A Theoretical Framework for Implementing Convertible Contracts in Oil and Gas Projects
Abstract
Conventional forms of contract cannot address the dynamic and unpredictable environment of fast-track projects in the oil and gas industry. Using a single contract type such as cost reimbursable or lump sum for the whole project life cycle shifts the project risks to the owner or the contractor inequitably. Convertible contracts have been used in some oil and gas projects as an alternate contracting strategy to optimize risk taking/rewarding between contracting parties. Through this study, it was discovered that there is a significant gap in academic studies addressing the most challenging issues in managing convertible contracts. This identified gap led the researcher to design the research questions regarding the conversion time, estimation strategy, potential risks, and contractual relationships in convertible contracts. Accordingly, by addressing the research questions, this research aimed to develop a theoretical framework for implementing convertible contracts in oil and gas projects. Since the research questions were quite interpretive and investigative and the main objective of this study was to develop a theoretical framework, a grounded theory study was chosen as the main qualitative research design. Interview was the major instrument to collect the required data and information, and an in-depth review of documents was conducted. The collected data were analyzed through open coding, axial coding, selective coding, and theoretical integration to develop the main deliverable of the study, a theoretical framework, which consists of four main modules: conversion process, estimating strategy, potential risks, and collaborative strategy. To optimize the conversion process in convertible contracts, Module One provides important factors that influence deciding the conversion points, practical recommendations to enhance the conversion process, and possible conversion strategies in application of convertible contracts. Module Two presents an effective way to estimate a more accurate and reliable lump sum price at the time of conversion. The third module presents the potential risks in applying convertible contracts in oil and gas projects and appropriate strategies to mitigate the impact of cost risks in estimating the lump sum price. The fourth module proposes organizing a project collaboration centre with focus on critical activities/decisions before and after conversion.
Description
Keywords
Engineering--Civil
Citation
Moazzami Goudarzi, M. (2016). A Theoretical Framework for Implementing Convertible Contracts in Oil and Gas Projects (Doctoral thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca. doi:10.11575/PRISM/25054