Risk Management for Mega Air Separation Projects

David R Edmondson Vice President, Engineering Air Products November 2004

Risk Management
Why Risk management is important Air Products experience ORYX Approach Options for the future

Risk Management Why is Risk Management so Important?

Oxygen is an integral part of the GTL process Significant proportion of overall project costs Oxygen is on the critical path for GTL projects Need to manage any perceived technology risk Important to manage the project financial risk Maintains site safety performance

Air Products Cornerstones to Risk Management

World leading safety performance 0.607 recordable; 0.062 lost time Proven track record of competitive large plants First to design, build & operate > 3000 MT/day plant ORYX project is currently largest single order for oxygen production. Ongoing investment in technology Continual learning from operating experience 35 years operating experience of Air Separation plants with steam turbine drivers, including a doubled ended steam turbine drive.
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Basic Air Separation Process

Air Filter

Steam Turbine

Booster Air Compressor (BAC)

Compression Train

Air Pre-treatment Cold Box

Storage

Air Products Rotterdam - 3250 TPD O2 Supplying Shell PER + Project

Owned and operated by AP since 1997 Execution Strategy Side by Side HP/LP columns Site built cold box Site assembled compression system

Air Products Trinidad - 3000 TPD O2 Supplying Methanex Methanol Project

Owned and operated by AP since 2003 Execution Strategy Stacked HP/LP columns Site built cold box Site constructed double ended steam turbine driving compression

Risk Management - Construction Strategy

Site built machinery & Cold Box Effective for single train plants Issues for multiple trains Increased site activities challenge safety performance Suitability/availability of local contractors for extended period Managing site through periods of extreme weather Significant logistics and material handling Plot area increased to allow for construction access
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Risk Management ORYX Construction Strategy

Pre-fabrication/packaging of specialist skills areas Focus on Cold Box & compression train Built in Quality Improved control over quality & cleanliness Improves construction sequencing Reduces schedule risk Reduces site manning Fewer specialist skills on site Reduced plot requirements
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ORYX Cold Box Strategy

ORYX plant for 7000 TPD in two trains being loaded in UK

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ORYX Cold Box Strategy

Cleaned assembled and tested in controlled environment

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ORYX Cold Box Strategy

Utilises construction principles used for years in many smaller Air Separation Units
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ORYX Cold Box Strategy

ORYX Machinery Train Solution

Complete train run and shop tested Simpler foundations Reduced site construction and start-up

Does Size Matter?

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Does Size Matter? Single vs. Multiple trains

Single train sizing Analysed costs for and bid 3500, 5000 & 7000 TPD Compression, air pre-treatment & cold boxes Each have different constraints as plant size increases Cost benefits Equipment scaling benefits are minimal when using similar equipment configurations Some overall benefits due to fixed elements of scope

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Does Size Matter? Single vs. Multiple trains

Impact of increased equipment size needs to be fully understood: Equipment sourcing Reliability & operability Consider impact of steam balance on oxygen requirements at different points of facility operating map Optimum plant size and unit cost of oxygen dependent on owner design and operating philosophy Advantages to project risk profile by using existing demonstrated Air Separation Unit components and proven construction strategy

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Risk Management Further reducing unit cost of Oxygen

Need to incorporate innovation in process cycle and plant concepts Need to accept increased compression train size Need to accept change in equipment configuration Need to consider optimisation of each key area of the Air Separation Unit rather being focused on discrete trains

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Summary Points
Managing project risk includes: Client/supplier investment Employee/supplier safety Project risk profile reduced by using demonstrated equipment and project concepts Air Products have a broad experience of site built and packaged approach ORYX project demonstrates packaged approach: Product competitiveness Greater schedule certainty Reduced safety risks in difficult construction locations Could go further on packaging other plant areas Further cost benefits can be realised by good co-operation in the project development phase
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