A systems approach to cost management of large scale offshore oil projects

The main objectives of this thesis are to provide a systems synthesis of the various facets of project cost estimation and management and to suggest Improvements to the existing methods and philosophy with special references to offshore oil development projects. In seeking improved methods for cost estimation and control emphasis Is given to systems and cost modelling approaches.Large scale offshore oil projects are viewed as large scale systems which are characterised by structural complexity and environmental uncertainty. The problems of project organisational complexity can be reduced by applying the systems orientated technique of work breakdown structure (WBS) and work packaging. The work packaging approach allows the Implementation of the desired Integration of project cost, time, and resources (CTR).The CTR Integration can be best achieved through a computerised modelling system which provides a valuable management tool for rapid cost evaluation and sensitivity analysis. Complementary to the evaluation model, the development of macro cost estimating models and formulating of estimating algorithms using multiple regression analysis are demonstrated with historical data.For risk quantification, two useful techniques are discussed namely a PERT type estimating method and Monte Carlo simulation. Both techniques are capable of generating the necessary probability distribution of cost outcomes, which in turn forms a basis for contingency calculation.The PERT-type technique Is quasi-probabilistic in nature and It Is generally preferred for Its relative simplicity and practicality. It encourages range estimation based on historical data dispersion. And the management risk attitude and estimating confidence can also be expressed.The separation of the relatively non-controllable environmental variables from the controllable resources variables prompts the requirement of a two-tiered contingency management system. The derivation of the second tier contingency called the management reserves is proposed. Further works are also recommended especially referring to the need of using modelling approach for marginal oil and gas prospect evaluation and corporate planning.