Question 2 The total construction cost of a refinery project with a production c

Question

Question 2 The total construction cost of a refinery project with a production capacity of 250,000bbl/day in Austin, Texas, completed in 2010 was $250 million. It is proposed that similar refinery with a double production capacity than the one in Austin to be built in Trenton, North Dakota, USA for completion in year 2020. You are required to prepare an order of magnitude estimate for the proposed project. Given Information: Trenton index = 0.82 and for Austin = 0.80 Size factor (m) is 0.6 Inflation rate from 2010 to 2020 is expected to be 9% Note: Use the attached tables (published in year 2017) to solve this assignment.

Explanation / Answer

1. Typical constuction cost of refinery in Austin = $250 million

2. Adjustment for capacity based on exponential law yields -

   250 x (500,000 /250,000) 0.6 = $ 378.93 million

3. Adjustment for inflation in 2020 leads to

$378.93 x (1.09)10 = $897.06 million

4. Adjustment for location index = $897.06 x (.82 /0.8) = $919.49 million

Total estimation = $919.49 million

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