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Discover accurate cost projections for all of your E&P projects
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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?
Lets start with a basic question
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The IHS family of Costs and Strategic Sourcing
Pricing and Purchasing Generic construction data Consistently forecasted Gov. industry data sources Internal provider of raw data
QUE$TOR Industry estimating tool Data base of regional
itemized cost data Day rates $/t or manhour
Market Survey System Category Management MI Detailed category
demand/supply analysis Supplier assessment/tracking Category cost models
Upstream Capital and Operating Costs Services
Supplier/vendor actual costs Scenario forecasts Foundation of project escalation Project activity model based
Upstream Costs
ServicesMSS
P&PQUE$TOR
making bettersourcing decision
assessing input prices
benchmarking project cost trends
early phase cost estimation
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QUE$TOR
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QUE$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.
QUE$TOR: Cost Estimation Software
QUE$TOR is an upstream early stage cost estimation tool
QUE$TOR enables users to build project schematics to match their requirements
Project Schematics
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QUE$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$TOR contains and updated 60,000 cost data items
QUE$TOR: Leading the industry
80% of Global Cost Estimators use QUE$TOR as their industry standard
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QUE$TOR provides its users astreamlined process for cost estimationthat is:
Simple, quick and consistent
Reliable and know accuracy
Easy to run scenarios and optimization
Based on current costs
Complex yet simple
QUE$TOR: Reliable Cost Estimation
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Bottom-up Estimates for All Field Architecture
Shallow and deepwater offshore field developments
Dry and wet tree based systems
Subsea gathering systems and risers
Fixed and floating structures
Surface processing facilities
Offshore storage and export pipelines
Conventional onshore field developments
Well drilling and completion
Gathering networks
Processing facilities
Storage and export terminals
Infield and export pipelines
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Prospect evaluation
Quickly generate lifecycle cost estimates to assist with prospect screening
Concept screening
Compare multiple concepts ensuring a consistent estimate basis
Conceptual engineering
Develop a preliminary design
Project benchmarking
Produce regional cost benchmarks
Asset evaluation
To aid asset acquisition and divestiture
Typical Applications
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Targeting Middle of the Road EPC contract cost
Pre-sanction can be optionally added
(FEED study, Environmental studies )
Owners project management can be optionally added
Estimate Scope - CAPEX
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Workflow
Cost database regional costs by cost centre Technical database local technical inputs
Select databases
Reservoir properties recoverable reserves, production profiles, well counts Select concept field architecture and export options
Input field data
Change field architecture Add and remove components Adjust individual components Processing options, pipeline diameters
Modify concept
Adjust operating costs - manning, inspection & maintenance, consumables, well work-over, insurance, project costs and tariffs
Calculate OPEX
Total CAPEX to CAPEX forecastSchedule CAPEX
Forecasts production, CAPEX, OPEX, decommissioning Exported and used for economic analysis
Generate investment profile
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QUE$TOR Cost Summary & Field Development Schematic
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Automatically calculates all component costs and populates the cost tree using QUE$TOR defaults in seconds
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Outputs: Annual Expenditure and Production
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Component Listing - Offshore
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Component Listing Offshore
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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
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100
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240
2000 2002 2004 2006 2008 2010 2012 2014
Up
str
eam
Cap
ital
Co
st
Ind
ex (
2000 =
100)
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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
IHS Global Scenarios form the basis of the forecasts
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120
140
160
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100
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140
160
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240
2000 2002 2004 2006 2008 2010 2012 2014
Av
era
ge m
on
thly
Bre
nt
cru
de p
rice (
$/B
BL
)
Up
str
eam
Cap
ital
Co
st
Ind
ex (
2000 =
100)
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Release Process for Cost Data
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A new version of QUE$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
Single data-input review
Compare with expectations and market trends
Data Benchmarking
Generation of average unit costs
Update of main exchange rates
Database Updates
24 Benchmark projects are run
Compared against previous release
Project Benchmarking
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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
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Leverage IHS expertise
Maximize public domain sources
Subscribe to 3rd party data
Relationships with vendors
Relationships with operators
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Understanding Upstream Costs
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RigPoint: Indonesia rig availability
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Our teams are constantly working to keep QUE$TOR updated with the latest cost data. In 2013 additional capabilities included:
HIPPS (High Integrity Pressure Protection System)
Bulk CO2 Membrane separation
Windows 8 support
Hull transportation costs added
Electrical buildings
Included editable weather downtime factors
Ability to set flow line design pressure in subsea
Improved acid gas removal system estimation
QUE$TOR: Developments in 2013
Global Data Collection
Internal Expert Reviews
Developing Latest Models
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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
QUE$TOR: Planned developments for 2014
Shell is building worlds largest Offshore floating facility ever made at an estimated cost of $13 Billion*
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CERA Cost Forums
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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
Operations
Maintenance
Facilities I&M
Logistics
LogisticsWell Services
Offshore Rigs
Land Rigs
Installation Vessels
Yards & Fabrication
Equipment
Subsea
Bulk Materials
Steel
Construction Labor
Engineering & PM
Labor
Steel
Equipment
Civils
Engineering & PM
Electricals
UOCS UCCS DCCS
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Measuring Performance
The portfolio index collectively monitors costs for a virtual portfolio around the world and is indexed to the year 2000 (2000 = 100).
The portfolio index collectively monitors costs for a virtual portfolio around the world and is indexed to the year 2000 (2000 = 100).
Portfolio Index
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.
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.
Market Indices
OPEX Markets
Upstream CAPEX Markets
Downstream CAPEX Markets
UOCI
UCCI
DCCI
Performance
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Example Upstream Portfolio
Canada OffshoreUS Onshore GasAlaska Onshore OilGOM Deepwater (2)
Trinidad & Tobago Onshore GasColumbia Onshore OilBrazil Onshore GasBrazil Deepwater (2)
North Sea ShallowNorth Sea Deepwater (2)
Nigeria Onshore OilNigeria DeepwaterAngola OffshoreAngola DeepwaterSouth Africa Onshore Gas
Libya Onshore GasSaudi Arabia Onshore OilOman Onshore Gas
Russia DeepwaterRussia Onshore GasKazakhstan Onshore OilAzerbaijan Shallow Water (2)
China Onshore OilMalaysia Onshore GasIndonesia DeepwaterAustralia Shallow WaterIndia Onshore Gas
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Root Cause
Conduct Root Cause Analysis
IHS CERA Cost
ForumOil $
Natural Gas $
Supply/Demand
GDP
FX
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Outlook
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.
Determine Costs Outlooks
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IHS Global Scenarios
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
dramaticallyMeta
ECONOMIC VOLATILITY Second Great Recession Protectionism leads to a Long Slowdown Little change in energy demand, supply, and technologyVortex
Global Redesign
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Henry Hub Price outlookBrent Price Outlook
Source: IHS CERA.
Long-Term Oil and Gas Price Outlook
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IHS Upstream Capital Costs Index UCCI
Data in this table is for Global Redesign only
Source: IHS CERA.
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%
IndexQ4 2011220Q1 2012227
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Notes: 1. Historical indices include escalation, inflation and currency exchange (USD)2. Forecasts include escalation and inflation but no FX movements
Example deliverable: UCCSPortfolio Index
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Steel Products IndexCost 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
Offshore
Rigs
Land
Rigs Installation
VesselsYards &
FabricationEquipment
Subsea Equipment
Steel Products
Bulk
MaterialsConstruction
LaborEngineering
& PM
Down 0.1%
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Market Overview Q4 2011 to Q1 2012
IndexQ4 2011 292Q1 2012 291
Notes: 1. Historical indices include escalation, inflation and currency exchange (USD)2. Forecasts include escalation and inflation but no FX movements
Example deliverable: UCCSMarket Index Scenarios
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Breakout Indices
Market Changes
Iron ore prices have decreased, driven by decreased steel production in Europe and flat Chinese demand
Coal shipments from Australia to China are increasingly being replaced by inland shipments from Mongolia
Transportation costs increased on higher fuel costs
Regional IndicesRaw MaterialsQ4 2011 to Q1 2012 Price Changes (USD)
Structural steel prices declined in Asia and Europe, reflecting regional slowdowns in construction activity
Overcapacity kept linepipe prices in check in all regions
Rebar prices were up primarily due to speculation of higher scrap prices in upcoming months
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Offshore
Rigs
Land
Rigs Installation
VesselsYards &
FabricationEquipment
Subsea Equipment
Steel Products
Bulk
MaterialsConstruction
LaborEngineering
& PM
Example deliverable: UCCSMarket Index Regional Breakout
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Market Trends
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
Drivers
Supply, demand, GDP are the main drivers for this market
Changes in exchange rates can lead to shifts in trade patterns
Projected Trends
Market Q4 2012 2013 2014
Global Redesign 6% 14% 5%
Metamorphosis 3% 6% 14%
Vortex -6% -8% -13%
Regional ForecastsGlobal Redesign
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Offshore
Rigs
Land
Rigs Installation
VesselsYards &
FabricationEquipment
Subsea Equipment
Steel Products
Bulk
MaterialsConstruction
LaborEngineering
& PM
Note: Forecasts include escalation and inflation but no FX movements.
Example deliverable: UCCSMarket Index Regional Forecast
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Six-month review
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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
Chineses Contractors
Local Content Review
MSS and CCAF Overlap Review
Details behind Cost of Oil
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Cost of Oil
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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
Cost of Oil
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Q1 2014Equivalent Brent
price ($/bbl)10% IRR
Equivalent Brent price ($/bbl)
15% IRR
Capex($/bbl)
Opex($/bbl)
Exploration ($/bbl)
Saudi Arabia 21.07 22.77 3.73 2.15 0.04
Iran 27.07 29.77 4.63 3.15 0.04
Libya (current situationmakes costs uncertain)
Uncertain Uncertain Uncertain Uncertain Uncertain
Egypt 40.06 43.81 19.48 11.31 0.37
Mexico 44.71 48.95 5.94 4.64 0.32
China 47.23 52.61 18.08 8.93 0.41
Argentina 49.91 51.34 6.84 5.64 0.32
Russia with export tax and tariff
48.0886.67
54.1492.69
11.24 6.46 0.07
US Tight Oil 50.02 60.19 18.65 11.45 0.10UK North Sea (shallow water)
51.51 60.04 11.52 12.53 0.40
Brazil 54.16 63.28 12.88 12.50 0.27
US GOM (deepwater) 55.40 63.96 17.29 13.61 0.54
Norway 61.21 67.29 14.07 15.34 0.46
Angola 64.00 74.20 17.28 13.52 0.55
Nigeria 67.86 78.57 20.88 13.92 0.10
SAGD 72.24
Mine 108.34
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Current cost of oil for selected new projectsBreakeven price at 10% & 15% IRR
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Q1 2014Natural gas price
for 15% rate of return ($/Mcf)
Capex($/Mscf)
Opex($/Mscf)
Exploration ($/Mscf)
Iran (uncertain for newprojects)
3.12 1.50 1.02 0.02
Oman 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
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Current cost of gas for selected new projectsBreakeven price at 15% IRR
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Global breakeven cost stack
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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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