EPC Contracts - Oil & Gas Sector
G O I N G B E Y O N D
August 2004
Introduction
3
Basic features of an oil and gas project
4
The contractual structure
4
Bankability
6
Basic features of an EPC contract
7
Split EPC contracts
11
Key oil and gas specific clauses
14
in oil and gas EPC contracts
General interface issues
14
Feedstock and product storage
14
Interfacing of commissioning
15
and testing regimes
Feed stock specification issues
16
Interface issues between a supply
17
or offtaker and the EPC contractor
Key performance clauses in oil
18
and gas EPC contracts
Rationale for imposing liquidated damages
18
The law of liquidated damages
18
Drafting of liquidated damages clauses
19
Drafting of the performance guarantee regime
19
Key general clauses in EPC contracts
23
Delay and extensions of time
23
Exclusive remedies and fail safe clauses
26
Force majeure
28
Operation and maintenance
31
Spare parts
31
Dispute resolution
33
Appendix 1 - Example clause
Part I
Performance testing and guarantee regime
Part II
Extension of time regime
Contents
Introduction
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Introduction
Engineering, Procurement and Construction (EPC)
Contracts are a common form of contract used to
undertake construction works by the private sector
on large scale and complex oil and gas projects.1
Under an EPC Contract a contractor is obliged to
deliver a complete facility to a developer who need
only 'turn a key' to start operating the facility, hence
EPC Contracts are sometimes called turnkey
construction contracts. In addition to delivering a
complete facility, the contractor must deliver that
facility for a guaranteed price by a guaranteed date
and it must perform to the specified level. Failure to
comply with any requirements will usually result in
the contractor incurring monetary liabilities.
It is timely t