EP427/BEP4023 Process Equipment Design

Chapter 7
Equipment Sizing and Costing

(Jan - Apr 2024)

Asst Prof Dr Cheok Choon Yoong
cheokcy@ucsiuniversity.edu.my

1
CLO5: Produce project planning and cost
estimation of process equipment. (C6,
PLO11)

•Sizing and costing of units such as

reactors, distillation columns and other
auxiliary units.
•Estimation of capital costs and
manufacturing costs.
•Engineering economics and
profitability analysis.
 Equipment Sizing and Costing
Design engineer needs to make quick and rough cost
estimation to decide between alternative designs and
for project evaluation. Chemical plants are built to make
profit. Simple costing can be done to make preliminary
estimates of capital and operating costs at the flow-sheet
stage.

The accuracy of an estimate depends on :

1) Design detail available
2) Cost data available
3) Time spent on preparing the estimate

3
 Fixed Capital Investment
The total cost of designing, constructing and
installing a plant that made up of:
1. The inside battery limit (ISBL) investment
2. The modifications and improvements, known
as off-site or OSBL investment
3. Engineering and construction costs
4. Contingency charges

4
 Fixed Capital Investment
ISBL Plant Costs OSBL Investment
The cost of procuring and installing all the The costs of the additions- made to the site
process equipment infrastructure
Direct field cost: all major equipment (vessels, columns, Electric main substations, power generation plants,
reactor etc), bulk items (piping, valves, insulation, catalyst boilers, cooling towers, water pipes, tanker farms etc
etc), civil works, installation and supervision
10 % - 100 % of ISBL
Indirect field cost: construction costs, field expenses and
services, construction insurance, labour benefits and Typical petrochemical plant, 20% - 50 % of ISBL
burdens, miscellaneous overhead.
FIXED CAPITAL
INVESTMENT
Engineering Costs
Contingency Charges
The costs of detailed design and other
engineering services required The extra costs added into the project budget
to allow for variation from the cost estimate
Detailed design of process equipment, piping systems,
control systems; procurement of main plants items; Costs that cover changes in project scope, changes in
construction supervision; administrative charges etc prices, currency fluctuations
10% of ISBL + OSBL
30% of ISBL + OSBL cost for small projects
50 % of ISBL + OSBL for uncertain technology
10% of ISBL + OSBL for big projects
5
 Working capital
Working capital (additional investment) are:
The cost to build the plant, to start the plant up and run it
until it starts earning income.

1) Value of raw material inventory

2) Value of product and by-product inventory
3) Cash on hands
4) Accounts receivable
5) Credit for accounts payable
6) Spare parts inventory

5% of the fixed capital (simple, single product process)

30% of the fixed capital (diverse range of product process)
15% of the fixed capital (typical petrochemical plants) 6
 Variable Costs of Production
The costs that are proportional to the plant
output or operation rate
1) Raw materials consumed by the process
2) Utilities
3) Consumables
4) Effluent disposal
5) Packaging and shipping
**Variables cost can be reduced by more
efficient design or operation of the plant
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 Fixed Cost of Production
The costs that are incurred regardless of the plant operation rate or output
(these costs are not reduced if the plant cuts back its production rate)
1) Operating labour
2) Supervision
3) Direct salary overhead
4) Maintenance
5) Property taxes and insurance
6) Rent of land
7) General plant overhead
8) Allocated environmental charges
9) Running license fees and royalty payment
10) Capital charges (interest payments)
11) Sales and marketing costs
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 Classification of Capital Cost Estimates
Capital cost estimate can be classified into five types:

Order of Magnitude Estimates - (ballpark estimate, guesstime, Class 5 estimate),

accuracy 30-50% - based on the costs of similar processes, no design information,
initial feasibility studies, screening purposes

Preliminary Estimates – (approximate, study, feasibility, Class 4) (30%) – initial

feasibility studies and make coarse choice between design alternatives , limited cost
data and design detail

Definitive Estimates – (authorization, budgeting, control, Class 3)(10-15%) – for the

authorization of fund to proceed, more detailed estimate can be made, This may
involve funds to cover cancellation charges on any long delivery equipment to avoid
delay in the project

Detailed Estimates – (quotation, tender, firm estimate, contractor’s estimate, class

2)(5-10%) – for project cost control and estimate for fixed price contracts

Check Estimates – (tender, as-bid, Class 1) (5 – 10%) – based on completed

design and concluded negotiations on procurement
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 Rapid Cost Estimates
Historic Cost Data
•The quickest way to make an order-of-magnitude estimate.
•Requires no design information other than the production
rate.
The capital cost of a project is related to capacity by the
equation:

(6.6)

Where C2 = ISBL capital cost of the project with capacity S2,

C1 = ISBL capital cost of the project with capacity S1.

The value of index n is typically 0.8 to 0.9 (processes with a lot of mechanical
work or gas compression) and 0.7 (typical petrochemical processes), 0.4 to 0.5
(small scale, highly instrumented processes), 0.6 (whole chemical industry)
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 Rapid Cost Estimates
• Rearranged form of equation 6.6:
(6.7)

𝐶2 = 𝑎 𝑆2𝑛

• Values of a and n for some fuels and

commodity chemical processes are given in
Table 6.2. The costs in the Hydrocarbon
Processing supplements are supplied by the
technology vendors and are suitable for
ballpark estimates only. 11
 Rapid Cost Estimates

Table 6.2 Process Cost Correlations

*Please refer textbook for the complete Table 6.2 12

 Rapid Cost Estimates
Notes for Table 6.2 Process Cost Correlations

13
 Rapid Cost Estimates
Step counting methods
If cost data is not available, then an order-of magnitude estimate can be made
by adding contributions for different plant sections of functional units (all the
equipment and ancillaries for significant process step or function – such as a
reaction and separation. Pumping and heat exchange are not normally
considered unless they a substantial cost for example compressors,
refrigeration systems or furnace systems).
Bridgewater’s method, that correlates plant cost against number of processing
steps. For plants primarily processing liquids and solids:

(6.8)

(6.9)

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 Rapid Cost Estimates

2
5
4
3

1 6

15
Rapid Cost Estimates

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 Rapid Cost Estimates
Manufactured Products
Bridgewater’s method for chemical plants and do
not extend well to other types of manufacturing.
For large scale production of manufactured items
(> 500,000 pieces per year) a rule of thumb is:
TCOP = 2 x material cost (6.10)
This equation can be used to make a very
approximate estimate of plant cost if fixed costs
and utilities can be estimated.
*TCOP = total cost of production

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 EXAMPLE 6.1
The process for making cyclohexane by
saturation of benzene consists of a feed-effluent
heat exchanger, a saturation reactor and a
product stabilizer column. Estimate the cost of a
plant that produces 200,000 metric tons per
year (200 kt/y) of cyclohexane using the
correlation in Table 6.2 and Bridgewater’s
method.

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 EXAMPLE 6.1
Using Table 6.2: a = 0.0061, n = 0.6
Range of S = 100,000 to 300,000 tpy (tons per year)
S2 = 200,000 tpy, so in the range of S

C = a S2n = (0.0061)(200,000)0.6
= $9.24 Million expressed on a Jan 2006 USGC basis
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 EXAMPLE 6.1
Using Bridgewater’s method,
Have two functional units (reactor and product stabilizer – the
heat exchangers doesn’t count)
Assume that conversion is 1.0,
Since Q = 200,000 tpy and Q>60,000, so
C = 3200 N (Q/s) 0.675 = (3200)x(2)x(200,000)0.675
= $24 Million expressed on a Jan 2000 USGC basis

CONCLUSION
Bridgewater’s method is an approximation, Table 6.2 based on data from
technology vendors. With the level of information available it is probably safe
to say that the cost is in the range $10 MM to $20 MM. The costs are not on
the same time basis, correcting costs on different time bases must be applied
(cost escalation).
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 Factorial Method of Cost Estimation
A relatively accurate estimates of the capital cost of the project
can be made by Lang Factors & Detailed Factorial Estimates.
1. Lang Factors
Lang (1948) proposed that ISBL fixed capital cost of a plant is
given as a function of the total purchased equipment cost:
𝑪 = 𝑭(σ 𝑪𝒆 ) (6.11)

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 Factorial Method of Cost Estimation
Hand (1958) suggested that better results are obtained by using different
factors for different types of equipment as per in Table 6.3:

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 Factorial Method of Cost Estimation
2. Detailed Factorial Estimates

Equation 6.11 to make a preliminary estimate once the

flow-sheet has been drawn up. When more detailed
design information is available then the installation factor
can be estimated somewhat more rigorously (by
considering the cost factors that are compounded into
Lang Factor individually)

The direct cost items that are incurred in the

construction of a plant in addition to the cost of
equipment are listed in Table 6.4
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Factorial Method of Cost Estimation

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 Factorial Method of Cost Estimation
Typical factors for the components of the capital cost are given in
Table 6.4. These installation factors given are for plants built from
carbon steel. When more exotic materials are used then a material
factor fm should also be introduced:

Note that fm is not equal to the ratio of the metal prices, as the
equipment purchased cost also includes labour costs, overheads,
fabricator’s profit and other costs that do not scale directly with
metal price.

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 Factorial Method of Cost Estimation
Equation 6.11 can be expanded for each piece of equipment to give:
(6.13)

(6.14)

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 Factorial Method of Cost Estimation
Typical values of the material factors for common engineering alloys
are given in Table 6.5

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 Estimation of Purchased Equipment Costs
The factorial method of cost estimation is based on purchased
equipment costs and therefore requires good estimates for
equipment costs.
(6.15)
Where:

The correlations in Table 6.6 are only valid between the lower
and upper values of S indicated. The prices are all for carbon
steel equipment except where noted in the table. Costs
calculated can be updated (using Cost Escalation) and converted
to international locations (using Location Factors).
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Estimation of Purchased Equipment Costs

Notes

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*Please refer textbook for the complete Table 6.6
 Factorial Method of Cost Estimation
Summary of Factorial Method
• Prepare material & energy balances; draw up preliminary flow sheets, size major
1 equipments and select material of construction

• Estimate the purchased cost of the major equipment

2

• Calculate ISBL installed capital cost using factors in Table 6.4 and correcting for materials
3 of construction using equa. 6.13 or 6.14 with factors given in Table 6.5

• Calculate OSBL, engineering and contingency costs using factors given in Table 6.4
4

• The sum of ISBL, OSBL, engineering and contingency costs is the fixed capital investment
5

• Estimate the working capital as a percentage of the fixed capital investment: 10 – 20% is
6 typical

• Add the fixed and working capital to get the total investment required
7

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 Example 6.2
A plant modification has been proposed that will allow recovery of
a by-product. The modification consists of adding the following
equipment:
Equipment Design parameters/operating conditions
1. Distillation column Height: 30m; Diameter: 3 m; 50 sieve trays; 10 bar; 500 ℉
2. U-tube heat exchanger Area: 60 𝑚2
3. Kettle reboiler Area: 110 𝑚2
4. Horizontal pressure vessel Cylinder volume: 3 𝑚3 ; Assume 𝐿𝑐 = 2𝐷𝑐 ; 10 bar; 500 ℉
5. Storage tank Volume: 50 𝑚3
6. Two centrifugal pumps flow rate 3.6 m3/h, driver power 500 W
7. Three centrifugal pumps flow rate 2.5 m3/h, driver power 1 kW (two installed plus
one spare)
Estimate the installed ISBL capital cost of the modification if the
plant is to be built from type 304 stainless steel. Estimate the cost
using both Hand’s method and the factors given in Table 6.4.
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 Distillation column, height 30m, diameter Example 6.2-Solution
1 3m, 50 sieve trays, operating pressure 10 bar
The design pressure of the vessels should be 10% above the operating pressure,
so the design pressure is 11 bar or roughly 1.1 x 106 N/m2.
The maximum allowable stress for type 304 stainless steel at 500 °F (260 °C) is
12.9 ksi or roughly 89 N/mm2 (Table 13.2).
Assuming the welds will be fully radiographed the weld efficiency is 1.0.
Substituting in equation 13.41 for the column wall thickness, tw, then gives:

𝑃𝑖 𝐷𝑖
𝑡=
2𝑆𝐸 − 1.2𝑃𝑖

We can now calculate the shell mass, using the density of 304 stainless steel
(8000 kg/m3):
𝑆ℎ𝑒𝑙𝑙 𝑚𝑎𝑠𝑠 = 𝜋𝐷𝑐 𝐿𝑐 𝑡𝑤 𝜌
= 𝜋(3𝑚)(30𝑚)(0.02𝑚)(8000 𝑘𝑔Τ𝑚3 )
= 45239 𝑘𝑔

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1 Example 6.2-Solution

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34
 1 Example 6.2-Solution
Using the correlations in Table 6.6, we obtain the following purchase costs for the
stainless steel pressure vessels:

Distillation column shell, cost = 𝟏𝟓, 𝟎𝟎𝟎 + 𝟔𝟖 𝟒𝟓𝟐𝟑𝟗 𝟎.𝟖𝟓 = $𝟔𝟑𝟏, 𝟏𝟔𝟏
For the remaining equipment we obtain the following purchase costs from the
correlations in Table 6.6 based on carbon steel construction:
𝟏.𝟖
Distillation column trays, cost per tray = 𝟏𝟏𝟎 + 𝟑𝟖𝟎 𝟑. 𝟎 = $𝟐𝟖𝟓𝟓
Cost for 50 trays = 𝟓𝟎 × $𝟐𝟖𝟓𝟓 = $𝟏𝟒𝟐, 𝟕𝟕𝟎

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 Example 6.2-Solution

2 U-tube heat exchanger, area 60 m2

U-tube heat exchanger, cost = 𝟐𝟒, 𝟎𝟎𝟎 + 𝟒𝟔 𝟔𝟎 𝟏.𝟐 = $𝟑𝟎, 𝟐𝟔𝟎

3 Kettle reboiler, area 110 m2

Kettle reboiler, cost = 𝟐𝟓, 𝟎𝟎𝟎 + 𝟑𝟒𝟎 𝟏𝟏𝟎 𝟎.𝟗 = $𝟒𝟖, 𝟑𝟕𝟒

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 Example 6.2-Solution
Horizontal pressure vessel, volume 3 m3, operating pressure 10 bar.
4 Assuming that the vessel is a cylinder with Lc =2Dc

2
𝐷𝑐 𝑃𝑖 𝐷𝑖
𝑉𝑐𝑦𝑙𝑖𝑛𝑑𝑒𝑟 = 𝜋 𝐿𝑐 = 3 𝑚 3 𝑡=
2 2𝑆𝐸 − 1.2𝑃𝑖
2
𝐷𝑐 1.1 × 106 × 1.24
𝜋 2𝐷𝑐 = 3 =
2 2 × 89 × 106 − 1.2 × 1.1 × 106
2×3
𝐷𝑐 3 = = 1.91 = 0.00769 𝑚 ≈ 0.008 𝑚
𝜋
𝐷𝑐 = 1.24 𝑚

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 Example 6.2-Solution
4 𝑆ℎ𝑒𝑙𝑙 𝑚𝑎𝑠𝑠 = 𝜋𝐷𝑐 𝐿𝑐 𝑡𝑤 𝜌
= 𝜋 (1.24𝑚)(2 × 1.24 𝑚)(0.008𝑚)(8000 𝑘𝑔Τ𝑚3 )
= 618 𝑘𝑔

𝟎.𝟖𝟓
Horizontal pressure vessel, cost = 𝟏𝟏, 𝟎𝟎𝟎 + 𝟔𝟑 𝟔𝟏𝟖 = $𝟐𝟓, 𝟖𝟒𝟖

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 Example 6.2-Solution
5 Storage tank: Volume 50 𝑚3
Storage tank (conical head), cost = 𝟓, 𝟎𝟎𝟎 + 𝟏𝟒𝟎𝟎 𝟓𝟎 𝟎.𝟕 = $𝟐𝟔, 𝟔𝟒𝟕

6 Two centrifugal pumps: flow rate 3.6 m3/h, driver power 500 W

7 Three centrifugal pumps: flow rate 2.5 m3/h, driver power 1 kW (two installed
plus one spare)

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 Example 6.2-Solution
Following Hand’s method, the installed cost of the distillation column is then:
C = 4 x 631,161 = $2,524,644

The cost of the trays can be converted to type 304 stainless steel by
multiplying by the appropriate materials factor from Table 6.5, giving:
C = 1.3 x 142,770 = $185,601
This then gives a total cost for the column plus internals
= 2,524,644 + 185,601 = $2,710,245

The installed cost of the horizontal pressure vessel

= 4 x 25,848 = $103,392.

The installed cost for the exchangers and storage tank in carbon steel
construction is:
C = 3.5(30,260 + 48,374) + 2.5(26,647) = $341,837
so the cost in type 304 stainless steel = 1.3 x 341,837 = $444,387.

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 Example 6.2-Solution
For the pumps, we need to add the cost of the pump and driver before
determining the installed cost. Only the cost of the pump needs to be
converted to stainless steel.
For the first set of pumps:
C = 4 x (440 + (1.3 x 14,200)) = $75,600
For the second set of pumps only two are installed (the other is a
warehouse spare), so the total installed cost is:
C = (1.3 x 7, 050) + 820 + (4 x 2 x (820 + (1.3 x 7, 050))) = $90,000

The total installed ISBL cost of the plant is then:

C = $2,710,245 + $103,392 + $444,387 + $75,600 + $90,000
= $3,423,624 (or $3.5MM; ±30% within the accuracy of the
method)

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If instead we use the factors given in Table 6.4, then Example 6.2-Solution
using equation 6.13:

(6.13)
42
The installed cost for the exchangers, tank and Example 6.2-Solution
pumps is equal to:

𝐶 = 30,260 + 48,374 + 26,647 + 14,200 + 14,100

[ 1 + 0.8 × 1.3 + 0.3 + 0.3 + 0.2 + 0.3 + 0.2 + 0.1 ]
𝐶 = 133,581 3.74 = $499,593
The installed cost for the pressure vessels and pump drivers (which do not require
a materials conversion factor) is:
𝐶 = 631,161 + 25,848 + 440 + 1,640
[1 + 0.8 + 0.3 + 0.3 + 0.2 + 0.3 + 0.2 + 0.1]
𝐶 = 659,089 3.2 = $2,109,085
In addition to this, we require the cost of the trays in stainless steel and the cost of
the spare pump and driver:
𝐶 = 820 + 1.3 185,601 + 7,050 = $251,266
The total installed ISBL cost of the plant is then:
𝐶 = $499,593 + $2,109,085 + $251,266 = $2,859,944
(or $2.9MM; ±30% within the accuracy of the method)
Note that although the answers obtained by the two methods are different, each is well within
the range of accuracy of the other. Both estimates should be stated as being on a U.S. Gulf
Coast basis, January 2007, as this is the basis for the correlations in Table 6.6. 43
 Cost Escalation
Cost estimation use historical data and are themselves forecasts
of future costs. The prices of the material of construction and the
costs of labour are subject to inflation. Use of published cost
indices to update the cost.

More convenient to use the composite indices published for various

industries in the trade journals:
Index Journal name
Chemical Engineering Plant Cost Index (CE index) Chemical Engineering
Marshall and Swift Index (M&S equipment cost index) Chemical Engineering
[but the index has been discontinued since 2010]
Nelson-Farrar Refinery Construction Index (NF index) Oil and Gas
ACE (Association of Cost Engineer) Index The Cost Engineer
PREDICT Plant Cost Index Process Engineering
Construction cost index Engineering News Record
44
 Cost Escalation
Figure 6.2a
Variation of major
cost indices.

NF
▲ MS
■ CE

45
 Cost Escalation
Figure 6.2b
Variation of major
cost indices relative
to 1990 = 1.0

NF
▲ MS
■ CE

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The purchased cost of a shell and tube heat exchanger, carbon Example 6.3
shell, 316 stainless steel tubes, heat transfer area 500 m2, was
$64,000 in 2003; estimate the cost in 2018. Use the M&S
Equipment Cost Index.
Solution
NF From Figure 6.2a:
▲ MS
■ CE Index in 2003 = 1125
2050 Index in 2018 = 2050

So, estimated cost in 2018

= $64,000 x 2050/1125
= $116,622.
1125

2003 2018 47
 Location Factors
Most plant and equipment cost data is given on a US Gulf Coast
(USGC) or Northwest Europe basis. The cost of building a plant in
any other location will depend on:
•Local fabrication and construction infrastructure
•Local labour availability and cost
•Costs of shipping or transporting equipment to site
•Import duties or other local tariffs
•Currency exchanger rates
These differences are often captured in cost estimating by using
a location factor

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 Location Factors

These differences are often captured in

cost estimating by using a location
factor:

where: LFA = location factor for location

A relative to USGC basis

Table 6.7 gives example

location factors relative to a
USGC installation.

49
 Example 6.4
The cost of constructing a 30,000 metric tons per year (30 kMTA) acrolein plant was
estimated as $80 million ($80 MM) on a 2006 U.S. Gulf Coast basis. What would be
the cost in Euros and in U.S. dollars on a 2006 Germany basis?
Solution
From Table 6.7, the 2003 location factor for Germany was 1.11
The exchange rate in 2003 averaged about €1 = US$1.15 and in 2006 it averaged
about €1 = US$1.35.
The 2006 location factor for Germany is thus 1.11 x 1.35/1.15 = 1.30
The cost of building the acrolein plant in Germany in 2006 is US$80 MM x 1.30
= US$104 MM.
The cost of building the plant in Euros (€2006) is US$104/1.35 = €77 million.

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 Economic Evaluation of Projects
As the purpose of investing money in chemical plant is to
earn money, some means of comparing the economic
performance of projects is needed.

The management must be convinced that the project will

provide a sound investment compared to other
alternatives.

Principal methods used for making economic comparisons

between projects: Cash Flow & Cash Flow Diagrams,
Economic Analysis (Pay-Back Time & Return on
Investment)

51
 Cash Flow
1 A-B the investment required
to design the plant.

2
B-C The heavy flow of capital
to build the plant, and provide
funds for start-up

3 C-D The process come on

stream and income is
generated from sales.

4 D-E Project is earning money.

E-F Toward the end of the

5 project. It may due to the
increasing operating costs
and falling sale volume

Figure 6.8. Project cash-flow diagram 52

 Pay-Back Time
A simple method for estimating the pay-back time is to divide the total
initial capital (fixed capital + working capital) by the average annual
cash flow:

This is not the same pay-back time indicated by the cash-flow diagram,
as it assumes that all the investment is made in year zero and
revenues begin immediately.

For most chemical plant projects, this is not realistic as investments

are typically spread over 1 to 3 years and revenues may not reach
100% of design basis until the second year of operation.
The simple pay-back time also neglects taxes and depreciation.

53
 Return on Investment (ROI)
ROI allows an investor to evaluate the performance of an
investment and compare it to others in his or her portfolio.

If ROI is calculated as an average over the whole project:

Pre-tax ROI:

Pre-tax ROI is based on cash flow, not profit or taxable

income and therefore does not include a depreciation
charge.

54
 Past year final exam question
A company propose a new plant design to make 30000 tonnes per annum of refined
aniline by the hydrogenation of nitrobenzene. The product specification is a 95%
conversion of aniline. The the company decides that the process involves four
significant stages. The major items of equipment that will be required are detailed
below:
•U-tube shell and tube heat exchanger, kettle type, heat transfer area 55 m2, and
operating pressure 10 bar, materials carbon steel.
•Hydrogenation column: diameter 2 m, height 25 m, ,carbon stainless steel
steel cladkg/m
(ρ=7850 vessel,
3), 20

stainless steel sieve plates, operating pressure 15bar.

bar, Temperature 100 °C.
•Condenser: fixed
Doubletube sheets, area 25 m2, carbon steel shell and tubes, operating
pipe,
pressure 1 bar.
•Fluidized bed reactor: diameter 3.3 m, total height 17 m, operating pressure 10 bar,
materials carbon steel.

Estimate the total capital cost in pounds sterling of the plant using:
1) Bridgewater’s method. (2 marks)
2) A detailed factorial method with the working capital is 10% of fixed capital. Neglect
the cost of ancillary building, contractors’ fee and contingencies. (17 marks)

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