Annuals

Increasing the chosen value of process energy consumption also increases all temperature differences available for heat recovery and hence decreases the necessary heat exchanger surface area (see Fig. 6.6). The network area can be distributed over the targeted number of units or shells to obtain a capital cost using Eq. (7.21). This capital cost can be annualized as detailed in App. A. The annualized capital cost can be traded off against the annual utility cost as shown in Fig. 6.6. The total cost shows a minimum at the optimal energy consumption. 

MW) Annual hot utility cost (10 yr ) Otnin arw) Annual cold utility cost (10 yr ) NETWORK vn) UNITS Annualized capital cost (10 yr ) Annualized total cost d0 yr )... 

Annualized heat exchanger capital cost = capital cost x — ... 

Annualized network capital cost = A uNiTsf 10,552 + network)... 

The total annualized cost at the optimal setting of the capital/energy tradeoff is... 

Townsend, D. W., and Linnhoff, B., Surface Area Targets for Heat Exchanger Networks, IChemE Annual Research Meeting, Bath, U.K., 1984. 

EP = value of products - raw materials costs - annualized capital cost - energy cost... 

Yee, T. F., and Grossmann, I. E., A Simultaneous Optimization Approach for the Synthesis of Heat Exchanger Networks, Paper 81d, Annual AIChE Meeting, Washington, 1988. 

There can be an element of maintenance costs that is fixed and an element which is variable. Fixed maintenance costs cover routine maintenance such as regular maintenance on safety valves which must be carried out irrespective of the rate of production. There also can be an element of maintenance costs which is variable. This arises from the fact that certain items of equipment can need more maintenance as the production rate increases. Also, royalties which cover the cost of purchasing another company s process technology may have different bases. Royalties may be a variable cost, since they can sometimes be paid in proportion to the rate of production. Alternatively, the royalty might be a single-sum payment at the beginning of the project. In this case, the single-sum payment will become part of the project s capital investment. As such, it will be included in the annual capital repayment, and this becomes part of the fixed cost. 

The preceding definitions of economic potential and total annual cost can be simplified if it is accepted that they will be used to compare the relative merits of difierent structural options in the flowsheet and difierent settings of the operating parameters. Thus items which will be common to the options being compared can be neglected. 

The cost of the capital depends on its source. The source of the capital often will not be known during the early stages of a project, and yet there is a need to select between process options and carry out preliminary optimization on the basis of both capital and operating costs. This is difficult to do unless both capital and operating costs can be expressed on a common basis. Capital costs can be expressed on an annual basis if it is assumed that the capital has been borrowed over a fixed period (usually 5 to 10 years) at a fixed rate of interest, in which case the capital costs can be annualized according to... 

Take the capital cost and spread it as a series of equal annual payments A made at the end of each year over n years. The first payment gains interest over (n — 1) years, and its future value after (n - 1) years is... 

The future worth of the second annual payment after (n - 2) years is... 

As stated previously, the source of capital is often not known, and hence it is not known whether or not Eq. (A. 10) is appropiiate to represent the cost of capital. Equation (A. 10) is, strictly speaking, only appropriate if the money for capital expenditure is to be borrowed over a fixed period at a fixed rate of interest. Moreover, if Eq. (A. 10) is accepted, then the number of years over which the capital is to be annualized is unknown, as is the rate of interest. However, the most important thing is that even if the source of capital is not known, etc., and uncertain assumptions are necessary, Eq. (A. 10) provides a common basis for the comparison of competing projects. 

Example A.4.1 The purchased cost of a distillation column is 1 million, and the reboiler and condenser are 100,000. Calculate the annual cost of installed capital if the capital is to be annualized over a 5-year period at a fixed rate of interest of 5 percent. 

When using annualized capital cost to carry out optimization, the designer should not lose sight of the uncertainties involved in the capital annualization. In particular, changing the annualization period can lead to very different results when, for example, carrying... 

Time is taken into account by discounting the annual cash flow Acf with the rate of interest to obtain the anitual discounted cash flow -Adcf- Thus, at the end of year 1,... 

The sum of the annual discounted cash flows over n years SAdcf is known as the net present value (NPV) of the project ... 

We have paid particular attention to industrial processes and have tried to give some indication of the use of particular chemicals. In order to give some idea of the relative magnitudes of production we have included data on annual production. In this, because of availability of data, we have not been entirely consistent in including common data or common units. (World, U.S. or European production figures are used as seem most appropriate or up-to-date - and it must be remembered that for most speciality chemicals U.S. production is dominant.)... 

Biedermann, J.M., J.-P. Peries and J. Bousquet (1987), SOLVAHL an attractive way to provide conversion units with high quality feedstocks . National Petroleum Refiners Association (NPRA) paper No. AM-87-41, Annual meeting, San Antonio, TX. 

Maier, C.E., P.-H. Bigeard, A. Billon and P. Dufresne (1988), Boost middle distillate yield and quality with a new generation of hydrocracking catalyst . NPRA paper No. AM-88-76, Annual meeting, San Antonio, TX. 

Keywords deterministic methods, STOllP, GllP, reserves, ultimate recovery, net oil sands, area-depth and area-thickness methods, gross rock volume, expectation curves, probability of excedence curves, uncertainty, probability of success, annual reporting requirements, Monte-Carlo simulation, parametric method... 

The annual reporting requirements to the US Securities and Exchange Commission (SEC) legally oblige listed oil companies to state their proven reserves. 

The cost of implementing CAO depends of course on the system installed, but for a new field development is likely to be in the order of 1 -5% of the project capital expenditure, plus 1-5% of the annual operating expenditure. 

Minimum risk estimates are sometimes used to quantify either maximum exposure in monetary terms or, in the case of an annual work plan containing multiple projects, to help determine the proportion of firm projects. Firm projects are those which have budget cover even if costs overrun. A minimum risk estimate is one with little or no probability of overrun, and can be used to reflect the risk associated with very complex or novel projects. 

For any one case, say the base case, the project cashflow is constructed by calculating on an annual basis the revenue items (the payments received by the project) and then subtracting the expenditure items (the payments made by the project capex, opex and host government take). For each year the balance is the annual cash surplus (or cash deficit). Flence, on an annual basis... 

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