CHAPTER I

CAPITAL ESTIMATE
1.1.

Cost Index
Most cost data which are available for immediate use in a preliminary or

predesign estimate are based on conditions at some time in the past. Because price
may changes considerably with time due to changes in economic conditions, some
method can be used for updating cost data applicable at a past date to costs that are
representative of conditions at a later time. This can be done by using cost index.
Cost index is numerical values that reflect historical change in engineering
costs. The cost index numbers are dimensionless, and reflect relative price change in
either individual cost items such labor, material, utilities; or groups of costs such
consumer prices, producer prices. Indexes can be used to update historical costs with
the basic ratio relationship as follows;
C2 =C1

I2
I1

()

where,
C1

= Estimated cost at previous time (USD)

C2

= Cost at expected time (USD)

I1

= Index value at expected time (Year)

I2

= Index value at previous time (Year)

The index used is the Chemical Engineering (CE) Plant Cost Index. The data

is gotten from the CEPCI Online. However, the available data for 2015 is only for the
range year between 2004-2013. The Table 1.1 below shows the data for cost index
from 2004 to 2013.
Table 1.0.1. Chemical Engineerings Plant Cost Index

Year
2004
2005
2006
2007
2008

CEPCI
444.2
468.2
499.6
525.4
575.4

(Source: CPCEI Online, 2015)

Table 1.1. Chemical Engineerings Plant Cost Index (Contined)

Year
2009
2010
2011
2012
2013

CEPCI
521.9
550.8
585.7
584.6
567.3

(Source: CPCEI Online, 2015)

Using the data above, we can projected annual cost index in year of 2018.
Projections made by the cost growth index, based on data annually. First, we can plot
it as Figure 1.1 below. Then , we get the equation y = 14.4 x 28,389. So, for
estimate annual cost index in 2018, we can use that equation.
700.0
600.0
500.0

f(x) = 14.4x - 28388.87

R = 0.77

400.0

CEPCI

300.0
200.0
100.0
0.0
2002

2004

2006

2008

2010

2012

2014

Year
Figure 1.0.1. Chemical Engineerings Plant Cost Index Graphic
(Source: CPCEI Online, 2015)

By extrapolating the data and graphic, we can get a cost index value of 670.2 on
2020, as stated in Table 1.2 below:

Table 1.0.2. Projection of Chemical Engineerings Plant Cost Index

Year
2014
2015
2016
2017
2018

CEPCI
612.6
627.0
641.4
655.8
670.2

(Source: Authors Personal Data, 2015)

1.2.

Direct Cost
Direct cost is the cost that is experience depreciation in the equipments. Direct

is consist of total bare modul cost, bulk material cost (piping, valve, electrical,
instrumentation, installation etc), site development cost, building cost and offsite
facilities cost.
1.2.1. Total Bare Modul Cost
To obtain an estimate of the capital cost of a chemical plant, the costs
associated with major plant equipment must be known. The calculation of total bare
module cost is begun with the calculation of purchased equipment cost. FOB (Free
On Board) is the bases cost of the purchased equipment cost. This is based on the
parameter of each equipment. The parameters and the formula we can see in Process
and Product Design Principles by Seider exactly in the Table 16.32 or based on
current price quote from a suitable vendor.
Analyses of the total installed costs of equipment in a number of typical
chemical plants indicate that the cost of the purchased equipment varies from 65 to 80
percent of the installed cost depending upon the complexity of the equipment and the
type of plant in which the equipment is installed. In other case, we can use bare
modul factor on the FOB purchase cost of the process equipment that is shown in
Table 1.3 to estimate total installation cost of process equipment. When these cost are
added to the purchase cost, Guthrie call the result the bare module cost instead of the
installed cost.

Table 1.0.3. Bare Modul Factor of Guthrie

(Source: Seider et al, 2004)

Using the design specification for all equipment, the purchase cost can be
determined, and later converted into 2018 purchase cost using the cost index. The
overall calculation is summarized on Table 1.4.

Table 1.0.4. Total Bare Modul Factor Cost

No
A
1
2
B
1
C
1
2
3
D
1
2
3
E
1
2
3
4
5

Equipment
Equipment Name
Code
Filter
F-101
Coarse Strainer
F-102
Multi Media Filter
Deoxygenation Tower
V-101
Deoxygenation Tower
Deaeration Vacuum Package
M-101
Ejector
P-102
Vacuum Pump
V-102
Deoxygenation Separator
Centrifugal Pump
P-101
Seawater Lift Pump
P-103
Booster Pump
P-104
Seawater Injection Pump
Reciprocating Pump
Oxygen Scavenger
P-105
Dosing Pump
P-106
Nitrate Dosing Pump
P-107
Biocide Dosing Pump
Corrosion Inhibitor
P-108
Dosing Pump
Hypochlorite Dosing
P-109
Pump

(Source: Authors Personal Data, 2015)

Qty.

Price/Unit

Total
Price

Bare Module
Factor

CTbm in
2018

Reference

2
2

$51,100
$36,000

$102,000
$72,000

2.32
2.32

$403,200
$284,100

Seider, 2003

$46,900

$46,900

4.16

$331,800

Seider, 2003

1
2
1

$5,600
$133,500
$3,600

$5,690
$267,000
$3,600

3.30
2.15
4.16

$18,500
$574,100
$25,500

Seider, 2003

1
1
1

$23,500
$17,900
$167,000

$23,500
$17,900
$167,000

3.30
3.30
3.30

$77,600
$59,100
$551,100

Seider, 2003

$8,700
$9,700
$8,700

$8,700
$9,700
$8,700

3.30
3.30
3.30

$28,700
$32,000
$28,700

$6,000

$6,000

3.30

$19,800

$3,400

$3,400

3.30

$11,200

1
1
1
1
1

Seider, 2003

Table 1.4. Total Bare Modul Factor Cost (Cond)

No
F

Equipmen
Equipment Name
t Code
Chemical Injection Tank

1 T-101
2 T-102
3 T-103
4 T-104

Oxygen Scavenger Tank

Nitrate Tank

1
1

Biocide Tank

Corrosion Inhibitor Tank

5 T-105
Hypochlorite Tank
G
Hypochlorite Generator
1 CH-101

Qty.

Hypochlorite Generator

1
1

Bare Module
Factor

CTbm in 2018

$39,000

$39,00
0

1.41

$113,300

$47,600

$47,60
0

1.41

$138,300

$39,200

$39,20
0

1.41

$113,900

$44,800

$44,80
0

1.41

$130,100

$68,000

$68,00
0

1.41

$197,500

$55,000

$110,0
00

2.00

$220,000

Price/Unit

Total Bare Modul Cost

(Source: Authors Personal Data, 2015)

Total
Price

$4,358,500

Reference

Wallas, 1990

Alibaba, 2015

1.2.2. Bulk Material Cost

Bulk material cost is consist of valve and instrumentation cost, piping and
fitting cost, electrical system, safety equipment, media filter cost and installation
cost. Instrumentation is the major part of the capital investment which actually
includes not only the instruments but also all auxiliries for a complete system.
Instrumentation costs may be calculated from divided type of instrumentation and
valve and also find price per unit of each equipment. Calculation for Instrumentation and valve cost is shown in Tabel 1.5.
Table 1.0.5. Instrumentation and Valve Cost

No
1

Controller
Pressure Control

Pressure Control
Valve

Level Control

Level Control
Valve
Flow Rate Control

Flow Rate Control

Valve

Check Valve

Backwash Valve
Sludge Disposal
Valve
ESDV
Priority Panel
Portable Smoke
Detector

9
10
11
12

Note
Qty.
Pressure
5
Transmitter
Pressure
5
Indicator
2"
2
6"
3
Level
1
Transmitter
Level Indicator
5

Price/Unit

Total Price

$101

$510

$51

$260

$326
$1,223

$650
$3,670

$122

$120

$39

$200

$1,223

$1,220

$120

$840

$51

$360

4
3
4
2
12

$326
$1,223
$290
$710
$609

$1,300
$3,670
$1,160
$1,420
$7,310

6"

$609

$3,050

6"

2
2

$4,974
$7,260

$9,950
$14,520

$1,852

$5,560

6"
Flow Rate
Transmitter
Flow Rate
Indicator
1.5 "
6"
1.5"
6"
6"

Total

$55,800

(Source : Hayward, 2015)

The cost for piping covers pipe, fitting, supports, and other terms involved
in the complete erection of all piping used directly in the process. The cost of

piping depending upon the size of pipe or fitting and length of pipe. Calculation
for piping and fitting cost is shown in Tabel 1.6 and 1.7.
Table 1.0.6. Piping Cost

Size
(in)
1.5
6
10

Length
Wall
(in)
Thickness (in)
0.21
59.06
0.86
236.22
1.51
393.70
Total

Mass
(lb)
34
2,213
10,791

Mass
Price/ton
(kg)
15
$ 665
996
$ 686
4,856
$ 697

Total
Price
$10
$680
$3,390
$4,100

(Source : US Pipe, 2015)

Table 1.0.7. Fitting Cost

Type
Elbow 90o
Tee
Bend

Size (in)
1.5
6
10
6
10
1.5
6
10
Total

Qty.
35
15
8
4
2
12
6
4

Price/ unit
$98
$184
$227
$22
$24
$85
$153
$188

Total Price
$3,410
$2,750
$1,810
$90
$50
$1,020
$920
$750
$10,800

(Source : Hayward, 2015)

In ordinary chemical plants, the electrical installation consists of four

major components. Those are power wiring, lighting, transformation and service,
and instrument and control wiring. The complete installed cost of electrical may
be calculated that is shown in Tabel 1.8.
Table 1.0.8. Electical System Cost

Requirement
Building Lamp
Outdoor Lamp
Panel Distribution Lighting
Transformation, metering
and protection system
UPS + Battery
LV Switchboard
Cathodic Protection

Qty.

Total

10
8
1

Unit
Unit
Unit
Lot

Price/Unit
$20
$20
$1,707

Total Price
$200
$200
$1,700

Lot

$36,321

$36,300

1
1
1

Lot
Lot
Lot

$88,850
$62,500
$25,500

$88,900
$62,500
$25,500
$215,300

In seawater injection plant, is used multi media filter to filter the solid
seawater. So we can estimate media filter that is used in multi media filter. The
type of media filter is antrachite, sand and garnet with volume that is shown in

Table 1.9. Media filter cost has been calculated and it shown in Tabel 1.9 with
volume and height in column that is gotten in sizing assignment.
Table 1.0.9. Media Filter Cost

Type
Media
Antrachite
Sand
Garnet

Height
(m)
0.2
0.5
0.2

Volume
Density
3
(m )
(kg/m3)
1.41
1,600
3.53
2,650
1.41
4,200
Total

Qty.
2
2
2

Price per
ton
$190
$80
$200

Total
Price
$430
$700
$1,200
$2,300

(Source : Alibaba, 2015)

The other of bulk material cost that is used in seawater injection plant is
safety equipment such as APAR, safety sign and personal protective equipment.
And also, the installation cost like water installation, electrical installation and
hydrant installation is put in bulk material cost. Calculation for safety eqquipment
cost and installation cost is shown in Tabel 1.10 and 1.11.
Table 1.0.10. Safety Equipement Cost

Type

2
6
10

Price/ unit
$1,704
$370
$200

Total Price
$3,410
$2,220
$2,000

$148

$1,180

Qty.

APAR 25 Kg
APAR 6 Kg
Safety Sign
PPE standard Oil & Gas (Safety Shoes,
Safety Helm, Safety Glass, Ear Plug)
Total

$8,800

Table 1.0.11. Installation Cost

Installation Cost
Water Installation
Electricity Installation
Hydrants Installation
Total

$8,500
$6,500
$4,500
$19,500

1.2.3. Site Development cost

The site development costs consist of constructions for fencing, grading,
roads, sidewalks, railroad sidings, landscaping, and similar items. By following
Guthrie metodh, it can be estimate as an amount equivalent to 10-20 % of the total

bare module cost for grass plant root and equivalent 4-6 % of the total bare
module cost for brown plant root. In seawater injection plant, site development is
consist of prepare the steel platform for building modular deck. Cost of site
preparation of our plant can be seen at Table 1.12.
Table 1.0.12. Site Development Cost

Type
Floor 1
First
Floor 2
Area
Floor 3
Second Floor 1
Area
Floor 2

Area (m2) kg/m2

48
212.9
48
212.9
42
212.9
15
212.9
15
212.9
Total

mass (kg)
10,219
10,219
8,942
3,194
3,194

USD/ton
3,850
3,850
3,850
3,850
3,850

Total Price
$39,300
$39,300
$34,400
$12,300
$12,300
$137,600

(Source : Authors Personal Data, 2015)

1.2.4. Building Cost

In estimating the cost for buildings, depend construction and existence of
plant site. Cost for plumbing, heating, lighting, ventilation, and similar building
services are list the erected unit costs of buildings and building components. But,
In our plant, there are no building like office, laboratory or station. So, building
cost in our plant is $0. Control room for our plant is joined with main control
room that in kerisi field platform and also the buliding for labor is joined in main
office in kerisi field platform.
1.2.5. Offsite FacilitiesCost
Offsite facilities include such as utilities for supplying steam, water,
power, compressed air, and fuel in an industrial plant. Waste disposal, fire
protection, and miscellaneous service items also are included under the general
heading of service facilities cost. In our plant, offsite facilities that is used is
power generator, cooling and process water and compressed air for instrument air.
The total cost for offsite facilities in chemical plants has been calculated and is
shown in Table 1.13.

Table 1.0.13. Offsite Facilities Cost

Electricity (Power Generator)

Cooling Water

Utility Cost
2,694.54 kW
156.74 GPM

203 $/kW
58 $/GPM

$547,000
$9,100

Process Water
Air Instrument Compressor
Package

2.22 GPM

247 $/GPM
1

Lot

Total

$500
$25,000
$581,600

(Source : Authors Personal Data, 2015)

1.3.

Indirect Cost
Indirect cost is the cost that is not include depreciation in the investation or

equipments . Indirect is consist of engineering and supervisior cost, contruction

expenses, contractor fee and contingency cost.
1.3.1. Engineering and Supervisior Cost
The engineering costs, sometimes referred to home office costs or
contractor charges, include the costs of detailed design and other engineering
services required to carry out the project construction design and engineering,
drafting, purchasing, accounting, construction and cost engineering, travel,
reproductions, communica-tions. This cost is normally considered an indirect cost
in fixed capital investment and is approximately 8 percent of the total direct costs
of the process plant. The calculation of engineering and supervisior cost is shown
in Tabel 1.15.
1.3.2. Construction Expenses
Construction is the item else that is included into indirect plant cost and
consist temporary construction and operation, construction tools and rentals, home
office personnel located at the construction site, construction payroll, travel and
living, taxes and insurance, and other construction overhead. This expense item is
occasionally included under equipment installation, or more under engineering,
supervision, and construction. If construction or field expenses are to be estimated
separately, the construction expenses average roughly 10 percent of the total direct
costs. The calculation of contruction expenses is shown in Tabel 1.15.
1.3.3. Contractor Fee
The contractors fee depends upon the size, complexity, and location of the
plant. It may be estimated as being equivalent to 3 percent (Seider, 2004) of total
direct plant cost. The calculation of contractor fee is shown in Tabel 1.15.

1.3.4. Contingency Cost

Contingency charges are extra costs added into the project budget to allow
for variation from the cost estimate. In order to compesate for unpredictable
expense, minor process changes, price changes, and estimating errors, a
contingency charge is applied against the direct plant cost. It may be estimated as
being equivalent to 15 percent (Seider, 2004) of total direct plant cost with
average contingency. The cost of contingencies varies considerably, with 15 %
being a useful estimate when the design team is unable to make a better estimate.
The calculation of contingency cost is shown in Tabel 1.15.
1.4.

Additional Cost

1.4.1. Royalties Cost

When a company desires to use a process that is covered by patents owned
by patent owned by another company , a license may sometimes be negotiated.
The license fee may be one time fee, in which case that fee is included in capital
investement as one time royalty or pay up license. In the absence of data, an initial
royalty fee of 2 % of total depreciable capital cost.
1.4.2. Plant Start Up Cost
Plant start up cost divided into two categories : (1) the costs incurred by
the contractor in checking equipment performance, calibrating, controller and
other plant equipment and commisioning the plant, and (2) those cost incurred by
plant operating personel when starting up and shutting down the plant. The cost of
plant start up is typically estimate as 10 % of total depreciable capital cost.
1.4.3. Supporting Facilities Cost
The supporting facilities costs consist of equipment that is used for labor
room like desk, chair, computer, etc. Calculation for supporting equipment cost is
shown in Tabel 1.4.
Table 1.0.14. Supporting Facilities Cost

Equipment
Office Desk
Office Chair
Air Conditioner

Qty.
5
5
5

Price / Unit
$111
$67
$370

Total Price
$600
$300
$1,900

Locker
Computers
White Board
Cupboards
Telephone
Photocopy Machine
Fax Machine, Scanner and Printer
Total

1
5
5
5
5
1
2

$259
$630
$56
$150
$74
$1,000
$370

$300
$3,200
$300
$800
$400
$1,000
$700
$9,500

(Source : Authors Personal Data, 2015)

1.5.

Working Capital
Working capital is needed to cover operating cost that required for early

operation of the plant. Includes cash cost of inventories, net accounts receivable,
spare parts or supplies, and cash-on-hand. The working capital for an industrial
plant consists of the total amount of money invested in raw materials and supplies
carried in stock, finished products in stock and semifinished products in the
process of being manufactured, accounts receivable, cash kept on hand for
monthly payment of operating expenses, such as salaries, wages, and raw-material
purchases, accounts payable, and taxes payable. In general, it will be found to be
amount equal to 15 % of the total capital investment cost (C TCI) or or 17.6 % of
total permanent investment cost (CTPI). The calculation of working capital cost is
shown in Tabel 1.15.
1.6.

Calculation of Total Capital Investment

Total Capital Investment, CTCI, is total of total permanent investment (C TPI)

and working capital cost (CWC). However, total permanent investment (CTPI) is
total of total depreciable capital (CTDC) and additional cost like royalties and start
up cost. And also total depreciable capital (CTDC) is total of total direct cost (total
bare module, site development, buliding, and offsite facility cost) and total
indirect cost (engineering, contruction, contingency cost and contractor fee). The
calculation of total capital investment (CTCI) is shown in Table 1.15.

Table 1.15. Total Capital Investment

Type Cost

Kind of Cost

Total Bare-Module Cost

Cost of Bulk Material
Direct Cost Site Development Cost
Building Plant Cost
Offsite Facilities Cost
Total
Direct
Permanent
Investment
Engineering and Supervision
Construction Expense
Indirect
Cost
Contingencies Cost
Contractors Fee

Additional
Cost

Working
Capital

Symbol

Cost

Note

CTBM
CBulk
Csite
CBuild
Coffsite

$3,358,500
$316,600
$137,600
$0
$749,500

Calculated
Calculated
Calculated
(no buliding office, etc)
Calculated

CDPI

$4,562,200

(CDPI = CTBM + Cbulk + Csite + Cbulid + Coffsite)

Total Depreciable Capital

CTDC

$6,201,600

Royalties Cost
Plant Start Up Cost
Supporting Facilities Cost
Total Permanent Investment
Working Capital

Croyal
Cstartup
Csupport
CTPI
CWC

$124,100
$620,500
$9,500
$6,945,700
$1,222,700

(8% CDPI)
(10% CDPI)
(15% CDPI)
(3 % CDPI)
(CTDC = CDPI + Ceng + Ccontruction + Ccontingency
+ C contractor)
(2% CTDC)
(10% CTDC)
Calculated
(CTPI = CTDC + Croyal + Cstart up)
(CWC = 17.6 % CTPI)

Total Capital Investment

CTCI

$8,183,400

(CTCI = CTPI + CWC)

(Source : Authors Personal Data, 2015)

Ceng
Ccontruction
Ccontingency
Ccontractor

$365,000
$456,200
$684,300
$136,900

1.7.

Capital Cost Breakdown

Total capital investment breakdown is shown in Figure 1.2. Based on

Figure 1.2, direct cost with pencentage of 56 % is the highest cost in capital cost.
The other cost like indirect cost, additional cost and working capital cost have
percentage value of 20 %, 9 % and 15 %.

Figure 1.0.2. Total Capital Investment Breakdown

(Source : Authors Personal Data, 2015)

Direct cost and Indirect cost breakdown is shown in Figure 1.3 and Figure
1.4. Based on Figure 1.3, Total bare modul cost with pencentage of 74 % is the
highest cost in direct cost. Based on Figure 1.4, contingency cost with pencentage
of 42 % is the highest cost in indirect cost.

Figure 1.0.3. Direct Cost Breakdown

(Source : Authors Personal Data, 2015)

Figure 1.4. Indirect Cost Breakdown

(Source : Authors Personal Data, 2015)