All field development estimates will cover the CAPEX, OPEX and Decommissioning phases. Following the initial provision of all known relevant data and information, we will assess the Class/Type estimate that can be produced.

The Cost Estimate Classification System adopted and used by OGDE is the PDF file AACE International Recommended Practice No. 18R-97 (PDF, 3.5 MB).

Cost Estimate Classification Matrix For The Oil & Gas Industries

The following Figure 1 shows the levels of estimate classification together with the primary and secondary characteristics.

This guideline reflects generally-accepted cost engineering practices. This addendum was based upon the practices of a wide range of companies in the process industries from around the world, as well as published references and standards. Company and public standards were solicited and reviewed, and the practices were found to have significant commonalities. These classifications are also supported by empirical process industry research of systemic risks and their correlation with cost growth and schedule slip.

Figure 1

  Primary Characteristic Secondary Characteristic
Estimate Class MATURITY LEVEL OF PROJECT DEFINITION DELIVERABLES
Expressed as % of complete definition
END USAGE
Typical purpose of estimate
METHODOLOGY
Typical estimating method
EXPECTED ACCURACY RANGE Typical variation in low & high ranges [a]
Class 5 0% to 2% Concept Screening Capacity Factored, Parametric Models, Judgment, or Analogy L: -20% to -50%
H: +30% to +100%
Class 4 1% to 15% Study or Feasibility Equipment Factored or Parametric Models L: -15% to -30%
H: +20% to +50%
Class 3 10% to 40% Budget Authorization or Control Semi-Detailed Unit Costs with Assembly Level Line Items L: -10% to -20%
H: +10% to +30%

[a] The state of process technology, availability of applicable reference cost data, and many other risks affect the range markedly. The +/- value represents typical percentage variation of actual costs from the cost estimate after application of contingency (typically at a 50% level of confidence) for given scope.

.

The Characteristics of the Estimate Classes; C5,C4 and C3

The following Figures 2, 3, and 4 provide detailed descriptions of the five estimate classifications as applied in the process industries. They are presented in the order of least-defined estimates to the most-defined estimates. These descriptions include brief discussions of each of the estimate characteristics that define an estimate class.

For each table, the following information is provided:

  • Description: a short description of the class of estimate, including a brief listing of the expected estimate inputs based on the maturity level of project definition deliverables. The 'minimum' inputs reflect the range of industry experience, but would not generally be recommended.
  • Maturity Level of Project Definition Deliverables (Primary Characteristic): Describes a particularly key deliverable and a typical target status in stage-gate decision processes, plus an indication of approximate percent of full definition of project and technical deliverables. For the process industries, this correlates with the percent of engineering and design complete.
  • End Usage (Secondary Characteristic): A short discussion of the possible end usage of this class of estimate.
  • Estimating Methodology (Secondary Characteristic): a listing of the possible estimating methods that may be employed to develop an estimate of this class.
  • Expected Accuracy Range (Secondary Characteristic): typical variation in low and high ranges after the application of contingency (determined at a 50% level of confidence). Typically, this represents about 80% confidence that the actual cost will fall within the bounds of the low and high ranges. The estimate confidence interval or accuracy range is driven by the reliability of the scope information available at the time of the estimate in addition to the other variables and risk identified above.

Figure 2

Class 5 Estimate

Description
Class 5 estimates are generally prepared based on very limited information, and subsequently have wide accuracy ranges. As such, some companies and organizations have elected to determine that due to the inherent inaccuracies, such estimates cannot be classified in a conventional and systematic manner. Class 5 estimates, due to the requirements of end use, may be prepared within a very limited amount of time and with little effort expended—sometimes requiring less than an hour to prepare. Often, little more than proposed plant type, location, and capacity are known at the time of estimate preparation.

Maturity Level of Project Definition Deliverables
Key deliverable and target status: Block flow diagram agreed by key stakeholders. 0% to 2% of full project definition.

End Usage
Class 5 estimates are prepared for any number of strategic business planning purposes, such as but not limited to market studies, assessment of initial viability, evaluation of alternate schemes, project screening, project location studies, evaluation of resource needs and budgeting, long-range capital planning, etc.

Estimating Methodology
Class 5 estimates generally use stochastic estimating methods such as cost/capacity curves and factors, scale of operations factors, Lang factors, Hand factors, Chilton factors, Peters- Timmerhaus factors, Guthrie factors, and other parametric and modeling techniques.

Expected Accuracy Range
Typical accuracy ranges for Class 5 estimates are -20% to -50% on the low side, and +30% to +100% on the high side, depending on the technological complexity of the project, appropriate reference information and other risks ( after inclusion of an appropriate contingency determination). Ranges could exceed those shown if there are unusual risks.

Figure 3

Class 4 Estimate

Description
Class 4 estimates are generally prepared based on limited information and subsequently have fairly wide accuracy ranges. They are typically used for project screening, determination of feasibility, concept evaluation, and preliminary budget approval. Typically, engineering is from 1% to 15% complete, and would comprise at a minimum the following: plant capacity, block schematics, indicated layout, process flow diagrams (PFDs) for main process systems, and preliminary engineered process and utility equipment lists.

Maturity Level of Project Definition Deliverables
Key deliverable and target status: Process flow diagrams (PFDs) issued for design. 1% to 15% of full project definition.

End Usage
Class 4 estimates are prepared for a number of purposes, such as but not limited to, detailed strategic planning, business development, project screening at more developed stages, alternative scheme analysis, confirmation of economic and/or technical feasibility, and preliminary budget approval or approval to proceed to next stage.

Estimating Methodology
Class 4 estimates generally use stochastic estimating methods such as equipment factors, Lang factors, Hand factors, Chilton factors, Peters-Timmerhaus factors, Guthrie factors, the Miller method, gross unit costs/ratios, and other parametric and modeling techniques.

Expected Accuracy Range
Typical accuracy ranges for Class 4 estimates are -15% to -30% on the low side, and +20% to +50% on the high side, depending on the technological complexity of the project, appropriate reference information, and other risks (after inclusion of an appropriate contingency determination). Ranges could exceed those shown if there are unusual risks.

Figure 4

Class 3 Estimate

Description
Class 3 estimates are generally prepared to form the basis for budget authorization, appropriation, and/or funding. As such, they typically form the initial control estimate against which all actual costs and resources will be monitored. Typically, engineering is from 10% to 40% complete, and would comprise at a minimum the following: process flow diagrams, utility flow diagrams, preliminary piping and instrument diagrams, plot plan, developed layout drawings, and essentially complete engineered process and utility equipment lists.

Maturity Level of Project Definition Deliverables
Key deliverable and target status: Piping and instrumentation diagrams (P&IDs) issued for design. 10% to 40% of full project definition.

End Usage
Class 3 estimates are typically prepared to support full project funding requests, and become the first of the project phase control estimates against which all actual costs and resources will be monitored for variations to the budget. They are used as the project budget until replaced by more detailed estimates. In many owner organizations, a Class 3 estimate is often the last estimate required and could very well form the only basis for cost/schedule control.

Estimating Methodology
Class 3 estimates generally involve more deterministic estimating methods than stochastic methods. They usually involve predominant use of unit cost line items, although these may be at an assembly level of detail rather than individual components. Factoring and other stochastic methods may be used to estimate less-significant areas of the project.

Expected Accuracy Range
Typical accuracy ranges for Class 3 estimates are -10% to -20% on the low side, and +10% to +30% on the high side, depending on the technological complexity of the project, appropriate reference information, and other risks (after inclusion of an appropriate contingency determination). Ranges could exceed those shown if there are unusual risks.

The Basis of Estimate (BoE) >

Who we have worked with...

  • Shell
  • BP
  • Statoil
  • Chevron
  • Marathon Oil
  • ENI AGIP KCO
  • Petro-Canada