The Oil and Gas Authority’s five-year review of major oil and gas projects on the UK Continental Shelf showed more than £40 billion was invested in projects — but that fewer than 25% of developments were delivered on time and that projects delivered were on average 35% over budget.
The OGA reviewed 58 major projects executed between 2011 and 2016 and found:
- Since 2011, fewer than 25% of oil and gas projects were delivered on time, with projects averaging 10 months’ delay
- Projects delivered were on average 35% over budget relative to estimates made in Field Development Plans (FDPs) consented by the Department of Energy and Climate Change and, latterly, the OGA
- Levels of capital expenditure were at an all-time high, averaging just over £12 billion annual Money of the Day (MoD) since 2011, compared to £3 billion-£6 billion MoD per annum through the last decade
Gunther Newcombe, OGA Operations Director, said: “In the last five years, over £40 billion 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 (Maximising Economic Recovery of the UK’s oil and gas resources).”
Following the report, Oil & Gas UK and the Engineering Construction Industry Training Board (ECITB) Offshore Project Management Steering Group will work together to deliver industry guidelines, including recommendations and good practice, for better 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.”
ECITB chief executive Chris Claydon said: “There are a lot of valuable initiatives being examined in support of MER, but making real change will come down to people, culture and behaviours.
“To make the step change necessary to improve project performance will require innovative leadership and a truly collaborative approach.
“This thought-provoking report highlights how much there is still to do and the issues raised will be considered by the Offshore Project Management Steering Group.”