
UPSTREAM EP ADVISORS
Where Technical Insight Meet Business Solutions
Capital Cost Estimation

HOW CAPITAL COSTS ARE ESTIMATED
Base Estimates
This is the estimate based on the defined project scope, including owners costs and the development/ activity allowances, but excluding contingencies, market adjustment and escalation. They are in constant value of money (CVM) with a reference date.
Allowances
Activity or development allowances are integrated into the base estimate to cater for statistically known unforeseen elements, such as
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bulk material growth;
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minor quantity increases;
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rework;inefficiencies;
Market Adjustments
Market adjustments are made to account for market uncertainties. The projects within two years of FID should use current market conditions. Project with more than two year, market factors should be estimated and linked to oil & gas prices.
Contingency
It is added to the base estimate to allow for incomplete project definition and specific project risks to bring the estimate to a 50/50 level. Contingencies are based on risk score and reducing in each project stage; from Identify to execute stage.
EPC Mark up
EPC contractor charge a premium on, the degree of commercial/financial risk they are prepared to shoulder, and the premium they will seek for carrying the risks assigned to them. Expect significant EPC mark-up over your cost estimates, in a new project in a challenging location.
WHERE WE NEED COST ESTIMATE
IDENTIFY Phase (Level-0): We needs high-level scouting estimates (contingency +/- 50%)
ASSESS Phase (Level-1): We need estimates for feasibility stage
SELECt Phase (Level -2): The pre-FEED cost estimates in Concept stage to compare different concepts.
DEFINE Phase (Level -3): Estimates in FEED stage are for estimating Execute Budget
EXECUTE Phase (Level -4): Detailed estimates by EPC contractor based on bill of materials