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1.1   overview of the study                                                       1
1.2   statement of problem                                                       7
1.3   purpose of the study                                                                8
1.4   research questions                                                           10
1.5   research hypotheses                                                                10
1.6   significance of the study                                                  11
1.7   definition of terms                                                           12
1.8   limitations of the study                                                    14
1.9   organization of the study                                                 15
2.1   introduction                                                                     16
2.2 history of the Nigerian petroleum industry                        17
2.2.1 current status of the petroleum industry in Nigeria                18
2.2.2 oil and gas reserves                                                        18
2.2.3 oil fields                                                                          19
2.2.4 Nigeria liquefied natural gas                                           19
2.2.5 licenses and leases                                                         20
2.2.6 major events in the history of the Nigeria oil and gas     21
2.3   government memorandum on the petroleum industry
Bill, 2009                                                                         24
2.3.1 general nature of the government memorandum            24
2.3.2 increase oil and gas production                                      25
2.3.3. significance increase in gas supplies for power
generation  and domestic industries                                        26
2.3.4 increase government revenue from deep water                       27
2.3.5 deal with the Niger delta crises                                               28
2.3.6 deregulate petroleum product prices                               30
2.3.7 protect health, safety and environment                          31
2.3.8 create efficient regulatory powers with a strong
midstream entity                                                              31
2.4   Nigerian agip oil company, Nigerian agip exploration
and agip energy and natural resources                            32
2.4.1 adverse effects of the reform PIB on agip                         33
2.4.2 proposed alternatives solutions for the reforms                      34
2.5   shell petroleum development company limited (SPDC)    36
2.5.1 SPDC corporate strategy for ending gas flaring               37
2.5.2 why gas is flared in Nigeria                                             38
2.5.3 SPDC and gas utilization                                                        39
2.5.4 major ongoing gas gathering projects                              39
2.5.5 major future gas gathering projects                                        39
2.6   The concepts of budgeting and budgetary control            40
2.7   budgetary control                                                             46
2.7.1 objectives of budgetary control                                               47
2.7.2 problems associated with budgetary control                   51
2.8   types of budget                                                                51
2.8.1 fixed budget                                                                    52
2.8.2 sales budget                                                                    52
2.8.3 flexible budget                                                                        53
2.8.4 activity based budget                                                      53
2.8.5 value based budget                                                         54
2.8.6 zero based budget                                                           54
2.8.7 line item budgets                                                            55
2.9 master budget                                                                    56
2.10 budgeting process                                                            57
2.11 budget as a tool for management control                         60
2.12 approaches to budgeting                                                 62
2.12.1 advantages of budgeting                                                       64
2.12.2 limitations of budgeting                                                        65
2.13 administration of budget                                                 67
2.13.1 budget committee                                                         67
2.13.2 budget director                                                             67
2.13.3 budget manual                                                             68
2.13.4 budget education                                                          68
2.14 oil and gas budgeting                                                       68
2.14.1 methods of accounting                                                 69 full cost method                                                         69 successful efforts method                                          70
2.14.2 offshore operations                                                               71 development costs                                                     71 production costs                                                                71 geological and geophysical costs                                        71 depreciation, depletion and amortization                   72 removal and restoration                                             72 unproved properties                                                   72 support facilities                                                                73
2.14.3 accounting policy                                                          73
2.14.4 oil and gas sales                                                           73 cash and gas sales                                                     74 accounts receivable approach                                    74
2.14.5 oil and gas reserves                                                      75 performance curve                                                     75 volumetric                                                                  75 material balance analysis                                          75 analogy                                                                      76
2.14.6 income tax                                                                    77
2.15 summary                                                                         78
3.1   Introduction                                                                     79
3.2   research design                                                                        79
3.3   population design                                                            80
3.4   sampling procedure and sample size determination                80
3.5   methods of data collection                                                       82 primary data                                                                        82
3.5.2 secondary data                                                                       82
3.6   operational measures of variables                                    83
3.6.1 dependent variables                                                        83
3.6.2 independent variables                                                    83
3.7   data analysis techniques                                                 83
3.7.1 simple percentages                                                         84
3.7.2 kendall coefficient of concordance                                  84
3.7.3 testing the significance of w                                            85
3.7.4 Z-test                                                                              86
References                                                                               87

The Shell Petroleum Development Company (SPDC) Nig. Ltd. And the Nigerian Agip Oil Company (NAOC) Ltd. Belong to the group of multinational Oil Companies (MNOCs) operating in Nigeria host country while its policies, decisions and mode of operations made at the home country. Though they are into oil prospecting and exploration however, our interest is to find out the budget and budgetary control measure built in by them.
The researcher interaction with staff of both companies linkened their budget preparation and presentation to that of Nigeria where the executive submits the budget to the legislature, the legislature in order to incorporate items that will be of economic benefit to them delay the passage of the budget appropriation bill into law. The implication of this is untimely budget presentation, poor actualization of the budgeted goal, inability to make comparison to see if there is deviation from set standard, no performance report, etc. meanwhile a budget is supposed to be presented at the beginning of the financial year say January ending latest is presented at the middle of the year and most times third quarter as the case may be and so could not achieved its objectives. they further advanced that what is prevailing at the larger economy is happening at the sub-structured system.
For SPDC, the budget and budgetary control processes which includes: preparation, setting standard to check deviation against result, evaluation of performance, inability to measure profitability, return on investment, market share, rate of growth, etc. are decisions often times taken by the home country and are prone to delay as such do not given room for a meaningful budget implementation.
On the side of NAOC, there is no performance report due to time lag between the preceding and current year for comparison purposes; inadequate budget review, home country influence, etc. are some of the variables that militate against a smooth budget implementation.
The oil and gas industry also known as the petroleum industry constitute the largest industry in the world. Chiefly because it is a major source of revenue to the government including exercise taxes, royalties, license, rent, bonus, etc.
Oil and gas operations commenced in Nigeria effectively in 1956, with then Shell D’ Arch. Before this time, which is from November 1938, almost the entire country was covered by a concession granted to the company to explore for petroleum resources. This dominants role of shell in the Nigeria membership of the organization of petroleum exporting countries (OPEC) in 1971, after which the country began to take a former control of its oil and gas resources, in line with the practices of the other members of OPEC.
This period witnessed the emergence of National Oil Companies (NOCs) across OPEC members’ countries with the sole objective of monitoring the state of the oil-producing countries in the exploitation of the resources. Whereas in some OPEC members countries the NOCs took direct control of production operations,  Nigeria, the Multinational Oil Companies (MNOCs) were allowed to continue with such operations under Joint Operating Agreement (JOA) which clearly specified the respective stake of the companies and the government of Nigeria in the ventures.
This period also witnessed the arrival on the scene of other MNOCs such as Gulf Oil and Texaco (now Chevron Texaco) Efl Petroleum (now Total), Mobil (now Exxonmobil), and Agip, in addition to shell, which was already playing a dominant role in the industry. These other companies were also operating under JOAs with Nigeria National Petroleum Corporation (NNPC), with varying percentages of stakes in their respective acreages. To date, the above companies constitute the majority players in Nigeria’s oil industry, with shell accounting for a just little less than 50% of Nigeria total daily production, which currently stands at about 2.4 million barrels of oil per day. JOAs are also still dominant in the oil industry in Nigeria, accounting for over 90% of total oil and gas production in Nigeria today.
The oil and gas industry is engaged in wide ranges of activities that are diverse and technically distinct but all contributing in getting petroleum from the ground to the final consumer. The industry has four major segments.
1.     Exploitation and production by which petroleum companies (referred to as oil and gas companies or simply put oil companies) explore for underground reservoirs of oil and gas and produce the discovered oil and gas using drilled wells through which the reservoirs of oil, gas and water are brought to the surface and separated.
2.     Hydrocarbon processing by which crude oil refineries and gas processing plants separate and processes the hydrocarbon fluids and gas into various marketable products. Refined products and natural gas liquids may be processed further in petrochemical plants for making petrochemicals. Some petrochemical may in turn, be sent to the crude oil refineries for mixing or processing with other liquid hydrocarbon to make various refined products such as gasoline.
3.     Transportation, distribution and storage by which petroleum is moved from the producing well areas to the crude oil refineries and gas processing plants. Crude oil is moved by pipeline, truck, and barge or tanker oil. Natural gas is moved by pipeline and refined products are transported by various means to retail distribution point, such as gasoline and fuel stations.
4.     Retail or marketing which ultimately markets in various ways the refined products, natural gas liquids and natural gas to various consumers.
However, the above segments can be broadly classified as downstream and upstream sectors. The exploitation and production segment is sometimes called upstream operations, while the other three segments are collectively called downstream operations. Companies having both upstream and downstream operations are vertically integrated. Other companies involved in upstream only are referred to as independents. The several largest integrated petroleum companies are called majors.
However, due to the complicated and capital intensive nature of the business, most companies specialize in the different operations while some do carry on business in all segment of the industry. Such companies like the Nigerian National Petroleum Corporate (NNPC), Shell Petroleum Development Company (S.P.D.C) and Nigerian Agip Oil Company (N.A.O.C).
It is necessary at this point to give a general view of budget and budgetary control having gone through the overview of the petroleum industry.
According to the Certified Institute of Management Accountants’ Official Terminology quoted in Idornigie (2003:57) a budget is “a plan quantified in monetary terms, usually approved prior to a planned income to be generated and or expenditure to be employed at attaining a given objectives”.
Adeniji (2004:298) saw budget as “a plan quantified in monetary prepared and approved prior to a defined period of time usually showing planned income to e generated and/or expenditure to be incurred during that period and the capital to be employed to attain a given objective”. It is a future plan of action formulated by management for the whole organization or a section therefore, which is expressed, in monetary terms. Therefore, it is a detailed  commitment to a plan of action and in this respect differs from a “forecasts” which is merely an assessment of future events which are likely to occur if no positive planning action is taken.
Budgetary control on the other hand is a part of overall system of responsibility accounting within an organization. It is a system of accounting in which cost and revenue are analyzed in accordance with areas of personal responsibilities so that performance of the budget holders can be monitored in financial terms. It provides a basis for monitoring the progress of organization as a whole and of its components parts towards the achievement of the objectives specific in the budget. Budgets therefore serve both planning purposes and control purposes as reflected in the comparison of budgeted and actual results of organization.
Budgetary control is an example of “management by exception” where an attention is directed to the few items, which are not processing according to plan.
From the discussion above, it is evidence that there have been studies on budgeting and budgetary control in one of the multinational oil companies (S.P.D.C) non have focus on a comparative study thereby creating a gap in the literature.
To fill the gap in the literature, this study examines the comparative study of S.P.D.C and NACO in Nigeria.
Business environment today is characterized with a lot of ups and down in its operation that are complex in nature thus subjecting them to heavy competitive pressure such that the rate of growing of the economy as a whole fluctuates and these fluctuations affects different industries in one way or the other. The oil and gas industry is not an exception to this fluctuation. Business cycle is affected by so many factors; some are controllable while others are uncontrollable such as changes in prices of oil and gas at the international market and the regulatory of production quotas by the organization of Petroleum Exporting Countries (OPEC). The budget as a control tool can be used to control such controllable factors and make allowances and provisions for such uncontrollable factors.
More so, the economic reforms agenda initiated by the Obansanjo administration which led to the deregulation of the petroleum downstream sector have liberalized the industry for competition and commercialization. The attendant consequence is that the oil and gas companies are now faced with so many challenges in the industry with regards to their profit with little or no subsidy or subvention from government. With this development and volatile nature of the industry for example youth restiveness in the oil producing communities, military attacks especially in the Niger Delta region of Nigeria, pipeline vandalization among others have impede oil exploitation and production.
Hence, there is need for oil companies to properly plan its operations periodically if it must succeed. A blueprint of a company translated in monetary terms in called the budget.
Thus this study seeks to examine the industries budgeting and budgetary control procedure with specific reference to the comparatives study of the Shell Petroleum Development Company, Nig. Ltd and the Nigeria Agip Oil Company Ltd.
The aim for this study is to describe the budgeting and budgetary control in the oil and gas industry and suggest effective ways of implementing management control in the sector. There is a need for oil and gas industries in Nigeria to develop and implement a well- conceived strategic plan in order to be competitive in the business environment. Budgeting and budgetary control could be used to verify that the company is on the trajectory for reaching the strategic breakthrough as it is set in the long-term plan.
Hence the main objective of the study is to examine the budgeting and budgetary control in the oil and gas industry in Nigeria with specific reference to the Shell Petroleum Development Company Nig. Ltd and Nigeria Agip Oil Company Ltd. Specially, the study examines:
i.      Whether the delay in budget preparation and presentation could be responsible for poor actualization of the yearly goals and objectives.
ii.     Whether the problem of comparison of budget performance between preceding and current year is as a result of inadequate budget review and no performance result.
iii.    Appropriate suggestion made based on the comparative analysis of the study.
iv.    How home country influence impede budget implementation
v.     The budget process and the control measures built into the system and their conformity in the oil and gas industries.
vi.    How budgeting and budgetary control will help an organization evaluate its performance.
In view of the research problems and objectives sated above, this study was conducted in consideration of the following questions:
a.     Does budgeting and budgetary controls in oil and gas industry sector different from manufacturing sectors?
b.     What is the impact of budget and budgetary control on the market share of the industry?
c.     Is budget and budgetary control in the oil and gas industry a veritable indicator of rate of growth?
d.     Does budget and budgetary control a determinant of return on investment?
e.     Is budget and budgetary control a measure of profitability?

In order to ascertain the validity and reliability of this research work, some hypotheses which are fundamental to the study, must be tested to provide empirical evidence. Hence the study tested the following hypotheses:
H01: There is no significant relationship between budget and budgetary control and profitability.
H02: There is no significant relationship between budget and budgetary control with return on investment.
H03: There is no significant relationship between budget and budgetary control with rate of growth.
H04: There is no significant relationship between budget and budgetary control with market share.
H05: There is no significant relationship between budget and budgetary control in the petroleum industry and that of manufacturing sectors.

Conceptual Framework
Independent Variable                         Dependent Variables
    i.        Budgeting
  ii.        Budgetary control

    i.        Profitability
  ii.        Return on investment
iii.        Rate of growth
 iv.        Share of market

This study will be of importance to several categories of persons, individual, corporate organizations, companies, etc. particularly those in the oil and gas industry. The research will create a refreshing awareness to the management of Shell Petroleum Development Company Nig. Ltd and Nigeria Agip Oil Company Ltd where this study was carried out. It will hopefully go a long way in improving the budgeting and budgetary control system in the face of dwindling resources. Thus, investors in the petroleum industry will find this work worthwhile in making their investment decisions.
Furthermore, the study will be significance to the body of knowledge (students and lectures) that may have little or no idea about the oil/gas industry and its budgeting and budgetary system. It will afford them the opportunity of being aware of what is obtaining in the oil and gas industry as regards to budgeting and budgetary control systems in Nigeria.
It will also give the researcher the opportunity of drawing the primary or basic distinctions between budgeting and budgetary control in the petroleum sector and those in other industries.
Finally, it will serve as a guide to future researchers on this area who may decide to continue from where the researcher stopped.
Budgeting: A plan that is express in quantitative, usually monetary terms over a specific period of time usually one year.
Budgetary Control: The part of the overall system of responsibility accounting within an organization.
Corporate Strategy: This involves strategic decisions such as: what is the company’s mission or purpose? What re the values and principles that should govern the behaviour of members of the organization?
Management Control: The process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organization’s objectives.
Concession: Is a right granted to a company by the federal government on behalf of the federation to explore and produce oil and gas within a given area.
Control: Is the process of comparing actual result with planned result and reporting on the variation so that corrective action can be taken.
Downstream Activities: Refers to those activities that start from receipt of crude oil into tanks or gas into petrochemical tanks to the transportation of refined products to the final users or of processes products to secondary industry.
Upstream Activities: This involves the acquisition of universal interest in properties for prospecting exploration, development and production of crude oil and gas.
Refining: This is simply the breaking down of the hydrocarbon mixture of crude oil into useful petroleum products through the processes of distillation, cracking, reforming and extraction.
Dry Hole: Is a well that either finds no oil or gas, or finds too little to make it commercially viable.
Controllable Factors: These are factors that affect the firm that are within the control of firm and are subject to changes by those decisions of management. Examples are material, capital, manpower, etc.
Uncontrollable Factors: These are factors which affect the firms that are beyond the control of the firm and management action cannot change such factors e.g. government policies, political factors, economic factors, etc.
Field: Is a given area or region, usually comprising a number of individual reservoirs in which oil/gas reserves exist.
Barrel: Is a standard of measurement in the oil industry. One barrel equals 42 U.S gallons (35 imperial gallons) at standard condition.
This study is supposed to cover all companies involves in oil and gas activities in Nigeria so as to collect adequate data on their nature of budget and budgetary control system put in place. This intended scope could not be however the attained due to cost of collecting the data.
The survey therefore, will cover three major cities Nigeria: Port Harcourt, Warri and Lagos. This is based on the spatial distribution of oil and gas industries in a few administrative and urban centres. Data collected from the petroleum sector in these cities were generalized to the true representation of the other parts of the country not covered in this study.
The study is also hindered by sensitivity of the sample elements. It was quite difficult to get some of the organizations and their employees to understand the academic nature of this study. In other words, some of the employees saw their response as one that will implicate them as evidence by the poor rate of response to the distributed sets of questionnaire.
Further limitation to the study was the attitude of most companies managers towards giving out information in good time. There is the fear that the information might lead to them losing their jobs or giving vital information to competitors. All these frustrated the efforts of the researcher to retrieve the entire questionnaire administered.
These limitations notwithstanding, the samples techniques adopted allays all fears of bias and make the finding of the study generalizable.
This study is organized into five chapters:
Chapter one deals with the overview of the statement of the problems, purpose of the study, research questions, hypotheses, significance of the study, definition of terms and limitation of the study.
Chapter two deals with the review of related literature on the subject and summary.
Chapter three attempts to describe the research design, sampling procedure and sample size determination, data collection method, operational measures of the variables and the data analysis technique.
Chapter four deals with the presentation and analysis of data.
Chapter five presents the discussion, conclusions, implications of the research findings, as well as the recommendations. Finally, there are suggestions for further research.