An offshore contractor seeking to invest in marine equipment assets as a means to increase return on capital is confronted with a range of technical, commercial and geopolitical parameters, which can dramatically influence the investment outcome. The complexity of the offshore construction market does not translate readily into a simple traditional market analysis of "supply and demand". Given the continuous evolution of offshore facilities design and changing oil and gas market the forecast of demand is highly dynamic. The decision of what are the best marine equipment capabilities to meet this uncertain demand, which can remain competitive over 20+ years, is a challenging one. In order to arrive at a logical business case for a given marine asset investment, the use of scenario planning involving various business models must be used.rnThis paper will discuss the range of parameters typically studied in a marine asset investment business case and the types of parametric business models which are used to provide a quantitative analysis of investment opportunities. The use of parametric models allows the use of scenario planning to establish range estimates of return on investment (ROI) for a single marine equipment asset capability or a portfolio thereof.rnScenarios involving various marine construction market evolutions over the life of the asset can be assessed for ROI based on ranges of market share which are impacted by competitor's capabilities and geopolitical factors.rnThe paper will present typical case studies for two investment scenarios, one for the construction of a new construction vessel and the other the upgrade of an existing marine asset. The paper will discuss how the capabilities of these assets were selected.rnThe Business Case- Value Proposition Based on CompromisernThe installation of offshore facilities is a high variable cost business, where the progress of the work involves inherent physical risks not found in most other forms of construction or any other line of business. Given the cash flow involved in bringing offshore project on line, the owners of these projects, demand predictable contractor performance: certainty of schedule and quality in the finished work.rnAs any tradesman will attest, using the "correct tool" for any job is essential for completing it in a safe, efficient and reliable matter. Employing under capacity or ill suited construction equipment offshore means the offshore project duration will take longer, result in considerably higher variable cost and reduce surety in the quality and schedule of the finished work. Using the wrong equipment offshore can create situations where the offshore risks of the job cannot be effectively managed resulting in disaster for both the contractor and other stakeholders in the project.rnAn offshore contractor deciding to invest in new or upgraded equipment must believe the cost invested will generate greater future profits than otherwise possible. Typically these profits are generated by reducing incremental cost of production and/or increased turnover thereby increase margins on fixed cost. The future profits must be rationally dimensioned to create a business investment case.
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