This article outlines the key steps
and requirements that investors, developers, and project owners should complete
before committing to an investment and proceeding with project construction.
1.
Defining the Investment Objective and Project Vision
Every successful project starts with
a clear objective. Investors must define:
- The purpose of the project (commercial, strategic, sustainability-driven,
or mixed)
- Expected returns and acceptable risk levels
- Target market and long-term business strategy
Without a clear investment thesis,
projects often drift during development, leading to scope changes, cost
overruns, and misaligned expectations among stakeholders. A well-defined vision
helps guide technical decisions and commercial strategies throughout the
project lifecycle.
2.
Market Study and Demand Analysis
Before any technical work begins,
understanding the market is critical. A market analysis should assess:
- Demand size and growth potential
- Competitive landscape
- Pricing mechanisms and revenue stability
- Regulatory and policy environment
Overestimating demand or relying on
optimistic pricing assumptions is one of the most common causes of project
failure. Independent market and commercial reviews can help validate
assumptions and ensure the project is grounded in realistic market conditions.
3.
Site Selection and Preliminary Constraints Assessment
Project location significantly
affects cost, schedule, and operability. Key considerations include:
- Land availability and ownership status
- Access to utilities, infrastructure, and logistics
- Environmental and social constraints
- Regulatory and permitting requirements
Early identification of site-related
risks can prevent costly delays later. Many projects encounter serious
challenges during permitting because site constraints were not properly
assessed during the early stages.
4.
Feasibility Study (FS)
The Feasibility Study is a critical
milestone in project development. It integrates technical, commercial,
financial, and regulatory aspects into a single decision framework. A robust FS
typically covers:
- Technology selection and process concept
- Preliminary capital and operating cost estimates
- Financial modeling and sensitivity analysis
- Risk identification and mitigation strategies
The purpose of the FS is not to
justify a project at all costs, but to determine whether the project should
proceed, be modified, or be stopped. Independent feasibility reviews provide an
objective assessment and strengthen investor confidence.
5.
Technology Evaluation and Risk Assessment
Technology risk plays a major role,
especially in energy, bioenergy, and industrial process projects. Investors
should evaluate:
- Technology maturity and reference projects
- Supplier capability and warranties
- Operating complexity and maintenance requirements
First-of-a-kind or unproven
technologies may offer higher returns but carry higher risk. Understanding who
bears this risk—and how it is mitigated—is essential before moving forward.
6.
Front-End Engineering Design (FEED)
FEED bridges the gap between
feasibility and execution. It provides sufficient engineering detail to:
- Define project scope clearly
- Improve cost and schedule accuracy
- Support EPC tendering and contract negotiations
Projects that skip or rush FEED
often face change orders, disputes, and delays during construction. A
well-developed FEED significantly reduces uncertainty and improves project
bankability.
7.
Financial Structuring and Investment Readiness
Once technical and commercial
fundamentals are established, attention shifts to financial structuring. This
includes:
- Capital structure (equity vs debt)
- Funding sources and financing terms
- Sensitivity to cost overruns, delays, and market
fluctuations
Investors and lenders typically
require independent technical and commercial due diligence before committing
funds. Preparing the project to meet these requirements early improves the
chances of securing financing on favorable terms.
8.
EPC Strategy and Contract Preparation
Choosing the right execution
strategy is critical. Options include EPC, EPCM, or multi-package contracting.
Before selecting an EPC contractor, investors should:
- Define a clear and complete scope of work
- Ensure balanced risk allocation
- Review contractor experience and execution capability
Approving an EPC contract without
proper preparation exposes investors to hidden risks that may only emerge
during construction or commissioning.
9.
Permitting, Environmental, and Regulatory Compliance
Regulatory approvals are often
underestimated in project schedules. Investors should ensure:
- Environmental impact assessments are completed
- Permits and licenses are clearly identified
- Compliance obligations are integrated into project
planning
Delays in permitting can halt
projects regardless of technical readiness.
10.
Independent Project Review and Decision Gate
Before final investment decision
(FID), an independent project review provides a comprehensive assessment of
readiness across all dimensions. Such reviews help:
- Validate assumptions
- Identify gaps and inconsistencies
- Support informed investment decisions
Independent consultants act as
objective advisors, ensuring decisions are based on facts rather than optimism.
Conclusion
Starting an investment and building
a project is a multi-stage process that requires discipline, experience, and
objective analysis. Skipping steps or relying solely on internal assumptions
increases the risk of failure. Projects that succeed are those that invest time
and resources upfront—through feasibility studies, engineering design, market
validation, and independent reviews.
By following a structured
development approach, investors and project owners can significantly improve
project outcomes, protect capital, and achieve sustainable long-term value.
📌 How Our Consulting Services Support This Process
At Engineering Projects &
Industry Review Hub, we support clients through:
- Project feasibility and investment readiness reviews
- FS, FEED, and DED advisory services
- Independent technical and commercial due diligence
- EPC strategy and risk assessment
Our role is to help investors and
project owners make informed, confident decisions at every stage of project
development.
By Ahmad Fakar – Engineering expert / Consultant
📩 Email: afakar@gmail.com
📱 WhatsApp: +62 813-6864-3249
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