Gerald L. Farrar
Contributing Editor
Recently a questionnaire went out to a selected number of refiners and refinery design and construction firms to get up-to-date refinery construction cost information and to establish trends in refinery construction costs.
One of the results that has emerged is that the proportions of labor and materials might be changing for some construction projects.
The Nelson-Farrar refinery construction cost index (inflation) has for a number of years been calculated using a ratio of 60% labor, 40% materials.
Indications are that this ratio may be decreasing, even to the point that the value for some projects may be 40% labor, 60% materials. Ratios for still other projects are falling somewhere between the two limits.
For the sake of continuity, the labor/construction ratio used in calculating the Nelson-Farrar inflation index for monthly publication in Oil & Gas Journal will continue to be 60:40. But the cost evaluator may take any percentage ratio he wishes and use the materials component and the labor component published monthly to calculate the inflation index more in keeping with his own situation.
The accompanying table shows values of the inflation index at 60, 55, 50, 45 and 40% labor for the years 1989 and 1990.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
