Modernizing the Happel Factor for
Cost Estimation in Oil and Gas Projects
FEATURED PAPER
By Robbii Adriansyah Kullit
Depok, Indonesia
ABSTRACT
Equipment-factored estimation methods for storage terminal projects were developed decades ago for chemical process plants and have not been updated to reflect current Indonesian construction conditions — leaving a critical gap in Class 4 estimation at the FEL-2 Assess gate. This paper identifies, selects, and updates the most suitable equipment-factored estimation method to fill this gap. A structured Multi-Attribute Decision Making (MADM) analysis — comprising Non-Compensatory and Compensatory models — was applied to four candidate methods, selecting the Happel Factor with an Additive Weighting score of 0.967. The updated factor was derived from level 2 estimate records encompassing more than 15,000 WBS cost elements from completed storage terminal projects (2019–2025), with outlier analysis conducted using IQR and MAD methods simultaneously. A Monte Carlo simulation using a lognormal distribution generated probabilistic contingency provisions at P70, P80, and P90 confidence levels. Back-test results confirm estimates within the AACE Class 4 accuracy range of -30% to +50% at P70 to P90 (+6% to +47%). This paper provides the first published, data-validated equipment-factored estimation framework for Indonesian storage terminal projects.
Keywords: Happel Factor, Cost Estimation, Front-End Loading, Oil and Gas Projects, Capital Cost
INTRODUCTION
The Importance of Cost Estimating
Cost estimating is the process to produce an ‘educated guess’ of what a program, project, work package, or activity will cost at some point in the future, while cost budgeting is taking that approved estimate and allocating it over time by cost loading the phased, work packages or activities. Explained another way, cost estimating is the process of generating a monetary value or range of values for management to review and accept.” “Upon acceptance, this value or range of values becomes the time-phased budget for the program, project, work package, or activity against which progress against the plan is assessed, analyzed, evaluated, the output of which is used by management to make decisions.” [1]
“The cost estimation, including both fixed and variable costs, varies at each project design stage—such as concept screening, preliminary study, budget authorization, budget control, and construction—because the quality and quantity of available information differ across these stages of the project life cycle.”[2]
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How to cite this paper: Kullit, R. A. (2026). Six Decades Later: Modernizing the Happel Factor for Cost Estimation in Oil and Gas Projects; PM World Journal, Vol. XV, Issue VIII, August. Available online at https://pmworldjournal.com/wp-content/uploads/2026/08/pmwj167-Aug2026-Kulit-Six-Decades-Later-paper.pdf
About the Author
Robbii Adriansyah Kullit
Depok, Indonesia
Robbii Adriansyah Kullit is an engineer with over twelve years of professional experience in the oil and gas sector. Currently, he works as an engineer at Indonesia’s national oil company. Several projects have been completed across various downstream oil and gas projects, including fuel and LPG terminals and related infrastructure, with a focus on design and cost engineering. He holds a bachelor’s degree in civil engineering and professional engineer from Gadjah Mada University. He is attending a distance learning mentoring course, under the tutelage of Dr. Paul D. Giammalvo, CDT, CCE, MScPM, MRICS, GPM-m, Senior Technical Advisor at PT Mitratata Citragraha to attain Certified Cost Professional (CCP) certification from AACE International.
Robbii lives in Depok, Indonesia, and can be contacted at:adriansyah.kullit@gmail.com
[1] PTMC, & Giammalvo, P. D. (2021). Unit 10- Managing Cost Estimating and Budgeting. In Project Controls/PMO Handbook of “Best Tested and PROVEN Practices.
[2] Cheali, P., Gernaey, K. V., & Sin, G. (2015, February 6). Uncertainties in early-stage capital cost estimation of process design – A case study on Biorefinery design. Frontiers. https://www.frontiersin.org/journals/energy-research/articles/10.3389/fenrg.2015.00003/ful l
