By Ben DuBose

GALVESTON, Texas -- Tight capital constraints by many companies in the industry and wide fluctuations in energy costs are making grassroots projects less economically feasible, a consultant at Energy Systems Engineering said on Tuesday.

Speaking at the second annual Energy Construction Forum, Ray Elshout told delegates that the current trend is to debottleneck existing units to reduce energy usage and improve profitability, rather than building new units.

"The emphasis now is on plant performance and safety, environmental and operating flexibility," Elshout said in his presentation regarding cost-effective debottleneck expansions.

In prior market eras, Elshout noted that greenfield plants were the preferred way to expand, with a typical return on investment (ROI) of 25% to 30%. Because engineering tools were labor intensive and required extensive man hours, only a small volume of E&C companies were true candidates to be service providers.

"Usually, the only difference among them was a project-by-project willingness to make a deal," Elshout said.

But today, the requisite engineering tools involve commercial data packages and increased automation, which allows international engineering, procurement and construction management (EPCM) firms to offer engineering services at lower prices and compete directly in the US market.

"Construction providers are having to catch up," Elshout said.

Elshout noted that there are two basic types of revamp projects. The first affects primarily just the re-engineered units, with minor utility and construction procedures as the primary concerns. The second, however, is to revamp unit yields, which can affect many units in the refinery and make the construction and start-up processes more complex.

"Economics must be performed for the entire plant," Elshout said, noting that most modern refinery revamps follow the second pattern.

Elshout urged EPC providers to target a "trial and error" approach, including a look at alternative options and equipment to be modified, or possibly supplemented with additional equipment.

At that point, preliminary cost estimates can be made, and operators and contractors can jointly determine whether the improvement in economics supports the costs of the modifications.

The second annual  Energy Construction Forum continues through Wednesday at Moody Gardens.