SKF4153: Plant Design 1

Capital Cost Estimation

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SKF4153: Plant Design 1

Objective

Be able to
Estimate the purchase cost of process equipment
Estimate bare-module cost
Estimate total capital investment

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SKF4153: Plant Design 1

The companys Income Statement

Income Statement (Table 16.4) is one of the financial statements in a

company annual report.

Need to familiar with all the terms in the table.

% Operating margin= (Income from operation)x100/(net sales)
% Profit margin = (Net income)x100/(net sales)
Net sales is gross sale minus returns, discounts and allowances.
Net income = (Net sales)- (Cost of goods sold)-(Operating expenses) (Interest expense)-(Taxes)
(Cost of goods sold) = (Cost of raw material) + (Cost of manufacturing)

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SKF4153: Plant Design 1

Use of equipment costing

To calculate:
Direct Permanent Investment CDPI
Purchase cost of equipment + Cost of its installation

Total permanent investment CTPI (also known as fixed capital

investment)
CTPI=CDPI + Cost of land + Royalties +Start up cost +
Contingency

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SKF4153: Plant Design 1

Rate of Return (IRR)

Total Capital Investment (TCI) for a chemical process = CTPI +
working capital
The TCI and the annual manufacturing cost plus other related
expenditures will be used to calculate the cash flows for
profitability analysis such as to determine
the investors rate of return (IRR) or known also as the
discounted cash flow rate of return (DCFRR)
IRR is one of the investment decision tools.
If decision to choose among various processes is solely based
on IRR, we should go for the process with highest IRR

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SKF4153: Plant Design 1

Cost Index (I)

Equipment cost is obtained from charts, equations or quotes from vendors
The cost changes (increases) from year to year primarily due to inflation

The charts and equations are usually apply for a particular month/year.
Vendors quotes also valid for a certain period

To estimate purchase cost at a later date, we multiply the purchase

cost (Base Cost) available for a particular date with the ratio of cost index I
at a later date to a base cost index, Ibase at the date that applies to the
purchase cost

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SKF4153: Plant Design 1

The Indexes
The chemical engineering (CE) Plant Cost
Index
The Marshall & Swift (MS) Equipment
Cost Index
The Nelson-Farrar (NF) Refinery
Construction Cost Index
The Engineering News-Record (ENR)
Construction Cost Index

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SKF4153: Plant Design 1

Comparison of annual average

cost indexes

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SKF4153: Plant Design 1

Economy of Scale

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Economies of scale refers to the decreased per unit cost

as capacity increases
This principle holds as long as each major piece of
equipment can be made larger for higher capacity.
However if the equipment size exceeds maximum size
that can be fabricated and shipped, the equipment must
be duplicated (e.g. two production trains)..so the
economy of scale is lost.

SKF4153: Plant Design 1

Economy of Scale
The economy of scale is estimated by the following eqn,

eq. 16.3

Cost2 Capacity 2

Cost1 Capacity 1

m varies from 0.48 to 0.87 for equipment and

0.38 to 0.9 for plants
If we use m=0.6 (average value), this is
referred to as six-tenths rule

Example, if the capacity is double, the cost will only

increase by 52%

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SKF4153: Plant Design 1

Typical Plant Capacity

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See Table 16.8 for typical capacity (pounds/year) of

15 major commodity chemicals in
Common units are tonne/year or tons/day
Note: 1 tonne=1000kg 1 ton=2000 Ib
To estimate total depreciable capital investment
(CTDC) using cost data form earlier plant at
different capacity,
Note: b refers to base data such as in Table 16.8

SKF4153: Plant Design 1

Total Capital Investment (TCI)

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One-time expense for design, construction and start-up

for new or a revamp of an existing plant
Grass-roots plants vs Plant expansions
See Table 16.9 (Busche 1995)
See Table 16.5 for example

SKF4153: Plant Design 1

Total Capital Investment (TCI)

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TCI includes,
total bare-module (include installation)
spares and catalyst costs
site preparation, building cost
service facilities
utilities plant
contingencies, contractors fee, land, royalties
start-up
working capital

SKF4153: Plant Design 1

Battery Limits

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Imaginary border that separate on-site

(Process Plant) from offsite facilities

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Offsite Facilities

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SKF4153: Plant Design 1

Bare-module cost

Bare-module cost for fabricated equipment

Distillation column, HEX, vessel
Custom design
Bare-module cost for process machinery
Pump, compressor, centrifuge
Vendor supplied

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SKF4153: Plant Design 1

Bare-module cost

The bare-module costs could also be estimated using baremodule factor based on f.o.b. purchase cost of equipment
Bare-module cost=FBMx Purchase cost
See Table 16.11

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SKF4153: Plant Design 1

Bare-module cost:
Direct Material and Labor

Direct Material and labor

Material: Piping to other modules, concrete foundation, steel
supporting structure, instruments, controller, wiring, lighting,
painting, insulation
Field labor for equipment erection and setting

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SKF4153: Plant Design 1

Bare-module cost: Indirect Cost

Indirect Cost
Freight, Insurance, Taxes
Construction overheads: workers health insurance, kwsp,
salaries of supervisory personnel, temporary building, crane
rental, security, job site clean-up
Contractor engineering expenses: Procurement expenses,
salaries for project and process engineers, designers, home
office expenses etc

See Table 16.10 for bare-module cost for a HEX

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SKF4153: Plant Design 1

Working Capital (CWC)

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Fund needed to cover operating costs required for the

early operation of the plant.
Include inventory (keeping stock)
Spare of charge catalyst and
Account receivable (transactions dealing with the billing
of customers)

SKF4153: Plant Design 1

Estimation of TCI

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Methods and Levels of accuracy of estimate,

Order-of-magnitude estimate ( 50%) based on production rate
and major equipments as determine determine from benchscale laboratory data.
Study estimate ( 35%) based on a preliminary process design
Preliminary estimate ( 20%) based on detailed process design
studies leading to an optimized process design
Definitive estimate based on a detailed plant design, including
detailed drawings and cost estimates, sufficient to apply cost
accounting.

SKF4153: Plant Design 1

Order-of-Magnitude Estimate of TCI

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Rapid determination to determine if a process is worth

pursuing
Suitable for low pressure process (<100psi)
Need production rate data
Need a flowsheet showing reactors, compressors and
separation equipment (no need to show HEX and
pump)

SKF4153: Plant Design 1

Order-of-Magnitude Estimate of TCI

Calculation are based on

Year 2000 Marshall and Swift Cost Index (MS index) of
1,103
A base production rate of 10,000,000 lb/yr of main
product
Carbon steel construction
Design pressure < 100 psi

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SKF4153: Plant Design 1

Order-of-Magnitude Estimate
Step 1

Using six-tenths rule, compute production rate factor FPR

Eq 16.5

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FPR

M ain product flowrate, lb / yr

10,000,000

0.6

SKF4153: Plant Design 1

Order-of-Magnitude Estimate
Step 2

Calculate module cost CM

Eq 16.6
0.25

design pressure, if > 100psi

CM FPR FM
(US $130,000)
100

0.25

design pressure, if > 100psi

(US $130,000)
CM FPR FM
100

FM is material factor, Carbon steel (FM=1.0), Copper (FM=1.2),

Stainless steel (FM=2.0), Nickel Alloy (FM=2.5), Titanium clad

(FM=3.0)

See Appendix III for assistance in choosing materials of

construction

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SKF4153: Plant Design 1

Order-of-Magnitude Estimate
Step 3

Calculate total bare-module investment CTBM

Eq. 16.7

MSindex for year 2008

CTBM , 2008 FPI
C M
1103

FPIis factor to account for piping, instrumentation,

automatic control as well as indirect costs.
FPI depends on whether the plant processes solid, fluids

or both

For solid handling (FPI=1.85), solid & fluids (FPI=2.0) and

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for fluids handling (FPI=2.15)

SKF4153: Plant Design 1

Order-of-Magnitude Estimate
Step 4

Calculate direct permanent investment CDPI

16.8

CDPI 1 F1 F2 CTBM

F1 and F2 are factors to account site preparation, service

facilities, utility plants.

For outdoor construction (F1=0.15), Indoor & outdoor

(F1=0.4) and indoor only (F1=0.8)

For minor addition to existing facilities(F2=0.10), major

addition to existing facilities(F2=0.3) and for grass-roots

plant (F2=0.8)

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SKF4153: Plant Design 1

Order-of-Magnitude Estimate
Step 5
Calculate total permanent investment CTPI
Add 40% to cover for contingencies and another 10% for
land, royalties and start-up.

CTPI 1.5CDPI
Calculate total capital investment CTCI
Add 15% to the total permanent investment CTPI

CTCI 1.15CTPI
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SKF4153: Plant Design 1

Study Estimate of TCI

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Here the method is based on overall factor method of

Lang (1947,1948)
Requires complete M&E balances and equipment sizing
Requires information on material of construction for
major equipment inclusive HEX and pump
f.o.b purchase cost of each equipment must be estimated,
see Table 16.9 for references.

SKF4153: Plant Design 1

Study Estimate of TCI

Step 1

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From process design prepare equipment list giving,

Equipment title or name
Equipment Label (e.g. P1, R2)
Size (Hp, ft2, diameter (ft), height (ft))
Material of construction
Design temperature
Design pressure
See Table 16.18

SKF4153: Plant Design 1

Study Estimate of TCI

Step 2

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Add f.o.b purchase cost data (Cpi) and the corresponding

cost index (Ibi)
Update to the current cost index (Ii) and sum the
updated purchase cost to get the total f.o.b. purchase
cost
Multiply by 1.05 to account for delivery cost to the plant
site

SKF4153: Plant Design 1

Study Estimate of TCI

cont. Step 2

Then, multiply by Lang factor (fL,TPI) to get the total permanent

investment cost (CTPI), i.e. Not including working capital
Or multiply by Lang factor (fL,TCI) to get the total capital investment
cost (CTCI)

CTPI
Eq 16.9 & 16.10

CTCI

II
1.05 f L ,TPI C P ,i
i I b ,i
II
1.05 f L ,TCI C P ,i
i I b ,i

See Table 16.16 for Lang Factors, details breakdown are in Table
16.17

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SKF4153: Plant Design 1

Study Estimate of TCI

cont. Step 2

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See Table 16.16 for Lang Factors, details breakdown

are in Table 16.17
Note:You can add additional cost of spares, storage
and surge tanks, initial catalyst charge, royalties and
plant start up as Lang Factors do not include all these.
See example 16.3 (note, this example also compare
CTCI from order-of-magnitude estimate)

SKF4153: Plant Design 1

Preliminary Estimate

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Based on Individual Factors Method of Guthrie (1969,

1974)
Best carried out, after
Optimal process design developed
Complete M&E balances, Equipment sizing and
materials of construction
Process control configuration developed as in P&ID.

SKF4153: Plant Design 1

Preliminary Estimate
Step 1

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From process design prepare equipment list giving,

Equipment title or name
Equipment Label (e.g. P1, R2)
Size (Hp, ft2, diameter (ft), height (ft))
Material of construction
Design temperature
Design pressure

SKF4153: Plant Design 1

Preliminary Estimate
Step 2
Add f.o.b purchase cost data (CP,b) and the corresponding

cost index (Ib).

Note: Here the f.o.b purchase cost is based on near

ambient design pressure, carbon steel material and a base

design

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SKF4153: Plant Design 1

Preliminary Estimate
Step 3
Update to the current cost index (I).
For each piece of equipment, determine bare-module

cost (CBM) using bare-module factors (FBM) in Table 16.11

and apply appropriate factors for design (Fd), pressure (FP)
and material (Fm).
Eq 16.12

CBM
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I
CP ,b FBM Fd FP FM 1
Ib

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Preliminary Estimate
Step 4
Obtained the total bare-module cost CTBM.

CTBM CBM

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SKF4153: Plant Design 1

Preliminary Estimate
Step 5
Calculate total permanent investment CTPI, (note: not

including start-up and royalties)

CTPI 1.18(CTBM Csite Cbuilding Coffsite facilities )

Add working capital to calculate total capital investment

CTCI

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CTCI CTPI CWC

SKF4153: Plant Design 1

Purchase Cost

See Table 16.19 for sources of widely used

equipment cost data
Included are the corresponding cost index for
the cost data
Equipment cost usually presented in the form of
graphs and/or equations of f.o.b. purchase cost as
a function of equipment size factor
Accuracy is no better than 25%

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SKF4153: Plant Design 1

Purchase Cost

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Always check the validity of cost data by comparison

with various sources.
Previous vendor bids and quotes
Cost estimate from manufacturer requires special
request and costly to prepare

SKF4153: Plant Design 1

Purchase Cost Using IPE

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IPE: Aspen Icarus Process Evaluator

Software for cost system
More accurate, consistent and periodically updated

SKF4153: Plant Design 1

Purchase Cost:
Centrifugal Pump

This method is by Mosanto Company

Determine size factor,
S=Q(H)0.5
Q is flowrate in gpm and H is the pump head in ft
Calculate base f.o.b. purchase cost,
CB=exp{9.2951-0.6019[ln(S)]+0.0519[ln(S)]2}

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Or determine base f.o.b. purchase cost form Figure

16.3
Base f.o.b. purchase cost are for single-stage, 3600
rpm, vertical split case (VSC), and made of cast
iron.

SKF4153: Plant Design 1

Fig 16.3
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SKF4153: Plant Design 1

Purchase Cost:
Centrifugal Pump
For centrifugal pump with specification (speed, material
etc.) other than base cost specification on the Figure
16.3, the f.o.b. purchase cost is,
Cp=FTFMCB
FM is material factor (Table 16.21)
FT is pump type factor (Table 16.20)
This price does not include the electric motor
Note: CE cost index: 394 (mid-2000)

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SKF4153: Plant Design 1

Purchase Cost:
Shell and Tube HEX

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Geometrical variables for S&T HEX are

Tube diameter, wall thickness, length, spacing &
arrangement
Baffle type and spacing
Numbers of tube and shell passes
Fixed-head, U-tube, floating head, kettle design
However, most published cost data are correlated in terms of
HEX surface area, i.e.
size factor= surface area

SKF4153: Plant Design 1

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SKF4153: Plant Design 1

Purchase Cost: Shell and Tube HEX

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Here specifications for base f.o.b. purchase cost are

carbon steel tubes, in. or 1 in. OD, wall thickness of tube
is 16 BWG (Birmingham Wire Gage), 20 ft long, square or
triangular pitch
carbon steel shell with shell side pressure up to 100psig
For base f.o.b. purchase cost use Figure 16.10, or
Use one of equations 16.39 16.42 (four different designs)

SKF4153: Plant Design 1

Fig 16.10
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SKF4153: Plant Design 1

Purchase Cost: Shell and Tube HEX

Floating head,
CB=exp{11.667-0.8709[ln(A)]+0.09005[ln(A)]2}

eqn 16.39

Fixed head,
CB=exp{11.0545-0.9228[ln(A)]+0.09861[ln(A)]2}

eqn 16.40

U-tube,
CB=exp{11.147-0.9186[ln(A)]+0.09790[ln(A)]2}

eqn 16.41

Kettle vaporiser,
CB=exp{11.967-0.8709[ln(A)]+0.09005[ln(A)]2}
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eqn 16.42

SKF4153: Plant Design 1

Purchase Cost: Shell and Tube HEX

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For S&T HEX with specification (pressure, material and

tube-length) other than base cost specifications on the
Figure 16.10, the f.o.b. purchase cost is,
Cp=FPFMFLCB
FL is tube-length correction factor (see bottom page 523)
FM is material factor (Eqn 16.44 and Table 16.25)
FP is pressure factor (Eqn 16.45)

SKF4153: Plant Design 1

Pressure vessel:
Knock-out drum

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Pressure vessel:
Flash drum

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Pressure vessel:
Reflux drum

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Pressure vessel with ladder, platform and support

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SKF4153: Plant Design 1

Pressure vessel

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Pressure vessel

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Pressure vessel

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Ellipsoidal head

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SKF4153: Plant Design 1

Pressure Vessel
Widely used in chemical industry
Cylindrical shape with inside diameter Di and cylindrical
shell length L (called the tangent-to-tangent length)
Welded two ellipsoidal or torispherical heads at
opposite ends
Includes:

nozzles for entering and exiting streams,

manholes, connection for relief valves and
instruments, skirts and saddle for support,
platforms, ladder
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SKF4153: Plant Design 1

Pressure Vessel

Little or no internals (empty).

Examples are reflux drum, knock-out drum, settlers,
reactor, mixing vessel, vessel for fixed-bed adsorption and
storage drum
Oriented horizontally or vertically
Thickness of the wall are usually determined from ASME
Boiler and pressure vessel code

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SKF4153: Plant Design 1

Purchase Cost: Pressure Vessel

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Here we use method by Mulet, Corripio and

Evan (1981)
See Figure 16.13, the correlations are eqn 16.53
(Horizontal), eqn 16.54(Vertical). This gives
CP=CV
Based on weight of shell and two 2:1 elliptical
heads
Size factor=weight (lb)
Carbon steel
Cost includes nozzles, manholes and supports
But do not include platform and ladder.

SKF4153: Plant Design 1

Fig 16.13
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SKF4153: Plant Design 1

Purchase Cost: Pressure Vessel

For other specification,

Cp=FMCV+CPL

Additional cost for platform and ladder is given in Eqn

16.55 (Horizontal) and Eqn 16.56 (Vertical)
FM are given in Table 16.26
Cost includes nozzles, manholes and supports
But do not include platform and ladder

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SKF4153: Plant Design 1

Stripping Tower

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Absorption Tower

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Distillation Tower

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Distillation Tower

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SKF4153: Plant Design 1

Towers for Distillation, Absorption and

Stripping

Vertical pressure vessel containing

plates, packing, internals for multiple entries,
management of bottom liquids and its withdrawal.

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SKF4153: Plant Design 1

Purchase cost: Towers for Distillation,

Absorption and Stripping

Purchase cost (in US$) Cp=CT are from Figure 16.13 or

eqn 16.57 (note: should be CT instead of CV )
This cost inclusive nozzles, manholes, a skirt and internals
(but not plates or packing)

For other specification,

Cp=FMCT+CPL

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CPL is given by eqn 16.58

SKF4153: Plant Design 1

Weight of pressure vessel and tower

W=(Di+tS)(L+0.8Di)tS
is density of carbon steel
tS is thickness of shell and head

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SKF4153: Plant Design 1

Pressure vessel cylindrical shell thickness tS

Use eqn 16.60

Note also the minimum wall thickness is
given at the top of pg 530
Eqn 16.62 for wall thickness taking into
consideration of wind load and earthquake
effect.
Eqns 16.63-16.65 are for pressure vessel
operating under vacuum

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SKF4153: Plant Design 1

Tower: Cost of Plate Column

Add cost of installed trays (inclusive all downcomers) CT to
cost of vessel.
Cp=FMCT+CPL+CT

where,

CT=NTFNTFTTFTMCBT

Base cost CBT (CE 394, yr 2000) is given by eqn 16.67

NT is tray number, FNT is given by eqn 16.68, FTT is tray type
factor, FTM is tray material factor, see pg 532
For Packed column, see pg 534
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SKF4153: Plant Design 1

Table 16.32
Summary of Purchase cost of other
chemical processing equipments
For your plant design project, this table
could be very valuable

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SKF4153: Plant Design 1

Aspen Icarus Process Evaluator

(IPE)
Software to estimate equipment size,
purchase costs, installation costs and total
permanent investment.
The CD-ROM that you have will show
two examples

Depropanizer distillation tower

Monochlorobenzene separation process.

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