W7_ Khalid Almamari_Economic Evaluation of Site Power’s Alternatives

  1. Problem Definition

The SCADA facility is using Diesel generators for power supply during its operation with small requirements in absent of OHL connection. Those generators require a lot of rental cost and maintenance through the whole year. However, the company power is available around the field and can be constructed but with little of capital investment to be connected to the power system. The questions is the selection of better option either to stop using diesel generators and buying power from the company itself or maintain the stuff as they are now?

  1. Identify the Feasible Alternatives

The alternatives are:

  1. Do nothing and maintain the stuff as they are now. OR
  2. Stop using diesel generators and extension of new OHL connection.


  1. Development of the Outcomes for Alternatives
  • Calculate the annual cost of diesel generators rental and the diesel cost.
  • Calculate the annual cost of connection the power along with additional cost for operation.


  1. Selection of Criteria

Net Present Value (NPV) is the present value of cash inflows and outflows of a firm. It assists in determining the present value of an investment by deducting the entire cash flows.

The alternative with higher net present value is selected.


  1. Analysis and Comparison of the Alternatives.

As collected from the field, the total power required per annum is small for the SCADA project but the power will support ESP once converted from self-flow to artificial pumps in additional that generator can’t handle it.

The two alternatives are compared as in the following table at 8.0 % (as taken from finance department) rate for 5 year. [Negative (-) means cost spent]

Comparison Parameter Diesel Generators Company Power
Annual Operating cost (rent + diesel) -45000$ -1500$
Capital Cost N/A -100000$
Total NPV -179672$ -109218$


  1. Selection of the Preferred Alternative.

As using government power has higher NPV which is good investment, therefore, it is selected as the preferred project to be implemented for nearby wells.


  1. Performance Monitoring and the Post Evaluation of Result.

Such diesel generators will be either return to Rental Company or transfer them to the new wells which are located in new field where there is no power system at all.



  1. com, a. (n.d). Economic Evaluation. Retrieved August 27, 2014, from http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=7&cad=rja&uact=8&ved=0CFkQFjAG&url=http%3A%2F%2Fwww.amazon.com%2FEconomic-Evaluation-Projects-Electricity-Industry%2Fdp%2F0863413048&ei=o90FVMfYENOyuATejIHwDg&usg=AFQjCNFXe3PfliGwmLN8rQDY2XeapAlJsA&bvm=bv.74115972,d.c2E
  2. com, r. (n.d). Economic Evaluation. Retrieved August 27, 2014, from http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0CCkQFjAB&url=http%3A%2F%2Fwww.robertson-cgg.com%2Fpreg%2Ftraining%2Feconomic-evaluation-oil-gas-projects&ei=at4FVIJFx724BPvsgZAM&usg=AFQjCNHldMYacXD6fHE7pzUbmmNWtvcRYQ&bvm=bv.74115972,d.c2E
  3. edu, p. (n.d). NPV. Retrieved August 27, 2014, from https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=0CEUQFjAE&url=https%3A%2F%2Fwww.princeton.edu%2F~achaney%2Ftmve%2Fwiki100k%2Fdocs%2FNet_present_value.html&ei=Cd8FVJniHZPhuQTL-oHgCg&usg=AFQjCNHJ8A8vZiPeyGGa6aatsv9HtHkviA&bvm=bv.74115972,d.c2E

4 thoughts on “W7_ Khalid Almamari_Economic Evaluation of Site Power’s Alternatives

  1. Hi Khalid, you have selected an EXCELLENT case study and your analysis was great with ONE exception……… Before you can make a valid assessment, you have the professional obligation to VALIDATE the MARR (8%)

    Go here and then provide us with these calculations for Oman at your site…


    The problem with many of these calculations is the MARR has proven to be too low, which means is should be validated…… (Look at the blog postings from your colleagues as well as several of them have done the calculations for Oman already)

    Dr. PDG, Jakarta

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