The Independent Oil Companies in Developing Emerging Markets

The Independent Oil Companies in Developing Emerging Markets

Introduction

U.K is an emerging economy with increasing gross domestic product (GDP). The construction industry is the main contributor to the growth with real expansion of 7.2 percent in 2001 and 14 percent in the first quarter of the year 2002. However, U.K's construction industry has recently encountered many issues that cause negative impacts on construction projects, one of which is the lack of systematic and effective risk management system.

Risks in construction often cause time and cost overruns. Many projects have been delayed or exceeded their planned budgets, as project managers could not manage risk effectively. These problems seem to happen more frequently these days, because of the emerging nature of the economy. Projects today are exposed to considerably more risks and uncertainties because of factors such as planning and design complexity, presence of various interest groups (project owner, consultants, contractors, vendors, etc.), resource availability (material, equipment, funds, etc.), climatic environment, social concerns as well as economical and political statutory regulations.

The oil and gas industry in U.K contributed 10 percent of the GDP in 2001. Today, the industry continues to grow strongly implying demands for construction of new oil and gas facilities. Oil and gas construction projects are often capital intensive. Hence, their successful implementation is strategically important. However, oil and gas construction projects are exposed to risks because of large capital investment, involvement of many stakeholders, and use of complex technology, high environmental and social impact.

Oil and gas projects in U.K are implemented through joint ventures partnerships involving multinational companies like British Petroleum, Petronas, Total, Chevron, Conoco, etc. Such partners supply capital and high technologies needed for oil and gas projects which British partners are still lacking. The participation of foreign partners makes the projects suffer from risks such as differences in practices between domestic and foreign partners, policy and political risks, financial risks, legal and political risks. The inflation rate in U.K is quite high; while the national currency is relatively weak. U.K is located in South East Asia, a region considered the most dynamic and challenging in the world. The quality of management in U.K is still below world standard as the country is emerging from a planned economy. In view of the above, oil and gas construction projects in U.K pose lots of risks that can cause adverse impacts on project implementation. Therefore, there is urgent need for good risk management in oil and gas project management. Accordingly, the objectives of the study are to determine the major risks affecting oil and gas construction projects in U.K and propose appropriate strategies to effectively mitigate the major risks (Glennie 1998, 11).

Oil & Gas Sector of UK

The UK is uniquely positioned to partner excellence in both upstream projects and downstream in the Oil and Gas. From the time of the Industrial Revolution, the UK companies are renowned for excellence in innovation and manufacturing processes. Advanced technology firms can meet virtually all aspects of the supply chain ...