Discover accurate cost projections for all of your E&P projects
Let’s start with a basic question • How do you currently estimate project costs? • How important is the project lifecycle cost in your development
considerations? • How are you currently managing estimation in the dynamic cost
market? How do you adapt estimates in the changing cost market? • How extensive is your cost estimation team/resource? • How much time do you spend generating a project cost estimate? • Lack of experience in the workforce and limited pool of
resources?
The IHS family of Costs and Strategic Sourcing • Upstream Capital and Operating Costs Services • Supplier/vendor actual costs • Scenario forecasts • Foundation of project escalation • Project activity model based
”benchmarking project cost trends”
• Market Survey System • Category Management MI • Detailed category demand/supply analysis • Supplier assessment/tracking • Category cost models
Upstream Costs Services
MSS
”making better sourcing decision”
”early phase cost estimation”
”assessing input prices”
QUE$TOR • QUE$TOR • Industry estimating tool • Data base of regional itemized cost data • Day rates $/t or manhour
P&P • • • • •
Pricing and Purchasing Generic construction data Consistently forecasted Gov. industry data sources Internal provider of raw data
QUE$TOR
QUE$TOR: Cost Estimation Software
QUE$TOR is an upstream early stage cost estimation tool QUE$TOR is a project modelling, evaluation and decision support tool for global application in the upstream oil and gas industry. It provides a quick and consistent methodology to generate current cost estimates based on standard engineering algorithms and up to date cost data. Allowing users to optimise early phase development plans for oil and gas projects.
Project Schematics
QUE$TOR enables users to build project schematics to match their requirements
QUE$TOR: Leading the industry • QUE$TOR is used by cost estimators in
at least 52 countries throughout the world • QUE$TOR is used by over 160 parent
companies
• QUE$TOR is used by 90% of the top 25
largest oil and gas companies • QUE$TOR contains and updated 60,000
cost data items
80% of Global Cost Estimators use QUE$TOR as their industry standard
QUE$TOR: Reliable Cost Estimation
QUE$TOR provides its users a streamlined process for cost estimation that is: • Simple, quick and consistent • Reliable and know accuracy • Easy to run scenarios and
optimization • Based on current costs • Complex yet simple
Bottom-up Estimates for All Field Architecture • Shallow and deepwater offshore field developments • Dry and wet tree based systems • Subsea gathering systems and risers • Fixed and floating structures • Surface processing facilities • Offshore storage and export pipelines
• Conventional onshore field developments • Well drilling and completion • Gathering networks • Processing facilities • Storage and export terminals • Infield and export pipelines
Typical Applications • Prospect evaluation • Quickly generate lifecycle cost estimates to assist with prospect screening
• Concept screening • Compare multiple concepts ensuring a consistent estimate basis
• Conceptual engineering • Develop a preliminary design
• Project benchmarking • Produce regional cost benchmarks
• Asset evaluation • To aid asset acquisition and divestiture
Estimate Scope - CAPEX • Targeting “Middle of the Road” EPC contract cost • Pre-sanction can be optionally added • (FEED study, Environmental studies ) • Owner’s project management can be optionally added
Workflow Select databases • Cost database – regional costs by cost centre • Technical database – local technical inputs
Input field data
• Reservoir properties – recoverable reserves, production profiles, well counts • Select concept – field architecture and export options
Modify concept
• Change field architecture – Add and remove components • Adjust individual components – Processing options, pipeline diameters
Calculate OPEX
• Adjust operating costs - manning, inspection & maintenance, consumables, well work-over, insurance, project costs and tariffs
Schedule CAPEX • Total CAPEX to CAPEX forecast Generate • Forecasts – production, CAPEX, OPEX, decommissioning investment profile • Exported and used for economic analysis 11
QUE$TOR – Cost Summary & Field Development Schematic
• Automatically calculates all component costs and populates the cost tree using QUE$TOR defaults in seconds 12
Outputs: Annual Expenditure and Production
Component Listing - Offshore
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Component Listing – Offshore
15
Component listing - Onshore
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Upstream Capital Costs Index (UCCI) • Cost inflation has become a significant project risk within the upstream O&G • Inflation levels from 2005 to mid 2008 were running at circ 25% p/a • The UCCI tracks the change in CAPEX for a typical upstream portfolio • Index is based to January 2000 and is updated on a quarterly basis
Upstream Capital Cost Index (2000 = 100)
240 220 200 180 160 140 120 100 80 2000
2002
2004
2006
2008
2010
2012
2014
UCCI vs. Brent Crude Price • Oil price is a key driver for upstream markets • Increasing oil price leads to profits, which pays for E&P investment, which produces demand
• A wide range of variables are used to forecast cost inflation scenarios
240
160
220
140
200
120
180
100
160
80
140
60
120
40
100
20
80 2000
2002
2004
2006
2008
2010
2012
0 2014
Average monthly Brent crude price ($/BBL)
Upstream Capital Cost Index (2000 = 100)
• IHS Global Scenarios form the basis of the forecasts
Release Process for Cost Data • A new version of QUE$TOR is released twice per year, cost database updates
are included in every release to reflect current prices • May release – Q1 prices • November release – Q3 prices
• For each release, we provide updates to all of the regional cost databases • 17 Offshore regional databases • 11 Onshore regional databases
• Continuous, year round process • Focus driven by market changes
Data Collection
Data Benchmarking • Single data-input review • Compare with expectations and market trends
• Generation of average unit costs • Update of main exchange rates
Project Benchmarking • 24 “Benchmark” projects are run • Compared against previous release
Database Updates
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Cost Data Sourcing for QUE$TOR • QUE$TOR cost analysts collect data year round • Understanding the dynamics of key upstream markets • Improving our regional cost networks • Researching emerging technology costs
Leverage IHS expertise Maximize public domain sources Subscribe to 3rd party data Relationships with vendors Relationships with operators
20
Understanding Upstream Costs
21
RigPoint: Indonesia rig availability
QUE$TOR: Developments in 2013 Our teams are constantly working to keep QUE$TOR updated with the latest cost data. In 2013 additional capabilities included: • HIPPS (High Integrity Pressure Protection
Global Data Collection
System) • Bulk CO2 Membrane separation • Windows 8 support • Hull transportation costs added • Electrical buildings
Internal Expert Reviews
• Included editable weather downtime factors • Ability to set flow line design pressure in
subsea • Improved acid gas removal system
estimation
Developing Latest Models
QUE$TOR: Planned developments for 2014 Our teams are constantly working to keep QUE$TOR updated with the latest cost data. Additions in 2014 will include: • Introducing QUE$TOR technical committees. The
first to be organized in February 2014 • LNG module • HPHT • Circular FPSO • ‘Copy/Paste’ duplication • Sulphate removal • Heavy oil enhancements • Metrics reporting
Shell is building world’s largest Offshore floating facility ever made at an estimated cost of $13 Billion*
CERA Cost Forums
IHS CERA Methodology
The IHS CERA Costs Forums are designed to help clients address a dynamic costing environment against shifts in industry fundamentals and geopolitical shocks.
Identify Fundamental Costs Drivers Measure Performance Conduct Root Cause Analysis Determine Costs Outlooks
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Cost Drivers – Market Indices
UOCS Operations
UCCS Offshore Rigs
DCCS Labor
Land Rigs Maintenance Logistics Facilities I&M Well Services Logistics
Installation Vessels
Steel
Yards & Fabrication Equipment Subsea
Equipment Civils
Bulk Materials Steel
Engineering & PM
Construction Labor Engineering & PM
Electricals
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Performance Measuring Performance UOCI
Portfolio Index
• The portfolio index collectively monitors costs for a virtual portfolio around the world and is indexed to the year 2000 (2000 = 100).
UCCI
DCCI
Market Indices
• Each of the primary markets related to each cost forum are measured individually and independently and indexed against the year 2000 (2000 = 100). These markets evaluate current and historic trends related to rates and prices and provide the foundation for root cause analysis.
OPEX Markets
Upstream CAPEX Markets
Downstream CAPEX Markets
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Example Upstream Portfolio
Russia Deepwater Russia Onshore Gas Kazakhstan Onshore Oil Azerbaijan Shallow Water (2)
North Sea – Shallow North Sea – Deepwater (2) Canada Offshore US Onshore Gas Alaska Onshore Oil GOM Deepwater (2)
China Onshore Oil Malaysia Onshore Gas Indonesia Deepwater Australia Shallow Water India Onshore Gas Trinidad & Tobago Onshore Gas Columbia Onshore Oil Brazil Onshore Gas Brazil Deepwater (2) Libya Onshore Gas Saudi Arabia Onshore Oil Oman Onshore Gas
Nigeria Onshore Oil Nigeria Deepwater Angola Offshore Angola Deepwater South Africa Onshore Gas
Root Cause Conduct Root Cause Analysis
Supply/Demand
Natural Gas $
Oil $
GDP
IHS CERA Cost Forum
FX
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Outlook Determine Costs Outlooks Outlooks • Time Period: 1 to 20 years • What: Portfolio Index and Market Indices • Approach: Outlooks leverage the materials, frameworks, and processes developed by
the IHS CERA Global Scenario Study. In this study, three separate scenarios (Base, High, and Low) help navigate the assumptions necessary to support the long-term outlooks. Key inputs are oil price, natural gas price, GDP, oil supply, oil demand, gas supply, and gas demand as well as supporting story lines that paint the energy picture.
IHS Global Scenarios
Global Redesign
Meta
Vortex
EXPANSION OF GLOBALIZATION • Growing global trade and investment • Tension related to greenhouse gas (GHG) policy and nuclear weapons proliferation • Global institutions adapt to crisis and new balance of power • Evolutionary changes in energy demand and supply PAIN AND FEAR • Pain and fear drive innovation and environmental policy • Revolutionary increase in electrification of vehicle fleet • Growth in global greenhouse gas (GHG) emissions slows dramatically
ECONOMIC VOLATILITY • Second Great Recession • Protectionism leads to a “Long Slowdown” • Little change in energy demand, supply, and technology
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Long-Term Oil and Gas Price Outlook
Brent Price Outlook
Henry Hub Price outlook
Source: IHS CERA.
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Example deliverable: UCCS Portfolio Index
IHS Upstream Capital Costs Index UCCI Data in this table is for Global Redesign only Notes: 1. Historical indices include escalation, inflation and currency exchange (USD) 2. Forecasts include escalation and inflation but no FX movements
Index Q4 2011—220 Q1 2012—227
Year
Index
YOY % Chg.
2012
240 (Q4)
Up 5% (Q1-Q4)
2013
261
Up 8%
2014
279
Up 7%
2015
293
Up 5%
Up 3.3%
Source: IHS CERA.
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Example deliverable: UCCS Market Index – Scenarios
Market Overview Q4 2011 to Q1 2012 Offshore Rigs
Land Rigs
Installation Vessels
Yards & Fabrication
Cost Changes •
Global steel costs were relatively flat in the 1Q 2012
•
Buying has resumed in Asia after the Chinese New Year holiday
•
US prices were flat. Import prices from Asia increased, but remained lower than domestic US pricing, keeping prices in check
•
European prices increased by 0.2% in the quarter in US$ terms (2.6% in €)
•
OCTG costs increased globally by 0.5%, with pricing flat in the US but increasing slightly in Europe and Asia, driven by drilling activity and imports to the North America
•
Alloy seamless casing OCTG prices increased globally, while tubing decreased
•
Linepipe costs decreased by 1.3%, with overcapacity and more mills coming onstream in the next few years
Equipment
Subsea Equipment
Steel Products
Bulk Materials
Construction Labor
Engineering & PM
Steel Products Index Index Q4 2011— 292 Q1 2012— 291
Down 0.1%
Notes: 1. Historical indices include escalation, inflation and currency exchange (USD) 2. Forecasts include escalation and inflation but no FX movements
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Example deliverable: UCCS Market Index – Regional Breakout
Breakout Indices Offshore Rigs
Land Rigs
Installation Vessels
Yards & Fabrication
Equipment
Subsea Equipment
Steel Products
Bulk Materials
Construction Labor
Engineering & PM
Regional Indices
Raw Materials Q4 2011 to Q1 2012 Price Changes (USD)
Market Changes •
Iron ore prices have decreased, driven by decreased steel production in Europe and flat Chinese demand
•
Structural steel prices declined in Asia and Europe, reflecting regional slowdowns in construction activity
•
Coal shipments from Australia to China are increasingly being replaced by inland shipments from Mongolia
•
Overcapacity kept linepipe prices in check in all regions
•
Rebar prices were up primarily due to speculation of higher scrap prices in upcoming months
•
Transportation costs increased on higher fuel costs
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Example deliverable: UCCS Market Index – Regional Forecast
Market Trends Offshore Rigs
Land Rigs
Installation Vessels
Yards & Fabrication
Equipment
Trends •
Raw steel prices will vary depending on region and type of steel
•
Demand growth in 2012 will be positive in the United States and Asia but will decline in Europe
•
Supply is ample and lead times are normal
•
China has ramped up production after the New Year celebrations, and restocking has begun
•
Imports are flowing to the United States due to steep discounts, keeping US prices in check
•
Traditional trade flows will shift, exports will flow from Asia to Europe, as the dollar weakens and more European mills close
•
Pipe pricing is as low as it will be for 2012, and will likely rise for the rest of the year
•
OCTG demand is expected to grow on high oil prices which will offset a decline gas drilling
Subsea Equipment
Steel Products
Bulk Materials
Construction Labor
Engineering & PM
Regional Forecasts—Global Redesign
Projected Trends Market
Q4 2012
2013
2014
Drivers
Global Redesign
6%
14%
5%
•
Metamorphosis
3%
6%
14%
Vortex
-6%
-8%
-13%
•
Supply, demand, GDP are the main drivers for this market Changes in exchange rates can lead to shifts in trade patterns
Note: Forecasts include escalation and inflation but no FX movements.
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Six-month review
May 2012 Houston Forum
May 2012 Q1 Market Update
July 2012 Q2 Market Update
MSS and CCAF Cost Alignment
Aug/Sept New Excel Workbook
Ongoing Forecast Work
October 2012 – 15th CCAF London Forum
Q3 2012 Market Update
Houston Workshop Items: • Consistent Work Book Format • Update Regional Forecasts • Review Portfolio • Portfolio Recommendation • Chinese’s Contractors • Local Content Review • MSS and CCAF Overlap Review • Details behind Cost of Oil
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Cost of Oil
Cost of Oil • The methodology calculates regional costs through the following
steps • Determine the cost of exploration, including appraisal wells but excluding
license, lease, or purchase costs. • Determine the cost of development, including any relevant risk premiums. • Determine the cost of operations. • Apply the fiscal model to determine the oil and gas price required for a 15%
IRR and highlight the areas where project development is viable at current oil and gas prices
Current cost of oil for selected new projects —Breakeven price at 10% & 15% IRR Equivalent Brent price ($/bbl) 10% IRR 21.07 27.07
Equivalent Brent price ($/bbl) 15% IRR 22.77 29.77
Uncertain
Uncertain
Egypt Mexico China Argentina
40.06 44.71 47.23 49.91
43.81 48.95 52.61 51.34
19.48 5.94 18.08 6.84
11.31 4.64 8.93 5.64
0.37 0.32 0.41 0.32
Russia with export tax and tariff US Tight Oil UK North Sea (shallow water) Brazil US GOM (deepwater) Norway Angola Nigeria SAGD Mine
48.08 86.67 50.02 51.51
54.14 92.69 60.19 60.04
11.24
6.46
0.07
18.65 11.52
11.45 12.53
0.10 0.40
54.16 55.40 61.21 64.00 67.86 72.24 108.34
63.28 63.96 67.29 74.20 78.57
12.88 17.29 14.07 17.28 20.88
12.50 13.61 15.34 13.52 13.92
0.27 0.54 0.46 0.55 0.10
Q1 2014 Saudi Arabia Iran Libya (current situation makes costs uncertain)
Capex ($/bbl)
Opex ($/bbl)
Exploration ($/bbl)
3.73 4.63
2.15 3.15
0.04 0.04
Uncertain Uncertain
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Uncertain
Current cost of gas for selected new projects —Breakeven price at 15% IRR Natural gas price for 15% rate of return ($/Mcf)
Capex ($/Mscf)
Opex ($/Mscf)
Exploration ($/Mscf)
3.12
1.50
1.02
0.02
3.80
1.70
1.12
0.01
Russia
4.04
1.80
1.14
0.04
Peru
5.39
2.41
2.04
0.05
Algeria
4.67
1.95
1.75
0.05
Egypt
5.05
2.20
1.95
0.04
Argentina
5.75
2.83
2.03
0.04
Australia
5.83
3.19
1.47
0.07
Norway
5.56
3.00
2.37
0.09
Azerbaijan
5.70
1.97
2.14
0.03
Thailand
5.86
2.66
2.05
0.04
Nigeria
6.45
3.13
1.76
0.03
Q1 2014 Iran (uncertain for new projects) Oman
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Global breakeven cost stack
The range of full cycle break even prices is very wide for US tight oil and deep water projects, although some projects’ costs are highly skewed
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Proof of our commitment
1,200
1,400
world-class experts and researchers
industry analysts
140
+
global offices
800
software developers
