Above the Arctic Circle, workers are toiling to build a 300-mile pipeline that will run from Siberian oil fields to Purpe in northern Russia.
Begun in 2012, the project is scheduled to be completed in three stages by late 2015 at an estimated cost of $3.8 billion.
This is just one among a host of projects that are planned around the globe in the next 15 years or so by companies in the utilities, energy, metals, mining and chemicals industries. By some estimates, they represent a total investment of $60 trillion—more than the combined 2012 GDP of the European Union, the United States, China, Japan, Brazil, Russia and India. With the stakes so high, getting these projects right is especially critical.
Other industries make large capital investments, of course. Telecom players worldwide are currently investing billions as they introduce high-speed mobile 4G technology or build fiber-optic fixed networks, and the global automotive industry routinely spends massive amounts to retool existing plants or build new ones.
But delivering capital projects on time and on budget is proving more difficult than ever in sectors like energy and chemicals. The reasons center on today’s riskier, rapidly evolving business environment. For example, nearly two-thirds of this money will be spent in less developed countries, which can make many aspects of a venture more difficult. Projects are also growing larger and more complex; meanwhile, commodity markets and the broader macroeconomic environment have become more volatile and uncertain.
Comment submitted
Submitted comment may not display automatically.