Project Development Methodology

Egyptian Petrochemicals Holding Co.

Project DevelopmentMethodology

The Society of Chemical Engineers

May 8,2016

Eng. M. Samy Abdel-HadyProfessional Consultant

Objective

Development Phase

Execution Phase

Open Discussion

Contents

This presentation provides the broad range of knowledge and expertise required to launch a new project.

Objective

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Range of Project Cycle

Planning

Define Leading Options

Define Execution Plan

Negotiate & Secure Finances

Business

Development Phase Execution Phase

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Engineering

&

EPC

Commissioning

&

Start - up

± 50% ± 30% ± 10%

0 to 5 % 5 to 10 % 10 to 15 % Engineering Cost

Up to 30% Project Cost Reduction Potential

Cost of Design Changes

Business Planning Phase



Negotiate & Secure

Finances

Engineering Procurement

Construction

Business Planning



Negotiate & Secure

Finances

Engineering &

EPC

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Commissioning

& Start - up




Negotiate & Secure

Finances


Construction

Business Planning



Negotiate & Secure

Finances

Engineering &

EPC

1. In-house Feasibility Study

2. Project Identification

3. Pre - Feasibility Study

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Commissioning

& Start - up

In-house Feasibility Study

Evaluate opportunities through:

Screening then selection of the most appropriate scenario/alternative

Technology

Market

Economic

Feed Stock

Site

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start

Identify

Opportunities

Conduct

Preliminary

Evaluations

Evaluation

Report

Decision

Box

Proceed with

Development of

Selected Alternative(s)

Pre-Feasibility

Study

Gate

Stop ,Hold , Recycle back

Project Identification - Decision Flowchart

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Scoping exercise to concentrate finally on one base case

The study shall basically include:

Pre - Feasibility Study- CONCEPT

Availability of Feedstock

Preliminary Marketing Trends

Proven/ commercialized technologies

Project Investment Estimate

Preliminary financial Structure

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Negotiate & Secure

Finances


Construction

Business Planning



Negotiate & Secure

Finances

Engineering &

EPC

1. Formation of

Sponsor Group

2. Front End Studies

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Commissioning

& Start - up

Formation of The Sponsor Group

• Shareholder representative

• Feedstock supplier

• Bankers or financing groups

• Off-takers

• Operating companies

Front End Studies


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Negotiate & Secure

Finances


Construction

Business Planning



Negotiate & Secure

Finances

Engineering &

EPC

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1. Company Formation

2. Major Agreements

3. Project Schedule

4. Detailed Feasibility Study

Commissioning

& Start - up

Company Formation

Major Agreements

• Shareholders

• Feedstock

• Site

• Financing

• Marketing Off-Take

• Technologies

Project Schedule

Bankable /Detailed Feasibility Study


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Deep analysis of the base case leading to confidence that no major obstacle remains

to develop the project in collaboration of international experienced consultant.

The main deference between pre-feasibility & detailed feasibility studies is the risk analysis and mitigation.

Detailed Feasibility Study- CONCEPT

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Detailed Feasibility

Study

MarketAnalysis

Cost Estimate, Process Design

Basis

Financial Analysis

Process

Technology

SelectionDelivered

Cost Competitiveness

Pricing Analysis

Detailed Feasibility Study - CONTENT

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DetailedFeasibility

Study covers supply, demandand trade analysis in thetarget markets.High level Marketing PlanAssessment of delivered cost competitiveness to the target markets

MarketAnalysis


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DetailedFeasibility

Study

PricingAnalysis

Presents forecasts for prices , netback analysis in the target markets.

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DetailedFeasibility

Study Determines the delivered cost of target marketsthen compare with those of other producers who are in position to export to project target market.

Delivered Cost

Competitiveness

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DetailedFeasibility

Study

Select the most appropriate technology and licensor via KT analysis

Process

Technology

Selection

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Study

Provides capital and operating cost estimates for project facilities

Cost Estimate, Process Design

Basis

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Study

Financial Analysis

Developing a financial model to evaluate the economic viability of the project based on commercial and technical evaluations.

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Internal rate of return (IRR)Net present values (NPV)Estimate of project cash flowBalance sheet

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Detailed Feasibility Study - Deliverables

Sensitivity Analysis

Sensitivity analysis is used to determine the effectof technical and economic parameters onprofitability of the project.

After estimating market priceprojections, market share,revenues, profitability iscalculated and sensitivity casesare made which analyze theeffect on returns of plantcapacity, capital cost, feedstockprice, netback product pricesand debt to equity ratio.

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Risk Analysis and Mitigation

Feedstock

Technology

Margin & Price

Market Variables

Risk

• Long-Term Agreement, • Take-or pay basis

• A marketing plan

• Proven.• Track record

• Alternative feed stocks.• Multiple suppliers of FS• Strong supply agreement provisions.

Mitigation Strategy

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Risk Analysis and Mitigation ( cont.)

Investment Costs,construction andcompletion risk

Off-take Risk

Risk

• Screening off-takers for credit history. • Selection of multiple off-takers .• Take-or-pay basis.

• Fixed price, • Date for EPC contract

Mitigation Strategy

Competition• Multiple off take agreements • Long-term, Take-or pay basis

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Negotiate & Secure

Finances


Construction

Business Planning



Negotiate & Secure

Finances

Engineering &

EPC

5/9/2016 MSA 26

Negotiate &

Secure Finances

& Start-up

Commissioning &

Start -up

Corporate finance

Project finance


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Range of Project Cycle

Planning




Business

Development Phase Execution Phase

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Engineering

&

EPC

Commissioning

&

Start - up

The Engineering

• Front End Engineering Design “FEED”

• Basic Design Package “BDP”

The EPC

• Lump Sum Turn Key “LSTK”

• Reimbursable

• Negotiate bid (reimbursable FEED & lump sum EPC, open book)

Commissioning & Start-up

Execution Phase

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PMT proficiently level.

Partner selection criteria.

Value chain approach.

Team work spirit.

Success Factors

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Open Discussion

5/9/2016 MSA 31

Thanks for your

Precious Time…Eng. M. Samy Abdel-Hady

Professional Consultant

[email protected]