Advantage of EPC contract for Oil & Gas Corporations

Advantage of EPC contract for Oil & Gas Corporations

EPC engineering incorporates various regulations under its name that is Engineering, Procurement & Construction. It is a prominent method of contracting agreements and forms an intangible component of the Oil and Gas industry as well. The contractor of EPC engineering and construction helps in carrying out the detailed engineering design of the project, procuring all the equipment and materials necessary, and then constructing to deliver a developed asset to their clients. 

In gas & oil like operation-oriented industries, various aspects and areas of work are included such as an engineering activity, monitoring stocks & supplies, construction supervision, and commissioning, and many more.

Why EPC Companies are considered as an aid to Oil & Gas industry?

The EPC engineering phase of a project is known as the Execution Phase. It is the phase that covers the initiation phase and is commonly known as the Front-End Engineering Design phase or “FEED”. It is a fundamental engineering design applied as the foundation for the EPC phase, wherein companies design process flows piping and instrumentation, and many more. The FEED can be categorized into packages that cover various areas of the project. Bidding is done after utilizing the FEED packages as a base when the client offers the EPC work to the market. 

An EPC engineering contractor executes & delivers the project according to the fixed timeline and budget. Also, it is recognized as a LSTK Contract or Lump Sum Turn Key.  An EPC contract helps in building the risk for holding to the schedule and budget on the EPC Contractor, the principal or owner enters into a contract with the EPC contractor, who will enter into other various sub-contracts that include subcontractors to perform the specific part of the project. All these are the indicators that they will not only be responsible for the engineering aspects of the tender but also supervise the construction and procurement sections of the project.

Why is EPC Engineering different from other contracts? 

An important benefit of EPC engineering contracts is that they organize a channel of required communication which enables the proprietor to engage with a single contractor, who will manage and regulate the working with subcontractors. 

This assignment of the EPC contract or agreement makes it easier for the owner to regulate the project and helps in evaluating the progress effectively based on the performance of the project and the duties performed by the contractor. Thus, the EPC contract also benefits contractors to exercise control while choosing the subcontractors. The contractor will be provided with more authority to execute the project. They become liable to manage risk associated with the coordination of the project design. It helps to reduce the construction costs by setting an appropriate plan initially. Moreover, enhanced communication and cost-effectiveness are the competitive advantages that contractors opt for this system. 

An EPC engineering contractor is accountable for supervising the implementation process of projects, thus confirming his prominence as the most vital part of the entire work process. 

These contracts help in solving the connection problem between planning, designing, and construction effectively reducing the middleman link between purchasing and construction process. In this way, the inconsistency among practicability, technicality, security could also be reduced.

The Oil and Gas EPC Engineering Market is based on the kind of operations and the Oil & Gas industry can be categorized as upstream, midstream, and downstream.

  • The upstream sector includes,

Looking for potential underground/underwater crude oil and natural gas fields, drilling exploratory wells, drilling and operating the wells that carry crude oil or raw natural gas to the surface.

  • The midstream sector includes

 Transportation by rail, pipeline, barge, and many more.

  • The downstream sector includes

Refining crude oil and the processing of natural gas and the conversion of them into processed products. 

Based on location, EPC engineering activities related to oil and gas are divided into offshore and onshore facilities. As demand rises, the market starts prospering. Declining operating costs of oil & gas fields, expansion in the downstream sector, increasing demand for LNG infrastructure are some of the factors that drive the market of oil & gas.

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