Capital Cost Estimation

Chandran Udumbasseri, Technical consultant

cudumbasseri@yahoo.co.in.

Capital cost includes all types of costs. Inflation causes change in price of certain product and
equipment over time period. A material purchased today may not have the same price 1 or 2
years back. The inflation causes price increase. While estimating cost this change should be
adjusted to the present price. This adjustment is done using the ratio equation of cost & indices

= =

The available index databases are the following:

1. Chemical engineering plant cost index (CEPI)
2. Marshal & Swift Equipment cost Index
3. Engineering News Record Construction cost index
The costs are weighted as follows:
1. Equipment, machinery and support = 61%
2. Construction labour = 22%
3. Buildings = 7%
4. Engineering & Supervision = 10%
Total = 61+22+7+10 = 100

Example calculation: Suppose the CEPI for the year 1995 is 381 and 2003 is 405 (base 1957 =
100). If the cost of a plant is Rs = 121,000,000 in 1995 what is its cost in 2003.
Using above equation;
= = ; COST 2003 = COST1995 x

COST 2003 = 121,000,000 x = Rs 128,622,000

There is another cost ratio based on capacity. If cost of certain plant capacity is known it can be
extrapolated to a different capacity using this ratio

= = ]n

The factor “n” is given by different estimations as follows:

1. Remer & Chai ; n= 0.67
2. Chase for plant size, n = 0.67
3. Chase for equipment, n = 0.6
Example calculation: If 100MTPY plant costs Rs = 120 Crore, then what will be the cost for 150
MTPY plant.
Here plant size is considered. So the factor 0.67 may be used for calculation.
Cost for 150 MTPY = Cost for 100MTPYx ]0.67
Cost for 150 MTPY = 120[150/100]0.67 = log120 x (1.5)0.67
= 2.0792 + 0.67 x0.1761 = antilog2.197 = Rs 294.4Crore

Composite cost indices published in various journals are used to get better estimation.
If the following are the indices,
1. C, composite index
2. Ce, civil work index
3. Cn, site work index
4. Di, design index
5. Eq, equivalent Index
Then,
C = 0.45Eq + 0.1Ce + 0.19Cn + 0.26Di
in which Eq is the ‘Equipment Index’, Ci the ‘Civil Index’, Cn the ‘Construction, or Site, Index’,
and Di ‘Design, Engineering and Administration Index’. All four component indices are in turn
made up of their own sets of sub-indices.

The base year is January 2000 = 100

Example:
The cost of heat exchanger in Jan 1998 was $7600. Estimate the cost in Jan 2006.

Index in 1998 = 106

2000 = 108 (100 base)
2004 = 111
Estimated cost in Jan 2000 = 7600x108/100 = 7743
In 2004 = 7743 x111/100 = 8595
So average increase in cost per year is 2.5 %
In 2006 = 8595x(1.025) = 9030

UK Predict Indices (base 2005 = 100)

Sept Oct Nov
C (Composite) 132.2 132.1 132.8
Eq (Equipment) 126.2 126.7 126.7
Ci (Civils) 126.2 141.8 142.0
Cn (Construction) 124.9 125.0 126.0
Di (Design & Eng) 144.4 143.0 145.0

Below is given the process engineering index and composite process engineering index
Rapid estimating method
In this method cost is related to capacity. Cost of a process with the same method done before is
referred and the cost is evaluated by using the equation:

C2 = C1 x ( )n

C2 is the capital cost foe the capacity S2

C1 is the capital cost for the capacity S1
The value of “n” is taken as 0.6
C2 = capital cost of the project with capacityS2
C1 = capital cost of the project with capacity S1

When plant size is not known, then use n= 0.67

For equipment cost rating use n = 0.6
Example;
A 100 tpy plant costed $32.9M in 1999. What would the cost for 150tpy?

= 32.9x[150/100]0.67 = 43.2M

Step counting estimation method

Capital cost is determined by different process steps involved in the overall process. Material of
construction, yield, operating conditions, and etc are such processes to be considered.
Bridgewater gives an equation for plants with capacity less than 60,000 tons per year as,

C= 150000 N(Q/s)0.30.
Above 60,000 tons per yesr the equation is,

C= 170 N (Q/s) 0.675.

C is capital cost, N is number of functional units, Q is plant capacity (t/y), and “s” is reaction
conversion.
s=

Lang method or factorial method

Fixed cost of a plant is given in terms of purchased equipment cost by the equation,
Cf = fLCe
Cf = fixed capital cost
Ce = total delivered cost of all major equipments
fL is the Lang’s factor

fL = 3.1 for solid processing plant

fL = 4.7 for liquid processing plant
fL = 3.6 for mixed process

Detailed factorial method

The direct cost for a plant construction includes the following:
1. Equipment erection
2. Piping
3. Electrical
4. Instruments
5. Process building
6. Ancillary building
7. Storages
8. Utilities
9. Site and site preparation