INDUSTRY regulator the Oil and Gas Authority (OGA) has revealed that less than a quarter of new projects in the sector have been delivered on time over the last five years.
In an analysis of 58 projects between 2011 and 2016, it found that they were delayed by an average of 10 months and costs over-ran by around a third over budget – despite levels of capital expenditure being at an all-time high throughout the period covered.
“This analysis shows a trend of cost over-run and delay in project delivery,” said the report.
Loading article content
The OGA paper, entitled Lessons Learned from UKCS Oil and Gas Projects, said that the successful development of new fields is a “vital part” of ensuring the maximum economic recovery of oil and gas from the region.
All the projects it looked at were aimed at recovering hydrocarbons, rather than decommissioning.
“Since 2011 fewer than 25 per cent of oil and gas projects have been delivered on time; with projects averaging 10 months’ delay and coming in around 35 per cent over budget,” said the report. The figures are arrived at when the true time and cost of a certain project was set against the estimates made in field development plans (FDPs) approved by government or the OGA.
It continued: “In the same time period, levels of capital expenditure have been at an all-time high, averaging just over £12 billion annually money of the day (MoD) since 2011.
“This compares to £3bn to £6bn (MoD) per annum through the last decade; and £1bn to £2bn annually on decommissioning.”
The report found the increase in investment was driven by a number of factors including a previously favourable oil price.
Of the 58 projects the OGA looked at, production has started on 38, while 20 are still being worked on. It said the figures may first appear to suggest that there are many projects currently under execution with a healthy future workload for the supply chain.
But it warned: “However, the reality is somewhat different. By Q1 2017, half of these current projects are forecast to have started production and there will be less than 10 major projects under execution in the UKCS.”
Gunther Newcombe, the OGA’s operations director, said: “In the last five years, over £40bn has been invested in new oil and gas projects. This brings considerable benefits in terms of financial contribution to the economy, supporting thousands of skilled jobs and safeguarding the UK’s energy supply.
“The lessons learned outlined in the report have been derived from extensive engagement with industry, with focus on how major projects are planned and executed, rather than technical scope. One of the key findings was that there was no correlation found between the size and complexity of projects and delay, with the key factors being non-technical in nature. There are also encouraging signs that the ability to deliver projects in line with cost and schedule commitments has been improving recently. This is aligned to the effort we have seen industry making in the areas of production efficiency and operating costs over the last 18 months.”
Mike Tholen, Oil and Gas UK’s upstream policy director, added: “This report indicates that the industry is keen to learn from detailed reviews of past performance and is continuing to improve in its quest to deliver on time and on budget.”