Development of a probabilistic cost estimate for the demolition and decommissioning of and Oil Terminal (Project Gateway), Germany, for confidential client

The project involved the development of probabilistic cost estimates for the demolition and decommissioning of certain portions of a tank farm, terminal and related structures for the project named Gateway. It consisted of:

  • The evaluation of costs associated with the decommissioning and removal of existing facilities from the site;
  • The evaluation of costs related to soil and groundwater remediation that may be needed after demolition and decommissioning are completed;
  • The cost evaluations included a build-up of cost components for each scenario that considered documented and derived facility details, vendor quotes, professional costing references, expected variable ranges, and future uncertainty, by using forecasting techniques such as Monte Carlo simulations;
  • The development of the Conceptual Site Model.

This allowed the analysis of a number of scenarios using site-specific data and costs. Sensitivity analyses were conducted to establish the variables that were driving uncertainty in the model to allow the client to focus research and/or sampling efforts.

Deterministic cost estimate is generally a summation of worst -case scenarios, which result in depicted costs being unrealistically high.  The probabilistic cost estimate accounts for the principle that when dealing with large, multifaceted, and complex sites, the worst or best -case scenario will not be the result in every area or for every variable.  In reality, the actual cost outcome will be a summation of expected cost outcomes for each required action where some actions will exceed the expected cost, and some will be below the expected cost.  This is the basic function of Monte Carlo simulations, which provide a robust measure of uncertainty in overall cost.