The Pegasus-Global June 2009 Newsletter

Risk Allocation for owners and Contractors

Risk typically is defined as an element or factor arising during project execution which inhibits or negates the achievement of stated project cost, schedule or quality goals. Risk is both a potential condition and a specific element or event which may result in that condition. Project Risk Management is composed of a systematic process by which risk elements or conditions may be identified, evaluated and avoided, mitigated or eliminated, in order to preserve the achievement of project cost, schedule, and quality goals. Project Risk Management is the common term for a systematic program by which a party to a construction project identifies, evaluates, and acts to avoid, mitigate or eliminate risk elements or factors which threaten the successful achievement of project cost, schedule, scope, quality, and goals. Every party to a construction project holds a particular and unique position relative to the risk elements for which it assumes responsibility during the execution of that project. Construction in the global market recognizes two types of risk management:

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Pegasus-Global assists Washington Tribes

Upon summary judgment, the State was found to have an obligation to uphold Article III of the original Stevens Treaty which guaranteed to the Tribes the right of "...taking fish at all usual and accustomed grounds..." throughout the state.

During the construction of various roads in Washington State, fish-bearing water courses were directed through culverts passing under those roads which, for a variety of reasons, have been discovered to represent "barriers" to the migration of those native fish populations. The Fish Barrier Project (FBP) was developed and implemented within the State of Washington to remediate approximately 1,200 culverts which have specifically been identified as barriers to migration of the fish populations to and from their natural spawning grounds. The FBP is a specific, long term program which involves a number of Washington State Departments and Agencies.

Deutsche Bank

Long term growth in projected CAPEX for upstream projects and downstream projects by Owner/Operators (Integrated Oil Companies or National Oil Companies) in light of sustained global demand and pricing projections has fueled much discussion over the last three years and continues to make the exploration and production a hot investment area. There is no slackening in future demand, but there is a flattening of CAPEX budgets in respect to the medium term (the next two to three years especially) because many current projects are behind schedule and costs have dramatically increased. Thus, in 2007 these cost and schedule pressures are causing many Owner/Operators to extend planned release dates for announced projects, especially in West Africa, Central and East Asia, Australia, and South America. We currently are seeing signs from our engagements that the upstream CAPEX project delays and cost increases are also hampering expected growth in the downstream CAPEX projects as well, because Owner/Operators do not want to subject planned projects to similar cost and time issues, and their CAPEX budget reserves are being consumed by the cost and schedule overruns with the current projects.

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