Chemical Engineering December 2016 - 55

using the price-quality matrix (Figure 2).
Some additional contributing factors are
described in the sections below.
Strategic plant location. With regard
to the proposed location of the facility,
there are several factors to keep in mind,
such as resources, workforce availability,
cost of transportation and land, as
well as the different services the process
will require.
Raw materials. To ensure coverage of
demand, the plant will need sufficient
supplies. A plant location that is close
in proximity to raw-material resources
allows the enterprise to prevent incurring
high costs for transportation and
storage, and it helps to guarantee
the availability of materials. In many
cases, this could mark the difference
with the competition.
Workforce. If the project requires many
jobs in the area, and results in a high
employment demand, it could indicate
an advantage for the success of the
project. However, even if there is considerable
local interest in employment opportunities,
it is important to remember
that hiring talented, qualified groups of
employees is key.
Land and transportation. How are the
products going to be sent to the final
destinations? This is another relevant
issue for the operation of a business,
keeping in mind that a good transportation
service offers cost advantages,
delivery promptness, efficiency, security,
flexibility and quality client services.
Transportation considerations further
underline the importance of the plant's
location, since this is closely related to
the achievable operational scale and
technology utilization. The best location
for a plant will be the one that offers the
lowest prices at the plant's total capacity.
In trying to reduce costs, we should
not consider only the current, immediate
costs, but also the intangible factors
influenced by possible changes in
costs of the plant that may affect the
attitude of local authorities and citizens
in the region.
Industrial services. Another issue to
take into account is the availability and
costs of essential services and utilities,
such as electricity, water and fuels.
Capital cost estimations
Making capital cost estimates before energy
and mass balances is a very useful
Quality-price matrix
High
Medium
Low
Underpriced
Bargain
Cheap goods
Low
Ideal for penetration
Average
Unhappy customers
Medium
Price
FIGURE 2. This matrix enables an evaluation of potential product prices [4]
activity. As a project proceeds from initial
conception through detailed design
to startup, costs begin to accumulate.
At the same time, the ability of the engineers
to decrease the project's costs
is minimal. There is therefore a strong
incentive to try to estimate project costs
at as early a stage as possible, even if
the design information is incomplete, so
that the project can be optimized and
evaluated and possibly abandoned if it is
not attractive [5].
This predesign method identifies a
certain number of units and then applies
an average capital cost correlated
per unit. This average capital cost is
associated with the complexity, conditions
and yield of the process and construction
materials. The following sections
detail some methods for capital
cost estimations. Calculation examples
for each method are shown in the box
on p. 50.
These are order-of-magnitude
(OOM) methods, meaning that they
depend on the size and capacity of
the new plant, and they typically cannot
achieve actual accuracy greater
than ±30%. You may choose one of
these methods based on the quantity
of information available, and by conTABLE
3. PROCESS-SPECIFIC COEFFICIENTS [5]
Type of Process
Processes that use a great deal of mechanical work or gas compression
(methanol, paper pulping)
Petrochemical processes
Average process or if sufficient data are not available
Small-scale, highly instrumented
Item
Piping
Installation factor
Equipment erection
F
Instrumentation and control
Electrical
Civil
Structures and buildings
Cladding and paint
Offsites
Design and engineering
Contingency
CHEMICAL ENGINEERING WWW.CHEMENGONLINE.COM
DECEMBER 2016
fi
fer
fp
fel
fc
fs
fl
OS
DE
X
Fluids
4.74
0.3
0.8
0.3
0.2
0.3
0.2
0.1
0.3
0.3
0.1
Value of exponent n
0.8-0.9
0.7
0.6
0.4-0.5
TABLE 4. LANG FACTORS (BASED ON INDUSTRIAL SECTOR) [5]
Fluids-Solids
3.63
0.5
0.6
0.3
0.2
0.3
0.2
0.1
0.4
0.25
0.1
Solids
3.61
0.6
0.2
0.2
0.15
0.2
0.1
0.05
0.4
0.2
0.1
49
Premiere offering
Overpriced
Make the sale and run
High
Product
quality
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Chemical Engineering December 2016

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