Costing of Pipelines - 1

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1. Introduction

• The selection of the optimal pipeline route, diameter, material, wall thickness, pump
station location, pump units and operational equipment or facilities is typically the
result of economic analysis and investment capital evaluation of the most reasonable
scenarios developed through
the design phase.

• Typically, even before the detailed design of a pipeline system has begun, an order-of-
magnitude cost study will be performed, with the goal of determining the feasibility of
continuing to invest time and capital in the design phase of the project.

• For a typical cross country pipeline project, the cost of pipe and its
associated construction and installation costs can be as much as 80% of
the capital investment , therefore , the selection of the pipe, with regard
to the type of material, size etc. is very important.

• A piping works engineer requires not only wide engineering knowledge

– not necessarily in depth , but certainly an understanding but he must
also have an understanding of engineering economics, costs of
metallurgical, methods of pipe fabrication, erection and sufficient
knowledge of mechanical, civil, electrical and instrumentation
engineering to discuss the requirements.

2. Direct and Indirect Costs Associated with Piping

• The direct cost of piping is related to the purchase and installation of

piping along with accessories. i.e. it deals with raw materials, labour,
energy etc.

• Indirect cost includes:

• Design and engineering cost, which cover the cost of design and cost of
“engineering” of the piping system, purchasing, procurement and
construction supervision.
• Contractor‘s fees (Technology Fee)

• Contingency allowance, this is an allowance to cover for unforeseen

circumstances ( labour disputes, design errors etc.).

3. Economic Evaluation of the Piping System

• As the purpose of investing money in modern piping system is to earn

money, some means of comparing the economic performance of piping
is needed.

• For a small piping system , and for simple choices between alternative
processing schemes , the decisions can usually be made by comparing
the capital and operating costs. More sophisticated evaluation
techniques and economic criteria are needed when decisions have to be
made between large, complex piping systems, particularly when the
piping systems differ widely in scope, time scale, etc.

• Making major investment decisions in the face of uncertainties that

will undoubtedly exist about plant performance, costs, the market
Government policy and the world economic situation, is a difficult and
complex task (if not an impossible task) and in a large design
organisation, the evaluation would be done by a specialist group.

4. Economics of Pipe Diameter – Concept

• The sizing of process lines can be divided into two categories

 Lines which do not contain pumping equipment

 Lines which contain pumps or compressors

Lines in the first group are sized on the basis of available pressure drop,
while those in the second must be based on an economical pipe size ( the
smaller the pipe , the less the pipe costs but the higher the pumping costs, and thus an
optimum size must exist).
Paradoxically, however, it is uneconomical to make economic studies on each process
line for a proposed plant. The designer, therefore, must have some means of
determining which lines justify careful cost analysis.

The designer can select a conservative line size which will definitely fulfill the
requirements. But will the next smaller size be more economical? The only manner in
which this can be determined definitely is by careful economic analysis.

If the possible saving , however, is not far from the cost in the man-hours required to
make the study, it is better to select the conservative size without further use of
valuable time.

If, on the other hand, the possible savings are substantial, then further detailed study is
indicated.

5. Inch Meter and Inch Diameter Concept

Purpose:

The purpose of inch meter and inch diameter is :

a. To find out piping erection load

b. Manpower planning
c. Piping work progress monitoring
d. Costing

The following example will illustrate the concept of the inch-meter and the inch-dia:

Q.1 Elbow 2" size, 20 nos., are to be fitted in a pipeline. Find out the inch dia?

Ans: Inch dia : size x no. of weld joints x no. of elbows

= 2 x 2 x 20 = 80 inch dia.

Q. 2 Find out the inch meter for 20 m pipeline of 2" size

Ans: Inch meter = Pipe size in inches x length in m

= 2" x 20 = 40 inch meter
Note : Inch meter will be more relevant in case of yard piping whereas inch dia will be
more relevant in case of plant piping.

6. Dividing the Cost of the Pipe Work

The costs of process industry pipe work are usually sub-divided as below:

1. Piping design and engineering: The cost of design work associated

with the pipe work including layout studies , scheming , analysis and
detailing.

2. Materials: The cost of all bought out materials , i.e. pipe flanges, fittings, valves,
expansion units, etc.

3. Fabrication: The cost of site fabrication , off-site fabrication, done in a

shop away and adjacent to site.

4. Erection: The cost of erecting on-site fabricated pipe work and pressure testing. This
includes preliminaries, variation orders and error
rectification if any.

Economic Pressure drop

Fluid Velocity (ft/s) available Remark
Pipe diameter d (in) (Ib/in2) / 100 ft

Pump discharge pipe

2.0
(d/3 + 5) ft/s

Pump suction pipe

0.4
(d/6 + 1.3) ft/s

Steam or gas line

0.5
20 d ft/s

For liquids, a velocity in excess of 20 ft/s should never be specified in order to avoid
erosion of the pipe. On suction lines to the pump, the pressure drop should always be
less than 50% of the total head developed by the pump.

7. Suggested Steam Pipe Velocities in Pipe Connecting Steam Turbines

SERVICE - STEAM TYPICAL RANGE -ft/s

Inlet to turbine 100 - 150

Exhaust, non-condensing 175 - 200

Exhaust - condensing 400 – 500

8. Relative Economics of Various Materials of Construction

S.No. Material Connection Factor

Carbon steel (C.S.), A-53,

1 Welded 1.00
seamless

Carbon steel (C.S.), A-53,

2 Screwed 0.84
welded galvanised

3 Wrought iron, galvanised Screwed 1.61

Unplasticised polyvinyl
4 Sock, weld 1.79
chloride

5 Carbon steel, lead lined Flanged 4.11

6 Carbon steel, PVC lined Flanged 4.76

7 Stainless steel Welded 15.00

9. Material Estimation

There are three main topics of pipe work estimation as mentioned below:

S.No. Stage Accuracy Basis

1 Preliminary +/- 25% Based on %age of total plant cost

2 First control +/- 20 % Based on completed P and I’s etc.

Final P and I, all pipe work details,

3 Second control +/- 10 %
drawings, material list etc.

10. Fabrication Cost Estimation

The contents of fabrication cost estimation comprise the following:

1. Fabrication
2. Fabrication / Welding
3. Welding
4. Supports

11. Erection Cost Estimation

The contents of fabrication cost estimation comprise the following:

1. Erection
2. Supports
3. Testing of completed pipelines

12. Rates for Fabrication and Erection

The schedule of rates under the fabrication and erection work are established in “man
hours” which should be representative of the gang time to complete the operation. The
type of rate will depend on the client and contractor relationship on the basis of the
contractor’s tenders.

The rates shall be included or excluded, allowances for construction plant, tools, tackle
and consumables.

Typical rates for various piping materials are enclosed for reference. These include
labour, consumables, tools, tackles and overheads.

13. Typical Rates for Fabrication, Erection and Testing of Pipelines for
Costing with Example

a) Mild steel (MS), B and C class piping: Rs. 45/- per inch dia per metre
length.

b) SS 304 piping ( Sch 5): Rs. 90/- per inch dia per metre length.

c) PVC Piping: Rs.45/- per meter length.

d) Cu Piping: Rs. 100/- per inch dia metre.

e) Pipe fitting reducer, bend etc.

SS 304: Rs. 125/- per inch dia
MS: Rs. 60/- per inch dia
Copper: Rs.140/- per inch dia

f) Fabrication and erection of MS supports= Rs. 4500/- per MT.

Q. Find out the labour cost for making a MS reducer of 2" x 4" size?

Ans: MS Reducer 2" x 4" = 4x60 = Rs.240/- (Considering 4" dia)

Q. Find out the labour charges for fabrication and erection of a MS pipeline of 50 NB
(2") MS “B” or MS “C” of 400 m length fabrication and erection?

Ans: 2 x 400 x 45 = Rs.36,000/-

Typically the quantum of pipe fabrication, erection and testing of pipe work shall be
expressed as shown below:

1. MS “B” and “C” class piping : 12450 inch mtr

2. SS 304 piping : 2850 inch mtr
3. PVC piping : 285 inch mtr
4. Cu piping: 695 inch mtr

14. Typical Calculation for Piping Cost

SS Condensor Copper
Raw material Factors
tube Condensor tube

Sheet width mm

Raw material base

Rs/kg 78.50 140.00
rate

Packing and
Rs/kg 1.00 0.79 1.40
forwarding

Conversion Rs/kg 40.00 50.00

Excise % 16.00 19.09 30.62

Sales tax/ VAT % 4.00 5.53 8.88

Insurance % 0.20 0.29 0.46

Transportation Rs/kg 2.00 2.00

Total Cost Rs/kg 146.19 233.37

Modvat Benefit Rs/kg 19.09 30.62

Cost to Co. Rs/kg 127.11 202.74

Rs/mtr 93.81 246.74

15. General Scope of Work for Piping Fabrication and Erection

• Fabrication, cutting, welding, assembly in position as per drawing.

• All raw material i.e. pipe, reducers, bends, flanges, sockets etc. and
hardware i.e. nut, bolts, gaskets etc. shall be supplied by client.

• Fitment includes assembly of fittings i.e. flanges, bends, valves, reducer, fabrication
of tees, fitment of non return valve, valves, gaskets, nut bolts, sockets for pressure
gauges fabrication and fitment of thermowell, etc. Pipe work shall be carried out as per
piping drawings/ specifications/ instructions given to construction engineer.

• After assembly, complete pipeline to be welded by taking necessary

precautions to avoid stresses. If stresses developed , those are to be
removed and welded as per standard practice and instructions of the
site co-ordinator.

• One in-position weld is allowed for line which cannot be welded on

ground.

• After welding , finishing and grinding , pipeline to be hydraulically tested at pressure

specified in the order.

• After hydraulic testing, pipeline to be painted with red–oxide ( one coat).

• After painting, pipeline to be assembled in position and with necessary

clamps and supports.
16. List of Tools, Tackles and Machinery Required to Carry Out the
Piping Works

To be arranged by contractor:

1. Rectifier
2. H.F. unit
3. Transformer
4. Grinders- AG7
5. Winch – 5 MT
6. Chain block 3 MT 11 mtr. Lift
7. Ropes / pulleys
8. FF2 grinder
9. Hacksaw/Files etc. and other tools and tackles.
10. Pipe voice
11. G Q 4 Grinder
12. Abrasive cutting machine
13. Gas cutting

17. Contractor Manpower List of Piping, Fabrication and Erection

For piping, fabrication and erection:

1. Experienced Mechanical Engineer as in-charge

2. Supervisor
3. Highly skilled fitter for SS 304
4. Highly skilled fitter for MS B and C class piping and fabrication
5. Welders for SS TIG, Welders for SS Tacking, Welders for MS Tacking
6. Helpers/Riggers

18. Additional Cost Information

• Piping cost may vary between 20 to 66 %.

• Piping cost may be a headache to the estimator as he/she is asked to
give the cost even before engineering and execution.
• The estimator needs to convert the preliminary flow sheet into a fair
approximation of an actual design.
 • The estimator should have the skill to draw quick and rather accurate
free hand isometric sketches, which will be of inestimable value.

19. Methods used for Estimation

• Piece by piece method ( Detailed costing)

• Finagling factor ( 40 % of equipment cost)
• N system.

20. N System

The N system is based on the fact which has been tested many times, that the costs of
strings of pipes of different sizes but of the same material and class of pipe bear
constant relations to each other. The N system was introduced by R.A. Dickson (Chem.
Eng. Nov 1947, PP 121-123)

21. How to use the N System

Step I : Calculate the cost of the reference sizes of the strings of pipe in question.

StepII : Then use the N factors to get the cost of the same string in the required size.

Continued to Costing of Pipelines - 2

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Costing of Pipelines - 2
http://www.pipingguide.net/2009/04/costing-of-pipelines-2.html

Reference: INDUSTRIAL PIPING, CHARLES T. LITTLETON, 1ST ED.

Industrial Piping, Charles T. Littleton, formerly engineer in charge of Piping, American

Cyanamid Co. First Ed. McGraw-Hill Book Co. ... The chapter on Estimating Piping Costs
by R. A. Dickson, Standard Oil Co. of New Jersey is a valuable addition

Continued from - Costing of Pipelines - 1

22. Piping Cost Estimation

Piping always represents a sizable part of the total installed cost of any process plant. It
may run to 20 percent or even more of the entire cost of the plant, including land and
buildings, and may total from around 10 percent to as high as two-thirds of the cost of
the equipment. But piping is usually complicated and often consists of a myriad of
small, rather inexpensive parts. Its estimation can therefore be a headache to the
estimator.

It makes his problem no easier that he is often asked for a reasonable estimate long
before the final plans exist and before the project engineers have any idea how much
piping will actually be needed. In this case, he must not only be an estimator, but he
must be able quickly to convert the preliminary flow sheet into a fair approximation of
an actual design to know what his estimate will involve. For this purpose the ability to
make quick and rather accurate free-hand isometric sketches is of inestimable value.

However, the estimation of the piping need not be arduous if the estimator will make
use of the N system developed by the another during the last several years. This
system, first disclosed in Chemical Engineering (R.A. Dickson, Chem. Eng., November,
1947, pp 121-123) has now been carried much further and includes most kinds of pipes
with which the chemical engineer is likely to be concerned.

The N System of Calculating Piping Costs. This new system of estimating

piping cost is quicker than the piece-by-piece, and more accurate than the “finagling-
factor,” system, the two methods ordinarily used by estimators.

The first requires picking of each length of pipe with its fittings and valves
and pricing the material and labour costs in detail, then adding them all up for the total
cost. The second consists in taking a percentage of the total cost of a project as the cost
of the piping. This percentage the “finagling factor,” is supposed to be around 40
percent.
* The author wishes to express his appreciation to the firms listed and to
may others who prefer to remain anonymous, but who helped by furnishing cost data
on which the N-factor tables are based. Specific acknowledgement is made to
Armstrong Cork Co., Inc.; Mundet Cork Corp.; Johns Manville, Inc.; Cooper Alloy
Foundry Co.; Taylor Forge and Pipe Works; Andrews Knapp Construction Co.; Knapp
Mills Inc.; The Saran Lined Pipe Co.; The Rie-Wil Co.; and The Duriron Co.

See, for example, Table 10-33 of the N factors. The costs of different sizes of steel Pipe,
butt-welded, schedule 40, black, with fittings and valves as specified, will be to each
other approximately as the N factors. As the table shows, a string of 2-in nominal
diameter pipe will cost 1.84 times as much as the same string in 1 in.

Take, for example, a string of such pipe of 2-in nominal diameter:

Item Unit Cost Total Cost

500’ pipe $ 0.23 $ 115.00
7 fittings 7.00 49.00
2 valves 22.00 44.00
$ 208.00

The same string in 1-in nominal diameter:

Item Unit Cost Total Cost

500’ pipe $ 0.13 $ 65.00
7 fittings 4.50 32.00
2 valves 11.00 22.00
$ 119.00

Hence, 208/119 = 1.84, the N factor for 2-in. pipe in terms of 1 in. pipe as unity.

Not only has the N-factor System been tested thoroughly, but it also shows up
satisfactorily over a period of time. Several checks of this fact have been made. For
example, table 10-39 was selected at random, and comparable strings were figured for
4- and 12-in. pipe, using first the costs of 1935, and then July, 1949, costs. Despite the
fact that the costs of each string had risen approximately 83 per cent from 1935 to
1949, the N factor for 4-in. pipe for 1935 was 0.249, and for 1949; 0.248.

How the N-factor System Is Used: To use the tables, first calculate the cost of the
reference sizes of the strings of pipe in question. Then use the N factors to get the cost
of the same string in the required size.

The index of N-factor tables includes 66 materials and weights of piping,

counting some insulated, some bare. If the N system is adopted, this means that prices
and costs of installation of these materials for the reference sizes only need be kept on
file, instead of material and labour cost of every size of every material and wall
thickness in common use. (Also as later explained, if less accurate estimating suffices,
data given here can be “factored” to the date of use by using one of the available cost
variation indexes.).

The tables cover only the cost of putting the strings of pipe together. The costs of
burying or supporting pipelines are easily calculated. Moreover, many times the
proposed lines lie on the ground or are supported on existing structures. These
conditions are far too variable to include in any tables of costs.

An example of use: Assure that several strings of pipe of various sizes have been taken
from the flow diagram of a small project involving some additional piping.

The specifications of pipe, fittings and valves are:

Pipe: steel, schedule 40, butt-welded, black, bare

Fittings: forged steel, screwed. 2,000# cold-water pressure

Valves: bronze, screwed ends, 200 # cold-water pressure

Assume that the pipe is to be installed on existing support.

First consult the index of N-factor tables. The specifications of the pipe, fittings and
valves in Table 10-33 correspond to those required. The reference size, i.e., the size for
which N = 1.00, is 1 in.

Next, calculate the cost of hypothetical string of 1-in. pipe of the required
specifications. (Or take the cost from Table 10-33, giving the cost of the
reference string in July, 1949. Then “factor” this cost to date of use.)

As in Table 10-33, the installed costs may be found to be:

Per foot of pipe .............................. $ 0.13

Per fitting ....................................... 4.50
Per valve ......................................... 11.00

Calculate all the strings taken from the flow diagram as 1-in. pipe, then multiply by the
N factor for the actual size:
For comparison, the total cost of piping calculated by the conventional pieceby - piece
system would be S764, as shown in the following check:
What Data Are Needed: The N-factor tables were derived by actual calculation of the
installed costs of typical strings of pipe in all the sizes mentioned in each table, and in
all the different weight and materials of construction listed in the 66 tables. For
uniformity, all have been calculated on the basis of July, 1949, materials and labour
costs in the New York area. For each specification the costs so calculated for the several
sizes have been compared with the cost of one reference size which is taken as 1.00.
The comparative costs of the other sizes of the same material are then listed as
multipliers of the reference size. In Table 10-1, for example, the sizes range from ½ to
12 in. The reference size is 3 in, and the N factors (i.e. relative costs compared with
that
of the reference size range from 0.320 to 6.730).

Hence, the N factors are all based on the reference size (or in a few cases, two reference
sizes) for each piping specification, and to figure any string of pipe, it is necessary only
to figure the cost for the reference size in that particular specification. Once the cost of
the reference size is known, the costs for any other size or for several sizes can be
determined immediately by multiplying by the proper N factor. This means that it is
necessary to keep up-to-date the cost data only for the reference size (or sizes) in each
specification, since the N factors remain constant through an extremely wide range of
material and labour cost variations.

Estimating without Current Data: This means also that it is unnecessary to keep up-to-
date data even on the costs for the reference strings, if a somewhat lower degree of
estimating accuracy can be tolerated than is possible by having up-to-date figures. For
this purpose, each of the tables includes as a second part (or in some cases, as a second
and third part) the detailed calculations for the reference size or sizes for these
materials are based on July, 1949 costs. As long as labour and material costs do not
change much from July, 1949, these figures can be used directly. But since such costs
are not likely to be stated in the future, it is possible to “factor” them to the date of use
by the judicious use of one or more of the available cost indexes, in comparison to the
index for July, 1949.

Cost Indexes: Many cost indexes are available monthly in the Survey of Current
Business, published by the U.S. Department of Commerce. Among these are several
building cost indexes for various kinds of labour and for a number of basic materials.
The Survey, as well as the magazine Engineering News-Record, also publishes the ENR
Construction Cost Index, which is widely used by estimators in dealing with plant and
equipment cost variations, although it is intended to cover only heavy construction
costs. Some organisations have successfully applied their own modifications to the
ENR Index in using it to “factor” plant and equipment costs. The magazine Chemical
Engineering regularly publishes the comparative equipment cost indexes for process
industries compiled quarterly by the evaluation engineering firm of Marshall and
Stevens, together with this firm’s 1947 industry average, covering equipment costs in a
wide range of industrial and commercial activities.

None of these indexes applies directly to piping costs and must therefore be used with
care. However, experience has indicated that such “factoring” can be sufficiently
accurate at least for pre-construction cost estimating. The only indexes that actually
deal with piping cost, as far as the author knows, are not so readily available as those
mentioned. These are the Handy Indexes of Public Utility Costs, put out for the estate
of William W. Handy by Whitman, Requard and Associates, of Baltimore, and
Benjamin L. Smith and Associates, of Albany. This compilation is issued every six
months and lists several kinds of piping including gas mains and power plant piping.
Table for N System

Pipe: aluminium, Aleoa alloy 618-T6, standard weight, bare, 1/2 “ to 12”
Fittings: aluminium, welding

Valves: ½” and 1" aluminium, screwed, gate; 1 ½” to 12" aluminium, flanged, gate,
125#

Reference size: 3#