Cost Estimating Budgeting STAP G 1 M 14483

SPEO IDENTIFICATION CODE PAG 2 OF 5
Eni S.p.A.
E&P Division REVISION
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INTRODUCTION
PURPOSE OF THE DOCUMENT
This handbook supports Wells Cost Management and in particular Wells Cost Estimating,
Budgeting and Controlling for Exploration and Develpment Projects.
Cost Estimating is the process of developing an approximation (estimate) of the cost of the
resources needed to execute and complete project activities. As a predictive process,
estimating must address risks and uncertainties. The outputs of estimating are used primarily
as input for budgeting, cost or value analysis, decision making in business, asset and project
planning, or for project cost and schedule monitoring and control processes.
Cost Budgeting is the process of developing the time-phasing (and / or depth phasing) of cost
disbursement for the project, operation or activity.
Cost Controlling is the process of controlling changes to the project’s cost estimate. It is
carried out to verify, according to a defined frequency, that actual project’s costs figures trends
are in line with Wells Cost Estimates (WCE) and Wells Cost Baseline (WCB). As a verification
process, controlling early highlight cost variations, so to enable Project Team to define and
implement corrective actions to guarantee that cost objectives (WCE and WCB) are met
through the entire Project Life Cycle.
This Cost Estimating, Budgeting and Controlling Handbook has to be considered a Company
Standard defining the requirements, methodologies and rules that must be followed to operate
uniformly and in compliance with the Company Principles.
The final aim is to improve performance and efficiency in terms of project costs, while providing
all personnel involved in Drilling, Completion and Production Optimization activities with
common guidelines in all areas where the Company operates.
IMPLEMENTATION
All engineers engaged in Drilling, Completion and Workover activities are expected to make
themselves familiar with the contents of this manual and be responsible for compliance to it.
This handbook has been developed to assist DC&W Dept. in performing Wells Cost Estimating
and Controlling, with the aim of:
o providing a standard to perform Wells Cost Estimating and Wells Cost Controlling;
o improving the confidence on Wells Cost Estimates;
o controlling changes to Wells Cost Estimates;
o supporting the overall project performance maximisation and enabling it to achieve its
stated goals with the use of minimum resources.
This handbook intends to provide assurance to Company and Shareholders that Project WCE
activities provide reliable data to support the decision process and that Project WCOSTC
ensures proper control of Project’s cost expenditures.
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This handbook defines workflows, methods and approaches in order to provide a standard
framework for carrying out Wells Cost Estimating process and Wells Controlling process, to
satisfy the above-described objectives.
In particular:
Wells Cost provides Wells Cost Management Process overview and general Wells Cost
Engineering knowledge
Wells Cost Glossary provides the definition of the cost terms used through the various
handbooks and reference to the corresponding or modified Development Management
System (DMS) terms
Wells Cost Estimating for Feasibility Phase provides the process and the main
techniques of Wells Cost Estimating applicable during the Feasibility phase
Wells Cost Estimating for Planning Phase provides the process and the main
techniques of Wells Cost Estimating applicable during the Planning Phase
Wells Cost Estimating for Unit Cost Revision Phase provides the process and the
main techniques of Wells Cost Estimating applicable during the Unit Cost Revision
Phase
Wells Cost Controlling for Execution Phase provides the process and the main
techniques of Wells Cost Controlling applicable during the Wells Cost Controlling Phase
Wells Cost Code provides Company standard Cost Breakdown Structure and relevant
use rules.
UPDATING, AMENDMENT, CONTROL & DEROGATION
This handbook is a ‘live’ controlled document and, as such, it will only be amended and
improved by the Company in accordance with the development of Company experience.
Accordingly, it will be the responsibility of everyone concerned in the use and application of this
handbook to suggest revisions on an ongoing basis.
Derogations from the handbook shall be approved solely in writing by the by the Manager of the
local Drilling, Completion and Workover Department (DC&W Dept.) after the local Company
Manager and the Corporate Drilling & Production Optimization Services Standards Department
in Eni E&P Division Head Office have been advised in writing.
The Corporate Drilling & Production Optimization Services Standards Department will consider
such approved derogations for future amendments and improvements of this handbook, when
the updating of the document will be advisable.
Eni S.p.A.
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INDEX
SECTION 1 Wells Cost
Wells Cost Management
Planning Process Overview
Types of Costs
Types of Estimates
Cost Breakdown Structure
Wells Cost Estimate Coding and Documentation
Wells Cost Estimate Build-Up
Assumptions and Constrains
Similitude Criteria
Drilling Cost Drivers
Allowances
Cost indexes
Location Factors
Cost Escalation
Contingencies
Expected Accuracy Range
Cost Data
Cost Engineering Basic Formulas
CAPEX, OPEX and DECAB Cost Estimating
Lyfe Cycle Cost
Wells Cost Estimating Boundaries
SECTION 2 Wells Cost Glossary
SECTION 3 Wells Cost Estimating for Feasibility Phase

Cost Estimating for Feasibility Phase Overview
Process Overview
Process Steps
SECTION 4 Wells Cost Estimating for Planning Phase

Cost Estimating for Planning Phase Overview
Process Overview
Process Steps
SECTION 5 Wells Cost Estimating for Unit Cost Revision Phase

Cost Estimating for Unit Cost Revision Phase Overview
Process Overview
Process Steps
SECTION 6 Wells Cost Controlling for Execution Phase

Cost Controlling for Execution Phase Overview
Process Overview
Process Steps
SECTION 7 Wells Cost Code Handbook

Cost Code of Account
Time Phases
Rig Contractor
Tangible
Intangible
Well Site
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ACRONYMS
DC&W Drilling, Completion and Workover
CEA Cost Estimate
DC&W CEA Drilling, Completion and Workover Cost Estimating
COSTC Cost Control
DC&W COSTC Drilling, Completion and Workover Cost Control
CBS Cost Breakdown Structure
WPB Wells Project Baseline
WSB Wells Scope Baseline
WTB Wells Time Baseline
WRB Wells Resources Baseline
WCB Wells Cost Baseline
WCE Wells Cost Estimate
ETF Estimate To Finish
EAF Estimate At Finish
EFC Estimated Final Cost
CAS Company Accounting System
CV Cost Variance
CI Cost Index
DPM Development Project Manager
PT Project Team
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SECTION 1
WELLS COST
SECTION 1 of Cost Estimating, Budgeting and Controlling Handbook

Wells Cost
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INDEX
1. WELLS COST MANAGEMENT OVERVIEW ....................................................................4
2. PLANNING PROCESSES OVERVIEW.............................................................................6
2.1 GENERAL PLANNING PROCESS ...................................................................................6

2.2 WELLS PLANNING PROCESS OVERVIEW .............................................................................8
2.3 WELLS PROJECT BASELINE........................................................................................10
3. TYPES OF COSTS .........................................................................................................11
4. TYPES OF ESTIMATES .................................................................................................14
5. COST BREAKDOWN STRUCTURE...............................................................................16
6. WELLS COST ESTIMATE CODING AND DOCUMENTATION ......................................18
7. WELLS COST ESTIMATE BUILD-UP ............................................................................20
8. ASSUMPTIONS AND CONSTRAINS .............................................................................22
9. SIMILITUDE CRITERIA ..................................................................................................23
10. DRILLING COST DRIVERS............................................................................................24
11. ALLOWANCES...............................................................................................................25
12. COST INDEXES..............................................................................................................26
12.1 LOCATION FACTORS....................................................................................................27
12.2 COST ESCALATION ......................................................................................................28
13. CONTINGENCIES...........................................................................................................30
14. EXPECTED ACCURACY RANGE ..................................................................................33

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15. COST DATA ...................................................................................................................37
16. COST ENGINEERING BASIC FORMULAS....................................................................38
17. CAPEX, OPEX AND DECAB COST ESTIMATING ........................................................39
18. LYFE CYCLE COST .......................................................................................................40
19. COST RISK ANALYSIS ..................................................................................................41
20. COST BUDGETING ........................................................................................................47
21. WELLS COST ESTIMATING BOUNDARIES .................................................................50
ANNEX 1: TYPICAL RISKS .....................................................................................................52

ANNEX 2: COST ENGINEERING BASIC FORMULAS........................................................................53

Wells Cost
Wells Exploration and Development Projects 1.
Wells Cost
Eni S.p.A.
E&P Division
Wells Cost Glossary Wells Cost Codes

SPEO
Documents
Wells Cost Estimating Wells Cost Estimating Wells Cost Estimating Wells Cost Controlling
for Feasibility Phase for Planning Phase for Unit Cost Revision Phase for Execution Phase
Wells Cost
Wells Cost Estimating
Wells Cost
Controlling
+ 40% - 25% + 25%

Hand Production &
Phases
Unit Cost
Project
STAP-G-1-M-14483
Feasibility G1 Feasibility G2 Planning G3 Revision R Execution

over close out
WELLS COST MANAGEMENT OVERVIEW
IDENTIFICATION CODE
Is the asset ready for

production?
Class I V Class III Class I
Class II
Economics Est imate Economics Est imate Economics Est imate Economics Est imate
- 40% + 40% - 25% + 25%
- 15% + 15% - 10% + 10%

0
WCE
(Feasibility WCE WCE
WCE WCE

(Feasibility Phase) (AFE) Revise /
Phase) Wells Update
Engineering
PAG
Drilling & Drilling &

Completion Study Completion Study Procurement
4
Estimating a nd
Techical & Cost
Cost Estimating Unit Cost Cost
Cost Estimating for Feasibility for Planning Control
Revision
OF
Controlling Processes
REVISION
Wells
53
Execution &
Completion
+ 4 0% - 2 5% + 25 %
Unit Cost Production &
Feasibility G1 Feasibility G2 Pla nning G3 Revision R Execution Hand
over close out
Wells
DC&W
production?
Class I
Eni S.p.A.
Class I V Class III Class II

Economics Est imate Economics Est imate Economics Est imate
Economics Est imate
- 4 0% + 40% - 2 5% + 25 %
- 1 5% + 15 % - 1 0% + 10 %
E&P Division
WCE WCE WCE WCE

WCE
(AFE) Revise /
SPEO
(FINANCIAL
Wells Update
BUDGET)
Engineering

Cost Estimating for Feasibility for Planning Revision Control
Concept D efin ition Set- up
Reservo ir mo del u pdat e
Dril ling & Com ple tio n eng inee ri ng:
Wells
- Dril ling Act iv ity
- Well Profile Refin in g
Execution &
- Casing Desi gn Completion
- Mud Progr am
- Cement Pro gram
- BHA Stu dy
- Hydraulic P rogr am
- Torque & Drag
Wells Cost
- Casing Wea r St udy
- Bits Progr am
- Well Head Def ini tio n
- Operation al Sequ ence Defi nit ion
- Drill ing Un it Charact eris a tio n
STAP-G-1-M-14483
- Remedia l Jo bs Eval uat ion

Feasibi lit y study set -up - Progress Cha rt Ref in ing
IDENTIFICATION CODE
Reservo ir eva lua tio n - Comp leti on Act iv ity Study

N° of Wells - Complet ion Def in itio n
Target Locat ions a nd To lera nc es - Formation / Wel l Bo re Int erface
Draft Wel ls Profi le - Materia ls Defin ition

Field App raisa l
- Well Flow As sura nce St udy Performanc e Tes t
Type of Wel l Mater ial & Serv ic es Exec utio n setup
N° of Wells - Well Del iver abili ty
Charact erist ics of prod uced / injecte d flu ids Procurem ent Drilli ng, Comp leti on Ope rat ions Runn in g pro ducti on Decomm iss io nin g pl ann ing
Draft Wel ls Profi le - Complet ion com pone nt Des ign Update / Revise Cost Well O perat ions
Wells Tec hnic a l Out li ne
- X-Mas Tre e Estimate Prepare Ha nd -over t o Decommis sio nin g, A band onme nt & Ecolo gic a l
0
Charac t eris t ics of prod uced / injecte d flu ids Well De velo pmen t Sche du les Defin it ion Reservo ir mo del u pdat e Operat ion
- Complet ion F lui ds Prog ram
Res tora tio n
Technica l & Econom ic eval uat ion Dril li ng & Com ple tio n St udy
- Remedia l Jo b eval uat ion
Model li ng of conc ep t alte rnat ives
- Operation al Sequ ence

Screen ing of conce pt altern ativ es - Complet ion T ime Est imat e
Concept a lte rnat ives opt im isatio n - Geolog ical a nd We ll E ng inee rin g Project
- Technical Consiste ncy C heck Technical Process
- Project preparat ion L
- Prelimi nary O perat ions
PAG
- Conductor p ipe phase – p il ot ho le E

- Surface hole p hases and cas ing
Cost Estimating /
5
- Intermedia te phases a nd cas in g G Control Process

- Final phase an d casin g
- Complet ion E
- Tes ting
OF
Cost
- Procurem ent P lan N
- Procurement Sche dule Estimating
REVISION
- Tec hnic al Spec ificat ions D

- Rig Av ailab il ity S urve y
/ Control
53
A Output
Market Scout ing / Pre -inqu iry
Tender in g
Project Execut ion P lan nin g
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2. PLANNING PROCESSES OVERVIEW
2.1 GENERAL PLANNING PROCESS
A process is “a series of steps and actions which produces a result.”

Cost Estimating is one of many steps in the project management process, yet it is a process
unto itself, and is part of the planning processes.
Planning Processes - as defined by Project Management Institute (PMI) - including Cost

Estimating are shown in the figure below.
Scope Activity Activity Schedule

Planning Definition Sequencing Development
Activity Cost
Scope Duration Budgeting
Definition Estimating
Resource
Planning
Cost Project Plan

Estimating Development
Risk
Management
Planning
Planning Processes Relationships - PMI scheme
The processes above indicated include the following activities:

o Scope Planning: developing a written scope statement as the basis for future project
decisions
o Scope Definition: subdividing the major project deliverables into smaller, more
manageable components
o Resources Planning: determining what resources (people, equipment, material, etc.)
and what quantities of each should be used to perform project activities
o Activity Definition: identifying the specific activities that must be performed to produce
the various project deliverables
o Activity Sequencing: identifying and documenting interactivity dependencies
o Activity Duration Estimating: estimating the number of work periods that will be needed
to complete individual activities
o Risk Management Planning: deciding how to approach and plan for risk management
in a project

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o Schedule Development: analysing activity sequences, activity durations, and resources

requirements to create the project schedule
o Cost Estimating: developing an approximation (estimate) of the costs of the resources
required to complete project activities
o Cost Budgeting: allocating the overall cost estimate to individual work packages
o Project Plan Development: taking the results of other planning processes and putting
them into a consistent, coherent document.
Inputs to Cost Estimating come from:

o Scope Definition
o Activity Duration Estimating
o Resource Planning
o Risk Management Planning
Outputs from Cost Estimating are given to:

o Cost Budgeting

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2.2 WELLS PLANNING PROCESS OVERVIEW
Cost Estimating process has different characteristics in the various project phases (Feasibility,
Planning, Unit Cost Revision).
The detailed Cost Estimating process for each project phase is described under the Well Cost
Estimate Handbooks for the various project’s phases.
A general Planning Process scheme for Wells - including Cost Estimating - is given in the figure
below.
Reference Wells
Project Data Field Data
Wells Technical
Collection Analysis
Data gathering Outline
Risk
Management
Planning
Wells Wells Activity
Resources Definition and
Planning Sequencing
Wells
Wells
Development
Cost Estimating Execution
Schedules
Time Evaluation
Definition
Cost
DB Setup Time Schedule
DB Setup
Wells Planning - General Process
The processes above indicated include the following activities:

o Project Data Collection: collecting from different sources the data required to start the
entire planning process
o Reference Wells Data Gathering: collecting the data relevant to wells similar to those
under cost estimating
o Field Data Analysis: collection and analysis of data from other professional areas to
develop possible alternatives and relevant time and costs
o Wells Technical Outline: defining the technical characteristics of the development
scenario defined in the previous step

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o Risk Management Planning: identifying the project risks and defining a plan to control
such risks
o Wells Activity Definition and Sequencing: identifying and sequencing the various
activities required for executing the wells
o Wells Resource Planning: identifying and quantifying the various resources required to
perform the activities identified
o Time Schedule DB Setup: defining the time durations applicable in relation to identified
reference wells
o Wells Execution Time Evaluation: selecting and defining the duration of the activities
identified as function of the information available from the area of activity and of the
resources identified or eventually assuming a generic rig
o Wells Development Schedules Definition: defining the mobilization-drilling-
demobilization schedule, with reference to the drilling rig and techniques selected
o Cost DB Setup: selecting and defining the cost of the activities identified as function of
identified time durations and resources

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2.3 WELLS PROJECT BASELINE
Project Cost Baseline (PCB) is the original approved plan (for a project, a operation package, or
an activity) which defines and qualifies the WCE.
Thus PCB defines cost figures but also the operations, the assumptions (on operation scope on
operation durations and on operation costs), etc., which underline the WCE.
Wells Project Baseline
Scope Time Resource Cost

Baseline Baseline Baseline Baseline
• We ll Site • Civil contractor • We ll Site Cost

• We ll Site • Da ily Rig Cost
• We lls n° • Rig N° / Type
• De pht / Time • Tangible Cost
• We lls depht • Inta ngibles
• Completion Time • Inta ngible Cost
• Phases ∅ • Tangibles
• Etc. • WCE
• Etc. • Etc.
When the original plan is varied (i.e. higher drilling depth, lower penetration rate, etc.) it is
reasonable to expect also a modification to WCE.
Regardless whether revised WCE are approved or not by higher management level than DPM,
it is paramount to develop corrective actions to ensure the achievement of WCE.
When such variances can’t be absorbed, the Project Team shall redefine the Wells Project
Baseline and in particular the Wells Cost Baseline and Wells Cost Estimate.
This will ensure that:
1. reasonable project objectives - in particular revised project schedule and project cost
estimate - are re-defined
2. remaining part of the project is controlled versus a feasible project baseline.

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3. TYPES OF COSTS
Costs can be classified under different categories; here are mentioned those applicable to
Wells Cost Estimating process.
The following classification are summarised:

o General cost classification;
o Life-cycle cost classification;
o Wells costs typical classification;
o Wells main work blocks costs classification;
o Wells work phases cost classification.
Cost Classification
Classification Sub- Explication and notes
classification
General cost Note: for reference only
classification
Direct costs Costs traceable directly to the product or service being
produced (i.e. salary of personnel working on a
project). Further subdivision is possible:
o Direct Material: cost of materials, assemblies,
and parts that are used for the project
completion.
o Direct Labour: wages and salary of personnel
working for the project completion.
Indirect costs All costs which do not become a final part of the
installation, but that are required for the orderly
completion of the project (i.e. field administration, direct
supervision, start-up costs, insurance, taxes, etc.)
Overhead costs A cost inherent in the performing of an activity that
cannot be charged to or identified with a part of the
work, or asset and therefore must be allocated on
some arbitrary basis believed to be equitable, or
handled as an expense independent of the project
effort (i.e. legal department assistance, etc.).
Standard costs, Standard costs are desired cost objectives (i.e.
budgets and manhours cost for a defined drawing preparation, or for
variances a drilling sub-activity execution, etc.).
Budgets refer a macro activity (i.e. drilling dept. cost).
Variances are the difference between planned and
actual costs, used to evaluate areas of good or poor
performance.
Joint costs Joint costs are costs related to more parts of the
project and cannot be assigned up to specific part until
a certain project progress is reached.
Life-cycle cost Note: Company standard

classification
CAPEX Ref. to page 4 ACRONYMS
OPEX Ref. to page 4 ACRONYMS
DECAB Ref. to page 4 ACRONYMS

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Wells costs Sub- Note: Company standard

typical classification
classification
Rig Contractor Cost related to drilling works (i.e. drilling rig and
costs personnel, etc.).
Well site costs Costs related to site preparation (i.e. civil works such
as escavation, roads, fence, canteen, access permits,
etc.)
Tangible costs Costs related to the materials used and incorporated
for the well drilling (i.e. casing, tubing, surface
connections, other equipment, etc.).
Intangible costs Costs of services, materials non permanently
incorporated into the project, but required to execute
the drilling works (i.e. mob-demob, cementing, bit,
company personnel management and supervision,
etc.).
Rig Contractor
Intangible
Well site
Tangible

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Wells main item Sub- Note: for reference only

work costs classification
classification
Rig costs Costs for rig
Service costs Costs for services required by rig operations (i.e.
cementing, mudding, etc.)
Logistic costs Costs for site logistics
Materials costs Costs of all materials incorporated into the well
MOB + DEMOB Costs of rig moving to site (MOB) and from the site
costs (DEMOB)
Company Costs of company personnel working at home office,
personnel costs site, partners, etc.
Wells work Sub- Note: Company standard

phases cost classification
classification
Rig / rigless Costs for moving the rig or the equipment – in case of
equipment rigless operation – on and from the well location.
MOB-DEMOB
(Moving) costs
Preliminary Costs for starting drilling, W.O. activities, etc.
works costs
Re-entry works Costs for arranging the restart of an existing well (i.e.
costs well head and B.O.P. operation, milling plugging, etc.).
Drilling works Costs for drilling up to reaching the planned depth.
costs
(subdivided in
phases and main
activities)
Workover costs Costs to inspect, restore, modify, etc. the well.
Completion Costs for performing the end of operation on
works costs production casing with bit scraper on bottom, etc.
Wells testing Costs for performing well testing (i.e. run in well testing
costs string).
Well DECAB Costs for temporary or permanent well abandonment.
costs
Well securing Costs for securing the well (i.e. run in hole plugs, etc.)
costs
Production Costs for the operations of production maintenance
maintenance (i.e. gradient survey, acid job, washing job, etc.).
costs
Down time Costs for solving the planned and unplanned
costs operations, including all operations required to restore
the conditions existing before the incident and for stops
not due to incidents (i.e. safety, etc.).

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4. TYPES OF ESTIMATES
In general terms, several type of estimates are used and these may be classified by:
How the estimate will be used;
The type/quantity/amount of information available for preparing the estimate;
The range of accuracy desired in the estimate;
The calculation technique used to prepare the estimate;
The time allotted to produce the estimate;
The method of input / form of output (computer, manual forms) in preparing the
estimate;
The phase of project (Feasibility, Planning, Unit Cost Revision) in which the
estimate is prepared;
The perspective of preparer (Company, contractor, insurance company, etc.);
Etc.
This handbook focuses on two approaches to cost estimating:

Determinist Cost Estimating
Probabilistic Cost Estimating
Deterministic Cost Estimating: a deterministic cost estimate, as opposed to a probabilistic (or

stochastic) estimate, is one which contains no random (or probabilistic) cost values.
It is used when cost values are known with certainty (i.e. in routine projects).
Deterministic cost estimating relies upon fixed cost figures or “base cost” for each cost item.
This cost is calculated by the estimator on the basis of his / her previous experience –
correspondence to P(50/50) in the probabilistic estimate may be assumed.
Contingencies are calculated as a percentage of the base cost and are added to the cost
item(s).
Probabilistic Cost Estimating: a probabilistic estimate, as opposed to a deterministic

estimate, is one which contains random cost values.
It is used when cost values are subject to some degree of uncertainty.

Cost values have a probabilistic distribution (i.e. the difference between the actual cost and the
estimated cost of each cost item is variable). This dispersion is taken into account in the cost
model.
Probabilistic cost estimating, or Cost Risk Analysis, uses probability distribution for each cost
item. Each “base cost” item is modelled as a triangular, beta, gaussian, etc. probability
distribution function of the cost in order to account for the uncertainty in the cost estimate for
each item.
Probalistic cost estimating process is described under Cost Risk Analysis para.

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Most used Probability Distributions
Probability Probability
Uniform Distrib. Normal Distrib.
Min. Max. Cost Cost

Min. Max.
Probability Probability
Triangular Distrib. Beta Distrib.
Cost
Min. Max. Min. Max.
Probabilistic Cost Estimating is used for significant and strategic projects.
The term ‘Base cost’ used in this document refers to costs estimated either deterministically or
probabilistically, excluding any unforeseen/unforeseeable conditions, or uncertainties within the
defined Project Scope (which are calculated and covered separately in contingencies, as
explained in the relevant paragraph).
The term “Allowances”, which are additional resources included in estimates to cover the cost
of known but undefined requirements for an individual activity, work item, etc. More details
about Allowances are provided in the relevant para.
WEC are defined and selected to provide the level of accuracy required for each phase in
accordance with company policy for investments authorization.

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5. COST BREAKDOWN STRUCTURE
Project Mangement required different breakdown structures to support the planning anc control
processes. Herebelow are recalled the most significant.
Work Breakdown Structure (WBS) is a deliverable-oriented grouping of project elements that

organises and defines the total work scope of the project. Each descending level represents an
increasingly detailed definition of the project work.
An example of WBS is provided herebelow.
Development
Project
CAPEX OPEX DECAB
Wells Facilities Wells Facilities Wells Facilities
Drilling
Tangible Intangible Well site
rig Tangible Intangible Tangible Intangible
Company
Rig Casing Safety
Personnel Downtime Hole plugs Decomm.
valves
MOB + Restoration
Tubing Logistics X-mas tree Gradient Dismantling
DEMOB works
replacem. survey works
Surface Services
connections Washing Company
job Personnel
Utilities
Company
Personnel
Wells Work Breakdown Structure

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Cost Breakdown Structure (CBS) is a hierarchical structure, which allows the representation
of cost figures at different levels of detail.
CBS could be also the same than WBS or different if related to cost accounts or control items.
Other CBS examples are provided herebelow.
Project CAPEX
MOB-DEMOB Wells Site Well 1 Well 2 Well… i Insurances
CBS Rig Alternative Rig less Well Site
(Heavy) CBS
Dri lli ng Completion Completion
W orkover
Movi ng Movi ng Movi ng

Movi ng Phase ∅ i
Prelimi nary Prelimi nary Preliminary

Prelimi nary
Completion Completion Completion

Re-e ntry
Well Well Well
Testing Testing Testing
Drilli ng
Secure Secure Secure
Well Well Well
Well
Testing
Well W orking
Tangible Intangible
A bandoni ng Unit
Secure CB S CB S CB S
Well
Repeated under each
descending root
Rig
Tangible Intangible
Contractor
CB S CB S CB S
Repeated under each CBS Feasibility Phase “G1”

descending root CBS Feasibility Phase “G2”
CBS Planning Phase “G3”
CBS furthe r deta ils available during Execution Phase
The CBS is a fundamental tool to support Wells Cost Estimating and Wells Cost Controlling; it
evolves with the project phases as indicated in the above figure.
More details on CBS are available in Wells Cost Code Handbook.

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6. WELLS COST ESTIMATE CODING AND DOCUMENTATION
Wells Cost Estimate and Wells Cost Budget should be prepared according to a cost accounting
(or coding) system, to simplify their generation and to support the Wells Cost Control.
Wells Cost Estimate coding examples are the cost classification provided under para 5; usually
to each cost item is assigned a code to better compare various project, to interface the cost
control system, etc.
Cost coding is also the link between Company Cost Accounting System and the project control
system: cost codes of accounts for DC&W are provided in Wells Cost Code Handbook.
In particular cost coding ensures the unambiguous relationship among cost estimate, cost
control and company accounting system.
Cost Code Cost Code Cost Code

for for for
Estimating Controlling Accounting
In particular cost coding ensures the bijection between cost estimate elements and cost control
elements, cost control and cost accounts elements, and cost account and cost estimate
elements.
Cost estimate coding is also related to the Cost Breakdown Structure, where the cost codes
assign a “tag” to each cost element.
Cost
Controlling
BS
Cost
Accounting
Cost BS
Estimating
BS
Cost Data
Cost Breakdown Structures Workflow
Cost may be aggregated in different ways in the various CBS; nevertheless the lowest “cost
element” (corresponding to the Work Package as lowest WBS element, or eventually a further
breakdown) shall have a corresponding “cost element” in another CBS.

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Particular care shall be paid when Company develops project in partnership (i.e. joint ventures)
with other oil companies. In order to assure the proper cost account, it should be established -
since the project beginning - the unambiguous relationship between Company cost code of
accounts and JV cost code of accounts.
Company cost JV cost code
code of accounts of accounts
XXX AAA
YYY BBB
ZZZ CCC
Whenever such correspondence cann’t be easily developed, it is necessary to further

breakdown the costs to a lower degree of detail, in order to identify it.

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7. WELLS COST ESTIMATE BUILD-UP
Wells cost is estimated summing the costs of the various resources used for the project.
The basic formula for estimating WC is:
WC = Σi (Qi • Ci)
where:
o Qi = quantity of element i
o Ci = unit cost of element i
with sum extended to all items (N); item may be either labour / material / service (or drilling /
tangible / intangible costs).
The determistic cost estimating buid-up formula may be represented as follows, showing all :
Well Cost
Cost Element 1
Cost Element 2
Cost Element Cost
… Element N
Unit Cost 1 Quantity 1
Escalation Contingency Base Allowance Contingency

Base Cost 1
Cost 1 Cost 1 Quantity 1 Quantity 1 Quantity 1
Cost contingency on Element 1
Cost escalation on Element 1 Base quantity from “take off”, BOQ,

ecc. (i.e. dwgs, spec.s, database,
contractors proposals, etc.)
Best cost estimate without risk
from previous similar projects Known-known extra required
(from previous experience)
Quantity contingency on Element 1
For a detailed determistic estimate this formula could be deployed defining:
Qi = [(Base Quantity)i + (Allowance Quantity)i] • (1 + Contingency Cost)i

Ci = [(Base Cost)i + (Escalation Cost)i] • (1 + Contingency Cost)i
where contingency cost and quantity are expressed respectively as % of the amount between
square parenthesis.

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The various “blocks” are developed and combined in different ways depending upon WCE
method applied in each project phase.
Probabilistic cost estimating scheme is represented under para Cost Risk Analysis.

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8. ASSUMPTIONS AND CONSTRAINS
Assumptions are all information and data on which the cost estimate relies, which are subject to
a certain degree of uncertainty, such as:
Drilling, seismic and geological / lithological data
Surface seismic data
Production life
Well type
Rig type
Well operational sequence
Well execution time estimate
Reservoir production scenario
Cost data
Risks identified
Efficiency in resources consumption
Rig market
Etc.
The more the assumptions are close to the real (future and true) cost figures; the better the cost
estimate will approximate the final cost.
Constrains are all limitations to which the project has to adhere to, such as:
Geographical constrains, topology and geological hazards
Budget
Company internal rules
Laws and regulations
JVs agreements
HSE requirements
Resource limitation
Weather, climate, etc.
Etc.
Constrains are often responsible of unneeded costs increases: Value Engineering process and
Constructability process can be applied to lower such costs.
In some cases the distinction between assumptions and constrains might overlap; a constrain
subject to a degree of uncertainty is also an assumption.
Cost estimate shall qualify the main assumptions and constrains on which are based.

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9. SIMILITUDE CRITERIA
The estimate of unit cost requires the definition of quantitative similitude criteria to drive the
database inquiry.
The most important similitude criteria for Drilling operations are:
• Well Technical Outline: the number, size and interval depth of the drilling phases and
the eventual deviation profile
• Average Daily (Drilling) Progress: the average daily drilling progress for each drilling
phase, taking into account the drilling technique adopted (bit type, size, use of rotay /
mud motor) and the Rig type
• Time Required: the time required for logging, casing and cementing.
The most important similitude criteria for Completion operations are:

• Completion Type: the type of completion foreseen
• Time Required: the time required for logging, casing and cementing.
The similitude criteria shall define also the allowance range (+/- X%) of the acceptable data.

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10. DRILLING COST DRIVERS
Cost drivers are the main variables influencing the final cost. Cost Estimating has to
comprehend and to account for the proper cost drivers of each activity or work package under
cost estimating to improve cost estimate accuracy.
The main drilling cost driver is time required to execute the various drilling activities. Time is
mainly influenced by:
Lithology
Drilling rig performance
Other cost drivers are:

Rig daily cost
Drilling techonologies used
Stagnating vs. active drilling market (influencing rig daily cost)
Oil price (the lower the oil price, the less investments are approved by oil companies,
the higher will be rig availability and the lower will be prices offered)
Location factors (i.e. country)
Cartels
Dumping commercial policy
New technologies rise
Company procurement optimisation
Logistics
Etc.
The importance of proper drilling cost drivers management is related to the:

Opportunity of WCE optimisation through drilling cost drivers leverage
Improve the EAR through better “centered” cost definition
One of the challenge faced in WCE is the definition of WCE drivers, the comprehension of how
these vary over time, and how these influence the cost estimate.
This challenge can be managed by:

database analysis
forecasting techniques utilisation
publications and studies
etc.
eventually combined, to improve the confidence on cost data utilised.

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11. ALLOWANCES
Allowances cover events that are said to be “known-known”, i.e. events that always happen and
whose magnitude and probability are well known.
Example of allowance is the difference between casing length purchased and the casing length
calculated from well profile casing “take off”: said difference (technical allowance) accounts for
scrap, damage, theft, etc., which are known to happen on all projects.
Cost = (Base quantity + technical allowance) x unit cost
Allowance Cost = technical allowance x unit cost
Technical allowance is often expressed as % of quantity base estimate or “take off”.
This approach simplify the procedure of cost estimating such known and repetitive events. It
applies to all items under estimate provided that reliable data are available.
The development of reliable figures on allowances requires the statistical analysis of previous
projects’ data.

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12. COST INDEXES
Cost Index is a number which relates the cost of an item at a specific time to the corresponding
cost at some arbitrarly specified time in the past.
Cost indexes support WCE providing cost data from similar projects developed at an earlier
date and updating these cost data to present time: thus cost indexes apply mainly for WCE in
Feasibility phase and Planning phases where cost data used come mainly from database and
publications. WCE during Unit Cost Revision relies upon bids from suppliers and contractors,
thus use of cost indexes are very limited.
Cost over time might vary for several reasons; most common drivers of such variation have
been identified under para Drilling Cost Drivers.
Cost indexes compare present cost with history; published or Company calculated data do not
forecast future escalation, that is left to the cost estimator evaluation.
Cost indexes should be used according to the following formula:
Cost Year Y = Cost Year X • Cost Index Year Y / Cost Index Year X
Cost indexes have inherent limitations:

o May be limited in accuracy: two different indexes (from different sources) could produce
different results
o Are based on average values: specific cases might differ from the average (i.e. due to
technology difference)
o At best, to keep acceptable accuracy range, should be applied up to 4÷5 years period
o For time intervals greater than 5 years, indexes are highly inaccurate and should be
used for order-of-magnitude cost estimates only.
The para Cost Escalation provides the technique on how to deal with future cost escalation.
Company internally developed cost indexes are based on database regularly updated by
feeding them with final project cost data and discarding elder ones which become misleading.

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12.1 LOCATION FACTORS
Location factor is an estimating factor used to convert the cost of an identical well from one
location to another. This factor takes into consideration the impact of climatic conditions, local
infrastructure, local soil conditions, safety and environmental regulations, taxation and
insurance regulations, resources availability and productivity, etc.
Location factors should support cost estimating when are well known the costs in a certain
country - usually company country or a nearby country - and the wells under cost estimating
should be developed in a country for which reliable cost data are unavailable.
Location factors can be determined through:

a. Published data
b. Company database elaboration
Published data shall always be used with care, since these are:
o Affected by their underlying method of determination
o Inadequately explained
o Improperly dated
thus the estimator has to understand such limitations when using such data.
In addition such data reflect only the relative cost to replicate a well exactly in another location,
thus not considering cost effects introduced by site-unique conditions (i.e. access, local
transport, site conditions, etc.).
Company database elaboration provides more accurate location factors without the above
biases.
Typical location factors are related to:

o Political
Stability
Attitude towards foreign investments
Type of bureaucracy
o Finance
Banking system
Insurance regulations
Tax system
Import duties and licenses
Customs
Inflation
Currency exchange rate
o Legal system
Laws governing conduct of business and individual freedom
o Social system
Business ethics
Education
Language and religion
Length of workweek
Holidays
o Health
Diseases
Medical assistance
o Geography
Climate

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Soil
o Industry
Labour availability
Equipment availability
Labour productivity
o Infrastructures
Roads
Harbours
Air flight
o Etc.
Within a country regional variations could be expected.
Location factors are also considered in cost risk analysis when defining “base cost” and the
“impact of risk occurrence”.
With reference to Wells costs typical classification, location factors influence mainly:
• Wells site costs
• Tangible costs
• Intangible costs
and has limited influence on Drilling costs.
12.2 COST ESCALATION
Cost escalation is the provision in actualised or estimated costs for an increase in the cost of
equipment, material, labour, etc., over that specified in the purchase order or contract due to
continuing price level change over time.
Cost escalation might have different sources, such as:

o Inflation / deflation
o Increase / decrease in demand
o Monopoly
o Political situation
o War
o Etc.
and often are already considered as project risks.
The most common use of cost escalation is to account for inflation impact, when using cost
data that refer to a certain “base time” (i.e. today’s cost or Base Cost) and these will be
expended in the future time, thus need to be “actualised”. A common technique to manage the
time value of money is to:
1. calculate the percentage of cost breakdown for the various cost items (cost weight %);
2. determine the rate of escalation for each item (based on judgement, published
forecasts, etc.);
3. based on project schedule, determine the “cost centroid” of each activity, and calculate
the escalation (escalation rate for time period x n° of time periods), according to the
formula:
Escalation Cost = Σi (Total Costi (including escalation) - Base Costi)
with sum extended to all cost items (i) under estimate, where:

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Total Costi = Base Costi x Cost Weighti % x (1.00 + YERi)TPi
YERi = Yearly Escalation Ratei % (i.e. 7% per year)
TPi = Time Period from Base Cost date to Cost Centroid expressed in years
Well Cost
Drilling Cost Completion Cost
The above figure represents the Cost-breakdown for the below scheme.
Cost
Centroid
Drilling
TPdrilling
Completion
TPcomple tion
Base Project Time

Time Execution Start
With reference to Wells costs typical classification, Escalation should be considered for:
• Wells site costs
• Tangible costs
• Intangible costs
and do not for Drilling costs.

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13. CONTINGENCIES
Contingency covers costs that may result from incomplete design, unforeseen/unforeseeable
conditions, or uncertainties within the defined project scope. The size of the contingency
depends on the status of wells engineering, procurement, and drilling works; and on the
complexity and uncertainties surrounding the wells to be drilled. Contingency is not to be used
to avoid carrying out proper cost estimates for wells component parts and operations.
Contingency covers “known-unknown” events, i.e. events known and whose magnitude and
probability is uncertain (unknown).
This definition of contingency highlights two of its fundamental aspects:

It covers unforeseeable costs
It covers uncertainties within the defined Project scope
Contingency does not cover scope change and unforeseeable events not included in cost
estimates: these are separately approved, funded and managed using the Change Control
process.
A list of contingency items can be found in Annex 1 Typical Risks.
The following methods may be used to estimate Contingencies.
For deterministic cost estimates:
overall percentage: contingencies are calculated as a percentage of the estimated

project cost, using the formula:
Contingency = k% x estimated cost
where k is a value obtained by comparing the actual cost of a past project with its
original estimated cost.
detailed percentage: contingencies are calculated by combining the contingencies

estimated for each activity, operation, physical component, or work package, etc.
(referred to below as items), using the formula:
Contingency = Σi ki% x estimated costi
where:
ki = contingency of cost element i
estimated costi = estimated cost of cost element i
This method is equal to the overall percentage, but is applied to each individual cost
element.
detailed percentage incorporating probability of occurrence: contingencies are

calculated by combining the contingencies estimated for each activity, operation,
physical component, or Work Package, etc. (referred to as items), using the formula:
Contingency = Σi ki% x estimated costi x Pi

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where:
ki = contingency of element i
estimated costi = estimated cost of element i
Pi = probability of occurrence of estimated cost of element i.
For probabilistic cost estimates:
detailed estimate supported by risk analysis: calculation of contingencies including a risk

analysis for each cost item (i.e. activity or operation). Performed by evaluating the cost
impact and probability distribution for each identified risk. (This method is detailed in the
paragraph on Probabilistic Cost Estimating / Cost Risk Analysis).
The paragraphs Cost Risk Analysis describe the process for calculating contingencies using the
output of probabilistic cost estimates.
This process is based on the cumulative cost vs. target cost curve described in the previous
paragraph. Often this curve is drawn in reverse because it renders the “not exceeding cost”
concept better. The software commercially available also includes this feature.
Cumulated probability vs. Target Cost
Cum ulated Probability

of Target Cost Overrun
1.00 100%
Reverse Curve
0.50 50%
0.00 0%
Min. P(50/50) Target Cost Max.
Minimum and maximum Wells costs are easily calculated (sum of all Min. costs and of all Max.
costs of each item, respectively), so the curves are usually expressed in the form shown above.
Contingencies are estimated by defining the cumulated probability of “not exceeding” a certain
value i.e. 80% or whatever is Company/Project Policy, and then adding the contingency
required to achieve this objective.

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Confidence of achieving target cost
Cum ulated Probability of

Target Cost Overrun
100%
Estimated central value,
best estimate, base cost:
• mediane P(50/50)
Contingency (i.e. 80% confidence)

50%
20%
Min. Target Cost Max.
This representation of the cumulated probability of achieving the target cost suggests that
project definition can be improved. The effect of such an improvement is reflected by the
reduction in the confidence interval (CI – ref. to para Expected Accuracy Range). It should be
noted that when the difference between the min. and max. costs is zero, this estimate is equal
to a Deterministic Estimate.

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14. EXPECTED ACCURACY RANGE
The Expected Accuracy Range (EAR) is an indication of the degree to which the final cost
outcome for a given project will vary from the estimated cost.
As the level of Project definition increases, the cost estimation method selected may benefit
from the availability of increasingly detailed data / information. As a result, the expected
accuracy of the estimate tends to improve. This improvement in accuracy is the combined effect
of:
increasingly detailed and accurate data / information (i.e. level of Project definition);
Cost Estimating methods that take advantage of the increased detail of data /
information.
Project cost estimates should be carried out using cost estimating methods that are able to
provide the required levels of accuracy:
Levels of accuracy in Project phases
Hand Production &

+ 40% - 25% + 25%
Feasibility G1 Feasibility G2 Planning G3 Unit Cost

Revision R Execution
over close out

production?
Clas s I V Clas s III Class II Class I
Ec onomic s Est imate Economic s Es t imate Economics Est imate Ec onomic s Est imate
- 40% + 40% - 25% + 25%
+ 15% - 10% + 10%

- 15%
+ 40%
CAPEX expecte d accuracy
+ 25%
+ 15% + 10%
Class IV Class III Class II Class I
- 15% - 10%
- 25%
- 40%
The EAR of an estimate is traditionally expressed as a range of +/- X% around the point
estimate (before application of contingency in a deterministic estimate), and usually assumes a
certain level of confidence of the actual cost outcome falling within this range. In the above
figure the Gate 3 requires an EAR of +/- 15%.
The figure below shows the upper and lower boundaries of EAR (a probability of less than 10%
of overrun and underrun respectively - i.e. P(10/90) and P(90/10)).

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Accuracy and Contingency in Project phases
+ 40 % - 25% + 2 5%
Hand Production &
over close out

production?
Class I V Class III Class II Class I
- 4 0% + 4 0% - 25% + 2 5%
+ 15% - 10% + 10%

- 15%
90/10
90/10 Accuracy Contingency
90/10 90/10
Base Cost
50/50
90/10 90/10
10/90
10/90
This means that a cost estimate output for Planning phase of 1000 (units of currency), with an
EAR of +/- 15%, has a 10% probability of exceeding 1150 [(1000 x (1 + 15%)], and a 10%
probability of being lower than 850 [(1000 x (1 - 15%)].
It is recognised that in the absence of reliable probabilistic cost estimates, the purpose of the
definition given to confidence level indicators or the boundaries of the accuracy range is
somewhat limited. It does, however, provide a basis for the consistent use of estimating
terminology and definitions and thus for the future validation of current practice with regard to
accuracy and contingency.
Gate 3 requires the achievement of +/- 15% EAR.

In case of probabilistic cost estimating (or cost risk analysis) and detailed contingency definition
supported by risk analysis, it is possible to verify whether the estimate has reached the required
EAR by verifying CI spread.
The reasons of EAR improvement through the project phases have been explained under this
paragraph.
CI improvement (reduction) can be achieved by further:
Design development
Detailed cost estimate
Risk analysis
Etc.

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____________________________________________________________________________
Confidence Interval and Scope Definition
Cumulated Probability of
Target Cost Overrun
100%
Confidence Interval Reduction by:

• Design Development
• Detailed Cost Estimate
A • Risk Analysis
B
A B C
Min. Max.
CI C Target Cost
CI B
CI A
The better the Wells Project Scope is defined lesser will be CI spread.
This representation is also useful to compare different project solutions, in fact

those having a lower CI have a less dispersion in cost data thus are less risky projects
It is possible to define a maximum confidence interval (as % of the P(50/50) cost), beyond
which the project cannot be submitted for sanction and must be modified or cancelled.
To verify that the current Wells Project Scope and relevant estimate have reached the EAR
required for Project Sanction, the following shall be verified.
Confidence Interval and Expected Accuracy Range
Cumulated Probability
100%
90% EAR ≤ 15% requires
1.(Cmax-Cmin)/Cbase≤0.30
2.(Cbase-Cmin)/Cbase≤0.15
50% 3.(Cmax-Cbase)/Cbase≤0.15
10%
Min. C min C base C max Max.

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If the above conditions are not verified the Wells Project definition should be increased to
improve the EAR.
Deterministic Cost Estimate do not allow said analysis since each cost item is a fixed value,
thus the distribution probability and the CI cannot be defined.
EAR is an indication of the degree to which the final cost outcome for a given project will vary
from the estimated cost.
WCE EAR has a different shape that that shown in the relevant figure; in fact WCE factors cost
and quantity have different behaviours throughout the various project phases:
o Quantity figures are mainly affected by technical definition and data from exploration
wells and subsequent drilling and completion study and wells engineering
o Unit Cost figures are influenced by type (induced by technical definition) / cost of rig
(relevant to type and market conditions) and relevant finalisation through purchase
order award to contractors.
Quantity
effect of drilling and

completion study and
wells engineering
Unit Cost
effect of
P.O. award
Hand Production &

+ 40% - 25% + 25%

over close out

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15. COST DATA
Cost estimating basic formula is:
Cost Estimate = Quantity x Unit Cost
Cost Estimate relies upon quantity estimate and cost data to develop cost estimates. Examples
of cost data are:
o Unit cost (labour, material and equipment)
o Service cost as function of type / size
o Escalation
o Trend of cost expenditure vs. time
o Location factors
o Efficiency in resources expenditure
o Etc.
Cost data are collected by several different sources, such as:

o Published data from specialised organizations
o Company database, updated with final cost data of completed projects
o Company elaboration (forecasts, etc.) on database
o Bids from suppliers and contractors
o Purchase orders
o Etc.
Since cost data are main “building blocks” in cost estimating it is fundamental to:
o Easily access applicable cost data
o Properly account project cost expenditure to feed company database
o Elaborate cost data to infer relationships (i.e. correlation) between activities, risks,
efficiency, etc. and costs

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16. COST ENGINEERING BASIC FORMULAS
Cost Engineering formulas are used to perform cost comparison involving:

o Time value of money
o Relationships between kinds of costs
o Methods for handling unequal durations
Time influences value: equal amount of money received (or spent) at different times do not
have equal value; to compare or add them accurately they must be reduced to a common time
reference point.
If an amount of money P, earns interests “i” (expressed in decimal point form) for a specified
time period, its value at the end of that time period becomes:
F1 = P (1+i)
where F1 is the future value after one time period. The equation extended to “n” time periods is:
F = P (1+i)+/- n
The exponent is positive if time is moving with the calendar and negative if it is moving against
the calendar.
The most common time period used is the year, although any time period can be used for
compounding interests.
The main time value conversion formulas are:

o P: present value, for a single amount
o F: future value, for a single amount
o UB: uniform beginning-of-year amount
o UE : uniform end-of-year amount
Relevant formulas are given under Annex 2.
The “i” value is provided by Company financial dept.
These formulas account only for time value of money; a common problem in cost estimating is
the comparison of past data with current figures; this is made by using the above formula and
using the “yearly escalation rate” (eventually applied on annual time intervals, when it is
changing over the time interval under analysis); when such “yearly escalation rate” for the cost
items under evaluation are not available, “i” could be used with reasonable approximation
(exept for drilling cost).

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17. CAPEX, OPEX AND DECAB COST ESTIMATING
CAPEX are all costs attributable to the creation of a permanent or fixed asset. CAPEX with
respect to Wells Costs - sometimes referred to as DRILLEX - are the cost sustained for creating
new wells.
OPEX are all expenditures incurred in the operation and maintenance of an asset. OPEX with
respect to Wells Costs, are cost incurred to operate and maintain the wells during the
production life.
DECAB are all costs incurred at the end of production life in dismantling facilities, abandoning
wells, disposing of materials, decontaminating the area, and restoring the site in accordance
with requirements expressed in local law, regulations and consents.
CAPEX, OPEX and DECAB cost estimating are the three main cost items to be estimated for
each phase.
The cost estimating of these three items require different input, techniques and supporting
tools: these are detailed under the relevant Wells Cost Estimating Guidelines.

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18. LYFE CYCLE COST
Life Cycle Cost is the sum of CAPEX + OPEX + DECAB.

Life Cycle Cost is considered in investment decision, authorization and eventually re-
authorization.
Since CAPEX is the main cost factor in Life Cycle Cost, and wells cost might easily weight up to
60% of development project CAPEX, it is evident the paramount importance to define reliable
cost estimating criteria.
The figure below provides qualitative cumulative trend of such costs.
Life Cycle Costs
CAPEX
Cumulative Costs
DECAB
OPEX
Unit Cost Production

Feasibility Feasibility Planning Execution
Revision & Close
Close-- out
Note: relative costs and durations not in scale

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19. COST RISK ANALYSIS
Cost risk analysis (or probabilistic cost estimating) relies upon probability distribution for each
cost item.
Each cost element is subject to a certain degree of uncertainty due to several reasons, such as:
Required resources
Quantity estimate
Unit price estimate
Scope definition
Etc.
The root causes of these uncertainties drive the project risk analysis and in particular the cost
risk analysis. A list of typical project risks is given under Annex 1.
Objective of cost risk analysis is to improve the confidence of achieving a target cost or “not
exceeding” a defined cost value.
Cost risk analysis is a complex task and applies when wells cost estimate requires a
probabilistic approach, such as when there is a high uncertainty on:
Lithology
Drilling rig performance (type availability), cost
Etc.
or when:
CAPEX estimate qualifies - according to defined company criteria - for cost risk
analysis
Project partners - JV Agreements so require
Etc.
The decision about using cost risk analysis should be made at the beginning of the cost
estimating process.
Probabilistic cost estimating relies upon probability distribution for each cost element.
The histogram below provides an example of probability (p) versus cost (€) distribution. The
continuous curve represents the cumulated probability of “not exceeding” the cost value.
When P(50/50) or other probability reference values are used (e.g. P(10/90), P(90/10)) it must
be made clear whether they refer to probability distribution or to cumulated probability
distribution; in this document references are made clearly.
When the probability distribution must be expressed as a single-value estimate, Expected Value
may be used (the probability-weighted average). Expected Value is the best single-point value
estimate, because it is an objective (unbiased) representation of a probability distribution.
The P(50/50) of the cumulated probability distribution is known as the “median”.

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________________________________________________________________________
Probabilistic Cost Estimating
5 0 /5 0
p 90
10
In order to obtain a total estimate, the sum of the effect of the various probability distribution
functions for all cost elements needs to be calculated. To do this, software such as the Monte
Carlo simulation that produces a cumulative probability distribution curve of target cost
achievement may be used.
When the cost impact (in probabilistic terms) of risk occurrence with their probability
distributions are added to the “base cost” of each item (in probabilistic terms), the cost model
generated for the item provides a complete representation of the item’s cost.
__________________________________________________________________
Item Cost Estimate
Probability
ELEMENT
COST
ESTIMATE Cost
Min. Max.
Probability
Cost
Probability PROBABILITY Min.
Max.
BASE COST and
IMPACT
PROBABILITY
Cost
Min. Max. RISK n° 1 and
i.e. P(10/90) i.e P(90/10) IMPACT
PROBABILITY
RISK n° 2 and
IMPACT
PROBABILITY
RISK n° … and
IMPACT
RISK n° N
__________________________________________________________________
Subsequently, by summing (in probabilistic terms) the distribution costs of all elements, the
model provides the cumulated probability curve of cost achievement.

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_______________________________________________________________________________________________________
Cost Item Summing
CBS
COST ESTIMATE
ELEMENT n°COST
1 ESTIMATE
ELEMENT n°COST
2 ESTIMATE
ELEMENT n°…
COST ESTIMATE
ELEMENT n° M
PROBABILITY
andPROBABILITY
PLANNED IMPACT RISKand
SCOPE COST n° 1IMPACT PROBABILITY
RISK and
n° 2IMPACT PROBABILITY
RISK and
n° …IMPACT RISK
n° N
Cumulative probability distribution is represented by a curve whose vertical height is the

probability of an amount being equal to or less than the value on the horizontal axis. The
horizontal axis goes from 0 to 100% (or 0 to 1.00) or from minimum to maximum. It provides the
same information as probability distribution, but makes reading the confidence level, confidence
interval etc., easier.
__________________________________________________________________
Cumulated Probability vs. Target Cost
1.0
0.5
0.0
Min. P(50/50) Max.
Target Cost
__________________________________________________________________

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Confidence level is the probability that:
Results will be equal to or more favourable than the estimate

A decision taken will achieve the desired results
A stated conclusion is true
The cumulated probability curve provides information about:
Min. cost ÷ Max. cost range (Confidence Interval)

Median of the estimate: P(50/50) and other typical values such as P(10/90),
P(90/10)
The cumulated probability of “not exceeding” each target cost
Comparison of various project alternatives
The Cumulative Probability vs. Target Cost curves can be plotted for various project
alternatives, in order to highlight the significant cost characteristics each one.
This curve may also be usefully applied in calculating contingencies (as explained in the
relevant paragraph).
In the following paragraphs the Minimum cost coincides with the origin of the graph, since the
focus is on the variable part of the estimate.
Project approval for execution (Gate 3) requires the achievement of +/- 15% EAR.
In case of probabilistic cost estimating (or cost risk analysis) and detailed contingency definition
supported by risk analysis, it is possible to verify whether the estimate has reached the required
EAR by verifying CI spread.
The reasons of EAR improvement through the project phases have been explained under
paragraph Expected Accuracy Range.
CI improvement (reduction) can be achieved by further:

Design development
Detailed cost estimate
Risk analysis
Etc.

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Confidence Interval and Scope Definition
Cumulated Probability of
Target Cost Overrun
100%
Confidence Interval Reduction by:

• Design Development
• Detailed Cost Estimate
A • Risk Analysis
B
A B C
Min. Max.
CI C Target Cost
CI B
CI A
The better the Project Scope is defined lesser will be CI spread.
This representation is also useful to compare different project solutions, in fact:

Those having a lower CI have a less dispersion in cost data, thus are less risky
projects
It is possible to define a maximum confidence interval (as % of the P(50/50) cost),
beyond which the project cannot be submitted for sanction and must be modified or
cancelled
To verify that the current Project Scope and relevant estimate have reached the EAR required
for Project Sanction, the following shall be verified.
Confidence Interval and Expected Accuracy Range
100%
90% EAR ≤ 15% requires
1.(Cmax-Cmin)/Cbase≤0.30
2.(Cbase-Cmin)/Cbase≤0.15
50% 3.(Cmax-Cbase)/Cbase≤0.15
10%
Min. C min C base C max Max.

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If the above conditions are not verified the Project definition should be increased in order to
improve the EAR.
Deterministic Cost Estimate do not allow said analysis since each cost item is a fixed value,
thus the distribution probability and the CI cannot be defined.

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20. COST BUDGETING
Cost budgeting is the process of time-phasing (and/or depth phasing) the cost expenditures for
all CBS elements.
Each CBS element under Cost Budgeting requires the allocation of resources consumption and
relevant cost expenditure over time / depth.
The steps to be followed are:

Get start - finish dates or start - finish depth of the planned operations.
For each cost element, allocate cost using one of the following cost over time / depht
distribution:
Uniform;
Linear;
Start of period expenditure;
Centroid of period expenditure;
End of period expenditure;
according to the planned resources expenditure. It is advisable to follow the planned resources
expenditure, rather than following the invoicing scheme; the latter can be used only if better
information are unavailable.
Calculate integral cost over time / depth in order to calculate the cumulative cost expenditure,
by summing the cost budgets of all sub-operations (if any).
The figure below shows the above mentioned distributions and relevant cumulative curves.
Cost
Linear’s
Cumulative
Uniform’s
Start of Cumulative
Period End of Period
Cumulative & Cumulative
Start of
Period Linear
Centroid of Period
& Cumulative
Uniform
Operation X
Start Finish
Time / Depth

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In particular, when a high degree of precision is not required, a linear cumulative cost can be
assumed as model; this is done assigning all costs at the end of the period, and applying a
triangular distribution of cost cumulative from start to finish.
The figure below shows the above described approach.
Cost
Operation
Total Cost
Activity N
Operation
Total Cost
Cumulative Activity …
Activity B
Activity A
Operation X
Start Finish
Time / Depth

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Aggregate cost expenditure over time / depth of all CBS Elements
The aggregation (sum-up) of the cost budgets of all CBS elements is made by summing the
cost budgets of all cost elements.
When a triangular distribution of cost cumulative from start to finish is used, these can be
summed-up as shown in the figure below.
Cost
Operation N
Operation B Operations Total

Budget Cost
Operation A Operation N
Total Cost
Operation B
Total Cost
Operation A
Total Cost
Time / Depth

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21. WELLS COST ESTIMATING BOUNDARIES
Wells are always part of a bigger project that includes other facilities such as onshore / offshore
/ sub sea facilities, terminals, pipelines, etc.
To avoid duplications and/or voids in the cost estimate this handbook indicates the battery limits
of wells cost estimate, in terms of scope of work and general/common cost items.
Well cost estimate shall include:

Material
Labour
Equipment
Services
Company personnel (home office and site)
Travel, relocation, board and lodging, pocket money for company personnel
Allowances
Escalation
Contingencies
Taxes and duties
Insurance
relevant to Wells up to flow lines excluded.
In general terms the following battery limit apply between Wells and Facilities cost estimating:
1. Rig site preparation is included in WCE (i.e. access roads, rig site, fence, waste pit,
celler, cost of right of access and land lease); cost of oil concession, access roads
upgrading , etc., are excluded
2. Christmas tree is include in WCE; cost of flow line, shutdown safety valves, control
panels, etc. installed on the flow line, are excluded
3. for Well Head and Christmas Tree subsea installation Wells Head is included in
WCE; cost of Christmas tree is excluded
4. Logistics: up these are used for Wells drilling and completion works are included in
WCE.
Depending upon project scope, some site facilities or logistics might be shared between wells
drilling and facilities construction; examples follow:
o Transport facilities
o Site offices, canteen, personnel accommodation facilities, first aid, etc.
o Etc.
Before cost estimate is initiated such clarification is required.

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ANNEXES

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ANNEX 1: TYPICAL RISKS
Wells drilling typical risks

Unexpected reservoir size
Unforeseen site geotechnical and geomorphological conditions
Selection of drilling technologies
Timely availability of appropriate drilling rig
Drilling operation duration (planned and unplanned)
Drilling operation daily cost
Completion operation duration (planned and unplanned)
Completion operation daily cost
Well operational sequence
Drilling penetration rate
Well site
Stuck pipe
Well control
Lost circulation
Location factors (ref. para 13.1)
JV agreements
HSE requirements
Etc.

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ANNEX 2: COST ENGINEERING BASIC FORMULAS
n F
F=P(1+i)
Single Payment
-n
P=F(1+i)
P
F
F = [ Ub (1+i)] • [(1+i)n-1] /i
Ub Ub Ub Ub Ub
P = [ Ub (1+i)] • [ (1+i)n-1] /[i(1+i)n]

Uniform beginning-
of-the-year payments Ub = [ P/(1+i)] • [i(1+i)n] /[ (1+i)n-1]
F
F = Ue[(1+i)n-1]/i
Ue Ue Ue Ue Ue
P = Ue[(1+i) n-1]/[ i(1+i)n]

Uniform end-of-
the-year payments Ue = P[i(1+i)n]/[ (1+i)n-1]

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SECTION 2
WELLS COST GLOSSARY

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INDEX
1. INTRODUCTION ...............................................................................................................3
2. WELLS COST GLOSSARY ..............................................................................................3

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1. INTRODUCTION
This section supports the understanding of the terms used in Wells Cost section, Wells Cost
Estimating section, Wells Cost Controlling section, Wells Cost Code section.
2. WELLS COST GLOSSARY
TERM DEFINITION Corresponding

TERM in DMS /
PROMS
Accounted Cost Cost incurred for the execution of the activities or Accounted Cost
operations as recorded in Company Accounting System (DMS)
(CAS).
Accrued Cost Value of the Actual Cost (of operations) calculated Accrued Cost
summing the accounted value plus an estimate by the (DMS)
Project Team; also called Value of Operation Done.
Accuracy The estimated bandwidth around a predicted or Accuracy
measured result, expressed as +/- X%. (DMS)
Actual Cost (AC) Known cost of an activity, a group of activities or project Actual Cost
(operations) actually performed up to Depthnow / (DMS)
Timenow.
Actualized Cost The best estimate of current cost expenditure, -
developed using cost data of previous projects.
Activity Work to be carried out as part of a process Activity (DMS)
characterised by a set of specific inputs and tasks that
produces a set of outputs. A defined and logic set of
Activities is an Operation. The lowest level of Cost
Breakdown Structure and of Time Breakdown.
Allowance The additional quantity of Resources – with respect to -
Quantity Base Quantity of Resources – to cover events that
always happen, but is more practical to account for
these as percentage of Base Quantity.
Approval For The document(s) issued at the end of the cost -
Expenditure estimating process of the Planning phase, addressing
(AFE) the cost estimate developed.
Asset Anything that has value to the Company. Current value Asset (DMS)
of property, investments, stock and cash. Usually
designates the field to be developed, including wells and
facilities.
Base Cost Activity cost estimate excluding any allowance and any Base Cost
contingency. (DMS)
Base Quantity The base quantity of Resources required without -
allowance and / or contingency.
It is calculated from specifications, drawings,
contractors’ bids, DC&W Dept. database, etc.
CAPEX All costs attributable to the creation of a permanent or CAPEX (DMS)
fixed asset.
Company Company ERP (i.e. SAP) system used by Company to SAR R/3 (DMS)

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Accounting account costs for administrative and financial purposes.

System (CAS)
Contingency Cost Additional cost to cover events that may result from Contingency
incomplete design, unforeseen / unforeseeable (DMS)
conditions, or uncertainties within the defined project
scope. The size of the contingency depends on the
status od wells engineering, procurement and drilling
operations.
Contingency Additional quantity to cover events that may result from -
Quantity incomplete design, unforeseen / unforeseeable
conditions, or uncertainties within the defined project
scope. The size of the contingency depends on the
status of wells engineering, procurement and drilling
operations.
Cost In project control and accounting, it is the amount Cost (DMS)
measured in money, cash expended or liability incurred,
in consideration of goods and/or services received.
From a total cost management perspective, cost may
include any investment of resources in strategic assets
including time, monetary, human, and physical
resources.
Cost Baseline The original approved plan (for a project, an operation, Baseline (DMS)
or an activity) which defines and qualifies the project’s
cost.
Cost Breakdown The hierarchical cost structure which allows the Cost
Structure (CBS) representation of cost figures at different levels of detail. Breakdown
Each element of CBS should indicate WCE, WCE@, AC, Structure
Cost Indexes, ETF, EAF, etc. (DMS)
Cost Budget The time-phasing (and/or depth-phasing) of cost Cost Phasing
disbursement for the project, operation or activity. (DMS)
Cost Controlling The process of controlling changes to project’s or
activity’s or operation’s cost estimate.
Cost Element Each element of the Cost Breakdown Structure. Cost Element =
Lowest level of
Cost
Breakdown
Structure
(DMS)
Cost Estimate The cost of resources needed to execute and complete -
project activities.
Cost Estimating The process of developing an approximation (estimate) Cost Estimating
of the cost the resources needed to execute and (DMS)
complete project activities.
Cost Index The ratio between Well Cost Estimate@ and Actual Cost -
(WCE@ / AC)
Cost Variance The difference between Well Cost Estimate@ and -
Actual Cost (WCE@ - AC)
Cumulative Cost The sum of all costs – for a project, an operation, or an -
activity – from its Start upto Depthnow or Timenow.
Same as Actual Cost; the term is often used to indicate
the curve plotting AC vs. Depth or vs. Time.

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Drilling ENI E&P Division Departments involved in Drilling,

Completion & Completion and Workover Activities
Workover
Department
(DC&W Dept.)
DECAB All costs incurred at the end of production life in DECAB (DMS)
dismantling facilities, abandoning wells, disposing of
materials, decontaminating the area, and restoring the
site in accordance with requirements expressed in local
law, regulations and consents.
Depthnow Depth specified as current for carrying out an evaluation -
of the actual costs for operations executed during an
exploration or development project.
Escalation Cost Covers an increase in the cost of service, material, -
labour, etc. over that accounted in the cost database or
specified in the purchase order or contract due to
continuing price level change over time.
Estimate / An evaluation of a probable quantitative result. Usually Estimate (DMS)
Estimated Cost applied to project costs and durations. Should always
include some indication on Accuracy (+/- X%).
Estimate At The expected total cost of an activity, a group of Estimate At
Finish (EAF) activities, or the project when the defined scope of Completion
operations has been completed. Most techniques for (EAC) of DMS.
forecasting EAF include some adjustment of the original
cost estimate, based on actual project performance to
date.
Estimate To The expected additional cost needed to finish an Estimate To
Finish (ETF) activity, a group of activities, or the project. Most Complete
techniques for forecasting ETF include some adjustment (ETC) of DMS
to the original cost estimate, based on actual project
performance to date.
Expected An indication of the degree to which the final cost Expected
Accuracy Range outcome for a given project will vary from the estimated Accuracy
cost. Range (DMS)
Expected Final Same as Estimate At Finish (EAF). Expected Final
Cost (EFC) Cost (DMS)
Final Cost The total cost expenditure incurred for the resources -
utilised to execute and complete the project activities.
It can be valued only at the end of the project, operation,
or activity.
G1 Decision Gate 1 at the end of the the first part of the G1 at the end
Feasibility Phase where a key management decision of Evaluation
must be made before a project can progress phase (DMS)
G2 Decision Gate 2 at the completion of the Feasibility G2 at the end
Phase where a key management decision must be of Concept
made before a project can progress Selection
phase(DMS)
G3 Decision Gate 3 at the end of the Planning Phase where G3 at the end
a key management decision must be made before a of Concept
project can progress Definition
phase (DMS)
Heavy Workover Workover operations that modify the Asset; relevant -
cost are CAPEX .

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Life-cycle The concept of considering the entire time-span of a -

project, from its conception up to its dismantling,
abandoning and site restoration.
Light Workover Workover operations that do not modify the Asset; -
relevant costs are OPEX. It includes all maintenance
operations.
Location Factor An estimating factor used to convert the cost of a similar -
well (or part thereof) from one location to another.
Operation A logically combined set of Activities bringing about a -
defined and clearly measurable result.
OPEX All expenditures incurred in the operation and OPEX (DMS)
maintenance of an asset.
Physical Progress The percent complete for each of individual activities, Physical
operations or project. It is an element, that, unlike time Progress (DMS)
progress, qualifies in an inequivocal way the completion
level achieved by the activity, operation or project.
Production The production time span of a reservoir from start-up to -
Lifecycle well decommissioning.
Process A series of step and actions which produces a result. -
Production Profile A deliverable showing the production of the reservoir Production
from plant start-up and for the whole production Profile (DMS)
lifecycle.
Quantity (of
Resources)
Resource The project resources (people, equipment and Everything that
materials) needed and their quantities to perform project is required to
activities. perform an
activity on an
asset (DMS)
Resource The original approved plan (for a project, an operation, Resource
Baseline or an activity) which defines and qualifies the project’s Baseline (DMS)
resources.
Revise WCE The revision to a previously issued WCE requiring -
modification to the the total cost of the DC&W cost of
the project.
Schedule The planned dates for perfoming working phases, -
operations and activities and the planned dates for
meeting milestones.
Scope The operations (and activities) to be carried out and Scope of Work
deliverables to be produced in a project. = A description
of the work to
be carried out
in a project
together with
the
deliverables,
targets and
constrains for
each pahse of
the project
(DMS)
Scope Baseline The original approved plan (for a project, an operation, Scope Baseline
or an activity) which defines and qualifies the project’s (DMS)

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scope.
Take off A specific method for identifying and recording from
drawings and specifications the material and quantities
required for estimating the cost to fully execute an
activity, operation or project.
Time The time frame (start-finish) in which all project activities -
and the entire project shall be performed.
Timenow Date specified as current for carrying out an evaluation Timenow
of the actual costs for operations executed during a (DMS)
exploration or development project.
Time Baseline The original approved plan (for a project, an operation, Time Baseline
or an activity) which defines and qualifies the project’s (DMS)
time.
Unit Cost
Update WCE The revision to a previously issued WCE without -
modifying the total cost of the DC&W cost of the project.
It requires only modification to CBS cost elements’ cost.
Variance Difference between planned values and actual values. Variance (DMS)
Wells Cost The original approved plan (for a project, a operation -
Baseline (WCB) package, or an activity) which defines and qualifies the
Wells Cost Estimate (WCE).
Wells Cost The cost estimate of an activity, a group of activities or -
Estimate (WCE) operations or project planned or scheduled to have been
completed or of services planned or scheduled to have
been performed.
In other words is the estimated cost expenditure of each
cost element of the CBS as output of the Cost
Estimating process (Cost Estimating for the Feasibility
phase, for the Planning phase and for the Unit Cost
Revision phase).
Other definition: An evaluation the cost of resources
needed to execute and complete an activity a group of
activities (operations), or the project relevant to DC&W
operations.
Wells Cost The Wells Cost Estimate at the Depthnow or Timenow -
Estimate@ at which the cost control is performed.
Working Phase The upper level of the Time Breakdown of a Well. -
Further breakdowns are: Operation and Activity.

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SECTION 3
WELLS COST ESTIMATING

FOR
FEASIBILITY PHASE

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INDEX
1. INTRODUCTION ...............................................................................................................3
2. COST ESTIMATING FOR FEASIBILITY PHASE OVERVIEW .........................................4
3. PROCESS OVERVIEW.....................................................................................................5
3.1 WSB, WTB AND WRB REVIEW AND APPRAISAL .........................................................6
3.2 SELECT CBS FOR COST ESTIMATING..........................................................................7
3.3 ESTIMATE DRILLING AND COMPLETION TECHNICAL CHARACTERISTICS .............9
3.4 IDENTIFY AND SELECT SIMILAR WELLS....................................................................11
3.5 ESTIMATE UNIT COST OF SIMILAR WELLS ...............................................................13
3.6 ESTIMATE COST ...........................................................................................................14
3.7 COST BUDGETING ........................................................................................................15
3.8 WCE AND BUDGET COST APPROVAL ........................................................................18
ANNEX 1 - FORM FOR WCE AND BUDGET .........................................................................19
SECTIO 3 of Cost Estimating, Budgeting and Controlling Handbook

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1. INTRODUCTION
This section supports DC&W Cost Estimating (CEA) during Feasibility phase.
The figure below shows the project phase in which this section applies.
Document Number:
Hand Production &

+ 40% - 25% + 25%
Feasibility G1 Feasibility G2 Pla nning G3 Unit Cost

over close out

production?
Economics Est imate Economic s Es t imate Economics Est imate Economics Est imate
- 40% + 40% - 25% + 25%
WCE + 15% - 10% + 10%

- 15%

WCE WCE
Phase) (AFE) Revise /
(Feasibility
Phase) Wells Update
Engineering

Wells
Execution &
Completion

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2. COST ESTIMATING FOR FEASIBILITY PHASE OVERVIEW
Cost Estimating is the process of evaluating the cost of resources needed to execute and
complete an activity a group of activities, or the project relevant to DC&W operations.
In particular DC&W CEA for Feasibility phases is the process carried out to issue the best Wells
Cost Estimate based on limited technical data and information developed during the Drilling &
Completion study.
The objective of such process is to enable Project Team to issue the most reliable WCE at
this phase.
WCE supports also the “go-no go” decision about the Project.
Cost Estimating for Feasibility phase receives input and provides output to planning (both to
planning and scheduling). It includes also Cost Budgeting.
Cost Control
Pl a n
gre ss
ni ng
& Pro
&S
g
che
dule
t ori n
PLANNING &
dul i
Sche
Moni
CONTROL CYCLE
ng
Co g
st in
Bu at
t im
dg s
et
in stE
g
Co

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3. PROCESS OVERVIEW
Mains step of Cost Estimating for Feasibility phase are:
WSB, WTB and WRB Review and Appraisal

Select CBS for Cost Estimating
Estimate Drilling and Completion Technical Characteristics
Identify and Select Similar Wells
Estimate Unit Cost of Similar Wells
Estimate Cost
Cost Budgeting (Depth vs. Time and Time vs. Cost)
WCE and Budget Cost Approval
Wells Cost Estimating for Feasibility Phase Process Workflow

OTHER PROCESSES
PLANNING & SCHEDULING
Project Scope Project Time

Project Resources
(Operations) (Schedule)
and WRB
and WSB and WTB
WSB, WTB and

FEASIBILITY PHASE WELLS COST ESTIMATING
WRB Review
and Appraisal
Cost Budgeting WC E and

Select CBS for
Estimate Cost • Depth vs. Cost Budget Cost
Cost Estimating
• Time vs. Cost Approval
Estimate
Identify and Estimate Unit Cost
Drilling and
Select of
Completion Tech.
Similar Wells Similar Wells
Characteristics
Input
Output
Input
Output
DC&W Dept. DC&W Dept.

Cost Database Cost Database
WSB = Wells Scope Baseline; WTB = Wells Time Baseline; WRB = Wells Resources Baseline

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3.1 WSB, WTB AND WRB REVIEW AND APPRAISAL
The first step of DC&W CEA for Feasibility phase is WSB, WTB and WRB Review and
Appraisal.
This step is required at:

• DC&W CEA start during Project Feasibility phase
The objectives of this step are:

• To provide a consistent set of documents and data to be used as basis to develop WCE
The activities of this step are:

• To review Wells Project Baseline (operations, timing, and resources, etc.)
• To collect all documents and data required to support WCE
WSB, WTB and WRB Review and Appraisal Step Work flow
OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
WSB, WTB and

Collect Data
WRB Review Go to next step
and Documents
and Appraisal

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3.2 SELECT CBS FOR COST ESTIMATING
The second step of DC&W CEA for Feasibility phase is Select CBS for Cost Estimating
purpose.

• DC&W CEA start during Project Feasibility phase.
The objective of this step is:

• To define and select the most suitable CBS for DC&W CEA

• To evaluate whether the Project has particular CBS requirements (i.e. Joint Ventures)
• To define and select a suitable CBS:
o For Company Projects use standard Company CBS
o For other Projects (i.e. Joint Ventures) define eventually custom CBS
• To get approval for defined CBS (no approval is required for standard Company CBS).

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
Evaluate Project’s Particular NO Select Company

From previous step requirements requirements Go to next step
std. CBS
for CBS identified?
YES
Define
custom CBS
Custom CBS
Approval
WC E = Wells Cost Estimate; WCB = Well Cost Baseline; WSB = Wells Scope Baseline; WTB = Well Time Baseline; WRB = Well Resources Baseline

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The Standard Company CBS for Feasibility phase is given below.
Well… i
Rig Alternative Rig less G1

G2
Drilli ng Co mpletion Completion
Rig Rig Working

Tangible Intangible Tangibl e Intangible Tangibl e Intangible
Contractor Co ntracto r Unit
WCE developent with lower CBS cost elements at G2 (Gate 2) than that at G1 (Gate 1)
become feasible only if relevant technical data and information to support such estimate are
available.

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3.3 ESTIMATE DRILLING AND COMPLETION TECHNICAL CHARACTERISTICS
The third step of DC&W CEA for Feasibility phase is Estimate Drilling and Completion
Technical Characteristics.


• To make available the best estimate of those technical characteristics driving WCE.

• To estimate the technical characteristics required to identify the similar wells
Estimate Drilling and Completion Technical Characteristics Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
Estimate Drilling
Technical
Characteristics
From previous step Go to next step
Estimate
Completion
Technical
Characteristics
WC E = Wells Cost Estimate; WCB = Wells Cost Baseline; WSB = Well Scope Baseline; WTB = Wells Time Baseline; WRB = Wells Resources Baseline

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Main technical characteristics are:
• for Drilling Operations:

o Lytology sequence
o Well total depth
o Well drilling schedule (total duration of drilling operations)
o Casing type and size (for the various phases)
o Phases drilling schedule
o Estimated Rig type
• for Completion Operations:

o Completion type
o Completion schedule (total duration of completion operations)
Some of these technical characteristics might not be available at the earlier project phases,
thus the WCE shall be based only on the data and information available and on the required
assumptions.

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3.4 IDENTIFY AND SELECT SIMILAR WELLS
The fourth step of DC&W CEA for Feasibility phase is Identify and Select Similar Wells.


• To identify those wells whose characteristics are similar to that under WCE to get better
cost estimate.

• To define quantitative similitude criteria
• To inquiry DC&W Dept database through the similitude criteria identified
• To highlight the similar wells (or parts thereof) identified
• To short list the similar wells (or parts thereof) identified
Identify and Select Similar Wells Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
Define
Inquiry Database
Quantitative Extract Short List
From previous step through Go to next step
Similitude Similar Wells Similar Wells
Similitudes
Criteria

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Similitude Criteria
For explanations refer to Wells Cost Handbook.
Database Inquiry
Database inquiry shall be done based on similitude criteria identified.
Extract Similar Wells
The similar wells (or parts thereof) identified shall be identified and listed for further
considerations.
Short List Similar Wells
The similar wells identified, shall be short listed according to a defined criteria (i.e. closer
range value with respect to defined allowance range for acceptable data, same country,
lytology, confidence on data reliability, etc.).

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3.5 ESTIMATE UNIT COST OF SIMILAR WELLS
The fifth step of DC&W CEA for Feasibility phase is Estimate Unit Cost.


• To perform the best estimate of unit cost of operations required for the Execution
phase.

• To extract - from similar wells short listed - the comparable wells operation(s) or parts
thereof
• To calculate the unit cost of operations relevant to the similar wells at the date when
these where performed
• To calculate the actualised unit cost, using cost indexes, location factors, cost
escalation, etc. (ref. Wells Cost Handbook)
Estimate Unit Cost Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
Extract from
Calulate Calculate
Similar Wells
From previous step Unit C ost Actualised Go to next step
Comparable
“when performend” Unit C ost
Operations

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3.6 ESTIMATE COST
The sixth step of DC&W CEA for Feasibility phase is Estimate Cost.


• To calculate the best estimate of the total cost of resources required for the Execution
phase.

• To calculate total cost of each CBS element
• To sum the cost of all CBS elements
(Ref. Wells Cost handbook)
Estimate Cost Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
Σ
Calculate
Calculate
From previous step Total Cost of each Go to next step
Total Cost
CBS Element
O utput
Π
Quantity
X
Unit C ost

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3.7 COST BUDGETING
The seventh step of DC&W CEA for Feasibility phase is Cost Budgeting.


• To calculate the best estimate of the total cost expenditure over depth / time for the
Execution phase.

• To get schedule of operations for each CBS element to be cost budgeted
• To allocate cost expenditures over time / depth (phasing) of CBS elements
• To calculate cost expenditures vs. depth / time
Cost Budgeting Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
Depth / Time
Get Schedule
From previous step phasing of Go to next step
of Operations
Cost Expenditures

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Each CBS element under Cost Budgeting requires the allocation of cost expenditure over
time / depth.
The steps to be followed are:

• Get start - finish dates or start - finish depth of the planned operations;
• For each cost element, allocate cost using uniform the following cost over time /
depht distribution;
• Calculate integral cost over time / depth in order to calculate the cumulative cost
expenditure (linear distribution), by summing the cost budgets of all sub-operations
(if any).
The figure below shows the above mentioned distribution and relevant cumulative curve.
Cost
Uniform’s
Cumulative
Uniform
Operation X
Start Finish
Time / Depth

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Whe more than one operation must be considered, the cost distribution of the various parts
shall be summed.
Cost
Well
Total
Completion Cost
Operation Cost
Cumulative
Drilling
Operation Cost
Cumulative
Drilling Operation Completion Operation
Start Finish
Time / Depth

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3.8 WCE AND BUDGET COST APPROVAL
The eighth step of DC&W CEA for Feasibility phase is Cost Budgeting.


• To get management approval to WCE and relevant Budget.

• To fill and review the form of WCE and relevant Budget
• To submit said form for approval to proper management level
• To get approval from Management.
WCE and Budget Approval Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
FEASIBILITY & PLANNING PHASES WELLS COST ESTIMATING
Submit Form Get

Fill WC E and
From previous step for Management Management STOP
Budget Form
Approval Approval
WC E = Wells Cost Estimate; WCB = Wells Cost Baseline; WSB = Well Scope Baseline; WTB = Wells Time baseline; WRB = Wells Resources Baseline

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ANNEX 1 - FORM FOR WCE AND BUDGET
Issue Date: ___________________

Revision N°: ___________________
Country: _____________________
Reservoir: ____________________
Well ID: _____________________
1. Drilling Cost: _________________
Drilling Time: __________________

Drilling Total Depth: _____________
2. Completion Cost: ______________
Completion Time: ______________
3. Total Well Cost (1+2): ________________
4. Budget Cost: ____________________

Month 1: ________
Month 2: ________
Month...: _________
Month N: ________

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SECTION 4

FOR
PLANNING PHASE
SECTION 4 Cost Estimating, Budgeting and Controlling Handbook

Wells Cost Estimating for Planning Phase
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INDEX
1. INTRODUCTION ...............................................................................................................3
2. COST ESTIMATING FOR PLANNING PHASE OVERVIEW ............................................4
3.1 WSB, WTB AND WRB REVIEW AND APPRAISAL .........................................................6
3.2 SELECT CBS FOR COST ESTIMATING..........................................................................7
3.3 ESTIMATE QUANTITY / TYPE OF RESOURCES............................................................9
3.4 ESTIMATE UNIT COST ..................................................................................................12
3.5 ESTIMATE COST ...........................................................................................................16
3.6 COST BUDGETING ........................................................................................................17
3.7 WCE AND WCB APPROVAL .........................................................................................21
ANNEX 1 - FORM FOR WCE AND BUDGET .........................................................................22

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1. INTRODUCTION
This section supports DC&W Cost Estimating (CEA) during Planning phase.
The figure below shows the project phase in which this section apllies.
Document Number:
Hand Production &

+ 40% - 25% + 25%

over close out

production?
Economic s Est imate Economics Est imate Economic s Est imate Economics Est imate
- 40% + 40% - 25% + 25%
WCE + 15% - 10% + 10%

- 15%

WCE WCE
(Feasibility
Phase) Wells Update
Engineering

Wells
Execution &
Completion

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2. COST ESTIMATING FOR PLANNING PHASE OVERVIEW
complete an activity a group of activities, or the project relevant to DC&W operations.
In particular DC&W CEA for Planning phase is the process carried out to develop the Wells
Cost Estimate based on more detailed and precise technical data and information developed
during the Wells Engineering.
The objective of such process is to enable Project Team to issue the most reliable WCB and
WCE for the Cost Control during Execution phase (although revised during Unit Cost
Revision phase).
This ensures the definition of more realistic cost objectives (WCE and WCB) for the
Project.
WCE supports also the “go-no go” decision about the Project.
Cost Estimating for Planning phase receives input and provides output to planning (both to
planning and scheduling and to cost controlling). It includes also Cost Budgeting.
Cost Control
Pl a n
gress
ning
Moni le & Pro
&S
g
che
t ori n
du
PLANNING &
duli
Sche
CONTROL CYCLE
ng
Co g
in
st
Bu at
t im
dg s
et
stE
in
g Co

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3. PROCESS OVERVIEW
Mains step of Cost Estimating for Planning phase are:
WSB, WTB and WRB Review and Appraisal

Estimate Quantity / Type of Resources
Estimate Unit Cost
Estimate Cost
Cost Budgeting (Depth vs. Time and Time vs. Cost)
WCE and Budget Cost Approval
Wells Cost Estimating for Feasibility & Planning Phases Process Workflow
OTHER PROCESSE S

Project Resources
and WRB
and WSB and WTB
Get Cost Data

from
Existing Contracts
WSB, WTB and
PLANNING PHASE WELLS COST E STIMATING
WRB Review
O utput
and Appraisal
Input
Estimate Cost Budgeting WC E and

Select CBS for
Quantity / Type Estimate Unit Cost Estimate Cost • Depth vs. Cost Budget Cost
Cost Estimating
of Resources • Time vs. Cost Approval
Inp ut
O utput
DC&W Dept.
Cost Database

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3.1 WSB, WTB AND WRB REVIEW AND APPRAISAL
The first step of DC&W CEA for Planning phase is WSB, WTB and WRB Review and
Appraisal.

• DC&W CEA start during Project Planning phase

• To provide a consistent set of documents and data to be used as basis to develop WCE

• To review Wells Project Baseline (operations, timing, and resources, etc.)
• To collect all documents and data required to support WCE
WSB, WTB and WRB Review and Appraisal Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
WSB, WTB and

Collect Data
PLANNING PHASE WELLS COST ESTIMATING
WRB Review Go to next step

and Documents
and Appraisal

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3.2 SELECT CBS FOR COST ESTIMATING
The second step of DC&W CEA for Planning phase is Select CBS for Cost Estimating.

• DC&W CEA start during Project Planning phase.

• To define and select the most suitable CBS for DC&W CEA

o For Company Projects use standard Company CBS
• To get approval for defined CBS (no approval is required for standard Company CBS).
Select CBS for Cost Estimating Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB

std. CBS
for CBS identified?
YES
Define
custom CBS
Custom CBS
Approval
WC E = Wells Cost Estimate; WCB = Well Cost Baseline; WSB = Wells Scope Baseline; WTB = Well Time Baseline; WRB = Well Resources Baseline

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The Standard Company CBS for Planning phase is given below.
Well… i
Rig Alternative Rig less
Dri lling Complet ion Complet ion
Moving Phase ∅ i
Working
Tangibl e Int angible
Unit
CB S CB S CB S
Rig
Cont ract or
CB S CB S CB S
Repeated under each

descending root

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3.3 ESTIMATE QUANTITY / TYPE OF RESOURCES
The third step of DC&W CEA for Planning phase is Estimate Quantity and Type or Resources
required for the Project.


• To perform the best estimate of quantity and type of resources required for the
Execution phase.

• To estimate for each CBS Element Type of Resources required
• To estimate for each CBS Element Base Quantity of Resources
• To estimate for each CBS Element Allowance Quantity of Resources
• To estimate for each CBS Element Contingency Quantity of Resources
• To calculate for each CBS Element Total Quantity of Resources
Estimate Quantity / Type of Resources Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
Estimate Type Estimate Base Estimate Estimate

From previous step of Resources Quantity Allowance Quantity Contingency
Required of Resources of Resources Resources
Σ
Calculate
Total Quantity
of Resources
Go to next step

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The figure below shows quantity estimate with respect to CBS element cost estimate.
Well Cost
Cost Element 1
Cost Element 2
Cost Ele ment …
Cost Element N

Base Cost 1
Base quantity from “take off”, BOQ,

Cost escalation on Ele ment 1
Quantity contingency on Ele ment 1
The figure below provides a template to follow for estimating quantity and type of resources for
each CBS element.
Cost Element - Quantity

Cost Element CBS Resources Estimated Notes
Description Code
Type Quantity
Description Code Description Base Allowance Contingency Total

(A) (B) (C) (D) = (A + B) x (1+C)
The basic formula for Quantity calculation is:
Qi = [(Base Quantity)i + (Allowance Quantity)i] • (1 + Contingency Quantity %)i

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Base Quantity is the quantity of Resources required without Allowance and/or Contingency. It
is calculated from specifications, drawings, contractors bids (same or other similar projects),
DC&W Dept. database, etc.
Allowance Quantity covers events that always happen, but is more practical to account for
these as percentage of Base Quantity, then including the same within the Base Quantity (i.e.
Allowance Quantity = Base Quantity x A%)
Example of Allowance Quantity is the difference between casing length purchased and the
casing length calculated from well profile casing “take off”: said difference (technical allowance)
accounts for scrap, damage, theft, etc., which are known to happen on all projects.
Contingency Quantity accounts for events that may result from incomplete design,
unforeseen/unforeseeable conditions, or uncertainties within the defined project scope. The
size of the contingency depends on the status of wells engineering, procurement, and drilling
operations; and on the complexity and uncertainties surrounding the Wells to be drilled.
Contingency is not to be used to avoid carrying out proper cost estimates for wells component
parts and / or operations.
Contingency on quantity highlights two of its fundamental aspects:
• It covers unforeseeable quantities
• It covers uncertainties relevant to quantities within the defined Project scope
estimates: these are separately approved, funded and managed using the Cost Control
process.
These are often accounted for multiplying the (Base + Allowance) Quantity by a C% factor < 1.
C% is derived from quantity analysis of previous similar projects, eventually readjusted for the
specific needs of the well.
The above approach simplifies the previous formula into:

Qi = (Base Quantity)i • (1 + A%)i • (1 + C%)i

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3.4 ESTIMATE UNIT COST
The fourth step of DC&W CEA for Feasibility & Planning phases is Estimate Unit Cost.

• DC&W CEA start during Project Feasibility & Planning phases.

• To perform the best estimate of unit cost of resources required for the Execution phase.

Path 1
• To identify Well’s main characteristics
• To define Quantitative Similitude Criteria
• To query DC&W Database for Similar Wells Cost Data
• To extract Similar Wells
• To short List Similar Wells
• To extract from Similar Wells Comparable Resources / Operations
• To estimate for each CBS element Base Unit Cost of Resources “when performed”
• To estimate for each CBS element Unit Cost of Escalation
• To estimate for each CBS element Unit Cost of Contingency
• To calculate for each CBS element Unit Cost of Resources
Path 2
• To get existing contracts
• To extract Unit Cost
The two path are alternative one to the other; path 2 implies that the unit cost get the
contract(s) available is reliable and no further correction is developed (i.e. escalation and / or
contingency).

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Estimate Unit Cost Step Workflow

OT HE R PROCESSE S

Project Resources
and WRB
and WSB and WTB
Query DC &W
Identify Well’s Define
Database for Extract
From previous step Main Quantitative
Similar Well Similar Wells
Characteristics Similitude Criteria
Cost Data
Path 1
PLA NNING PHA SE WE LLS COST E ST IMAT ING
Extract from Similar Estimate

Estimate Estimate
Short List Wells Comparable Base Unit Cost
Unit C ost of Unit C ost of
Similar Wells Resources of Resources
Escalation Contingency
/ Operations “when performed”
Σ
Calculate
Get Existing Unit C ost
Extract Unit Cost of Resources
Contracts
Path 2
Go to next step

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The figure below shows unit cost estimate with respect to CBS element cost estimate.
Well Cost
Cost Element 1
Cost Element 2
Cost Element …
Cost Element N

Base Cost 1
Base quantity from “take off”, BOQ,

Cost escalation on Element 1
Quantity contingency on Element 1

The figure below provides a template to follow for estimating unit cost of resources for each CBS
element.
Cost Element - Unit Cost

Cost Element CBS Unit Cost No tes
Description Code
Type Cost
Description Code Description Base Escalation Contingency Total

(A) (B) (C) (D) = [ (A) + ( B)] x
(1+C)
The basic formula for Quantity calculation is:
Qi = [(Base Cost)i + (Escalation Cost)i] • (1 + Contingency Cost %)i

Base Cost is the unit cost of Resources estimated without Escalation and/or Contingency. It is
calculated from cost data of previous projects, contractor bids, etc. (same or other similar projects),
DC&W Dept. database, etc.

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Escalation Cost covers an increase in the cost of service, material, labour, etc., over that
accounted in the cost database or specified in the purchase order or contract due to continuing
price level change over time.
Escalation Costi = Base Costi {[Cost Weighti % x (1.00 + YERi)TPi] - 1}
YERi = Yearly Escalation Ratei % (i.e. 7% per year)
TPi = Time Period from Base Cost date to Cost Centroid expressed in years
Details about Escalation Cost are provided in the relevant paragraph of Wells Cost Handbook.
Contingency Cost accounts for events that may influence the unit cost estimated from incomplete
design, unforeseen/unforeseeable conditions, or uncertainties within the defined project scope (i.e.
rig contractor daily cost, unit cost of casing, etc.).
Contingency on quantity highlights two of its fundamental aspects:
• It covers unforeseeable unit costs
• It covers uncertainties relevant to unit cost within the defined Project scope
estimates: these are separately approved, funded and managed using the Cost Control process.
These are often accounted for multiplying the (Base + Escalation) Cost by a C% factor < 1.
C% is derived from unit cost analysis of previous similar projects, eventually readjusted for the
specific needs of the well.

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3.5 ESTIMATE COST
The fifth step of DC&W CEA for Planning phase is Estimate Cost.


• To calculate the best estimate of the total cost of resources required for the Execution
phase.

• To calculate total cost of each CBS element
• To sum the cost of all CBS elements
Estimate Cost Step Workflow

OT HE R PROCESSE S

Project Resources
and WRB
and WSB and WTB
PLANNING PHA SE WE LLS COST E ST IMATING
Σ
Calculate Calculate
From previous step Total Cost of each Total Cost Go to next step
CBS Element of Resources
O utput
Π
Quantity
X
Unit C ost

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3.6 COST BUDGETING
The sixth step of DC&W CEA for Planning phase is Cost Budgeting.


• To calculate the best estimate of the total cost expenditure over depth / time of the
resources required for the Execution phase.

• To define which CBS elements requires Cost Budgeting
• To get schedule of operations for each CBS element to be cost budgeted
• To allocate cost expenditures over time / depth of all CBS elements
• To calculate cost expenditures vs. depth / time
Cost Budgeting Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
Define Depth / Time

Get Schedule
From previous step CBS Elements for phasing of Go to next step
of Operations
Cost Budgeting Cost Expenditures

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Wells Cost Handbook provides general guidance on cost budgeting.
In particular, when a high degree of precision is not required, a linear cumulative cost can be
assumed as model; this is done assigning all costs at the end of the period, and applying a
triangular distribution of cost cumulative from start to finish.
Cost
Operation
Total Cost
Operation
Cost Budget
Operation X
Start Finish
Time / Depth
For drilling operations, the cost budgeting is developed as follows:
Time / Depth
Start
Drilling Phase
Drilling
Phase’s
Cost Budget
Drilling
Phase’s
Operations
Total Cost
Finish
Cost
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For operations carried out among the various drilling phases which do not modify the depth, the
cost budgeting is developed as follows:
Time Depth
Start
Operation
Operation Cost
Operation
and Cost Budget
Cost Budget
Operation
Finish Start Finish

Operation Cost
Cost
For completion operations the cost budgeting is developed as follows:
Time Operation
Total Cost
Finish
Operatiion
Operation
Cost Budget
Start
Cost

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The overall WCE and Well Cost Budget can be represented in Depth vs. Cost or Time vs. Cost
diagram, as follows:
Operations’
Depth Cost Budget
O
D
Legenda:
D = Drilling
O
O = Other operations between
drilling phases
C = Completion
Operation
Cost
Cost
Operations’
Time Cost Budget
Legenda:
D
D = Drilling
O = Other operations between
O drilling phases
C = Completion
Operation C
Cost
Cost
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3.7 WCE AND WCB APPROVAL
The seventh step of DC&W CEA for Planning phase is WCE and WCB Approval.


• To get management approval to WCE and relevant Budget.

• To fill and review the form of WCE and relevant Budget
• To get approval from Management.
Annex 1 suggests the reporting form for WCE and Budget submission for Management
approval.
WCE and Budget Approval Step Workflow

OTHER PROCESSES

Project Resources
and WRB
and WSB and WTB
Submit Form Get

Fill WC E and
From previous step for Management Management STOP
Budget Form
Approval Approval
WC E = Wells Cost Estimate; WCB = Wells Cost Baseline; WSB = Well Scope Baseline; WTB = Wells Time baseline; WRB = Wells Resources Baseline

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ANNEX 1 - FORM FOR WCE AND BUDGET
Issue Date: ___________________

Revision N°: ___________________
Country: _____________________
Reservoir: ____________________
Well ID: ______________________
1. Drilling Cost: _________________
1.1 Rig Contractor Cost:_______________

1.2 Tangible Cost: ___________________
1.3 Intangible Cost: __________________
Drilling Time: __________________

Drilling Total Depth: _____________
2. Completion Cost: ______________
2.1 Rig Contractor: _________________

2.2 Tangible Cost: __________________
2.3 Intangible Cost: _________________
Completion Time: ______________
3. Total Well Cost (1+2): ________________
3.1 Total Rig Contractor Cost: _________

3.2 Total Tangible Cost: ______________
3.3 Total Intangible Cost: _____________
4. Budget Cost: ____________________

Month 1: ________
Month 2: ________
Month...: _________
Month N: ________
Note: further WCE details are available up to lowest CBS cost element.

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SECTION 5

FOR
UNIT COST REVISION PHASE

Wells Cost Estimating for Unit Cost Revision Phase
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INDEX
1. INTRODUCTION ...............................................................................................................3
2. COST ESTIMATING FOR UNIT COST REVISION PHASE OVERVIEW ..........................4
3.1 INPUTS FROM PROCUREMENT .....................................................................................6
3.2 WCE AND WCB REVIEW AND APPRAISAL...................................................................7
3.3 IDENTIFY AND ANALYSE VARIANCES..........................................................................8
3.4 QUANTIFY EFFECT OF VARIANCES ON WCE ELEMENTS ..........................................9
3.5 REVISE WCB / WCE AND COST BUDGET ...................................................................10
3.6 APPROVAL OF REVISED WCB / WCE AND COST BUDGET ......................................11

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1. INTRODUCTION
This section supports DC&W Cost Estimating (CEA) during Unit Cost Revision phase.
Document Number:
Hand Production &

+ 4 0% - 25 % + 25 %

over close out

production?
- 40 % + 40 % - 25 % + 25 %
WCE + 1 5% - 10 % + 1 0%
- 15 %

WCE WCE
(Feasibility
Phase) Wells Update
Engineering

Wells
Execution &
Completion

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2. COST ESTIMATING FOR UNIT COST REVISION PHASE OVERVIEW
complete an activity a group of activities, or the project relevant to DC&W works.
In particular DC&W CEA for Unit Cost Revision Phase is the process carried out to verify,
before the Execution Phase, that WCE carried out during Feasibility & Planning phases are still
valid, identify variances if any and revise Wells Cost Estimate (WCE) and Wells Cost Baseline
(WCB) as needed.
Variances might be generated by two main sources:

1. Procurement
2. Well Programs update
This handbook provides guidance with respect to variances originated by procurement, while
Wells Cost Estimating Handbook for Feasibility and Planning phases provides guidance to
variances originated by wells programs update.
The objective of such process is to early highlight cost variations with respect to previous
WCB/WCE, so to enable Project Team to issue the most reliable WCB and WCE for the
Cost Control during Execution phase.
This ensures the definition of more realistic cost objectives (WCE and WCB) for the
Project.
Cost Estimating for Unit Cost Revision phase receives input and provides output to planning
(both to planning and scheduling and to cost controlling).
Cost Control
Pla
gress
nnin
Moni l e & Pro
g
&S
g
che
tori n
du
PLANNING &
dul
Sche
ing
CONTROL CYCLE
Co g
st t in
Bu a
t im
dg
et t Es
in s
g Co

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3. PROCESS OVERVIEW
Main step of Cost Estimating for Unit Cost Revision phase are:
Inputs from Procurement (DC&W Contracts Awarded):

o Unit Prices and Forfeit Prices
WCE / WCB and Budget Review and Appraisal (as output of Cost Estimating developed
at the end of Feasibility & Planning phases)
Identify and Analyze Variances on WCE and WCB
Quantify (in cost terms) effect of Variances on WCE Elements
Revise WCB / WCE and Cost Budget
Approval of revised WCB / WCE and Cost Budget
Wells Cost Estimating for Unit Cost Revision Phase Process Workflow
FEASIBILITY &
PLANNING
OTHER PROCESSES
PLANNING & SCHEDULING PROCUREMENT

PHASES COST
ESTIMATING
Project Scope Project Time DC&W

• WCE Project Resources
(Operations) (Schedule) Contracts
• WCB and WRB
and WSB and WTB Awarded
Unit Prices and

Forfait Prices
UNIT COST REVISION PHASE WELLS COST ESTIMATING
WC E and WCB
Review and Inputs from
Appraisal Procurement
Identify and
Analyse
Variances
NO
Variances
STOP
Identified?
YES Approval of
Quantify Effect
Revise WCB / WCE revised
of Variances on
and Cost Budget WCB / WCE and
WC E Elements
Cost Budget
WSE = Wells Scopre Baseline; WTB = Wells Time Baseline; WRB = Wells Resources Baseline

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3.1 INPUTS FROM PROCUREMENT
The first step of DC&W CEA for Unit Cost Revision phase is Input from Procurement.

• DC&W CEA start during Project Unit Cost Revision phase, following the procurement
campaign

• To get all data and information from procurement which might impact WCE and WCB

• To collect all contracts awarded relevant to DC&W Operations
• To evaluate for each contract the Unit prices and forfeit prices
Inputs from Procurement Step Workflow
FEASIBILITY &
PLANNING
OTHER PROCESSES

PHASE COST
ESTIMATING

• WCB and WRB
Evaluate for
Collect all
each Contract Unit
Go to next step Contracts for
Prices and
DC&W Operations
Forfait Prices

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3.2 WCE AND WCB REVIEW AND APPRAISAL
The fifth step of DC&W CEA for Unit Cost Revision phase is Well Cost Estimate and WRB
Review and Appraisal.

campaign.

• To make Project Team aware of the WCE and WCB developed during Feasibility &
Planning phases and the revised ones, deriving from procurement.

• To collect all project documents relevant to WCE and WCB (as output of Feasibility &
Planning phases Cost Estimating)
• To collect the input from procurement relevant to revised Unit Prices and Forfeit Prices
• To compare WCE and WCB with Unit Prices and Forfeit Prices, as basis for variances
identification and analysis
WCE and WCB Review and Appraisal Step Workflow
FEASIBILITY &
PLANNING
OTHER PROCESSES

PHASES COST
ESTIMATING

• WCB and WRB
Collect WCE
Inputs from
and WCB
Procurement
Documentation
Compare WC E
with
Unit Prices and
Forfait Prices
Go to Identify
and Analyse
Variances

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3.3 IDENTIFY AND ANALYSE VARIANCES
The sixth step of DC&W CEA for Unit Cost Revision phase is Identify and Analyse Variances.

campaign.

• To identify only those Variances affecting WCE and WCB.

• To identify variances, by analysing the output of the comparison WCE vs. Unit Prices
and Forfeit Prices
• To define criteria to rank variances according to their impact on WCE and WCB revision
• To short-list the ranked variances, excluding those variances causing minor or
negligible impacts
Identify and Analyse Variances Step Workflow

FEASIBILITY &
PLANNING
OTHER PROCESSES

PHASES COST
ESTIMATING

• WCB and WRB
Define Criteria Go to Quantify

Input from Short-list
Identify Variances to Effect of Variances
Previous Step Variances
Rank Variances on WCE Elements

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3.4 QUANTIFY EFFECT OF VARIANCES ON WCE ELEMENTS
The seventh step of DC&W CEA for Unit Cost Revision phase is Quantify Effect of Variances
on WCE Elements.

campaign.

• To quantify impact caused by Variances on each cost element

• To calculate revised cost - eventually applying the technique deployed under Planning
Phase for revising unit cost / forfeit cost - for each cost element
Quantify Effect of Variances on WCE Elements

FEASIBILITY &
PLANNING
OTHER PROCESSES

PHASES COST
ESTIMATING

• WCB and WRB
Go to Revise
Input from Calculate
WCB / WCE and
Previous Step revised Cost
Cost Budget

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3.5 REVISE WCB / WCE AND COST BUDGET
The eighth step of DC&W CEA for Unit Cost Revision phase is Revise WCB / WCE and Cost
Budget.

campaign.

• To revise WCB, WCE and Cost Budget

• To sum all revised and non-revised WCE cost elements to get revised WCE figures,
according to CBS hierarchy
• To revise Cost Budget - eventually applying the technique deployed under Planning
Phase for cost budgeting - for each cost element
Revise WCB / WCE and Cost Budget Step Workflow

FEASIBILITY &
PLANNING
OTHER PROCESSES

PHASES COST
ESTIMATING

• WCB and WRB
Go to Approval of
Input from Sum all Revise
revised WCB / WCE
Previous Step Cost Elements Cost Budget
and Cost Budget

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3.6 APPROVAL OF REVISED WCB / WCE AND COST BUDGET
The ninth step of DC&W CEA for Unit Cost Revision phase is Revise WCB / WCE and Cost
Budget.

campaign.

• To get management approval to revised WCB, WCE and Cost Budget

• To fill and review the form of WCE and relevant Budget (as per Planning phase form)
• To get approval from management.
Approval of Revised WCB / WCE and Cost Budget Step Workflow

FEASIBILITY &
PLANNING
OTHER PROCESSES

PHASE COST
ESTIMATING

• WCB and WRB
Submit Form for Submit Form for Get

Input from Fill WC E and
Management Management Management STOP
Previous Step Budget form
Approval Approval Approval

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SECTION 6
WELLS COST CONTROLLING

FOR
EXECUTION PHASE

Wells Cost Controlling for Execution Phase
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INDEX
1. INTRODUCTION ...............................................................................................................4
2. COST CONTROL PROCESS OVERVIEW........................................................................5
3. DEFINITION OF VARIOUS TYPES OF COSTS................................................................6
4. COST CONTROL VS. COST ACCOUNTING ...................................................................7
5. COST BREAKDOWN STRUCTURE FOR COST CONTROLLING...................................8
5.1 CAPEX COST BREAKDOWN STRUCTURE FOR COST CONTROLLING.......................8

5.2 OPEX COST BREAKDOWN STRUCTURE FOR COST CONTROLLING .........................9
5.3 DECAB COST BREAKDOWN STRUCTURE FOR COST CONTROLLING ......................9
5.4 TIME PHASES COST ESTIMATING AND CONTROLLING ............................................10
6. PROCESS OVERVIEW...................................................................................................11
6.1 WCE AND WCB REVIEW AND APPRAISAL.................................................................12
6.2 SELECT CBS FOR COST CONTROL ............................................................................14
6.3 ASSIGN WCE TO CBS COST ELEMENTS ....................................................................15
6.3.1 BOTTOM-UP TECHNIQUE.............................................................................................16
6.3.2 TOP-DOWN TECHNIQUE...............................................................................................17
6.4 COLLECT ACTUAL COST DATA ..................................................................................18
6.5 INPUT COST DATA IN MONITORING SYSTEM - COMPARE AC WITH WCE..............20
6.6 CALCULATE COST INDEXES .......................................................................................22
6.7 ESTIMATE COST AT/TO FINISH ...................................................................................23
SECTION 6 of Cost Estimating, Budgetiong and Controlling

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6.8 IDENTIFY AND ANALYSE VARIANCES........................................................................27
6.9 UPDATE WCE ................................................................................................................29
6.10 DEFINE AND PROPOSE CORRECTIVE ACTIONS .......................................................30
6.11 REVISED WCB/WCE DEVELOPMENT AND APPROVAL.............................................31
6.12 COST REPORTING ........................................................................................................32
7. COST DATABASE USE AND UPDATE .........................................................................33
ANNEX 1 - COST REPORT ITEM CHECKLIST AND SUGGESTED FORM............................34

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1. INTRODUCTION
This section supports Drilling Completion & Workover (DC&W) Cost Control (COSTC) during
Execution phase.
Document Number:
Hand Production &

+ 40% - 2 5% + 25 %

over close out

production?
- 4 0% + 4 0% - 2 5% + 25 %
WCE + 15% - 10 % + 10%

- 15%

WCE WCE
(Feasibility
Phase) Wells Update
Engineering

Wells
Execution &
Completion

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2. COST CONTROL PROCESS OVERVIEW
Cost Control is the process of controlling changes to the project’s cost estimate.
In other words, DC&W COSTC is the process carried out to verify, according to a defined
frequency, that actual project’s costs figures (AC) trends are in line with Wells Cost Estimate
(WCE) and Wells Cost Baseline (WCB).
The objective of such process is to early highlight cost variations, so to enable Project Team to
define and implement corrective actions to guarantee that cost objectives (WCE and
WCB) are met through the entire Project Life Cycle.
Cost controlling receives input and provides output to planning (both to planning and scheduling
and to cost estimating and budgeting).
Cost Control P l an
gress
ni ng
Moni l e & Pro
&S
g
che
t ori n
du
PLANNING &
dul i
Sche
CONTROL CYCLE
ng
Co g
st in
Bu at
dg im
et Est
in st
g
Co

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3. DEFINITION OF VARIOUS TYPES OF COSTS
The following cost types are used during DC&W COSTC process:
Wells Cost Estimate (WCE): the cost estimate of an activity, a group of activities or
project (operations) planned or scheduled to have been completed or of services
planned or scheduled to have been performed.
In other words is the estimated cost expenditure of each cost element of the CBS as
output of the Cost Estimating process (Cost Estimating for the Feasibility and Planning
Phases and Unit Cost Revision phase).
Wells Cost Estimate@ (WCE@): Wells Cost Estimate at a certain Depthnow or

Timenow.
Wells Cost Baseline (WCB): the original approved plan (for a project, an operation
package, or an activity) which defines and qualifies the Wells Cost Estimate (WCE).
Accounted Cost: cost incurred for the activities or operations as recorded in Company
Accounting System (CAS).
Actual Cost (AC): known cost of an activity, a group of activities or project (operations)
actually performed up to Depthnow / Timenow.
Accrued Cost: value of the Actual Cost (of operations) calculated summing the
accounted value plus an estimate by the Project Team; also called Value of Operation
Done.
Estimate To Finish (ETF): the expected additional cost needed to complete an activity,
a group of activities, or the project.
Estimate At Finish (EAF): the expected total cost of an activity, a group of activities, or
the project when the defined scope of operation has been finished. Most techniques for
forecasting EAF include some adjustment of the original cost estimate, based on actual
project performance to date; also called Expected Final Cost (EFC).
Final Cost: the total cost expenditure incurred for the resources utilised to execute and
complete the project activities. It can be valued only at the end of the project, operation,
or activity.
All cost types defined above shall be managed either as single figures or as cost expenditures
curves; the single figure is the integer of cost expenditures.
More details on various types of costs can be found in Wells Cost Handbook.

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4. COST CONTROL VS. COST ACCOUNTING
The objective of DC&W COSTC process is to early highlight cost variations, so to enable
Project Team to define and implement corrective actions to guarantee that cost
objectives (WCB and WCE) are met through the entire Project Life Cycle.
Cost accounting is the historical reporting of actual and / or committed cost on a project. Costs
are denoted and segregated within cost codes that are defined in a chart of accounts.
Cost accounting requires that cost data are inputted in Company Accounting System (CAS)
based on Company Cost Code of Accounts: the purpose is to aggregate accounted costs under
cost codes defined mainly for accounting and financial purposes.
In project control practice, cost accounting is the step performed by the Project Team for the
collection of actual cost data and their input in the proper item of the Cost Breakdown Structure;
this constitutes the basis to compare then actual versus estimated costs.
Since the use of term of cost accounting in cost control practice might create misunderstanding
with the routine accounting activity, this is not used in cost control.
To meet cost control objective, cost accounting is only a transient step; if cost control is limited
to cost accounting it can’t provide the required analysis of project performance, thus can’t
enable the project team in defining the corrective actions to guarantee cost objectives are met.

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5. COST BREAKDOWN STRUCTURE FOR COST CONTROLLING
Cost Breakdown Structure CBS is the hierarchical cost structure, which allows the
representation of budget figures at different levels of detail.
CBS is the basic tool for cost control. Its definition must allow the generation of data that
provide the required knowledge of the project status.
Standard CBS has been developed and is advisable to use the same on all projects: this will
enable to acquire comparable cost data relevant to various projects.
Following para describe standard CBS for CAPEX, OPEX and DECAB.
Different CBS can be defined and used in particular cases (i.e. JV, etc.) to meet all partners
requirements: in these cases it is advisable at least to re-classify cost data according to
Company standard CBS to properly feed project cost database.
5.1 CAPEX COST BREAKDOWN STRUCTURE FOR COST CONTROLLING
CAPEX CBS used for Exploration and Development Projects is described in the figure below.
Project CAPEX
(Heavy) CBS
Drilli ng Comp let ion Complet ion
W orkove r
Movi ng Moving Moving

Movi ng Phase ∅ i
Preli mi nary Prelimi nary Preliminary

Preli mi nary
Complet ion Co mplet ion Co mplet ion

Re-e nt ry
W ell W ell W ell
Testing Test ing Test ing
Dri lli ng
W ell Well W ell
W ell
Test ing
W ell W orki ng
A bandoni ng Unit
W ell
Repeated under each
descending root
Rig
Cont ract or
CB S CB S CB S
Repeated under each

descending r oot
More details on CBS for CAPEX can be found in Cost Codes Handbook.

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5.2 OPEX COST BREAKDOWN STRUCTURE FOR COST CONTROLLING
OPEX CBS used for Exploration and Development Projects is described in the figure below.
Project OPEX
(Light ) (Light ) CBS

W orkove r W orkove r
Moving Moving
Preliminary Preliminary
Completion Completion
Well Well
Test ing Test ing
Secure Secure
Well Well
Rig
Tangible Intangible Working
Tangible Int angible
Contract or Unit
CBS CB S CB S CB S CB S CB S
Repeated under each Repeated under each

descending root descending root
5.3 DECAB COST BREAKDOWN STRUCTURE FOR COST CONTROLLING
DECAB CBS used for Exploration and Development Projects is described in the figure below.
Project DECAB
Well Well CBS

A bando ning A bandoni ng
Movi ng Moving
Preli minary Prelimi nary
Well Well
A bando ni ng A bandoni ng
Rig W orki ng
Tangible Intangible
Tangibl e Int angible Unit
Co nt ractor
CB S CB S CB S
CB S CB S CB S
Repeated under each

Repeated under each
descending root
descending root

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5.4 TIME PHASES COST ESTIMATING AND CONTROLLING
The CBS shown in the previous para apply (as Company standard CBS) to DC&W Cost
Controlling process.
The CBS used in the previous DC&W Cost Estimating does not show the various Time Phases.
At the beginning of the Execution phase the Project Team shall further detail the CBS by
estimating also the costs according to the further breakdown provided through the Time
Phases.
The figure below shows the CBS development throughout the various project phases.
Project CAPEX
(Heavy) CBS
Drilli ng Completion Completion
Workove r
Moving Moving Moving

Moving Phase ∅ i
Preliminary Preliminary Prelimi nary
Preliminary
Re-entry
Well Well Well
Drilling
Well Well Well
Well
Testing
Well Working
Tangible Intangible
A bandoning Unit
Well
Repeated under each
descending root
Rig
Tangible Intangible
Contractor
CB S CB S CB S
Repeated under each CBS Feasibility Phase “G1”

descending root CBS Feasibility Phase “G2”
CBS Planning Phase “G3”

CBS further details available during Execution Phase

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6. PROCESS OVERVIEW
Main step of Cost Control process are:
Review and appraisal of WCE and WCB (as output of Cost Estimating developed at the
end of Unit Cost Revision phase)
Select Cost Breakdown Structure (CBS) for Cost Control
Assign Wells Cost Estimate (WCE) to CBS Cost Elements
Collect Actual Cost (AC) Data
Compare AC with WCE
Calculate cost indexes (CV, CI)
Estimate Cost To Finish (ETF and Estimate Cost At Finish (EAF)
Identify and Analyse Cost Variances
Update Wells Cost Estimate (WCE)
Define and propose corrective actions
Revised WCB/WCE development and approval
Cost Reporting
Wells Cost Control Process Workflow

SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
• WCE Operations and Update Project
Schedule and Depth / Time
• WCB related Resources Schedule
Resources Progress
At Finish
WCE and WCB Estimate Cost:

Select CBS for Identify and Variances within
review and - At Finish
Cost Control Analyse Variances Control Limits?
appraisal - To Finish NO
YES
Input Cost Data in
Assign WCE
Monitoring System: Calculate
to CBS Update WCE
Compare AC Cost Indexes
Cost Elements
with WCE Define and

Propose
Corrective
Actions
Collect AC Data
NO
AND / OR
Revised Project
Data from Cost Reporting
Best Estimate WCB required?
Company
based on Work
Accounting
Performed
System YES
Revised WCB / WCE

Development
and Approval
WC E = Wells Cost Estimate; CBS = Cost Breakdown Structure; WCB = Wells Cost Baseline; AC = Actual Cost
Following paragraphs provide details on each step.

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6.1 WCE AND WCB REVIEW AND APPRAISAL
The first step of DC&W COSTC process is WCE and WCB review and appraisal.
This step is required at Project Execution phase start only.

• To provide a consistent set of cost data to be used as estimated costs figures as
baseline reference to control Actual Costs (AC).

• To review Well(s) Project Baseline (activities, timing and resources, etc.) - used to
generate WCE - to ascertain these are still valid as basis for WCB
• To identify those parts of WCB varied
• To evaluate the impact of WPB variations on WCB and on WCE
• To activate Cost Estimating process for those parts of WCE impacted by said variations
• To get approval for revised WCE
WCE and WCB Review and Appraisal Step Workflow

SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimated
Project Appraise
Resources Progress
At Finish
NO
Indentify WCB WCB variated
WPB review Go to next step
Variated parts parts identified?
YES
YES NO
Revised Project
Update WCE
WCB required?
Revised WCB / WCE

Development
and Approval

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Wells Cost Estimate is represented as a Depth vs. Cost curve as follows.

Depth vs. Wells Cost Estimate curve
Moving
Preliminary
WCE - Cumulative Cost
Phase ∅ 1
Drilling
Phase ∅ 2
Drilling
Phases
Logs
Phase ∅ 3 Run Casing
Cementing Well Testing
Well Head Completion
Drilling Cost Completion Cost

Depth
The above figure does not allow cost control of Completion operations, for which is required a
Time vs. Cost curve, as follows.
Time vs. Cost of Completion Works curve
Time
Activity3
Activity2
Completion
Activities
Activity1

for Completion

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6.2 SELECT CBS FOR COST CONTROL
The second step of DC&W COSTC process is Select CBS for Cost Control purpose.
This step is required at Project Execution phase start only.

• To define and select the most suitable CBS for DC&W COSTC

o For Company Projects use standard Company CBS ref. para. 7)
• To get approval for custom CBS (no approval is required for standard Company CBS).
Select CBS for Cost Control Step Workflow

SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimated
Project Appraise
• AFE Operations and Update Project
Resources Progress
At Finish

std. CBS
for CBS identified?
YES
Define
custom CBS
Get Custom CBS

Approval
The definition of a custom CBS requires the analysis of the project’s requirements which might
drive the selection of a CBS different from that Company standard.
In such case, it is advisable that lower CBS elements are can be re-combined for proper
feeding of Company cost database.

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6.3 ASSIGN WCE TO CBS COST ELEMENTS
The third step of DC&W COSTC is Assign WCE to CBS Cost Elements.

• Project Execution start
• Any WCE Update
• Any WCE Revision.

• To deploy WCE into costs figures for each cost element as baseline reference to control
Actual Costs (AC).

• To evaluate whether WCE has been issued with same breakdown required by selected
CBS or not
• To assign WCE to each CBS element if WCE has same breakdown (bottom-up
technique)
• To assign WCE starting from CBS level having same WCE breakdown (top-down
technique)
Assign WCE to CBS Cost Elements Step Workflow

SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
Resources Progress
At Finish
Review WC E
Go to next step assignment
to CBS
YES Calculate Cost for

Evaluate WCE CBS and WCE have Assigng WCE to
From previous step upper CBS
breakdown vs. CBS same breakdown? CBS elements
elements
NO
Identify CBS level

corresponding
to WCE breakdown
Develop Cost for

Lower CBS
elements
Assign WCE to
CBS level
Calculate Cost for
upper CBS
elements
Following sub-para. describe the bottom-up and top-down techniques used to deploy cost
figures for all CBS cost elements.

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6.3.1 BOTTOM-UP TECHNIQUE
Bottom-up technique applies when CBS and WCE have same breakdown.
Same breakdown means that exists an unambiguous correspondence between WCE and CBS
lower cost elements; i.e. to each WCE cost item corresponds a cost element at lower level of
CBS.
Cost Contol
CBS
WCE
Cost Data
for each
Cost
Element
Cost of upper CBS elements are calculated by adding the costs of all cost elements depending
from that cost element.
Cost Contol
CBS
Cost
A B C
A1 A2 B1 B2 C1 C2
Cost A = Cost A1 + Cost A2

Cost B = Cost B1 + Cost B2
Cost C = Cost C1 + Cost C2
Cost = Cost A + Cost B + Cost C

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6.3.2 TOP-DOWN TECHNIQUE
Top-down technique applies when WCE has lower breakdown than CBS.
“Lower breakdown” means that WCE data have lower breakdown degree with respect to CBS
breakdown.
Cost Contol
CBS
Bottom-up Top-down
WCE
WCE is assigned to corresponding CBS element and is further broken down according to
following techniques:
• Known %, developed from cost database relevant to previous similar projects
• Drilling engineers’ experience.
Cost Contol
CBS
Cost
A B C
A1 A2 B1 B2 C1 C2
Cost A = Cost A1 + Cost A2

Cost B1 = XB % Cost B
Cost B2 = YB % Cost B
Cost C1 = XC % Cost C
Cost C2 = YC % Cost C
Cost = Cost A + Cost B + Cost C
In most cases - as shown in the above figures - a mix of top-down and bottom-up techniques
should be applied.

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6.4 COLLECT ACTUAL COST DATA
The fourth step of DC&W COSTC is Collect Actual Cost Data.
This step is required at any Depthnow / Timenow.

• To make available the best estimate of Actual Cost (AC) for the operation performed up
to Depthnow / Timenow.

• for each lowest CBS cost element:
o To estimate the cost of the operations performed relevant to the cost element, if
Accounted Costs not available at Depthnow / Timenow
o To get Accounted Costs for those operations - or parts thereof - already
approved and inputted in Company Accounting System (CAS)
• for each upper CBS cost element:
o To calculate cost of upper cost elements by summing the Actual Costs of the
cost elements descending from that cost element.
In most cases the Actual Cost of a cost element requires input both from cost estimate of the
operation done and from Company Accounting System.
Collect Actual Cost Data Step Workflow
SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
Resources Progress
At Finish
Use CAS Cost Data

Get Depthnow
Input
YES
CAS Cost Data

Subdivide
Identify Cost PARTIAL Available

Input from Actual Cost Data Operations for
Element and
Dephtnow available in CAS? which CAS Cost
related Operations CAS Cost Data
Data is available
not Available
NO
Estimate Cost Data
Repeat for all

Cost Elements
Calculate
Actual Cost Calculate
Go to next step
for upper Actual Cost
Cost Elements
CAS = Company Accounting System

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8.4.1 USE OF CAS COST DATA
Use of accounted costs available from CAS for Actual Cost provides 100% of accuracy; these
data are available with some delay with respect to the costs sustained for the operations done
up to Depthnow / Timenow.
Therefore CAS cost data can be used only for completed operations of parts thereof.
8.4.2 ESTIMATE COST DATA
When CAS cost data is unavailable, an estimate of the costs for the operations shall be done
following one, or a mix, of these techniques:
• Cost estimate based on project contracts
• Cost estimate based on DC&W Dept. cost database relevant to other projects
• Cost estimate based on CAS cost data for same or other projects.
Accuracy of estimated cost is < 100%; therefore when CAS cost data is available it has to
replace the previously estimated cost data.
8.4.3 CALCULATE ACTUAL COST
Calculus of Actual Cost of operation of a cost element often requires input from both CAS and
Cost Estimating (also known as Accrued Cost).
The figure below provides a scheme of Actual Cost accuracy, CAS cost data and estimated
cost data. “Final Cost of Operation Performed” represents the 100% of accounted cost that is
unknown at Depthnow / Timenow during operation performance, but will be known at their
completion after all cost accounting process have been completed.
Accrued Cost and its Accuracy

MAX. ESTIMATED COST DATA
Max. Estimate for Actual Cost of Operation Performed

Min. Estimate for Actual Cost of Operation Performed
MIN. ESTIMATED COST DATA
Accuracy Range
Accuracy < 100%
Final Cost of Operation Performed
CAS COST DATA

Accuracy = 100%

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6.5 INPUT COST DATA IN MONITORING SYSTEM - COMPARE AC WITH WCE
The fifth step of DC&W COSTC is Input Cost Data in Monitoring System and Compare AC with
WCE.

• Project Execution start: only for WCE data input in cost monitoring system
• Any Depthnow / Timenow for:
o Actual Cost
o WCE Update
o WCE Revision
data input.

• To develop the basis for cost performance analysis

• To get input for Depthnow / Timenow (from Schedule and Physical Progress
Controlling) to compare the AC with relevant WCE
• To compare AC with WCE for each cost element and calculate ∆ cost for each cost
element (CV= WCE@ - AC)
WCE@ is the cost estimate corresponding to the Depthnow / Timenow.

Input Cost Data In Monoting System - Compare AC with WCE Step Workflow
SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
Resources Progress
At Finish
Get Dephtnow /
Timenow Input
Calculate
Input AC in
Check and CV = WCE - AC
From previous step Cost Monitor Go to next Step
Approve AC for each CBS
Tool (Genesis)
cost element
WC E = Wells Cost Estimate; AC = Actual Cost; CV = Cost Variance

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Calculus of Cost Variance = WCE@ - AC is shown in the figures next page.

AC vs. WCE for Drilling Works WCE - Cumula tive Cost
AC - Actua l Cost
Phase ∅ 1
Phase ∅ 2 AC
WCE
Drilling
Phases
Depthnow
CV = WCE@ - AC
Phase ∅ 3
Depth
AC vs. Time for Completion Works

Time
Activity3
Timenow
CV = WCE@ - AC
Activity2
Completion
Activities
Activity1

AC - Actual Cost
CV value indicates operation (or phase, or activity or entire project, depending upon CBS cost
element under analysis) cost trend:
• Positive CV indicates AC lower than WCE, thus positive cost trend
• Negative CV indicates AC higher than WCE, thus negative cost trend
• CV 0 = indicates AC equal to WCE, thus acceptable cost trend.

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6.6 CALCULATE COST INDEXES
The sixth step of DC&W COSTC is Calculate Cost Indexes (CI).

• Any Depthnow / Timenow

• To provide objective data to evaluate cost efficiency and cost estimate at finish

• To calculate CI for each CBS element
Calculate Cost Performance Indexes Step Workflow
SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
Resources Progress
At Finish
Calculate
CI = WCE / AC
From previous step Go to next step
for each CBS
cost element
WC E = Wells Cost Estimate; AC = Actual Cost; CI = Cost Index
Cost Index (CI) = WCE@ / AC

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6.7 ESTIMATE COST AT/TO FINISH
The seventh step of DC&W COSTC is Estimate Cost At Finish (EAF) and Cost To Finish
(ETF).


• To issue best estimate of Final Cost expenditure

• To estimate Cost At Finish and Cost To Finish for each CBS element various other
techniques
Estimate Cost At/To Finish Step Workflow

SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
Resources Progress
At Finish
Apply various
Define ETF Range Calculate EAF
From previous step ETF Estimate Go to next step
or Value Range or Value
Techniques
ETF = Estimate To Finish; EAF = Estimate At Finish
Following para. describe the details of the techniques applied.

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8.7.1 APPLY VARIOUS ETF ESTIMATE TECHNIQUES
ETF is the best possible estimate at Depthnow / Timenow of further expenditure necessary for
operations’ completion.
Following techniques can be applied to estimate ETF:

• Constant WCE
• Constant EAF
• CPI correction
WCET is the total cost estimated for the operations.
Constant WCE
This techniques assumes that WCE is correct thus the remaining costs to be expended are
those already estimated:
ETF = WCET - AC
It implies no variances occurred to Wells Cost Baseline, thus project cost performances are
equal to those planned.
Constant EAF
This technique assumes that EAF - estimated at the previous Depthnow/Timenow - can be
confirmed:
ETF = EAF - AC
It implies that no variances occurred with respect to the estimate developed at the previous
Depthnow/Timenow, thus the last estimate could be confirmed.
CI correction
This technique assumes that the remaining part of the operations will be executed with the
same cost index (CI) of the operations up to Depthnow/Timenow:
ETF = (WCET / CI) - AC
It implies that the operation efficiency (or inefficiency) with respect to WCE is assumed being
constant for the remaining part of the operations.
Project Team consideration on operations and WCB might drive them to the conclusion that
the remaining part of the operations might have a better or worse cost index than those up to
Depthnow/Timenow:
ETF = [WCET / (K•CI)] - AC
K is the correction factor: K< / >1 means that the remaining part of the operations are expected
to have a worse / better cost performance.
These various techniques support the definition of ETFmax and ETFmin, thus a range for ETF.

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This is represented in the figures below.
ETF Range Definition for Drilling

AC - Actual Cost
Phase ∅ 1
AC
Phase ∅ 2
WCE
ETF = EAF - AC
AC
Depthnow
WCE@
ETF = [WCET/(K• CI)] - AC
Phase ∅ 3
ETF = WCET - AC
ETF = (WCET /CI) - AC
WCET
EAF
Depth WCET/CI
WCET /K• CI
ETF Range definition for Completion

WCET /K• CI
EAF
WCET /CI
Time
WCET
ETF = (WCET /CI) - AC

Activity3 ETF = [ WCET/(K• CI)] - AC
AC
WCE@
Timenow
ETF = WCET - AC
ETF = EAF - AC
Activity2
Completion
Activities
Activity1

AC - Actual Cost

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EAF is then calculated:

EAF = AC + ETF
Based on calculated ETFmin and ETFmax, also for EAF can be identified EAFmin and EAFmax.
EAF Range Definition for Drilling

WCE - Cumula tive Cost
AC - Actual Cost
Phase ∅ 1
AC
Phase ∅ 2
WCE
AC
Depthnow
WCE@
Phase ∅ 3
WCET
EAFMIN EAFMAX
Depth RANGE OF FUTURE
COST TRENDS
EAF Range Definition for Completion
EAFMAX
EAFMiN
Time
WCET
Activity3
AC
WCE@ Timenow
RANGE OF FUTURE
Activity2 COST TRENDS
Activity1

AC - Actual Cost
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6.8 IDENTIFY AND ANALYSE VARIANCES
The eighth step of DC&W COSTC is Identify and Analyse Variances.


• To identify the significant variances and relevant operations for further analysis (Update
/ Revise WCE, Corrective Actions, etc.).

• To identify those operations whose CI are outside the defined control limits.
Control Limits are upper and lower limits for CI, as defined by PT.
In absence of any specific indication for CI upper and lower control limits, it can be assumed
equal to the Expected Accuracy Range +/- 15%.
Variances can be monitored for each CBS element, from lowest to the entire project.
Identify and Analyse Variances Step Workflow

SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
Resources Progress
At Finish
Go to Update WC E
YES
Evaluate CI within
CI entire project
or outside
From previous step within
Control Range for
Control Limits?
each cost element
NO
Go to Define and
Propose
Corrective Actions
CI = Cost Index

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Variances Monitoring
Out of control limits
CI
upper limit
Control Range 1.0
lower limit
Depth / Time
CI - especially figures below lower limit - indicates those operations on which the PT has to
concentrate its effort.

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6.9 UPDATE WCE
The ninth step of DC&W COSTC is Update WCE.


• To provide a reliable WCE against which to compare AC.

• To calculate the revised WCE for each cost element.
Update WCE, requires an internal adjustment to WCE, without modifying the WCE of the
entire project.
Update WCE Step Workflow

SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
• WCE Operatios and Update Project
Resources Progress
At Finish
Update WCE for

From previous step each CBS Go to next step
Cost Element
WC E = Wells Cost Estimate
WCE of each cost element is well approximated by the EAF of each cost element; otherwise -
for those operations identified critical from CI - the cost estimating technique applied for
Planning phase, should be applied, whenever WCB suffers considerable variances.

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6.10 DEFINE AND PROPOSE CORRECTIVE ACTIONS
The tenth step of DC&W COSTC is Define and Propose Corrective Actions.

• Any Depthnow / Timenow when variance is outside control limits.

• To provide a reliable WCB as basis to develop a reliable WCE.

• To re-evaluate the WPB and identify possible Corrective Actions
• To select suitable Corrective Actions
• To evaluate whether such Corrective Actions require WCB revision.
Define and Propose Corrective Actions Step Workflow
SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
Resources Progress
At Finish
Go to Update WC E
and Cost
Performance
Reporting
NO
Identify
Select Revised WCB
From previous step possible
Corrective Actions Required?
Corrective Actions
YES
Go to Revised
WCB/WCE
Development
and Approval
WCB = Wells Cost Baseline; WCE = Wells Cost Estimate
Corrective Actions, is a broad term to indicate: drilling program modification, rig type
modification, wells drilling sequence, WCE substantial revisions (modification to WCE of the
entire project, etc.)

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6.11 REVISED WCB/WCE DEVELOPMENT AND APPROVAL
The eleventh step of DC&W COSTC is Revised WCB/WCE Development and Approval.

• Any Depthnow / Timenow when variance is outside control limits and WCB must be
revised.

• To get management approval for a reliable WCB as basis to develop a reliable WCE for
the operations at finish.

• To develop a detailed proposal of WCB/WCE revision (eventually including also WPB)
• Submit said proposal for approval to proper management level
• Obtain approval.
Revised WCB/WCE Developed and Approval Step Workflow

SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
Resources Progress
At Finish
Go to
Cost Reporting
Develop Detailed YES
Submit Proposal Approval
From previous step Proposall
for Approval obtained?
for WCB/WCE
Go to Assign WCE
to CBS
NO Cost Elements
Go to
Go to Update WC E
Cost Reporting
WCB = Wells Cost Baseline; WCE = Wells Cost Estimate

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6.12 COST REPORTING
The twelfth step of DC&W COSTC is Cost Reporting.

• Any Depthnow / Timenow.

• To inform management about cost trends and corrective actions required.

• To prepare the Cost Report in accordance to pre-defined template
• To submit said Cost Report to DPM and other proper management level.
Annex 1 provides Cost Report item checklist and suggested forms.
Cost Reporting Step Workflow

SCHEDULE &
COST PHYSICAL
OTHER PROCESSES

ESTIMATING PROGRESS
CONTROLLING
Update estimate
Project Appraise
• WCB Related Resources Schedule
Resources Progress
At Finish
Cost Report Cost Report

From previous step FINISH

Preparation Submission

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7. COST DATABASE USE AND UPDATE
Actual Cost gathered during DC&W COSTC process provides input to feed and update DC&W
Dept. Cost Database.
These Cost Data are further processed and used during DC&W CEA process.
Nevertheless also during DC&W COSTC process, an activity, a group of activities, or the
project might require to be re-cost estimated; such re-estimate is performed using both Cost
Data from the same project or - if the contracts issued for the project do not provide cost data
for the activities under CEA - from DC&W Dept. Cost Database.
Cost Database Use and Update
Input Output
• Cost Data for CEA
• Cost Data DC&W Dept. during Pre-feasibility,
from all COST Feasibility and
Projects Program
DATABASE • Cost Data to Update
/ Revise CEA during
Execution
Use of standard CBS simplifies costs inputting and comparison and makes use of Cost Data
more reliable for DC&W CEA and COSTC.

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ANNEX 1 - COST REPORT ITEM CHECKLIST AND SUGGESTED FORM
Cost Report Item Checklist:
• Project Title and job number

• Executive Summary
o Cost Report Closing Date
o Main variations (scope, time, resources, unit rates, etc.)
o Control Limits defined
o Project’s Actual Cost
o Project’s Cost Variance
o Project’s Cost Estimate To Finish
o Project’s Cost Estimate At Finish (including EAF trend from Project’s
start)
o Project’s Cost Index (including CI trend from Project’s start)
o Corrective Actions
• Cost Breakdown Structure used
• Level of cost detail provided in Cost Report
• Details of cost for each cost element:
o WCE 1st issue
o WCE subsequent Issues (revisions / updates) and relevant issue dates
o Actual Cost
o Cost Variance
o Estimate To Finish
o Estimate At Finish
o Cost Index
o Notes (i.e. explanation of Cost Index outside Control Limits)

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Cost Report Suggested Form
1. Project Title: name of the project and eventually sub-project
2. Job Number: job number(s) assigned to the projects and subprojects
3. Executive Summary:
a. Cost Report closing date: date up to which the actual cost have
been accounted / estimated
b. Main Variations to:
i. Scope
ii. Time
iii. Resources
iv. Unit rates
v. Other
(brief description of the main variations which justify higher /
lower Cost Index)
c. Control Limits defined: control limits agreed, outside which
Corrective Actions become mandatory
d. Project’s Actual Cost: total AC for the operations done up to Cost
Report closing date (i.e. Depthnow for Drilling and Timenow for
Completion)
e. Project’s Cost Variance: CV relevant to the entire project
f. Project’s Estimate To Finish: total ETF required (Min. and Max.
values)
g. Project’s Estimate At Finish: total EAF estimated (Min. and Max.
values) and relevant trend
WCET WCET Estimate At Finish

1st Current 1 st … Current
Issue Issue
date date Min. Max. Min. Max. Min. Max.
Closing dates
h. Project’s Cost Index: CI trend from Project’s start-up to Cost Report
closing date
CI
upper limit
Control Range 1.0
lower limit
Closing Dates

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i. Corrective Actions: brief description of Corrective Actions defined
4. Cost Breakdown Structure used: definition of CBS used (Company

standard or custom: describe in detail custom CBS eventually in an
attachment to Cost Report)
5. Level of cost detail provided in Cost Report: with reference to CBS, detail
which cost elements are detailed in the following part of Cost Report
6. Details of cost for each cost element under control:
ref. next pages and relevant clarification notes

Eni S.p.A.
E&P Division
SPEO
Well… / Drilling Phases

C ost Desc rip. De pth Planned Actual Plann ed Actual Actual WCET WC ET WC E@ AC CV CI Esti m. Actual C ost x Esti m. Actu al Actual ET F EAF No tes
Cod e Rang e Tim e Tim e Tim e T o De pth % 1 st Cu rren t Curren t Cost x Cost x De pth Cost x Cost x
Cost x
From Du ra t. Finish Phase Issue Issue Issue De pth Mete r Day Day
Dura t. De pth Day (19 ) (2 0)
/ To Dat e Dat e Dat e Mete r Mete r Index Index
@ @
M M M M
(1) (2) (4) (5) (6 ) (7) (8 ) (9) i a i a
(3) (1 0) (11) (12 ) (13 ) (1 4) (15) (16) (17 ) (1 8) n x n x (21)
Moving N.A. N.A. N.A. N.A. N.A.
Phase
∅…
Phase
∅…
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Well… / Drilling Phases - clarification notes
1. Depth Range From / To: the depth range of each drilling phase
2. Planned Time Duration @: the planned number of days to drill up to that depth from phase’s
beginning
3. Actual Time Duration @: the actual number of days to drill up to that depth from phase’s
beginning
4. Planned Time To Finish: the planned number of days to drill the balance phase
5. Actual Depth: the actual depth reached at the Closing Date
6. Actual % Phase: the progress - on depth basis - achieved; calculated as:
[(Actual Depth - Depth Phase start) / Depth Range (phase length)] x 100
for moving shall be calculated on a 0÷100 % basis: 100% shall be assigned at moving finish
7. WCET 1st Issue: the 1st issue of WCET (of the phase) and relevant issue date
8. WCET Current Issue: the last revision / update of WCET (of the phase) and relevant issue
date
9. WCE@ Current Issue: the last revision / update of WCE@ (of the phase) and relevant issue
date
10. AC: the Actual Cost of phase’s operation
11. CV: Cost Variance; calculated as:
WCE@ - AC
12. CI: Cost Index; calculated as:
WCE@ / AC
13. Estimated Cost x Depth Meter: the average cost x depth meter deducted from WCET;
calculated as:
WCET (of the phase) / Depth Range (phase length)
14. Actual Cost x Depth Meter: the average cost x depth meter deducted from AC; calculated as:
AC / (Actual Depth - Depth Phase start)
15. Cost x Depth Meter Index: the ratio between the Estimated Cost x Depth Meter and the Actual
Cost x Depth Meter; calculated as:
(Estimated Cost x Depth Meter) / (Actual Cost x Depth Meter)
16. Estimated Cost x Day: the average cost x day deducted from WCET; calculated as:
WCET / Phase’s Planned Time Duration (Days)
17. Actual Cost x Day: the average daily cost; calculated as:
AC / Actual Time Duration @
18. Actual Cost x Day Index: the ratio between the Estimated Cost x Day and the Actual Cost x
Day; calculated as:
(Estimated Cost x Day) / (Actual Cost x Day)
19. ETF: cost estimate to finish; calculated with the various techniques indicated in this handbook
20. EAF: cost estimate at finish; calculated with the various techniques indicated in this handbook
21. Notes: notes as required

Eni S.p.A.
E&P Division
SPEO
Well… / Drilling
Cost Desc rip. Well Planned Actual Planned Actual Actual % WCET WCET WCE@ AC CV CI Esti m. Actual Cost x Esti m. Actual Actual ETF EAF Notes
Code Total Time Time Time To De pth Drilling 1 st Curren t Curren t Cost x Cost x Depth Cost x Cost x Cost x
Depth Dura t. Dura t. Finish De pth Issue Issue Issue Depth De pth Mete r Day Day Day
(19) (20)
Dat e Mete r Meter Index Index
@ @ Date Date
M M M M
i a i a
n x n x (21)
(6) (9)
(1) (2) (3) (4) (5) (7) (8) (10) (11) (12) (16) (17)
(13) (14) (15) (18)
Drilling
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Well … / Drilling - clarification notes
1. Well Total Depth: the depth of the well

2. Planned Time Duration @: the planned number of days to drill up to that depth from well
beginning
3. Actual Time Duration @: the actual number of days to drill up to that depth from well
beginning
4. Planned Time To Finish: the planned number of days to drill the balance well’s depth
6. Actual % Drilling Depth: the progress - on depth basis - achieved; calculated as:
[(Actual Depth) / Well Total Depth)] x 100
7. WCET 1st Issue: the 1st issue of WCET and relevant issue date
8. WCET Current Issue: the last revision / update of WCET and relevant issue date
9. WCE@ Current Issue: the last revision / update of WCE@ and relevant issue date
10. AC: the Actual Cost of drilling operation calculated as sum of actual cost of all drilling cost up
to closing date
WCE@ - AC
WCE@ / AC
13. Estimated Cost x Depth Meter: the average cost x depth meter deducted from WCET;
calculated as:
WCET / Well Total Depth
AC / Well Total Depth
WCET / Well Drilling Planned Time Duration (Days)
Day; calculated as:
19. ETF: cost estimate to finish; calculated as sum of ETF of various drilling phases
20. EAF: cost estimate at finish; calculated as sum of EAF of various drilling phases

Eni S.p.A.
E&P Division
SPEO
Well… / Completion Activities

Cost Desc rip. Planned Actual Planned Actual WCET WCET WCE@ AC CV CI Esti m. Actual Actual ET F EAF No tes
Code Tim e Tim e Tim e T o % 1 st Curren t Curren t Cost x Cost x
Cost x
Dura t. Finish Activit Issue Issue Issue Day Day Day
Dura t. (14) (15)
y Dat e Index
@ @ Dat e Dat e
M M M M
(7) i a i a
(1) (2) (3) (4) (5) (6) (11)
(8) (9) (10) (12) (13) n x n x (16)
Activity
…
Activity
…
Activity
…
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Well… / Completion Activities - clarification notes
1. Planned Time Duration @: the planned number of days to execute the completion activity
from its beginning
2. Actual Time Duration @: the actual number of days to execute the completion activity up to
the Closing Date
3. Planned Time To Finish: the planned number of days to finish the operations of the activity
4. Actual % Activity: the progress - on time basis - achieved; calculated as:
[(Actual Time Duration) / Completion Activity Planned Time Duration (Days))] x
100
5. WCET 1st Issue: the 1st issue of WCET (of the activity) and relevant issue date
6. WCET Current Issue: the last revision / update of WCET (of the activity) and relevant issue
date
7. WCE@ Current Issue: the last revision / update of WCE@ (of the activity) and relevant issue
date
8. AC: the Actual Cost of completion activity
WCE@ - AC
WCE@ / AC
WCET (of the activity) / Completion Activity Planned Time Duration
(Days)
Day; calculated as:
14. ETF: cost estimate to finish; calculated with the various techniques indicated in this handbook
15. EAF: cost estimate at finish; calculated with the various techniques indicated in this handbook

Eni S.p.A.
E&P Division
SPEO
Well… / Completion
Cost Desc rip. Planned Actual Planned Actual WCET WCET WCE@ AC CV CI Esti m. Actual Actual ET F EAF No tes
Cod e Tim e Tim e Tim e T o % 1 st Curren t Curren t Cost x Cost x Cost x
Dura t. Finish Com pl Issue Issue Issue
Dura t. Day Day Day
@ etion (14) (15)
@ Dat e Dat e Dat e Index
M M M M
(1) (2) (3) (5) (6) (7) (11) i a i a
(8) (9) (10) (12) (13) n n x (16)
(4) x
Comple
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Well … / Completion - clarification notes
1. Planned Time Duration @: the planned number of days to execute the completion activities
2. Actual Time Duration @: the actual number of days to execute the completion activities up to
the Closing Date
3. Planned Time To Finish: the planned number of days to finish the completion activities
4. Actual % Activity: the progress - on time basis - achieved; calculated as:
[(Actual Time Duration) / Completion Activities Planned Time Duration (Days))] x
100
5. WCET 1st Issue: the 1st issue of WCET and relevant issue date
6. WCET Current Issue: the last revision / update of WCET and relevant issue date
7. WCE@ Current Issue: the last revision / update of WCE@ and relevant issue date
8. AC: the Actual Cost of completion activities calculated as sum of actual cost of all completion
activities up to the closing date
WCE@ - AC
WCE@ / AC
WCET / Completion Activity Planned Time Duration (Days)
Day; calculated as:
14. ETF: cost estimate to finish; calculated as sum of ETF of all completion activities
15. EAF: cost estimate at finish; calculated as sum of ETF of all completion activities

Eni S.p.A.
E&P Division
SPEO
Well…
Cost Desc rip. Well Planned Actual Planned Actual Actual % Actual WCET WCET WCE@ AC CV CI Esti m. Actual Cost x Esti m. Actual Actual ETF EAF Notes
Code Total Time Time Time To Depth Drilling % 1st Curren t Curren t Cost x Cost x Depth Cost x Cost x Cost x
Durat. Finish Depth Issue Issue Issue Depth Depth Meter Day Day Day
Depth Durat. Compl (20) (21)
Date Meter Meter Index Index
@ @ etion Date Date
M M M M
i a i a
n x n x (22)
(6) (10)
(1) (2) (3) (4) (5) (7) (8) (9) (11) (12) (13) (17) (18)
(14) (15) (16) (19)
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Well… - clarification notes
1. Well Total Depth: the depth of the well

2. Planned Time Duration @: the planned number of days to execute the operations up to that
step (depth or completion activity, calculated from well beginning)
3. Actual Time Duration @: the actual number of operation days (drilling + completion) up to that
progress from well beginning
4. Planned Time To Completion: the planned number of days to execute the balance well’s
operations
6. Actual % Drilling Depth: the progress - on depth basis - achieved; calculated as:
[(Actual Depth) / Well Total Depth)] x 100
7. Actual % Completion: the progress - on time basis - achieved; calculated as:
[(Actual Time Duration of Completion Activities) / Completion Activities Planned Time Duration
(Days))] x 100
8. WCET 1st Issue: the 1st issue of WCE (sum of WCET for drilling and completion operations)
9. WCET Current Issue: the last revision / update of WCET (sum of WCET for drilling and
completion operations)
10. WCE@ Current Issue: the last revision / update of WCE@
11. AC: the Actual Cost of operation (drilling and / or completion)
WCE@ - AC
WCE@ / AC
14. Estimated Cost x Depth Meter: the average cost x depth meter deducted from WCE;
calculated as:
WCET (drilling) / Well Total Depth
AC (drilling) / Well Total Depth
17. Estimated Cost x Day: the average cost x day deducted from WCE; calculated as:
WCET (drilling + completion) / Well Drilling + Completion Planned
Time Duration (Days)
AC (drilling + completion) / Actual Time Duration @ (drilling +
completion)
Day; calculated as:
20. ETF: cost estimate to finish; calculated as sum of ETF of Drilling + Completion
21. EAF: cost estimate at finish; calculated as sum of EAF of Drilling + Completion

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For significant / risky cost element, CI trend should be added.
Attachments
1. Explanatory Notes
2. Significant document: i.e. supporting Variances Analysis, especially those
justifying CI outside control limits

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SECTION 7
WELLS COST CODES

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TABLE OF CONTENTS
1. COST CODE OF ACCOUNTS OBJECTIVE AND SCOPE .................... 7
1.1 OBJECTIVE .......................................................................................................................7

1.2 SCOPE ...............................................................................................................................7
1.3 APPLICABILITY ................................................................................................................7
2. REFERENCES .............................................................................. 8
3. COST CODES OF ACCOUNT.......................................................... 9
4. TIME PHASES ........................................................................... 13
4.1 MOB-DEMOB............................................................................. 14
4.2 WELLS SITE.............................................................................. 15
4.3 WELL ........................................................................................ 16
4.3.1 RIG................................................................................. 17
4.3.1.1 DRILLING ....................................................................... 18
4.3.1.1.1 MOVING ............................................................... 19
4.3.1.1.2 PHASE ∅ ............................................................... 20
4.3.1.1.2.1 PRELIMINARY ...................................................... 21
4.3.1.1.2.2 RE-ENTRY ............................................................. 22
4.3.1.1.2.3 DRILLING ............................................................. 23

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4.3.1.1.2.4 WELL TESTING ..................................................... 24
4.3.1.1.2.5 WELL ABANDONING ............................................. 25
4.3.1.1.2.6 SECURE WELL ....................................................... 26
4.3.1.2 COMPLETION.................................................................. 27
4.3.1.2.1 MOVING ............................................................... 28
4.3.1.2.2 PRELIMINARY ...................................................... 29
4.3.1.2.3 COMPLETION ........................................................ 30
4.3.1.2.4 WELL TESTING ..................................................... 31
4.3.1.2.5 SECURE WELL ....................................................... 32
4.3.1.3.1 MOVING ............................................................... 34
4.3.1.3.2 PRELIMINARY ...................................................... 35
4.3.1.3.3 COMPLETION ........................................................ 36
4.3.1.3.4 WELL TESTING ..................................................... 37
4.3.1.3.5 SECURE WELL ....................................................... 38
4.3.2.1 MOVING ......................................................................... 40
4.3.2.2 PRELIMINARY ................................................................ 41
4.3.2.3 COMPLETION.................................................................. 42
4.3.2.4 WELL TESTING ............................................................... 43

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4.3.2.5 SECURE WELL ................................................................. 44
5. RIG CONTRACTOR .................................................................... 45
5.1 RIG MOBILIZATION AND DEMOBILIZATION ..........................................................46

5.2 REIMBURSABLE EQUIPMENT SERVICES ................................................................47
5.3 OTHER DRILLING COSTS ....................................................................................48
5.3.1 RIG MOVING.......................................................................................................49
5.3.2 OCCASIONAL SERVICES .......................................................................................50
5.3.3 ADDITIONAL EQUIPMENT SERVICES ......................................................................51
5.4 RIG RATE ...........................................................................................................52
6. TANGIBLE ................................................................................ 53
6.1 CASING & TUBING ........................................................................................................54

6.1.1 TUBING ..............................................................................................................55
6.1.2 COMPLETION EQUIPMENT ....................................................................................56
6.1.3 CONDUCTOR PIPE SQUINCH-JOINT .....................................................................57
6.1.4 CASING ..............................................................................................................58
6.1.5 CASING EQUIPMENT............................................................................................59
6.2 WELLS HEAD CHRISTMAS TREE AND EQUIPMENT ......................................................60
6.2.1 WELL HEAD CHRISTMAS TREE AND EQUIPMENT ..................................................61
6.3 MECHANICAL MATERIALS .............................................................................................62
6.3.1 MECHANICAL MATERIALS ....................................................................................63
7. INTANGIBLE............................................................................. 64
7.1 CONSUMABLE MATERIALS .............................................................................................67

7.1.1 BIT .....................................................................................................................68
7.1.2 FUEL ...................................................................................................................69
7.1.3 LUBRICANTS .......................................................................................................70
7.1.4 OTHER OIL PRODUCTS FOR BUNKERING..............................................................71
7.2 OTHER SUPPLIES ...........................................................................................................72
7.2.1 OTHER SUPPLIES ................................................................................................73
7.3 WELLS SEISMIC TESTS .................................................................................................74
7.3.1 WELLS SEISMIC TESTS ......................................................................................75
7.4 TRANSPORTS AND RELATED BURDENS ........................................................................76
7.4.1 LAND TRANSPORTS .............................................................................................77
7.4.1.1 LAND TRANSPORTS .............................................................................................78
7.4.1.2 CARS AND SPECIAL VEHICLES RENTALS ..............................................................79
7.4.2 MARINE TRANSPORTS .........................................................................................80
7.4.2.1 MARINE TRANSPORTS .........................................................................................81
7.4.2.2 VESSELS RENTALS ..............................................................................................82
7.4.3 AIR TRANSPORT..................................................................................................83
7.4.4 PIPELINE TRANSPORT .........................................................................................86
7.4.5 TRANSPORT & SHIPPING SERVICES ....................................................................87

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7.4.5.1 LOADING UNLOADING PORTERAGES CARRIERS SERVICES ...................................88

7.4.5.2 WAREHOUSING, TRANSITS AND DEPOSITS .........................................................89
7.4.5.3 SHIPPING AGENT CUSTOM OPERATION SERVICES ...............................................90
7.4.5.4 ACTIVITIES RELATED TO MARINE - AIR TRANSPORTS ..........................................91
7.5 TRAVELS & MISSIONS ..................................................................................................92
7.5.1 TRAVELS AND MISSIONS .....................................................................................93
7.6 SPECIALISED CONTRACTORS ........................................................................................94
7.6.1 DRIVING CONDUCTOR PIPE SERVICES ................................................................95
7.6.2 GEOLOGICAL ASSISTANCE SERVICES ..................................................................96
7.6.3 MUD SERVICES ...................................................................................................97
7.6.4 DEVIATION SERVICES .......................................................................................103
7.6.4.1 DEVIATION TECHNICAL ASSISTANCE .................................................................104
7.6.4.2 DEVIATION EQUIPMENT RENTALS ......................................................................105
7.6.5 ELECTRICAL LOGS SERVICES ............................................................................106
7.6.6 PUMPING & CEMENTING SERVICES ...................................................................107
7.6.6.1 CEMENTING TECHNICAL SERVICES ....................................................................108
7.6.6.2 CEMENT ADDITIVES ..........................................................................................109
7.6.6.3 CEMENT MATERIALS .........................................................................................110
7.6.7 CASING AND TUBING RUNNING SERVICES ........................................................111
7.6.8 ENDLESS TUBING UNIT AND NITROGEN SERVICES ............................................112
7.6.9 CASING CUTTING AND MILLING SERVICES ........................................................113
7.6.10 DRILLING / PRODUCTION ASSISTANCE DIVING AND ROV SERVICES .................114
7.6.11 STIMULATION SERVICES ...................................................................................115
7.6.11.1 STIMULATION SERVICES AND EQUIPMENT ...........................................116
7.6.11.2 STIMULATION MATERIALS ...................................................................117
7.6.12 PRODUCTION TESTS SERVICES .........................................................................118
7.6.12.1 PRODUCTION TESTS SERVICES .........................................................................119
7.6.12.2 DRILL STEM TESTS SERVICES ...........................................................................120
7.6.13 GRAVEL PACKING SERVICES .............................................................................121
7.6.13.1 GRAVEL PACKING SERVICES AND EQUIPMENT ...................................................122
7.6.13.2 GRAVEL PACKING MATERIALS ...........................................................................123
7.6.14 OTHER SPECIALISED SERVICES ........................................................................124
7.6.14.1 PICK-UP LAYDOWN MACHINE SERVICES ............................................................125
7.6.14.2 CORING SERVICES ............................................................................................126
7.6.14.3 SOUR GAS MONITORING AND SAFETY EQUIPMENT ............................................127
7.6.14.4 OTHER SERVICES NOT INCLUDED UNDER OTHER COST CODES.........................128
7.6.15 OTHER DRILLING / PRODUCTION SERVICES ......................................................129
7.6.15.1 E.I. CASING PACKERS ........................................................................130
7.6.15.2 PACKERS AND SAFETY VALVES ............................................................131
7.6.15.3 LINER HANGERS ..................................................................................132
7.6.15.4 INTEGRATED COMPLETION SERVICES ..................................................133
7.6.16 NON DESTRUCTIVE TESTS ON PURCHASED MATERIALS .....................................134
7.6.17 WASTE TREATMENT SERVICES ..........................................................................135
7.7 CONTRACTOR LOSS TOOLS REIMBURSEMENT ...........................................................136

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7.7.1 CONTRACTOR LOSS TOOLS REIMBURSEMENT ....................................................137

7.8 ENVIRONMENTAL SERVICES ......................................................................................138
7.8.1 SECURITY AND GUARDIANSHIP SERVICES .........................................................139
7.9 TAXES & DUTIES .........................................................................................................140
7.9.1 CUSTOM LEVIES PURCHASES AND SALES TAXES ..............................................141
7.9.2 MISCELLANEOUS TAXES ....................................................................................142
7.10 TELECOMMUNICATION SERVICES ...............................................................................143
7.10.1 OTHER TELECOMMUNICATION SERVICES ...........................................................144
7.10.2 TELECOMMUNICATION SERVICES.......................................................................145
7.11 TECHNICAL CONSULTING SERVICES ..........................................................................146
7.11.1 TECHNICAL CONSULTING SERVICES .................................................................147
7.12 RENTALS & HIRE .........................................................................................................148
7.12.1 DOWNHOLE TOOLS RENTALS ............................................................................149
7.12.2 SURFACE EQUIPMENT RENTALS .........................................................................150
7.13 COMPANY SERVICES ....................................................................................................151
7.13.1 INTERNAL PERSONNEL SERVICES ......................................................................152
7.13.2 INTERNAL VEHICLES SERVICES .........................................................................153
7.13.3 INTERNAL HELICOPTER SERVICES .....................................................................154
7.13.4 INTERNAL VESSEL SERVICES ............................................................................155
7.13.5 INTERNAL POOL / AUXILIARY SERVICES ............................................................156
7.14 OTHER SERVICES .........................................................................................................157
7.14.1 DRAWING, PHOTOGRAPHS, VARIOUS REPRODUCTION .......................................158
7.14.2 OTHER SERVICES .............................................................................................159
8. WELL SITE (CIVIL WORKS) .................................................... 160
8.1 EXCAVATION ................................................................................................................161

8.2 CONSTRUCTION / RECONDITIONING ONSHORE RIG SITES ....................................162
8.3 CIVIL WORKS ..............................................................................................................163
8.4 WATER, ELECTRICAL, TELEPHONE, GAS UTILITY CONNECTIONS ...........................164
8.5 AREA RESTORATION....................................................................................................165
8.6 LAND RENTAL ..............................................................................................................166
8.7 BUILDING RENTAL.......................................................................................................167
9. INSURANCES.......................................................................... 168
9.1 INSURANCES ................................................................................................................169

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1. COST CODE OF ACCOUNTS OBJECTIVE AND SCOPE
1.1 OBJECTIVE
This section has been developed to assist DC&W Dept. in performing Wells Cost
Estimating and Control, with the aim of providing a standard and unambiguous
guidance to allocate costs under the proper correct cost code.
Such allocation is of a paramount importance in order to properly monitor and
control the project, and to feed cost database with consistent and comparable data
from the various projects, to make available data subsequently for cost estimating.
Thus this section is written for DC&W Dept. while using specific software tools (i.e.
Genesys) and not for Company ERP (i.e. SAP).
1.2 SCOPE
This section defines all cost items (i.e. activities, materials and equipment costs)
relevant to a certain cost code.
Cost codes are used by:
• Project for allocating cost estimates, and for monitoring and controlling
Project’s performances;
• Company to control project costs for administrative and financial purposes.
This section covers only cost codes used for Projects cost estimate and control; this
section indicates the direct correspondence between (Project) Cost Code and
Company Cost Code of Accounts and provides the required clarified clarifications
whenever required. The format is given below.
(Project) Cost Code Company Cost Code of Account (ERP)

XXXXXX (YYYYYY)
(Project) Cost Code might have - in few cases and only for contracts issued - more
than one corresponding Company Cost Code of Account; the convention used is:
• XXXXXX: used Company Cost Code of Account for the entire contract;
• YYYYYY: ERP codes applicable to each contractual work item.
Reference is made to Company Charts of Accounts Release 2004; modification to
Company Charts of Accounts shall require the revision of the correspendece
between (Project) Cost Code and Company Cost Code of Account.
1.3 APPLICABILITY
The document is applicable to all DC&W projects.

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2. REFERENCES
Wells Cost Section
Wells Cost Estimating Sections
Wells Cost Controlling Section
Company CHARTS OF ACCOUNTS Release 2004

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3. COST CODES OF ACCOUNT
3.1 General
Cost Codes of Account are used by:

• Project for allocating cost estimates, and for monitoring and controlling the
project;
• Company to control project costs for administrative and financial purposes
(as defined in Chart of Accounts).
Unless differently stated hereinafter Cost Code means Project’s Cost Code of
Account.
Following paragraphs:
• describe the cost belonging to each Cost Code and relevant explanations
and battery limits, whenever required;
• define the correspondence between Project Cost Code and Company Cost
Code of Account;
• are deployed according to the current Project Cost Breakdown Structure,
and specifically according to the following scheme:
¾ Time Phases: para 4 (MOB-DEMOB, Well Site, Well, Rig,

Rigless, etc.)
¾ Work type: para 5, 6 and 7 (Rig Contractor, Tangible,
Intangible)
Following pages show the Cost Breakdown Structures used for DC&W project
CAPEX, OPEX and DECAB cost estimating and control.
3.2 Constrains in using custom CBS
CBS defined in this section is a proposed template, and has been developed to
satisfy projects’ needs and objectives, including their cost estimating and
controlling.
It is of paramount importance that cost data are comparable among various
projects; thus specific project needs (such as local fiscal regulations, JV, etc.)
driving to defining and using a different CBS, require in any case to account cost
according to Company CBS (in this case two CBS are required: Company CBS to
feed cost database, and project CBS to estimate and control the project).
3.3 Project Phase Cost Allocation
Each well is characterised by a life cycle: in particular life cycle cost is subdivided in
three main phases: Capex, Opex and Decab.
Thus when a well requires decompletion, relevant costs are sustained to modify the
asset and shall be accounted for as DECAB of the existing well; costs sustained to
drill / modify the existing well after said decompletion shall be accounted for as
CAPEX of the new well (although it includes some assets of the previous existing
well).

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Project CAPEX
(Heavy) CBS
Drilli ng Completion Completion
Workove r
Movi ng Moving Moving

Movi ng Phase ∅ i
Preli mi nary Prelimi nary Preliminary
Preli mi nary
Re-e ntry
Well Well Well
Dri lli ng
Well Well Well
Well
Testing
Well Worki ng
Tangibl e Intangible
A bandoni ng Unit
Well
Repeated under each
descending root
Rig
Tangibl e Intangible
Contractor
CB S CB S CB S
Repeated under each

descending root

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Project OPEX
(Light) (Light) CBS

Workove r Workove r
Moving Moving
Co mpletion Completion
Well Well
Testing Testing
Secure Secure
Well Well
Rig
Tangible Intangible Working
Tangible Intangible
Contractor Unit
CB S CB S CB S CB S CB S CB S
Repeated under each Repeated under each

descending root descending root

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Project DECAB
Well Well CBS

A bandoning A bandoni ng
Moving Moving
Well Well
Abandoning Abandoning
Rig Working
Tangible Intangible
Tangible Intangible Unit
Contractor
CB S CB S CB S
CB S CB S CB S
Repeated under each

Repeated under each
descending root
descending root

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4. TIME PHASES
Time Phases refer to the logic sequence of DC&W operations, and CBS upper
part reflects such sequence. Time is the main cost driver of DC&W projects.
Project CAPEX
MOB-DEMOB Wells Site Well 1 Well 2 Well… i
(Heavy) CBS
Drilli ng Complet ion Complet ion
Workove r
Movi ng Moving Movi ng

Moving Phase ∅ i
Prelimi nary Preli minary Prelimi nary
Prelimi nary
Complet ion Completion Complet ion
Re-e nt ry
Well Well Well
Test ing Test ing Testing
Dri lli ng
Well Well Well
Well
Testing
Well
A bandoning
Secure
Well
Following subparagraphs describe each CBS item.
Reference is made to CAPEX Cost Breakdown Structure, beeing the most

complete.

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4.1 MOB-DEMOB
Cost Code Company Cost Code of Account

621032 (621029)
Includes Costs relevant to:

• Rig Moving from Rig Contractor’s base to Well Site (MOB)
• Rig Moving from the original contractual geographical area to another
not previously foreseen in the contract
• Rig Moving from Well Site to Rig Contractor base (or field of another
company) (DEMOB)
Project CAPEX
MOB-DEMOB
Excludes Costs relevant to:

• …
• …
• …
Specific Rules:
• …

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4.2 Wells Site

N.A.

• Excavation
• Construction / Reconditioning Onshore Rig Sites
• Civil Works
• Water, Electrical, Telephone, Gas Utility Connections
• Area Restorations
• Land Rental
• Building Rental
Details of each item are given under para 8. Well Site (Civil Works): the same
CBS shall be used. Cost Code numbers are different due to the different roots.
Well Site
(Civil Works)
Construction / Water, Electric.

Area
Excavation Reconditioning Civil Works Tele ph., Gas
Restorations
Onshore Rig Sites Utilit. Connect.
Land Renta l Building Rental
Well Site (Civil

( Civil Works
Works)) CBS

…
…
…
Specific Rules:
• Cost Code differ from those indicated under para 8, in the following
manner:………………………………………………………
• This cost code is alternative to Well Site for each Well (cost code
…………….); decision at project commencement shall be taken
whether to use Wells Site or Well Site (Well Site is recommended in
order to better assign cost to each well)

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4.3 Well

N.A.

• Rig Drilling and Completion operations
• Rigless Completion operations
• Well Site operations

• …
Specific Rules:
• …
• …
• …
Project CAPEX
Well 1 Well 2 Well… i
Rig Alternative Rig less Well Site

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4.3.1 Rig

N.A.

• Drilling, Completion and (Heavy) Workover operations
executed through a Rig and ancilary equipment and services
Well… i
Rig
(Heavy)
Dri lli ng Co mplet ion
W orkove r

• Rigless Completion operations
Specific Rules:
• …

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4.3.1.1 Drilling

N.A.

• Drilling operations
executed through a Rig and ancilary equipment and services
Rig
Dri lli ng
Movi ng Phase ∅ i

• Completion operations
Specific Rules:
• …

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4.3.1.1.1 Moving

N.A.

• Rig-down, Rig Moving and Rig-up between two Wells of the same
contractual scope of work
Dri lli ng
Movi ng

• Operations on various Phases ∅i
• …
• …
Specific Rules:
• …

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4.3.1.1.2 Phase ∅

N.A.

• Preliminary
• Re-entry
• Drilling
• Well Testing
• Well Abandoning
• Secure Well
operations
Dri lli ng
Phase ∅ i
Preli mi nary
Re-e ntry
Dri lli ng
Well
Testing
Well
A bandoni ng
Secure
Well

• Moving
Specific Rules:
• Phases ∅ are identified according to “Hole size”

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4.3.1.1.2.1 Preliminary

N.A.

• Start of Drilling activities (Conductor pipe; Skidding; killing; etc).
∇ START: End of Rig Equipment testing.

∇ FINISH: start of re-entry, drilling phases.

• Re-entry
• Drilling
• Well Testing
• Well Abandoning
• Secure Well
operations
Specific Rules:
• …

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4.3.1.1.2.2 Re-entry

N.A.

• Start the activity on an existing well (wellhead & B.O.P. operation,
milling, plugging, etc.).
∇ START: first tool ready to run in hole

∇ FINISH: run in hole of the first bit to start drilling

• Preliminary
• Drilling
• Well Testing
• Well Abandoning
• Secure Well
operations
Specific Rules:
• …

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4.3.1.1.2.3 Drilling

N.A.

• Drilling works (reach the planned depth)
∇ START: Run in hole of the first bit to start drilling.

The start of each drilling phase is identified by the start of the run in hole of
the first bit to drill the phase.
∇ FINISH: Exploration wells: end recording of last log or reaching of final depth.
Development wells: end of operation on the production casing with bit
scraper on bottom.

• Preliminary
• Re-entry
• Well Testing
• Well Abandoning
• Secure Well
operations
Specific Rules:
• …

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4.3.1.1.2.4 Well Testing

N.A.

• Well Testing operations (perform well testing)
∇ START: start run in hole well testing string

∇ FINISH: for DST, up to start of well abandoning operation, or starting of
well completion phase, drilling restart; for Production test, from well start-up
or starting of well abandoning operation

• Preliminary
• Re-entry
• Drilling
• Well Abandoning
• Secure Well
operations
Specific Rules:
• …

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4.3.1.1.2.5 Well Abandoning

N.A.

• Well Abandoning operations (execute permanent or temporary well
abandonment)
∇ START: start run in hole D.P., wire line, coiled tubing for positioning the
first plug (cement, bridge, etc.)
∇ FINISH: end of operations on well

• Preliminary
• Re-entry
• Drilling
• Well Testing
• Secure Well
operations
Specific Rules:
• …

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4.3.1.1.2.6 Secure Well

N.A.

• Secure Well operations (execute activities to secure well: run in hole
plugs or b.p.v., redressing t.s.v. or s.c.s.s.v., test s.c.s.s.v., etc.)
∇ START: start run in hole first tool

∇ FINISH: from well start-up or start of other operations

• Preliminary
• Re-entry
• Drilling
• Well Testing
• Well Abandoning
operations
Specific Rules:
• …

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4.3.1.2 Completion

N.A.

• Moving
• Preliminary
• Completion
• Well Testing
• Secure Well
operations
Rig
Completion
Movi ng
Preli mi nary
Completion
Well
Test ing
Secure
Well

• ….
Specific Rules:
• …

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4.3.1.2.1 Moving

N.A.


• Preliminary
• Completion
• Well Testing
• Secure Well
operations
Specific Rules:
• …

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4.3.1.2.2 Preliminary

N.A.

• Preliminary operations (completion)
∇ START: End of rig Equipment testing.

∇ FINISH: starting completion operations

• Re-entry
• Well Testing
• Well Abandoning
• Secure Well
operations
Specific Rules:
• Only for completion operations executed after some hold time, with rig
re-positioning.

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4.3.1.2.3 Completion

N.A.

• Well completion configuration operations
∇ START: Development wells: 1st completion, end of activities on

production casing with bit scraper on bottom; other completions, end of
restoration activities on production casing with bit scraper on bottom
Exploration wells: end recording of last log or reaching of final depth.
∇ FINISH: end make-up of production cross

• Moving
• Preliminary
• Well Testing
• Secure Well
operations
Specific Rules:
• …

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4.3.1.2.4 Well Testing

N.A.


∇ FINISH: for Production test, from well start-up

• Moving
• Preliminary
• Completion
• Secure Well
operations
Specific Rules:
• …

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4.3.1.2.5 Secure Well

N.A.

• Secure Well operations (execute activities to secure well: run in hole
plugs or b.p.v., redressing t.s.v. or s.c.s.s.v., test s.c.s.s.v., etc.)

∇ FINISH: from well start-up or start of other activities

• Moving
• Preliminary
• Completion
• Well Testing
operations
Specific Rules:
• …

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4.3.1.1 (Heavy) Workover

N.A.

• Well modification

• Drilling
• Completion
operations of a new Well
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.1.3.1 Moving

N.A.

• Equipment (i.e. slike line eq., colied tubing eq., artificial lift eq., etc.)
moving operations between two Wells of the same contractual scope
of work

• Preliminary
• Completion
• Well Testing
• Secure Well
operations
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.1.3.2 Preliminary

N.A.

• Preliminary operations (start completion)
∇ START: end of equipment testing

∇ FINISH: start of completion operations

• Moving
• Completion
• Well Testing
• Secure Well
operations
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.1.3.3 Completion

N.A.

• Perform well completion configuration
∇ START: Run in hole of the first tool to start completion.

• Moving
• Preliminary
• Well Testing
• Secure Well
operations
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.1.3.4 Well Testing

N.A.



• Moving
• Preliminary
• Completion
• Secure Well
operations
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.1.3.5 Secure Well

N.A.

• Secure Well (execute activities to secure well: run in hole plugs or
b.p.v., redressing t.s.v. or s.c.s.s.v., test s.c.s.s.v., etc.)


• Moving
• Preliminary
• Completion
• Well Testing
operations
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.1 Rig less

N.A.

• Moving
• Preliminary
• Completion
• Well Testing
• Secure Well
operations
Well… i
Rigle ss
Completion
Movi ng
Preli mi nary
Completion
Well
Testing
Secure
Well

• Completion with Rig (included in ……………………… Completion)
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.2.1 Moving

N.A.

• Equipment (i.e. slike line eq., colied tubing eq., artificial lift eq., etc.)
moving operations between two Wells of the same contractual scope
of work

• Preliminary
• Completion
• Well Testing
• Secure Well
operations
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.2.2 3Preliminary

N.A.

• Preliminary operations (start completion)
∇ START: end of equipment testing

∇ FINISH: start of completion operations

• Moving
• Completion
• Well Testing
• Secure Well
operations
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.2.3 Completion

N.A.

• Perform well completion configuration
∇ START: Run in hole of the first tool to start completion.

• Moving
• Preliminary
• Well Testing
• Secure Well
operations
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.2.4 Well Testing

N.A.



• Moving
• Preliminary
• Completion
• Secure Well
operations
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
4.3.2.5 Secure Well

N.A.

• Secure Well (execute activities to secure well: run in hole plugs or
b.p.v., redressing t.s.v. or s.c.s.s.v., test s.c.s.s.v., etc.)


• Moving
• Preliminary
• Completion
• Well Testing
operations
Specific Rules:
• …

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
5. RIG CONTRACTOR
Rig Contractor costs are subdivided in:

1. Rig Mobilization & Demobilization
2. Reimbursable Equipment Services
3. Other Drilling Cost
4. Rig Rate
Rig Contractor
Rig Reimbursable
Other Drilling
Mobilization Equipment Rig Rate
Costs
Demobilization Services
Rig Contractor CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
5.1 Rig Mobilization and Demobilization

621032 (621030)

• Rig Moving from Rig Contractor’s base to Well Site (MOB)
• Rig Moving from the original contractual geographical area to another
not previously foreseen in the contract
• Rig Moving from Well Site to Rig Contractor base (or field of another
company) (DEMOB)

…
…
…
Specific Rules:

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
5.2 Reimbursable Equipment Services

621032 (621034)

• Equipment used to:
o Drilling rig upgrade
o Etc.
relevant to rig contractor equipment improvement (thus not included
in base Rig Rate, but foreseen as option in Rig Contractor’s contract)

• Equipment supplied by contractors other than Rig Contractor (included
under …… ……………….Specialised Contractors)
Specific Rules:
• Equipment supplied by Rig Contractor

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
5.3 Other Drilling Costs

621032 (621031, 621033)

• Rig Moving
• Occasional Services
• Additional Equipment Services

…
…
…
Specific Rules:
• …
Other Drilling
Costs
Additional
Rig Occasional
Equipment
Moving Services
Services
Rig Contractor - Other Drilling Costs CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
5.3.1 Rig Moving

621032 (621031)

• Skidding Rig operations

…
…
…
Specific Rules:
• Cost to be assigned to the Well to be drilled

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
5.3.2 Occasional Services

621032 (621033)

• Services such as:
o Additional surveillance
o Additional crew
o Overtime work
o Additional persons in a crew
o Needs/requets from Company personnel
excluded from Rig Rate as defined in Contractor’s contract

• Services included in Rig Rate
Specific Rules:
…
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
5.3.3 Additional Equipment Services

621032 (621031)

• Equipment used to:
o Drilling Rig upgrade
o Etc.
relevant to equipment improvement (thus not included in base Rig Rate, but
foreseen in Rig Contractor’s contract) and specifically requested by Company

• Equipment supplied by contractors other than Rig Contractor (included
in the various sub-items of “Specialised Contractors” or of “Rentals &
Hires” under Intangible)
Specific Rules:
• Cost of additional equipment supplied by Rig Contractor

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
5.4 Rig Rate

621032

• Dayly Rig cost (indipendently from the operations carried out), or for
stand-by not imputable to Rig Contractor
• Snubbing Unit and Pulling Unit services

…
…
…
Specific Rules:
• Costs from Rig-up end to Rig-down start
• Contract to be analysed if stand-by costs are foreseeen for reasons
imputable to Rig Contractor
• Contractual tariffs for various activities might be different for various
activities (i.e. during drilling maximum tariff, during log stand-by
tariff, during running in-hole of a completion string, etc.):
nevertheless all these shall be included within this Cost Code

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6. TANGIBLE
Tangible costs are subdivided in:

1. Casing & Tubing
1.1 Tubing
1.2 Completion Equipment
1.3 Conductor Pipe Squinch-Joint
1.4 Casing
1.5 Casing Equipment
1.6 Floating Equipment
2. Well Head Christmas Tree and Equipment
2.1 Well Head Christmas Tree and Equipment
3. Mechanical Materials
3.1 Mechanical Materials
Tangible
Well Head
Mechanical
Casing & Tubing Christmas Tree
Materia ls
and Equipment
Tangible CBS
General Rule:
Tangible materials even if purchased / included under different contract (i.e. included in contractor’s
scope), shall be included under these Cost Codes, unless differently indicated

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.1 Casing & Tubing
Casing &
Tubing
Completion Conductor Pipe Casing Floating

Tubing Casing
Equipment Squinch-Joint Equipment Equipment
Tangible - Casing & Tubing CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.1.1 Tubing

611103

• Tubing materials used for completion operations

• Casing materials (included in ……… Casing)
Specific Rules:
…
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.1.2 Completion Equipment

611104

• Equipment and materials used for wells completion operations, such
as:
o Pumping rods
o Production packers
o Control lines
o Etc.

…
…
…
Specific Rules:
…
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.1.3 Conductor Pipe Squinch-Joint

611130

• Materials, such as:
o Conductor pipe
o Squinch-joint

…
…
…
Specific Rules:
…
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.1.4 Casing

611132

• Casing pipe materials

• Casing Equipment (included in …….. Casing Equipment)
Specific Rules:
…
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.1.5 Casing Equipment

611133

•Shoes
•Collars
•Plugs
•Centralizers
•Stop Collars
• Linear Hangers
• Scratchers
• Etc.
used during casing operations

• Casing Pipe (included in …….. Casing)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.2 Wells Head Christmas Tree and Equipment
Tangible
Wells Head
Christmas Tree
and Equipment
Tangible - Wells Head Christmas Tree and

Equipment CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.2.1 Well Head Christmas Tree and Equipment

611102

• Surface and Subsea Well Head
• Well Head appurtenances, such as:
o Valves
o Gaskets, O-rings and Nuts and Bolts
o Etc.
• Christmas Tree
• Mud line suspension

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.3 Mechanical Materials
Mechanical
Materials
Tangible - Mechanical Materials CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.3.1 Mechanical Materials

611105

• Templates
• “Monotubolare”
• Etc.

• Steel Structures (included in …………………. Steel Structures)
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7. INTANGIBLE
Intangible costs are subdivided in:

1. Consumable Materials
1.1 Bit
1.2 Fuel
1.3 Lubricants
1.4 Other Oil Products for Bunkering
2. Other Supplies
2.1 Other Supplies
3. Wells Seismic Tests
3.1 Wells Seismic Tests
4. Transports and Related Burdens
4.1 Land Transports
4.1.1 Land Transports
4.1.2 Cars and Special Vehicles Rentals
4.2 Marine transport
4.2.1 Marine Transports
4.2.2 Vessel Rentals
4.3 Air Transport
4.3.1 Air Transports
4.3.2 Helicopter Rentals
4.4 Pipeline Transports
4.5 Transport & Shipping Sevices
4.5.1 Loading Unloading Porterages Carrier Services
4.5.2 Warehousing, Transits and Deposits
4.5.3 Shipping Agent Custom Operation Services
4.5.4 Activities Related to Marine - Air Transports
5. Travels & Missions
5.1 Travels and Missions
6. Specialized Contractors
6.1 Driving Conductor Pipe
6.2 Geological Assistance
6.3 Mud Services
6.3.1 Mud Technical Assistance
6.3.2 Mud Equipment Rentals
6.3.3 Mud Materials and Additives
6.3.3.1 Company Mud Materials and Additives
6.3.3.2 Contractor Mud Materials and Additives
6.4 Deviation Services
6.4.1 Deviation Technical Services
6.4.2 Deviation Equipment Rentals
6.5 Electrical Logs
6.6 Pumping & Cementing Services
6.6.1 Cementing Technical Services
6.6.2 Cement Additives
6.6.3 Cement and Additives
6.7 Casing and Tubing Running Services
6.8 Endless Tubing Unit and Nitrogen Services
6.9 Casing Cutting and Milling Services

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
6.10 Drilling & Production Assistance Diving and ROV Services

6.11 Stimulation Services
6.11.1 Stimulation Services and Equipment
6.11.2 Stimulation Materials
6.12 Production Tests Services
6.12.1 Production Tests Services
6.12.2 Drill Stem Tests Services
6.13 Gravel Packing Services
6.13.1 Gravel Packing Service and Equipment
6.13.2 Gravel Packing Materials
6.14 Other Specialized Services
6.14.1 Pick-up Lay-down Machine Services
6.14.2 Coring Services
6.14.3 Sour Gas Monitoring and Safety Equipment
6.14.4 Other Services Not Included Under Other Cost Codes
6.15 Other Drilling & Production Services
6.15.1 E.I. Casing Packers
6.15.2 Packers and Safety Valves
6.15.3 Liner Hangers
6.15.4 Integrated Completion Services
6.16 Non Destructive Tests on Purchased Materials
6.17 Waste Treatment Services
6.17.1 Waste Treatment Services
7. Contractor Loss Tools Reimbursement
7.1 Contractor Loss Tools Reimbursement
8. Environmental Services
8.1 Security and Guardianship Services
9. Taxes & Duties
9.1 Custom Levies, Purchases and Sales Taxes
9.2 Miscellaneous Taxes
10.Telecommunication Services
10.1 Telecommunication Services
10.2 Other Telecommunication Services
11.Technical Consulting Services
11.1 Technical Consulting Services
12.Rentals & Hire
12.1 Downhole Tools Rentals
12.2 Surface Equipment Rentals
13.Company Services
13.1 Internal Personnel Services
13.2 Internal Vehicles Services
13.3 Internal Helicopter Services
13.4 Internal Vessel Services
13.5 Internal Pool/Auxiliary Services
14.Others Services
14.1 Drawing, Photographs, Various Reproductions
14.2 Other Services

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
Intangible
Consumable Wells Seismic Transports and Travels &

Other Supplies
Materials Tests Related Burdens Missions
Specialised Contractor LossTools Environmental Telecommunication

Taxes & Duties
Contractors Re imbursement Services Services
Technical
Company
Consulting Re ntals & Hire Other Services
Services
Services
Intangible CBS
General rule:
Intangible materials even if purchased by Company under different contract
(i.e. not included in contractor’s scope), shall be included under these Cost
Codes.

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.1 Consumable Materials
Intangible
Consumable
Materia ls
Other Oil
Bit Fuel Lubricants Products for
Bunkering
Intangible - Consumable Materials CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.1.1 Bit

611131

• Drilling Bits used for drilling operations (indipendently from type, and
including driil core barrel shoe)
• Chockes installed on bit

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.1.2 Fuel

611101

• Diesel oil, kerosene, petrol fuel purchased by Company or reimbursed
to Contractor

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.1.3 Lubricants

611108

• Lubricants (oil and grease) used for the various equipment purchased
by Company or reimbursed to Contractor

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.1.4 Other Oil Products for Bunkering

611124

• Other oil products for bunkering

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.2 Other Supplies
Intangible
Other Supplies
Tangible - Other Supplies CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.2.1 Other Supplies

611091

• Utilities consumption, such as:
o Electric power
o Gases
o Steam and hot water
o Potable and non-potable water

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.3 Wells Seismic Tests
Intangible
Wells Seismic
Tests
Intangible - Wells Seismic Tests CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.3.1 Wells Seismic Tests

621021

• Wells Seismic Tests

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4 Transports and Related Burdens
Intangible
Transports and
Re lated Burdens
Transport and
Land Marine Air Pipeline
Shipping
Transports Transports Transports Transports
Services
Intangible - Transports and Related Burdens CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.1 Land Transports

N.A.

• Land Transports
• Cars ans Special Equipment Rentals

• Marine Transport and Vessel Rentals (included in…………. Marine
Transport)
• Air Transport, Aircrafts Rentals and Helicopter Rentals (included
in…………. Air Transport)
• Transports & Shipping Services (included in ……………… Transports &
Shipping Services)
Specific Rules:
…
…
Transpo rts
and Re lated
Burdens
Land Tra nsports
Cars and
Land Tra nsports Special Vehicles
Re ntals
Intangible - Land Transports CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.1.1 Land Transports

624025

• Equipment, materials, cuttings and sludge, drilling / completion fluids,
crude oil, etc. trasport made through:
o Truck
o Railway

• Cars and Special Vehicles Rentals (included in …………………….. Cars and
Special Vehicles Rentals)
• Marine Transport (included in…………. Marine Transport)
• Air Transport (included in…………. Air Transport)
Shipping Services)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.1.2 Cars and Special Vehicles Rentals

635130

• Rentals / leasing of cars and special vehicles such as:
o Cars, buses, taxi with / without driver
o Industrial vehicles
o Carriages, Trolleis, Wagons
o Haulage with special vehicles

• Land Transport (included in ……………………. Land Transport)
• Marine Transport (included in…………. Marine Transport)
• Air Transport (included in…………. Marine Transport)
Shipping Services)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.2 Marine Transports

N.A.

• Marine transports
• Vessels Rentals

• Land Transport (included in ……………….. Land Transport)
• Air Transport (included in ……………… Air Transport)
Shipping Services)
Specific Rules:
…
…
Transports
and Re lated
Burdens
Marine
Transports
Marine Vessels
Transports Re ntals
Intangible - Marine Transports CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.2.1 Marine Transports

624201

• Equipment, materials, cuttings and sludge, drilling / completion fluids,
crude oil, etc. transport made through:
o Ship
o Barge
o Towboat

• Land Transport (included in ………………… Land Transport)
Shipping Services)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.2.2 Vessels Rentals

635150

• Rentals of vessels, such as:
o Utility Vessels
o Crew Boat
o Towboat
o Straight supply vessel
o Diving support vessels
o Etc.

• Land Transport (included in …………………. Land Transport)
Shipping Services)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.3 Air Transport

N.A.

• Air transport
• Helicopter Rentals
• Airport Services

• Land Transport (included in ……………… Land Transport)
• Marine Transport (included in ……………… Marine Transport)
Shipping Services)
Specific Rules:
…
…
Transports
and Related
Burdens
Air
Transports
Air Helicopters
Transports Rentals
Intangible - Air Transports CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.3.1 Air Transports

624204

• Equipment and materials trasport made through:
o Airplane
o Helicopter

Shipping Services)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.3.2 Helicopter Rentals

635225

• Rental / leasing of:
o Airplanes
o Helicopters
for:
o General and on-shore passengers transport
o Off-shore passengers transport
o Air operations
o Hook air transport for air operations
o Equipment and materials transports

Shipping Services)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.4 Pipeline Transport

624205

• Fluid Transport through Pipeline, such as:
o Crude Oil
o Natural Gas
as defined in the relevant pipeline transport service agreement for pipeline
transports

• Other services or activities related to this service shall be accounted in
the relevant applicable cost code
Specific Rules:
• Cost imputable to Wells CAPEX up to production tests included, and
then to OPEX

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.5 Transport & Shipping Services

N.A.

• Loading Unloading Porterages Carriers Services
• Warehousing, Transits and Ddeposits
• Shipping Agent Custom Operations Services
• Activities Related to Marine-Air Transports

…
…
…
Specific Rules:
…
…
Transports
and Re lated
Burdens
Transports &
Shipping
Services
Loading Unloading Warehousing Shipping Agent Activities

Porterages Transits and Custom Ope rations Re lated to
Carriers Services Deposits Services Marine - Air Transports
Intangible - Transports & Shipping Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.5.1 Loading Unloading Porterages Carriers Services

627251

• Porterages and manual labour utilized for transport purpose

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.5.2 Warehousing, Transits and Deposits

627261

• Equipment and materials warehousing and deposits required during
transports
• Transits duties posed on equipment and materials during transports

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.5.3 Shipping Agent Custom Operation Services

627822

• Services provided by shipping agent for custom clearance operations

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.4.5.4 Activities Related to Marine - Air Transports

627823

• Support services for air transports
• Technical / operative assistance in marine / aeronautical operations

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.5 Travels & Missions
Intangible
Travels &
Missions
Intangible - Travels & Missions CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.5.1 Travels and Missions

630000, 630001, 630080, 630090

• Expatriate Travel Expenses
• Local Travel Expenses
• Reimbursement of Documented Travel and Subsistance Expenses –
Members of Reimb. Doc. Travel & Subs. – Members Board of
Directors
• As above for France (630090)

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6 Specialised Contractors
Intangible
Specialised S. = Services
Contractors
Driving
Geological Pumping &
Conductor Mud S. Deviation S. Electrical Logs
Assistance Cementing S.
Pipe S.
Casing and Endless Tubing Drilling & Production

Casing Cutting
Tubing Unit and Assistance Diving Stimulation S.
& Milling S.
Running S. Nitrogen S. and ROV S.
Non Destructive
Production Gravel Other Other Drilling & Waste
Tests on Purc hased
Tests S. Packing S. Specialised S. Production S. Treatment S.
Materials
Intangible - Specialised Contractors CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.1 Driving Conductor Pipe Services

621040

• Driving conductor pipe (pile driver and welding machine)

• …
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.2 Geological Assistance Services

621041

• Geological assistance (or Mud logging); inclused all contractual items:
o Personnel services
o Equipment used
o Consumables
o Etc.…

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.3 Mud Services

N.A.

• Mud technical assistance
• Mud equipment rentals
• Mud materials and additives

…
…
…
Specific Rules:
…
…
Specialised
Contractors
Mud Se rvices
Mud Technical Mud Equipment Mud Materia ls

Assistance Re ntals and Additives
Company Contractor
Materia ls and Materia ls and
Additives Additives
Intangible - Mud Sercices CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.3.1 Mud Technical Assistance

621042

• Mud technical assistance services, such as:
o Equipment used
o Consumables

• Mud Equipment Rentals (included in ………………….. Mud Equipment
Rentals)
• Mud Materials and Additives (included in ………… Mud Materials and
Additives)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.3.2 Mud Equipment Rentals

621042 (635223 (1))

• Mud Equipment Rented

• Mud Technical Assistance (included in …………………. Mud technical
assistance)
• Mud Materials and Additives (included in ………… Mud materials and
additives)
…
Specific Rules:
• (1) Only for Mud Centrifugal Sepator Service

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.3.3 Mud Materials and Additives

621042 (1) (611135 (2), 611136
(3))

• Mud materials and additives, for mud operations
• Additives to modify mud characteristics
• Completion Fluids Materials

• Mud Technical Assistance (included in ………… Mud Technical
Assistance)
• Mud Equipment Rentals (included in …………… Mud Equipment Rentals)
Specific Rules:
• (1) Only for ………………..
• ..
• (3) for Completion Fluids Materials
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.3.3.1 Company Mud Materials and Additives

611135

purchased by Company

• Mud Materials and Additives purchased by Contractor (included in
………………….. Contractor Mud Materials and Additives)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.3.3.2 Contractor Mud Materials and Additives

621042 (1)

purchased by Contractor

• Company Mud Materials and Additives (included in …………………..
Company Mud Materials and Additives)
…
…
Specific Rules:
• (1) Only for Mud Materials and Additives purchased by Contractor

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.4 Deviation Services

N.A.

• Deviation Technical Assistance
• Deviation Equipment Rentals

…
…
…
Specific Rules:
• SDD included in this code
• LWD included in this code when used only for formation evaluation
Specialised
Contractors
Deviation
Services
Deviation Deviation
Technical Equipment
Assistance Re ntals
Intangible - Deviation Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.4.1 Deviation Technical Assistance

621043

• Deviation Technical Assistance

• Deviation Equipment Rentals (included in ………….. Deviation
Equipment Rentals)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.4.2 Deviation Equipment Rentals

621043

• Deviation Equipment Rentals

• Deviation Technical Assitance (included in ……….. Deviation Technical
Assistance)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.5 Electrical Logs Services

621044

• Electrical logs services, such as:
o Equipment used
o Consumables
included in Contractor scope

• Wells Seismic Tests (included in ………… Wells Seismic Tests)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.6 Pumping & Cementing Services

N.A.

• Cementing Technical Service
• Cement Additives
• Cement and Additives

…
Specific Rules:
…
…
Specialised
Contractors
Pumping and
Cementing
Services
Cementing
Cement Cement
Technical
Additives Materials
Service
Intangible - Pumping and Cementing Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.6.1 Cementing Technical Services

621045

• Personnel services
• Equipment used
• Consumables

• Cement Additives (included in ………….. Cement Additives)
• Cementing Technical Services (included in ………….. Cementing
Technical Services)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.6.2 Cement Additives

621045

• Cement Additives

Technical Services)
• Cement Materials (included in ……….. Cement Materials)
• Fluids used during Completion Operations (included in ……….. Mud
Materials and Additives)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.6.3 Cement Materials

611134

• Cement and Additives Materials
purchased by Company

Technical Services)
• Cement Additives (included in ……… Cement Additives)
• Fluids used during Completion Operations (included in ……….. Mud
Materials and Additives)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.7 Casing and Tubing Running Services

621046

• Ancillary casing running services, such as:
o Equipment
included in Contrator scope

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.8 Endless Tubing Unit and Nitrogen Services

621049

• Endless Tubing Unit (ETU) services, such as:
o Equipment
included in Contrator scope
…
…
…

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.9 Casing Cutting and Milling Services

621050, 611150

• Casing Cutting and Milling services, such as:
o Personnel Services
o Equipment
o Consumable materials
o Fishing services and equipment (ref. 611150 (1))
Included in Contrator scope

…
…
…

…
…
…
Specific Rules:
• (1) link with 3rd level of purchase is included under 621050
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.10 Drilling / Production Assistance Diving and ROV

Services

621051

• Submarine Assistance, such as:
o Divers
o Remote Operated Vehicles (ROV)
services and equipment included in Contractor scope

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.11 Stimulation Services

621053

• Stimulation services such as:
o Personnel service
o Equipment
o Materials
services and equipment included in Contractor scope …
…
…
…

• Stimulation Materials (included in …………… Stimulation Materials)
…
…
Specific Rules:
…
…
Specialised
Contractors
Stim ulation
Services
Stimulation
Stim ulation
Services and
Materia ls
Equipment
Intangible - Stimulation Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.11.1 Stimulation Services and Equipment

621053

• Stimulation:
o Technical service
o Equipment

• Materials purchased by Company (included in ……………. Stimulation
Materials)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.11.2 Stimulation Materials

621053 (1), 611139 (2)

• Stimulation materials and additives, such as:
o Acid (cloride acid)
o Chemical products (i.e. …………………)
o Sands for gravel packing
purchased by Company or by Contractor

• Stimulation services and equipment (included in ……………. Stimulation
Services and Equipment)
Specific Rules:
• (1) Only for materials included in Contractor scope
• (2) Only for materials purchased by Company, excluded materials for
sand control

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.12 Production Tests Services
Specialised
Contractors
Production
Tests
Services
Production Drill Stem

Tests Tests
Services Services
Intangible - Production Tests Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.12.1 Production Tests Services

621054 (611152, 611153)

• Production tests services, including:
o Services
o Equipment
o Materials
for:
o Well Testing
o Wire Line, Slick Line Test

…
…
…
Specific Rules:
• (1) Included Wire Line Tools 611153

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.12.2 Drill Stem Tests Services

621054

• Production tests services, including:
o Services
o Equipment
o Materials
for:
o Drill Stem Test

…
…
…
Specific Rules:
• (1) Included Wire Line Tools 611153

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.13 Gravel Packing Services

N.A.

• Gravel packing service, such as:
o Personnel service
o Equipment
o Materials

• Sands for gravel packing materials purchased by Company (included in
……. Stimulation Materials)
Specific Rules:
Specialised
Contractors
Gravel Packing
Services
Gravel Packing
Gravel Packing
Services and
Materia ls
Equipment
Intangible - Gravel Packing Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.13.1 Gravel Packing Services and Equipment

621055

• Gravel packing service, such as:
o Personnel service
o Equipment
o Materials

• Materials and Additives (included in …………. Gravel Packing Mateials)
Specific Rules:

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.13.2 Gravel Packing Materials

611139 (1), 621055 (2)

• Gravel packing Materials and Additives
included in Contractor scope or purchased by Company

• Gravel Packing Services and Equipment (included in …………………..
Gravel Packing Services and Materials)
Specific Rules:
• (1) Materials and Additives purchased by Company, excluded
materials for acid stimulation
• (2) Materials and Additives purchased by Contractor

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.14 Other Specialised Services

N.A.

• Pick-up and Lay-down machine services
• Coring services
• Sour Gas Monitoring and Safety Equipment
• Other Services Not Included Under Other Cost Codes

…
…
…
Specific Rules:
…
…
Specialised
Contractors
Other
Specialised
Services
Sour Gas Othe Services

Pick-up Lay-down Coring
Monitoring and Not Included Under
Machine Services Services
Safety Equpment Other Cost Code
Intangible - Other Specialised Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.14.1 Pick-up Laydown Machine Services

621056 (1)

• Pick-up and Lay-down machine services

• Coring Services (included in ………………. Coring Services)
• Sour Gas Monitoring and Safety Equipment (included in ………… Sour
Gas Monitoring and Safety Equipment)
• Other Services Not Included Under Other Cost Codes (included in ………
Other Services Not Included Under Other Cost Codes)
Specific Rules:
• (1) Excluding Coring services, Sour Gas Monitoring and Safety
Equipment, Other Services Not Included Under Other Cost Codes

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.14.2 Coring Services

621056 (1)

• Coring services

• Pick-up and Lay-down Machine Services (included in …… Pick-up and
Lay-down Machine Services)
• Sour Gas Monitoring and Safety Equipment (included in ………… Sour
Gas Monitoring and Safety Equipment)
Specific Rules:
• (1) Excluding Pick-up and Lay-down Machine Services, Sour Gas
Monitoring and Safety Equipment, Other Services Not Included
Under Other Cost Codes

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.14.3 Sour Gas Monitoring and Safety Equipment

621056 (1)

• Sour Gas Monitoring and Safety Equipment

• Coring Services (included in …………. Coring Services)
Specific Rules:
• (1) Excluding Pick-up and Lay-down Machine Services, Coring
Services, Other Services Not Included Under Other Cost Codes

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.14.4 Other Services Not Included Under Other Cost Codes

621056 (1)

• Other Services Not Included Under Other Cost Codes

• Coring Services (included in …………. Coring Services)
• Sour Gas Monitoring and Safety Equipment (included in ……… Sour Gas
Monitoring and Safety Equipment)
Specific Rules:
• (1) Excluding Pick-up and Lay-down Machine Services, Coring
Services, Sour Gas Monitoring and Safety Equipment

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.15 Other Drilling / Production Services

621057

• E.I. Casing Packers
• Packers and Safety Valves
• Liner Hangers
• Integrated Completion Services

• Related Materials purchased by Company
• …
…
Specific Rules:
…
…
Specialised
Contractors
Other Drilling /
Production
Services
Integrated
E.I. Packers and
Liner Hange rs Completion
Casing Packers Safety Valves
Services
Intangible - Other Drilling / Production Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.15.1 E.I. Casing Packers

621057 (1)

• E.I. Casing Packers

• Packers and Safety Valves (included in ………… Packers and Safety
Valves)
• Liner Hangers (included in ………… Liner Hangers)
• Integrated Completion Services (included in ………… Integrated
Completion Services)
…
…
Specific Rules:
• (1) Excluding Packers and Safety Valves, Liner Hangers, Integrated
Completion Services, Related Materials purchased by Company
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.15.2 Packers and Safety Valves

621057 (1)

• Packers and Safety Valves

• E.I. Casing Packers (included in ………… E.I. Casing Packers)
• Liner Hangers (included in ………… Liner Hangers)
• Integrated Completion Services (included in ………… Integrated
…
…
Specific Rules:
• (1) Excluding E.I. Casing Packers, Liner Hangers, Integrated
Completion Services, Related Materials purchased by Company
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.15.3 Liner Hangers

621057 (1)

• Liner Hangers

• E.I. Casing Packers (included in ………. E.I. Casing Packers)
• Packers and Safety Valves (included in ………. Packers and Safety
Valves)
• Integrated Completion Services (included in ………. Integrated
…
…
Specific Rules:
• (1) Excluding E.I. Casing Packers, Packers and Safety Valves,
Integrated Completion Services, Related Materials purchased by
Company
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.15.4 Integrated Completion Services

621057 (1)

• Integrated Completion Services

• E.I. Casing Packers (included in ………. E.I. Casing Packers)
• Packers and Safety Valves (included in ………. Packers and Safety
Valves)
• Liner Hangers (included in ………. Liner Hangers)
• Related Materials purchased by Cxompany
…
…
Specific Rules:
• (1) Excluding E.I. Casing Packers, Packers and Safety Valves,
Integrated Completion Services, Related Materials purchased by
Company
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.16 Non Destructive Tests on Purchased Materials

627315

• Non destructive Tests on Purchased Materials, such as:
o Personnel Services
o Equipment
o Materials

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.6.17 Waste Treatment Services

627317 (621052)

• Antipollution Services and Equipment
• Drilling / Production Wastes Treatment / Disposal
• Other Wastes Treatment / Disposal
• Disposal through Waste Water Treatment Plants

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.7 Contractor Loss Tools Reimbursement
Intangible
Specialised
Contractor
Contractor
Loss Tools
Reimbursement
Intangible - Contractor Loss Tools

Reimbursement CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.7.1 Contractor Loss Tools Reimbursement

N.A.

• Reimbursement of Contractor Tools Losss during Drilling / Completion
operations
…
…
…

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.8 Environmental Services
Intangible
Environmental
Services
Security and
Gua rdianship
Services
Intangible - Environmental Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.8.1 Security and Guardianship Services

627231

• Security and Guardianship Services
…
…
…

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.9 Taxes & Duties
Intangible
Taxes & Duties
Custom Levies
Miscellaneous
Purchases and
Taxes
Sales taxes
Intangible - Taxes & Duties CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.9.1 Custom Levies Purchases and Sales Taxes

691100

• Export / Import Custom Duties
…
…

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.9.2 Miscellaneous Taxes

691200

• Indirect taxes such as:
o …
o …
o Govermental Concession for mining (or mining license)
o …
o …

Royalty
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.10 Telecommunication Services
Intangible
Telecom munication
Services
Other
Telecommunication
Telecom munication
Services
Services
Intangible - Telecommunication Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.10.1 Other Telecommunication Services

627034

• Services related to telecommunication

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.10.2 Telecommunication Services

627318

• Telecommunication Services, such as:
o Telephony and Data Services
o TLC licence, lease, rental
…
…
…

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.11 Technical Consulting Services
Intangible
Technical
Consulting
Services
Intangible - Technical Consulting Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.11.1 Technical Consulting Services

631402

• Specialised technical consulting services such as:
o Organizational studies and consultancies
o Design Validation and Certification
o Operating / Safety Manuals Preparation
o Subsidence Studies and Control
o Plant Risk / Reliability Studies
o Site Characterization for Contamination / Decommissioned
o Preliminary studie for land reclaimation
o Technical / Scientific Consultancy
o Support service to improve / certify HSE-QR system
o Inspection and expediting services at supplier’s premise
o Environmental Impact Study services
o Audit on Quality Plans (definition and Implementation)
o Technical Assistance
o Techincal and Professional Studies and Consultancy services
o ….
…
…

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.12 Rentals & Hire
Intangible
Rentals
& Hire
Downhole Surface
Tools Equipment
Rentals Rentals
Intangible - Rentals & Hire CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.12.1 Downhole Tools Rentals

635222, 635223 (1)

• Downhole Equipment Rentals, such as:
o Drilling Pipe
o Heavy Weight Drilling Pipe
o Mud Operator Cabin
o Bottowell Equipment
o Make-up Flange Running Equipmewnt

• Surface Equipment (included in …………….. Surface Equipment Rentals)
…
…
Specific Rules:
• (1) Contract for Surface Equipment Rentals contracts might contain
also Downhole Tools: these shall be included under this cost code
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.12.2 Surface Equipment Rentals

635223, 635222 (1)

• Surgface Equipment Rentals, such as:
o Surface Production Equipment
o Surface Drilling Equipment
o Additional Cabins
o Mud Packing Station
o Etc.

…
…
…
Specific Rules:
• Cost of personnel require to operate these equipment shall be included
under this cost code
• (1) Downhole Tools rentals contracts might contain also Surface
EQIPMENT rentals: these shall be included under this cost code

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.13 Company Services

N.A.
Intangible
Company
Services
Internal Internal Internal Internal Internal

Personnel Vehicles Helicopter Vessel Pool/Auxiliary
Services Services Services Services Services
Intangible - Company Services CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.13.1 Internal Personnel Services

N.A. P65001

• Internal Personnel Services, such as:
o Drilling Enginesrs, Drilling Supervisors and other Well site
Personnel
o Home office Company Prsonnel (Drilling, Workover and
Completion Dept.)
o Etc.
…
…
…

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.13.2 Internal Vehicles Services

N.A. P65002

• Services provided through Company Vehicles

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.13.3 Internal Helicopter Services

N.A. P65003

• Services provided through Company Helicopters
• ……
• …
• …
• …

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.13.4 Internal Vessel Services

N.A. P65004

• Services provided through Company Vessels
…
…
…
…

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.13.5 Internal Pool / Auxiliary Services

N.A. P65005

• Rate for equipment availability on demand (applicable only in Italy)
…
…
…

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.14 Other Services
Intangible
Other
Services
Drawings, Photographs,
Other
Various
Services
Re productions
Intangible - Other Services CSB

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.14.1 Drawing, Photographs, Various Reproduction

627316

• Reproduction of documents with offset, cyclostyle
• Coping, Translations, e6tc.
• Photocoping
• Microfilm
• Binding
• Photographs / Movies development and printing
• Etc.

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
7.14.2 Other Services

627999, 623099

• Maintenance contracts
• Health Services
• Othe Services not classified elsewhere
• Translations
• Typing
• Data processing
• Existing Wells Revision
• Various shopworks (with or without machines)
• Carpenter Works (without materials supply)
• Termal treatments
• Meteorological Srvices
• Helicopter landing areas management
• Microsismic control networks and data processing
• Wells data loading on magnetic support
• Mining Studies
• Data Collection and Preparation

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
8. WELL SITE (CIVIL WORKS)
Well Site costs are subdivided in:

1. Excavation
2. Construction / Reconditioning Onshore Rig Sites
3. Civil Works
4. Water, Electrical, Telephone, Gas, Utility Connections
5. Area Restorations
6. Land Rental
7. Building Rental
Well Site
(Civil Works)
Construction / Water, Electric.

Area
Excavation Reconditioning Civil Works Teleph., Gas
Restorations
Onshore Rig Sites Utilit. Connect.
Land Rental Building Re ntal
Well Site (Civil

(Civil Works
Works)) CBS

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
8.1 Excavation

621060

• Excavation
• Road works and related earth movements
• Earth movements for various excavations

…
…
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
8.2 Construction / Reconditioning Onshore Rig Sites

621061

• Construction / restoration of:
o Well site and acces roads and their upgrading / restoration /
maintenance, from main existing road(s) to to each Well
o Rig site
o Canteen
o Pits
o Fences
includes engineering, materials, construction works by construction
contractor
o Materials purchased by Company for Site Roads

• Company personnel supervision and other services to be included
under Internal Personnel Services (ref. …………..)
• Specific Rules Depending upon CBS in use::
o Well Site cost item exist at Level 1 only: all costs for Site
Roads are included under this item (ref. ……………..)
o Well Site cost item exist at Level 1 and for each Well: costs for
main Site Road (i.e. from main existing road to the field) is
included under Level 1; costs for roads from main Site Roads
to each Well are assigned to each belonging Well
o Well Site cost item exist for each Well only: all costs for Site
Roads are included under these items with the following rules:
o Costs for roads from main Site Roads to each Well are
assigned to each belonging Well
o Costs for main Site Road is assignee to each Well of the field
as “pro quota” of Well’s budget cost vs. total Wells’ budget
cost
• When Site Roads or their parts are not clearly attributable to
Facilities or Wells (i.e. common use, etc.) the cost are shared
between Wells project and Facilities project as “pro quota” of Wells /
Facilities budget vs. total project budget.

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
8.3 Civil Works

621064, 611107

• Metallic Protection Cages
• Constructed Building
• Foundation for Rented Building
• Works for archeological remains
along with engineering, materials, construction works by construction
contractor (including earth escavation and movement whenever required)
• Materials purchased by Company for any of the above item

• Site Roads (included in ………… Site Roads)
• Rented Building (included in …………… Building Rental)
• Company personnel supervision and other services (included in
……….. Internal Personnel Services)
• Utilities connections (included in ……………….. Water, Electrical,
Telephone, Gas Utility Connections)
• Civil Works for Facilities’ purpose
Specific Rules:
• When Civil Works or their parts are not clearly attributable to
SAP ITEMS TO BE CHECKED. DECOMMISSIONING INCLUDED…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
8.4 Water, Electrical, Telephone, Gas Utility Connections

621065

• Water (industrial, potable, etc.)
• Electrical energy
• Telephone
• Gas
facilities design, installation, maintenance and consumption

• Concessions and Telecommunication services (included in …
Concessions and Other Telecommunication Services Fees)
…
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
8.5 Area Restoration

621092

• Site Restoration activities such as:
o Removal of contaminated earth, vegetation, materials, etc.
o Removal of wastes (solids/debris, sludge, liquid)
o Site decontamination
o Removal of temporary facilities for water, electrical energy,
telephone and gas
o Removal of foundations for rented or leased buildings
o Earth movements for restoration purpose
o Pits Cleaning and Closing

• Landscaping (included in ………… Landscaping)
• Earth movements for purposes other than restoration (included in
………… Civil Works)
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
8.6 Land Rental

635112

• Land rented for any purpose during Moving, Drilling, Workover and
Completion, such as:
o Access roads
o Building areas
o Storage areas
o Rig site
o Etc.

• Land purchase
• Land rental during Opex and Decab
Specific Rules:
…
…

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
8.7 Building Rental

635122

• Site Building rented or leased
• Constructed building (included in ………… Civil Works)

• Building foundations (included in ……………… Civil works)
• Home office building rental (i.e. for JV)
Specific Rules:
• Recovery value - if any - shall be a project income
• When Rented or Leased Buildings are not clearly attributable to

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
9. INSURANCES
All Insurances costs imputable to the Project are accounted under this code.
Project CAPEX
Insurances

Wells Cost Codes
Eni S.p.A.
STAP-G-1-M-14483 0
9.1 Insurances

625004, 625005, 625006, 625007,
625010

• Insurances Cost backcharged to the Project

• Insurances activated by the various contractors (included in their
costs)
Specific Rules:
…
…
COMPANY CODES OF ACCOUNT TO BE VERIFIED

Wells Cost Codes

Cost Estimating Budgeting STAP G 1 M 14483

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Cost Estimating Budgeting STAP G 1 M 14483

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SPEO IDENTIFICATION CODE PAG 2 OF 5

UPDATING, AMENDMENT, CONTROL & DEROGATION

SECTION 2 Wells Cost Glossary

SECTION 3 Wells Cost Estimating for Feasibility Phase

SECTION 4 Wells Cost Estimating for Planning Phase

SECTION 5 Wells Cost Estimating for Unit Cost Revision Phase

SECTION 6 Wells Cost Controlling for Execution Phase

SECTION 7 Wells Cost Code Handbook

DC&W Drilling, Completion and Workover

CEA Cost Estimate

DC&W CEA Drilling, Completion and Workover Cost Estimating

COSTC Cost Control

DC&W COSTC Drilling, Completion and Workover Cost Control

CBS Cost Breakdown Structure

WPB Wells Project Baseline

WSB Wells Scope Baseline

WTB Wells Time Baseline

WRB Wells Resources Baseline

WCB Wells Cost Baseline

WCE Wells Cost Estimate

ETF Estimate To Finish

EAF Estimate At Finish

EFC Estimated Final Cost

CAS Company Accounting System

DPM Development Project Manager

SECTION 1 of Cost Estimating, Budgeting and Controlling Handbook

1. WELLS COST MANAGEMENT OVERVIEW ....................................................................4

2. PLANNING PROCESSES OVERVIEW.............................................................................6

2.1 GENERAL PLANNING PROCESS ...................................................................................6

3. TYPES OF COSTS .........................................................................................................11

4. TYPES OF ESTIMATES .................................................................................................14

5. COST BREAKDOWN STRUCTURE...............................................................................16

6. WELLS COST ESTIMATE CODING AND DOCUMENTATION ......................................18

7. WELLS COST ESTIMATE BUILD-UP ............................................................................20

8. ASSUMPTIONS AND CONSTRAINS .............................................................................22

9. SIMILITUDE CRITERIA ..................................................................................................23

10. DRILLING COST DRIVERS............................................................................................24

12. COST INDEXES..............................................................................................................26

12.1 LOCATION FACTORS....................................................................................................27

12.2 COST ESCALATION ......................................................................................................28

14. EXPECTED ACCURACY RANGE ..................................................................................33

SECTION 1 of Cost Estimating, Budgeting and Controlling Handbook

15. COST DATA ...................................................................................................................37

16. COST ENGINEERING BASIC FORMULAS....................................................................38

17. CAPEX, OPEX AND DECAB COST ESTIMATING ........................................................39

18. LYFE CYCLE COST .......................................................................................................40

19. COST RISK ANALYSIS ..................................................................................................41

20. COST BUDGETING ........................................................................................................47

21. WELLS COST ESTIMATING BOUNDARIES .................................................................50

ANNEX 1: TYPICAL RISKS .....................................................................................................52

SECTION 1 of Cost Estimating, Budgeting and Controlling Handbook

Wells Cost Glossary Wells Cost Codes

+ 40% - 25% + 25%

Feasibility G1 Feasibility G2 Planning G3 Revision R Execution

Is the asset ready for

- 15% + 15% - 10% + 10%

SECTION 1 of Cost Estimating, Budgeting and Controlling Handbook

Drilling & Drilling &

Class I V Class III Class II

WCE WCE WCE WCE

Cost Estimating Unit Cost Cost

- Remedia l Jo bs Eval uat ion

 Reservo ir eva lua tio n - Comp leti on Act iv ity Study

 Target Locat ions a nd To lera nc es - Formation / Wel l Bo re Int erface

Reservo ir eva lua tio n - Comp leti on Act iv ity Study

Target Locat ions a nd To lera nc es - Formation / Wel l Bo re Int erface

Draft Wel ls Profi le - Materia ls Defin ition