ANALYSING DELAY AND COST OVERRUN IN REFINERY AND PETROCHEMICAL MEGA PROJECTS AND MITIGATION OF CRITICAL DELAYS: INDIAN SUB-CONTINENT

Abstract

Delays in the refinery and petrochemical mega projects have significant economic implications, particularly in the developing economies. This research investigates the primary causes of project delays and their correlation with cost overruns through a combination of literature review, expert interviews, and qualitative analysis in the Indian context. Press Information Bureau (20th April, 2024) published a report that the Public Procurement is estimated between 20% to 22% of the country's GDP. The Indian economy size is around USD 2.7 trillion and annual Public Procurement is approximately USD 500 Billion. The contribution of “Central Public Sector Enterprises (CPSEs)” to India's Gross Domestic Product (GDP) is approximately 15% to 16%. The government's focus on capital expenditure (CAPEx) has been one of the key drivers of economic growth, particularly in an uncertain and challenging global environment. Investments in sectors like road transport and highways, petroleum, railways, defense services, and telecommunications provide sustained growth by alleviating logistical challenges and expanding productive capacities. The "Quarterly Project Implementation Status Report (QPISR), Q3 (2023-24)", published by the “Ministry of Statistics and Programme Implementation, Government of India”, highlights that 1,897 projects funded by the central government are currently under execution. 96 projects out of the 161 projects related to the petroleum sector i.e. refineries & petrochemical projects, LNG terminals & pipeline projects are getting delayed and which are running behind the schedule. Refineries and petrochemical mega projects are very complex in nature due to complex scope, procurement methods, financing, organization structure, complexity involving stakeholders such as “Owner, Licensor/Technology Providers, Project Management Consultant, Engineering Project and construction Management Consultant, Suppliers, Contactors, Third Party Inspection Agencies (TPIAs), Government Institutions like MoEF and NGT approvals”, external factors like local stakeholders, political institutions and ideological polarising groups and in this way the aforesaid factors lead to cascading effect of project delay and thus running behind the scheduled project completion time and cost overrun. Key causes of delays have been analysed through literature review, recommendation by researchers and interviews with experts in related fields. Further, key causes of delays are ranked and the relationship between key delay factors of various stakeholders and with cost overrun by using linear regression. Cost Overrun having strong relationships with Contractor, vi Project Management & Engineering Consultancy. The analysis underscores the importance of factors such as the Owner, Material, Labour, and Government & Political influences on cost overruns in refinery and petrochemical projects. While “Force Majeure, Unforeseen Conditions, External Factors” are statistically significant, their impact is weaker compared to other variables. The Pareto chart has been also prepared to identify the critical causes that account for the majority of the impact. The chart reveals that the top 10 Contributors (Vital Few) contribute a disproportionately large portion of the total impact. These 10 causes alone account for nearly 50–60% of the cumulative impact (based on cumulative percentage). The study highlights that improved stakeholder coordination, efficient risk management, and expeditious decision-making are crucial in mitigating the delays. The research offers practical recommendations for improving the schedule of projects and reducing cost overruns, thereby contributing to the successful implementation of mega projects in India.