1

Montreuil, 9 December 2018

de P. Ratcliffe
à R.Boucou

Note au dossier

Project: 1016680 Aluminium Complex in Qatar

Reference: Operating Costs, inventories and startup costs.

1.Introduction

The estimation of annual operating cost, inventories and startup costs has been made using data provided by AP.

The method of work and the results of the estimations are encompassed in the following summary sheets.

  1. Sheet 1 - Summary operating cost. This shows total cash operating costs in MillionUS$ and US$/tonneAl, with electricity counted at direct operating cost (fuel, plus personnel, plus annual operating and maintenance supplies, plus major overhauls on a six year cycletime).
  2. Sheet 1BIS- Summary operating cost. This shows total cash operating costs in MillionUS$ and US$/tonneAl, with electricity counted at full commercial price which yields a 12% Internal rate of return on capital cost of the power plant.
  3. Sheet 2 - Cost of inventories expressed in millionUS$.
  4. Sheet 3 - Startup cost expressed in millionUS$.

Details on the above summary sheets are established according to the following methodology.

2.Details on the summary sheets

2.1Raw materials and CONSUMABLE cost

2.1.1Production

Net annual aluminium production after 1% loss, 245 000 tonnes as per AP document, March 1996, Raw Materials and Consumables Consumption, page 4.

2.1.2Alumina

Alumina (specific consumption) is established according to AP document, March 1996, Raw Materials and Consumables Consumption, page 5, section 2.1. Alumina (cost/tonne) is established according to APdocument, February 1996, Raw Material Prices, page 11.

The long term average FOB price of alumina is considered to be US$210/tonne which is within the accepted range of 11-13% of the long term average LMEprice of aluminium.

Freight cost FOB to CIF Dhuba is 16US$/t and CIF to plant site is 3.4US$/t.

2.1.3Other raw materials

The data are taken from APDocument: for specific consumption, same reference as above, (Raw Materials and Consumables Consumption, March 1996, sections 2.2 to 2.7), and for unit costs (Raw Material Prices, February 1996, sections 2 to 9).

2.1.4Utilities

2.1.4.1Electricity

Assumptions:

  • Total power installed435MW
  • Fuel (gas) cost0.5US$/MBTU
  • Net fuel heat rate11385 KJ/kWh
  • Production hours8760 hours
  • Output MWh = 435MW x 8760h= 3 810 604MWh=3.81Million MWh

Unit cost of electricity:

Unit cost of electricity is calculated as follows :

Fuel requirement:

  • 435MW x 11385KJ/KWh x 8760h= 43383.681TJ
  • = 41.122 TBTU[1]
  • Fuel cost = 41.122TBTU x 0.5US$/MBTU = 20.6 MUS$/year
  • Unit fuel cost = 20.6MUS$$/3.81Million MWh=5.40US$/MWh

Personnel cost

  • 59 persons @24982US$/year 1.49MUS$ or 0.43US$/MWh

Operating and maintenance supplies:

  • 0.6% of equipment cost1.128M$/year 0.32US$/MWh

Major overhauling of power units:

  • 15.4MUS$ on a 6 year cycle time2.5MUS$/year 0.73US$/MWh

Summary

Total unit cost of electricity (operating) delivered to the Aluminium complex is shown in the following table:

Alternatively, a selling price of electricity to the aluminium complex, i.e. including the cost of capital employed and profit margin, is calculated. This is the price which yields a 12% internal rate of return to the power plant operator. This price is 14.51US$/MWh.

2.1.4.2Gas

Gas price considered is 0.5US$/MillionBTU (our understanding of the figure of 0.5 US$/MMBTUas per fax 25 March 1996), i.e.1.985US$/Mkcal (0.2519kcal/BTU). Specific consumption and gas heating value are given in AP’s document: Raw Materials and Consumables Consumption, March 1996, section 3.2 page 7).

2.1.4.3Water

Water prices (industrial and potable) are considered to be 1.20US$/m3, (4.4QAR/m3, 3.64QAR/US$). Specific consumption is given in AP’s document: Raw Materials and Consumables Consumption, March 1996, section 3.3 page 7).

2.1.5Plant supplies

These expenses are derived from APdocument (Raw Materials and Consumables Consumption, March 1996, section 4 page 8).

2.1.6General expenses

These expenses are derived from APdocument (Raw Materials and Consumables Consumption, March 1996, section 5 page 9).

2.1.7Specific annual costs

These costs are estimated on the basis of APdocument (Raw Materials and Consumables Consumption, March 1996, section 6 pages 10 and 11).

Specific annual costs considered are for pot relinings and for flue wall replacements, all the other costs are considered to be included in the other items of the operating cost estimate.

Personnel cost is not accounted for, considering that personnel is included in the personnel costing made globally for the project.

The cost of relining for one pot is applied to the total number of pots of the plant (i.e. 288pots), and it is considered that each pot has to be relined once every six years. Hence, the annual operating cost includes a provision for relining 1/6 i.e.15% of the total number of pots.

Likewise, for flue wall replacement:

The total of specific annual costs (provisions) is therefore 9,636MUS$.

2.1.8Land lease

Land lease is established on the basis of an area of 840x1320m (110.88hectares), at a cost of QAR2.5/m² per year (3.64QAR/US$), i.e. 0.76MUS$/year.

2.2Personnel Cost

2.2.1Personnel summary sheet

Personnel summary sheet (from APdocument: Work Organisation, Plant Manning; March 1996) and the accompanying organisation charts. This refers to collective occupation of personnel in three zones: production, technical, and administrative.

The summary personnel sheet is used to derive personnel numbers required after accounting for individual working schedules (i.e. weekly rest, official holidays, individual holidays, sick leave, etc.). Individual schedule as indicated below is derived from QGPC Data Information package: Section QAPCO Personnel Policies pages 5, 15, 19, 21.

2.2.2Individual work schedule

2.2.3Collective work schedules

Collective working schedules are established for the three zones as shown below[2]:

2.2.4Professional skills and Payscales

Professional skills and payscales[3] are considered as follows:

2.2.4.1Allocation of professional skills and costs to the company as per AP’s personnel summary sheet

To the personnel of the different lines (personnel summary provided by AP), levels and costs to the company are allocated as follows, using the above data:

2.2.4.2Personnel costs based on collective work and individual work schedules

Using this data, personnel costs are first computed, for collective work.

The costs thus derived are then increased, for each of the zones (production, technical, administrative), using the ratios derived in the collective work schedule.

A summary of the results of this cost calculation is given below:

Note: Average cost per employee year is 30000US$ as per QGPC’s letter of 25/3/1996.

2.2.4.3Cross-check

For the purpose of cross-checking, the above data is used to derive the following cross-checking table which expresses personnel, in terms of productivity: i.e. manhours/tonneAl (on the basis of 245000tpaAl) and average cost/hour in US$ (on the basis of 8hours/day of presence).

2.3Inventories

Cost of inventories is established using APdocument Working Capital Costs, February 1996, section4.

2.4Startup costs

Startup costs are established on the basis of AP document «Startup costs», page 9.

Notes:

AP startup personnel cost (400Manmonths as per AP document «Work organisation-Plant manning» page 23), has not been counted, considering that this would duplicate with the expatriate personnel considered in the personnel costs.

Training of QGPC personnel in AP plants has been counted on the basis of AP document «Work organisation-Plant manning» page 25.

2.5Summary

Summary sheets of operating costs (with partial and full electricity cost), inventories cost and startup costs, are given overleaf.

They are summarised below:

MUS$US$/tAl

operating cost (with partial electricity cost)216.3882.7

operating cost (with full electricity cost)242.3991.1

Inventories76.1

Start-up costs53.8

[1] 1 BTU=1.055KJ

[2]Personnel numbers as given by AP for Production and Technical zones are for continuous working schedule i.e. 7days/week. Ratio of increase accounts only for individual holidays, absenteism and sickleave.

[3]Payscales: this means the total true cost to the company, of employing a particular category of personnel.