Capital Cost Estimating Q&A

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Capital Cost Estimating Q&A

Note to Reader This presentation was prepared for the purposes of answering questions from the prior year. This years version may look substantially different.

Question 1 “What exactly is a ‘factored equipment estimate’ ?“
What’s a “base cost”, “bare module cost” and what’s included in the latter? What factors are applied to get a total estimate of the plant? What do these factors take into account?

From Equipment Price to DFC Estimate
Direct Field Cost (DFC) Direct Field Labour (DFL) Indirect Field Cost (IFC) Home Office Engineering Total Project Cost (ITC) Allowances 0.25 x DFC 1.0 to 1.6 x DFL Equipment Purchase Price Equipment Factor “Off Sites” Cost DIRECT FIELD COSTS Equipment Cost bulk materials & labour to install off-sites (pipe racks, rail spurs …) INDIRECT FIELD COSTS engineering, freight, insurance, overhead CONTINGENCY AND FEES first fill of plant, taxes, duties escalation Tanks and Vessels Columns and Trays Pumps and Compressors Exchangers Heaters TOTAL PROJECT COST x Factors Plus Off Sites, ie Piperacks,Rail Spurs, Tank Farms etc Direct Field Cost

Estimate Equipment Cost DIRECT FIELD COSTS
bulk materials (piping, valves, instruments) & labour to install off-sites (pipe racks, rail spurs …) INDIRECT FIELD COSTS engineering, freight, insurance, overhead, const supervision CONTINGENCY AND FEES first fill of plant, taxes, duties escalation TOTAL PROJECT (CAPITAL) COST

Method 1: Lang Factored Estimate
Total Capital Cost = Flang * (Sum Of Purchased Cost of Equipment) Flang = for fluid processing plant

Method 2: Equipment Cost Factor
Direct Field Cost (DFC) Direct Field Labour (DFL) Allowances Indirect Field Cost (IFC) Home Office Engineering Total Project Cost (ITC) 0.25 x DFC 1.0 to 1.6 x DFL Equipment Purchase Price X Equipment Factor “Off Sites” Cost 1.18 x

From Equipment Price to “Direct Field Cost”
x Factors Tanks and Vessels Columns and Trays Pumps and Compressors Exchangers Heaters Plus Off Sites, ie Piperacks,Rail Spurs, Tank Farms etc

Rail Spurs Office Bldg Pipe Racks Cooling Tower Rail Car Loading Steam Boilers Fire Water Sys Nitrogen Plant Inside Battery Limits

Equipment Factor EQUIPMENT FACTOR MODULE COST PURCHASE COST

Equipment Factors Shop Fab. Vessels Compressors Exchangers
Fired Heaters Pumps Material Handling Equipment

X Equipment Factor Direct Field Cost (DFC) Direct Field Labour (DFL)
Allowances Indirect Field Cost (IFC) Home Office Engineering Total Project Cost (ITC) 0.25 x DFC 1.0 to 1.6 x DFL Equipment Purchase Price X Equipment Factor “Off Sites” Cost 1.18 x

Method 3: The CAPCOST Approach
Equipment Parameters (Pressure, MOC, Size, Hp …) “Base Cost” = Purchase Cost of Equipment - in Carbon Steel and 0 barg Which One Do We Want? Bare Module Factor = f (Factorpressure, Factormaterial) BARE MODULE COST (Directs and Indirects) - installed equipment in actual materials and actual pressure Module Factor = 1.18 MODULE COST OF PLANT - for expansion to an existing Plant -contingency 15%, fees 3% CHEE 470 Stops Here Grass Roots Factor = 1.30 GRASS ROOTS COST OF PLANT - infrastruction (utilities, off-sites aux. Buildings, product storage, loading and unloading facilities ...)

Determine Equipment Cost
Note: Price for Carbon Steel Construction and 0 Bar(g) Fixed Tube exch with 28 m2 = \$6500 Convert To Today’s \$’s using the CEPCI value

Factor to Today’s Cost \$6500 * (1999 CECPI / 1996 CECPI) = today’s cost \$6500 x (390.6 / 381.7) = \$6650 in 1999

Pressure Factor (Fp) Pressure Factor Fp = 1.14

Material Factor (Fm)

Bare Module Factor FBM Fp Fm 1.14 x 3 = 3.42 Therefore FBM = 7
Bare Module Cost = Base Cost x FBM = \$6650 x 7 = \$46,550 Nowhere is the purchased cost of the equipment (at design press and materials)

Module Cost Of Plant Add Contingency and Fees (building permits, environmental permits etc.) Module Cost = 1.18 S (of Bare Module Cost for all equipment) Module Cost = 1.18 x \$46,550 = \$ 54,900

Question 2 What is a capital cost?

Capital Cost What’s “Capital ?”
Capital is the money required to build a plant or facility It’s separated from “Expense” money because of the Tax implications imposed by Revenue Canada, IRS, etc.

Facility Timeline Facility Creation Facility Operation Conceptual
Engineering Detailed Engineering & Construction Start-up Capital \$ Expense \$ Expense \$ Expense \$ - Operating Expenses -Depreciation Capital Cost

Capital vs Expense Once the plant is running ‘Expenses’ are small items or costs which are incurred yearly, or have about a 1 year life. i.e. Software, Office supplies, wages, advertising, heat, lighting, ... When Calculating Yearly Income Subtract your Expenses From Your Income

Capital vs Expense ‘Capital’ are expensive items or items which have more than a year of life. i.e. House, lawnmower, TV, computer, chemical plant equip, first fill of chemicals Revenue Canada etc. only allow you to subtract a % of the Capital every year to account for the wearing out of the facility (depreciation). This is called the “Capital Cost Allowance”

Capital vs Expense Capital Cost Allowance ( CCA )
Works Like a Bank Account Revenue Canada allow a % of the remaining asset value to be claimed Remaining Asset Value Time (years)

CCA Classes

Taxable Income Income That’s Taxable (Net Income)
Taxable Income = Income - Expenses CCA Can’t use CCA if Expenses are greater than Income (can’t use CCA to claim a loss) CCA can be ‘banked’ for later years where profit is occurring

CCA

Capital - The Point Capital is only allowed to be ‘depreciated’ over years and thus it’s ability to minimize taxable income is limited. Expenses are claimed in the year they’re paid. They’re better for minimizing your taxes. The Games People play

The Capital Cost Estimate
The tax implications of Capital money requires that you know how much Capital was spent on any asset. The business financial analysis (NPV etc.) requires that you know the Capital Cost and the Operating Cost well ahead of actually spending any significant amounts of money.

Capital Cost Estimate Summary:
The cost to initially build the facility which will be depreciated over time.

Question 3 -CAPCOST - arrggh!
“When our tube/shell design pressures are below those which CAPCOST recognizes, do we simply take the minimum CAPCOST pressure and size on that basis?”

Off The Shelf Items ASME Code
Piping, Valves, Pumps and most equipment have been standarized in design pressures of the connecting Flange Standards are called 150, 300, 600, 900, 1500, 2500 “lb” flange ratings. A 150lb rating  150 psig rating, temperature is important in the ultimate strength of the item Along with standard flanges are standard pipe wall thickness (Sch 40, Sch 80 etc.) ASME Code

Flange Rating

Heat Exchanger Standards
TEMA - Tubular Exchanger Manufacturers Association dictates minimum requirements for exchanger mechanical design Legislation does not require TEMA standards be used.

ASME- Pressure Vessel Standards
ASME Code It started in Chicago after a major explosion in a shoe factory that had a boiler. The boiler explosion caused the government to start regulating pressure vessels (including boilers). A tool for regulating manufacturers of pressure vessels, heating exchangers, and piping, not pumps, not compressors (no rotating equipment)

ASME- Pressure Vessel Standards
Since the explosion in Chicago codes were developed for the guidance in the calculation of pressure vessels, tables of metal strength vs temp Safety factor of 4 has historically been applied to the mechanical strength of metal, recently (this year) it was reduced to 3.5

ASME Code Sections I - Power Boilers
II - Materials (properties i.e. allowable stresses) III - Nuclear Power Plants IV - Heating Boilers V - Non Destructive Examination VII - Guidelines for the Care and Operation of Heating Boilers IX - Welding and Brazing Qualifications X - Fiber-Reinforced Plastic Pressure Vessels XI - Rules for Inservice Inspection of Nuclear Power Plant Components

Minimum Design and CAPCOST
Allowing CAPCOST to choose a minimum makes sense since the manufacturer would do the same.

Question 4 - Unknown Equipment
To size the reactor cooling jacket do we send you our data? Is there significant expense in the jacket? Jacket cost is about \$35,000 for the reactor.

CAPCOST - User Added Eq. Treat as an additional piece of equipment
Bare Module factor is irrelevant

Question 5 - Storage Tanks
How do you do the costing for the cone roof storage tanks?

\$239,000 Multiply by 2 to get “bare module cost”

Question 5 -Agitator “How can we account for the agitator (shaft, seal + motor) cost in our estimate?”

Reactor Diagram

Agitator Costs \$65,000 Multiply by 3.0 to get “bare module cost” in CAPCOST

The Final Screen