OPEX Estimation: Methodology and Benchmarks for Operating Cost Forecasting
Operating expenditure estimation is often an afterthought in capital project planning — but OPEX drives investment returns over the full asset life.
Why OPEX Gets Less Attention Than It Deserves
Capital expenditure estimation receives the lion share of attention in project cost engineering. CAPEX is large, visible and concentrated in the early years of a project. But for most industrial facilities, cumulative OPEX over a 20 to 30 year operating life significantly exceeds the original CAPEX. A 1% error in OPEX forecasting has a larger impact on project NPV than a 5% error in CAPEX.
OPEX Cost Categories
- Fixed OPEX — Costs that do not vary with production rate: labour, maintenance contracts, insurance, property taxes, lease costs
- Variable OPEX — Costs that scale with throughput: feedstock, utilities, catalysts and chemicals, royalties
- Maintenance CAPEX — Periodic expenditure to maintain asset integrity and performance
- Sustaining CAPEX — Investment required to maintain production capacity over the asset life
- ABEX — End-of-life decommissioning and abandonment cost obligations
Benchmarking OPEX
OPEX benchmarking is more difficult than CAPEX benchmarking because operating cost data is commercially sensitive. CAF Corporation Kpex platform (Module D) provides OPEX benchmarks for oil and gas facilities and is progressively extending coverage to power generation, renewable energy and process industries.
