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Intelligence for energy companies seeking a data-driven approach to cost management

Pricing Projects in the Wake of an Oil Crash: How Midstream Firms Can Stay Competitive in a Down Market

April 10, 2020 at 6:00 PM / by Wood Mackenzie Supply Chain posted in Project Estimation, Cost Reduction, Industry Insights, Oil & Gas

COVID19 Production

 

Amidst the COVID-19 market downturn, midstream projects are under intense scrutiny as executives look to reduce spending in a capital-constrained environment. However, data challenges prevent firms from identifying opportunities to lower cost estimates, resulting in scrapped projects and lost bids.

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[Whitepaper] How Segmenting Suppliers Can Help Predict Bidding Behavior

November 26, 2018 at 5:08 PM / by Wood Mackenzie Supply Chain posted in Project Estimation, Power & Utilities

The variability of supplier responses to bid events can pose significant financial and operational risks to energy companies, especially as this behavior is prone to change when market and economic conditions shift. Variances in bid responses during the recent economic recession and recovery motivated PowerAdvocate to analyze the impact of macroeconomic factors on supplier bidding behavior. The aim of this analysis was to uncover trends that, when coupled with project and company-specific data, will enable industry leaders to better anticipate and mitigate project and supplier risk. If you missed our introduction of this analysis, you can read our previous blog about it here.

Our team hypothesized that suppliers who offer a diverse range of services, work across multiple industries, and service a wide geographic area respond to macroeconomic circumstances differently than smaller or more specialized suppliers. To measure these differences, and to better understand how a supplier’s profile influences their behavior, the team categorized bid data into two groups: bids from major suppliers and bids from specialized suppliers.

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[Whitepaper] Reduce Supplier Risk by Predicting Bidding Behavior

November 14, 2018 at 6:16 PM / by Michael Sojka and Isabel Schwartz posted in Project Estimation, Power & Utilities

Historically, energy firms have seen uncertainty in their supplier’s behavior as simultaneously unmanageable and a source of severe risk for their operations. This uncertainty can cause major projects to fall behind schedule and can create reputational and financial loss for an organization.

While this risk has always been a concern for energy firms with high exposure to contractors, the volatility of today’s market highlights the need for all companies to be able to proactively mitigate the risk that suppliers pose to major projects and operations.

Leveraging PowerAdvocate’s energy supplier database of $3.3T in energy market spend and 70K sourcing events, we identified and quantified trends in supplier bidding behavior. Using these insights, energy firms can efficiently plan for changes in bidding behavior and mitigate risks during market fluctuations.

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Solar Tariffs Expected to Impact Costs for Solar Projects: How to Mitigate, Plan, and Prepare 

February 26, 2018 at 2:49 PM / by Samantha Walter & Justin Steimle posted in Project Estimation, Cost Reduction, Industry Insights, Power & Utilities

Higher prices are on the horizon for utility-scale solar projects due to tariffs and quotas recently approved by President Trump. This new legislation could seriously impact financial plans for solar projects, but expertise in capital projects, specifically renewable projects, can help utilities, EPCs, and developers mitigate these costs and prepare for future changes.

Why are the rules changing?

In September, the International Trade Commission (ITC) determined that U.S. solar manufactures experienced significant injury due to imports of crystalline silicon photovoltaic (CSPV) solar cells and modules. This investigation stems from the United States’ Global Safeguard law, where an industry representative may petition the ITC to determine if imports are causing “serious injury” and recommend remedies. The petition was filed by the recently bankrupted Suniva and later joined by SolarWorld.

On January 22, the Trump Administration followed through with the recommendations from the ITC and imposed a four-year solar import tariff that will start at 30 percent in the first year and gradually drop to 15 percent. This tariff will apply to all CSPV solar cells and modules that are imported into the U.S. There is a quota specifically for solar panel cells which excludes the first 2.5 GW of cells imported into the U.S. each year, but the details on how the quota will apply remain undetermined. Like the tariff, the quota will last four years.  All countries are included except for Generalized System of Preferences (GSP) beneficiary countries, which account for less than three percent of total imports.

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[Whitepaper] 4 Factors to Consider During Your Capital Program Organizational Transition

May 9, 2017 at 8:05 AM / by Wood Mackenzie Supply Chain posted in Project Estimation, Power & Utilities

Making any change to an organization requires proactive management to ensure a smooth transition. There are many potential pitfalls that can arise if all affected stakeholders are not aligned and actively engaged in the process. 

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[Whitepaper] How a Utility Portfolio Spend Profile Influences Capital Program Value

April 27, 2017 at 8:08 AM / by Wood Mackenzie Supply Chain posted in Project Estimation, Power & Utilities

The foundation for an optimal utility capital project delivery model is built on a thorough understanding of the expected portfolio of work that the organization needs to accomplish. Portfolio spend profile analysis provides capital program organizations with the insight needed to determine the appropriate resourcing and risk mitigation strategies to employ in its delivery model.

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[Whitepaper] How to Approach Utility Capital Project Delivery Model Optimization

April 14, 2017 at 11:01 AM / by Wood Mackenzie Supply Chain posted in Project Estimation, Power & Utilities

Maintaining profitability in a rapidly fluctuating market environment is a challenge for any firm. For utilities, structuring a Capital Program Office to meet the specific needs of projected workload is a key success factor. Achieving the optimal Delivery Model requires considering a wide range of factors – and a significant investment of time and resources. Before refining an existing or transitioning to a new Delivery Model, it pays to first understand the transitional costs, value, and ongoing savings opportunities.

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2 New Metrics to Evaluate Gas Distribution Replacement Performance

October 6, 2016 at 11:44 AM / by Adam Pearson posted in Project Estimation, Power & Utilities

The scatterplot results from our previous blog post reveal two findings around utility gas distribution replacement rates that surprised us. First, our analysis shows that at the current rate of replacement, the majority of the industry will require at least 25 years to complete their programs. Second, we find capable, prominent companies plotted on the bottom of the y-axis – near a zero percent Replacement Rate. There are two metrics that help shed some light on what’s behind these findings.  

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How Does Your Gas Distribution Replacement Rate Compare with Utility Peers?

September 20, 2016 at 7:29 AM / by Paul Cappello posted in Project Estimation, Power & Utilities

Gas distribution replacement programs are big, complex, and critical capital initiatives to manage. Natural gas utilities spend $22 billion and modernize 30,000 miles of distribution pipeline annually to ensure safety and to enhance system reliability and integrity.  From our experience providing technology and consulting to 14 of the top 50 U.S. gas utilities and helping them manage some $2.6 billion in annual gas infrastructure spend, we’ve seen utilities across the country ramp up their efforts to meet the challenge.

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Midstream, Refining, and Petrochemical Project Forecast: 2016 through 2020

August 26, 2016 at 6:54 PM / by Energy Intelligence Group posted in Project Estimation, Cost Reduction, Oil & Gas

With the future of oil and gas prices still uncertain, many midstream and downstream firms are asking how much investment is still being planned for the coming years.

In today's project forecast update, we share how and where the market is planning projects in the midstream, refining, and petrochemical sectors over the next four years. Read on to view maps of the top areas of capital investment through 2020:

Billions are Planned in Gas Pipeline, LNG, and Energy Storage Projects

Midstream_Project_Forecast_2016-1.png

Sources: SNL, Oil & Gas Journal

This map of planned midstream investment suggests three important observations:

  • Large LNG projects will ramp up over the next 4 years
  • The Gulf Coast continues to be an area of some of the largest investments, with many pipeline projects still planned for the Northeast
  • Storage projects are not to be overlooked as an area of competing investment

Let's next take a look at the downstream market.

More than $100B of Downstream Projects Planned through 2020

Downstream_Project_Forecast.png

Sources: Oil & Gas Journal, Petrochemical Update, ICIS Chemical Business Magazine

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