Costs & Strategic Sourcing

Delivering solutions that support sourcing decisions and help clients manage costs across the oil, gas and power value chains.

IHS Costs and Strategic Sourcing services deliver analysis and insight on activities throughout the value chain, enabling clients to more efficiently manage the sourcing of project materials and services, operating and capital costs, and spending strategy to achieve a decisive and sustainable competitive advantage.

IHS Costs and Strategic Sourcing (C&SS) solutions provide timely and objective cost, spend, and deliverability data, analysis, and forecasts on more than 30 categories of critical E&P capital equipment and services. Managers of supply chains, procurement, and spend by category; analysts and market intelligence professionals all benefit from C&SS information and insight to ensure more predictable project deliveries, better sourcing/procurement decisions, and improved bottom-line savings.

IHS monitors and collects data and forecast information on project and operating costs for offshore and onshore field developments, as well as downstream oil and gas and power projects. Clients receive timely, objective, third-party information on prices, costs, market fundamentals and forecasts, enabling them to stay current on competitive terms and deliverability, on which suppliers are the best fit for strategic relationships, and on how to gain leverage in negotiations. IHS Costs and Strategic Sourcing is a comprehensive service for businesses that need to evaluate program-level data and weighted matrix criteria, providing insight on successful management in challenging supplier markets and cost environments.

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Who uses IHS Costs and Strategic Sourcing solutions?	How?
Supply chain and category managers and analysts Project procurement Strategic planners and lead cost estimators/planners	Supply chain planning, sourcing strategy development, and supplier relation management Sourcing/procurement/contracting strategy planning and execution Monitor, forecast, and manage major capital investment and operating costs

Challenges within the market

The scarcity of skilled labor has boosted wages worldwide. Projects that were economically viable a year ago may no longer be attractive, as the costs of building upstream oil and gas facilities may continue to rise over and above inflation for the foreseeable future. Premium steels are no longer readily available in some markets. In others, rig rates have shot up drastically in response to the growing number of well programs.

In the current climate of extreme market volatility and economic uncertainty, can your company afford not to have C&SS critical information and insights on supply chain and project costs?

Understanding costs, spending, and supply bottlenecks and opportunities dramatically affects an organization’s ability to effectively execute its E&P plan and manage its operational needs. IHS Costs and Strategic Sourcing services deliver analysis and knowledge on the wide range of required capital and operating categories in the oil and gas and power business landscape to enable clients to respond quickly and effectively to changes in the market.

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Benefits

IHS Costs and Strategic Sourcing helps clients with:

Cost monitoring and planning:

Measure your company's cost performance against the industry benchmark
Determine the key drivers for costs
Forecast project and operating cost development
Assess regional and country-level differences and requirements
Create cost development scenarios

Strategic sourcing/category management:

Identify supply bottlenecks and opportunities
Manage lead times and capital equipment deliveries
Develop sourcing strategies per critical spend category
Break down costs by category
Assess and track suppliers

Contracting:

Understand your bargaining position
Identify and assess the commercial models
Understand underlying cost component developments
Negotiate contract escalation clauses
Manage local content requirements

Why use IHS Costs and Strategic Sourcing solutions?

Could your business benefit from access to strategic spend analysis while managing costs in a suppliers market?

IHS Costs and Strategic Sourcing will help you evaluate the signposts of market shifts, identify the most important drivers of market and category price movements, and importantly obtain the insight to take corrective action to minimize commercial impact.

We can help you navigate the options—whether to lock in crew and equipment for smooth operations or to consider spot market purchasing services in fluctuating market conditions—and to evaluate the challenges associated with sourcing quality and reliability.

As service providers take advantage of the tight market, operators must manage the cost and spend risks of long-term investment plans and operational improvement programs. IHS can help operators mitigate this risk by delivering in-depth analysis, regular industry and market updates by category, and the insight to support informed decisions.

The Market Survey System^SM (MSS) provides actionable market intelligence to support oil and gas companies’ contract and procurement teams in making better sourcing decisions. A comprehensive web-based tool that delivers news, data, analysis and forecast reports on more than 30 upstream spend categories and about 100 service companies. Rating and information on 700+ companies and detailed tracking and analysis of demand, supply, suppliers and category costs.

When your business needs to:
- Identify supply bottlenecks and opportunities
- Understand your bargaining/commercial position
- Evaluate the impact of key cost drivers
- Better manage your suppliers (SRM)
MSS enables your business to make better sourcing/procurement decisions, more predictable project deliveries and bottom-line cost savings.

The IHS CERA Capital Costs Analysis Forum - Upstream advisory service responds to the needs of upstream industry clients who seek to control capital costs. The forum mainly serves to determine upstream project development costs through the application of an Upstream Capital Cost Index (UCCI) designed to capture the precipitating elements behind the modern cost environment. Clients can ascertain a clearer picture of how specific inputs affect total portfolio costs. IHS CERA analysts use the UCCI to show how certain costs are interrelated and where savings can occur to offset increased fees. Forum members are privy to comprehensive cost data, including an analysis of the key drivers behind rising costs, regional cost comparisons, long-term and scenario forecasts.

The IHS CERA Operating Costs Analysis Forum - Upstream advisory service responds to the needs of upstream industry clients who seek to control operating costs. The forum mainly serves to determine upstream operating costs through the application of an Upstream Operating Cost Index (UOCI), which is designed to capture the elements driving the modern cost environment. The UOCI tracks the lifecycle cost for a representative set of project portfolios and calculates weighted values for various inputs that have, in recent years, caused upstream operating costs to skyrocket. IHS CERA analysts use the indices to show how certain costs are interrelated and where savings can occur to offset increased fees elsewhere. Forum members are privy to comprehensive cost data, including an analysis of the key cost drivers, regional cost comparisons, long-term and scenario forecasts.

The IHS CERA Capital Costs Analysis Forum - Brazil 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.

Specific to the Brazil Cost forum is the tracking of 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.

The IHS Upstream Spend Report is a user-friendly source of vital spending data on new construction projects worldwide. The IHS Upstream Spend Report provides critical, need-to-know information on how much is being spent in a variety of categories. Delivered quarterly, each report builds understanding of demand and of global, regional, and sector spending for category-level goods and services. This gives the strategy planner and project-based personnel the tools to assess activity levels in their respective areas and to map the way forward.

The Upstream Spend Report delivers a historical overview and an outlook for capital and operating expenditures. The five-year projection is built on a project-by-project basis that leverages the IHS CERA Capital Costs and Operating Costs Analysis Forums’ and the Market Survey System’s quantitative analysis of service category demand across the oil and gas industry.

The Jackup Rig Report examines global and regional supply and demand for the offshore jackup rig fleet. The information contained in this report can be used to make more informed business decisions:
- See the “big picture” of the jackup market, economic and political, and understand where it is heading
- Day rate and utilization review and forecasts by region and type of jackup rigs
- Optimize the utilization of assets or identify and assess the need for further investment
- Obtain the best value for your company by optimizing your strategic, long-term plans
Drawing upon the world's most comprehensive and up-to-date offshore rig database, RigPoint^SM from IHS, the Jackup Rig Market Report is the definitive report for the industry on the jackup rig market.

The Floating Rig Report focuses on issues associated with the long-term demand and supply trends of all types of semisubmersibles and drillships. With nearly 200 tables and charts, the report presents a wealth of detailed analysis covering every aspect of the floating rig market. The information contained in this report can be used to make more informed business decisions:
- See the “big picture” of the floating rig market and understand where it is heading
- Day rate and utilization review and forecasts by region and type of floating rigs
- Optimize the utilization of assets or identify and assess the need for further investment
- Obtain the best value for your company by optimizing your strategic, long-term plans
Drawing upon the world's most comprehensive and up-to-date offshore rig database,RigPoint^SM from IHS, the Floating Rig Market Report is the definitive report for the industry on the semisubmersible and drillship market.

The IHS CERA Capital Costs Analysis Forum - Downstream features our advisory service to help clients effectively monitor, forecast and manage downstream portfolio project costs. Used by clients in the regional industry, as well as end-users, service providers and financial companies.

The IHS CERA Capital Costs Analysis Forum - European Power helps utilities companies and power generators to better monitor, forecast and manage costs within their portfolios of projects and to discuss costs from a strategic point of view with regulators and investors. Used by firms in the regional industry as well as by regulators and investors in the financial sector.

The IHS CERA Capital Costs Analysis Forum - North American Power helps clients in the North American power business better monitor, forecast and manage their project portfolio costs.

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