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The Downstream Dilemma
Rice EPC Forum Candida Scott IHS CERA Senior Director Cost and Technology 23 April 2010 • Houston CONFIDENTIAL © 2010, All rights reserved, Cambridge Energy Research Associates, Inc., 55 Cambridge Parkway, Cambridge, Massachusetts 02142 No portion of this presentation may be reproduced, reused or otherwise distributed in any form without prior written consent. CERA_Template_MMDD09
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1 Terms of Use The accompanying materials were prepared by Cambridge Energy Research Associates, Inc. (CERA), and are not to be redistributed or reused in any manner without prior written consent, with the exception of client internal distribution as described below. CERA strives to be supportive of client internal distribution of CERA content but requires that CERA content and information, including but not limited to graphs, charts, tables, figures, and data, are not to be disseminated outside of a client organization to any third party, including a client’s customers, financial institutions, consultants, or the public. Content distributed within the client organization must display CERA’s legal notices and attributions of authorship. Some information supplied by CERA may be obtained from sources that CERA believes to be reliable but are in no way warranted by CERA as to accuracy or completeness. Absent a specific agreement to the contrary, CERA has no obligation to update any content or information provided to a client. CCAF-D_042310 CERA_Template_MMDD09
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Downstream Capital Costs Trend with Oil Prices on the Way Up
2 Downstream Capital Costs Trend with Oil Prices on the Way Up Source: IHS Cambridge Energy Research Associates and EIA IHS CERA_Template MMDD09 CERA_Template_MMDD09
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Downstream Trend With Other Energy Indexes
. CCAF-D_London_042110 CERA_Template_MMDD09
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Downstream Construction Cost Face Many Pressures
Falling Oil Demand Source: IHS Cambridge Energy Research Associates. CCAF-D_042310 IHS_CERA_Template_MMDD09 CCAF-D_Houston_051209
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Geographical Recovery
-10% -5% 0% 5% 10% 15% 2005 2006 2007 2008 2009 2010 2011 2012 2013 Real Change NAFTA Western Europe (Excludes Turkey) Emerging Europe (CIS+CEB) China Asia-Pacific Latin America & Caribbean Excluding Mexico Middle East North Africa Forecast Source: IHS Global Insight. GDP is based on exchange rate basis. CCAF-D_042310 CCAF-D_Houston_051209
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IHS/CERA Downstream Construction Capital Costs Index
6 IHS/CERA Downstream Construction Capital Costs Index Past 6 months: 1.5 % increase Past 12 months: 7.5 % decrease Excludes EPC fees; risk premium and escalation fees Source: IHS Cambridge Energy Research Associates. CCAF-D_042310 IHS_CERA_Template_MMDD09 CCAF-D_Houston_051209
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Labor Costs Are a Significant Proportion of Capital Costs
Source: IHS Cambridge Energy Research Associates IHS CERA_Template MMDD09 CERA_Template_MMDD09
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The ‘Great’ recession CCAF-D_London_042110 CERA_Template_MMDD09
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Direct Wages Don’t Come Down
Source: IHS Cambridge Energy Research Associates and Bureau of Labor Statistics IHS CERA_Template MMDD09 CERA_Template_MMDD09
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Downstream EPC Historical Performance
CCAF-D_042310 CERA_Template_MMDD09
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EPC Employment Tracks Backlog
Source: IHS Cambridge Energy Research Associates and Annual Reports of Fluor, Foster Wheeler and Jacobs Engineering IHS CERA_Template MMDD09 CERA_Template_MMDD09
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EPC Revenues and Margins
12 EPC Revenues and Margins Source: IHS Cambridge Energy Research Associates and Annual Reports of Fluor, Foster Wheeler and Jacobs Engineering IHS CERA_Template MMDD09 CERA_Template_MMDD09
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Raw Material Volatility
Source: IHS Cambridge Energy Research Associates. CCAF-D_042310 CCAF-D_Houston_051209
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The Dilemma CCAF-D_London_042110 CERA_Template_MMDD09
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If you have any questions about this presentation or
IHS CERA in general, please feel free to contact Candida Scott 800 TRY CERA Calgary Oslo Moscow San Francisco Cambridge, MA Paris Beijing Tokyo Houston Washington, DC Dubai Mexico City Mumbai Bangkok Singapore Rio de Janeiro Johannesburg 55 Cambridge Parkway Cambridge, Massachusetts 02142, USA CERA_Template_MMDD09
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