Risk Factors Affecting Delays in Upstream Natural Gas Mega-Projects: An Australian Perspective

Abstract

The rapid expansion of the Australian gas industry has seen massive investment in mega-projects, but benefits from this have been impeded by the impact of severe project delays. Risks causing delays in upstream mega-projects are high, leading to frequent cost and schedule overruns. However, the absence of research concerning delays during this complex phase of mega-projects provides the opportunity to critically examine underlying challenges experienced by various project participants involved in upstream gas projects in Australia. Data was gathered through an extensive literature review, interviews with industry experts, and a survey. A list of risk factors extracted from the literature was checked with industry experts for relevance in upstream mega-projects, and missing risks were added. The survey was circulated to a random sample of people working within the natural gas projects domain, including clients, consultants, and contractor organisations. Using Likert-style five-point scales, participants rated the frequency of occurrence and severity of each of the risks impacting delays. A total of 70 risk factors were identified, which were then traced back to 10 risk sources that impact delays in upstream gas projects. The findings reveal that 72% of participants believe that the average delay in gas projects is between 10% and 30% in Australia. Moreover, 93% of participants mentioned that schedule slippage in the upstream phase causes severe challenges in attaining "first gas" and results in overall project delays. Based on the frequency of occurrence and severity indices, the magnitude of risk factors and sources was used to ascertain critical risks causing major delays. Kruskal-Wallis and Mann-Whitney U tests were applied to check the differences in perception of risk criticality influencing delays among the participants, who differed depending on work experience, job position, and the type of participants’ company. These tests indicated a good association in such perceptions. Key risk factors causing major delays included frequent change orders being issued by clients, unrealistic time schedules imposed on contracts, and poor organisational structures. Risks in mega-projects cannot be eliminated completely. However, a more precise identification and prioritisation of risks causing major delays, along with differences in risk perceptions of various project parties, will provide an informed and broader perspective to industry practitioners and stakeholders in managing risks more effectively to reduce upstream gas project delays.