a computerized procedure for the evaluation of operating and investment costs
TRANSCRIPT
Computers & Chemical Engineering Vol. 8, No. 5, pp. 301-307, 1984 0098-l 354184 $3.00 + .OO Printed in the U.S.A. Pergamon Press Ltd.
SHORT NOTE
A COMPUTERIZED PROCEDURE FOR THE EVALUATION OF OPERATING AND
INVESTMENT COSTS
S. ALI, G. DONATI, G. L. MARZIANO and M. TENCONI Istituto “G. Donegani” S.p.A., Novara, Italy
Abstract-The economic analysis of chemical plants is a major commitment in both the development of a new process and the operation of an existing plant. The main requirements of a computerized procedure for the economic evaluation of chemical plants as the logical steps generally involved with it are given. A description of the Istituto Donegani evaluation program, its structure, the cost data routine, estimate procedure and an example of computation is shown.
INTRODUCTION
The economic analysis of chemical plants is a major commitment in both the development of a new process and the operation of an existing plant. In the development of new products and processes, an accurate selection and a rapid technical and economic evaluation from the first research stages would at least save time and money and increase the probability of reaching a profitable result.
In the operation of an existing plant a continuous economic control would allow the selection of the most economic production-mix and production level, as well as indicating the opportunity of some plant modification in order to improve the overall efficiency.
Due to the complexity of chemical processes, the economical optimization of either new or existing plants would require a lot of engineering effort and a great deal of time in the absence of a powerful and flexible tool such as could be provided by a suitable computerized procedure.
STATEMENT OF THE PROBLEM
A computerized procedure for the economic evaluation of chemical plants should comply with the following requirement: (i) it should be consistent: namely the cost estimation of different equipment items should have a known degree of accuracy to estimate the reliability of the evaluation; (ii) it should be flexible and easy to use with the possibility of dealing with different kinds of input data; (iii) it should give information using different computation procedures (for example the Miller’s or Guthrie’s methods for the investment estimates) according to the final object of the evaluation and the available process or economic data.
Two main objects may be considered: (i) profitability analysis, when a new plant or relevant modifications of an existing plant have to be evaluated; (ii) gross profit estimation, when the optima1 production level and mix are to be determined.
In a research environment the first object of course is emphasized.
The logical process that is involved in an economical evaluation can be schematically represented by a block diagram as reported in Fig. 1. An economical evaluation of a chemical process
generally implies the following steps: (i) material and energy balance computation; (ii) investment cost evaluation; (iii) product cost estimation and profitability analysis.
The first step involves the so called “process simulation”, that has been the object of extensive wqrks during the past few years both in industry and in the university (Refs. (l-31). It has to be pointed out, however, that for economical evaluation purposes, expecially in a preliminary stage, the material and energy balances do not need to be described very accurately. On the other hand, relatively good estimates of equipment costs and reliable investment evaluation procedures are needed.
For this reason in recent years our company has collected and stored in files cost data of the main equipment items and plant erection factors for various chemical processes, derived from Montedison experience in constructing chemical plants.
DESCRIF’IION OF THE PROGRAM
The program for economical evaluations of new processes or plant modifications, that we present, can be described according to the block diagram of Fig. 2.
The general supervisor has the duty of organizing the computation according to the user’s options. First it reads the data about mass and energy balance, that can be either computed by a process simulator or directly given by the user.
When the equipment items of the process are already sized (that is the usual case in batch processes) the data on mass and energy balance are given to battery limits as data about unit consumption of raw materials and utilities.
In such case the supervisor directly refers to the subroutines for evaluation of equipment costs.
Alternatively the equipment items may be sized by the program, through suitable subroutines, and then their costs computed as in the previous case: of course in this situation the mass energy balances must be given in more detail. After equipment costs, the general supervisor activates the subroutine for the investment evaluation, then those for the operating and fixed costs.
Then the subroutines for profitability analysis are called; in order to perform the computation, data on selling prices of the product and on project
301
302 S. ALI et al.
EvaLuotion
available dotal
Investment awemy knownlon ccm~uter with simplified Procedures1
fl Investment eVaLuation
-l-
lPrdltoblLity 1 (onalyr8s p
I 1 and energy
Fig. 1. Logical block diagram of an economical evaluation procedure.
A computerized procedure for the evaluation of operating and investment costs 303
scheduling must be given by the user. The main results given by the program are:
total investment break-even price discount cash flow rate of return (D.C.F.R.R.) net present value pay-out time
JNVESTMENT BSIMATE PROCRDURES
Two main investment estimate procedures are con- sidered in the program. The frrst one, the most frequently used in our computations, is that devel- oped by Miller, suitably adapted to fit Montedison’s experience better.
This procedure computes the erected plant cost by multiplying the total cost of main equipment items by the minimum and maximum value of a factor related to equipment erection, foundations and structures, instrumentation, piping and so on. Range and values of the factors are according to the complexity and nature of the considered plant and the average cost of main equipments.
The most probable factors for the erected plant cost are then chosen by the user between the max- imum and minimum values from past experiences in constructing chemical plants. The second procedure, developed by Guthrie (Ref. [4]), essentially consists in
the use, for each of the main equipment items, of a suitable factor to get the installed cost. The sum of all the installed costs gives then the erected plant cost.
EQIJWMENT COST DATA BANR
The calculation of investment cost with the pre- viously described methods is based on the com- putation of the equipment costs.
Cost correlations, on the base of a series of cost data for most types of chemical equipment items derived from a number of plants constructed by Montedison in the last 15 yr have been developed and used.
They consist in a cost-function of the general form:
C =f(a, x)
where a is a vector of regression coefficients (deter- mined by a best-fitting method on the base of avail- able cost data) while x is a vector of relevant load parameters of each equipment; C is then a basic cost that must be multiplied by suitable factors accounting for the construction materials, the operating pressure and temperature, and the design type. All cost data used to develop cost correlations are stored in a data bank, containing over 300 cost values about columns, pumps, vessels, compressors and so on, organized to be easily updated and retrieved.
Table 1. Ethylene glycol from O,, CO, H, 150000 T/y; 8000 h/y. Battery limits investment (106L)
C.E. Index = 215.0
Process equipment costs
Exchangers 1537.1 Reactors & Vessels 607.7
COlUlNlS 370.2
Pumps 431.0
Compressors 2448.0 Centrifuges & Filters 499.5
Total main items 5893.5
storages 477.6
Total main apparatus
FOB or FOR charge (4%)
Transportation and insurance (7.5%)
6371.1 M.L.
254.8
477.8
Main apparatus & machinery (M.E.) 7103.8
Secondary equipments 1278.7 -_-----~--~----~---------~~---~---~-~----~---~------------------
Apparatus and machinery 8382.5
Number of M.E.=:71 M.E.Average Cost = 100.1 ErectionIndex= .99
Erected plant cost
Engineering
Start up
PLant overhead
Catalysts and chemicals
16631.1 M.I..
2335.4
1000.9
836.1
477.9
Total Battery Limits inveitment 21329.3 M.L.
Notes: FOB: free on board FOR: free on railway
304 S. ALI et al.
Table 2 Ethylene Glycol from O,, CO, H,
lo3 t/a
Discount Calendar factor Production v, x
Year year 1 (--> ’ Vi (1 - el,5 - e,,6)
1+r
0 1978 1.000 0.0 0.0 0.0
1 1979 0.926 0.0 0.0 0.0
2 1980 0.857 0.0 0.0 0.0
3 1981 0.794 0.0 0.0 0.0
4 1982 0.735 0.0 0.0 0.0
5 1983 0.681 90.0 85.1 31.5
6 1984 0.630 120.0 113.4 10.5
7 1985 0.583 135.0 127.6 5.2
8 1986 0.540 150.0 141.7 5.3
9 1987 0.500 150.0 141.7 0.0
10 1988 0.463 150.0 141.7 0.0
11 1989 0.429 150.0 141.7 0.0
12 1990 0.397 150.0 141.7 0.0
(*) 13 1991 0.368 150.0 141.7 0.0
(r = 8%) 14 1992 0.340 150.0 141.7 0.0
(qs = 2.5%) 15 1993 0.315 0.0 0.0 - 42.0
(e, = 2.5%)
(1, = 0.3,s)
Total
Break-even price
Notes: (*) qs = Turnover percentage for product improvement e,,, - Turnover percentage for commercial costs t, = Factor to calculate the working capital
A computerized procedure for the evaluation of operating and investment costs 305
150000 T/y; 8000 h/y Break-sven price
M.L.
Variable costs Invastment Fixed costs \
(6-7)x4 4, E I.2 E I.4 9+10+11 4x 12
0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 1066.3 0.0 1066.0 914.0
0.0 0.0 5332.3 0.0 5332.0 4233.0
0.0 0.0 11731.1 0.0 11731.0 8623.0
36.4 20429.0 3199.4 3928.7 27557.0 18755.0
64.8 27238.7 0.0 3967.3 31206.0 19665.0
71.4 30643.5 0.0 4007.5 34651.0 20219.0
73.7 34048.3 0.0 4048.6 38097.0 20583.0
70.9 34048.3 0.0 4091.0 38139.0 19079.0
65.7 34048.3 0.0 4134.1 38183.0 17686.0
60.8 34048.3 0.0 4179.7 38228.0 16395.0
56.3 34048.3 0.0 4226.0 38274.0 15199.0
52.1 34048.3 0.0 4273.7 38322.0 14091.0
48.3 34048.3 0.0 4322.8 38371.0 13064.0
13.2 0.0 0.0 0.0 0.0 0.0
613.7 188506.0
P = L./Kg. 307.17
“+‘Ei,l+El,2+Ei,4
P so (1+r3’
=n+t n(l -ei,S-ei,6)-dVit1
(1 + ri)i
306 S. ALI et al.
Input dota depending on user*s reque*t PROGRAM PACKAGE
Input’doto olwoys rewired
suppliers or
olreody know”
Subroutines
SubroutInes for equipments
_---- costs sst,mo-
-Row mater~ol -ReCOVerleS
1
Subroutines for Profltobllity __ Prolect
O”PlYS15 ScheduClng
t
-I
Fig. 2. Block diagram of program structure.
The main pieces of information reported in the bank for each apparatus are: type of the equipment, design features, construction material, process pa- rameters, year of purchase, price, project under which the equipment was bought. The information retrieval can be operated in different ways according to the user’s needs.
For example it is possible to print out the data referring to all the equipments of assigned type, or, among these, only to those having process parame- ters within a given rage; alternatively one can get all the equipment items purchased under a given project or in a particular year, and so on.
The data bank and the programs for its updating and retrieval operate off line with respect to the
program for economic evaluation. They are used for three main purposes: (1) to store the information relating to the equipments purchased by Montedison; (2) to check the cost computed by the cost re- gressions, especially for those equipments that due to their unusual characteristics are less precisely repre- sented by the regressions themselves; (3) to period- ically update the cost regressions.
EXAMPLE OF COMPUTATION
The program previously discussed has been used to economically analyze several processes at different stages of development. We present the economic results of a process for the production of etylene glycol, which was under study in our labs.
A computerized procedure for the evaluation of operating and investment costs 301
The value of the erect plant cost (EPC) was computed by means of the total installation factor and the investment was evaluated assuming suitable percentages of EPC for engineering and start up.
In Table 1 the results of the evaluation of EPC and total investment are presented while in Table 2 the computation of break-even price of production is reported.
REFERENCES 1. R. L. Motard, M. Shacham & E. M. Rosen, AICHE Jf,
21, 417, 1975.
2. L. B. Evans et al., MIT-2295T9, Second Annual Report, 1978.
3. G. Donati 8z M. Tenconi, Proc. Znt. Cong. on Con- tribution of Computers to the Development of Chemical Engineering and Industrial Chemistry. Paris, March 7-10, 1978.
4. K. M. Guthrie, W. R. Grace & Co. Chem. Eng., March 24, 114 + 142, 1969.