estimation method. ISBL (Inside Battery Limits) plant costs are the cost of procuring and installing all process equipment. Uttt B.`5. T#gV@!t1*5maRqQSeJ``P6 Cr1`` There are also other indices for building the plants offsite. Capital Cost Estimation Dr. M. Subramanian Associate Professor . Sadara Chemical Company is planning full-scale production in mid-2016 (Fletcher). 0000000876 00000 n This helps. As stated, the debt ratio is a comparison of the total debt and total assets of the company. Jun 01, 2014Many engineering design projects are developed to provide sizing information from which estimates of capital and operating costs can be made. More importantly, these measures also give insight into the health of the company beyond common metrics of revenue and costs. Preliminary Estimate. pZm};*t|6sxn]w&c~M9 z 1/Fy@+Rnt`tsf ZA.=jh;Rq0K!-",qR /n*:DK!/q0pC&s")8@ pF9a}'|qxp~UpIf7~F[ Order of Magnitude. This page has been accessed 191,788 times. This cost depends largely on the size of the parent company, and whether or not it has in-house capability to do detailed design of the many different processes and equipment within a chemical plant. Aspen's Economic Evaluation Product Family builds off of its original ICARUS technology. With this method, the design activity is progressed between 0-2 percent. A process that appears viable but has 50% error associated with capital costs, may quickly become undesirable as the project evolves. The data and information within the software has been obtained from a wide variety of literature sources. Then in 2013, Dow Chemical and Saudi Aramco contributed about 17 billion USD total. Correlations for constants can be found in Towler's Chemical Engineering Design (Towler and Sinnott, 2013). In these cases, OSBL will be as low as 20% of the ISLB. This was the debt financing aspect of the project financing. Estimate including allowances, but excluding escalation, currency risk, contingency and management reserves. In this post I want to share classification of capital cost estimation. Ultimately, a definitive or detailed estimate for plant construction and budget control will be prepared. There is . chemical-engineering-plant-cost-index 1/3 Downloaded from odl.it.utsa.edu on November 7, 2022 by guest Chemical Engineering Plant Cost Index . Capital cost estimates are required in the early business planning and feasibility assessment stages of a project, in order to evaluate viability and to compare the economics of the alternative processes and operating conditions that are under consideration for the plant. The total cost is determined by multiplying the total purchased cost for all the major items of equipment by a constant. 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The term, or duration of the bond, was 15.75 years. Depending on the size of the project and the amount contracted to the outside, engineering costs may include 30% of the ISBL and up to all of the OSBL, or only 10% of the ISBL. IxaIUy!=z9RDqn"3 The course will be useful to chemical or mechanical engineers who wish to work as scheduling and cost estimation engineer executing EPC of process plants. It is important to differentiate it with costs of outflows during design and construction. This cost includes design, site remediation, purchasing process equipment, developing infrastructure, and contingency charges, and includes the raw material costs as well as labor. These facilities and pieces of equipment are not directly affiliated with the process but are critical costs associated with constructing any work site, and are filed under OSBL cost. Definitive Estimates. This is done by using the factorial method. The accuracy of this type of estimate will depend on: Enter your email address to subscribe to this blog and receive notifications of new posts by email. One of the most important aspects of determining the overall economic viability of a chemical process is determining the capital cost. 78 29 Many engineering design projects are developed to provide sizing information from which estimates of capital and operating costs can be made. For this reason, the cost associated with process equipment is not as straightforward as the sticker price. startxref Detailed Estimates. Especially in cases involving handling solids, OSBL costs can be as high as 100% of the ISBL cost. Justus von Liebig - Wikipedia Virtually all cost estimation is performed according to one or some combination of the following basic approaches: Production function. Preparation for Plant Design Job, is your chance to uncover the truth about chemical process engineering and plant design jobs. During feasibility study, Pre-FEED study, or during FEED (Front-End Engineering Design), capital cost estimation is always created. The purpose of this thesis is to improve the 'art' of early capital cost estimation of chemical process plants. It is important and relatively straightforward to obtain an estimate for the ISBL of the plant, and as other costs are often estimated based on the result of the ISBL, it is critical that this value is as accurate as possible. The following terminology is associated with cost estimates and risk. Boston: Elsevier; 2013. p. 307354. 106 0 obj <>stream : MILBANK TWEED HADLEY & MCCLOY LLP, Sept. 2013. Another important measure is the cost of equity. A composite index for the United States process plant industry is published in the journal Chemical Engineering. 0000006410 00000 n Plant Design and Economics for Chemical Engineers. (510%) Final estimation based on completed design. Contents 1 Calculations methods 2 Using a cost index 3 Cost indexes in engineering 4 Cost Indexes for different locations Fuel Value Calculator giving net heating value for natural gas, propane, wood, fuel oil, coal, switchgrass, shelled corn and electricity. What can I do to convert dolars to Rs? Lang factor is 3.1 for solid processing plant and 4.74 for fluids processing plant. New York: McGraw-Hill; 2002. Home; About; News; Products; Services; . It is required to provide project analysis and evaluation, to select among alternative designs, to plan the appropriation of funds and to. Because of the abundance of chemical engineering plants in the U.S Gulf Coast, it is often the standard for plant and equipment cost. To get the best estimate, each job should be broken down into its components and separate indices should be used for labor and materials. In addition, for companies that have recently been started, many of these quantitative measures may be skewed because of the heavy investment on research and growth. Chemical plants are built to make a profit, and. 0000004489 00000 n As mentioned above, OSBL costs are usually estimated as a percentage of ISBL costs until detailed site information and site layout are available for design. For this reason, a number of tools have been developed to produce capital cost estimates at relatively early phases of plant construction including order of magnitude estimates, cost curve calculations, and more detailed costing of designed process equipment and other ancillary buildings and equipment. Towler gives the following equation to estimate the new design cost based on values which can be found in Towler and Sinnott (2013) Table 7.1: S = size parameters, based on existing plants. 5th ed. Several computer tools by Aspen Tech are available for estimating capital costs. Capital cost estimation for chemical plant. Research indicates that a combined cycle power plant with a capacity of 620 MW with the same technology had construction completed in 2011 in the same regional area. Order of Magnitude estimate. Because of the magnitude of costs associated with the start-up and maintenance of a chemical plant, there are often different project financing methods required to cover the capital needs. OSBL (Outside Battery Limits) Plant Costs, Example of Project Financing: Sadara Integrated Chemicals Project, Accuracy and purpose of Capital Cost Estimates, Estimating Installed Costs: The Factorial Method, http://www.icoste.org/Book_Reviews/CFM-Info.pdf, https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&oldid=4573. : Butterworths Journal of International Banking and Financial Law, Mar. Production cost (OPEX) estimation of a chemical process plant To estimate the production costs of the chemical process plant, these are the preliminary estimated data. Equipment, machinery Engineering and supervision supports 61% 10% Installation labor 22% Buildings . Usually, specialized suppliers install the entire utilities system, or the entire fencing system, or provide the entire firefighting service, so many of the components of OSBL capital costs are simply negotiated with contractors. Installation factors are usually based on a specific material for its equipment, usually carbon steel. This value is an interest rate that is the effective rate at which all of the capital is raised. 0000033753 00000 n GENERAL PROCESS PLANT COST ESTIMATING, Kolmetz Handbook of Process . Web. Once costs are determined, if one could instantaneously construct the plant, then there would be no need for contingency charges. Pressure vessels are costed exactly according to ASME Boiler and Pressure Vessel Code Section VIII Division 1. However, private companies can still sell stocks. In detailed factorial estimates, other direct costs are compounded into the Lang factor. GENERAL PROCESS PLANT COST ESTIMATING (ENGINEERING DESIGN GUIDELINE) Co Author: Reni Mutiara Sari Author / Editor Karl Kolmetz TABLE OF CONTENTS INTRODUCTION 5 Scope 5 . ISBL is often defined as the "inner" cost of the plant, in that it is the cost associated with building the plant itself, from unloading the raw materials to shipping final products. Operating cost estimation. trailer where is the cost of capital, is the debt ratio, is the interest at which bonds are issued, and is the cost of equity. The values above should be used as a guide only. The working capital turnover is a metric that is used to determine how efficiently the working capital is managed. By leaving many aspects of the plant unspecified, the error grows dramatically. "Dow Chemical Co. (DOW) Short-term (Operating) Activity Analysis." Cost curves can be used as preliminary estimation of equipment costs if updated cost data is not available. This article is Part II of a two-part series on capital cost estimation. In academia, operating costs (opex) are usually estimated as a percentage of capital costs, often a nominal ten percent. This measure is the expected return for any given cost in a company. Two of the companies that corroborated in this financing project were Dow Chemical and Saudi Aramco. LT$/T`I9wWJGGzg-,OG ?_RfsD}J@R Rather than having the plant engineer do these designs anyway, a contractor is usually hired to do this design. This is the simplest method of estimation and only needs data on plant capacity and cost in a. Spreadsheets are useful tools for this purpose, and, once created, can be appended to cost worksheets for easy retrieval. 0000011469 00000 n Chemical plants are built to make a profit, and an . and Plant Design Challenge Link . Costdataonline.com. Based on my experience, in almost every stage of project, capital cost estimation is always part of document deliverable. At the time, Dow Chemical Co. had annual sales of over 57 billion USD and produced over 5000 products in varying sectors. Many of the steps involved in designing detailed equipment or structures onsite fall outside the scope of chemical process design. Simply stated: The objective for any plant is to maximize the working capital turnover. A company could release short term bonds in order to make the stream of revenue more consistent. Equity financing involves the issuing of common stock. This course attempts to give a guided path and method to the cost estimation engineer to define the scope of work , estimate the man-hour cost and submit the bid in a reliable approach.. Knowledge of major pieces of equipment Accuracy: 30% 3. Sadara Chemical Company provides an insight into real world project financing. The cost used in this calculation is usually the stock price of the company. Process Eng. Both give capital in order to obtain equity in the company. If the process of design and construction of a piece of equipment is known, then it is preferred by professional cost estimators to estimate total cost based on the cost of materials, labor, and manufacturer profit. This should be kept in mind when utilizing cost estimates to perform economic analysis of the chemical process. Others include power. <]>> It is good practice to include design factors for safety throughout the process. . It is also different from the costs of feedstocks and utilities that are paid during normal operations of the plant. However, most companies utilize a combination of these two methods to successfully finance a project. general-process-plant-cost-estimating-engineering 1/7 Downloaded from ads.independent.com on November 4, 2022 . (30%) Based on only a few design detail. xb```@# X8v00p80 jq;Wvf=Pi^"X$4ei*Y*>:=q@;GI=/E.d)r%4E"(QFdKkXc!&S@R@/3>lTLch=TB&[ xX.@d!E%`8]WFGAg0r p Once requirements for onsite steam and electricity are determined, more detailed design can be done. N.p. When all of these factors are taken into account, a useful estimate of working capital needed is approximately seven weeks of productions costs minus two weeks of feedstocks costs (Towler). More specifically, chemical companies often do not start full production until 2-3 years after plant construction is completed. sqv/LMYNt`PYATdX/{ [IPR]E@y EFI~uK%a%_8XuGD*l}0D,0#0C2ScSop9vvm~ /huD)dRCX?{BS=RFAjjC3S) l=cjpj>Kw[//s8uC:/Mi7+LM)92mcc In many cases, an estimator must use considerable judgment in preparing the estimates. The probable accuracy is -30% to +50%. Both indices are updated monthly and indices for forty types of equipment are updated quarterly. The multipliers, depending on the type of plant are given . 78 0 obj <> endobj TJ$o,&1LE\sgEG*Fc&~5'8F`j"T*be(Ep5hAyA7|,;ey@{`!TpfJY_vwHu4i*b]:`8AB(ApHDgzr2^q@4 Here is a sample of such a spreadsheet used for a project in India. Analysis, Synthesis and Design of Chemical Processes (Turton) Plant Design and Economics for Chemical Engineers (Peters) The capital costs associated with purchasing, building, and starting up any chemical plant can be estimated with methods discussed in previous and later sections. Equity financing is accomplished through the sale of stock, also known as equity, in the company. Here is a sample of such a spreadsheet used for a project in India. The bonds were sold at an interest rate of 2.95%. Adding these libraries allows use of the costing software for cost estimates. Failure to properly correct installation factors for materials of construction is one of the most common sources of error with the factorial method. The method relates present costs to past costs that are based on statistical digests. There are two ways to accomplish this: increase annual revenues or decrease working capital. There exists a relationship between revenue and working capital because of the aforementioned risk of being unable to address unexpected operations needs. The Total Installed Cost estimate was obtained by multiplying the equipment cost (purchase cost) by appropriate factors. This article by K.M. Risk. This is not recommended for shared computers, Multiphase Slug Length and Volume Calculator. Estimation of cost based on component cost will allow an unbiased estimation of real cost, allowing accurate estimation as well as possible price negotiation. Because of this, an increasing return on equity shows that more profit is being made relative to the amount of equity invested. 0000000016 00000 n Study estimate (factored estimate). If the scope of the project changes, or if the project undergoes "scope creep," it is often easier to add capacity buy purchasing additional utilities from the outside once existing utilities have been constructed. . In construction, the production function may be expressed by the The other extreme is utilizing an existing, underused site with no solids handling requirement, when fabricating a low-volume specialty chemical. The probable accuracy of -25% to +30%. h[Sevvvvv8D8n&CH 5I1Db%0QiDKv=g'|MJ3i4 AE%-V'b9H5{u-Z'o- ? Base estimate. Study Estimate. Capital cost estimates for chemical process plants are usually based on purchase cost estimation for major equipment items. As stated, the debt financing involves the issuing of bonds. 0000002816 00000 n Better estimate can be made when the different factors are used for corresponding equipment. Buyers of the bonds can be either individual investors or banks and others institutional investors. Estimation of production cost and revenue - processdesign Mar 11, 2016Total Manufacturing Cost = RMC + U + L + M + S + D + T = The prices of the construction and the labor are subject to inflation; therefore, a method has to be used to update old cost data. They do not fully represent the true costs for any particular piece of equipment or plant, nor the effect of supply and demand on prices. The Total Installed Cost estimate was obtained by multiplying the equipment cost (purchase cost) by appropriate factors. In total, the sale of these bonds earned about 2 billion USD (Dewar). The Chemical Engineering Plant Cost Index Since its introduction in 1963, the Chemical Engineering Plant Cost Index (CEPCI) has served as an important tool for chemical-process-industry (CPI) professionals when adjusting process plant construction costs from one period to another. The accuracy of the total cost of a project will become more accurate as the project continues. 0000010933 00000 n Any costs associated with developing the plant itself is considered ISBL. The value of inventory, the value of products and by-products, magnitude of accounts payable, magnitude of accounts receivable, process equipment spare parts costs. For the early stages of the design process, it is often necessary to make quick capital cost estimates of total plant cost. Process Eng. Lang proposed capital cost equipment by given equation: C is the total capital cost, F is the installation factor also known as Lang factor, and C_e is the cost of major equipment. Many of these costs have high value, but have a characteristic of being illiquid. Plant Design and Economics for Chemical Engineers. Accuracy and the reliability of the estimate will heavily depend on the availability of the data and the level of the design at the time. 5 Feb. 2016. This type requires data such as preliminary material and energy balances and major equipment items. For example, an expensive reactor in a process may be worth 3 million USD, but it can not be sold quickly for this price in the event 3 million USD is needed. Mergers and takeovers can occur when one company assumes majority ownership of another company. The chemical industry has angel investors and venture capitalists who operate as individuals, and there are groups of individuals with the same interests who pool money in order to have a larger ownership interest. Chemical Week or Hydrocarbon Processing are potential sources. 2014. Sadara Project Sukuk: Heralding a New Era? Equity financing occurs throughout the lifetime of a company. NYSE Stock Exchange Data. Guthrie is entitled "Data and Techniques for Preliminary Capital Cost Estimating". Fletcher, Phillip, et al. The two main methods of project financing are debt and equity financing. In 2013, one of the largest financing projects in the chemicals industry occurred in the petrochemical sector. 262 of 365 - THINGS ABOUT COST ESTIMATION FOR CHEMICAL PROCESS ENGINEERS PEOPLE WILL NOT TEACH YOU Chem. In addition, bonds can have a variety of different payback times and interest rates. 0000025968 00000 n However, in some cases, this may an inadequate pressure vessel design. Both of these should be used as initial estimates, but further analysis of the aforementioned factors will yield a more useful value for working capital. Pahrump: Cost Data On Line, Inc.; c2008- [cited 2015 Feb 26]. In these cases, the design should be manually entered. There are many aspects of plant operation that are considered when making an estimation for how much working capital is needed. After the bond is sold, the company who sold the bond is now in debt to the buyer. When more detail has been acquired, installation factor are more rigorously estimated. Authors: Alex Chandel [2014] , Eric Jiang [2014] , Minwook Kim [2014] , Todor Kukushliev [2014] , William Lassman [2014] , and Watson Fu [2016], Steward: Daniel Garcia, David Chen, and Fengqi You. The working capital is a distinct cost associated with maintaining operations in a plant (Towler). This will correspond to down time for the process and decreased production and decreased revenues. In the aspenONE product suite, the primary capital estimation tool is Aspen Capital Cost Estimator. and Plant Design Challenge Link . A simple example of unique characteristic that affects the size of working capital is the seasonality of a product. An order-of-magnitude cost estimation is needed for a proposed 1,240-megawatt ("MW") combined cycle power plant, as of January 2013.