Category Archives: Week 8

W8_Mohammed_Production Expansion


Problem definition

The Government has directed the company to increase the company oil production rate by additional 40,000BOPD before end of 2013 as per the encourage exploration results. As facility department our role is to decide which facilities needed to cover such expansion. The required facilities and the alternatives are the main challenges which are answered in the below Blog. The blog will highlight in brief the required WBS as per the proposed scope for the proposed options.

Development of the feasible alternatives

The targeted area is divided to two parts with respect of location and reservoir quantities expected, the facilities were proposed as following:

Scenario 1: Build one FPF with capacity covering the production of two areas.

Scenario 2: Build small capacity FPF in each area.

 

Analysis and comparison of the alternatives

Scenario 1: Development of AREA-1

  1. AREA-1 & AREA-2 Field Surface Facilities (FSF) i.e. wells,  OGM and trunk line to Hadida FPF
  2. AREA-1 FPF.
  3. Transit line from AREA-1 to CPF, for LC & HC. Design capacity is 40,000 BOPD. At least one middle pump station shall be considered for future.
  4. Consider 2 phases: short term or early production and long term. The early production is to export qualified 10,000 BOPD of LC from
  5. Power Generation Plant and Distribution for FPF and other FSF Requirements.
  6. Instrumentation, Control Philosophy &Telecommunication
  7. Expansion in the Central Processing Facilities (CPF) to handle the extra fluid

Scenario 2: Development of AREA-1 & Area-2, Will be same as above, in addition to the following:

  1. AREA-2 FPF
  2. Transit Line from AREA-2 to AREA-1
  Development of AREA-1 WBS     Development of AREA-1 & 2 WBS
1.0 Crude Expansion Projects    1.0 Crude Expansion Projects
1.1 Conceptual design 1.1 Conceptual design
1.2 Basic design 1.2 Basic design
1.3 Long Lead Items 1.3 Long Lead Items

1.3.1

Compressors

1.3.1

Compressors

1.3.2

Line Pipe

1.3.2

Line Pipe
1.4 Pre-Award Phase (Tendering and Award) 1.4 Pre-Award Phase (Tendering and Award)

1.4.1

Issuing of ITB

1.4.1

Issuing of ITB

1.4.2

Bid Evaluation

1.4.2

Bid Evaluation

1.4.3

Shareholders & Government Approvals

1.4.3

Shareholders & Government Approvals

1.4.4

Award

1.4.4

Award
1.5 Post Award Phase (EPCC & PCC Projects) 1.5 Post Award Phase (EPCC & PCC Projects)
1.5.1 Central Processing Facility Expansion (PCC) 1.5.1 Central Processing Facility Expansion (PCC)

1.5.1.1

Procurement

1.5.1.1

Procurement

1.5.1.2

Construction

1.5.1.2

Construction

1.5.1.3

Commissioning

1.5.1.3

Commissioning
1.5.2 EPCC for Field Processing Facility of AREA 1 1.5.2 EPCC for Field Processing Facility of AREA-1

1.5.2.1

Engineering

1.5.2.1

Engineering

1.5.2.2

Procurement

1.5.2.2

Procurement

1.5.2.3

Construction

1.5.2.3

Construction

1.5.2.4

Commissioning

1.5.2.4

Commissioning
1.5.3 EPCC for Pump Station (EPCC) 1.5.3 EPCC for Pump Station (EPCC)

1.5.3.1

Engineering

1.5.3.1

Engineering

1.5.3.2

Procurement

1.5.3.2

Procurement

1.5.3.3

Construction

1.5.3.3

Construction

1.5.3.4

Commissioning

1.5.3.4

Commissioning
1.5.4 PCC for Field Surface Facility (AREA-1 & AREA-2) 1.5.4 PCC for Field Surface Facility (AREA-1 & AREA-2)

1.5.4.1

Engineering

1.5.4.1

Engineering

1.5.4.2

Procurement

1.5.4.2

Procurement

1.5.4.3

Construction

1.5.4.3

Construction

1.5.4.4

Commissioning

1.5.4.4

Commissioning
1.5.5 Transit Line from AREA-1 to CPF (170km) 1.5.5 Transit Line from AREA-1 to CPF (170km)

1.5.5.1

Engineering

1.5.5.1

Engineering

1.5.5.2

Procurement

1.5.5.2

Procurement

1.5.5.3

Construction

1.5.5.3

Construction

1.5.5.4

Commissioning

1.5.5.4

Commissioning
    1.5.6 Transit Lines from AREA-1 to 2 (20km)
   

1.5.6.1

Engineering
     

1.5.6.2

Procurement
     

1.5.6.3

Construction
     

1.5.6.4

Commissioning
      1.5.7 EPCC for Field Processing Facility of AREA-2
     

1.5.7.1

Engineering
     

1.5.7.2

Procurement
     

1.5.7.3

Construction
     

1.5.7.4

Commissioning
         

Selection of the preferred alternatives

From the above WBS its shown that the only difference is in the additional FPF of AREA-2 and the additional transit line from AREA- to AREA-1, but actually, there are many differences are not shown i.e. The difference in the capacities which are resulted in the difference in the scope and accordingly the cost estimate which changed from one scenario to another.

Following the same WBS, the estimation were done for both scenarios and we found that it is better to go for scenario two but in two phases, firstly to build only one FPF and later to construct the second one. The conceptual study is on progress and the results of our decision will be clearer after getting the result of the conceptual study.

Performance monitoring and the post evaluation of results

The result of the chosen option will be determined after the conceptual study.

 

Conclusion

The company has taken the risk and concentrates on the second scenario considering it’s the most optimum choice and its added value more than the first scenario.

 

References

* Humphreys & Associates, Project management using Earned Value.

* W14_ADI_WBS Development for conceptual study phase of project

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W8_Zakiya_Material Selection


Problem Statement

In the design of a tractor radiator, an engineer has a choice of using either a brass-copper alloy casting or a plastic molding. Either material provides the same service. However, the brass-copper alloy casting weighs 30 pounds, compared to 25 pounds for the plastic molding. Every pound of extra weight has been assigned a penalty of $6.50 to account for the increased fuel consumption during the life cycle of the car. The brass-copper alloy casting costs $3.85 per pound, whereas the plastic molding costs $7.90 per pound. Machining costs per casting are $6.50 for the brass-copper alloy. Which material should the engineer select, and what is the difference in the unit costs?


Alternative Solution

Engineer must choose 2 different types of material:

  • Brass-copper alloy
  • Plastic

Selection Criteria

Which material that gives the lowest cost


Analysis & Comparison of Alternatives

1. Brass-copper alloy

Casting Cost = 30 pounds x $3.85           = $ 115.5

Penalty          =   5 pounds x $6.50           = $   32.5

Machining Cost                                           = $     6.5  +

Total Cost                                                     = $ 154.5

2. Plastic

Casting Cost = 25 pounds x $7.90 = $197.5

Difference Unit Cost : $197.5 – $154.5 = $43

Selection of preferred Alternatives

Based on above calculation, it concluded that brass-copper alloy has lower cost compare to plastic. Difference cost between 2 materials is $43. So, brass-copper alloy is the chosen material.

Reference

  • Sullivan G. William, Wick M. Elin, Koelling Patrik C., Engineering Economy Chapter 2,Question 2-33, Page 77, Pearson International.

W8_AN & ET_ITC Machine or Jumbo drill for Underground Mining _Kristal2011


Problem recognition:

Company “X” is looking for an opportunity to buy a new ITC machine to do development of underground mining. A typical machine that currently using is a Jumbo drill machine. Jumbo drill requires using explosive to charge at drill holes made by Jumbo. ITC does not need explosive as this machine is a continuous mining machine with hammer or cutter attached on the boom and also equipped by a single line conveyor at the back to allow moving the ore or waste.

Feasible alternative:

Is to buy an ITC machine or just continue with the Jumbo drill machine.

Criterion:

Take the one with the bigger NPV.

Analysis and Comparison:

Below is the cost analysis made, with assumption that service life is 5 years and salvage value is 0

Cost Analysis

No.

Equipment Total Price

Consumable Cost / month

Labour cost / month

Explosive Cost

Estimated Maintenance Cost

Cost Saving
(ITC)

Cut Length
(Meter Advance)

Estimated Tonnes Produced

Average Kencana Grade (g/t)

Estimated Oz Recovered / year

Estimated Price / year
1oz gold = USD 1363.17

Additional Revenue

ITC

Jumbo

ITC

Jumbo

ITC
(6 op.s)

Jumbo
(6 op.s, 6 off.s)

ITC

Jumbo

ITC

Jumbo

Labour cost diff.

Explosive Cost

ITC

Jumbo

ITC

Jumbo

July 2010 – June 2011

ITC

Jumbo

ITC

Jumbo

ITC
1 $1,403,915.03 $ 1,281,955.81 $303,667.36    $ 84,683.29 $ 224,629.48 $ – $225,051.49 $693,117.56 $ 427,291.64 $ 139,946.19 $ 225,051.49

1,199

1,176

98,809

91,159

25.30

80,372.42

74,150.15

$109,561,273.89

$101,079,256.04

$8,482,017.84
ITC to Jumbo Performance

$121,959.22

$303,667.36

($139,946.19)

($225,051.49)

$265,825.92

  

23.77

7,649.58

  

6,222.27

$8,482,017.84

  

        

($61,330.32)

      Total Cost saving for ITC $ 99,171.76

  

           

Total operational cost ITC

$388,350.65                                          
           

Total operational cost Jumbo

$449,680.96                                          
           

  

  

  

  

                                            
           

Maintenance Cost Different

$265,825.92                                          
           

  

  

  

  

                                            

Economic Analysis

  

Capital Investment

Annual Expenses

Annual Production

Annual Revenue

Service Life (Years)

Salvage Value

  

Operations

Maintenance

Total

ITC

$1,403,915

$388,351

$693,118

$1,081,468

$109,561,274

$108,479,806

5

$0

Jumbo

$1,281,956

$449,681

$427,292

$876,973

$101,079,256

$100,202,283

5

$0

                 
                 
    ITC Jumbo          
  Capital Investment

($1,403,915.03)

($1,281,955.81)

         
  Annual Revenue Year 1

$108,479,805.68

$100,202,283.44

         
  Annual Revenue Year 2

$108,479,805.68

$100,202,283.44

         
  Annual Revenue Year 3

$108,479,805.68

$100,202,283.44

         
  Annual Revenue Year 4

$108,479,805.68

$100,202,283.44

         
  Annual Revenue Year 5

$108,479,805.68

$100,202,283.44

         
  Salvage Value

$0.00

$0.00

         
                 
  MARR

20%

           
                 
  NPV =

$323,017,108.76

$298,384,209.48

         

Selection of the preferred alternative:

Looking at NPV, ITC has bigger NPV compares to Jumbo drill machine. So that, it is recommended to buy an ITC machine for mining in underground mine.

Reference:

  1. Sullivan William. Wicks M, Elin. Koelling C, Patrick. Engineering Economic, Fifteenth edition. Pearson International Edition, 2009.