2 – Summary

The NPD has reviewed 66 developments pursued on the NCS between 2007 and 2018. This review shows that most of the projects end up with costs which fall within the estimates given in the PDO.

Relatively few projects experience cost overruns, and this number has decreased further in recent years. An important reason for this is that the licensees have done sufficiently detailed early-phase work before sanctioning the project.

Market trends following the oil price slump have also made a positive contribution, since the availability of resources and capacity at the suppliers has been better than in the years before the downturn.

Just over 80 per cent of the selected projects have been delivered within or below the uncertainty range in the estimate. Subsea developments very often progress as planned, and 90 per cent of them were completed in line with or below the PDO estimate.

Experience shows that platform-based developments are more challenging, and several of these have cost overruns. Nevertheless, the review reveals that 71 per cent of these projects were delivered or are being developed in line with the estimated cost.

On average, projects were completed about 3.5 months later than planned. The average delay is longer for platform developments than for subsea projects.

The report compares projects approved in 2007-12 with those given the green light in 2013-18. This review shows that project execution improved in the second period compared with the first. More of the projects in 2013-18 have been developed in accordance with the time and cost estimates.

While a majority of the large and medium-sized fields on the NCS have seen their reserves increase, a majority of the small fields have witnessed a reduction. This tendency also applies to the projects covered by this report.

The NPD has regularly followed up projects in the execution phase for a number of years. Dialogue with the operator and licensees builds up the NPD's knowledge about and experience of project execution on the NCS.

On the basis of this follow-up, the report highlights the following factors which are important when planning and executing new projects.

• The operator must establish a project organisation with sufficient expertise and capacity to plan and execute the project.
  
  
• Detailed planning, with a good process for concept selection and enough time to mature the selected concept before the PDO, is crucial for the project to get off to a good start and achieve execution success. In this context, a quality assurance system is important for ensuring sufficient technical detailing and maturation at the various project milestones.
  
  
• The project organisation should actively seek to learn lessons and transfer experience from execution and operation of other developments, and take account of these in its planning.
  
  
• A contract and execution strategy must be established which is tailored to the expertise and capacity of the operator and the supplier. Continuity of main contractor(s) from frontend to detail engineering could be positive for execution, since it helps ensure that contractors are familiar with the project when detail design begins and that they have ownership of the solutions chosen.
  
  
• The operator must manage the project on the basis of risk assessments, cost developments and progress, and adjust project follow-up as well as taking action should problem areas be identified.

In addition to the operator, the other licensees have a responsibility for project execution. They must therefore contribute their expertise to the planning and execution of projects.

In 2016 (with minor adjustments in 2018), the guidance for PDOs and PIOs was updated in part to make this responsibility clearer. More information is now required about project execution, including documentation of measures taken by licensees to fulfil their “seeto-it” duty.

The licensees have highlighted the topsides as particularly challenging in platform developments. Errors and deficiencies in engineering and constructing these structures are an important cause of delays and cost overruns. The topsides have incurred large cost increases even in several of the projects which have ended up overall with costs in line with the PDO estimate.

In the NPD’s assessment, expertise and experience in the operator’s project organisation will be more significant for the outcome in this type of project than with subsea developments. Companies with a portfolio of such projects on the NCS and with a project organisation which builds experience and expertise over time have better results than operators with few projects. Outcomes are more varied for the latter group.

Many large developments were pursued in the years before the oil price slump. Capacity constraints in Norway contributed to the award of several contracts to Asian yards. The review reveals no clear link between successful project execution and the geographical location of the construction site.

Several of the operators have nevertheless pointed to factors which experience shows to have made building in Asia more demanding than in Norway with more familiar partners. It is important to have sufficient expertise about and understanding of the cultural and organisational conditions at the yards.

The latter also lack expertise in complying with Norsok standards, and specialist teams with Norsok expertise and experience from similar developments were therefore established in several of the projects to compensate for this.

More follow-up and a greater presence than expected have also been required at the yard’s subcontractors. The effect of these conditions has often been insufficiently assessed when estimating costs and
awarding contracts, and has in many cases been an important contributor to cost increases in this part of the project – even in developments which lie overall within the uncertainty range.

On average, projects on the NCS experience fewer delays and meet their cost estimates better than developments on the UK continental shelf (UKCS). Both continental shelves have seen an improvement in project execution during recent years.

The average size of current discoveries on the NCS is smaller than before. A majority are most likely to be developed with subsea facilities. Experience presented in this report shows that such projects are almost always executed in accordance with the approved plans, regardless of the operator’s project development experience.

However, reviewing developments after fields come on stream shows that reserves often decline for smaller projects compared with expectations in the PDO. Drilling many appraisal wells before a PDO is often not considered beneficial on small fields, and the decision base may then be relatively more uncertain than for larger discoveries.

This indicates that achieving a good understanding and best estimate of the reserve base and choosing a development concept which can handle the uncertainties if the downside materialises are at least as important as executing a project on time and to budget.

Where fields on stream are concerned, good facility knowledge and maintenance planning are important in preparing a realistic decision basis for modification projects. Experience from some of these fields shows that changes have occurred because drawings were insufficiently updated, and it proved necessary to replace or upgrade more equipment than expected.