IPA hosted the Upstream Cost Engineering Committee (UCEC) annual meeting on June 20, 2018, in Houston, Texas. Oil and gas asset development cost groups representing nearly a dozen upstream companies, including majors and independents, attended UCEC 2018. The UCEC is a subcommittee of the Upstream Benchmarking Consortium (UIBC), a group of owner operators committed to improving the capital effectiveness of their capital projects. IPA facilitates both the UCEC and IBC.
The UCEC helps owners improve upstream project and business results by providing metrics for better cost engineering. The metrics produced by the UCEC can be used to support conceptual estimates and schedule development, estimate and schedule reviews, and calibration and improvement of company tools and databases. The metrics are useful in assessing a company’s performance against industry norms. UCEC participants include IPA client representatives who have a common interest in cost engineering and cost metric development.
But the UCEC is more than just about discussing metrics. With guidance from UCEC member companies, IPA develops tools for owner cost engineers to better support the development and validation of cost and schedule estimates. Networking opportunities are also afforded to UCEC participants. Additionally, the committee sponsors research studies that examine critical topics of interest to upstream cost engineering professionals. Each year, UCEC steering committee members recommend topics for IPA to examine; the research topics presented at UCEC 2018 are summarized below.
Location Differences in E&P Facility Development
Recognizing “dramatically different project costs for a given scope” depending on a project’s location, the study set out to quantify location differences in facility development and identify reasons for the cost differences. More specifically, the study examined areas of higher and lower wage rates, fabrication costs, and the effects of local content requirements for the delivery of fixed platforms and subsea assets. The purpose of the study is to allow E&P companies to better validate early asset development estimates by leveraging regional cost difference insights.
Schedule Quality as a Driver of Project Outcomes
Project schedules are an integral part of establishing a basis for project execution. They serve to aid in understanding the time needed to execute a project and shed light on associated costs. But are there other ways that a schedule benefits a project team? The study pulled project schedules apart, analyzed their basic components, and then looked at how the overall quality of a schedule drives outcomes. A novel measure of schedule quality resulting from the study gives companies an improved means of gauging drivers of schedule slip and cost growth.
Industry Dollar per Ton
The study provides companies with more granular metrics for developing offshore facilities, including metrics for better estimates of Front-End Loading (FEL) and project management costs, topsides and substructure fabrication costs, and hook-up and commissioning service costs.