Every day of delay on an FPSO project costs tens of millions. But do you know exactly how much your project stakeholders are losing?
Based on simplified economic impact analysis on a real FPSO Project, here's what schedule delays actually cost both oil company operators and FPSO owners:
📊 For Oil Company Operators (Client):
Daily Revenue Impact: • Lost production revenue = Daily production × Oil price • Example: 50,000 bbl/day × $80/bbl = $4M per day • 30-day delay = $120M in lost revenue
Additional Client Losses: • Deferred cash flow impacting project NPV • Cost of alternative oil supply arrangements • Extended project team and overhead costs • Financing cost increases and covenant risks • Share price impact from missed production targets
🚢 For FPSO Owners/Contractors:
Charter Revenue Losses: • Lost day rates during delay period • Example: $200,000/day charter rate × 30 days = $6M • Continued CAPEX financing with no revenue stream
Additional Owner Costs: • Penalties and standby costs • Extended yard and crew expenses • Liquidated damages exposure • Rework and scope change costs
💸 Combined Impact Example:
Total daily loss: $4M (client) + $200K (owner) = $4.2M per day One month delay: $126M in direct losses
🔥 Big Picture Potential Financial Impacts:
Based on the above assumptions, the potential impact of schedule delays can be HUGE:
• Annual delay cost: $1.5B+ in combined losses • Client (Oil Company) bears ~95% of total economic impact • Owner (FPSO Contractor) bears ~5% of total economic impact • 3-year delay approaches $5B+ in total direct losses • This excludes financing costs, share price impacts, and reputation damage
⚠️ Hidden Multiplier Effects:
Beyond direct losses, delays trigger: • Additional financing charges on extended debt • Share price volatility affecting market capitalization • Reputation damage impacting future contract opportunities • Resource costs for extended project teams • Regulatory delays from repeated design changes
🎯 The Prevention Imperative:
The data is clear: Prevention costs far less than cure.
Key Success Factors: ✅ Have the right team and organisation at the start ✅ Complete FEED before EPC start ✅ Realistic schedule development with risk buffers ✅ Early procurement of critical long-lead items ✅ Delivery-focused project organization ✅ Strict change management processes
Remember: Offshore work costs 4x onshore rates. Every delay compounds exponentially.
The bottom line: Schedule delays don't just impact timelines—they destroy project economics and can threaten company survival.
Need help quantifying your project's delay risk exposure or developing robust delivery strategies?
Contact Me: Gurin Hanspal, Operations Director @ www.Upstream-Petroleum.com 📧 gurin.hanspal@upstream-petroleum.com
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