Archives :: Business & Economics :: Cost Engineering

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June 1, 2014
Cost estimation is a critical dimension of project planning in asset-heavy industries such as the chemical process industries (CPI). Construction cost indices are useful tools in cost estimation and are used to compare plant construction costs from one time period to another. Understanding them can improve the accuracy of the cost estimates, as well as the effectiveness with which they are applied. This...
April 24, 2014
Most chemical processes are born in the laboratory. The challenge for engineers is to then convert the laboratory method into a large and economically sound industrial process. Unfortunately, many promising technologies never see the light of day; some because of perpetual piloting programs aimed at solving minute process issues, others due to unanticipated technical problems resulting from fast-tracking...
December 1, 2013
Capital cost calculations I recently read the article “Capital Costs Quickly Calculated” [ Chem. Eng., pp.46­–52, April 2009] and find it extremely informative and useful. I have reservations about the example given about the cost comparison of two spherical storage tanks. The authors state that the costs of spherical storage tanks are proportional to surface area, therefore, to the...
December 1, 2013
The topic of carrying out process engineering calculations in the most effective manner can be considered in these four ways: 1. The purpose of the calculation 2. The content of the calculation 3. The method used to carry out the calculation 4. The performer of the calculation   The purpose of the calculation Engineers typically carry out calculations for a variety of purposes including the following...
September 10, 2013
Bigger is better. That simple statement summarizes one of the fundamental principles of chemical engineering. It is a statement that we frequently want to ignore, but if capital efficiency is the main concern, it is always true. All engineers need an occasional reminder of this truism and can be aided by a tactile exercise that shows the inescapability of the bigger-is-better mentality. Origami, the...
July 1, 2013
When considering project proposals for new processes in the chemical process industries (CPI), capital equipment costs often become the primary focus. The purpose of this article is to provide a detailed examination of the total cost of process equipment and the implications that the initial equipment cost has for longterm costs over the full life of the process. FIGURE 1. Initial capital costs alone are...
May 1, 2013
A variety of technologies, methods and best practices are available to obtain the lowest total cost of ownership for compressors used in plants throughout the chemical process industries (CPI). This article discusses several critical areas in which concerted effort can help to reduce the overall cost of ownership.    Specifying compressors The ability to carry out proper shop-based performance...
February 1, 2013
Determining the proper preliminary size for centrifugal pumps during the initial stages of any pump-specification exercise requires numerous calculations and assumptions. This article reviews the steps needed to size centrifugal pumps during the early stages of a project, to support initial cost-estimation efforts. Such early pump-sizing efforts are important steps toward final pump selection and detailed...
January 1, 2012
Maximizing value during the procurement of equipment assets and raw materials is critical to the business functions of companies in the chemical process industries (CPI). Today’s tough economic environment places added pressure on chemical engineers to secure the best value for money spent on design and equipment. Whether the items your company needs are chemicals, pieces of equipment or skid-mounted...
November 1, 2011
To stay on budget, major capital projects often call for aggressive schedules. Engineering, procurement and construction (EPC) contractors often end up using work processes that are not part of an established or standard work procedure. This is especially true when it comes to acquiring materials to support the schedule, particularly for critical paths related to the piping design, supply, fabricate and...
September 27, 2011
In today’s economy, businesses have become more cash-conscious. The focus on expenses has become increasingly important to the bottom line. Typically, the top three business expenses are wages, raw material costs and taxes. If jobs are cut, or raw material purchases are reduced, margins may be salvaged in the short term, but over a period of time, lack of inventory and production shutdowns can prove...
August 1, 2011
Capital cost assessment is an integral part of process design when building or expanding a chemical process plant. It is required to provide project analysis and evaluation, to select among alternative designs, to plan the appropriation of funds and to serve as a basis for project cost control. Capital cost estimation is also important for an engineerng student’s final design project. The accuracy of...
March 28, 2011
PCMS and Track, two cost-control software packages used in petroleum refining, chemical and petrochemical industries, have joined forces. Management Controls, Inc., the owner of Track, has acquired PCMS (Project Control Management System). Users will soon...
March 28, 2011
A newly launched front-end design tool from this company allows for rapid development and evaluation of capital project options in the process industries. The software tool integrates flowsheet development, 3-D layout, factored...
February 1, 2011
Throughout the chemical process industries (CPI), project owners often track key performance indicators (KPIs) to ensure that all participants are able to attain or improve important performance objectives associated with their investments. For instance, for complex projects involving various contractors and sub-contractors, the predetermined expectations spelled out in the agreed-upon set of KPIs allow...
December 1, 2010
Most of the more than $100 billion in capital spending and $1.2 trillion in prodution costs spent annually by the chemical process industries (CPI) is committed by decisions made in the early phases of process development and plant design. A more disciplined approach to decision-making that fosters early attention to costs and more thorough consideration of available options has the potential to lower...
July 1, 2010
Reduction of greenhouse gas (GHG) emissions continues to be a major issue in national and international public policy, as well as a major focus for companies in the chemical process industries (CPI). Many countries are considering systems that place a price on GHG emissions through a carbon cap-and-trade system, for example. In an environment where GHG emissions have a given price, certain energy...
July 1, 2010
With bio-based chemical production growing, and several newer companies ready to enter commercial production, indications are that biologically derived chemicals will be an increasing force in the petrochemicals market. But bio-based chemical producers must confront the bottom-line requirements of product performance and cost, rather than riding their products’ environmental benefits. Susan Sun...
February 1, 2010
This article describes an algorithm that end users can use to develop a program on a personal computer to assess the technical and economic feasibility of installing a variable frequency drive (VFD) on centrifugal pumps. This simple algorithm serves a variety of useful functions, helping engineers to carry out the following functions: Check the technical feasibility and evaluate whether or not it is...
January 1, 2010
The chemical process industries (CPI) invest large amounts of capital each year and spend even more to produce the goods they sell. In 2007, CPI companies large enough to be in the Fortune 500 list invested more than $100 billion of capital and spent more than $1.2 trillion making their products. Most of this money is committed by decisions made in the early stages of process development and plant design...
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