Chaotic Dynamics of Cost Overruns in Oil and Gas Megaprojects: A Review
Cost overruns are a persistent problem in oil and gas
megaprojects. Whilst the extant literature is filled with studies on
incidents and causes of cost overruns, underlying theories to explain
their emergence in oil and gas megaprojects are few. Yet, a way to
contain the syndrome of cost overruns is to understand the bases of
‘how and why’ they occur. Such knowledge will also help to develop
pragmatic techniques for better overall management of oil and gas
megaprojects. The aim of this paper is to explain the development of
cost overruns in hydrocarbon megaprojects through the perspective of
chaos theory. The underlying principles of chaos theory and its
implications for cost overruns are examined and practical
recommendations proposed. In addition, directions for future research
in this fertile area provided.
[1] P. Reina and W.J. Angelo, Megaprojects need more study up front to
avoid cost overruns. ENR, 2002. 249(3).
[2] C. Eden., F. Ackermann, and T. Williams, The amoebic growth of
project costs. Project Management Journal, 2005. 36(1): p. 15-27.
[3] R. Kombargi, A. Masuy, A. Sastry, & F, Ozeir, (2012), Executing
Capital Projects in the MENA Energy Industry: Much to Learn, More to
Deliver: Booz&Co.
[4] P. Ker, (2011). Pluto blowout wipes $1bn off Woodside. The Sydney
Morning Herald. Retrieved from http://www.smh.com.au/business/
pluto-blowout-wipes-1bn-off-woodside-20110617-1g7ze.html.
[5] G. Jergeas, Analysis of the front-end loading of Alberta mega oil sands
projects. Project Management Journal, 2008. 39(4): p. 95-104.
[6] P. E. Love, et al., Dynamics of rework in complex offshore hydrocarbon
projects. Journal of Construction Engineering and Management, 2011.
137(12): p. 1060-1070.
[7] A. Rolstadås, et al., Risk navigation strategies for major capital
projects: Beyond the myth of predictability. 2011: Springer.
[8] J.A. Ford, et al., Confronting the Productivity Challenge in the High
Cost Economy: Evidence from the Australian Oil and Gas Industry, in
Global Perspectives on Achieving Success in High and Low Cost
Operating Environments, G. Roos and N. Kennedy, Editors. 2014,
Business Science Reference: Hershey, PA.
[9] P.E. Love and D.J. Edwards, Curbing rework in offshore projects:
systemic classification of risks with dialogue and narratives. Structure
and Infrastructure Engineering, 2013. 9(11): p. 1118-1135.
[10] A.L. Stinchcombe and C.A. Heimer, Organization theory and project
management: Administering uncertainty in Norwegian offshore oil.
1985: A Scandinavian University Press Publication.
[11] N. Van Thuyet, S.O. Ogunlana, and P.K. Dey, Risk management in oil
and gas construction projects in Vietnam. International journal of energy
sector management, 2007. 1(2): p. 175-194.
[12] B. Asrilhant, M. Meadows, and R. Dyson, Techniques to support
successful strategic project management in the UK upstream oil and gas
sector. European Management Journal, 2006. 24(2): p. 214-225.
[13] C.H. Loch, A. DeMeyer, and M.T. Pich, Managing the unknown: A new
approach to managing high uncertainty and risk in projects. 2011: John
Wiley & Sons.
[14] M.D. Cleden., Managing project uncertainty. 2012: Gower Publishing,
Ltd.
[15] D. Levy, Chaos Theory and Strategy: Theory, Application, and
Managerial Implications. Strategic Management Journal, 1994. 15: p.
167-178.
[16] L.E. Reichl, The transition to chaos. 2004: Springer.
[17] D. Schuldberg, D., Chaos Theory and Creativity, in Encyclopedia of
Creativity, Mark and R.P. Steven, Editors. 2011, Academic Press: San
Diego. p. 183-191.
[18] C.A. Haigh, (2008). Using simplified chaos theory to manage nursing
services. Journal of Nursing Management, 16(3), 298-304. doi:
10.1111/j.1365-2834.2007.00833.x
[19] H. Tsoukas, Introduction: chaos, complexity and organization theory.
Organization, 1998. 5(3): p. 291-313.
[20] R.A. Thietart and B. Forgues, Chaos theory and organization.
Organization science, 1995. 6(1): p. 19-31.
[21] P. Murphy, Chaos theory as a model for managing issues and crises.
Public relations review, 1996. 22(2): p. 95-113.
[22] T. Cooke-Davies., et al., Mapping the strange landscape of complexity
theory, and its relationship to project management. Project Management
Journal, 2007. 38(2): p. 50-61.
[23] H. Singh and A. Singh, Principles of complexity and chaos theory in
project execution: A new approach to management. Cost Engineering,
2002. 44(12): p. 23-33.
[24] E. Lorenz, The Essence of Chaos. 1993, London: University Of London.
[25] J. Bardyn and D. Fitzgerald, Chaos theory and project management: A
perspective on managing the complex project. Managing complexity in
organizations: A view in many directions, new edn. 2005. 246-258.
[26] B. Asrilhant, M. Meadows, and R.G. Dyson, Exploring decision support
and strategic project management in the oil and gas sector. European
Management Journal, 2004. 22(1): p. 63-73.
[27] K. .Remington and R. Zolin, Controlling Chaos? The Value and the
Challenges of Applying Complexity Theory to Project Management, in
Aspects of Complexity: Managing Projects in a Complex World, T.
Cooke-Davies, et al., Editors. 2011, Project Management Institute:
Pennsylvania.
[28] R.C. Hilborn, Chaos and nonlinear dynamics: an introduction for
scientists and engineers. 2000: Oxford University press Oxford.
[29] P. Delpont, The ROGTEC Interview: Pierre Delpont External Relations
Director, North Caspian Operating Company B.V, in ROGTEC. 2012.
[30] Sellnow, T.L., M.W. Seeger, and R.R. Ulmer, Chaos theory,
informational needs, and natural disasters. Journal of Applied
Communication Research, 2002. 30(4): p. 269-292.
[31] M.W. Seeger, Chaos and crisis: Propositions for a general theory of
crisis communication. Public Relations Review, 2002. 28(4): p. 329-337.
[32] L.P. Beckerman, The non-linear dynamics of war. Science Applications
International Corporation. 1999: Springer Verlag. 2.
[33] D.R. Bamford and P.L. Forrester, Managing planned and emergent
change within an operations management environment. International
Journal of Operations & Production Management, 2003. 23(5): p. 546-
564.
[34] M. Speakman and R. Sharpley, A chaos theory perspective on
destination crisis management: Evidence from Mexico. Journal of
Destination Marketing & Management, 2012. 1(1): p. 67-77.
[35] E.E. Peters, Fractal market analysis: applying chaos theory to
investment and economics. Vol. 24. 1994: John Wiley & Sons.
[36] R.G.L. Pryor and J.E.H. Bright, Applying Chaos Theory to Careers:
Attraction and attractors. Journal of Vocational Behavior, 2007. 71(3):
p. 375-400.
[37] Grassberger, P. and I. Procaccia, Measuring the strangeness of strange
attractors, in The Theory of Chaotic Attractors. 2004, Springer. p. 170-
189.
[38] R. Burke, Project management: planning and control techniques. 2013.
[39] E.W. Merrow, Industrial megaprojects: concepts, strategies, and
practices for success. 2011: John Wiley & Sons.
[40] NCOC. About Kashagan: Development Strategy. 2013 November 10,
2014; Available from: http://www.ncoc.kz/en/kashagan/development_
strategy.aspx.
[41] L. Gomez-Mejia, D. Balkin, and R. Cardy, Management: People,
Performance. Change. Boston, MA: Prentice Hall, 2012.
[42] J. Gleick, Chaos: Making a new science. 1987, London: Viking Penguin
Inc.
[43] R.I. Faulconbridge and M.J. Ryan, Engineering a System: Managing
Complex Technical Projects. 2005: Argos Press.
[44] D. Frear, The Effect of Change on Management Planning : Applying
Chaos Theory. International Journal of Business and Social Science,
2011. 2(14).
[45] R.C. Hilborn, Sea gulls, butterflies, and grasshoppers: A brief history of
the butterfly effect in nonlinear dynamics. American Journal of Physics,
2004. 72(4): p. 425-427.
[46] V. Rai and R.K. Upadhyay, Evolving to the edge of chaos: Chance or
necessity? Chaos, Solitons & Fractals, 2006. 30(5): p. 1074-1087.
[47] Project-Management-Institute, A guide to the Project Management Body
of Knowledge (PMBOK guide). Fifth ed. 2013.
[48] A. De Meyer, C.H. Loch, and M.T. Pich, From variation to chaos. MIT
Sloan Management Review, 2002. 43: p. 60-7. [49] F.C. Moon, Chaotic and Fractal Dynamics: Introduction for Applied
Scientists and Engineers. 2008: John Wiley & Sons.
[50] T. Ahmed, J.Y. Ruwanpura, and R. Clark. Predicting Schedule and Cost
Elements Variation for EPC Projects in Alberta. in Proceedings of
Construction Research Congress 2005. 2005.
[51] D. Baccarini and P.E. Love, Statistical Characteristics of Cost
Contingency in Water Infrastructure Projects. Journal of Construction
Engineering and Management, 2013. 140(3).
[52] P.E.D. Love, et al., Project Pathogens: The Anatomy of Omission Errors
in Construction and Resource Engineering Project. Engineering
Management, IEEE Transactions on, 2009. 56(3): p. 425-435.
[53] T. Sorel, The life cycle continuum. Public roads, 2004. 68(1).
[1] P. Reina and W.J. Angelo, Megaprojects need more study up front to
avoid cost overruns. ENR, 2002. 249(3).
[2] C. Eden., F. Ackermann, and T. Williams, The amoebic growth of
project costs. Project Management Journal, 2005. 36(1): p. 15-27.
[3] R. Kombargi, A. Masuy, A. Sastry, & F, Ozeir, (2012), Executing
Capital Projects in the MENA Energy Industry: Much to Learn, More to
Deliver: Booz&Co.
[4] P. Ker, (2011). Pluto blowout wipes $1bn off Woodside. The Sydney
Morning Herald. Retrieved from http://www.smh.com.au/business/
pluto-blowout-wipes-1bn-off-woodside-20110617-1g7ze.html.
[5] G. Jergeas, Analysis of the front-end loading of Alberta mega oil sands
projects. Project Management Journal, 2008. 39(4): p. 95-104.
[6] P. E. Love, et al., Dynamics of rework in complex offshore hydrocarbon
projects. Journal of Construction Engineering and Management, 2011.
137(12): p. 1060-1070.
[7] A. Rolstadås, et al., Risk navigation strategies for major capital
projects: Beyond the myth of predictability. 2011: Springer.
[8] J.A. Ford, et al., Confronting the Productivity Challenge in the High
Cost Economy: Evidence from the Australian Oil and Gas Industry, in
Global Perspectives on Achieving Success in High and Low Cost
Operating Environments, G. Roos and N. Kennedy, Editors. 2014,
Business Science Reference: Hershey, PA.
[9] P.E. Love and D.J. Edwards, Curbing rework in offshore projects:
systemic classification of risks with dialogue and narratives. Structure
and Infrastructure Engineering, 2013. 9(11): p. 1118-1135.
[10] A.L. Stinchcombe and C.A. Heimer, Organization theory and project
management: Administering uncertainty in Norwegian offshore oil.
1985: A Scandinavian University Press Publication.
[11] N. Van Thuyet, S.O. Ogunlana, and P.K. Dey, Risk management in oil
and gas construction projects in Vietnam. International journal of energy
sector management, 2007. 1(2): p. 175-194.
[12] B. Asrilhant, M. Meadows, and R. Dyson, Techniques to support
successful strategic project management in the UK upstream oil and gas
sector. European Management Journal, 2006. 24(2): p. 214-225.
[13] C.H. Loch, A. DeMeyer, and M.T. Pich, Managing the unknown: A new
approach to managing high uncertainty and risk in projects. 2011: John
Wiley & Sons.
[14] M.D. Cleden., Managing project uncertainty. 2012: Gower Publishing,
Ltd.
[15] D. Levy, Chaos Theory and Strategy: Theory, Application, and
Managerial Implications. Strategic Management Journal, 1994. 15: p.
167-178.
[16] L.E. Reichl, The transition to chaos. 2004: Springer.
[17] D. Schuldberg, D., Chaos Theory and Creativity, in Encyclopedia of
Creativity, Mark and R.P. Steven, Editors. 2011, Academic Press: San
Diego. p. 183-191.
[18] C.A. Haigh, (2008). Using simplified chaos theory to manage nursing
services. Journal of Nursing Management, 16(3), 298-304. doi:
10.1111/j.1365-2834.2007.00833.x
[19] H. Tsoukas, Introduction: chaos, complexity and organization theory.
Organization, 1998. 5(3): p. 291-313.
[20] R.A. Thietart and B. Forgues, Chaos theory and organization.
Organization science, 1995. 6(1): p. 19-31.
[21] P. Murphy, Chaos theory as a model for managing issues and crises.
Public relations review, 1996. 22(2): p. 95-113.
[22] T. Cooke-Davies., et al., Mapping the strange landscape of complexity
theory, and its relationship to project management. Project Management
Journal, 2007. 38(2): p. 50-61.
[23] H. Singh and A. Singh, Principles of complexity and chaos theory in
project execution: A new approach to management. Cost Engineering,
2002. 44(12): p. 23-33.
[24] E. Lorenz, The Essence of Chaos. 1993, London: University Of London.
[25] J. Bardyn and D. Fitzgerald, Chaos theory and project management: A
perspective on managing the complex project. Managing complexity in
organizations: A view in many directions, new edn. 2005. 246-258.
[26] B. Asrilhant, M. Meadows, and R.G. Dyson, Exploring decision support
and strategic project management in the oil and gas sector. European
Management Journal, 2004. 22(1): p. 63-73.
[27] K. .Remington and R. Zolin, Controlling Chaos? The Value and the
Challenges of Applying Complexity Theory to Project Management, in
Aspects of Complexity: Managing Projects in a Complex World, T.
Cooke-Davies, et al., Editors. 2011, Project Management Institute:
Pennsylvania.
[28] R.C. Hilborn, Chaos and nonlinear dynamics: an introduction for
scientists and engineers. 2000: Oxford University press Oxford.
[29] P. Delpont, The ROGTEC Interview: Pierre Delpont External Relations
Director, North Caspian Operating Company B.V, in ROGTEC. 2012.
[30] Sellnow, T.L., M.W. Seeger, and R.R. Ulmer, Chaos theory,
informational needs, and natural disasters. Journal of Applied
Communication Research, 2002. 30(4): p. 269-292.
[31] M.W. Seeger, Chaos and crisis: Propositions for a general theory of
crisis communication. Public Relations Review, 2002. 28(4): p. 329-337.
[32] L.P. Beckerman, The non-linear dynamics of war. Science Applications
International Corporation. 1999: Springer Verlag. 2.
[33] D.R. Bamford and P.L. Forrester, Managing planned and emergent
change within an operations management environment. International
Journal of Operations & Production Management, 2003. 23(5): p. 546-
564.
[34] M. Speakman and R. Sharpley, A chaos theory perspective on
destination crisis management: Evidence from Mexico. Journal of
Destination Marketing & Management, 2012. 1(1): p. 67-77.
[35] E.E. Peters, Fractal market analysis: applying chaos theory to
investment and economics. Vol. 24. 1994: John Wiley & Sons.
[36] R.G.L. Pryor and J.E.H. Bright, Applying Chaos Theory to Careers:
Attraction and attractors. Journal of Vocational Behavior, 2007. 71(3):
p. 375-400.
[37] Grassberger, P. and I. Procaccia, Measuring the strangeness of strange
attractors, in The Theory of Chaotic Attractors. 2004, Springer. p. 170-
189.
[38] R. Burke, Project management: planning and control techniques. 2013.
[39] E.W. Merrow, Industrial megaprojects: concepts, strategies, and
practices for success. 2011: John Wiley & Sons.
[40] NCOC. About Kashagan: Development Strategy. 2013 November 10,
2014; Available from: http://www.ncoc.kz/en/kashagan/development_
strategy.aspx.
[41] L. Gomez-Mejia, D. Balkin, and R. Cardy, Management: People,
Performance. Change. Boston, MA: Prentice Hall, 2012.
[42] J. Gleick, Chaos: Making a new science. 1987, London: Viking Penguin
Inc.
[43] R.I. Faulconbridge and M.J. Ryan, Engineering a System: Managing
Complex Technical Projects. 2005: Argos Press.
[44] D. Frear, The Effect of Change on Management Planning : Applying
Chaos Theory. International Journal of Business and Social Science,
2011. 2(14).
[45] R.C. Hilborn, Sea gulls, butterflies, and grasshoppers: A brief history of
the butterfly effect in nonlinear dynamics. American Journal of Physics,
2004. 72(4): p. 425-427.
[46] V. Rai and R.K. Upadhyay, Evolving to the edge of chaos: Chance or
necessity? Chaos, Solitons & Fractals, 2006. 30(5): p. 1074-1087.
[47] Project-Management-Institute, A guide to the Project Management Body
of Knowledge (PMBOK guide). Fifth ed. 2013.
[48] A. De Meyer, C.H. Loch, and M.T. Pich, From variation to chaos. MIT
Sloan Management Review, 2002. 43: p. 60-7. [49] F.C. Moon, Chaotic and Fractal Dynamics: Introduction for Applied
Scientists and Engineers. 2008: John Wiley & Sons.
[50] T. Ahmed, J.Y. Ruwanpura, and R. Clark. Predicting Schedule and Cost
Elements Variation for EPC Projects in Alberta. in Proceedings of
Construction Research Congress 2005. 2005.
[51] D. Baccarini and P.E. Love, Statistical Characteristics of Cost
Contingency in Water Infrastructure Projects. Journal of Construction
Engineering and Management, 2013. 140(3).
[52] P.E.D. Love, et al., Project Pathogens: The Anatomy of Omission Errors
in Construction and Resource Engineering Project. Engineering
Management, IEEE Transactions on, 2009. 56(3): p. 425-435.
[53] T. Sorel, The life cycle continuum. Public roads, 2004. 68(1).
@article{"International Journal of Architectural, Civil and Construction Sciences:71308", author = "O. J. Olaniran and P. E. D. Love and D. J. Edwards and O. Olatunji and J. Matthews", title = "Chaotic Dynamics of Cost Overruns in Oil and Gas Megaprojects: A Review", abstract = "Cost overruns are a persistent problem in oil and gas
megaprojects. Whilst the extant literature is filled with studies on
incidents and causes of cost overruns, underlying theories to explain
their emergence in oil and gas megaprojects are few. Yet, a way to
contain the syndrome of cost overruns is to understand the bases of
‘how and why’ they occur. Such knowledge will also help to develop
pragmatic techniques for better overall management of oil and gas
megaprojects. The aim of this paper is to explain the development of
cost overruns in hydrocarbon megaprojects through the perspective of
chaos theory. The underlying principles of chaos theory and its
implications for cost overruns are examined and practical
recommendations proposed. In addition, directions for future research
in this fertile area provided.", keywords = "Chaos theory, oil and gas, cost overruns,
megaprojects.", volume = "9", number = "7", pages = "911-7", }
