When a project starts the investor is always facing a lot of questions. Is it feasible? Is it economically viable? Where to install the facilities? How to get the permits? When could I start the operation? Which financing model?
The answers to these questions require time and effort. However, the market opportunity to develop a business might not remain on after for long. The investor cannot wait for the answers; the cumulative times for all these answers could mean missing the opportunity. The investor should thus organize its activities in order to optimize the efforts and expenses. One needs to also organize activities into a sequence, and eventually overlap the said activities in a natural and dynamic progression.
The sequence of the activities
The sequence of the activities will depend upon the nature of the investment and the capability of the investor to find solutions. The main challenges faced by the investor are related to the best site selection with regards to the market, to the investment and operating costs, to the technical feasibility and economical viability of the proposed project, the permitting, the financing, the best strategy for the project execution and for minimizing the project risks.
The activities that are required to address all these elements are carried out by the investor’s in-house resources or are outsourced to consultant and engineering contractors.
The industry has established a tradition of project phasing through different steps, to sequentially bring the information and data to the various actors in the project development; the investor, consultants and engineering contractors. This progressively secures the project development whilst managing the project risks and preventing useless expenses until the final investment decision (FID).
The traditional phasing can be summarized as follows:
1. Market appraisal and project performance definition
2. Project feasibility study, including site selection
3. Basic design, including environmental assessment
5. Project financing
6. Project implementation (detail engineering, procurement, construction and commissioning)
7. The start of commercial operation
The listed steps are sequential but could overlap with regard to the project, its milestones and/or particular issues. This phasing, to be efficient, shall comply with rules and each step has to cover a specific scope. The results of each step will then be used to implement the following step. It is therefore important to correctly define the phasing.
In the typical phasing there are three phases basically involving technical studies which are needed to enable progress and to feed inputs to the financial and the legal phases. These three technical steps are the feasibility study, the basic design and the project execution. The scope of each technical step will be set up to give the expected answer without exposure to extra expenses or schedule issues.
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