Ethylene based petrochemical facilities are large and complex, based on most of the contributing criteria. These facilities involve high level of process complexity with all the sophisticated unit operations involved and the processing conditions. These facilities require advanced and complex controls for operating them safely while meeting high level of performance and environmental requirements. The construction, commissioning and start-up efforts pose a special challenge during planning and execution of these projects. These facilities are highly capital intensive.
The capital cost of ethylene plants has been increasing in real terms since early 2000 and has more than canceled out the benefits of larger capacity. Era of escalating capital costs also makes it difficult to forecast the rates of return on capital invested.
It is nearly impossible to determine the sole impact of plant size on the capital cost due to other changes and many interactive factors occurring at the same time. As loss of production has high impact on overall economics, there is strong emphasis on reliability. The development and execution of these large facilities not only creates peak loads for equipment/ materials/ fabrication industry (particularly for items that have limited number of suppliers), it also creates a large demand for engineering resources. This peak demand often leads to higher costs and impacts the quality as well as productivity, resulting in recycles and late changes thus impacting the cost even more. Industry is losing experience and knowledge as individual retire or move-on to different roles/industry. Industry also has a tendency of lack of hiring and training during prolonged low cycles.
While developing and executing these facilities, capital cost is estimated with different levels of accuracy during different stages. Majority of the large capital programs fail to meet their budgeted investment levels. A part of the reason is the estimation of capital cost, as it’s not an exact science.
There is a high risk in estimating bulk materials, as these don’t have the same favorable relationship with plant size as does the equipment. The bulk materials are impacted by climatic conditions, design requirements/specifications, and owner preferences. Large equipment and piping require adequate access for construction, operation and maintenance purposes resulting in larger spacing needs and plot size. This impacts directly on bulk quantities and fabrication/construction. Cost estimation requires a great deal of judgement based on experience, interpretation of engineering data/specifications and level of details. Costs are impacted by market and macroeconomic conditions as well as local conditions. Cost is also heavily dependent on project size and complexity.
Ethylene plants (like most of the hydrocarbon industry) differ from manufacturing industry in expected productivity gains in designing/constructing these facilities over time. The plants are rarely replicated for a variety of reasons.
Some owners may take the approach of duplicating or replicating or introduce small changes necessitated by the business needs. This assumes that lessons learned are applied to avoid any problems experienced. The changing feedstock situation, energy costs, environmental regulations, changes in equipment design/suppliers or construction techniques may necessitate the changes.
Large scale ethylene-based investments are always challenging to develop, execute and operate. The robustness of these decisions depends on multiple interdependent factors.
High investment intensity and high economic impact of loss of production pose inherently high risk for owners/operators. Fewer decisions can be left to chance. Inherent understanding of process technology, equipment/design limits and controls/safety philosophy/systems is essential for supporting these facilities effectively through early development, execution and throughout the life cycle.
Based on the feedback about the capital cost increase over the recent years, there is a need to at least challenge the perceived beliefs about plant scale as well as technical options and their applicability to meet desired business objectives. A great deal will always have to be left to the informed judgement and technical expertise applied to the project specific objectives and needs. The incentive to carry out and lead this analysis, supported by experienced and knowledgeable individuals, lies with owners and operators due to high level of risks and rewards.
The capital cost of ethylene plants has been increasing in real terms since early 2000 and has more than canceled out the benefits of larger capacity. Era of escalating capital costs also makes it difficult to forecast the rates of return on capital invested.
It is nearly impossible to determine the sole impact of plant size on the capital cost due to other changes and many interactive factors occurring at the same time. As loss of production has high impact on overall economics, there is strong emphasis on reliability. The development and execution of these large facilities not only creates peak loads for equipment/ materials/ fabrication industry (particularly for items that have limited number of suppliers), it also creates a large demand for engineering resources. This peak demand often leads to higher costs and impacts the quality as well as productivity, resulting in recycles and late changes thus impacting the cost even more. Industry is losing experience and knowledge as individual retire or move-on to different roles/industry. Industry also has a tendency of lack of hiring and training during prolonged low cycles.
While developing and executing these facilities, capital cost is estimated with different levels of accuracy during different stages. Majority of the large capital programs fail to meet their budgeted investment levels. A part of the reason is the estimation of capital cost, as it’s not an exact science.
There is a high risk in estimating bulk materials, as these don’t have the same favorable relationship with plant size as does the equipment. The bulk materials are impacted by climatic conditions, design requirements/specifications, and owner preferences. Large equipment and piping require adequate access for construction, operation and maintenance purposes resulting in larger spacing needs and plot size. This impacts directly on bulk quantities and fabrication/construction. Cost estimation requires a great deal of judgement based on experience, interpretation of engineering data/specifications and level of details. Costs are impacted by market and macroeconomic conditions as well as local conditions. Cost is also heavily dependent on project size and complexity.
Ethylene plants (like most of the hydrocarbon industry) differ from manufacturing industry in expected productivity gains in designing/constructing these facilities over time. The plants are rarely replicated for a variety of reasons.
Some owners may take the approach of duplicating or replicating or introduce small changes necessitated by the business needs. This assumes that lessons learned are applied to avoid any problems experienced. The changing feedstock situation, energy costs, environmental regulations, changes in equipment design/suppliers or construction techniques may necessitate the changes.
Large scale ethylene-based investments are always challenging to develop, execute and operate. The robustness of these decisions depends on multiple interdependent factors.
High investment intensity and high economic impact of loss of production pose inherently high risk for owners/operators. Fewer decisions can be left to chance. Inherent understanding of process technology, equipment/design limits and controls/safety philosophy/systems is essential for supporting these facilities effectively through early development, execution and throughout the life cycle.
Based on the feedback about the capital cost increase over the recent years, there is a need to at least challenge the perceived beliefs about plant scale as well as technical options and their applicability to meet desired business objectives. A great deal will always have to be left to the informed judgement and technical expertise applied to the project specific objectives and needs. The incentive to carry out and lead this analysis, supported by experienced and knowledgeable individuals, lies with owners and operators due to high level of risks and rewards.
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