OSLO: Extracting and processing oil and gas at a profit has always been a numbers game. Last year the price for crude oil dropped by 60%, leading to thousands of job cuts across Norway. It’s now more critical than ever for operators to make better use of IT to understand and manage every element of risk and uncertainty to safeguard the future of the industry.
There’s a clear need to make better data-based decisions in this business,” said Leif Braute, a project risk management specialist at technical assurance, research, certification, and risk management company DNV GL.
“Budget over-runs, schedule delays, and production shortfalls are regular causes of project failure. It seems like companies are not setting cost and schedule targets correctly and perhaps in some cases not selecting the right projects in the first place. It’s easy to say these things with hindsight, but the industry must learn the lessons.”
Despite the Norwegian tax system offering favourable tax incentives on investment, the cost of such failures can be severe.
In 2013, Canadian energy company Talisman Energy scrapped an oil platform in Norwegian waters, without any crude oil ever being produced. The Yme platform was supposed to begin producing oil in January 2009 but numerous structural and safety issues led to serious cost over-runs and delays from which the project never recovered. The initial project cost was estimated at 4.9bn kroner (£425m).
More recently, ENI’s Goliat field is reported to face a 50% increase on planned cost after years of delays.
A recent government report assessing the cost over-runs and delays on a set of projects on the Norwegian continental shelf concluded, among other things, that insufficient up-front planning was done before investment decisions were made. A similar report reached the same conclusion back in 1999.
