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Incentivizing Early Completion of Major Oil and Gas Projects - It’s All in the Curves

Title: Incentivizing Early Completion of Major Oil and Gas Projects - It’s All in the Curves

Author: Stephen J.C. Paterson

Abstract: Incentives, the carrot that an Owner dangles in front of a Contractor when the project starts to drift of track in an attempt to bring things back in line. More often than not a system is quickly cobbled together as a quick fix, usually leaving both sets of management teams who are administering it with differing views with regards achievement of the financial recompense.

The US Department of Transportation’s document “Work Zone Road User Costs Concepts and Applications” addresses the concepts of incentives and disincentives for their traffic projects. It is this concept that this paper addresses by substituting “Lost Opportunity costs” in place of the “Road User Costs Concept” and testing against a simplistic conceptual Oil and Gas project. It explores the initial concept, applies this to a similar model developed specifically for project and arrives at an incentive/disincentive scheme for acceleration or lost opportunities which can be implemented during the contract development stage outlining the “daily bonuses or penalties” to be applied.

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