Standardization: The next step in lowering capital costs?

17:19 PM | March 5, 2020 | Francinia Protti-Alvarez

The standardization of plant design could deliver projects faster, and therefore at a lower cost, says David Gaertner, vice president/global petrochemical business at Schneider Electric. The adoption of standardization could enhance the positive impact modularization, and digital tools are already having on efficiencies and lowering capital costs. 

Capital deployment is following demand in chemicals supported by the swelling middle class and urbanization in China and other emerging economies, as well as by abundant and cheap feedstock. The shortage of tradespeople in the US Gulf Coast is causing projects to change execution strategies to move labor to countries like China where labor cost is low and abundant, industry participants say.

"So, operating companies in the engineering, procurement, and construction (EPC) sector are using more of this strategy of modularization," Gaertner adds. "Process modules are built in China and shipped to the site. Labor at the site integrates the modules like Lego building blocks to complete the plant with a smaller site workforce."

"In some places in the world [modularization] is more efficient, safer. The productivity of labor is better if we can build the plants just not on the plant site but offsite, and bring in different modules," adds Ron Venner, vice president/innovation & knowledge management at Lummus Technology. "That's a project-by-project, site-specific analysis we do, using strategic modularization for plant design," says Venner.

Standardization of plant design could further shorten delivery times and therefore bring capital costs down. The idea was successfully deployed in France, allowing the nuclear industry to copy the designs of their nuclear plants many times over.

"It's the reason why France was able to produce nuclear energy at a far lower price than in the United States," Gaertner says. "The way to get capital costs down is copying a design from a former design where you do not have the reengineer everything."

Standardization would make it possible to take a process designed package (PDP), which forms the basis of design for that project. For example, with a standard PDP to build five ethylene crackers or five propane dehydrogenation plants, the EPC could reuse that design, according to Gaertner.

"If that concept is applied further down the supply chain, suppliers of equipment like furnaces, reactors, pumps, valves, can also reuse their design," Gaertner says. Exercising this strategy requires a great deal of discipline from the owner, EPC, licensor, and suppliers. The licensor should not have to forfeit the protection of their intellectual property."

Meanwhile, digital tools continue facilitating strategic modularization along with other aspects of the EPC process.

"One of the challenges around the capital is designing [a plant] to precisely hit the target capacity without over-design and over the cost of the equipment," Venner says. Here is where technology companies help in the design with tools and to manage the process of designing and building plants to make that happen.

"We are combining technologies used in process design, 3D design, dynamic simulation, and automation to speed the commercial release of new process designs to the market," adds Gaertner. "We are also exploring the possibility of incorporating Machine Learning with these technologies to refine the design before building. This approach can reduce cost, risk, and schedule from the conventional approach of building successive plants to test designs before having the confidence to build at a commercial scale."

These tools are being implemented and utilized and refined to ensure efficient project execution. But "it is not just using digitalization in established enterprises once the plant is up and running. It is also taking advantage of some of these tools for project execution, ensuring a seamless transition across the different project phases, not only for on-time execution but also on a budget," Venner notes.

These tools support the engineering and building of the complexes and are also helping to train the workforce. Several new technologies will add value to these integrated refinery petrochemical projects, but new technologies also bring challenges.

"More is required in planning because there are many new technologies and emerging technologies that we need to evaluate. One challenge we see is the rapid commercialization of some of the disruptive technologies announced—such as thermal crude-to-chemicals, or the oxidative coupling of methane to produce olefins. A project may take five, six years to come to start-up, and you do not need that disruption midproject," Venner says.