© 2020 CMC-Global Directory, Leesi Gborogbosi, CMC

In this article, I will be discussing the marginal field strategy, investors and operators can execute to achieve third party cost savings in marginal oil and gas field operations.

There is a push by the Nigerian government for oil and gas companies to achieve low technical and operating costs. Marginal field operators and investors should pursue third party cost savings in marginal field operations, as strategic initiatives.

In the oil and gas industry, marginal oil and gas field operators that manage their costs effectively will gain competitive advantage. The oil market has less manoeuvrability. Oil cartels determine international oil price.

Cost profile is one of the key areas that marginal oil and gas field companies have flexibility. In some companies, you may find that about 70% of their costs come from third parties through contracts and procurements.

Definition of Third Party Cost Savings

Third-party Cost Savings (TPCS) is defined as the difference between the latest estimates for the third party spends and the annual planned budget. Third-party costs savings for projects is determined over the full lifecycle and on an annual basis.

It is challenging to manage the process of third party cost savings, especially for marginal oil and gas fields. These challenges will be overcome if experienced consultants are engaged. The consultants should have hands-on experience of working on similar cost-saving initiatives.

The Challenge Of Cost Savings Initiatives

The organisation I worked with expressed the desire to have a uniform and clear definition of the third party cost savings (TPCS). This was to aid common understanding and shared vision across the organisation.

Responding to request by the leadership of a business function for support to enable the delivery of cost reduction program, the finance team took on the responsibility of designing and developing a robust structure for reporting cost savings.

We had the challenge of setting stretched targets. Our team had to secure the buy-in of project cost managers to ensure planned cost savings targets were delivered.

There is the need to have the third-party cost savings signed off timely to have a transparent process for the organisation-wide cost reduction program. This is a challenge that marginal oil and gas field companies will also face.

Another key challenge is to get the managers in your company to agree on the distinction between cost savings and cost avoidance. We can define cost avoidance as the reduction in budget scope. This distinction could be challenging for marginal oil and gas field companies.

As managers are the ones expected to deliver on cost savings, they are often tempted to adopt cost avoidance approaches. And in some cases this may be good savings behaviour, it is in itself, not cost savings. 

Strategy For Third-Party Cost Savings In Marginal Field

I discuss this cost savings strategy by using an example of how I successfully executed the strategy to achieve third party cost savings at a leading multinational E&P oil and gas company in Nigeria.

Managing “Third Party Cost Savings (TPCS)” is a key component of executing a company’s cost reduction program especially for marginal oil and gas field companies.

Receiving commendation from management is a sign that the work can be cascaded across the organisation.

Senior leadership support

Senior leadership need to fully support the third party cost reduction program. This makes the entire organisation focus on the cost reduction program. This focus led to the organisation having a competitive advantage in best costs and project delivery on schedule.

Strategic levers

To achieve third party cost savings, we will adopt six strategic levers. These include contract optimization reviews, category management and technology-driven cost reduction initiatives among others.

Cost savings structure 

Our detailed process flow-maps provided the needed transparency to the cost savings process and aided a better understanding of cost savings. We provided a structure for defining cost savings, capturing, verifying, and reporting of actual cost savings achieved.

 The organisation adopted the cost savings template and the reporting structure as best in class.

Removal of barriers and resistance

This removed barriers and resistance to the organisation's cost reduction program. This work enabled the assessment of the level of cost savings performance. Our work enabled the organization to have the assurance that the cost savings program will be delivered.

With this transparency and understanding of the cost savings process, managers will be willing to undertake more cost savings projects. They will identify new cost savings projects to replace other projects that are not delivering on the plan.

Cross-functional collaboration

We provided advisory to the contracting and procurement Leadership, and finance function that the innovative and sustainable solution is to have greater collaboration between the contracting and procurement function and finance function in driving the cost ambition program.

Build a shared vision

Organise third party cost savings workshops for the business managers, business finance managers, contracting and procurement leadership team. Some of the outcomes of the workshop will be:

  1. A better understanding of the TPCS process.
  2. Timely sign-off of cost savings achieved.
  3. Any changes that are to the "cost savings" guidelines should be cascaded across the organisation.
  4. An agreed verification process by all key parties.

Responsible parties

The project manager and finance manager should review the cost savings that will be reported. The project manager, contracting and procurement manager, and finance manager should off on the 3rd party spend savings.

Get expert help as you manage marginal field costs

Gabriel Domale Consulting, under the leadership of Dr Leesi Gborogbosi, has the expertise to help investors have a better understanding of the oil and gas industry, especially the marginal field cost structure. We will provide support in cost estimation, valuation, economics, cost reduction, finance operations, planning and budget to marginal oil and gas field companies.

Specifically, our focus is to help the growth of marginal oil and gas field companies by functioning as:

  1. Technical Partner - Operatorship.
  2. Technical Partner - Corporate and Business Strategy.
  3. Technical Partner - Finance and Treasury Operations.
  4. Technical Partner - Transformation.
  5. Technical Partner - Governance Structure, Risk and Compliance.
  6. Technical Partner - Investment plan and Budget planning.
  7. Technical Partner - Commercial and Technical Due Diligence.
  8. Technical Partner - Capital Efficiency and Operational Excellence.
  9. Technical Partner - Cost Reduction Program.
  10. Chief Strategist   - To the CEO & Board of Directors.

Request For Our Services

We can work with your marginal oil and gas field company to develop and implement a detailed program for third party cost savings in a marginal field.

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Gabriel Domale Consulting, under the leadership of Dr Leesi Gborogbosi, has the expertise to help companies to develop and implement cost reduction programs as a competitive advantage. We will provide support in cost analysis, contract management, contract optimisation review, contract tender boards and transparent performance management, and compliance monitoring. His expertise will be of great value to marginal oil and gas field companies.

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Dr Leesi Gborogbosi worked with Shell Nigeria, a Royal Dutch Shell Company, a leader in the oil and gas industry, for 26 years. He was Project Finance Manager of Upstream Oil & Gas Projects (Headline size: $8 bln) - Southern Swamp Associated Gas System, Forcados Yokri Integrated Project, Otumara, Adibawa, Agbada and Assa North/Ohaji South Projects. 

Dr Leesi Gborogbosi provided advisory services namely, strategic planning, budget management, contract performance review, knowledge management of third party cost reduction, supplier financial risks assessment and mitigation plan, funding strategy and risk management. These services covered the full life cycle of 7 major upstream oil/gas projects, power facilities and export pipelines.

See his profilehttps://www.gabrieldomale.com/blog/consulting-my-drive-is-to-help-companies-in-africa-to-grow

Our leading consultants are ex-managers from the oil and gas industry with a minimum of two decades of hands-on leadership experience and insights.

Our Consulting Services Include:

  1. Finance.
  2. Value-For-Money Audit.
  3. Taxation & Audit.
  4. Strategy.
  5. Contracting Strategy.
  6. Budget & Planning.
  7. Performance Management.
  8. Merger & Acquisition.
  9. Due Diligence & Deal Advisory.
  10. Governance, Risk & Compliance.
  11. Leadership Training.
  12. Human Capital.
  13. CFO & Non-Executive Director - Search.
  14. Transformation.
  15. Cost Reduction & Optimization.
  16. Facilities Management.
  17. Digital/Data Analytics.
  18. Public Sector.
  19. Institutional Reforms.      

Core Sectors We Focus On In Delivering Consulting Services

  1. Oil & Gas.
  2. Capital Projects / Construction.
  3. FMCGs.
  4. Hospitality.
  5. Technology.
  6. Financial Services.
  7. Public Sector.
  8. Agriculture.
  9. Non-Profit Organisations.

Our Value Propositions

Gabriel Domale Consulting collaborates with finance leaders to make crucial decisions and optimize performance. By focusing on financial excellence in finance systems, accounting operations, budgeting, finance transformation, cost reduction, governance, risk, and compliance.

We provide support to business and finance leaders to help them to identify growth opportunities and create value. Using excellence in strategy implementation, capital efficiency, building strategy, planning frameworks and the crafting of innovative funding solutions. We deliver projects within costs.

Read more: https://www.gabrieldomale.com/blog/management-consulting-services-by-gabriel-domale-consulting

Bio Of Our CEO - Dr Leesi Gborogbosi

Dr Leesi Gborogbosi, is the CEO of Gabriel Domale Consulting (Management Consulting Firm), Nigeria, helping companies in Africa to grow by providing advisory in finance, strategy, corporate governance, transformation, cost management, leadership and institutional reform.

Dr Leesi Gborogbosi has doctoral degrees in strategy (and also in business studies) and MSc (Research Methodology in Management) from IE Business School, Madrid and an MBA (Finance and Banking) from the University of Port Harcourt, Nigeria; and BSc (Accountancy) from the University of Nigeria, Nsukka. He had his secondary education at Federal Government College, Jos, Nigeria.  His doctoral dissertation focuses on strategy implementation, collaboration, the role of middle managers, and the dynamics of social movements (host communities).

He leverages his professional experience as a Certified Management Consultant (CMC); Fellow, Institute of Chartered Accountants of Nigeria; and The Institute of Management Consultants. Also, he is Member of the Chartered Institute of Purchasing & Supply, London; Nigerian Institute of Management (Chartered); and Strategic Management Society, Chicago, United States.

He was nominated by the Strategic Management Society, Chicago for "Best Conference Paper Prize Awards" in 2017 and 2015. He was appointed the Chair for the Session on “Leading change implementation processes” at the Strategic Management Society conference in Denver, United States in 2015.

Dr Leesi Gborogbosi has about three decades of leadership experience in the oil and gas industry (Shell Nigeria). He is an expert in finance, strategy, corporate governance, transformation, cost management, leadership and institutional reform.


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About us: Gabriel Domale Consulting, a leading management consulting firm, helps companies in Africa to grow, provides insights to leaders and transforms institutions. Our consultants utilize their decades of hands-on experience to provide advisory in finance, strategy, corporate governance, transformation and leadership training to help companies and public institutions to transform their operations. We encourage leaders seeking insights to visit our BLOG here and also Request For Proposal (RFP) for our consulting services here