Procedure: FEASIBILITY STUDY

Manual: Facility Engineering Standards Rev. Date: 09/24/01

INTRODUCTION

A Feasibility Study is usually done in the Development phase of the Capital

Expenditure process to determine whether it makes sense to continue with a given
Proposal.

The main deliverable is research and investigative work presented in the form of a
Study document. This document will contain conclusions and recommendations
which will assist the Business Unit in appraising the need and business worth of the
Proposal under study.

1.0 PURPOSE

Describes the Feasibility Study methodology required to assess the

continuance of a proposal.

2.0 FEASIBILITY STUDY MANAGEMENT STRATEGY

The following are meant to assist in formulating strategies to effectively

manage a Feasibility Study.

 A Feasibility Study is undertaken so that informed decisions can be made

regarding a Proposal's potential for enhancing the business.

 Such a Study is normally done in the developmental phase of a Proposal,

and monies are budgeted for its execution.

 The Study is usually done in-house on small projects and by an outside

Consultant on medium/large projects.

 Each Feasibility Study will be different in scope and focus, and its Index
should be modified, truncated, or expanded, accordingly.

 For the Study to be performed in a cost effective manner, the Business Unit
must state the desired "deliverables" clearly.

 Prior to initiating any work, agree with the Consultant (when used) not just
on the budget limitations but also on the Study schedule. Ensure the
schedule allows progress reviews by the Business Unit. Monitor the work
via progress meetings and discuss any preliminary findings. Allow that
certain findings may alter the relative emphasis on focus areas and could
possibly affect the future course of the Study work. Make sure that a draft
of the Feasibility Study document is reviewed and accepted prior to its final
production. The schedule should make allowance for this activity.

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 Ensure that the Feasibility Study document meets all the originally agreed
to "deliverables". In this regard the following checklist can be used.

3.0 FEASIBILITY STUDY EXECUTIVE SUMMARY, CONFIDENTIALITY,

INTRODUCTION AND BACKGROUND

3.1 Executive Summary

 Summary description of the Study
 Summary of the findings
 Statement on attractiveness of the final proposal

3.2 Confidentiality
 State level of Confidentiality required

3.3 Introduction
 Purpose of the Study (Deliverables)
 Drivers ($'s, Safety, Health, and/or Environment)
 Plants or Business Units impacted
 Study sponsor/ Senior Management involvement
 Scope of the Study
 How was study conducted
 Alternatives studied
 Final proposal recommended
 Omissions of the Study

3.4 Background
 Original concept and its source
 Prior studies
 Prior findings
 Validity of prior work and findings

4.0 PROCESS & TECHNOLOGY

4.1 The Process

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Manual: Facility Engineering Standards Rev. Date: 09/24/01

 Simplified description
 Block Flow model
 Overall simplified material balance
 Determinants of the process selected and alternatives
 Technology / Process Licensing considerations
 Further Process/Technology development required
 Performance Warranties desired / required

4.2 Utilities
 Utilities requirement summary
 Utilities serving site (present requirement)
 Impact/consequences of changed requirements

4.3 Scope of Facilities

 Throughput / name plate capacity
 Determinants for the optimum size plant
 Long lead delivery equipment list
 Product / feed yields
 Plant on stream factor
 Batch or continuous operation
 Dovetail with existing Process/Facilities
 Physical size of the Plant
 Preliminary Plot Plan

4.4 Raw Materials Considerations

 Ownership
 Security of Supply
 Variability of Supply
 purity/contaminants/variability
 Minimum quality required
 Raw Materials supply/quality - contractual considerations

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 Means of supply
 Storage requirements
4.5 Product Considerations
 Product demand curve
 Final product specifications
 Product supply/quality - contractual considerations
 By-products management
 Potential utilization / value adding of by-products

4.6 Site Selection

 Grass roots or addition to present site
 Site ownership
 Site selection criteria including environmental
 Alternative sites considered
 Proposed Site and route selection

4.7 Infrastructure
 Power, fuel, and water
 Roads, rail, and dock
 Ancillary buildings and process facilities
 Ancillary services (Fire protection/Communications/Security)
 What is available Vs what is required

5.0 FINANCIAL & ECONOMICS

5.1 Financing of Project

 Proposed project financing
 Project finance requirements/guarantees
 Tax considerations/implications
 Government support & incentives available/desired?

5.2 Capital and Operating Cost Estimates

 Basis of cost estimates

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 Preliminary Operating & Capital cost estimates

 Statement on accuracy of the estimates

5.3 Economic Evaluation

Reference the Nexen Evaluation Guidelines for detailed evaluation
 Criteria used
 Presentation of results
 Commentary on proposal attractiveness / ranking

6.0 RESPONSIBLE CARE

6.1 Responsible Care

 Conformance with guidelines and code of practice
 Impact on employee and community safety
 Transportation risk management
 Process safety highlights
 Hazard reviews/management
 Emergency Response

6.2 Environmental Considerations

 Waste disposal plan
 Hazardous Waste production/disposal/management system
 Environmental Impact/Mitigation measures
 Impact studies requirement
 Permitting/Regulatory requirements (Federal, Provincial, Municipal)
 Outline of Permitting Procedures

7.0 BUSINESS
7.1 Ownership of the Project
 Sole or joint venture
 Background of J.V. partner
 What does J.V. partner bring to the table
 Outline of proposed partnership structure

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8.0 MARKETING

8.1 Marketing
 Initial sales forecast
 Long term sales forecast
 Pricing forecast
 Raw materials transportation/logistics
 Product transportation/distribution logistics
 Target market areas
 Low cost producer/competitive producer costs
 Market sensitivities

8.2 Customer Focus

 Sole or joint supplier
 Technical service resources
 Product information
 Customer site assessments
 Sales contracts

9.0 PRELIMINARY PROJECT EXECUTION PLAN

9.1 Execution Strategy

 Outline project execution plan
 Outline construction plan
 Sponsor responsibilities
 Contracting plan
 Workforce/skills requirement/availability
 In-house resource requirements/availability

9.2 Project Schedule

 Preliminary bar chart schedule
 Listing of key milestones

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 Preliminary Work Breakdown Structure

9.3 Site Preparation

 Basic Civil requirements
 Demolition of Existing Facilities
 Security of Site
 Impact on surrounding community
 Required community agreements

10.0 RISK ASSESSMENT

10.1 Risk Assessments

 Raw materials supply / costs
 Product marketing
 Technology - stage of development
 Patent infringements
 Plant scale-up
 Government approval process
 Ownership change
 Overall risk assessment

10.2 Corporate Strategic Plans

 Conformance / enhancement of strategic plans
 Conformance to Capital Plan

11.0 CONCLUSIONS & RECOMMENDATIONS

11.1 Conclusions
 Conclusions re all Focus Areas
 Statement on overall Proposal attractiveness

11.2 Recommendations
 Drop, park, or go forward with Proposal.
 Future development steps

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