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Capital Budgeting: 2005 CAPEX-Low Pressure Exhaust Header for Turbo-Alternator
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| Words: 3000 | Submitted: 12-Feb-2009
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2005 CAPEX-Low Pressure Exhaust Header for Turbo-Alternator
Scope of Operations
The Refinery process of crude oil includes receiving cargo from tankers at the berths or from Very Large Crude Carriers through a Single Point Mooring System (SPM). The crude oil is then refined into various products such as LPG, diesel, gasoline, jet fuel, fuel oil, asphalt, sulfur, and carbon dioxide. All products go through a process of stringent quality controls before leaving the refinery by tankers, bunkering barges, tank trucks, drums or pipelines for distribution to domestic and export markets.
Capital Budgeting Project in the Company
Like many other companies in Singapore, RXC undertakes various capital budgeting projects annually to meet the increasing demands of the job scope. Various stages and phases are set to analyze the feasibility and the profitability of each potential capital budgeting project. A Capital Budgeting decision needs systematic and careful analysis as such decisions are hard to reverse without severely disturbing an organization economically and otherwise.
General Background of the Basic Screening Process
In RXC’s decision-making process, they have adopted ChevronTexaco’s basic screening process which is the ChevronTexaco Project and Execution Process (CPDEP); a process that improves decision making and execution by fostering better planning, collaboration and communication. It’s vision- The Right Project Implemented Well.
The basic CPDEP map has five phases. Phase 1 is to Identify and Assess Opportunities. This is whether the frame is developed with elements such as the opportunity statement, vision of success, business case and so on. Then, it is to conduct a Preliminary Assessment and develop a preliminary overall plan after. A plan for Phase 2 will be developed and then the next stage is to seek and incorporate lessons learnt. Phase 2 is to Generate and Select Alternative(s) which involves defining the preliminary scope for each alternative generated and analysis of the alternatives such as the value and benefits, costs, schedule, and uncertainties. They will then develop a plan for Phase 3 and again, capture, share and incorporate their learning. Phase 3 is to Develop Preferred Alternative. In this phase, their business case will be refined and fully defined and the scope will be frozen. The final implementation and execution plans will be developed as well as to confirm the value and to commit to business metrics. The next phase, Phase 4, is to Execute. Here, there will be a complete and detailed design (finalized business plan). Next is to finalize business and operation plans. The last phase, Phase 5, is to Operate and Evaluate. In this phase, the business plan will be executed and the asset will be operated. There will be monitoring and evaluating of the performance and alongside this, there will be identification of new opportunities. Again, like all the other phases, they will capture and incorporate their lessons learnt.
Use of CPDEP on small projects
CPDEP can also be applied to small projects. *Table 1 attached in the appendix lists some of the aspects of CPDEP and describes examples of how they can be scaled and applied to small projects. As our discussed project is a small one, the table will show projects from USD$250,000 up to USD$1 million and it can also be used as a guide for projects of even lesser cost.
Brief Background of the Project
The name of this project, as mentioned in the preface is, “2005 CAPEX - Low Pressure Exhaust Header for Turbo-Alternator.” The nature of this project is to conserve energy and it was approved as part of the 2005 CAPEX Plan with an approved budget of S$400,000. The project will generate incremental power of 200 to 500kW from TA by exhausting 35 MT/H steam directly into a dedicated LLP Steam Header for deaerators at a lower pressure.
Background on the Opportunity
The current situation is such that the amount of power generated is highly dependent on the demand of MP and LP steam. Thus, very often, power generation cannot be optimized due to instability of the LP steam header/demand. This leads to sub-optimization of TA and increased energy cost. The deaerators consume about 42MT/hr of LP steam for a process called stripping. However, steam pressure requirement is only 1.2Kg/cm2g. As a result, LP steam is stepped down to LLP steam.
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