Cause and Impact Analysis of Cost and Schedule Overruns in Subsea Oil and Gas Projects – A Supplier's Perspective

Abstract

Abstract. This paper identifies drivers for cost and schedule overruns in subsea production system projects from a supplier's point of view. Subsea Production Systems connects subsea wells to offshore vessels, and enable efficient and safe hydrocarbon production. Using root cause analysis, cause and effect diagram, and Pareto charts in a specific company we identified three main drivers of cost and schedule overruns: qualification of products, changing vendors frequently, and project management. Detailed analyzes of a reference project found that the supplier identified about half of the technology gaps during the tender phase. Technology qualification programs of key components were not included in the bid, although the project had to pay for related cost overruns. In summary, the project could have eliminated more than two thirds of the cost escalation related to qualification costs by capturing all technology gaps in the early tendering phase, and as a result significantly increased the profitability.

Application of system thinking to frame the problem in a subsea development projects with high-level business requirements

“…In 2014, the oil prices dropped significantly, and the industry faced a down turn. Combining low oil prices with cost increases made it challenging to develop profitable fields [8]. During this period several field developments were set on hold since they were not profitable, and the activity on the NCS dropped significantly.…”

Application of a System Engineering Framework to the Subsea Front‐End Engineering study

“…They illustrated this by a case study performed of a subsea system delivery, showing that 74 % of the late design changes could be prevented by early phase need analysis. Several articles predict model based system engineering (MBSE) as the way to go for the future subsea industry, among these (Bergli & Falk, 2017). However, there is a limited research on actual usage of MBSE in the industry.…”

“…Since 2014 the oil price has dropped significantly which makes the field development even less profitable. Combining low oil prices with cost increases, makes it challenging to develop profitable fields (Bergli & Falk, 2017). The cost report (OG21, 2015a) claims that the industry should target a cost reduction of 50% to meet the future market.…”

Reducing Project Cost Growth Through Early Implementation of Interface Management

“…The media has scrutinized oil and gas projects over the course of the last 20-30 years, and there have been many reports highlighting severe cost and schedule overruns, as recently detailed by Bergli (Bergli and Falk, 2017) and earlier by Tranøy (Tranøy and Muller, 2012). Both Bergli and Tranøy investigated sources and impact of these cost and schedule slips and arrived at similar conclusions; that company processes during FEED and tender phases are not robust enough to capture the required input.…”