Process Design Practice

CHEM4007B
Lecture Notes

Lecturer Name: Dr. Youssef Touhami

Academic Year: 2019-2020
Course Coordinator Name: Dr. Youssef Touhami
 Process Design Practice
Lecture Notes-Chapter#3.1
Capital Cost Estimation

Course Learning Outcomes

• Calculate sizes, materials, and capital and operating costs of
equipment commonly used in the chemical processing industries

Lecturer Name: Dr. Youssef Touhami

Academic Year: 2019-2020
Course Coordinator Name: Dr. Youssef Touhami
 CHEM 4007B:
Process Design Practice

Adopted from:
Richard Turton, Richard C. Baillie, Wallace B. Whiting, Joseph A.
Shaeiwitz, “Analysis, Synthesis, and Design of Chemical
Processes”, Third Edition, Prentice Hall, 2009

Dr. Youssef Touhami

Chemical Engineering,
Faculty of Engineering, Sohar University
S2 2018-2019
 Section 3
Engineering Economics Analysis of
Chemical Processes
 Chapter 3.1
Capital Cost Estimation

DrYoussef Touhami
Department of Chemical Engineering
Faculty of Engineering, Sohar University
S2 2018-2019
Outline

• Types of estimates
• Adjusting costs for changes in capacity
• Adjusting costs for changes in time
• Total plant cost estimates
– Direct, indirect, etc.
– Lang Factors
– Module cost approach
– Effect of temperature and pressure
• CAPCOST program
Outline Chapters

• In Chapter 1.1, the information provided on a process flow

diagram, including a stream table and an equipment summary
table, was presented. In the next four chapters, this
information will be used as a basis for estimating

• How much money (capital cost) it takes to build a new

chemical plant

• How much money (operating cost) it takes to operate a

chemical plant

• How to combine items 1 and 2 to provide several distinct

types of composite values reflecting process profitability
• How to select a “best process” from competing
alternatives

• How to estimate the economic value of making

process changes and modifications to an
existing processes

• How to quantify uncertainty when evaluating the

economic potential of a process
• In this chapter, we concentrate on the estimation
of capital costs.

• Capital cost pertains to the costs associated with

construction of a new plant or modifications to
an existing chemical manufacturing plant.
 Fixed Capital
Investment, FCI
Total Module Cost
Capital Cost
(CTM or CGR)

Bare Module Contractor Fees, CFee

(CBM) Contingency, Ccont
Categorized into
divisions representing:
 costs to secure
Direct Indirect
Expenses Expenses equipment (direct)
(CDE) (CIDE)  costs to install the
equipment (indirect)
Equipment Purchase, CP Engineering, CE
Materials CM & Labor CL Freight, Ins., Tax, CFIT
Overhead, CO

Equipment Installation
Process Piping
Instrumentation
Electrical
Buildings
Yard Improvements
Auxillary Facilities
Capital Cost Estimate Types

There are five generally accepted

classifications of capital cost estimates that are
most likely to be encountered in the process
industries:
1. Detailed estimate
2. Definitive estimate
3. Preliminary estimate
4. Study estimate
5. Order-of-magnitude estimate
Capital Cost Estimate Types

1. Order of Magnitude Estimate (Feasibility)

– + 40%, - 20%
– BFD , Process Modification

2. Study Estimate / Major Equipment

– + 30%, - 20%
– PFD , Cost Chart
Capital Cost Estimates Types
(cont’d)
3. Preliminary Design (Scope) Estimate
– + 25%, - 15%
– PFD , vessel sketches , equip. diagrams

4. Definitive (Project Control) Estimate

– + 15%, - 7%
– PFD , P&ID, all vessel sketches, equip. diagrams,
preliminary isometrics
Capital Cost Estimates Types
(cont’d)
5. Detailed (Firm or Contractors) Estimate
– + 6%, - 4%
– Everything included – ready to go to construction
phase

• Estimate low so actual cost will be high (+)

• Estimate high so actual cost will be low (-)
• Why is + # > - #.?
Table 3.1. Summary of Capital Cost Estimating Classifications
Order-of-Magnitude (also known as Ratio or Feasibility) Estimate

Data: This type of estimate typically relies on cost information for a complete process taken from previously built plants.
This cost information is then adjusted using appropriate scaling factors, for capacity, and for inflation, to provide the
estimated capital cost.

Diagrams: Normally requires only a block flow diagram.

Study (also known as Major Equipment or Factored) Estimate

Data: This type of estimate utilizes a list of the major equipment found in the process. This includes all pumps, compressors
and turbines, columns and vessels, fired heaters, and exchangers. Each piece of equipment is roughly sized and the
approximate cost determined. The total cost of equipment is then factored to give the estimated capital cost.

Diagrams: Based on PFD as described in Chapter 1.1. Costs from generalized charts.

Preliminary Design (also known as Scope) Estimate

Data: This type of estimate requires more accurate sizing of equipment than used in the study estimate. In addition,
approximate layout of equipment is made along with estimates of piping, instrumentation, and electrical requirements.
Utilities are estimated.

Diagrams: Based on PFD as described in Chapter 1.1. Includes vessel sketches for major equipment, preliminary plot plan,
and elevation diagram.
 Table 3.1. Summary of Capital Cost Estimating Classifications

Definitive (also known as Project Control) Estimate

Data: This type of estimate requires preliminary specifications for all the equipment, utilities,
instrumentation, electrical, and off-sites.

Diagrams: Final PFD, vessel sketches, plot plan, and elevation diagrams, utility balances, and a preliminary
P&ID.

Detailed (also known as Firm or Contractor’s) Estimate

Data: This type of estimate requires complete engineering of the process and all related off-sites and
utilities. Vendor quotes for all expensive items will have been obtained. At the end of a detailed estimate,
the plant is ready to go to the construction stage.

Diagrams: Final PFD and P&ID, vessel sketches, utility balances, plot plan and elevation diagrams, and
piping isometrics. All diagrams are required to complete the construction of the plant if it is built.
 Table 7.2. Classification of Cost Estimates

Level of Project Expected Accuracy

Definition (as % of Methodology Range (+/– Range Preparation Effort
Class of Complete Typical Purpose of (Estimating Relative to Best (Relative to Lowest
Estimate Definition) Estimate Method) Index of 1) Cost Index of 1)

Class 5 0% to 2% Screening or Stochastic or 4 to 20 1

Feasibility Judgment

Class 4 1% to 15% Concept Study or Primarily Stochastic 3 to 12 2 to 4

Feasibility

Class 3 10% to 40% Budget, Mixed but Primarily 2 to 6 3 to 10

Authorization, or Stochastic
Control

Class 2 30% to 70% Control or Primarily 1 to 3 5 to 20

Bid/Tender Deterministic

Class 1 50% to 100% Check Estimate or Deterministic 1 10 to 100

Bid/Tender
Cost of Estimate – See Also Table 7.2

Accuracy
1
2
3
4
5

Cost of Estimate (Time)

Factored Estimates

• Total Plant Capital Cost CTM (Fixed Capital

Investment, FCI) can be estimated by a
factored estimate.

• In a factored estimate, one first estimates

the cost of individual pieces of equipment,
then estimates the total installed cost by
multiplying by factors.
Definitions

CoP,i Purchased Cost equipment i (base conditions)

FoBM,i Bare Module $ Factor (base conditions).
CoBM,i BM equipment Cost (base conditions).
FBM,i BM Factor corrected for not CS 1 atm
CBM,i Bare Module equipment cost
FM Materials Factor (1 for carbon steel)
FP Pressure Factor (1 for pressure ~1 atm)
CTM Total Module Cost (addition to existing plant)
CGR Grass Roots Cost (new plant, new site)
Estimating Purchased
Equipment Cost
• Vendor quote
– Most accurate
• based on specific information
• requires significant engineering
• Use previous cost on similar equipment
and scale for time and size
– Reasonably accurate
• beware of large extrapolation
• beware of foreign currency
• Use cost estimating charts and scale for time
– Less accurate
– Convenient
Effect of capacity on cost

• A  equipment cost attribute

n
• C  purchased cost Ca  A a 
• n cost exponent   
– typically 0.4-0.8 Cb  A b 
– Often use n = 0.6, then refer to eqn as the 6/10ths rule
– 6/10ths rule can be used to scale up an entire process
• a  unit with required attribute
• b unit with base attribute
Exponents tabulated in numerous sources, such as Perry's
Chemical Engineer's Handbook
In general, the larger the equipment, the lower the cost of
equipment per unit of capacity
 Table 3.3. Typical Values of Cost Exponents for a Selection
of Process Equipment

Range of Equipment
Correlation Units of Capacity Cost Exponent n
Type

Reciprocating
compressor with 0.75 to 1490 kW 0.84
motor drive

Heat exchanger shell

1.9 to 1860 m2 0.59
and tube carbon steel

Vertical tank carbon

0.4 to 76 m3 0.30
steel

Centrifugal blower 0.24 – 71 std m3/s 0.60

Jacketed kettle glass

0.2 to 3.8 m3 0.48
lined
Example 1

• A New Plant Ordered a Set of Floating

Head Heat Exchangers (Area = 100 m2)
cost $92,000. What Would Cost be for a
Heat Exchanger for Similar Service if Area
= 50 m2 and n = 0.44 ?
 Example 1 - Solution

n
 Aa 
Ca  Cb  
 A b 
0.44
 50 
92, 000 
 100 
 Ca  $67,300
100 m2 Exchanger is not twice as expensive as a 50 m2 exchanger

Economy of Scale
Effect of Time

• Time increases – cost increases (inflation)

• Inflation is measured by cost indexes - Figure

7.3
– Chemical Engineering Plant Cost Index (CEPCI)
– Marshall and Swift Process Industry Index

• Numbers based on “basket of goods” typical

for construction of chemical plants - Table 7.5
Effect of time on cost

• I  cost index
• C  purchased cost
• 1  base time when cost is known
• 2  time when cost is desired

C2  I 2 
 
C1  I 1 
Cost Indicies

• Marshall & Swift Equipment Cost Indexes

– all-industry equipment index - arithmetic average of indexes for
47 different types of industrial, commercial, and housing
equipment
– based on an index value of 100 for the year 1926
– account for cost of machinery and major equipment plus costs
for installation, fixtures, tools, office, and minor equipment

• Engineering News-Record Construction Cost Index

– indicates variance in labor rates and materials costs for industrial
construction
– one of three basis’ used: 100 for 1913, 1949 or 1967

• Nelson-Farrar Refinery Construction Cost Index

– petroleum industry construction costs
– basis - 100 for 1946
Table 7.4. Values for the Chemical Engineering Plant Cost Index and the Marshall and Swift
Equipment Cost Index from 1991 to 2006
Year Marshall and Swift Equipment Cost Index Chemical Engineering Plant Cost Index

1991 931 361

1992 943 358
1993 964 359
1994 993 368
1995 1028 381
1996 1039 382
1997 1057 387
1998 1062 390
1999 1068 391
2000 1089 394
2001 1094 394
2002 1104 396
2003 1124 402
2004 1179 444
2005 1245 468
2006 1302 500
Chem. Engr. Plant Cost Index (CEPCI)
• construction costs for chemical plants

• equipment, machinery and supports, 61%; erection and

installation labor, 22%; buildings, materials, and labor,
7%; engineering and supervision, 10%

• major components subdivided as: fabricated equipment,

37%; process machinery, 14%; pipe, valves, and fittings,
20%; process instruments and controls, 7%; pumps and
compressors, 7%; electrical equipment and materials,
5%; structural supports, insulation and paint, 10%

• basis - 100 for 1957-1959

 Table 7.5. The Basis for the Chemical Engineering Plant Cost Index
Components of Index Weighting of Component (%)
Equipment, Machinery, and Supports
a. Fabricated equipment 37

b. Process machinery 14
c. Pipe, valves, and fittings 20
d. Process instruments and controls 7
e. Pumps and compressors 7
f. Electrical equipment and materials 5
g. Structural supports, insulation, and paint 10
100 61 % of total
Erection and installation labor 22
Buildings, materials, and labor 7
Engineering and supervision 10
Total 100
 Chemical Engineering Plant Cost Index from 1950 to 2008
700

600 y = 1E-07x6 - 0.0014x5 + 6.8648x4 - 17771x3 + 3E+07x2 - 2E+10x + 6E+12

R² = 0.9947

500

400

300

200

100

0
1950 1960 1970 1980 1990 2000 2010
Example 2

• Cost of vessel in 1993 was 25,000, what is

estimated cost today?

 Inow   575 
Cnow  C1993    25, 000  
 I1993   359 
 Example 3 - Accounting for Time and Size

• 2 heat exchangers, 1 bought in 1990 and

the other in 1995 for the same service
A B
Area = 70 m2 130 m2
Time= 1990 1995
Cost = 17 K 24 K

I = 358381
 Example 3 (cont’d)

• What is the Cost of a 80 m2 Heat

Exchanger Today ?

• Must First Bring Costs to a Common Time

 575 
A = 70 CA  2008   17    27
 358 

 575 
B = 130 CB  2008   24    36
 381 
 Example 3 (cont’d)

C  K An log  36   log  27 
n  0.6
27  K  70  log 130   log  70 
n

36  K 130 
n

C 27
K  n  0.46  3.74
A 70

C  3.74  80 
0.46
 28.7
 Total Cost of Plant

• Purchased cost – equipment f.o.b.

• Installed cost – Often 3 to 8 times larger
than purchased cost
 Installed Equipment Cost (Table 7.6)

• 1. Direct Project Expenses

– Equipment
– Material for installation
– Labor for installation

• 2. Indirect Project Expenses

– Freight, insurance, and taxes
– Construction overhead
– Contractor engineering expenses
 Installed Equipment Cost (cont’d)

• Contingency and Fee

– Contingency
– Contractor fee

• Auxiliary Facilities
– Site development
– Auxiliary buildings
– Off-sites and utilities
 Table 7.6. Factors Affecting the Costs Associated with Evaluation of Capital Cost of Chemical
Plants (from References [2] and [5])

Factor Associated Symbol Comments

with the Installation
of Equipment
1. Direct Project Expenses
a. Equipment CP Purchased cost of equipment at manufacturer’s site.
f.o.b. cost
(f.o.b. = free
on board)

b. Materials CM Includes all piping, insulation and fireproofing, foundations and

required for structural supports, instrumentation and electrical, and painting
installation associated with the equipment.

c. Labor to CL Includes all labor associated with installing the equipment and
install materials mentioned in (a) and (b).
equipment
and material

2. Indirect Project Expenses

a. Freight, CFIT Includes all transportation costs for shipping equipment and materials
insurance, to the plant site, all insurance on the items shipped, and any purchase
and taxes taxes that may be applicable.

b. Construction CO Includes all fringe benefits such as vacation, sick leave, retirement
overhead benefits, etc.; labor burden such as social security and unemployment
insurance, etc.; and salaries and overhead for supervisory personnel.
c. Contractor CE Includes salaries and overhead for the engineering, drafting, and
engineering project management personnel on the project.
expenses
 Table 7.6. Factors Affecting the Costs Associated with Evaluation of Capital Cost of Chemical
Plants (from References [2] and [5])

Factor Associated Symbol Comments

with the Installation
of Equipment
3. Contingency and Fee
a. Contingency CCont A factor to cover unforeseen circumstances. These may include loss of
time due to storms and strikes, small changes in the design, and
unpredicted price increases.
b. Contractor CFee This fee varies depending on the type of plant and a variety of other
fee factors.

4. Auxiliary Facilities
a. Site CSite Includes the purchase of land; grading and excavation of the site;
development installation and hookup of electrical, water, and sewer systems; and
construction of all internal roads, walkways, and parking lots.
b. Auxiliary CAux Includes administration offices, maintenance shop and control rooms,
buildings warehouses, and service buildings (e.g., cafeteria, dressing rooms, and
medical facility).
c. Off-sites COff Includes raw material and final product storage; raw material and final
and utilities product loading and unloading facilities; all equipment necessary to
supply required process utilities (e.g., cooling water, steam generation,
fuel distribution systems, etc.); central environmental control facilities
(e.g., waste water treatment, incinerators, flares, etc.); and fire
protection systems.
Equipment Costs

• Purchased cost Cpo is typically estimated

by an equation of form:
 K1  K 2 log10 A  K3 log10 A
2
log10 Cop
– where Ki are a series of constants associated
with the type of equipment being costed, and
– A is the capacity (independent variable) of the
unit
• Cpo is the base condition cost (i.e., for
carbon steel at atmospheric condition)
 Equipment Costs
Heat Exchanger K1 K2 K3
Fixed tube, sheet, or U tube 4.3247 -0.303 0.1634
Floating Head 4.8306 -0.8509 0.3187
Bayonet 4.2768 -0.0495 0.1431
Kettle Reboiler 4.4646 -0.5277 0.3955

10000000
fixed tube sheet
floating head
bayonet
kettle reboiler
1000000 K values taken from the
cost, U.S. $

CAPCOST® program

100000

10000
100 1000 10000
exchanger area (sq ft) (capacity, A)
Module Costing Technique

• The bare module cost CBMis the sum of the direct and indirect costs
associated with equipment purchase and installation.
• The bare module cost CBM can be found from the expression:

CBM = CP° FBM° = CP°(B1 + B2FMFp)

– CP° is the purchased cost of the base condition (most common material,
usually carbon steel, operating at ambient pressure)
– FBM° is a multiplicative factor called the bare module cost factor that
adjusts for all of the previously discussed costs, as well as for specific
materials of construction (FM) and for actual operating pressures (Fp).
– B1 and B2 are factors that are dependent on equipment-type.
– The superscript ° is used to denote base condition factor (i.e, carbon
steel and ambient pressure operation).
Pressure Factors
• A pressure factor Fp,vessel for a vessel of diameter D and
operating at pressure P (in units of bar) is based the
ASME code for pressure vessels.
• Assuming a maximum allowable carbon steel stress of
944 bar, a 90% weld efficiency, a minimum allowable
vessel thickness of ¼", and a corrosion allowance of ⅛"

P  1D  0.00315
2850  0.6P  1
Fp, vessel 
0.0063
• For pressures below -0.5 barg, Fp,vessel = 1.25
• For all other process
log10 Fp  C1  C2 log10 P  C3 log10 P
equipment, 2
Module Factor Approach –
Pressure Factors

Figure 7.6 Pressure Factors for Carbon Steel Vessels

Module Factor Approach –
Pressure Factors
 Material Factors

material FM .
carbon steel 1.0
stainless steel clad 1.7
stainless steel 3.1
nickel clad 3.6
nickel 7.1
titanium clad 4.7
titanium 9.4
 Direct Project Expenses

CDE = CP° + CM + CL
CDE = CP° (1 + M)(1 + L)
• Equipment f.o.b. cost CP°
– purchased cost of equipment at manufacturer's site (free on board)
• Materials required for installation CM = M CP°
– includes all piping, insulation and fire proofing, foundations and
structural supports, instrumentation and electrical, and painting
associated with the equipment.
• labor to install equipment &mat'l CL = L (CP° + CM) = CP° L (1 + M)
– all labor associated with installing the equipment and materials
Indirect Project Expenses

CIDE = CFIT + CO + CE
CIDE = CP° (1 + M) (FIT + LO + E)
• Freight, insurance, taxes CFIT = FIT(C0 + CM)
– includes all costs for shipping equipment and materials to the plant site
• Construction overhead CO = O CL
– includes fringe benefits, sick leave, vacation; labor burden such as
social security and unemployment insurance, etc.; and salaries and
overhead for supervisory personnel
• Contractor engineering expense CE = E (CP° + CM)
– includes salaries and overhead for engineering, drafting, and project
management personnel
Bare Module Cost

• Substitution and collection of like terms:

CBM° = CIDE + CDE
CBM° = CP° (1 + M) (1 + L + FIT + LO +
E)

• Sum of Direct and Indirect costs for a

process unit
Contingency and Fee

• A contingency factor covers unforeseen

circumstances (15% for well understood
systems)
CCont = ContCBM°
= CP° (1 + M) (1 + L + FIT + LO + ECont

• Contractor Fee (typically assumed to be 3%)

CFee = FeeCBM°
= CP° (1 + M) (1 + L + FIT + LO + EFee
Total Module Cost

• Total cost for purchase and installation of a

process unit, CTM
CTM= CBM° + CCont + CFee
CTM= CP° FBM + CP° Cont + CP° Fee

CTM= CP° (1 + M)(1 + L + FIT + LO+ E1 Fee + Cont)

 Table 7.8. Equations for Evaluating Direct, Indirect, Contingency, and Fee Costs

Factor Basic Equation Multiplying Factor to Be Used with Purchased

Cost,

1. Direct

a. Equipment 1.0

b. Materials αM

c. Labor (1.0 + αM)αL

Total Direct (1.0 + αM)(1.0 + αL)

2. Indirect

a. Freight, etc. (1.0 + αM)αFIT

b. Overhead CO = αOCL (1.0 + αM)αLαO

c. Engineering (1.0 + αM)αE

Total Indirect CIDE = CFIT + CO + CE (1.0 + αM)(αFIT + αLαO + αE)

Bare Module (1.0 + αM)(1.0 + αL + αFIT + αLαO + αE)

3. Contingency and Fee

a. Contingency (1.0 + αM)(1.0 + αL + αFIT + αLαO + αE)αCont

b. Fee (1.0 + αM)(1.0 + αL + αFIT + αLαO + αE)αFee

Total Module (1.0 + αM)(1.0 + αL + αFIT + αL αO + αE)(1.0 +

αCont + α Fee)
Bare Module Cost for nonbase
conditions

• Pressure Factors (FP) – calculated from expression specific to type

of vessel (see Appendix A)
• Materials of Construction Factors (FM) – simple mutiplicative factor
based on relative cost of material to base case material
– Carbon steel (base case)
– Low-alloy steel (low/moderate)
– Stainless steel, Aluminium and Copper and their alloys (moderate)
– Titanium and Nickel and their alloys (high)

CBM = CP° FP FM = CP° [FP FM (1+fP&I)+FBM°-1-fP&I]

where fP&I represents fraction of installation associated with piping and instrumentation
Grass Roots Cost (new site)

• Includes costs for site development,

auxiliary buildings, and off-sites and
utilities. Such facilities depend typically on
materials of construction and/or operating
pressure, and can range from 20 to 100%
of the base module cost. A value of 50%
is a good starting point to assume.
CGR = CTM + 0.5 CBM,i°
summation is performed over all n process units in the design
 CAPCOST®
• CAPCOST® is a Microsoft Excel
program for estimating bare module, total
module, and grass roots costs of complex
chemical plants.
 Lang Factors

• Table 7.7
• Use multiplier depending on type of plant to
escalate equipment costs to installed costs
• Flang= 4.74 Fluid processing plant
= 3.63 Solid-Fluid processing plant
= 3.10 Solid processing plant
Table 3.7. Lang Factors for the Estimation of Capital Cost for Chemical Plant
(from References [6, 7, 8])
Capital Cost = (Lang Factor)(Sum of Purchased Costs of All Major Equipment)

Type of Chemical Plant Lang Factor = FLang

Fluid processing plant 4.74

Solid-fluid processing plant 3.63

Solid processing plant 3.10

 Lang Factors (cont’d)

n
CTM  FLang  C pi
i 1

Total Module Cost Purchased Cost of Major Equipment

From Preliminary PFD
(Pumps, Compressors, vessels, etc.)
Algorithm for Calculating Bare Module Costs: The
following six-step algorithm is used to estimate actual bare
module costs for equipment from the figures in Appendix
A.
1. Using the correct figure in Appendix A (Figures A.1–
A.17), or the data in Table A.1, obtain for the desired
piece of equipment. This is the purchased equipment
cost for the base case (carbon steel construction and
near ambient pressure).

2. Find the correct relationship for the bare module factor.

For exchangers, pumps, and vessels, use Equation
A.4 and the data in Table A.4. For other equipment, the
form of the equation is given in Table A.5.
3. For exchangers, pumps, and vessels, find the
pressure factor, FP, Table A.2 and Equation A.2 or
A.3, and the material of construction factor, FM,
Equation A.4, Table A.3, and Figure A.18. Use
Equation A.4 to calculate the bare module factor,
FBM.
4. For other equipment find the bare module factor,
FBM, using Table A.6 and Figure A.19.
5. Calculate the bare module cost of equipment, CBM,
from Equation 7.6.
6. Update the cost from 2001 (CEPCI – 397) to the
present by using Equation 7.4.