plant design costing revision

SKF4153: Plant Design 1

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Capital Cost Estimation


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Objective

Be able to

◦ Estimate the purchase cost of process equipment

◦ Estimate bare-module cost

◦ Estimate total capital investment


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The company’s Income Statement

Income Statement (Table 16.4) is one of the financial statements in a

company annual report.

◦ Need to familiar with all the terms in the table. % Operating margin= (Income from operation)x100/(net sales)

% Profit margin = (Net income)x100/(net sales)

Net sales is gross sale minus returns, discounts and allowances.

Net income = (Net sales)- (Cost of goods sold)-(Operating expenses) -

(Interest expense)-(Taxes)

(Cost of goods sold) = (Cost of raw material) + (Cost of manufacturing)


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Use of equipment costing

To calculate:

Direct Permanent Investment CDPI

◦ Purchase cost of equipment + Cost of its installation

Total permanent investment CTPI (also known as fixed capital

investment)

◦ CTPI=CDPI + Cost of land + Royalties +Start up cost +

Contingency


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Rate of Return (IRR)

Total Capital Investment (TCI) for a chemical process = CTPI +

working capital

The TCI and the annual manufacturing cost plus other related

expenditures will be used to calculate the cash flows for

profitability analysis such as to determine

◦ the investor’s rate of return (IRR) or known also as the

discounted cash flow rate of return (DCFRR)

◦ IRR is one of the investment decision tools.

◦ If decision to choose among various processes is solely based

on IRR, we should go for the process with highest IRR


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Cost Index (I)

Equipment cost is obtained from charts, equations or quotes from vendors

The cost changes (increases) from year to year primarily due to inflation

The charts and equations are usually apply for a particular month/year.

Vendors quotes also valid for a certain period

To estimate purchase cost at a later date, we multiply the purchase

cost (Base Cost) available for a particular date with the ratio of cost index I

at a later date to a base cost index, Ibase at the date that applies to the

purchase cost


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The Indexes

The chemical engineering (CE) Plant Cost

Index

The Marshall & Swift (MS) Equipment

Cost Index

The Nelson-Farrar (NF) Refinery

Construction Cost Index

The Engineering News-Record (ENR)

Construction Cost Index


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Comparison of annual average

cost indexes


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Economy of Scale

Economies of scale refers to the decreased per unit cost

as capacity increases

This principle holds as long as each major piece of

equipment can be made larger for higher capacity.

However if the equipment size exceeds maximum size

that can be fabricated and shipped, the equipment must

be duplicated (e.g. two production trains)…..so the

economy of scale is lost.


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Economy of Scale

m varies from 0.48 to 0.87 for equipment and 0.38 to 0.9 for plants

If we use m=0.6 (average value), this is referred to as “six-tenths rule” ◦ Example, if the capacity is double, the cost will only

increase by 52%

The economy of scale is estimated by the following eqn,

eq. 16.3 m

Capacity

Capacity

Cost

Cost

1

2

1

2


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Typical Plant Capacity

See Table 16.8 for typical capacity (pounds/year) of 15 major commodity chemicals in

Common units are tonne/year or tons/day

Note: 1 tonne=1000kg 1 ton=2000 Ib

To estimate total depreciable capital investment (CTDC) using cost data form earlier plant at different capacity,

Note: b refers to base data such as in Table 16.8


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Total Capital Investment (TCI)

One-time expense for design, construction and start-up

for new or a revamp of an existing plant

Grass-roots plants vs Plant expansions

See Table 16.9 (Busche 1995)

See Table 16.5 for example


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Total Capital Investment (TCI)

TCI includes,

◦ total bare-module (include installation)

◦ spares and catalyst costs

◦ site preparation, building cost

◦ service facilities

◦ utilities plant

◦ contingencies, contractor’s fee, land, royalties

◦ start-up

◦ working capital


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Battery Limits

Imaginary border that separate on-site

(Process Plant) from offsite facilities


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Offsite Facilities


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Bare-module cost

Bare-module cost for fabricated equipment

◦ Distillation column, HEX, vessel

◦ Custom design

Bare-module cost for process machinery

◦ Pump, compressor, centrifuge

◦ Vendor supplied


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Bare-module cost

The bare-module costs could also be estimated using bare-

module factor based on f.o.b. purchase cost of equipment

◦ Bare-module cost=FBMx Purchase cost

◦ See Table 16.11


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Bare-module cost:

Direct Material and Labor

Direct Material and labor

◦ Material: Piping to other modules, concrete foundation, steel

supporting structure, instruments, controller, wiring, lighting,

painting, insulation

◦ Field labor for equipment erection and setting


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Bare-module cost: Indirect Cost

Indirect Cost

Freight, Insurance, Taxes

Construction overheads: workers health insurance, kwsp,

salaries of supervisory personnel, temporary building, crane

rental, security, job site clean-up

Contractor engineering expenses: Procurement expenses,

salaries for project and process engineers, designers, home

office expenses etc

◦ See Table 16.10 for bare-module cost for a HEX


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Working Capital (CWC)

Fund needed to cover operating costs required for the

early operation of the plant.

Include inventory (keeping stock)

Spare of charge catalyst and

Account receivable (transactions dealing with the billing

of customers)


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Estimation of TCI

Methods and Levels of accuracy of estimate,

◦ Order-of-magnitude estimate (± 50%) based on production rate

and major equipments as determine determine from bench-

scale laboratory data.

◦ Study estimate (± 35%) based on a preliminary process design

◦ Preliminary estimate (± 20%) based on detailed process design

studies leading to an optimized process design

◦ Definitive estimate based on a detailed plant design, including

detailed drawings and cost estimates, sufficient to apply cost

accounting.


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Order-of-Magnitude Estimate of TCI

Rapid determination to determine if a process is worth

pursuing

Suitable for low pressure process (<100psi)

Need production rate data

Need a flowsheet showing reactors, compressors and

separation equipment (no need to show HEX and

pump)


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Order-of-Magnitude Estimate of TCI

Calculation are based on

◦ Year 2000 Marshall and Swift Cost Index (MS index) of

1,103

◦ A base production rate of 10,000,000 lb/yr of main

product

◦ Carbon steel construction

◦ Design pressure < 100 psi


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Order-of-Magnitude Estimate

Step 1

Using six-tenths rule, compute production rate factor FPR

6.0

000,000,10

/,flowrateproduct Main

yrlbFPR

Eq 16.5


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Step 2

Calculate module cost CM

)000,130$(100

100psi > if pressure,design

)000,130$(100

100psi > if pressure,design

25.0

25.0

USFFC

USFFC

MPRM

MPRM

FM is material factor, Carbon steel (FM=1.0), Copper (FM=1.2), Stainless steel (FM=2.0), Nickel Alloy (FM=2.5), Titanium clad (FM=3.0)

See Appendix III for assistance in choosing materials of construction

Eq 16.6


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Step 3

Calculate total bare-module investment CTBM

MPITBM CFC

1103

2008year for index MS2008,

FPIis factor to account for piping, instrumentation,

automatic control as well as indirect costs.

FPI depends on whether the plant processes solid, fluids

or both

For solid handling (FPI=1.85), solid & fluids (FPI=2.0) and

for fluids handling (FPI=2.15)

Eq. 16.7


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Step 4

Calculate direct permanent investment CDPI

TBMDPI CFFC 211

F1 and F2 are factors to account site preparation, service facilities, utility plants.

For outdoor construction (F1=0.15), Indoor & outdoor (F1=0.4) and indoor only (F1=0.8)

For minor addition to existing facilities(F2=0.10), major addition to existing facilities(F2=0.3) and for grass-roots plant (F2=0.8)

16.8


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Step 5

Calculate total permanent investment CTPI

Add 40% to cover for contingencies and another 10% for land, royalties and start-up.

DPITPI CC 5.1

Calculate total capital investment CTCI

Add 15% to the total permanent investment CTPI

TPITCI CC 15.1


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Study Estimate of TCI

Here the method is based on overall factor method of

Lang (1947,1948)

Requires complete M&E balances and equipment sizing

Requires information on material of construction for

major equipment inclusive HEX and pump

f.o.b purchase cost of each equipment must be estimated,

see Table 16.9 for references.


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Step 1

From process design prepare equipment list giving,

◦ Equipment title or name

◦ Equipment Label (e.g. P1, R2)

◦ Size (Hp, ft2, diameter (ft), height (ft))

◦ Material of construction

◦ Design temperature

◦ Design pressure

◦ See Table 16.18


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Step 2

Add f.o.b purchase cost data (Cpi) and the corresponding

cost index (Ibi)

Update to the current cost index (Ii) and sum the

updated purchase cost to get the total f.o.b. purchase

cost

Multiply by 1.05 to account for delivery cost to the plant

site


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cont. Step 2

Then, multiply by Lang factor (fL,TPI) to get the total permanent investment cost (CTPI), i.e. Not including working capital

Or multiply by Lang factor (fL,TCI) to get the total capital investment cost (CTCI)

See Table 16.16 for Lang Factors, details breakdown are in Table 16.17

iP

i ib

ITCILTCI

iP

i ib

ITPILTPI

CI

IfC

CI

IfC

,

,

,

,

,

,

05.1

05.1

Eq 16.9 & 16.10


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cont. Step 2

See Table 16.16 for Lang Factors, details breakdown

are in Table 16.17

Note: You can add additional cost of spares, storage

and surge tanks, initial catalyst charge, royalties and

plant start up as Lang Factors do not include all these.

See example 16.3 (note, this example also compare

CTCI from order-of-magnitude estimate)


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Preliminary Estimate

Based on Individual Factors Method of Guthrie (1969,

1974)

Best carried out, after

◦ Optimal process design developed

◦ Complete M&E balances, Equipment sizing and

materials of construction

◦ Process control configuration developed as in P&ID.


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Step 1 From process design prepare equipment list giving,

◦ Equipment title or name

◦ Equipment Label (e.g. P1, R2)

◦ Size (Hp, ft2, diameter (ft), height (ft))

◦ Material of construction

◦ Design temperature

◦ Design pressure


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Step 2

Add f.o.b purchase cost data (CP,b) and the corresponding

cost index (Ib).

Note: Here the f.o.b purchase cost is based on near

ambient design pressure, carbon steel material and a base

design


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Step 3

Update to the current cost index (I).

For each piece of equipment, determine bare-module cost (CBM) using bare-module factors (FBM) in Table 16.11 and apply appropriate factors for design (Fd), pressure (FP) and material (Fm).

1,

MPdBM

b

bPBM FFFFI

ICC

Eq 16.12


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Step 4

Obtained the total bare-module cost CTBM.

BMTBM CC


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Step 5

Calculate total permanent investment CTPI, (note: not including start-up and royalties)

)(18.1 facilitiesoffsitebuildingsiteTBMTPI CCCCC

Add working capital to calculate total capital investment CTCI

WCTPITCI CCC


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Purchase Cost

See Table 16.19 for sources of widely used

equipment cost data

Included are the corresponding cost index for

the cost data

Equipment cost usually presented in the form of

graphs and/or equations of f.o.b. purchase cost as

a function of equipment size factor

Accuracy is no better than ±25%


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Purchase Cost

Always check the validity of cost data by comparison

with various sources.

Previous vendor bids and quotes

Cost estimate from manufacturer requires special

request and costly to prepare


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Purchase Cost Using IPE

IPE: Aspen Icarus Process Evaluator

Software for cost system

More accurate, consistent and periodically updated


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Purchase Cost:

Centrifugal Pump

This method is by Mosanto Company

Determine size factor, S=Q(H)0.5

Q is flowrate in gpm and H is the pump head in ft

Calculate base f.o.b. purchase cost, ◦ CB=exp{9.2951-0.6019[ln(S)]+0.0519[ln(S)]2}

Or determine base f.o.b. purchase cost form Figure 16.3

Base f.o.b. purchase cost are for single-stage, 3600 rpm, vertical split case (VSC), and made of cast iron.


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Fig 16.3


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Purchase Cost:

Centrifugal Pump

For centrifugal pump with specification (speed, material

etc.) other than base cost specification on the Figure

16.3, the f.o.b. purchase cost is,

◦ Cp=FTFMCB

FM is material factor (Table 16.21)

FT is pump type factor (Table 16.20)

This price does not include the electric motor

Note: CE cost index: 394 (mid-2000)


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Purchase Cost:

Shell and Tube HEX

Geometrical variables for S&T HEX are

◦ Tube diameter, wall thickness, length, spacing &

arrangement

◦ Baffle type and spacing

◦ Numbers of tube and shell passes

◦ Fixed-head, U-tube, floating head, kettle design

However, most published cost data are correlated in terms of

HEX surface area, i.e.

◦ size factor= surface area


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Purchase Cost: Shell and Tube HEX

Here specifications for base f.o.b. purchase cost are

◦ carbon steel tubes, ¾ in. or 1 in. OD, wall thickness of tube

is 16 BWG (Birmingham Wire Gage), 20 ft long, square or

triangular pitch

◦ carbon steel shell with shell side pressure up to 100psig

For base f.o.b. purchase cost use Figure 16.10, or

Use one of equations 16.39 – 16.42 (four different designs)


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Fig 16.10


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Floating head,

CB=exp{11.667-0.8709[ln(A)]+0.09005[ln(A)]2} eqn 16.39

Fixed head,

CB=exp{11.0545-0.9228[ln(A)]+0.09861[ln(A)]2} eqn 16.40

U-tube,

CB=exp{11.147-0.9186[ln(A)]+0.09790[ln(A)]2} eqn 16.41

Kettle vaporiser,

CB=exp{11.967-0.8709[ln(A)]+0.09005[ln(A)]2} eqn 16.42


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For S&T HEX with specification (pressure, material and

tube-length) other than base cost specifications on the

Figure 16.10, the f.o.b. purchase cost is,

◦ Cp=FPFMFLCB

FL is tube-length correction factor (see bottom page 523)

FM is material factor (Eqn 16.44 and Table 16.25)

FP is pressure factor (Eqn 16.45)


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Pressure vessel:

Knock-out drum


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Pressure vessel:

Flash drum


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Pressure vessel:

Reflux drum


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Pressure vessel with ladder, platform and support


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Pressure vessel


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Ellipsoidal head


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Pressure Vessel

Widely used in chemical industry

Cylindrical shape with inside diameter Di and cylindrical

shell length L (called the tangent-to-tangent length)

Welded two ellipsoidal or torispherical heads at

opposite ends

Includes:

◦ nozzles for entering and exiting streams,

manholes, connection for relief valves and

instruments, skirts and saddle for support,

platforms, ladder


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Pressure Vessel

Little or no internals (empty).

Examples are reflux drum, knock-out drum, settlers,

reactor, mixing vessel, vessel for fixed-bed adsorption and

storage drum

Oriented horizontally or vertically

Thickness of the wall are usually determined from ASME

Boiler and pressure vessel code


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Purchase Cost: Pressure Vessel

Here we use method by Mulet, Corripio and

Evan (1981)

See Figure 16.13, the correlations are eqn 16.53

(Horizontal), eqn 16.54(Vertical). This gives

CP=CV

Based on weight of shell and two 2:1 elliptical

heads

Size factor=weight (lb)

Carbon steel

Cost includes nozzles, manholes and supports

But do not include platform and ladder.


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Fig 16.13


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Purchase Cost: Pressure Vessel

For other specification,

◦ Cp=FMCV+CPL

Additional cost for platform and ladder is given in Eqn

16.55 (Horizontal) and Eqn 16.56 (Vertical)

FM are given in Table 16.26

Cost includes nozzles, manholes and supports

But do not include platform and ladder


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Stripping Tower


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Absorption Tower


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Distillation Tower


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Towers for Distillation, Absorption and

Stripping

Vertical pressure vessel containing

◦ plates, packing, internals for multiple entries,

management of bottom liquids and its withdrawal.


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Purchase cost: Towers for Distillation,

Absorption and Stripping

Purchase cost (in US$) Cp=CT are from Figure 16.13 or

eqn 16.57 (note: should be CT instead of CV )

This cost inclusive nozzles, manholes, a skirt and internals

(but not plates or packing)

For other specification,

◦ Cp=FMCT+CPL

CPL is given by eqn 16.58


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Weight of pressure vessel and tower

W=π(Di+tS)(L+0.8Di)tSρ

ρ is density of carbon steel

tS is thickness of shell and head


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Pressure vessel cylindrical shell thickness tS

Use eqn 16.60

Note also the minimum wall thickness is

given at the top of pg 530

Eqn 16.62 for wall thickness taking into

consideration of wind load and earthquake

effect.

Eqns 16.63-16.65 are for pressure vessel

operating under vacuum


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Tower: Cost of Plate Column

◦ Add cost of installed trays (inclusive all downcomers) CT to

cost of vessel.

Cp=FMCT+CPL+CT where,

CT=NTFNTFTTFTMCBT

◦ Base cost CBT (CE 394, yr 2000) is given by eqn 16.67

◦ NT is tray number, FNT is given by eqn 16.68, FTT is tray type

factor, FTM is tray material factor, see pg 532

◦ For Packed column, see pg 534


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Table 16.32

Summary of Purchase cost of other

chemical processing equipments

For your plant design project, this table

could be very valuable


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Aspen Icarus Process Evaluator

(IPE) Software to estimate equipment size,

purchase costs, installation costs and total

permanent investment.

The CD-ROM that you have will show

two examples

◦ Depropanizer distillation tower

◦ Monochlorobenzene separation process.

plant design costing revision

Documents

mfaw080901 cost index

unit cost

cost changes

purchase cost skf4153

cost contingency skf4153

base cost index

ratio of cost index

net sales cost