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Methodologies for Cost Estimation of Chemical

Plants as a Function of Engineering Progress

Dr. Kunzmann, W. Pehlke

GT/MR – Project Controlling, Cost Engineering & Engineering Governance
Who We Are and What We Stand for

BASF – The Chemical Company

The world’s leading chemical company
Our portfolio ranges from chemicals, plastics, performance
products, agricultural products and fine chemicals to
oil and natural gas
Customers in virtually all industries
Sales 2006: €52,610 million
Income from operations (EBIT) 2006: €6,750 million
Employees (at year-end 2006): 95,247
14 operating divisions manage
68 global and regional business units
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Global Presence

Geismar Antwerp
Ludwigshafen
Nanjing

Kuantan
Freeport

„ Employees 1) Sales 2)
„Europe 61,444 €29.5 billion
„North America 15,513 €11.5 billion
„Asia, Pacific 12,788 €8.1 billion
„South America 3) 5,502 €3.5 billion
Verbund site
1) As of December 31, 2006; 2) By location of customer
Major chemical 3) South America, Africa, Middle East
production site
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The Ludwigshafen site: The world’s largest integrated
chemical complex

„ BASF Group’s largest Verbund site

with a total site area of
„ 10 sq. km. Ö approx. 2,500 acre
„ Location of the company’s
global headquarters
„ Manufactures high-value products
in a dense network of plants
„ Location of BASF Group’s
technology platforms
and competence centers

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Tasks and Responsibilities of Corporate Engineering
Business Mission

„ As Owner’s Engineer we design and build Production Plants and

Infrastructure Facilities for BASF Group in close cooperation and on
request of the Operating Divisions including respective project
management and controlling.

„ As Global Competence Center we have governance function for the

execution of capital projects Group wide and with this regard member
of Commission S. We develop and maintain the cost engineering
database and methodology for BASF investments, small projects,
extensions and plant changes.

Location of Engineering Offices

Location of Project Sites BASF Engineers
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Project Controlling, Cost Engineering &
Engineering Governance

Competence Center Cost Engineering

„ Cost estimates in all project phases (300 per year)
„ Site studies & technology benchmarks
„ Cost workshops

Competence Center Project Controlling

„ Continuous analysis & report of project progress and
project cost status
„ Scope & claims management

Engineering Governance
„ Comments on cost estimates for Commission S
„ Development and maintenance of methods & tools
for Cost Engineering, Project Controlling, Scheduling
„ Review Technical Packages
„ Project Management Procedures
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Cost Engineering Methods
From Innovation to Successful Project

Less than 1 % of ideas finally successful implemented

Idea Project Product Market Success

11 Success
17 +/-
24 Loss

Source: University of St. Gallen, Prof. Gassmann

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Cost Engineering Methods
Phase Gate Method
a Control Instrument for Innovation Chains

Gates

Project Cost Estimate as Invest

one Criteria for Selection economically N
?
at Innovation Chain Control

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Cost Engineering Methods
Accuracy and Engineering Progress

40

30
known u n k n o w n
20

10
Accuracy [%]

-10

-20

Assumptions Cost Engineering

-30

-40
0 10 20 30 40 50 60 70 80 90 100

Degree of engineering [%]

Appropriation Approval ± 10%
Definition Approval ± 15%
Study ± 20%
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Cost Engineering Methods
Accuracy of Estimates

Methods

Capacity Method
+/- 30 %

Reference Plant Method

+/- 20-30 %

Exponent Method
+/- 10-30 %

Structure Method
+/- 20 %

Modular Estimate
+/- 15-20 %
KOSDIASPlus
EstiMadeTM Quantity Based Estimate
+/- 10 %

Definition
Approval

Study Conceptual Extended Detail Engineering /

Phase Phase Conceptual Construction
Phase

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Cost Engineering Methods
Capacity Method

y = cs • x

y= Investment costs to be estimated

cs = Specific Investment
X= Plant Capacity

Applied for: First rough estimate for „Business Case“ by „non Engineers“
Accuracy: ± 30 %

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Cost Engineering Methods
Exponent Method

General formula:

n
⎛ x ⎞
y = y o . ⎜x ⎟
entia
l
⎝ o⎠
nfid
co
y = plant costs to be estimated, equipment cost
y0 = known costs
x = new capacity, volume, size
x0 = known capacity , ...
n = Exponent

Applied for: Calculation of plant costs from

existing size and costs to new size
Accuracy: ± 10 – 30 %

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Cost Engineering Methods
Exponent Method

General formula:
n
x ⎞
y = y o . ⎜x ÷
⎝ o⎠

Mat. of Construction: 1.4541 Mat. of Construction: 1.4541

y = costs to be estimated Heat Exch. Area: 43 m² Heat Exch. Area: 93 m²
Tubeside pressure: 40 bar Tubeside pressure: 40 bar
y0 = known costs Shellside pressure: 10 bar Shellside pressure: 10 bar
x = new heat exch. area Price (ex works): 25 TEUR Price (ex works): 40 TEUR
x0 = known heat exch. area
n = Exponent

Applied for: Conversion of known specific costs

(eg. equipment costs) scale up / down
Accuracy: ± 10 – 30 %

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Cost Engineering Methods
Structure Method

Controlling & Reporting - GI/R

1.01.1.1.
Status: 12/2004
Cost Structure of chemical plants at BASF AG
- only for GI-internal use -
Rev. 2
Page 1 of 1 „ Breakdown total investment in cost groups
ø Equipm.-Costs: 5 tEuro 30 tEuro 100 tEuro 30 tEuro
Gr. Description % relating to
Σ D-G Σ A-M Σ A-U
A Sewers, roads, railroads 5% 2% 1% 0,5% 0,4%
Pipe racks/bridges 2% 1% 0% 0,3% 0,2%

„ For simular process plants the relation of

Ground, concrete and masonry work 23% 12% 8% 3,6% 2,8%
Steel structure 43% 22% 14% 6,7% 5,2%
Architectural (doors, windows) 7% 3% 2% 1,0% 0,8%
Engineering and Construction Supervision 9% 5% 3% 1,4% 1,1%

B
Aux. Constr. (Fdns, misc supports)
CIVIL AND STRUCTURAL
Insulation
Painting
9%
98%
29%
4%
4%
49%
12%
2%
2%
31%
6%
1%
1,2%
14,8%
3,6%
0,5%
0,9%
11,5%
2,8%
0,4%
cost groups is considered be constant
HVAC/Fire protection 16% 7% 4% 2,1% 1,6%
INSULATION/PAINTING/HVAC/ETC 49% 20% 11% 6,1% 4,8%
C MOVEABLE INVENTORY 3% 2% 1% 0,6% 0,4%
D-G PLANT EQUIPMENT 100% 100% 100% 30,3% 23,6%

„ Detailed analysis of executed projects

CS Piping 10% 6% 4% 1,7% 1,3%
Alloy Piping 31% 18% 12% 5,3% 4,2%
CS Valves and specialities 3% 2% 1% 0,5% 0,4%
Alloy Valves and specialities 13% 8% 5% 2,3% 1,8%
H PIPING 58% 32% 22% 9,9% 7,7%
I PIPING outside Plants 2% 2% 2% 0,5% 0,4%
K ELECTRICAL primary system 3% 2% 1% 0,6% 0,5%
L Electrical secondary system 8% 4% 3% 1,3% 1,0%
Instruments 63% 24% 13% 7,3% 5,7%
DCS (incl. Programming) 38% 15% 8% 4,5% 3,5%
Installation materials 17% 7% 4% 2,2% 1,7%
ELECTRICAL and INSTRUMENTATION 126% 51% 28% 15,4% 12,0%
M Installation Labor for D-G 6% 4% 4% 1,4% 1,1%
Installation Labor for H 65% 28% 16% 8,6% 6,7%
Installation Labor for I 3% 2% 2% 0,6% 0,5%
Installation Labor for K
Installation Labor for L
Scaffolding
2%
28%
7%
1%
12%
4%
1%
7%
2%
0,3%
3,6%
1,1%
0,2%
2,8%
0,8%
Applied for: Study estimate and „Check & Balance“
Temporary Construction Facilities 2% 1% 1% 0,3% 0,2%
Start-up preparation 6% 2% 1% 0,7% 0,5%
Construction management and supervision
INSTALLATION LABOR
45%
163%
17%
72%
9%
42%
5,2%
21,8%
4,1%
16,9%
Accuracy: ± 20 %
Σ A-M DIRECT COSTS 603% 330% 238% 100,0% 77,7%
N Project Engineering 70% 26% 13% 7,8% 6,1%
Design Engineering 158% 58% 30% 17,6% 13,7%
Design by others 9% 3% 2% 1,0% 0,8%
Permit Fees 4% 2% 1% 0,5% 0,4%
ENGINEERING 241% 89% 45% 26,9% 20,9%
O Others 9% 6% 4% 1,7% 1,3%
Construction Interest Costs
U Contingency 0% 0% 0% 0,0% 0,0%
ΣΣ A-U TOTAL COSTS 853% 424% 287% 128,6% 100,0%
Basis:
70 E & I
ø Equipm.-Costs: 5 tEuro Total plant costs 3 Mio Euro
ø Equipm.-Costs: 30 tEuro Total plant costs 9 Mio Euro
ø Equipm.-Costs: 100 tEuro Total plant costs 20 Mio Euro
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Cost Engineering Methods

A CIVIL AND STRUCTURAL (LABOR & MATERIAL)

B INSULATION / PAINTING / HVAC / ETC (LAB. & MAT.)
C MOVABLE INVENTORY (MATERIAL ONLY)
D-G PLANT EQUIPMENT (MATERIAL ONLY)
H PIPING IN PLANTS – ISBL (MATERIAL ONLY)
K ELECTRICAL PRIMARY SYSTEM (MATERIAL)
L ELECTRICAL AND INSTRUMENTATION (MATERIAL)
M INSTALLATION LABOR
N ENGINEERING
O EXPENSES
U CONTINGENCY
∑∑ A–U TOTAL COSTS
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Cost Engineering Methods
Modular Estimate

„ Scope definition for equipment moduls:

Isometrics
- Piping Complexity „ Survey of typical solutions
- Flanges & Elbows Electrical Users
- Valves - Power Supply
- Electrical Installations
„ Typical scope for each
Specification Sheet
- Functional Description
cost group
- Description of Scope

„ Modul costs include typical

costs from all cost groups
Nozzle Schedule P&IDs
- Instrumentation Applied for: Research & Development
- Piping
- Insulation
Civil Design - Tracing
Accuracy: ± 20 %
- Built-up Area
- Building Volume
Piping Design Basis
- Foundations
- Materials
- Lighted Area
- Gaskets

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Cost Engineering Methods
Quantity Based Estimate

cc==m
m••ccs
s

Example:
Example:
CCsteel==250
steel
250t t••1800
1800€/t
€/t

CCsteel
steel==450
450T€
T€

c= Costs to be estimated
m= Quantity
cs = Specific cost

Applied for: For project definition and appropriation approval

Accuracy: ± 10 %
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Cost Engineering Methods
Example for Quantity Based Method, Instrumentation

Vessels
Vessels ... Equipment List

FF LL PP TT . . . Instrument type

local
local DCS
DCS
0,5
0,5 0,3
0,3 ... Typical number of Instruments
Evaluation of existing plants
Example 50 vessels
+ technology specifics
25
25 15
15 + plant specifics

0,4 t€/device 7,3 t€/device ... Average specific costs

10 T€ 110
10T€ 110T€
T€ ... Estimate result
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Cost Engineering Methods
Cost Curve

Cost Estimating Data 1.E.B.2.2

0 30.11.98 Page 1 of 1
1 10.03.00

„ Cost curves a basis for cost estimates

Group E GI/R
2 05.08.05 Controlling & Reporting

Contact: Pieroth-Lenz Apparatus Status: 09 / 2005

Vessel SS 304 L
valid for: 25 gal to 26.500 gal; 0 psi to 300 psi

Standard design:
vertical or horizontal orientation, 6 nozzles, 1 manhole, not heated. „ Data from executed projects
1000

„ Procurement situation reflected

100

„ Review of projects and update of data

Costs in TEURO

„ sets performed on a regular basis

10

„ Used in software for cost engineering

1
0,1 1 10 100
Capacity in m³

Comments:
Purchase order value plus design allowance, changes and transportation to site, ASME Code.
Gulf Coast Basis

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Cost Engineering Methods
Foreign Country Estimate

Factor Method
DOMESTIC
Foreign
FC Spec. Costs

Project Country
Scope
Costs

IMPORTS Exchange Rate

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Cost Engineering Methods
Foreign Country Estimate

MADE IN GERMANY MADE IN USA

DIN ASME
status
100.000
Kostenbasis Lu

Mat. of Construction: 1.4541 Mat. of Construction: 304 L (= 1.4541)

Heat. Exch. Area: 1000 sq. ft (= 93 m²)
Kosten [DM]

Heat Exch. Area: 93 m² 10.000

Tubeside pressure: 40 bar Tubeside pressure: 580 psi (= 40 bar)

Shellside pressure: 10 bar p= 6/ 6 Shellside pressure: 145 psi (= 10 bar)
1.000
1 10 100 1000
Wärmeaustauschfläche [m²]

Estimated costs LU: 31.500 EUR Actual purchasing cost: 37.000 USD

Factor „EUR-USA“ Exchange rate

0,9 28.500 EUR 0,77 EUR/USD

LU Conditions Foreign Conditions

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Cost Engineering Methods
Survey

Methods

Capacity Method
+/- 30 %

Reference Plant Method

+/- 20-30 %

Exponent Method
+/- 10-30 %

Structure Method
+/- 20 %

Modular Estimate
+/- 15-20 %
KOSDIASPlus
EstiMadeTM Quantity Based Estimate
+/- 10 %

Defintion
Approval

Study Conceptual Extended Detail Engineering /

Phase Phase Conceptual Construction
Phase

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Cost Engineering Methods
Data Basis and Evaluation

„ More than 1400 project evaluations including detailed cost structure

„ More than 1000 data sets for installed modules

„ Cost curves for all types of equipment, 800 data sets updated on a regular
basis

„ Cost Engineering basis for more than 45 foreign countries

„ Procurement situation to be updated twice a year including specific

forecasts

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THE END

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