Cost estimation detailed

When an oil or gas field has just been discovered, the quality of the information available about the well stream may be sparse, and the amount of detail put into the process design should reflect this. However, early models of the process along with broad cost estimates are needed to progress, and both design detail and cost ranges narrow as projects develop through the feasibility study and field development planning phases (see Section 12.0 for a description of project phases). 

The capital cost estimates are generated by the Engineering function, often based on 50/50 estimates (equal probability of cost overrun and underrun). It is recommended that the operating expenditure is estimated based on the specific activities estimated during the field lifetime (e.g. number of workovers, number of replacement items, cost of forecast manpower requirements). In the absence of this detail it is common, though often inaccurate, to assume that the opex will be composed of two elements fixed opex and variable opex. 

Factor Methods. A more detailed product cost estimation method is to relate manufacturing cost items to a few calculated items, such as raw materials, labor, and utihties by means of simple factors (1,2). Internal accounting groups often develop factors to use with this method. This factor method is very popular. 

Cooling Water System. A list of cooling duties will be available at this point so the cost estimate for this system can be factored or estimated based on a similar operating system. For a more definitive estimate based on initial or detailed layout, it is probably best to use a contractor or consultant skilled in these designs. If a cooling tower is involved, the groundwork will already have been set. This basis can be passed along on specification sheets provided in the Appendix to a vendor for quotes. 

Detailed Cost Estimate Unit Cost Ion Exchange Com- ments RO Comments... 

Process economics is an essential element of a good design procedure. The objective of this appendix is to provide an overview of basic concepts in cost estimation and economics of chemical processes. For more details, the reacker is referred to Humphreys and Wellman (1996), Peters and Timmerhaus (1991), Garrett (1989) and Ulrich (1984). 

The team will develop a detailed plan, including timetable and cost estimates. In the meantime, it is estimated that the process, from start through pilot testing, will require about 120 staff-months over a period of approximately 18 months, including time from corporate division and facility personnel. A more rigorous estimate will be made before we move into PSM system development. 

Undertaking a PSM initiative will requite time, staffpower, and funding— direct and/or indirect. The task team s first priority will be to develop a detailed plan for the Core Management Group s review and approval, including specific schedules and cost estimates. 

Prepare rough cost economics, including preliminary sizing and important details of equipment, factor to an order of magnitude capital cost estimate [34] (see also [19]), prepare a production cost estimate, and work with economic evaluation representatives to establish a payout and the financial economics of the proposed process. 

Because of the magnitude of the task of preparing the material for this new edition in proper detail, it has been necessary to omit several important topics that were covered in the previous edition. Topics such as corrosion and metallurgy, cost estimating, and economics are now left to the more specialized works of several fine authors. The topic of static electricity, however, is treated in the chapter on process safety, and the topic of mechanical drivers, which includes electric motors, is covered in a separate chapter because many specific items of process equipment require some type of electrical or mechanical driver. Even though some topics cannot be covered here, the author hopes that the designer will find design techniques adaptable to 75 percent to 85-1- percent of required applications and problems. 

Estimates were made by Uhlig in the USA. Worner in Australia, and Vernon in the UK, in which the cost of protection and prevention were added to the cost of deterioration due to corrosion. These early estimates were made by individual scientists from cost information from new major industries scaled up to a national level, and were of the order of 1-1.5% of GNP. More detailed estimates were subsequently made by the Committee on Corrosion and Protection (the Hoar Committee) in the UK, and Payer etal. for the National Bureau of Standards in the USA. The later estimates were around 3.5-4% of GNP, the higher figure reflected factors not covered in the earlier surveys, which were, moreover, based on organisations which had probably already taken action to minimise their corrosion costs. Estimates have since been made for other European countries which tend to confirm the higher figure. 

For a more detailed treatment of the subject the reader should refer to the numerous specialised texts that have been published on cost estimation. The following books are particularly recommended Happle and Jordan (1975) and Guthrie (1974), Page (1984), Garrett (1989). 

Capital cost estimates for chemical process plants are often based on an estimate of the purchase cost of the major equipment items required for the process, the other costs being estimated as factors of the equipment cost. The accuracy of this type of estimate will depend on what stage the design has reached at the time the estimate is made, and on the reliability of the data available on equipment costs. In the later stages of the project design, when detailed equipment specifications are available and firm quotations have been obtained, an accurate estimation of the capital cost of the project can be made. 

The accuracy and reliability of an estimate can be improved by dividing the process into sub-units and using factors that depend on the function of the sub-units see Guthrie (1969). In Guthrie s detailed method of cost estimation the installation, piping and... 

The cost estimates prepared for the treatment technologies commonly used in this industry are described below in a brief fashion. More details of the factors considered in the cost analysis are available in the source.6... 

It should be emphasized that capital cost estimates using installation factors are at best crude and at worst highly misleading. When preparing such an estimate, the designer spends most of the time on the equipment costs, which represents typically 20 to 40% of the total installed cost. The bulk costs (civil engineering, labor, etc.) are factored costs that lack definition. At best, this type of estimate can be expected to be accurate to 30%. To obtain greater accuracy requires detailed examination of all aspects of the investment. Thus, for example, to estimate the erection cost... 

This book applies a systems philosophy to the preliminary process design and cost estimation of a plant. In doing so, it tries to keep in perspective all aspects of the design. There is always a tendency on the part of designers to get involved in specific details, and forget that their job is to produce a product of the desired quality and quantity, at the lowest price, in a safe facility. What is not needed is a technological masterpiece that is difficult to operate or costly to build. 

The major disadvantage of this method is that no cost information has been published and so anyone wanting to use it must develop his own data. This is time-consumming and hence expensive. Once data are developed, this method could produce more accurate results than any except the detailed cost estimate. 

In the detailed design stage, everything must be specified. Each phase of the preliminary design must now be done in much more detail. The flow sheets develop into piping and instrument diagrams. The duty requirements for a piece of equipment become a specification sheet. The layout drawings may be replaced by a scale model, and a construction bid or detailed cost estimate is obtained to verify the previous cost estimate. 

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