April 2017

Trends and Resources

Business Trends: Standardized modularization—Drivers, challenges and perspectives in the oil and gas industry

Modularization is an alternative way of performing engineering aimed to reduce the number of interfaces, the total installed cost (TIC) and overall schedule length of a project, while optimizing the return on investment (ROI) and allowing standardization for similar future projects.

Eftimie, C., RTS Ltd.

In contrast with conventional projects, modularization splits a unit into parts of a system to be prefabricated in an offsite fabricator workshop and assembled later onsite, on a pre-laid foundation. This method aims to reduce the number of interfaces, the total installed cost and the schedule length of a project, while optimizing the return on investment and allowing standardization for similar future projects. Modularization allows the movement of complex and costly tasks from the field into fabrication yards, thereby reducing risk and labor effort while improving quality, schedule and savings via higher offsite productivity. Is modularization a viable solution for downstream projects? This month’s Business Trends section provides detailed information on modularization strategy and project drivers, along with the benefits and challenges of utilizing modular designs.

Woodside’s LNG plant on Australia’s North West Shelf is one of the world’s largest LNG terminals. The facility’s LNG trains were built using modular design and construction. Photo courtesy of GE Oil and Gas.
Woodside’s LNG plant on Australia’s North West Shelf is one of the world’s largest LNG terminals. The facility’s LNG trains were built using modular design and construction. Photo courtesy of GE Oil and Gas.


Modularization is an alternative way of performing engineering aimed to reduce the number of interfaces, the total installed cost (TIC) and overall schedule length of a project, while optimizing the return on investment (ROI) and allowing standardization for similar future projects. This design philosophy has been used since the 1980s. Its related know-how and principles started to slowly transfer from offshore platforms to onshore applications without the pressure of low oil prices, as is seen today.

In contrast with conventional projects (e.g., field-constructed or stickbuilt), modularization will split a unit into parts of a system (“modules”) to be prefabricated in an offsite fabricator workshop and assembled later onsite, on a pre-laid foundation.

The defined modules are portable, with a compact design and the combined functionality of multiple skids. Modules are also self-supporting and removable, if required. From this perspective, modularization design is not done around equipment, but rather at a package level (modular) vs. the single-point design of conventional engineering.

The decision to follow this design strategy is taken very early after the start of a project—typically during the conceptual/pre-front-end engineering design (pre-FEED) phase—when the engineering consultant evaluates the most cost-effective design strategy. A study of modularization feasibility vs. stick-built design, taking into account the owner’s input and considering all critical factors, will help decide the project strategy early in the project’s execution.

Developing a modularization strategy

Is modularization a viable solution for the project?1 The following “checklist” items may help steer the designer in the right direction:1

  • Is future plant capacity suitable for modularization?
  • Are restrictions present on where and who can fabricate the modules?
  • Is modularization impacted by shipping and transportation limits?
  • How would equipment spacing limits impact modularization?
  • Are site permits available at the start of the project?
  • What is the availability of onsite heavy-lift cranes (> 300 t/module)?
  • Is the competence of shortlisted modularization fabricators proven?
  • What is the difference between field vs. shop fabricator labor cost and productivity?

Project drivers for modularization

Several factors2,3,4 are in favor of driving a project toward modularization:

  • Remote locations: Projects in poorly accessible places are more costly using the conventional construction strategy
  • Site security: Maximizing project activities offsite reduces the cost/schedule impact in unstable areas (e.g., affected by war)
  • Adverse weather/climate impact: Long, severe winters or intense, hot climates are in favor of maximizing yard fabrication (offsite)
  • Lack of skilled resources onsite or nearsite: Typically, offsite fabrication yards are using skilled electricians, welders, etc.
  • Improved productivity and schedule: Workshop fabrication allows for the effective use of labor in an optimized environment, thereby reducing cost overruns and delays that are often related to onsite activities
  • Minimized downtime impact in brownfield projects: Quicker site installation of prefabricated modules
    allows for a reduced schedule, less field disruption, safer handling and faster run
  • Standardization (design one and build many): Allows reusing of the same design across many different projects in a scalable, interchangeable and safe way, which reduces direct project time and costs (E&C) by 20% or more
  • Proven competence and experience of fabricators: Modularization know-how is crucial in limiting rework and schedule reduction
  • Testing/acceptance and performance runs at fabricator yard: Modular skids are assembled offsite and fully
    tested for equipment and piping, while cables are checked for continuity
  • Cost savings: Maximized workshop fabrication translates into the reduction of field erection and construction hours involving costly labor effort and costly logistics at site rates. Labor cost at the fabrication yard is about two-thirds of that at the field. Modules allow important procurement savings, along with reduced field management (including owner’s supervision) and test run/inspection costs.

Additional benefits of modularization.2,3,4

Workshop fabrication of modules offers many advantages vs. onsite components production, as in stickbuilt design:

  • Increased quality and health, safety and environment: A workshop-controlled environment (with required materials and tools already present) enables personnel to meet the highest standards, with routine operations (testing and inspection inclusive) performed by skilled labor, based on past experience and best know-how. It also allows for increased safety and reduced risks.
  • Reduced schedule (up to 25%–50%): Yard fabrication allows for early procurement of critical equipment and maximized parallel works (workshop vs. field civil work/site preparation); yard work can start before obtaining a site permit (FIGS. 1 and 2). Short schedules are important when required to market products rapidly.
  • Efficiency: Fabrication yard productivity is higher vs. onsite, due to an environment with little to no disruptions, as well as an organization allowing multiple shifts.
  • Application of fabrication standards and unitization: Modules incorporate many functions depending on complexity, and are ideally hooked up by flanged connections at the module edge at the same plane and accessible elevation, avoiding scaffolding, which otherwise can reach up to 30% of module cost. Piping is fully painted and insulated, and the supports are inside the module. Electrical/controls (with local panels) are incorporated in the module (main field power/instrument cables are installed underground prior to module arrival, ready for interconnection). If not unitized, modules are provided with three-degree freedom spools. Pipe racks also are unitized (continuous length fabrication, fully tested, cut apart in modules and welded later at each connection).
  • Mobility and reusability: Modular fabrication results in easier transportation (by truck, rail or sea) of less material/equipment, and allows for module relocation, if required.
  • Economical manufacturing: Modular fabrication reduces labor hours and material loss, resulting in compact packages with less piping, due to optimized design.
  • Reduced onsite logistics: Less lifting equipment and optimized field usage of heavy-lift cranes; minimized handling of materials onsite.
  • Less onsite interfaces: The compact design of modules reduces the number of interconnections and simultaneous site operations.
  • Less construction complexity: Field operations are minimized.
  • Smaller footprints: Modules can fit into a smaller plot area and typically gather all connections onto one side.
FIG. 1. Modularization can save 25%–50% of time vs. conventional construction.<sup>5</sup>
FIG. 1. Modularization can save 25%–50% of time vs. conventional construction.5
FIG. 2. Schedule comparison: Modularization vs. conventional.<sup>6</sup>
FIG. 2. Schedule comparison: Modularization vs. conventional.6

Modularization challenges.4

The engineering module concept has both positive and negative aspects. Among the negative issues, the most important is the cost of the first design, which can exceed that of the conventional design by up to 50%–60% (or reaching up to 12% of the TIC),2 depending on the familiarity and past experience of the module contractor.

Since the front-end effort is more intense than in conventional engineering and the number of long-lead items (LLI) is greater with orders placed much earlier during the project, planning, schedule and activities sequencing are crucial to meet the hookup and commissioning target dates. Module interfaces shall be identified and frozen early in the process to allow progress of parallel workshop and site activities. Plan deviations will be restricted to a minimum, and the alignment with the overall construction schedule is expected to be continuous. Good coordination and claim management are critical, since procurement starts at an earlier stage. Expediting should be constantly evaluated to anticipate and avoid major delays. Several additional aspects should be carefully evaluated before moving forward with a modular strategy:

  • Space utilization: Module design should allow access to the components needing to be shut off, which may require advanced 3D ergonomics analysis.
  • Optimization of the level of modularization: Module sizes/weights are limited by local transportation regulation (typical size: 12 ft × 12 ft × 60 ft, up to 24 ft × 24 ft × 120 ft by truck/rail, or larger by sea; weights up to 400 t–600 t by truck/rail, or up to 12 Mt by sea).
  • Accessibility and maintainability: Equipment and instrumentation within a module have less access/maintenance space, as in the case of conventional design.
  • Accelerated procurement and complexity: The number of LLI is increased and orders are placed earlier vs. conventional design, which requires a transportation strategy (e.g., access routes, loading/offloading facilities) for intense expediting.
  • Managing a modularization project within a conventional one requires personnel to consider equipment spacing requirements and confined area accessibility for maintenance in an existing, limited plot area.
  • Interface management and execution strategy: Requires experience in both offsite modular fabrication and field construction/assembly, which implies multiple work sites supervision and, possibly, more complexity.
  • Shipping costs: Larger modules are transported by sea, but may need to consider damage, delays or loss risks and fees related to insurance, marine surveyors and customs, plus costs for heavy lifting and special transport. Transportation and lifting in land-locked locations (with few or no roadways) may also become challenging.
  • Local laws and regulations: Awareness of local and national laws is critical for planning a modularization project, since it may impact shipping schedules and coordination between multiple sites.
  • Construction and quality standards: The implementation and/or deviation from these standards may become critical. Potential conflicts between fabricator vs. owner standards can be solved via industry practice and adopting standards deviations, if justified.
  • Materials/logistics: The timely delivery and handling of materials and equipment, heavy lifting/hauling, shipping constraints (truck/rail/barge), routing and clearances are critical factors.
  • Project management: Modularization is not as change-friendly as stickbuilt projects, so the designer will be prepared for no additional changes after the piping and instrumentation diagram has been issued for design, except for safety and/or code reasons.
  • Fabrication shop capabilities: The ability of a fabricator to build, assemble and plan/coordinate transports shall be completed by their access to roads, rail systems or deepwater (for larger modules).

An urgency to invest in modularization

It is recognized that the efficiency driven by modularization in the energy industry has been slower to materialize, compared to other heavy industries—e.g., automotive, civil infrastructure, shipbuilding, etc. These industries have utilized modularization design strategies for many years. However, oil and gas industry licensors and workshop fabricators have adapted to this new reality faster than engineering companies, where efforts are still ongoing to improve their competitiveness.

The key elements in modularization are interfaces standardization and change management. However, a few significant contributing aspects include:

  • Standardized modularization: Mini-refineries (with capacities of up to 50 Mbpd), gas plants up to 200 MMcfd, and floating production, storage and offloading (FPSO) vessels have been built and operated based on the modularized approach. Important cost savings have been reported based on the replication or templating in multiple similar parallel trains. This approach implies that engineering companies will continue to adapt to the market with a new set of engineering standards, and become familiar with vendor standards for packages and materials.
  • Minimizing peak labor pressure at the field: Maximizing the work in the fabrication shops will continue to reduce dependence on the availability of skilled field workers. This work includes performing most of the precommissioning and commissioning work offsite.
  • Reorganization of engineering companies: Facing variable conditions in the oil industry, many engineering companies are now expressing more interest in reviewing integration and optimization opportunities for existing and future plants. In this area, modularization may also become a “preferred choice.” Many companies have invented a “module architect” position, which is a more skilled engineering position requiring not only a techno-commercial overall project view, but also the know-how of supply chain elements across multiple projects.
  • Technologies offered as packages: Many licensors have started, and will continue to offer, licensed technologies based on the modularized packages concept.

Takeaway

Despite some reservations about, and resistance toward, this new, accelerated way of performing engineering, modularization will continue to develop as a widespread revolution, due to its proven benefits. It allows the movement of complex and costly tasks from the field into fabrication yards, in addition to reducing risks and labor effort, all while improving quality, schedule and savings via higher offsite productivity. However, it requires a strong know-how of both fabricators and contractors, based on past experience and lessons learned in similar projects.

The modularization trend will continue in the coming years, under the pressure of fluctuating oil prices, the reduction of available skilled workers and tighter environmental regulations. However, successful modularization requires a more mature design and project execution organization. Engineering companies must invest in this new reality. They must improve their expertise, be open to alliances with specialized fabricators and adapt their project management approach to the challenges of standardized modularization. HP

LITERATURE CITED

  1. Jameson, P. H., “Is modularization right for your project?” Hydrocarbon Processing, December 2007.
  2. Hesler, W., “Modular design—where it fits,” CEP, October 1990.
  3. Bjorklund, M. and J. Karlsson, “Modular design,” Wartsila Technical Journal, February 2008.
  4. De la Torre, M. L., “A review and analysis of modular construction practices,” Lehigh University Theses and Dissertations, May 1994.
  5. Integrated Flow Solutions, “Need a new or replacement process unit?” September 2016.
  6. Meyer, W., “Modularization,” Houston Business Roundtable, August 2007.

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