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Cost estimate

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Welcome to this presentation. …

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.

Comments are most welcome (herve.baron@gmail.com), which I will incorporate for the benefit of all.

Published in: Business, Economy & Finance

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  • A very concise presentation to understand estimation technique
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  • Yes, but the BOQ will be in accordance with the Method of Measurement and if that is along centre line then it would be 6.1m but normally the item will be the 6.1 m with an extra over for pipe-fittings i.e. flange and elbow.
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  • @GeoffCosgroveTDCEngM

    Thank you very much for your inoput, Geoff

    I understand that BOM is purchased quantity and BOQ is the erected quantity.

    To build up on your example, if the MTO was:
    pipe (5m), elbow (1 off), flange (1off)
    the BOM would be:
    pipe (6m) + elbow (1 off) + flange (1 off)
    and the BOQ would be:
    pipe (m): 6.1.

    Indeed, the actual length of piping to erect would be measured as 5 meters (pipe) +0.8 m (elbow)+ 0.3 m (flange) = 6.1

    Isn'it?

    Thanks again
    Best Rgds
    Hervé
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  • Just a comment:
    MTO is the direct take off from the drawings with no allowances 5.1m pipe
    BOM is the commercialised MTO i.e. 6 m pipe (as purchased)
    BoQ is the measurement/cost item including item coverage and other measurement rules, may consist of one or more BOM items plus allowances, for waste, tolerance and joint details etc..
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  • thanks a lot..........!
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  • 1. Capital projects cost estimation H. Baron, 2014 Welcome to this presentation. It explains the 3 methods commonly used for estimating the cost of an Oil & Gas facility. Comments are most welcome at herve.baron@gmail.com.
  • 2. Purpose of estimate: • Concept screening • Study of feasibility • Decision to invest Estimate type: • Capacity factored • Equipment factored • Analytical Cost estimate
  • 3. • Capacity factored C1/C2 = (P1/P2)e e ~ 0.6 Ci: Cost of facility with production capacity Pi Exercise: what is the increase in cost for +50% capacity increase?
  • 4. Exercise: what is the increase in cost for +50% capacity increase? In your opinion, what is the limit of such estimate? • Capacity factored C1/C2 = (P1/P2)e e ~ 0.6 Ci: Cost of facility with production capacity Pi
  • 5. • Equipment factored C = f M C: total installed cost of facility M: cost of main equipment f: factor Cost estimate
  • 6. Cost estimate • Equipment factored C = f M C: total installed cost of facility M: cost of main equipment f: factor Note: Typical figures for Petrochemical Plant
  • 7. Cost estimate What’s the main equipment? • Equipment factored C = f M C: total installed cost of facility M: cost of main equipment f: factor
  • 8. Cost estimate • Equipment factored C = f M f: factor
  • 9. Cost estimate • Equipment factored C = f M f: factor f depends on – Type of facility (petrochemical, refining, LNG, off-shore)
  • 10. Cost estimate How does f varies with facility size? • Equipment factored C = f M f: factor f depends on – Type of facility (petrochemical, refining, LNG, off-shore) – Size
  • 11. Cost estimate How does f varies with facility size? • Equipment factored C = f M f: factor f depends on – Type of facility (petrochemical, refining, LNG, off-shore) – Size
  • 12. Cost estimate How does f varies cost of Main Equipment? • Equipment factored C = f M f: factor f depends on – Type of facility (petrochemical, refining, LNG, off-shore) – Size – Cost of Main Equipment
  • 13. Cost estimate How could the method be refined? • Equipment factored C = f M f: factor f depends on – Type of facility (petrochemical, refining, LNG, off-shore) – Size – Cost of Main Equipment
  • 14. Cost estimate • Equipment factored C = ∑ fi Mi Mi Cost of all type i Main equipment fi: factor
  • 15. Cost estimate • Equipment factored C = ∑ fi Mi Mi Cost of all type i Main equipment fi: factor Why do you think justifies such an approach?
  • 16. Cost estimate • Equipment factored C = ∑ fi Mi Mi Cost of all type i Main equipment fi: factor Why do you think justifies such an approach?
  • 17. Cost estimate • Equipment factored C = ∑ fi Mi Mi Cost of all type i Main equipment fi: factor In your opinion, what is the limit of such estimate?
  • 18. • 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 – Engineering & Project Management – Miscellaneous Cost estimate
  • 19. Cost estimate • 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 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
  • 20. • 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 – Engineering & Project Management – Miscellaneous Cost estimate
  • 21. • Main equipment supply + install • Supply Cost estimate
  • 22. • Main equipment supply + install • Supply: process (dimensions) & mechanical (weight) design Cost estimate
  • 23. • Main equipment supply + install • Supply: process (dimensions) & mechanical (weight) design • Rate? Cost estimate
  • 24. • Main equipment supply + install • Supply: process (dimensions) & mechanical (weight) design • Rate: USD 4/kg for CS USD12/kg for SS USD 300-500 /m2 for Shell & Tube HX / Air-coolers USD 1000/kW for pumps Cost estimate Important note: these ratios – and the following ones - are the ones obtained by large EPC Contractors ordering large quantities.
  • 25. • Main equipment supply + install • Supply: process (dimensions) & mechanical (weight) design • Installation Cost estimate
  • 26. • Main equipment supply + install • Supply: process (dimensions) & mechanical (weight) design • Installation ratios: % supply cost, typ., 8% Cost estimate
  • 27. • Main equipment supply + install • Supply: process (dimensions) & mechanical (weight) design • Transport: project specific • Installation ratios: % supply cost, typ., 8% 30 h/ton (includes labour and equipment) Cost estimate
  • 28. • 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 – Engineering & Project Management – Miscellaneous Cost estimate
  • 29. Piping supply + install • Qty: ratio (eqt weight), typ. 40% Cost estimate
  • 30. Piping supply + install • Qty: ratio f (eqt number) Cost estimate
  • 31. Piping supply + install • Qty: ratio f (eqt number) Cost estimate
  • 32. Piping supply + install • Qty: ratio f (eqt number) Remark: Unit vs Interconnection Cost estimate
  • 33. Piping supply + install • Qty: ratio (eqt number, eqt weight) MTO Cost estimate
  • 34. Piping supply + install • Qty: MTO Cost estimate
  • 35. Piping supply + install • Qty: MTO » Item count: P&IDs » Lengths: Piping Layout Cost estimate
  • 36. Piping supply + install • Qty: MTO » Item count: P&IDs » Lengths: Piping Layout Both Process & Utility lines Both Above Ground & Underground lines Cost estimate
  • 37. Piping supply + install • Qty: MTO » Item count: P&IDs » Lengths: Piping Layout Both Process & Utility lines Both Above Ground & Underground lines Allowances added for: Cost estimate
  • 38. Piping supply + install • Qty: MTO » Item count: P&IDs » Lengths: Piping Layout Both Process & Utility lines Both Above Ground & Underground lines Allowances added for: what is not taken-off, e.g., small diameter and design development (P&ID completion) to obtain quantities to erect Cost estimate
  • 39. Piping supply + install • Qty: MTO » Item count: P&IDs » Lengths: Piping Layout Both Process & Utility lines Both Above Ground & Underground lines Allowances added for: what is not taken-off, e.g., small diameter and design development (P&ID completion) to obtain quantities to erect Cost estimate
  • 40. Piping supply + install • Qty: MTO » Item count: P&IDs » Lengths: Piping Layout Both Process & Utility lines Both Above Ground & Underground lines Allowances added for: what is not taken-off, e.g., small diameter and design development (P&ID completion) to obtain quantities to erect cut and losses to obtain quantities to be supplied Cost estimate
  • 41. Cost estimate Piping supply + install • Qty: ratio (eqt number, eqt weight) MTO • Rate Supply
  • 42. Cost estimate Piping supply + install • Qty: ratio (eqt number, eqt weight) MTO • Rate Supply $ /kg, typ. USD 3 /kg for CS
  • 43. Piping supply + install • Qty: ratio (eqt number, eqt weight) MTO • Rate Supply $ /kg, typ. USD 3 /kg for CS Install Cost estimate
  • 44. Piping supply + install • Qty: ratio (eqt number, eqt weight) MTO • Rate Supply $ /kg, typ. USD 3 /kg for CS Install std mhrs/ton, typ. 200-250 in unit, 100 on interconnecting pipe-racks, applied to the total piping weight, including fittings, valves etc. Cost estimate
  • 45. Electrical supply + install • Price ratio % Main equipment, typ. 15-20% Cost estimate
  • 46. Electrical supply + install • Price ratio % Main equipment, typ. 15-20% • Quantities: Consumers list • Rate (supply+install): USD 50k / consumer (w/o generation) USD 520 / installed kW Cost estimate
  • 47. Instrumentation & Control system supply + install • Price ratio % Main equipment, range: 40-120% Cost estimate
  • 48. Instrumentation & Control system supply + install • Price ratio % Main equipment, range: 40-120% • Qties Cost estimate
  • 49. Instrumentation & Control system supply + install • Price ratio % Main equipment, range: 40-120% • Qties nb equiv. loops (CV, 0.5 ON/OFF, Analyser) Cost estimate
  • 50. Instrumentation & Control system supply + install • Price ratio % Main equipment, range: 40-120% • Qties nb equiv. loops (CV, 0.5 ON/OFF, Analyser) • Rate Cost estimate
  • 51. Instrumentation & Control system supply + install • Price ratio % Main equipment, range: 40-120% • Qties nb equiv. loops (CV, 0.5 ON/OFF, Analyser) • Rate supply: $ /equivalent control loops, typ. 90k install: hrs / equivalent control loops, typ. 750 Cost estimate
  • 52. Instrumentation & Control system supply + install • Price ratio % Main equipment, range: 40-120% • Qties Instrument list Cost estimate
  • 53. Instrumentation & Control system supply + install • Price ratio % Main equipment, range: 40-120% • Qties Instrument list • Rate Supply+install: $ / I/O, typ. 1000 Cost estimate
  • 54. Civil Works • Price Ratio % Main equipment cost, typ. 15-20% Cost estimate
  • 55. Civil Works • Price Ratio % Main equipment cost, typ. 15-20% • Qty Cost estimate
  • 56. Civil Works • Price Ratio % Main equipment cost, typ. 15-20% • Qty Dimensions/Weight of equipment & structure => size of foundations (m3) Cost estimate
  • 57. Civil Works • Price Ratio % Main equipment cost, typ. 15-20% • Qty Dimensions/Weight of equipment & structure => size of foundations (m3) • Rate Cost estimate
  • 58. Civil Works • Price Ratio % Main equipment cost, typ. 15-20% • Qty Dimensions/Weight of equipment & structure => size of foundations (m3) • Rate all-in (materials & labour) rate $/m3, typ. 1000 Cost estimate
  • 59. Civil Works • Price Ratio % Main equipment cost, typ. 15-20% • Qty MTO: excavation, formwork, rebar, etc. Cost estimate
  • 60. Civil Works • Price Ratio % Main equipment cost, typ. 15-20% • Qty MTO: excavation, formwork, rebar, etc. • Rate Mhrs/operation * labour cost Cost estimate
  • 61. Cost estimate Steel structures • Price Ratio % Main equipment cost, typ. 10-30%
  • 62. Cost estimate Steel structures • Price Ratio % Main equipment cost, typ. 10-30% • Qty Ratio pipe-racks: 90% of piping weight platforms: 10% of equipment weight
  • 63. Cost estimate Steel structures • Price Ratio % Main equipment cost, typ. 10-30% • Qty Ratio pipe-racks: 90% of piping weight platforms: 10% of equipment weight
  • 64. Cost estimate Steel structures • Price Ratio % Main equipment cost, typ. 10-30% • Qty Ratio pipe-racks: 90% of piping weight platforms: 10% of equipment weight • Rate Supply $ / kg, typ. 2 Erection $ /kg, typ. 1 (includes crane)
  • 65. Cost estimate Steel structures • Price Ratio % Main equipment cost, typ. 10-30% • Qty Ratio pipe-racks: 90% of piping weight platforms: 10% of equipment weight • Rate Supply USD / kg, typ. 2 Erection 20 std manhours/t
  • 66. • Analytical – Main equipment supply + install – Piping supply + install – Electrical supply + install – Instrumentation & Control system supply + install – Civil Works – Steel structures – Painting, Insulation Cost estimate
  • 67. Cost estimate • Painting, Insulation • Price ratio % eqt, piping, str cost, typ. 5% each
  • 68. Cost estimate • Painting, Insulation • Price ratio % eqt, piping, str cost, typ. 5% each • Qty ratio % eqt / piping weight
  • 69. Cost estimate • Painting, Insulation • Price ratio % eqt, piping, str cost, typ. 5% each • Qty ratio % eqt / piping weight, typ. XXX • Rate supply + install h / m2 typ. 0,5 for painting 1,5 for (hot) insul.
  • 70. • 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 – Engineering & Project Management – Miscellaneous Cost estimate
  • 71. Cost estimate • Temporary Construction facilities • Ratio % total cost, typ. 5% for new site • Detailed
  • 72. • 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 – Engineering & Project Management – Miscellaneous Cost estimate
  • 73. Cost estimate • Engineering & Project Management = all Project services • Price ratio % total cost, typ. 15%
  • 74. Cost estimate • Engineering & Project Management = all Project services • Price ratio % total cost, typ. 15% • Qty ratio
  • 75. Cost estimate • Engineering & Project Management = all Project services • Price ratio % total cost, typ. 15% • Qty ratio hrs / eqt item, typ. 1800 for Refining, 2500 for gas, 4000 for LNG
  • 76. Cost estimate • Engineering & Project Management = all Project services • Price ratio % total cost, typ. 15% • Qty
  • 77. Cost estimate • Engineering & Project Management = all Project services • Price ratio % total cost, typ. 15% • Qty home office: tasks list * manhours * rates field supervision: ratio to labour, typ. 1/7
  • 78. • 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 – Engineering & Project Management – Miscellaneous – Contractor’s cost Cost estimate
  • 79. Cost estimate • Miscellaneous • Earthworks: always specific • Special foundations • Infrastructures: roads, buildings • Spare parts, typ. 5% main equipment cost • First fill (catalyst, lubes, chemicals)
  • 80. • 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 – Engineering & Project Management – Miscellaneous – Contractor’s cost Cost estimate
  • 81. Cost estimate • Contractor’s cost – profit, – risks, – sales cost,
  • 82. Cost estimate • Contractor’s cost – profit, typ. 7% – risks, – sales cost, typ. 10-15%
  • 83. – Main equipment supply + install – Piping supply + install – Electrical supply + install – Instrumentation & Control system supply + install – Civil Works – Steel structures – Painting, Insulation – Temporary construction facilities – Engineering & Project Management – Miscellaneous – Contractor’s cost Cost estimate
  • 84. Cost estimate 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?
  • 85. Cost estimate 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) • Direct costs / Indirect costs
  • 86. Cost estimate Historical evolution: + Increased instrumentation & control systems costs - Engineering low cost centers - Low cost sourcing – 20% cheaper - Increase in productivity (3D model) + Additional requirements: safety, environment
  • 87. Going further… http://www.toblog.fr/en/baron.htm l You enjoyed this presentation? Share my experience on other topics: Engineering Contract Management Project Control Welcome to my classroom training The list and schedule of coming sessions is on my blog at: