AN ASSESSMENT OF BUDGETING IS AN INDISPENSABLE TOOL FOR PLANNING AND CONTROL IN THE OIL INDUSTRY
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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 amortized 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