Step 8. Calculate cash flow for selected configurations.
The selected manufacturers’ equipment offer will also include a delivery time
for the equipment item. Using these and other experience factors, prepare a
preliminary schedule for the installation of the facilities. This is executed by the
experienced schedule engineers of the company or by accepted consultants.
Using this schedule, the development engineer participates with others (usually
members of the company’s project management department or finance departments) to split the budget down to annual payments over the construction period
as scheduled. The exercise continues to allocate payout of the capital costs on an
annual basis over a prescribed period after plant start-up. This is also discussed
later in this chapter.
Step 9. Calculate the return on investment based on a discounted cash flow basis.
The development engineer proceeds to develop the return on investment using
the cash flow developed in step 8 for the selected configurations. A technique
using the discounted cash flow principle is used for this purpose. This provides a
more accurate and more credible result than an ROI arrived at by the simple
method where no account is taken of the construction time and cash flow. Details
of ROI calculations are given later in this chapter.
Step 10. Prepare the study report and presentation to management.
Much of the report should be written as the study project proceeds. In this way,
facts which are still fresh in one’s mind are recorded accurately. The final report
must be concise but complete with all salient points. Techniques in report
writing are not included as a subject here. Sufficient to say that communicating
the study and its results effectively is as important as any technique and good
engineering “know how” used in the work. The same applies to the final oral
presentation to management. The study, the methodology, and, finally, the
results must be presented in a manner that maintains interest and stimulates
the decision-making mechanism.
This completes a typical study approach. Should the screening study reveal an
option which far surpasses any of the others studied in terms of payout, this could be
the only option that then needs further study as described in steps 7–10. Such a
situation saves a considerable time and effort.
Building Process Configurations and the Screening Study
(See also the chapter entitled “▶ Petroleum Products and a Refinery Configuration”
of this Handbook).
From item 1 above, it can be seen that the first major event that involves in-depth
examination in a process study is the screening of options. Here a very simple and
preliminary economic comparison of the options is carried out. This comparison is
viable because the basis for the economic criteria is the same for each of the
options. It must be borne in mind that a prerequisite for carrying out any of
these process studies is a good working knowledge of the processes involved.
Petroleum Refinery Planning and Economics
703
The selected manufacturers’ equipment offer will also include a delivery time
for the equipment item. Using these and other experience factors, prepare a
preliminary schedule for the installation of the facilities. This is executed by the
experienced schedule engineers of the company or by accepted consultants.
Using this schedule, the development engineer participates with others (usually
members of the company’s project management department or finance departments) to split the budget down to annual payments over the construction period
as scheduled. The exercise continues to allocate payout of the capital costs on an
annual basis over a prescribed period after plant start-up. This is also discussed
later in this chapter.
Step 9. Calculate the return on investment based on a discounted cash flow basis.
The development engineer proceeds to develop the return on investment using
the cash flow developed in step 8 for the selected configurations. A technique
using the discounted cash flow principle is used for this purpose. This provides a
more accurate and more credible result than an ROI arrived at by the simple
method where no account is taken of the construction time and cash flow. Details
of ROI calculations are given later in this chapter.
Step 10. Prepare the study report and presentation to management.
Much of the report should be written as the study project proceeds. In this way,
facts which are still fresh in one’s mind are recorded accurately. The final report
must be concise but complete with all salient points. Techniques in report
writing are not included as a subject here. Sufficient to say that communicating
the study and its results effectively is as important as any technique and good
engineering “know how” used in the work. The same applies to the final oral
presentation to management. The study, the methodology, and, finally, the
results must be presented in a manner that maintains interest and stimulates
the decision-making mechanism.
This completes a typical study approach. Should the screening study reveal an
option which far surpasses any of the others studied in terms of payout, this could be
the only option that then needs further study as described in steps 7–10. Such a
situation saves a considerable time and effort.
Building Process Configurations and the Screening Study
(See also the chapter entitled “▶ Petroleum Products and a Refinery Configuration”
of this Handbook).
From item 1 above, it can be seen that the first major event that involves in-depth
examination in a process study is the screening of options. Here a very simple and
preliminary economic comparison of the options is carried out. This comparison is
viable because the basis for the economic criteria is the same for each of the
options. It must be borne in mind that a prerequisite for carrying out any of
these process studies is a good working knowledge of the processes involved.
Petroleum Refinery Planning and Economics
703