Oil and Gas Megaprojects Axel Preiss, EY - Service - …...The better the question. The better the an swer. The better the world works. Oil and Gas Megaprojects Axel Preiss, EY ÖGEW/DGMK

The better the quest ion. The better the answer.The better the world works.

Oil and Gas Megaprojects Axel Preiss, EY

ÖGEW/DGMK Herbsttagung 2015 Vienna, 19. November 2015



Are Oil and Gas Megaproject overruns of more than US$500 billion possible?

ÖGEW/DGMK Herbsttagung 2015 Vienna, 19. November 2015


Vorführender

Präsentationsnotizen

Picture emphasis on need to rethink how things are done, innovation, etc.


EY’s Global Oil & Gas Capability: Capital Projects

Introduction


Page 4 ÖGEW/DGMK Herbsttagung 2015

EY at a glance

Our Purpose: Building a better working world We are committed to building a better working world – one with increased trust and confidence in business, sustainable growth, development of talent in all its forms, and greater collaboration.

1,400+ 96 Houston office

10,000 Global oil and gas professionals

Global Oil & Gas Centers

We serve all of the Top 10 oil and gas companies on the Forbes Global 2000 list, auditing 26% of them.

years of service

professionals

15

Market leadership

Industry leadership


EY and Capital Projects

EY within Capital Projects

• We support multiple companies through their capital projects; from business case through development and execution, into operations

• We deliver a broad range of services related to capital projects – Spanning from independent project reviews on behalf of oil companies, to supporting contractors in delivering on time and budget

• We have a global group of 400 experts focusing on Capital Projects within oil and gas


Spotlight on Oil and Gas Megaprojects Thought Leadership - Megaprojects Series EY and O&G megaprojects

• Spotlight on oil and gas megaprojects kicks off a series that explores capital projects in oil and gas, reviews performance trends and outlines the root causes behind industry wide poor delivery performance.

Vorführender


EY studied 365 megaprojects with proposed capital investment of US$1b or greater in the upstream, liquefied natural gas (LNG), pipeline and refining sectors. These included projects that have been proposed but haven’t reached FID as well as those that have passed final investment decision (FID) but have not begun operations. The projects were evaluated on two criteria - Cost and Time. Of the 365 projects reviewed, cost data was available for 205 and time data for 242.


These projects comprise a sizable Investment…

In its 2014 World Energy Investment Outlook, the International Energy Agency (IEA) estimates a cumulative investment of US$22.4t in the global oil and gas sector (2014-35).

Our own research into current capital projects found 365 projects currently in development & expected to go into production prior to 2020 (projects over US$1bn)…combined total spend is forecast at some US$2.6t


Built it, paid it. Delayed it? Paid more?

EY’s Spotlight on Megaprojects Report



Megaprojects Report…the Numbers Don’t Lie Our Research shows that project performance (to budget & schedule) is consistently poor!


Project Performance - Results By Region

Cost & schedule overruns were common in all industry segments & regions. Overall, 64% of the projects are facing cost overruns and 73% report schedule delays.

Current project estimated completion costs - Av. 59% above the initial estimate. In absolute terms, the cumulative cost of these projects has increased to US$1.7t from an original estimate of US$1.2t.

North America

58% of projects face cost overruns

55% of projects face schedule delays

51% is the average project budget overrun

Latin America




Africa




Europe




Middle East




Asia-Pacific





What about post FID performance? Performance post FID is similarly poor despite completion being some way off in the distance.


Root causes of cost overruns and delays

Industry research suggests that non-technical issues are responsible for the majority of the overruns.

Poor Procurement of Contractors

Poor Contractor Management

Portfolio & Project Commercial Context

Project Development

Project Delivery Regulatory Challenges

Geopolitical Challenges

JV set up & management

Poor Portfolio Management & Changing Risk

Appetite

Ineffective Project Management

HSE Risk & Local Content

Geopolitical & Security Issues

Access to Funding

Inadequate Planning

Regulatory Delay & Policy Uncertainty

Financial & Supplier Market

Uncertainty

Aggressive Estimates &

Optimism Bias

Human Capital Deficit

Inadequate Infrastructure

Civil & Workforce Disruption

External Factors Internal Factors


How do other megaproject challenges weigh in?

Megaprojects Series Continued



The Megaprojects Series - Moving forward

• Navigating Geopolitics - Released

• Building Portfolios for Success - Released

• JV relationships in Megaprojects - Released

• Megaproject Planning and Sanction

• Megaproject Delivery

• Regulatory Challenges for Megaprojects

• Spotlight on Megaprojects - Data Update and Review

Articles in the series:

Vorführender


Removed “future” from “Future articles in the series” as ‘released’ indicates that the others are to come


Oil & Gas Megaprojects Joint Ventures Use of JV’s to drive growth and minimize risk We evaluated our original Megaprojects database to analyse JV cost and schedule performance across a subset of projects where ownership structure was clearly identifiable: 205 JV projects (US$ 1.58t) and 128 Non-JV projects (US$ 0.75t).

We assessed the key challenges facing organisations and management teams in the current environment.


JVs can provide the benefits of collaboration and risk sharing (a key for the large projects in the Oil & Gas industry) while maintaining corporate independence and avoiding the economic and political risk associated with a merger or acquisition.

Oil & Gas Megaprojects Joint Ventures Why are JV’s increasingly common in O&G?

Capital intensity

Risk mitigation

Access to technology

Access to resources

Supply chain optimization

Market positioning and scale

Regulatory requirements

Political sensitivity

Vorführender


Cut text from graphics


Oil & Gas Megaprojects Joint Ventures Performance Challenges Total

JVs

Total

Non-JVs

Vorführender


Renewed graphics


Vielen Dank für Ihre Aufmerksamkeit!

Q&A

Vorführender


Documents

Oil and Gas Megaprojects Axel Preiss, EY - Service - …...The better the question. The better the an swer. The better the world works. Oil and Gas Megaprojects Axel Preiss, EY ÖGEW/DGMK