The Impact of Strategic Procurement on Cost Overruns and Delays in Petroleum Exploration and Production Projects

Abstract

Cost overruns and project delays persist as significant challenges in petroleum exploration and production (E&P) projects, frequently resulting in reduced profitability, strained stakeholder relationships, and missed strategic objectives. This study investigates the impact of strategic procurement practices on mitigating cost and schedule risks in petroleum projects. Using a dataset of 120 projects, the study employs descriptive statistics, correlation analysis, and multiple regression modelling to evaluate the role of supplier relationship management (SRM), early supplier involvement, contract alignment, supplier qualification, and digital enablement in influencing project performance.

The findings reveal that SRM and early supplier involvement significantly reduce cost overruns, while contract alignment demonstrates a marginal yet negative effect on cost growth. In terms of schedule performance, SRM, early involvement, contract alignment, and digital enablement all emerge as significant determinants of reduced delays, underscoring the importance of collaborative supplier engagement and digital transformation in project delivery. Project characteristics—particularly offshore location, project size, and contract type—were found to be critical drivers of both cost and schedule risks, with offshore and reimbursable-contract projects especially vulnerable to overruns and delays.

The study contributes to both theory and practice by demonstrating how procurement strategies, when aligned with contextual project risks, can substantially improve project outcomes. It advances procurement literature within the petroleum sector by integrating strategic practices with performance metrics and extends the application of Transaction Cost Economics and the Resource-Based View in project management research.

Practically, the study recommends strengthening supplier relationships, integrating suppliers early in the project lifecycle, adopting digital procurement platforms, and aligning contracts with project objectives. For risk-sensitive projects, particularly offshore and large-scale operations, targeted procurement governance and robust contracting strategies are essential. The findings reinforce the view that procurement is not merely a transactional activity but a strategic enabler of efficiency, reliability, and competitiveness in petroleum E&P projects.