The Oil and Gas Authority (OGA) has published a comprehensive five-year review of major oil and gas projects undertaken on the UK Continental Shelf (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. 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 (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
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, 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.”
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.
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 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 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.”
Gunther Newcombe added: “The OGA report presents common lessons harvested from various major projects and summarises 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.”
Notes to editors:
- The Lessons Learned from UKCS Oil and Gas Projects 2011-2016 report uses data gathered by the OGA. It focuses on costs and schedule compliance relative to that stated in the consented FDP
- For the purpose of this report, a ‘significant’ project was determined to be a new field with a stated capital cost >£50 million or redevelopment costing >£250 million at sanction. All projects were consented by the OGA under an FDP or Field Development Plan Addendum (FDPA) regulatory process
- Excluded from the study were smaller capital projects, infill or extended reach drilling projects, and investments where no FDP or FDPA was submitted
- Projects that started off low but ended up higher than the £50 million or £250 million threshold were also not included
- Expected capital costs in FDPs and FDPAs are reported in constant prices where the price base reflects the time of submission or expected approval of the field or project. Outturn costs have been estimated in money-of-the-day rather than in constant price terms. The capital costs facing UKCS developers depend on a range of factors including in particular the global oil price
- The data set of 58 projects is deemed to be representative as they contribute around 75% of the total capital expenditure over the past five years
- The OGA’s Asset Stewardship Expectations are one element of the OGA’s Asset Stewardship Strategy and target elements of the oil and gas lifecycle where the largest MER UK impact can be achieved. They are not intended to have binding legal effect but rather set out for industry, operating across the oil and gas lifecycle, expectations which, if followed, will help to facilitate delivery of the MER UK Strategy
- The Asset Stewardship Strategy’s objective is to clearly define what good asset stewardship is and how the OGA’s enhanced asset stewardship process will work
- The MER UK Asset Stewardship Task Force works to enhance and improve asset stewardship by maximising value through improving safety, efficiency and reducing cost
- It is co-chaired by Ray Riddoch, UK Managing Director and SVP Europe, Nexen, and Scott Robertson, Central North Sea Area Manager, OGA, and includes representation from major operators, contractors and other industry bodies
- The creation of industry guidelines for robust project delivery is being sponsored by Jim Thompson, Chair of the ECITB’s Offshore Project Management Steering Group, and Katy Heidenreich, Upstream Operations Optimisation Manager, Oil & Gas UK.
For more information please contact:
Oil & Gas Authority
Tel: +44 (0) 300 020 1072