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More megaprojects mean growing delays
Fuel Fix ^ | March 5, 2014 | Ryan Holeywell

Posted on 03/06/2014 4:50:02 AM PST by thackney

As the oil and gas industry builds a growing number of multibillion-dollar megaprojects each year, they face another trend: a growing number of delays.

In 2000, major exploration and production companies suffered average project delays of about six months. By 2012, those delays averaged 2.5 years, said Luc Messier, ConocoPhillips’ senior vice president for project development, citing industry research.

Those delays have coincided with a rise in the number and cost of major capital projects being built by the energy industry.

Just seven years ago, a megaproject to most of us was around $5 billion,” said Bob Fryklund, chief upstream strategist at IHS. “Nowadays … in our view, a megaproject doesn’t even get exciting until you’re spending something in the tens of billions of dollars.”

Managing so many projects of that size can be a struggle. Across the industry, about a third of the delays were caused by “people and organizations” — things like a lack of available talent. Nearly 20 percent were caused by “governance” — mistakes like timelines that were too aggressive, Messier said.

“There’s so much activity going on,” Messier said. “It makes it more difficult.”

So what’s an energy company to do to avoid those delays? Industry officials discussing the topic at a CERAWeek panel in Houston said there isn’t a silver bullet. But they agreed a strategy that focuses on phased construction could be a best practice to follow.

Indeed, Messier said two big projects ConocoPhillips is pursuing in Canada relied on a phased approach, largely to manage the available manpower needed to construct the facilities.

Jim Flood, vice president for the Arctic and eastern Canada at ExxonMobil Development Company, also said there needs to be a shift away from an industrywide endemic of focusing so much on being a region’s first player to achieve production, which encourages companies to rush engineering and can ultimately lead to delays.

There also may be a trend towards more modular construction, in which components of a project are built off-site before they’re assembled. That can help companies avoid performing expensive work in areas where the labor market is tight, Messier said.

TOPICS: News/Current Events
KEYWORDS: energy; naturalgas; oil

1 posted on 03/06/2014 4:50:02 AM PST by thackney
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