Cost overruns on the Norwegian continental shelf: The element of surprise

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 79 different projects between 2000 and 2013. 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 and finally that the size of the investment of the projects has a positive impact on the overruns. Furthermore, we find evidence that current economic activity matters to an extent, but that the pivotal factor is the unexpected change in activity.