Abstract
The procurement of refinery projects is a high-risk venture. Determining how to finance a refinery and manage typical risks in order to get sound economic returns is a major challenge. There are significant risks exposed in refinery business environment, for instance construction risk, demand risk, operation risk and especially price risk on both demand and supply sides. Availability and characteristics of types of crude oil supply and product derivatives can determine the choice of refinery types. Apart from buying crude oil in the spot market and selling its products on a similar basis, it is necessary to create significant price certainty to ensure a robust cash flow is achieved. The supply contract and off-take contract can be used to create sufficient certainty of price, quantity and availability of both crude oil and sales of refined products, and thus ensure the financial viability of a refinery project. A mechanism for assessing the risks associated with procuring a refinery is presented and an evaluation of the economic parameters modelled in Visual Basic, Crystal Ball and Excel spreadsheets is illustrated. The paper provides a case study of a refinery procurement utilizing a number of bundles of crude oil supply contracts and off-take contracts.
| Original language | English |
|---|---|
| Title of host publication | CME 2007 Conference - Construction Management and Economics: 'Past, Present and Future'|CME Conf. - Constr. Manage. Econ.: 'Past, Present Future' |
| Pages | 1313-1322 |
| Number of pages | 9 |
| Publication status | Published - 2007 |
| Event | 25th Inaugural Construction Management and Economics: 'Past, Present and Future' Conference, CME 2007 - Reading Duration: 1 Jul 2007 → … |
Conference
| Conference | 25th Inaugural Construction Management and Economics: 'Past, Present and Future' Conference, CME 2007 |
|---|---|
| City | Reading |
| Period | 1/07/07 → … |
Keywords
- Cashflow
- Contract
- Modelling
- Risk
- Simulation