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Egyptian Petrochemicals Holding Co.
Project DevelopmentMethodology
The Society of Chemical Engineers
May 8,2016
Eng. M. Samy Abdel-HadyProfessional Consultant
This presentation provides the broad range of knowledge and expertise required to launch a new project.
Objective
5/9/2016 MSA 3
Range of Project Cycle
Planning
Define Leading Options
Define Execution Plan
Negotiate & Secure Finances
Business
Development Phase Execution Phase
5/9/2016 MSA 4
Engineering
&
EPC
Commissioning
&
Start - up
± 50% ± 30% ± 10%
0 to 5 % 5 to 10 % 10 to 15 % Engineering Cost
Up to 30% Project Cost Reduction Potential
Cost of Design Changes
Business Planning Phase
Define Leading Options
Define Execution Plan
Negotiate & Secure
Finances
Engineering Procurement
Construction
Business Planning
Define Leading Options
Define Execution Plan
Negotiate & Secure
Finances
Engineering &
EPC
5/9/2016 MSA 5
Commissioning
& Start - up
Business Planning Phase
Define Leading Options
Define Execution Plan
Negotiate & Secure
Finances
Engineering Procurement
Construction
Business Planning
Define Leading Options
Define Execution Plan
Negotiate & Secure
Finances
Engineering &
EPC
1. In-house Feasibility Study
2. Project Identification
3. Pre - Feasibility Study
5/9/2016 MSA 6
Commissioning
& Start - up
In-house Feasibility Study
Evaluate opportunities through:
Screening then selection of the most appropriate scenario/alternative
Technology
Market
Economic
Feed Stock
Site
5/9/2016 MSA 7
start
Identify
Opportunities
Conduct
Preliminary
Evaluations
Evaluation
Report
Decision
Box
Proceed with
Development of
Selected Alternative(s)
Pre-Feasibility
Study
Gate
Stop ,Hold , Recycle back
Project Identification - Decision Flowchart
5/9/2016 MSA 8
Scoping exercise to concentrate finally on one base case
The study shall basically include:
Pre - Feasibility Study- CONCEPT
Availability of Feedstock
Preliminary Marketing Trends
Proven/ commercialized technologies
Project Investment Estimate
Preliminary financial Structure
5/9/2016 MSA 9
Business Planning Phase
Define Leading Options
Define Execution Plan
Negotiate & Secure
Finances
Engineering Procurement
Construction
Business Planning
Define Leading Options
Define Execution Plan
Negotiate & Secure
Finances
Engineering &
EPC
1. Formation of
Sponsor Group
2. Front End Studies
5/9/2016 MSA 10
Commissioning
& Start - up
Formation of The Sponsor Group
• Shareholder representative
• Feedstock supplier
• Bankers or financing groups
• Off-takers
• Operating companies
Front End Studies
Define Leading Options
5/9/2016 MSA 11
Business Planning Phase
Define Leading Options
Define Execution Plan
Negotiate & Secure
Finances
Engineering Procurement
Construction
Business Planning
Define Leading Options
Define Execution Plan
Negotiate & Secure
Finances
Engineering &
EPC
5/9/2016 MSA 12
1. Company Formation
2. Major Agreements
3. Project Schedule
4. Detailed Feasibility Study
Commissioning
& Start - up
Company Formation
Major Agreements
• Shareholders
• Feedstock
• Site
• Financing
• Marketing Off-Take
• Technologies
Project Schedule
Bankable /Detailed Feasibility Study
Define Execution Plan
5/9/2016 MSA 13
Deep analysis of the base case leading to confidence that no major obstacle remains
to develop the project in collaboration of international experienced consultant.
The main deference between pre-feasibility & detailed feasibility studies is the risk analysis and mitigation.
Detailed Feasibility Study- CONCEPT
5/9/2016 MSA 14
Detailed Feasibility
Study
MarketAnalysis
Cost Estimate, Process Design
Basis
Financial Analysis
Process
Technology
SelectionDelivered
Cost Competitiveness
Pricing Analysis
Detailed Feasibility Study - CONTENT
5/9/2016 MSA 15
DetailedFeasibility
Study covers supply, demandand trade analysis in thetarget markets.High level Marketing PlanAssessment of delivered cost competitiveness to the target markets
MarketAnalysis
Detailed Feasibility Study - CONTENT
5/9/2016 MSA 16
DetailedFeasibility
Study
PricingAnalysis
Presents forecasts for prices , netback analysis in the target markets.
5/9/2016 MSA 17
Detailed Feasibility Study - CONTENT
DetailedFeasibility
Study Determines the delivered cost of target marketsthen compare with those of other producers who are in position to export to project target market.
Delivered Cost
Competitiveness
5/9/2016 MSA 18
Detailed Feasibility Study - CONTENT
DetailedFeasibility
Study
Select the most appropriate technology and licensor via KT analysis
Process
Technology
Selection
5/9/2016 MSA 19
Detailed Feasibility Study - CONTENT
Detailed Feasibility
Study
Provides capital and operating cost estimates for project facilities
Cost Estimate, Process Design
Basis
5/9/2016 MSA 20
Detailed Feasibility Study - CONTENT
Detailed Feasibility
Study
Financial Analysis
Developing a financial model to evaluate the economic viability of the project based on commercial and technical evaluations.
5/9/2016 MSA 21
Detailed Feasibility Study - CONTENT
Internal rate of return (IRR)Net present values (NPV)Estimate of project cash flowBalance sheet
5/9/2016 MSA 22
Detailed Feasibility Study - Deliverables
Sensitivity Analysis
Sensitivity analysis is used to determine the effectof technical and economic parameters onprofitability of the project.
After estimating market priceprojections, market share,revenues, profitability iscalculated and sensitivity casesare made which analyze theeffect on returns of plantcapacity, capital cost, feedstockprice, netback product pricesand debt to equity ratio.
5/9/2016 MSA 23
Risk Analysis and Mitigation
Feedstock
Technology
Margin & Price
Market Variables
Risk
• Long-Term Agreement, • Take-or pay basis
• A marketing plan
• Proven.• Track record
• Alternative feed stocks.• Multiple suppliers of FS• Strong supply agreement provisions.
Mitigation Strategy
5/9/2016 MSA 24
Risk Analysis and Mitigation ( cont.)
Investment Costs,construction andcompletion risk
Off-take Risk
Risk
• Screening off-takers for credit history. • Selection of multiple off-takers .• Take-or-pay basis.
• Fixed price, • Date for EPC contract
Mitigation Strategy
Competition• Multiple off take agreements • Long-term, Take-or pay basis
5/9/2016 MSA 25
Business Planning Phase
Define Leading Options
Define Execution Plan
Negotiate & Secure
Finances
Engineering Procurement
Construction
Business Planning
Define Leading Options
Define Execution Plan
Negotiate & Secure
Finances
Engineering &
EPC
5/9/2016 MSA 26
Negotiate &
Secure Finances
& Start-up
Commissioning &
Start -up
Range of Project Cycle
Planning
Define Leading Options
Define Execution Plan
Negotiate & Secure Finances
Business
Development Phase Execution Phase
5/9/2016 MSA 28
Engineering
&
EPC
Commissioning
&
Start - up
The Engineering
• Front End Engineering Design “FEED”
• Basic Design Package “BDP”
The EPC
• Lump Sum Turn Key “LSTK”
• Reimbursable
• Negotiate bid (reimbursable FEED & lump sum EPC, open book)
Commissioning & Start-up
Execution Phase
5/9/2016 MSA 29
PMT proficiently level.
Partner selection criteria.
Value chain approach.
Team work spirit.
Success Factors
5/9/2016 MSA 30
Recommended