3-capital-cost-estimation #1 s19 fs15 #2 fs20

8/9/2019 3-Capital-Cost-Estimation #1 s19 Fs15 #2 Fs20

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TOPI TOPI OUT OME

apital ost Estimating

1 Capital Cost Distinguish the classification offixed capital cost estimates

2 Classification of Fixed

Capital Cost Estimates

Estimate the purchase equipment

costs based on the effect of timeand capacity

3 Estimating PurchasedEquipment Costs

Calculate the total capital cost ofa plant

4 Estimating the Total CapitalCost of a Plant


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What is economics?-The study of how limited

resources is used to satisfyunlimited human wants

Engineering Economy- Is a collection of

mathematical techniquesthat simplify economiccomparison


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1. Problem recognition, formulation, andevaluation.2. Development of the feasible alternatives.3. Development of the cash flows for each

alternative.

4. Selection of a criterion ( or criteria).5. Analysis and comparison of thealternatives.

6. Selection of the preferred alternative.7. Performance monitoringand post-evaluationresults.


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ExampleBad news: You have just wrecked your car!. Youneed another car immediately because you havedecided that walking, riding a bike, and taking abus are not acceptable. An automobile wholesaleroffers you $2000 for your wrecked car. Also, yourinsurance company’s claims adjuster estimates thatthere is $2000 in damage for your car. Because youhave collision insurance with a $1000 deductibilityprovision, the insurance company mails you acheck for $1000. the odometer reading on yourwrecked car is 58 milesAssumption:

A new car worth $10000 with odometer reading 28milesPrice of selling a repaired car = $4500


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Sources of EquipmentPrice Fluctuation

Company PoliciesOperation Time and Rate ofProduction


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Used to describe the process by which thepresent and future cost consequences ofengineering designs are forecastProvide information used in setting a selling price

for quoting, bidding, or evaluating contractsDetermine whether a proposed product can bemade and distributed at a profit (EG: price = cost+ profit)Evaluate how much capital can be justified forprocess changes or other improvementsEstablish benchmarks for productivityimprovement programs


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Order of Magnitude Estimate◦ relies on cost information for a complete process

taken from previously built plants◦ Requirement – blok flow diagram◦

Accuracy: +40% to -20%Study Estimate◦ Utilizes a list of major equipment found in the

process (e.g. pumps, compressors and turbines,

columns and vessels, fire heaters and exchangers)◦ Each of equipment is roughly size and appropriate

cost determined◦ Based on process flow diagram (PFD)◦ Accuracy: +30% to -20%


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Preliminary Design Estimate◦ Requires more accurate sizing of equipment than

used in study estimate together with layout ofequipment (piping, instrumentation, electrical

requirements) and also utilities.◦ Accuracy: +25% to -15%Definitive Estimate◦ Requires preliminary specifications for all the

equipment, utilities, instrumentation, electrical andoff-sites

◦ Accuracy: +15% to -7%


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Detailed Estimate◦ Requires complete engineering of the process and

all related off-sites utilities◦

Obtained vendor quotes for all expensive items◦ End of detailed estimate: the plant is ready to go to

construction stage◦ Accuracy: +6% to -4%


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Requirement – Process Flow Diagram (PFD)◦ Material and energy balance◦ Material of construction◦ Size/capacity – roughly estimatedAlternatives of Estimation◦ Current price quoted from suitable vendor (most

accurate)◦ Use cost data on previously purchased equipment

(same type)◦ Utilized summary graphs available for various types

of common equipment (discussed in detailed)

For each major piece

of equipment identified


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The relationship between the purchased cost and anattribute of the equipment related to units ofcapacity is given by:

where;A = Equipment cost attributeC = Purchased cost

n = Cost exponentSubscripts – a:- equipment with the requiredattribute

b:- equipment with the base attribute

--------- Equation 1.1

n

b

a

b

a

A A

C C


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Equation 1.1 can be rearrange to give

where

--------- Equation 1.2 naa A K C

nbb

AC K

Equation 1.2 is a straight line with a slope of n when thelog of C is plotted versus the log of A

aValues of cost exponent, n used in Equations 1.1 and 1.2varies depending upon the class of equipmentReplacing n in Equation 1.1 or/and 1.2 by 0.6 provides the

relationship referred to as the six-tenth-rule


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Equipment type Range ofcorrelation

Units ofCapacity

CostExponent n

Reciprocating compressorwith motor drive

220 to 3000 Kw 0.70

Heat exchanger shell and tubecarbon steel

5 to 50 m 2 0.44

Vertical tank carbon steel 1 to 40 m 3 0.52

Single-stage Blower 0.5 to 4 m 3/s 0.64

Jacketed kettle glass lined 3 to 10 m3

0.65

Table 2.3: Typical Values of Cost Exponents for a Selection ofProcess Equipment


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Example 3The purchased cost of a recentlyacquired heat exchanger with an area of

100 square meters was $10,000.Determine:a) the constant K in equation 1.1b) the cost of a new heat exchanger of180m 2


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Indices most generally accepted in chemicalindustry◦ The Marshall and Swift Equipment Cost Index◦ The Chemical Engineering Plant Cost Index

Determination of Purchased Cost

where;C= Purchase CostI = Cost Index

Subscripts – 1:- refers to the base time when cost isknown

2:- refers to the time when cost is desired

1

212 I

I C C --------- Equation 1.3


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Year CE Plant Cost Index

1996 381.8

1997 386.5

1998 389.5

1999 390.6

2000 394.1

2001 394.3

2002 395.6

2003 401.7

2004 444.2

2005 468.2

2006 499.6

2007 525.4

2008 575.4

Jun 2009 597.1

Values for Selected Indexes between 1985

to Jun 2009


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Total capital cost of a chemical plantincludes:

◦ Direct Project Expenses

Equipment f.o.b. cost, C P Material required for installation, C MLabor to install equipment and material, C L

◦ Indirect Project ExpensesFreight, insurance and taxes, C FITConstruction overhead, C OContractor engineering expenses, C E


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◦ Contingency and Fee

Contingency, C ContContractor fee, C Fee

◦ Auxiliary FacilitiesSite development,C SiteAuxiliary Buildings, C AuxOffsites and Utilities, C

off


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Estimating capital cost for a process plant◦ Access to previous similar plant with different

capacity◦ Apply principles that already introduced:

The six-tenth rule – may be used to scale up/downto a new capacityThe Chemical Engineering Plant Cost Index – shouldbe used to update the capital costsLang Factor Method – used when no cost informationavailable


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Lang Factor Method

where;CTM = the capital cost of the plantCp,i = the purchased cost for the major

equipment units

n = the total number of individual unitsFLang = the Lang Factor

n

i

i p Lang TM C F C 1

, --------- Equation 1.4


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Type of Chemical Plant Lang Factor,F lang

Fluid Processing Plant 4.74

Solid-Fluid Processing Plant 3.63

Solid Processing Plant 3.10

Capital Cost = (Lang Factor) x (Sum of Purchased Costs of all MajorEquipment)

Table 2.3: Lang Factors for the Estimation of Capital Costfor Chemical Plants


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Example 5The capital cost of a 30,000 metric ton/yeariso-propanol plant in 1980 was estimated to

be $5,000,000. Estimate the capital cost of anew plant with a production rate of 50,000metric tons/year in mid-1996


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Example 6Determine the capital cost for a majorexpansion to a fluid processing plant that has

a total purchased equipment cost of$6,800,000


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Bare Module Cost for Equipment at BaseConditions◦ Condition specified for base case are:-

Unit fabricated for most common material, usuallycarbon steel (CS)Unit operated at near ambient pressure

◦

Bare Module Cost:-

BM P BM F C C


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Bare Module Cost for Equipment at BaseConditions

◦ Bare Module Factor:-

where M E LO FIT L BM F 11

P C

= Bare module equipment cost: direct+ indirect cost

= Bare module equipment factor

= Purchased cost for base conditions

BM C

BM F


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Example 7The purchased cost for a carbon steel heat exchangeroperation at ambient pressure is $10,000. for a heatexchanger module, Ulrich [4] provides the followingcost multiplying factors

Determine:a) Bare module cost factor, F BMb) Bare module Cost, C BMc) Materials and labor costs to install the exchanger

M

L

FIT

O

E

Cost Multiplier Value

0.710.370.080.700.15


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Example 8Find the mid-1996 bare module cost of afloating head shell and tube heat exchangerwith a heat transfer area of 100m 2 . Theoperating pressure of the equipment is1.0bar with both shell and tube sidesconstructed of carbon steel. For this materialand pressure the values of F

P and F

M are

equal to 1.0


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Figure A.1: Purchased equipment cost for shell and tube heat exchangers


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Figure A.2: Pressure factors (F p) for heat exchangers


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Figure A.3: Bare module factors (Fo

BM) for heat exchangers

FM = Material factor to account formaterials of construction(for carbon steel, F M = 1)

FP = pressure factor to account forhigh pressure from Figure 2.5(for ambient pressure, F P = 1)


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Shell Material Tube Material Material Factor, F M

Carbon Steel (CS) Carbon Steel (CS) 1.00

Carbon Steel (CS) Copper (Cu) 1.25

Copper (Cu) Copper (Cu) 1.60

Carbon Steel (CS) Stainless Steel (SS) 1.70Stainless Steel (SS) Stainless Steel (SS) 3.00

Carbon Steel (CS) Nickel Alloy (Ni) 2.80

Nickel Alloy (Ni) Nickel Alloy (Ni) 3.80

Carbon Steel (CS) Titanium (Ti) 7.20Titanium (Ti) Titanium (Ti) 12.00

Table 2.9: Material Factors Floating Head Heat Exchangers


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Bare Module Cost for Non-BaseConditions◦ Condition specified for Non-Base Case

Equipment made form other material ofconstructionOperating at non-ambient temperatureFBM in the base case is replaced with actual baremodule cost factor, F 0 BM

◦ Bare Module Cost:-

o BM P

o BM F C C


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Example 10Find the bare module cost of a floating-headshell and tube heat exchanger with a heattransfer area of 100m 2 . The operatingpressure of the equipment is 100 bar on bothshell and tube sides and the construction of

the shell and tubes is of stainless steel.


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Example 11Find the bare module cost (in 1996) of astainless steel tower 3m in diameter and 30mtall. The tower has 40 stainless steel sievetrays and operates at 20 bar.


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Grass Roots and Total Module Costs◦ Grass Roots

new facility in which we start the construction onessentially undeveloped land

◦ Total Module CostsCost of making small-to-moderate expansions oralterations to an existing facility

n

i

oi BM

n

i

oiTM TM C C C

1,

1, 18.1Total Module Cost,

n

i

oi BM TM GR C C C

1,35.0Grass Root Cost,


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Example 12A small expansion to an existing chemicalfacility is being investigated and apreliminary PFD of the process is shown inFigure E2.14. The expansion involves theinstallation of a new distillation column witha reboiler, condenser, pumps and otherassociated equipment. A list of equipment,sizes, materials of construction, andoperating pressure is given in Table E2.14A.Using the charts in Appendix A, calculatethe total module cost for this expansion in1996.


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3-capital-cost-estimation #1 s19 fs15 #2 fs20

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