Published June 2019
In our continuous discussions with clients around the world, a topic of frequent interest and priority is the variation between construction cost levels in different locations (“Location Factor”). In general, much of the relative cost fluctuation can be attributed to wide swings in global currency exchange rates and, in some regions, improving skilled labor productivities, local labor rates and project development procurement strategies.
To help our customers understand the fundamentals of location factors, we conducted primary market research and developed a location factor model and methodology that reflects IHS Markit macroeconomics and the country-specific costs needed to develop relative location factors for the construction of petrochemical, chemical and refinery plants. The results and methodology were published in our Location Factor PEP Report RP 204C (December 2016).
PEP Review 2019–12 Location Factor Model
In the 2019 PEP Review (like 2016 Report 204C), we include geographical coverage of 12 locations:
2. Canada (Alberta)
3. China (coastal)
8. Russia (Surgut, Western Siberia)
10. Saudi Arabia
11. South Korea
12. United States (Gulf Coast)
Any geography can be set to 1.0 as the basis country. Note that the base case shows location factor subcomponents relative to the US Gulf Coast and are on a third quarter 2016 basis.
An important user experience of the PEP Review 2019–12 Location Factor Model is enhanced functionality for customers, who can now:
- Estimate a 10-year forward view of location factors.
- Set and/or view scenario conditions (e.g., “test” alternate labor and equipment EPC business models/approaches).
- Input the user’s own time series of macroeconomics and cost data.