Delaying projects risks raising costs

21 December 2007
High oil prices have been a recurring theme throughout 2007. Unfortunately, so have rocketing development prices and project delays. This is leading to bouts of indecision, which will have a long-term impact.

With oil prices averaging $70 for the year, the region’s national oil companies have been increasingly prepared to invest in economically challenging projects.
But delays and cost overruns mean that the viability of projects has had to be constantly reviewed.
The industry is relying on high oil prices
to ensure many of the projects remain econ-omically viable.
While few projects have yet been cancelled, completing huge refineries and production facilities on time and to budget will become increasingly difficult, even for the standard setter, Saudi Aramco.
Its Khursaniyah development faces a delay of up to six months, while Kuwait and Oman face difficult decisions for their respective refining ventures at Al-Zour and Duqm.
National oil companies know that oil prices are unlikely to stay at their record highs throughout 2008, while costs could keep rising.
But many projects already in the planning stage are critical and must proceed.
For projects such as Al Zour, which is strategically important to Kuwait, a quick decision to proceed should be made or costs will simply rise further.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications