PLANT DESIGN AND ECONOMICS (5) Zahra Maghsoud Data Presentation - - PDF document

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PLANT DESIGN AND ECONOMICS

Zahra Maghsoud

(5)

Data Presentation

٢

manufacturer’s plant purchaser’s plant

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METHODS FOR ESTIMATION OF FIXED CAPITAL INVESTMENT

٣

Order of magnitude

Turnover Ratio Seven- Tenths Rule

Study

Lang Hand Wroth

Preliminery

Chilton Peters and Timmerhaus Holland

Definitive

Hirsch and Glazier Guthrie

Detailed

Richardson Account code

The methods vary from a simple single factor to a detailed method using a code of accounts that involves item-by-item costing.

PROCESS ENGINEERING ECONOMICS, Couper J. R., 2003; Chapter 4

۴

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1-Order-of-Magnitude Estimates

 A project scope is essential before preparing an estimate

irrespective of the quality of the estimate.

 At best the accuracy range for these estimates may vary from

±30% to 50%.

۵

1-Order-of-Magnitude Estimates

۶

• 1. Turnover Ratio

 This is a rapid, simple method for estimating the fixed capital

investment but is one of the most inaccurate. The turnover ratio is defined as:

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1-Order-of-Magnitude Estimates

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• 1. Turnover Ratio

 The annual gross sales figure is the product of the annual

production rate and the selling price per unit of production.

 A basic assumption is that all product made is sold. For a large

number of chemical processes operating near ambient conditions, the turnover ratio is near 1.0.

 These ratios may vary from 0.2 to 5.0. Values less than 1.0 are

for large volume, capital-intensive industries and those greater than 1.0 are for processes with a small number of equipment items.

 A list of turnover ratios is found in Table 4.6.

٨

 Example 1. Estimate the fixed

capital investment for a 1500 ton/day ammonia plant using the turnover ratio. The current gross selling price of ammonia is $150/ton. The plant will operate at a 95% stream time.

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1-Order-of-Magnitude Estimates

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• 2. Seven-Tenths Rule

 It has been found that cost-capacity data for process plants

may be correlated using a logarithmic plot similar to the 0.6 rule.

 Remer and Chai have compiled exponents for a variety of

processes and most are between 0.6 and 0.8. The use of an average value 0.7 is the name of this method. Table 4.8 contain appropriate data. The equation is

1-Order-of-Magnitude Estimates

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• 2. Seven-Tenths Rule

 A company is considering the manufacture of ethylene oxide as an

intermediate for its polymer division. The process to be used is the direct

• xidation of ethylene. The company built a similar unit in 1997 that had a

rated capacity of 100,000 tons annually for $66,000,000. The projected production of the new facility is to be 150,000 tons annually. Estimate the fixed capital investment in late 2001 dollars to produce the required ethylene

• xide.

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METHODS FOR ESTIMATION OF FIXED CAPITAL INVESTMENT

١١

Order of magnitude

Turnover Ratio Seven- Tenths Rule

Study

Lang Hand Wroth

Preliminery

Chilton Peters and Timmerhaus Holland

Definitive

Hirsch and Glazier Guthrie

Detailed

Richardson Account code

PROCESS ENGINEERING ECONOMICS, Couper J. R., 2003; Chapter 4

2- Study Estimates

١٢

1- Lang Method

 Lang developed a method for obtaining quick estimates of

the capital investment based upon information gathered on 14 processing plants of various sizes and types.

 He recommended that the delivered equipment cost be

multiplied by a factor based upon the type of processing plant to obtain the fixed capital investment.

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2- Study Estimates

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 1- Lang Method  These factors include process equipment, instrumentation

and automatic control equipment, piping, insulation, electrical, engineering costs, etc., but do not include a contingency factor.

 The factors are found in Table 4.9.

2- Study Estimates

١۴

1- Lang Method

 A small fluid processing plant is considered for construction adjacent to a

larger operating unit at a large plant site. The present delivered equipment costs are as follows:

 Estimate the fixed capital investment, assuming a 15% contingency factor.

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2- Study Estimates 1- Lang Method

١۵

2- Study Estimates

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2-Hand Method

 The Hand method is a refinement of the Lang method for

quick estimates.

 Hand recommended that equipment be grouped by type,

such as heat exchangers, pumps, compressors, with an appropriate factor applied to each type for installation.

 The categories and factors are included in Table 4.10.

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2- Study Estimates

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2-Hand Method

 The justification for different factors is that not

all equipment requires the same amount of foundations, piping, electrical, insulation, etc. for installation.

 The Hand method does not include a

contingency factor, so the user should apply an appropriate figure.

2- Study Estimates

١٨

3-Wroth Method

 A more detailed list of equipment installation factors was

compiled by Wroth.

 The Lang and Hand methods start with delivered equipment

costs, but the Wroth method begins with purchased costs so delivery charges must included.

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2- Study Estimates

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3-Wroth Method

2- Study Estimates

3-Wroth Method

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 Solve previous Example for the battery-limits fixed capital

investment using the Wroth method. Assume that the delivery charges are 5% of the purchased equipment cost. A 15% contingency factor is to be used.

 Since the Wroth method begins using purchased equipment

costs, the delivered equipment costs will have to be converted.

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2- Study Estimates

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 The results of the three methods are:  The Lang method, in general, has a tendency to produce high

figures.

 Whatever figure is reported to management, there should be

a statement about the potential accuracy of these study methods, ± 30%

METHODS FOR ESTIMATION OF FIXED CAPITAL INVESTMENT

٢٢

Order of magnitude

Turnover Ratio Seven- Tenths Rule

Study

Lang Hand Wroth

Preliminery

Chilton Peters and Timmerhaus Holland

Definitive

Hirsch and Glazier Guthrie

Detailed

Richardson Account code

PROCESS ENGINEERING ECONOMICS, Couper J. R., 2003; Chapter 4

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3- Preliminary Estimates

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1- Chilton Method

 Chilton used multiple factors to obtain a battery-limits fixed

capital investment. The method is an extension of previously discussed factored methods.

 Chilton developed this method years ago based upon long

experience in chemical process plants. For many years, this was the only method reported in the open literature and as a result became popular.

٢۴

1- Chilton Method

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3- Preliminary Estimates

1- Chilton Method

٢۵

 A small fluid processing plant is to be built at an existing plant site.

The delivered equipment costs are:

 The equipment is to be installed in an outdoor structure. The

process is heavily instrumented, and auxiliary services and outside lines are minimal. The process is well defined and is based upon a similar unit built at another company location. Estimate the battery-limits fixed capital investment using the Chilton method.

٢۶

Chilton Method

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3- Preliminary Estimates

٢٧

 2- Peters and Timmerhaus Method  This method begins with purchased equipment costs

delivered and combines some of the features of the Lang and Chilton methods.

 A process is classified according to whether it is a solid, solid–

fluid, or fluid processing plant like the Lang method, and then 12 factors for direct and indirect costs are applied is in the Chilton method.

3- Preliminary Estimates

٢٨

 2- Peters and Timmerhaus Method

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2- Peters and TimmerhausMethod (Example)

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3- Preliminary Estimates

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 3-Holland Method  Holland et al. proposed a method that combine features of

the Lang, Chilton, and Peters and Timmerhaus methods.

 In Table 4.16 equipment installation factors are presented

depending upon the type of processing plant beginning with delivered equipment costs.

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3- Preliminary Estimates

٣١

 3-Holland Method

METHODS FOR ESTIMATION OF FIXED CAPITAL INVESTMENT

٣٢

Order of magnitude

Turnover Ratio Seven- Tenths Rule

Study

Lang Hand Wroth

Preliminery

Chilton Peters and Timmerhaus Holland

Definitive

Hirsch and Glazier Guthrie

Detailed

Richardson Account code

PROCESS ENGINEERING ECONOMICS, Couper J. R., 2003; Chapter 4

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4- Definitive Methods

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 The methods mentioned in this section can produce

accuracies from -10% to +20%, depending upon the quality of the data available.

 A detailed scope is essential in order to provide product

capacity, location, utility and service requirements, building requirements for process storage, and handling.

 Process flowsheets, material and energy balances, site

information, piping and instrumentation diagrams, utility requirements, equipment and instrumentation and electrical specifications, should be firm.

4- Definitive Methods

٣۴

 1- Hirsch and Glazier Method  The authors of this method reported costs of some 42

refining, petrochemical, and synthetic fuel plants.

 They developed algorithms and auxiliary plots consisting of a

series of installation factors that permit the user to obtain a fixed capital investment cost with accuracies near the upper limit of those in the definitive estimate range.

 The procedure is structured to begin with purchased

equipment cost. The factors and algorithms are found in Table 4.18.

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 1- Hirsch

and Glazier Method 2-Guthrie Method

 The equation for the total capital investment by the Guthrie method

is:

CTCI = C TPI + C WC = 1.18( C TBM + C site + C buildings + C offsite facilities) + C WC

 This equation does not account for royalties or plant startup. The

factor, 1.18 covers a contingency of 15% and a contractor fee of 3%.

 The working capital can be estimated at 15% of the total capital

investment.

4- Definitive Methods

Product and Process Design Principles, W. D. Seider, J. D. Seader, D. R. Lewin, Wiley, 2003.

٣۶

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٠١/٣٠/١۴٣٧ ١٩ 2-Guthrie Method

 The total bare-module cost, CTBM, refers to the summation of

bare-module costs for all items of process equipment, including fabricated equipment, process machinery, spares, storage tanks, and surge tanks. The initial charge of catalyst is included with the corresponding catalytic reactor cost.

 The bare-module cost is based on the f.o.b. equipment

purchase cost, to which is factored in direct field materials and labor, and indirect expenses such as freight, insurance, taxes, overhead, and engineering.

WC

C

) +

facilities

• ffsite

C

+

buildings

C

+

site

C

+

TBM

C

( 1.18 =

WC

C

+

TPI

C

=

TCI

C

٣٧

 For site development costs, C site, a value of 10-20% of C TBM

may be assigned for a grass-roots plant and 4-6% for an addition to an integrated complex.

 In the Guthrie method, buildings include process buildings

and non-process buildings. If the equipment is housed, the cost of process buildings may be estimated at 10% of C TBM.

 If a grassroots plant is being considered, the non-process

buildings may be estimated at 20% of C TBM . If the process is to be an addition to an integrated complex, the non-process buildings may be estimated at 5% of C TBM.

2-Guthrie Method

WC

C

) +

facilities

• ffsite

C

+

buildings

C

+

site

C

+

TBM

C

( 1.18 =

WC

C

+

TPI

C

=

TCI

C

٣٨

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 Offsite facilities include utility plants, when the company

provides its own utilities, pollution control, ponds, waste treatment, and receiving and shipping facilities.

 The utility plants may be estimated with the help of Table 16.12.

To this may be added 5% of CTBM to cover other facilities.

Cost data:1995

2-Guthrie Method

WC

C

) +

facilities

• ffsite

C

+

buildings

C

+

site

C

+

TBM

C

( 1.18 =

WC

C

+

TPI

C

=

TCI

C

٣٩

 The Guthrie method proceeds by steps as follows:  Step 1: From the process design, prepare an equipment list,

giving the equipment title, label, size, material of construction, design temperature, and design pressure.

 Step 2: Using the data in Step 1 with f.o.b. equipment

purchase cost data, add to the equipment list the cost, CPb, and the corresponding cost index, lb, of the cost data.

 In the Guthrie method, the f.o.b. purchase cost is a base cost

corresponding to a near-ambient design pressure, carbon steel as the material of construction, and a base design.

2-Guthrie Method

۴٠

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 Step 3: Update the cost data to the current cost index. For

each piece of equipment, determine the bare-module cost, using bare-module factors, FBM, from Table 16.11, As discussed earlier, the bare module cost accounts for delivery, insurance, taxes, and direct materials and labor for installation.

2-Guthrie Method

۴١

 Step 4: Obtain the total bare-module cost, CTBM, by summing

the bare-module costs of the process equipment.

 Step 5: Estimate the total permanent investment (fixed

capital). Add to this an estimate of the working capital to

• btain the total capital investment.

2-Guthrie Method

WC

C ) +

facilities

• ffsite

C +

buildings

C +

site

C +

TBM

C ( 1.18 =

WC

C +

TPI

C =

TCI

C

۴٢

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2-Guthrie Method

۴٣

 The f.o.b purchased cost is estimated as follows:

2-Guthrie Method

Product and Process Design Principles, W. D. Seider, J. D. Seader, D. R. Lewin, Wiley, 2003. pp 505-557

۴۴

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2-Guthrie Method

۴۵ ۴۶  The base f.o.b. purchase cost for a fabricated vertical pressure vessel, 6 ft

in inside diameter and 100 ft in height made of carbon steel for a design pressure of not greater than 50 psig is given as $102,000 as of 1995 (CE index = 381). Calculate the bare-module cost for the year 2000 (CE index = 394) if the vessel is made of 316 clad stainless steel for a design pressure

• f 200 psig. For these conditions, Guthrie (1974) gives FBM = 4.16, Fd = 1,

Fp = 1.55, Fm = 2.60.

2-Guthrie Method

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METHODS FOR ESTIMATION OF FIXED CAPITAL INVESTMENT

۴٧

Order of magnitude

Turnover Ratio Seven- Tenths Rule

Study

Lang Hand Wroth

Preliminery

Chilton Peters and Timmerhaus Holland

Definitive

Hirsch and Glazier Guthrie

Detailed

Richardson Account code

PROCESS ENGINEERING ECONOMICS, Couper J. R., 2003; Chapter 4

5-Detailed Estimates

۴٨

 Detailed estimating procedures should yield an accuracy of

±5% to 10%.

 1- Richardson Rapid Estimating Method  Developed by Richardson Engineering Services Inc, the

system is presented in seven volumes. The process equipment volume is of interest to chemical engineers.

 By following the instructions in the manuals, a detailed

estimate can be prepared. Preparing an estimate using this method takes time and the detail required is considerable.

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5-Detailed Estimates

۴٩

5-Detailed Estimates

۵٠

2- Code of Accounts Method

 Companies have a codified system called “code of accounts.”

This code is essentially a listing of all the elements in a detailed estimate so that no pertinent items have been

• mitted

 Experienced personnel are required to prepare this quality

estimate.

 The code is used to note only estimate costs, but later when

the plant is being built it is used to control costs.

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