HERVE

BARON
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.

Please download this file so that you can see my trainers notes in
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HERVE
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Cost estimate of Oil & gas facilities

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HERVE
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Cost estimate of Oil & gas facilities

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Place your
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2013 Herv Baron

HERVE
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Cost estimate of Oil & gas facilities

Agenda

Introduction

The different estimation methods:

Capacity factored
Equipment factored
Analytical

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Cost estimate of Oil & gas facilities

What will be the

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overall cost of
this facility?
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Cost estimate of Oil & gas facilities
Cost = Quantities * item costs
All items

How would you determine quantities?

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Cost estimate of Oil & gas facilities

Quantities estimates:
Ratio from past projects
Material Take-Off

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Cost estimate of Oil & gas facilities
Cost = Quantities * item costs
All items

How would you determine quantities?

What is an item cost made of?

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Cost estimate of Oil & gas facilities

Item cost = Supply cost + installation cost

How would you each one?

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Cost estimate of Oil & gas facilities

Item cost estimates:

Supply + installation
In-house data from
past projects
Inquiries

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Cost estimate of Oil & gas facilities

Item cost estimates:

Supply + installation
In-house data from
past projects
Inquiries

Sensitivity to:
Raw materials

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Cost estimate of Oil & gas facilities

Item cost estimates:

Supply + installation
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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Cost estimate of Oil & gas facilities

Item cost estimates:

Supply + installation
In-house data from
past projects
Inquiries

Sensitivity to:
Raw materials

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Construction market
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Cost estimate of Oil & gas facilities

Sensitivity to:
Raw materials

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Construction market
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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities
Capacity factored
C1/C2 = (P1/P2) e
e ~ 0.6
Ci: Cost of facility with production
capacity Pi

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Cost estimate of Oil & gas facilities
Capacity factored
C1/C2 = (P1/P2) e
e ~ 0.6
Ci: Cost of facility with production
capacity Pi

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Exercise: what is the increase in cost for +50% capacity increase?
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Cost estimate of Oil & gas facilities
Capacity factored
C1/C2 = (P1/P2) e
e ~ 0.6
Ci: Cost of facility with production
capacity Pi

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Exercise: what is the increase in cost for +50% capacity increase?
In your opinion, what is the limit of such estimate?
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Cost estimate of Oil & gas facilities
Capacity factored
C1/C2 = (P1/P2) e
e ~ 0.6
Ci: Cost of facility with production
capacity Pi

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Exercise: what is the increase in cost for +50% capacity increase?
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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Cost estimate of Oil & gas facilities

Equipment factored
C=fM
C: total installed cost of facility
M: cost of main equipment
f: factor

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Cost estimate of Oil & gas facilities

Equipment factored
C=fM
C: total installed cost of facility
M: cost of main equipment
f: factor

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Note: Typical figures for Petrochemical Plant
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Cost estimate of Oil & gas facilities

Equipment factored
C=fM
C: total installed cost of facility
M: cost of main equipment
f: factor

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Whats the main equipment?
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Cost estimate of Oil & gas facilities

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Cost estimate of Oil & gas facilities

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How is the cost of main
equipment evaluated?
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Cost estimate of Oil & gas facilities

Process design

PFDs
H&M balance

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Cost estimate of Oil & gas facilities

Equipment factored
C=fM
f: factor
f depends on
type of facility (petrochemical, refining, LNG, off-shore)
Size

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Cost estimate of Oil & gas facilities
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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Cost estimate of Oil & gas facilities

Equipment factored
C = fi Mi
Mi Cost of all type i Main equipment
fi: factor

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Cost estimate of Oil & gas facilities

Equipment factored
C = fi Mi
Mi Cost of all type i Main equipment
fi: factor
Why do you think justifies such an approach?

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HERVE
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Cost estimate of Oil & gas facilities

Equipment factored
C = fi Mi
Mi Cost of all type i Main equipment
fi: factor
Why do you think justifies such an approach?

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HERVE
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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities

Main equipment supply + install

Supply

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Cost estimate of Oil & gas facilities

Main equipment supply + install

Supply: eqt list (dimensions) => weight

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Cost estimate of Oil & gas facilities

Process design

PFDs
H&M balance

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HERVE
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Cost estimate of Oil & gas facilities

Main equipment supply + install

Supply: eqt list (dimensions) => weight
Rate?

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Cost estimate of Oil & gas facilities

Main equipment supply + install

Supply: eqt list (dimensions) => weight
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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Cost estimate of Oil & gas facilities

Main equipment supply + install

Supply: eqt list, dimensions/capacity/weight
Installation

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Cost estimate of Oil & gas facilities

Main equipment supply + install

Supply: eqt list, dimensions/capacity/weight
Installation ratios: % supply cost, typ. 8%

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Cost estimate of Oil & gas facilities

Main equipment supply + install

Supply: eqt list, dimensions/capacity/weight
Installation ratios: % supply cost, typ. 8%
30 std manhours/ton (includes labour

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and equipment)
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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: ratio (eqt weight), typ. 40%

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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: ratio f (eqt number)

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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: ratio f (eqt number)

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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: ratio f (eqt number)
Remark: Unit vs Interconnection

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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: ratio (eqt number, eqt weight)
MTO

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Cost estimate of Oil & gas facilities

Process design

PFDs P&IDs

H&M balance

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Cost estimate of Oil & gas facilities

Process design

PFDs P&IDs
H&M balance

Equipment list

Plot Plan

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Cost estimate of Oil & gas facilities

Piping Layout

P&IDs

Plot Plan

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HERVE
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Cost estimate of Oil & gas facilities
For more information on Engineering, refer to:

A unique synthesis for the

busy Project professional

270 pages
300 illustrations

2013 Herv Baron

HERVE
BARON
Cost estimate of Oil & gas facilities
For more information on Engineering, refer to:
Table of Contents

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HERVE The Oil & Gas Engineering Guide
BARON
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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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: MTO

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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: MTO
Item count: P&IDs
Lengths: Piping Layout

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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: MTO
Item count: P&IDs
Lengths: Piping Layout
Both Process & Utility lines
Both Above Ground & Underground lines, Fire water

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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: MTO
Item count: P&IDs
Lengths: Piping Layout
Both Process & Utility lines
Both Above Ground & Underground lines, Fire water
Allowances added for:

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Cost estimate of Oil & gas facilities

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

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Cost estimate of Oil & gas facilities

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

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HERVE
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Cost estimate of Oil & gas facilities

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

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cut and losses to obtain quantities to be supplied
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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: ratio (eqt number, eqt weight)
MTO
Rate Supply

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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: ratio (eqt number, eqt weight)
MTO
Rate Supply $ /kg, typ. USD 3 /kg for CS

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Cost estimate of Oil & gas facilities

Piping supply + install

Qty: ratio (eqt number, eqt weight)
MTO
Rate Supply $ /kg, typ. USD 3 /kg for CS
Install

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Cost estimate of Oil & gas facilities

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,

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applied to the total piping weight,
including fittings & valves.
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Cost estimate of Oil & gas facilities

Electrical supply + install

Price ratio % Main equipment, typ. 15-20%

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Cost estimate of Oil & gas facilities

Electrical supply + install

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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Cost estimate of Oil & gas facilities

Consumers list
Single Line Diagram

Plot Plan

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Cost estimate of Oil & gas facilities

Consumers list
Single Line Diagram

Plot Plan

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Cost estimate of Oil & gas facilities

Instrumentation & Control system supply + install

Price ratio % Main equipment, range: 40-120%

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Cost estimate of Oil & gas facilities

Instrumentation & Control system supply + install

Price ratio % Main equipment, range: 40-120%
Qties

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Cost estimate of Oil & gas facilities

Instrumentation & Control system supply + install

Price ratio % Main equipment, range: 40-120%
Qties nb equiv. loops (CV, 0.5 ON/OFF, Analyser)

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Cost estimate of Oil & gas facilities

Instrumentation & Control system supply + install

Price ratio % Main equipment, range: 40-120%
Qties nb equiv. loops (CV, 0.5 ON/OFF, Analyser)

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Rate
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Cost estimate of Oil & gas facilities

Instrumentation & Control system supply + install

Price ratio % Main equipment, range: 40-120%
Qties nb equiv. loops (CV, 0.5 ON/OFF, Analyser)

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Rate supply: $ /equivalent control loops, typ. 90k
install: hrs / equivalent control loops, typ. 750
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Cost estimate of Oil & gas facilities

Instrumentation & Control system supply + install

Price ratio % Main equipment, range: 40-120%
Qties Instrument list

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Cost estimate of Oil & gas facilities

Instrumentation & Control system supply + install

Price ratio % Main equipment, range: 40-120%
Qties Instrument list

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Rate Supply+install: $ / I/O, typ. 1000
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Cost estimate of Oil & gas facilities

Civil Works
Price Ratio % Main equipment cost, typ. 15-20%

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Cost estimate of Oil & gas facilities

Civil Works
Price Ratio % Main equipment cost, typ. 15-20%
Qty

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Cost estimate of Oil & gas facilities

Civil Works
Price Ratio % Main equipment cost, typ. 15-20%
Qty Dimensions/Weight of equipment &
structure => size of foundations (m3)

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Cost estimate of Oil & gas facilities

Civil Works
Price Ratio % Main equipment cost, typ. 15-20%
Qty Dimensions/Weight of equipment &
structure => size of foundations (m3)
Rate

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Cost estimate of Oil & gas facilities

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

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Cost estimate of Oil & gas facilities

Civil Works
Price Ratio % Main equipment cost, typ. 15-20%
Qty MTO: excavation, formwork, rebar, etc.

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Cost estimate of Oil & gas facilities

Civil Works
Price Ratio % Main equipment cost, typ. 15-20%
Qty MTO: excavation, formwork, rebar, etc.
Rate Mhrs/operation + labour cost

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Cost estimate of Oil & gas facilities

Steel structures
Price Ratio % Main equipment cost, typ. 10-30%

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Cost estimate of Oil & gas facilities

Steel structures
Price Ratio % Main equipment cost, typ. 10-30%
Qty Ratio

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Cost estimate of Oil & gas facilities

Steel structures
Price Ratio % Main equipment cost, typ. 10-30%
Qty Ratio pipe-racks: 90% of piping weight

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platforms: 10% of equipment weight
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Cost estimate of Oil & gas facilities

Steel structures
Price Ratio % Main equipment cost, typ. 10-30%
Qty Ratio pipe-racks: 90% of piping weight

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platforms: 10% of equipment weight
Rate
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Cost estimate of Oil & gas facilities

Steel structures
Price Ratio % Main equipment cost, typ. 10-30%
Qty Ratio pipe-racks: 90% of piping weight

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platforms: 10% of equipment weight
Rate Supply USD 2/kg
Erection 20 std manhours/t
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Cost estimate of Oil & gas facilities

Analytical
Main equipment supply + install
Piping supply + install
Electrical supply + install
Instrumentation & Control system supply + install
Civil Works
Steel structures
Painting, Insulation

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Cost estimate of Oil & gas facilities

Painting, Insulation
Price ratio % eqt, piping, str cost, typ. 5% each

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Cost estimate of Oil & gas facilities

Painting, Insulation
Price ratio % eqt, piping, str cost, typ. 5% each
Qty MTO

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Cost estimate of Oil & gas facilities

Painting, Insulation
Price ratio % eqt, piping, str cost, typ. 5% each
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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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities

Temporary Construction facilities

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Ratio % total cost, typ. 5% for new site
Detailed
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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities

Engineering & Project Management = all Project services

Price ratio % total cost, typ. 15%

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HERVE
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Cost estimate of Oil & gas facilities

Engineering & Project Management = all Project

services

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Price ratio % total cost, typ. 15%
Qty ratio
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Cost estimate of Oil & gas facilities

Engineering & Project Management = all Project

services

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Price ratio % total cost, typ. 15%
Qty ratio hrs / eqt item, typ. 1800 for Refining,
2500 for gas, 4000 for LNG
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Cost estimate of Oil & gas facilities

Engineering & Project Management = all Project

services

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Price ratio % total cost, typ. 15%
Qty
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Cost estimate of Oil & gas facilities

Engineering & Project Management = all Project

services

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Price ratio % total cost, typ. 15%
Qty home office: tasks list + std manhours
field supervision: ratio to labour, typ. 1/7
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Cost estimate of Oil & gas facilities

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

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Miscellaneous
Contractors cost
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Cost estimate of Oil & gas facilities

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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HERVE
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Cost estimate of Oil & gas facilities

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

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Miscellaneous
Contractors cost
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Cost estimate of Oil & gas facilities

Contractors cost
profit,
risks,
sales cost,

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Cost estimate of Oil & gas facilities

Contractors cost
profit, typ. 7%
risks,
sales cost,
typ. 10-15%

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HERVE
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Cost estimate of Oil & gas facilities
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: catalysts etc.
Contractors cost

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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities

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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Cost estimate of Oil & gas facilities

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
BARON
Cost estimate of Oil & gas facilities
For more information on Engineering, refer to:

A unique synthesis for the

busy Project professional

270 pages
300 illustrations

2013 Herv Baron

HERVE The Oil & Gas Engineering Guide - 2nd edition
BARON
Table of Contents

Discipline presentation:
activities and deliverables

The overall process

Methods & tools

HERVE The Oil & Gas Engineering Guide - 2nd edition
BARON
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
HERVE The Oil & Gas Engineering Guide - 2nd edition
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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
HERVE The Oil & Gas Engineering Guide - 2nd edition
BARON
Table of Contents

Methods & tools

HERVE
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Use these methods as

standard, question
deviations.
HERVE
BARON

Implement powerful
procedures
HERVE
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Request meaningful
progress reports
HERVE
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Implement effective
Project Control
HERVE The Oil & Gas Engineering Guide - 2nd edition
BARON

This book is destined to both:

Oil & Gas companies Project execution personnel

Oil & Gas contractors Project execution personnel

HERVE The Oil & Gas Engineering Guide
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,

HERVE The Oil & Gas Engineering Guide
BARON
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,

HERVE The Oil & Gas Engineering Guide
BARON
2nd edition
Order direct on the publisher website:

http://www.editionstechnip.com/en/catalo
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the.html