Study of Legal-Contractual Risks Distribution in EPC Turnkey Documents of the Oil industry, 5490 Journal and FIDIC

Increasing comprehensive understanding of EPC contracts, the most widely-used contract model in the oil and gas industry, and conducting a detailed review of the method of contractual distribution of responsibilities and risks among the parties involved, are crucial for successful implementation of mentioned contracts. Therefore, this article explains the most important legal concepts in EPC contracts and analyzes the method of distributing legal-contractual risks and responsibilities in these contracts. This analysis is based on internal EPC documents published for industrial works, compared to the FIDIC EPC/Turnkey model contract. we identify points of distinction, analyze the strengths and weaknesses of the mentioned documents and provided appropriate suggestions to eliminate deficiencies and modify items that need revision.This article answers the question of how successful internal EPC documents have been in designing an equitable and efficient contractual distribution of risks and responsibilities between the employer and contractor. A comparative study of the method of distribution of legal-contractual risks in the EPC documents of the oil industry and industrial EPC (5490 journal) compared to FIDIC EPC/Turnkey confirms a more equitable distribution of risks in the EPC document of the oil industry than the unilateral transfer of risks to the contractor in 5490 journal, specially by setting deadlines and specific penalties for the timely fulfillment of obligations by the employer. However, the efficient distribution of legal-contractual risks between the contracting parties, as the approach adopted in FIDIC, still needs revision regarding the method of risks transferring in this document. This article provides solutions for this purpose, such as creating a correspondence between the contracting parties’ rights in contract termination, predicting the payment of damages resulting from the unilateral contract termination by the employer, as well as the damages caused to the contractor as a result of the termination of the contract by the contractor due to the employer’s negligence, modifying the final dispute resolution method and the method of appointing members of dispute resolution boards,  balancing the compensation liability of Third party damages, Providing payment of damages in all cases of employer’s delay in timely fulfilling of his obligations and Predicting the right of work suspension by the contractor to ensure timely payment of invoices.