SAP ID:25831

Submitted to:Dr .brig Nawar Khan

EXECUTIVE SUMMARY:
This report provides the framework for detailed and comprehensive approach to costing of
OGDCL one of the largest project at NASHPA oil field. At one of the fields, at Nashpa Plant
OGDCL developed field by installing Tank 7 & 8 piping works. In this report detailed analysis of
project costing at NASHPA plant is entailed along with project costing strategies and
terminologies and factors that lead to the project failure are also elaborated. .Furthermore,
recommendations have been given in order to make in future projects successful and cost
effective.

Introduction

Oil & Gas Development Company Limited (OGDCL) is an Exploration / Production company which is
operating oil/gas fields in various parts of Islamic Republic of Pakistan. At one of the fields, OGDCL
intend to develop field by installing Tank 7 & 8 piping works at Nashpa Plant. Pakistan largest oil and gas
exploration company.More than 15000 employees . Annualy turnover 150 billion Rs
Head office Islamabad.
 Project background at Naspa Plant

OGDCL NASHPA project was initiated to arrest depleting pressure and to enhance production, o3 Front-
end Engine driven Reciprocating compressors have been installed at Mela Plant. To recover 30 MTPD
LPG from the compressed gas at NASHPA Plant, Raw Gas has been transported by laying of 22 KM
pipeline from Mela to Nashpa Plant with the cost of 3.2 billion Rs.

Acknowledgement:

First and foremost, praises and thanks to Almighty ALLAH, the most merciful and
beneficent, who endowed me with the ability to work hard and finish this project
on time.

I would like to express my deep and sincere gratitude to my respectable teacher

“Dr Brig. Nawar Khan” who gave me the golden opportunity to do this career
building project while provided valuable guidance in right direction and
supervised me with the best of his experience and skills . He also guided me to
utilize my management skills properly that assisted me in the achievement of
goals within the given time and I came to know about so many new things .
Here we I also point out the name of “Mr. Yaseen Khan” Project Manager at
OGDCL. He remained very supportive and cooperated with the greatest of his
knowledge and provided me adequate data and material related to Project. He
gave me sufficient time and mentorship throughout this project.
Contents
EXECUTIVE SUMMARY:.............................................................................................................3
Introduction of company...................................................................................................................4
Operations management practices at Sapphire.................................................................................5
Conclusion........................................................................................................................................8
Recommendations.............................................................................................................................8
Reference..........................................................................................................................................9

Project description:
TERM PROJECT / MAJ CASE STUDY
PROJECT SCHEDULING AND COST MANAGEMENT

1. Carry our analysis of a project practices with respect to project cost management
Report format is as follows.
1. Total pages = 10 -15 pags
Introduction to business = 2-3 pages
2. Describe in your own words the project cost management terminologies/procedures .
 3. Analysis of Project costing practices
4. Recommendation for improvement and modification required in existing project scheduling and
cost management practices= 2-3
5. References = 2 - 3 pages
6. Annex – extra document as exhibits

Assessment
1. 50% marks are allotted for written report and 50% for presentation by each individual
2. Every member of the group to visit the organization
3. Every member of the group to present his part of report
4. Presentation will be held in second last week of semester
5. Report to be submitted on the day of presentation

The first offshore wells were drilled in the GoM in 1947, and by 1978, the first pipeline was
installed in over 1000 ft (300 m) water depth. Today, GoM pipelines transport oil and gas in
water depths up to 9500 ft (2900 m). From 2000–2009, one-third of all pipeline miles in the
region were installed, with almost half of all mileage (43%) coming from deepwater (>1000 ft or
300 m).

Project Manager

In OGDCL NASHPA plant project costing Cost was tracked Nasphpa plant pipinig, testing, and
deployment in real-time to ensure the project stays within budget. Project costing software was used to
track expenses and compare them to the budgeted costs. That would allow them to make adjustments
as needed to keep the project on track financially.

Direct costs: Direct costs are costs that can be directly attributed to a specific project. These costs
include the cost of materials, labor, and equipment. Direct cost at OGDCL NASHPA was estimated to be
1.7 billion RS.

Indirect costs: Indirect costs are costs that cannot be directly attributed to a specific project. These costs
include the cost of overhead, such as rent, utilities, and insurance. The indirect costs were estimated to
be 40million Rs.
 Contingency costs: Contingency costs are costs that were set aside to cover unexpected expenses.
These costs were at OGDCl NASHPA plant was 22% of the total project cost.

The total cost of a project is the sum of the direct costs, indirect costs, and contingency costs.

 Consider all of the potential costs associated with the project.

In addition to the direct costs of materials and labor, there are also indirect costs
associated with projects, such as overhead costs, insurance costs, and permit costs.

 Use historical data to help estimate costs.

If you have completed similar projects in the past, you can use the costs of those
projects to help estimate the cost of the current project.

 Get quotes from vendors and contractors.

Once you have estimated the cost of each task or activity, you can get quotes from
vendors and contractors to get an idea of the actual cost of completing the project.

 Build in a contingency fund for unexpected costs.

Even if you have carefully estimated the cost of the project, there will always be
unexpected costs. It is a good idea to build in a contingency fund of 10-20% of the total
project cost to cover unexpected costs.

Sure, here is an example of project costing numerical:

 Direct costs: Direct costs are costs that can be directly attributed to a specific project.
These costs include the cost of materials, labor, and equipment.
 Indirect costs: Indirect costs are costs that cannot be directly attributed to a specific
project. These costs include the cost of overhead, such as rent, utilities, and insurance.

But unfortunately ,the cost of development was higher than expected they may need to reduce the
scope of the project or find ways to optimize the development process to stay within budget.
The project manager would need to track the costs of raw materials, labor, and overhead expenses in
real-time to ensure the project stays within budget. They could use a project costing software to track
expenses and compare them to the budgeted costs.

To illustrate the mathematical implications, let's assume that the

company has a budget of $100,000 for the project, and they plan to produce 10,000 units of the
product.

This means that the cost per unit should not exceed $10. If the cost per unit is higher than $10, the
company will not be able to make a profit on the product.

If the project manager notices that the cost per unit is higher than expected, they may need to adjust
the production process to reduce costs. For example, they may need to negotiate better prices for raw
materials, optimize the production line to reduce labor costs, or find ways to reduce overhead expenses.
By making these adjustments, they can ensure that the cost per unit stays within the budgeted amount
and the project remains profitable.

The project budget is $50,000,00 and the project is expected to take 6 months to complete. The project
manager estimates that the team will spend 1,000 hours on the project, with an average hourly rate of
$50.

Using this information, we can calculate the total cost of the project as follows:

Total cost = (hours worked) x (hourly rate)

Total cost = 1,000 x $50
Total cost = $50,0000,00

This means that the project is expected to cost exactly the budgeted amount of $50,000. However, if the
project manager notices that the team is spending more hours than expected, or if the hourly rate is
higher than anticipated, they may need to adjust the project plan to stay within budget. For example,
they may need to reduce the scope of the project or find ways to optimize the development process to
reduce costs.

Sure, here is an example of how to estimate the cost of a project using a bottom-up approach:

Identify the tasks or activities that need to be completed in order to complete the project.

Estimate the cost of each task or activity.

For example, the cost of clearing the land might be $10,000, the cost of pouring the foundation might be
$20,000, and so on.
Add up the total costs of all of the tasks or activities.

In this example, the total cost of the project would be $100,000.

This is just a simple example, and the actual cost of a project will vary depending on the size and
complexity of the project. However, this approach can be used to estimate the cost of any project.

Here are some additional tips for estimating project costs accurately:

Be as specific as possible when estimating costs.

For example, instead of estimating the cost of "building a house," estimate the cost of each individual
task or activity, such as clearing the land, pouring the foundation, and so on.

Consider all of the potential costs associated with the project.

In addition to the direct costs of materials and labor, there are also indirect costs associated with
projects, such as overhead costs, insurance costs, and permit costs.

Use historical data to help estimate costs.

If you have completed similar projects in the past, you can use the costs of those projects to help
estimate the cost of the current project.

Get quotes from vendors and contractors.

Once you have estimated the cost of each task or activity, you can get quotes from vendors and
contractors to get an idea of the actual cost of completing the project.

Build in a contingency fund for unexpected costs.

Even if you have carefully estimated the cost of the project, there will always be unexpected costs. It is a
good idea to build in a contingency fund of 10-20% of the total project cost to cover unexpected costs.

ife-cycle costing is a costing strategy that takes into account the total cost of a project over its entire life
cycle, from planning and design to construction, operation, maintenance, and disposal. This approach
considers all costs associated with the project, including initial investment, ongoing maintenance and
repair costs, and end-of-life disposal costs. By considering the entire life cycle of the project, life-cycle
costing helps ensure that the most cost-effective approach is taken, and that the project is sustainable
and environmentally responsible. This approach is commonly used in government projects to ensure that
the project is completed within budget and meets the necessary standards and requirements.

For example, let's say that you are planning a project to build a new house.

It is important to note that project costs can change over time. This is due to a number of factors, such
as changes in the cost of materials, changes in the labor market, and changes in the scope of the project.
As a result, it is important to regularly review project costs and to make adjustments as needed.

Here are some tips for estimating project costs accurately:

Be as specific as possible when estimating costs.

Strategies used in

Consider all of the potential costs associated with the project.

OGDCL policy to ensure project

Use historical data to help estimate costs.

Get quotes from vendors and contractors.

Build in a contingency fund for unexpected costs.

MAINN POINTS :

MANAGEMENT RESERVES

CONTIGENCY RESERVES

ACTIVITY CONTIGENCY RESERVE

ACTUAL COST

Expected cost

Variance between actual and expected

Variance analysis is used to compare actual costs to estimated costs and identify any discrepancies

Further more ,cost eastimates were also made Estimates are important in oil and gas projects because
they help project managers plan and budget for the project. They can be based on historical data,
 industry benchmarks, or expert opinions.. This information can be used to adjust future estimates and
improve project planning.

Overall, a cost sheet with estimates and variance analysis is an important tool for managing the costs of
an oil and gas project and ensuring that it stays within budget.

estimating the management reserve is to add 5-10% of the cost baseline. The higher the
uncertainty, the higher the percentage.

Management reserve is defined as the cost or time reserve that is used to manage the
unidentified risks or “unknown-unknown”. The management reserve is a part of the project
budget but not the cost baseline.Management reserve at OGDCL NASHPA project were 3%
added in project cost baseline.

Strategies used in

Conclusion:
To conclude that OGDCL NAspa oil field

Recommendations:

OGDCL should conduct feasibility study besides financia also conduct mostly focus on political
feasibility in order to prevent from any uncertainty like inflation due to political instability.

It is to be recommended that Sapphire should ensure existing client while selecting vendors.

Furthermore their feedback must be taken about vendor in order to conduct procurement
smoothly and profitably . Furthermore, they should not rely on physical approach while selecting
vendors. They should also conduct analysis of vendors electronic front in order to make it too much
precise and accurate.

 Project cost management is the process of planning, estimating, budgeting, financing, funding, managing,

and controlling the costs of a project. It involves identifying all the costs associated with a project and

developing a budget that will cover those costs. The goal of project cost management is to ensure that

the project is completed within the approved budget and that the project's financial resources are used

efficiently.

Some of the key terminologies and procedures used in project cost management include:
- Cost estimation: This involves predicting the costs of the project based on the available information and

historical data.

- Cost budgeting: This involves allocating the estimated costs to the various project activities and creating

a budget for the project.

- Cost control: This involves monitoring the project's actual costs and comparing them to the budgeted

costs. Any variances are identified and corrective actions are taken to keep the project on track.

- Earned value management: This is a technique used to measure the project's progress and performance

by comparing the actual costs and work completed to the planned costs and work.

To analyze project costing practices, you would need to review the project's budget, cost estimates, and

actual costs incurred. You would also need to evaluate the effectiveness of the cost control measures in

place and identify any areas where improvements could be made.

Based on your analysis, you can make recommendations for improving the project's cost management

practices. This could include implementing better cost estimation techniques, improving the accuracy of

the budget, or enhancing the cost control measures. The goal is to ensure that the project is completed

within the approved budget and that the financial resources are used efficiently.