Perculator a unified cost estimating and economic evaluation tool, gains early insights of economic assessments in a portfolio of development options. This tool was developed using the experience of front end estimation across a broad range of clients and developments through a collective effort spearheaded by our Field Development team supported by the Subsea Systems, Subsea Pipelines, Risers and Floating Structures teams.
The technical function of Perculator is illustrated in Figure 1 below, in the context of a typical Field Development study framework. The primary function of Perculator within the framework is to consolidate cost estimate building block information to generate CAPEX estimates for various concepts.
Figure 1 – Perculator within a Field Development Framework
Perculator significantly improves the clarity of workflow, thereby allowing the generation and compilation of a large number of building blocks for multiple concepts with ease, thus enabling concepts to be easily broadened and explored thoroughly.
Perculator is structured to work equally across a range of cost estimate accuracy levels, from high-level estimates at AACE Class 5 down to FEED level estimates at AACE Class 3. The accuracy is determined by the level of cost and engineering definition in the building blocks, allowing a seamless transition across phases as the building block detail and definition progresses.
In addition to CAPEX estimating, the early economic assessment tool embedded within Perculator can calculate cash flows, tax profiles over time and key metrics such as NPV, IRR and VIR. This provides an early appreciation of economic metrics, enables early case refinement and screening, and gives the development team valuable insights within a short time frame. This is especially valuable in the evaluation of complex cases with different income streams (e.g. varying product types, production rates, phasing, pricing) and under different tax regimes.
The benefits that Perculator adds to a field development project include:
- Utilisation of the Peritus global costing library;
- Establishment of common priorities between the engineering and management teams;
- Rapid development of alternative concepts, and rapid update of estimates as understanding evolves;
- Generation of preliminary ranking of concepts; and
- Provision of early insights on likely economic outcomes for decision makers.
Perculator has been developed with in-house norms, but can be quickly and easily customised to match any specific client norms, making it a versatile, yet simple, tool to use at all stages of development.
Perculator has already been employed on a number of projects, and has demonstrated its ability to rapidly provide estimates and economics for a variety of options, leading to clear insights into the relative value of options and facilitate decision making.
Case Study – Assess Phase FDP
The Field Development team utilises Perculator on Assess phase studies. One such study, executed over 3 months, used Perculator to compile CAPEX, OPEX and revenue inputs as an enabler to provide rapid economic screening of options. It supported the client by identifying a number of new opportunities and resulted in key changes to the project’s Field Development Plan, with significant cost savings and value improvements.
The study involved a complex development that included a portfolio of existing infrastructure, deep and shallow water operating fields, marginal fields and potential 3rd party fields. The client approached Peritus to support them in “thinking outside the box” and to identify alternate solutions that would improve the project economics through challenging previous concept work and the original development drivers.
Peritus facilitated a series of framing workshops with the client enabling alignment across the project team, compilation of key inputs from subject matter experts, introduction of new and emerging technologies concepts, and identification of a wide range of opportunities and challenges. A total of seventeen options were generated through the brainstorming workshop involving different downstream markets, upstream sources and campaign phasings. The work program executed by Peritus is identified in the Figure 2.
Figure 2 – Opportunity Identification Work Plan
The Field Development team executed the study supported by the Peritus Subsea Systems, Subsea Pipelines, Risers, Flow Assurance and Floating Structures teams. Production profiles and reservoir depletion strategies were developed by the Peritus team for each option (in consultation with the client), often scaling or making intuitive assumptions based on experience (Figure 3 – Example of Reservoir depletion strategies developed by Peritus).
Figure 3 Reservoir Depletion Strategies (Developed by Peritus)
Over thirty cost estimate building blocks were then developed and Perculator was utilised to consolidate and estimate the CAPEX and associated economics metrics for each option (assuming different options for tax treatment across issues such as PRRT). Some key outputs from Perculator are shown in Figure 4 and Figure 5 below.
Figure 4 NPV Vs CAPEX
Figure 4 identifies the estimated NPV vs CAPEX (present value) for various development options and it assists with identifying those options with higher NPVs and lower CAPEX, compared to the Base Case.
Since some of the various concept options are not exclusive of each other, it was possible to use the analysis present a ‘creaming curve’ whereby the maximum value could be obtained by arranging the options in a development sequence. This is demonstrated in Figure 5 by plotting cumulative NPV vs CAPEX (present value).
Figure 5 Cumulative NPV vs CAPEX
The VIR (‘value investment ratio’), also shown on Figure 5 was used in this project as a financial indicator. It is derived by dividing the NPV by the CAPEX (i.e. the slope between any two points). A higher VIR indicates a greater economic return per dollar invested.
Although this exercise was performed at a high level with a range of approximated inputs and Peritus’ in-house assumptions, Perculator was able to quickly and clearly evaluate and compare economic indicators for the seventeen alternative development scenarios against the Base Case, thereby identifying attractive alternatives and providing a basis for forward planning of more detailed technical and economic assessments.