Appendix F. Regional Costs Factors

The costs modelling presented in the previous Appendixes (C, D and E) are based on European costs. However, many of these costs are location dependent. For instance, geophysical works depend on the local market activities (number of drilling rigs available in a given region...) or the civil engineering costs differs in function of local wages. The following section gives the main assumptions for the costs factors modelling.

In order to be able to use our costs modelling and workflows (part 4) for the different regions of the study, we used costs factors to adjust the costs to a given region. For the sake of simplicity we looked at the issue on a regional level and not on a country per country basis.

Cost factors cannot be the same between qualified and non qualified work. That is why we discriminated the costs factors between three categories:

  1. Field works: corresponds to the work performed by engineers and qualified technicians to build infrastructures or performed specific data acquisition. The costs of these operations are often higher than the average wage costs of a given region.
  2. Civil engineering: corresponds to the non qualified work performed by the local workforce paid at the local average wage.
  3. Qualified work: corresponds to the work of engineers and staff performing the study and engineering part of the project. This staff is paid at higher wages than the average regional wage.

In order to determine what could be the cost factors for civil engineering, we looked at the average wages in each region. The table below gives an overview of this different. Data originated form OECD statistics and International Labour Organization mainly.

Table 15: Average Wage Difference Between Region (Source OECD, ILO)

The third line of the table gives the percentage of differences with the Europe average wage which is our base case for cost modeling. We cannot take use these percentages directly since we need to include material costs in the overall cost calculation. Finally, we assumed a cost factor of 0.2 (1 being for Europe) for regions having an average annual wage below 20% of European level, we added 0.1 to the percentage of difference with Europe for regions having an average annual wage above 80% and nothing otherwise. We did not have any data for Middle East so we considered that the average wage for this type of work was equivalent to the one of South America region.

For qualified work which is essentially linked to staff wages, we assumed that the cost factor could go below 50% of European cost for developing region and is equal to European costs for regions having an average annual wage above 80.

Field work factor depends heavily on local market condition for rigs and seismic acquisition. In North America and Oceania, the geophysical works are generally lower than Europe due to the size of the market. We assigned a 0.9 factor to these costs. We assumed a 0.7 cost factors o the Middle Easy based on recent available seismic acquisition costs and 0.6 for the rest of developing countries to take into account the lower costs of the workforce in those regions.

Table 16 sums up all hypotheses. Table 17 and Table 18 gives the distribution of the costs factors per item for DSF onshore and offshore costs items.

Table 16: Regional Costs Factors Philosophy

Table 17: Regional Costs Factors for Onshore Case

Table 18: Regional Costs Factors for Offshore Case