KPMG audits reveal over-billing in North Sea oil and gas sector
Professional services firm KPMG has said rampant over-billing in the North Sea oil and gas sector should be tackled by firms trying to cut costs.
KMPG reportedly audited more than 10,000 contracts and found as many as 70 per cent of them were not complied with, leading to frequent over-billing between 1-5% of “high-risk” spend.
The findings come as businesses operating in the North Sea compete to cut costs and staff in the wake of the slump in crude oil prices.
Ken Milliken, KPMG forensic associate partner for Scotland, said: “There is no silver bullet for the oil and gas industry’s cost issues but avoiding loss by ensuring contracts are performing can restore cash to businesses and aid future contract negotiations.
“Conducting a contract audit can provide transparency on actual costs and identify inaccuracies such as non-inclusion of rebates and discounts, incorrect overhead apportionment and intercompany mark ups.
“For an individual business on an individual contract, a saving of one or two percent may only be seen as marginal.
“However, given the value of the overall supply chain in the UK oil and gas industry and the potential scale of overbilling that our own experience of contract audit has highlighted, there are very significant cumulative savings to be made by addressing this issue.
“Good contract discipline should, therefore, form part of the wider strategic focus within the industry on bringing down the per barrel production cost through transformation, innovation and collaboration.”