Assessment of the effect of external risk factors on the success of an oil and gas construction project

Abstract

Purpose

Construction projects in the oil and gas sector are greatly affected by external risk factors, especially those related to the economy, politics, security and stability factors. Hence, this research aimed to investigate the fundamental relationship between the external risk factors and their effects on the construction project success using Structural Equation Modeling method and PLS-SEM approach.

Design/methodology/approach

Data collected through a structured survey distributed to projects teams in the oil and gas sectors in Yemeni companies involved in mega construction projects. A hierarchical model for assessing causative external risk factors and their effects on project success was developed and analyzed using Smart PLS 3 software of SEM.

Findings

The findings showed that economic, political, force majeure and security-related risk factors had a strong effect on project success. Besides, the Coefficient of Determination (R-squared value) equals 0.743, represented the proportion of variation in the dependent variable(s), which can be explained by one or more predictor variable. Moreover, the predictive relevance value Q2 is 0.375 above zero, which indicates that the conceptual model can predict the endogenous latent constructs. The calculated Goodness of Fit (GoF) Index of the model was 0.699, which shows that the developed model had substantial explanatory power to represent the relationship between the cause of external risk factors to and the effect on construction project success.

Research limitations/implications

This research was limited to the oil and gas construction projects in Yemen as case study.

Practical implications

Practically, this study highlights the external risk factors that cause a negative effect on the success of oil and gas construction projects in Yemen. The research model of these factors is the first step in the risk management process to develop strategic responses for risks and explain the relationship between cause and effect on project success.

Social implications

The model of external risks factors that cause the failure of construction projects helps develop response strategies for these risks, thereby increasing the chances of project success reflected in the oil and gas sector, which is a main tributary of the national economy in developing countries.

Originality/value

There is a need to improve the planning of economic and security performance as well as to mitigate political risk factors effects on project success and other risk factors discussed in this study, which effect on construction project success according to their priorities.

Citation

A Kassem, M., Khoiry, M.A. and Hamzah, N. (2020), "Assessment of the effect of external risk factors on the success of an oil and gas construction project", Engineering, Construction and Architectural Management, Vol. 27 No. 9, pp. 2767-2793. https://doi.org/10.1108/ECAM-10-2019-0573