# Evaluating the Cost Efficiency of Systems Engineering in Oil and Gas Projects
## 2 Materials and Methods  
A probabilistic decision tree with various outcomes of events, whose probability can be determined based on a statistical sample, is taken as the basis for the SE efficiency assessment method. Statistics on the success of oil and gas projects were collected by studying open source data generated by the Independent Project Analysis (IPA), a leading consulting organization that analyzes projects' results. The organization's database contains more than 20,000 studied capital construction projects, with a geographical coverage of more than 100 countries. Data from the IPA [25] on the success of 318 oil and gas megaprojects (including 130 in exploration and production) with budgets exceeding $1 billion show that projects are unsuccessful in 78% of cases. These projects had an average budget overrun of 33% over the planned costs, and were started with a 30% delay from the previously planned schedule.  
According to the IPA study, the key failure factors are cost overruns, execution schedule slips, and problems with achieving the designed production level and Net Present Value (NPV), adopted at the Financial Investment Decision (FID) stage. In addition to these problems, the IPA study points out a negative impact of \"the drive for speed\" in order to facilitate the start of commercial operation, which adversely affects the planning and quality of a project's development.  
Statistics on projects, which used SE elements, are published in the report on success of major public investment projects by the Norwegian University of Science and Technology [26]. The report contains data on investment projects, half of which relate to the transport and defense industries, with an average budget of about NOK (Norwegian Krone) 3 billion ($292.5 million). The method of evaluating success described in the report is based on the Norwegian Quality Assurance Scheme for large government projects, which includes a two-level verification system for moving a project to the next stage. This scheme is integrated into a \"stage-gate\" model of a project, starting from the concept stage and ending with putting it into operation. At the first stage of QA1 (quality assurance of the choice of concept), the project's conformity with the initial goals, objectives, needs, and requirements of key stakeholders is assessed, and opportunities for further development and alternative concepts should also be examined here with a feasibility study. The second stage of QA2 (quality assurance of the management documentation) is a more detailed assessment of the project's budget, including the necessary reserves for contingencies and the delivery time for parts to ensure operational success. After analyzing data on 219 projects that passed QA1 and QA2 quality control in terms of deadlines and budgets, it was discovered that about 80% of the projects were completed within the set cost limits and below, while only 37% were unsuccessful in terms of deadline. Table 1 shows the summary of success analysis for the oil and gas industry international projects, as well as for projects using the SE methods. Table 2 shows the statistics on budget overruns and delays in the implementation schedule for unsuccessful projects. Based on the statistical data, which are probabilistic, shown in Table 1, we have proposed a method which relies on a trade off analysis in risk conditions using decision trees [28; 29; 30]. The decision tree includes a comparison of two alternatives for a project's development--with and without using SE. There are four outcomes for each option in the decision tree: the completion of the project within the planned schedule and budget (successful project); on time and beyond budget; within budget but beyond a deadline; beyond both budget and deadline. Figure 1 shows the decision tree constructed for these alternatives and their outcomes. The figure shows data on the shares of projects resulting in the above-mentioned outcomes, expressed as percentages, which are obtained based on statistics (Table 1).