Structural modeling and analysis of causes of cost overruns in oil and gas projects in Kazakhstan

Murat Syzdykov, Gulnura Taikulakova, Gulzada T. Shakulikova

2025

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DOI 10.54859/kjogi108936
Data confidence 70 medium
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Abstract

Background: The oil and gas industry frequently face budget overrun issues. Project costs increase, stakeholders are dissatisfied, and overall performance suffers. To avoid this, it is important to find effective methods for preventing or mitigating the risk of cost overruns. Aim: The objective of the study is to analyze the relationship between resource-related factors, such as labor, equipment, and material factors, and cost overruns in the oil and gas projects in Kazakhstan. Materials and methods: A structured survey consisting of 15 resource-related risk factors was distributed to experienced professionals working in the oil and gas sector. A total of 172 valid responses were gathered. The data were evaluated using descriptive statistics, econometric methods and partial-least squares structural equation modeling (PLS-SEM) to assess reliability, validity, causal relationships, and regressed variables. Results: The empirical analysis shows that labor-related risks, including labor shortages, low productivity, and labor incompetence, have the most substantial and statistically significant impact on cost overruns. Material-related and equipment-related risks demonstrate a moderate yet meaningful effect. All three latent constructs exhibit internal consistency and convergent validity. Furthermore, change orders and financial difficulties are also strong contributors to cost escalations. Conclusion: The study concludes that effective resource planning is critical for minimizing cost overruns and ensuring the successful execution of oil and gas projects in Kazakhstan. Improving workforce competency, enhancing material supply reliability, and efficiently providing physical resources are recommended practices for overall project management body of knowledge.