Decommissioning Chemical Plants- A proven roadmap
Executive Summary
The current economic and socio-political environment has made product lifecycles of chemicals much shorter. Also cost pressures, regulatory pressures, influence of non-state actors and changing market geographies, mean that manufacturing plants (examples are chemical process plants, Oil & Gas facilities, hydrocarbon processing plants and similar) need to be shuffled around, shut down or shifted at a much higher frequency than in earlier years. This article is a primer on how company managements can handle this without getting overwhelmed by the complexities of these projects. This can happen because quite a few company managements may be very skilled and versatile when setting up new plants, but may be inexperienced while doing the reverse.
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Why de-commission?
There has been a change in the economic environment in the world due to various factors such as technological advancement in communications, transport and policies of states such as low entry tariffs, encouragement for foreign direct investment, tax incentives, etc. The product life cycle undergoes a change when an external environment changes. If we look at events in the last few years, it becomes clear that the economic boom and bust cycle happens much faster, unlike in the past, where plants could adjust to the environment over a period of a decade or so. In the present economic climate, there are several times when plants need to be de-commissioned. It could be because of technological obsolescence, or due to various regulatory, taxation or cost pressures, or even due to pressures from third parties. Such a situation may also arise due to a buy-out, or due to change in the market geography. In all these cases, there is a need to decommission an existing plant. The fixed assets need to be utilized for alternate products or simply disposed off to recover part of the investment. Alternatively, they can be relocated to a new place, to set up a new facility, which may be geographically, even several thousands of miles away. Typical examples would be of a plant that may be sold off in the US to a Chinese company and the new owner may want to shift it from North America to China. Or an Indian entrepreneur may want to shift a plant from a congested urban location, to a new industrial area in another state. While we have always heard of these cases, the fact is that the frequency of these events happening has increased and will continue to increase as the economy becomes more and more fast-changing and globally integrated.
The common thread amongst all these cases is that a plant (or plants) is to be de-commissioned.
De-commissioning a plant in the chemical, pharmaceutical, hydrocarbon processing and similar industries is much more challenging, than other in sectors like engineering or automobile, because of the nature of the chemicals handled in such plants. Many of these may be explosive, toxic or in other ways harmful to the environment. In these plants, where chemicals are toxic, explosive, or corrosive, a sound methodology is needed. This article presents such a methodology.
Where do we start?
Once it is clear that there is a need to de-commission the plant, the first stage is estimation of costs. Be aware that many of the garden variety of consultants, contractors and others are very familiar with erection and commissioning costs, but may not be completely at ease with estimating de-commissioning costs. So think about getting some help from people who either specialize in these activities, or have a couple of such completed jobs under their belt, to get the best results.
Secondly, ensure that the people whose assistance is solicited are reliable and trustworthy, as the nature of the initial work is confidential. You do not want to unnecessarily alarm your regular employees, or suppliers and other stakeholders. You have to of course involve these people, but at a later date.
Thirdly, many times these shutdown/exit costs are needed not only for actually carrying out the work itself, but also to work out "What-If" and similar strategic scenarios. If your global strategy is therefore going to be based on this figure, then you should be sure that it is a good enough estimate and it is kept under wraps. This cost will be one of the major decision points on whether de-commissioning makes sense or not. This first cost estimate will be the lynchpin on which the whole case (maintaining the status quo, or shutting down the plant) will rest and one cannot stress the importance of arriving at a realistic figure.
The Process-Rolling up your sleeves and starting it
Once it is clear that the plant has to be shut down, one can then start planning the process of doing so. The process of decommissioning is a 3D process- It involves the three Ds of Decontamination, Dismantling and Disposal.
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