Oil & Gas Energy Project Delays and Overruns Could Cost $5 Trillion through 2035

---

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Trillions of dollars of lost investments could be incurred by companies in the oil and gas utility industries due to delays and budget overruns on essential capital projects, according to Accenture (NYSE:ACN) (Dublin, Ireland). This warning runs parallel to the International Energy Agency(IEA) forecast that the energy industry will spend up to $38 trillion on global projects through 2035. These projects are essential because they maintain existing assets, such as pipelines and power grids. They are also very important because they build new assets.

As a result of surveying 61 energy executives in 21 countries (who are responsible for $1 billion-plus capital projects), it was estimated that the potential overspending across the whole capital budget of the sector could be about 13%, which represents $5 trillion based on the IEA forecast.

Only 34% of survey respondents reported that they had delivered within 25% of their approved budget for all projects, and only 32% said they delivered on schedule. Major obstacles that the respondents identified were regulatory requirements (49%) and work force/skills availability (25%).

At a time of increasing project size and complexity, there is a need to focus on risk management with a rigorous approach, extensive cross-functional input, as well as robust monitoring processes at the project and portfolio levels, says the report.

Better methods of collaboration and data transfer are needed with engineering, procurement and construction (EPC) contractors and suppliers. Data should be collected at all levels and leveraged with advanced analytics to gain insight about it. This includes comparing estimates on past projects.

A key area for improvement is the transition from the construction phase to an operating asset. It requires improved collaboration through the life of the project.

It's essential for companies in the energy industry to develop a talent strategy early on in a project. There are many elements that should be considered, including leadership, organizational culture and organizational structure.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.