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Capital Cost Estimate Types •
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1. Order of Magnitude Estimate (Feasibility) (Feasibility) –
+ 40%, 0%, - 20%
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BFD , Process Modification
2. Study Estimate / Major Equipment –
+ 30%, 0%, - 20%
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PFD , Cost Chart
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Capital Cost Estimates Types Types (cont’d) (co nt’d) •
5. Detailed (Firm or Contractors) Estimate –
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+ 6%, - 4% Everything Everything included included – ready to go go to construction construction phase
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Estimate low so actual cost will be high (+)
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Estimate high so actual cost will be low (-)
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Why is + # > - #.?
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The first three types serve as a cost indicator at a very early stage of the project design stage. They are developed with a minimum amount of detailed engineering Meant only as advise to the client or to management as a first look at project cost.
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Cost Curve Estimates •
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The cost curve method of estimating corrects for the major deficiency illustrated above by reflecting the significant effect of size or capacity on cost. These curves indicate that costs of similar process units or plants are related to capacity by an equation of the following form: Plant A cost Plant A capacity x = Plant B cost Plant B capacity
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Major Equipment Factor Estimates •
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Major equipment factor estimates are made by applying multipliers to the costs of all major equipment required for the plant or process facility. Different factors are applicable to different types of equipment, such as pumps, heat exchangers, pressure vessels, etc. Equipment size also has an effec effectt on the factors.
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This method of estimating, if carefully followed, can predict actual costs within 10 to 20%. A shortcut modification of this method uses a single factor for all equipment. A commonly used factor for petroleum refining facilities is 4.5. The accuracy of this shortcut is of course less than when using individual factors.
Estimating the cost of oil and gas
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Using historical costs •
As mentioned previously capital cost estimates estimates of industrial process plants can be made using previously obtained equipment costs of similar size and then can be scaled to reflect current costs using cost curves and •
Adjusting for different sizes
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Adjusting for different time periods
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However, even these types of expedient quotations are time consuming. Sophisticated estimating software are available.
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1. Rule Of Thumb Estimates Estimates •
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Produce only an approximation of the order of magnitude of cost. These are simply a fixed cost per unit of feed or product. Some examples are: –
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Complete coal fired electric power plant: $2,500/kW Complete synthetic ammonia plant: $200,000/TPD Complete petroleum refinery: $25,000/BPD
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The Rule of Six-tenths •
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Approximate costs can be obtained if the cost of a similar item of different different size or capacity is known. A rule of thumb developed over the years known as the rule of six-tenths gives very satisfactory satisfactory results r esults when only an approximate cost within plus or minus 20% is required.
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The “N” “ N” exp e xp on ent •
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An analysis of the cost of individual pieces of equipment shows that the size factor’s exponent will vary from 0.3 to unity, but the average is very near to 0.6, thus the name for the rule of thumb. If a higher degree of sophistication is sought, Table 1 below can be used.
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Using Table 1 size exponents transforms the previously presented formula into,
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Cost Indices •
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Cost indices are useful when basing the approximated approximated cost on other than current prices. If the known cost of a piece p iece of equipment is based on, for instance instance 1998 prices, this cost must be multiplied by the ratio of the present day index to the 1998 base index in order to proportion the value to to present day dollars. dollars.
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The following example illustra i llustrates tes a combined use of both of these ratio and proportion methods to produce an approximate cost. Please note that the costs presented here are purely hypothetical hypothetical and should not be used as a basis for anything other than an illustration. illustration.
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We now have all of the necessary components to approximate the present day cost ( C B ) of a 5,000-gallon vessel.
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We have, two dates, past and of course current; two known capacities (SB and S A ); and one historical cost (C O ) (that of the 2001 purchased vessel).
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The student may be interested to know that the M & S Cost Index’s base is 1926 = 100; this provides an astonishing astonishing indication of the amount of inflation that has taken place.
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Therefore, the 4 th Quarter 2006 cost of the 2,000-gallon capacity vessel is estimated to be $18,565. Now, having determined the current estimated estimated cost of the smaller capacity vessel, we need to adjust this amount to correspond to the larger volume (5,000 gallons).
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Substituting in the equation presented earlier results in,
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Cost Indexes •
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Estimating Estimating Process Process Costs Costs From Existing Operations
No costs remain stable due to inflation and deflation. As a result, in our estimates we must adjust any cost ost relative to some ome basis or index dex.
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Cost Indexes
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Data from Two Cost Indexes
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Cost as a function of capacity for f or centrifuges for inorganic service. These data are for solid bowl, screen bowl, and pusher types
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4. Definitive Estimates •
Definitive cost estimates are the most time consuming and difficult to prepare but are also the most accurate. These estimates require preparation of plot plans, detailed flow sheets and preliminary construction construction drawings. drawings. Scale models are sometimes used. All material and equipment are listed and priced. The number of man hours for each construction activity activity is estimated. Indirect field costs, such as crane rentals, costs of tools, supervision, etc., are also estimated. This type of estimate estimate usually results in an accuracy accuracy of ±5%. –
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Lang Exponent •
The exponent used in scaling the cost for different plant capacities. –
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Promoter calculates the cost of the project facilities from the reference plant by applying the following formula: C = Cb x [Qa/ Qb] Qb] pow pow ( x) where Ca = Cost of the Plant,
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Cb = Base Case Case Cost, Cost,
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Qa = Capacity Capacity of the Plant,
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Qb = Base Case Capacity, Capacity, x = the Lang cost capacity exponent. exponent.
The Lang exponent is usually between 0.6 and 0.7 and can vary from one process to another.
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