1. Problem Definition
In this 8th blog I will try to calculate the construction price forecast for Drilling Site Preparation (DSP) for year 2022 with predictions based on the gold price increases. As we know the value of gold has relative purchasing power remains. The cost price that would be predicted is for budgeting POFD (Plan of Future Development) in onshore oil and gas field as part of the 30 years contract.
2. Development of Feasible Alternatives
The owner estimate of DSP jobs in 2005 was 286,175 USD where the site area of 90m x 90m with pareto job is earth works. The price of gold in 2022 is determined based on extrapolation of historical data from 1990. Before estimating the forecast cost, it will show of how to use control chart for gold price.
3. Development Outcomes for Alternative
Below are the historical data of the average price of gold per year from 1990 to 2012:
4. Selection of Criteria
The value of the average price of gold per year are plot into the charts and it extrapolate to year 2022 with trendline polynomial order 3 (aggresive), polynomial order 2 (moderate) and linier (conservative) as below:
5. Analysis of the Alternatives
Regression analysis applied to moderate model comparing to actual data . The data tested using residual analysis to describe the reability of the base predictive model. Below is residual analysis data from regression:
From the residual data and it analysis above, plot it using control chart as below:
The chart above indicates that the model is quite reliable since 95.45% of distribution residual data are within 3 sigma limit and 73.73% are within 2 sigma limit. 
6. Selection of Preferred Alternative
As we see that actual average gold price in 2005 is 444.74 USD/oz, so the value of DSP at that time is 286.175 USD / (444.74
USD/oz) = 643.47 oz gold.
Now we can predict the cost of DSP in 2022 using aggressive (7097.84 USD/oz), moderate (4008.61 USD/oz) and conservative (1537.07 USD/oz) models:
Aggressive prediction : 4,567,219.73 USD
Moderate prediction : 2,579,402.57 USD
Conservative prediction : 989,052.82 USD
7. Performance Monitoring & Post Evaluation of Results
The estimation results of this forecast budget can be used as reference other than calculation by currency inflation predictions. The price of course can be updated with respect to current gold prices and displays various other types of trendline that comes closest historical chart pattern data.
 London Fix Historical gold – result. (n.d.). Retrieved from http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx
 Using History to Determine Gold’s Intrinsic Value [SPDR Gold Trust (ETF), iShares Gold Trust(ETF), ProShares Ultra Gold (ETF)] – Seeking Alpha. (n.d.). Retrieved from http://seekingalpha.com/article/262560-using-history-to-determine-golds-intrinsic-value
 Asmoro, T. H., (2013). Exploring Gold Equivalency for Forecasting Steel Prices on Pipeline Projects. Retrieved from http://pmworldjournal.net/wp-content/uploads/2013/05/pmwj10-may2013-asmoro-gold-equivalency-for-forecasting-steel-prices-FeaturedPaper.pdf