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(EST-2875) CAPEX Growth Over Project Delay - A Case Study

Prolonged project delays could be detrimental to the project’s CAPEX, schedule and economic feasibility, if it does not end up killing the project. The Case Study is a Midstream EPC Gas Project jointly owned by a National Oil Company and multiple International Oil Companies. The Project has been on the drawing board for over a decade with successive CAPEX estimates prepared during the project’s development phase. This Paper presents the estimating processes that were adopted by the FEED contractor on behalf of the owner in the preparation of the CAPEX estimates and the resultant steady CAPEX growth over time. While the major contributing factors to the CAPEX growth are identified principally as scope changes (internal) and cost escalation (external), there were still many others. Appropriate monitoring and quantification of these factors are required as the project’s CAPEX evolves over time in order to provide a good basis for informed decision by management. Keeping the project’s CAPEX growth at a minimum enhances the realization of the project’s business objectives and profitability.