PTQ Q4 2023 Issue

Vol 28 No 5 Q4 (Oct, Nov, Dec) 2023 ptq PETROLEUM TECHNOLOGY QUARTERLY

Cost factors to consider in 2024

H igh construction costs in the petrochemical industry can be attributed to fac- tors impacting the design, procurement, and commissioning of petrochemical facilities. It is no secret that high construction and operational costs are seen in every industry and commercial sector. However, the ‘hybridisation’ of the hydro- carbon processing industry seen with the integration of the biochemical processing industry (such as fast pyrolysis integrated with hydrotreating) complicates planning. Intricate petrochemical processes, equipment, and safety considerations demand extensive planning and engineering expertise, driving up costs. Refining and pet - rochemical facilities must adhere to numerous regulations and environmental stan- dards. Complying with these often requires additional design elements, specialised equipment, and safety measures, contributing to higher costs. Depending on the complexity, these facilities often need significant site preparation and infrastructure development, such as building access roads, utility connections, and waste disposal systems, and the associated costs can be substantial. Skilled craftsmen and other specialised labour are essential for all construction phases, often commanding higher wages due to the specialised nature of the work and potential risks involved. Additionally, labour shortages in certain regions can ramp up costs. At RefComm Galveston 2023, it was noted that there is a shortage of labourers available for the installation of refractory in FCC transfer lines, while the increased usage of structured packing in main fractionators is calling for a higher level of skill to avoid damage during installation. More expensive specialised materials that may have been overlooked during pre- planning are compounding revamp and turnaround budgets, including the need for higher amounts of quality, steel such as 316 S.S., and specialised alloys, such as Monel, that are more resistant to corrosion by many aggressive agents (such as high TAN crudes). Higher complexity requires advanced process control systems. In the long term, these multiple layers of control system investments mitigate operational costs. The most recent advanced capabilities, including AI and machine learning capabilities, require extensive training and vendor support. Implementing these engineering controls and safety measures can add to the overall construction costs. In any event, delays in project timelines can lead to increased costs due to prolonged labour, equipment rentals, and other ongoing expenses. Changes in project scope, design, or requirements can also result in additional costs. Then, the market’s economic fluctuations, currency exchange rates, and geo - political factors must be considered. Extended delays in transporting large and heavy equipment to remote or challenging locations can incur substantial costs. Difficulties in accessing remote areas can further complicate logistics and increase costs. The refining and petrochemical industry also competes with other industry sectors for financing. Securing financing for petrochemical projects can involve high inter - est rates or complex financing structures. ‘Virtue signalling’ investments involving decarbonisation technology can facilitate financing for multibillion-dollar projects to justify the production of high-margin products from SAF to specialised polymers. Downstream projects often have long construction and commissioning periods, during which labour, equipment, and other expenses accumulate because of the product supply and distribution challenges seen since the global pandemic. Scaling up or down the capacity of a facility due to market or regulatory factors also impacts costs. In summary, high construction costs result from the complex nature of strin- gent regulatory requirements, the need for specialised materials, labour, safety con- siderations, as well as external economic and logistical factors.

Editor Rene Gonzalez editor@petroleumtechnology.com tel: +1 713 449 5817

Managing Editor Rachel Storry rachel.storry@emap.com Editorial Assistant Lisa Harrison lisa.harrison@emap.com

Graphics Peter Harper

Business Development Director Paul Mason sales@petroleumtechnology.com tel: +44 7841 699431

Managing Director Richard Watts richard.watts@emap.com

Circulation Fran Havard circulation@petroleumtechnology. com

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PTQ (Petroleum Technology Quarterly) (ISSN No: 1632-363X, USPS No: 014-781) is published quarterly plus annual Catalysis edition by EMAP and is distributed in the US by SP/Asendia, 17B South Middlesex Avenue, Monroe NJ 08831. Periodicals postage paid at New Brunswick, NJ. Postmaster: send address changes to PTQ (Petroleum Technology Quarterly), 17B South Middlesex Avenue, Monroe NJ 08831. Back numbers available from the Publisherat $30 per copy inc postage.

Rene Gonzalez, Editor, PTQ

PTQ Q4 2023