This paper is focused on establishing a method for a modified escalation model that produces more specificity for project cost comparisons among certain types of upstream projects. Many escalation models fail because of either a lack of appropriate detail or requirements to maintain too many complex routines. In short, any model needs to deliver the appropriate amount of information without becoming a burden. This study will also address the concept of location factors and the challenges in dealing with sourcing issues for respective commodities. Within the last five years several major commodities such as steel or cement have experienced exorbitant price increase on the global markets because of increased demand from developing economies. The demand pull exerted by China's expanding economy has broken the continuity of slow but steady project cost increases for global capital projects. This paper presents considerations regarding escalation indices for projects like pipelines, offshore, and onshore to enable reasonable economic comparisons.
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