• Petroleum sector could face over Rs 2.4 lakh crore impact of project delays

    hat could be the total size of the price paid by the petroleum sector due to unwanted delays in implementation of oil and gas projects?

    The price could be a staggering over Rs 2.4 lakh crore through 2040, according to a study by Project Management Institute (PMI), a research and education institution.

    The Mumbai-based institute said in a report on project management practices in the oil and gas sector the country faces the humongous cost overruns and additional investment outlay over 2015-40 period if the existing project implementation scenario in the petroleum sector continues to prevail. The report was based on a survey of industry professionals.

    “With the new trend of fast growth, a lot of project managers are being assigned cases without on field experience. Becoming a project manager in the oil and gas sector requires in-depth knowledge about the Industry as opposed to other sectors that require only good people management skills,” said Partha Purkayastha, Managing Director, Amec Foster, speaking at a conference organized by PMI today in Delhi.

    The oil and gas sector has witnessed an average delay of 1.5 years in implementation of projects with average cost escalation of 6.2 per cent in the past, according to the PMI report. An average of 15-month delay has been noticed in projects worth Rs 100-999 crore each while the delay increases to 18 months in projects worth Rs 1,000 crore and more.

    Also, an average cost overrun of 6.9 per cent has been noted in projects worth Rs 1,000 or more across all PSU petroleum projects.

    Delays in petroleum projects occur at two stages — The Planning Stage and The Execution Stage. At the planning stage delays occur due to lack of detailed planning, poor risk management and lack of flexibility. Issues like change of scope of work, procurement delays and manpower allocation occur at the execution stage, the report stated.

    The report said only 25 per cent of the surveyed oil and gas companies had a dedicated independent risk management vertical and only 28 per cent of the respondents mentioned about organizational practice of drawing detailed response plan for each of the major identified risks.

    The report, released today, also talks about cost overruns occurring due to lack of planning, or continuous growth in a project’s scope and lack of management skill. “The Oil and Gas sector is expected to create a huge investment opportunity of $542 billion by 2040. We believe this can be achieved by improving the project management practices, identifying the gaps in organizational structure, practices, skill sets etc,” said Raj Kalady, Managing Director at PMI.

    He added there is a need to look at ways to bridge the gaps in project management through better organizational planning and manpower capability building. India is the 4th largest consumer of oil and petroleum products in the world with 216 million metric tonnes per annum (MMTPA) of refining capacity. Jerome Murphy Authentic Jersey

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