The paper "Project Risk Management in Oil and Gas Industry" is a great example of management coursework. The oil and gas project management is faced with a series of risks both within the internal and external environment of involved organizations, which may include economic, social, political, environmental, public, logistical, and legal risks. In addition, in projects that involve international partnering between oil and gas organizations, as much as the projects are supplied with advanced technologies and capital, they are exposed to other risks such as practice differences between the local and foreign partners, legal risks, political and policy risks, and financial risks.
These risks have a negative impact on the success of oil and gas projects in terms of increased cost, prolonged schedules, and reduced quality. As such, there is need to adopt various strategies that would deal with the risks within the oil and gas projects and facilitate project success. Some of the risks include prolonged processes for project approval and bureaucratic systems of government, poor project design, project team incompetence, and contract law risks. Through proper management of these risks, the coordination of activities within the projects would be facilitated enabling the optimum performance of all the involved parties and increased performance of the project teams.
This would, in turn, have a positive effect on the general outcomes of the project. Introduction Oil and gas industry projects are exposed to both external risks including social, economic, political, public, legal, environmental, and logistical risks; and internal risks including design, financial, contractual, personal, construction, and operational risks (Badiru & Osisanya 2013, p. 444). Such risks may have significant negative influences on the project’ s schedule, cost or quality.
Most of the oil production organizations are within developing countries, which do not have well established effective and systematic systems of risk management. In the contemporary society, oil and gas projects are exposed to more uncertainties and risks due to various factors including complexity in design and planning; availability of different interest groups such as contractors, owners, and consultants among others; availability of resources such as equipment, materials and funds, among others; social concerns; climatic environment; among political and economic statutory regulations (Inkpen & Moffett 2011). Most oil and gas projects involve joint ventures partnerships that involve multinational organizations.
Such partnerships offer high technologies and capital required for the project’ s success which may not be available for local partners. However, these foreign partnerships expose oil and gas organizations to risks including practice differences between the local and foreign partners, political and policy risks, legal risks, and financial risks (Inkpen & Moffett 2011, p. 173). Therefore, it is important to manage risks appropriately in project management within the oil and gas industry. This paper identifies various risks within the oil and gas projects and reviews various strategies that could be employed in managing such risks. Major Risks and Management Strategies Long project approval process and bureaucratic systems of government The bureaucratic government system and prolonged procedures for approval of projects are one of the major risks in projects within the oil and gas industry.
This is especially eminent in countries with incompetent staff within the regulatory agencies of the government, unclear power and responsibility, ineffective law implementation procedures, and complex procedures of approval (Thuyet et al. 2007, p. 186).
As a result of such imperfections in the handling of the projects, there is a long delay in the reception of approval for most projects. This problem is common among developing countries and thus has an astounding effect on the image of such countries in relation to the attraction of foreign investors. This risk has a considerable impact on the expansion of business within an organization as it slows the process and makes it tedious (EY 2015, p. 5).
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