Page 347 - Hydrocarbon Exploration and Production Second Edition

334 Reasons for Contracting

low risk
estimate

50 / 50
estimate

Cost x

base case
estimate

0 50 90 100
Probability of cost being less than x

contingency overrun potential
Figure 13.9 Estimates and contingency.

with little or no probability of overrun, and can be used to reflect the risk associated
with very complex or novel projects.
This may be referred to as the p90 cost estimate. Note that it is at the high end
of the range, whereas to a typical subsurface engineer a p90 reserves estimate is at the
low end of the range. Care must be taken when quoting p90 and p10 estimates, as
they may mean different things to different disciplines or even to different companies!

13.4. Reasons for Contracting

Many oil and gas companies do not consider the detailed design and
construction of production facilities as part of their core business. This is often the
stage at which work is contracted out to engineering firms and the client company
will switch manpower resources elsewhere, although some degree of project
management is commonly retained.
Contracts are used by an oil company where

the services offered by a contractor can be provided more cheaply or more
efficiently than using in-house resources
the services required are of a specialist nature, and are not available in-house
services are required for a peak of demand for a short period of time, and the oil
company prefers not to recruit staff to meet this peak.