Headquartered in Beijing, petrochemical giant Sinopec often encounters projects worth up to US$10bn. Such projects not only have enormous risks in the process, but also have long construction periods that may be 5 to 6 years from commencement to completion in normal conditions. During this period, risks are manifold and scenarios unpredictable, making risk analysis essential.
Jin Feng, Project Risk Manager at Sinopec Engineering Group, has responsibility for risk quantification, the mathematical model of risks, and related topics. At Sinopec, he uses @RISK frequently. Examples of applications include refinery bidding, mergers, and investment projects.
Generally speaking, we may think that the biggest risk for an oil company is the price fluctuation of crude oil, but there are other factors. After building an investment model in @RISK, Sinopec analysts found that oil price risk is not the most important risk – other risks such as contract risk should also be considered.
The popularity of @RISK has grown rapidly at Sinopec, particularly in departments related to foreign-oriented investment engineering construction. @RISK has become indispensable for major projects above US$100 million.