Rystad: Hasty offshore sanctioning leads to cost overruns

As the oil and gas industry comes out of the recent downturn, E&P companies are tempted to chase the rewards of higher oil prices by accelerating the sanctioning of new projects. However, hasty sanctioning can lead to less certainty of what the ultimate cost of any given project will be, according to Rystad Energy.

Projects with high levels of so-called engineering definition are generally expected to remain within about 20% of the initial cost estimates, Rystad Energy said.

“For offshore operators, that means the expected variation for projects to be sanctioned during the period from 2019 to 2023 could be as high as $220 billion,” says Matthew Fitzsimmons, Vice President of Rystad Energy’s Oilfield Service Research division.

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