Introduction to Process Engineering Economics

1
G. Heyen
Tempus:JEP:Part 1
Part 3 : Eva!uatInn nf Invcstmcnts 2
Reliability of estimates
Accuracy versus cost
Cost structure for building a new plant
Typical plant cost evaluation methods
Lang's factors
Happel's method
Chauvel-Guthrie's method
Examples and applications
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Data rcquIrcd
Order-of-magnitude estimate
based on similar plant
short description and size
Study estimate
based on size of major equipment items
allow to decide whether to invest in a detailed study
Preliminary estimates
minor equipments and site are examined
allow to decide budget
Definitive estimates
almost complete data, but drawings not complete
Detailed estimate
complete drawings and specifications
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
-40
-30
-20
-10
0
10
20
30
40
Detailed
estimate
Definitive
estimate
Preliminary
estimate
Study
estimate
Order of
magnitude
Hnw rc!Iab!c arc cstImatcs ?
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Accuracy vs cnst nf cstImatInn Accuracy vs cnst nf cstImatInn
Typical average man power
for making estimates (man days)
Cost of project < 2 2 -10 10-150
Type of estimate (M )
Order-of-magnitude 3 6 12
Study 12 30 50
Preliminary 45 100 150
Definitive 80 230 300
Detailed 300 800 1600
0,1%
1%
0% 20% 40%
0,2%
0,5%
2%
5%
Relative cost
Possible error
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Cnst structurc fnr buI!dIng a ncw p!ant
Investment Distribution-Complete Plants (refinery type)
% of total % of total % of process
investment, investment, equipment,
range average average
Process units 30-45 35 100
Utilities 10-25 20 57
Offsite 30-45 35 100
Buildings 5-20 10 29
TOTAL 100 286
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
TypIca! cstImatInn tcchnIqucs
The exponent method can be used to extrapolate from a
known investment
Short cut methods provide order of magnitude estimates
from very little information
Most methods relate total investment to purchase cost of
all main equipment items
Lang's method uses an overall factor
Happel's method uses separate factors to estimate
installation labor for each class of equipment, and global
factors for extra fees
Guthrie's method uses detailed factors for each
equipment type
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Happc!'s mcthnd
Estimate purchase cost for all pieces of equipment
("Material")
Estimate labor needed for installation ("Labor")
Extra material and labor for piping, insulation, etc are
estimated from ratios relative to sum of Material
Installed cost of special equipment is added
Overhead, engineering fee, contingency are also added
This leads to total investment
Follow calculations according to next table
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Happc!'s mcthnd : tab!c 1
Item Material Labor
Vessels A : 10% of A :
Towers, field fabricated B : 30-35% of B :
Towers, prefabricated C : 10-15% of C :
Exchangers D : 10% of D :
Pumps, compressors
and other machinery E : 10% of E :
Instruments F : 10-15% of F :
Key accounts
(sum of A to F) G :
Introduction to Process Engineering Economics
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Tempus:JEP:Part 1
Happc!'s mcthnd : tab!c 2 Happc!'s mcthnd : tab!c 2
Item Material Labor
Key accounts
(sum of A to F) G :
Insulation H = 5-10% of G : 150% of H :
Piping I = 40-50% of G : 100% of I :
Foundations J = 3-5% of G : 150 % of J :
Buildings K = 4% of G : 70 % of K :
Structures L = 4% of G : 20 % of L :
Fireproofing M = 0,5 to 1% of G : 500 to 800% of M :
Electrical N = 3-6% of G : 150% of N :
Painting
and cleanup O = 0,5 to 1% of G : 500 to 800% of O :
Sum of material and labor P :
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Happc!'s mcthnd : tab!c 3
Sum of material and labor P :
Installed cost of special equipment Q :
Subtotal R = P+Q :
Overheads S = 30 % of R :
Total erected cost T = R+S :
Engineering fee U = 10% of T :
Contingency fee V = 10% of T :
Total investment W = T+U+V :
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Lang's mcthnd
It provides a quick way of relating the final plant cost from
the sum of all purchased equipment costs.
Total investment = K * (purchased equipment costs)
K is "Lang factor"
K = 3.1 for solid processing
K = 3.6 for mixed solid and fluids processing
K = 4.7 for fluids processing
Bach proposes to use separate factors for production units,
storage and utilities.
Hand recommends separate coefficients for each class of equipment.
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Chauvc!-GuthrIc's mcthnd
Original method proposed by Guthrie is very complex :
Factors are proposed for each class of equipment to evaluate all items in
the installed cost as a function of a bare equipment cost.
Plant capacity is accounted twice :
for each equipment, the base cost is related to capacity
multiplying factors are also capacity dependent
Correction factors affect the bare equipment cost to account for :
different materials
equipment type or geometry
high pressure or temperature
Indirect costs are evaluated by multiplying the direct costs by appropriate
factors :
transportation, taxes, insurances (normally location dependent)
indirect field expenses = (equipment+manpower)
* (size factor) * (manpower/equipment factor)
engineering fee = (equipment+manpower) * (type factor)
* (size factor) * (manpower/equipment factor)
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Chauvc!-GuthrIc's mcthnd (2)
Evaluate main base cost P
B
:
from charts
no material or structural correction
Evaluate actual cost P
R
:
with all corrections for material type or complexity
Estimate factors from tables :
f
1
= secondary equipment cost / main base cost
f
2
= piping and valves / main base cost; may be corrected for material
type as follows : f'
2
= f
2
(1+ ( P
R
- P
B
) / P
B
)
f
3
= erection / main base cost
f
4
= indirect field expenses / main base cost
Correct costs for the project size (use f
5
, next chart)
Battery limit cost :
P
R
+ f
5
(P
B
f
5
+ P
B
f
3
+ P
B
f
4
)
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Cnst cnrrcctInn fnr prnjcct sIzc
f5
P
R
(MECU 94)
0,9
1
1,1
1,2
0 1 2 3 4
air cooler
drums
heat
exch.&others
columns,
reactors
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
Off sItcs
Sometimes neglected from evaluation or rough evaluation
when precison needed is low
when several similar projects must be compared
when the plant is located in a large industrial site
Usually estimated as a percentage of the battery limit investment (30% to
40% in oil refining and petrochemistry)
Utilities (steam, electricity, compressed air, refrigeration)
may be shared by several plants
use estimation charts
cost of distribution network : site dependent
Storage
2-3 months production in refinaries
4-8 days in petrochemical plants
Introduction to Process Engineering Economics
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G. Heyen
Tempus:JEP:Part 1
App!IcatInn : mcthann! rccnvcry p!ant
Gas blower
Pump
30 C, Air
+ 3.3 wt %
MeOH
Water
Air exhaust
Methanol
absorption
column
Surge
tank
Pump Pump
Pump
55 C
30 C
Water
88C
Methanol
distillation
column
Column
feed preheater
105 C
Steam
Methanol
condenser
Cooling
water
Cooling
water
Reflux drum
Recovered
Methanol
38 C
Product
cooler
1
2
3
4
5
6
7
8
9
10 11
12
13