BUDGETING IS AN INDISPENSABLE TOOL FOR PLANNING AND CONTROL IN THE OIL INDUSTRY ( A CASE STUDY OF ADDEX PETROLEUM )
1.1 INTRODUCTION TO THE STUDY
The long-term success of any business enterprise depend largely on its management managing. In fact, coordinating and controlling all efforts in an enterprises in order to achieve it stated objectives. Management functions of coordinating and controlling an enterprises facilitated by various procedures are of which is planning.
Omolehinwa (1991) stated that a budget can be view as the plan of dominant individuals in an organization expressed in monetary term, and subject to the constrains imposed by available resources may be utilized to achieve whatever the dominant individuals agrees to be the priorities of the organization.
For the purpose of the study, we shall defined budgeting as the formal approach of stating and communicating a firm’s control responsibilities of management in such a way as to maximize the benefit derivable from the use of it is scarce resources.
1.2 PURPOSE OF THE STUDY
The purpose of this study is to examine the budgetary system of Addax development Nigeria limited appraise the procedure and technique adopted in budget preparation and to determined the level of compliance of the company’s budget of the production sharing control (PSC) with the Nigerian Government.
1. This study intends to establish to use of budgeting as a tool for planning and control in addex.
2. To know the existence or otherwise of adequate budgetary control set up by management to identify the techniques and practices adopted in the budgeting process of Addex
3. To identify the techniques and practices adopted in the budgeting process of Addex.
4. To know the existence or otherwise of adequate control of Addex budget by NNPC.
5. To identify obstacles encountered in the planning, budget preparation and control function in Addex.
1.3 STATEMENT OF THE PROBLEM
Task is the petroleum industry are divided into major categories up stream and downstream. Upstream involve the acquisition of mineral interest in properties. Exploration concluding prospect development and production of crude oil and gas)
Downstream involve transporting refining and marketing of oil, gas derivatives, the upstream sector of the petroleum industry is capital intensive and probability of not discovering of not discovering quantity is high
Major economic assets of an oil company are its oil and gas reserve as part of effort to reduce. Basic risk in oil and gas exploration, companies engage in arrangement such as joint venture farm out carried in interest in interest button hole and dry hole agreements, production sharing agreement and others.
The time differences between much exploration and the bringing of reserve into product often run to several years, particularly in off share location consequently, the risk of loss of capital is high. This risk is affected by the nature of the location availability of funds and government legislations
A principle type of ownership of economic interests encountered the industry as a result of the high capital out lay and high works involves is the production sharing contract (psc)
Currently, the Nigeria national petroleum company (NNPC) through various agreement one of which is the psc.
In a pcs arrangement the company operating the venture will produce the required funding to carry out exploration development and product are set a side to cover cost oil comortised capital cost and product)profit oil are the shared among operating companies and NNPC at the agreed ratia
Given this section the partner to the venture on weak programme of project and budgets for each preceding year.
It is the responsibility of the management of the operating companies for an effective system in place for an effective planning and control of the joint venture operations. This is seldom the case
1.4 SCOPE OF THE STUDY
The study is necessary focused on budgeting as a tools for planning and control, the study uses addex petroleum development (Nigeria) limited as a case study
1.5 RESEARCH OF METHOLOGY
This states the type of data to be collected and the source what instrument to be used for data collection and data analysis? For data collection instrument include interview, questionnaire, textbook, consultation etc. while for data analysis we have descriptive or inessential statistic or botto.
The research work on the infact of electronic baking (embanking) on Nigeria bank with emphasis on first bank of Nigeria PLC
The research has made use of both primary and secondary source of data
The primary data employed include questionnaire and interview while secondary data include textbooks, internet, journals, current annual reports e.t.c
The population research is basically the staff and customer of the first bank of Nigeria plc. While both descriptive and inferential statistics has been employed to present and analyze of data collected
1.6 RESEACH QUESTION
1. What are the different types of budgeting system within the oil and gas industry
2. What are the type of budget prepared and what technique of budgeting adopted by addex?
3. What process are in place for budget in addex?
4. Are the procedure followed?
5. Are there enough personnel involved in the budget planning function of the4 company ?
6. Are the objective of budgeting realized?
7. Are the procedure state in the production sharing contract in relation to annual work programme.
8. Does NNPC follow up on the implementation of approved budgets and what are the budgetary control procedure adopted by NNPC?
9. Are there adequate training session for personnel responsible for the budgeting function in the company?
1.7 PLAN OF THE STUDY
The research work will be divided into five chapters for each chapter contains the following :chapter one will have the back ground of the study, statement of research problem, purpose of the study, scope and limitation of the study, research methodology, research question and plan of the study while
Chapter two will treat theoretical framework, planning function in an organization, how is the corporate plan developed, corporate plan budget, what is budget, approaches to budgeting, types of budget, budget preparation the budget manual, the budgeting , controlling function in an organization, and condition for successful budgeting
Chapter three will discuss brief history of the case study, restatement of research question, method of approach, methodology and limitation of methodology
While chapter four contain introduction data analysis and presentation to research questionnaire classification of costs, narrative of ad dare’s budgeting system
Finally chapter five and discuss the finding summary recommendation and conclusion, summary of suggestion for further study
This will state the last of material textbooks, journal magazines consulted in the writing of the proposal and those that will be use to write main project.
2.1 PLANNING FUNCTION IN AN ORGANIZATION
Planning is one of the most important functions of management.
According to Malcoln et al (1996), planning is carried out to select in advance for an organization and its functional areas future possible courses of action from among alternatives. It is to decide in advance what at certain time and how it will be accomplished. Planning is futuristic, it is an affair for the whole organization one shortcoming of the definition is that it does not specify the time limit for planning.
Savage (1990) suggested that “there are several practice who have rested interest in continue survival and prosperity of any form a problem for a corporate planner is to reconcile the competing interest in Drucker (1963) added that all business enterprises exist to serve three main public stakeholders, the employer and customers outside the above interest, (public interest) business enterprises also meet the interest of government, the society and the community etc.
Lucey (1983) defined planning as the establishment of objectives, and the formulation, evaluation and selection of polices, strategies, tactics and action acquired to achieve these objective.
He further stated that planning , short-term operational planning, long-term planning or4 corporate planning which usually covers periods longer than one year involves the formulation, evaluation and selection of strategies through a review of the objectives and operation environment of an organization and assessment of the strengths, weaknesses, opportunities and threats (SWOT)..