Four out of every five oil and gas megaprojects are characterized as failures. Independent Project Analysis (IPA) Founder and CEO Edward Merrow provided that staggering statistic in an appearance on the Oil & Gas Today Podcast The Boardroom while explaining to host Tim Haidar how he classifies success versus failure.
The 10-minute interview covered topics such as defining megaproject success versus failure, approaching megaprojects more slowly, and the anticipated skill shortage in the near future. Merrow’s answer to the following question posed by Haidar is particularly valuable to those involved with oil and gas megaprojects:
Is that [ratio] the same for the rest of the megaprojects that you’ve looked at? And if not, what can the oil and gas sector learn from its cross-sector counterparts?
Edward Merrow: “No, it’s not. The other sectors [including minerals, chemicals, and power] are categorized by a failure rate that is approximately 50%. That’s not good, but it’s considerably better than oil and gas. In general, those projects that are successful in the other sectors, as well as in oil and gas, are those that did a very thorough job in the front-end. They did good appraisal. They did what we call good Reservoir Front-End Loading, which is that they actually defined how they were going to deplete the reservoir very carefully. They did very good definition of what the facilities would look like. They optimized the facilities versus the wells. And they then proceeded to execute the project well. One of the things that we in the industry like to do is hurry up and do a poor job in the front-end and then we blame the contractors for doing a poor job executing the project. But the fact is, contractors do good projects well and bad projects poorly. It’s the owner that is actually to blame here, not the contractors.”
The Boardroom Oil & Gas Today Podcast interview with Edward Merrow is available for listening in its entirety at www.oilandgasiq.com.