Sometimes a very rough high level engineering cost for a future project might be needed for budget approvals, initial planning, contracting strategy discussions, benchmarking of bid prices or negotiating with the engineering contractors. The rough cost could also be helpful to plan the manning level in the design office.
As a thumb rule, for most Oil & Gas projects, typically, the engineering costs generally ranges between 5 and 15% of the overall CAPEX (Capital Expenditure), depending on the scope of engineering required, project size, complexity, brownfield / greenfield development etc.
The percentage will be at the lower end for a larger project (higher CAPEX) and will tend to be at the higher end for smaller CAPEX projects.
The various engineering scopes that could be included in any one or more engineering contractor’s scope of work could be as follows:
- Concept work
- Pre-FEED engineering
- FEED engineering
- Detailed engineering
- Procurement services
- Follow-on engineering
- Site survey works
The below tabulation shows typical indicative engineering costs for various projects with varying CAPEX values
These rough percentages are very much high level indicative numbers, based on experience, to just help with a quick calculation of the total engineering costs. The table above can be utilised to calculate the indicative high level cost for the engineering effort required for a scope (for example, only FEED engineering, or only detailed engineering etc.).
The actual engineering cost for individual projects will depend on the project complexity, location of engineering, available skill level, previous experience with the technology and many other factors.
Ideally, of course, deliverables and activity based resource requirement would be established and costed by Individual estimators / project engineers to arrive at the overall engineering cost for the required scope. The high-level percentages suggested in this post can still be useful in such a case; they can be used as a rough guide to review, cross-check and critic the detailed calculation.
Note: The actual percentage for all the above scope of work could sometimes be much more than 15% of the overall CAPEX for small projects. The percentage could end up being less than 5% for very large CAPEX projects, specifically those which have several repeatable portions which make the total value of the project high, but would not require multiple engineering effort.