Maersk Oil Speeds Decisions, Extends Competitive Edge by Streamlining E&P Project Cost-Estimation
This Danish energy firm makes expert use of an IHS tool to meet tight deadlines for project bids -- eliminating the need for hundreds of hours of manual cost-estimation and saving 75% of the time required to ramp up an outside contractor -- while giving decision makers confidence in the estimates’ proven accuracy.
- Evaluate global exploration and production opportunities to choose the most profitable
- Accelerate early-stage cost evaluations in order to provide competitive advantage
- Assure accuracy of early-stage cost estimates as basis for business decisions
Energy with QUE$TOR™
- Improved ability to meet tight deadlines for project bids by eliminating need for 100s of hours of traditional, manual cost-estimation work
- Used tool in-house and saved 75% of the time that would be required to ramp up with outside contractor – e.g. 2 days versus 2 weeks
- Provided high degree of confidence in accuracy – e.g. early-stage estimate done in hours was within 10% of detailed estimate that took a week
- Generated numerous estimates in a short time to account for broad range of factors/variables
- Collaborated with system developers to enable on-going system enhancements that meet company and industry-wide needs
Maersk Oil Streamlines E&P Project Cost-Estimation
Maersk Oil is committed to unlocking potential – recognizing bold new opportunities while clearly understanding and managing risks.1 When it was established in 1962, this independent Danish oil company (a fully-owned subsidiary of the global conglomerate, the A.P. Moller - Maersk Group) began by exploring in the Danish part of the North Sea. Today it operates on a global scale, producing oil in not only the North Sea but also in Qatar, Algeria, and Kazakhstan as well as conducting exploration activities in the US Gulf of Mexico, Angola and other locations. In one region after another, Maersk Oil has transformed challenging fields into commercial successes and a strong industry leadership position by pioneering new technologies and harnessing talent.2
The success of Maersk Oil's expansion strategy depends on the ability of decision makers to make smart choices. Company leaders determine the value and cost-effectiveness of each exploration and production (E&P) project so they can select the most profitable opportunities. The stakes are high, with many projects costing about 1 billion US dollars,3 and the company must act fast in order to beat global competitors to the next great opportunity.
Fortunately, Maersk Oil's team of executives, scientists, engineers and analysts has proven extraordinarily adept at making these decisions. A key contributor on many major projects is Stephen Brown, a Maersk Oil project manager with recognized expertise in concept screening, optimization and cost estimation who has been using QUE$TOR software since 1998.
Understanding Operational Challenges
"The process starts with geological uncertainty about what could be there and then you add the uncertainty about what the production facility would look like," said Brown. "Then put in the reality of a production schedule and you end up with a range of big-to-small cost scales – knowing that you still face uncertainty about how much gas or oil is available."
Evaluating a project's potential rewards and risks can be complex and difficult. The work typically requires expenditure modeling, market research, development scheduling, support for feasibility studies and concept selection, and more. If done manually, hundreds of hours of research and analysis might be required.
Accelerating In-House Analysis
Many of the business development opportunities that Maersk Oil considers have very narrow windows for submitting bids. Providing cost estimates with a high level of confidence within those short timeframes is vital to the company's success.
"QUE$TOR is a very good tool for quickly coming up with the early-stage cost estimates," said Brown. "There are other commercial products out there, but I don't think any come close to QUE$TOR's functional flexibility, ease of use or repeatable accuracy.
However, it is important to recognize that every tool is only as good as the people who use it. So competent people is key no matter which tool is used."
By having the right tool in-house and using it intelligently, you can save more than 75 percent of the time that it would take to get to the same answer from outside.
If Maersk Oil did not have QUE$TOR, Brown says that the company would have to find a contractor who has their own systems or a team of market researchers and software developers to build an alternative. Either option would take far more time and present a risk to the company's ability to meet bid deadlines.
"This tool is built on years of experience, expertise and continuous improvement," observes Brown. "By having the right tool in-house and using it intelligently, you can save more than 75 percent of the time that it would take to get to the same answer from outside. It once took a contractor 2 weeks to do a job that would have taken us about 2 days in-house."
Streamlining Cost Estimates
For more than 15 years, Brown and other Maersk Oil project managers have used QUE$TOR to rapidly estimate: a full range of operational costs; sizing of facilities, pipelines and substructures; implementation schedules to predict cash flows; and more. Using Maersk Oil primary data and leveraging basin data within the IHS Markit solution, they have readily generated production models to support concept development and design flow rates.
When Maersk Oil colleagues who were not involved in the initial review provide feedback later in the internal review process – and those issues inevitably raise new challenges that can impact the model – Brown can easily address the issues.
"Having a tool that is flexible and easy-to-use allows me to take a probabilistic approach when dealing with multiple uncertainties," said Brown. "It enables me to quickly account for a broad range of cost factors that change over time and across projects."
Demonstrating Speed and Accuracy
In his evaluation of a recent project in the Middle East, for example, Brown needed to take four key variables (oil, water, gas and hydrogen sulfide content) and come up with cost estimates for a range of 10,000 barrels a day to 100,000 barrels a day.
"I can build a perfect model in the system and quickly get a cost," said Brown. "Typically, I have a conic - five points on a slide curve. There is a point for cost, gas handling, gas compression, gas treatment, and for Sulphur recovery. I calculated the results within just a few days because I could input the parameters, quickly make changes, save the answers, and produce single spreadsheets as needed. That saved us a lot of time."
On a similar project, a local contractor spent an entire week using another system to develop the detailed analysis and came back with a cost estimate that was within 10 percent of what Brown had calculated in a matter of hours with QUE$TOR.
While individual results vary, the overall accuracy of Brown's estimates has provided company leaders with confidence when making fast, critical decisions.
Collaborating for Continuous Improvement
Project managers at Maersk Oil facilties worldwide use QUE$TOR to collaborate with their teams. Brown's long experience and special expertise with the system have turned him into a 'go-to' resource. He is often asked to provide concept development cost-estimate advice on Maersk Oil projects around the world.
Over the years, Brown has also been a valued collaborator with IHS Markit developers, periodically offering suggestions for enhancements to QUE$TOR.
"I know the tool's history and its capabilities. So when I identify a limitation, I am glad to suggest mechanisms for addressing the issue as well as providing external feedback while the IHS Markit team works on continuous improvements."
As a result of Brown's active collaboration, the 200-plus oil and gas companies in 50 countries who use QUE$TOR worldwide now have access to enhanced E&P cost-estimation capabilities. Maersk Oil is indeed pioneering new technologies, harnessing talent, and strengthening its industry leadership position.
3 billion US dollars (USD) is equivalent to more than 5 billion Danish kroner (DKK)0