir pro#ect"s ob#ecti'es. +0e ne%t section ill briefl$ consider t0e concept risk management and 0o it is practiced in oil and gas pro#ects. =Roberts3 et al3 2..3> 2.9 Risk :anagement and $rojects:

5normous literature 0a'e been ritten about pro#ect risk management and most of t0em seem to come to an agreement t0at risk management is about finding t0e sources of risks on pro#ects and determining met0ods b$ 0ic0 t0ese risks can be mitigated on pro#ects. Nafra-7abe)a3 et al3 =2..,> and AE23 =2...> defines risk management as practiced in a pro#ect en'ironment; as a s$stematic process for identif$ing3 anal$)ing and responding to uncertainties 0ic0 are pro#ect-related conditions or e'ents t0at 0a'e t0e capabilit$ to impact undesirable conse<uences on a pro#ect"s aims and ob#ecti'es. =Nafra-7abe)a3 et al3 2..,; AE23 2...> /not0er 'ie b$ t0e /ustralian Risk Eanagement 9tandard =Risk Eanagement 9tandard /9DNN9 !3(.>3 =1---> proposes t0at3 risk management process is 2-

about unco'ering t0e eaknesses used in product de'elopment met0ods 'ia a structured a$ in order to initiate timel$ mitigation actions so as to a'oid3 transfer3 reduce t0e likeli0ood and reduce t0e impact of risks. 7er'one3 2..(3 =4iel3 et al3 1--, cited in 7er'one3 2..(> concurs3 t0at all risks can be effecti'el$ mitigated or addressed b$ using one of follo ing a$s: 2. Reducing or eliminating t0e risks b$ including t0e remedies to pro#ect issues or problems in t0e pro#ect plan 22. +ransferring t0e risk to ot0er acti'ities or to ot0er responsible parties. 222. /bsorbing or pooling t0e risk b$ planning for t0em 2H. /'oiding t0e risks b$ ensuring t0at <ualit$ control procedures and practices are put in place on t0e pro#ect Due to time constraints 0ic0 are a c0aracteristic feature of oil and gas pro#ects; 7oncurrent 5ngineering =75> p0ilosop0$ is usuall$ used to for o'erlapping design and construction stages. 75 is t0e de'elopment of processes and products b$ carr$ing out pro#ect tasks or functions concurrentl$ or simultaneousl$ it0 t0e aim of reducing time3 cost and ac0ie'ing 0ig0 <ualit$ products. =7aillaud3 et al.3 1---> /ustralian Risk Eanagement 9tandard =Risk Eanagement 9tandard /9DNN9 !3(.>3 =1---> proposes a risk management process 0ic0 is ideal for most 75 pro#ects3 0ic0 is a ma#or c0aracteristic of oil and gas pro#ects; it could be argued t0at it also applies to most oil and gas pro#ects. +0is is illustrated in Figure 2-2 as follo s:

+igure 2 , Representation of risk management process. "ource .A";&<" ! 4/: 1===0

3.

7ommunicate and consult

31

Eonitor and Re'ie

7ommunicate and consult

5stablis0 t0e conte%t

2dentif$ risks

/nal$)e risks

5'aluate risks 32

/ccess risks

Eonitor and Re'ie

+reat risks

+0e risk management process comprise of se'en =*> iterati'e sub-processes 0ic0 are as follo s: establis0ing risk conte%t; identif$ing risk; anal$)ing risk; e'aluating risk; consultation and communication amongst stake0olders; controlling and monitoring risk related e'ents. +0e risk management process aligns it0 7oncurrent 5ngineering =75> pro#ects de'elopment and design because cost is reduced 0en c0anges are made during t0e design stage of oil and gas pro#ects t0an 0en c0anges are made during implementation or construction stages of t0e pro#ects. =/0med3 et al.3 2..*> 2.= Risk :anagement 1echni>ues:

+0e 'arious risk management tec0ni<ues t0at are used on most pro#ects ill be outlined 0ile describing t0e stages of t0e risk management process. 2.=.1 7stablishing $roject Conte8t:

/0med3 et al.3 =2..3a3 b> describes t0e establis0ing of conte%t on pro#ects as t0e stage in risk management process 0ere t0e pro#ect units =process3 functional3 data3 etc> and t0e relations0ips bet een t0em are represented. +0is is a 'er$ essential stage in oil and gas pro#ects because t0e pro#ect risks are accessed from a strategic perspecti'e. +0e pro#ect status is represented in numerous forms like; 0o bid preparations ill be carried out; 0o resources ill be used; t0e pro#ect"s budget; t0e stake0olders in'ol'ed; e<uipments re<uired for t0e pro#ect; contractual deli'erables; t0e pro#ect"s strategic aims and ob#ecti'es; t0e pro#ect"s time sc0edule and t0e purpose of t0e pro#ect it0 respect to aspects 0ic0 t0e pro#ect team deems important for t0e successful deli'er$ of t0e pro#ect ob#ecti'es. +0e risk management tec0ni<ues used in for establis0ing conte%t on pro#ects 0ic0 are also used as pro#ect modeling tec0ni<ues and tools are stated as follo s =/0med3 et al.3 2..*>: 1. Aro#ect net ork diagrams 2. Arecedence diagram met0od =ADE> 3. 1enerali)ed acti'it$ net orks !. Design structure matri% =D9E> &. 2D5F. functional modelling (. 2D5F3 process modelling 33

2.=.2

Risk Identification:

Risk identification is usuall$ t0e first stage of risk management on most pro#ects and t0e same also applies to oil and gas pro#ects. /ll pro#ect situations are studied al a$s so as to determine 0at could go rong it0 regards to t0e pro#ect de'elopment and design. 2t la$s t0e foundation for t0e follo ing stages 0ic0 are; risk anal$sis and risk control. /ll t0e possible sources of risks =losses or gains> and t0eir indi'idual impacts or conse<uences to a pro#ect are identified during t0is stage. =+c0anko'a3 2..2> defines sources of risks3 as t0e elements of a pro#ect"s en'ironment 0ic0 can eit0er bring negati'e or positi'e outcomes to t0e pro#ect aims and ob#ecti'es. =5lms3 1--,> proposes3 t0at t0e sources of risks on pro#ects are classified into e%ternal and internal risks; but =Billiams et al.3 1--, cited in +c0anko'a3 2..2> argues3 b$ classif$ing sources of risks in a more detailed a$ it0 respect to t0e en'ironment in 0ic0 t0e risks arise as follo s: social en'ironment; p0$sical en'ironment; operational en'ironment; political en'ironment; legal en'ironment; cogniti'e en'ironment and economic en'ironment. +0e common risk identification tec0ni<ues 0ic0 are used on most pro#ects are stated belo as follo s =/0med3 et al.3 2..*>: 1. 8rainstormingD70ecklists 2. 2nfluence diagrams 3. Fault +rees !. 7ause-and-effect diagrams &. Failure mode and effect anal$sis =FE5/> (. :a)ard and operabilit$ stud$ =:/N?A> *. 5'ent tree 2.=. Risk Anal)sis:

2n oil and gas pro#ects3 after t0e identification of risk e'ents3 an assessment of t0e risk c0aracteristics s0ould be carried out so as to determine 0et0er t0e risk e'ents re<uire furt0er anal$ses. 2mmediatel$ a decision is made in t0is lig0t; furt0er anal$sis is re<uired to 3!

be carried out on a risk e'ent; t0e ne%t stage is to determine 0et0er t0is ill be carried out b$ <ualitati'e or <uantitati'e means. =/mornsa ad atana3 2..2> 2n most pro#ects3 t0e <ualitati'e approac0 of determining risk parameters are often more appropriate and is usuall$ used for carr$ing out risk anal$sis because sub#ecti'e assessment tec0ni<ues 0ic0 range from t0e relati'e measures of 0uman opinions3 feelings and #udgments are used for anal$)ing risks as compared to ideal situations. 5'en t0oug0 <ualitati'e approac0 ma$ be influenced b$ personal preferences3 biases and e%pertise; it still pro'ides t0e foundation for risk assessment b$ 0ig0lig0ting possible risk e'ents. ?n t0e contrar$3 t0e <uantitati'e approac0 is carried out b$ statistical anal$sis of 0istorical data for e%act prediction of risk e'ents; and determination of risk parameters. . =/0med3 2..*> Eeasurement metrics are usuall$ establis0ed and used for anal$)ing risks so as to determine t0e magnitude of t0e risks in order to aid t0e de'elopment of effecti'e mitigation strategies and plans. Aatterson and Neaile$ =2..2> re'eal t0at t0e t o parameters for measuring risk are; risk impact3 se'erit$ or conse<uence and risk likeli0ood or probabilit$. +0e likeli0ood or probabilit$ of risk s0o s t0e possibilit$ t0at a risk e'ent ill occur; 0ile risk impact3 se'erit$ or conse<uence3 is t0e representation of an outcome t0at spa ned from a risk e'ent. De$ and ?gunlana =2..!> concurs b$ affirming t0at it ill be incomplete to access risks based on t0e criteria of onl$ its e%pected 'alue; t0e risk se'erit$ and likeli0ood s0ould also be taken into account. +0erefore3 t0e basic functions 0ic0 constitute t0e met0odolog$ of risk anal$sis or assessment as used on most oil and gas pro#ects are; to determine and measure t0e magnitude3 conse<uence and probabilit$ of a risk e'ent; 0ere t0e product of t0e risk conse<uence and probabilit$ totals up to gi'e t0e risk magnitude. Eills =2..1> s0o s t0e relations0ip bet een t0ese t0ree functions b$ using t0e e<uation belo : RI ? # 8 C @@@@@@@@@@@@@@ equation 2.1 B0ere; RI P Risk impact; 3&

# P Likeli0ood of risk; and C P 7onse<uence of risk; 90en3 =2..1> and Rafter$3 =1--!> concurs t0at risks 0a'e t o attributes and used a model to <uantif$ risk as a product of t0e fre<uenc$ of occurrence and t0e degree of impact. +0e$ proposed t0e e<uation belo : R ? +r 8 Im @@@@@@@@@@@@@ equation 2.2 B0ere; R P Risk +r P Fre<uenc$ of occurrence of risk; and Im P Degree of impact of risk; 7agno3 et al. =2..*> proposes t0at for t0e de'elopment of an effecti'e anal$sis of risks on pro#ects3 t0e follo ing s0ould be considered: 1. +0e basic elements of t0e ma#or impending risks s0ould be identified. +0ese comprise of sources of uncertainties3 t0e affected acti'ities3 t0e stake0olders t0at represent t0e o ners of t0e risks3 and after ards3 t0e corresponding s0are of t0e total pro#ect risk s0ould be assigned to eac0 element of risk. 2. / met0odolog$ s0ould be de'eloped 0ic0 ill integrate t0e t o main c0aracteristics of risk anal$sis i.e. t0e anal$sis of t0e main risks and anal$)ing t0e usual 'ariabilit$ it0 respect to pro#ect parameters =e.g. t0e 'ar$ing durations in pro#ect acti'ities>3 0ic0 are t0e uncertainties t0at do not t0reaten t0e outcome of t0e pro#ect if considered alone. =Bard3 1---> 3. +0e total life-c$cle of t0e pro#ect s$stem 0ic0 represents t0e pro#ect outcome s0ould be taken into account. +0e maintenance and operational p0ases of t0e pro#ect s0ould be included in designing t0e s$stem !. / distinction bet een t0e risk anal$sis to be carried out during t0e pro#ect"s conceptual stage s0ould be made =/l<uier3 et al.1--->3 also bearing in mind all t0e 3(

stake0olders =contractors3 subcontractors3 suppliers3 end users3 etc.> t0at ill be in'ol'ed in t0e pro#ect3 and t0e e%ecution stage3 0ere t0e contractual content of t0e pro#ect 0as reac0ed a stationar$ point. 9ince t0e main aim in risk anal$sis in a pro#ect s$stem is t0e determination of risk effects pro#ect acti'ities; numerous tec0ni<ues in t0e risk management literature are being applied in modern da$ pro#ects. +0e common risk anal$sis tec0ni<ues 0ic0 are used in most pro#ects are stated belo as follo s =/0med3 et al.3 2..*>: 1. Arobabilit$ and impact grids 2. 5stimation of s$stem reliabilit$ 3. Fault tree anal$sis !. 5'ent tree anal$sis &. 9ensiti'it$ anal$sis and simulation 2.=.! Risk 7valuation:

2n pro#ects3 after t0e anal$sis of risk e'ents3 an e'aluation of t0e anal$)ed risks are carried out b$ prioriti)ing t0e risks eit0er b$ using lessons learnt on pre'ious pro#ects; organi)ational or compan$ kno ledge; best practices; industr$ benc0marks; past pro#ect e%periences; and standard practices. =/mornsa ad atana3 2..3a> /ll t0ese are done so t0at effecti'e mitigation strategies and plans ill be determined and de'eloped for t0e pro#ect concerned. Eore so3 different aspects of a pro#ect ranging from pro#ect strateg$3 pro#ect sc0edule3 pro#ect budget3 etc. are in'estigated on t0is stage it0 regards to a risk e'ent occurring so t0at mitigation options for risks are determined and t0e most suitable option=s> c0osen and incorporated to produce a pro#ect mitigation plan. +0e common risk e'aluation tec0ni<ues 0ic0 are used in most pro#ects are stated belo as follo s =/0med3 et al.3 2..*>: 1. Decision tree anal$sis 2. 3. Aortfolio management: Eultiple criteria decision-making met0od

3*

2.=.3

Risk :itigation;Response:

+0e pre'ious sections 0a'e gi'en an o'er'ie of risks and risk management processes 0ic0 are being used toda$ in most pro#ects. ?il and gas construction pro#ects are not left out. 2n line it0 t0e ob#ecti'e of t0e stud$3 t0is section ill discuss t0e final stage in t0e risk management c$cle; risk mitigation or response because if effecti'e mitigation plans are not de'eloped on oil and gas pro#ects3 it leads to unsuccessful e%periences on pro#ects. 5'en t0oug03 t0e scope of t0e researc0 is to determine risk response strategies to effecti'el$ mitigate t0e ma#or risks in oil and gas construction pro#ects; t0e pre'ious sections ere 0ig0lig0ted because risk response strategies cannot be ac0ie'ed or de'eloped it0out passing t0roug0 t0e pre'ious risk management stages. AE2 =2..!> defines risk response as t0e procedure of considering t0e possible c0oices a'ailable on a pro#ect and actions de'eloped so as to reduce t0reats as ell as taking ad'antage of t0e a'ailable opportunities. 2n oil and gas pro#ects3 some risks like a broken petroleum or crude oil pipeline are 'er$ sensiti'e t0at t0e$ need immediate response 0ile some are small t0at t0e$ can be neglected e.g. a ater reser'oir it0 little ater leakages. /fter t0e e'aluation of risk e'ents3 risk mitigation or response actions are produced 0ic0 can be said to be contingenc$ plans 0ic0 are initiated after risk e'ents e'entuate. +0is can be termed a feed back or a reacti'e approac0 to risk mitigation. =/0med3 et al.3 2..*> ?n t0e contrar$3 t0e feed for ard or t0e pro-acti'e approac0 is t0e approac0 0ereb$; risk mitigation actions are initiated based on t0e probabilit$ or c0ance t0at a risk e'ent ill occur. =4artam and 4artam3 2..1> / t$pical e%ample is; 0en oil and gas companies get insurance co'er it0 regards to fire outbreak or ot0er construction risks like deat0 of staff =life insurance> on t0eir pro#ects. / combination of t0e reacti'e and t0e pro-acti'e approac0 is applied to t0e risk management practices carried out in most contemporar$ oil and gas pro#ects for a'oiding risks3 retaining risks3 reducing t0e probabilit$ of risks3 reducing t0e impacts of risks3 and transferring risks. =Risk Eanagement 9tandard3 /9DNN9 !3(.3 1---> +0ese follo ing risk mitigating or response tec0ni<ues ill be discussed belo as follo s: 2.=.3.1 Risk avoidance:

2n t0is tec0ni<ue3 instead of confronting t0e risks3 t0e$ are usuall$ eliminated or a'oided b$ organi)ations. / t$pical e%ample of risk a'oidance usuall$ used b$ oil companies is b$ not 3,

tendering for construction pro#ects 0ic0 t0e$ en'isage ma$ not turn out to be fa'orable for t0eir compan$; especiall$ 0en multinational companies ant to in'est in ne pro#ects t0at are outside t0eir 0ome countr$. /not0er e%ample is t0e Nigerian federal or state go'ernment3 not releasing funds for a pro#ect t0e$ en'isage ill be unsuccessful. +0is is because if careful feasibilit$ studies are not done3 t0e compan$ and t0e go'ernment bod$ 0andling t0e pro#ect ma$ be faced it0 political risks of e%propriation and nationali)ation; =8erlin3 et al.3 2..3> and en'ironmental risks. 2.=.3.2 Risk retention:

2n t0is tec0ni<ue3 risks are usuall$ monitored b$ organi)ations b$ ensuring t0at ade<uate back up strategies or plans are pro'ided in case t0e e%posure to t0e risk c0anges. +0e compan$ fulfilling t0e contract terms is usuall$ retain risks on oil and gas pro#ects; and most times companies tend to retain risks t0at are fre<uent in occurrence and 0a'e small losses. +0ere are t o t$pes of risk retention: t0e acti'e and passi'e retention. +0e acti'e retention also kno n as Mself-insurance" is t0e t$pe 0ereb$ companies deliberatel$ manage risks after cautious e'aluation of potential costs and losses from different a$s of 0andling risks; 0ile passi'e retention also kno n as Mnon-insurance" arise because of neglect3 absence of decision and ignorance. =8aker3 et al.3 1---> 2.=.3. Risk reduction:

2n t0is tec0ni<ue3 oil and gas companies de'elop or take pre'enti'e actions so as to decrease t0e possibilit$ of risks occurring on pro#ects. /not0er met0od is b$ de'eloping correcti'e actions incase a risk or risks arise on t0e pro#ect. +0e former focuses on t0e actual causes of t0e risks for determining t0e risk likeli0ood 0ile t0e latter focuses on t0e conse<uences for determining t0e risk impacts. 8aker3 et al.3 =1---> argues t0at3 risk reduction is a form of risk retention because risks are retained first before actions are de'eloped and pursued for reducing t0e effects. 2n Nigeria3 oil and gas companies usuall$ carr$ out risk reduction practices on pro#ects b$; staff training to educate t0em about potential risks" de'eloping effecti'e pro#ect s$stem to ensure consistenc$" p0$sical protection for 0ealt0 and safet$ risks" etc. 2.=.3.! Risk transfer:

3-

2n t0is tec0ni<ue3 oil and gas companies transfer risks to t0e best parties t0at can 0andle t0e risks. +0e acti'it$ or t0e propert$ 0ic0 is responsible for t0e risk ma$ be transferred to a sub-contactor to 0andle t0e 0a)ardous process. 5.g. most oil producer sub-contract t0eir drilling acti'ities 0ic0 is 'er$ speciali)ed and sensiti'e to oil ser'icing companies like 9c0lumberger because of t0eir e%pertise in t0e crude oil drilling acti'ities. /not0er tec0ni<ue being used is b$ oil and gas companies are; to retain t0e acti'it$ or propert$ responsible for t0e risk and transferring t0e financial risk to an insurance compan$. / t$pical e%ample is t0e risk of a fire outbreak on an offs0ore platform is transferred to insurance companies and premiums are paid b$ t0e oil compan$. 2t is also kno n as risk s0aring 0ic0 are of four t$pes namel$: re-insurance; co-insurance; e%cess or deductible; and first loss co'er. =8aker3 et al.3 1---> /0med3 et al.3 =2..*> put for ard a risk management frame ork it0 respect to t0e risk management process 0ic0 is ideal for most pro#ects as s0o n in Figure 2-3 as follo s:

!.

+ig 2, : +ramework for risk management tools. "ource .Ahmed% et al.% 2//50

!1

2nteracti'e O 7ollaborati'e 2nterface

7onte%t 5stablis0ment

Risk Eodel O Quer$ Eec0anism

Risk 2dentification

Arior Risk 4no ledge =Repositor$>

Risk /nal$sis

Qualitati'e O Quantitati'e Eeasures

Risk 5'aluation !2

Decision 9upport 9$stems

Risk Focused Aro#ect +eam

+reat Risks

Eitigation Alanning

2.1/

"ummar):

+0e c0apter clearl$ ga'e a background insig0t into t0e nature of oil and gas pro#ects3 t0e features and t0e c0aracteristics of t0e Nigerian oil and gas pro#ects. +0e literature re'ie s0o s t0at t0e Nigerian oil and gas industr$ comprises of t0e upstream and do nstream sector 0ic0 are filled it0 a 0andful of in'estment opportunities 0ic0 lead to ne pro#ects being carried out on a fre<uent basis. +0e findings from t0e c0apter satisfies t0e aim and ob#ecti'es of t0e dissertation in 'arious a$s discussed as follo s 2t as disco'ered t0at oil and gas pro#ects in Nigeria are 'er$ sensiti'e because of t0e 'olatile nature of t0e products and t0e en'ironment 0ere t0e operation and processes are carried out. /ll t0ese acti'ities e%pose oil and gas pro#ects to different risk factors. +0e different sources of risks in oil and gas pro#ects in Nigeria oil and gas industr$ can be classified b$ t0e nature of t0e en'ironment 0ere t0e$ originate as follo s: social en'ironment; p0$sical en'ironment; cogniti'e en'ironment; operational en'ironment; political en'ironment; legal en'ironment; and economic en'ironment. Risks in oil and gas pro#ects in Nigeria oil and gas industr$ can also be classified b$ t0e risk le'el it0in a pro#ect and b$ t0e e%act nature3 c0aracteristics or dependenc$ of t0e risks to ere classified it0 ot0er risks. +0e$ are: strategic3 c0ange3 operational and unforeseeable risks =risk le'el>. 4no ledge and financial; e%ternal and internal; speculati'e and static respect to t0eir c0aracteristics and nature. /lso3 t0ere is interdependenc$ bet een t0e 'arious t$pes of risks as t0e$ take t0eir forms in Nigerian oil and gas pro#ects. +0e literature re'ie re'ealed t0at t0e concept of risk management 'er$ essential and needs to be routine so t0at oil and gas companies can meet <ualit$; it0 t0eir ob#ecti'es of cost3 time and it0 respect to t0e 0a)ardous nature of oil and gas pro#ects. Risk management as

!3

practiced in oil and gas pro#ects

as found to be di'ided into fi'e stages: establis0ing t0e

pro#ect concept3 risk identification3 risk anal$sis3 risk e'aluation and risk mitigation. 2n Nigeria3 at t0e strategic stage of oil and gas pro#ects3 t0e conte%t of t0e pro#ect is establis0ed it0 respect to setting pro#ect units3 orking relation s0ips3 etc. +0e risk identification stage is t0e stage 0ere all t0e possible sources of risks and t0eir indi'idual

impacts or conse<uences are identified. +0e risk anal$sis stage follo s b$ a complete assessment of t0e c0aracteristics of t0e identified risks =risk probabilit$ and conse<uence> eit0er <ualitati'el$ or <uantitati'el$ so as to determine t0e magnitude of t0e risks. +0e risk e'aluation stage is 0ere t0e anal$)ed risks are prioriti)ed so t0at effecti'e risk mitigation 0ole risk management c$cle plans or strategies can be de'eloped on t0e pro#ect. +0e risk mitigation stage is t0e last and 'ital stage of t0e 0ere all t0e possible c0oices a'ailable so as to reduce t0e pro#ect t0reats are carried out3 and strategies are de'eloped to counter t0ese and also e%plore a'ailable opportunities on t0e pro#ect. 2t as found t0at risks could be a'oided3 retained3 reduced and transferred. 9uitable tec0ni<ues used in carr$ing out risk management practices at t0e 'arious stages 0ig0lig0ted. Finall$3 pro#ect risk management in'estigates in details; t0e structure of a pro#ect3 t0e pro#ect en'ironment =e%ternal and internal>3 processes3 products and procedures used in carr$ing out pro#ect acti'ities. 2t can also be said to be supplementing for pro#ect management practices. +0e c0apter 0as s0o n t0at in line it0 t0e ob#ecti'es of t0e dissertation researc0 t0at it is imperati'e t0at t0e different t$pes3 forms3 and t0e ma#or sources of risks t0at emanate in oil and gas pro#ects in Nigeria are clearl$ understood so t0at effecti'e mitigation plans or strategies can be de'eloped b$ pro#ect management teams 0ile carr$ing out risk management practices for t0e successful deli'er$ of oil and gas construction pro#ects in Nigeria. ere

!!

Chapter : Research methodolog)


.1 Introduction: 0ic0 all t0e

+0e purpose of t0e c0apter is to describe t0e s$stematic processes b$

necessar$ data re<uired for t0e actuali)ation of t0e researc0 dissertation ob#ecti'es =to determine t0e ma#or risks affecting oil and gas construction pro#ects in Nigeria so t0at appropriate mitigation strategies can be proposed to effecti'el$ respond to t0ese risks> as mentioned earlier as collected. /fter an e%tensi'e re'ie of t0e current literature on t0e as nature of risks and risk management in Nigerian oil and gas construction pro#ects carried out; t0e ne%t stage <uestionnaire sur'e$

as to gat0er data t0roug0 e%tensi'e inter'ie s and

it0 prominent personnel in t0e Nigerian oil and gas industr$ ranging

from emplo$ees of pri'ate multinational oil companies3 go'ernment agencies =public sector> to pri'ate indigenous oil and gas construction companies bot0 in t0e do nstream and upstream sector. +0is aspect as done in an ob#ecti'e a$3 not b$ #ust collating t0e necessar$ information a'ailable3 but also to present a balanced 'ie . .2 Research: 0ereb$ information

Leed$ and ?rmrod3 =2..&> defines researc0 as t0e s$stematic process

data is collected3 anal$)ed and interpreted so as to increase t0e researc0ers understanding of t0e p0enomenon about t0eir interests or concerns. +0e researc0 dissertation aims at identif$ing t0e risk factors t0at affect oil and gas construction pro#ects in Nigerian and deri'e suitable risk responses for t0em. +0erefore3 to effecti'el$ reali)e t0is stud$3 t0e researc0 dissertation ill accomplis0 t0e t0ree c0aracteristics of researc0 0ic0 are stated belo as follo s =Balliman3 2..&>: 1. +0e researc0 ill be performed in a controlled and s$stematic a$ !&

2. 2t ill be empirical and t0e results confirmed using t0e real orld situation 3. 2t ill in'ol'e rigorous data testing sourced from current literature

:ethodolog): 0ic0 are t0e orld is ere made. Bisker3 =2..,> put for ard 0ic0 t0e is0es to disco'er and t0e

2n order to ac0ie'e t0e purpose of t0is researc0 dissertation3 ke$ decisions c0oices of a met0odolog$ or appropriate met0ods t0at decisions are usuall$ dictated it0 respect to t0e manner b$

interpreted b$ t0e aut0or3 t0e t$pe of information t0e aut0or

researc0"s final outcome. Bisker3 =2..,> furt0er states t0at t0e difference bet een met0odolog$ and researc0 met0ods is t0at; t0e former is t0e p0ilosop0ical assumptions and rationale 0ic0 underlies a particular stud$ 0ile t0e latter are t0e medium3 'e0icles3 procedures3 s$stems and processes t0at are used to gat0er data. +0erefore3 researc0 met0ods 0ic0 are adopted for a researc0 are go'erned b$ t0e researc0"s met0odolog$. Bit0 respect to t0e aim of t0is researc03 t0e descripti'e and e%planator$ approac0es to researc0 ill be adopted. +0ese ill be used for anal$)ing t0e identified risk sources t0at are present in Nigerian oil and gas pro#ects. +0e stud$ also focuses on testing concepts into 0ic0 ma#or risks are present on most oil and gas construction pro#ects. .! Research methods:

2n practice t0ere are t o t$pes of researc0 met0ods adopted for carr$ing out researc0 and t0e$ are; t0e <ualitati'e and <uantitati'e met0ods of researc0. +0e researc0 dissertation ill be adopting t0e mi%ed met0odolog$ <uantitati'e t$pes of researc0 met0ods 0ereb$ elements of bot0 t0e <ualitati'e and t0e ill be used. Naoum3 =2..*> describes <ualitati'e

researc0 as being sub#ecti'e and focuses on t0e descriptions3 e%periences and attitudes of indi'iduals in a particular field. Qualitati'e researc0 is mainl$ used for testing for t0e e%istence of 'ariables instead of testing for t0eir fre<uenc$ or number. Naoum3 =2..*> furt0er breaks do n <ualitati'e researc0 into t o t$pes. 5%plorator$ researc0 is t0e first t$pe 0ic0 is used if a researc0er"s kno ledge of t0e sub#ect is limited. / t$pical tec0ni<ue used 0ere are inter'ie s; 0ic0 are usuall$ used for data collection and entails t0e collection of ra data from t0e e%act t0ings t0e inter'ie ee sa$s to t0e !(

inter'ie er. /ttitudinal researc0 is t0e second t$pe opinions and perceptions are e'aluated sub#ecti'el$.

0ic0 is used

0en people"s 'ie s3

+0us3 <ualitati'e researc0 met0od is impressionistic because it entails t0at t0e researc0 results s0ould be repeated b$ ot0ers for 'alidation or confirmation since it cannot be 'erified using tests; and t0e researc0er s0ould also 0a'e an open mind. +0is approac0 suit t0e researc0 dissertation mitigating t0e ma#or risks t0at affect oil and gas construction pro#ects in Nigeria. ?n t0e contrar$3 <uantitati'e approac03 positi'ist met0odolog$ 0ic0 is ob#ecti'e in nature3 originates from a ill it0 respect to t0e researc0 aim of proposing strategies for

0ic0 utili)es a deducti'e3 interpretation for p0enomenon and it0 countable and tangible measures because statistical

e%plaining e'ents3 and <uantitati'e data collection. =Bisker3 2..,> +0e <uantitati'e data is 0ard3 reliable3 and not abstract anal$sis of t0e collected data are tested for 'alidit$ and t0is can be repeated for similar results to be e%perienced. =Naoum3 2..*> 9ocial sur'e$s are used during t0is t$pe of researc0 and because of t0e gap bet een t0e researc0er and t0e stud$ sample and t0e rigorous testing of concepts; it ill be suitable for t0is researc0. +0is ill be e'ident in t0e researc0 ob#ecti'e of determining t0e ma#or sources of risks t0at affect oil and gas construction pro#ects in Nigeria. Cust like t0e <ualitati'e researc03 t0e <uantitati'e approac0 0as its limitations. 2f re<uired information cannot be <uantified3 t0ere is difficult$ in using t0is met0od. +0erefore3 <uantitati'e met0ods can be argued to possibl$ be sub#ected to bias because of t0e data conte%t3 design of t0e researc0 and t0e population sample. .3 -ata collection:

Data as described b$ Leed$ and ?rmrod3 =2..&> are t0e pieces of information recei'ed b$ an obser'er of a particular situation. +0e researc0 dissertation ill use t0e t o t$pes of data 0ic0 are; t0e primar$ and t0e secondar$ data. +0e primar$ data used for t0e researc0 ere gat0ered b$ t0e use of <uestionnaires and e%tensi'e p0one inter'ie s designed in line t0e researc0 ob#ecti'es. +0e target population for t0e data collection; do nstream sector of Nigeria oil and gas industr$. +0e respondents it0 ere t0e people t0at ere managers3 risk

are in'ol'ed in oil and gas construction pro#ects acti'ities3 bot0 in t0e upstream and e%perts3 pro#ect managers3 pro#ect team members and ot0er significant personnel in go'ernment agencies3 pri'ate multinational and pri'ate indigenous oil and gas companies. +0e secondar$ data as collected 'ia an in-dept0 re'ie !* of current literature into t0e t$pes

of risks3 sources of risks and risk management as practiced in Nigerian oil and gas pro#ects. +0e information as sourced from electronic and 0ard sources. +0e 0ard sources ere #ournals3 books3 academic publications and proceedings from conferences electronic sources for t0e data mining process of t0e of t0e researc0 in t0e Nigerian oil and gas industr$. +0e reasons for t0e selection of bot0 t0e <ualitati'e and <uantitati'e met0ods for t0e researc0 are as follo s: 1. +0e oil and gas industr$ is ad'ersarial3 contractuall$; and 'er$ competiti'e3 commerciall$; t0ereb$3 opinions from e%perienced personnel are 'er$ 'aluable because of restrictions t0at are placed on gi'en access to detailed information. 2. 7ontractors3 clients and t0e go'ernment agencies in t0e industr$ are lacking co0esion; t0ereb$3 creating a deficienc$ in accessing compre0ensi'e data. +0us3 it is essential to compare t0e statements from t0ese organi)ations. 3. +0ere 0a'e been confidential and commercial restrictions to data pre'iousl$ presented in t0e oil and gas industr$ because of t0e absence of single data sources. .4 "urve) research: as conducted into t0e ma#or risks it0 t0e researc0 ob#ecti'es i.e. t0e 0ile t0e

as collected from t0e

internet so as to t0ro more lig0t into t0e nature and opportunities t0at are open to in'estors

2n t0e <uest to ac<uire information3 a sur'e$ researc0 is ac<uired it0 respect to a group of people in line

t0at affect oil and gas construction pro#ects in Nigeria. 2n t0is t$pe of researc03 information Nigerian oil and gas construction ke$ pla$ers" 'ie s to ards t0e ma#or sources of risks in oil and gas pro#ects. +0ese ill entail; t0eir opinions3 c0aracteristics and attitudes to t0e risk t$pes3 sources and t0e risk management practice as a 0ole. +0e sur'e$ met0od as emplo$ed for t0is researc0 because of t0e simple nature of t0e design. +0ree met0ods usuall$ used for sur'e$s as identified b$ Leed$ and ?rmrod3 =2..&> are: 1. +elep0one inter'ie s 2. Face to face inter'ie s 3. Questionnaires

!,

+0e use of telep0one inter'ie s and <uestionnaires t0is researc0 0ic0 is in line

ill be adopted for data collection in

it0 t0e proposition made b$ Naoum3 =2..*> t0at3 postal

<uestionnaires and personal inter'ie s are t0e most suitable form of data collection for researc0es made in t0e construction industr$. .4.1 1elephone Interviews: ere carried out. +0ree top managers: a

2n t0e <uest to ac<uire information and for t0e accommodation of <ualitati'e researc0 met0ods; personal in-dept0 telep0one inter'ie s Aro#ect manager manager orking orking it0 a pri'ate3 multi-national oil and gas compan$; a Aro#ect orking it0 a go'ernment agenc$ t0at inspects all oil ere asked t0e

it0 an indigenous; pri'ate sector oil and gas design and construction

compan$; and a Aro#ect manager oil and gas industr$; respondents researc0. .4.2 Auestionnaires:

and gas acti'ities on pro#ects bot0 in t0e upstream and do nstream sector of t0e Nigerian ere inter'ie ed. +0e sources of t0e <uestions t0at ere in line ere dra n from e%tant literature and it0 t0e ob#ecti'es of t0e

+0e use of <uestionnaires is a common met0od for data collection. 2nformation is usuall$ collected directl$ 'ia t0e responses coming from <uestions t0at people. +0e respondents to t0e sent out <uestionnaires ere asked a group of ere managers3 risk e%patriates3

pro#ect managers3 pro#ect team members and ot0er significant personnel of go'ernment agencies3 pri'ate multinational and pri'ate indigenous oil and gas companies. +0e <uestionnaires ill gat0er factual information it0 regards to t0e Nigerian oil and gas industr$"s ke$ pla$er"s 'ie s and attitudes to t0e ma#or risk t$pes and sources t0at oil and gas construction pro#ects are e%posed to3 as as disco'ered from e%isting literature. 5'en t0oug03 t0e use of <uestionnaires is usuall$ good for sur'e$s done in large scale3 it can also be used for sur'e$s done in small scale pro'ided t0e researc0er"s issues to be in'estigated and information to be gat0ered are clear and precise. =Eunn and Dre'er3 1--.> +0e use of <uestionnaires is appropriate for t0e researc0 because of t0e numerous ad'antages stated as follo s =Balliman3 2..&; Bisker3 2..,>: 1. 2t is cost effecti'e 2. 2t is eas$ to design !-

3. 2t can be sent to a large number of people !. 2t ensures t0e respondents anon$mit$ &. 2t reduces misrepresentation and misinterpretation of <uestions because of t0e standard nature of t0e <uestions. ?n t0e ot0er 0and3 <uestionnaire are imperfect and 0a'e t0e disad'antage of slo response it0 regards to t0e respondents3 time spent in its design3 time spent in anal$)ing t0e findings and bias 0ic0 ma$ be influenced b$ t0e background of t0e respondent. +0e ere taken care of b$ t0e a$ t0e identified disad'antages related to using <uestionnaires

<uestionnaires ere designed and administrated in t0e researc0. .4.2.1 Auestionnaire -esign: Questionnaire design is 'ital in sur'e$ researc0 gi'en t0e fact t0at people are often put off b$ <uestionnaires. =Bisker3 2..,> 2t is recommended and essential to t0oroug0l$ pilot t0e <uestions t0at <uestions ill make up a <uestionnaire. 2n t0is stud$3 in order to be sure t0at a clear as ac0ie'ed it0 respect to t0e sample group; t0e as generated; understanding of t0e <uestions so as to eliminate ambiguit$. 2t

ere refined and piloted carefull$ before t0e final <uestionnaire

as ac0ie'ed b$ using simple instructions to describe and

guide t0e respondents on 0o t0e$ s0ould ans er t0e <uestions. +0e <uestionnaire la$out as split into t o sections3 it0 eac0 of t0e sections = 0ic0 ere

mostl$ closed ended <uestions> focusing on a 'ital area in t0e stud$. +0e t o sections of t0e <uestionnaire 0a'e t0e follo ing 0eadings: 1. 1eneralD7ompan$ 2nformation 2. Risk Eanagement Rationale +0e adoption of t0is approac0 assisted in a'oidance of o'ercro ding and unnecessar$ duplication of t0e researc0 <uestions. +0is conforms to t0e proposition b$ Bisker3 =2..,> 0ic0 states t0at t0e use of lengt0$ <uestionnaires usuall$ makes t0e respondents irritated and bored3 leading to lo rate of response. +0erefore3 t0e <uestionnaire in t0is researc0 as designed to comprise s0ort and precise <uestions at t0e fore front follo ed b$ a continuum link to furt0er <uestions in t0e researc0. &.

2n t0e <uest for data collection3 some part of t0e second section of t0e <uestionnaire adopted t0e fi'e-le'el #udgment scale =+0u$et3 et al.3 =2..*> numerical rating scale arranged in order of 0o 'ie 0ic0 utili)es t0e use of Mlo "3 a respondent"s M0ig0"3 do n to 0o

is3 to ards t0e researc0 <uestions. /lso3 t0e forced c0oice met0od of t0e Likert scaleere supported b$

t$pe <uestions as used in determining t0e fre<uenc$ of usage of t0e different t$pes of risk response tec0ni<ues used in oil and gas organi)ation. +0ese tec0ni<ues Leed$ and ?rmrod3 =2..*> 0en attitudes3 c0aracteristics3 be0a'iors or ot0er e'ents of

interest are to be assessed on a continuum. 2n using t0is approac03 =Bisker3 2..,> concurs t0at <uestions are easier to cip0er b$ respondents as compared to t0e open ended <uestions. +0ereb$3 t0e respondents are more likel$ to be focused on t0e <uestionnaire. .4.2.2 Auestionnaire Administration: +0e introduction of t0e internet 0as assisted in resol'ing t0e problems related to using <uestionnaires for data collection in researc0. +0e administration of <uestionnaires 'ia electronic media 0as 0elped in resol'ing and eliminating t0e cost issues linked to postal <uestionnaires administered to large samples; losses due to mails in transit; t0e lengt0 of time in'ol'ed in postages; and respondents" attitudes to ards postal ser'ices. +0us3 t0e researc0 utili)ed electronic media 'ia email for <uestionnaire administration due to t0e fore mentioned ad'antages. 2n t0e <uest to seek a 0ig0 response to t0e <uestionnaires from t0e respondents3 Eicrosoft ord as t0e soft are used in de'eloping t0e <uestionnaire because of t0e soft are"s it0 user friendl$ Eacros =soft are program statements> 0ic0 ere ritten and popularit$ and respondents" kno ledge in t0e business en'ironment. +0e <uestionnaire as designed added to t0e Eicrosoft ord file to en0ance t0e filling capabilit$ of t0e respondents b$

making use of interacti'e c0eck bo%es t0at t0e respondents completed electronicall$3 sa'ed and sent back to t0e aut0or"s email address t0at as clearl$ ritten in t0e <uestionnaire. 8$ so doing3 t0e time asted in t0e respondents3 printing out3 filling out3 scanning3 attac0ing as a'oided. +0us3 it back to t0ere email addresses before sending back responses

eliminated t0e need for respondents to be proficient in computer usage. .5 "ample "election: &1

9ampling is 'er$ 'ital in researc0 due to t0e fact t0at an entire population is almost impossible to e%amine. =Fello s and Liu3 2..3> +0e unit for sampling in t0e researc0 ere managers3 risk e%perts3 pro#ect managers3 pro#ect team members and ot0er significant personnel in go'ernment agencies3 pri'ate multinational and pri'ate indigenous oil and gas companies bot0 in t0e upstream and do nstream sector of Nigeria oil and gas industr$. Questionnaires totaling up to !. in number t0is met0od for t0e researc0 gas industr$. .9 Research -elimitations: ere sent out amongst t0e entire target sample. +0e distribution and t0e response order ill be represented in t0e subse<uent c0apter. 6sing as c0osen because it offers a good representation of t0e people in'ol'ed acti'el$3 in procuring oil and gas construction pro#ects in Nigerian oil and

+0e risk management process as practiced in Nigerian oil and gas construction pro#ects in'ol'es people in t0e do nstream and upstream pro#ect groups of public sector go'ernment agencies3 pri'ate multinational companies and pri'ate indigenous companies. +0ese different groups it0 t0eir different c0aracteristics 0a'e t0eir indi'idual opinion and 'ie s about t0e ma#or risks t$pes and sources in oil and gas pro#ects and t0e mitigation strategies for t0ese risks. +0erefore3 for t0e purpose of t0e stud$3 onl$ t0e perspecti'es of t0e target population on ma#or risk sources ill be soug0t. Bit0 respect to t0e gap in distance bet een t0e aut0or and t0e target population; and t0e time frame 0ic0 is needed for completing t0e researc03 t0e c0oice of telep0one inter'ie s and t0e use of an electronic <uestionnaire for t0e researc0. Ne'ert0eless3 it as t0e most suitable media for data collection as recogni)ed t0at t0e representation of t0e entire target

population ma$ not be repudiated from t0e respondents 'ie s because; not all t0e operators in t0e upstream and do nstream sector of t0e Nigerian oil and gas industr$ ma$ 0a'e access to internet to facilitate t0e data collection process. Ne'ert0eless3 t0e sample still continues to be a 'alid and dependable information source since most of t0e corporate3 public and pri'ate sector oil and gas organi)ation in Nigeria 0a'e internet access. .= 7thical Issues:

+0e follo ing et0ical issues ere considered in carr$ing out t0e researc0 it0 respect to t0e principles stated belo as follo s =+0u$et3 et al.3 2..*>: &2

1. 2nformed consent: +0e respondents participate. +0e respondents 2. :onest$: +0e researc0

0ic0 participated in t0e stud$

ere notified

about t0e ob#ecti'es of t0e researc0 and 0ad t0e c0oice of not to participate or do ere also notified of t0e c0oice of being informed about t0e result of t0e researc0 findings if t0e$ so is0. as carried out in a manner t0at is 0onest. B0ile carr$ing 0ic0 ere used in t0e researc0 out t0e researc03 'arious aut0ors and t0eir ideas ere referenced and ackno ledged. 3. Arotection from 0arm: +0ere as no t0reat or ps$c0ological 0arm to t0e respondents it0 regards to t0e a$ t0e researc0 <uestions ere designed. !. /non$mit$: +0e respondents ere gi'en utmost assurance t0at t0eir responses it0out t0e ill remain pri'ate and t0eir comments or identit$ not e%posed consent of t0e respondent or noted ot0er ise. ritten

&3

Chapter !: -ata collection and anal)sis


!.1 'verview of Approaches: as collected from respondents in Nigerian oil and gas construction

+0e purpose of t0is c0apter is to anal$)e and discuss t0e responses and results from t0e researc0 data t0at companies. / combination of t0e <ualitati'e and <uantitati'e approac0es to data anal$sis ill be utili)ed in anal$)ing t0e collected data t0at originated from a <uestionnaire sur'e$ and e%tensi'e p0one inter'ie s. !.1.1 Aualitative Approach: ere carried out it0 t0ree e%perienced managers t0at

2n-dept0 telep0one inter'ie s

e%ecute risk management functions as follo s: 1. / 9afet$ Eanager =upstream and di'ision> orking it0 Department of

Aetroleum Resources =DAR>; t0e Nigerian go'ernment"s regulator$ aut0orit$ and a public sector compan$ t0at inspects oil and gas companies acti'ities. 2. / Aro#ect Eanager and gas pro#ects 3. / Aro#ect Eanager orking it0 a multinational pri'ate sector3 oil and gas e%ploration3 drilling3 design and construction compan$ t0at undertake bot0 upstream and do nstream oil and gas pro#ects +0e responses to t0e <uestions ill be anal$)ed so as to gi'e an insig0t into t0e a$ oil and gas companies in Nigeria respond to t0e ma#or risks t0at emanate on oil and gas construction pro#ects. +0eir responses as used to de'elop an e%tensi'e c0ecklist of risks and sent to ot0er respondents =as <uestionnaires> in different oil and gas companies bot0 in &! orking it0 an indigenous3 pri'ate sector oil and gas design and construction compan$ t0at undertake bot0 upstream and do nstream oil

t0e upstream and do nstream sectors. +0e <ualitati'e met0od and for narrating t0e results from t0e <uantitati'e anal$sis.

ill also be used to discuss

!.1.2

Auantitative Approach: ere asked to

+0e <uestionnaire sur'e$ data from section t el'e =12> of t0e distributed <uestionnaire ill be anal$)ed b$ using t0e Relati'e inde% =R2> tec0ni<ue. +0e respondents #udge t0e attributes of e'er$ risk. +0e attributes ere t o in number and are: t0e fre<uenc$

of occurrence3 represented b$ MFr"3 and t0e degree of impact3 represented b$ M2m". 90en =2..1> and Rafter$3 =1--!> represent t0is using t0e e<uation belo : R ? +r 8 Im @@@@@@@@@@@@@@ equation 4.1 B0ere; R P Risk +r P Fre<uenc$ of occurrence of risk; and Im P Degree of impact of risk; /ll t0e attributes abo'e ill be measured numericall$ and t0e respondents ill make t0eir #udgments b$ using t0e fi'e le'el scale of #udgment 0ic0 uses 'er$ lo 3 lo 3 medium3 0ig0 and 'er$ 0ig0 for representing bot0 t0e degree of impact and fre<uenc$ of occurrence of risks. +0e model is applied b$ con'erting t0e opinion #udgment scale into numerical scales. +0is researc0 ill appl$ 'alues as suggested b$ AE8?4 =2...>3 0ic0 assigns a 'alue of ..1 to M'er$ lo " and 'alues of ..33 ..&3 ..* and ..- to Mlo "3 Mmedium"3 M0ig0"3 and M'er$ 0ig0" respecti'el$. Data ill be collected and t0e eig0tings of all t0e risks from eac0 respondent"s assessment are called t0e risk score; and ill be calculated using t0e formula +0u$et3 et al. =2..*>: Rij = Frij x Imij@@@@@@@@@@@@@ equation 4.2 B0ere; Rij P Risk 9core Frij P Fre<uenc$ of occurrence for risk i assessed b$ respondent # Imij P Degree of impact for risk i assessed b$ respondent # &&

/n a'erage score for eac0 risk is determined b$ calculating t0e a'erage scores from all t0e respondents. +0is is called t0e Mrisk-inde% score"3 0ic0 is used for ranking t0e risks. +0e risk-inde% score is t0en calculated it0 t0e follo ing formula:

RI =
i

R
j =1

equation 4.3

B0ere;

RI iP Risk-inde% score for risk i Rij P Risk score assessed b$ respondent # for risk i N P Number of respondents

+0e risk ranking ill be done b$ ordering t0e risks in increasing numerical order of =13 23 3.>3 it0 t0e ma#or risk 0a'ing t0e 'alue of M1"3 t0e second ma#or risk 0a'ing t0e 'alue of M2" and so on. !.1. (raphical Illustrations:

Aictorial and grap0ical presentations ill be used as anot0er tec0ni<ue for con'e$ing t0e results and findings of t0e researc0 in a non-'erbal manner. 1rap0s and c0arts ill be used as forms of grap0ical illustration in t0e researc0 because of t0eir ad'antage of making researc0 results eas$ to interpret. !.2 Auestionnaire surve) response: ere sent out to four different t$pes of compan$ groups

/ sum of fort$ =!.> <uestionnaires

t0at speciali)es bot0 in upstream and do nstream acti'ities in oil and gas pro#ects in Nigeria as follo s: 1. <uestionnaires to public sector companies3 1. <uestionnaires to pri'ate =multinational> companies and 2. to pri'ate =indigenous> companies. 2. <uestionnaires ere distributed to t0e pri'ate indigenous companies because t0ere are more companies in t0is categor$ t0an an$ ot0er categor$. ?ut of !. <uestionnaires t0at distributed3 3. <uestionnaires and rate of <uestionnaire responses as presented belo : ere ere returned. +able !-1 s0o s t0e details of t0e distribution

&(

1able !,1: -istribution of surve) responses


S/No 1 2 3 Company type Public sector Private( Multinational) Private (Indigenous) Nos of questionnaires Distributed Return 10 10 20 5 7 18 Return rate (%) 50 70 90

Total

40

30

75

+0e table abo'e s0o s t0at a *&@ return rate as recorded in t0e <uestionnaire sur'e$. +0e rate is 0ig0 as compared to t0e lo er response of (.@ =Ngu$en3 et al.3 2..*> as reali)ed in a related stud$. +0e table abo'e also s0o s t0e percentage distribution of respondents in t0e sur'e$ as follo s: Aublic sector companies &.@; Ari'ate =Eultinational> companies *.@ and Ari'ate =indigenous> companies -.@. !. "ection 1: (eneral;background information ill anal$)e

2n line it0 t0e ob#ecti'es of t0e researc03 t0e first section of t0e <uestionnaire

t0e effects of t0e background and general information of t0e respondents in t0e sur'e$. +0is establis0es a clear insig0t into t0e acti'ities of t0e companies ans ering t0e sur'e$ <uestions it0 respect to t0eir staff e%perience and number3 compan$ 0istor$ and t0eir general perception to t$pes of risks and t0e risk effects on risk management as practiced in oil and gas pro#ects in Nigeria. !. .1 RespondentBs job position: as made to incorporate more ill 0a'e a more compre0ensi'e

2n distributing t0e <uestionnaires3 a deliberate effort managers in t0e researc0 due to t0e fact t0at managers

kno ledge about risks and risk management practices in numerous aspects of oil and gas pro#ects. From t0e sur'e$3 it as found t0at !(.(*@ =1!> of t0e respondents ere managers &*

0ic0 comprised of operations3 pro#ect and marketing managers; emplo$ees s0o s t0eir distribution: 1able !,2: Results of respondentsB job position
S/No 1 2 3 4 5 ' Respondents job position Project anagers anagers Frequency 10 1 2 7 2 7 ercenta!e (%) 35 3 7 24 7 24

0ile &3.33@ =1(>

ere

0ic0 comprised of pro#ect3 safet$ and discipline engineers. +0e figure belo

!"eration #a$et%

anagers

Project &ngineers #a$et% &ngineers (isci"line &ngineers

+igure !,1: -istribution of respondentsB job position

(isci"line &ngineers 24) Project anagers 35)

#a$et% &ngineers 7)

Project &ngineers 24)

!"eration anagers 3) #a$et% anagers 7)

&,

+0e abo'e table and c0art =+able !-2 and Figure !-1> s0o s t0at t0e percentage distributions of t0e respondents" #ob position in t0e sur'e$ are as follo s: 3&@ =1.> are Aro#ect managers; 3@ =1> are ?peration managers3 *@ =2> are 9afet$ managers3 2!@ =*> are Aro#ect engineers3 and 2!@ =*> are Discipline engineers. From obtained results3 it can be inferred t0at t0e respondents to t0e <uestionnaire are indi'iduals 0o make significant contributions to t0e risk management practices in Nigerian oil and gas pro#ects. !. .2 Corking e8perience:

1able !, : Results of respondentsB )ears of working e8perience


S/No 1 2 3 "ears of #or$in! e%perience 0 to 5 %ears ' to 10 %ears *bove 10 %ears Frequency 4 10 1' ercenta!e (%) 13 33 54

+igure !,2: -istribution of respondentsB )ears of working e8perience

0 to 5 %ears 13) *bove 10 %ears 54)

' to 10 %ears 33)

+0e abo'e table and c0art =+able !-3 and Figure !-2> s0o s t0at t0e percentage distributions of t0e respondents" $ears of 13@ =!> 0a'e . to & $ears orking e%perience in t0e sur'e$ are as follo s: orking orking e%perience. From t0e obtained orking e%perience; 33@ =1.> 0a'e ( to 1. $ears

e%perience; and &!@ =1(> 0a'e abo'e 1. $ears

&-

results3 it implies t0at risk management practices in Nigerian oil and gas sector in'ol'es people 0o 0a'e 0ig0 industr$ e%perience.

!. .

7ducational >ualification: it0 respect to educational <ualification s0o t0at eac0

+0e <uestionnaire results obtained

of t0e respondents possessed at least a form of 0ig0er educational <ualification =E8/3 Esc3 8sc and 8eng>. +0is implies t0at t0e decision makers 0o are in'ol'ed in carr$ing out risk management practices in Nigerian oil and gas pro#ects are educated. !. .! Respondents age group:

1able !,!: Results of respondentsB age group


S/No 1 2 3 4 5 ' Respondents a!e !roup 25 to 30 +ears 31 to 35 +ears 3' to 40 +ears 41 to 45 +ears 4' to 50 +ears ,50 +ears Frequency 2 12 3 7 5 1 ercenta!e (%) 7 40 10 23 17 3

(.

+igure !, : -istribution of respondentsB age group

,50 +ears 3) 4' to 50 +ears 17)

25 to 30 +ears 7)

31 to 35 +ears 40) 41 to 45 +ears 23)

3' to 40 +ears 10)

+0e abo'e table and c0art =+able !-! and Figure !-3> s0o s t0at t0e percentage distributions of t0e respondents" age groups in t0e sur'e$ are as follo s: *@ =2> are 2& to 3. $ears; !.@ =12> are 31 to 3& $ears; 1.@ =3> are 3( to !. $ears; 23@ =*> are !1 to !& $ears; 1*@ =&> are !( to &. $ears; and 3@ =1> are abo'e &. $ears. From t0e obtained results3 it as noticed t0at t0e age group it0 t0e 0ig0est fre<uenc$ =modal age group> ere bet een 31 to 3& $ears of age. /lso3 all t0e respondents from !1 $ears and abo'e in risk management practices in Nigerian oil and gas industr$. !. .3 1)pes of projects e8ecuted b) respondents: ere managers. 2t can be inferred t0at a considerable number of managers are acti'el$ in'ol'ed

(1

+0e Nigerian oil and gas industr$

as identified from e%tant literature to be di'ided into ere re<uested to select t0e

t o sectors and as indicated in t0e <uestionnaire; respondents

sector 0ere t0e$ carr$ out t0eir pro#ect acti'ities. +able !-& s0o s t0e sur'e$ results.

1able !,3: Results of project t)pes e8ecuted b) respondents


S/No 1 2 3 Type of projects e%ecuted by respondents !nl% u"strea !nl% do-nstrea .ot/ Frequency 0 3 27 ercenta!e (%) 0 10 90

+igure !,!: -istribution of project t)pes e8ecuted b) respondents


.ot/ 90)

!nl% do- nstrea 10)

!nl% u"strea 0)

+0e abo'e table and c0art =+able !-& and Figure !-!> s0o s t0at t0e percentage distributions of t0e respondents" it0 respect to t0e oil and gas sector; 0ere t0e$ carr$ out t0eir pro#ects acti'ities are as follo s: 3@ =1.> carr$ out onl$ do nstream pro#ect acti'ities; -.@ =2*> carr$ out bot0 upstream and do nstream pro#ect acti'ities; and none of t0e companies carr$ out onl$ upstream acti'ities. From t0e obtained results3 it t0at onl$ respondents" petroleum products orking carr$out onl$ do nstream pro#ect acti'ities as noticed 0ile ot0ers it0 companies t0at engage in retail and marketing of

=designDconstruction3 inspection3 and drillingDe%ploration> companies; carr$ out t0eir pro#ect acti'ities in bot0 sectors 0ic0 ma$ be offs0ore or ons0ore. 2t can be inferred t0at risk

(2

management practices carried out on most of t0e pro#ects in bot0 t0e upstream and do nstream sectors of Nigerian oil and gas industr$. !. .4 "ervices rendered b) organiDations: ere re<uested to select t0e t$pe of pro#ects 0ere t0e$ carr$ out t0eir pro#ect acti'ities;

2n t0e <uestionnaire sur'e$; respondents ser'ices t0at t0eir indi'idual organi)ations

render in Nigerian oil and gas industr$. +0e table belo s0o s t0e sur'e$ results. 1able !,4: Results of project services rendered b) respondents
S/No 1 2 3 4 Type of projects ser&ices rendered by respondents Ins"ection (esign0construction 1etail0 ar2eting (rilling0e3"loration Frequency 4 18 4 4 ercenta!e (%) 13 '1 13 13

+igure !,3: -istribution of project services rendered b) respondents


13) 13) 13) Ins"ection (esign0construction 1etail0 ar2eting (rilling0e3"loration '1)

+0e abo'e table and c0art =+able !-( and Figure !-&> s0o s t0at t0e percentage distributions of t0e respondents" it0 respect to t0e ser'ices t0at t0eir indi'idual organi)ations render in Nigerian oil and gas industr$ are as follo s: 13@ =!> are in'ol'ed in inspection acti'ities; (1@ =1,> are in'ol'ed in design and construction acti'ities; 13@ =!> are in'ol'ed in retail and marketing acti'ities; and 13@ =!> are in'ol'ed in drilling and e%ploration acti'ities. From t0e obtained results and from in-dept0 telep0one inter'ie s3 it as gat0ered t0at; Nigerian go'ernment o ned public sector companies like DAR3 in'ol'ed in inspecting and regulating t0e ere a$ t0e ot0er companies =designDconstruction3 (3

inspection3 and drillingDe%ploration> carr$ out risk management practices in bot0 upstream and do nstream oil and gas pro#ects. +0is t0e$ do b$ gi'ing t0em guidelines on t0e risk assessment met0odolog$ and marketing companies 0en to use t0em on pro#ects. =DAR3 2..(> +0e retail and ere pri'ate indigenous companies t0at carr$ out t0eir pro#ect

acti'ities onl$ in t0e do nstream sector. Eost of t0e drilling and e%ploration companies ere pri'ate multinationals t0at 0a'e #oint 'entures it0 NNA7 =t0e o ner of and Nigerian go'ernment representati'e; in all oil and gas pro#ects>. =NNA73 2..,> +0is is because of t0e inabilit$ of t0e pri'ate indigenous companies" lack of finance and e%pertise to carr$ out t0ese 0ig0 tec0nolog$ and 0uge capital intensi'e pro#ects. (1@ distribution pro#ects 0ic0 as comprised of mostl$ t0e pri'ate indigenous companies t0at carr$ out most design and construction ere sublets from t0e multinational companies. +0is large percentage is Nigerian Local content polic$ to carr$ out *.@ of all design and design and construction companies. Bit0 respect to t0e because of t0e ne

construction pro#ects in t0e oil and gas sector b$ t0e $ear 2.1.. =N ac0uk u3 2..,> +0is boosted t0e springing up of ne ob#ecti'es of t0e researc03 it can be inferred t0at risk management practices carried out b$ t0e 'arious companies in Nigerian oil and gas pro#ects are regulated and monitored under strict guidelines b$ Nigerian go'ernment bodies responsible for ensuring t0at pro#ect risks are effecti'el$ managed and responded to; at t0e 'arious ke$ stages of oil and gas pro#ects. !. .4 'rganiDations )ears of e8perience:

1able !,5: Results of respondentsB organiDations )ears of e8perience


S/No 1 2 3 3 Respondents or!ani'ations years of e%perience 4ess t/an 5%rs 5 to 10%rs 10 to 20%rs 20%rs and above Frequency 0 2 ' 22 ercenta!e (%) 0 7 20 73

+igure !,4: -istribution of respondentsB organiDations )ears of e8perience

(!

73) 4ess t/an 5%rs 5 to 10%rs 10 to 20%rs 20) 7) 0) 20%rs and above

+0e abo'e table and c0art =+able !-* and Figure !-(> s0o s t0at t0e percentage distributions of t0e respondents" indi'idual organi)ations $ears of e%perience in Nigerian oil and gas industr$ are as follo s: *@ =2> 0a'e & to 1. $ears; 2.@ =(> 0a'e 1. to 2. $ears; and *3@ 0a'e abo'e 2. $ears of e%perience. + o companies in'ol'ed in design and construction ere in t0e & to 1. $ears of e%perience range. +0e rest 0ad abo'e 1. $ears e%perience in t0e Nigerian oil and gas industr$. Bit0 respect to t0e organi)ations t0at participated in t0e researc0 sur'e$3 it can be seen t0at most of t0e companies 0a'e been operating in t0e oil and gas sector for long. +0us3 it can be inferred t0at most of t0e organi)ations t0at partook in t0e sur'e$ are 'er$ e%perienced in oil and gas pro#ects. !. .5 7mplo)ee siDe:

1able !,9: Results of respondentsB organiDationBs emplo)ee siDe


S/No 1 2 3 4 5 Respondents or!ani'ation(s employee si'e 1 to 100 100 to 250 250 to 1000 1000 to 5000 *bove 5000 Frequency 0 0 4 18 8 ercenta!e (%) 0 0 13 '0 27

+igure !,5: -istribution of respondentsB organiDationBs emplo)ee siDe

(&

*bove 5000 27)

250 to 1000 13)

1000 to 5000 '0)

+0e abo'e table and c0art =+able !-, and Figure !-*> s0o s t0at t0e percentage distributions of t0e respondents" indi'idual organi)ations emplo$ee si)e are as follo s: 13@ =!> 0a'e 2&. to 1... emplo$ees; (.@ =1,> 0a'e 1... to &... emplo$ees; and 2*@ 0a'e abo'e &... emplo$ees. Eedium si)ed design and construction companies respondents in t0e t0ird categor$ =2&. to 1...> emplo$ees; ere t0e 0ile large si)ed indigenous

multinationals3 public sector go'ernment organi)ations and retail and marketing companies 0ad from 1... to &...R emplo$ees. +0is is because t0ese large si)ed organi)ations 0a'e been in e%istence for man$ $ears and carr$ out oil and gas pro#ects in t0eir subsidiaries 0ic0 are spread around t0e nation. +0us3 it can be inferred t0at since t0e large si)ed organi)ations constitute a total of ,*@ of t0e sur'e$; t0e$ are more organi)ed and 0a'e abundance of emplo$ees pro#ects. !.! 2n line "ection 2: Risk management rationale it0 t0e ob#ecti'es of t0e researc03 t0is section of t0e <uestionnaire ill be used to 0o carr$ out risk management on t0eir 'arious oil and gas

anal$)e t0e risk management practices carried out b$ t0e respondents in t0e sur'e$. +0e <uestions seek to find out 0o organi)ations identif$ t0e sources of risks; t0e risk response tec0ni<ues t0e$ use; and an anal$sis of t0e ma#or risks t0at emanate in Nigerian oil and gas pro#ects ill be carried out so as to determine t0e fi'e ma#or risks t0at impede t0e pro#ects. +0is ill be furt0er anal$)ed so as to determine suitable response strategies for t0ese risks. !.!.1 'rganiDations and risk management s)stem:

2n t0e <uestionnaire sur'e$ results; all t0e respondents agreed t0at t0eir indi'idual organi)ations maintained a risk s$stem. /ll also agreed t0at t0e identified risks are stored in a risk management database eit0er b$ recording t0e risks in a risk register3 documenting ((

and storing t0em as 0ardcop$ files; or b$ storing t0em as folders electronicall$3 inside computer 0ard discs3 flopp$ dri'es or compact discs. +0is implies t0at oil and gas organi)ations pa$ significant attention to risk management practices so as to effecti'el$ mitigate risks on pro#ects.

!.!.2

Risk ranking for &igerian oil and gas construction projects: 0ic0 ere t0irt$ =3.> in number; ere asked 0ic0 ere identified from e%tensi'e p0one inter'ie s to as used to deri'e t0e risk inde% score b$ it0

2n t0e <uestionnaire sur'e$; t0e respondents to rate a list of t ent$ =2.> risks

be t0e most common sources of risks t0at emanate in Nigerian oil and gas pro#ects. +0e a'erage risk scores from t0e 3. respondents t0e formula belo :
30

putting t0e numerical 'alues as proposed earlier in e<uation !.3. +0is is represented

RI =
i

R
j =1

equation 4.4

30

B0ere;

RI i P Risk-inde% score for risk i Rij P Risk score assessed b$ respondent # for risk i 30 = Number of respondents

+0e ranking of t0e identified top t ent$ =2.> risks

as carried out

it0 respect to t0e risk

inde% score so as to determine t0e top fi'e =&> ma#or risks so as to furt0er anal$)e and de'elop suitable mitigating strategies for t0ese risks in line be s0o n in table !-- as follo s: it0 t0e researc0 ob#ecti'es. +0is is similar to a stud$ carried out b$ +0u$et et al.3 =2..*>. +0e <uestionnaire results can

(*

1able !,=: Risk ranking for &igerian oil and gas construction projects Rank 1 2 3 ! & ( * , 1. 11 12 13 Risk 7ode R12.1& R12.& R12.( R12.* R12.R12.1! R12.1. R12.11 R12.13 R12.3 R12.1* R12.1, R12.1 Risk factors 9ecurit$ t0reats from neig0boring residents 2ncompetence of pro#ect team members Aoor designs Late internal appro'als from clients Aoor and inade<uate tendering 2nade<uate pro#ect organi)ation structure 70anges in design 2nade<uate budgeting and poor pro#ect planning Aoor pro#ect feasibilit$ studies 2nefficient and poor performance of constructors Reduced <ualit$ in procured materials Aoor coordination amongst sub-contractors and contractors Damage to ork b$ t0ird part$ (, R2 ..&(21 ..3,23 ..3*& ..2-*! ..2,11 ..2*!! ..2!&, ..23*, ..22*, ..212& ..2.-, ..1-(& ..1*(!

1! 1& 1( 1* 1, 12.

R12., R12.12 R12.2 R12.! R12.1( R12.2. R12.1-

8ureaucratic pro#ect and go'ernment appro'al procedures Differences in practices bet een local and foreign contractors 5n'ironmental protection pressure of ot0er groups Aoor relations0ip it0 go'ernment bodies Late pro'ision or deli'er$ of materials Borking conditions deferring from contract specification Lack of e%perience in design and construction

..1((& ..1(3, ..1&-2 ..1!&2 ..1!&2 ..1112 ..1.,(

/ compre0ensi'e list of t0e ranked risks as deduced from a combination of in-dept0 telep0one inter'ie s and <uestionnaire sur'e$ is s0o n in t0e table abo'e. +0e t ent$ =2.> risks are sorted accordingl$3 in ascending order of t0eir o'erall impact on oil and gas pro#ects in Nigeria. +0e top ten risks t0e risks. !.!. 2n line 1he anal)sis of the top ten risks in &igerian oil and gas construction projects: it0 t0e ob#ecti'es of t0e stud$3 t0e top ten ma#or risks in Nigerian oil and gas ill t0en be anal$)ed furt0er to determine t0eir features3 c0aracteristics and causes; so t0at ade<uate strategies can be proposed to mitigate

pro#ects ill be anal$)ed t0oroug0l$. 2n order to anal$)e t0ese top ten ma#or risks; t0e mean of occurrence and t0e mean of impact degree for eac0 indi'idual risk identified b$ t0e respondents 0ere determined. +0is can be seen as s0o n in table !-1. as follo s:

(-

1able !,1/: 1op ten risks statistics for &igerian oil and gas construction projects Eean of Eean of ?ccurrence 2mpact Fre<uenc$ Degree =Fr> =2m> ..* ..&133 ..!-33 ..2( ..&333 ..!2(* ..!((* ..&( ..!2(* ..!2 ..!2(* ..(.(* ..*( ..(&33 ..(, ..!,33 ..&2(* ..&-33 ..!, ..!2(* ..!,(* ..!*33 ..!&33 ..32(* Risk 2nde% 9core =R2> ..&(21 ..3,23 ..3*& ..2-*! ..2,11 ..2*!! ..2!&, ..23*, ..22*, ..212& ..2.-, ..1-(&

Rank 1 2 3 ! & ( * , 1. 11 12

Risk code R12.1& R12.& R12.( R12.* R12.R12.1! R12.1.

Risk Factors 9ecurit$ t0reats from neig0boring residents 2ncompetence of pro#ect team members Aoor designs Late internal appro'als from clients Aoor and inade<uate tendering 2nade<uate pro#ect organi)ation structure

70anges in design 2nade<uate budgeting and poor pro#ect R12.11 planning R12.13 R12.3 R12.1* R12.1, 2mproper pro#ect feasibilit$ studies 2nefficient and poor performance of constructors Reduced <ualit$ in procured materials Aoor coordination amongst subcontractors and contractors *.

13 1! 1& 1( 1* 1, 12.

R12.1 R12., R12.12 R12.2 R12.!

Damage to ork b$ t0ird part$ 8ureaucratic pro#ect and go'ernment appro'al procedures Differences in practices bet een local and foreign contractors 5n'ironmental protection pressure of ot0er groups Aoor relations0ip it0 go'ernment bodies

..2*33 ..3! ..3, ..2&33 ..2*33 ..32 ..2333 ..2&33

..* ..!((* ..3.(* ..&( ...!-33 ..!.(* ..3133 ..2-33

..1*(! ..1((& ..1(3, ..1&-2 ..1!&2 ..1!&2 ..1112 ..1.,(

R12.1( Late pro'ision or deli'er$ of materials Borking conditions deferring from R12.2. contract specification Lack of e%perience in design and R12.1construction

From table !-1. abo'e3 it can be deduced t0at Msecurit$ t0reats from neig0boring residents" risk take up t0e first position it0 a risk-inde% score =..&(21>3 to become t0e risk it0 t0e 0ig0est risk score-inde%. +0is is an e%ternal risk and 0as bot0 t0e 0ig0est mean of impact degree =..*(> and t0e 0ig0est mean of occurrence fre<uenc$ =..*>. 2t implies t0at oil and pro#ects in Nigeria are 0ig0l$ prone to t0is ma#or risk. 2t inter'ie s t0at t0e main causes of t0is risk as gat0ered from t0e conducted ere disturbances from t0e local residents and

militants in t0e Niger Delta region in t0e form of assault and kidnapping of oil and gas companies emplo$ees; 'andali)ing of oil and gas pipelines; and sabotage =fire and e%plosion of oil and gas facilities>. 2t pa$ment 0ic0 as also gat0ered t0at due to lack of compensation as supposed to be paid to t0e poor rural d ellers of t0ese oil ric0 regions

for t0e compulsor$ ac<uisition of t0eir lands for oil and gas e%ploration; al a$s generates crisis in t0e area. =?gedengbe3 2..*> +0e second to t0e fift0 risks are as follo s: M2ncompetence of pro#ect team members" it0 a risk-inde% score =..3,23>; Mpoor designs" appro'als from clients" tendering" it0 a risk-inde% score =..3*&>; Mlate internal it0 a risk-inde% score =..2-*!>; and Mpoor and inade<uate

it0 a risk-inde% score =..2,11>. From t0e second do n to t0e tent0 =2nd to

1.t0> ranking risks are all internal risks. Bit0in t0is limits ere associated ere risks 0ic0 also occupied 0ig0 positions in t0e risk ranking and

it0 t0e management acti'ities of t0e client. +0e$ are as follo s: *1

M2ncompetence of pro#ect team members" as t0e 2nd; Mlate internal appro'als from clients" as t0e !t0; Minade<uate pro#ect organi)ation structure" as t0e (t0; Minade<uate budgeting and poor pro#ect planning" as t0e ,t0 and Mimproper pro#ect feasibilit$ studies" as t0e - t0. +0e fact t0at t0ese management associated risks 0a'e 0ig0 ranking signifies t0at clients and emplo$ers in Nigerian oil and gas construction pro#ects are failing in t0eir duties of directing; moti'ating emplo$ees; organi)ing; controlling; and planning oil and gas pro#ects. From t0e inter'ie s conducted3 it as re'ealed t0at t0e reason for t0ese lapses accrue to orkers being used on ell as lack of a defined s$stem in pro#ects" structure and incompetent

pro#ects. +0us3 it can be inferred t0at; in order to manage t0ese risks3 t0ere s0ould be a focus on impro'ing clients" management skills3 abilities and kno ledge as emplo$ees capabilities. 2t is ort0 noting t0at t o risks 0ic0 0ad 0ig0 risk ranking; and found t0eir places as t0e ere associated it0 t0e designs. +0e$ are: Mpoor it0 a risk-inde% score orks 0ic0 are done at

3rd and *t0 in t0e top ten risk ranking designs"

it0 a risk-inde% score =..3*&>; and Mc0anges in design"

=..2!&,>. MAoor designs" risk alt0oug0 occupied t0e o'erall t0ird position3 0ad t0e second 0ig0est mean of impact degree =..(&33>. +0is is because design t0e earl$ stages of oil and gas pro#ects 0a'e a 'er$ 0uge impact on t0e total outcome of pro#ects. / little fla in a design can cause enormous c0anges in t0e construction p0ase and in allocating resources; t0us3 reducing <ualit$ and causing cost and time o'erruns on pro#ects. =+0u$et3 et al.3 2..*> M70anges in design" risk is common in oil and gas pro#ects and t0e earlier it occurs3 t0e lesser it 0as impact on t0e total pro#ect outcome. 2t usuall$ occurs in t0e construction p0ase of Nigerian oil and gas pro#ects. +0is risk 0ad ..!, as t0e mean of impact degree and t0is implies t0at c0anges in design in Nigerian oil and gas pro#ects 0a'e a medium effect or impact on t0e o'erall pro#ect outcome. From t0e inter'ie s3 it as gat0ered t0at t0is risk is usuall$ caused b$ c0anges in design specifications3 scope c0anges and poor <ualit$ designs. +o curb t0ese risks3 design standards are put in place to enable regulators3 clients and contractors to reac0 a mutual understanding about t0e 2..,> a$ to carr$ out designs. =9nell3

*2

MAoor and inade<uate tendering" risk 0ad t0e ranking position as &t0; it0 a risk-inde% score =..2,11>3 mean of impact degree =..&2(*> and mean of occurrence fre<uenc$ =..&333>. +0is means t0at t0is risk 0as a se'ere impact on pro#ect outcomes. From t0e inter'ie s3 it as re'ealed t0at risks associated it0 tendering in oil and gas pro#ects in Nigeria are attributed to poor contractor selection b$ clients. 2ncompetent and unreliable contractors end up inning bids due to inade<uacies in t0e e'aluation processes and selection criteria not on merit but based on 0ic0 lacked Mdue processes". +0us3 contractors are appointed b$ public and pri'ate sector clients" 0om t0e$ kno . =?gunsemi and /#e3 2..(> +0is makes contactor and client et0ics during contractor selection and e'aluation processes a comple% and sensiti'e issue $et to be addressed in Nigerian oil and gas pro#ects. +0e 1.t0 risk Minefficient and poor performance of constructors" risk it0 a risk-inde% score

=..212&>; mean of impact degree =..!*33>; and mean of occurrence fre<uenc$ =..!2>. +0is as identified to be a 'er$ sensiti'e risk t0at needs to be addressed in Nigerian oil and gas industr$. 7lients" pro#ects often end up suffering from o'erruns in cost3 dela$s in time3 poor <ualit$ ser'ices and decreased producti'it$ due to poor performance on t0e contractor side. 2n-dept0 inter'ie s re'ealed t0at lack of sufficient e<uipments and tec0nolog$; appropriate e%perience; financial capabilit$; trained emplo$ees; a'ailable resources; good <ualit$ construction met0ods; and efficient management skills; ere t0e causes of 0ic0 are contractors poor performance on pro#ects. 8esides3 Nigeria oil and gas pro#ects

usuall$ large and comple%3 re<uiring 0uge capital in'estment3 modern tec0nologies and e'er c0anging up to date construction met0ods; attracts multinational companies. 7onse<uentl$3 conflicts t0at impede pro#ect successes are often generated due to t0e differences in tec0nolog$ kno indigenous companies. !.3 Risk response strategies for mitigating the major risks ere it0 t0eir fre<uenc$ of occurrence and degree of impact. 2n line as used 'ia telep0one inter'ie s it0 t0e 0o bet een t0e emplo$ees of multinational and

2n t0e pre'ious section3 t0e top ten ma#or risks in Nigerian oil and gas pro#ects identified

ob#ecti'es of t0e stud$ and due to t0e time constraints and limits of t0e researc0; <ualitati'e met0od of researc0 it0 e%perienced personnel of t0e ell as to Nigerian oil and gas industr$; to find out t0e c0aracteristics and causes as

propose efficient strategies to effecti'el$ mitigate onl$ t0e fi'e ma#or risks on t0e risk *3

ranking de'eloped from t0e <uantitati'e anal$sis because of t0e se'ere impacts t0e$ 0a'e on oil and gas pro#ects in Nigeria. +0is section t0oroug0l$. !.3.1 "ecurit) threats from neighboring residents .R12.130 ill focus on anal$)ing eac0 indi'idual risk

+0e risks accruing to securit$ t0reats from neig0boring residents on Nigerian oil and gas pro#ects are enormous. +0ese are e%ternal risks t0at in0ibit t0e ac0ie'ement of a pro#ect"s cost3 time and <ualit$ ob#ecti'es. 2t as gat0ered from t0e conducted inter'ie s t0at t0e agitating $out0s and militants acti'ities on oil and gas fields in t0e form of assault and kidnapping of oil and gas companies emplo$ees =5 e#e3 2..*>; 'andali)ing of oil and gas pipelines; and sabotage =fire and e%plosion of oil and gas facilities>. 2t t0at due to lack of compensation pa$ment 0ic0 as also gat0ered as supposed to be paid to t0e poor rural

d ellers of t0ese oil ric0 regions for t0e compulsor$ ac<uisition of t0eir lands for oil and gas e%ploration; al a$s generates crisis in t0e area. =?gedengbe3 2..*> 2n t0is lig0t3 t0e respondents to t0e inter'ie strategies 0ic0 include: 1. +0e compulsor$ land use act s0ould be amended so t0at ade<uate compensation fees s0ould be paid to t0e o ners of t0e ac<uired lands b$ oil and gas companies or t0e federal go'ernment. 2. 7orporate social responsibilit$ =79R> =5'uleoc0a3 2..&> s0ould be enforced b$ t0e federal go'ernment so as to increase t0e de'elopment of t0ese oil ric0 communities b$ oil and gas companies. 3. +0e federal go'ernment of Nigeria s0ould seek to enforce stringent la s on acti'ities. =5ssoka3 et al.3 2..(> !. +0e LN1 production s0ould be introduced full$ so as stop t0e flaring of gases 0ic0 cause 0arm to 0uman3 animals and t0e entire ecological en'ironment in t0e Niger Delta region. =1albrait03 2..,> !.3.2 Incompetence of project team members .R12.30 aste disposals so as to stop t0e oil spillages from acti'ities from oil and gas construction t0at ere carried out proposed se'eral

*!

From t0e p0one inter'ie s3 it indi'iduals

as gat0ered t0at t0e Nigerian oil and gas pro#ects lack

it0 skills3 kno ledge and abilit$ to perform t0eir duties efficientl$. 5'en

t0oug0 most pro#ect team members possessed at least one form of 0ig0er education degree3 t0ere is still t0at lack of insufficient skills needed to manage oil and gas pro#ects. 2n t0is 'ie 3 t0e follo ing strategies ere proposed b$ t0e inter'ie ees as follo s: 1. 5ffecti'e team ork s0ould be en0anced 'ia staff training to update t0em ne tec0nologies and industr$ skills. 2. 1ood staffing b$ effecti'el$ matc0ing pro#ect team members to t0e rig0t pro#ects 0ere t0e$ can function efficientl$ to ac0ie'e optimum producti'it$. !.3. $oor designs .12.40 it0 t0e

+0e risks of poor designs b$ contractors in Nigerian oil and gas pro#ects are enormous3 and usuall$ cause t0e non-ac0ie'ement of pro#ects" cost3 time and <ualit$ ob#ecti'es. B0o absorbs t0e e%tra cost of incomplete or unclear scopes and specifications3 ambiguous design and designers" incompetenceJ +0is <uestion usuall$ causes a lot of conflict bet een clients and contractors. 2n Nigeria3 indigenous companies 0a'e little e%perience in design of oil and gas facilities3 t0us t0ere e%ists a dominance of foreign multinational companies t0at 0a'e more e%perience but still run into design difficulties due to t0e comple% nature of t0e designs in t0e industr$. 2n t0is lig0t3 t0e respondents to t0e inter'ie strategies 0ic0 include =+0u$et3 2..*>: 1. 2ndigenous companies partnering it0 t0e multinationals to impro'e cost t0at ere carried out proposed se'eral

effecti'eness; efficienc$; <ualit$ of products and ser'ices; transparenc$ and transfer of tec0nolog$3 long term commitment and en0anced opportunit$ for inno'ation. 2. 7ontractor selection to be based on e%perience and pre'ious performance so t0at competent and e%perienced manpo er ill be carr$ing out design orks efficientl$. 3. 6sing concurrent engineering to impro'e constructabilit$ and time sa'ings. !. Design standards put in place to enable regulators3 clients and contractors to 0a'e a mutual understanding about t0e a$ to carr$ out designs. =9nell3 2..,>

*&

!.3.!

#ate internal approvals from clients .12.50

+0is is an internal pro#ect risk t0at usuall$ originates in clients organi)ation. +0e inter'ie respondents re'ealed t0at t0is risk emanates on Nigerian oil and gas pro#ects due to managers lacking t0e aut0orit$ to sol'e problems and lack of emplo$ee commitment. Aro#ect managers are usuall$ faced it0 t0e problem of slo responses from t0e top management to pressing pro#ect issues e.g. allocating resources. +0is leads to time and at times lead to cost o'erruns on pro#ects. =+0u$et3 2..,> 2n t0is lig0t3 t0e respondents to t0e inter'ie strategies: 1. 6sing +QE =+otal Qualit$ Eanagement> practices for en0ancing t0e in'ol'ement of all pro#ect emplo$ees to s0are in t0e pro#ect 'ision and goals. 2. 5mpo ering pro#ect managers it0 appro'als aut0orit$ so as to make on time and faster decisions 0ic0 en0ances inno'ation and successful deli'er$ of pro#ects. t0at ere carried out proposed t0e follo ing

!.3.3

$oor and inade>uate tendering .12.=0 it0 its ob#ecti'es. ?il and gas pro#ects usuall$ adopt one of t0e follo ing

+0e risk accruing to poor and inade<uate tendering usuall$3 can de'iate a pro#ect from meeting up met0ods; restricted tendering3 open tendering3 restricted accelerated3 competiti'e negotiated3 competiti'e negotiated accelerated tendering and dialogues. =Aalanees aran and kumaras am$3 2..1> +0e inter'ie s re'ealed t0at lack of Mdue processes" =unet0ical attitudes of bidders> and Minade<uate e'aluation criteria" are t0e main sources t0at pose tendering risks in Nigerian oil and gas industr$. Aublic sector clients often accept lo est price tender so as to s0o accountabilit$ and in defense for criticisms. =Bong3 et al.3 2...> Eoreo'er3 t0ese bidders submit lo prices to in and after inning3 t0e$ negotiate it0 clients at later stages to mark-up t0eir tender. /not0er identified source is t0e collusion of bidders like it0dra al3 briber$3 and false inflation of co'ering and tender prices. 2n t0is lig0t3 t0e respondents to t0e inter'ie strategies: 1. +0e tec0ni<ue3 E7DE =Eultiple criteria decision making> s0ould be used for e'aluating contractors. *( t0at ere carried out proposed t0e follo ing

2. 7lients increasing legal enforcement of collusion b$ impro'ing t0e detection of bidders during pre<ualification and final stages of e'aluation. 3. 7lients using selecti'e tendering b$ in'iting onl$ credible and professional contractors !.4 "ummar) ere used to assess t0e ma#or risks t0at

+0e <uantitati'e and <ualitati'e approac0es

emanate in Nigerian oil and gas construction pro#ects. +0e findings from results from t0e background information of t0e <uestionnaire sur'e$ re'eals t0at risk management practices in Nigeria oil and gas industr$ in'ol'es people it0 0ig0 industr$ e%perience; educated; and mostl$ carr$ out pro#ects in bot0 upstream and do nstream sector. Eost of t0e organi)ations 0a'e e%perience in oil and gas acti'ities because t0e$ 0a'e been in e%istence long enoug0 in t0e industr$; it0 ade<uate staff strengt0. +0e second part t0e <uestionnaire re'ealed t0at all organi)ations in Nigerian oil and gas industr$ maintain a risk management s$stem as compact discs and flopp$ dri'es. +0e top ten ma#or risks t0at emanate on oil and gas construction pro#ects bot0 in t0e upstream and do nstream oil and gas sectors are: &.2 9ecurit$ t0reats from neig0boring residents (.2 2ncompetence of pro#ect team members *.2 Aoor designs ,.2 Late internal appro'als from clients -.2 Aoor and inade<uate tendering 1..2 2nade<uate pro#ect organi)ation structure 11.2 70anges in design 12.2 2nade<uate budgeting and poor pro#ect planning 13.2 2mproper pro#ect feasibilit$ studies 1!.2 2nefficient and poor performance of constructors ell as store identified risks in a risk management database eit0er as 0ard copies or electronic copies in computer 0ard dri'es3

**

Qualitati'e met0od

as used 'ia in-dept0 telep0one inter'ie s; to furt0er anal$)e t0e top ell as mitigating

fi'e ma#or risks due to t0eir 0ig0 mean of impact degree and 0ig0 risk inde% score t0oroug0l$. +0e causes and c0aracteristics of t0e top fi'e ma#or risks; as strategies gas pro#ects. ere de'eloped to curb t0e top fi'e ma#or risks t0at emanate on Nigerian oil and

Chapter 3: Conclusion and recommendations


3.1 Conclusion:

2n recent times3 t0e concept of risk management is an essential process t0at cannot be neglected in t0e management of pro#ects in de'eloped countries. Ne'ert0eless3 t0e practice is still ne during t0e implementation of pro#ects in de'eloping countries; 0ic0 includes Nigeria. ?nl$ t0e Nigerian oil and gas sector seems to be t0e sector amongst ot0ers; t0at is keen on utili)ing risk management practices during t0e implementation of pro#ects because of t0e 'olatile nature of products and c0aracteristics of t0e pro#ect en'ironment 0ere t0e operation and processes are carried out3 in a constantl$ c0anging d$namic en'ironment 0ic0 is e%posed to enormous risks. +0us3 t0is researc0 is 'er$ significant and timel$ considering t0e fact t0at t0e oil and gas sector is t0e most important contributor to t0e total re'enue of t0e Nigerian econom$.

*,

+0e researc0 dissertation

0ic0 aimed at identif$ing t0e risk factors t0at affect oil and gas as accomplis0ed 'ia reali)ing

construction pro#ects and to deri'e risk responses for t0em t0e follo ing researc0 ob#ecti'es:

+0e different t$pes of risks as ell as t0e different en'ironments 0ere t0ese risks originate in oil and gas pro#ects 0ere identified from an e%tensi'e literature re'ie . / closer as s$stematicall$ used to determine t0e fre<uenc$ assessment 'ia a <uestionnaire sur'e$ gas construction pro#ects in Nigeria. +0e results of t0e researc0 'ia t0e risk scores of t0e ma#or risks re'ealed t0at t0e top ten ma#or risks in oil and gas construction pro#ects in Nigeria ere: 1. 9ecurit$ t0reats from neig0boring residents 2. 2ncompetence of pro#ect team members 3. Aoor designs !. Late internal appro'als from clients &. Aoor and inade<uate tendering (. 2nade<uate pro#ect organi)ation structure *. 70anges in design ,. 2nade<uate budgeting and poor pro#ect planning -. 2mproper pro#ect feasibilit$ studies 1.. 2nefficient and poor performance of constructors

of occurrence and t0e degree of impact of t0e ma#or sources of risks t0at emanate in oil and

3.2

Recommendations

For t0e successful deli'er$ of pro#ects3 it is essential t0at a t0oroug0 e%amination of t0e ma#or risks affecting a pro#ect is e%amined. 2n t0e <uest to de'elop strategies to effecti'el$ mitigate t0e identified ma#or risks; literature and in-dept0 inter'ie s ere carried out in t0e researc0 and ere used to proffer appropriate practical strategies 0ic0 0ere proposed for t0e top fi'e most ranked3 ma#or risks in oil and gas construction pro#ects in Nigeria. +0e researc0 proposed recommendations to effecti'el$ mitigate t0e top-fi'e ma#or risks as follo s:

*-

1. +0e compulsor$ land use act s0ould be amended so t0at ade<uate compensation fees s0ould be paid to t0e o ners of t0e ac<uired lands b$ oil and gas companies or t0e federal go'ernment. 2. 7orporate social responsibilit$ =79R> s0ould be enforced b$ t0e federal go'ernment so as to increase t0e de'elopment of t0ese oil ric0 communities b$ oil and gas companies. 3. +0e federal go'ernment of Nigeria s0ould seek to enforce stringent la s on acti'ities. !. +0e LN1 production s0ould be introduced full$ so as stop t0e flaring of gases 0ic0 cause 0arm to 0uman3 animals and t0e entire ecological en'ironment in t0e Niger Delta region. &. 5ffecti'e team ork s0ould be en0anced 'ia staff training to update t0em ne tec0nologies and industr$ skills. (. 1ood staffing b$ effecti'el$ matc0ing pro#ect team members to t0e rig0t pro#ects 0ere t0e$ can function efficientl$ to ac0ie'e optimum producti'it$. *. 2ndigenous companies partnering it0 t0e multinationals to impro'e cost effecti'eness; efficienc$; <ualit$ of products and ser'ices; transparenc$ and transfer of tec0nolog$3 long term commitment and en0anced opportunit$ for inno'ation. ,. 7ontractor selection to be based on e%perience and pre'ious performance so t0at competent and e%perienced manpo er ill be carr$ing out design orks efficientl$. -. 6sing concurrent engineering to impro'e constructabilit$ and time sa'ings. 1.. Design standards put in place to enable regulators3 clients and contractors to 0a'e a mutual understanding about t0e a$ to carr$ out designs. 11. 6sing +QE =+otal Qualit$ Eanagement> practices for en0ancing t0e in'ol'ement of all pro#ect emplo$ees to s0are in t0e pro#ect 'ision and goals. 12. 5mpo ering pro#ect managers it0 appro'als aut0orit$ so as to make on time and faster decisions 0ic0 en0ances inno'ation and successful deli'er$ of pro#ects. 13. +0e tec0ni<ue3 E7DE =Eultiple criteria decision making> s0ould be fre<uentl$ used for e'aluating contractors. 1!. 7lients increasing legal enforcement of collusion b$ impro'ing t0e detection of bidders during pre<ualification and final stages of e'aluation. it0 t0e aste disposals so as to stop t0e oil spillages from acti'ities from oil and gas construction

,.

1&. 7lients s0ould be using selecti'e tendering b$ in'iting onl$ credible and professional contractors

3.

#imitations of research

Bit0 regards to t0e gap in distance bet een t0e aut0or and t0e target population; and t0e infle%ible time sc0edule re<uired for completing t0e researc03 t0e c0oice of telep0one inter'ie s and t0e use of an electronic <uestionnaire collection for t0e researc0. :o e'er3 it as t0e most suitable media for data as recogni)ed t0at t0e representation of t0e entire

target population ma$ not be repudiated from t0e respondents 'ie s because; not all t0e operators in t0e upstream and do nstream sector of t0e Nigerian oil and gas industr$ ma$ 0a'e access to internet to facilitate t0e data collection process. Ne'ert0eless3 t0e sample still continues to be a 'alid and dependable information source since most of t0e corporate3 public and pri'ate sector oil and gas organi)ations in Nigeria 0a'e internet access.

3.!

Recommendations for future research

:a'ing undertaken t0e researc0 on risk management in oil and gas construction pro#ects in Nigeria; opportunities are open for future researc0 to be aimed at using t0e ascertained ma#or sources of risks and recommended strategies proposed in t0e researc0 dissertation; for de'eloping a practical risk management model for future use b$ clients3 in'estors3 researc0ers and all stake0olders t0at 0a'e interest in t0e Nigerian oil and gas industr$.

,1

References /de usi3 H./. =1--,>3 De'elopment of petroleum resources in Nigeria G /d'ances3 c0allenges and opportunities3 Petroleum Science and Technology, 'ol. 1(3 no. *3 pp. (,&(-&. /0med3 /.3 4a$is3 8. and /mornsa ad atana3 9. =2..*>3 / re'ie of tec0ni<ues for risk management in pro#ects3 Benchmarking: An International ournal, Hol. 1!3 No. 13 pp. 223(. /0med3 /.3 /mornsa ad atana3 9. and 4a$is3 8. =2..3a>3 / conceptual frame ork for risk anal$sis in concurrent engineering3 Proceeding! o" the 1#th International $on"erence on Production %e!earch, 4&# Augu!t, Black!'urg, (irginia, )SA, =R1.( Aaper No. ,( 8adiru3 /.8. =1--(>3 Pro*ect +anagement in +anu"acturing and ,igh Technology -.eration!, Bile$3 Ne Fork3 NF. /kor3 /.C. and 2g0o3 +.C. =2..2>3 5ffluent <ualit$ and astes from petroleum drilling operations in t0e Niger Delta3 Nigeria3 /n0ironmental +anagement and ,ealth, Hol. 133 No. 23 pp. 2.*-21(. /mornsa ad atana3 9. /0med3 /.3 4a$is3 8. and 4aebernick 3 :.3 =2..2>3 Risk mitigation in'estment in concurrent design Arocess3 Proceeding! o" the International $on"erence on +anu"acturing Automation, Hol. 1!3 No. 13 pp. 22-3(. ,2

/l<uier3 /.E.3 7agno3 5.3 7aron3 F.3 Leopulos3 H. and Ridao3 E./. =2..2>3 70apter 21 G /nal$sis of 5%ternal and 2nternal Risks in Aro#ect 5arl$ A0ase3 2n 9le'in D.3 7leland3 D. and Ainto3 C. =eds.> The 1rontier! o" Pro*ect +anagement %e!earch, Aenns$l'ania3 69/: Aro#ect Eanagement 2nstitute =AE2>. 8aker3 9.3 Aonnia03 D. and 9mit03 9. =1--->3 Risk response tec0ni<ues emplo$ed currentl$ for ma#or pro#ects3 $on!truction +anagement and /conomic!, 'ol. 1*3 issue: 23 pp. 2.&213. 8a#pai3 9. and 1upta3 C.A. =2..*>3 9ecuring oil and gas infrastructure3 ournal o" Petroleum Science and /ngineering, &&3 pp. 1*!-1,( 8erlin3 /.3 8erlin3 /.2. and Hrooman3 LLA. =2..3> Eanaging Aolitical Risk in t0e ?il and 1as industries3 -il, 2a! 3 /nergy 4a5 Intelligence, Hol. 13 No. 23 Earc03 2..3. 80aruc0a3 4. and :olland3 D. =2..,>3 6pstream tec0nolog$ integration: ?pportunities3 obstacles3 success3 -""!hore maga6ine: 7rilling technology8India re.ort, /pril3 Hol. (,3 No. !3 pp.((-(8ro$d3 +.3 =2..1>3 con!tructing the "uture, 1ore!ight: making the "uture 5ork "or you, D+23 London. 8udget Eonitoring and Arice 2ntelligence 6nit. =8EA26> =2..!>3 The AB$ o" the $ontract 7ue Proce!! .olicy, 9tate press3 /bu#a 7agno3 5.3 7aron3 F. and Eancini3 E. =2..*>3 / multi-dimensional anal$sis of ma#or risks in comple% pro#ects, %i!k +anagement, -3 pp. 1-1,3 doi:1..1.&*Dpalgra'e.rm.,2&..1! 7aillaud3 5.3 1ourc3 D.3 1arcia3 L./.3 7rossland3 R. and EcEa0on3 7.3 et al. =1--->3 / frame ork for a kno ledge-based s$stem to risk management in concurrent engineering3 $oncurrent /ngineering: %e!earch and A..lication!, Hol. *3 No. 33 pp. 2&*-2(* 7er'one3 :.F.3 =2..(>3 Aro#ect Risk Eanagement3 -$4$ Sy!tem! 3 Ser0ice!: International digital li'rary .er!.ecti0e!, Hol. 223 No. !3 pp. 2&(-2(2. 70aroenngam3 7. and Fe03 7.F. =1--->3 7ontractual Risk and Liabilit$ 90aring in :$dropo er 7onstruction3 International ournal o" Pro*ect +anagement, Hol. 1*3 No. 13 pp. 2--3*. 70ido)ie3 2. =2..,>3 Po5er emergency delayed again, +0e punc03 Lagos. Dastous3 A./.3 Nikiema3 C.3 Earec0al3 D.3 Racine3 L. and Lacoursiere3 C.A. =2..,>3 Risk management: /ll stake0olders must do t0eir part3 ournal o" 4o!! Pre0ention in the Proce!! Indu!trie!, 213 pp. 3(*-3*3.

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De$3 4.A. and ?gunlana3 9.?. =2..!>3 9election and application of risk management tools and tec0ni<ues for 8uild-operate-transfer pro#ects3 Indu!trial management and 7ata !y!tem!, Hol. 1.!3 No. !3 pp. 33!-3!( Department of Aetroleum Resources =DAR>3 =2..(>3 2uideline! concerning im.lementation and u!e o" ri!k analy!i! in the 9igerian Petroleum Indu!try, DAR3 Nigeria 5lms3 D.3 =1--,>3 -5ning the 1uture: Integrated %i!k +anagement in Practice, 7enter for /d'anced 5ngineering3 70ristc0urc03 Ne Nealand 5ssoka3 A./3 6bogu3 /.5. and 6)u3 L. =2..(>3 /n o'er'ie of oil pollution and 0ea'$ metal concentration in Barri area3 Nigeria3 +anagement o" /n0ironmental :uality: An International ournal, Hol. 1*3 No. 23 pp. 2.--21&. 5'uleoc0a3 9.6. =2..&>3 Eanaging indigenous relations: 7orporate social responsibilit$ in a ne age of acti'ism3 $or.orate $ommunication!: An International ournal, Hol. 1.3 No. !3 pp. 32,-3!. 5 e#e3 1. =2..*>3 Eultinational oil companies" 79R initiati'es in Nigeria: +0e skepticism of stake0olders in 0ost communities3 +anagerial 4a53 Hol. !-3 No. &D(3 pp. 22,-23&. Flanagan3 R. and Norman3 1.3 =1--3>3 %i!k +anagement and $on!truction, 8lack ell 9cience 1albrait03 D.3 =2..,>3 Regional Aerspecti'e: Best /frica Regional ?'er'ie 3 -""!hore Technology International, 2..,3 pp. !*-!-. 2bra0im3 E.C. =2..,>3 1ro t0 prospects of oil and gas abundant economies: t0e Nigerian e%perience =1-*.-2...>3 ournal o" /conomic Studie!, Hol. 3& No. 23 pp. 1*.-1-.. Cones3 7. =1--!>3 A!!e!!ment and $ontrol o" So"t5are %i!k!3 Arentice-:all3 5ngle ood 7liffs3 NC 4artam3 N./. and 4artam3 9./. =2..1>3 Risk and its management in t0e 4u aiti construction industr$: contractors" perspecti'e3 2nternational Cournal of Aro#ect Eanagement3 Hol. 1-3 No. (3 pp. 32&-33&. 40an3 9./.3 =1--!>3 9igeria: The Political /conomy o" -il, ?%ford 6ni'ersit$ Aress. 4iel3 E.3 7ule3 A.5.3 L$$tinen3 4. and 9c0midt3 R.7.3 =1--,>3 A "rame5ork "or identi"ying !o"t5are .ro*ect ri!k!, 7ommunications of t0e /7E3 Hol. !13 No. 113 pp. *(-,3. 4ieserman3 8.C. =1--->3 Arofits and principles: promoting multinational corporate responsibilit$ b$ amending t0e /lien +ort 7laims /ct3 The $atholic )ni0er!ity 4a5 %e0ie5, Hol. !3 spring3 p. ,,1

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Lee3 F.9.3 4im3 F.3 4im3 9.:.3 4im3 7.3 70ung3 7.:. and 5+ Cung3 B.D.3 =2..!>3 /nal$sis of 0uman error and organi)ational deficienc$ in e'ents considering risk significance3 9uclear /ngineering and 7e!ign, 23.3 pp. (1-(*. Leed$3 A.D. O ?rmrod3 C.5. =2..&>3 Practical %e!earch: Planning and 7e!ign, ,t0 edn3 7ollier-Eacmillan3 Arentice :all3 Ne Cerse$. Long3 N.D.3 ?gunlana3 9.3 Quang3 +. and Lam3 4.7. =2..!>3 Large construction pro#ects in de'eloping countries: a case stud$ from Hietnam3 International ournal -" Pro*ect +anagement, 'ol. 223 No. *3 pp. &&3-&(1. Louca3 L./.3 and Eo0ammed /li3 R.E. =2..,>3 2mpro'ing t0e ductile be0a'iour of offs0ore topside structures under e%treme loads3 /ngineering Structure!, 3.3 pp. &.(-&21. Luu3 H.+.3 4im3 9.F.3 Ngu$en3 H.+. and ?gunlana3 9.?. =2..,>3 Quantif$ing sc0edule risk in construction Aro#ects using ba$esian belief net orks3 International ournal o" Pro*ect +anagement, doi:1..1.1(D#.i#proman.2..,..3...3. Eills3 /. =2..1>3 / s$stematic approac0 to risk management for construction3 !tructural !ur0ey, Hol. 1-3 No. &3 pp. 2!&-2&2 Eo0ammed /li3 R.E. and Louca3 L./.3 =2..,>3 Aerformance based design of blast resistant offs0ore topsides3 Aart 2: A0ilosop0$3 ournal o" $on!tructional Steel %e!earch, (!3 pp. 1.3.-1.!& Eunn3 A. and Dre'er3 5. =1--.>3 )!ing :ue!tionnaire! in Small&Scale %e!earch, 97R53 9cotland Naoum3 9.1. =2..*>3 7i!!ertation re!earch and 5riting "or con!truction !tudent!, 2nd edn3 8utter ort0-:einemann3 ?%ford3 64 Nigerian National Aetroleum 7orporation =NNA7> =2..,>3 A'out 99P$. /'ailable: 0ttp:DD .nnpcgroup.comDretail.0tm S/ccessed 2& Cul$ 2..,T. Nigerian National Aetroleum 7orporation =NNA7> =2..,>3 A'out 99P$. /'ailable: 0ttp:DD .nnpcgroup.comDpotential.0tm S/ccessed 2& Cul$ 2..,T. Nigerian National Aetroleum 7orporation =NNA7> =2..,>3 A'out 99P$. /'ailable: 0ttp:DD .nnpcgroup.comDaboutus.0tm S/ccessed 2& Cul$ 2..,T. Nigerian National Aetroleum 7orporation =NNA7> =2..,>3 7o5n!tream -..ortunitie!. /'ailable: 0ttp:DD .nnpcgroup.comDdo nstream.0tm S/ccessed 2& Cul$ 2..,T. Nigerian National Aetroleum 7orporation =NNA7> =2..,>3 ).!tream -..ortunitie!. /'ailable: 0ttp:DD .nnpcgroup.comDupstream.0tm S/ccessed 2& Cul$ 2..,T. N ac0uk u3 7. =2..,> Nigerian in'estors make steel3 pipes for oil and gas industr$3 The Punch 9e5!.a.er, +0ursda$3 Ea$ 2-3 2..,3 pp. 23-2&. ,&

?de03 /.E. and 8attanei03 :.+. =2..2>3 7auses of construction dela$: traditional contracts3 International ournal o" Pro*ect +anagement, 'ol. 2.3 No. 13 pp. (*-*3 ?gedengbe3 A.9. =2..*>3 7ompulsor$ ac<uisition of oil e%ploration fields in Delta 9tate Nigeria: +0e compensation problem3 ournal o" Pro.erty In0e!tment 3 1inance, Hol. 2&3 No. 13 pp. (2-*(. ?gunsemi3 D.R. and /#e3 2.?. =2..(>3 +0e 2mpact of 7ontractors Are<ualification on construction Aro#ect Deli'er$ in Nigeria3 Proceeding! o" the International $on"erence in the Built /n0ironment in the 21!t $entury ;I$IB/ 2<<=>, eds. C.H. +orrance3 :. /dnan O R. +akim3 4uala Lumpur: Eala$sia3 pp. 111-12. ?kpala3 D.7.3 5'aluation and selection of construction pro#ects in Nigeria. $on!truction management and economic!, Hol. -3 No. 13 1--13 Februar$3 &1-(1. ?lsen3 C.5. =2..2>3 1lobal et0ics and t0e /lien +ort 7laims /ct: a summar$ of t0ree cases it0in t0e oil and gas industr$3 +anagement 7eci!ion, Hol. !.3 No. *3 pp. *2.-*2! Aalanees aran3 5. O kumaras am$3 E.E. =2..1>3 Recent ad'ances and proposed impro'ements in contractor pre<ualification met0odologies3 Building and /n0ironment, Hol. 3(3 No. 13 pp. *3-,*. Aatterson3 F.D. and Neaile$3 4. =2..2>3 / risk register database s$stem to aid t0e management of pro#ect risk3 International ournal o" Pro*ect +anagement, Hol. 2.3 No. &3 pp. 3(&-3*!. Aetroleum Aroducts Aricing Regulator$ /genc$ =AAAR/> =2..,>3 7eregulation Policy: A %e0ie5. /'ailable: 0ttp:DD .pppra-nigeria.orgDarticledetails.aspJ/rticle2DP1 S/ccessed .3 /ugust 2..,T. Aetroleum Aroducts Aricing Regulator$ /genc$ =AAAR/> =2..,b>3 Petroleum 1acilitie! in 9igeria. /'ailable: 0ttp:DD .pppra-nigeria.orgDretailUoutlets.asp S/ccessed .3 /ugust 2..,T. Aro#ect Eanagement 2nstitute =AE2> =2..!>3 a guide to the Pro*ect +anagement Body o" ?no5ledge ;P+B-? guide>, 3rd edn3 AE23 69/ Aro#ect Eanagement 2nstitute =AE2> =2...>3 a guide to the Pro*ect +anagement Body o" ?no5ledge ;P+B-? guide>, AE23 69/ Rafiu3 2. =2..&>3 Accident! at retail outlet!, Dail$ 70ampion3 Lagos. Rafter$3 C. =1--!>3 %i!k Analy!i! in Pro*ect +anagement, 5OFN 9pon3 London Risk Eanagement 9tandard /9DNN9 !3(. =1--->3 %i!k +anagement Standard AS89@S 43=<, 9tandards /ssociation of /ustralia3 9$dne$ ,(

Roberts3 /. Ballace3 B. and Ec7lure3 N.3 =2..3>3 Strategic %i!k +anagement, 5dinburg0 8usiness 9c0ool3 :eriot- att 6ni'ersit$3 5dinburg03 64. 90aluf3 2.E. =2..,>3 / flare incident at an oil field3 7i!a!ter Pre0ention and +anagement, Hol. 1*3 No. 13 pp. (-1&. 90en3 L.F.3 Bu3 1.5.7. and Ng3 7.9.4. =2..1>3 Risk /ssessment for 7onstruction Coint Hentures in 70ina3 ournal o" $on!truction /ngineering and +anagement, Hol.12*3 No. 13 Canuar$DFebruar$: pp. *(-,1. 9immons3 4. and Du0ane$3 8. =2..,>3 5scra'os float-o'er installation dictates platform design3 -""!hore maga6ine: 7rilling technology8India re.ort, /pril3 Hol. (,3 No. !3 pp.1.21.!. 9nell3 R. =2..,>3 ?ffs0ore 9tructures - 9tandardi)ation3 -""!hore Technology International, 2..,3 pp. 1(*-1(-. 9te'ens3 A. =2..&>3 ?il markets3 -A"ord %e0ie5 o" /conomic Policy, Hol. 213 No. 13 pp. 1-!2. +c0anko'a3 L. =2..2>3 Risk identification G basic stage in risk management3 /n0ironmental +anagement and ,ealth, Hol. 133 No. 33 pp. 2-.-2-*. +oor3 9. and ?gunlana3 9.?. =2..,>3 7on<uering t0e 7onstruction 8attle: ?'ercoming t0e problems on large construction pro#ects in a de'eloping econom$3 Proceeding! o" the International con"erence in the Built /n0ironment in the 21!t $entury ;I$IB/ 2<<=>, eds. C.H. +orrance and /dnan3 :. and +akim3 R.3 4uala Lumpur: Eala$sia3 pp. -*. +0u$et3 N.H.3 ?gunlana3 9.?. and De$3 4.A.3 =2..*>3 Risk Eanagement in ?il and 1as 7onstruction Aro#ects in Hietnam3 International ournal o" /nergy Sector +anagement, Hol. 13 2ssue: 23 pp. 1*&-1-!. Bard3 9.7. =1--->3 /ssessing and Eanaging 2mportant Risks. International ournal o" Pro*ect +anagement, Hol. 1*3 No. (3 pp. 331-33( Balliman3 N. =2..&>3 Bour %e!earch Pro*ect, 2nd edn3 9/153 London Billiams3 7./.3 9mit03 E.2. and Foung3 A.7. =1--,>3 %i!k +anagement and In!urance, 2r in3 Ec1ra :ill B0ittaker3 8. =1--->3 B0at ent rongJ 6nsuccessful information tec0nolog$ pro#ects3 In"ormation +anagement and $om.uter Security, Hol. *3 No. 13 pp. 23-2-. Bisker3 1. =2..,>3 The Po!tgraduate %e!earch ,and'ook, 2nd edn3 Aalgra'e3 Eacmillan3 Ne Fork. Bong3 7.:.3 :olt3 1.D. and 7ooper3 A./. =2...>3 Lo est price or 'alueJ 2n'estigation of 64 construction clients" tender selection process3 $on!truction +anagement and /conomic!, Hol. 1,3 No. *3 AA. *(*-**! ,*

Borld 8ank =1--*>3 Corld 7e0elo.ment %e.ort, Borld 8ank3 Bas0ington3 D7 Nafra-7abe)a3 /.N.3 Ridao3 E./.3 7amac0o3 5.F.3 =2..,>3 6sing a risk-based approac0 to pro#ect sc0eduling: / case illustration from semiconductor manufacturing3 /uro.ean ournal o" -.erational %e!earch, 1-.3 pp. *.,-*23.

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