Infographic: Gap widens between Northeast, Gulf Coast project costs
Estimated costs for ethane cracker projects are growing at a faster rate in the U.S. Northeast than on the Gulf Coast, according to Petrochemical Update’s US Ethylene Plant Construction Costs second-quarter update.
The base-case scenario for a 1.25 million ton-per-annum (mtpa) cracker in the Northeast rose 3.4% to $1.89 billion in Q2 2016. The high-case scenario reached $2.17 billion and the low-case scenario $1.61 billion. On the Gulf Coast, the base-case scenario for a 1.25 mtpa cracker rose 1.85% to $1.77 billion.
As Petrochemical Update reported recently, the base-case scenario for a 1.5 mtpa cracker on the Gulf Coast rose 1.75% to $2.11 billion in Q2 2016. By comparison, the US inflation rate rose 1.03% in the second quarter.
Estimated labor costs, which typically account for roughly half the cost of ethane-cracker projects, are now 9% higher in 1.25 mtpa projects in the Northeast than they are on the Gulf Coast. Excluding labor, ethane cracker projects in the Northeast are 4.5% more expensive than on the Gulf Coast.
The Northeast has the highest total construction costs. Construction costs make up for more than 90% of total projects costs; other costs, such as procurement, account for the remainder. (Source: U.S. Ethylene Plant Construction Costs Quarterly Update Q2 2016)
In the Northeast, cost estimates for major equipment rose 3.08% and bulk-material costs rose 1.8% in the second quarter. Costs rose for every equipment and material category, with compressors, fans and blowers recording the highest increase of 10.3%.
Total indirect costs were up 3.8% due to higher labor costs and contractor fees. Detailed design and engineering costs rose 6.6%, and other costs – including project management and controls, procurement, and EPC warranty and fees – also rose 6.6%.
Equipment and materials account for three-fifths of total construction costs in the U.S. Northeast (Source: U.S. Ethylene Plant Construction Costs Quarterly Update Q2 2016)
Piping systems are the most expensive bulk material in a typical cracker project, both in terms of the cost of the material and the cost of the labor required for installation. In the Northeast, piping systems now account for 48.97% of the total estimated cost of bulk materials.