North Sea oil projects are rife with delays and overspending

 
Courtney Goldsmith
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Cabinets From Both UK And Scottish Governments Meet In North East Scotland
The five-year report says projects need to be better defined (Source: Getty)

The UK's North Sea oil projects have run rampant with delays and overspending in recent years, a report by the industry regulator today revealed.

Fewer than 25 per cent of oil and gas projects since 2011 were delivered on time, and projects were on average around 35 per cent over budget, a five-year review by the Oil and Gas Authority (OGA) said.

At the same time, levels of capital expenditure were at an all-time high, averaging just over £12bn annually compared with £3-6bn through the last decade.

Read more: North Sea oil production will peak in 2017

The report found there was no correlation found between the size and complexity of projects and delay.

Instead, projects needed to be better defined before they started and should be kept as simple as possible. Accountability of the project's delivery should be increased and firms should improve cooperation with stakeholders, the report found.

In the last five years, more than £40bn has been invested into new oil and gas projects, contributing to the economy, supporting thousands of jobs and safeguarding the UK's energy supply, said Gunther Newcombe, operations director of OGA.

He added the regulator is seeing encouraging signs that recent projects have been more in line with costs and schedule commitments.

"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," he said.

Read more: Shell agrees to sell nearly half of its North Sea assets for $3.8bn

Oil & Gas UK and the Engineering Construction Industry Training Board (ECITB) are working together to deliver industry guidelines, including recommendations and good practice, to improve project delivery following the report.

"Making real change will come down to people, culture and behaviours," said Chris Claydon, chief executive of ECITB.

"To make the step change necessary to improve project performance will require innovative leadership and a truly collaborative approach," Claydon said.

"This thought-provoking report highlights how much there is still to do."‚Äč

Read more: BP plans to double North Sea oil production by the end of the decade

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