6 – Project execution internationally

The EY consultancy published Spotlight on oil and gas megaprojects /11/ in 2014. This report studied costs and schedules in 365 projects covering upstream oil and gas, LNG, pipelaying and refineries costing more than USD 1 billion apiece.

It found that 64 per cent experienced cost overruns, while 73 per cent suffered delays. The average cost increase was 59 per cent.

The Oil and Gas Authority (OGA) in the UK analysed 58 projects from the 2011-16 period in a report on Lessons Learned from UKCS Oil and Gas Projects 20112016 /2/, published in 2017.

Thirty-eight of the 58 had been completed. These overran their estimated cost and schedule by an average of 35 per cent and 10 months respectively. The corresponding averages for the 20 projects still under way were 20 per cent and 13 months. Subsea developments had the lowest average delay and overrun.

Eleven of the 58 projects were reviewed in more detail with the aim of acquiring and sharing relevant experience with other developments. These projects varied significantly, with some above and others below their cost estimate. Three stood out in particular with overruns of more than 140 per cent.

The OGA published 2018 UKCS Projects Insights Report /3/ in 2019. This report concluded that project execution was better in 2018. Sixty per cent of the projects were delivered on time, compared with 25 per cent in 2011-16. Developments completed in 2018 met their cost estimates to a much greater extent. The OGA believes the industry has addressed many of the issues identified in its 2017 report.

One reason for the improvement is that operators are involving suppliers earlier and now have a better dialogue and collaboration with the suppliers on challenges and solutions. The projects are better defined towards the end of Feed, and the risk registers address uncertainties which must be handled in detail design.

A further observation is that the operators are paying greater attention than before to continuity of project personnel from Feed to detail design, which ensures ownership and understanding of the scope of work. 

Comparison of conditions on the NCS and the UKCS

described in the OGA’s 2017 report shows that the 58 British projects in 2011-16 had higher cost increases and longer delays on average than NCS developments. According to this report, roughly half the projects were implemented as planned.

More than 80 per cent of the 66 developments on the NCS were completed in accordance with the uncertainty range in the PDO or below (the OGA does not define the criteria which must be met in order to accord with the development plans, so the figures are not necessarily fully comparable).

As on the NCS, subsea developments on the UKCS seem to be the project type which is most often executed as planned but with a higher average delay and cost increase. Challenges are greater for stand-alone field developments on both continental shelves. An improvement in project execution has been seen on both the NCS and the UKCS in recent years.

The NPD’s conclusions on project experience coincide with conditions identified by the OGA. To succeed, it is important that projects are sufficiently well matured to a good level of quality before being sanctioned. Feed must be completed before detail design starts, and the latter stage before construction begins.

The OGA highlights the significance of building a competent project organisation with continuity of personnel throughout. Suppliers should be involved at an early stage, and a good collaboration should be developed with them.