Discover accurate cost projections

for all of your E&P projects

Lets 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 )
Owners 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

14

Component Listing Offshore

15

Component listing - Onshore

16

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

19

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 worlds 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

27

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

28

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

29

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

31

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

32

Long-Term Oil and Gas Price Outlook

Brent Price Outlook

Henry Hub Price outlook

Source: IHS CERA.

33

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 2011220
Q1 2012227

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.

34

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

35

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

36

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 ForecastsGlobal 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.

37

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
Chineses Contractors
Local Content Review
MSS and CCAF Overlap Review
Details behind Cost of Oil

38

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

41

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

42

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

43

Proof of our commitment

1,200

1,400

world-class experts
and researchers

industry analysts

140

global offices

800

software developers