QUE$TOR Benchmarking Analysis Report - IHS Markitproductdownloads.ihs.com/private/release/Que$tor... · QUE$TOR Benchmarking / November 2020 5 •From Q1 2020 to Q3 2020, average

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QUE$TOR 2020 Q3

QUE$TOR Benchmarking November 2020

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Content list

QUE$TOR Benchmarking / November 2020

1. Benchmarking purpose and method

2. Benchmarking summary results

3. Project cost variations

4. Offshore cost category variations

5. Onshore cost category variations

6. Effect of drilling

7. General conclusions

8. Offshore summary

9. Onshore summary

10. Results and chart interpretation

11. Benchmarking project portfolio

12. Technical upgrades

13. Global market trends

14. Cost data adjustments

2


Benchmarking purpose

• This benchmarking analysis serves multiple purposes:

✓ Checking that the new capital cost estimates are consistent with the global market changes

described in the QUE$TOR 2020 Q3 Release Notes document, available from the QUE$TOR

application by clicking in the main Menu on Help<Release Notes

✓ Understanding how technical changes in the application impact project cost estimates

✓ Comparing the cost change effects by region, component type, and cost category

• This document provides a summary of the effects that cost and technical changes have

on project cost estimations when a QUE$TOR project is updated from the previous

version, QUE$TOR 2020 Q1, to the updated version QUE$TOR 2020 Q3.

• The following benchmarking results are meant to supplement the market trend

discussions contained in the Cost database update section of the QUE$TOR 2020 Q3

Release Notes document.

3



Benchmarking method

• Our benchmarking analysis consists of running a set of projects using three different

versions of QUE$TOR:

1) the previous version, i.e. QUE$TOR 2020 Q1

2) an intermediate version that only includes latest technical changes and new features

3) the updated version, i.e. QUE$TOR 2020 Q3, inclusive of both cost and technical changes

• The results of the analysis show the variations of project costs, in US dollar terms, when

technical changes and cost changes were applied. In particular:

• Technical changes are the changes in results from the previous to the intermediate version.

• Cost changes are the difference between the results of the intermediate version and the results of the

updated version.

• Combined changes are the difference between the previous and the updated version, i.e. the effect of

cost and technical changes together.

• The analysis uses a large sample of projects (~250 offshore and ~200 onshore) based on

real assets and potential developments all around the world.

• Every region contains both offshore and onshore projects. The overall portfolio is not

intended to include all possible cases but to be a representative sample of what is feasible

in each region. As a result some project types or regions may be more or less represented

than others.

4



Benchmarking summary results


5

• From Q1 2020 to Q3 2020, average total project costs varied between -4.5% and +6.7%

(when drilling is included) and between -4.6% and +7.5% (when drilling is excluded).

• Most market segments had cost trends declining in the last six months. Increases in project costs

observed in some regions were a result of new features and technical adjustments. A full description

of the technical changes can be found in the Technical upgrades page. In some specific cases, the

appreciation or depreciation of local currencies against the US dollar had an effect on the project cost

changes.

• The effects of drilling were different in offshore and onshore projects. Excluding drilling costs, most

offshore regions increased due to the effect of technical changes, which impacted mainly Installation

costs. Excluding drilling costs, most onshore regions decreased due to the combined reductions in

Equipment, Materials, and Prefabrication/Construction costs.

• Offshore, Equipment and Materials costs varied between -1.8% and +7.1% whilst

Installation costs varied within -7.1% and +6.1%. The significant decrease was registered

in Subsea as a result of reduction in day rates and technical adjustments.

• Onshore, Construction costs varied the most, between -7.4% and +14.1%. The cost

changes of the other key cost categories were within the -12.3% to +3.9% range.


Source: IHS Markit © 2020 IHS Markit

Project cost variations due to technical changes

6

Average variation in offshore and onshore project costs by region due to just technical changes


When only technical changes were applied, average total project costs increased in most regions,

except in C.I.S. where offshore projects decreased and in Australasia and Africa where onshore project

costs remained flat.



Effects of technical changes on offshore and onshore project

costs

In all regions, technical adjustments and new features affected most projects. Differences

in cost variations for offshore and onshore projects derived from the different impact of

specific technical adjustments.

• Offshore – Variations in offshore project costs were the result of the following technical changes:

• New assumptions behind the breakdown of offshore installation vessels caused cost estimates of some

installation activities to increase, impacting installation costs in projects with a Topsides component. They also

caused a decrease in installation costs in projects containing a Jacket component. This was particularly

pronounced in the C.I.S. region, which was the only region showing a small decrease.

• The additional line items in offshore drilling increased installation costs in offshore drilling, contributing to the

increase in project costs in most regions.

• Onshore - Onshore project costs increased in most regions due to the following technical changes:

• The update of onshore drilling duration data increased drilling durations and consequently construction costs in

onshore drilling in most regions.

• The generator set and turbine list update caused changes in weight and variations in civils area requirements

with an increase in site preparation costs.

• The Far East showed the greatest increase (+8%) because it included regions with significant increase in

drilling durations. Australasia and Africa did not show any significant change because onshore drilling duration

data were unchanged in both regions.

7



Project cost variations due to combined (cost + technical)

changes

8

Average variation in offshore and onshore project costs by region due to technical and cost changes


From Q1 2020 to Q3 2020, average total offshore project costs varied globally between

-4.5% and +6.7% whilst onshore costs varied between -3.3% and +5.9%

Source: IHS Markit © 2020 IHS Markit Source: IHS Markit © 2020 IHS Markit


Why offshore and onshore projects costs varied differently in

some regions

Differences in cost variations for offshore and onshore projects were due to the different

influence of technical and regional cost changes. In this release, the impact of technical

changes on total project variations was comparable to the effect of market cost changes in

several regions.

• Europe showed the highest increase in offshore project costs because of the additional effect of the

strengthening European currencies versus the US dollar.

• Increases in offshore project costs were due to the combined effect of various technical changes:

generator set and turbine list update, addition of line items to offshore drilling, increase in topsides

material bulk factors associated with high pressure manifolds, and new offshore installation vessel

definition for Topsides components.

• Decreases in offshore project costs were caused by the new offshore installation vessel definition for

Jacket components, exchange rate adjustments, regional cost data corrections, and declines in

market cost trends.

• Increases in onshore project costs were the result of the onshore drilling duration data update, which

has resulted in longer well drilling durations. Additional increases were due to the data update for

generator sets and turbines, which impacted civils costs.

• Decreases in onshore costs were attributable to decreasing Equipment and Materials costs, reduced

labour rates and to the depreciation of local currencies against the US dollar.

9



Project cost distribution by cost category


10

Distribution of cost category costs



Project cost distribution by cost category

• Most medium-to-large-value* cost categories varied between -10% and +16% for offshore

projects and between -6.0% and +8.4% for onshore projects.

➢ Offshore Installation and onshore Construction were the two cost categories showing the largest

increase (up to 17.8% and 42%, respectively) for medium-to-large-value projects.

• For small-value* cost categories, offshore projects had the largest increases and the

greatest reductions. Variations in onshore project costs were more moderate.

➢ Installation was the offshore cost category with the largest range of variations. For small-value

installation costs, the greatest cost reduction (-52.3%) was caused by the new offshore installation

vessel definition for Jacket components and a decline in day rates for some offshore vessel types in

some regions. The largest increase in offshore Installation costs (up to 108%) was the result of the

new offshore installation vessel definition for Topsides components.

➢ Materials was the offshore cost category with the largest increase (up to 116%) for small-value

projects because of the increase in topsides material bulk factors associated with high pressure

manifolds.

➢ Construction was the onshore cost category with the largest increase (up to 48%) because of the

update of onshore drilling durations data increased drilling durations and consequently construction

costs in onshore drilling in most regions.

* Small-value and medium-to-large-value cost categories are assumed to be approximately below and above a $0.2bn threshold, respectively.

11



Project cost distribution by cost component


12

Distribution of component costs by cost category



Project cost distribution by cost component

• Most cost components varied between -5.0% and +6.7% for offshore projects and between

-2.3% and +2.8% for onshore projects. Some components varied more significantly:

• Subsea was the offshore cost component with the largest reduction (-11.5%) due to a decline in

Installation costs. Some regional adjustments (declines of about 5-20% depending on the region)

implemented for subsea supply vessel and subsea diving vessel affected this component cost

globally.

• Terminal was the onshore cost component with the largest reduction (-6.4%) due to a decrease in

Construction costs. This is because labour rates declined significantly in the regions (i.e. Africa, South

America, and Russia) with a high number of projects including Terminal components.

• Semi-sub was the offshore cost component with the greatest increase (+9.4%) due to an increase in

Materials costs. Topsides material bulk factors were increased in several projects with high pressure

manifolds. This resulted in an increase of semi-submersible operating weight with subsequent

increase in their hull weight, materials and fabrication costs.

• Onshore drilling was the onshore cost component with the greatest increase (+13.9%) due to a

significant increase in Construction costs. This was caused by the increase in onshore drilling duration

data, a technical upgrade implemented in most regions.

13



Offshore Equipment costs by region

14

Average offshore Equipment cost changes by region


Offshore Equipment costs decreased in most

regions, except in Europe and Middle East.

• Collapsed demand and rescheduling of projects

caused by COVID-19 pandemic caused equipment

prices to drop globally since Q1 2020. North America

showed the largest reduction (-1.8%)

• Europe showed the largest increase (+6.6%)

because the strengthening effect of European

currencies versus the US dollar exceeded the

decline in market trends. All major West European

currencies (i.e. Norwegian kroner, European euro

and British pound) appreciated against the weak US

dollar by +11%, +6% and +5%, respectively.

• Middle East showed a moderate increase (+2.1%) in

Equipment costs as the selected procurement

strategy for Equipment in this region is set up as

Western Europe and therefore it saw an increase in

US dollar terms.

• In most of the remaining regions, declining costs and

weak local currencies were responsible for the cost

reductions. Although the Australian dollar increased

in strength, the decline in Equipment costs was

stronger than the appreciation in exchange rate.Source: IHS Markit © 2020 IHS Markit


Offshore Materials costs by region

15

Average offshore Materials cost changes by region


Offshore Materials costs varied between -2.0% in

C.I.S. and +7.5% in Europe, in US dollar terms.

• Low demand for materials in the oil and gas sector

was one of the major factors causing Materials costs

to decline almost globally.

• Again Europe and Middle East increased because of

the European currency appreciation against the US

dollar. Middle East projects had the procurement

strategy for Materials set up to be as Western

European, therefore it saw Materials cost rising.

• Similarly to Equipment, in most of the remaining

regions, declining costs and weak local currencies

were responsible for Materials cost reductions.

Although the Australian dollar appreciated, the

decline in Materials costs was stronger than the

appreciation in exchange rate.



Offshore Fabrication costs by region

16

Average offshore Fabrication cost changes by region


Offshore Fabrication costs varied between -7.8%

in Latin America and Africa and +6.8% in Europe.

• Europe, the Middle East, and North America showed an

increase as a result of the combined effect of technical

changes and market trends.

• Average Fabrication costs in Europe and the Middle

East increased by 6.8% and 5.9% because a number

of offshore high-pressure projects had Topsides bulk

factors increased. This affected the Materials weights

and consequently the Fabrication costs.

• Fabrication costs for Latin America, Africa, and the

C.I.S. decreased due to a significant reduction in labour

rates.



Offshore Installation costs by region

17

Average offshore Installation cost changes by region


Offshore Installation costs had a mixed variation

globally.

• Europe, Africa, Latin America, and North America

showed an increase in Installation costs. This was due

to the combined effect of technical changes and market

trends.

• Average Installation costs in Europe increased by 6%

because a high number of offshore projects with

Topsides components had installation cost increasing

as a result of the new installation vessel breakdown.

On top of this, most offshore vessels in Europe saw an

increase in day rates.

• Installation costs for C.I.S, Australasia, Middle East and

Far East decreased. The significant decrease in C.I.S.

was due to a significant number of projects affected by

the new offshore vessel breakdown for Jacket

component.



Offshore component costs varied in the range -3.0% to +2.0%

18

Average offshore cost variation by component

• Reductions in vessel purchase prices, materials cost

and labour rates were responsible for the decrease in

Tanker costs

• Decreases in subsea specialized vessels impacted

the Subsea Installation costs as a result of both

market decline and technical adjustments


• The increase in Offshore drilling was due to the

additional line items (i.e. site survey, ROV drill rig

support, rental tooling for wellhead and xmas tree

completion) to the offshore drilling cost sheet

• The increase in Semi-submersible and Topsides is

attributable to the increase in Installation costs as a

result of the new offshore vessel breakdown



Onshore Equipment costs by region

19

Average onshore Equipment cost changes by region


• Onshore Equipment costs increased globally,

mainly due to technical changes

• The update of onshore drilling durations data mostly

impacted projects with many wells

• The update to the power generation and compressor

set data increased civils area and site preparation

costs in some projects

• In Australasia and Europe, the higher increase

was due to currency adjustments as local

currencies strengthened against the US dollar

• Market trends did not dominate the average

onshore Equipment cost changes as market

costs for equipment decreased globally since

the first quarter of 2020



Onshore Materials costs by region

20

Average onshore Materials cost changes by region


• Onshore Materials costs had a mixed trend,

due to technical changes, market trends and

fluctuations in the exchange rates against the

US dollar

• Latin America showed the largest decrease in costs

(-4.4%), largely related to both the significant

declines in OCTG costs in Onshore drilling and to

extreme volatility in the exchange rates in this

region.

• Regional variations in steel costs affected project

cost estimates for Onshore drilling, Pipelines, and

Infrastructure components.

• The increase in Europe and Australasia was due to

the appreciation of local currencies. The Middle East

was also affected as most projects had the Materials

procurement strategy set up as Western Europe.



Onshore Prefabrication costs by region

21

Average onshore Prefabrication cost changes by

region


• Most regions showed a decrease in onshore

Prefabrication costs as a result of declining

labour market trends

• Latin America had the largest reduction (-12.3%) in

Prefabrication costs as onshore labour rates

dropped significantly in the region in US dollar terms.

Construction costs were similarly affected but in this

cost category the decrease was offset by the

increase in onshore drilling durations due to the data

update.

• Australasia was the only region recording a

noticeable increase in onshore labour rates since the

first quarter of 2020. This was due to the significant

appreciation (+14%) of the Australian dollar and a

better-than-expected performance of the labour

market in the region.



Onshore Construction costs by region

22

Average onshore Construction cost by region


• Most regions had an increase in onshore

Construction costs as a result of technical

changes

• Construction costs increased in Onshore drilling

component as a result of the update of the drilling

duration data

• Construction costs increased in those components

including power generator and gas compressor set

as the generator set and turbine list update

increased their footprint, and consequently the site

preparation and civils costs

• Africa and Latin America showed a decrease

because of the effect of reduced labour rates in

different components (e.g. Wellpad group,

Production facility, Terminal) but also because

of the depreciation of local currencies

• Africa showed the largest reduction (-7.4%) as it was

one of the regions where the drilling duration data

did not change



Onshore component costs varied globally between -1.7%

and +6.1%

23

Average onshore cost variation by component


• Equipment, Materials, Prefabrication, and Construction costs decreased in

all onshore components, excluding Onshore drilling. The negative trend in

these cost categories was primarily attributable to global decreases in the

corresponding market segments due to the unprecedented impacts of

COVID-19 and the oil price drop

• In the Onshore drilling component, the effect of the increase in drilling

durations exceeded the general declining market cost trends in most

regions, except in Africa and Australasia where the drilling duration data

were unchanged



How and why onshore project costs varied

• Including onshore drilling, the average onshore project costs increased in most regions:

Far East (+5.9%), Europe (+4.1%), Middle East (+3.5%), Australasia. (+2.0%), the C.I.S.

(+0.9%), and North America (+0.7%).

• Africa (-3.3%) and Latin America (-1.8%) were the only two regions which had project

costs declining.

• Average onshore project costs changes were caused by the combined effect of the cost

data update and technical adjustments, although technical changes played a major role

this release:

• The update of drilling duration data significantly increased Onshore drilling costs in most regions.

• Major cost categories (i.e. Equipment, Materials and Fabrication) have seen a reduction in costs

throughout most regions, in US dollar terms, as a result of the economic impact of the COVID-19

outbreak.

• The project cost reduction in Africa and Latin America was due to the additional effect of local

currency depreciation.

24



Effect of drilling costs on total project cost variations

• Two major technical changes, i.e. the onshore drilling duration data update and the

additional line items in offshore drilling, have caused an increase in drilling costs. When

both offshore and onshore drilling are excluded, project costs are not impacted by these

changes.

• When offshore drilling costs are excluded, regions with an increase in average offshore

project costs saw a further increment (e.g. Europe costs increased by +6.7% with drilling

and by +7.5% without drilling) whilst regions showing a decrease became even more

negative (e.g. Australasia decreased by -1.6% with drilling and by -3.3% without drilling).

• When onshore drilling costs are excluded, most regions had a decrease in their project

cost variation (e.g. Far East costs increased by +5.9% with drilling and decreased by

-0.4% without drilling). This is because the increased costs of the technical changes are

taken away and the onshore market trends were globally negative in US dollar terms.

• The regional mixed effect was due to the fact that the actual costs are summed for all

types of offshore projects in each region and then the percentage change is calculated

between the new and the old version. Larger projects have a larger impact on the results

generating this regional variation.

• Market variations in offshore rig day rates had a minor impact on offshore drilling costs,

which remained dominated by technical change effects.

25



Project cost variations due to technical changes, excluding

drilling

26

Variation in offshore and onshore costs (without drilling) by region due to just technical changes


Excluding drilling costs, technical changes had a small impact on project costs, especially onshore.

Offshore, the adjustment of Topsides material bulk factors in high pressure projects caused the +3.7%

cost variation in the Middle East.

Source: IHS Markit © 2020 IHS MarkitSource: IHS Markit © 2020 IHS Markit


Project cost variations due to combined (cost + technical)

changes, excluding drilling

27

Variation in offshore and onshore costs (without drilling) by region due to technical and cost changes


When drilling costs are excluded, from Q1 2020 to Q3 2020, average total offshore project costs varied

globally between -4.5% and +6.7% and onshore costs between -3.4% and +3.1%.

Source: IHS Markit © 2020 IHS Markit Source: IHS Markit © 2020 IHS Markit


General conclusions

• From Q1 2020 to Q3 2020, average total project costs varied between -4.5% and +6.7%

(when drilling is included) and between -4.6% and +7.5% (when drilling is excluded).

• The changes in offshore costs were mainly attributable to the effect of technical adjustments in

Offshore drilling and Installation costs. When drilling is excluded, decreases in Installation costs

caused cost declines in several regions, most notably the C.I.S. and Latin America.

• The effects of technical adjustments in Onshore drilling impacted onshore costs globally, producing

positive variations for most regions. However, excluding drilling changes, more regions showed

project costs decreasing due to the reduction in Equipment, Materials, Prefabrication, and

Construction costs.

• The majority of medium-to-large projects, offshore and onshore, had their key cost

categories varying between -10% and +16%.

• Cost categories in small projects, for both onshore and offshore, varied primarily due to the

combined effect of technical adjustments and cost changes, and fluctuated within a much

bigger range of -20% to +20%.

• Most cost components varied between -5.0% and +6.7% for offshore projects and between

-2.3% and +2.8% for onshore projects.

• Onshore drilling was the onshore cost component with the greatest increase (+13.9%) due

to a significant increase in Construction costs.

28



Offshore summary

• Offshore total project cost variations by region were between -4.5% (C.I.S.) and

+6.7% (Europe), and were mainly driven by technical changes affecting

Equipment, Materials and Installation costs.

• The regional variations were due to the combination of cost data updates and

technical changes:

• Equipment and Materials costs decreased in most regions due to declining costs and weak local

currencies. However, strong European currency appreciation against the US dollar marked

increases in costs in both Europe and the Middle East.

• Fabrication costs increased in Europe and the Middle East because of Topsides bulk factors

adjustments affecting high-pressure projects. Decreases in Latin America, Africa, and C.I.S. were

due to significant reduction in labour rates.

• The effect of the new offshore installation vessel definitions impacted project costs differently

depending on the component type. Europe showed the largest increase (+6.1%) in Installation

costs due to many projects containing Topsides components. The C.I.S. had the greatest

reduction (-7.1%) because Installation costs decreased in numerous projects with Jacket

components.

• Without drilling costs, regional trends were primarily negative, with only Europe and

the Middle East noting increases of +7.5% and +3.6%, respectively. Project cost

changes for all other regions were between -4.6% and -1.2%.

29



Onshore summary

• Onshore total project cost variations by region were between -3.3% (Africa) and

+5.9% (Far East), and were mainly driven by technical changes affecting

Equipment, Materials and Construction costs.

• Two regions, Africa and Latin America, showed decreases in their average onshore

total project costs. The regional variations were due to the combination of cost data

updates and technical changes:

• Although market trends for equipment declined globally, onshore Equipment costs increased in

all regions due to the technical update of onshore drilling duration data

• Materials costs had a mixed trend as the balance between market decreases in steel costs and

increases in drilling duration data produced different results by region

• Prefabrication costs decreased in most regions as a result of declining labour rates whilst

Construction costs mostly increased being affected by the increase in duration data in the

Onshore drilling component

• Without drilling costs, regional trends were primarily negative, with only Australasia,

the Middle East and Europe showing increases up to +3.1%. Project cost changes

for all other regions were between -3.4% and -0.4%.

30



Results and chart interpretation

• Benchmarking results are analyzed and presented to provide information to QUE$TOR

users on expected variations of project cost estimations.

• The project portfolio used in this analysis includes a large sample of projects which are

based on real assets and potential developments around the world.

• Results are presented in column and scatter charts using the following parameters:

• Change in offshore and onshore costs by region and project type: percentage variations for offshore

and onshore projects are calculated by summing up all capital costs of all the projects of a certain

type (i.e. offshore and onshore) and located in a specific region; then by calculating the variation of

this total sum between the updated and the previous version of QUE$TOR.

• Cost change by cost category: this is calculated by summing up all the capital costs of that specific

cost category (e.g. Equipment, Materials, Construction, Fabrication, etc.) for all components for all the

projects in the portfolio (i.e. offshore and onshore) in all regions; then by calculating the variation of

this total sum between the updated and the previous version of QUE$TOR.

• Cost change by component type: this is calculated by summing up all the capital costs for all the cost

categories of that specific component (e.g. Topsides, Production facility, Tanker, Infrastructure, etc.) in

the portfolio (i.e. offshore and onshore) in all regions; then by calculating the variation of this total

sum between the updated and the previous version of QUE$TOR.

• Cost change by project type: this is calculated by summing up all the capital costs for all the projects

of a specific type (i.e. offshore and onshore) in the portfolio in all regions; then by calculating the

variation of this total sum between the updated and the previous version of QUE$TOR.

31



QUE$TOR benchmarking portfolio offers global coverage

32

25-30 projects 10-15 projects 3-5 projects



Technical upgrades

• The technical changes that have most significantly affected project cost estimations are:

• The onshore drilling durations data update increased onshore drilling durations and, therefore, the drilling costs. The

additional line items in offshore drilling impacted offshore drilling costs due to increased durations and day rates for

certain vessel types to better account for required activities.

• The update of technical data and changes to the generator set and turbine list, including expanding the onshore

generator sets, increased Topsides and onshore component costs due weight changes, and variations in civils area

requirements for some machines.

• The offshore installation vessel definition has improved the level of detail of individual vessel types used in

installation activities for jacket, bridge link, and topsides components, resulting in modified cost estimates for

installation activities within these components.

• The adjustment of Topsides material bulk factors associated with high pressure manifolds caused an increase in

Materials costs in some Topsides components, which had a cascaded effect on substructure costs (e.g. by

increasing the semi-submersible hull steel quantity required to support a larger weight).

33

• Technical changes implemented in QUE$TOR 2020 Q3 were:• Generator set and turbine list update

• Subsea individual riser editable properties

• Moveable links in subsea schematic

• Addition of transit distance to spoolbase in Subsea and

Offshore pipeline

• Onshore drilling duration data update

• Additional line items in Offshore drilling

• Subsea testing and commissioning vessel changes

•

• Compact deck configuration added in Topsides

• Offshore installation vessel definition

• Inclusion of gas turbine area in the onshore product export civils

area

• Fast rescue craft option added in Topsides facilities

• Pressure profile changes related to hydrostatic pressure and

frictional loss from the seabed to surface, when landfall is selected

• Adjustment of Topsides material bulk factors associated with high

pressure manifolds



Global market trends

• There is no denying that the COVID-19 pandemic has been one of the greatest

challenges our world has faced for generations.

• The lockdowns and quarantines have taken a huge bite out of oil demand and this has eroded oil

prices.

• Energy markets are fundamentally changing, shifting towards low carbon, a shift driven by social

expectations, technology, and changes in consumer spending patterns.

• In response to the rapidly changing market conditions, many companies have decided to

either cease or decrease capital expenditures, and upstream oil and gas companies are

facing increasingly complex strategic decisions.

• Weakening economic growth, intensifying trade tensions, and global political risks are

dominating the rest of 2020 and setting the ground for an uncertain and challenging

2021.

• The effect of all these factors remains unclear as we move forward. Economic recovery

and investment decisions depend largely on how soon the pandemic will be under

control; an effective vaccine and its rapid distribution could produce a rapid return to a

new normal, whilst a longer duration for lockdowns and social distancing throughout the

world could mean a deeper recession and slower recovery.

34



Cost data adjustments

• The global oil and gas market has continued to adjust to the uncertainty caused by

COVID-19 and the weakness in the oil price. Overall material, labour, equipment costs,

and most vessel rates have been decreasing. As the second and third quarters of 2020

have progressed, the unprecedented effects of COVID-19 have continued with no clear

end in sight. Cost volatility is expected to continue.

• QUE$TOR takes a considered view and tries to avoid any transient cost variations with

the aim of providing accurate cost data to be used for cost estimation purposes.

Therefore, users may see some differences in trends, especially for commodity prices as

compared with the latest available data.

• Some costs were adjusted to be closer to the latest real project data available and not

necessarily to align with the most recent market movement; others were adjusted in the

view of how the market will probably evolve. The adjusted data were:

• Subsea control costs were increased for some regions to have a more global rate despite global

market trends being almost flat.

• Day rates for some construction vessels (e.g. J-lay pipe vessel) were decreased in most regions to

be more in line with market levels. However, market trends for these vessels slightly decreased or

remained flat. Some regional adjustments (declines of about 5-20% depending on the region) were

also implemented for subsea supply vessel, subsea diving vessel, dredging vessel, and rock

dumping vessel.

35



Customer suggestions and feedback


• Does this report provide enough information?

• Does it meet your expectations?

• Is there anything you would like us to add or replace?

We would love to hear your thoughts

Please provide your feedback by contacting us at

[email protected]

Thank you!

36


QUE$TOR Customer Support

[email protected]

Americas: +18004472273

Europe, Middle East and Africa: +44(0)1344328300

Asia Pacific: +6042913600

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QUE$TOR Benchmarking Analysis Report - IHS Markitproductdownloads.ihs.com/private/release/Que$tor... · QUE$TOR Benchmarking / November 2020 5 •From Q1 2020 to Q3 2020, average