Project Management in the Oil and Gas Industry

Table 4.4 Percentage of steel structure costs.
Item
Percentage from 
the total cost, %
Percentage 
of cost for 
 connection, %
Percentage of 
the connection 
cost, %
Preliminary design
2
33
0.7
Final design
3
55
1.7
Detail drawings
8
77
6.2
Total design cost
13
8.6
Material
38
40
15.2
Fabrication
27
63
17
Painting
10
35
3.5
Erection
12
45
5.4
Total percentage
100
49.7
Figure 4.1 Percentage of cost for steel structures.
Erection
12%
Design
13%
Material
38%
Fabrication
27%
Painting
10%

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Project Management in the Oil and Gas Industry
There is no doubt, also, that they are important in the cost of manu-
facturing and the installation phase, as the connection cost percentage 
is 63 percent and 45 percent, respectively. The connections are of great 
importance in the calculation of costs, as well as in the preparation of 
schedules.
4.2.3 Detailed 
Cost
The detailed cost estimate will be determined by the detailed construction 
drawings of the project and project specification.
The engineering office calculates the estimated cost through the expe-
rience of the contractors who carry out the construction of those proj-
ects with a cost estimate of others directly to the contractor as well as 
the expected profit. This depends on the engineering expertise of the 
office, in addition to the fact that the owner should add his cost for 
supervision.
The contractor will calculate the cost for the tender to be included in 
the bidding as the tendering cost estimate calculation is performed by the 
contractor and will be presented to the owner in the form of a bid or offer 
or as a start to negotiate the prices. Often, the contractor estimates the 
price with high accuracy in order to ensure that the work carried is out by 
the financial terms and he or she may use every method of calculating the 
estimated cost for construction.
Most of the construction companies have a procedure and scientific way 
to calculate the cost of construction of the project and to develop appropri-
ate pricing of the tender.
There are some works and the facilities or equipment that will be deliv-
ered by the subcontractors. The subcontractors put the price of work and 
then the general contractor studies the offers from the subcontractors and 
chooses the best price. After that, the general contractor will add his per-
centage of indirect cost and profit.
It is included in the cost of supervision, non-profit, and expenses, 
in addition to the direct cost of others directly and it is conducted by 
subcontractors’ offers, expense amounts, and construction procedures 
and steps.