Feasibility studies

In the preceding brief overview of project management, we chose to address the workings of a project as a task with defined goals and a defined and accepted concept for achieving them, with only the most cursory mention of the work necessary to get to that point, referred to as ‘the study’. Now we will address the means of getting to that point.

There are a few reasons for moving in this apparently bizarre fashion.

The ultimate objective of the study is the project, and it is easier to comprehend many of the study activities if we start by understanding the objective. Much (but not all) of the work executed in the study is in fact an abbreviation of the more detailed work carried out at the project stage, when physical commitments are produced rather than paper abstractions; it is difficult to properly describe an abbreviation without first describing the full process. Competent study practitioners have first to become competent project practitioners, although the full learning experience seems to be a number of cycles of both.

We will begin from the point when a management or an investor takes a decision to expend resources to examine the business potential of an idea, in other words, commissions a study. This is at any rate the starting point for the purposes of this book; it would be possible to digress at great length on both technical and business research processes leading up to the production of worthwhile ideas.

The study invariably includes the following.

1. Defining the idea.

2. Developing the process application of the idea. The work to be done obviously depends on what has gone before. It may be necessary to

commence with laboratory research and bench-scale testing of processes, and with geological exploration and widespread sampling of raw materials. Proving the reserves of acceptable plant feedstock is often a major part of a study, but it is not addressed here because our interest is in the process plant.

In general, it is necessary to obtain sufficient data on the materials to be processed, consider the available process options, carry out any process testwork that may be required to demonstrate workable process routes, and prepare flowsheets based on the applicable processes.

3. Evaluating the process proposals technically and economically. The technical evaluation may involve further testwork, and possibly the construction of a pilot plant. It may be possible to observe similar existing plants, where the performance of the process can be demonstrated under industrial conditions. The economic evaluation implies estimating the capital and operating costs of the plant, and for this it is necessary to prepare at least an outline design of the plant. The economic evaluation may also involve product marketing surveys and similar activities beyond our scope.

4. Reviewing, testing, redesigning, optimizing, and re-evaluating the various possibilities; selection of the most attractive proposals, and presentation of the corresponding technical and economic evaluation.

Usually before a project goes ahead, investors demand a level of confidence in its technical and economic viability, in keeping with the value of the investment. Before a major project is authorized, it is not unusual to go through years of technology search and negotiation, laboratory and pilot plant tests, plant design and costing exercises, hazard and risk analysis, environmental impact studies, market studies, and financial analysis. There may also be negotiations with statutory and government bodies, trades unions, buyers of the product, and other interested parties.

As our focus is on project engineering, we will direct our attention to those parts of the study with which the project engineer is most concerned, beginning with the evaluation of the process and the process design information. Firstly we need to know that we have a process which works, and can be operated in an industrial environment. For all but the simplest processes there are only two ways to do this: preferably, by ensuring similarity to existing successfully operating plants, or failing that, by operation of a pilot plant. The challenge here lies in the

word ‘similar’. To know what constitutes similarity, and to be able to recognize any small difference which may have a critical effect, requires an expert knowledge of the process in question. Thus it is necessary to have both reference and/or pilot plants and an expert opinion on their relevance to assume any level of confidence in an application of process technology.

To design a plant, which can be expected to work as well as the existing plants on which the design is based, usually requires an understanding of several special engineering features which may not be readily apparent. Such features may include, say, special materials of construction, small equipment-design changes, and specific maintenance features, which are the product of the process development, often arrived at through expensive trial and error. We need to have the leading participation of the process technologist in the development of the full plant design criteria.

The development of appropriate process flowsheets and basic process engineering is also outside the scope of this book. We will begin at the point of developing the process designs into actual plant designs, which can be assessed technically and costed. In principle, the work that has to be done is the same as the initial work already described for the engineering of projects:

• comprehensive design criteria are prepared;

• process equipment bids are solicited;

• equipment selections are made for purposes of plant design and costing, but without any commitment;

• plant layouts are developed in conjunction with appropriate materials transport system design; and

• structures, civil works, electrical and instrumentation systems, piping, and any other utilities and facilities are designed and costed.

However, unlike project work, studies are usually commenced without a definite plant design concept and construction plan; these are subject to change, and the essential requirement is to find the most suitable concepts and plans which will become the basis for the detailed project designs, budgets, and schedules. Inevitably the plant design is developed in a series of iterations. Initially, relatively broad concepts are explored, and possible innovations are introduced. Some concepts, for example materials handling system, layout, or site location, may be quickly rejected, while others may need more detailed comparison to arrive at the best choice. The phases of initial conceptual development, and of more detailed design and evaluation, are often formally split into

two parts: a pre-feasibility study with an accuracy¹ of say ±20 per cent, and a feasibility study with an accuracy of say ±10 per cent. This gives the investor an opportunity to abort the study work or change direction before too much money is spent.

The development of cost-effective designs is discussed in Chapter 11, Value Engineering and Plant Optimization. Cost estimating is clearly at the heart of study work; it is one of the investor’s main concerns. In keeping with the need to carry out initial study work comparatively quickly and less accurately, there are a variety of estimating techniques available to estimate plant costs without doing too much design work.

Ultimately, however, an accurate estimate must be based on the submis-sion of competitive bids for all items, and the bids must be based on the adequate specification of equipment items, and adequate quantification of sufficiently developed designs of other items.

9.2 Proposals

Studies may be regarded as a type of proposal, in that they relate to the proposed construction of a process plant. However, we will restrict the use of the term ‘proposal’ to that of an offer, namely an offer to build a specified process plant at a certain price or price basis, a commitment rather than an estimate. ‘Study’ will be used when an estimate of plant costs, rather than a commitment, is submitted. The essential content of a process plant project engineer’s work is the same for both, but there is a fundamental difference in how the end product is used, in that the relationship with the client is different. There is a corresponding difference in the assessment of risk.