What are the key cost engineering practices for the oil and gas industry?

1 Cost estimation

Cost estimation is the process of predicting the cost of a project or a product based on various factors, such as scope, schedule, quality, resources, and risks. Cost estimation is essential for planning, budgeting, and controlling the project, as well as for evaluating its feasibility, profitability, and return on investment. Cost estimation requires a systematic approach that involves defining the project scope, breaking down the work into manageable units, applying appropriate methods and tools, and validating and updating the estimates as the project progresses. Some of the common methods and tools for cost estimation in the oil and gas industry are analogy, parametric, engineering, and probabilistic models, as well as software applications and databases.

2 Cost analysis

Cost analysis is the process of comparing, evaluating, and optimizing the cost of a project or a product based on various criteria, such as performance, quality, reliability, and sustainability. Cost analysis is crucial for making informed decisions, identifying opportunities for improvement, and ensuring alignment with the project objectives and stakeholder expectations. Cost analysis requires a comprehensive approach that involves collecting and analyzing relevant data, applying appropriate techniques and metrics, and communicating and reporting the results and recommendations. Some of the common techniques and metrics for cost analysis in the oil and gas industry are cost-benefit analysis, value engineering, life cycle costing, cost variance analysis, and key performance indicators.

3 Cost control

Cost control is the process of monitoring, measuring, and managing the cost of a project or a product to ensure that it stays within the approved budget and meets the desired quality standards. Cost control is vital for preventing cost overruns, minimizing waste, and maximizing value. Cost control requires a proactive approach that involves establishing a baseline, tracking and reporting the actual cost, identifying and resolving issues, and implementing corrective and preventive actions. Some of the common tools and practices for cost control in the oil and gas industry are earned value management, change management, risk management, and contingency planning.

4 Cost optimization

Cost optimization is the process of finding the optimal balance between the cost and the value of a project or a product, considering the trade-offs between various factors, such as scope, schedule, quality, resources, and risks. Cost optimization is important for achieving the best possible outcome, enhancing the competitive advantage, and increasing the customer satisfaction. Cost optimization requires a creative approach that involves exploring alternative solutions, evaluating their impacts, and selecting the most feasible and beneficial option. Some of the common methods and tools for cost optimization in the oil and gas industry are design optimization, process optimization, lean management, and digital transformation.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?