Updated: Dec 9, 2019
Project overruns are a common occurrence in large oil and gas projects. A study by the Norwegian Petroleum Directorate reviewed five field developments to identify underlying causes and provide recommendations. They identified that the issues are not specific to Norway but a global issue which is costing the industry billions of dollars on an ongoing basis. While a large part of those overruns can be attributed to issues encountered during the construction and executions phase a similar study of 11 offshore UK projects shows that the projects with the largest schedule and cost over-runs occurred with projects that failed to produce accurate cost/schedule estimating prior to FID.
One of the key lessons from these studies indicates that these projects require meticulous work in the engineering phase as this will form the basis for future decisions. A significant issue during FDP planning is the requirement for information exchange across multiple disciplines. Potentially across several re-cycles. With large tranches of experienced staff leaving the industry the problems become compounded.
The studies also suggest that while a large part of that loss only starts to become apparent at the project delivery stage, the root causes relate to the original project definition. In many cases, the drive to fast track projects is simply pushing the risk from definition phase into the execution phase. By which time the expenditure is already committed and decisions become driven by expediency rather than the best technical solution.
Smaller operators struggle to establish (and larger Operators to enforce existing) in-house processes to ensure that all of these issues are addressed and in many cases are reliant on the competency of their staff to ensure that the left hand is talking to the right hand. More and more project owners are recognizing that interface issues represent significant risk to their projects and are actively pursuing interface management solutions to address this risk.
By Graeme Rae
Director - Engineering
Aleca Sdn. Bhd.