Well Abandonment Project and Recommendation for Applying Activity Based Cost/Earn Value Management

Abstract

Review the Activity Based Costing (ABC) and Earned Value Management (EVM) fundamentals of being applied to the case study. Examine the constraints and its feasibilities in recommending the implementation of ABC combined with EVM to well abandonment projects. Well abandonment project is one of phase in the oil well's life span that must be done after it is no longer producing and to protect environment. Instead of giving revenue, well abandonment projects are spending money. To fulfill its deliverables with cost-effectively and in timely manner, the project coverage requires good planning, scheduling, and control. This paper is an actual case study which documents the abandonment of 7 oil wells located in Indonesia. ABC assigns resource costs to a cost object based on activities performed for the cost object. EVM coordinates the work scope, schedule, and cost goals of a program or contract, and objectively measures progress toward these goals. By applying the fundamentals of ABC and EVM, the abandonment project of 7 oil wells was completed in a total of 131 days, a slippage of 12% over the approved plan of 117 days and at a total cost of 1.078 million USD, versus the target cost of 1.074 million dollars. This paper explores the step-by-step process that is used to create the Baseline Schedule, track the progress against the schedule and report to the appropriate stakeholders. The paper concludes by recommending ABC combined with EVM be applied to other well abandonment projects.