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Australian Energy Producers Journal Australian Energy Producers Journal Society
Journal of Australian Energy Producers
RESEARCH ARTICLE (Non peer reviewed)

Better project delivery: Australia’s value opportunity

Angus Rodger
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Wood Mackenzie, 3 Church Street, #29-01 Samsung Hub, Singapore 049483. Email: angus.rodger@woodmac.com

The APPEA Journal 59(2) 709-711 https://doi.org/10.1071/AJ18106
Accepted: 12 March 2019   Published: 17 June 2019

Abstract

Has the industry seen the light on project delivery? Numerous signs of improved execution through the downturn in Australia and across the globe suggest oil and gas companies are finally getting it right after a lengthy period of dismal performance. Even before prices went to US$100 per barrel and beyond, the oil and gas industry had a poor track record of delivering major projects. However, higher prices exacerbated the situation, encouraging poor capital discipline and overconfidence in undertaking large-scale, highly complex projects that overstretched the supply chain. The results were delays, cost overruns and billions of dollars in value destroyed. Over the past decade the average project was delivered 6 months late, with costs up 14% compared with the forecast at final investment decision. The top 15 cost blowouts were a cumulative US$80 billion over budget. Much of that was in Australia. But lessons have been learned. Without the safety net of higher prices, the successful execution of capital projects has become of crucial importance to the industry. There is now evidence of post-downturn projects being delivered on time and on budget; in Australasia, recent examples include Greater Western Flank Phase 2 and the Bayu-Undan infill drilling campaign. But do these successes mean execution has really improved? It can be argued these are relatively simple brownfield, subsea developments. When we enter the next investment cycle with bigger projects (Scarborough, Browse and Barossa), will we see the same old mistakes repeated again?

Keywords: company strategy, complex gas, deepwater, liquefied natural gas, Majors, offshore, oil prices, Papua New Guinea, project execution, subsea.

Angus Rodger is a Research Director in Wood Mackenzie’s Asia–Pacific upstream research team, based in Singapore. He has been the global lead and author of Wood Mackenzie’s benchmark analysis of global pre-FID and deepwater projects, including studies on cost deflation and project evolution. Angus has participated in a wide range of consulting projects for national and international oil companies, including new business development, M&A, regional basin screening and gas development. Angus joined Wood Mackenzie’s South-east Asia upstream research team in May 2008, and subsequently moved to Perth in 2013 to become the senior analyst in Wood Mackenzie’s Australasia upstream research team. Prior to Wood Mackenzie, Angus worked in the upstream industry for 5 years, covering the North Sea, West Africa and South East Asia. Angus holds a BA(Hons) in Politics with International Relations from the University of Warwick.