Project Cost Basf

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Methodologies for Cost Estimation of Chemical Plants as a Function of Engineering Progress

Dr. Kunzmann, W. Pehlke GT/MR – Project Controlling, Cost Engineering & Engineering Governance

Who We Are and What We Stand for

BASF – The Chemical Company The world’s leading chemical company Our portfolio ranges from chemicals, plastics, performance products, agricultural products and fine chemicals to oil and natural gas Customers in virtually all industries Sales 2006: €52,610 million Income from operations (EBIT) 2006: €6,750 million Employees (at year-end 2006): 95,247 14 operating divisions manage 68 global and regional business units BASF Engineers Our Skills. Your Future2

Global Presence

Geismar

Antwerp Ludwigshafen

Nanjing Kuantan

Freeport „ „Europe „North

America „Asia, Pacific „South America 3)

Employees 1)

Sales 2)

61,444 15,513 12,788 5,502

€29.5 billion €11.5 billion €8.1 billion €3.5 billion

Verbund site 1)

Major chemical production site

As of December 31, 2006; 2) By location of customer 3) South America, Africa, Middle East BASF Engineers Our Skills. Your Future

The Ludwigshafen site: The world’s largest integrated chemical complex

„ BASF Group’s largest Verbund site with a total site area of „ 10 sq. km. Ö approx. 2,500 acre „ Location of the company’s global headquarters „ Manufactures high-value products in a dense network of plants „ Location of BASF Group’s technology platforms and competence centers

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Tasks and Responsibilities of Corporate Engineering Business Mission

„ As Owner’s Engineer we design and build Production Plants and Infrastructure Facilities for BASF Group in close cooperation and on request of the Operating Divisions including respective project management and controlling. „ As Global Competence Center we have governance function for the execution of capital projects Group wide and with this regard member of Commission S. We develop and maintain the cost engineering database and methodology for BASF investments, small projects, extensions and plant changes.

Location of Engineering Offices Location of Project Sites

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Project Controlling, Cost Engineering & Engineering Governance

Competence Center Cost Engineering „ Cost estimates in all project phases (300 per year) „ Site studies & technology benchmarks „ Cost workshops Competence Center Project Controlling „ Continuous analysis & report of project progress and project cost status „ Scope & claims management Engineering Governance „ Comments on cost estimates for Commission S „ Development and maintenance of methods & tools for Cost Engineering, Project Controlling, Scheduling „ Review Technical Packages „ Project Management Procedures BASF Engineers Our Skills. Your Future

Cost Engineering Methods From Innovation to Successful Project

Less than 1 % of ideas finally successful implemented Idea

Project

Product

Market

Success

11 Success 17 +/24 Loss

Source: University of St. Gallen, Prof. Gassmann

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Cost Engineering Methods Phase Gate Method a Control Instrument for Innovation Chains

Gates

Project Cost Estimate as one Criteria for Selection at Innovation Chain Control

J

Invest economically ?

N

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Cost Engineering Methods Accuracy and Engineering Progress

40

30

known

u n k n o w n

20

Accuracy [%]

10

0

-10

-20

Assumptions Cost Engineering -30

-40 0

10

20

30

40

50

60

70

80

90

100

Degree of engineering [%] Appropriation Approval ± 10% Definition Approval ± 15% Study ± 20%

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Cost Engineering Methods Accuracy of Estimates

Methods Capacity Method +/- 30 % Reference Plant Method +/- 20-30 % Exponent Method +/- 10-30 % Structure Method +/- 20 %

KOSDIASPlus

Modular Estimate +/- 15-20 %

EstiMadeTM

Quantity Based Estimate +/- 10 %

Definition Study Phase

Conceptual Phase

Approval Extended Conceptual Phase

Detail Engineering / Construction

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Cost Engineering Methods Capacity Method

y = cs • x

y= cs = X=

Investment costs to be estimated Specific Investment Plant Capacity

Applied for:

First rough estimate for „Business Case“ by „non Engineers“

Accuracy:

± 30 % BASF Engineers Our Skills. Your Future

Cost Engineering Methods Exponent Method

General formula:

l tia n e fid n co

n x ⎞ ⎛ y = y o . ⎜x ⎟ ⎝ o⎠ y = plant costs to be estimated, equipment cost y0 = known costs x = new capacity, volume, size x0 = known capacity , ... n = Exponent Applied for:

Calculation of plant costs from existing size and costs to new size

Accuracy:

± 10 – 30 % BASF Engineers Our Skills. Your Future

Cost Engineering Methods Exponent Method

General formula: n x ⎞ y = y o . ⎜x ÷ ⎝ o⎠ y = costs to be estimated y0 = known costs x = new heat exch. area x0 = known heat exch. area n = Exponent Applied for: Accuracy:

Mat. of Construction: Heat Exch. Area: Tubeside pressure: Shellside pressure: Price (ex works):

1.4541 43 m² 40 bar 10 bar 25 TEUR

Mat. of Construction: Heat Exch. Area: Tubeside pressure: Shellside pressure: Price (ex works):

1.4541 93 m² 40 bar 10 bar 40 TEUR

Conversion of known specific costs (eg. equipment costs) scale up / down ± 10 – 30 % BASF Engineers Our Skills. Your Future

Cost Engineering Methods Structure Method

Controlling & Reporting - GI/R 1.01.1.1. Status: 12/2004

Cost Structure of chemical plants at BASF AG

Rev. 2 Page 1 of 1

- only for GI-internal use ø Equipm.-Costs:

5 tEuro

30 tEuro 100 tEuro

Description

Gr.

A

Sewers, roads, railroads Pipe racks/bridges Ground, concrete and masonry work Steel structure Architectural (doors, windows) Engineering and Construction Supervision Aux. Constr. (Fdns, misc supports)

CIVIL AND STRUCTURAL B

Insulation Painting HVAC/Fire protection

INSULATION/PAINTING/HVAC/ETC C MOVEABLE INVENTORY D-G PLANT EQUIPMENT CS Piping Alloy Piping CS Valves and specialities Alloy Valves and specialities

H PIPING I PIPING outside Plants K ELECTRICAL primary system L Electrical secondary system Instruments DCS (incl. Programming) Installation materials

ELECTRICAL and INSTRUMENTATION M

Installation Labor for D-G Installation Labor for H Installation Labor for I Installation Labor for K Installation Labor for L Scaffolding Temporary Construction Facilities Start-up preparation Construction management and supervision

INSTALLATION LABOR

Σ A-M DIRECT COSTS N

Project Engineering Design Engineering Design by others Permit Fees

ENGINEERING O Others Construction Interest Costs U Contingency

ΣΣ A-U TOTAL COSTS

„ Breakdown total investment in cost groups

30 tEuro

% relating to

5% 2% 23% 43% 7% 9% 9% 98% 29% 4% 16% 49% 3% 100% 10% 31% 3% 13% 58% 2% 3% 8% 63% 38% 17% 126% 6% 65% 3% 2% 28% 7% 2% 6% 45% 163%

Σ D-G 2% 1% 12% 22% 3% 5% 4% 49% 12% 2% 7% 20% 2% 100% 6% 18% 2% 8% 32% 2% 2% 4% 24% 15% 7% 51% 4% 28% 2% 1% 12% 4% 1% 2% 17% 72%

603% 70% 158% 9% 4% 241% 9%

330% 26% 58% 3% 2% 89% 6%

1% 0% 8% 14% 2% 3% 2% 31% 6% 1% 4% 11% 1% 100% 4% 12% 1% 5% 22% 2% 1% 3% 13% 8% 4% 28% 4% 16% 2% 1% 7% 2% 1% 1% 9% 42%

Σ A-M 0,5% 0,3% 3,6% 6,7% 1,0% 1,4% 1,2% 14,8% 3,6% 0,5% 2,1% 6,1% 0,6% 30,3% 1,7% 5,3% 0,5% 2,3% 9,9% 0,5% 0,6% 1,3% 7,3% 4,5% 2,2% 15,4% 1,4% 8,6% 0,6% 0,3% 3,6% 1,1% 0,3% 0,7% 5,2% 21,8%

Σ A-U 0,4% 0,2% 2,8% 5,2% 0,8% 1,1% 0,9% 11,5% 2,8% 0,4% 1,6% 4,8% 0,4% 23,6% 1,3% 4,2% 0,4% 1,8% 7,7% 0,4% 0,5% 1,0% 5,7% 3,5% 1,7% 12,0% 1,1% 6,7% 0,5% 0,2% 2,8% 0,8% 0,2% 0,5% 4,1% 16,9%

238% 13% 30% 2% 1% 45% 4%

100,0% 7,8% 17,6% 1,0% 0,5% 26,9% 1,7%

77,7% 6,1% 13,7% 0,8% 0,4% 20,9% 1,3%

0%

0%

0%

0,0%

0,0%

853%

424%

287%

128,6%

100,0%

„ For simular process plants the relation of cost groups is considered be constant „ Detailed analysis of executed projects

Applied for:

Study estimate and „Check & Balance“

Accuracy:

± 20 %

Basis: 70 E & I

ø Equipm.-Costs: ø Equipm.-Costs: ø Equipm.-Costs:

5 tEuro Total plant costs 30 tEuro Total plant costs 100 tEuro Total plant costs

3 Mio Euro 9 Mio Euro 20 Mio Euro

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Cost Engineering Methods

A B

CIVIL AND STRUCTURAL (LABOR & MATERIAL) INSULATION / PAINTING / HVAC / ETC (LAB. & MAT.)

C

MOVABLE INVENTORY (MATERIAL ONLY)

D-G

PLANT EQUIPMENT (MATERIAL ONLY)

H

PIPING IN PLANTS – ISBL (MATERIAL ONLY)

K

ELECTRICAL PRIMARY SYSTEM (MATERIAL)

L

ELECTRICAL AND INSTRUMENTATION (MATERIAL)

M

INSTALLATION LABOR

N

ENGINEERING

O

EXPENSES

U ∑∑

CONTINGENCY A–U TOTAL COSTS BASF Engineers Our Skills. Your Future

Cost Engineering Methods Modular Estimate

„ Scope definition for equipment moduls: Isometrics - Piping Complexity - Flanges & Elbows - Valves

„ Survey of typical solutions Electrical Users - Power Supply - Electrical Installations

Specification Sheet - Functional Description - Description of Scope

„ Typical scope for each cost group „ Modul costs include typical costs from all cost groups

Nozzle Schedule

Civil Design - Built-up Area - Building Volume - Foundations - Lighted Area

P&IDs - Instrumentation - Piping - Insulation - Tracing

Applied for:

Research & Development

Accuracy:

± 20 %

Piping Design Basis - Materials - Gaskets

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Cost Engineering Methods Quantity Based Estimate

m••ccs cc==m s Example: Example: 250t t••1800 1800€/t €/t CCsteel==250 steel

450T€ T€ steel==450 CCsteel

c= m= cs =

Applied for: Accuracy:

Costs to be estimated Quantity Specific cost

For project definition and appropriation approval ± 10 % BASF Engineers Our Skills. Your Future

Cost Engineering Methods Example for Quantity Based Method, Instrumentation

Vessels Vessels FF

LL

PP

local local

DCS DCS

0,5 0,5

0,3 0,3

...

TT . . .

...

15 15

0,4 t€/device 7,3 t€/device

10 10T€ T€ 110 110T€ T€

Instrument type

Typical number of Instruments Evaluation of existing plants + technology specifics + plant specifics

Example 50 vessels

25 25

Equipment List

...

Average specific costs

...

Estimate result

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Cost Engineering Methods Cost Curve

Cost Estimating Data

0 1

Group E

2

Apparatus

Contact: Pieroth-Lenz

30.11.98 10.03.00 05.08.05

1.E.B.2.2 Page 1 of 1 GI/R Controlling & Reporting

Status: 09 / 2005

„ Cost curves a basis for cost estimates

Vessel SS 304 L valid for:

25 gal to 26.500 gal; 0 psi to 300 psi

„ Data from executed projects

Standard design: vertical or horizontal orientation, 6 nozzles, 1 manhole, not heated.

1000

„ Procurement situation reflected 100

Costs in TEURO

„ Review of projects and update of data „

sets performed on a regular basis

10

„ Used in software for cost engineering 1 0,1

1

10

100

Capacity in m³

Comments: Purchase order value plus design allowance, changes and transportation to site, ASME Code. Gulf Coast Basis

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Cost Engineering Methods Foreign Country Estimate

Factor Method

DOMESTIC Foreign FC Spec. Costs

Country

Project Scope

Costs

IMPORTS

Exchange Rate

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Cost Engineering Methods Foreign Country Estimate

MADE IN GERMANY

MADE IN USA

ASME

DIN 100.000

status

1.4541 93 m² 40 bar 10 bar

Kosten [DM]

Kostenbasis Lu

Mat. of Construction: Heat Exch. Area: Tubeside pressure: Shellside pressure:

Mat. of Construction: 304 L

Heat. Exch. Area: 1000 sq. ft Tubeside pressure: 580 psi Shellside pressure: 145 psi

10.000

p= 6/ 6

(= 1.4541) (= 93 m²) (= 40 bar) (= 10 bar)

1.000 1

10 100 Wärmeaustauschfläche [m²]

1000

Estimated costs LU: 31.500 EUR

Factor 0,9

LU Conditions

Actual purchasing cost: 37.000 USD

„EUR-USA“ 28.500 EUR

Exchange rate 0,77 EUR/USD

Foreign Conditions BASF Engineers Our Skills. Your Future

Cost Engineering Methods Survey

Methods Capacity Method +/- 30 % Reference Plant Method +/- 20-30 % Exponent Method +/- 10-30 % Structure Method +/- 20 %

KOSDIASPlus

Modular Estimate +/- 15-20 %

EstiMadeTM

Quantity Based Estimate +/- 10 %

Defintion Study Phase

Conceptual Phase

Approval Extended Conceptual Phase

Detail Engineering / Construction

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Cost Engineering Methods Data Basis and Evaluation

„ More than 1400 project evaluations including detailed cost structure „ More than 1000 data sets for installed modules „ Cost curves for all types of equipment, 800 data sets updated on a regular basis „ Cost Engineering basis for more than 45 foreign countries „ Procurement situation to be updated twice a year including specific forecasts

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THE END

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