Group 8

             This case study was the value engineering of a refinery facility in California in 1993.  The value engineering process was broke down in to three teams each team was giving an area to value engineer.  The points of view were layout, process, and electrical, mechanical, and piping.  The final results of the value engineering process resulted in approximately $35,000,000 or 60% of savings were realized this resulted in an 11% reduction in cost.  Also an annual savings of $500,000 a year in operating cost. 

 The first value engineering team was given the task of evaluating the project layout.  The team preformed a component functional analysis and also developed a Functional Analysis System Technique Diagram to use as an aid to them during the value engineering process.  This team developed twelve design suggestions and also came up with sixty four ideas of which four of them were selected and developed.   The team’s proposals were to consolidate the site to reduce interface cost, reduce the size of the site, and to consolidate buildings.  The building consolidation was done to reflect actual future requirements as opposed to the design future recruitments.   This team came with a positional saving of $8.5 million in initial cost.

            The second value engineering team was given the task of evaluating the process of how the refinery functions.  The team evaluated the flow of the project and also developed a Functional Analysis System Technique Diagram to use as an aid to them during the value engineering process.  This team developed five design suggestions and also came up with forty four ideas of which four of them were selected and developed.  The proposals that this team developed resulted in $38 million in value engineering recommendations as well as a $1 million in annual cost savings.  The team’s proposals were to combined or delete redundant tanks, use seawater for cooling rather than fresh water, to reduce the number of seawater pumps, and to eliminate pipeline scrapers.

            The third value engineering team was given the task of evaluating the electrical, mechanical, and piping on the project.  The team reviewed a number of functional areas from there previous Functional Analysis System Technique Diagrams.  This team put a large amount of their focus on the piping diagrams and the electrical diagrams that were generated by the electrical team.   This team came up with thirty two ideas and developed five of them.  These proposals had a potential savings of $7.6 million.  Also the team developed twenty four mechanical and electrical design suggestions that had a potential savings of $2.2 million.  The team’s proposals were to eliminate one product loading arm at the port facility because of its poor value, eliminate some of the excessive fill requirement in the off-plant tank area, install the main electrical distribution line above ground, and reduce the size of the main transformers closer to the actual needs.  The key design   suggestions were to eliminate the fifteen percent overdesign for tanks, use earthen berms for the site, reduce the number of pump spares, and delete one of the pipe launchers and receivers. 

            When the teams reviewed the proposals that they came up with for the refinery project they decided that if there was one component of the proposal that was not affective or the team did not like the whole proposal was not thrown out rather that section was reviewed and made to work.  With the technique the total impact of the three value engineering teams was 455 million and this represented about 17% of the planned investment.  Also $1 million in annual operation and maintenance savings could be saved if all the ideas were implemented. 

Value engineer (VE) the layout space of refinery facility by rearranging of pipe to reduce cost.

Team One conducted the VE based on function analysis using the Function Analysis System Technique (FAST) Diagram to help it determine which component meets its project objective. At the beginning of the study, the team came up with many ideas for development, four were selected. Twelve suggestions were also developed. 

After the VE study, it is estimated that the potential savings would be 8.5 million in initial costs due to reduction of interface cost and size of building to meet the project objective rather than desired future requirement.

Team One implemented the Weighted Evaluation to narrow down on the less important focus in the VE study. The major focus for the team was to move all hydrocarbon pipings to South East  and to support facility at North and West side of the site. The purpose of rearragement of piping was to reduce pipe costs.

Team One had four proposals for VE study, one of which was the main focus for the team to recommend was the revise layout of site. 

Original Design- The basic design layout consisted of product store tanks running along north side of site then all products flow from tanks to hydrocarbon products facilities to the south. The layout accumilated unnecessary use of hydrocarbon piping. Unit cost from estimate for this type of piping cost up to $884/meter. 

*(costs all $x1,000)

ADVANTAGES	DISADVANTAGES
Not known	Unneccessary quantity of piping used
	High in present worth costs of $6,028
	High in annual cost of $642

Proposed Design- To minimize the piping to carry back and forth flow sequences.

Highest ranked alternate- moving the product store tanks to the south of Refinery

-          Moving all hydrocarbon products facilities to the east.

-          Most personnel and utility facilities move to the west (near the site center.)

-          Future siting is moved to the far west.

*(costs all $x1,000)

ADVANTAGES	DISADVANTAGES
Low in quantity of piping used	Not known
Low in present worth costs $3,368
Low in annual costs of $364
Life cycle present worth savings of $2,938

Result- Reduction in on-site piping from $7,847 meters to 4,499 meters. 

The Process team reviewed the process flow of the project and developed a FAST diagram. The team broke down 44 ideas into five design suggestions.  The five design suggestions would result in $38 million in initial cost savings.  An additional $1 million per year savings would also be achieved.  The principal proposals were to use seawater for process cooling, eliminate/reduce seawater pumps, eliminate pipeline scrapers, and to combine or eliminate redundant type tanks. 

The final value engineering recommendation was to combine and or eliminate redundant type tanks.  This involved evaluating the original processes as to eliminate anything that was not absolutely necessary as per the FAST diagram.  The processes were broke down into three major areas of concern feeding the system, interim product storage and by-product storage.

The original design called for two stock tanks, one would feed the system while the other was filling. The proposed design directly feeds the process and calls for one tank to a) keep the plant on-line during a feed line interruption, b) provide surge in case plant is off-line and c) catch off-spec product for rerun.  The feed that is coming into the plant is approximately equal to the amount of feed the plant needs to operate so there is no reason not to eliminate the extra storage.  The tank that is kept in the design is available for off-spec product, to catch feed if the process is down, or to feed the process if the incoming feed pipeline is down. 

In the original design Benzene and Cyclohexane flowed down to day tanks for checking product quality prior to shipment to the port.  If the product does not meet specifications then they are re-run via an off-spec tank.  Benzene that meets specifications goes to a product tank for either shipment to port or for local sale.  In the proposed design there is no on-site storage.  All products flow directly to the port.  In the original design the product is not mixed well enough before it is placed in the on-site storage tanks so it is impossible to get a good sample.  If one sample from the tank is not up to specifications than the whole tank will have to be reprocessed.  You lose the money you spent processing the material the first time and you lose the ability to process new product while you are reprocessing the off-spec product which is a permanent revenue loss.  In the proposed design the product quality is monitored continuously by taking frequent samples directly from the line or through an on-line analyzer.  An operator can take immediate action if a sample does not meet specification or if the analyzer reports a problem instead of waiting till a whole tank has to be reprocessed.  Off-spec products can be immediately routed back to the feed tank or directly back into the process. 

In the original design the two by-products flow to separate day storage prior to batch shipment down a common line.  In the proposed design both by-products will flow directly to the port in separate lines.  There is no good reason for storing this material on-site. 

The initial and life cycle savings from the proposal comes from reducing the number of tanks on-site, reducing quantity of monitoring wells, eliminating the concrete pads needed for the extra tanks, reducing the amount of pumps needed by 14 and the associated energy needed to power the pumps, replacing 5 miles of 10”, 12” and 14” piping with 4”, 6” and 8” piping and increasing the overall reliability of the system by eliminating unnecessary functions that would have to be maintained.  The basis for this savings comes from the ability to analyze the product continuously for quality control while being able to take immediate action if the product is not up to specifications, the process must be able to operate under sufficient stability if the proposal is used and any required blending can be performed at the port. 

On page 265 and 266 of the case study you can see the original layout and the proposed layout.  Comparing the two, you can see the dramatic reduction in the amount of storage in the proposed design.  The weighted evaluation the team created shows that the proposed design outperforms the original design 115 to 73 which is a significant amount. 

The original design would have cost $60.9 million while the proposed design cost $27.1 million which had an initial savings of $33.8 million.  The annual cost was reduced from $7.063 million to $1.234 million for an annual savings of $685,000.  Using a twenty year life cycle the total savings adds up to $39.6 million.

Through the use of Functional analysis, the team used decided to use two different FAST diagrams.  One of the diagrams was designated for piping and mechanical work while the other concentrated solely on the electrical aspect.  With respect to the functional analysis study, the team comprised a series of five proposals based on 32 ideas generated.  The team generated the principal proposals as follows: Eliminate one of the loading arms, Combine wastewater and off-plot tank feed, Eliminate tank area fill, Reevaluate substation, Revise 115 KV plant feed.  The estimated initial savings of $7.6 million with design suggestions estimated at saving $2.2 million.

Upon implementation, proposal E-3 was chosen to revise the electrical feed.  The original design designated  the 115 KV plant feed to be installed underground from the power company substation which was 4.3 kilometers away  from the main substation.  The team proposed that the electrical plant feed was installed above ground.  The local requirements actually dictate that the 115 KV service is installed underground; however, the proposal includes the request for a waiver in this case to install the service above ground.  The VE team felt like the operation would be suitable for this type of industrial area.

The original design of the plant feed required two feeders with three inch cable which is equivalent to that of the proposal.  The requirement of 84, 624 linear feet of line is represented with a cost of $25 per linear foot in the original design and only $10 per linear foot in the proposal.  The realized cost savings by using above ground cable was an astonishing $1,269,360.

The installation of the original design was $100 per linear foot as compared to only $10 per linear foot as estimated in the proposal for above ground service.  The installation savings also totaled $1,269,360.

For the installation of the above ground feed it is necessary add the cost of 30 towers spaced at 500 feet apart.  The cost per unit was approximated at $5000 per tower which totals to $150,000 for the towers.

The markup for both operations remained constant at (.8); however, since the total cost of the proposed design was significantly less than the original design the markup difference was again in the favor of the proposed design with a savings of $1,910,976.

All totaled, the proposed design suggested a present worth savings of $4,299,696.  It is important to note that the sum of the initial savings and the sum of the total present worth savings are equal because there was no proposed savings for annual operation and maintenance.

Refinery_facility.pptx