CHE 425 Ch5 PDF

CHE 425 Engineering Economics and Design Principles
Prof. Adnan Alamer Chemical Engineering Dept., KFUPM
CHAPTER 5
Definition
Capital cost pertains to the costs associated with construction of a new plant or modification to an existing chemical manufacturing plant.
Types of Capital Cost Estimate n Order of Magnitude Estimate (Feasibility) o Study Estimate / Major Equipment p Preliminary Design (Scope) Estimate q Definitive (Project Control) Estimate r Detailed (Firm or Contractors) Estimate
Types of Capital Cost Estimate (cont.)

Order of Magnitude Estimate (Feasibility)
Data: Cost information for a complete process Diagram: BFD
Study Estimate / Major Equipment

Data: List of major equipments Diagram: PFD
Preliminary Design (Scope) Estimate

Data: Accurate equipment sizes, layout of equipment, piping, instrumentation and electrical requirements Diagram: PFD and preliminary PI&D
Types of Capital Cost Estimate (cont.)

Definitive (Project Control) Estimate
Data: specification of all equipment, utilities, instrumentation, electrical and off-sites. Diagram: Final PFD and a preliminary PI&D
Detailed (Firm or Contractors) Estimate

Data: Complete engineering of the process and all related off-sies and utilities. Diagram: Final PFD and P&ID
Types of Capital Cost Estimate
Example 5.2
Estimating Purchased Equipment Costs

Vendor quote
Most accurate
based on specific information requires significant engineering
Use previous cost on similar equipment and scale for time and size
Less accurate
beware of large extrapolation beware of foreign currency
Use cost estimating charts and scale for time

Reasonably accurate Convenient
Prof. Adnan Alamer Chemical Engineering Dept., KFUPM 9
Effect of Size (Capacity)

Ca Aa = Cb Ab
n
(5.1)
Ca = KAa
where
(5.2)
K = Prof. Adnan Alamer n Chemical Engineering KFUPM AbDept.,
Cb
10
Effect of Size (Capacity)
11
12
Effect of Size (Capacity) (cont.)

n = 0.4 0.8 Typically Often n ~ 0.6 and we refer to Eq.(5.1) as the (6/10)s Rule
Assume all equipment have n = 0.6 in a process unit and scale-up using this method for whole processes Order-of-Magnitude estimate
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14
15
Another way of looking at economy of scale
16
Economy of Scale
Effect of Time
Time increases cost increases (inflation) Inflation is measured by cost indexes - Figure 5.3
Chemical Engineering Plant Cost Index (CEPCI) Marshall and Swift Process Industry Index
Numbers based on basket of goods typical for construction of chemical plants - Table 5.5
Equation for Time Effect
I2 C 2 = C1 I 1
19
20
21
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Example
Question Cost of vessel in 1993 was 25,000, what is estimated cost today (Sept 2003 CEPCI = 402)? Solution
I now 402 Cnow = C1993 = $27,990 I = 25,000 359 1993

Example - Accounting for Time and Size

2 heat exchangers, 1 bought in 1990 and the other in 1995 for the same service A 70 m2 1990 17 K 358 B 130 m2 1995 24 K 381
Area Time Cost I
= = = =
What is the Cost of a 80 m2 Heat Exchanger Today? (I = 402)

Example - Solution
Must First Bring Costs to a Common Time
A = 70
402 Ca (2003) = 17 = 19.089 358
A = 130
402 Cb (2003) = 24 = 25.323 381
Example Solution (cont.)
C = KA
n=
19.089 = K (70)
n
25.323 = K (130) n
= 0.4565
log ( 25.323 ) log(19.089) log (130 ) log(70)
19.089 C K = n = 0.4565 = $2.745 70 A
C = 2.745(80 )
0.4565
= $20.288 = $20,290
26
Total Cost of Plant

Purchased equipment cost equipment f.o.b. Installed cost Often 3 to 8 times larger than purchased equipment cost
27
Installed Cost of Equipment (Table 5.6)

1. Direct Project Expenses
Equipment Material for installation Labor for installation
2. Indirect Project Expenses

Freight, insurance, and taxes Construction overhead Contractor engineering expenses
Installed Cost of Equipment (Table 5.6) (cont.)

Contingency and Fee
Contingency Contractor fee
Auxiliary Facilities
Site development Auxiliary buildings Off-sites and utilities
29
Lang Factors
Table 5.7 Use multiplier depending on type of plant to escalate equipment costs to installed costs Flang = 4.74 = 3.63 = 3.10 Fluid processing plant Solid-Fluid processing plant Solid processing plant
This estimating technique is insensitive to changes in process configuration
30
Lang Factors (contd)
CTM = FLang C pi
i =1
31
Lang Factors (contd)
32
Module Factor Approach

Table 5.8 Direct, Indirect, Contingency and Fees are expressed as functions (multipliers) of purchased equipment
o cost (C p ) at base conditions (1 bar and CS)
Each equipment type has different multipliers Details given in Appendix A
33
Module Factor Approach
C BM = C
Bare Module Cost
o p F BM
Bare Module Factor (sum of all multipliers) Purchased Equipment Cost for CS and 1 atm pressure - Appendix A
o FBM = B1 + B2
FBM = B1 + B2FpFM
Fp = pressure factor (= 1 for 1 bar)
FM = material of construction factor (=1 for CS)
Cp = Co p F p FM
35
36
37
38
39
Pressure Factors
40
Pressure Factors
41
Pressure Factors
42
Pressure Factors
43
Illustrative Example
Compare Costs for
1. Shell-and-tube heat exchanger in 2001 with an area = 100 m2 for :
Carbon Steel at 1 bar Carbon Steel at 100 bar Stainless Steel at 1 bar Stainless Steel at 100 bar
44
Effect of Materials of Construction and Pressure on Bare Module Cost
P
1 bar 1 bar 100 bar 100 bar
MOC CS SS CS SS
Co p
25 K 25 K 25 K 25 K
o CBM
CBM 82.3 K 154 K 98.1 K 197.4 K

45
82.3 K 82.3 K 82.3 K 82.3 K
Bare-Module and Total-Module Costs

BM Previously Covered TM Includes Contingency and Fees at 15% and 3% of BM
CTM = 1.18
CBM
all equip
46
Materials of Construction
Very important Table 5.9 rough guide Perrys good source
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50
Results of Example 5.14
51
Capcost
Calculates costs based on input CEPCI use current value of 401 or latest from Chemical Engineering Program automatically assigns equipment numbers
52

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CHE 425 Engineering Economics and Design Principles

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Types of Capital Cost Estimate (cont.)

Study Estimate / Major Equipment

Preliminary Design (Scope) Estimate

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Types of Capital Cost Estimate (cont.)

Detailed (Firm or Contractors) Estimate

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Types of Capital Cost Estimate

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Estimating Purchased Equipment Costs

Use cost estimating charts and scale for time

Effect of Size (Capacity)

K = Prof. Adnan Alamer n Chemical Engineering KFUPM AbDept.,

Effect of Size (Capacity)

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Effect of Size (Capacity) (cont.)

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Another way of looking at economy of scale

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Equation for Time Effect

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

I now 402 Cnow = C1993 = $27,990 I = 25,000 359 1993

Example - Accounting for Time and Size

Area Time Cost I

What is the Cost of a 80 m2 Heat Exchanger Today? (I = 402)

Example Solution (cont.)

log ( 25.323 ) log(19.089) log (130 ) log(70)

19.089 C K = n = 0.4565 = $2.745 70 A

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Total Cost of Plant

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Installed Cost of Equipment (Table 5.6)

2. Indirect Project Expenses

Installed Cost of Equipment (Table 5.6) (cont.)

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

This estimating technique is insensitive to changes in process configuration

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Lang Factors (contd)

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Lang Factors (contd)

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Module Factor Approach

Each equipment type has different multipliers Details given in Appendix A

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Module Factor Approach

FM = material of construction factor (=1 for CS)

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM

Prof. Adnan Alamer Chemical Engineering Dept., KFUPM