Driving Project Efficiency and Cost Control in Nigeria's Oil and Gas Industry

Abstract

Abstract Oil and gas companies continue to contend with numerous existential challenges that are exerting pressure on their activities. Some of the challenges includes the rise in alternative and renewable energy, persistent talent challenge, increase in supply chain complexity, price volatility and growing competitive pressure (EIA, 2020). The need to respond effectively to these challenges has made cost control a strategic imperative and competitive necessity. Cost control should be applied as a strategic lever for improving project efficiency, influencing growth and boosting profitability through conscious and proactive approaches, rather than using cost management as a defensive tool (Aguilar and Ittner, 2018). New innovations like digitization, advance analytics and artificial intelligence provide potential solutions capable of addressing these problems (Bohari, 2020). These innovations can easily be implemented and enable rapid transformation of the industry. Cost control and project management initiatives have been implemented across most of the oil companies to weather the impact of rising cost and the low oil price. It was realized that having the right system in place, deploying modern technology, effective data collection and analysis, process reengineering, and automation are imperatives for driving cost reduction, capital efficiency and delivering competitive projects (Aguilar and Ittner, 2018). For instance, the leadership of one of the oil companies mandated the application of cost control and effective project management to well projects cost (circa $300-500mln annually). A combination of programs, innovations and practices were implemented between 2019 and 2021 and the control process was strengthened which resulted in savings of $20mln+ per annum year-on-year on drilling and wells related cost. Additionally, cost overruns were reduced and cost recovery from the JV partners improved due to better cost transparency and efficient cost management. This paper aims at contributing to the quality of cost management decisions, and improved planning and performance by exploring the impacts of technological disruption on cost control and assessing how it can drive efficiency and improve performance in oil and gas companies in Nigeria through a review of existing literature on the subject.