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Cost Overrun at the Norwegian Continental Shelf: The element of surprise

Atle Oglend, Petter Osmundsen and Sindre Lorentzen
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Sindre Lorentzen: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway

No 2016/3, UiS Working Papers in Economics and Finance from University of Stavanger

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 (search for similar items in EconPapers)
JEL-codes: C31 C51 D22 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2016-05-02
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