Review of Cost Improvement Literature with Emphasis on Synthetic Fuel Facilities and the Petroleum and Chemical Process Industries

by Ron Hess

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In order to provide a firmer basis for making realistic assessments of potential synthetic fuel process cost reductions, this Note documents a review of the publicly available literature on cost improvement, defined as the reduction in a technology's unit product cost that typically occurs as experience with the technology is gained. The review encompasses both theoretical and applied works and emphasizes the practical observations and empirical data from the few synthetic fuel facilities actually in existence as well as the analogous petroleum refining and chemical process industries. Among its conclusions, the study found that (1) with respect to overall unit product cost/price, the effective range of improvement rates appears to be between 5 percent and 40 percent with a norm between 20 percent and 30 percent; and (2) it typically takes four or five years to iron out basic performance problems in innovative process plants.

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