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(OWN-1547) Improving Owner’s Cost Estimating Processes and Practices – NOC Perspective

Primary Author: Mr. Johnson Olugbelenke Awoyomi CCP

Audience Focus: Intermediate
Application Type: Application
Venue: 2014 AACE International Annual Meeting, New Orleans, LA, USA

Abstract: A national oil company (NOC) in Africa created a Cost Engineering Division (CED) in 2011 to serve its entire capital value chain. This paper describes the approaches and lessons gained in creating the CED. Prior to 2011, the various units of the NOC were preparing their own cost estimates without any documented basis, consistency or guidelines. The AACE International TCM Framework® and selected Recommended Practices were used as guides to develop foundational cost engineering procedures and trainings. A key focus was creating awareness of the value of cost engineering because setting up a CED in an NOC is fraught with challenges of acceptability and cultural change. The paper underscores the significant value additions in terms of cost reduction and shows how it has helped to improve cost estimates resulting in better cost control budgets. The CED is now viewed as part of the project sanctioning process and its products are improving capital effectiveness. Finally, the paper identifies a number of issues and offer solutions for the benefit of NOCs, AACE International and industry in general.