Capital Cost Estimates

An estimate is prepared to
• Select a business opportunity from alternative proposals
• Select a process design from number of alternatives
• Prepare feasibility studies
• Appropriate funds for construction
• Present and select engineering bids
• Facilitate cost control of a project during implementation
Capital Cost Estimate Classifications
Estimate Type Accuracey Data Diagrams Notes

Order of + 40%, - 20% Existing plants Compare

Magnitude several
process
Study (Major + 30%, - 20% Roughly sized PFD
alternatives
equipment, major equipment
Factored) Generalized
charts cost
Preliminary + 25%, - 15% major equip. + PFD Compare the
Design (scope) piping + instr. + most
Elec. + util. profitable
Definitive + 15%, - 7% Prelim specs for all PFD + options
equipment, utilities, preliminary
inst+elec+off site P&ID
Detailed (firm or + 6%, - 4% Complete For the most
contractor engineering profitable
Few terminnologies
• FOB: Free on Board: purchased cost of the equipment , does not
include transportation cost, purchaser pay the transportation cost
• Delivered Cost: depends on weight, size ,distance and method of
transportation. 10% of the purchased cost is recommended
• Installed Cost: purchased, delivered, unloaded and placed on the
foundation on the site but does not include piping, electrical ,
insulation cost. Also called set in place cost. Varies between 20-90%
of the purchased cost depending on the type of equipment.
For example: HEs : 30-60% of the purchase cost
• Grass roots or green field: refers to a completely new facility in
which we start the construction on essentially undeveloped land. It
means the entire facility is estimated starting from site preparation,
storage, utilities, service facilities, docks etc.
• Battery limited : it is assumed that all raw materials, utilities , services
etc are available. It refers to the cost of making small to moderate
expansions or alterations to an existing facility.
 Equipment Purchase
Price X

“Off Sites”
Equipment
“Off Sites” Cost Factor

Direct Field Labour (DFL) Direct Field Cost (DFC)

0.25 x DFC

0.25 x
Indirect Field Cost (IFC)

DFC
1.0 to 1.6 x DFL

Rail Car Loading Cooling

Home Office Engineering
Tower
1.18 x
Allowances Total Project Cost (ITC)

Rail Spurs
Fire Water
Sys
Steam
Boilers
Pipe Racks

Inside
Battery Limits
Nitrogen
Plant

Office Bldg
Effect of capacity on purchased equipment
cost
n
Ca  Aa 
  (5.1)
Cb  Ab  Cost Exponent

Cost Equipment Cost

Attribute - Size

Ca  KAa n (5.2)

Cb
where K
Ab n
Effect of Capacity on Purchased Equipment Cost
Effect of Capacity on Purchased Equipment Cost
Ca  K Aan
where
K  Cb Abn
 n = 0.4 – 0.8 Typically
 Often n ~ 0.6 and we refer to Eq.(5.1) as the
(6/10)’s Rule
 Assume all equipment have n = 0.6 in a
process unit and scale-up using this method
for whole processes
 Order-of-Magnitude estimate
Economy of Scale
Example:
Use the six-tenths-rule to estimate the % increase in purchased
cost when the capacity of a piece of equipment is doubled.
Using Equation 5.1 with n = 0.6:

Ca./Cb = (2/1)0.6 = 1.52

% increase = (1.52 -1.00)/1.00)(100) = 52%

The larger the equipment, the lower the cost of equipment per
unit of capacity.
Example
Compare the error for the scale-up of a heat exchanger by a
factor of 5 using the six-tenth- rule in place of the cost exponent
given in Table 5.3.

Using Equation 5.1:

Cost ratio using six-tenth-rule (i.e. n = 0.60) = 5.00.6 = 2.63
Cost ratio using (n =0.59) from Table 5.3 = 5.00.59 = 2.58
% Error = (2.63 -2.58)/2.58)(100) = 1.9 %
Effect of time on cost estimates
COST INDEXES
 I2 
C2  C1 
 I1 
 C = Cost
 I = Value of cost index
 1,2 = Represents points in time at which
costs required or known and index values
known
Chemical Engineering Plant Cost Index
• Was established in the early 1960’s using a base period of 1957-59 as
100
• The index is intended for use in escalating the process plant
construction costs and is designed to reflect trends in chemical
process equipment costs
• Is updated monthly and is found in Chemical Engineering under
Economic Indicators
 The Basis for the Chemical Engineering Plant Cost Index

Components of Index Weighting of Component (%)

Equipment, Machinery and Supports:

37
(a) Fabricated Equipment
14
(b) Process Machinery
20
(c) Pipe, Valves, and Fittings
7
(d) Process Instruments and Controls
7
(e) Pumps and Compressors
5
(f) Electrical Equipment and Materials
10
(g) Structural Supports, Insulation, and
100 61% of total
Paint
Erection and Installation Labor 22

Buildings, Materials, and Labor 7

Engineering and Supervision 10

Total 100
M&S Cost Indes
• Marshall and Swift Cost Index
• Established in the base year, 1926 with a value of 100
• Reported as a composite of two major components
- a process industry equipment average
- All industry equipment average
• The process industry equipment average is based upon selected
process industries
M&S Index

Cement 2%
Chemicals 48%
Clay products 2%
Glass 3%
Paint 5%
Paper 10%
Petroleum Products 22%
rubber 8%
M&S Index
• Tracks equipment installed costs
• The all industry average is a simple arithmetic average of individual
indexes for 47 different types of industrial, commercial and housing
equipment
Nelson – Farrar Indexes
• Originally known as Nelson Refinery Construction Indexes
• Published in the Oil and Gas Journal each month
• Established in 1946 with a value of 100 and are heavily weighted
towards petroleum industry
Effect of Time on Purchased Equipment Cost
 Effect of Time on Purchased Equipment Cost

he purchased cost of a heat exchanger of 500 m2 area in 1990 was $25,000.

a. Estimate the cost of the same heat exchanger in 2001 using the two indices
introduced above.
b. Compare the results.

1990 2001
Marshal and Swift Index 915 1094
Chemical Engineering Plant Cost Index 358 397
a. Marshal and Swift: Cost = ($25,000)(1094/915) = $29,891
Chemical Engineering: Cost = ($25,000)(397/358) = $27,723
b. Average Difference: ($29,891 -27,723)/($29,891 + 27,723)/2)(100) = 7.5%
Marshal & Swift and CEPCI
The capital cost of a 30,000 metric ton/year isopropanol plant in
1986 was estimated to be $7 million. Estimate the capital cost of a
new plant with a production rate of 50,000 metric tons/year in 2001.

Cost in 2001 = (Cost in 1986)(Capacity Correction) (Time

Correction)
= ($7,000,000)(50,000/30,000)^0.6(397/318)
=($7,000,000)(1.359)(1.248) = $11,870,000
Lang Factor
n
CTM  FLang  C pi
i 1

Total Module Cost Purchased Cost of Major Equipment

From Preliminary PFD
(Pumps, Compressors, vessels, etc.)
Chemical Plant Type Lang Factor Flang
Fluid Processing Plant 4.74

Solid-Fluid Processing Plant 3.63

Solid Processing Plant 3.10

Lang Factor

Determine the capital cost for a major expansion to a fluid processing

plant that has a total purchased equipment cost of $6,800,000.

Capital Costs = ($6,800,000)(4.74) = $32,232,000

Lang factor is used for major expansion and not a completely new
plant
Guthrie Method / Module Method
(Definitive)
• Direct, Indirect, Contingency and Fees are expressed as functions (multipliers)
of purchased equipment cost at base conditions (1 bar and CS)
• Each equipment type has different multipliers
• Depends on specific equipment type, specific system pressure and specific
material of construction
 CBM  C p FBM
o Bare Module Factor
(sum of all multipliers)

Bare Module Purchased Equipment Cost for CS

Cost and 1 atm pressure

FBM = B1 + B2FpFM
o
FBM  B1  B2

Fp = pressure factor (= 1 for 1 bar)

FM = material of construction factor (=1 for CS)
Bare Module Cost

F  1  M 1  L  FIT  LO  E 

0
BM
Example 5.9
The purchased cost for a carbon steel heat exchanger operating
at ambient pressure is $10,000. For a heat exchanger module
given the following cost information:
Item % of Purchased Equipment Cost
Equipment 100.0
Materials 71.4
Labor 63.0
Freight 8.0
Overhead 63.4
Engineering 23.3
Using the information given above, determine the equivalent cost
multipliers given in Table 5.8 and the following:
0
a. Bare module cost factor, FBM
b. Bare module cost, C BM0
Item % of Purchased Cost Multiplier Value of Multiplier
Equipment Cost
Equipment 100.0 1.0
Materials 71.4 M 0.714
Labor 63.0 L 0.63/(1+0.714)=
0.368
Freight 8.0  FIT 0.08/(1+0.714)=
0.047
Overhead 63.4 0.634/0.368/
O
(1+0.714)= 1.005
Engineering 23.3 E 0.233/(1+0.714) =
0.136

a.:
0
FBM = (1 + 0.368 + 0.047 + (1.005)(0.368) + 0.136)(1 + 0.714) = 3.291
b. From Equation 5.6:
0
C BM = (3.291)($10,000) = $32,910
Determine Equipment Cost
• Find the bare module cost of a floating head shell and tube heat
exchanger with a heat transfer area of 100 m2 at the end of 2011. The
operating pressure of the equipment is 1 bar, with both shell and
tube sides constructed of carbon steel.
Log10 Cpo = 4.836 -0.8509*log10 (100)+0.3187* (log10 100)2

Cpo = $25,644
Pressure factor

Fp =1
Material factor
 Material
Factor

Fm=1
 FBM = B1 +B2*Fp*Fm
= 1.63 + 1.66
=3.29
CBM = FBM *Cp0 = 3.29*25,644

= 84,368$

This is 2001 cost, need to calculate the 2011 cost by using CEPCI
Cp = 84,368* (CEPCI,2011)/CEPCI,2001 = 84368* 582/394=$124,625
The operating pressure of the equipment is 100 barg on both shell and
tube sides, and the MOC of the shell and tubes is stainless steel.
Calculate the bare module cost of the floating head heat exchanger
with heat transfer area of 100 m2 .

B1 , B2 and Cpo will remain same.

Fp and Fm will change

FP = 1.383
Material factor
 Material
Factor

Fm= 2.75
 FBM = B1 +B2*Fp*Fm
= 1.63 + 1.66 *1.383*2.75
=7.94
CBM = FBM *Cp0 = 7.94*25,644

= 203,700$

This is 2001 cost, need to calculate the 2011 cost by using CEPCI
Cp = 203,700* (CEPCI,2011)/CEPCI,2001
= 203,700* 582/394=$300,897
 Pressure Factor for vessels
Pressure Factor, FP ,

(𝑃 + 1)𝐷
+ 𝐶𝐴
2 𝑆𝐸 − 0.6(𝑃 + 1)
𝐹𝑃,𝑣𝑒𝑠𝑠𝑒𝑙 = 𝑓𝑜𝑟 𝑡𝑣𝑒𝑠𝑠𝑒𝑙 > 𝑡𝑚𝑖𝑛 𝑚)
(0.0063​
0.0063

If FP is less than 1, then FP= 1.0

For P less than -0.5 barg, FP = 1.25

A value of S of 944 bar is taken for CS and Corrosion Allowance of 0.00315 m is assumed.

The accuracy of Fp drops as the operating temperature decreases

 Equipment Parameters (Pressure, MOC, Size, Hp …)

“Base Cost” = Purchase Cost of Equipment

- in Carbon Steel and 0 barg

Bare Module Cost, CBM = Cpo (B1+B2FpFM )

BARE MODULE COST (Directs and Indirects)
- installed equipment in actual materials and actual pressure

Total Module Cost, CTM = 1.18ƩCBM

MODULE COST OF PLANT
- for expansion to an existing Plant -contingency 15%, fees 3%

Grass Roots Cost, CGR = CTM+ 0.5 ƩCoBM

GRASS ROOTS COST OF PLANT
- infrastruction (utilities, off-sites aux. Buildings, product storage,
loading and unloading facilities ...)