Economic evaluations

Economic evaluation is an assessment of the probable benefit or reward of a proposed course of action, relative to other choices. Although the benefit usually takes the form of a financial return, in environmental management, transportation (qv), health care, and other social areas, the benefit may be a social gain instead. Some method is then developed to translate the social gain into a monetary equivalent. The discussion herein is limited to the financial return expected from some type of production or service activity. 

The problem is defined during process development as information becomes available and decisions are made. Initially, the definition is limited, vague, and brief and economic analysis involves a high level of uncertainty. As the project evolves, the definition becomes more complete, more highly specific, and lengthier. At the same time, the economic assessment tends to exhibit less uncertainty. 

Whenever an economic evaluation is undertaken, a corresponding problem definition should be provided as the basis on which the evaluation is made. This definition, sometimes called an economic scope, should clearly differentiate between specifications that have actually been selected and features that have been assumed for the evaluation. In a comparison of alternatives, all of the assumptions, data, and conditions must be consistent, reaUstic, and devoid of bias. 

The three general types of cost estimates needed are equipment cost, capital investment cost, and product cost. Equipment cost estimates are needed as part of the capital investment estimate, which indicates the amount of money that is needed to start the venture. Both of these estimates are reflected in the product cost estimate, which is important to both management and marketing groups. 

Equipment Costs. Equipment costs include the purchased cost of process and materials handling equipment, storage faciUties, waste treatment equipment, stmctures, and site service faciUties. Installation costs such as insulation, piping, painting and finishing, foundations, process stmctures, instmmentation, and electrical service connections are estimated or factored separately. Actual quoted prices from suppHers are the best data, but these are not usually available when estimates are made. The quick, inexpensive cost estimates are based largely on personal cost files, internal company cost data, or pubUshed cost correlations. 

THE ECONOMIC evaluation of a chemical plant covers a wide range of topics. The scope is much too broad to allow inclusion of a detailed description in this short section, indeed entire books have been written on this topic alone. Sections 6.2 to 6.4 contain brief notes covering the main topics to be considered in the introductory stages (feasibility study) of a design project. 

Several excellent reference sources are available, those written by and for chemical engineers are especially useful. The most prominent text in this field is by Peters and Timmerhaus, 1980 (see reference in Appendix L here). The following chapters, containing over 200 pages, are included in that text  

Cost and Asset Accounting presents a survey of accounting 

Cost Estimation provides information regarding the estimation 

Taxes and Insurance taxes represent a significant payment from a 

The research on the liquefaction of waste polymers and the coprocessing of waste plastics with vacuum residue or coal has been a subject of study by many groups at universities and environmental agencies. A significant amount of effort and funds are being diverted to develop process technology in order to convert mixed plastics waste from municipal 

This section deals with the economic evaluation of the conversion of mixed plastics waste (MPW) into synthetic crude (syncrude) oil and coprocessing of MWP with vacuum residue into syncrude. In their feasibility study, Ali and co-workers considered the process technology developed by Veba Oel AG of Germany the Veba Combi-Cracking (VCC) option for the processing of MPW [31], The process data and economic data were taken mainly from Dijkema and Stougie [32] and Huffman and Shah [33] for this study. All the cost data were translated to represent the economic analysis for Saudi Arabian conditions. 

It is estimated that solid wastes in cities of Saudi Arabia constitute approximately 15 wt% of total solid wastes. It is estimated that around 600000 ton/yr of plastics are being consumed in Saudi Arabia. This gives an estimated amount of 90 000 ton/yr of plastic waste. 

The estimated cost of erecting a MPW processing facility in Saudi Arabia is estimated to be US 47790000 to process 100000 ton/yr MPW or to produce 73 600 ton/yr of synthetic crude oil. The price of syncrude oil is taken as 155 per ton. 

The production cost of syncrude oil is estimated to be 179 per ton from a 100 000 ton/yr MPW (only) processing facility. An additional cost of 24 per ton is required to process MPW in a 100000 ton/yr facility. However, if the capacity of the plant is increased to 200000 ton/yr, the production cost decreases to 125 per ton thereby making the project slightly profitable with a return on investments (ROI) of 5.4% per year. 

---

The project cashflow forms the basis of the economic evaluation methods which will be described. From the cashflow a number of economic indicators can be derived and used to judge the attractiveness of the project. Some of the techniques to be introduced allow the economic performance of proposed projects to be tested against investment criteria and also to be compared with alternative investments. 

So far, the economics of developing discovered fields has been discussed, and the sensitivity analysis introduced was concerned with variations in parameters such as reserves, capex, opex, oil price, and project timing. In these cases the risk of there being no hydrocarbon reserves was not mentioned, since it was assumed that a discovery had been made, and that there was at least some minimum amount of recoverable reserves (called proven reserves). This section will briefly consider how exploration prospects are economically evaluated. 

Mark Cook is a Reservoir Engineer and Petroleum Economist. He has worked on international assignments mainly in Tanzania, Oman, the Netherlands and the UK. His main focus is in economic evaluation of field development projects, risk analysis, reservoir management and simulation. After 11 years with a multinational company he co-founded TRACS International of which he is Technical Director. 

Econo Foam Economic evaluation EcoO EcoRl EcoRI Ecostatin... 

Cost Calculation. The main elements determining production cost are identical for fine chemicals and commodities (see Economic evaluation), a breakdown of production cost is given in Table 2. In multipurpose plants, where different fine chemicals occupying the equipment to different extents are produced during the year, a fair allocation of costs is a more difficult task. The allocation of the product-related costs, such as raw material and utiHties, is relatively easy. It is much more difficult to allocate for capital cost, labor, and maintenance. A simplistic approach is to define a daily rent by dividing the total yearly fixed cost of the plant by the number of production days. But that approach penalizes the simple products using only part of the equipment. 

Economic evaluations of algal production indicate that production costs vary from 0.15 to 4.00/kg of algal product, depending on type of bioreactor, culture technique, and operating conditions (51). For systems with controlled agitation and carbonation, including raceways and tubular reactors, production costs ate estimated to range from 2.00 to 4.00/kg. 

M. E. Frank and B. K. Schmid, "Economic Evaluation and Process Design of a Coal—Oil—Gas (COG) Refinery," paper presented at Symposium on Conceptual Plantsfor the Production of Synthetic Fuels From Coal, AIChE 65th Annual Meeting, New York, Nov. 26, 1972. 

M. Ikura andj. F. Kelly, "A Techno-Economic Evaluation of CANMET Coprocessing Technology," Proceedings Annual International Pittsburgh Coal Conference, 1990, pp. 719—728. 

The choice of catalyst is based primarily on economic effects and product purity requirements. More recentiy, the handling of waste associated with the choice of catalyst has become an important factor in the economic evaluation. Catalysts that produce less waste and more easily handled waste by-products are strongly preferred by alkylphenol producers. Some commonly used catalysts are sulfuric acid, boron trifluoride, aluminum phenoxide, methanesulfonic acid, toluene—xylene sulfonic acid, cationic-exchange resin, acidic clays, and modified zeoHtes. 

D. M. Jenkins and T. S. R Bdry,Economic Evaluation of the MIT Process for Manufacture DSE-3992-T1, National Technical Information... 

An estimate of total product cost is an important part of economic evaluation and management planning. Total product cost can be viewed as the sum of the manufacturing cost and the general expense. 

---