IHS CERA Capital Cost Analysis Forum - Brazil

The Brazil Capital Costs Analysis Forum service reports on activity along the engineering, procurement and construction (EPC) value chain, assesses the maximum achievable local content and projects the cost for different inputs under distinct scenarios and a specific set of assumptions. It also shows how this knowledge can provide a competitive advantage. By carefully monitoring market changes, explaining their drivers and projecting the implications under different scenarios, the Forum enables members to anticipate the cost and schedule of different development projects, plan for the impact of local content requirements and implement strategies for success.

Forum members receive

• A comprehensive source of information:  The IHS CERA Brazil Capital Costs Forum Advisory Service tracks the performance of 10 key markets within Brazil and globally. It leverages the IHS Global Scenarios, in particular IHS CERA Energy Scenarios for Brazil, as a tool to project the impact of geopolitical events, changes in regulations and the local investment environment on oil and gas development costs. The service also tracks the performance of local contractors to draw key insights about the evolution of contractor participation in the context of local requirements.
• Easy access:  Brazil Capital Costs Forum Advisory Service information and reports are accessed on ihscera.com.
• Timely updates: Service members meet twice a year to discuss findings and set the agenda for research and modeling. In addition, quarterly reports present in-depth analysis of current issues and strategies.
• User support:  Rio-based IHS CERA professionals are available to answer questions concerning the methodology of the analysis and other specific Forum topics.

Benefits:

The Brazil Capital Costs Analysis Forum service enables members to

• Use in their strategic planning our overview and analysis of key markets (steel, engineering, project management, construction labor, bulk materials, fabrication, offshore and onshore rigs, subsea and installation vessels) and future trends over the next five years.
• Compare offshore capital cost index updates and analyze against trends in other global offshore provinces. 
• Incorporate into project planning our analyses of achieved and achievable local content, with five-year projection.
• Schedule and follow up on development projects, including estimated costs and completion times.

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At the core of the Brazil Costs Forum are a set of indexes used to monitor the current state of the global and Brazilian upstream cost environment, together with Brazil offshore project portfolio used to define and generate index values. IHS CERA experts apply insight and local industry knowledge to frame changes in index values against larger issues such as local contractor capabilities, local content requirements, labor shortages, indirect taxation or changes in regulations or investment environment. Likewise, the tools used to develop and analyze the indexes also enable projections of the potential impact of long-term trends on project fundamentals.

The IHS CERA Brazil Cost Forum delivers value to its members based on two key components:

• Market analysis—IHS CERA tracks the performance of ten key markets within Brazil and globally (steel, engineering and project management, construction labor, equipment, bulk materials, fabrication, offshore rigs, onshore rigs, subsea and installation vessels) from 2000 to the current date. It leverages the IHS Global Scenarios, and in particular IHS CERA Energy Scenarios for Brazil, as a tool to project the impact of geopolitical events, change in regulations and local investment environment on oil and gas development costs.
• Local contractor analysis—IHS CERA will track performance of local contractors, processing capacity, backlog and investment plans to draw key insights about the evolution of local contractor participation in the context of local content requirements, taxes, local costs and planned production targets.

The IHS CERA Brazil Costs Forum membership is on an annual basis, during which IHS CERA delivers two research cycles, each culminating in member workshops. At scheduled times through the year, members receive the following products and services:

Market Fundamentals Analysis and Reports

• Upstream capital costs market review and forecast (updated every six months)
• Upstream costs tracker and benchmarking report (updated quarterly)
• Local content tracker (updated every six months)
• Large development project monitor (updated quarterly)

Data Center

• Brazil capital costs index data tables
• Brazil offshore drilling rig monitor
• Offshore production unit outlook
• Shipyard and EPC contractor activity outlook

Workshops

• Spring and autumn workshops discuss forum research and plan the next round of analysis and modeling.

Website Access

• The forum website is a reference tool providing research analysis and findings, summaries and workshop proceedings, project schedules and logistics information.

Telephone Access to Staff

• Access to Rio-based IHS research staff for questions concerning forum research.

The methodology on which the Brazil Capital Costs Analysis Forum Service is based derives meaning through the tracking of investment costs of a carefully selected portfolio of projects. As drivers of component costs (e.g., steel, insurance, rig rates, productivity, taxes) rise and fall, so does the cost of the index portfolio. This portfolio-based methodology provides a solid, real-world context for the cost picture. What distinguishes our approach from a simple basket of component costs is the way we calculate the ratio and influence of each component:

• A representative portfolio of Brazilian projects is assembled.
• Each project is modeled using the IHS QUE$TOR cost-engineering tool.
• Investment cost for each project is estimated using a multiyear database of Brazilian industry costs.
• Investment costs are projected using each of the scenarios-based forecast databases.
• Projects are then aggregated into indexes, with the components compared and analyzed.

Thanks to this methodology, members receive valuable answers to crucial questions requiring an in-depth understanding of the actual relationship between cost components, regulations, and activity outlooks. Members can therefore better understand key strategic issues such as:

What are the market opportunities for local suppliers and contractors?

What are the maximum levels of local content that can be achieved for specific offshore developments, for specific components (floating production, storage, and offloading; subsea, wells, etc.), or for a representative offshore portfolio?

What are the cost and schedule implications of different local content levels and the likelihood of project delays?

How do Brazil’s cost performance and productivity compare with other regions globally?

How can we achieve local content requirements at the lowest possible cost and with a minimum impact on schedule?

How many wells, production units, subsea installations, drilling rigs and services will be needed to deliver production targets?  What level of investment will be needed to avoid delays and fulfill local content requirements?

How will capital and operational costs for offshore developments in Brazil evolve in the next 10 years, and what factors will drive them?

Brazil Capital Costs Analysis Forum Service experts:

• Carla Cohen, IHS CERA Associate Director, Principal Researcher Latin America
• Candida Scott, IHS CERA Senior Director, Costs and Technology Group
• Pritish Patel, IHS CERA Director, Capital Costs Analysis
• Enrique Sira, IHS CERA Senior Director, Latin America
• Carlos Rocha, IHS CERA Associate Director, Latin America
• Erik Simonsen, IHS Principal, Europe and Africa
• Fabiano Costa, IHS CERA Associate II, Latin America
• Djane Jobim, Latin America