Cost Overrun at the Norwegian Continental Shelf: The Element of Surprise

39 Pages Posted: 9 Jun 2016

See all articles by Atle Oglend

Atle Oglend

University of Stavanger

Petter Osmundsen

University of Stavanger; CESifo (Center for Economic Studies and Ifo Institute)

Sindre Lorentzen

University of Stavanger

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Date Written: June 7, 2016

Abstract

We examine drivers of cost overruns in Norwegian development projects in the oil and gas sector. The multivariate longitudinal econometric analysis employs a unique and detailed dataset consisting of 80 different projects between 2000 and 2015. Among the significant results, we find that the unexpected change in economic activity has a positive effect on the overruns; there is a considerable positive momentum in the transitional cost overruns; more experienced operators tend to incur less overruns; finally, that the size of the investment of the projects has a positive impact on the overruns. Further, we find evidence that the current economic activity matters to an extent, but it is the unexpected change in activity that is the pivotal factor.

Keywords: cost overrun, cost estimation, estimation error

JEL Classification: C510, D220, C310

Suggested Citation

Oglend, Atle and Osmundsen, Petter and Lorentzen, Sindre, Cost Overrun at the Norwegian Continental Shelf: The Element of Surprise (June 7, 2016). CESifo Working Paper Series No. 5886, Available at SSRN: https://ssrn.com/abstract=2791393

Atle Oglend

University of Stavanger ( email )

PB 8002
Stavanger, 4036
Norway

Petter Osmundsen (Contact Author)

University of Stavanger ( email )

4036 Stavanger
Norway

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Sindre Lorentzen

University of Stavanger ( email )

PB 8002
Stavanger, 4036
Norway

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