Modularisation – The Next Step - Presentation by Bill Meyer, Foster Wheeler USA Corporation

Modularisation – The Next Step

William (Bill) Meyer - Director Project Execution Development
B.E. (Civil) Hons., MBA. Foster Wheeler USA Corporation
Houston, Texas.
william_meyer@fwhou.fwc.com

Bill Meyer © 2011 FOSTER WHEELER. All rights reserved. Feb 2011

Topics

1. Where is modularisation going? Is there a trend?

2. What is the optimum size of module? Are larger modules
better?

3. What impacts are tomorrow’s modules likely to have on
construction?


Agenda

1. Introduction

2. Historical Perspective – Past Trends

3. Understanding why – Cost / benefit and decision
process

4. Optimising module sizes

5. Summary

6. Q & A


Accent
Australian

University of Melbourne
Bachelor of Engineering (Civil) Honors

MBA

Work
½ as specialist Heavy Lift and Transport contractor

– Vice President Mammoet USA

½ Foster Wheeler – Engineering, Procurement, Construction contractor

– Director Project Execution Development

– Focus on major project construction execution and project management


Global Engineering and
Foster Wheeler Construction Contractor and Power
Equipment Supplier
In business for over 100 years
Strong history in technology
development
Proven track record of successful
project execution
A global presence
Over 13,000 resources
Permanent offices in 28
countries
Financially strong



Bogota

Registered Office & Corporate Center
Operating Unit HQs and/or Main Engineering Center
Regional/Local Engineering Center
Sales Offices


Topics

1. Introduction

2. Historical Perspective – Past Trends

3. Understanding why – Cost / benefit and decision
process

4. Optimising module sizes

5. Summary

6. Q & A



Historical Perspective – past trends

Statoil Mongstad – Norway - 1988
221 modules
975 tonnes max module
6 module yards




Statoil Mongstad – Norway - 1988
221 modules
975 tonnes max module
6 module yards
Schedule driven




Mobil Coryton – UK - 1993

Isomerisation unit
58 Modules to 350 tonnes
Barge delivery from one
European fabricator




Mobil Coryton – UK - 1993

Isomerisation unit
58 Modules to 350 tonnes
Barge delivery from one
European fabricator
Schedule driven




ExxonMobil Singapore Aromatics - 1996

213 modules – 26,875 tonnes total
1150 tonnes max
7 module yards
39 barge voyages
Schedule driven




Inco Goro – New Caledonia - 2006

Nickel mine and ore processing plant
599 modules
600 tonnes max
2 main module
yards




Inco Goro – New Caledonia - 2006

Nickel mine and ore processing plant
599 modules
600 tonnes max
2 main module
yards
Cost driven



The Woodside-operated NWSV Phase V
LNG Expansion – Australia – 2007

75 modules
1,800 tonnes max
Pluto currently nearing completion



The Woodside-operated NWSV Phase V
LNG Expansion – Australia – 2007

75 modules
1,800 tonnes max
Pluto currently nearing completion
Cost and schedule driven




1. Pre circa 2000, main reason to go modular was for schedule
benefits
2. More recently, cost benefits have been the aim



Viable Modular Execution

Benefits > Price you have to pay for those Benefits



Viable Modular Execution

Benefits > Price you have to pay for those Benefits

AND

Risk of NOT achieving those Net Benefits is Low, Manageable &
Risk Goals are Achievable


Modular Execution Benefits can be:
1. Cost reductions


1. Cost reductions
2. Schedule reductions


1. Cost reductions

Profit

Compliance


1. Cost reductions
3. Safety enhancements


1. Cost reductions
4. Quality enhancements


1. Cost reductions
5. Reduced impact on Society


1. Cost reductions
6. Reduced impact on Environment


1. Cost reductions
6. Reduced impact on Environment
7. And many more…



Decision Analysis – Modular or Stick built?


Timing is Critical

Evaluate Module Options

Modular Execution Decision

Project
Phase
FEL 1
Conceptual FEL 2
Assess FEL 3
Define FEL 4
Execution FEL 5
Evaluation



e.g. OSBL piping in existing racks
Major storage tanks



Site Survey includes
• Labour
Availability, productivity, quality,
craft availability, cost, other projects
in area, union impacts, regional /
political issues etc


Labour Productivity
8000

7000

6000

5000

4000

3000

2000

1000

0

4

2

0

8

6

4
12

24

36

46

50

50

50

56

64

72

80

88

96
0

10

11

12

12

13

14
Graph 1 - Labor vs time (% of project schedule) – Direct hour impact if productivity
shortfall of trainees


Result of productivity shortfall

7000

6000

5000

4000

3000

2000

1000

0

4

2

0

8

6

4
12

24

36

46

50

50

50

56

64

72

80

88

96
0

10

11

12

12

13

14
Graph 2 - Labor vs time (% of project schedule) – Schedule impact if productivity
shortfall of trainees


Skilled Labour Availability – Move manhours Offsite

7000

6000

Move manhours offsite to
5000
pre-cast, pre-fab, pre-
assembly and modules
4000

3000

2000

1000

0

4

2

0

8

6

4
12

24

36

46

50

50

50

56

64

72

80

88

96
0

10

11

12

12

13

14
Graph 4 - Labor vs time (% of project schedule) – Manhours moved offsite



• Labour
• Weather impacts



• Labour
• Weather impacts
• Logistics
On site and to site, route surveys,
from fabrication yard, cost and
technical capabilities, laydown
areas


Site access restrictions can limit size of modules that can be
delivered to site


Logistics are project specific -

– Some sites have their own ports …


Logistics are project specific -

… others are road access only



• Labour
• Weather impacts
• Logistics
• Environmental impact



• Labour
• Weather impacts
• Logistics
• Safety



• Labour
• Weather impacts
• Logistics
• Safety
• Permit issues



• Labour
• Weather impacts
• Logistics
• Safety
• Permit issues
• Etc.



Module Yard Survey includes
• Labour
Productivity, cost, flexible
workforce, skills, experience etc


Relative Costs to Fabricate Modules and Ship to Project X site

Project and Site Specific

Module Yard Specific

Calendar Date Specific

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M i co
ly

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Fr a

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M ore
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Th es
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Si ysi

Si por
re

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Ph ays

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hi

hi
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al



• Labour
• Yard capabilities
Covered fabrication, assembly area,
loadout capabilities, management
skills and experience, procurement
capability, drafting capability,
quality systems, safety records etc



• Labour
• Size of client management team
required



• Labour
required

• Shipping type and distances to site



• Labour
required

• Weather



• Labour
required

• Weather
• Political factors



• Labour
required
• Weather
• Political factors
• Etc


Type of plant
Will impact possible module sizes
Scale of plant


Economics of Modular Execution

For the cost estimates of stick and modular

Need only to focus on DIFFERENTIAL COSTS between stick built
and modular execution


Cost Downside
Increased cost of steel / minor bulks / foundations


Cost Downside
Increased cost of shipping


Cost Downside
Potentially - increased cost of transport and installation


Cost Downside
Potentially - increased cost of transport and installation
Increased cost of Engineering
Increased cost of client yard management
Increased cost to set modules / extra field welds / hydro


Cost Upside
Move labour cost offsite to cheaper / more productive labour
supply


Manhours moved offsite on a past modular project

120,000 120,000

100,000 100,000

80,000 80,000

60,000 60,000

40,000 40,000

20,000 20,000

- -
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33
months months

Site Prep Civil Structural / Mech / Equip Piping E&I Indirects


Cost Upside
supply
Reduce indirect costs at site as less directs (construction
supervision, consumables etc)


Cost Upside
supply
Reduced cost of camp construction due to lower peak


Cost Upside
supply
Improved productivity (weather, flexible workforce, site
accessibility, material flows, etc)


Cost Upside
supply
Reduced schedule reduces construction indirects


Cost Upside
supply
Reduced schedule reduces construction indirects
[Positive impact to NPV if revenue stream begins earlier]


Cost Neutral
Shipping of module materials to yard versus shipping to site


Module Modular versus Stick built costs

versus Existing Project Data

(Note – All projects have different cost drivers )
Stick built $100.0

$90.0
Cost $80.0
Installation cost ∆

Savings Shipping cost ∆
$70.0
Differentials $60.0
Millions $ Const. Mngmt cost ∆
Foundation cost ∆
$50.0
Steel cost ∆
$40.0
Engineering cost ∆
$30.0
Camp cost ∆
$20.0
Labour cost
$10.0

$0.0
Modular Cost Stick built Cost


Marginal Cost of Construction
Marginal Cost of Construction / manhour =
Wages for Direct Labour
+ Indirect Labour (incl Inspection and QA)
+ Payroll Burdens / Benefits / Allowances / Premiums /
Camp Costs / Subsistence for Direct and Indirect Labour
+ Management Costs / Field Offices / Indirect Facilities
+ Construction Equipment / Small Tools and Consumables
+ Scaffold
+ Stick Built Materials Laydown and Distribution
+ ETC


Cost Benefits

Construction
Site
Labour Productivity 2.20
Marginal Cost of Construction / mh $105.00
Relative Manhour Cost c/w Gulf Coast $231.00



Cost Benefits

Construction Module
Site Yard
Labour Productivity 2.20 1.20
Marginal Cost of Construction / mh $105.00 $55.00
Relative Manhour Cost c/w Gulf Coast $231.00 $66.00



Cost Benefits
Economic Productivity Factor

Construction Module
Site Yard
Economic Productivity Ratio 3.50 : 1



Cost Benefits
Economic Productivity Factor using a Far East Module Yard

Construction Module
Site Yard



Cost Benefits
Economic Productivity Factor

Construction Module
Site Yard



COST DRIVEN MODULAR SCHEDULE DRIVEN COST DRIVEN STICK BUILT
PROJECT MODULAR PROJECT PROJECT
Modular versus Stick built costs Modular versus Stick built costs Modular versus Stick built costs

$140.0

$120.0

$100.0
Installation cost ∆ Installation cost ∆ Installation cost ∆
Shipping cost ∆ Shipping cost ∆ Shipping cost ∆
$80.0
Steel cost ∆ Steel cost ∆ Steel cost ∆
Engineering cost ∆ Engineering cost ∆ Engineering cost ∆
$60.0
Camp cost ∆ Camp cost ∆ Camp cost ∆

Labour cost Labour cost Labour cost
$40.0

$20.0

$0.0
Modular Cost Stick built Cost
Modular Cost Stick built Cost Modular Cost Stick built Cost


Manhour Density is Key



The more manhours in a given shipping volume, the greater the
cost benefit to moving those manhours offsite.

This benefit must outweigh the cost to ship those manhours
back to site.


Cost of module shipment vs. module “size”

Cost ($ million)

services
Specialist Semi-
Liner
Heavy Lift Submersibles
Ships

Module size / weight Large



The more manhours in a given shipping volume, the greater
the cost benefit to moving those manhours offsite.

This benefit must outweigh the cost to ship those manhours
back to site.

Second order effects then must be taken into account, such as
extra steel costs, site transport and installation costs etc.


Identify the labour intensive sections on the site…
(highlighted red)


Aggregate where feasible…


Construct off-site


Interconnectivity factors


Interconnectivity factors

Additional hookup at the interface
Additional ship space
Additional Installation costs
Delta steel



Vertical and
horizontal
splits for
this CCR


Summary

1. Where is modularisation going? Is there a trend?

More modularisation is the trend for jobs in high labour
cost areas / low quantity of skilled labour areas

Trend will be driven by demand for resources and energy

Market segment dependant

BRIC – IC low , BR depends on location of site and yards


Summary

2. Are larger modules better?

Depends on plant scale and type / shipping
distances and costs / logistics constraints

Relative costs of shipping vs. big / small / splitting

For any given shipping cost curve – typically yes!

Manhour density of plant modules > breakeven

Height of C. of G!


Summary

3. What impacts are tomorrow’s modules likely to have on
construction?

In general – reduces construction risk (but shifts it to E&P)

Construction equipment
Technology exists to move and install large loads

Crane size development driven by larger equipment items
and need for longer reach, not primarily module sizes

Innovation is still key!



ANY QUESTIONS ?


Modularisation – The Next Step - Presentation by Bill Meyer, Foster Wheeler USA Corporation

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