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Upstream projects hit the mark

The oil and gas industry is turning around its reputation for always delivering upstream projects behind schedule and overbudget, according to a new Wood Mackenzie report.

  The successful execution of capital projects has become of crucial importance to an upstream industry adapting to lower prices.

  The downturn forced companies to critically evaluate and improve how they manage their major capital investments, and it is clear why. The top 15 project blowouts of the last decade were a cumulative US $80 billion over budget.

  "The scale of underperformance was staggering,” said Angus Rodger, research director, Wood Mackenzie. "Surveying the last decade of project delivery, the average development started-up six months later than planned and $700 million over budget. That is a huge amount of value destruction.”

  In comparison, there is a growing list of mid- to large projects that have been delivered on target over the past 12 months.

  This includes areas previously notorious for cost blowouts, such as the Arctic and Caspian. Examples of improved execution include deepwater (BP’s West Nile Delta and Atoll, Eni’s Zohr and Cape Three Points), LNG (Novatek’s Yamal), shallow-water gas (BP’s Shah Deniz Phase 2) and subsea tie-backs such as Woodside’s Persephone and Wintershall’s Maria.

  Most recently, Shell brought onstream its deepwater Gulf of Mexico Kaikias field nearly one year ahead of schedule. Not only a quick turnaround, it epitomises how the deepwater sector has – for now – transitioned to a simpler, lower-cost business model.