New research has revealed that nine out of 10 oil and gas projects across the globe exceed their budgets, thus leading to higher prices for consumers
A study by Dr Evans Akwasi Gyasi, an academic from CU Coventry, which is a part of the Coventry University Group, found that there is a dramatic level of overspending by businesses in the oil and gas industry.
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 play a part in spiralling budgets, according to him.
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 15 years of experience.
He further expressed his hopes that the 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 US$349455 and US$698910 per day to drill an oil well, and given that it is a 24-hour process, not functioning can cost a company millions.”
“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,” he added.
Gyasi has incorporated his research findings into teaching on the management and leadership degree programme at CU Coventry, where students are taught by industry professionals.
According to him, “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.”