Cost Estimate

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Cost estimate of Oil & gas facilities
Welcome to this presentation.
It explains how the investment cost for an Oil & Gas facility is
estimated.
After a short introduction, the 3 common methods of cost
estimate are shown.
Common ratios, such as $/kg for equipment, pipe etc. are given.
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Agenda
Introduction
The different estimation methods:

Capacity factored
Equipment factored
Analytical
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What will be the
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overall cost of
this facility?
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Cost = Quantities * item costs
All items
How would you determine quantities?
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Quantities estimates:
Ratio from past projects
Material Take-Off
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Cost = Quantities * item costs
All items
How would you determine quantities?

What is an item cost made of?
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Item cost = Supply cost + installation cost
How would you each one?
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Item cost estimates:

Supply + installation
In-house data from
past projects
Inquiries
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In-house data from
past projects
Inquiries
Sensitivity to:
Raw materials
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In-house data from
past projects
Inquiries
Sensitivity to:
Raw materials
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Steel, alloy steel, copper,
cement, iron
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In-house data from
past projects
Inquiries
Sensitivity to:
Raw materials
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Construction market
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Sensitivity to:
Raw materials
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Construction market
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Purpose of estimate:
Concept screening
Study of feasibility
Decision to invest
Estimate type:
Capacity factored
Equipment factored
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Analytical
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Purpose of estimate:
Concept screening
Study of feasibility
Decision to invest
Estimate type:
Capacity factored
Equipment factored
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Analytical
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Capacity factored
C1/C2 = (P1/P2) e
e ~ 0.6
Ci: Cost of facility with production
capacity Pi
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Capacity factored
C1/C2 = (P1/P2) e
e ~ 0.6
capacity Pi
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Exercise: what is the increase in cost for +50% capacity increase?
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Capacity factored
C1/C2 = (P1/P2) e
e ~ 0.6
capacity Pi
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In your opinion, what is the limit of such estimate?
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Capacity factored
C1/C2 = (P1/P2) e
e ~ 0.6
capacity Pi
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In your opinion, what is the limit of such estimate? It takes into
account neither market conditions nor plant location (labour cost)
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Equipment factored
C=fM
C: total installed cost of facility
M: cost of main equipment
f: factor
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Equipment factored
C=fM
f: factor
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Note: Typical figures for Petrochemical Plant
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Equipment factored
C=fM
f: factor
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Whats the main equipment?
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How is the cost of main
equipment evaluated?
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Process design
PFDs
H&M balance
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Equipment factored
C=fM
f: factor
f depends on
type of facility (petrochemical, refining, LNG, off-shore)
Size
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Equipment factored
C=fM
f: factor
f depends on
type of facility (petrochemical, refining, LNG, off-shore)
Size
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Typical figures for a chemical plant
In your opinion, how can we refine the estimate?

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Equipment factored
C = fi Mi
Mi Cost of all type i Main equipment
fi: factor
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Equipment factored
C = fi Mi
fi: factor
Why do you think justifies such an approach?
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Equipment factored
C = fi Mi
fi: factor
Why do you think justifies such an approach?
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Equipment factored
C = fi Mi
Mi Cost of all type I Main equipment
fi: factor
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In your opinion, what is the limit of such estimate?
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Analytical
Main equipment supply + install
Piping supply + install
Electrical supply + install
Instrumentation & Control system supply + install
Civil Works
Steel structures
Painting, Insulation
Temporary construction facilities
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Engineering & Project Management
Miscellaneous
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Analytical
Establish the bill of quantities (BOQ) in each trade: equipment,
civil, piping, structural steel etc.
BOQ = Material Take-Off (what is measured from available
drawings at this stage) + allowances for design development +
allowances for what is not yet on drawings + contingencies
Apply ratios to get supply + installation cost
Installation cost = qty * manhours/ton ratio * labour cost
Labour cost is all in, i.e., includes construction equipment (crane,
scaffolding)
The ratio is based on standard manhours, i.e., home country,
Localization factor (productivity) to be applied, i.e., actual
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installation manhours = ratio * productivity
Example: piping installation cost, ratio: 250 std h / ton
Western Europe, labour cost $100/hr yields $20k/ton
Middle East, labour cost $18/hr, productivity 2.5 yeilds $16k/ton
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Analytical
Civil Works
Steel structures
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Miscellaneous
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Supply
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Supply: eqt list (dimensions) => weight
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Process design
PFDs
H&M balance
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Rate?
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Rate:
USD 4/kg for CS depends on eqt size: 4 (large) 10 (small)
USD12/kg for SS
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USD 300-500 /m2 for Shell&Tube / Air-coolers
USD 1000/kW for pumps
Important note: the above ratios and the following ones - are the ones obtained by large EPC
Contractors ordering large quantities (USD 1bln jobs). Higher ratios must be used on smaller jobs!
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Supply: eqt list, dimensions/capacity/weight
Installation
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Installation ratios: % supply cost, typ. 8%
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Installation ratios: % supply cost, typ. 8%
30 std manhours/ton (includes labour
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and equipment)
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Analytical
Civil Works
Steel structures
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Miscellaneous
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Qty: ratio (eqt weight), typ. 40%
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Qty: ratio f (eqt number)
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Remark: Unit vs Interconnection
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Qty: ratio (eqt number, eqt weight)
MTO
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Process design
PFDs P&IDs
H&M balance
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Process design
PFDs P&IDs
H&M balance
Equipment list
Plot Plan
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Piping Layout
P&IDs
Plot Plan
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For more information on Engineering, refer to:
A unique synthesis for the

busy Project professional
270 pages
300 illustrations
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Table of Contents
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HERVE The Oil & Gas Engineering Guide
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2nd edition
Order direct on the publisher website:
http://www.editionstechnip.com/en/catalo
gue-detail/1111/oil-gas-engineering-guide-
the.html
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Qty: MTO
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Qty: MTO
Item count: P&IDs
Lengths: Piping Layout
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Qty: MTO
Item count: P&IDs
Both Process & Utility lines
Both Above Ground & Underground lines, Fire water
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Qty: MTO
Item count: P&IDs
Both Above Ground & Underground lines, Fire water
Allowances added for:
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Qty: MTO
Item count: P&IDs
Both Above Ground & Underground lines
what is not taken-off, e.g., small diameter and design
development (P&ID completion) to obtain quantities
to erect
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Qty: MTO
Item count: P&IDs
to erect
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Qty: MTO
Item count: P&IDs
to erect
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cut and losses to obtain quantities to be supplied
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MTO
Rate Supply
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MTO
Rate Supply $ /kg, typ. USD 3 /kg for CS
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MTO
Install
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MTO
Install std mhrs/ton, typ. 200-250 in unit,
100 on interconnecting pipe-racks,
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applied to the total piping weight,
including fittings & valves.
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Price ratio % Main equipment, typ. 15-20%
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Price ratio % Main equipment, typ. 15-20%
Quantities: Consumers list
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Rate (supply+install): USD 50k / consumer (w/o
generation) USD 520 / installed kW
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Consumers list
Single Line Diagram
Plot Plan
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Consumers list
Single Line Diagram
Plot Plan
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Price ratio % Main equipment, range: 40-120%
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Qties
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Qties nb equiv. loops (CV, 0.5 ON/OFF, Analyser)
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Rate
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Rate supply: $ /equivalent control loops, typ. 90k
install: hrs / equivalent control loops, typ. 750
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Qties Instrument list
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Qties Instrument list
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Rate Supply+install: $ / I/O, typ. 1000
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Civil Works
Price Ratio % Main equipment cost, typ. 15-20%
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Civil Works
Qty
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Civil Works
Qty Dimensions/Weight of equipment &
structure => size of foundations (m3)
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Civil Works
Rate
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Civil Works
Rate all-in (materials & labour) rate $/m3, typ. 1000
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Civil Works
Qty MTO: excavation, formwork, rebar, etc.
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Civil Works
Qty MTO: excavation, formwork, rebar, etc.
Rate Mhrs/operation + labour cost
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Steel structures
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Steel structures
Qty Ratio
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Steel structures
Qty Ratio pipe-racks: 90% of piping weight
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platforms: 10% of equipment weight
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Steel structures
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Rate
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Steel structures
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Rate Supply USD 2/kg
Erection 20 std manhours/t
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Analytical
Civil Works
Steel structures
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Price ratio % eqt, piping, str cost, typ. 5% each
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Qty MTO
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Qty MTO
Rate supply + install h / m2
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typ. 0,5 for painting 1,5 for (hot) insul.
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Analytical
Civil Works
Steel structures
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Miscellaneous
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Temporary Construction facilities
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Ratio % total cost, typ. 5% for new site
Detailed
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Analytical
Civil Works
Steel structures
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Miscellaneous
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Engineering & Project Management = all Project services

Price ratio % total cost, typ. 15%
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Engineering & Project Management = all Project

services
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Qty ratio
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services
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Qty ratio hrs / eqt item, typ. 1800 for Refining,
2500 for gas, 4000 for LNG
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services
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Qty
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services
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Qty home office: tasks list + std manhours
field supervision: ratio to labour, typ. 1/7
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Analytical
Civil Works
Steel structures
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Miscellaneous
Contractors cost
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Miscellaneous
Earthworks: always specific
Special foundations
Infrastructures: roads, buildings
Spare parts, typ. 5% main equipment cost
First fill (catalyst, lubes, chemicals)
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Analytical
Civil Works
Steel structures
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Miscellaneous
Contractors cost
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Contractors cost
profit,
risks,
sales cost,
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Contractors cost
profit, typ. 7%
risks,
sales cost,
typ. 10-15%
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Instrumentation & Control system
supply + install
Civil Works
Steel structures
Miscellaneous: catalysts etc.
Contractors cost
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Main features:
Different level of Cost estimate accuracy
Feasibility study +/-30% accuracy
Final Investment Decision (FID) +/- 10%
Which of the methods we have seen would you use for

each case?
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Main concepts:
Different level of Cost estimate accuracy
Factored / Detailed
Qty estimate: allowances for design development
Rates:
In-house historical data similar Plant
Cost estimate: Contingencies for cost escalation
Inquiries + provisions for cost adders (supplies),
additional works/re-works (construction)
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Direct costs / Indirect costs
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Historical evolution:
+ Increased instrumentation & control costs
- Engineering low cost centers
- Low cost sourcing 20% cheaper
- Increase in productivity (3D model)
+ Additional requirements: safety, environment
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HERVE
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A unique synthesis for the

busy Project professional
270 pages
300 illustrations
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HERVE The Oil & Gas Engineering Guide - 2nd edition
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Table of Contents
Discipline presentation:
activities and deliverables
The overall process
Methods & tools

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Table of Contents
Discipline presentation:
activities and deliverables
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The work of each

Engineering discipline is
described
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Design activities are

explained, e.g., Plant
Equipment layout
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Complex activities, such as

QRA, are explained
through a practical
example.
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How are materials of

construction selected ?
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How and when are Piping

Materials ordered?
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A sample of all common

Engineering documents is
included
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A sample of all common

Engineering documents is
included
Use this to specify what

you want to your
Engineering supplier !
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Verify the contents of

engineering documents
with check lists.
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Difference between
Engineering and Shop
drawings
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Understand the main

technical aspects, e.g.,
DCS vs ESD
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The common 2 types of

package control
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The different Plant

drainage systems
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The dynamic forces to

which an Off-Shore
Plant is subject
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Table of Contents
The overall process

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Use this as standard,

question deviations.
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Understand the new

3D-model centered
engineering process
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Know the interfaces

between disciplines...
and with Vendors
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Understand what
drives the Project
schedule
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Table of Contents
Methods & tools

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Use these methods as

standard, question
deviations.
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Implement powerful
procedures
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Request meaningful
progress reports
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Implement effective
Project Control
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This book is destined to both:
Oil & Gas companies Project execution personnel
Oil & Gas contractors Project execution personnel

BARON
2nd edition
If your are on the Client side, i.e., contracting Engineering

services, this book will help you to:
Specify to an Engineering supplier what you want: what

deliverables and with what contents,
Set a standard in Engineering execution that you and your

supplier can adhere to: design stages/gates, methods to be
used, etc.
Specify the progress report you want, with the meaningful

indicators,
Ask the right questions to assess the true progress,

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2nd edition
If your are on the Contractor side, i.e., performing Engineering

activities, this book will help you to:
Understand the work of each discipline and the overall

picture,
Challenge what one discipline tells you,
Understand the critical areas,
Put in place the right methods to be successful,

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2nd edition
Order direct on the publisher website:
http://www.editionstechnip.com/en/catalo
gue-detail/1111/oil-gas-engineering-guide-
the.html

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HERVE

Welcome to this presentation.

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The different estimation methods:

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What will be the

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How would you determine quantities?

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How would you determine quantities?

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Item cost = Supply cost + installation cost

How would you each one?

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Item cost estimates:

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Item cost estimates:

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Item cost estimates:

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Item cost estimates:

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In your opinion, how can we refine the estimate?

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Main equipment supply + install

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Main equipment supply + install

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Main equipment supply + install

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Main equipment supply + install

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Main equipment supply + install

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Main equipment supply + install

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Main equipment supply + install

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