STRATEGIC APPLICATIONS OF LIFE CYCLE COSTING: OPERATIONS BUSINESS PLANNING

Abstract

This paper briefly examines the business environment and challenges facing the Upstream (E&P) Sector. It suggests that operational phase risks, which undermine a venture's economic success, have traditionally been understated and inadequately defined. This, in turn, has tended to shape a (reactive) problem solving culture vis-vis a (proactive) management of risk culture in the Industry. Failures of ventures to deliver the expected return on the capital investment have been an unwelcome result.

Operations Business Planning (OBP) is a technique which encourages the venture to move into proactive modus operandi. It achieves this through systematically integrating a venture's assets, activities, resources, costs and employee knowledge into a practical dynamic model. This model can be used to constantly challenge the acceptability of the venture's performance and to proactively re-shape its strategies and tactics to successfully exploit the varying business climates it faces in its life.

Examples are cited to demonstrate the success of OBP's application and the benefits achieved.