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Capital Cost Estimating Q&A. Note to Reader n This presentation was prepared for the purposes of answering e-mail questions from the prior year. This.

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Presentation on theme: "Capital Cost Estimating Q&A. Note to Reader n This presentation was prepared for the purposes of answering e-mail questions from the prior year. This."— Presentation transcript:

1 Capital Cost Estimating Q&A

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

3 Question 1 n What exactly is a factored equipment estimate ? n Whats a base cost, bare module cost and whats included in the latter? n What factors are applied to get a total estimate of the plant? n What do these factors take into account?

4 Estimate TOTAL PROJECT COST From Equipment Price to DFC n Tanks and Vessels n Columns and Trays n Pumps and Compressors n Exchangers n Heaters x Factors Plus Off Sites, ie Piperacks,Rail Spurs, Tank Farms etc Plus Off Sites, ie Piperacks,Rail Spurs, Tank Farms etc Direct Field Cost 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 0.25 x DFC Equipment Purchase Price Equipment Factor Off Sites Cost DIRECT FIELD COSTSDIRECT FIELD COSTS Equipment CostEquipment Cost bulk materials & labour to installbulk materials & labour to install off-sites (pipe racks, rail spurs …)off-sites (pipe racks, rail spurs …) INDIRECT FIELD COSTSINDIRECT FIELD COSTS engineering, freight, insurance, overheadengineering, freight, insurance, overhead CONTINGENCY AND FEESCONTINGENCY AND FEES first fill of plant, taxes, dutiesfirst fill of plant, taxes, duties escalationescalation

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

6 Method 1: Lang Factored Estimate Total Capital Cost = F lang * (Sum Of Purchased Cost of Equipment) F lang = 4.74 for fluid processing plant

7 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 0.25 x DFC Equipment Purchase Price X Equipment Factor Off Sites Cost 1.18 x

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

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

10 Equipment Factor EQUIPMENT FACTOR MODULE COST PURCHASE COST

11 Equipment Factors n Shop Fab. Vessels n Compressors n Exchangers n Fired Heaters n Pumps n Material Handling Equipment 2.0 - 2.5 1.5 - 2.5 1.7 - 2.5 2.5 - 3.5 1.5 - 3.0

12 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 0.25 x DFC Equipment Purchase Price X Equipment Factor Off Sites Cost 1.18 x

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

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

15 Factor to Todays Cost $6500 * (1999 CECPI / 1996 CECPI) = todays cost $6500 x (390.6 / 381.7) = $6650 in 1999

16 Pressure Factor (F p ) Pressure Factor F p = 1.14

17 Material Factor (F m )

18 Bare Module Factor F BM F p F m 1.14 x 3 = 3.42 Therefore F BM = 7 Bare Module Cost = Base Cost x F BM = $6650 x 7 = $46,550 Nowhere is the purchased cost of the equipment (at design press and materials)

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

20 Question 2 n What is a capital cost?

21 Capital Cost n Whats Capital ? –Capital is the money required to build a plant or facility n Its separated from Expense money because of the Tax implications imposed by Revenue Canada, IRS, etc.

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

23 Capital vs Expense n 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,... n When Calculating Yearly Income Subtract your Expenses From Your Income

24 Capital vs Expense n 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 n 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

25 Capital vs Expense n 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)

26 CCA Classes

27 Taxable Income n Income Thats Taxable (Net Income) Taxable Income = Income - Expenses - CCA Cant use CCA if Expenses are greater than Income (cant use CCA to claim a loss) CCA can be banked for later years where profit is occurring

28 Small Business Tax- Revenue

29 Small Business Tax - Expenses CCA

30 Capital - The Point n Capital is only allowed to be depreciated over years and thus its ability to minimize taxable income is limited. n Expenses are claimed in the year theyre paid. Theyre better for minimizing your taxes. n The Games People play

31 The Capital Cost Estimate n The tax implications of Capital money requires that you know how much Capital was spent on any asset. n 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.

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

33 Question 3 -CAPCOST - arrggh! n 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?

34 Off The Shelf Items n Piping, Valves, Pumps and most equipment have been standarized in design pressures of the connecting Flange n 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.)

35 Flange Rating

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

37 ASME- Pressure Vessel Standards n 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)

38 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

39 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

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

41 Question 4 - Unknown Equipment n 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 reactorJacket cost is about $35,000 for the reactor.

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

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

44 User Added - Storage Tanks $239,000 Multiply by 2 to get bare module cost

45 Adding Storage Tank

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

47 Reactor Diagram

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

49 The Final Screen


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