On the Edge of Chaos: Complexity Offering Value Expectations on O&G Projects

Abstract

Oil and gas drilling schemes are inherently complex systems comprising different technical disciplines and multiple interconnected, globally diverse stakeholders, operating within a dynamic environmental and legislative environment. This presents numerous challenges to traditional project management which assumes a very ‘reductionist lens’ and which fails to account for the impact of dynamic internal and external forces on the ‘soft’ boundaries of the project domain. Oil and gas projects are characterized by extreme difficulty in predicting outcomes and system behaviors and, at the tails of the distribution of events, ‘black-swans’ do occur. This increases project and business risk for stakeholders and affects value creation and appropriation opportunities.

The paper argues that a holistic understanding of oil and gas drilling projects is necessary to account for the experiences, politics, human interactions, emergence and complex behavior of individuals and teams, both internal and external to the project environment. Experience and case studies will be discussed and challenged to uncover if this complexity is one of the reasons why projects sometimes fail to deliver sustainable value outcomes to clients. Then, through exploring complexity theory, we will attempt to understand the importance of understanding and coping with the emergent behavior of systems, using the theoretical ‘edge of chaos’ as a metaphor for ‘highly complex projects’. By understanding complexity (as distinct from attempting to quantify it), the authors suggest that our existing ‘bodies of knowledge’ in project management may require a significant renovation to improve project outcomes, the value expectations that clients have and to contribute to long term sustainable and competitive growth for the industry.

Introduction

More than 80% projects are failed due to production rate, schedule, or cost. On a $5 billion project, the average overrun cost is $1.7 billion, which is around 33% of the overall coast. Similarly, the production impairment and schedule cost can be equivalent to that amount. As a result, companies have to bear the loss of billions of dollars. The reasons for this loss and its frequent occurrence are many; however, the major one is that that oil and gas industry has become more complex and the management is incapable of managing these complexities of oil and gas industry related projects (Gate, 2016).