Petchems owners urged to plan for modular projects in FEED stage

Petrochemical and refinery companies looking to modularize parts of their construction projects must develop a modular strategy very early in the project cycle and fully understand how modularization fits their project goals if they are to meet their budgets and schedules, according to a panel of construction experts from Shell Oil Company, Dow Chemical, Phillips 66 and Honeywell.

Speaking at Petrochemical Update’s Gulf Coast Modular Construction Conference & Exhibition in Houston on December 1, the experts discussed their companies’ use of offshore engineering, pre-fabrication and modularization as a flood of capital spending on the US Gulf Coast is beginning to strain project supply chains.

The heated downstream construction market and looming shortages of skilled craft and engineering labor on the US Gulf are driving some petrochemical owners to modularize parts of their projects, mainly to meet their expected on-site manpower demand.

ExxonMobil, for example, is having eight ethylene furnaces for its Baytown, Texas cracker built in Thailand, while Dow Chemical and Sasol are also modularizing part of their new cracker projects in Freeport, Texas, and Lake Charles, Louisiana, respectively.

Modular construction can flatten the peak of craft labor demand at the job site and help control volatile wage costs by using skilled labor resources at fabrication yards around the world.

At the same time, it poses additional challenges to contractors and owners, particularly around logistics, communication and quality management.

Source: US Ethane, EthyIene & PoIyethyIene: Exports & Markets Report (December 2015).

Early planning

While modularized construction has many advantages in heated construction environments, an effective front-end loading (FEL) for a petrochemical project should begin by assessing the benefits against the liabilities of modules, according to Edward Sparks, vice president - manager of construction services at WorleyParsons and a moderator of the conference panel.

The optimum split of modular and field construction efforts varies for each individual project based on factors such as local labor costs, transportation limitations and schedule.

“It is almost always beneficial to perform some modularization; how much depends on many factors and should be identified early during [Front-End Engineering Design] (FEED) or preliminary design,” Sparks said.

A modular project generally has more complex engineering and design requirements than conventional, or stick-built, construction because it requires the concurrent activities off-site preparation and off-site construction and transportation.

For a modular project to meet its budget and schedule targets, engineering and design must be executed early in the project and with a modular construction technique in mind, Sparks said.

Honeywell, for example, typically finalizes its construction strategy by the project’s FEL 2 stage, said Meric Daigle, senior director capital procurement at Honeywell.

Meanwhile, Phillips 66 chooses its construction methods after defining the scope of the project, according to Michael Merritt, corporate senior construction manager at Phillips 66.

The initial decision is taken by the company’s vice president or president of manufacturing after early consultations between the business unit leaders and the project services team. Following further studies and discussions, the engineering group, the project services team and the construction management personnel jointly decide whether to modularize or stick-build the project.

Similarly, Shell assesses the viability of modularization at the project’s concept phase, according to Clint Ardoin, construction manager at Shell Oil Company.

“If you wait too long until the design phase, it could spell disaster,” he said.

The Dow Chemical Company chooses its construction approach early in the FEED stage after discussions and consultation with the project’s construction manager and the regional labor buyer, said Robert Schulz, director of construction and technology center leader, Engineering Solutions at Dow.

To modularize or not?

According to WorleyParsons’ Sparks, companies should choose their preferred construction method after identifying the key drivers for their projects and conducting a preliminary logistics study to understand the complete route, transportation costs, shipping envelope, and the weight restrictions for modular construction.

Cost and schedule are key criteria for companies like Phillips 66 and Honeywell, which follow a speed-to-market strategy and put a high priority on accelerating the project delivery.

"We always have competing data on both sides – is it cost-beneficial, is it cost-neutral, does it cost more. We generally have sided that, especially in the East-for-West mode [sourcing from Asia], it can cost less,” Honeywell’s Daigle said.

“We also have experience where we didn’t save money, but we thought it saved schedule.”

Honeywell is currently completing a lot of its engineering and detailed design in low-cost shops overseas, primarily in China and India. Global sourcing has allowed it to cut expenses for some equipment and materials by about 25%, even after accounting for inspection expenditures, Daigle told Petrochemical Update.

Modular construction requires additional steel to brace and transport modules – about 15-30% more for small to medium-sized modules, according to Sparks. It also increases the engineering man-hours, structural analysis, new drawings and coordination by about 20% on average, and requires 5% more pipe and 10% more electrical work.

Modularization also puts more pressure to advance engineering and procurement so that they can support the module assembly schedule, he added. Unlike stick-build construction, modular construction has little tolerance for scope changes or out-of-sequence module completion and delivery, and requires all of the engineering to be locked in before fabrication starts.

Besides, it requires special care and additional expenses to move items that are susceptible to shock such as compressors and control consoles.

Planning and procurement for modular projects also require more complex estimating and cost control, as well as a material control strategy. According to Sparks, in many cases companies need to hire special consultants for marine work and logistics.

The optimum approach should arrange the equipment to fit the module rather than identifying what part of the layout will fit into the modules. Companies should also make sure that their procurement schedule supports the module assembly, and that construction planning and sequencing will be predominantly based around the module delivery schedule, site preparation, as well as the installation and tie-in of the modules, Sparks added.

Phillips 66, for example, brings its procurement team between the FEL 1 and FEL 2 phase. This allows the company to identify its preferred vendors and get delivery cost estimates for the different modules while the design team is identifying the major process equipment for the project, Merritt said.