Julia Rager

Drew Terry
Micheondra Williams
CEPM4
12-8-05

Oil and Gas Platform Cost Estimation

Our program was created with the motive of estimating costs for an oil or gas

offshore platform. In order to do so, much research was necessary in order to find how

different factors effected price. After the research was completed, the program was

written and tested. With some final tweaking, we were able to create an accurate

program that receives some preliminary guidelines from a user and then gives the

resulting cost values.

To make this project achievable, assumptions were made before looking up

specific information. Firstly, only three major platform locations were considered: the

Gulf of Mexico, Eastern Mediterranean, and West Africa. Some locations that were

purposely excluded were the North Sea, East Asia, United State’s West and East

Coast, Alaska, and Brazil. The three possible locations contain most of today’s offshore

platforms, so this assumption did not hurt the program in such a way as to make it

unusable. Secondly, all platforms are assumed to be fabricated in the United States and

then transported to an offshore installation site. With this assumption, differing costs of

labor and materials based on location could be ignored when considering the structural,

equipment, and outfitting costs. The different locations only affect the transport and

installation costs then. Also, the platform structural type is assumed to be a

conventional fixed jacket and deck that is piled to the sea bed. As a result, our program

does not include tension leg platforms, SPAR platforms, etc. Lastly, a range of possible
platform configuration data points are used, and shown in the following tables. Only

these possible ranges are considered because any values outside of them are not

meaningful or economical.

Research was then done surrounding these assumptions. The first major

epiphany that we ran across was that engineers do not know how large a platform will

be when initially planning the construction. Instead, they take the type of production

facility (either gas or oil) and water depth into consideration, and then decide how large

a platform should be. Also, the production rate directly affects how large and costly the

deck itself will be. With this in mind, a set of initial questions that the program should

ask were created. The questions that set the parameters of all calculations give the

following information: platform installation location (Gulf of Mexico, Eastern

Mediterranean, or West Africa), type of production facility (gas or oil), type of platform

(production or drilling and production), water depth (in feet), and production rate (in
mmscfd or bopd). With this small amount of information, formulas were created to find

the size and cost of an offshore platform.

In order to create these formulas, the total cost of a platform was split up into five

parts: structural, equipment and outfitting, transport and installation, engineering and

project management, and contingency costs. Each of these five categories required

different techniques in order to derive accurate equations.

Structural costs include the cost of the jacket, piles, anodes, deck, protective

coatings, boat landings, bumpers, etc. To calculate the jacket cost, the weight was first

calculated, which was dependent upon water depth and platform type. Using many data

points of previously built platforms, different equations were created for each range of

water depth. After the weight, in tonnage, was derived, the jacket’s cost could be

determined by using a simple unit cost ($/tonnage) of material. This same technique

was utilized in finding equations for the piles’ weight and cost. The Anode’s weight was

then found easily because it was directly proportional to 1/15 of the jacket’s weight.

Then, a unit price was, again, used. When deriving equations for the deck cost, the

deck area was initially found in a similar manner as the jacket’s tonnage, and then a unit

cost ($/ ft2) was used. The deck area was dependent upon the production facility type,

production rate, and platform type. Also, the unit cost measurement was dependent

upon the facility type. A flat rate on all other miscellaneous costs averaged out to be

$250,000. From here, the total structural cost was set equal to the sum of the jacket,

piles, anodes, deck, and miscellaneous costs.

Equipment and outfitting costs include topside production equipment, piping,

electrical and instrument controls, and onshore hook-up and tests costs. Again, using
previous data, we found that the topside production equipment cost is dependent on the

facility type and production rate. All other costs under this category were conveniently

proportional to the topside production equipment cost.

Transport and installation cost was the most difficult to derive and calculate

because the data was dependent upon the facility type, production rate, water depth,

and platform installation location. The task of generalizing each range of possibilities

proved to be very difficult. Attached to this report is a print out of all the factors included

in each range. Some connections and simplifications could be made off of these, but not

many. In the end, many “if then” statements were necessary to chip away at each

possibility, and an equation could be found for each specific situation.

Engineering and project management costs, as well as contingency costs were

estimated to be around 12% of the subtotal. The subtotal includes all costs up until this

point. Contingency costs were included in case any construction goes awry, or costs

were miscalculated. Finally, the total estimated cost could then be calculated to be the

sum of the subtotal, engineering and project management cost, and the contingency

cost. To check if the final estimation was accurate, real data was used to compare off

of. All of our results turned out to be surprisingly accurate.

Programming

In order to create a Visual Basic program that could execute these calculations,

we had to figure out a way to form a path leading from the user input values to the final

cost estimation. The obvious method of doing this was through “IF” statements and the

most efficient way of developing the program was through separate parts, or sub-

functions.
 The first step was to create a user interface that would be straight forward so that

anyone, even someone who has never used a program before, could easily make

sense of what values should be input. To do this, the first three values to identify,

location, production type, and production facility, are simply chosen through option

buttons. Remaining inputs, water depth and production rate, are then entered into a

message box that asks the user to give numbers in a certain range. The program will

not continue until the user inputs values inside the suggested range. VB Code to do

this was written as the main body of the program along with variable assignments and

function calls.

After the user interface was developed, the next step was to write the functions

necessary to complete the program. Each function was written and tested individually

to easily identify and filter out any problems that may have occurred. Functions were

structured as levels of “IF” statements that led to the calculation of one cost value. For

example, the Transportation and Installation cost depends on not only the location of

the rig but the type of production, the production rate, and the water depth as well.

Obviously, every combination of variables had to be accounted for. So if the rig was

located in West Africa, if the rig was to produce gas, if the production rate was within a

certain range, and if the water depth was within a certain corresponding range, then the

Transportation and Installation cost was assigned a unique equation according to those

parameters. Writing a separate equation to go with every combination of parameters

became quite tedious but proved to be an easy way to go about writing the code.

Once the main program was written, a method of outputting the program results

had to be decided upon. To allow the user to easily save the results, the estimated cost
values were written to a sequential text file in the C:\ drive. Also, a picture box was

added with a similar output as the sequential file to immediately display the results on

completion of the program.

Generally speaking, the program came together quite easily and when finished,

proved to be very user friendly.

Programming Problems

Problems that arose during the development of the program included repetition,

variable misprints, and improper variable assignments or declarations. Because the

program was tested as each function was written, identifying a problem was made easy,

most of the time.

Repetition occurred when writing “IF” statements that had parameters depending

on water depth and production rate. For example, the user is asked to type in values

inside a certain range for water depth, but this range was split up into parts because

one equation does not describe the affected cost for all values of water depth. The

transition values from one range to the next had to be written carefully as not to overlap

any numbers; otherwise we would end up with two different equations for one water

depth.

Common occurrences that are easily overlooked are variable misprints. When

writing a program, it is easy to misspell or type a variable name wrong, a very small

mistake but as a result, the program will not function. Separating the program into

functions helped locate the misprints as we scrolled through the code to find where the

problems were.
 Lastly, the program was halted due to improper variable declarations and

assignments. For example, in the first case a variable was mistakenly declared as two

different types, Currency and Single, so when the command button was pressed, errors

occurred. In the later case, equations assigning values to variables were missing a

multiplication sign, which caused errors, or missing parenthesis, which caused

miscalculation. An equation missing parenthesis was a very difficult dilemma to

overcome because the program could still be executed with no errors. The only way to

identify this problem was to test the program for all combinations and analyze the

output.

Overall, problems within the code were a small occurrence and whenever one

would arise, was easily identified and fixed.

In conclusion, extensive research led to a method of estimating the cost of

constructing oil and gas offshore platforms. Once this was done, we could write a

program that would allow users to set their own parameters and analyze an estimated

cost unique to their project stipulations.