Reduce Capital Cost Overruns with Repeatable Engineering Designs

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1 WHITE PAPER Reduce Capital Cost Overruns with Repeatable Engineering Designs by Ron Beck, Industry Marketing Director, Aspen Technology, Inc.

2 The use of standardized and modular designs to reduce engineering and capital cost uncertainties is vital to remain competitive in today s turbulent marketplace. Capital projects that overrun their budgets are a major strategic issue in the oil & gas and petrochemical industries. EY published a study in 2014, which revealed that of 365 Mega Projects, 64% were over budget and 73% were behind schedule. With alignment issues between Engineering, Procurement and Construction companies (EPCs) and Owners, the project scope is often not clearly understood, which can put EPCs at risk in the bidding strategy. EY published a study in 2014, which revealed that of 365 Mega Projects, 64% were over budget and 73% were behind schedule. Typically, oil and gas top side projects will range from $5m - $30m. Therefore, gaining a 2% increase on this number is realistic for companies who can achieve greater accuracy and consistency of their estimates via an integrated engineering approach. Many leading companies are changing their delivery plans towards a more efficient trend of repeatable engineering designs by adopting cutting-edge engineering software to achieve best practices and improved economics across the lifecycle of capital projects. 2

3 Making the right economic trade-off Most process engineering groups have extensive libraries of prior designs. However, these may not be mobilized to be effectively reused, whether in whole or in part. The Aspen HYSYS software tool in AspenTech s process simulation system can store completed designs as templates for later reuse. A crucial factor is the accompanying cost model and the ability to rapidly assemble a new design with the associated costs. Aspen Capital Cost Estimator (ACCE) is a model-based estimating system that captures engineering knowledge through an engineer in a box approach. It is used for the estimation of capital projects of any size and is widely used across the process industries for both conceptual and detailed estimating. This powerful tool can capture historical costs, which can then be easily adjusted based upon a new location, different workforce requirements, or adjusted project size and scope. Aspen Basic Engineering (ABE) is proven to deliver Basic Engineering packages faster and with fewer resources. It s also a comprehensive solution that allows customers to increase agility, compress project schedules and integrate global design teams. The ABE FEED platform provides a powerful database to store designs for reuse and captures the process flow diagram, equipment lists and data sheets to associate the process model and cost estimate with the various FEED deliverables. A standardized design must be scalable and modified in several different directions. The most obvious is size and throughput based upon the target yield and economics of the proposed project, as contrasted to the baseline reference project. Project location also has significant impact on civil and structural engineering and will determine elements, such as heat exchanger selection. A standard design will vary based upon specific feedstock. All of these can be easily handled using aspenone Engineering where the process simulation is integrated with the economic software to enable a proposal team to consider alternative sizes, locations, feedstock, and designs, both in terms of process parameters and specifications, but also in terms of capital and operating costs. Modular design introduces both important opportunities for savings, but additionally a number of subtle trade-offs between on-site fabrication and shop modular fabrication. When modular construction is being considered, long lead time items often become extended further due to the need to deliver to the fabrication site, the time to fabricate, and then finally to ship. Early and accurate conceptual designs become even more important making it attractive to modify traditional work flows and achieve a fast track design. ACCE is a valuable tool in evaluating the efficacy of modules for a given project. On large scale tasks, the software gives the project team and the client an early insight into the resource constraints, such as craft labor and fabrication equipment. The tools can provide accurate and easy evaluation of shop versus field fabrication, including a whole host of commercial trade-offs. 3

4 Leading by example A number of companies have achieved a competitive advantage in the areas of standardized and modular design, taking advantage of the unique characteristics of aspenone Engineering. For example, a leading European specialty chemicals company evolved its business model towards rapid innovation with the introduction of biochemical and nutritional chemicals. They developed a business assessment framework based on reusable process unit models in the Aspen Plus process simulator, coupled with the economic evaluation templates that can rapidly and predictably assess project economics. This has enabled the company to support their business strategy of managing an innovation portfolio to make the right decisions based on which chemicals will be most economically successful. One of the world s largest petrochemicals complexes in the Middle East has made extensive use of modular construction to overcome potential construction resource risks and cost uncertainties. Given the size and scope of this project, evaluating different design and fabrication alternatives was a daunting task. ACCE played a crucial role in helping to understand the cost, risk and resource trade-offs of different design and construction scenarios. The net result has been an optimized construction strategy, which has not encountered any significant resource or executional hold-ups. A leading supplier of proprietary process technologies has implemented a software environment and new engineering workflow that enables them to react much more quickly to project proposals. ABE is saving this company up to 10% cycle time in engineering hours on repeatable designs, as well as capturing best practice process design templates. Being best-in-class Companies today need to rapidly and confidently evaluate capital investment projects early in the design process, understand the economic implications of engineering decisions and effectively manage the project. The aspenone Engineering suite comprises integrated engineering modeling and analysis tools and uniquely supports the concepts of repeatable, standardized and modular design. The suite ensures that data does not need to be re-entered between the engineering tools and enables optimization of a design across the feasibility study, conceptual engineering and FEED workflow, while conforming to normal engineering practices and work business processes. In summary, with powerful and integrated engineering software, businesses can make collaborative decisions that will dramatically reduce engineering and capital cost uncertainties, helping to deliver best-in-class project execution. This approach will ensure greater efficiency, accuracy and profitability. 4

5 AspenTech is a leading supplier of software that optimizes process manufacturing for energy, chemicals, engineering and construction, and other industries that manufacture and produce products from a chemical process. With integrated aspenone solutions, process manufacturers can implement best practices for optimizing their engineering, manufacturing, and supply chain operations. As a result, AspenTech customers are better able to increase capacity, improve margins, reduce costs, and become more energy efficient. To see how the world s leading process manufacturers rely on AspenTech to achieve their operational excellence goals, visit Worldwide Headquarters Aspen Technology, Inc. 20 Crosby Drive Bedford, MA United States phone: fax: [email protected] Regional Headquarters Houston, TX United States phone: São Paulo Brazil phone: Reading United Kingdom phone: +44-(0) Singapore Republic of Singapore phone: Manama Bahrain phone: For a complete list of offices, please visit 5