Modeling the effects of Construction Risks on the Performance of Oil and Gas Projects in Developing Countries: Project Managers' Perspective

Abstract

Oil and gas (O&G) construction projects are considerably prone to risk due to their complex nature, environment, and the involvement of numerous stakeholders. Additionally, the increase in global energy consumption makes it imperative for decision-makers to assess O&G risks and understand how they impact project performance (PP). This research seeks to (1)identify and assess the level of riskiness of the key risks facing O&G construction projects by considering the case of Iraq; and (2)capture the effects of O&G risks on construction PP from project managers’ perspective. To achieve this, a mixed-method approach was adopted. First, we identified O&G project risks through a focus group session with six Iraqi project managers. Second, we rated the level of riskiness of the identified risks and their impact on PP by administrating a survey to 75 experts. Third, we quantitatively analyzed the identified risks under fuzzy-analytical hierarchy process environment. Fourth, we quantitatively analyzed the effects of the identified risks on PP under structural equation modelling environment. The findings show that the most significant O&G risks are poor communication, skilled workers shortage, unstable security, political instability, and contractor bankruptcy. Furthermore, the results of the SEM analysis show that management risks have the strongest effects on PP, followed by legal risks, financial risks, technical risks, and logistics risks. The findings of this investigation might be of interest to O&G decision-makers, as they offer insight into how these risks may affect PP. This should facilitate the development of mitigation strategies in the early stages of the project.