Project economics economic analysis

In order to evaluate projects using the usual type of project economic analysis, it is important to have predicted recovery profiles for the continued waterflood and for a range of polymer flooding strategies. The only way of obtaining these data is to perform reservoir simulation calculations of the proposed projects. Although these calculations may be subject to many uncertainties and difficulties, they are currently the only available means of assessing projects of this type in a rational and consistent manner for a specific reservoir. For this reason, polymer flood simulation is discussed in some detail in this and other chapters. 

The production profile for oil or gas is the only source ofrevenueior most projects, and making a production forecast is of key importance for the economic analysis of a proposal (e.g. field development plan, incremental project). Typical shapes of production profile for the main drive mechanisms were discussed in Section 8.2, but this section will provide some guidelines on how to derive the rate of build-up, the magnitude and duration of the plateau, the rate of decline, and the abandonment rate. 

In order to test the economic performance of the project to variations in the base case estimates for the input data, sensitivity analysis is performed. This shows how robust the project is to variations in one or more parameters, and also highlights which of the inputs the project economics is more sensitive to. These inputs can then be addressed more specifically. For example if the project economics is highly sensitive to a delay in first production, then the scheduling should be more critically reviewed. 

The economics of the arc-coal process is sensitive to the electric power consumed to produce a kilogram of acetylene. Early plant economic assessments indicated that the arc power consumption (SER = kwh/kgC2H2) must be below 13.2. The coal feedcoal quench experiments yielded a 9.0 SER with data that indicated a further reduction to below 6.0 with certain process improvements. In the propane quench experiment, ethylene as well as acetylene is produced. The combined process SER was 6.2 with a C2H2/C2H4 production ratio of 3 to 2. Economic analysis was completed uti1i2ing the achieved acetylene yields, and an acetylene price approximately 35% lower than the price of ethylene was projected. 

The problem is defined during process development as information becomes available and decisions are made. Initially, the definition is limited, vague, and brief and economic analysis involves a high level of uncertainty. As the project evolves, the definition becomes more complete, more highly specific, and lengthier. At the same time, the economic assessment tends to exhibit less uncertainty. 

Once the economic analysis has been completed, the project should be analyzed for unexpected as well as expected impacts on the economics. This is usually done through a set of what if calculations that test the project s sensitivity to missed estimates and changing economic environment. As a minimum, the DCF rate of return should be calculated for 10% variations in capital, operating expenses, and sales volume and priee. 

Most proprietary spreadsheets have procedures for calculating the cumulative NPW from a listing of the yearly net annual revenue (profit). Spreadsheets are useful tools for economic analysis and project evaluation. 

Economic analysis should be performed at all stages of an emerging project as more information and detail become available. The decision as to whether to proceed with a project will depend on many factors. There is most often... 

So far we have explained how to estimate capital and operating costs. In Example 3.3, we formulated an objective function for economic evaluation and discovered that although the revenues and operating costs occur in the future, most capital costs are incurred at the beginning of a project. How can these two classes of costs be evaluated fairly The economic analysis of projects that incur income and expense over time should include the concept of the time value of money. This concept means that a unit of money (dollar, yen, euro, etc.) on hand now is worth more than the same unit of money in the future. Why Because 1000 invested today can earn additional dollars in other words, the value of 1000 received in the future will be less than the present value of 1000. 

Based on a simple economic analysis, it appears that, when seawater is used as the salt solution, a membrane with a water flux in PRO of about 1 x 10 2cm3/cm2-sec ( <200 gal/ft2-day) is required to make the process economically viable in today s economy, even if the installed membrane cost is as low as 100/m2. The highest flux we projected under these PRO conditions among the RO membranes tested was only somewhat greater than 1 x 10 cm3/cm -sec ( 2 gal/ft -day), for a power output of 1.6 watt/m2. 

Whenever an economic study is prepared, the marketing, capital investment, and operating expense data used are estimates, and therefore a degree of uncertainty exists. Questions arise such as, What if the capital investment is 15 percent greater than the value reported A sensitivity analysis is used to determine the effect of percentage changes in pertinent variables on the profitability of the project. Such an analysis indicates which variables are most susceptible to change and need further study. 

Furthermore, a comparative economic analysis of the same projects has been carried out, and the possible annual savings for the consumers in Europe, Turkey and the South Caucasus countries have been suggested [22],... 

Action Perform a detailed economic analysis of the project including Capital cost estimates (by different methods)... 

Re-assess the economic feasibility of the project based upon the complete economic analysis. 

When determining which method of economic analysis she should use, she eliminated cost-minimization analysis because the treatment alternatives (service versus no service) will not result in equivalent outcomes. A cost-effectiveness analysis would not be appropriate because she is only interested in one particular program. A cost-utility analysis is also not appropriate because quality of life, while included in the project, is not the focus of her project. A cost-benefit analysis could be appropriate. A cost-benefit analysis requires that both the interventions and outcomes be valued in monetary units. She can determine the direct medical and/or nonmedical costs for each patient from data captured by her HMO. The HMO is very interested in costs, both those to implement the service and those it may save as a result. Cynthia decides that the most understandable analysis to present to the HMO is a cost-benefit analysis. 

Using the accelerated capital recovery system (ACRS) still showed negative cash flows for each project. The reason for these negative cash flows is that tire pyrolysis is only economic with unique situational variables. There are a number of questions about product quality, product price, and feed stock cost which tend to lend a vagueness to the economic analysis..."... 

Dow Chemical in Midland, USA, the microprocess technologist Velocys in Plain City, USA, and PNNL in Richland, USA, as research institute in microreactor technology have a public funded project on high-intensity production of ethylene and other olefins by oxidation such as the formation of ethylene from ethane [1], A two-step reactor engineering is performed, starting with a bench-scale reactor with microchannel dimensions equal to the latter commercial unit and followed by numbering to the latter. An economic analysis with focus on reactor costs and energy consumption completes the project. 

ASPEN (Advanced System for Process ENgineering) was funded at that time to provide this technical and economic analysis for the specialized requirements of fossil energy conversion processes. The project was established at the Massachusetts Institute of Technology for 3,285,000 over three years. 

The results of the Kythnos system economic analysis, presented in Table 5.2 are also of great interest for our study. According to the economic analysis, the main cost factor for such a hybrid system based on photovoltaic panels is the batteiy bank, followed by the diesel generating set and the PV array, since the lifetime of batteries is relatively limited (around 5 years), therefore the battery bank should be replaced several times during the project. Another important finding of the PV-diesel system economic analysis is high O M and fuel costs, which account for ca. 3616 /ycar. 

An economic analysis was carried out by Knoche and Funk (4) based upon a flowsheet developed by Westinghouse. This analysis indicated a projected hydrogen cost of about 6.50/106 Btu based upon the following fundamental assumptions ... 

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