2015 ARKH-P6-Project Management

PROJECT DEVELOPMENT

COST ESTIMATING DURING STUDY PHASE

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PROJECT DEVELOPMENT

HOW TO PERFORM A COST ESTIMATE

THREE MAIN METHODS FOR COST ESTIMATING

First “the Rule of Thumb”: US$/bbl US$/MMcfd, or by analogy with an other project (ratio between capacity with exponent 0.6)

i.e. a project to produce 150 MMcfd (equivalent to 25 000 bbl/d) could cost 400MM US$, what about a 250 MMcfd project with similar conditions:

400 x 250/150 exp 0.6 = 543 MM US$

But of course we have to adjust by other factors: escalation, country…

Second method - “Semi-Analytic estimate” . Factorisation method is often used.

Finally the “Detailed Cost Estimate”,

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PROJECT COST MONITORING

BUDGET

BUDGET

Once the Cost Estimate is ready and the Project agreed by the Operator and the Partners, the Initial Budget is finalised. Built in accordance with the WBS structure and the Project Schedule, this Budget will also be a Life of Project (LOP) Budget.

Accounting of a Company is normally based on a yearly basis, while a development Project must be followed along its all “Life”. Project Commitments (see below) have to be followed on a pluriannual basis.

Initial Budget may require some adjustment during the Project Life: either for the transfer of a provision or a budget line from one Package to an other, or the deletion/addition of one line. The Budget amended will become the “Revised Budget”.

Finally at the end of the Project, the final cost analysis will create the “Final Budget”.

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PROJECT COST MONITORING

WHY ?

To coordinate the efforts of the Project team to keep the expenses and the commitments within the envelope agreed by the Management and the Partners.

To ensure that the expected economic criteria of the Project will be met.

To keep the same methodology across the Project and sub-Projects and to establish and verify the good circulation of the information.

To satisfy the reporting obligations in terms of : legal ,fiscal ,operational ,management and partners reporting

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PROJECT COST MONITORING

FOR WHO ?

For the Owner and/or Operator :To inform the Finance Division when and as needed,for cash calls and impact on the overall Company Financing Plan

To inform the Partners in accordance with Management Agreement

For the top Management of the Project but also to keep all Managers of the Project aware of the situation

For the Lenders and Banks (if any)

To coordinate the figures to be passed to the main office Management - updating of the economic criteria

To inform the Insurance division of any significant changes (update of the CAR policy)

For back-up and updating of the home office data base

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PROJECT COST MONITORING METHODOLOGY EXPENDITURES INCURRED-PROGRESS

(INVOICE APPROVED)

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PROJECT MANAGEMENT

PROJECT EXECUTION PHASE

Quality

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