modularisation – the next step - presentation by bill meyer, foster wheeler usa corporation

Feb 2011Bill Meyer

Modularisation – The Next Step

© 2011 FOSTER WHEELER. All rights reserved.

William (Bill) Meyer -

B.E. (Civil) Hons., MBA.

Director Project Execution Development

Foster Wheeler USA Corporation

Houston, Texas.

[email protected]

Feb 2011Bill Meyer



Topics

1. Where is modularisation going? Is there a trend?

2. What is the optimum size of module? Are larger modules

better?

3. What impacts are tomorrow’s modules likely to have on

construction?

Feb 2011Bill Meyer



Agenda

1. Introduction

2. Historical Perspective – Past Trends

3. Understanding why – Cost / benefit and decision

process

4. Optimising module sizes

5. Summary

6. Q & A

Feb 2011Bill Meyer



Accent

� Australian

University of Melbourne

� Bachelor of Engineering (Civil) Honors

� MBA

Work

� ½ as specialist Heavy Lift and Transport contractor

– Vice President Mammoet USA

� ½ Foster Wheeler – Engineering, Procurement, Construction contractor

– Director Project Execution Development

– Focus on major project construction execution and project management

Feb 2011Bill Meyer



� Global Engineering and Construction Contractor and Power Equipment Supplier

� In business for over 100 years

� Strong history in technology development

� Proven track record of successful project execution

� A global presence

� Over 13,000 resources

� Permanent offices in 28 countries

� Financially strong

Foster Wheeler

Feb 2011Bill Meyer



Registered Office & Corporate CenterOperating Unit HQs and/or Main Engineering CenterRegional/Local Engineering CenterSales Offices

Bogota

Feb 2011Bill Meyer



Topics

1. Introduction



process


5. Summary

6. Q & A

Feb 2011Bill Meyer



Historical Perspective – past trends

Statoil Mongstad – Norway - 1988

� 221 modules

� 975 tonnes max module

� 6 module yards

Feb 2011Bill Meyer




Statoil Mongstad – Norway - 1988

� 221 modules

� 975 tonnes max module

� 6 module yards

� Schedule driven

Feb 2011Bill Meyer




Mobil Coryton – UK - 1993

� Isomerisation unit

� 58 Modules to 350 tonnes

� Barge delivery from one European fabricator

Feb 2011Bill Meyer




Mobil Coryton – UK - 1993

� Isomerisation unit

� 58 Modules to 350 tonnes

� Barge delivery from one European fabricator

� Schedule driven

Feb 2011Bill Meyer




ExxonMobil Singapore Aromatics - 1996

� 213 modules – 26,875 tonnes total

� 1150 tonnes max

� 7 module yards

� 39 barge voyages

� Schedule driven

Feb 2011Bill Meyer




Inco Goro – New Caledonia - 2006

� Nickel mine and ore processing plant

� 599 modules

� 600 tonnes max

� 2 main module

yards

Feb 2011Bill Meyer




Inco Goro – New Caledonia - 2006

� Nickel mine and ore processing plant

� 599 modules

� 600 tonnes max

� 2 main module

yards

� Cost driven

Feb 2011Bill Meyer




The Woodside-operated NWSV Phase V LNG Expansion – Australia – 2007

� 75 modules

� 1,800 tonnes max

� Pluto currently nearing completion

Feb 2011Bill Meyer




The Woodside-operated NWSV Phase V LNG Expansion – Australia – 2007

� 75 modules

� 1,800 tonnes max

� Pluto currently nearing completion

� Cost and schedule driven

Feb 2011Bill Meyer




1. Pre circa 2000, main reason to go modular was for schedule benefits

2. More recently, cost benefits have been the aim

Feb 2011Bill Meyer



Topics

1. Introduction



process


5. Summary

6. Q & A

Feb 2011Bill Meyer



Viable Modular Execution

Benefits > Price you have to pay for those Benefits

Feb 2011Bill Meyer



Viable Modular Execution

Benefits > Price you have to pay for those Benefits

AND

Risk of NOT achieving those Net Benefits is Low, Manageable &

Risk Goals are Achievable

Feb 2011Bill Meyer



Modular Execution Benefits can be:

1. Cost reductions

Feb 2011Bill Meyer




1. Cost reductions

2. Schedule reductions

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1. Cost reductions


Profit

Compliance

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1. Cost reductions


3. Safety enhancements

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1. Cost reductions



4. Quality enhancements

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1. Cost reductions




5. Reduced impact on Society

Feb 2011Bill Meyer




1. Cost reductions





6. Reduced impact on Environment

Feb 2011Bill Meyer




1. Cost reductions





6. Reduced impact on Environment

7. And many more…

Feb 2011Bill Meyer



Decision Analysis – Modular or Stick built?

Feb 2011Bill Meyer



Project

PhaseFEL 1

Conceptual FEL 2

Assess FEL 3

Define

Execution FEL 5

Evaluation

FEL 4

Evaluate Module Options

Modular Execution Decision

Timing is Critical

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e.g. OSBL piping in existing racks

Major storage tanks

Feb 2011Bill Meyer



Feb 2011Bill Meyer



Site Survey includes

• Labour

Availability, productivity, quality, craft availability, cost, other projects in area, union impacts, regional / political issues etc

Feb 2011Bill Meyer



Labour Productivity

0

1000

2000

3000

4000

5000

6000

7000

8000

0 12 24 36 46 50 50 50 56 64 72 80 88 96 104

112

120

128

136

144

Graph 1 - Labor vs time (% of project schedule) – Direct hour impact if productivity shortfall of trainees

Feb 2011Bill Meyer



Result of productivity shortfall

0

1000

2000

3000

4000

5000

6000

7000

0 12 24 36 46 50 50 50 56 64 72 80 88 96 104

112

120

128

136

144

Graph 2 - Labor vs time (% of project schedule) – Schedule impact if productivity shortfall of trainees

Feb 2011Bill Meyer



0

1000

2000

3000

4000

5000

6000

7000

0 12 24 36 46 50 50 50 56 64 72 80 88 96 104

112

120

128

136

144

Graph 4 - Labor vs time (% of project schedule) – Manhours moved offsite

Move manhours offsite to pre-cast, pre-fab, pre-

assembly and modules

Skilled Labour Availability – Move manhours Offsite

Feb 2011Bill Meyer




• Labour

• Weather impacts

Feb 2011Bill Meyer




• Labour

• Weather impacts

• Logistics

On site and to site, route surveys, from fabrication yard, cost and technical capabilities, laydown areas

Feb 2011Bill Meyer



Site access restrictions can limit size of modules that can be

delivered to site

Feb 2011Bill Meyer



Logistics are project specific -

– Some sites have their own ports …

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Logistics are project specific -

… others are road access only

Feb 2011Bill Meyer




• Labour

• Weather impacts

• Logistics

• Environmental impact

Feb 2011Bill Meyer




• Labour

• Weather impacts

• Logistics


• Safety

Feb 2011Bill Meyer




• Labour

• Weather impacts

• Logistics


• Safety

• Permit issues

Feb 2011Bill Meyer




• Labour

• Weather impacts

• Logistics


• Safety

• Permit issues

• Etc.

Feb 2011Bill Meyer



Module Yard Survey includes

• Labour

Productivity, cost, flexible workforce, skills, experience etc

Feb 2011Bill Meyer



Relative Costs to Fabricate Modules and Ship to Project X site

Italy

USA

USA

Japa

nKor

eaKor

eaKor

eaFra

nce

Mex

ico

Mal

aysi

aSin

gapo

reSin

gapo

reM

alay

sia

Philip

pine

sTha

iland

Chi

naC

hina

Vietn

amC

hina

Project and Site Specific

Calendar Date Specific

Module Yard Specific

Feb 2011Bill Meyer




• Labour

• Yard capabilities

Covered fabrication, assembly area, loadout capabilities, management skills and experience, procurement capability, drafting capability, quality systems, safety records etc

Feb 2011Bill Meyer




• Labour


• Size of client management team

required

Feb 2011Bill Meyer




• Labour



required

• Shipping type and distances to site

Feb 2011Bill Meyer




• Labour



required


• Weather

Feb 2011Bill Meyer




• Labour



required


• Weather

• Political factors

Feb 2011Bill Meyer




• Labour



required


• Weather

• Political factors

• Etc

Feb 2011Bill Meyer



Feb 2011Bill Meyer



Will impact possible module sizes Type of plant

Scale of plant

Feb 2011Bill Meyer



Feb 2011Bill Meyer



Economics of Modular Execution

For the cost estimates of stick and modular

Need only to focus on DIFFERENTIAL COSTS between stick built

and modular execution

Feb 2011Bill Meyer



Cost Downside

� Increased cost of steel / minor bulks / foundations

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Cost Downside


� Increased cost of shipping

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Cost Downside



� Potentially - increased cost of transport and installation

Feb 2011Bill Meyer



Cost Downside



� Potentially - increased cost of transport and installation

� Increased cost of Engineering

� Increased cost of client yard management

� Increased cost to set modules / extra field welds / hydro

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Cost Upside

� Move labour cost offsite to cheaper / more productive laboursupply

Feb 2011Bill Meyer



-

20,000

40,000

60,000

80,000

100,000

120,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33

months

-

20,000

40,000

60,000

80,000

100,000

120,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33

months

Manhours moved offsite on a past modular project

Site Prep Civil Structural / Mech / Equip Piping E & I Indirects

Feb 2011Bill Meyer



Cost Upside


� Reduce indirect costs at site as less directs (construction supervision, consumables etc)

Feb 2011Bill Meyer



Cost Upside



� Reduced cost of camp construction due to lower peak

Feb 2011Bill Meyer



Cost Upside




� Improved productivity (weather, flexible workforce, site accessibility, material flows, etc)

Feb 2011Bill Meyer



Cost Upside





� Reduced schedule reduces construction indirects

Feb 2011Bill Meyer



Cost Upside





� Reduced schedule reduces construction indirects

� [Positive impact to NPV if revenue stream begins earlier]

Feb 2011Bill Meyer



Cost Neutral

� Shipping of module materials to yard versus shipping to site

Feb 2011Bill Meyer



Module

versus

Stick built

Cost

Differentials

Modular versus Stick built costs

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

Modular Cost Stick built Cost

Installation cost ∆

Shipping cost ∆

Const. Mngmt cost ∆

Foundation cost ∆

Steel cost ∆

Engineering cost ∆

Camp cost ∆

Labour cost

Savings

Mill

ion

s $

Existing Project Data

(Note – All projects have different cost drivers )

Feb 2011Bill Meyer



Marginal Cost of Construction

Marginal Cost of Construction / manhour =

Wages for Direct Labour

+ Indirect Labour (incl Inspection and QA)

+ Payroll Burdens / Benefits / Allowances / Premiums /

Camp Costs / Subsistence for Direct and Indirect Labour

+ Management Costs / Field Offices / Indirect Facilities

+ Construction Equipment / Small Tools and Consumables

+ Scaffold

+ Stick Built Materials Laydown and Distribution

+ ETC

Feb 2011Bill Meyer



Cost Benefits

Construction

Site

Labour Productivity 2.20

Marginal Cost of Construction / mh $105.00

Relative Manhour Cost c/w Gulf Coast $231.00

Feb 2011Bill Meyer



Cost Benefits

Construction Module

Site Yard

Labour Productivity 2.20 1.20

Marginal Cost of Construction / mh $105.00 $55.00

Relative Manhour Cost c/w Gulf Coast $231.00 $66.00

Feb 2011Bill Meyer



Cost Benefits

Economic Productivity Factor

Construction Module

Site Yard




Economic Productivity Ratio 3.50 : 1

Feb 2011Bill Meyer



Cost Benefits

Economic Productivity Factor using a Far East Module Yard

Construction Module

Site Yard




Feb 2011Bill Meyer



Cost Benefits

Economic Productivity Factor

Construction Module

Site Yard





Feb 2011Bill Meyer




$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0



Shipping cost ∆

Steel cost ∆


Camp cost ∆

Labour cost




Shipping cost ∆

Steel cost ∆


Camp cost ∆

Labour cost




Shipping cost ∆

Steel cost ∆


Camp cost ∆

Labour cost

COST DRIVEN MODULAR

PROJECT

SCHEDULE DRIVEN

MODULAR PROJECT

COST DRIVEN STICK BUILT

PROJECT

Feb 2011Bill Meyer



Agenda

1. Introduction



process


5. Summary

6. Q & A

Feb 2011Bill Meyer



Manhour Density is Key

Feb 2011Bill Meyer




� The more manhours in a given shipping volume, the greater the cost benefit to moving those manhours offsite.

� This benefit must outweigh the cost to ship those manhoursback to site.

Feb 2011Bill Meyer



Cost of module shipment vs. module “size”

Co

st

($ m

illi

on

)

Module size / weight Large

Lin

er

serv

ices

Specialist Heavy Lift

Ships

Semi-Submersibles

Feb 2011Bill Meyer



Feb 2011Bill Meyer




� The more manhours in a given shipping volume, the greater the cost benefit to moving those manhours offsite.

� This benefit must outweigh the cost to ship those manhoursback to site.

� Second order effects then must be taken into account, such as extra steel costs, site transport and installation costs etc.

Feb 2011Bill Meyer




Feb 2011Bill Meyer



� Identify the labour intensive sections on the site…(highlighted red)

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� Aggregate where feasible…

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� Construct off-site

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Feb 2011Bill Meyer



Interconnectivity factors

Feb 2011Bill Meyer




�� Additional hookup at the interfaceAdditional hookup at the interface

�� Additional ship spaceAdditional ship space

�� Additional Installation costsAdditional Installation costs

�� Delta steelDelta steel

Feb 2011Bill Meyer




Feb 2011Bill Meyer




�� Additional hookup at the interfaceAdditional hookup at the interface

�� Additional ship spaceAdditional ship space

�� Additional Installation costsAdditional Installation costs

�� Delta steelDelta steel

Feb 2011Bill Meyer



Vertical and horizontal splits for this CCR

Feb 2011Bill Meyer



Agenda

1. Introduction



process


5. Summary

6. Q & A

Feb 2011Bill Meyer



Summary

1. Where is modularisation going? Is there a trend?

� More modularisation is the trend for jobs in high labour

cost areas / low quantity of skilled labour areas

� Trend will be driven by demand for resources and energy

� Market segment dependant

� BRIC – IC low , BR depends on location of site and yards

Feb 2011Bill Meyer



Summary

2. Are larger modules better?

� Depends on plant scale and type / shipping

distances and costs / logistics constraints

� Relative costs of shipping vs. big / small / splitting

� For any given shipping cost curve – typically yes!

� Manhour density of plant modules > breakeven

� Height of C. of G!

Feb 2011Bill Meyer



Summary

3. What impacts are tomorrow’s modules likely to have on

construction?

� In general – reduces construction risk (but shifts it to E&P)

� Construction equipment

� Technology exists to move and install large loads

� Crane size development driven by larger equipment items

and need for longer reach, not primarily module sizes

� Innovation is still key!

Feb 2011Bill Meyer



ANY QUESTIONS ?

modularisation – the next step - presentation by bill meyer, foster wheeler usa corporation

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