Cost estimating for chemical engineering plant design

Source: http://people.clarkson.edu/~wwilcox/Design/refcosts.htm

This color indicates a link available via Clarkson University (off-campus access)

Chemicals, raw materials and products: CAUTION: Prices for laboratory quantities are much higher than for the commercial quantities that you would use for plant design economic calculations. Don’t use the costs of raw materials and products given in the text. If you search the internet, use “price” rather than “cost.”

  • Wilson Web: on campus;       (Search price OR cost AND chemical’s name). Includes the following three:
  • Chemical Week:
    • at iMirus (See particularly the weekly CW Price Report of commodity petrochemicals and plastics.)
    • at Proquest (Search to find articles about particular chemicals, such as manufacturers, production rates, prices)
  • Chemistry and Industry (Click on one issue, and then Find to search for news about particular chemicals from many sources).
  • Purchasing.com/
  • Chemical & Engineering News. See “Facts and Figures for the Chemical Industry,” usually in June or July issue. Production rates of common chemicals versus time. Magazine: TP1 .C35
  • Noble metals (silver, platinum, rhodium, iridium) as used in small percentages in catalysts: use google or similar search engine to find price on line for quantity needed. Platinum compounds
  • Producer Price Indices U.S. Government statistics for price movement (but not actual prices): “The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output.”
  • Polymer prices
  • Oxygen costs
  • Search “chemical name price” at http://findarticles.com/ (unfortunately with annoying popups that may not be prevented)
  • Directory of engineering products and supplies Laboratory chemical suppliers often provide prices. Suitable for rough estimation of catalyst costs. Also google “chemical suppliers.”

Utilities costs

Lower costs than those found below may be negotiated with local suppliers when large quantities are to be used. To obtain the costs per GJ required by CAPCOST, it is necessary to use the higher heating value (HHV), which is also known as “Energy content,” “Btu content,” “Heating value,” and “Calorific Value.” Basically, it is the heat of combustion with liquid water as the product. For natural gas the HHV depends on composition, and is approximately 1030 Btu/ft3 (at 30 Torr and 60oF). Fuel oil #2 is about 140,000 Btu/gal and bituminous coal is ~30 MJ/kg. See Conversion factors between energy units.

Waste treatment costs

  • Methods and costs of treating waste water and gas.
  • Waste gas: Take a credit for a combustible (fuel) waste gas that is at a concentration above the upper flammability limit as the cost of an equivalent amount of natural gas based on its lower heating value (LHV). (Tabulations of data.)   The same can be done if the combustible components are present below the lower flammability limit, but sufficient oxygen is present for catalytic combustion to recover the LHV. HYSYS gives the LHV for a stream under the Properties tab. If the gas is below the lower flammability limit and consists of components that can be burned to CO2 and H2O, assume that these components are eliminated in a flame at a cost of $0.005/kg. Any products not permitted to be exhausted (such as SO2 in many places) must be removed before the gas is released. Charge $0.20 per kg of materials that must be removed.       Assume these are 2001 prices; update the burning cost using the price of natural gas and the waste treatment cost by the price of electricity.
  • Waste water: Charge $0.25 per kg of components that must be removed before discharge of the water.       This cost is for 2001, so update using the cost of electricity.

Wages and benefits

Equipment sizing: Before the cost of equipment can be estimated its size must be determined. Similarly, the utilities requirements must be calculated. Note that HYSYS/UniSim uses inappropriate default values when the units are first entered, e.g. tower diameter and heat exchanger area. Do not use these default values for cost estimation.

  • Sizing heat exchangers Warning: The part of HYSYS/UniSim installed at Clarkson University does not calculate heat transfer coefficients correctly. It only calculates q/DTavg and gives this as UA (i.e., it sets F=1) . The shell area sometimes shown under the Sizing tab is calculated from the default dimensions of the heat exchanger, and the U given by HYSYS/UniSim is calculated by dividing UA by this meaningless A. (Make certain you know how HYSYS/UniSim calculates UA.)
  • Sizing condensers & reboilers using HYSYS/UniSim For heat exchangers that condense steam or boil water fed at saturation, the temperature of the water-steam is fixed by the pressure and would be constant if its pressure drop in the heat exchanger were 0. The flow rate of the water-steam is calculated by dividing the Q by the latent heat of evaporation at that pressure. If the boiler feed water (bfw) is below saturation, calculation of the heat exchanger should be broken into two parts — one to heat the bfw up to the saturation temperature and a second to evaporate all of it.       Similarly, if superheated steam is fed, for calculation purposes break the heat exchanger into one that cools the steam to saturation and a second that condenses it to saturated water.
  • Fired heaters: Everything you need to cost fired heaters is in most design texts, CPC texts, and Perry’s. The cost depends on the duty and the process stream heated. The utility (fuel) cost is determined by dividing the duty by the lower heating value of the fuel and the efficiency.
  • Alternate heating methods, temperatures, costs
  • When a reactor is either heated or cooled, cost it as the sum of the cost of a heat exchanger plus that of a vessel. For a plug flow reactor, you calculate the area from the tube diameter, length and numbers. For a fluidized bed reactor use the Q and Ts to calculate the area as for other heat exchangers.
  • Do not forget to have spare pumps, as they tend to require maintenance more often than other units.
  • Make certain to select the type of compressor required for your conditions, e.g. do not use a blower or fan unless the pressure increase is very small. Spare compressors are not advised.

Equipment and capital investment

  • Comparison of cost estimating software (Double-click to enlarge image)
  • Chapter 20 in Walas (pre 1990)(copied into Appendix C of Process Engineering Economics)
  • “Conceptual Cost Estimating Manual” (many graphs of cost versus size as of January 1, 1996)
  • On-line equipment cost estimator courtesy of Peters, Timmerhaus and West (2003)
  • On-line estimator with useful references, from Matche
  • Materials selection and costs
  • All costs should be for the present time, or estimated for the proposed construction time.       Use the Chemical Engineering Plant Cost Index (CE index, or CEPCI) or another cost index to update equipment costs: last page of each issue of Chemical Engineering: TP1 .C3.   For recent data on line, Chemical Engineering. Alternatives are the ENR cost indices, the Marshall & Swift Equipment Cost Index (at the Chemical Engineering link above), and the Nelson-Farrar Refinery Cost Index (search Nelson-Farrar or Economics at the Oil & Gas Journal, TN860 .O4).       Chemical Engineering magazine and the Oil & Gas Journal also include cost indices for individual types of equipment.
  • Plots of CE, Nelson-Farrar refinery cost and Marshall & Swift indices from 1970 through 2006.
  • “Richardson Process Plant Construction Cost Estimating Standards: The Richardson Rapid System,” Cost Data On Line, Inc. (CD & costdataonline.com)(2009). Excellent source of cost estimating methods. 1999 edition in the Clarkson Library at Ref 692.5 R522p
  • Use pie charts to show graphically what the major cost items are to help you decide where to work on improving the economics of the plant.       It is recommended to have one pie chart for equipment and another for manufacturing costs. Rather than include the entire raw material cost as a manufacturing expense, include only the portion that is not converted to sellable product. If you are having difficulty showing a profit, it is probably because you are converting an insufficient fraction of the raw material to sellable product because of poor selectivity in your reactor and/or because of poor separations. Take a particular look at compressors, as they are expensive to purchase and to operate. Could a pump be used instead, e.g. by first condensing the stream? Should two compressors be used with a heat exchanger in between?
  • Optimization:       Before adjusting the operating parameters of individual units to cut costs, first consider rearranging, adding or subtracting units in your pfd. Consider using more than one reactor in series and more than one heat exchanger in series. For example, if you want to cool a stream to below 0oC, you can cool it part way by boiling water in one exchanger, some more with cooling water in a second exchanger, and finally with refrigerant in a third.      
  • Capital Costs Quickly Estimated

Calculation of NPV, DCFRR and payback period.

  • Example spreadsheet & plot for cash flow profitability analysis. Simple example of use of Excel’s goal seek to calculate interest rate from periodic (annuity) payments.
  • Make certain you do your MACRS depreciation, cash flow, and discounted cash flow calculations correctly. Note that a 5-year MACRS takes place over a 6-year period, because the first and last years are considered half years. At the end of 6 years of production, the book value should be 0.
  • MACRS recovery period for chemical manufacturing ; MACRS depreciation rates (from IRS publication 946)
  • Do not show depreciation as a cost or expense, except for calculation of income tax.
  • Corporate income tax rate (for corporate taxable incomes over $18,333,333) If a state is not shown, that state does not tax corporate income, in an effort to attract industry.
  • Do not forget to estimate reasonable values for land and working capital, and indicate how you arrived at these numbers. Remember to recover these costs in the last year of operation.
  • It is a serious mistake to calculate the sum of the discounted cash flows by dividing the sum of the cash flows by (1+i)n.
  • Instructions on use of Turton et al.’s Excel program CAPCOST.

 

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