CHAPTER I

CAPITAL ESTIMATE

1.1. Cost Index

Most cost data which are available for immediate use in a preliminary or

predesign estimate are based on conditions at some time in the past. Because price

may changes considerably with time due to changes in economic conditions, some

method can be used for updating cost data applicable at a past date to costs that are

representative of conditions at a later time. This can be done by using cost index.

Cost index is numerical values that reflect historical change in engineering

costs. The cost index numbers are dimensionless, and reflect relative price change in

either individual cost items such labor, material, utilities; or groups of costs such

consumer prices, producer prices. Indexes can be used to update historical costs with

the basic ratio relationship as follows;

C2=C1( I 2

I 1)

where,

C1 = Estimated cost at previous time (USD)

C2 = Cost at expected time (USD)

I1 = Index value at expected time (Year)

I2 = Index value at previous time (Year)

The index used is the Chemical Engineering (CE) Plant Cost Index. The data

is gotten from the CEPCI Online. However, the available data for 2015 is only for the

range year between 2004-2013. The Table 1.1 below shows the data for cost index

from 2004 to 2013.Table 1.0.1. Chemical Engineering’s Plant Cost Index

Year CEPCI2004 444.22005 468.22006 499.62007 525.42008 575.4

(Source: CPCEI Online, 2015)

Table 1.1. Chemical Engineering’s Plant Cost Index (Contined)

Year CEPCI2009 521.92010 550.82011 585.72012 584.62013 567.3

(Source: CPCEI Online, 2015)

Using the data above, we can projected annual cost index in year of 2018.

Projections made by the cost growth index, based on data annually. First, we can plot

it as Figure 1.1 below. Then , we get the equation y = 14.4 x – 28,389. So, for

estimate annual cost index in 2018, we can use that equation.

2002 2004 2006 2008 2010 2012 20140.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

f(x) = 14.3993939393939 x − 28388.8727272727R² = 0.773764589894395

Year

CEPC

I

Figure 1.0.1. Chemical Engineering’s Plant Cost Index Graphic (Source: CPCEI Online, 2015)

By extrapolating the data and graphic, we can get a cost index value of 670.2 on

2020, as stated in Table 1.2 below:

Table 1.0.2. Projection of Chemical Engineering’s Plant Cost IndexYear CEPCI2014 612.62015 627.02016 641.42017 655.82018 670.2

(Source: Author’s Personal Data, 2015)

1.2. Direct Cost

Direct cost is the cost that is experience depreciation in the equipments. Direct

is consist of total bare modul cost, bulk material cost (piping, valve, electrical,

instrumentation, installation etc), site development cost, building cost and offsite

facilities cost.

1.2.1. Total Bare Modul Cost

To obtain an estimate of the capital cost of a chemical plant, the costs

associated with major plant equipment must be known. The calculation of total bare

module cost is begun with the calculation of purchased equipment cost. FOB (Free

On Board) is the bases cost of the purchased equipment cost. This is based on the

parameter of each equipment. The parameters and the formula we can see in Process

and Product Design Principles by Seider exactly in the Table 16.32 or based on

current price quote from a suitable vendor.

Analyses of the total installed costs of equipment in a number of typical

chemical plants indicate that the cost of the purchased equipment varies from 65 to 80

percent of the installed cost depending upon the complexity of the equipment and the

type of plant in which the equipment is installed. In other case, we can use bare

modul factor on the FOB purchase cost of the process equipment that is shown in

Table 1.3 to estimate total installation cost of process equipment. When these cost are

added to the purchase cost, Guthrie call the result the bare module cost instead of the

installed cost.

Table 1.0.3. Bare Modul Factor of Guthrie

(Source: Seider et al, 2004)

Using the design specification for all equipment, the purchase cost can be

determined, and later converted into 2018 purchase cost using the cost index. The

overall calculation is summarized on Table 1.4.

Table 1.0.4. Total Bare Modul Factor Cost

No Equipment Code Equipment Name Qty. Price/Unit Total

PriceBare Module

FactorCTbm in 2018 Reference

A Filter1 F-101 Coarse Strainer 2 $51,100 $102,000 2.32 $403,200 Seider, 20032 F-102 Multi Media Filter 2 $36,000 $72,000 2.32 $284,100

B Deoxygenation Tower1 V-101 Deoxygenation Tower 1 $46,900 $46,900 4.16 $331,800 Seider, 2003

C Deaeration Vacuum Package1 M-101 Ejector 1 $5,600 $5,690 3.30 $18,500

Seider, 20032 P-102 Vacuum Pump 2 $133,500 $267,000 2.15 $574,1003 V-102 Deoxygenation Separator 1 $3,600 $3,600 4.16 $25,500

D Centrifugal Pump1 P-101 Seawater Lift Pump 1 $23,500 $23,500 3.30 $77,600

Seider, 20032 P-103 Booster Pump 1 $17,900 $17,900 3.30 $59,1003 P-104 Seawater Injection Pump 1 $167,000 $167,000 3.30 $551,100

E Reciprocating Pump

1 P-105 Oxygen Scavenger Dosing Pump 1 $8,700 $8,700 3.30 $28,700

Seider, 2003

2 P-106 Nitrate Dosing Pump 1 $9,700 $9,700 3.30 $32,0003 P-107 Biocide Dosing Pump 1 $8,700 $8,700 3.30 $28,700

4 P-108 Corrosion Inhibitor Dosing Pump 1 $6,000 $6,000 3.30 $19,800

5 P-109 Hypochlorite Dosing Pump 1 $3,400 $3,400 3.30 $11,200

(Source: Author’s Personal Data, 2015)

Table 1.4. Total Bare Modul Factor Cost (Con’d)

NoEquipment

CodeEquipment Name Qty. Price/Unit

Total Price

Bare Module Factor

CTbm in 2018 Reference

F Chemical Injection Tank

1 T-101 Oxygen Scavenger Tank 1$39,000 $39,000 1.41 $113,300

Wallas, 1990

2 T-102 Nitrate Tank 1$47,600 $47,600 1.41 $138,300

3 T-103 Biocide Tank 1$39,200 $39,200 1.41 $113,900

4 T-104 Corrosion Inhibitor Tank 1$44,800 $44,800 1.41 $130,100

5 T-105 Hypochlorite Tank 1$68,000 $68,000 1.41 $197,500

G Hypochlorite Generator

1 CH-101 Hypochlorite Generator 2$55,000 $110,000 2.00 $220,000 Alibaba, 2015

Total Bare Modul Cost $4,358,500

(Source: Author’s Personal Data, 2015)

1.2.2. Bulk Material Cost

Bulk material cost is consist of valve and instrumentation cost, piping and

fitting cost, electrical system, safety equipment, media filter cost and installation

cost. Instrumentation is the major part of the capital investment which actually

includes not only the instruments but also all auxiliries for a complete system.

Instrumentation costs may be calculated from divided type of instrumentation and

valve and also find price per unit of each equipment. Calculation for Instrumen-

tation and valve cost is shown in Tabel 1.5. Table 1.0.5. Instrumentation and Valve Cost

No Controller Note Qty. Price/Unit Total Price

1 Pressure Control

Pressure Transmitter

5 $101 $510

Pressure Indicator

5 $51 $260

2Pressure Control Valve

2" 2 $326 $6506" 3 $1,223 $3,670

3 Level ControlLevel Transmitter

1 $122 $120

Level Indicator 5 $39 $200

4Level Control Valve

6" 1 $1,223 $1,220

5 Flow Rate Control

Flow Rate Transmitter

7 $120 $840

Flow Rate Indicator

7 $51 $360

6Flow Rate Control Valve

1.5 " 4 $326 $1,3006" 3 $1,223 $3,670

7 Check Valve1.5" 4 $290 $1,1606" 2 $710 $1,420

8 Backwash Valve 6" 12 $609 $7,310

9Sludge Disposal Valve

6" 5 $609 $3,050

10 ESDV 6" 2 $4,974 $9,95011 Priority Panel   2 $7,260 $14,520

12Portable Smoke Detector

  3 $1,852 $5,560

Total $55,800(Source : Hayward, 2015)

The cost for piping covers pipe, fitting, supports, and other terms involved

in the complete erection of all piping used directly in the process. The cost of

piping depending upon the size of pipe or fitting and length of pipe. Calculation

for piping and fitting cost is shown in Tabel 1.6 and 1.7. Table 1.0.6. Piping Cost

Size (in)

Length (in)

Wall Thickness (in)

Mass (lb)

Mass (kg)

Price/tonTotal Price

1.5 59.06 0.21 34 15 $ 665 $10 6 236.22 0.86 2,213 996 $ 686 $680

10 393.70 1.51 10,791 4,856 $ 697 $3,390 Total $4,100

(Source : US Pipe, 2015)

Table 1.0.7. Fitting CostType Size (in) Qty. Price/ unit Total Price

Elbow 90o

1.5 35 $98 $3,4106 15 $184 $2,75010 8 $227 $1,810

Tee6 4 $22 $9010 2 $24 $50

Bend1.5 12 $85 $1,0206 6 $153 $92010 4 $188 $750

Total $10,800(Source : Hayward, 2015)

In ordinary chemical plants, the electrical installation consists of four

major components. Those are power wiring, lighting, transformation and service,

and instrument and control wiring. The complete installed cost of electrical may

be calculated that is shown in Tabel 1.8. Table 1.0.8. Electical System Cost

Requirement Qty. Unit Price/Unit Total PriceBuilding Lamp 10 Unit $20 $200Outdoor Lamp 8 Unit $20 $200Panel Distribution Lighting 1 Lot $1,707 $1,700Transformation, metering and protection system

1 Lot $36,321 $36,300

UPS + Battery 1 Lot $88,850 $88,900LV Switchboard 1 Lot $62,500 $62,500Cathodic Protection 1 Lot $25,500 $25,500

Total $215,300

In seawater injection plant, is used multi media filter to filter the solid

seawater. So we can estimate media filter that is used in multi media filter. The

type of media filter is antrachite, sand and garnet with volume that is shown in

Table 1.9. Media filter cost has been calculated and it shown in Tabel 1.9 with

volume and height in column that is gotten in sizing assignment.

Table 1.0.9. Media Filter Cost

Type Media

Height (m)

Volume (m3)

Density (kg/m3) Qty. Price per

ton Total Price

Antrachite 0.2 1.41 1,600 2 $190 $430Sand 0.5 3.53 2,650 2 $80 $700Garnet 0.2 1.41 4,200 2 $200 $1,200

Total $2,300(Source : Alibaba, 2015)

The other of bulk material cost that is used in seawater injection plant is

safety equipment such as APAR, safety sign and personal protective equipment.

And also, the installation cost like water installation, electrical installation and

hydrant installation is put in bulk material cost. Calculation for safety eqquipment

cost and installation cost is shown in Tabel 1.10 and 1.11.

Table 1.0.10. Safety Equipement CostType Qty. Price/ unit Total Price

APAR 25 Kg 2 $1,704 $3,410APAR 6 Kg 6 $370 $2,220Safety Sign 10 $200 $2,000PPE standard Oil & Gas (Safety Shoes, Safety Helm, Safety Glass, Ear Plug) 8 $148 $1,180

Total $8,800

Table 1.0.11. Installation CostInstallation Cost

Water Installation $8,500Electricity Installation $6,500Hydrants Installation $4,500

Total $19,500

1.2.3. Site Development cost

The site development costs consist of constructions for fencing, grading,

roads, sidewalks, railroad sidings, landscaping, and similar items. By following

Guthrie metodh, it can be estimate as an amount equivalent to 10-20 % of the total

bare module cost for grass plant root and equivalent 4-6 % of the total bare

module cost for brown plant root. In seawater injection plant, site development is

consist of prepare the steel platform for building modular deck. Cost of site

preparation of our plant can be seen at Table 1.12. Table 1.0.12. Site Development Cost

Type Area (m2) kg/m2 mass (kg) USD/ton Total Price

First Area

Floor 1 48 212.9 10,219 3,850 $39,300Floor 2 48 212.9 10,219 3,850 $39,300Floor 3 42 212.9 8,942 3,850 $34,400

Second Area

Floor 1 15 212.9 3,194 3,850 $12,300Floor 2 15 212.9 3,194 3,850 $12,300

Total $137,600(Source : Author’s Personal Data, 2015)

1.2.4. Building Cost

In estimating the cost for buildings, depend construction and existence of

plant site. Cost for plumbing, heating, lighting, ventilation, and similar building

services are list the erected unit costs of buildings and building components. But,

In our plant, there are no building like office, laboratory or station. So, building

cost in our plant is $0. Control room for our plant is joined with main control

room that in kerisi field platform and also the buliding for labor is joined in main

office in kerisi field platform.

1.2.5. Offsite FacilitiesCost

Offsite facilities include such as utilities for supplying steam, water,

power, compressed air, and fuel in an industrial plant. Waste disposal, fire

protection, and miscellaneous service items also are included under the general

heading of service facilities cost. In our plant, offsite facilities that is used is

power generator, cooling and process water and compressed air for instrument air.

The total cost for offsite facilities in chemical plants has been calculated and is

shown in Table 1.13.

Table 1.0.13. Offsite Facilities CostUtility Cost

Electricity (Power Generator) 2,694.54 kW 203 $/kW $547,000 Cooling Water 156.74 GPM 58 $/GPM $9,100 Process Water 2.22 GPM 247 $/GPM $500 Air Instrument Compressor Package  

1 Lot $25,000

Total $581,600 (Source : Author’s Personal Data, 2015)

1.3. Indirect Cost

Indirect cost is the cost that is not include depreciation in the investation or

equipments . Indirect is consist of engineering and supervisior cost, contruction

expenses, contractor fee and contingency cost.

1.3.1. Engineering and Supervisior Cost

The engineering costs, sometimes referred to home office costs or

contractor charges, include the costs of detailed design and other engineering

services required to carry out the project construction design and engineering,

drafting, purchasing, accounting, construction and cost engineering, travel,

reproductions, communica-tions. This cost is normally considered an indirect cost

in fixed capital investment and is approximately 8 percent of the total direct costs

of the process plant. The calculation of engineering and supervisior cost is shown

in Tabel 1.15.

1.3.2. Construction Expenses

Construction is the item else that is included into indirect plant cost and

consist temporary construction and operation, construction tools and rentals, home

office personnel located at the construction site, construction payroll, travel and

living, taxes and insurance, and other construction overhead. This expense item is

occasionally included under equipment installation, or more under engineering,

supervision, and construction. If construction or field expenses are to be estimated

separately, the construction expenses average roughly 10 percent of the total

direct costs. The calculation of contruction expenses is shown in Tabel 1.15.

1.3.3. Contractor Fee

The contractor’s fee depends upon the size, complexity, and location of

the plant. It may be estimated as being equivalent to 3 percent (Seider, 2004) of

total direct plant cost. The calculation of contractor fee is shown in Tabel 1.15.

1.3.4. Contingency Cost

Contingency charges are extra costs added into the project budget to allow

for variation from the cost estimate. In order to compesate for unpredictable

expense, minor process changes, price changes, and estimating errors, a

contingency charge is applied against the direct plant cost. It may be estimated as

being equivalent to 15 percent (Seider, 2004) of total direct plant cost with

average contingency. The cost of contingencies varies considerably, with 15 %

being a useful estimate when the design team is unable to make a better estimate.

The calculation of contingency cost is shown in Tabel 1.15.

1.4. Additional Cost

1.4.1. Royalties Cost

When a company desires to use a process that is covered by patents owned

by patent owned by another company , a license may sometimes be negotiated.

The license fee may be one time fee, in which case that fee is included in capital

investement as one time royalty or pay up license. In the absence of data, an initial

royalty fee of 2 % of total depreciable capital cost.

1.4.2. Plant Start Up Cost

Plant start up cost divided into two categories : (1) the costs incurred by

the contractor in checking equipment performance, calibrating, controller and

other plant equipment and commisioning the plant, and (2) those cost incurred by

plant operating personel when starting up and shutting down the plant. The cost of

plant start up is typically estimate as 10 % of total depreciable capital cost.

1.4.3. Supporting Facilities Cost

The supporting facilities costs consist of equipment that is used for labor

room like desk, chair, computer, etc. Calculation for supporting equipment cost is

shown in Tabel 1.4.

Table 1.0.14. Supporting Facilities CostEquipment Qty. Price / Unit Total Price

Office Desk 5 $111 $600 Office Chair 5 $67 $300 Air Conditioner 5 $370 $1,900 Locker 1 $259 $300 Computers 5 $630 $3,200 White Board 5 $56 $300 Cupboards 5 $150 $800 Telephone 5 $74 $400 Photocopy Machine 1 $1,000 $1,000 Fax Machine, Scanner and Printer 2 $370 $700

Total $9,500 (Source : Author’s Personal Data, 2015)

1.5. Working Capital

Working capital is needed to cover operating cost that required for early

operation of the plant. Includes cash cost of inventories, net accounts receivable,

spare parts or supplies, and cash-on-hand. The working capital for an industrial

plant consists of the total amount of money invested in raw materials and supplies

carried in stock, finished products in stock and semifinished products in the

process of being manufactured, accounts receivable, cash kept on hand for

monthly payment of operating expenses, such as salaries, wages, and raw-material

purchases, accounts payable, and taxes payable. In general, it will be found to be

amount equal to 15 % of the total capital investment cost (CTCI) or or 17.6 % of

total permanent investment cost (CTPI). The calculation of working capital cost is

shown in Tabel 1.15.

1.6. Calculation of Total Capital Investment

Total Capital Investment, CTCI, is total of total permanent investment (CTPI)

and working capital cost (CWC). However, total permanent investment (CTPI) is

total of total depreciable capital (CTDC) and additional cost like royalties and start

up cost. And also total depreciable capital (CTDC) is total of total direct cost

(total bare module, site development, buliding, and offsite facility cost) and total

indirect cost (engineering, contruction, contingency cost and contractor fee). The

calculation of total capital investment (CTCI) is shown in Table 1.15.

Table 1.15. Total Capital Investment

Type Cost Kind of Cost Symbol Cost Note

Direct Cost

Total Bare-Module Cost CTBM $3,358,500 Calculated Cost of Bulk Material CBulk $316,600 Calculated Site Development Cost Csite $137,600 Calculated Building Plant Cost CBuild $0 (no buliding office, etc) Offsite Facilities Cost Coffsite $749,500 Calculated

  Total Direct Permanent Investment CDPI $4,562,200 (CDPI = CTBM + Cbulk + Csite + Cbulid + Coffsite)

Indirect Cost

Engineering and Supervision Ceng $365,000 (8% CDPI) Construction Expense Ccontruction $456,200 (10% CDPI) Contingencies Cost Ccontingency $684,300 (15% CDPI) Contractor’s Fee Ccontractor $136,900 (3 % CDPI)

  Total Depreciable Capital CTDC $6,201,600 (CTDC = CDPI + Ceng + Ccontruction + Ccontingency + C contractor)

Additional Cost

Royalties Cost Croyal $124,100 (2% CTDC) Plant Start Up Cost Cstartup $620,500 (10% CTDC)

  Supporting Facilities Cost Csupport $9,500 Calculated   Total Permanent Investment CTPI $6,945,700 (CTPI = CTDC + Croyal + Cstart up)

Working Capital

Working Capital CWC $1,222,700 (CWC = 17.6 % CTPI)

Total Capital Investment CTCI $8,183,400 (CTCI = CTPI + CWC) (Source : Author’s Personal Data, 2015)

1.7. Capital Cost Breakdown

Total capital investment breakdown is shown in Figure 1.2. Based on

Figure 1.2, direct cost with pencentage of 56 % is the highest cost in capital cost.

The other cost like indirect cost, additional cost and working capital cost have

percentage value of 20 %, 9 % and 15 %.

Figure 1.0.2. Total Capital Investment Breakdown (Source : Author’s Personal Data, 2015)

Direct cost and Indirect cost breakdown is shown in Figure 1.3 and Figure

1.4. Based on Figure 1.3, Total bare modul cost with pencentage of 74 % is the

highest cost in direct cost. Based on Figure 1.4, contingency cost with pencentage

of 42 % is the highest cost in indirect cost.

Figure 1.0.3. Direct Cost Breakdown(Source : Author’s Personal Data, 2015)

Figure 1.4. Indirect Cost Breakdown (Source : Author’s Personal Data, 2015)