IMPORTANCE OF AN ACCURATE OPEX ESTIMATION IN THE PROJECT DECISION MAKING
The economic performance of a process plant facility is a function of many variables — the plant configuration, acquisition price of raw materials, product prices, strategic decisions, operating cost, and environmental requirements — and so simple economic models rarely provide sufficient guidance as an aid in decision making. Both raw materials and product prices change relative to each other, subject to the supply and demand forces in the market.
The process plants have some control over the cost of production, but price structures exhibit a more complex relationship. Process plants attempt to maximize earnings from fluctuations in the market price of the row material and product slate. Among the available studies in the literature on budgeting, few have dealt with operating cost forecasts and methods of effectively calculating them. Some of them defended that the existing estimating methods, such as regression model and artificial intelligence applications are improper and time-consuming to estimate costs in the construction industry. However, most of the papers refer to asymmetric information on budgetary slack, capital budgeting process, incentives, budget as a tool of managerial performance, budgetary participation and organizational effectiveness, and the role of budgetary information.
The focus of the budget in the view of many authors is in the organizational environment. However, the majority of the researches that address the budget issue at the international level are long and run through several areas of knowledge such as economics, psychology, sociology, management, and accounting, but not econometrics.
✔ - OPERATING EXPENDITURES COST ESTIMATING MATURITY STAGES
The OPEX estimate study should be performed with an increasing level of accuracy during the whole Asset Lifecycle (see figure below) starting from the early Development Phases up to end of the Asset producing life, as the amount of data available increases and different techniques become available (basic, detail, engineering). A risk analysis modelization through Montecarlo equations could be performed in order to verify the requested accuracy levels.
✔ - METHODS TO CALCULATE OPEX BASED ON THE MATURITY ENGINEERING LEVEL
EARLY PHASES - HISTORICAL PERCENTAGES RANGESOPEX is estimated as % of CAPEX or based on cost benchmarking. This method is applied only in the first phase of the projects (Pre-evaluation) when just a comparison within different development schemes is required.
✔ - METHODS TO CALCULATE OPEX BASED ON THE MATURITY ENGINEERING LEVEL
OTHER PHASES - ACTIVITY BASED COST (ABC) METHODActivity Based Cost (ABC) modelling:
Applicable for OPEX cost estimation which enables fundamental design and operating decisions. The ABC identifies, quantifies and analyses project activities and resources with detailed accuracy, transparency and visibility. It enables to understand the cost and value drivers for the operating expenditures. The process (represented in the picture below), is based on the principle that products come from activities and the activities consume resources.
Activity Based Cost (ABC) Process:
The process foresees the following steps (as in the following picture):
- Identify all the activities required to create the product.
- Divide the activities into cost pools, which includes all the individual costs related to an activity—such as manufacturing. Calculate the total overhead of each cost pool.
- Assign each cost pool activity cost drivers, such as hours or units.
- Calculate the cost driver rate by dividing the total overhead in each cost pool by the total cost drivers.
- Divide the total overhead of each cost pool by the total cost drivers to get the cost driver rate.
- Multiply the cost driver rate by the number of cost drivers.
OUTPUT STRUCTURE:
The activities and related costs that have been identified are collected in three main groups, for each of them some specifications have been introduced as shown below:
The output can be also divided in:
A) Direct costs: the portion of operating costs that may be assigned to a specific product or process area. These include costs for personnel, utilities, chemicals and consumables;
B) Indirect costs: the portion of operating costs that cannot be assigned to the end product or process such as overheads, general labour costs and costs of outside operations such as transportation and distribution. Indirect costs also include insurance, property taxes, depreciation, general management, etc;
Another way to wrap up de OPEX
A) Fixed: independent from the volumes of production;
B) Variable: dependent on the volume of production.
SAMPLE OF OUTPUT STRUCTURE FOR OFFSHORE OIL&GAS PROJECTS:
COST BENCHMARKING CURVES SOURCE - CAF-CAPEX OPEX DATABASE
Having a database with cost curves at hand with the following benefits:
- Updatable all the time with built-in inflation indexes
- Databases continually growing and updating
- Technical support available 24/7