Lecture 5: Costs

Question 1

Define the cost categories

Answer 1

• Capital costs - costs for plant, equipment, buildings etc => end up as fixed assets
  
  • Operating costs - costs associated with running plant ‘production costs’ => e.g. raw materials and labour

Question 2

2 types of capital costs?

Answer 2

Fixed and working

Question 3

Define fixed capital costs

Answer 3

• Inside battery limit costs (ISBL) = major process equipment (i.e. HE), other equipment (i.e. valve), civil engineering costs (i.e. roads), construction costs (i.e. labour)
  
  • Outside battery limit costs (OSBL) = power/steam generation plants, cooling towers/cw system, offices, labs, emergency services, site security (fences)
  • Engineering costs = detailed design, procurement, overheads, contractor profits
  • Contingency

Question 4

Define working capital costs

Answer 4

• Material inventory for production e.g. maintenance materials
  
  • Spare parts
    Cash reserve/short term borrowing facilities

Question 5

Define the cost estimation levels

Answer 5

· Class 5 - little or no design required = ±30-50% accuracy
· Class 4 - approximate sizing of plant items = ±30% accuracy
· Class 3 - sizing of major items and P&ID = ±10-15% accuracy
· Class 2 - detailed plant design complete and equipment quotes= ±5-10% accuracy
Class 1 - detailed design and agreed equipment prices = ±5-10% accuracy