Almost two thirds (64%) of multibillion-dollar, technically and operationally demanding megaprojects continue to exceed budgets, with three quarters (73%) missing project schedule deadlines, according to new report by EY.
On average, current project estimated completion costs were 59% above the initial estimate. In absolute terms, the cumulative cost of the projects reviewed for the report has increased to USD 1.7 trillion from an original estimate of USD 1.2 trillion, representing an incremental increase of USD 500 billion.
Axel Preiss, EY's Global Oil & Gas Advisory Leader, said, "While the report looks at current industry performance, longer-term industry outlooks suggest that project delivery success is actually decreasing, especially in certain segments of the industry, such as deepwater, where complexity and risk are considerably higher. Poor execution can potentially result in the project being economically uncompetitive and negatively impacting an organization's overall financial results."
Geographically, the proportion of projects facing cost overruns is highest in the Middle East (89%), followed by Asia-Pacific (68%), Africa (67%), North America (58%), Latin America (57%) and Europe (53%).
These figures tie in with the proportion of projects reporting schedule delays with the Middle East being the highest (87%) followed by Africa (82%), Asia-Pacific (80%), Europe (74%), Latin America (71%) and North America (55%).
Geographically, the proportion of projects facing cost overruns is highest in the Middle East (89%), followed by Asia-Pacific (68%), Africa (67%), North America (58%), Latin America (57%) and Europe (53%).
These figures tie in with the proportion of projects reporting schedule delays with the Middle East being the highest (87%) followed by Africa (82%), Asia-Pacific (80%), Europe (74%), Latin America (71%) and North America (55%).
Critically, from a capital investment perspective, the research shows that in the post-Final Investment Decision (FID) stage, 65% of the projects analyzed were facing cost overruns, with an average escalation of 23% from the approved FID budget. The reasons for this are varied and may be impacted by the geographic location of the project.
