W13_AI_Offshore Regasification Project Economical Evaluation – Part 3

  1. Problem Definition

The previous chapter, economical evaluation offshore regasification facilities project has been calculated by using Interest Rate Return (IRR) and External Rate Return (ERR), henceforth this chapter the feasibility project will be analyze by using Payback Period Method. The result of economical evaluation modelling is providing useful information for Board of Direction as evaluation substance to get the best decision.

  1. Identify the Possible Alternative

The calculation still using 2 (two) business scheme, as follow:

  • Owning

Company purchase newbuilt offshore regasification facility at shipyard or to shipowner

  • Leasing

Company leasing the offshore regasification facility to ship management or shipowner

The assumption for offshore regasification capacity is 100 MMSCFD.

 

  1. Development of The Outcome for Alternative

Refer to Sullivan 16th edition chapter 5, there is 3 (three) alternative method to determine feasibility of the project, as follow:

  • IRR (Interest Rate of Return) Method – Part 1
  • ERR (External Rate of Return) Method – Part 2
  • Payback Period Method – Part 3

Payback period method has been used as a measure of liquidity project, this method shows how fast an investment can be recovered. Low value payback period is considered desirable.

  1. Selection Criteria
  • Owning

The assumption for this calculation, as follow:

Table 1. Assumption

According to the assumption above, the model calculation by using discount factor as follow:

Table 2. Owning Scheme Cash Flow

Here is the cash flow of the owning scheme project profile, as follow:

Picture 1. Discounted Payback Period

  • Leasing

The assumption for this calculation, as follow:

Table 3. Assumption

According to the assumption above, the model calculation by using discount factor as follow:

Table 4. Leasing Scheme Cash Flow

Here is the cash flow of the leasing scheme project profile, as follow:

Picture 2. Project Net Cash Flow

 

  1. Analysis & Comparison of Alternative
  • Owning Scheme

Based on Payback Period Method, using owning scheme in 11 years the investment can be recovered.

  • Leasing Scheme

Based on Payback Period Method, using owning scheme in 14 years the investment can be recovered.

 

  1. Selection of the Preferred Alternative

Based on the calculation of both business scheme which is owning and leasing, found that by using owning scheme the investment can be recovered much faster than leasing scheme.

  1. Performance Monitoring and The Post Evaluation of Result

In economical evaluation, based on calculation using IRR method, ERR method and Payback Period Method resulted that owning scheme more profitable than leasing scheme. The number of IRR and ERR higher and faster to get the investment payback period as well. Furthermore, based on the scheme that has been selected, sensitivity analysis will be done to see the most influencing factor on IRR value.

References:

  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition Chapter 5 – Evaluating a single project., pp.239-246.
  2. Paska, H. M. I. (2015). W12_HMIP_Prioritization Project Portofolio using IRR, ERR and Payback Period Method

Retrieved from

https://garudaaace2015.wordpress.com/2015/05/18/w12_hmip_prioritization-project-portfolio-using-irr-err-and-payback-period-method/

  1. Setyo, U. D. (2017). W8_UDS_Evaluation in Choosing Best Supply Pattern Part 1

Retrieved from

https://emeraldaace2017.com/2017/09/23/w8_uds_-evaluation-in-choosing-best-supply-pattern-part-1/

 

 

W12_AI_Offshore Regasification Project Economical Evaluation – Part 2

  1. Problem Definition

In the previous chapter we have calculated the economical evaluation of offshore regasification facilities project by using Interest Rate Return (IRR), furthermore this week the analysis of project feasibility will be conducted using External Rate of Return (ERR). The result of this economic modeling is useful for the company as an evaluation material and assist the Board of Direction in decision making.

  1. Identify the Possible Alternative

Calculations still use 2 business schemes as follows

  • Owning

Company purchase newbuilt offshore regasification facility at shipyard or to shipowner

  • Leasing

Company leasing the offshore regasification facility to ship management or shipowner

The assumption for offshore regasification capacity is 100 MMSCFD.

 

  1. Development of The Outcome for Alternative

Based on Sullivan 16th edition chapter 5, there are 3 (three) alternative methods to determine whether a project is feasible or not, ie

  • IRR (Interest Rate of Return) Method – Part 1
  • ERR (External Rate of Return) Method – Part 2

The ERR method using the net cash flow generated to be reinvested or borrowed with using external interest rate (€) to get the economical calculation evaluation. At the end, the ERR method produces result identical as same as IRR method.

Step 1 : All of the outflows are discounted to time zero (PW) at €%

Step 2 : All of the inflows are compounded to end period (FW) at €%

Step 3 : Equation the inflows and outflows will be generated the ERR

  • Payback Period Method – Part 3
  1. Selection Criteria
  • Owning

The assumption used in this calculation is

Table 1. Assumption

Based on the above calculation assumption, we get the calculation model as follows

Table 2. Owning Scheme Cash Flow

The following is shown economical project profile based on cash flow above:

Picture 1. Project Net Cash Flow

 

The table above shows the total outflows and inflows. Next to get the ERR, then both outcomes will be equalized.

Picture 2. ERR Cash Flow

  • Leasing

The assumption used in this calculation is

Table 3. Assumption

Based on the above calculation assumption, we get the calculation model as follows

Table 4. Leasing Scheme Cash Flow

The following is shown economical project profile based on cash flow above:

Picture 3. Project Net Cash Flow

 

The table above shows the total outflows and inflows. Next to get the ERR, then both outcomes will be equalized.

Picture 4. ERR Cash Flow

 

  1. Analysis & Comparison of Alternative

The rule of thumb to justify this project feasibility by using ERR method, ERR Decision rule: If ERR ≥ MARR.

  • Owning Scheme

ERR generated is 31.68%, then ERR (31.68%) MARR (14.68%). So, it can be concluded that based on calculation using ERR method, the project is economically feasible to being reinvestment.

  • Leasing Scheme

IRR generated is 20.14%, then IRR (20.14%) MARR (14.68%). So it can be concluded that based on calculation using ERR method, the project is economically feasible to being reinvestment.

  1. Selection of the Preferred Alternative

Based on the calculation of the two business schemes which is owning and leasing, it is found that by using both schemes the project can allocate its profits to other projects with interest at (€) 3%.

However, by looking at the generated ERR value, that is ERR owning scheme IRR leasing scheme, then it can be concluded that ERR with owning scheme or purchase newbuilt offshore regasification facility is more profitable for company compared with leasing scheme.

  1. Performance Monitoring and The Post Evaluation of Result

In economical evaluation, besides using IRR and ERR method, then will be done the study of calculations using Pay Back Period (PBP) to get more complete economic adjustment in choosing between the two schemes.

References:

  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition Chapter 5 – Evaluating a single project., pp.237-239.
  2. Paska, H. M. I. (2015). W12_HMIP_Prioritization Project Portofolio using IRR, ERR and Payback Period Method

Retrieved from

https://garudaaace2015.wordpress.com/2015/05/18/w12_hmip_prioritization-project-portfolio-using-irr-err-and-payback-period-method/

  1. Setyo, U. D. (2017). W8_UDS_Evaluation in Choosing Best Suplly Pattern Part 1

Retrieved from

https://emeraldaace2017.com/2017/09/23/w8_uds_-evaluation-in-choosing-best-supply-pattern-part-1/

 

 

W11_AI_Offshore Regasification Project Economical Evaluation – Part 1

  1. Problem Definition

In the previous chapter the calculation of the capex and opex offshore regasification facilities project has been calculated, so that this week an analysis of the feasibility of the project will be conducted to determine whether or not this project is going forward. The results of the financial economic modeling of this project are useful to the company as an evaluation material and assist the Board of Direction in decision making. So this week the calculation of IRR Project will be applied.

  1. Identify the Possible Alternative

The calculation of project evaluation will be conducted with 2 business schemes, as follows :

  • Owning

Company purchase newbuilt offshore regasification facility at shipyard or to shipowner

  • Leasing

Company leasing the offshore regasification facility to ship management or shipowner

The assumption for offshore regasification capacity is 100 MMSCFD.

 

  1. Development of The Outcome for Alternative

Based on Sullivan 16th edition chapter 5, there is 3 (three) alternative method to determine whether a project is feasible or not, in example :

  • IRR (Interest Rate of Return) Method – Part 1

The project IRR will be calculated using several assumptions that will be explained at a later stage. The IRR represent the internal earning rate of the project. For this calculation the interest is being calculated on the beginning of year investment through the life of this project.

  • ERR (External Rate of Return) Method – Part 2
  • Payback Period Method – Part 3
  1. Selection Criteria

 

Refer to Sullivan chapter 5.6 The Internal Rate of Return Method, the IRR was defined by the present value of net cash flow.

  • Owning

The assumption used in this calculation is

Table 1. Assumption

Based on the above calculation assumptions, calculation model is obtained as follows

Table 2. Owning Scheme Cash Flow

 

The following shows an economical project profile based on cash flow:

Picture 1. Project Net Cash Flow

  • Leasing

The assumption used in this calculation is

Table 3. Assumption

Based on the above calculation assumptions, calculation model is obtained as follows

Table 4. Leasing Scheme Cash Flow

Picture 2. Project Net Cash Flow

  1. Analysis & Comparison of Alternative

The rule of thumb to justify this project feasibility by using IRR method, IRR Decision rule: If IRR ≥ MARR.

  • Owning Scheme

IRR generated is 16.31%, then IRR (16.31%) MARR (14.68%). So it can be concluded that based on calculation using IRR method, the project is economically feasible.

  • Leasing Scheme

IRR generated is 12.70%, then IRR (12.70%) < MARR (14.68%). So, it can be concluded that based on calculation using IRR method, the project is economically not feasible.

  1. Selection of the Preferred Alternative

Based on the calculation of the two business schemes which is owning and leasing, it is found that owning schemes are feasible and workable.

Hence by looking at the generated IRR value, IRR owning scheme or purchase newbuilt offshore regasification facility is more profitable for the company.

  1. Performance Monitoring and The Post Evaluation of Result

In economical evaluation, other than using IRR method, then a calculation study will be conducted using External Rate of Return (ERR) and Pay Back Period (PBP) so that the company get a more complete economic adjustment in choosing between the two schemes.

References:

  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition Chapter 5 – Evaluating a single project., pp.210-237.
  2. Prasetio, H. (2013). W7.1_HPO_Determining The Contractor’s IRR in Production Sharing Contract.

Retrieved from

https://simatupangaace2014.wordpress.com/2013/11/17/w7-1_determining-the-contractors-irr-in-production-sharing-contract/#more-1975

  1. Setyo, U. D. (2017). W8_UDS_Evaluation in Choosing Best Suplly Pattern Part 1

Retrieved from

https://emeraldaace2017.com/2017/09/23/w8_uds_-evaluation-in-choosing-best-supply-pattern-part-1/

 

 

W10_AI_Minimum Attractive Rate of Return (MARR) for Offshore Regasification Project in Indonesia using AHP

  1. Problem Definition

Related to the investment rule in company, they are using single hurdle rate for all project. In this blog, the appropriate MARR will be developed to find whether 10% is an appropriate rate. MARR calculation will be using Analytical Hierarchy Process (AHP) to determine range of project risk covers activity, technology type and demand (project location). Hence as the result, we can find the highest and lowest MARR for offshore regasification project.

  1. Identify the Possible Alternative
  • Estimating the Hurdle Rate

A company will invest to a project or execute a project which gives grater expected return than company cost of capital or WACC. WACC formula:

While the cost of equity is calculated by using CAPM formula:

  • Develop offshore regasification project risk

To cover all the MARR offshore regasification project scheme, there are 3 categories to be analyze which are:

  • Activity: Development and EPC
  • Technology Type: Floating Storage Regasification Unit (FSRU), Floating Storage Unit (FSU) – Floating Regas Unit (FRU), Floating Storage Unit (FSU) – Jetty
  • Demand: Sumatera Island, Java Island, Kalimantan Island, Sulawesi Island, Papua Island

 

  1. Development of The Outcome for Alternative
  • Estimating the Hurdle Rate
Item Value Source
Risk Free Rate 2.16 Damodaran 2017
Market Risk Premium 9.01 Damodaran 2017
Beta 1.07 Yahoo finance
% Debt 0.18 Public Financial Report
% Equity 0.82 Public Financial Report
After Tax Cost of Debt 4.4  

 

CAPM = 1.07 x 9.01 + 2.16
  = 11.8%

 

WACC = (0.18 x 4.4) + (0.82 x 11.8)
  = 10.47 %

 

 

  • Develop offshore regasification project risk

To purpose is to determine range of project risk based on activity, technology type and demand.

Picture 1. Hierarchical Tree

  1. Selection Criteria

Refer to Hierarchical Tree above, next step is to synthesize the relative ranking for each sub criterion using Analytical Hierarchy Process (AHP).

Table 1. The relative score

Based on the table above, hence the relative score result for each sub criterion as follow:

Table 2. Pairwise comparison matrix of offshore regasification project

Table 3. Project risk matrix algebra

  1. Analysis & Comparison of Alternative

Based on the table 3 above, the hierarchical tree with matrix rank result, as follow:

Picture 2. Matrix rank result

Refer to picture 2 above, the risk for each category will be scoring.

Table 4. Project Risk Scoring

The riskiest of offshore regasification project is EPC FSRU to supply Papua island with 8.35% and the least risky is Development FRU-Jetty to supply Kalimantan island with 0.91%.

  1. Selection of the Preferred Alternative

The MARR for offshore regasification project in Indonesia can be calculated by adding that risk scoring and country risk with formula:

WACC + Risk Scoring + Country Risk

MAX : 10.47% + 8.35% + 3.3% = 22.12%
MIN : 10.47% + 0.91% + 3.3% = 14.68%

The appropriate MARR for offshore regasification project in Indonesia should be around 14.68% to 22.12%.

  1. Performance Monitoring and The Post Evaluation of Result

To get more accurate WACC, the calculation and country risk data should be updating periodically. Project risk scoring will be updated due to change of Indonesia political and economic condition.

References:

  1. Liana, L. (2012). Using Analytical Hierarchy Process to Determine Appropriate Minimum Attractive Rate of Return for Oil and Gas Project in Indonesia
  2. Nunug, O.A. (2017). W12_OAN_Car Selection using AHP

Retrieved from

https://emeraldaace2017.com/2017/11/05/w12_oan_car-selection-using-ahp/

  1. Setyo, U.D. (2017). W9_UDS_Evaluation in Choosing Best Supply Pattern Part 2

Retrieved from

https://emeraldaace2017.com/2017/09/23/w9_uds_-evaluation-in-choosing-best-supply-pattern-part-2/

 

W12_AI_Offshore Regasification Project Economical Evaluation – Part 3

  1. Problem Definition

The previous chapter, economical evaluation offshore regasification facilities project has been calculated by using Interest Rate Return (IRR) and External Rate Return (ERR), henceforth this chapter the feasibility project will be analyze by using Payback Period Method. The result of economical evaluation modelling is providing useful information for Board of Direction as evaluation substance to get the best decision.

  1. Identify the Possible Alternative

The calculation still using 2 (two) business scheme, as follow:

  • Owning

Company purchase newbuilt offshore regasification facility at shipyard or to shipowner

  • Leasing

Company leasing the offshore regasification facility to ship management or shipowner

The assumption for offshore regasification capacity is 100 MMSCFD.

 

  1. Development of The Outcome for Alternative

Refer to Sullivan 16th edition chapter 5, there is 3 (three) alternative method to determine feasibility of the project, as follow:

  • IRR (Interest Rate of Return) Method – Part 1
  • ERR (External Rate of Return) Method – Part 2
  • Payback Period Method – Part 3

Payback period method has been used as a measure of liquidity project, this method shows how fast an investment can be recovered. Low value payback period is considered desirable.

  1. Selection Criteria
  • Owning

The assumption for this calculation, as follow:

Table 1. Assumption

According to the assumption above, the model calculation by using discount factor as follow:

Table 2. Owning Scheme Cash Flow

Here is the cash flow of the owning scheme project profile, as follow:

Picture 1. Discounted Payback Period

  • Leasing

The assumption for this calculation, as follow:

Table 3. Assumption

According to the assumption above, the model calculation by using discount factor as follow:

Table 4. Leasing Scheme Cash Flow

Here is the cash flow of the leasing scheme project profile, as follow:

Picture 2. Project Net Cash Flow

  1. Analysis & Comparison of Alternative
  • Owning Scheme

Berdasarkan Payback Period Method, didapatkan dengan menggunakan owning scheme dalam waktu 9 years the investment can be recovered.

  • Leasing Scheme

Berdasarkan Payback Period Method, didapatkan dengan menggunakan leasing scheme dalam waktu 11 years the investment can be recovered.

  1. Selection of the Preferred Alternative

Based on the calculation of both business scheme which is owning and leasing, found that by using owning scheme the investment can be recovered much faster than leasing scheme.

  1. Performance Monitoring and The Post Evaluation of Result

In economical evaluation, based on calculation using IRR method, ERR method and Payback Period Method resulted that owning scheme more profitable than leasing scheme. The number of IRR and ERR higher and faster to get the investment payback period as well. Furthermore, based on the scheme that has been selected, sensitivity analysis will be done to see the most influencing factor on IRR value.

References:

  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition Chapter 5 – Evaluating a single project., pp.239-246.
  2. Paska, H. M. I. (2015). W12_HMIP_Prioritization Project Portofolio using IRR, ERR and Payback Period Method

Retrieved from

https://garudaaace2015.wordpress.com/2015/05/18/w12_hmip_prioritization-project-portfolio-using-irr-err-and-payback-period-method/

  1. Setyo, U. D. (2017). W8_UDS_Evaluation in Choosing Best Supply Pattern Part 1

Retrieved from

https://emeraldaace2017.com/2017/09/23/w8_uds_-evaluation-in-choosing-best-supply-pattern-part-1/

 

 

W11_AI_Offshore Regasification Project Economical Evaluation – Part 2

  1. Problem Definition

In the previous chapter we have calculated the economical evaluation of offshore regasification facilities project by using Interest Rate Return (IRR), furthermore this week the analysis of project feasibility will be conducted using External Rate of Return (ERR). The result of this economic modeling is useful for the company as an evaluation material and assist the Board of Direction in decision making.

  1. Identify the Possible Alternative

Calculations still use 2 business schemes as follows

  • Owning

Company purchase newbuilt offshore regasification facility at shipyard or to shipowner

  • Leasing

Company leasing the offshore regasification facility to ship management or shipowner

The assumption for offshore regasification capacity is 100 MMSCFD.

  1. Development of The Outcome for Alternative

Based on Sullivan 16th edition chapter 5, there are 3 (three) alternative methods to determine whether a project is feasible or not, ie

  • IRR (Interest Rate of Return) Method – Part 1
  • ERR (External Rate of Return) Method – Part 2

The ERR method using the net cash flow generated to be reinvested or borrowed with using external interest rate (€) to get the economical calculation evaluation. At the end, the ERR method produces result identical as same as IRR method.

Step 1 : All of the outflows are discounted to time zero (PW) at €%

Step 2 : All of the inflows are compounded to end period (FW) at €%

Step 3 : Equation the inflows and outflows will be generated the ERR

  • Payback Period Method – Part 3
  1. Selection Criteria
  • Owning

The assumption used in this calculation is

Table 1. Assumption


Table 2. Owning Scheme Cash FlowBased on the above calculation assumption, we get the calculation model as follows

Table 2. Owning Scheme Cash Flow

The following is shown economical project profile based on cash flow above:

Picture 1. Project Net Cash Flow

The table above shows the total outflows and inflows. Next to get the ERR, then both outcomes will be equalized.

Picture 2. ERR Cash Flow

  • Leasing

The assumption used in this calculation is

Table 3. Assumption

Based on the above calculation assumption, we get the calculation model as follows

Table 4. Leasing Scheme Cash Flow

The following is shown economical project profile based on cash flow above:

Picture 3. Project Net Cash Flow

The table above shows the total outflows and inflows. Next to get the ERR, then both outcomes will be equalized.

Picture 4. ERR Cash Flow

 

  1. Analysis & Comparison of Alternative

The rule of thumb to justify this project feasibility by using ERR method, ERR Decision rule: If ERR ≥ MARR.

  • Owning Scheme

ERR generated is 31.68%, then ERR (31.68%) MARR (10%). Sehingga dapat disimpulkan bahwa berdasarkan perhitungan menggunakan ERR method, the project is economically feasible to being reinvestment.

  • Leasing Scheme

IRR generated is 20.14%, then IRR (20.14%) MARR (10%). So it can be concluded that based on calculation using ERR method, the project is economically feasible to being reinvestment.

  1. Selection of the Preferred Alternative

Based on the calculation of the two business schemes which is owning and leasing, it is found that by using both schemes the project can allocate its profits to other projects with interest at (€) 3%.

However, by looking at the generated ERR value, that is ERR owning scheme IRR leasing scheme, then it can be concluded that ERR with owning scheme or purchase newbuilt offshore regasification facility is more profitable for company compared with leasing scheme.

  1. Performance Monitoring and The Post Evaluation of Result

In economical evaluation, besides using IRR and ERR method, then will be done the study of calculations using Pay Back Period (PBP) to get more complete economic adjustment in choosing between the two schemes.

References:

  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition Chapter 5 – Evaluating a single project., pp.237-239.
  2. Paska, H. M. I. (2015). W12_HMIP_Prioritization Project Portofolio using IRR, ERR and Payback Period Method

Retrieved from

https://garudaaace2015.wordpress.com/2015/05/18/w12_hmip_prioritization-project-portfolio-using-irr-err-and-payback-period-method/

  1. Setyo, U. D. (2017). W8_UDS_Evaluation in Choosing Best Suplly Pattern Part 1

Retrieved from

https://emeraldaace2017.com/2017/09/23/w8_uds_-evaluation-in-choosing-best-supply-pattern-part-1/

 

W10_AI_Offshore Regasification Project Economical Evaluation – Part 1

  1. Problem Definition

In the previous chapter the calculation of the capex and opex offshore regasification facilities project has been calculated, so that this week an analysis of the feasibility of the project will be conducted to determine whether or not this project is going forward. The results of the financial economic modeling of this project are useful to the company as an evaluation material and assist the Board of Direction in decision making. So this week the calculation of IRR Project will be applied.

  1. Identify the Possible Alternative

The calculation of project evaluation will be conducted with 2 business schemes, as follows :

  • Owning

Company purchase newbuilt offshore regasification facility at shipyard or to shipowner

  • Leasing

Company leasing the offshore regasification facility to ship management or shipowner

The assumption for offshore regasification capacity is 100 MMSCFD.

 

  1. Development of The Outcome for Alternative

Based on Sullivan 16th edition chapter 5, there is 3 (three) alternative method to determine whether a project is feasible or not, in example :

  • IRR (Interest Rate of Return) Method – Part 1

The project IRR will be calculated using several assumptions that will be explained at a later stage. The IRR represent the internal earning rate of the project. For this calculation the interest is being calculated on the beginning of year investment through the life of this project.

  • ERR (External Rate of Return) Method – Part 2
  • Payback Period Method – Part 3
  1. Selection Criteria

Refer to Sullivan chapter 5.6 The Internal Rate of Return Method, the IRR was defined by the present value of net cash flow.

  • Owning

The assumption used in this calculation is

Table 1. Assumption


Table 2. Owning Scheme Cash FlowBased on the above calculation assumptions, calculation model is obtained as follows

Table 2. Owning Scheme Cash Flow

The following shows an economical project profile based on cash flow:

Picture 1. Project Net Cash Flow

  • Leasing

The assumption used in this calculation is

Table 3. Assumption


Table 4. Leasing Scheme Cash FlowBased on the above calculation assumptions, calculation model is obtained as follows

Table 4. Leasing Scheme Cash Flow

Picture 2. Project Net Cash Flow

  1. Analysis & Comparison of Alternative

The rule of thumb to justify this project feasibility by using IRR method, IRR Decision rule: If IRR ≥ MARR.

  • Owning Scheme

IRR generated is 16.31%, then IRR (16.31%) MARR (10%). So it can be concluded that based on calculation using IRR method, the project is economically feasible.

  • Leasing Scheme

IRR generated is 12.70%, then IRR (12.70%) MARR (10%). So it can be concluded that based on calculation using IRR method, the project is economically feasible.

  1. Selection of the Preferred Alternative

Based on the calculation of the two business schemes which is owning and leasing, it is found that both schemes are feasilble and workable.

However by looking at the generated IRR value,yaitu IRR owning scheme IRR leasing scheme it can be concluded that IRR with owning scheme or purchase newbuilt offshore regasification facility is more profitable for the company compared with leasing scheme.

  1. Performance Monitoring and The Post Evaluation of Result

In economical evaluation, other than using IRR method, then a calculation study will be conducted using External Rate of Return (ERR) and Pay Back Period (PBP) so that the company get a more complete economic adjustment in choosing between the two schemes.

References:

  1. Sullivan, G. W., Wicks, M. E., & Koelling, C. P. (2014). Engineering economy 16th Edition Chapter 5 – Evaluating a single project., pp.210-237.
  2. Prasetio, H. (2013). W7.1_HPO_Determining The Contractor’s IRR in Production Sharing Contract.

Retrieved from

https://simatupangaace2014.wordpress.com/2013/11/17/w7-1_determining-the-contractors-irr-in-production-sharing-contract/#more-1975

  1. Setyo, U. D. (2017). W8_UDS_Evaluation in Choosing Best Suplly Pattern Part 1

Retrieved from

https://emeraldaace2017.com/2017/09/23/w8_uds_-evaluation-in-choosing-best-supply-pattern-part-1/

 

W9_AI_Contingency Estimation of O&M Cost Offshore Regasification Project

  1. Problem Definition

Offshore Regasification Project has been one of the most priority project. Therefore, calculation of O&M Cost of Offshore Regasification Project must be developed.

The objective of this calculation is to determine cost overrun probability during O&M period. Therefore, it is necessary to prepare cost contingency for the project to anticipate the additional cost.

  1. Identify the Possible Alternative

There are 4 methods to estimate cost (also time) contingency, as follow:

  • Expert Judgment
  • Predetermined Guidelines
  • Simulation Analysis
    • Range Estimation
    • Expected Value
  • Parametric Modeling

For this case, Author uses Simulation Analysis with Range Estimation method.

Range estimating is a risk analysis technology that combines Monte Carlo sampling, a focus on the few critical items, and heuristics (rules of thumb) to rank critical risks and opportunities. This approach is used to establish the range of the total project estimate and to define how contingency should be allocated among the critical items.

  1. Development of The Outcome for Alternative

The following steps will be used to determine cost contingency using range estimating:

  • Determines of ranges for each cost items.
  • Determines the probability that each item can be completed within the estimate.
  • Running Monte Carlo simulation for the cost range.
  • Determines of critical items based on result of Monte Carlo simulation.
  • Determine of contingency with reference to critical items only.

Following are base estimates for each cost items:

Table 1. Base Estimate of O&M Cost Offshore Regasification Facilities

Estimator has developed table (1) above, to determine range of each cost item. Good estimate shall be calculated equal probability of overrun and underrun (50% probability), hence the assumption being that some project will overrun while others will underrun, and in the end they will balance out.

But estimator shall be added some risk-aversed attitude, in this calculation P80 will be used. It means that probability of 80% that the project will not overrun.

Table 2. Range and Desire Probability of Each Component

After determining range and desire probability of component cost, further step is to conduct Monte Carlo simulation with 1000 iterations. The result as follow:

Table 3. Monte Carlo Simulation Result

  1. Selection Criteria

Estimator using Bottom Line Critical Variance to categorize critical item of each cost component, table show below:

Table 4. Bottom Line Critical Variances

  1. Analysis & Comparison of Alternative

Using Bottom Line Critical Variance table above, critical item result as follows:

Table 5. Critical Items

  1. Selection of the Preferred Alternative

After categorize critical component, then the next step is determining cost contingency, as shown in following table:

Table 6. Cost Contingency

Hence the total cost contingency will be used for this project is $ 126.000 (only for critical item).

 

  1. Performance Monitoring and The Post Evaluation of Result

During the implementation of Offshore Regasification Project, it is necessary to monitor O&M cost to prevent cost overrun exceed cost contingency.

References:

  1. AACE International Recommended Practice No. 41R-08
    Retrieved from https://www.yumpu.com/en/document/view/50838191/41r-08-risk-analysis-and-contingency-determination-using-range-
  2. AACE International Recommended Practice No. 44R-08
    Retrieved from http://nebula.wsimg.com/ab1871cc797714d7bf4dc2bfc4f5c243?AccessKeyId=593FFA6B20F5002887D7&disposition=0&alloworigin=1
  3. Milza, R. (2016). W10_RM_Contingency Estimation in Gas Station Project.

Retrieved from https://goldenaace2015.wordpress.com/2016/03/08/w10_rm_contingency-estimation-in-gas-station-project/

  1. Asro. Y. W. (2014). W20_YAW_Contingency Estimation in Storage Tank Project.

Retrieved from  https://kristalaace2014.wordpress.com/2014/07/07/w20_yaw_contingency-estimation-in-storage-tank-project/

 

W8.1_AI_Tuckman Survey on Process Engineer Team

  1. Problem Definition

Process Engineer Team has been actively working together for the past 4 years. The challenge of this team is the increasing and complexity of gas infrastructure projects that will be faced. We now want to determine the leadership skills and styles which the group may benefit from as it enters this next phase of the project. Then for this week Tuckman Survey will be applied.

  1. Identify the Possible Alternative

In 1965, Tuckman published his Forming Storming Norming Performing model and completed with the fifth stage, Adjourning in 1970s. This model explains that as the team develops maturity and ability, relationships establish, and the leader changes leadership style from Directing (Telling), Coaching, Participative, and Delegating up to Directing (Concluding).

Fig. 1 Tuckman’s Team Development Model

Illustration graph of Tuckman Model Group Development Stages is shown in the next figure:

Fig 2. Tuckman Group Development Stages Model

  1. Development of The Outcome for Alternative

To determine current Process Engineer Team stage, each individual in team fill the excel format of Tuckman Survey Scoring Template.

Table.1 – Individual responses from the Tuckman Survey Scoring Template.

  1. Selection Criteria

Based on the above individual’s response, PERT analysis was performed to identify team behavior at P90 because these team already join over long time (4 years)

Table 2. P90 Delphi Technique Result

  1. Analysis & Comparison of Alternative

Based on Table 2, we can conclude team is in Performing stage (indicated by the rank). During this stage, team members often experience:

  • Constructive self-change;
  • Deep sense of belonging;
  • Understanding of each other’s strengths and weaknesses;
  • Self-organization of work;

Hints for team leaders:

  • Delegate all work that sensibly can;
  • Focus on developing team members;

Style of leadership this stage is “DELEGATING” mode where some leadership is shared by the team.

  1. Selection of the Preferred Alternative

Process Engineer team can achieve more than each team member individually. Being part of a high-performance team can be extremely rewarding, but it requires time and commitment to get to that stage. The team leader job is to help this team reach and sustain high-performance and leader has to adapt behavior and leadership style to the different challenges presented at each stage. The team leader responsibility is to be aware of the challenges the team will face and support the team to get aim together.

  1. Performance Monitoring and The Post Evaluation of Result

Team assessment should conduct periodically in six months ahead to capture team phase changing and select appropriate style of leadership, this evaluation can help the team to improve coordination and productivity.

 

References:

  1. Tuckman, B. (1965). Tuckman’s Team Developmental Model. Retrieved from http://www.focusadventure.com/team-building/gallery/tuckmans-team-developmental-model/
  2. Michell, Tony (2017). W2_ABM_Folow Up Tuckman|EMERALD AACE 2017. Retrieved from http://emeraldaace2017.com/2017/08/08/w2_abm_follow-up-tuckman-survey-on-spj-offshore-construction-team/
  3. Irene, A. (2017). W2_AI_Tuckman Analysis|EMERALD AACE 2017.

Retrieved from https://emeraldaace2017.com/2017/08/01/w1_ai_tuckman-analysis-assigment/

 

W8_AI_Tuckman Survey for Process Engineering

  1. Problem Definition

Process Engineer Team has been actively working together for the past 4 years. The challenge of this team is the increasing and complexity of gas infrastructure projects that will be faced. We now want to determine the leadership skills and styles which the group may benefit from as it enters this next phase of the project. Then for this week Tuckman Survey will be applied.

  1. Identify the Possible Alternative

In 1965, Tuckman published his Forming Storming Norming Performing model and completed with the fifth stage, Adjourning in 1970s. This model explains that as the team develops maturity and ability, relationships establish, and the leader changes leadership style from Directing (Telling), Coaching, Participative, and Delegating up to Directing (Concluding).

Figure 1. Tuckman’s Team Development Model

Illustration graph of Tuckman Model Group Development Stages is shown in the next figure:

Fig 2. Tuckman Group Development Stages Model

  1. Development of The Outcome for Alternative

To determine current Process Engineer Team stage, each individual in team fill the excel format of Tuckman Survey Scoring Template.

Table.1 – Individual responses

  1. Selection Criteria

Based on the above individual’s response, PERT analysis was performed to identify team behavior at P90 because these team already join over long time (4 years)

Table 2. P90 Delphi Technique Result

  1. Analysis & Comparison of Alternative

Based on Table 2 above, we can conclude the team is in Performing stage (indicated by the rank). During this stage, team members often experience:

  • Constructive self-change;
  • Deep sense of belonging;
  • Understanding of each other’s strengths and weaknesses;
  • Self-organization of work;

Hints for team leaders:

  • Delegate all work that sensibly can;
  • Focus on developing team members;

Style of leadership this stage is “DELEGATING” mode where some leadership is shared by the team.

  1. Selection of the Preferred Alternative

Process Engineer team can achieve more than each team member individually. Being part of a high-performance team can be extremely rewarding, but it requires time and commitment to get to that stage. The team leader job is to help this team reach and sustain high-performance and leader has to adapt behavior and leadership style to the different challenges presented at each stage. The team leader responsibility is to be aware of the challenges the team will face and support the team to get aim together.

  1. Performance Monitoring and The Post Evaluation of Result

Team assessment should conduct periodically in six months ahead to capture team phase changing and select appropriate style of leadership, this evaluation can help the team to improve coordination and productivity.

 

References:

  1. Tuckman, B. (1965). Tuckman’s Team Developmental Model. Retrieved from http://www.focusadventure.com/team-building/gallery/tuckmans-team-developmental-model/
  2. Michell, Tony (2017). W2_ABM_Folow Up Tuckman|EMERALD AACE 2017. Retrieved from http://emeraldaace2017.com/2017/08/08/w2_abm_follow-up-tuckman-survey-on-spj-offshore-construction-team/