ChE 735: Refining Processes, Chapters 17: Cost Estimation

ChE 735: REFINING PROCESSES
CHAPTER 17
Cost Estimation
RELATED KNOWLEDGE AREAS
• Refining economics
• Investment analysis
• Refinery audits (?)
• (Corporate) performance control
• Competitor analysis (e.g., Porter’s model)
• Strategic planning
• Asset valuation
• Market issues
INSTRUCTIONAL OBJECTIVES
CONTENTS
Levels of Cost Estimation
Economic Evaluation Models for Technology Adoption
INTRODUCTION
LN
HN
C3C4
K
LD
HD
ATR
HT3
HTD
PPQN
PDIN
PFO1A
VD1
PDA
DAO
VGO
FCC
LCO
ASFR
DO
PGLN
PGLP
C3C4
CRAN
CDU
FCC
Petroleum
Petroleum
Petroleum
VR
Figure x. Superstructure of a typical refinery (simplified) (Neiro & Pinto, 2004)
1
ChE 735: Refining Processes, Chapters 17: Cost Estimation
LEVELS OF COST ESTIMATION
Levels of Accuracy for Capital Cost Estimates of Industrial Plants
• Rule-of-thumb estimates
• Cost-curve estimates
• Major equipment factor estimates
• Definitive estimates
Rule-of-Thumb Estimates
• Useful for quick estimates
• Accurate to only about t 50%
Complete coal-fired power plant: $2 500 per kW
Complete synthetic ammonia plant: $200 000 per ton/day
Complete petroleum refinery: $25 000 per barrel/day
Cost-Curve Estimates
• Takes into account relationship to plant capacity:
Cost Plant #2 Capacity Plant #2
Cost Plant #1 Capacity Plant #1
n
| `
·

. ,
• Average value of 0.6 for the exponent (i.e., n = 0.6)
 Can vary from 0.5 for small units to 1.0 for large units
• Generally can predict costs within t 25% to 50%
Major Equipment Factor Estimates
• Capacity factors applied to major units
 Different factors for different units
 Requires heat and material balances
• Requires base cost estimates for all types of units
 Equipment costing software: ICARUS (ASPEN Technology)
• Can predict costs within t 10% to 20%
Definitive Estimates
• Very detailed and accurate cost estimates
• Requirements:
 Detailed process flowsheets: P&ID (Process and Instrumentation Diagrams)
 Plot plans (i.e., plant layout diagrams)
2
ChE 735: Refining Processes, Chapters 17: Cost Estimation
 Preliminary construction diagrams—may use scale models
• Indirect field costs also estimated
 Crane rentals
 Tool costs
 Construction supervision
ESCALATION OF COST DATA
• Adjust cost estimates for inflation
• Cost index numbers available
 e.g., Chemical Engineering Plant Cost Index (CEPCI) (published by the Chemical Engineering
magazine)
 Marshall & Swift
Chemical Engineering Plant Cost Index (CEPCI)
1990 357.6
1991 361.3
(diagram)
ITEMS FOR DETAILED COST ESTIMATES
• Process units
• Storage units
• Steam systems
• Cooling water systems
• Offsites
• Special costs
• Location factor
• Contingency
Storage Units
• Tank farm requires significant investment
• Includes tanks, piping, transfer umps, dikes
1
, etc.
• Rough costs:
 Low vapour pressure (gasoline and heavier): $60–80 per barrel storage
 Butane: $90–120 per barrel
 Propane: $100–130 per barrel
Utilities
• Steam
 Gas or oil fired heater
 250–300 psig
1
Long walls or embankments built to prevent flooding from the sea
3
ChE 735: Refining Processes, Chapters 17: Cost Estimation
 Water treating, deaerating, feed pumps, yard piping, condensate
 $150 per lb/hr
• Cooling water
 Induced draft cooling towers, water pumps, water treating, water piping
 Daily power requirements: kWh/day = 0.6 × gallon per minute (gpm)
 Makeup about 5% of usage
 $150 per gpm
• Others included in offsites (i.e., facilities required in a refinery that are not included in the costs of
major facilities)
 Electric power distribution
 Instrument air
 Drinking water
 Fire water
 Sewers
 Waste collection (Yusuf?)
 Fuel oil and fuel gas facilities
 Water supply, treatment, and disposal
 Flare, drain, and waste containment
 Plant communications systems
 Roads and walks
 Railroads
 Fence
 Buildings
 Vehicles
 Product and additive blending facilities
 Product loading facilities
Contingencies
• Covers unexpected costs, cost data inaccuracies, etc.
• At least 15%
Plant Location
• Adjustments for local climate, design requirements, construction conditions, etc.
Location Factor for Relative cost Remark
US Gulf Coast 1.0
Los Angeles 1.4
Portland & Seattle 1.2
Chicago 1.3
St. Louis 1.5
Detroit 1.3
New York 1.7 (construction condition?)
Philadelphia 1.5
Alaska, North Slope 3.0 (climate)
Alaska, Anchorage 2.0 (climate)
COST ESTIMATION CASE STUDY/EXAMPLE
4
ChE 735: Refining Processes, Chapters 17: Cost Estimation
(Gary and Handwerk (1994), pp. 359–373)
For the following example of a simplified refinery, calculate
1. the products available for sale;
2. investment;
3. operating costs;
4. simple rate of return on investment;
5. true rate of return on investment.
Also, prepare a basic block flow diagram (Figure 15.1). The following data are available:
1. Crude charge rate 30 000 BPSD (barrel per stream day)
2. Crude oil sulfur content 1.0 wt%
3. Full-range naphtha in crude 4000 BPSD
240°F medium boiling point (MBP)
56° API gravity
11.8 Kw
4. Light gas oil in crude 4000 BPSD
5. Heavy gas oil in crude 4000 BPSD
6. Vacuum gas oil in crude 6000 BPSD
7. Vacuum residual in crude 12 000 BPSD
8. On-stream factor 93.15%
9. Cost of makeup water $0.20/1000 gal
10. Cost of power $0.03/kWh
11. LHV of heavy gas oil 5.5 MMBtu/bbl
12. Replacement cost for desulfurizer catalyst is $1.00/lb
13. Replacement cost for reformer catalyst is $5.00/lb
14. Insurance annual cost if 0.5% of plant investment
15. Local taxes annual cost is 1.0% of plant investment
16. Maintenance annual cost is 5.5% of plant investment
17. Miscellaneous supplies annual cost is 0.15% of plant investment
18. Average annual salary plus payroll burden for plant staff and operators is $60 000
19. Value of crude oil and products at refinery is:
$/bbl
Crude oil 17.00
Gasoline 25.00
Light gas oil 24.00
Heavy gas oil 22.50
Vacuum gas oil 22.00
Vacuum residual 16.50
20. Depreciation allowance 15 years; straight-line
21. Corporate income tax 50% of taxable income
22. Location St. Louis, Missouri
23. Construction period 1992
24. Escalation rate (applicable to construction costs only) is 5% per year
5
ChE 735: Refining Processes, Chapters 17: Cost Estimation
Desalter
Crude
Distillation
Crude Oil
30 000 BPD
Vacuum
Distillation
Catalytic
Reformer
Hydrodesulfurizer
(HDS)
Vacuum Gas Oil
6000 BPD
Light Gas Oil, 4000 BPD
Heavy Gas Oil, 4000 BPD
Reformed Gasoline
2730 BPD 3000 BPD
Naphtha
4000 BPD
H
2
Makeup Fuel Gas
Vacuum Residual
12 000 BPD
18 000 BPD
Light Straight Run Gasoline
1000 BPD
H2S
561 lb/day
FIGURE 1. Block flow diagram for the case study
Process Requirements
The crude oil is to be desalted and fractionated to produce full-range naphtha, light gas oil, heavy gas oil,
and “atmospheric bottoms”. The latter cut is fed to a vacuum unit for fractionation into vacuum gas oil and
vacuum residuals. The full-range naphtha is to be hydrodesulfurized. After desulfurization, the light
straight-run (LSR) portion (i.e., the material boiling below 180°F) of the full-range naphtha is separated for
blending into the gasoline product. The balance of the naphtha is fed to a catalytic reformer that is operated
to produce a reformate having a research octane number (clear) of 93. This reformate plus the LSR are
mixed to make the final gasoline product. Propane and lighter hydrocarbons, including the hydrogen, which
are produced in the catalytic reformer, are consumed as fuel. The necessary hydrogen makeup for the
hydrodesulfurizer is, of course, taken from these gases before they are burned as fuel. The balance of the
fuel requirement is derived from light gas oil. The hydrogen sulfide produced in the hydrodesulfurizer is of
relatively small amount and is burned in an incinerator. No other product treatment is required. It can be
assumed that sufficient tankage for approximately 12 days storage of all products is required. The total
storage requirement will thus be approximately 360 000 barrels.
The above information, in addition to that contained in Gary and Handwerk (1994), is sufficient for the
solution of the problem.
Yield Calculations
Catalytic Reformer
Calculate properties of feed to reformer. Given total naphtha stream properties as follows:
• mid-boiling point = 240°F,
• API gravity = 56°API,
• Kw = 11.8.
The material boiling below 180°F, that is, the LSR is not fed to the reformer. After desulfurizing the total
naphtha, the LSR is fractionated out. The problem is to estimate the volume and weight of the LSR
assuming that a distillation curve is not available. This LSR is then deducted from the total naphtha to
compute the net reformer feed. The calculations are outlined in the following steps:
6
ChE 735: Refining Processes, Chapters 17: Cost Estimation
1. Assume that butane and lighter hydrocarbons in the naphtha are negligible. Thus, the lightest material
would be isopentane (i-C5) with a boiling point of 82°F. Hence, the mid-boiling point of the LSR would
be approximately ( )
1
180 F 82 F 131 F
2
° + ° · ° .
2. Assume that the LSR has the same Kw as the total naphtha, i.e., 11.8.
3. From the general charts
2
relating Kw, the mean average boiling point, and gravity, determine the gravity
of the LSR. This is 76.5°API.
4. The gravity of the naphtha fraction boiling above 180°F is next determined by a similar procedure. The
mid-boiling point for the total naphtha is given above as 240°F, and the initial boiling point was
estimated in Step 1 as 82°F. Therefore, the naphtha end point can be estimated as the following:
(240°F) + (240°F − 82°F) = 398°F
Now, the approximate mid-boiling point of the reformed feed is estimated as:
( )
1
180 F 398 F 289 F
2
° + ° · °
Using a Kw of 11.8, the reformer feed gravity is found (as in Step 3) to be 52.5°API.
5. With the above estimates of gravity of both the LSR and the reformer feed, it is now possible to estimate
the relative amounts of each cut that will exist in the total naphtha stream. This is done by weight and
volume balances as shown below. Using simplified nomenclature as the following:
VLSR = volume in gallons of LSR,
VRF = volume in gallons of reformer feed,
VN = volume in gallons of total naphtha,
WLSR = weight in pounds of LSR,
WRF = weight in pounds of reformer feed,
WN = weight in pounds of naphtha,
lb/gal LSR = 5.93 (67.5°API),
lb/gal RF = 6.41 (52.5°API),
lb/gal N = 6.29 (67.5°API),
Volume balance (hourly basis):
( )
N
LSR RF
42 gal
4000 BPCD 7000
24 h
gal
7000
h
V
V V
| `
· ·

. ,
⇒ + ·
(1)
Weight balance (hourly basis):
2
See for example, Maxwell (1950).
7
ChE 735: Refining Processes, Chapters 17: Cost Estimation
N
gal
lb
6.29 7000
gal
V
| `
·

. ,
lb
6.29
h gal
| `


. ,
( ) ( )
LSR RF
lb
44 030
h
lb lb lb
5.93 6.41 44 030
gal gal h
V V
| `
·

. ,
| ` | `
⇒ + ·

. , . ,
(2)
Simultaneous solution of the two equations for (VLSR) and (VRF) gives:
LSR
gal
1750 1000 BPD
h
V · · (2)
RF
gal
5250 3000 BPD
h
V · · (2)
6. The above information should then be tabulated as shown in Table 1, to ascertain that all items balance.
Stream °API lb/gal gal/hr lb/hr BPD
Light straight-run (LSR) 67.5 5.93 1750 10 378 1000
Reformer feed (RF) 52.5 6.41 5250 33 652 3000
Total naphtha 7000 44 030 40000
7. Before proceeding, it should be emphasized that the above methods for approximating the naphtha split
into LSR and reformer feed are satisfactory for preliminary cost and yield computations such as this
example, but not for final design calculations.
8. The reformer feed properties can now be used with the yield curves in Gary and Handwerk (1994). The
following yields are based on production of 93 RON reformate. From the yield curves:
vol%
5
C
+
86.0
vol% C4’s 5.0 (iC4/nC4 = 41.5/58.5)
wt% C1, C2 1.1
wt% C3 1.92
wt% H2 1.75
With the above data, complete the following table.
Component gal/h lb/gal lb/h BPD Mscf/day
H2 589 2 682
C1, C2 370 145
a
C3 153 4.23 646 133
iC4 109 4.69 511 62
nC4 154 4.86 748 88
5
C
+
4 515 6.82 30 788
b
2 580
Total 33 652 2 730 2 960
Feed 5 250 6.29 33 652 3 000 −
a
Assume lb C1/lb C2 = 0.5 (i.e., C1, C2 = 23.3 mol wt)
b
lb/h
5
C
+
obtained by difference from total feed less other products
8
ChE 735: Refining Processes, Chapters 17: Cost Estimation
Naphtha Desulfurizer
Assume crude oil contains 1.0%S.
Then, from curve for miscellaneous crudes,
naphtha contains 0.05% S (240°F MBP)
Calculate amount of sulfur produced. Assume Kw for desulfurized feed is 11.8. This combined with 240°F
MBP gives a naphtha gravity of 56°API (see reformer calculations).
56°API = 6.29 lb/gal
wt S in naphtha = SN
( ) ( ) ( ) ( )
N
lb
S 4000 42 6.29 0.0005 528
day
· ·
maximum of H2S formed = 32 × 528 = 561 lb/day
2
theoretical H S required 561 528
lb mol Mscf
33 16.5 6.26
day day day
· −
· · ·
Makeup H2 required is about 100 to 150 scf/bbl
3
or
4000 × 0.15 = 600 Mscf/day
Hydrogen from catalytic reformer is 2 682 Mscf/day, which is more than adequate.
TABLE 1. Summary of investment costs and utilities
Item BPSD
1992 G. C.,
$ (× 10
3
)
Cooling Water
(CW), gpm
Steam,
lb/hr
Power,
kW
Fuel,
MMBtu/hr
Desalter 30 000 1 800 83 20
Crude unit 30 000 27 000 3 125 12 500 1 125 63
Vacuum unit 18 000 14 500 1 875 7 500 225 23
Naphtha
desulphurizer
4 000 6 600 833 1 000 133 17
Reformer 3 000 11 000 1 250 3 750 375 38
Initial catalyst
(desulfurizer)
(included)
Initial catalyst
(reform)
600
Subtotal 61 500 7 166 24 750 1 878 141
Cooling water
system, 8 240 gpm
a
824 206
Steam system,
30 900 lb/hr
b
2 472 37
Subtotal 64 796 7 166 24 750 2 084 178
Storage
c
12 days
d
18 000
Subtotal 82 796
Offsites
c
(30%) 24 839
Subtotal 107 635
Location factor 1.4
Specifications cost
factor
1.04
e
Contingency 1.15
e
Escalation (1.05)
2
Total 198 697
f
3
Data taken from Nelson, W. L. Oil & Gas Journal 70 (1972), 49: 260–xxx.
9
ChE 735: Refining Processes, Chapters 17: Cost Estimation
Note:
Values shown are to be multiplied by 1000 when noted as $(×10
3
).
a
Add 15% excess capacity to calculated cooling water circulation.
b
Add 25% excess capacity to calculated steam supply.
c
Individual values for utilities in the storage and offsite categories are accounted for by notes a and b.
d
360 000 barrels at average cost of $50.00/bbl.
e
These factors are compounded.
f
This is the projected cost at the location in St. Louis in 1994. No paid-up royalties are included.
Calculation of Direct Annual Operating Costs
After completing the investment and yield calculations, the annual operating costs of the refinery can be
determined. Operating costs can be considered to include three major categories:
1. costs that vary as a function of plant throughput and on-stream time—these include water makeup
to the boilers and cooling tower, electric power, fuel, running royalties, and catalyst consumption;
2. costs that are a function of the plant investment—these include insurance, local taxes, maintenance
(both material and labour), and miscellaneous supplies;
3. costs that are determined by the size and complexity of the refinery—these include operating,
clerical, technical, and supervisory personnel.
The following section illustrates development of the aforementioned costs.
On-Stream Time
Refineries usually have an on-stream (full capacity) factor of about 92 to 96%. For this example, a factor of
93.15% (340 days per year) is used.
Water Makeup
1. To cooling tower (30°F ▲t):
1% evaporation for 10°F ▲t
0.5% windage loss
1% blowdown to control solids concentration
Cooling tower makeup = ( ) ( ) 3 1% 0.5% 1% 4.5% × + + ·
Makeup = 0.045 × 8240 gpm = 371 gpm
2. To boiler:
Average boiler blowdown to control solids concentration can be assumed to be 5%.
Boiler makeup = 0.05 × 30 900 = 1545 lb/hr = 3.1 gpm
Total makeup water = 374 gpm
Average cost to provide makeup water is approximately $0.20/1000 gallons.
Therefore, annual water makeup cost is
160 × 1440 × 340 × (0.20 × 10

3
) = $36 620.
Power
Industrial power costs range from $0.025/kWh (in locations where there is hydroelectric power) to
$0.06/kWh. For this example, use $0.03/kWh.
10
ChE 735: Refining Processes, Chapters 17: Cost Estimation
( )
24 hour
Power cost 2084 ·
1 day
340 day
| `


. ,
( )
kW
0.03
h
510 163.2 per year
510 160/ year
| `

. ,
·

Fuel
In this example, no separate charge will be made for fuel, since it is assumed that the refinery will use some
of the heavy gas oil products for fuel.
The amount of gas oil consumed must be calculated, so that this quantity can be deducted from the products
available for sale.
From the summary tabulation of utilities, we require 178 MMBtu/hr for full-load operation.
This fuel is supplied by combustion of reformer “off-gas” supplemented with heavy gas oil.
Some of the reformer off-gas is consumed in the hydrodesulfurizer and this quantity (hydrogen portion
only) must be deducted from available fuel.
A fuel balance is made as shown below to determine the amount of heavy gas oil consumed as fuel.
Step 1
From reformer calculations, the available fuel gas is:
TABLE 2. Available fuel gas from reformer calculations
Component Total
(lb/hr)
HDS* usage
(lb/hr)
Available for fuel (lb/hr)
= Total (lb/hr) – HDS usage (lb/hr)
H2 589 13
2
457
C1 123 0 123
C2 246 0 246
C3 646 0 646
1 604 13
2
1 472
*From hydrodesulfurizer (HDS) calculations, hydrogen makeup was 600 Mscfd (million standard cubic
feet per day).
In the petroleum industry, “standard conditions” are 60 °F and 14.696 psia.
At these conditions, 1 pound mole = 379.5 scf. Thus, hydrogen consumed in the HDS unit is:
scf
600 Mscfd 600 000
day
600 000 scf
day
·
·
1 lb mole
379.5 scf
1 day
2
2 lb H
24 hr 1 lb mole
2
H
lb
131.752 305 7
hr
·
Step 2
Calculated lower heating value (LHV) of available fuel gas is:
11
ChE 735: Refining Processes, Chapters 17: Cost Estimation
TABLE 3.
Component
Total
(lb/hr)
LHV*
(Btu/lb)
LHV (btu/hr)
= Total (lb/hr) × LHV (Btu/lb)
LHV
(MMBtu/hr)
H2 457 51 600 23 581 200 23.6
C1 123 21 500 2 644 500 2.6
C2 246 20 420 5 023 320 5.0
C3 646 19 930 12 874 780 12.9
1 472 44.1
*From Maxwell (1950) or Perry et al. (1997)
Step 3
Heavy gas oil required for fuel is computed by assuming 5.5 MMBtu/bbl LHV:
( ) ( ) 178 MMBtu/hr 44.1 MMBtu/hr
133.9 MMBtu
5.5 MMBtu/bbl

·
hr
bbl
5.5 MMBtu
24 hr
1 day
bbl
584.290 909 1
day
bbl
584
day
·

Step 4
Heavy gas oil remaining for sale = (4000 bbl/day) – (584 bbl/day) = 3416 BPSD
Royalties
The reformer is a proprietary process, therefore, royalties must be paid. On a “running” basis, these range
from $0.08 to $0.15 per barrel of feed. For this example, we use a value of $0.10.
Reformer: $0.10/bbl feed
$0.10
Annual cost
bbl
·
bbl
3000
| `

. ,
stream day g
340 day
| `


. ,
( )
1
$102 000 stream

·
Catalyst Consumption
The cost of catalyst consumption are as follows:
Desulfurizer: 0.002 lb/bbl; $1.00/lb

$1.00
Annual cost
lb
·
bbl
4000
| `

. ,
stream day g
340 day
| `


. ,
( )
lb
0.002
bbl
| `

. ,
= $2 720/stream⋅ year
Reformer: 0.004 lb/bbl; $5/lb

$5.00
Annual cost
lb
·
bbl
3000
| `

. ,
stream day g
340 day
| `


. ,
( )
lb
0.004
bbl
| `

. ,
= $20 400/stream⋅ year
Total catalyst cost: $23 120/stream⋅ year
12
ChE 735: Refining Processes, Chapters 17: Cost Estimation
Insurance
This cost usually makes up 0.5% of the plant investment per year:
0.5% × $198 697 000/year = $993 485/year
Local Taxes
This cost usually constitutes 1% of the plant investment per year:
1.0% × $198 697 000/year = $1 986 970/year
Maintenance
This cost varies anywhere between 3% and 8% of plant investment per year.
For this example, we use an average value of 5.5%. This includes material and labour costs for
maintenance.
5.5% × $198 697 000/year = $10 928 335/year.S
Miscellaneous Supplies
This item includes miscellaneous chemicals used for corrosion control, drinking water, office supplies, etc.
An average value of 0.15% of the plant investment per year is assumed:
0.15% × $198 697 000/year = $298 045.50/year ≈ $28 046/year
Plant Staff and Operators
The number of staff personnel and operators depend on plant complexity and location.
For this example, the following staff could be considered typical of a modern refinery:
TABLE 4.
Number per shift Payroll total
Plant manager 1
Process engineer 1
Mechanical engineer 1
Clerk 2
Stenographer 1
Chemist 1
Operating superintendent 1
Process operators 2 9
Utility operators 1 5
Total 22
Assume average annual salary plus payroll burden is $60 000 per person. Thus, total annual cost for staff
and operators is
$60 000 × 22 = $1 320 000
13
ChE 735: Refining Processes, Chapters 17: Cost Estimation
Note that maintenance personnel are not listed above since this cost was included with the maintenance
component.
Also note that it takes about 4.5 men on the payroll for each shift job to cover vacations, holidays, illness,
and fishing time.
TABLE 5. Summary of Direct Annual Operating Costs
Item $/year (× 10
3
)
Makeup water 37
Power 510
Fuel
a

Royalties 102
Catalyst 23
Insurance 993
Local taxes 1 987
Maintenance 10 928
Miscellaneous supplies 298
Plant staff and operators 1 320
Subtotal 16 198
Contingency (10%) 1 620
Total
b
17 918
Note:
a
Fuel quantity is deducted from available heavy gas oil for sale.
b
Additional items such as corporate overhead, research and development, sales expense, etc. are omitted
from this example.
Calculation of Income before Income Tax
Sales
Product BPD MBPY $/bbl $/year (× 10
3
)
Gasoline
Light Straight-Run (LSR) 1 000
Reformate 2 730
3 730 1 268 25.00 31 700
Light gas oil 4 000 1 360 24.00 32 640
Heavy gas oil 3 416 1 161 22.50 26 123
Vacuum gas oil 6 000 2 040 22.00 44 880
Vacuum residual 12 000 4 080 16.50 67 320
Total 202 663
Crude cost 30 000 10 200 17.00 173 400
Direct operating costs 17 918
Income before income tax 11 445
Calculation of Return on Investment
Investment = $198 697 000
Item $/year (× 10
3
)
Income before tax 11 445
less Depreciation allowance* 13 246
Taxable income (none)
14
ChE 735: Refining Processes, Chapters 17: Cost Estimation
Income tax at 50% (none)
Income after tax 11 445
plus Depreciation allowance (n.a.**)
Cash flow 11 445
Return on investment (% per year) 5.76
Payout time or period (year) 17.36
Note:
*15 years; straight-line depreciation model
**n.a. = not available
Discounted cash flow rate of return (DCFROR, also known as true rate of return sTRR):
Basis; 20-year life, no salvage value (see Appendix D in Gary and Handwerk, 1997)
TRR = DCFROR = i = ( ) 1 1
T S
i i
I
| `
− + −

. ,
( )
20
11 445
1
198 697
1
i
i
i
]
| `
] ⇒ · − −

] + . ,
]
By using a mathematical package of a spreadsheet package, e.g., Microsoft Excel, i is computed to be:
i = 0.0139 = 1.39% = 1.4%
Note:
Interest on capital during construction period and average feedstock and product inventories are not
considered in the above product slate.
These items would have resulted in an increase in investment and a decrease in the rate of return.
Conclusion: This demonstrates that, under conditions in the year 1992, a simple 30 000 BPD refinery
cannot be economically justified.
15

ChE 735: Refining Processes.6)  Can vary from 0. Chapters 17: Cost Estimation 2 LEVELS OF COST ESTIMATION Levels of Accuracy for Capital Cost Estimates of Industrial Plants • • • • Rule-of-thumb estimates Cost-curve estimates Major equipment factor estimates Definitive estimates Rule-of-Thumb Estimates • Useful for quick estimates • Accurate to only about ± 50% Complete coal-fired power plant: Complete synthetic ammonia plant: Complete petroleum refinery: Cost-Curve Estimates • Takes into account relationship to plant capacity: Cost Plant #2  Capacity Plant #2  =  Cost Plant #1  Capacity Plant #1  n $2 500 per kW $200 000 per ton/day $25 000 per barrel/day • Average value of 0.6 for the exponent (i.e.e..5 for small units to 1.. n = 0. plant layout diagrams) .0 for large units • Generally can predict costs within ± 25% to 50% Major Equipment Factor Estimates • Capacity factors applied to major units  Different factors for different units  Requires heat and material balances • Requires base cost estimates for all types of units  Equipment costing software: ICARUS (ASPEN Technology) • Can predict costs within ± 10% to 20% Definitive Estimates • • Very detailed and accurate cost estimates Requirements:  Detailed process flowsheets: P&ID (Process and Instrumentation Diagrams)  Plot plans (i.

transfer umps.6 361. dikes1.ChE 735: Refining Processes.g. etc. Chapters 17: Cost Estimation 3 •  Preliminary construction diagrams—may use scale models Indirect field costs also estimated  Crane rentals  Tool costs  Construction supervision ESCALATION OF COST DATA • Adjust cost estimates for inflation • Cost index numbers available  e. piping.. • Rough costs:  Low vapour pressure (gasoline and heavier): $60–80 per barrel storage  Butane: $90–120 per barrel  Propane: $100–130 per barrel Utilities • Steam  Gas or oil fired heater  250–300 psig Long walls or embankments built to prevent flooding from the sea 1 .3 Chemical Engineering Plant Cost Index (CEPCI) 1990 1991 (diagram) ITEMS FOR DETAILED COST ESTIMATES • • • • • • • • Process units Storage units Steam systems Cooling water systems Offsites Special costs Location factor Contingency Storage Units • Tank farm requires significant investment • Includes tanks. Chemical Engineering Plant Cost Index (CEPCI) (published by the Chemical Engineering  magazine) Marshall & Swift 357.

Chapters 17: Cost Estimation 4 Water treating. At least 15%  Plant Location • Adjustments for local climate.0 1. water piping  Daily power requirements: kWh/day = 0. Anchorage Factor for Relative cost 1. North Slope Alaska.ChE 735: Refining Processes.. and waste containment  Plant communications systems  Roads and walks  Railroads  Fence  Buildings  Vehicles  Product and additive blending facilities  Product loading facilities Contingencies • • Covers unexpected costs. and disposal  Flare.3 1. water pumps.3 1. feed pumps. deaerating.0 Remark (construction condition?) (climate) (climate) COST ESTIMATION CASE STUDY/EXAMPLE . design requirements.2 1.4 1. etc.0 2.5 1. etc.6 × gallon per minute (gpm)  Makeup about 5% of usage  $150 per gpm • Others included in offsites (i.e. Location US Gulf Coast Los Angeles Portland & Seattle Chicago St. condensate  $150 per lb/hr • Cooling water  Induced draft cooling towers. cost data inaccuracies. Louis Detroit New York Philadelphia Alaska. treatment.5 3.7 1. water treating. drain. construction conditions. facilities required in a refinery that are not included in the costs of major facilities)  Electric power distribution  Instrument air  Drinking water  Fire water  Sewers  Waste collection (Yusuf?)  Fuel oil and fuel gas facilities  Water supply. yard piping.

15% of plant investment Average annual salary plus payroll burden for plant staff and operators is $60 000 Value of crude oil and products at refinery is: $/bbl Crude oil 17.00 Heavy gas oil 22. 24. 5. 12. 15. Also.00/lb Insurance annual cost if 0. Crude charge rate Crude oil sulfur content Full-range naphtha in crude 30 000 BPSD (barrel per stream day) 1. .0 wt% 4000 BPSD 240°F medium boiling point (MBP) 56° API gravity 11. investment. 9. 16.20/1000 gal Cost of power $0. 14.50 Depreciation allowance 15 years.1).5% of plant investment Miscellaneous supplies annual cost is 0.03/kWh LHV of heavy gas oil 5.00 Light gas oil 24. the products available for sale.15% Cost of makeup water $0. Missouri Construction period 1992 Escalation rate (applicable to construction costs only) is 5% per year 4. 13. 19. true rate of return on investment. 22. 18. 11.5% of plant investment Local taxes annual cost is 1.00 Gasoline 25. straight-line Corporate income tax 50% of taxable income Location St. operating costs. simple rate of return on investment.5 MMBtu/bbl Replacement cost for desulfurizer catalyst is $1. 21.0% of plant investment Maintenance annual cost is 5. 3. 8.50 Vacuum gas oil 22. calculate 1. 7. pp. 5. 23. prepare a basic block flow diagram (Figure 15. 6.00 Vacuum residual 16.ChE 735: Refining Processes. 3. Louis. 17.00/lb Replacement cost for reformer catalyst is $5. Chapters 17: Cost Estimation 5 (Gary and Handwerk (1994). 10.8 Kw Light gas oil in crude 4000 BPSD Heavy gas oil in crude 4000 BPSD Vacuum gas oil in crude 6000 BPSD Vacuum residual in crude 12 000 BPSD On-stream factor 93. 20. 4. 2. 359–373) For the following example of a simplified refinery. 2. The following data are available: 1.

4000 BPD Vacuum Gas Oil 6000 BPD Vacuum Residual 12 000 BPD FIGURE 1.e. Yield Calculations Catalytic Reformer Calculate properties of feed to reformer.8. 4000 BPD Heavy Gas Oil. The latter cut is fed to a vacuum unit for fractionation into vacuum gas oil and vacuum residuals. The balance of the fuel requirement is derived from light gas oil. It can be assumed that sufficient tankage for approximately 12 days storage of all products is required. the light straight-run (LSR) portion (i. • Kw = 11. No other product treatment is required. the LSR is fractionated out. in addition to that contained in Gary and Handwerk (1994). of course. which are produced in the catalytic reformer. The total storage requirement will thus be approximately 360 000 barrels. The full-range naphtha is to be hydrodesulfurized. Given total naphtha stream properties as follows: • mid-boiling point = 240°F. The necessary hydrogen makeup for the hydrodesulfurizer is. that is. Propane and lighter hydrocarbons. and “atmospheric bottoms”.ChE 735: Refining Processes. The hydrogen sulfide produced in the hydrodesulfurizer is of relatively small amount and is burned in an incinerator. heavy gas oil. light gas oil. The calculations are outlined in the following steps: . Block flow diagram for the case study Process Requirements The crude oil is to be desalted and fractionated to produce full-range naphtha. Chapters 17: Cost Estimation 6 H 2S 561 lb/day Naphtha 4000 BPD Hydrodesulfurizer (HDS) H2 Makeup Light Straight Run Gasoline 1000 BPD Fuel Gas Reformed Gasoline 2730 BPD 3000 BPD Crude Oil 30 000 BPD Crude Distillation 18 000 BPD Vacuum Distillation Catalytic Reformer Desalter Light Gas Oil. is sufficient for the solution of the problem. The problem is to estimate the volume and weight of the LSR assuming that a distillation curve is not available. including the hydrogen.. are consumed as fuel. the material boiling below 180°F) of the full-range naphtha is separated for blending into the gasoline product. the LSR is not fed to the reformer. The balance of the naphtha is fed to a catalytic reformer that is operated to produce a reformate having a research octane number (clear) of 93. • API gravity = 56°API. This LSR is then deducted from the total naphtha to compute the net reformer feed. The material boiling below 180°F. The above information. taken from these gases before they are burned as fuel. After desulfurizing the total naphtha. After desulfurization. This reformate plus the LSR are mixed to make the final gasoline product.

the naphtha end point can be estimated as the following: (240°F) + (240°F − 82°F) = 398°F Now. the reformer feed gravity is found (as in Step 3) to be 52.5°API). determine the gravity of the LSR. the approximate mid-boiling point of the reformed feed is estimated as: 1 ( 180°F + 398°F ) = 289°F 2 Using a Kw of 11. i. lb/gal LSR lb/gal RF lb/gal N Volume balance (hourly basis): gal  42  VN = ( 4000 BPCD )   = 7000 24  h  gal ⇒ VLSR + VRF = 7000 h Weight balance (hourly basis): (1) 2 See for example. 11. 6.8. the mean average boiling point.41 (52. Hence. Chapters 17: Cost Estimation 7 1.5°API. weight in pounds of reformer feed. With the above estimates of gravity of both the LSR and the reformer feed. the mid-boiling point of the LSR would 1 be approximately ( 180°F + 82°F ) = 131°F . This is done by weight and volume balances as shown below.ChE 735: Refining Processes. it is now possible to estimate the relative amounts of each cut that will exist in the total naphtha stream. 5. 2 2. and the initial boiling point was estimated in Step 1 as 82°F. weight in pounds of LSR.e. the lightest material would be isopentane (i-C5) with a boiling point of 82°F. Thus. 3.5°API. volume in gallons of total naphtha.8. Assume that the LSR has the same Kw as the total naphtha. volume in gallons of reformer feed.. 6. 4. and gravity. . Therefore. From the general charts2 relating Kw.5°API). The gravity of the naphtha fraction boiling above 180°F is next determined by a similar procedure. Maxwell (1950). Assume that butane and lighter hydrocarbons in the naphtha are negligible.5°API). This is 76. = = = 5.29 (67. weight in pounds of naphtha.93 (67. The mid-boiling point for the total naphtha is given above as 240°F. Using simplified nomenclature as the following: VLSR VRF VN WLSR WRF WN = = = = = = volume in gallons of LSR.

93 6. 8.41  = 44 030 gal  gal  h   Simultaneous solution of the two equations for (VLSR) and (VRF) gives: VLSR = 1750 VRF = 5250 gal = 1000 BPD h gal = 3000 BPD h (2) (2) (2) 6.86 6.29  = 44 030  =  7000  gal   h  h gal       lb  lb  lb ⇒ ( VLSR )  5. C2 wt% C3 wt% H2 86. to ascertain that all items balance.1 1.0 (iC4/nC4 = 41. Component H2 C1. Stream Light straight-run (LSR) Reformer feed (RF) Total naphtha °API 67. Before proceeding. From the yield curves: + vol% C5 vol% C4’s wt% C1..3 mol wt) + b lb/h C5 obtained by difference from total feed less other products .82 lb/h 589 370 646 511 748 30 788b 33 652 BPD Mscf/day 2 682 145a 133 62 88 2 580 2 730 2 960 Feed 5 250 6.5 (i.0 5. Chapters 17: Cost Estimation 8 gal    lb   lb  lb VN  6.75 With the above data. complete the following table. The following yields are based on production of 93 RON reformate. it should be emphasized that the above methods for approximating the naphtha split into LSR and reformer feed are satisfactory for preliminary cost and yield computations such as this example.29 33 652 3 000 − a Assume lb C1/lb C2 = 0.92 1. C1.29   6.41 gal/hr 1750 5250 7000 lb/hr 10 378 33 652 44 030 BPD 1000 3000 40000 7. C2 C3 iC4 nC4 + C5 Total gal/h 153 109 154 4 515 lb/gal 4.ChE 735: Refining Processes.5/58.5) 1.93  + ( VRF )  6. The reformer feed properties can now be used with the yield curves in Gary and Handwerk (1994).23 4.69 4. but not for final design calculations.5 52. The above information should then be tabulated as shown in Table 1. C2 = 23.e.5 lb/gal 5.

04e 1. lb/hr 12 500 7 500 1 000 3 750 Power.26 day day day 3 Makeup H2 required is about 100 to 150 scf/bbl or = 33 4000 × 0. naphtha contains 0. C. gpm 83 3 125 1 875 833 1 250 Steam. L. 8 240 gpma Steam system.05)2 198 697f 64 796 18 000 82 796 24 839 107 635 7 166 24 750 2 084 7 166 24 750 1 878 206 141 37 178 Cooling Water (CW). This combined with 240°F MBP gives a naphtha gravity of 56°API (see reformer calculations).0005 ) = 528 day maximum of H2S formed = 32 × 528 = 561 lb/day theoretical H 2S required = 561 − 528 lb mol Mscf = 16. Then. kW 20 1 125 225 133 375 Fuel.15e (1.ChE 735: Refining Processes. W.5 = 6. Assume Kw for desulfurized feed is 11.0%S.15 = 600 Mscf/day Hydrogen from catalytic reformer is 2 682 Mscf/day. 56°API = 6. Summary of investment costs and utilities 1992 G.29 ) ( 0. Chapters 17: Cost Estimation 9 Naphtha Desulfurizer Assume crude oil contains 1.29 lb/gal wt S in naphtha = SN lb SN = ( 4000 ) ( 42 ) ( 6. $ (× 103) 1 800 27 000 14 500 6 600 11 000 (included) 600 61 500 824 2 472 12 daysd (30%) 1. TABLE 1..05% S (240°F MBP) Calculate amount of sulfur produced. which is more than adequate. . 30 900 lb/hrb Subtotal Storagec Subtotal Offsitesc Subtotal Location factor Specifications cost factor Contingency Escalation Total 3 BPSD 30 000 30 000 18 000 4 000 3 000 Data taken from Nelson.4 1. from curve for miscellaneous crudes. Oil & Gas Journal 70 (1972). 49: 260–xxx. MMBtu/hr 63 23 17 38 Item Desalter Crude unit Vacuum unit Naphtha desulphurizer Reformer Initial catalyst (desulfurizer) Initial catalyst (reform) Subtotal Cooling water system.8.

No paid-up royalties are included. Chapters 17: Cost Estimation 10 Note: Values shown are to be multiplied by 1000 when noted as $(×103). running royalties. maintenance (both material and labour). clerical. Louis in 1994. a factor of 93. Therefore. Water Makeup 1. 2. Boiler makeup = 0.05 × 30 900 = 1545 lb/hr = 3. and supervisory personnel.06/kWh. c Individual values for utilities in the storage and offsite categories are accounted for by notes a and b. use $0. annual water makeup cost is − 160 × 1440 × 340 × (0.025/kWh (in locations where there is hydroelectric power) to $0. The following section illustrates development of the aforementioned costs.20 × 10 3) = $36 620. the annual operating costs of the refinery can be determined.00/bbl. On-Stream Time Refineries usually have an on-stream (full capacity) factor of about 92 to 96%. Power Industrial power costs range from $0. costs that are a function of the plant investment—these include insurance.1 gpm Total makeup water = 374 gpm Average cost to provide makeup water is approximately $0. To cooling tower (30°F ▲t): 1% evaporation for 10°F ▲t 0. local taxes. fuel. Operating costs can be considered to include three major categories: 1.15% (340 days per year) is used. costs that vary as a function of plant throughput and on-stream time—these include water makeup to the boilers and cooling tower. f This is the projected cost at the location in St. costs that are determined by the size and complexity of the refinery—these include operating. For this example. a Add 15% excess capacity to calculated cooling water circulation.045 × 8240 gpm = 371 gpm 2.5% ) + 1% = 4.03/kWh. . Calculation of Direct Annual Operating Costs After completing the investment and yield calculations.20/1000 gallons. technical. To boiler: Average boiler blowdown to control solids concentration can be assumed to be 5%.5% windage loss 1% blowdown to control solids concentration Cooling tower makeup = ( 3 × 1% ) + ( 0. electric power. e These factors are compounded. 3. d 360 000 barrels at average cost of $50.5% Makeup = 0.ChE 735: Refining Processes. and miscellaneous supplies. and catalyst consumption. b Add 25% excess capacity to calculated steam supply. For this example.

the available fuel gas is: TABLE 2. From the summary tabulation of utilities. so that this quantity can be deducted from the products available for sale.ChE 735: Refining Processes.5 scf 24 hr 1 lb mole H 2 day lb hr = 131. Step 1 From reformer calculations.696 psia. we require 178 MMBtu/hr for full-load operation. Chapters 17: Cost Estimation 11  24 hour   kW  Power cost = ( 2084 )   340 day  0. “standard conditions” are 60 °F and 14. no separate charge will be made for fuel. hydrogen consumed in the HDS unit is: 600 Mscfd = 600 000 = scf day 600 000 scf 1 lb mole 1 day 2 lb H 2 379.03   1 day  h     = 510 163. At these conditions.752 305 7 Step 2 Calculated lower heating value (LHV) of available fuel gas is: .2 per year ≈ 510 160 / year ( ) Fuel In this example. Some of the reformer off-gas is consumed in the hydrodesulfurizer and this quantity (hydrogen portion only) must be deducted from available fuel. hydrogen makeup was 600 Mscfd (million standard cubic feet per day). In the petroleum industry. This fuel is supplied by combustion of reformer “off-gas” supplemented with heavy gas oil. Thus. The amount of gas oil consumed must be calculated.5 scf. A fuel balance is made as shown below to determine the amount of heavy gas oil consumed as fuel. since it is assumed that the refinery will use some of the heavy gas oil products for fuel. 1 pound mole = 379. Available fuel gas from reformer calculations Component H2 C1 C2 C3 Total (lb/hr) 589 123 246 646 1 604 HDS* usage (lb/hr) 13 2 0 0 0 13 2 Available for fuel (lb/hr) = Total (lb/hr) – HDS usage (lb/hr) 457 123 246 646 1 472 *From hydrodesulfurizer (HDS) calculations.

5 MMBtu/bbl = 133.9 MMBtu bbl 24 hr hr 5.15 per barrel of feed.6 2. these range from $0.5 MMBtu 1 day bbl day = 584. royalties must be paid.08 to $0.004 lb/bbl. Chapters 17: Cost Estimation 12 TABLE 3.004   bbl    ( ) = $20 400/stream⋅ year $23 120/stream⋅ year . For this example.002   bbl    = $2 720/stream⋅ year   340 day = $102 000 stream −1   ( ) ( )   lb   340 day  0.10/bbl feed  $0.10   bbl Annual cost =    3000 bbl   streamgday   Catalyst Consumption The cost of catalyst consumption are as follows: Desulfurizer: 0.ChE 735: Refining Processes. $5/lb  $5. On a “running” basis. Reformer: $0.1 ( 178 MMBtu/hr ) − ( 44.290 909 1 ≈ 584 Step 4 bbl day Heavy gas oil remaining for sale = (4000 bbl/day) – (584 bbl/day) = 3416 BPSD Royalties The reformer is a proprietary process.6 5. (1997) Component H2 C1 C2 C3 Step 3 Heavy gas oil required for fuel is computed by assuming 5. therefore.0 12. we use a value of $0.5 MMBtu/bbl LHV: LHV (MMBtu/hr) 23.10.00   bbl Annual cost =    4000 lb   streamgday   Reformer: 0.1 MMBtu/hr ) 5. LHV (btu/hr) Total LHV* (lb/hr) (Btu/lb) = Total (lb/hr) × LHV (Btu/lb) 457 51 600 23 581 200 123 21 500 2 644 500 246 20 420 5 023 320 646 19 930 12 874 780 1 472 *From Maxwell (1950) or Perry et al. $1.00/lb  $1.9 44.00   bbl Annual cost =    3000  streamgday  lb   Total catalyst cost:   lb   340 day  0.002 lb/bbl.

15% × $198 697 000/year = $298 045. we use an average value of 5. 5. etc. total annual cost for staff and operators is $60 000 × 22 = $1 320 000 . An average value of 0. Chapters 17: Cost Estimation 13 Insurance This cost usually makes up 0.5% × $198 697 000/year = $993 485/year Local Taxes This cost usually constitutes 1% of the plant investment per year: 1. This includes material and labour costs for maintenance.ChE 735: Refining Processes.5%.S Miscellaneous Supplies This item includes miscellaneous chemicals used for corrosion control.5% of the plant investment per year: 0.0% × $198 697 000/year = $1 986 970/year Maintenance This cost varies anywhere between 3% and 8% of plant investment per year.15% of the plant investment per year is assumed: 0. drinking water. the following staff could be considered typical of a modern refinery: TABLE 4. office supplies. Thus.50/year ≈ $28 046/year Plant Staff and Operators The number of staff personnel and operators depend on plant complexity and location. For this example.5% × $198 697 000/year = $10 928 335/year. Number per shift Plant manager Process engineer Mechanical engineer Clerk Stenographer Chemist Operating superintendent Process operators Utility operators Total Payroll total 1 1 1 2 1 1 1 9 5 22 2 1 Assume average annual salary plus payroll burden is $60 000 per person. For this example.

b Additional items such as corporate overhead. holidays. etc. and fishing time. illness.00 22.ChE 735: Refining Processes.50 22.00 16.00 24. TABLE 5. Calculation of Income before Income Tax Sales Product Gasoline Light Straight-Run (LSR) Reformate Light gas oil Heavy gas oil Vacuum gas oil Vacuum residual Total Crude cost Direct operating costs Income before income tax Calculation of Return on Investment Investment = $198 697 000 Item Income before tax less Depreciation allowance* Taxable income $/year (× 103) 11 445 13 246 (none) BPD 1 000 2 730 3 730 4 000 3 416 6 000 12 000 30 000 MBPY $/bbl $/year (× 103) 1 268 1 360 1 161 2 040 4 080 10 200 25. sales expense. Chapters 17: Cost Estimation 14 Note that maintenance personnel are not listed above since this cost was included with the maintenance component. research and development.00 31 700 32 640 26 123 44 880 67 320 202 663 173 400 17 918 11 445 . Also note that it takes about 4.5 men on the payroll for each shift job to cover vacations. Summary of Direct Annual Operating Costs Item Makeup water Power Fuela Royalties Catalyst Insurance Local taxes Maintenance Miscellaneous supplies Plant staff and operators Subtotal Contingency (10%) Totalb $/year (× 103) 37 510 − 102 23 993 1 987 10 928 298 1 320 16 198 1 620 17 918 Note: a Fuel quantity is deducted from available heavy gas oil for sale. are omitted from this example.50 17.

36 Income tax at 50% Income after tax plus Depreciation allowance Cash flow Return on investment (% per year) Payout time or period (year) Note: *15 years.76 17. = not available Discounted cash flow rate of return (DCFROR. 20-year life.4% Note: Interest on capital during construction period and average feedstock and product inventories are not considered in the above product slate. . Chapters 17: Cost Estimation 15 (none) 11 445 (n. a simple 30 000 BPD refinery cannot be economically justified. 1997) T S TRR = DCFROR = i =   − i ( 1 + i ) − 1 I     11 445  i ⇒i= − 1 − 20   198 697   ( 1 + i )   By using a mathematical package of a spreadsheet package. Conclusion: This demonstrates that.**) 11 445 5. straight-line depreciation model **n.ChE 735: Refining Processes.0139 = 1. under conditions in the year 1992..a. also known as true rate of return sTRR): Basis.a.39% = 1. i is computed to be: i = 0. Microsoft Excel. e.g. no salvage value (see Appendix D in Gary and Handwerk. These items would have resulted in an increase in investment and a decrease in the rate of return.

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