ABSTRACT

The objective of this thesis, which focuses on the oil and gas industry in Nigeria, is to examine the key causes of project cost overruns. To achieve the research objectives, we examined the following research questions: What are the drivers of project cost overruns? What critical project issues do we need to understand in order to eliminate the negative effects of cost overruns? To what degree do contract claims contribute? We used a survey questionnaire, interviews, and project-specific cases to examine the interactions of factors that culminate in cost overruns. We found that the key critical drivers of cost overruns are inadequate feasibility studies, inadequate definition of project requirements and low levels of scope definition, client-directed changes, stakeholder non-alignment, and complex commercial arrangements across numerous financial institutions by contractors. Finally, we explored how best to eliminate project cost overruns. Using the triangulation method, Likert Scale, and Chi-Square analysis, we observed that project cost overruns have a huge negative impact on projects and investment forecasts. Results from the Likert Scale show that a holistic analysis can contribute to an understanding of each variable's level of impact on project cost overruns within the oil and gas industry in Nigeria. Table 4.21 shows the weight of each variable in terms of positivity or negativity regarding the causes of cost overruns. Eighteen out of the total 33 variables fall in the unacceptable region, indicating that 60% of the variables are truly the causes of project cost overruns on investment forecasts. Ten out of the total 33 variables, which is 34%, fall in the mean region, indicating that they also play a key role in cost overruns. Results from the Chi-Square show that the computed value of X²c is 1.93 less than the tabulated value, so Ho is accepted at this level of 95% and 5%. The adverse impact of cost overruns would have a huge negative impact on project time, cost, and delivery. These impacts can be significantly prevented by a project management process tailored to ensure that risks involved in any change or deviation are consistently highlighted before impacting the project. We also provided useful recommendations on the best practices for mitigating or reducing cost overruns to their nearest minimum.