Delays and budget overruns on much-needed capital projects for the oil and gas and utility industries could cost companies in those industries trillions of dollars in lost investments, Accenture (NYSE: ACN) research shows.
The International Energy Agency (IEA) forecasts that the energy industry will spend nearly US$38 trillion globally on investments for global energy projects through 2035 1, chiefly to maintain existing assets such as pipelines and electric grids and to build new assets.
Accenture’s Innovation Center for Energy and Utilities conducted research to understand how much oil and gas companies and utilities worldwide might overspend if they do not improve the implementation, in terms of delivering on time and on budget, of these large capital projects.
As part of the research, Accenture surveyed 61 energy executives from 21 countries who have responsibility for capital projects of at least US$1 billion. Using conservative assumptions based on its research, Accenture estimated that the potential overspend across the whole capital budget of the energy industries could be approximately 13 percent, which translates to US$5 trillion overspend on the US$38 trillion IEA forecast for global investments.Among the findings that helped shape Accenture's assumptions: Only 34 percent of respondents said they had delivered to within 25 percent of their approved budget for all projects, and fewer than a third (32 percent) said they delivered to the approved schedule. When asked to identify challenges to getting projects launched on time, respondents most often cited regulatory requirements (cited by 49 percent) and workforce/skills availability (25 percent). “The increasing size and complexity of today’s major projects has added to the scale of challenges for energy companies globally,” said Jean-Marc Ollagnier, group chief executive of Accenture's Resources operating group. “But companies can improve their success in delivering capital projects by broadening their focus of project management beyond engineering and procurement to include human capital strategy, stakeholder and supplier relations, and defining and measuring success."
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