A study of nearly sixty major North Sea oil and gas projects has shown that they are typically late and significantly over budget.
Regulatory body the Oil and Gas Authority looked at the delivery of various schemes over the course of the last five years.
Fewer than 25% of the 58 capital projects were delivered on time, with projects averaging 10 months delay.
And on average they were 35% over budget relative to initial estimates submitted to the authorities.
In the same period levels of capital expenditure were at an all-time high, averaging just over £12 billion annual Money of the Day (MoD) since 2011.
This compares to £3-6 billion MoD per annum through the last decade
Following this high level review, a series of lessons learned events were undertaken with 11 operators and three major tier one contractors.
The lessons learned, which are highlighted in the OGA’s report, played a key role in developing one of the 10 Asset Stewardship Expectations focused on robust project delivery.
Gunther Newcombe, the OGA 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.
“The OGA will continue to work with operators using our asset stewardship processes to ensure learnings are transferred and value is maximised to deliver our principal objective of MER UK.”
The OGA’s paper, entitled Lessons Learned from UKCS Oil and Gas Projects, looks at the period from 2011 to 2016 and is described as a comprehensive five-year review of major UK oil and gas projects.
It states that the successful development of new fields is a “vital part” of ensuring the maximum economic recovery of oil and gas from the region.
The OGA carried out analysis of 58 major projects executed over the past five years. All are projects aimed at recovering hydrocarbons, rather than decommissioning.
The report stated: “Since 2011 fewer than 25% of oil and gas projects have been delivered on time; with projects averaging 10 months’ delay and coming in around 35% over budget.”
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.
The report 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 £3 to £6 billion (MoD) per annum through the last decade; and £1 to £2 billion annually on decommissioning.”
The report found that the increase in investment was driven by a number of factors including a previously favourable oil price.
Of the 58 projects looked at, production has started on 38 of them, while 20 are still being worked on.
The report 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.”
The report has outlined a number of recommendations and lessons to be gleaned from the findings.
Following publication of the report, Oil & Gas UK and the Engineering Construction Industry Training Board (ECITB) Offshore Project Management Steering Group are working together to deliver industry guidelines, including recommendations and good practice, for robust project delivery.
Mike Tholen, Oil & Gas UK’s upstream policy director, said: “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.
“This is reinforced through recent industry initiatives, including those led by the Efficiency Task Force and the OGA’s ‘Lessons Learned’ events.
“To assist further improvement in project delivery, the industry will be developing guidelines in collaboration with the ECITB to ensure that good practice to deliver greater performance is shared across the industry.”
For an in-depth analysis of the review and to read exclusive interview with the OGA operations director Gunther Newcombe check back Monday. Sign-up to Energy Voice’s free newsletter here to get all coverage direct to your inbox. /em>
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