Turnkey Contract

Definition - What does Turnkey Contract mean?

A Turnkey Contract is a type of contract or agreement between oil and gas organizations and contractors that states that when the job is awarded to a particular contractor based on the tendering process, this contractor has to complete all the requirements of the project, commission it and hand over the project in a working condition to the oil and gas organization.

Petropedia explains Turnkey Contract

In the oil and gas industry, many projects come along the pipeline as the industry needs a wide range of equipment to be installed, repaired, changed, etc. New projects or next phase of the project have to be commissioned and thus, oil and gas organizations circulate tenders or request for proposals (RFP’s) or request for quotes (RFQ’s) on either global platform or local platform. This means that if the tender is a global tendering process, all the contractors worldwide can participate in the tendering process and submit their bids. Similarly, if the tender is a local tendering process, only country specific contractors can participate in it.

The tender documents provides all the scope of the project, price details, product details, what is needed, when it is needed, penalty, payment schedule, etc., by the oil and gas organization to the contractor. Based on the details given in the tender process, the projects can be either a turnkey project, greenfield projects or brownfield projects.

Based on the awarding of the contract, a contractor works on the behalf of an oil and gas organization to complete the project from a scratch. It floats further tenders to purchase various equipment, electrical work and civil work. The contractor looks after all the requirements met as per the oil and gas organization for which the contractor is working on a turnkey project. This contractor performs all the inspections and test procedures to ensure proper working of the project. Based on the results and analysis, the contractor commissions the project and hands over the project to an oil and gas organization for further operations.

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