Project Management in the Oil and Gas Industry

Days
C
ost, K
14 15 16 17 18 19 20 21 22 23 24 25
Figure 4.4 Cash flow in case of late date.
40
35
30
25
20
15
10
5
0
1 2 3 4 5 6 7 8 9 10 11 12 13
Days
C
ost, K
14 15 16 17 18 19 20 21 22 23 24 25
Figure 4.5 Cash flow envelope.
35
30
25
20
15
10
5
0
1
Ahead of schedule
Within of schedule
Behind of schedule
2
3
4
5
6
7
8
9 10
Days
C
ost, K
11 12 13 14 15 16 17 18

---

Project Cost Control 133
When the cost curve could prevent this cost within the envelope, this 
indicates that you are in accordance with the scheme called the time 
“within schedule.”
Where the curve is less than planned, as shown in Figure (4.4), the situ-
ation is critical as the project is late and considered “behind schedule.”
As an example, the following table gives the values of the cost of plan-
ning in an engineering project for a period of twelve months in accordance 
Table 4.6. Cost per month.
June
May
April
March
Feb.
Jan.
Plan
200
200
200
200
140
60
Work in month
1000
800
600
400
200
60
Cumulative
20000
20000
20000
20000
14000
6000
Cost/month
100000
80000
60000
40000
20000
6000
BCWS
Dec.
Nov.
Oct.
Sep.
Aug.
July
Plan
100
100
200
200
200
200
Work in month
2000
1900
1800
1600
1400
1200
Cumulative
100000
10000
20000
20000
20000
20000
Cost/month
200000
19000
18000
16000
14000
120000
BCWS
Table 4.7 Parameters calculation.
June
May
April
March
Feb.
Jan.
20000
20000
20000
20000
14000
6000
Cost per month
100000
80000
60000
40000
20000
6000
BCWS
20000
20000
20000
20000
14000
4000
BCWP (EV)
20000
21000
23000
22000
14000
4000
ACWP
98000
78000
88000
38000
18000
4000
EV cumulative
104000
84000
63000
40000
18000
4000
ACWP cumulative
2000
2000
1000
1000
0
0
CV
0
0
0
100
200
200
SV
0.942
0.929
0.921
0.95
1
1
Cost index
1
1
1
0.95
0.9
0.66
Schedule index
15000
15000
15000
15000
15000
15000
BAC
16000
16250
16333
16034
15000
15000
EAC

---

134 
Project Management in the Oil and Gas Industry
with the planning timetable explained above. In the project six months 
after the transaction, we will calculate the position of the crisis to see the 
project as presented in Table (4.6).
From the previous table calculate the cost control parameters after six 
months from start of the project.
From the parameters in Table (4.7), provide us tools to evaluate the proj-
ect every month as follows:
January
The cost of execution is 300 less than the ACWP in this month, so the work 
is slow but the cost is acceptable.
The reason for this may be due to late hiring of new labours.
February
The work is progressing as planned, but work is still slow. Deal with this 
situation by letting them work on weekends to achieve the required time 
schedule.
March
During this month, the work is close to reaching the plan. Now the time 
schedule is not the only problem but also the cost increase.
April
This month the work was done more than it was planned. Now the work 
is going according to schedule and will be back to a normal mode of work, 
avoiding work on weekends.
May
The activity increased slightly more than planned, so we are going with the 
time schedule.
June
The work is progressing according to plan after six months of the project. 
Work is proceeding according to schedule, but there has been an increase 
in cost. It is expected that the budget at the end of the project will be about 
$16,000.
4.3.7 Engineering Cost Control
The most the project engineering phase has is ten percent of the cost of 
the total project. It is worth mentioning that most of the cost in design 
and drafting is around 58 percent of the total engineering cost. Table (2.8) 

---

Project Cost Control 135
presents the breakdown of the engineering phase cost. The engineering 
contractors fee or the administration overhead and profit cost usually aver-
age five percent. It is shown in Table (2.8) that design and drafting are the 
most significant items of technical man hour cost, so, in most cases, it is 
easier to calculate the required design and drafting cost and then develop 
the other item as a percentage.