1995AACE TRANSACTIONS
U&E.3
International Cost and Resource Database
Peter Christensen
his paperdescribesthe approachadoptedleading to the develop- arctic; and maybe marginal fields that might require extensionsof
T ment of an international cost and resourcedatabasecompiled by
a Norwegian offshore independentpetroleum company. In late
1989, SagaPetroleum a.s. decided to expand from being a Norwegian
existing technology.
The mandategradually becameless clear, and with the resources
and time perspective allotted, started to appear to be an impossible
national, independent, upstream offshore operator with intentions of task. What was required at the end of the task was a reliable reference
participating in national downstreamactivities, to entering the intema- database/informationcatalogue that would augment existing compo-
tional theater and concentrating activities on purely upstreamoil and nent models, field development modeling systems, and established
gas exploitation activities. To cater to this changeof direction, meth- methodsand procedures.
ods, models,procedures,and reliable databaseshad to be developedor’
acquiredto give the cost estimating’andscheduling group accessto the ‘DEVELOPMENT OF THE DATABASE
knowledge required for cost and schedule work to be performed in
house. The challenge imposed the requirement to develop effective Purpose
schemesand estimate costs, and to prepareschedulesso the company For any such databasethat was to be developed, the purpose
could competitively bid for licenses and evaluate acquisitions for all would be confined purely to the order-of-magnitude (screening)do-
other countries other than just Norway (offshore). An integral part of main of estimatepreparationand, as such, was to be structuredso that
this development work and the subject of this paper was the develop- estimates could be prepared to enable the company to evaluate
ment of a databasethat was completed(as an external contract)in June blocks/prospectsfor licensed concessionapplications, consideringac-
1992,and which resulted in a seriesof referencemanualscomprising quisitions via farm-in of early phase evaluations, and evaluating dis-
. a world regions overview, with development information for all coveriesto decide on further exploration/delineation and appraisal.
world regions, by region and country (part 1 of a study compris- Apart from the foregoing and use of general information con-
ing 3 books); and tained within the documentation, any further work beyond and after
. a Far East regional report, forming a more detailed overview of appraisalwould obviously be of such a field-specific nature necessitat-
this specific region and based on bottom-up and top-down data ing separateand dedicatedstudiesfor further evaluation, through to re-
acquisition (part 2 of a study comprising 3 volumes). alization. What was definitely not wanted was a “black box” that
would give some indications in terms of $/barrel output, as any such
BACKGROUND results would prove to be difficult to convince anyone that the resultant
The long-term strategy change initiated in late 1989 was a result numbersmay or may not be correct.
of the then lower margins and predicted return on investment for
downstreamactivities in refining/gas processingthen [Link] Available Information Sources
downstreamactivities proved marginal at that time, upstreamoil and
gasexploitation becamethe only viable alternative. location factors
AS a smaller Norwegian operator with accessto increasing re- Literature searchesand reviews revealedthat for cost estimatinga
servesbeing driven either through concessionlicense applications or number of published papershad been preparedpertaining to location
by acquisition, it becameapparentthat expansion would be restricted factors and the general problem of trying to determine resultant cost
by governing national constraints. The alternative remainedto pursue estimatesby the application of factors, models,and relationshipsto de-
international participation based on a selection of possible countries. rive estimatedcosts from a known referencebasecasescenariotram-
This seemingly one small step for developmentplannersand cost esti- posedto another location. Such work has been of great significanceto
matorsbecamea giant leap into the unknown. the industry and must be given due praise, though it often appearsto
reflect each author’s analysis at a defined point in time relatedto a sPe-
The unknown posed was how to go about compiling a database cific set of base though variable parameters, and perhaps may be
basedon the indications of where/what/how parametersthen given: “spiced” with subjective opinion and with an inherent underlying pos-
. perhaps3 regions, but could be 4 or 5; sibility of delusion. (Papersnormally presentthe results of the factsas
. probably will be looking at 5 to 10 different countries, maybe “evolved” by the author, and with a normal 2,000- to 5,000-wordpaper
fewer, maybegreater; limitation, the deeper background-where resultant values may be
. maybe onshore oil or gas fields; maybe in rainforests,deserts,or challenged-is rarely published.)
Permafrostareasand acquisitions; maybe offshore of either oil or The different approaches,ideas, concepts,conventions, and tradi-
gas-could be shallow swampy areas, tropical waters, or even tions found in the developmentof the location-related phenomenaare
UBrE.3.1
1995AACE TRANSACTIONS
not new; somepublished articles go back several [Link] to the stances,default calculation sections that in some casesallow changes
nature of a changing world with large regional economic oscillation, to be made,and an output/report section.
the problem of defining location factors is exacerbatedby attemptsto While data models provide parts of a history of developmentre-
meet changing economic circumstances,resulting in reevaluation of sulting in proposed unit rates applied to quantity-generative algo-
actual requirementsand a continual pursuance of cost reduction, re- rithms, the broaderview at regional and country levels is not normally
cently’conductedthrough the UK CRINE (Cost Reduction in New Era) given adequatefocus in the form of documentation. In other words,
initiative and a similar NORSOK (Norwegian Cost Reduction modelstend to representa static view of a possible deterministic devel-
Program). opment [Link] on our own input and choice of a local data-
Factoring from a known referencebaseis valid for construction of base, we could get a “number,” though this resultant number may or
identical or very similar facilities-as an oil and gas [Link] to may not be logically reconcilable when benchmarkedagainst known
the nature of possible realization strategy, we were more interestedin referencepoints.
anything other than serial construction, as there are few similarities be.- Proprietary softwaremodeling packageswere purchasedto enable
tween the different countries and regions, and even within countries, us to continue while other developmentwork was being [Link]
any basereferencecasewould have to be normalized to accommodate packagesfinally selectedsuited closely the way that our specific orga-
functional requirements,choice of technology, construction practices nization was structured and provided the requisite insight of the data
and methods,rules and regulations, and codesand specification differ- and model structure.
ences,togetherwith national and referencedcost information.
Generic Development
manuals and publications Severalpossible regions/countries/basinsstartedto emergeas tar-
A number of country-specific unit price/rate and workhour manu- gets during work done in 1990/91. As the identification of such was
als exist though such are generally more related to building constmc- more or lessgeneric, the requirementsfor a databasewere diverging. If
tion and civil works rather than specifically directed toward offshore or we were to look closely at a selectedcountry within a region, the final
onshore oil and gas facilities construction (there are some offshore choice may in fact not prove to be those that were initially selected;
pricing manualsfor the UK sectorof the North Sea).Someoil and gas therefore, it seemedprudent to attempt to develop such a database,
trade journals and magazines (monthly/quarterly) publish overview which would cover all regions countries with datathat were available.
lists of different regions and countries within regions. The lists give We were aware that not all required data fields could be com-
block number, operator name, concept considered, status of concept, pleted due to limited access,though we did have a format that com-
reserves, indicated capital expenditures, etc. In addition, the same piled all salient information for later captureand entry. As newcomers,
sourcesprovide awardedcontract sectionsand activity reports. although we had preferences,we did not have a history; nor had we de-
There are also a number of specific publications that can be pur- veloped a prejudice towards specific regions and countries. We were
chasedand that provide regional data in a structured form. Some are blessed by innocence; therefore, everything viewed initially became
specifically for subseadevelopment, whereas others provide all data more or lessequal.
(available information). There are also region-specific (facts only) plat- Looking at the experiences of others and how they went about
form guides that include a wealth of data on specific, completeddevel- compiling information and preparing databasesto evaluate acquisition
opment projects; data may include listings of modules, weights, and objects,logically, they must have developedfrom the hard experiences
fabricator, together with functional requirementsand outline specifica- learnedfrom realization and from them would have had to been devel-
tions. oped central databasesin which all project information could be con-
From a collective review of available public-domain information, tained and which would be referencedas [Link]
we found that through such, most of the objectivesof Part l-Regional would probably be continually supplemented further, we reasoned,
Overview could be obtained. What did not exist at that time was any with regular surveys to fabricators, suppliers, manufacturers,contrac-
singular publication that actually coveredthe whole world and that rep- tors, etc., to enablereindexing of the referencedata [Link] such in-
resenteda verified, methodicalcollection of piecemealinformation. formation, data models were probably developed to enable cost
estimatesof sufficient accuracyto preparebids or compile license ap-
Data Modeling Systems plications.
Prior to commencingwork on the database,we were awareof ex-
isting proprietary oil and gas field data-modeling systemsthat were IPrequalification and IIWQ
available for purchasefrom different US/UK vendors. Such packages For a small company without any extensive experiencefrom in-
are the result of compilations of large amountsof data,normalized and ternational projects, the problem of development of such a database
applied via regression analysis and calculation routines, to provide had to be by way of an external contract in order to gain from others
quantity-generative algorithm and cost databasesto develop hardware experienceand to provide the requisite resourcesto enablethe database
costs and-with management-decision routines-to define “prefer- to be completedwithin such a short period of time. Due to the vague-
ence” parametersresulting in additional costs,the sum of which would nessof what such a databasewould look like, we decided to preparea
result in an “estimate” of Costs. request for companies to prequalify for the intended study.
While the results of modeling systemsmay or may not be accu- Prequalification documents were sent to 10 international companies
rate, we had an inherent apprehensiontoward direct application (as sin- that were invited to presenttheir views on how they would go about
gle-source reference tools without more convincing background development and what information could be extracted from open
information); our suspicion was related more to the resolution of re- sourcesto comply with the outline shell defined in the request.
sults as printed from “models.” Models viewed tendedto be structured Of the 10 companies invited to prepare prequalifications, four
with fixed algorithms, which are not normally accessibleto the end companiesrespondedand preparedvoluminous [Link] docu-
user. In simple terms, typical models have data input sections, cost ments contained a wealth of information and formed a basis from
and/or factors databasesections that may be altered to reflect circum- which to preparea balancedrequestfor quotation (RFQ), which would
UJcE.3.2
1995AACE TRANSACTIONS
enable all to bid for the same scope on an equal basis. Extracts and open for later capture or decision. The important concept was to table
ideasfrom individual documentsformed the basisfor the RFQ. everything from everywhere in a standard format and obviously at-
tempt to acquire the best available indications at that time.
Scopeand Structure Development For practical reasonsof verification, data from different publica-
When considering what was available and the possibility of tions and reportsthat had conflicting information for the samedevelop-
adopting such, a two-sided approachstartedto emergein order to cap- ment and contained ambiguities that were not readily resolved, and
ture the diverging [Link] study rules/outline developedinto different opinions from different sources,formed portions of the piece-
the following requirements: meal collective view of the world as it then existed.
1. The databankmust ontain data acquired only from the public do-
main, fabricators, contractors, and independent consultants, and Bottom-Up Approach
do not include data from unofficial sources. At the same time that the top-down work was started,the more
detailed and time-consuming bottom-up approach was started. This
2. The databank cannot be prohibitively expensive, must be verifi- consistedof formulating requestsfor information to identify contrac-
able, and must consist of confirmed and reliable information that
tors and companiesin the Far East region. Had we, prior to this, known
does not concentrate purely on unit rates and pricing data, but of the no-disclosure(closed-shop)attitudes of operatorsand of restric-
rather starts with information about where, then provides an indi- tions imposedby the different country authorities, we probably would
cation of what has been done, and then lists projects in statused
have r-evaluatedsuch attemptstowards acquisition of this [Link] at-
form for each country and is filled only with datathat is known. tempts were not completely futile, though: we did receive hard data,
3. The databank(as part 1) must include a top-level overview of re- mainly through fabricators/[Link] informa-
gional data that reflects recent past history (how/what) and pro tion from operatorswas not madeavailable.
vides a requisite insight into the different country fact-file-type -This was another item on our learning curve. Due to our igno-
statistical data such as location, population, government,imports rance, we thought that data may have been readily available as it was
and exports, natural resources, production statistics, consumer to some extent in the North Sea area where, as mentioned, dedicated
price indexes (7 year), exchangerates(local currency to USD in a publications are printed with large amountsof factual technical infor-
7-year perspective), licensing term indications, infrastructure, mation. When further trying to understandthis, we found that the real-
companies active in each country, government departments/au- ization processwas more by way of compiling one AFE for approval
thorities responsible for oil and gas activities, country-specific by authorities, which would cover the entire capital expenditure,
drilling activity (7 year), production perspectives (7 year), and thereby leaving the operator and fabricator with room to move within
statusedlistings of projects in country (past/present/future). the approvedbudgets. Further, fabricators in that region, to a greater
4. The databank must take one (as part 2) of the regions, e.g., Far extent than normal (comparedto North Seafabricators), operateunder
East region, and develop a more detailed country-by-country turnkey-type EPIC contracts, with extensive use of standarddesigns
overview based on hard data collected via dedicated surveys of for facilities. Also, we found that the term “lump sum” in such areas
fabrication yards, suppliers, vendors,construction contractors,and meantexactly that: the total value as if as-built, i.e., not to exceedtotal
engineering and [Link] more detailed re- indicated cost and not as experienced in Europe (Norway) where the
view would comprise developmentoverviews, capability, and re- initial value, based on bid drawings constitutes a lump sum portion
sourcesand, finally, would lead to the country-specific facts: cost under a lump sum contract, and then there are usually many variations
database and methods developed, based on the latest and best to the contract (which in extreme caseshas sometimesincreasedthe
available information from fabricators and developersin the area value to twice that the original bid price).
at that time. Contrary to the popular technocratic belief that esti- The problem associatedwith discrete fabrication of components
mators only need some drawings, unit rates/prices,and location in other countries was not exactly unknown, as during the construction
factors to provide a number, our view was the opposite:the num- of the world’s largest steel-hulled tension leg platform. During that
bers were to be developedor derived basedon fact and proof, to- time in 1986 when the fabricator surveys were completed, we were
gether with indications of who/where/when/how/why, such that considering fabrication of different componentsof the project in differ-
any resultant documentationwould provide us with a concise and ent countries so as to provide a basis for preparing resourceand cost
reasonablyaccurateoverview of the completesituation, [Link] differenceswere seenwith respectto productivity and
to unit ratesbetweenthe different locations.
Top-Down Approach
A top-down compilation of all existing data within the public do- Quality Assurance
main formed part of the initial research,analysis, and data acquisition To achieve both a well-documentedproject and to ensurethat ob-
work. Such was derived via extraction of pieces of information from jectives were met by the contractor organization offices-main office
several hundred publications and further cross-referencedand checked and regional offices-and contractor affiliates participating in our
for validity. Further compilation led to additional leads along the path study, an integral and initial part of the study was the developmentof a
of expansion of published data that would suit more the overview re- project quality plan.
quirements of early-phaseconsideration by a petroleum companyand, This plan consistedof corporatesystems,quality assuranceproce-
as such, would have to include as requisite and minimum requirements dures, corporate administration, project managementand engineering
for Part l-world Regions: wells, reservoir depths,reserves,develop- and design manuals,procedures,policy guidelines and specific instmc-
ment concepts,key scheduledates,production rates,and costsdivided tions. Once this was firmly established and approved, the project
into OPEX, CAPEX, and EXPEX in referencebasecurrencies. proper could start with data collection and compilation, without any
This somewhatambitious conceptpromptedstandardformats that form of companyintervention.
were to be completed to the extent possible, basedon the information
available, where some data fields could not be entered. Such was left
WQE.3.3
1995AACE TRANSACTIONS
s daunting as the initial mandatewas, the final product from something with our cost estimating methods to reflect the change to-
A n the study provided a unique documentation of over 6,000
known, statusedprojects’ data for 90 different countries. The
data were acquired from purely public-domain sources and contact
ward international activities. The path proved to be different as costs
becamethe final product after all other relevant information pertaining
to costswas tabled. Unit rates meanlittle if the scopefrom which they
with fabricators. Not all data were available to provide the complete are derived is not adequatelydocumentedand further defined with re-
100%of data required, though even with blank spacesthe data suggest spect to what/whereIhow or why. With such development and the re-
indications. sultant resolution, we are nearing the ability to attempt to propose
The study further provided country-fact tile information, infra- alternativesthat hitherto representextendedtechnology that may prove
structure data, and region-specific indications related to trading and to be viable in an era of depleting petroleum resources,low oil prices,
contractor information, and, in general provided a consistentand deep marginal fields, and the obvious move toward extreme conditions both
insight into the world of oil and gasexploration and exploitation activi- offshore and onshore.
ties.
The databaseas is forms but one part of the toolbox, which is con- PeterChristensen
tinually under developmentand which allows accessto a wealth of rel- Nimannsveien 8
ative, salient information. The initial mandate was to try to do N3022 DRAMMEN
Norway
UCE.3.4
