Operating expenditure

Over the lifetime of the field, the total undiscounted operating expenditure (opex) is likely to exceed the capital expenditure (capex). It is therefore important to control and reduce opex at the project design stage as well as during the production period. 

The cost of implementing CAO depends of course on the system installed, but for a new field development is likely to be in the order of 1 -5% of the project capital expenditure, plus 1-5% of the annual operating expenditure. 

Standardisation of equipment items is an area for potential cost savings, both in terms of capital expenditure (capex) and operating expenditure (opex), and is a decision which should be taken In consultation with the production operations department at the FDP stage. Standardisation can be applied to equipment items ranging from drilling platforms to valves. The benefits of standardisation are ... 

As discussed in Sections 13.0 and 14.0, the management of operating expenditure (opex) is a major issue, since initial estimates of opex are often far exceeded in reality, and may threaten the profitability of a project. Within the FDP, it is therefore useful to specify the system which will be used to measure the opex. Without measuring opex, there is no chance of managing it. This will involve the joint effort of production operations, finance and accounting, and the development managers. 

Maintenance costs account for a large fraction of the total operating expenditure (opex) of a project. Because of the bath tub curve mentioned above, maintenance costs typically increase as the facilities age just when the production and hence revenues enter into decline. The measurement and control of opex often becomes a key issue during the producing lifetime of the field as discussed in Section 14.0. However, the problem should be anticipated when writing the FDP. 

Once production commences (possibly 3-8 years after the first capex) gross revenues are received from the sale of the hydrocarbons. These revenues are used to recover the capital expenditure (capex) of the project, to pay for the operating expenditure (opex) of the project (e.g. manpower, maintenance, equipment running costs, support costs), and to provide the host government take which may in the simplest case be in the form of taxes and royalty. 

The treatment of expenditures will be specified by the fiscal system set by the host government. A typical case would be to define expenditure on items whose useful life exceeds one year as capital expenditure (capex), such as costs of platforms, pipelines, wells. Items whose useful life is less than one year (e.g. chemicals, services, maintenance, overheads, insurance costs) would then be classed as operating expenditure (opex). 

The capital cost estimates are generated by the Engineering function, often based on 50/50 estimates (equal probability of cost overrun and underrun). It is recommended that the operating expenditure is estimated based on the specific activities estimated during the field lifetime (e.g. number of workovers, number of replacement items, cost of forecast manpower requirements). In the absence of this detail it is common, though often inaccurate, to assume that the opex will be composed of two elements fixed opex and variable opex. 

During the producing life, most of the money spent on the field will be on operating expenditure. This includes costs such as... 

At a very optimistic conversion efficiency of 10 % and a price for H2 of 15 per GJ only 10 worth of H2/m2/year would be obtained thus severely constraining construction and operational expenditures. Obviously, the situation worsens if conversion efficiencies are lower. In spite of the critical importance of this consideration, relatively few studies on photobiological hydrogen production report conversion efficiencies, and when these are reported they typically fall well below 1 % (i.e. < 1 HVmVyear). 

Catalyst Cost. Catalyst replacement cost represents a large operating expenditure, in addition to the effect that catalyst performance (good or bad) can have on yield and associated profit. Therefore, in addition to all the other objectives, we continually evaluated catalyst composition and method of manufacture as they impacted on catalyst cost. Catalyst manufacturing modifications as they impacted cost were always carefully reviewed and such review was a key part of the catalyst development program. 

Optimization models are capable of evaluating all possible plant-site combinations simultaneously. However, this approach would considerably increase the data preparation efforts required since for each plant-site combination both investment and operating expenditures would have to be estimated. Additionally, calculation times increase significantly with the number of alternative investment opportunities. 

As Chapters 8 and 9 pointed out, human resources are among a pharmacy s most valuable assets. Employee wages can account for one of the pharmacy s greater operating expenditures (see Chapter 15). Employees, however, should not be viewed as a cost but as an essential asset for organizational success. The ramifications of executing a good performance appraisal system extend to most human resources decisions. Table 10-1 summarizes some important points about the need for performance appraisals. 

Expenses, as outlined in Chap. 8, for various types of taxes and insurance can materially affect the economic situation for any industrial process. Because modem taxes may amount to a major portion of a manufacturing firm s net earnings, it is essential that the chemical engineer be conversant with the fundamentals of taxation. For example, income taxes apply differently to projects with different proportions of fixed and working capital. Profitability, therefore, should be based on income after taxes. Insurance costs, on the other hand, are normally only a small part of the total operational expenditure of an industrial enterprise however, before any operation can be carried out on a sound economic basis, it is necessary to determine the insurance requirements to provide adequate coverage against unpredictable emergencies or developments. 

There are a wide variety of materials available for use with CMP waste treatment systems. The challenge is to match the proper materials with the CMP chemistry with a proper financial and technical analysis. Due diligence performed in the short term will prevent increased operating expenditures in the long term. 

It has become clear that the achievement of ambient air quality standards will increase the cost of stationary combustion and industrial process operations. For example, the cumulative capital and operating expenditures for air pollution control on stationary sources to achieve these standards is estimated at 37.6 billion during this decade (J). This however, is only one of two basic concerns. The second diflBculty is the identification and development of sufficient low pollution fuel sources or alternative control technologies which can satisfy national energy de-... 

A breakdown of ESH operating expenditure is given in the form of a pie chart. DIC also invested 3.9 billion in environmental preservation and safety-related activities. 

Environmental expenditure figures for capital expenditure on EH S are given for all years since 1985 both in US dollars and as a percentage of the total capital expenditure. For the last year quoted (1998) the figures were US 110 million and 6.5%, respectively. No figures are included for operating expenditure on EH S. 

Environmental expenditure the CER includes both capital and operating expenditure on environmental protection. Each area has costs broken down against waste management, water protection, noise abatement and air quality management. 

Operating expenditure rose from DM 8.6 million in 1996 to DM 9.4 millionin 1997,thenfelltoDM8.5millionin 1998. 

Environmental expenditure capital expenditure on environmental improvements has gradually reduced from its peak in 1995 to 1.75m in 1998. This latter figure represents 11.6% of total capital expenditure. It is stated that future expenditure will be maintained at a level to ensure regulatory compliance. No figures have been given for operating expenditure on environmental matters. 

During the same period operating expenditure also increased from FIM 160 million to FIM 240 million. 

Environmental expenditure no specific reference is made in the CER or annual report to environmental capital or operating expenditure. In the section of the annual report on contingent liabilities it is stated that in 1999 Norsk Hydro spent NOK 10 million for corrective environmental measures. 

Between 1998 and 1999 capital expenditure rose from SEK 98 million to SEK 172 million mainly on major efforts to reduce atmospheric emissions, and a new wastewater treatment plant at Castellanza, Italy. During the same period, operating expenditure (including the cost of water and energy) remained stable at SEK 400 million. 

I), based upon figures supplied by 71 member firms whose annual expenditures range from less than 1 to more than 20 million. In 1969, the latest year available, these data reveal an industry operating expenditure on research and development of 549 million. For 1970, budgeted expenditures for research were at the level of 624 million, an increase of nearly 14% over the previous year. Of specific interest is the fact that 98.8% of those expenditures were financed by the industry itself. 

Of the total operating expenditures in 1969, 88.6% was spent within the industry, 9.7% was spent outside the industry (for consultants, research institutions, medical schools, hospitals), and 1.7% was spent on government contracts. 

The cement industry worldwide is very energy-intensive, with fuel cost typically accounting for 30-40% of OPEX (operation expenditures). For this reason the thermal energy efficiency has improved significantly over the last decades and the AF have been used to substitute the conventional fuels in order to furfher reduce cosfs. 

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