Modeling and simulation of factors affecting cost increases in oil and gas construction projects using a system dynamics approach (Case study: Esfand and Sivand projects in the Persian Gulf)

Document Type : Article extracted From phd dissertation

Authors
Ehsan Kheirollahzadeh 1
S. Mohammad Mirhosseini 1
Mohammad Reza Jalali 1
Mohammad Ehsanifar 2
1 Department of Civil Engineering, Ar.C., Islamic Azad University, Arak, Iran.
2 Department of Industrial Engineering, Ar.C., Islamic Azad University, Arak, Iran.
10.22034/he.2026.591664.1246
Abstract
Oil and gas construction projects face high uncertainty and rising execution costs due to structural complexity. A major challenge is the inability of conventional static approaches to explain the dynamic and nonlinear behavior of costs shaped by feedback loops, time delays, and imbalances between financial and operational flows. Therefore, this study aims to develop and validate a system dynamics model for analyzing and simulating the factors affecting cost escalation in oil and gas construction projects. This research adopted an exploratory mixed-methods approach. Data were collected through a literature review and semi-structured interviews with 15 experts selected through purposive sampling. Qualitative analysis identified 38 sub-factors and 11 major causes influencing project costs. These factors were incorporated into a stock-and-flow model with feedback loops and implemented using Vensim software. Model validity was evaluated through behavior reproduction, sensitivity analysis, and structural consistency tests. Simulation results showed that under an optimistic scenario, with a 50% increase in financial resource allocation and a 30% improvement in project control, remaining financial resources increased from USD 4.9 million to USD 7.6 million. Project completion time decreased from 25 to 13 time units, completed activities increased from 8,400 to 8,900, and remaining activities decreased from 46 to 32. Under a pessimistic scenario involving workload pressure and contractual conflicts, remaining financial resources declined to USD 1.5 million, project completion time increased to 29 time units, and completed activities decreased to 8,000.The findings indicate that project cost behavior is strongly influenced by feedback mechanisms and managerial policies. The proposed model can serve as an effective decision-support tool for cost control and performance improvement in oil and gas construction projects. It also enables managers to evaluate alternative policies, anticipate risks, optimize resource utilization, and support strategic decisions under uncertain conditions.
Keywords
Modeling and Simulation
Cost Increase
Construction Projects
Oil and Gas
System Dynamics
Subjects
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