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New research has revealed that nine out of ten oil and gas projects across the globe exceed their budgets

19th February 2018

A study by Dr. Evans Akwasi Gyasi, an academic from CU Coventry, part of the Coventry University Group, found that there is a dramatic level of overspending by businesses in the oil and gas industry.

Evans Gyasi

Gyasi said that factors such as poor cost estimation, change of scope, lack of proper risk identification and response plan, delays in the supply chain and broader economic factors all play a part in spiralling budgets. These are then reflected in the price consumers pay for fuel.

The research, sponsored by the Ghanaian government, took place over four years and saw consultations with 33 industry experts from across the UK, Ghana, Angola and Nigeria, each with at least fifteen years of experience.

Interviews with project managers, engineers and cost estimators highlighted the trend in the decade between 2005 and 2015.

Gyasi is author of the new book ‘A Bayesian approach to cost estimation for offshore deepwater drilling’.

He hopes that his findings will not only lead to change in the oil and gas industry, but other sectors where cost overrun is a common issue.

He said: “There are many examples of poor planning in the industry, where companies throw their budgets overboard.

“Time is the biggest cost driver in the oil and gas industry. It costs between £250,000 and £500,000 a day to drill an oil well, and given that it is a 24-hour process, not functioning can cost a company millions.

“I chose to focus my study on Sub-Saharan countries where companies regularly explore for oil and gas, and after four years of research and analysis, I found that nine out of ten projects exceed their budgets.

“Trends like these are particularly apparent in oil and gas, but are relatable to several other industries so this warning should be heeded by businesses in all sectors.”

Gyasi has incorporated his research findings into teaching on the Management & Leadership degree programme at CU Coventry, where students are taught by industry professionals.

He added: “Leaders play a critical role in cost management. Educating future leaders on the importance of cost control strategies will help shape the future of a range of industries.”