Owner's engineer vs independent engineer: which one does your project need?

The term sheet has arrived, and one condition says the lenders will appoint an independent engineer at the borrower's cost. You may already have an owner's engineer, or be about to hire one. So the owner's engineer vs independent engineer questions come fast: is this the same job, do you need both, and could the firm you already trust do the lenders' review too? This note is for sponsors raising debt on oil and gas, deep geothermal or CO2 storage projects, written from the owner's side, where we work.

Owner's engineer vs independent engineer: the short answer

An owner's engineer works for you. Its job is to make the project better: challenge contractors, protect budget and schedule, and raise uncomfortable issues before they get expensive. An independent engineer, also called the lenders' engineer or lenders' technical adviser, works for the people lending you money. Its job is to tell them whether the project is as sound as you say. One improves the project; the other tests it. For the contractor side, see owner's engineer vs EPC vs EPCM.

• Client: the owner's engineer answers to the asset owner; the independent engineer answers to the lenders.
• Mandate: the owner's engineer advises, specifies and supervises for you; the independent engineer reviews, monitors and reports, but never designs or manages.
• Timing: the owner's engineer joins at concept or FEED; the independent engineer joins at lender diligence and often stays into operations.

Who does the lenders' independent engineer work for, and who pays?

Here the invoice and the loyalty point in different directions. The lenders select the independent engineer and set its scope, but the borrower usually pays its fees. Paying does not buy control. The report goes to the lenders; you can normally comment on facts, not conclusions. Treat the independent engineer with courtesy and speed, but never as your adviser.

The owner's engineer is the opposite: you choose, pay and instruct it, and its duty is to you. That is what lets it argue your case, including with the independent engineer.

When does each one come in?

The owner's engineer should arrive early, because the decisions that shape cost and risk come long before any lending. It frames the concept, runs or checks the FEED, prepares the tender, and turns that work into a technical package a lender can read. If that is still ahead of you, start with front-end engineering and FEED services, not the lenders' review.

The independent engineer arrives with lender diligence, before financial close. When lenders scope independent engineer services for a subsurface project, expect this arc:

1. Pre-close review: technical basis, subsurface risk, well and facilities design, contracts, cost estimate, schedule, permits, and the technical inputs to the financial model.
2. Construction monitoring: progress reporting and review of changes, delays and claims.
3. Drawdown certification: confirming the work claimed is done before each release of funds.
4. Completion: witnessing tests and confirming the project meets the loan conditions.
5. Operations: periodic reporting on performance, where the lenders require it.

The pre-close review is largely a review of the work your owner's engineer produced. A thin or late technical package does not vanish in diligence; it comes back as conditions precedent, extra contingency or less debt. On subsurface projects the hardest questions land on the reservoir or storage formation and on the wells, so that is where your package must be clearest about uncertainty.

Does your project need both?

Not always. It depends on who is putting money in.

• Equity only, no lenders: you need an owner's engineer. If your board wants a second opinion, commission that yourself; see when to bring in an independent reviewer.
• Buying a producing asset with acquisition debt: you need your own technical due diligence services, and the lenders may appoint their own adviser on the same asset. See our anonymised case "Mature-field acquisition, de-risked" for owner-side acquisition work.
• Project finance secured on the project: you need both. The owner's engineer carries the project; the independent engineer tells the lenders it can be carried.
• Public funding or permits with independent oversight: the independent party may support an authority rather than a bank. In Switzerland we provide independent geological assurance on a deep geothermal project in support of the cantonal authorities. There we answer to the authority, not to the developer: the same separation of loyalties this note argues for.

Why one firm should not do both on the same project

The firm that wrote your FEED already knows the project, so asking it to act for the lenders looks faster and cheaper. Resist it, and expect lenders to push back.

A firm reviewing its own work is not reviewing. It is adding a second signature to its first opinion.

Three things break when one firm holds both mandates. The independent engineer would be checking a design basis, cost estimate and schedule its own colleagues wrote. Drawdown certification becomes self-certification: the firm supervising the contractor for you also tells the bank the work is done. And the first time cost or schedule slips, the firm has two clients who want opposite things. Separate teams inside one firm do not fix this: the problem is loyalty, not information.

Nor should the independent engineer fix what it finds: once it designs, it can no longer review. Warning signs when hiring either role:

• An owner's engineer offering to also sign off for the bank, to save you a fee.
• An independent engineer candidate offering to help redesign what it reviews.
• A lenders' scope that does not define drawdown certification, name the completion tests or fix the number of site visits. That is where disputes start.

Questions worth asking an owner's engineer before a financing:

• Who will answer the lenders' reviewer, and will that person stay through construction?
• How will you turn the FEED and tender work into a package a lender can read?
• How do you record subsurface uncertainty so it survives diligence?
• Will you confirm in writing that you hold no mandate for the lenders on this project?

How to set both up so financing does not stall

What slows a lenders' review often sits on the borrower's side: missing documents, numbers that do not match, slow answers. You control all three.

1. Appoint your owner's engineer first, so the technical package exists before anyone reviews it.
2. Ask the lenders for the independent engineer's draft scope and comment on it. You will usually agree its budget.
3. Keep one data room with one version of the basis of design, cost estimate, schedule, risk register and subsurface uncertainty ranges.
4. Check that the financial model uses the same numbers as the engineering documents. The reviewer will.
5. Route the reviewer's questions through one channel with a response log. Your owner's engineer drafts answers; you approve them.
6. Align the loan's completion and drawdown criteria with the milestones in your EPC and drilling contracts.
7. Get written conflict confirmations from both firms before either starts.

What moves the independent engineer's cost is mostly in the scope you are asked to agree: how deep the subsurface and well review goes, how many site visits and drawdown certificates the loan requires, how long monitoring lasts, and how many rounds of questions your package triggers. Only the last is fully in your hands: a clean technical package controls it.

After financial close, keeping the loan, contracts and progress reporting aligned is much of what owner-side project management services should cover.

The lenders' reviewer will want the same person answering at every site visit and every drawdown. On our projects, that is the senior partner who scoped the work, with no bench of juniors in between. If lenders are about to appoint their engineer and your technical package is not ready, tell us where the project stands.