OGA verdict on N. Sea oil and gas projects: ‘Too often too late and too expensive’  

Gunther Newcombe
Gunther Newcombe

The Oil and Gas Authority (OGA) today publishes its comprehensive five-year review of major oil and gas projects undertaken in the N. Sea while also setting out its expectations for robust future project delivery.

The successful development of new oil and gas fields is a vital part of ensuring the maximum economic recovery of hydrocarbons.

Last year, the OGA published its Asset Stewardship Strategy to help facilitate the delivery of the OGA’s principal objective, Maximising Economic Recovery of the UK’s oil and gas resources (MER UK).

In order to develop a good background of understanding around project delivery in the UKCS, the OGA reviewed 58 major projects executed between 2011 and 2016, with the principal findings summarised as follows:

  • Since 2011, on average fewer than 25% of oil and gas projects were delivered on time, projects averaging 10 months’ delay
  • Projects delivered were on average around 35% over budget relative to estimates made in field development plans
  • In the same time period, levels of capital expenditure were at an all-time high, averaging just over £12 billion annual 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 was undertaken with 11 operators and three major tier 1 contractors to develop a deeper understanding of good practice and areas for improvement.

The lessons learned, which are highlighted in the report, played a key role in developing one of the 10 Asset Stewardship Expectations focused on robust project delivery (SE-05).

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.”

Consequently, 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.

Chris Claydon, Chief Executive, ECITB, commented: “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.”   

One of the key steps is to hold a one day, cross-industry workshop in March 2017 with the objective of gathering input from industry and key stakeholders to frame guidance for project optimisation guidelines. Following this, a workgroup will be formed to develop the project guidance content, before issuing a draft for industry review with the aim of final publication before the end of this year.

The Lessons Learned from UKCS Oil and Gas Projects 2011-2016 report uses data gathered by the OGA

Dr. Patrick O'Brien
Dr. Patrick O’Brien

Meanwhile, speaking at an ITF technology event in Aberdeen, Greta Lydecker, Managing Director, Chevron Upstream Europe, separately congratulated the industry on its achievements so far,  but said that the downturn can be the catalyst for deeper change:

She added: “As an industry we have done fantastic things and we will continue to do so. Broadening our engagement with academia, our business partners in the supply chain, and other industries, will continue to drive creativity and innovation.

“People joining the industry straight out of university today come with a much greater aptitude for technology. Harnessing this will be key to maximising economic recovery from the U.K. and ensuring the industry’s long-term sustainability.”

Dr Patrick O’Brien, ITF Chief Executive, added: “Our Technology Showcase has demonstrated that there is a strong appetite to learn from other sectors that are rapidly developing new innovations and that oil and gas is making progress in digitalisation, robotics and automation.

“We now also need to embrace a culture change to the innovation process so that we empower new ideas throughout our industry.”

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