ISBL costs also include any associated fees with construction such as permits, insurance, or equipment rental, even if these items are not needed once the plant is operational. This should be kept in mind when utilizing cost estimates to perform economic analysis of the chemical process. Preliminary Estimates. 0000011841 00000 n This is the most useful measure for the economic evaluation of capital needed for projects. I believe that capital cost estimation is more art than science. Equity financing is accomplished through the sale of stock, also known as equity, in the company. 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. Chemical Plants. xb```@# X8v00p80 jq;Wvf=Pi^"X$4ei*Y*>:=q@;GI=/E.d)r%4E"(QFdKkXc!&S@R@/3>lTLch=TB&[ xX.@d!E%`8]WFGAg0r p If the working capital is too high, it can be considered cash that is not gaining interest or value. Plant Design and Economics for Chemical Engineers. Bonds can have a variety of different capital amounts, also known as bond principle. Accuracy and the reliability of the estimate will heavily depend on the availability of the data and the level of the design at the time. They do not fully represent the true costs for any particular piece of equipment or plant, nor the effect of supply and demand on prices. Uttt B.`5. T#gV@!t1*5maRqQSeJ``P6 Cr1`` Because of the abundance of chemical engineering plants in the U.S Gulf Coast, it is often the standard for plant and equipment cost. One of the most important aspects of determining the overall economic viability of a chemical process is determining the capital cost. These facilities and pieces of equipment are not directly affiliated with the process but are critical costs associated with constructing any work site, and are filed under OSBL cost. This article is Part II of a two-part series on capital cost estimation. 0000006410 00000 n LT$/T`I9wWJGGzg-,OG ?_RfsD}J@R In 2013, one of the largest financing projects in the chemicals industry occurred in the petrochemical sector. Rather than having the plant engineer do these designs anyway, a contractor is usually hired to do this design. 78 29 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. 78 0 obj <> endobj endstream endobj 91 0 obj <> endobj 92 0 obj <> endobj 93 0 obj <> endobj 94 0 obj <> endobj 95 0 obj <> endobj 96 0 obj <> endobj 97 0 obj <>stream Ever wonder what really goes into estimating the cost of a world scale chemical production facility? Enter your email address to subscribe to this blog and receive notifications of new posts by email. Estimate including allowances, but excluding escalation, currency risk, contingency and management reserves. Any costs associated with developing the plant itself is considered ISBL. Because the company is not currently traded, it is difficult to apply many of the quantitative measures to study the effectiveness of the project financing techniques. 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. In construction, the production function may be expressed by the 0 For companies with large debt ratios, the interest that is deducted from earnings will be large because of the large amount of debt carried. (3050%) First estimation conducted for screening purposes based on cost of similar processes. 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. process equipment cost estimates for over 275 types of equipment used in the chemical and metallurgical industry. 0000003406 00000 n The probable accuracy of -25% to +30%. The data and information within the software has been obtained from a wide variety of literature sources. This is because the needs during the time when the product is in season has a more significant impact on the sales. He identified three process plant types, which are solid processing plant, fluids processing plant, and mixed fluids-solids processing plant. Study Estimate. The guideline FOB cost is in US $ for a value of the Chemical Engineering Index (1957-59 = 100), CEPCI Index = 1000. . We might then account for inflation using the Chemical Engineering Plant Cost Index (CEPCI) or similar indexes. WARNING This software should be used for educational purposes only! 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. 18-July-2011 M Subramanian During times of low sales, they could sell bonds, and during times of high sales, they could pay back bonds. output of a process and the necessary resources is referred to as the production function. For most cases, however, a typical value is 40%, and will be slightly higher for new plants, lower for existing sites with high capacities. But it must be noted that for chemical plants of different processes, the individual factors that affect working capital can have large variance, and the aforementioned estimate will not work well for all situations. Simply stated: The objective for any plant is to maximize the working capital turnover. Upon clicking "Display Results," the user will be asked for a date, and then for the value of the Chemical Engineering (CE) Plant Cost Index. Aspen's Economic Evaluation Product Family builds off of its original ICARUS technology. Estimation of cost based on component cost will allow an unbiased estimation of real cost, allowing accurate estimation as well as possible price negotiation. Then in 2013, Dow Chemical and Saudi Aramco contributed about 17 billion USD total. Capital cost estimates for chemical process plants are usually based on purchase cost estimation for major equipment items. 0000008240 00000 n Specific location factors can be found in the most recent edition of Aspen Richardson's International Construction Cost Factor Location Manual (Costdataonline.com). The more experience a cost estimator gets from cost estimation, the more accurate the estimation. Several computer tools by Aspen Tech are available for estimating capital costs. 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.. As chemical companies grow, many decide to become publicly traded, or "go public". 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. During feasibility study, Pre-FEED study, or during FEED (Front-End Engineering Design), capital cost estimation is always created. 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. 262 of 365 - THINGS ABOUT COST ESTIMATION FOR CHEMICAL PROCESS ENGINEERS PEOPLE WILL NOT TEACH YOU Chem. 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. Ultimately, a definitive or detailed estimate for plant construction and budget control will be prepared. Home; About; News; Products; Services; . Detailed Estimates. Both give capital in order to obtain equity in the company. New York: McGraw-Hill; 2002. Sadara Chemical Company provides an insight into real world project financing. 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. The multipliers, depending on the type of plant are given . 1st ed. Chemical Week or Hydrocarbon Processing are potential sources. In academia, operating costs (opex) are usually estimated as a percentage of capital costs, often a nominal ten percent. During the preliminary stages of an investment project (before approval), several decisions have to be made on whether or not it should be pursued. 0000055339 00000 n Sadara Redefining the Possible. The project financing for Sadara Chemical Company began in 2011 with the issuance of a sukuk, which often referred to as Islamic bonds. August 1, 2011 | By Ying Feng and Gade P. Rangaiah National University of Singapore. 2002, Shabani and Yekta 2006 ). With this method, the design activity is progressed between 0-2 percent. An interesting application of debt financing is for seasonal products. Cost estimation: fuels, electricity, waste treatment Plot of $/GJ from 1970 through 2006 for natural gas, gasoline, fuel oils, wood & solid wastes, coal and nuclear. . 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. Knowledge of major pieces of equipment Accuracy: 30% 3. Debt financing usually involves the issuing of bonds. Order of Magnitude estimate. The other extreme is utilizing an existing, underused site with no solids handling requirement, when fabricating a low-volume specialty chemical. 0000033753 00000 n %PDF-1.4 % Jun 01, 2014Many engineering design projects are developed to provide sizing information from which estimates of capital and operating costs can be made. 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. The Lang factor method has a tendency to produce high results. (30%) Based on only a few design detail. At the time, Dow Chemical Co. had annual sales of over 57 billion USD and produced over 5000 products in varying sectors. Build your own from this sample which includes virtually all of the economics that need to be considered. "Dow Chemical Co. (DOW) Short-term (Operating) Activity Analysis." 0000003128 00000 n It is good practice to include design factors for safety throughout the process. 5 Feb. 2016. Pressure vessels are costed exactly according to ASME Boiler and Pressure Vessel Code Section VIII Division 1. Contents 1 Calculations methods 2 Using a cost index 3 Cost indexes in engineering 4 Cost Indexes for different locations What can I do to convert dolars to Rs? Extrapolate similar plant cost Accuracy: over 30% 2. This allows us to estimate the capital costs (capex) of the plant very roughly. Equity financing occurs throughout the lifetime of a company. The total cost is determined by multiplying the total purchased cost for all the major items of equipment by a constant. The second method is very simple to enact; rather than holding cash as working capital, it can be used in other aspects of the plant operations. Instead, most companies use costing software and other computer tools to perform economic analysis. Estimating variable costs Raw material usage. There are also other indices for building the plants offsite. %%EOF However, the boundaries between the classification are not clear-cut, and considerable judgment is required in the selection of appropriate factors. N.p. The working capital of a plant provides liquidity and flexibility as it is cash kept in reserve. Download Chemical Plant Cost Estimation 5 Votes 12 Ever wonder what really goes into estimating the cost of a world scale chemical production facility? 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). The Total Installed Cost estimate was obtained by multiplying the equipment cost (purchase cost) by appropriate factors. Equipment, machinery Engineering and supervision supports 61% 10% Installation labor 22% Buildings . OSBL costs are initially estimated as a percentage of the ISBL costs. Especially in cases involving handling solids, OSBL costs can be as high as 100% of the ISBL cost. Contingency charges ensure that there is enough capital on hand to deal with these unexpected changes. . Study estimate (factored estimate). In this post I want to share classification of capital cost estimation. It is anticipated that about 30% ownership in the company will be floated, or traded actively (Fletcher). hKoFs\qO>Hriu7(K%}VM`|of;|NHT!SB):1y.'T@8dx,pZ` :yU;t%dOH%#9Wz6! Analysis, Synthesis and Design of Chemical Processes (Turton) Plant Design and Economics for Chemical Engineers (Peters) Pahrump: Cost Data On Line, Inc.; c2008- [cited 2015 Feb 26]. Correlations for constants can be found in Towler's Chemical Engineering Design (Towler and Sinnott, 2013). It is rule-of-thumb methods based on cost data from similar-type plants are used. Definition of terms. In this case, the equity financing came from two well-established chemical companies. 106 0 obj <>stream pZm};*t|6sxn]w&c~M9 z 1/Fy@+Rnt`tsf ZA.=jh;Rq0K!-",qR /n*:DK!/q0pC&s")8@ pF9a}'|qxp~UpIf7~F[ AE%-V'b9H5{u-Z'o- ? In addition, the magnitude of the project gained worldwide recognition. The working capital is a distinct cost associated with maintaining operations in a plant (Towler). Dewar, John. 0000004489 00000 n Lang factor for different equipment can be found in calibrated data chart. Capital Cost Estimation Dr. M. Subramanian Associate Professor . A composite index for the United States process plant industry is published in the journal Chemical Engineering. endstream endobj 79 0 obj <> endobj 80 0 obj <> endobj 81 0 obj <>/ColorSpace<>/Font<>/ProcSet[/PDF/Text/ImageC/ImageI]/ExtGState<>>> endobj 82 0 obj <> endobj 83 0 obj <> endobj 84 0 obj [/ICCBased 99 0 R] endobj 85 0 obj [/Indexed 84 0 R 136 101 0 R] endobj 86 0 obj [/Indexed 84 0 R 221 100 0 R] endobj 87 0 obj <> endobj 88 0 obj <> endobj 89 0 obj <> endobj 90 0 obj <>stream The cost used in this calculation is usually the stock price of the company. Definitive Estimates. Chemical plants are built to make a profit, and an . 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. The quickest and most often employed order of magnitude process scales the cost of the new design based on the cost of similar processes. The expected return is a combination of the dividends the company pays and the growth of the company's stock price. Chemical plants are built to make a profit, and an estimate of the investment required and the cost of production is . This helps. In addition to the purchase price of the equipment, capital costs include delivery and installation of equipment, preparation of land for construction, salaries of contractors and construction workers, and any other costs associated with building a chemical plant. The return on equity can be used to understand how effectively the company is managed from a fiscal point of view. Chemical Engineering Plant Cost Index. general-process-plant-cost-estimating-engineering 1/7 Downloaded from ads.independent.com on November 4, 2022 . 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