A properly executed Feasibility
Study is not a formality—it is a decision-making tool designed to protect
capital, reduce uncertainty, and provide a realistic picture of a project’s
viability before major commitments are made.
What
Is a Feasibility Study?
A Feasibility Study is a structured
evaluation of a proposed project from multiple perspectives, including:
- Technical feasibility
- Commercial and market feasibility
- Financial viability
- Regulatory and environmental constraints
- Risk identification and mitigation
The objective of an FS is not to
justify a project at all costs, but to answer a fundamental question: Should
this project proceed, be modified, or be stopped?
Why
Feasibility Studies Are Often Misunderstood
In practice, many feasibility
studies are treated as promotional documents rather than objective analyses.
Common issues include:
- Overly optimistic assumptions on demand or pricing
- Underestimated capital and operating costs
- Incomplete risk assessment
- Technology choices driven by preference rather than
suitability
Such studies may help secure early
approvals, but they often lead to serious problems later during financing, EPC
execution, or operation.
A proper feasibility study should
challenge assumptions—not reinforce them.
Key
Elements of a Robust Feasibility Study
1.
Technical Feasibility
This evaluates whether the project
can be built and operated reliably under real-world conditions. It includes:
- Technology selection and maturity assessment
- Capacity definition and process configuration
- Utility requirements and infrastructure availability
- Constructability considerations
Investors should ensure that the
proposed technology has appropriate references or that the risks of new or
first-of-a-kind solutions are clearly identified and allocated.
2.
Market and Commercial Feasibility
A technically sound project can
still fail if market assumptions are weak. Market analysis should address:
- Demand size and growth trends
- Competitive landscape
- Revenue mechanisms and price volatility
- Contractual structures such as offtake agreements
Independent validation of market
assumptions is essential, particularly in sectors exposed to commodity price
fluctuations or regulatory changes.
3.
Financial Feasibility
Financial modeling translates
technical and commercial assumptions into investment metrics such as IRR, NPV,
and payback period. A reliable FS should include:
- Transparent CAPEX and OPEX estimates
- Sensitivity and scenario analysis
- Impact of delays, cost overruns, and price changes
Investors should be cautious of
studies that present a single “base case” without stress testing the project
under adverse conditions.
4.
Regulatory and Environmental Assessment
Permitting, environmental approvals,
and regulatory compliance often determine project timelines and feasibility.
Early identification of:
- Environmental impact requirements
- Licensing and permitting processes
- Local regulatory constraints
can prevent delays and cost
escalation later in the project lifecycle.
5.
Risk Identification and Mitigation
Perhaps the most critical function
of a feasibility study is risk identification. These risks may include:
- Technology performance risk
- Feedstock or supply risk
- Market and pricing risk
- Construction and schedule risk
- Regulatory and political risk
A good FS does not eliminate risk,
but it makes risk visible and manageable.
Why
Investors Should Demand Independent Feasibility Reviews
Feasibility studies prepared by
project sponsors, vendors, or EPC contractors may unintentionally reflect
inherent biases. Independent feasibility reviews provide:
- Objective assessment of assumptions
- Benchmarking against industry norms
- Identification of hidden or underestimated risks
For lenders and institutional
investors, independent FS reviews are often a prerequisite for financing
approval.
The
Link Between Feasibility Study and FEED
A feasibility study defines whether
a project makes sense. The next stage—Front-End Engineering Design
(FEED)—defines how the project will be executed.
Weak feasibility studies lead to:
- Poorly defined FEED scopes
- Inaccurate EPC pricing
- Increased change orders and claims
Conversely, a robust FS provides a
solid foundation for FEED, improving cost accuracy, schedule reliability, and
overall project bankability.
Common
Red Flags Investors Should Watch For
- CAPEX estimates with insufficient basis
- No sensitivity or downside scenarios
- Vague technology descriptions
- Unrealistic construction schedules
- Limited discussion of risks
These red flags often indicate that
a feasibility study is being used as a sales tool rather than a decision tool.
Conclusion
A proper Feasibility Study is one of
the most cost-effective investments an investor can make during project
development. It enables informed decision-making, protects capital, and
significantly improves the probability of project success.
Skipping or weakening this stage may
save time in the short term—but it often results in far greater costs, delays,
and disputes during execution and operation.
How
Our Consulting Services Support Feasibility Studies
At Engineering Projects &
Industry Review Hub, we support investors and project owners through:
- Independent feasibility study reviews
- Technical and commercial validation
- Risk assessment and mitigation planning
- Investment readiness advisory
Our role is to help decision-makers
move forward with clarity, realism, and confidence.
By Ahmad Fakar – Engineering expert / Consultant
📩 Email: afakar@gmail.com
📱 WhatsApp: +62 813-6864-3249
No comments:
Post a Comment