Cost estimation study

A key aspect in most cost estimation studies is the evalutUion of the cost of individual pieces of equipment. In addition to quotations from equipment manufacturers, there are several methods for developing cost estimates. For a typical conceptual design, it is normally acceptable to develop an order of magnitude or preliminary estimate whose accuracy is within -h/— 25 to 50%. The following methods may be employed to develop order of magnitude estimates ... 

Having defined and gathered data adequate for an initial reserves estimation, the next step is to look at the various options to develop the field. The objective of the feasibility study is to document various technical options, of which at least one should be economically viable. The study will contain the subsurface development options, the process design, equipment sizes, the proposed locations (e.g. offshore platforms), and the crude evacuation and export system. The cases considered will be accompanied by a cost estimate and planning schedule. Such a document gives a complete overview of all the requirements, opportunities, risks and constraints. 

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). 

Alcohol Production. Studies to assess the costs of alcohol fuels and to compare the costs to those of conventional fuels contain significant uncertainties. In general, the low cost estimates iadicate that methanol produced on a large scale from low cost natural gas could compete with gasoline when oil prices are around 140/L ( 27/bbl). This comparison does not give methanol any credits for environmental or energy diversification benefits. Ethanol does not become competitive until petroleum prices are much higher. 

Hydroformylation catalyzed by rhodium triphenylphospine results in only the 9 and 10 isomers in approximately equal amounts (79). A study of recycling the rhodium catalyst and a cost estimate for a batch process have been made (81). 

The most common approach to fixed cost estimation iavolves the use of a capital recovery factor to give the annual depreciation and return on capital. This factor typically is between 15 and 20% of the total capital investment. Property taxes are taken as 1—5% of the fixed capital and iasurance is assumed to be 1—2% of the fixed capital. If annual depreciation is estimated separately, it is assumed to be about 10% of the fixed capital investment. The annual iaterest expense is sometimes neglected as an expense ia preliminary studies. Some economists even beHeve that iaterest should be treated as a return on capital and not as part of the manufactufing expense. 

Types and Accuracy of Estimates Capital-cost estimates may be required for a variety of reasons, among others to enable feasibility studies to be carried out, to enable a manufacturing company to select from alternative investments, to assist in selection from alternative designs, to provide information for planning the appropriation of capital, and to enable a contractor to bid on a new project. It is therefore essential to achieve the greatest accuracy of estimation with a minimum expenditure of time and money. 

For prehminary screening and easibility studies or for rough cost estimates, one may wish to employ a version of the isothermal method which assumes that the liquid temperatures in the tower are everywhere equal to the inlet-liquid temperature. In their analysis of packed-tower designs, von Stockar and Wilke [Ind. Eng. Chem. Fun-dam. 16, 89 (1977)] showed that the isothermal method tended to underestimate the reqmred depth of packing by a factor of as much as 1.5 to 2. Thus, for rough estimates one may wish to employ the assumption that the temperature is equal to the inlet-liquid temperature and then apply a design fac tor to the result. 

From a survey of early 1982, prices of a number of widely used types of process filter were collated by Hall and coworkers [Chem. Eng., 89(7), 80 (1982)]. These data are drawn together in Fig. 18-137, updated to 1995 prices. They have a claimed accuracy of 10 percent, but they should be used confidently only with study-level cost estimations ( 25 percent) at best. Cost of deliveiy to the plant can be approximated as 3 percent of the FOB price [Pikulik anciDiaz, Chem. Eng., 84(21), 106(1977)]. 

Following development of the study direction, the evaluation describes the efforts of obtaining and validating process information, and then discusses equipment specifications and a cost estimate of the feasibility or budget type i.e., with plant costs factored from major material. Finally, project economics and financing complete the evaluation. 

In addition to being useful for side studies, the process specification sheets can be used as a file to capture the latest thinking for each individual unit of major material for cost estimation and final design. Vendor quotes are expedited if data is provided to them on standard-type process specification sheets. 

In-house or outside environmental experts should be brought into the study at an early stage. By having these people in "on the ground floor, feasibility analysis, cost estimates, and environmental impact studies will be more accurate with fewer surprises later in the project. 

Since the studies under discussion have cost estimates factored from major material, secondary systems at this stage have relatively smaller impact than later when more definitive cost estimates are done. At this stage, it is well to gain a feel for the completeness of the licensor s design with respect to secondary systems. 

Safety Systems. Major expenditures here include the flare system (the flare structures and large lines extending throughout the plant) and the iirevvater system (high-capacity pumps and extensive piping). Safety systems, fortunately, are usually given particular attention. At this study phase, the main thrust should be to check the completeness of licensor equipment lists for cost estimation purposes. 

Capital estimates are the heart and soul of all project Justification and feasibility studies. Inaccuracies can cause serious harm to a company as well as to the engineer making the mistake. With the flow of a project from its inception to construction, many cost estimates are made. Each new estimate is based on more data, and should be more accurate. 

The Rand Corp., "New Study Provides Key to Better Cost Estimates," Chemical Engineering, Feb. 9, 1981, p. 41. 

Water quality must be studied as well as quantity. Chemical and bacteriological examination will indicate the extent of treatment required and will aid in the development of water cost estimates for comparison with other locations. The possible contamination of the water source by other industries in the area should be anticipated. Note that "contamination" may consist of raising the temperature of the water to a level that renders its use as a cooling medium impossible. 

Comparisons between Enropean stndies are also difficult. Tolley and Gyldmark (1993) reviewed costs of treatment, care, and support for HIV-positive and AIDS patients in eleven Enropean conntries, which were based on data from the second half of the eighties. The anthors inflated cost fignres to 1990 prices and converted them from local currency to US by using national healthcare-specific price indices and health-specific purchasing power parities. The standardized cost estimates ranged between US 1,700 (social care per HIV-positive) and US 28,200 (hospital care per AIDS person-year), with the exception of a Greek study, which produced an adjusted cost estimate for the hospital treatment and care of AIDS patients of US 70,400 per person-year. 

If the trial is planned through the services of a contract research company, their estimate should include a time and cost accounting which specifies the exact services they will perform for the trial. Services not included are the responsibility of the Study Director and sponsor. When contracting out a field residue study, the contractor s cost estimate will only be a part of the total cost to the sponsor. Make sure that costs... 

The initial goal of the preliminary process study is to obtain an economic evaluation of the process, with the minimum expenditure of time and money. During this stage, all information necessary to obtain a reasonably accurate cost estimate for building and operating the plant is determined. It is expected that these costs will be within 10% of the actual costs. 

CASE STUDY CAPITAL COST ESTIMATION FOR A 150,000,000 LB/YR POLYSTYRENE PLANT USING THE SUSPENSION PROCESS... 

Case Study Capital Cost Estimation Cost of Equipment... 

The EDS II test program includes testing and design studies needed for a preliminary design of a full-scale pilot plant, a preliminary hazard analysis, development of a full-scale cost estimate, and a schedule for construction and operation of a facility employing the AEA technology. 

In another report, James and Kalinoski [4] performed an estimation of the costs for a direct hydrogen fuel cell system used in automotive applications. The assumed system consisted of an 80 kW system with four fuel cell stacks, each with 93 active cells this represents around 400 MEAs (i.e., 800 DLs) per system. The study was performed assuming that the DL material used for both the anode and cathode sides would be carbon fiber paper with an MPL. In fact, the cost estimate was based on SGL Carbon prices for its DLs with an approximate CEP value of around US 12 m for 500,000 systems per year. Based on this report, the overall value of the DLs (with MPL) is around US 42.98 per kilowatt (for current technology and 1,000 systems per year) and 3.27 per kilowatt (for 2015 technology and 500,000 systems per year). Figure 4.2 shows the cost component distribution for this 80 kW fuel cell system. In conclusion, the diffusion layer materials used for fuel cells not only have to comply with all the technical requirements that different fuel cell systems require, but also have to be cost effective. 

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