Oil and Gas Megaprojects Axel Preiss, EY - Service - …...The better the question. The better the...
Transcript of Oil and Gas Megaprojects Axel Preiss, EY - Service - …...The better the question. The better the...
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
The better the quest ion. The better the answer.The better the world works.
The better the quest ion. The better the answer.The better the world works.
Are Oil and Gas Megaproject overruns of more than US$500 billion possible?
ÖGEW/DGMK Herbsttagung 2015 Vienna, 19. November 2015
The better the quest ion. The better the answer.The better the world works.
The better the quest ion. The better the answer.The better the world works.
EY’s Global Oil & Gas Capability: Capital Projects
Introduction
The better the quest ion. The better the answer.The better the world works.
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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
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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
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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.
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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
The better the quest ion. The better the answer.The better the world works.
Built it, paid it. Delayed it? Paid more?
EY’s Spotlight on Megaprojects Report
The better the quest ion. The better the answer.The better the world works.
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Megaprojects Report…the Numbers Don’t Lie Our Research shows that project performance (to budget & schedule) is consistently poor!
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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
57% of projects face cost overruns
71% of projects face schedule delays
102% is the average project budget overrun
Africa
67% of projects face cost overruns
82% of projects face schedule delays
51% is the average project budget overrun
Europe
53% of projects face cost overruns
74% of projects face schedule delays
57% is the average project budget overrun
Middle East
89% of projects face cost overruns
87% of projects face schedule delays
68% is the average project budget overrun
Asia-Pacific
68% of projects face cost overruns
80% of projects face schedule delays
57% is the average project budget overrun
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What about post FID performance? Performance post FID is similarly poor despite completion being some way off in the distance.
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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
The better the quest ion. The better the answer.The better the world works.
How do other megaproject challenges weigh in?
Megaprojects Series Continued
The better the quest ion. The better the answer.The better the world works.
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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:
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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.
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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
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Oil & Gas Megaprojects Joint Ventures Performance Challenges Total
JVs
Total
Non-JVs
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Vielen Dank für Ihre Aufmerksamkeit!
Q&A