Peterhead CCS Project: Doc Title: Cost Estimate Report

PETERHEAD CCS PROJECT FRONT MATTER
Peterhead CCS Project

Doc Title: Cost Estimate Report
Doc No. PCCS-00-MM-FA-3101-00001
Date of issue: 18/03/2016
Revision: K03
DECC Ref No: 11.043
Knowledge Cat: KKD – Technical
KEYWORDS
Goldeneye, CO2, Carbon Capture and Storage. Cost Estimate.
Produced by Shell U.K. Limited

ECCN: EAR 99 Deminimus
© Shell U.K. Limited 2015.

Any recipient of this document is hereby licensed under Shell U.K. Limited’s copyright to use,
modify, reproduce, publish, adapt and enhance this document.
IMPORTANT NOTICE
Information provided further to UK CCS Commercialisation Programme (the Competition)
The information set out herein (the Information) has been prepared by Shell U.K. Limited and its
sub-contractors (the Consortium) solely for the Department for Energy and Climate Change in
connection with the Competition. The Information does not amount to advice on CCS technology or
any CCS engineering, commercial, financial, regulatory, legal or other solutions on which any reliance
should be placed. Accordingly, no member of the Consortium makes (and the UK Government does
not make) any representation, warranty or undertaking, express or implied as to the accuracy,
adequacy or completeness of any of the Information and no reliance may be placed on the
Information. In so far as permitted by law, no member of the Consortium or any company in the
same group as any member of the Consortium or their respective officers, employees or agents
accepts (and the UK Government does not accept) any responsibility or liability of any kind, whether
for negligence or any other reason, for any damage or loss arising from any use of or any reliance
placed on the Information or any subsequent communication of the Information. Each person to
whom the Information is made available must make their own independent assessment of the
Information after making such investigation and taking professional technical, engineering,
commercial, regulatory, financial, legal or other advice, as they deem necessary.
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The information contained on this page is subject to the disclosure on the front page of this document.
Table of Contents
Executive Summary 1
1. Introduction 3
2. Scope 4
3. FEED Cost Performance 4
3.1. Introduction 4
3.2. Cost Recovery 4
3.3. Total FEED Costs Breakdown 5
3.4. FEED Labour 10
3.5. Cost of Securing Long Lead Items 10
3.6. Other FEED Costs 10
3.6.1. Pipeline Landfall Options 10
3.6.2. Onshore (Capture Plant) 10
3.6.3. Process Design Package 11
3.6.4. Subsurface 11
3.6.5. Subsea 11
3.6.6. Application and Lease Fees 11
3.6.7. Relevant Work which is not part of the FEED Study Costs 11
4. Project Cost Estimate 11

4.1. Introduction 11
4.2. O er ie of Shell’s Sta dard Cost Esti atio Process 12
4.2.1. Cost Estimate Accuracy 12
4.2.2. Cost Estimate Components and Methods of Representation 12
4.2.3. Contingency and Cost Uncertainty Modelling 13
4.3. PCCS Cost Estimate Basis 13
4.4. Capital Expenditure (CAPEX) Estimate 14
4.5. Operating Expenditure (OPEX) Estimate 17
4.5.1. OPEX Estimation Methodology 17
4.5.2. OPEX Estimate 17
4.6. Power Plant OPEX Costs 19
4.6.1. Base Plant Cost 20
4.6.2. Fuel Gas 20
4.6.3. Carbon Cost 20
4.7. Carbon Capture and Storage (CCS) OPEX Costs 20
4.7.1. Carbon Capture, Compression & Conditioning (CCCC) Plant Operations 21
4.7.2. CCCC Plant Power Import 23
4.7.3. Transport 23
4.7.4. Monitoring during the Operations and the Post Operations Periods 24
4.7.5. Pre Start-Up Costs 24
4.7.6. Storage 25
4.8. Uncertainty of CAPEX and OPEX Estimates 25
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4.9. CAPEX Cost Estimate Uncertainties 26

4.10. OPEX Cost Estimate Uncertainties 27
5. Conclusion 27
6. References – Bibliography 29
7. Glossary of Terms 30
APPENDIX 1. Execute CAPEX Estimate (Based on WBS) 31
Table of Figures
Figure 1-1: Project Location 3
Figure 3-1: PCCS FEED Study – Work Breakdown Structure 6
Figure 3-2: PCCS Recoverable Costs 9
Figure 4-1: PCCS CAPEX Split 15
Figure 4-2: PCCS Onshore CAPEX Split 16
Figure 4-3: PCCS Offshore CAPEX Split 16
Figure 4-4: PCCS Full Life OPEX Split 18
Figure 4-5: Year by Year Base OPEX Estimate 19
Figure 4-6: Power Plant OPEX Cost Split 19
Figure 4-7: Year by Year Power Plant OPEX Estimate 20
Figure 4-8: CCS OPEX Cost Split 21
Figure 4-9: Year by Year CCS OPEX Estimate 21
Figure 4-10: Carbon Capture, Compression & Conditioning Plant OPEX
Breakdown 22
Figure 4-11: CCCC Plant OPEX Estimate 23
Figure 4-12: OPEX Cost Estimate Sensitivity Analysis 27
List of Tables
Table 3-1: Breakdown of FEED Project Costs 5
Table 3-2: Breakdown of FEED Project Costs by WBS 6
Table 4-1: Typical Cost Estimate Accuracies 12
Table 4-2: Base Estimate CAPEX Breakdown 15
Table 4-3: Base Estimate OPEX Breakdown 17
Table 4-4: Major Costs Components 26
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PETERHEAD CCS PROJECT Executive Summary
Executive Summary
Her Majesty’s Government (HMG) Autumn Statement and Statement to Markets on 25 November
2015 regarding the Carbon Capture and Storage Competition confirmed that the £1 billion ring-
fenced capital budget for the Carbon Capture and Storage Competition was no longer available. This
meant that the Competition could not proceed on the basis previously set out. In accordance with
the agreements with DECC, the Peterhead FEED was completed as planned in December 2015. The
Government and Shell are committed to sharing the knowledge from UK CCS projects, and this Key
Knowledge Deliverable represents the evolution and achievement of learning throughout the
Peterhead FEED and Shell’s intentions for the detailed design, construction and operating phases of
the project at the time of HMG’s Statement to Markets. After the announcement the tender and
CAPEX/OPEX development activities were stopped and this document represents the stage of
development for each scope at the time of the announcement. The Landfall, pipeline and subsea and
Goldeneye Topsides Modifications tender and CAPEX development activities were completed. A
near final cost is provided for the CCCC Plant. An indicative cost for the Power Plant scope is
presented that would have required further refinement if the project was progressing. With respect to
OPEX, the costs related to the Power Plant scope would have needed refinement pending the
discussions with the Power Plant vendors.
The purpose of this document is to provide an overview of the Front End Engineering Design
(FEED) cost performance and also the costing of the Execute phase of the Project, in terms of
capital expenditure (CAPEX) and operating expenditure (OPEX), for the purpose of providing CCS
developers with refined cost information.
The original FEED study budget was £43,820,017 inclusive of £2 million contingency. At the end of
FEED the FEED budget and estimate at completion reflect that approximately £1.5 million of the
contingency has been used. As a result, the PCCS Project FEED study was completed on time and
under budget. The largest use of contingency was associated with the de-risking of the pipeline
landfall design, including the decision to execute a HDD trial bore hole, undertaken to confirm the
technique can be employed for the rock conditions at Peterhead.
The CAPEX and OPEX estimates for the Execute phase of the PCCS project are based upon
information available at the end of FEED in December 2015. The CAPEX cost estimate and
estimate uncertainty takes into account information received from the Execute EPC tendering
process. Both estimates are inclusive of contingency. Although final cost and schedule tender
information were not available for all the engineering, procurement and construction (EPC) tenders
for the Execute phase at the time of HMG’s Statement, it is not expected that the final information
would have deviated significantly from the figures presented in this document.
The PCCS Project Execute phase CAPEX estimate covers the anticipated costs prior to entering
operations – i.e. engineering, procurement, construction and commissioning costs. The CAPEX
estimate is £999.7 million MOD (Money of the Day which refers to an estimate which is inclusive of
inflation and escalation to the date of expenditure).
Almost 2/3 of the Execute phase CAPEX costs are associated with the onshore scope including the
required power plant modifications and new build Carbon Capture, Compression and Conditioning
plant works. The offshore CAPEX components include scope associated with delivering the
transportation, platform, wells and subsurface works. The relative cost split is approximately:
 Onshore: 64%
 Offshore: 22%
 Other costs: 14%
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PETERHEAD CCS PROJECT Executive Summary
Within the Onshore CAPEX estimate, the costs are split approximately according to:
 Power Plant: 26%
 Carbon Capture, Compression and Conditioning Plant: 74%
The OPEX estimate considers costs between 2016 and 2041 and is reported in RT2015. It includes
some cost incurred prior to commencing operations which includes an element for facility
maintenance and operation that will increase or decrease in relation to changes in the project
schedule, a 15-year injection period and a period of monitoring post injection which will not be
affected by project schedule change. The OPEX estimate excludes future decommissioning or
abandonment costs. The OPEX estimate is £3,668.7 million RT2015 (Real Time 2015 - Value
escalated to account for Market conditions) with largest cost being from the Power Plant OPEX
element (81%) and the remaining 19% from the Carbon Capture, Transport and Storage element.
The fuel gas expenditure for the gas turbine supplying flue gas to the PCCS Project is the dominant
cost in the OPEX estimate.
The OPEX estimate is broken down into:
 Power Plant: 79%
 Capture, Transport, Storage, Metering Monitoring and Verification: 21%
Within the Power Plant OPEX estimate, the costs are split approximately according to:
 Fuel Gas: 64%
 Other: 36%

PETERHEAD CCS PROJECT Introduction
1. Introduction
The Peterhead Carbon Capture and Storage (CCS) Project aims to capture around one million tonnes
of CO2 per annum, over a period up to 15 years, from an existing Combined Cycle Gas Turbine
(CCGT) located at SSE’s Peterhead Power Station in Aberdeenshire, Scotland. This would be the
world’s first commercial scale demonstration of CO2 capture, transport and offshore geological
storage from a (post combustion) gas-fired power station.
Post cessation of production, the Goldeneye gas-condensate production facility will be modified to
allow the injection of dense phase CO2 captured from the post-combustion gases of Peterhead Power
Station into the depleted Goldeneye reservoir.
The CO2 will be captured from the flue gas produced by one of the gas turbines at Peterhead Power
Station (GT-13) using amine based technology provided by Cansolv (a wholly owned subsidiary of
Shell). After capture the CO2 will be routed to a compression facility, where it will be compressed,
cooled and conditioned for water and oxygen removal to meet suitable transportation and storage
specifications. The resulting dense phase CO2 stream will be transported direct offshore to the
wellhead platform via a new offshore pipeline which will tie-in subsea to the existing Goldeneye
pipeline.
Once at the platform the CO2 will be injected into the Goldeneye CO2 Store (a depleted hydrocarbon
gas reservoir), more than 2 km under the seabed of the North Sea. The project layout is depicted in
Figure 1-1 below:
Goldeneye
Platform
St Fergus
Terminal
Peterhead
Power Station
Figure 1-1: Project Location

PETERHEAD CCS PROJECT Scope
2. Scope
This document provides information on the Front End Engineering Design (FEED) study cost
performance and also the costing of the Execute phase of the Project in terms of capital expenditure
(CAPEX) and operating expenditure (OPEX), for the purpose of providing CCS developers with
refined cost information.
The FEED cost performance information includes a breakdown of the total costs incurred in
conducting the FEED: showing the initial budget, current budget, and projected outturn. Emergent
FEED costs, in respect of work that was not fully anticipated at the outset of the FEED phase of the
Project, are also identified and described.
The CAPEX and OPEX cost estimates, as developed during FEED, for the preparation of the
Project cost estimate for the Execute phase of the PCCS Project, are also presented in this cost
estimate report. Estimates of cost uncertainties for CAPEX and OPEX outturns are given, together
with an explanation of the issues driving those uncertainties.
3. FEED Cost Performance

3.1. Introduction
The PCCS Project FEED Study has been carried out in accordance with the FEED contract signed
between DECC and Shell, which was executed in February 2014. The FEED contract is subject to
UK and EU state aid rules and covers delivery of an agreed FEED Scope up to a Maximum Amount
of £38 million with DECC providing up to a Total Maximum Qualifying Amount of £28.5 million
(i.e. 75% of the Maximum Amount). Shell is responsible for 100% of any costs incurred during
FEED which are over the Maximum Amount.
3.2. Cost Recovery

Shell’s original estimate of the FEED costs included identification of costs eligible for cost recovery
from DECC. At the time of signing the FEED Agreement between DECC and Shell in February
2014, Shell estimated there would be some £38m of recoverable costs incurred from February 2014
to December 2015. These costs are defined as “total reimbursable costs” in the FEED Agreement.
This was used to determine the DECC TMQA of £28.5m - which is based on 75% cost recovery on
eligible costs.
In the FEED Agreement, the FEED study duration was broken down into five separate payment
periods. The “maximum qualifying amount” is a contractual term which defined the maximum
amount that Shell was entitled to recover from DECC for each of these payment periods.
Cumulative Maximum Qualify Amounts (CMQA) were defined for the five payment periods to up to
the Total Maximum Qualifying Amount (TMQA) of £28.5 million as follows:


Payment Period 1: £6,375,000 (six million, three hundred and seventy-five thousand pounds)
Payment Period 2: £13,875,000 (thirteen million, eight hundred and seventy-five thousand

pounds)
Payment Period 3: £20,625,000 (twenty million, six hundred and twenty-five thousand

pounds)
Payment Period 4: £25,875,000 (twenty-five million, eight hundred and seventy-five thousand

pounds)
Payment Period 5: £28,500,000 (twenty-eight million, five hundred thousand pounds)

PETERHEAD CCS PROJECT FEED Cost Performance
Only recoverable costs were eligible for cost recovery from DECC. “Recoverable costs” are the
costs incurred by Shell that are directly related to the execution of the FEED Agreement obligations.
Costs incurred in respect of Execute Project Contract or Contract for Difference (CfD) negotiations
or expenditure which DECC considered to be non-applicable or excessive for the purposes of
executing the FEED Agreement were not deemed eligible for cost recovery. The recoverable costs
are used to calculate Shell’s claim for 75% cost recovery in each of the payment periods, up to the
maximum allowed based upon the relevant CMQA/TMQA value.
A “forecast for recovery” was updated by Shell in monthly reports which were issued to DECC.
Both capped and uncapped forecast amounts were provided. The capped amount reflected the
TMQA/CMQA that Shell could recover from DECC in the event that £38m of recoverable costs
were spent in the execution of the FEED Agreement. The uncapped amount is an arithmetical
calculation of how much Shell could potentially recover from DECC if the 75% cost recovery was
applied to all recoverable costs incurred by Shell, including those above the £38m total reimbursable
costs estimate. However, this uncapped forecast recovery can never be applied in practice due to the
existence of the capped CMQA/TMQA values in the FEED Agreement.
Actual costs incurred by Shell in the delivery of the FEED Agreement are detailed in subsequent
sections of this report. The cumulative recoverable costs for the FEED contract and identification of
the five payment period durations are provided in Figure 3-2 below.
3.3. Total FEED Costs Breakdown

Initial and actual FEED cost information is presented in Table 3-1
Table 3-1: Breakdown of FEED Project Costs

FEED SCOPE Original Budget Latest Budget Actual Cost
£ (December 2015) (December 2015)
£ £
PROJECT MANAGEMENT 12,564,643 11,564,643 11,310,913
COMMERCIAL 3,639,335 3,664,335 3,343,659
ONSHORE 16,451,449 17,049,449 17,072,223
PIPELINES & SUBSEA 1,943,340 3,443,686 3,402,043
PLATFORM 1,741,434 1,841,434 2,092,157
WELLS & SUBSURFACE 2,659,799 2,596,799 2,754,254
OVERHEADS 2,820,017 3,194,317 3,326,564
100% TOTAL 41,820,017 43,354,663 43,301,813
CONTINGENCY 2,000,000 465,354 0
TOTAL INCL. CONTINGENCY 43,820,017 43,820,017 43,301,813
The table above shows values for the original budget, latest budget (at end December 2015) and the
actual FEED costs (at end December 2015). It is broken down into the project components which
were developed based upon the assigned FEED contracts and work scopes. Contingency provision
is also indicated. The provision of contingency within the Project is a standard project management
process to allow for the funding of uncertain scope elements in the risk reduction phase.

The FEED agreement provided detail on the planned breakdown of the project by discipline. The
work breakdown structure below was used to demonstrate where the costs including manhours by
discipline were booked during the FEED phase.
Figure 3-1: PCCS FEED Study – Work Breakdown Structure
The tabular cost report below shows a breakdown by the major sub-components of the project. The
costs shown are 100% project costs, with the recoverable costs broken out in the sub-total section.
Non Recoverable Costs are project costs not eligible for recovery from DECC: e.g. work on the
Execute Project Contracts and CfD inputs.
Table 3-2: Breakdown of FEED Project Costs by WBS

Work Breakdown Structure (WBS) Original Budget Actual Cost
Description £ (December 2015)
£
FEED C&P Support 1,024,950 1,192,300
FEED Finance Support 407,255 545,813
FEED Ops and Maint. Support 1,008,433 1,409,464

Work Breakdown Structure (WBS) Original Budget Actual Cost

Description £ (December 2015)
£
FEED Project Team 7,561,923 6,177,667
FEED Project Team - Non 0 143,884
Recoverable
FEED Project Management - PMO 2,500,000 1,714,872
FEED Project Management - Third 62,082 126,913
Party
PROJECT MANAGEMENT 12,564,643 11,310,913
FEED Commercial Support 907,041 797,867
FEED Legal Support 488,407 498,224
FEED Commercial 372,242 499,203
Non-Recoverable
FEED Regulatory and Comms 1,621,645 1,299,362
FEED Regulatory and Comms - 250,000 249,003
Third Party
COMMERICAL 3,639,335 3,343,659
FEED Onshore 2,104,950 2,577,329
FEED Onshore - SSE 3,400,000 3,432,950
FEED Onshore - Technip 9,051,499 9,135,496
FEED Onshore - PMO CCCC 0 434,423
FEED Onshore - Third Party 1,895,000 1,492,025
ONSHORE 16,451,449 17,072,223
FEED Pipelines and Subsea 1,028,340 1,327,488
FEED Pipelines and Subsea - Third 915,000 2,074,555
Party
PIPELINES & SUBSEA 1,943,340 3,402,043
FEED Goldeneye Platform 1,659,321 2,067,779
FEED Goldeneye Platform - Third 82,113 24,378
Party
PLATFORM 1,741,434 2,092,157
FEED Wells and Subsurface 2,142,799 2,446,011
FEED Wells and Subsurface - Third 517,000 308,243
Party
WELLS & SUBSURFACE 2,659,799 2,754,254
Overheads 2,820,017 3,326,564
100% TOTAL 41,820,017 43,301,813
CONTINGENCY 2,000,000 0
TOTAL 43,820,017 43,301,813
The following chart shows the recoverable costs accrued to date and the cumulative maximum
qualifying amount for each payment period. The graph also reflects the total reimbursable costs, total

maximum qualifying amount and the forecast for recovery - capped and uncapped (for information
only). The accrual based recoverable forecast is also shown for information.

Peterhead CCS: Recoverable Costs

40.0
35.0
30.0
25.0
GBP M
20.0
15.0
10.0
5.0
0.0
May-14 Aug Dec-14 May-15 Dec-15
Mar-14 Apr-14 Payment Jun-14 Jul-14 Payment Sep-14 Oct-14 Nov-14 Payment Jan-15 Feb-15 Mar-15 Apr-15 Payment Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Payment
Period 1 Period 2 Period 3 Period 4 Period 5
Recoverable Actual Costs 0.8 1.7 2.3 4.0 6.1 7.8 9.7 12.2 14.8 17.1 18.7 20.7 22.3 24.0 25.5 26.2 27.1 28.0 29.2 30.1 31.2 31.9
Cumulative Maximum Qualifying Amount 6.4 13.9 20.6 25.9 28.5
Total Reimbursable Cost 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0
Total Maximum Qualifying Amount 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5
Actual Recovery 0.8 1.7 2.3 4.0 6.1 7.8 9.7 12.2 14.8 17.1 18.7 20.7 22.3 24.0 25.5
Baseline Forecast Recovery (capped) 1.3 3.0 5.1 7.5 9.9 12.2 14.6 16.6 18.4 20.0 21.8 23.2 24.1 24.8 25.6 26.3 27.1 27.9 28.5 28.5 28.5 28.5
Current Forecast Recovery (uncapped) 25.5 26.2 27.1 28.0 29.2 30.1 31.2 31.9
Accrual based Recoverable Forecast 9.0 2.2 3.1 4.8 6.7 8.5 10.5 13.0 15.6 18.3 20.0 21.8 23.2 24.5 25.7 26.6 27.3 28.5 29.4 30.4 31.5 31.9
Figure 3-2: PCCS Recoverable Costs
Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03

The information contained on this page is subject to the disclosure on the front page of this document. 9
3.4. FEED Labour

The FEED project is largely study-based. As a consequence, the cost of labour represents the
overwhelming majority of costs within the FEED scope. Exceptions to this include fees for
equipment hire during site investigation works, licences, application submissions, travel, and certain
project overheads. For the FEED study such exceptions were considered to be small.
In general the labour costs, as contracted to Shell, are inclusive of any subcontractor overheads e.g.
office, computer and communications facilities, insurance etc.
3.5. Cost of Securing Long Lead Items

During the FEED there was no cost accrued for advance payments, reservation fees, down payments
or deposits for long lead items, vessel charters and rigs arising from the supply chain.
3.6. Other FEED Costs

The FEED costs reported above are inclusive of other costs that were managed by use of project
contingency. Such costs in FEED included performance of technical studies and physical trials. The
principal activities and costs not included in the original base budget are summarised by project area
below.
3.6.1. Pipeline Landfall Options

The most significant trial work carried out during FEED was associated with the transportation
pipeline landfall options. During FEED, it was decided to progress two options in parallel:


Horizontal directional drilling (HDD); and
Open-cut trenching.
Near the end of the FEED study, as part of the Project’s risk reduction strategy, it was decided to
carry out a trial bore using the HDD technique in order to confirm the rock conditions along the
proposed HDD route, at the pipeline landfall. The following work was carried out to support the
landfall of transportation pipeline:


HDD pilot hole works;

FEED for the open-cut method was performed in parallel with HDD FEED;

Additional onshore survey work was performed to support the HDD design; and
Expert review obtained of the report produced on the HDD landfall option.
The total value of these works was less than £1,500k.
3.6.2. Onshore (Capture Plant)

The following work was carried out to support the onshore area FEED.


Study performed to review and assess the impact of amine degradation;

Performance of absorber Schoepentoeter computational fluid dynamics modelling;
Study performed near the end of FEED to de-risk uncertainties in the waste water treatment
plant design.
The total value of these works was less than £500k.

PETERHEAD CCS PROJECT Project Cost Estimate
3.6.3. Process Design Package

Cansolv provided a Process Design Package to the Onshore FEED contractor. The Process Design
Package was incorporated into the FEED Basic Design and Engineering Package DEP by the
Onshore FEED Contractor.
3.6.4. Subsurface
The following work was carried out to support the subsurface area FEED.
 Development of subsurface safety value.
The total value of this work was less than £500k.
3.6.5. Subsea
The following work was carried out to support the subsea area FEED.


Pipe SIM modelling and subsea isolation valve bypass review;

Pipeline flow assurance study;
Nearshore pipeline stability study.
The total value of these works was less than £500k.
3.6.6. Application and Lease Fees

Payments for the following items were made during the FEED project.


Goldeneye storage site lease - payment to the Crown Estate;
Application for connection of power supply - payment to National Grid.
The total value of these items was less than £100k.
3.6.7. Relevant Work which is not part of the FEED Study Costs
In the Basic Design and Engineering Package (BDEP) Key Knowledge Deliverable – KKD 11.003
[1], reference is made to a solvent testing campaign which was carried out by Cansolv at the Test
Centre Mongstad in Norway. Although the results of the testing campaign were used as an input to
the FEED study work (as detailed in the BDEP KKD), this cost of this work was borne by the
process licensor and was not attributed to the Peterhead CCS Project.
4. Project Cost Estimate

4.1. Introduction
An overview of Shell’s standard cost estimation processes is provided along with a description of the
cost estimate basis for the Peterhead CCS project. This provides context for the cost estimate
information subsequently provided for both capital expenditure (CAPEX) and operating expenditure
(OPEX) costs for the Execute phase of the Project which are summarised below. The CAPEX
estimate covers the anticipated costs prior to entering operations – i.e. engineering, procurement,
construction and commissioning costs. Costs during the operations period are presented in the
OPEX estimate. The cost estimates provided do not include future decommissioning or
abandonment costs.

Information on major cost components carrying cost uncertainty is also provided along with
summary descriptions of the likely range of risk and reward structures which could be applicable in
the CCS supply chain.
4.2. Overview of Shell’s Standard Cost Estimation Process
4.2.1. Cost Estimate Accuracy

Cost estimates are prepared by Shell throughout the various phases of the Opportunity Realization
Process (ORP). Estimate Types vary from Type 0 (least accurate) to Type 4 (most accurate) as the
definition of each opportunity develops and matures through the process – progressing from an
factored methodology to the use of detailed Material Take Off (MTO) information.
As the project moves through phases of maturation, the cost estimate should mature in line with the
project: As time progresses the base estimate becomes larger as the risk mitigations are incorporated
in to the design, the Contingency becomes less as the risks are understood and engineered out and
the cost accuracy improves.
Table 4-1: Typical Cost Estimate Accuracies
Cost Estimate Expected

Type Accuracy
Type 1 +40% / -25%
Type 2 +25% / -15%
Type 3 +15% / -10%
4.2.2. Cost Estimate Components and Methods of Representation

The components of a cost estimate generally include:


Base scope costs;

Contingency;

Market factors; and
Inflation
Costs collected as an input to a cost model at a reference year are typically defined as a base case in
terms of Estimate Date Money (EDM). The EDM Escalated cost data refers to a base case estimate
which has been escalated by market effects but without inclusion of the effects of inflation. Money
of the Day (MOD) applies the effects of inflation to the EDM Escalated value. Real Terms (RT) cost
data consider the MOD value discounted to remove the effects of inflation considered at a specific
date in time for the purpose of project comparison. The same principles are generally applied when
defining CAPEX and OPEX estimates.
Market factors include allowance for market escalation – i.e. experience of a Real Terms cost increase
(or decrease) because of the market volatility, over and above the impact of Inflation. Each activity
within the estimate also needs to be uplifted to account for inflation and to estimate an equivalent
cost at the time of Project Execution.
When preparing cost estimates, contingencies are assessed in order to arrive at a validity of the
estimate with an accepted confidence level. Contingencies are assigned in order to raise the estimate
to achieve a 50% confidence level, i.e. there is an equal chance that the 'as built' cost of the project
will show an over or under expenditure. This figure is usually referred to as the “50/50” or “P50”
estimate and is, in statistical terms, the median of the range of possible final expenditure outcomes.
The accuracy band for a cost estimate is defined by the range of costs from the P10 (10% probability
that the project will come in on or under budget) to P90 (90% probability that the project will come
in on or under budget).
4.2.3. Contingency and Cost Uncertainty Modelling

Contingency is added to a cost estimate to allow for further scope definition emerging in subsequent
phases, and risks which have not been identified in the present project phase. It also covers minor
design and field changes but does not include major scope changes, such as increased
throughput/concept/layout. Contingency in the Peterhead CCS FEED study cost estimate was
calculated using a probabilistic method, consistent with Shell’s internal guidelines.
Shell uses proprietary simulation tools for cost risk analysis which apply an industry standard Monte
Carlo simulation approach. This method generates a full range of possible outcomes and their
associated probability of occurrence and is based on:


Deterministic cost inputs and ranges;

Probability distribution curves;

Risks;

Opportunities; and
Levels of effort.
The output from the cost uncertainty modelling process provides an overall project contingency
figure and also a cost uncertainty range – bounded by the P10 and P90 cost estimates. As a result of
the applied cost uncertainty modelling method, cost uncertainty information is not generated for
individual elements of the CAPEX and OPEX cost estimate breakdowns.
4.3. PCCS Cost Estimate Basis

The CAPEX and OPEX estimates for the Execute phase of the Peterhead CCS project were
developed in accordance with normal Shell practice and appropriate market guidelines such as the
Consumer Price Index (CPI) and Rate of Exchange (ROE) to take inflationary effects into account.
In accordance with Shell’s normal practice, CAPEX and OPEX estimates were developed in the pre-
FEED project phase based upon the concept engineering work carried out at that time. These
estimates were denoted as “Type 2” estimates under Shell’s cost estimation system.
The PCCS FEED study scope had a duration from March 2014 to December 2015 and consisted of
two phases. Within the overall PCCS FEED study scope, an Engineering FEED study was
undertaken by Shell and its engineering contractors between March 2014 and February 2015. Once
the Engineering FEED study phase was completed, the project team focused on developing the EPC
tendering arrangements and undertaking other activities in readiness for the execution phase
(Execution Preparation Phase) until the end of November 2015.
The project CAPEX and OPEX estimates were updated mid 2015 based upon the Engineering
FEED outputs – denoted as “Type 2 Updated” estimates. The CAPEX estimate was further updated
in late 2015 as a result of the increased cost certainty gained through undertaking the EPC tendering
process. This updated CAPEX cost estimate is denoted as a “Type 3” estimate in accordance with
Shell’s standard practice.
The CAPEX and OPEX estimates have been built up from a base estimate. The complete estimate
has been developed from the base estimate by including an allowance for risk and contingency. This
creates a P50 base estimate – i.e. the estimate has a 50% probability of over or under-running.

The Type 3 CAPEX estimate is expressed in “Money of the Day” (MOD) terms which includes
inflation and escalation to the most likely date of expenditure (i.e. the known cost in 2015 has been
escalated and inflated, at 2% per annum, as required in order to line up with the probabilistic
execution schedule).
The Type 2 updated OPEX estimate is based on the known cost base in 2015 and is therefore already
presented Real Terms (RT) 2015. Unlike the Type 3 CAPEX estimate there is no market escalation or
inflation applied to the presented values.
Therefore, the P50 MOD CAPEX estimate figures developed in 2015 have inflation and escalation
applied to the likely date of expenditure. Following the philosophy for development of Real Term
costs, the P50 RT2015 OPEX estimate figures developed in 2015 prices have no market escalation or
inflation applied to them despite the fact that in practice these costs will be incurred over the period
2016 to 2041.
The Type 3 CAPEX and Type 2 Updated OPEX estimates current at the end of the PCCS FEED
study are summarised below. A more detailed CAPEX estimate breakdown is provided in
APPENDIX 1. A Type 3 OPEX estimate was not also developed at the end of FEED, since the
tendering process for the operations contracts will not take place until after award of the Execute
contract.
4.4. Capital Expenditure (CAPEX) Estimate

CAPEX costs for the Execute phase of the PCCS project have been based upon the PCCS Project’s
technical scope and performance requirements detailed in the Basis of Design and Basic Design and
Engineering Package Key Knowledge Deliverables – KKDs 11.001 [2] and 11.003 [1] respectively.
The Execute phase CAPEX costs have been developed based upon the proposed EPC contract
scopes for the provision of detailed design, construction and commissioning works as detailed in the
Scope of Work for Execute Contracts, Key Knowledge Deliverable 11.058 [3]. The CAPEX cost
estimate covers the entire scope of the Execute phase of the PCCS Project and is reported according
to the following elements:


Venture implementation costs;
Onshore, covering Peterhead Power Station modification scope of work - including the new
steam generator and associated balance of plant; and the Carbon Capture, Compression and

Conditioning plant scope of work;

Landfall, pipelines and subsea scope of work;

Modifications to the Goldeneye platform and associated logistics scope of work;

Wells and subsurface scope of work;
Owner’s costs; and
 Commissioning.
The estimate is based upon cost information available at the end of FEED in December 2015.
Although final cost and schedule tender information were not available for all the engineering,
procurement and construction (EPC) tenders for the Execute phase at the time of HMG’s Statement,
it is not expected that the final information would have deviated significantly from the figures
presented in this document.
The CAPEX estimate is presented in the table below and subsequent graphics and represents the P50
MOD case. The presented figures include contingency provisions and anticipated foreign exchange
(FOREX) related costs.

Table 4-2: Base Estimate CAPEX Breakdown
Cost Element Base Estimate

(£ k)
Venture (SPV) Implementation 10,620
Owner’s Costs 108,990
Onshore 639,460
Landfall, Pipeline, Subsea 72,580
Goldeneye Modifications 60,690
Wells & Subsurface 88,470
Commissioning (Full CCS Chain) 18,500
FOREX 440
TOTAL 999,750
A more detailed breakdown of the Base CAPEX cost estimate is provided in APPENDIX 1 based
upon the Execute Project phase Work Breakdown Structure (WBS). A relative breakdown for the
CAPEX estimate is presented graphically in Figure 4-1.
Onshore CAPEX
14%
Offshore CAPEX (Landfall,

Pipeline, Subsea;
22%
Goldeneye Modifications;
and Wells & Subsurface)
64% Other (Venture (SPV)
Implementation; Owner's
Costs; and Commissioning
- Full Chain)
Figure 4-1: PCCS CAPEX Split

A relative breakdown for the Onshore CAPEX estimate is provided in Figure 4-2 and for the
Offshore CAPEX estimate in Figure 4-3.
26%
Power Plant
Modifications
Carbon Capture,
Compression &
Conditioning Plant
74%
Figure 4-2: PCCS Onshore CAPEX Split
33%
40%
Landfall, Pipeline, Subsea
Goldeneye Modifications
Wells & Subsurface
27%
Figure 4-3: PCCS Offshore CAPEX Split

4.5. Operating Expenditure (OPEX) Estimate

The OPEX estimate presented below, is based upon information available at the end of FEED in
December 2015. Although some commercial agreements had to still be finalised at the time of
HMG’s Statement, it is not expected that the final information would have deviated significantly from
the figures presented in this document. The operational expenditure (OPEX) information should not
be used for anything other than presentation of a snap shot of the most up to date estimate as of the
end of December 2015.
4.5.1. OPEX Estimation Methodology

In the absence of developed standard practice in the nascent CCS industry, the OPEX estimate has
generally been created in line with the Shell practice which reflects the industry standard for OPEX.
The power plant estimate has been developed by SSE in accordance with standard practice for the
power utility sector.
The OPEX model used as the basis of this report is built from:


The latest project schedule;

Bottom-up, activity-based modelling techniques;
Data from the financial model such as:
o Fuel gas consumption,
o CO2 Emissions,
o Amine consumption,
o Carbon Capture Conditioning and Compression Parasitic Load;
 Data from 3rd parties for operation of power plant equipment;



Project Data for waste streams and chemical utilisation;
Benchmarking studies for manpower.
The OPEX model provides an estimate for the period from 2016 through to 2041 which includes:
 Pre start-up costs for the Goldeneye facility; which are affected by any change in the project

schedule

Early Measurement Monitoring and Verification activities from 2016 to 2019;

Injection phase costs for the full chain from 2020 to 2035;
Post injection phase costs, excluding decommissioning.
4.5.2. OPEX Estimate

The OPEX estimate is presented in the table below and subsequent graphics and represents the Base
Estimate, reported in RT2015 (Real Terms 2015). The Base Estimate RT2015 is £3,668.7 million
between 2016 and 2041, excluding decommissioning.
Table 4-3: Base Estimate OPEX Breakdown
Cost Element Sub Element Cost (£ k)

Power Plant OPEX 2,900,500
Base Plant 366,800
Fuel Gas 2,336,800

Carbon Cost 196,900

Carbon Capture, Transport and Storage OPEX 768,200
Pre Start-Up Costs 16,700
CCCC Plant Power Import 235,100
CCCC Plant Operations 387,500
Transport 89,700
Storage 1,800
Monitoring (during and post operations) 37,400
TOTAL 3,668,700
The OPEX estimate costs are separately grouped by cost element into Power Plant related OPEX
and Carbon Capture, Transport and Storage (CCS) OPEX costs. The OPEX estimate shows that the
Power Plant OPEX estimate comprises approximately 80% of the total operating cost, as shown in
Figure 4-4 below.
21%
Carbon Capture,
Transport and Storage
OPEX
Power Plant OPEX
79%
Figure 4-4: PCCS Full Life OPEX Split
The OPEX cost distribution for each year of the Project operating period is shown in Figure 4-5
below.

Figure 4-5: Year by Year Base OPEX Estimate

The following sections describe the primary cost drivers and assumptions of each cost element of the
estimate.
4.6. Power Plant OPEX Costs

The Power Plant OPEX costs for the injection period of 2020 to 2035 account for the majority of
the operating costs for the PCCS Project – some 82% of the total OPEX estimate – as shown in
Figure 4-6. Within the Power Plant OPEX cost estimate, the fuel gas cost is the dominant cost
element - comprising 80% of the Power Plant OPEX cost and 64% of the total PCCS OPEX cost.
7%
13%
Base Plant
Fuel Gas
Carbon Cost
80%
Figure 4-6: Power Plant OPEX Cost Split
The Power Plant OPEX cost distribution for each year of the Project operating period is shown in
Figure 4-7.

Figure 4-7: Year by Year Power Plant OPEX Estimate
The sub-elements of the Power Plant OPEX estimate are described further in the following report
sections.
4.6.1. Base Plant Cost

The base plant covers the costs associated with SSE’s operation of the Peterhead Power Station
aspects attributable to the PCCS Project and have been provided by SSE. As of the end of December
2015, these costs have still to be finalised - particularly the gas turbine’s Long Term Service
Agreement (LTSA) that will affect the OPEX outturns. These OPEX costs are estimated to
comprise 13% of the Power Plant OPEX estimate and 10% of the total PCCS OPEX estimate.
4.6.2. Fuel Gas

Fuel gas costs are incurred as a result of fuel gas used for operating the Power Plant’s PCCS-related
equipment. This OPEX cost is estimated to comprise 80% of the Power Plant OPEX estimate and
64% of the total PCCS OPEX estimate.
4.6.3. Carbon Cost

The carbon cost includes costs associated with the emission of CO2 and is based upon costs provided
by DECC for emitted CO2. This OPEX cost is estimated to comprise 7% of the Power Plant OPEX
estimate and 5% of the total PCCS OPEX estimate.
4.7. Carbon Capture and Storage (CCS) OPEX Costs

The CCS OPEX estimate for the injection period of 2020 to 2035 accounts for the remainder of the
operating costs for the PCCS project – some 18% of the total OPEX estimate. As shown in Figure
4-8, within the CCS OPEX cost estimate the onshore Carbon Capture, Compression and
Conditioning (CCCC) Plant costs (summating the CCCC Plant power import and CCCC Plant
operating costs) presents the dominant cost element - comprising 81% of the CCS OPEX cost and
15% of the total PCCS OPEX cost.

0% 2%
Pre-Start Up Costs
12%
CCCC Plant Power Import
31%
CCCC Plant Operations
Transport
Storage
50%
5%
Monitoring (During & Post
Ops)
Figure 4-8: CCS OPEX Cost Split
The CCS OPEX cost distribution for each year of the Project operating period is shown in cost is
shown in Figure 4-9. Note that allowance for well related activities outside of normal routine
maintenance and MMV activities has created a cost spike in year 7 of CO2 injection. Further
information on the proposed injection regime including monitoring plan can be found in the Storage
Development Plan, Key Knowledge Deliverable 11.128 [7].
Figure 4-9: Year by Year CCS OPEX Estimate

The sub-elements of the CCS OPEX estimate are described further in the following report sections.
4.7.1. Carbon Capture, Compression & Conditioning (CCCC) Plant Operations

The CCCC Plant OPEX estimate covers costs associated with operating the onshore CCCC Plant.
This OPEX cost is estimated to comprise some 50% of the CCS OPEX estimate and 9% of the total

PCCS OPEX estimate. This OPEX cost is comprised of three elements. A cost breakdown summary
is provided in Figure 4-10.
1%
22%
Overhead Injection Period
Injection Phase
Organisation
CCCC Plant Operations
77%
Figure 4-10: Carbon Capture, Compression & Conditioning Plant OPEX Breakdown
4.7.1.1. Overhead injection period

The overhead injection period is a small cost item attributed to the onshore operating phase
insurance cost.
4.7.1.2. Injection Phase Organisation

The organisation costs include the OPEX cost for the field team required for the CCCC Plant and
provision of the onshore support organisation.
4.7.1.3. Carbon Capture, Compression and Conditioning (CCCC) Plant

The relative breakdown of the Carbon Capture, Compression and Conditioning Plant cost estimate is
shown in Figure 4-11 below.

1% 0%
8% 4%
11% 0% Tariff Fees
Site Costs
Waste Streams
Local Rates and Taxes
Consumables
Process Systems
Turn Arounds
76%
Figure 4-11: CCCC Plant OPEX Estimate
The estimate has been built using a bottom-up approach based on the equipment lists, system
structure and equipment OPEX templates for the process equipment and vendor quotation and
project process data for chemical usage and waste stream generation. At 76%, the use of various
consumables, when combined, form the largest cost. These are associated with the chemical usage
cost primarily for the replacement of amine and the handling of waste streams. These costs are
constantly accrued over the full injection phase, rather than low frequency costs for specific
maintenance activities.
4.7.2. CCCC Plant Power Import

The CCCC Plant Power Import costs are associated with the power supply requirement of the
Carbon Capture, Compression and Conditioning (CCCC) Plant which is imported from the National
Grid during the operating period 2020 to 2035. Power consumption has been based upon the defined
CCCC Plant availability as detailed in the Basis of Design, Key Knowledge Deliverable 11.001 [2] in
alignment with the imported electrical tariff rate defined by DECC. This OPEX cost is estimated to
comprise 31% of the CCS OPEX estimate and 6% of the total PCCS OPEX estimate.
Further commentary on the anticipated availability of the CCS Chain is provided in Section 4.2 of the
FEED Summary Report, Key Knowledge Deliverable 11.133 [4].
4.7.3. Transport
Transport costs are associated with the subsea pipeline between the onshore CCCC Plant and the
Offshore installation, Offshore installation and associated wells and the St Fergus supplied methanol
service across the period from 2016 to 2035. This OPEX cost is estimated to comprise 12% of the
CCS OPEX estimate and 2% of the total PCCS OPEX estimate.
Transport costs are comprised of three main elements which are described below. Further OPEX
cost breakdown information was not developed for these relatively small cost items and therefore no
further breakdown of the transport OPEX costs is presented in this document.

4.7.3.1. Pipelines
OPEX costs are associated with the ongoing operation and ownership of the subsea pipeline from
Goldeneye to Peterhead including pipeline lease fee and periodic maintenance and conditioning
monitoring activities including pipelines, risers and subsea structural inspections supplied by the
existing SUKEP asset operating the pipeline.
4.7.3.2. Offshore
OPEX costs are associated with the operation and ownership of the Goldeneye facility during the
injection period including:


Offshore insurance fee quotation supplied by the Shell insurance specialists.
Well activities outside of normal routine maintenance and MMV activities. This creates a cost
spike in year 7 of injection, to allow for one contingent tubing replacement. Costs and

requirements are specified by the Well Engineering team.
Operation of the installation.
The operational cost is derived from the current Goldeneye operating cost budget adjusted to
include an additional two trips to the facility per year (8 in total).
4.7.3.3. St Fergus Methanol supply

Methanol will be supplied to the injection wells from the St Fergus facility via a 4-inch line. The
methanol and associated supply equipment up to the inlet to the 4-inch line are to be owned and
operated by the existing owners, SEGAL with a tariff rate provided based on assumed fixed
maintenance costs and variable methanol usage.
4.7.4. Monitoring during the Operations and the Post Operations Periods
OPEX costs are associated with the MMV activities undertaken from 2020 to 2041 and include:


MMV activities required for the CO2 injection period (2020 to 2035);

MMV activities required post CO2 injection period (2035 to 2041); and,
Monitoring R&D funding.
This OPEX cost is estimated to comprise 5% of the CCS OPEX estimate and 1% of the total PCCS
OPEX estimate.
4.7.5. Pre Start-Up Costs

Pre start-up costs cover the pre Ready For Start-Up (RFSU) period of 2016 to 2020 and include:
 Operational Costs: Costs associated with operating the Goldeneye facility including normal
operating costs and planned remedial activities, which are affected by any change in the

project Schedule; and
Measurement, Monitoring and Verification (MMV) Costs: Costs associated with MMV
activities required prior to CO2 injection between 2016 to 2020.
The presented pre start-up costs are therefore entirely related to maintenance of the Goldeneye
facility prior to commencing PCCS operations plus associated MMV activities. This OPEX cost is
estimated to comprise 2% of the CCS OPEX estimate and 0.5% of the total PCCS OPEX estimate.

4.7.6. Storage
The OPEX costs associated with the Storage cost element include:


Final financial mechanism payment (post transfer obligation);

Lease Fee (a yearly cost for the lease of the reservoir from the Crown Estate);
Storage organisation costs associated with support of the MMV activities across the full life of
the project.
This OPEX cost is estimated to comprise <0.3% of the total CCS OPEX estimate.
4.8. Uncertainty of CAPEX and OPEX Estimates

The Project outturn costs will be either higher or lower than the presented estimates, depending on
which risks materialise and how emerging costs mature. In order to understand the likely variability
of CAPEX and OPEX outturns, Shell’s standard Cost and Schedule Risk Analysis (CSRA)
probabilistic method has been used. The method generates a full range of possible outcomes and
their associated probability of occurrence, based on ranges (with associated probability distributions)
for each parameter (input). Risk register, deterministic cost and schedule information were developed
ahead of holding workshops to develop the probabilistic CAPEX and OPEX cost estimate
information.
The methodology followed included the following steps:
 Consolidate Cost Estimate into major cost elements (15-60 items);
 Assign risk profile and cost uncertainty to estimate Best Case, Most Likely, and Worst Case
estimate ranges;
 Incorporate Risks and Opportunities into the cost model;
 Identify and link Schedule Risk Analysis output to schedule driven elements;
 Estimate impact of Unknown / Unknowns;
 Group and correlate cost elements and risks;
 Perform analysis and generate results; and
 Challenge results, validate with team and modify / re-run if needed.
The cost estimates were broken down in alignment with the Work Breakdown Structure and the
proposed structure of the EPC tenders. Risk profiles and cost uncertainties for the major cost
elements varied depending upon whether the major cost element was based on (final) tendered
information or was still in negotiation, was lump sum or reimbursable, and/or whether it was based
on detailed and benchmarked data or was less well defined. The more certain the cost (e.g. Lump
Sum agreed with preferred tenderer) the narrower the cost range, the more uncertain the cost (e.g.
untendered scope of work with limited benchmark data) the wider the cost range which was applied.
Inputs were taken from the latest version of the risk and opportunities register. Risks and
opportunities were screened for relevance to the CRSA: some risks were excluded as having no cost
impact or were deemed included in the cost uncertainty ranges for the major cost elements. Each
threat or opportunity that was incorporated in the model was given a percentage likelihood of
occurrence and a minimum and maximum outturn cost if it occurred. Correlation was applied to
similar major cost elements (e.g. Engineering/Procurement/Construction cost elements were
correlated at around 85%), to schedule driven elements and across discrete threats and opportunities
to ensure a realistic statistical prediction. The CRSA model which was developed in the proprietary
Crystal Ball software tool was run 1000 times (with each run comprising 100 iterations). The results
of the performed CRSA analysis allow outturn values to be estimated for P50, P90 and P10
probability cases.
P50 represents the probabilistic result (i.e. most likely) where there is equal chance of the result being
higher or lower than the value presented for the range of cost estimation scenarios studied. The P50
figures have been used to develop the CAPEX and OPEX cost estimates presented in this document.
The P90 and P10 values are used as indicators of the likely range of Project outturns, and are used
similar to an uncertainty value for the cost estimates.
For the CAPEX estimate, the P90 value represents a 12% over-run and the P10 value represents
a -11% (under spend), when compared to the most likely (P50) outturn value.
For the OPEX estimate, the P90 value represents a 24% over-run and the P10 value
represents a -16% (under spend), when compared to the most likely (P50) outturn value.
4.9. CAPEX Cost Estimate Uncertainties

As the FEED study progressed, it was possible to identify the areas of greatest cost uncertainty
within the Execute phase CAPEX cost estimate. These uncertainties are generally attributable to
either elements within the Execute phase EPC contracts where it was not possible to agree a fixed
price approach or areas where costs could not yet be readily determined – e.g. hire of a jack-up rig.
The list of major cost components which carry an uncertainty which is greater than a 5% share of the
project cost uncertainty into the Execute phase of the PCCS Project are presented in Table 4-4.
Further information can be found in the Major Cost Component Uncertainty report – KKD 11.144
[5].
Table 4-4: Major Costs Components

Major Costs Component % of Description of Uncertainty
Project
Cost
1 Onshore CCCC Plant 17% A construction Target Price Incentive mechanism is
Engineering Procurement and proposed for the Construction and commissioning
Construction (EPC) Contract – element of the EPC Contract where a pain/gain share
Construction Target Cost mechanism will be agreed with the Contractor
2 Onshore Power Station 15% A Target Price Incentive mechanism has been agreed for
modifications EPC Contract the PS EPC Contract (Balance of Plant)
(Balance of Plant including
Demolition)
3 Hire of Jack-Up Rig – Costs 6% The jack-up rig will be tendered in 2016 – day-rate costs
will be confirmed then. The industry typically tenders rig
requirements no more than 2 years ahead of
requirements
At the time of HMG’s announcement, discussions with the Engineering, Procurement and
Construction (EPC) Contractors, SSE and Cansolv were still in process and therefore the final risk
and reward allocation within the PCCS Execute contracts was not finalised. However, given their
advanced state of development, it is considered that the likely risk and reward allocation in these
contracts can be described with sufficient certainty to be instructive to other future CCS developers,
notwithstanding the fact that these agreements were not executed. Further information on the
proposed Execute phase contract structure can be found in the Scope of Work for Execute Contracts
report – KKD 11.058 [6]

PETERHEAD CCS PROJECT Conclusion
The approach to contracting in the Supply Chain is in line with Shell’s business as usual contracting
approach and is also in line with the industry standard approach. No characteristics unique to the
PCCS project have been identified that require Shell to deviate from its usual practice when
contracting with its supply chain. Currently there are no known advance payments, reservation fees,
down payments or deposits for long lead items, vessel charters and rigs arising from the Supply
Chain.
4.10. OPEX Cost Estimate Uncertainties

Unlike the CAPEX cost estimate, contractual arrangements have not been developed for the
individual elements of the OPEX cost estimate. Sensitivity analysis has been carried out on the largest
OPEX cost elements. The results obtained clearly identify that the likely operating costs are very
sensitive to the fuel gas consumption cost. The items with the greatest sensitivity, with the exception
of the power plant operating cost are the variable costs driven by the performance and/or availability
of the PCCS Project systems which also account for most of the operating cost.
OPEX Sensitivity to 10% change in each of the top costs over life
Carbon Cost - Full 19.08
CO2 Capture 21.78
Imported Power 22.78
SSE Operating Costs 33.59
Fuel Gas - Full 226.44
-250 -200 -150 -100 -50 0 50 100 150 200 250

MM GBP RT P50 2015
OPEX Decrease Total OPEX Increase Total
Figure 4-12: OPEX Cost Estimate Sensitivity Analysis
5. Conclusion
This document provides cost estimate information for Shell’s Peterhead CCS Project. The cost
estimate for the Execute phase of the Project is presented with Capital Expenditure (CAPEX) and
Operating Expenditure (OPEX) cost breakdown information. Information is also presented on the
Project’s FEED cost performance.
The FEED original budget was £43,820,017 inclusive of £2 million contingency. The largest use of
contingency was associated with the de-risking of the pipeline landfall design, including the decision
to execute a HDD trial bore hole, undertaken to confirm the technique can be employed for the rock
conditions at Peterhead.
The CAPEX and OPEX estimates for the Execute phase of the Project are based upon information
available at the end of December 2015 and thus the data provided presents a snapshot of the most
up-to-date costs at the time of writing this report.

PETERHEAD CCS PROJECT Conclusion
The CAPEX estimate is £999.7 million and the OPEX estimate is £3,668.7 million. Both estimates
are inclusive of cost contingencies. The CAPEX estimate is presented in MOD terms (Money of the
Day which refers to an estimate which is inclusive of inflation and escalation to the date of
expenditure) and the OPEX estimate is presented in RT terms.
The major CAPEX estimate components are found onshore associated with the required power plant
modifications and new build Carbon Capture, Compression and Conditioning plant and comprise
some 64% of the total CAPEX cost estimate. The offshore components including the
transportation, platform, wells and subsurface scope of work comprises some 22% of the total
CAPEX cost estimate.
The OPEX estimate considers costs between 2016 and 2041 including a 15-year injection period but
excluding decommissioning. The largest cost is from the Power Plant OPEX element (79%) with the
remaining 21% associated with the carbon capture, transport and storage activities. The fuel gas
expenditure is the dominant cost in the OPEX estimate.

PETERHEAD CCS PROJECT References – Bibliography
6. References – Bibliography
1. PCCS-00-PTD-AA-7704-00002, Basic Design and Engineering Package – KKD 11.003

2. PCCS-00-PT-AA-7704-00001, Basis of Design for the CCS Chain – KKD 11.001
3. PCCS-00-PTD-VA-5793-00002, Scope of Work for Execute Contracts – KKD 11.058
4. PCCS-00-MM-AA-7180-00001, FEED Summary Report for Full CCS Chain – KKD 11.133
5. PCCS-00-PTD-VA-7180-00001, Major Cost Component Uncertainty report – KKD 11.144
6. PCCS-00-PTD-VA-5793-00002, Scope of Work for Execute Contracts – KKD 11.058
7. PCCS-00-PT-AA-5726-00001, Storage Development Plan – KKD 11.128

PETERHEAD CCS PROJECT Glossary of Terms
7. Glossary of Terms
Term Definition
CAPEX Capital Expenditure
CCCC Carbon Capture, Compression and Conditioning
CCGT Combined Cycle Gas Turbine
CCS Carbon Capture and Storage
CO2 Carbon Dioxide
CTA Construction and Tie-in Agreement
DECC Department of Energy and Climate Change
EAC Estimate at Completion
EPC Engineering, Procurement and Construction
FEED Front End Engineering Design
FGS Flue Gas Supply
GBP Great British Pounds
GT Gas Turbine
HDD Horizontal Directional Drilling
KKD Key Knowledge Deliverable
LP Low Pressure
LTSA Long Term Service Agreement
MCC Market Compensation Charge
MMV Measurement, Monitoring and Verification
MOD Money Of the Day
NOAK Nth of a Kind
O&M Operations and Maintenance
OPEX Operating Expenditure
PCCS Peterhead Carbon Capture and Storage
PPA Power Purchase Agreement
PS Power Station
R&D Research and Development
RFSU Ready For Start Up
RT Real Terms (Value escalated to account for Market conditions)
SCR Selective Catalytic Reduction
SEGAL Shell-Esso Gas and Liquids
SPV Special Purpose Vehicle
SUKEP Shell UK Exploration & Production

PETERHEAD CCS PROJECT Glossary of Terms
APPENDIX 1. Execute CAPEX Estimate (Based on WBS)

WBS WBS WBS WBS WBS TOTAL CAPEX ESTIMATE
Level 1 Level 2 Level 3 Level 4 Level 5 (MOD GBP)
Peterhead CCS
1.1 Venture Implementation
1.1.1 Venture Implementation
1.1.1.1 Commercial / VI
00- VENTURE MANAGEMENT TEAM 2,768,077
00A -COMMUNICATIONS 1,973,280
01- SHELL GOVERNANCE TEAM 593,615
Project Specific VI Costs 5,281,361
1.2 Owners Costs
1.2.1 Owners Costs
1.2.1.1 SHELL OPERATOR TEAM
PM / PE / Business Support 36,101,090
Onshore 6,604,057
Subsea 3,835,590
Goldeneye 3,541,063
Wells & Subsurface 5,076,413
Commissioning 18,290,818
1.2.1.3 SHELL THIRD PARTY COST
Project Management 177,385
Onshore
Subsea 1,692,496
Goldeneye
Wells & Subsurface
Commissioning 1,323,120
1.2.1.4 INSURANCE, FINANCE & TAX
Insurance 12,205,879
Finance
Tax
1.2.1.5 MISCELLANEOUS
Logistics
HSSE 2,111,888
Other (Incl. License Fees) 9,428,816
Consumables
First Fills
Spares 2,664,123
Project Specifics Miscellaneous Costs 2,715,718
OWNERS COST - ACTIVITY ALLOWANCE 3,220,487
1.3 Onshore
1.3.1 Power Plant
1.3.1.1 SSE Breakdown
SSE 11,000,000
Lot 2 80,000,000
Lot 3 48,000,000
Insurance 1,440,000
Risk / Contingency 21,600,000
1.3.1.2 EPC General
Detailed Design
Procurement & fabrication
Construction
1.3.1.3 Power Station Modifications
Detailed Design
Construction
1.3.1.4 SCR
Detailed Design 750,000
Procurement & fabrication 2,250,000
Construction 2,000,000
1.3.1.5 Pre-commissioning & Handover
Detailed Design
Construction
Page 1 of 4
Peterhead CCS
1.3.2 CCCC
1.3.2.1 Capture Plant
Detailed Design & Engineering 8,063,453
Procure Major Equipment & Fabrication 83,297,661
Procure Bulk Materials 76,261,715
Project Management 17,813,670
Site Services / Indirect Field Cost 55,611,910
Commissioning & Start Up
1.3.2.2 Compression & Conditioning Plant
Project Management
Site Services / Indirect Field Cost
Commissioning & Start Up (TCE)
1.3.2.3 Waste Water Treatment Plant
Project Management
1.3.2.4 132 kV Connection
Detailed Design & Engineering 578,725
Procure Major Equipment & Fabrication
Procure Bulk Materials 807,098
Project Management
Construction 258,567
1.3.2.5 Onshore Pipe & Pig Trap
Procure Major Equipment & Fabrication 298,451
Project Management
Construction 541,877
1.3.2.6 EPC General / Other
Procure Major Equipment & Fabrication
Project Management
Overhead 11,858,200
Profit 5,959,241
1.3.3 Non-EPC Base Scope
1.3.3.1 Non-EPC Base Scope
Visitor Centre & Social Development 2,420,649
1.3.3.2 EPC Activity Allowance

CCCC Activity Allowance 29,027,267
Page 2 of 4
Peterhead CCS
1.4 Subsea
1.4.1 Subsea EPC
1.4.1.1 Landfall, Pipeline Installation (KP 0.39 to KP 1.2)
Project Management / Preliminaries 452,681
Detailed Design and Engineering 1,017,892
HSEQ 152,419
Procurement 261,423
Horizontal Directional Drilling Operations (HDD) 4,943,413
Pipeline Fabrication 2,253,560
Pipeline Installation 1,380,310
Pre-commissioning Activities
Data Manuals and As-Built Documentation Package 57,957
1.4.1.2 Offshore Pipeline Installation (KP 1.093 to KP 22.175)
Detailed Design and Engineering 1,061,198
HSEQ 152,419
Procurement 4,024,861
Pipeline Installation 15,084,063
Precommissioning Activities
1.4.1.3 Onshore Fabrication
Detailed Design and Engineering 610,736
HSEQ 152,419
Procurement 866,898
Fabrication and Construction of SSIV 702,978
Fabrication and Construction of Subsea Spool Pieces 287,131
1.4.1.4 Subsea Construction / Tie-in Activities
HSEQ 152,419
Procurement 717,791
Fabrication and Construction of SSIV 1,832,592
Fabrication and Construction of Subsea Spool Pieces 12,559,374
1.4.1.5 Pre-Commissioning Activities
HSEQ 152,419
Procurement 302,729
Pre-commissioning Activities 827,920
Subsea Activity Allowance 7,673,825
1.4.2.2 Shell Materials

Free Issue Materials 9,958,062
1.4.3 St Fergus
1.4.3.1 St Fergus
ISC - Plant Upgrades 1,652,447
Page 3 of 4
Peterhead CCS
1.5 Goldeneye Modifications
1.5.1 Goldeneye Modifications EPC
1.5.1.1 General
Logistics 6,683,920
1.5.1.2 Goldeneye Modifications (EPC Contract)

Project Management 4,510,654
Detailed Design/Engineering 3,923,972
Procurement & Fab 9,032,014
1.5.1.3 Shell Services
Mob / Demob 3,476,860
W2W Vessel & Gangway 22,188,872
Goldeneye Activity Allowance 3,276,374
1.6 Wells & Subsurface

1.6.1 Wells & Subsurface
1.6.1.1 Mob / Demob
Mob 4,103,402
Demob 4,103,402
1.6.1.3 Workover (x4)
Well GYA01 15,680,404
Well GYA02 15,680,404
Well GYA03 15,680,404
Well GYA04 15,680,404
1.6.2 Subsurface
1.6.2.1 Third Party Costs
Subsurface (2017) 13,313,134
Subsurface (2018, 2019 & 2020) 3,386,449
Wells Activity Allowance
Subsurface Activity Allowance 837,933
1.7 Commissioning
1.7.1 Commissioning
1.7.1.1 Commissioning
CSU Team 11,840,679
EPC - CSU Support 5,114,200
Integrated Commissioning 1,548,129
P50 MOD Excluding FOREX 999,296,089
FOREX 436,416
P50 MOD 999,732,505
Page 4 of 4

Peterhead CCS Project: Doc Title: Cost Estimate Report

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PETERHEAD CCS PROJECT FRONT MATTER

Peterhead CCS Project

Produced by Shell U.K. Limited

© Shell U.K. Limited 2015.

Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03 i

4. Project Cost Estimate 11

4.9. CAPEX Cost Estimate Uncertainties 26

Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03 iii

Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03 1

Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03 2

Figure 1-1: Project Location

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3. FEED Cost Performance

3.2. Cost Recovery

Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03 4

3.3. Total FEED Costs Breakdown

Table 3-1: Breakdown of FEED Project Costs

PROJECT MANAGEMENT 12,564,643 11,564,643 11,310,913

COMMERCIAL 3,639,335 3,664,335 3,343,659

ONSHORE 16,451,449 17,049,449 17,072,223

PIPELINES & SUBSEA 1,943,340 3,443,686 3,402,043

PLATFORM 1,741,434 1,841,434 2,092,157

WELLS & SUBSURFACE 2,659,799 2,596,799 2,754,254

OVERHEADS 2,820,017 3,194,317 3,326,564

100% TOTAL 41,820,017 43,354,663 43,301,813

CONTINGENCY 2,000,000 465,354 0

TOTAL INCL. CONTINGENCY 43,820,017 43,820,017 43,301,813

Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03 5

Figure 3-1: PCCS FEED Study – Work Breakdown Structure

Table 3-2: Breakdown of FEED Project Costs by WBS

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Work Breakdown Structure (WBS) Original Budget Actual Cost

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Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03 8

Peterhead CCS: Recoverable Costs

Figure 3-2: PCCS Recoverable Costs

Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03

3.4. FEED Labour

3.5. Cost of Securing Long Lead Items

3.6. Other FEED Costs

3.6.1. Pipeline Landfall Options

The total value of these works was less than £1,500k.

3.6.2. Onshore (Capture Plant)

The total value of these works was less than £500k.

Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03 10

3.6.3. Process Design Package

The total value of this work was less than £500k.

The total value of these works was less than £500k.

3.6.6. Application and Lease Fees

The total value of these items was less than £100k.

4. Project Cost Estimate

Doc. no.: PCCS-00-MM-FA-3101-00001, Cost Estimate Report Revision: K03 11

4.2. Overview of Shell’s Standard Cost Estimation Process

4.2.1. Cost Estimate Accuracy

Cost Estimate Expected

4.2.2. Cost Estimate Components and Methods of Representation

4.2.3. Contingency and Cost Uncertainty Modelling

4.3. PCCS Cost Estimate Basis

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