Wednesday, October 15, 2014

10. Journal paper (2014); Facing Project Cost Exposure during Front End Loading (FEL) Implementation

The planning of a project is the most critical phase, since all project definitions and requirements should be completed in this phase. Of all project variables, cost is the most sensitive one especially for project that has a limited range of return on investment. Thus, the project cost and planning team has to have a better planning process as well as incorporating the external commercial factors in the project cost.

Meanwhile, Front End Loading (FEL) stages used to evaluate a completed project have limitations in observing the project cost. The cost estimation level is developed and improved in accordance with three FEL stages; Appraise (FEL1), Select (FEL2) and Define (FEL3), prior to the execution phase. Although the actual cost will be realized after execution, the projective project cost needs to be confirmed at the end of FEL 3.

This paper concludes that the characteristics of cost exposure during the planning of an oil and gas project in the FEL stages must be identified and understood by the company. The company is therefore able to foresee the project risk, particularly regarding the project cost.

Keywords: Front End Loading (FEL), Project Planning, Project Cost.


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