Feasibility Study Phase

Feasibility study is the first phase of oil and gas construction project life-cycle. This phase is also called/known as

• • Programming phase
• • Definition phase
• • Predesign phase
• • Project Inception stage

It is a relatively short period at the start of the project and is about understanding the project goals and objectives and getting enough information to confirm that project should proceed or to convince that it should not proceed and abort. Successful completion of inception stage activities and approval of project by the stakeholder/ sponsor marks the initiation of the project.

The primary objectives of this phase are as follows:

• • Establish a justification or business case for the project.
• • Conduct feasibility study to assess whether the project is technically feasible and economically viable.
• • Obtain stakeholders approval to proceed with the project or to stop the project
• • Establish project goals and objectives
• • Establish scope and boundary conditions
• • Estimate overall schedule and cost for the project
• • Conduct cost/benefit analysis
• • Identify potential risks associated with the project
• • Outline key requirements that will drive design trade-offs and identify which requirements are critical.
• • Identify and evaluate alternatives/options
• • Select preferred alternative
• • Develop design basis
• • Establish project delivery and contracting system
• • Develop project charter

Most important decisions about planning, organization, type of contract take place during this phase.

Figure 8.2 illustrates logic flowchart for feasibility study stage phase.

FIGURE 8.2 Logic flowchart diagram for feasibility study stage phase.

Project Initiation

Project development process begins with project initiation and ends with project close-out and finalization of project records after completion of construction of the project. The project initiation starts with identification of need and a business case.

Most construction projects begin with recognition of a new facility and identification of need. The need should be based on real (perceived) requirements or deficiency.

Identification of Need

The need of the project is created by the owner. The owner of the facility could be an individual, a public/private sector company, or a governmental agency. The need could be to develop a new facility/project or renovation/refurbishment of existing facility or to produce new products. The need of the project is created by the owner and is linked to the available financial resources to develop the facility/project. The owner’s need must be well defined describing the minimum requirements of quality, performance, project completion date, and approved budget for the project.

Owner’s needs are quite simple and are based on following:

• • To have best facility/project for the money, i.e., to have maximum profit or services at a reasonable cost
• • On time completion, i.e., to meet the owner’s/user’s schedule
• • Completion within budget, i.e., to meet the investment plan for the facility

It is essential to get a clear definition of the identified need or the problem to be solved by the new project. The owner’s need must be well defined, indicating the minimum requirements of quality and performance, an approved budget, and required completion date. The need should be based on real (perceived) requirements. The identified need is then assessed and analyzed to develop the need statement. Need assessment is conducted to determine the need. Need assessment is a systematic process for determining and addressing needs or “gaps” between current conditions and desired conditions “want.” Need analysis is the process of identifying and evaluating the need. The need statement is written based on the need analysis and is used to perform feasibility study to develop project goals and objectives and subsequently to prepare project scope documents.

The owner’s need must be well defined indicating the minimum requirements of quality and performance, an approved main budget and required completion date. Sometimes, the project budget is fixed and therefore the quality of building system, materials, and finishes of the project need to be balanced with the budget. A business case typically addresses the business need for the project, and the value the project brings to the business (project value proposition). A value proposition is a promise of value to be delivered by the project. Following questions address the value proposition:

a. How the project solves the current problems or improves the current situation?

TABLE 8.1

5 W 2 H Analysis for Project Need