Cost Engineering Natural Gas Plant

Developments of Natural Gas Markets
TMC
ASOCIACION VENEZOLANA DE PROCESADORES DE GAS

XVII CONVENCIN INTERNACIONAL DEL GAS
23 al 25 de mayo de 2006
Caracas, Venezuela
VIRTUAL PLANT APPROACH TO DESIGN,

ENGINEER AND PROCURE PROJECT VALUE
OVER THE LIFE CYCLE
Luis Eduardo Nio Monr

Mariana Nio Rivero
TRANSITION MANAGEMENT CONSULTANTS VENEZUELA C.A.
Caracas, Venezuela
XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006
Page 0
CONTENTS
ABSTRACT ......................................................................................................................2
I.
Introduction ..............................................................................................................3
II.
Objectives ................................................................................................................5
III.
Scope .......................................................................................................................7
IV.
Designing and Simulating a Virtual Plant Model.......................................................8
V.
Structuring a Capital Project Simulation Model ......................................................10
VI.
Ten Steps to Design, Engineer and Procure Project Value....................................12
VII. A Practical Example: The Case Of a Natural Gas Liquid Extraction Project ..........15
VIII. Conclusions............................................................................................................32
IX.
References Cited....................................................................................................32
X.
Bibliography............................................................................................................33
Page 1
ABSTRACT
Prevailing wisdom indicates that the economic value of a capital project is defined at
the front end and must be assured through its EPC phase. Value has been
traditionally measured in terms of expected financial returns on the associated capital
investment; todays concept, however, goes deeper into the roots of value to include
plant supply reliability and availability, cost competitiveness and client satisfaction.
In order to achieve the expected level of project value at the front end it is necessary
to measure the impact of the different options of equipment configuration and
specification on the net present value of the CAPEX, OPEX and revenue cashflows
over the total life cycle. Performing these analyses, with the necessary efficiency and
accuracy, demands however the use of proven computerized modeling and
simulation techniques designed to readily answer these questions through
appropriate performance indicators.
The objective of this paper is to demonstrate the validity and benefits of using a
Virtual Plant computer model throughout the projects conceptual development and
FEED phases in order to simulate and quantify the impact of the different design,
engineering and procurement options on the end project value.
Page 2
I.
Introduction
Capital projects represent the tangible version of a business idea when it
requires depreciable capital goods, designed and engineered to process and
generate specific products to be sold for an expected profit. Given the
availability and cost of the required feedstock and the market and price for the
end products, the success of a capital venture depends on the capacity of the
process facility to adequately deliver products on time, volume, specification and
cost, in order to generate the expected shareholder value.
Sound analysis, on the other hand, supports prevailing wisdom in that the
economic value of a capital project is defined at the front end and must be
assured through its EPC phase. Value has been traditionally measured in terms
of expected financial returns on the associated capital investment; todays
concept of value, however, goes deeper into its own roots to include plant
supply reliability and availability, cost competitiveness and client satisfaction.
To be able to achieve the desired level of project value at the front end it is
necessary to measure the impact of the different options of equipment
configuration and specification on the net present value of the CAPEX, OPEX
and revenue cashflows over the total life cycle. Performing these analyses, with
the necessary efficiency and accuracy, demands however the use of proven
computerized modeling and simulation techniques designed to readily answer
these questions through appropriate performance indicators.
The authors objective is to demonstrate the validity and benefits of using a
Virtual Plant throughout the conceptual development and FEED phases in
order to simulate and quantify the impact of the different design, engineering
and procurement options on the end project value. A Virtual Plant is a
computerized mathematical model of the plant and equipment system, designed
to answer specific questions regarding the systems ability to adequately fulfill
the requirements of the demand through simulation techniques.
Page 3
In order to achieve this purpose the authors will use the CAPITAL PROJECT
SIMULATION MODEL, CAPSIM, developed by their technical financial
consulting firm. CAPSIM is a comprehensive financial model that inserts the
Virtual Plant in the context of the CAPEX and OPEX environment that defines
and quantifies the capital and operating costs associated with the modeled
system. These three components of CAPSIM interact with each other thus
allowing the engineer to select the equipment configuration, specification and
procurement options that maximize project value over its total life cycle.
The methodology to be used in order to demonstrate the validity of the approach
is based on the application of the following ten steps to a particular project:
1.
Define plant adequate operation conditions
2.
Design the Process Technology Model
3.
Identify critical equipment functions
4.
Select configuration arrangements for each critical equipment function
5.
Design and validate the Conceptual Development Model
6.
Specify equipment and issue Requests for Quotations
7.
Select the most cost effective proposals
8.
Design and validate the FEED Model
9.
Issue Purchase Orders to selected vendors
10. Complete and freeze basic engineering and perform comprehensive risk
analyses
In this paper the authors use a natural gas liquid extraction project as an
example to demonstrate the value enhancement capabilities of the proposed
approach.
Page 4
II.
Objectives
The objective of this paper is to demonstrate the validity and benefits of using a
Virtual Plant computer model throughout the conceptual development and
FEED phases in order to simulate and quantify the impact of the different
design, engineering and procurement options on the end project value.
The proposed Virtual Plant approach constitutes a fundamental tool for this
purpose due to its capacity to model a specific plant and equipment system and
simulate its behavior over the projects life cycle. The systems mathematical
model is designed using process engineering information and defines the
functional relationship between equipment availability and the systems
production capacity; equipment availability is simulated using appropriate
reliability and maintainability probability density functions thus enabling the
model to process the performance indicators associated with the systems
production effectiveness and supply reliability and availability.
To achieve this objective the authors will use the CAPITAL PROJECT
SIMULATION MODEL, CAPSIM, a comprehensive financial computer model
that inserts the Virtual Plant model in the context of the CAPEX and OPEX
environment that defines and quantifies the capital and operating costs
associated with the modeled system, thus allowing the technical and economic
analysis and evaluation of design, engineering and procurement decisions over
the projects life cycle.
The Figure 1 is graphical description of the structure of the CAPSIM model.
Page 5
Figure 1 The CAPSIM Model
The three modules of CAPSIM interact with each other in order to generate the
fundamental performance indicators of project value from the standpoint of the
internal, external and financial strategic perspectives of the capital venture, at its
different stages of development throughout the life cycle.
The CAPEX cash flows are determined based on information obtained from the
appropriate class estimates and project execution schedules while the OPEX
cash flows are determined using the models own simulation results and
statistical operation and maintenance costs profiles.
Revenue cash flows and penalty costs can be calculated by associating
simulated production volumes and product price forecasts over the life cycle.
Page 6
III.
Scope
Given the availability and cost of the required feedstock and the market and
prices for the end products, the success of a capital venture depends
fundamentally on the capacity of the process facility to adequately meet demand
conditions at the right production cost. This paper will in consequence deal with
the root attributes that in essence define project value; that is, those associated
with plants ability to meet the adequate operation conditions set by the projects
business drivers.
These root attributes are defined in terms of internal and external performance
indicators that measure the plants capacity to reliably deliver products to clients
in the required volume and specification, and at adequate unit production costs.
The following are some of the root performance indicators that can be generated
by CAPSIM at the conceptual and FEED phases of a project:
1.
Internal, plant performance

Total production
Total revenue
Average production
Production effectiveness
Production losses
Mean production loss per interruption
Penalty costs for lost production
Systems ownership cost
Unit production costs
Page 7
2.
External, service quality

Mean time between (adequate operation) interruptions, MTBI
Mean interruption time, MIT
Supply reliability, Rs
Supply availability, As
All these indicators are essential requirements to properly measure the financial
performance the project through appropriate indicators such as:
IV.
1.
Internal Rate of Return, IRR
2.
Net Present Value, NPV
Designing and Simulating a Virtual Plant Model

The proposed Virtual Plant approach constitutes a fundamental tool due to its
capacity to model a specific plant and equipment system and simulate its
behavior over the projects life cycle. The systems mathematical model is
designed using process engineering information and defines the functional
relationship between equipment availability and the systems production
capacity; equipment availability is simulated using appropriate reliability and
maintainability probability density functions thus enabling the model to process
the required performance indicators associated with production effectiveness
and supply reliability and availability.
Virtual Plant models are used to support design and engineering efforts as well
as to audit resulting and/or existing design and engineering proposals, at any
level of development of a project. When they are used at the project
development concept phase we call them Process Technology (PT) models; if at
conceptual design level we call them Concept Development (CD) models and
FEED models when used at the front end loading phase.
Page 8
Virtual Plant models can be upgraded as the level of precision increases

through detailed engineering to as built drawings in order to expand its use into
the asset management phase of the project. At the detailed engineering level
these models represent a valuable low cost virtual project debottlenecking tool.
Virtual plants are useful at any moment during the development of a capital
project. We have used them in consulting engagements for several capital
projects in the energy sector, mostly oil and gas, during the following phases of
development:
1.
Project Conceptualization
2.
Concept Development
3.
FEED
4.
Detailed engineering
5.
Procurement
6.
O&M
For the gas sector in particular we have used them in consulting engagements
at different stages of the value chain:
1.
Gas compression and transmission
2.
Gas liquids extraction
3.
Gas liquids fractionation
4.
Ethane compression and transmission
The following steps are required to design and simulate a Virtual Plant model
from existing process engineering data:
Page 9
1.
Define the systems battery limits
2.
Establish its Adequate Operation Conditions, AOCs
3.
Design a functional model of the system using process flow diagrams
4.
Quantify plant production capacity for the different productive states of the
system
5.
Estimate the reliability, availability and maintainability (RAM) parameters of

equipment functions or positions included in the model
6.
Simulate the systems internal and external performance indicators
7.
Compare simulation results with established AOCs
8.
Identify systems effectiveness and reliability risks areas
9.
Identify areas of potential system value enhancement
10. If required, apply CAPSIM in order to choose most economic options to

mitigate risk or enhance value
RAM equipment estimates can be obtained from sources such as statistical
failure and repair data from similar equipment or using industry sources such as
the Offshore Reliability Data Handbook, OREDA [1].
These steps will be documented as part of a practical example to be developed
later in this paper.
V.
Structuring a Capital Project Simulation Model

When inserted within the framework of CAPSIM, the Virtual Plant becomes its
Performance Module and can now be used to technically and economically
evaluate design, engineering and procurement options in order to enhance
project value or for mitigation of effectiveness and reliability risk areas.
Page 10
CAPSIM expands the scope of the Virtual Plant capabilities by adding to it the
capacity to incorporate the time value of money in the analyses and to generate
financial performance indicators. On the other hand, the insertion of the Virtual
Plant model in CAPSIM actually empowers the intrinsic capacities of the
traditional CAPEX/OPEX model by adding to it the ability to interact with the
plant itself.
The CAPEX capital cashflows are determined based on information obtained
from the appropriate class estimates and project execution schedules while the
OPEX expense cashflows are determined using the virtual models own
simulation results and statistical operation and maintenance costs profiles.
Revenue cashflows and penalty costs can be calculated by associating
simulated production volumes and product price forecasts over the life cycle.
By adequately structuring its PERFORMANCE, CAPEX and OPEX Modules,
CAPSIM is capable of generating all the internal, external and financial
performance indicators associated with the system being modeled.
CAPSIM has been used for projects in the gas industry mostly in the area of
analysis of procurement options.
The following information is required in order to structure the CAPEX Module of
CAPSIM:
1.
Installed capacity
2.
Equipment costs
3.
Engineering and construction costs
4.
Commissioning and start up costs
5.
Project work schedules
The following data should be provided to set up the OPEX Module:
Page 11
1.
Mean equipment unscheduled repair costs
2.
Mean equipment inspection cost and frequency
3.
Mean equipment overhaul cost and frequency
4.
Operating costs
The process of structuring these modules will be documented through a

practical example to be developed later in this paper.
VI.
Ten Steps to Design, Engineer and Procure Project Value

The authors propose ten steps in order to design, engineer and procure the
expected project value at the frond end:
1.

From the projects development concept define the physical scope of the
plant system to be analyzed as well as any other system outside the battery
limits that may affect its behavior.
The systems applicable adequate operation conditions are, for example:
Volume of products to be supplied
Supply reliability and availability
Allowable mean time between interruptions of adequate supply
Page 12
Allowable mean penalty cost per interruption

Unit production cost
2.

From the Project Development Concept process information, design a
Process Technology (PT) Model of the plant system using process
information data at the equipment function level.
3.

Using appropriate estimates of equipment function reliability, maintainability
and availability (RAM) parameters, simulate the system effectiveness as
well as the supply reliability and availability of the PT Model and, based on
the definition of adequate operation conditions of the plant system, identify
critical equipment functions.
Critical functions are defined based on impact in number and duration of
adequate operation interruptions and ranked as well as in terms of
production losses per interruption.
4.

Identify the different equipment configuration options to be considered for
each critical equipment function and use CAPSIM to select the most cost
effective configuration using appropriate RAM attributes and cost estimates.
Equipment RAM estimates can be obtained from sources such as statistical
failure and repair data from similar equipment or using the OREDA [1]
database. Class 1 cost estimates, +40% to -30%, for CAPEX and OPEX are
sufficient at this stage of analysis.
5.
Page 13
Upgrade the PT Model into a Conceptual Development (CD) Model using

the selected equipment configurations, and use CAPSIM to simulate
results and validate fulfillment of system adequate operation conditions.
If fulfillment is not validated, review and revise the equipment configuration
analyses and selection performed in step 4 and repeat the process until
validation is confirmed.
6.
Specify equipment and issue requests for quotations

Based on the approved configuration arrangements, generate engineering
and RAM specifications for the different equipment procurement processes
to be initiated and issue the corresponding Requests for Quotations (RFQs)
to selected bidders.
RFQs must specifically request that bidders provide information related to
their estimates of equipment failure and repair rates as well as maintenance
and operation costs of proposed equipment. Recommended scheduled
maintenance policies should be also quantified in terms of frequency and
cost.
7.
Select most cost effective proposals

Analyze and compare bids using CAPSIM and select the most cost
effective proposals based on actual bid cost and RAM data.
Class 2 cost estimates, +20% to -10% for installation hook up and
commissioning of equipment systems are required at this stage of analysis.
8.
Design and validate the FEED model

Upgrade the CD Model into a Front End Engineering Design (FEED) Model
and run a full CAPSIM analysis, using the selected proposals, in order to
validate fulfillment of system adequate operation conditions.
Page 14
If fulfillment is not validated, review and revise the bid analyses and
selection performed in step 7 and repeat the process until validation is
confirmed.
In case of selecting proposals from different manufactures, measure the
cost and benefits of equipment standardization.
9.

Issue Purchase Orders (POs) to selected equipment suppliers.
analyses
VII. A Practical Example: The Case Of a Natural Gas Liquid Extraction Project
To illustrate the proposed process in this paper we will analyze the case of a
natural gas liquid extraction project proposed to supply the ethane requirements
of new ethylene plant.
The business idea
Presently there is a current of 950 MMSCFD of wet production associated gas
being used to provide fuel gas to an existing refinery and for transmission and
distribution of natural gas for domestic and industrial consumers.
The business idea is to extract the natural gas liquids by installing a new liquid
extraction facility on ethane extraction mode in order to sell 40.000 BPD of
ethane to a new ethylene plant.
The remaining NGL would be processed in an existing fractionation facility.
The residue gas produced by the new extraction facility would be used to satisfy
the requirements the refinery and the domestic and industrial clients.
Page 15
The economic value of the proposed project is to be estimated considering only

the revenue coming from the sale of ethane. Penalty cost for lost production has
been established at 35 US$/barrel.
The Project Development Concept
Figure 2 shows the approved Project Development Concept using two 2
extraction trains in parallel with a capacity to produce 20.000 BPD of ethane
each at 90% ethane recovery.
Figure 2 Project Development Concept
Page 16
Apply the ten steps process to design, engineer and procure project value
at the front end
1.
2.
3.
4.
5.
6.
Specify equipment and issue Requests for Quotations
7.
Select most cost effective proposals
8.
Design and validate the FEED Model
9.
analyses
Step 1 - Define plant adequate operation conditions
To operate adequately the new extraction plant must be able to deliver 40.000
BPD of ethane in specification at least 97.5 % of the time with a maximum
permissible interruption time of 36 hrs.
Step 2 - Design the Process Technology Model
Figure 3 shows the PT model to be simulated in order to identify critical
equipment functions.
Page 17
Extraction Train 1
Turboexpansion
Charge
pumping
Demethanization
Reflux
pumping
Propane
compression
Deethanization
Ethane
compression
Extraction Train 2
Hot oil
pumping
Turboexpansion
Charge
pumping
Demethanization
Residue gas
compression
Reflux
pumping
Deethanization
Figure 3 Process Technology Model
Step 3 - Identify critical equipment functions

Figure 4 shows the results of simulating the PT model at the Plant and
Equipment Function levels. The criteria chosen to rank equipment function
criticality was % of lost production.
The results of the simulation indicate that 59.61% of the lost production is
associated with the three process compressor equipment functions. The
simulated results also indicate that the PT model has a supply availability of
94.46%, below the 97.5% established in the AOCs.
Equipment configuration analyses will be performed in the next step in order to
define the most effective compressor configurations for each service required in
order to increase system supply reliability to at least 97.5%
Page 18
Table I shows the RAM parameters applied to each equipment function in order
to simulate the results presented in Figure 4.
Table I RAM parameters PT Model

Mean Time Between
Failures MTBF (hours)
Mean Time Down - MTD

(hours)
Compressors
1,100.00
10.00
Turbo expanders
2,150.00
8.00
Pumps
1,500.00
6.00
Vessels
20,000.00
40.00
In this paper the Weibull distribution will be used for all reliability and
maintainability simulations, using values of the shape parameter, equal to 1.00
and 2.50 respectively.
Step 4 - Select configuration arrangements for each critical equipment
function
Table II shows the process design operating conditions for each one of the
different compressor equipment functions to be configured.
Table II Compressor operating conditions

Ethane
Propane
Residue gas
Flow (MMSCFD)
68
190
800
Inlet temperature (F)
45
36
122
Inlet pressure (psig)
415
62
500
Discharge pressure(psig)
780
250
1,300
Service
Page 19
Figure 4 - Critical Equipment Function Identification
Page 20
Figures 5, 6 and 7 show the results of the configuration analysis for the different
compressor equipment functions. The performance indicators to be used for
selection of configurations are Production Effectiveness and Mean Production
Loss per Interruption due to their direct impact on ethane production.
The results presented in the above mentioned figures indicate that for all
equipment functions the best configuration arrangement is 3x50%. In the next
step these configurations will be validated by inserting them into the model in
order to generate the required simulation results at the plant level.
Table III shows the input data used in order to model, simulate and evaluate the
indicated configurations for each equipment function using electric motor driven
centrifugal compressors.
Page 21
Table III CAPSIM input data

Ethane
Configuration option
Propane
Residue gas
2 x 60%
3 x 50%
2 x 60%
3 x 50%
2 x 60%
3 x 50%
Equipment cost
MMUS$
5.04
6.83
12.23
16.56
10.43
13.04
Construction costs
MMUS$
15.12
20.48
36.68
49.68
31.29
39.11
TOTAL CAPEX
MMUS$
20.16
27.30
48.91
66.23
41.71
52.14
Annual operation costs
US$/yr
290,155
424,023
313,413
451,493
315,305
438,780
Annual maintenance costs
US$/yr
193,437
282,682
208,942
300,996
210,203
292,520
TOTAL OPEX
US$/yr
483,592
706,704
522,355
752,489
525,508
731,301
Mean cost per failure
US$
10,000
10,000
10,000
10,000
10,000
10,000
Mean cost per inspection
US$
19,500
16,250
24,300
20,250
24,480
17,850
Mean cost per overhaul
US$
117,000
100,750
178,200
148,500
183,600
127,500
Mean Time Between Failures MTBF
hrs
1,100
1,100
1,100
1,100
1,100
1,100
Mean Time Down - MTD
hrs
10
10
10
10
10
10
Mean Time Between Inspection - MTBIN
hrs
40,000
40,000
40,000
40,000
40,000
40,000
Mean Inspection Time - MINT
hrs
19.5
16.25
24.3
20.25
24.48
17.85
Mean Time Between Overhauls - MTBOH
hrs
80,000
80,000
80,000
80,000
80,000
80,000
Mean Overhaul Time - MOHT
hrs
117
100.75
178.2
148.5
183.6
127.5
Operation costs
Maintenance costs parameters
RAM parameters
Scheduled maintenance data
Page 22
Figure 5 Equipment Configuration Analysis Ethane Compression
Page 23
Figure 6 - Equipment Configuration Analysis Propane Compression
Page 24
Figure 7 - Equipment Configuration Analysis Residue Gas Compression
Page 25
Step 5 - Design and validate the Conceptual Development Model

Figure 8 shows the results of simulating the CD model using only the selected
configurations
Figure 9 shows the results of simulating the CD model using all possible mixes
of configurations for the three compressor equipment functions.
Figure 10 shows the results of simulating the CD model using the selected
configurations together with the rest of equipment functions.
The results of the first simulation validates that the selected configurations
indeed have the capacity to meet and exceed AOCs while the second
simulation confirms that of all configuration schemes the 3x50% is definitely the
best option.
The results of the third simulation however indicate that the CD model is still not
meeting supply availability requirements and that further configuration analyses
must be performed in other equipment functions, such as hot oil pumping, in
order for the system to operate adequately.
Step 6 - Specify equipment and issue Requests for Quotations
Based on the approved configuration arrangements, generate engineering and
RAM specifications for the different early equipment procurement processes to
be initiated and issue the corresponding Requests for Quotations (RFQs) to
selected bidders.
RFQs must specifically request that bidders provide information related to their
estimates of equipment failure and repair rates as well as maintenance and
operation costs of proposed equipment. Recommended scheduled maintenance
policies should be also quantified in terms of frequency and cost.
Page 26
Step 7 - Select the most cost effective proposals

Figure 11 shows the results of simulating bids from suppliers A, B and C for the
propane compressors. Using the same criteria applied for configuration selection
the bid from supplier B was selected.
The same procedure has to be applied to the rest of the equipment items to be
early procured.
Step 8 - Design and validate the FEED Model
Upgrade the CD Model into a Front End Engineering Design (FEED) Model and
run a full CAPSIM analysis, using the selected proposals, in order to validate
fulfillment of system adequate operation conditions.
If fulfillment is not validated, review and revise the bid analyses and selection
performed in step 7 as well as detected effectiveness and reliability risk areas
and repeat the process until validation is confirmed.
In case of selecting proposals from different manufactures, measure the cost
and benefits of the different options of equipment standardization.
Step 9 - Issue Purchase Orders to selected vendors
Issue Purchase Orders (POs) to selected equipment suppliers
Step
10
Complete
and
freeze
basic
engineering
and
perform
comprehensive risk analyses
Page 27
Figure 8 Configuration Validation, selected options
Page 28
Figure 9 Configuration Validation, all options
Page 29
Figure 10 CD Model Validation
Page 30
Figure 11 Bid Analysis
Page 31
VIII. Conclusions
The discussion regarding project investment strategies has traditionally spun
heavily around the costs and benefits of investing in equipment reliability and
maintainability. Between those who preach that the benefits are there and those
who think that the numbers are not sufficiently substantiated to support the
lobbying effort for the extra capital required.
We believe that the missing links thus far have been the resources and
capabilities to assess the impact that investment decisions at the equipment
level have on the end financial results of the capital venture.
What we have presented in this paper is precisely an approach that allows the
analysts to not only evaluate the stand alone behavior of an equipment system
but, more importantly, to measure its impact on the fulfillment of the plant
performance and service quality indicators that are at the root of end project
value.
It is our conclusion that the proposed procedure and its practical application
show the strength and validity of the use of a Virtual Plant approach to design,
engineer and procure project value at the front end. It also shows the
importance of performing these analyses before equipment early procurement
efforts are otherwise initiated.
We cannot, on the other hand, overemphasize the importance of assuring the
resulting project value throughout the intensive time and cost dominated EPC
phase of the project. That is, if the shareholders want to receive the plant they
bet their money on.
IX.
References Cited
1.
OREDA Offshore Reliability Handbook, 4th Edition, OREDA Participants,

2002
Page 32
X.
Bibliography
1.
Guidelines for Improving Plant Reliability through Data Collection and

Analysis, American Institute of Chemical Engineers, 1998
2.
John W. Hackney, Control and Management of Capital Projects, John Wiley

& Sons, Inc., 1965
3.
Nio, L.E. and Nio M., Modeling and Simulation of Capital Projects: How
to assure successful investments in the energy sector, Venezuelan
Association of Gas Processors, AVPG, XVI International Gas Convention,
Caracas, Venezuela, May 2004
4.
Nio, L.E., Management of Capital Projects: A Value Approach, Project

Management Institute, 3rd. Iberoamerican Project Management Congress,
Caracas, Venezuela. July 2002
Page 33

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Developments of Natural Gas Markets

ASOCIACION VENEZOLANA DE PROCESADORES DE GAS

VIRTUAL PLANT APPROACH TO DESIGN,

Luis Eduardo Nio Monr

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006

Developments of Natural Gas Markets

Designing and Simulating a Virtual Plant Model.......................................................8

Structuring a Capital Project Simulation Model ......................................................10

Ten Steps to Design, Engineer and Procure Project Value....................................12

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006

Developments of Natural Gas Markets

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006

Developments of Natural Gas Markets

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006

Developments of Natural Gas Markets

Define plant adequate operation conditions

Design the Process Technology Model

Identify critical equipment functions

Select configuration arrangements for each critical equipment function

Design and validate the Conceptual Development Model

Specify equipment and issue Requests for Quotations

Select the most cost effective proposals

Design and validate the FEED Model

Issue Purchase Orders to selected vendors

Developments of Natural Gas Markets

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006

Developments of Natural Gas Markets

Figure 1 The CAPSIM Model

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006

Developments of Natural Gas Markets

Internal, plant performance

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006

Developments of Natural Gas Markets

External, service quality

Internal Rate of Return, IRR

Net Present Value, NPV

Designing and Simulating a Virtual Plant Model

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006

Developments of Natural Gas Markets

Virtual Plant models can be upgraded as the level of precision increases

Gas compression and transmission

Gas liquids extraction

Gas liquids fractionation

Ethane compression and transmission

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006

Developments of Natural Gas Markets

Define the systems battery limits

Establish its Adequate Operation Conditions, AOCs

Design a functional model of the system using process flow diagrams

Estimate the reliability, availability and maintainability (RAM) parameters of

Simulate the systems internal and external performance indicators

Compare simulation results with established AOCs

Identify systems effectiveness and reliability risks areas

Identify areas of potential system value enhancement

10. If required, apply CAPSIM in order to choose most economic options to

Structuring a Capital Project Simulation Model

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006

Developments of Natural Gas Markets

Engineering and construction costs

Commissioning and start up costs

Project work schedules

The following data should be provided to set up the OPEX Module:

XVII Gas Convention, AVPG, Caracas, Venezuela, May 23 - 25 th, 2006