Most UK oil and gas projects typically delivered late, OGA report reveals

A new report by the UK oil and gas industry regulator, the Oil and Gas Authority (OGA), has revealed that less than a quarter of new oil and gas projects on the UK continental shelf (UKCS) have been delivered on time since 2011. 

The OGA on Friday published a five-year review of major oil and gas projects undertaken on the UKCS, 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 from the UKCS, the OGA said.

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. The principal findings of the report include:

– 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 (FDPs) consented by the Department of Energy and Climate Change and, latterly, the OGA;

– In the same time 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.

“In the last five years, over £40bn has been invested in new oil and gas projects,” OGA Operations Director said. 

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.

No correlation between size & delay

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 maximized to deliver our principal objective of MER UK.”

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.

According to OGA, 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 optimization 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 2017.

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.”

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 behaviors. 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.”

Gunther Newcombe added: “The OGA report presents common lessons harvested from various major projects and summarizes recommendations that, if implemented, should improve future project delivery in the UKCS. The audience for this publication should not be limited to project practitioners, but should also extend to key decision makers for future projects globally.”