Project Delays, Budget Overruns Could Cost Oil and Utility Industries Trillions of Dollars

by CFO Innovation Asia Staff, 12 July 2012

0 comments

Facebook

Digg

Twitter

topics:
Budgeting and Planning Management

tags:
Budgeting and Planning capital projects oil and gas industry utilities

Delays and budget overruns on much-needed capital projects for the oil and gas and utility industries could cost companies in those industries trillions of dollars in lost investments, Accenture research shows.

The International Energy Agency (IEA) forecasts that the energy industry will spend nearly US$38 trillion globally on investments for global energy projects through 20351, chiefly to maintain existing assets such as pipelines and electric grids and to build new assets.

Using conservative assumptions based on its research, Accenture estimated that the potential overspend across the whole capital budget of the energy industries could be approximately 13 percent, which translates to US$5 trillion overspend on the US$38 trillion IEA forecast for global investments.

Among the findings that helped shape Accenture's assumptions: Only 34 percent of respondents said they had delivered to within 25 percent of their approved budget for all projects, and fewer than a third (32 percent) said they delivered to the approved schedule.

When asked to identify challenges to getting projects launched on time, respondents most often cited regulatory requirements (cited by 49 percent) and workforce/skills availability (25 percent).

“The increasing size and complexity of today’s major projects has added to the scale of challenges for energy companies globally,” said Jean-Marc Ollagnier, group chief executive of Accenture's Resources operating group. “But companies can improve their success in delivering capital projects by broadening their focus of project management beyond engineering and procurement to include human capital strategy, stakeholder and supplier relations, and defining and measuring success."

Offering recommendations, Accenture says organisations need a rigorous approach to assessing risks—at the project and portfolio levels—as well as robust processes for monitoring and mitigating them.

Rising asset-construction costs increase the pressure for operational excellence. Utilities companies, for example, are turning to EPC (engineering, procurement and construction) firms for turnkey execution of projects.

Comment on this article

Your name: *

E-mail: *

The content of this field is kept private and will not be shown publicly.

Homepage:

Comment: *

Web page addresses and e-mail addresses turn into links automatically.
Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <dl> <dt> <dd> <a> <p> <span> <div> <h1> <h2> <h3> <h4> <h5> <h6> <img> <img /> <map> <area> <hr> <br> <br /> <ul> <ol> <li> <dl> <dt> <dd> <table> <tr> <td> <em> <b> <u> <i> <strong> <font> <del> <ins> <sub> <sup> <quote> <blockquote> <pre> <address> <code> <cite> <embed> <object> <strike> <caption>
Lines and paragraphs break automatically.
Use  to create page breaks.

More information about formatting options

Verification Code

This question is for testing whether you are a human visitor and to prevent automated spam submissions.

What is the first word in the phrase "filurin dele hufirik ujoman erotuw"?: *

Accounting and Regulations

CFO innovation Asia Accounting and Regulation the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Accounting Regulation, IFRS, US GAAP, Tax, investor relations, corporate governance, Corporate Law, Financial Regulators, Internal Audit, Audit, Corporate Law.

Auditing, Investor Relations, Law and Compliance, Tax

Finance and Banking

CFO innovation Asia, Finance and Banking the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Corporate Finance, trade finance, treasury and risk management, capital expenditure, Banking, mergers and acquisitions

Cash and Liquidity Management, Corporate Finance, Insurance, Treasury Management

Management

CFO innovation Asia the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Management, Corporate Governance, Human Resource Management, Compensation and Benefits, Mergers and Acquisitions, Professional Development, Corporate Real Estate, Risk Management, Budgeting and Forecasting, Business Process Management, Business Process Reengineering, Outsourcing.

Budgeting and Planning, Business Expense Management, Human Capital Management, Outsourcing and Shared Services, Risk Management

Metrics

Corporates, Financial Services

Technology

CFO innovation Asia Technology the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Systems, Business Intelligence, EPR, Accounting software, CRM, Cloud Computing, Telecommunications, Business Process Outsourcing, Business Process Management Software.

Business Intelligence, Enterprise Software and Systems, Financial Systems, Security