Coker A.K. Fortran Programs for Chemical Process Design, Analysis, and Simulation
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ii0
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120
130
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REAL
OPEN
OPEN
PI =
READ
READ
READ
READ
READ
READ
READ
READ
READ
READ
OD, KINS
(UNIT=3, FILE ='DATA85.DAT', STATUS='OLD', ERR=I8)
(UNIT=l, FILE ='PRN')
3.1415927
THE
THE
THE
THE
THE
THE
THE
THE
THE
THE
TOTAL LENGTH OF PIPE, ft.: TOTL
TEMPERATURE IN THE PIPE, oF: TP
HOT-MEDIUM INLET TEMPERATURE, oF: TMI
HOT-MEDIUM OUTLET TEMPERATURE, oF: TMO
AIR TEMPERATURE, oF: TAIR
OUTSIDE DIAMETER OF PIPE, inch.: OD
ALLOWANCE FOR THE TRACER DIAMETER, inch.: TAL
INSULATION THICKNESS, inch.: TK
THERMAL CONDUCTIVITY OF INSULATION, Btu/hr.ft^2(oF/ft): KINS
SPECIFIC HEAT CAPACITY OF THE HOT MEDIUM, Btu/Ib.oF: CP
READ THE FILM HEAT TRANSFER COEFFICIENT TO AIR CORRECTED
FOR THE WIND, Btu/hr.ft^2.oF: HA
READ THE THERMAL CONDUCTANCE, TRACER TO PIPE
WITHOUT CEMENT, Btu/hr.oF (ft. of pipe).: TCA
READ THE THERMAL CONDUCTANCE, TRACER TO PIPE
WITH CEMENT, Btu/hr.oF (ft. of pipe).: TCB
READ (3, *
READ (3, *
READ (3, *
READ (3, *
, ERR=I9) TOTL, TP, TMI
, ERR=I9) TMO, TAIR, OD
, ERR=I9) TAL, TK, KINS
, ERR=I9) CP, HA, TCA, TCB
GO TO 20
WRITE (*, i00)
FORMAT (6X, 'DATA FILE DOES NOT EXIST')
GO TO 999
WRITE (*, ii0)
FORMAT (6X, 'ERROR MESSAGE IN THE DATA VALUE')
GO TO 999
WRITE (i, 120)
FORMAT
(///,
10X, 'HEAT TRACER REQUIREMENTS FOR PIPELINES AND ',
/, 10X, 'HEAT LOSS FROM AN INSULATED PIPELINE WITH TRACING', /,
78(IH*))
WRITE ( I, 130) TOTL, TP, TMI
FORMAT (6X, 'TOTAL PIPELINE LENGTH, ft.:',T60,F9.1,/,
6X, 'TEMPERATURE IN PIPE, oF:',T60,F9.1,/,
6X, 'HOT-MEDIUM INLET TEMPERATURE, oF:',T60,F9.1)
WRITE (i, 140) TMO, TAIR, OD
FORMAT (6X, 'HOT MEDIUM OUTLET TEMPERATURE, oF:',T60, F9.1,/,
6X, 'AIR TEMPERATURE, oF:',T60,F9.1,/,
6X, 'OUTSIDE DIAMETER OF PIPE, in.:',T60,F9.3)
WRITE (i, 150) TAL, TK, KINS
FORMAT (6X, 'ALLOWANCE FOR TRACER DIAMETER, in.:', T60, F9.2,/,
6X, 'INSULATION THICKNESS, in.:', T60, F9.2, /, 6X,
'THERMAL CONDUCTIVITY OF INSULATION, Btu/hr.ft^2(oF/ft): ' , T60,
717
160
30
40
170
180
* F9.3)
WRITE (i, 160) CP, HA, TCA, TCB
FORMAT (6X,'SPECIFIC HEAT OF HOT MEDIUM, Btu/Ib.oF:',T60,F9.3,
* /,6X,'FILM HEAT TRANSFER COEFFICIENT TO AIR',
*
/,6X,'CORRECTED FOR WIND, Btu/ft^2.hr.oF:',T60,F9.3,
* /,6X,'THERMAL CONDUCTANCE TRACER TO PIPE',
* /,6X,'WITHOUT CEMENT, Btu/hr.oF.ft of pipe:',T60,F9.3
* /,6X,'THERMAL CONDUCTANCE TRACER TO PIPE',
* /,6X,'WITH CEMENT, Btu/hr.oF.ft of pipe:',T60,F9.3)
CALCULATE THE AVERAGE TEMPERATURE OF HOT MEDIUM, oF
CONTRL = 0.0
TMEDAV = 0.5*(TMI+TMO)
TA = 0.5*(TMEDAV+TP)
DI = OD+TAL
DO = DI+2.0*TK
HA1 = HA
X = (ALOG(DO/DI)*HAI*DO)/(24.0*KINS)
TS = (TA+X*TAIR)/(I.0+X)
WRITE (i, 170) TS
FORMAT (6X, 'OUTSIDE SURFACE TEMPERATURE OF INSULATION, oF:',
* T60,F9.3)
CALCULATE THE COMBINED CONVECTIVE AND RADIATIVE HEAT TRANSFER
COEFFICIENT.
HCOMB = 564.0/((DO**0.19)*(273.0-(TS-TAIR)) )
WRITE (i, 180) HCOMB
FORMAT (6X,'THE COMBINED CONVECTIVE AND RADIATIVE', /, 6X,
'HEAT TRANSFER COEFFICIENT, Btu/h.oF.ft^2: ' , T60, F9.3)
CONSTANTS FOR THE WIND FACTOR
CO = 2.814
C1 = -0.00038857
C2 = -0.0000012857
WF = C0+(CI*(TS-TAIR))+(C2*((TS-TAIR)**2))
CALCULATED FILM HEAT-TRANSFER COEFFICIENT TO AIR CORRECTED FOR
THE WIND, HA2: Btu/hr.ft^2.oF
HA2 = HCOMB*WF
IF ((HA2-HAI) .GE. 0.01) THEN
HA1 = HA2
GO TO 40
ELSE
CALCULATE THE HEAT FLOW THROUGH THE INSULATION Btu/hr.(lin ft).
QINS = (2.0*PI*KINS*(TA-TS))/(ALOG(DO/DI) )
718
190
200
210
C
C
220
230
C
C
C
240
250
CALCULATE THE HEAT FLOW BY RADIATION AND CONVECTION TO AIR
QRC = (HAI*PI*DO*(TS-TAIR))/12.0
ENDIF
WRITE (i, 190) WF, HA2
FORMAT (6X,'WIND FACTOR:',T60, F9.3, /, 6X,
'HEAT TRANSFER COEFFICIENT TO AIR', /, 6X,
'CORRECTED FOR THE WIND, Btu/hr.ft^2.oF: ' , T60, F9.3)
CALCULATE THE TOTAL HEAT LOST FROM PIPELINE ,Btu/hr.
QT = QINS*TOTL
WRITE (i, 200) QINS, QT
FORMAT (6X,'HEAT LOSS PER FOOT OF PIPE, Btu/hr.ft:', T60,F9.3,/,
6X,'TOTAL HEAT LOSS FROM PIPELINE, Btu/hr.:', T60, F9.3)
IF (CONTRL .EQ. 1.0) THEN
GO TO 999
ELSE
CALCULATE THE FLOW RATE OF HOT MEDIUM, ib/h
W = QT/(CP*(TMI-TMO))
WRITE (i, 210) W
FORMAT (6X,'FLOW RATE OF HOT MEDIUM, ib/hr.:', T60, F9.3)
CALCULATE THE NUMBER OF TRACERS REQUIRED WITHOUT
HEAT-TRANSFER CEMENT.
TWOC = QINS/(TCA*(TMEDAV-TP))
CALCULATE THE NUMBER OF TRACERS REQUIRED WITH
HEAT-TRANSFER CEMENT.
TWC = QINS/(TCB*(TMEDAV-TP))
ENDIF
WRITE (i, 220) TWOC, TWC
FORMAT(6X,'THE NUMBER OF TRACERS WITHOUT HEAT TRANSFER CEMENT:',
T60, F9.2,/,6X,
'THE NUMBER OF TRACERS WITH HEAT TRANSFER CEMENT:',T60, F9.2)
WRITE ( 1, 230)
FORMAT ( IH , 78 (IH-) )
CALCULATION OF HEAT LOSS FROM AN INSULATED PIPE WITHOUT
TRACING, WHERE TMI=TMO=TP, AND TA=0.0
WRITE (i, 240)
FORMAT (//, 6X,'HEAT LOSS FROM AN INSULATED PIPE',k)
WRITE (i, 250)
FORMAT (" WITHOUT TRACING', /IH ,78(IH*))
719
C TO CALCULATE THE HEAT LOSS FROM AN INSULATED PIPE, CONTRL=I.0
999
TMI = TP
TMO = TP
TAL = 0.0
CONTRL = CONTRL + 1.0
GO TO 30
CLOSE ( 3, STATUS=' KEEP' )
CLOSE (i)
STOP
END
720
CHAPTER 9
Engineering Economics
INTRODUCTION
Project evaluation enables the technical and economic feasibility of a
chemical process to be assessed using preliminary process design and
economic evaluations. Once a process flowsheet is available, these evalu-
ations can be classified into several steps: material balance calculations,
equipment sizing, equipment cost determination, utilities requirements,
investment cost estimation, sales volume forecasting, manufacturing cost
estimation, and finally profitability and sensitivity analysis.
The results of an economic evaluation are reviewed together with
other relevant aspects, such as, competition and likely product life in
arriving at project investment decisions. The decisions are essential in
order to both plan and allocate the long-term use of available resources.
The objectives of an economic appraisal are:
9 To ensure that the expected future benefits justify the expenditure
of resources.
9 To choose the best project from among alternatives to achieve
future benefits.
9 To use all available resources.
These objectives ensure that the right project is undertaken and is likely
to attain the desired profitability.
In the chemical process industries, an investment project may arise
from any of a range of activities. It may be a minor modification to an
existing plant, a major plant expansion or revamping, a completely new
plant (on an existing or greenfield site) or the development of an
entirely new process or product. For a major or a new plant, economic
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Fortran Programs for Chemical Process Design
assessment with increasing degrees of accuracy may be carried out at
different stages as the plant progresses. This may be based on an initial
research and development (R&D), through various stages of the project
(e.g., pilot plants, material evaluation, preliminary plant design), which
leads to the decision whether or not to proceed with investment in a full
scale plant for the process. Table 9-1 lists examples of the use of engi-
neering economics. The approach used for economic evaluation depends
on the quality of the information, that is, the stage in the project at which
it is undertaken.
Table 9-1
Use of Chemical Engineering Economics
Production or Plant Technical Services
A. Plant equipment continuously needs repair, replacement, or moderniza-
tion. The responsible engineer should know roughly what the compara-
tive performance, costs, and payout periods are, even if there is a plant
engineering group to do that type of analysis, or a firm price quotation
will be obtained later.
B. Plant changes, such as those initiated by the ever increasing costs of
energy and environmental requirements, necessitate that many energy
saving, pollution, and hazardous waste control possibilities must be
considered. To make intelligent recommendations, the responsible
engineer should personally conduct design and cost estimates, pay-back,
and economic calculations on the alternatives before making even
preliminary recommendations.
C. Competitors' processing methods, as well as R&D, sales, or management
suggested changes must be continuously examined. Supervisors or other
groups may be responsible, but the staff engineer can help a great deal by
making preliminary cost estimates and economic analyses of the changes
to guide his or her own thinking (and hopefully the group's position).
D. All engineers should have a feel for their company's business, products,
and economics. This requires occasional economic reading, and a basic
understanding of the company's annual reports and general industry
economic news.
Research and Development
A. In the process of being creative, one thinks of many novel ideas. During
the analytical phase of creative thinking many of the ideas will require a
quick cost estimation and economic analysis to provide a better idea of
their merit. Even though supervisors or others may be assigned to do this
work, the chances of conceiving good ideas and having them accepted
increases immensely if some economic screening can be done by the originator.
B. While conducting R&D studies, there are always many stumbling points
or alternative directions that may be taken to solve problems. Often brief
cost estimates and economic analyses will help the engineer in deciding
which are the most promising directions to pursue.
C. After an early or intermediate stage of an R&D program has been
successful, new funding requests usually are required to continue the
study. These requests can always benefit from having potential prelimi-
nary economic analyses. Later, in the final stages of a successful project,
the engineer may be part of a team assigned to provide a more definitive
preliminary economic projection and analysis.
D. In dealing with production, sales, or management personnel, one can
usually gain more respect, and be considered more practical and less
"theoretical," by having a reasonable knowledge of the costs and eco-
nomics of the projects under study, and general industry economics.
Sales
A. A general knowledge of company costs, profits, and competition are very
helpful for more effective salesmanship.
B. Salesmen often recommend new products, improvements, or pricing
ideas to their management. A cost and economic estimate for these ideas
should be helpful in the proposal report.
C. Salesmen sometimes perform market surveys. Again, a general economic
knowledge of the industries and companies surveyed may be essential,
and is always useful.
D. Salesmen may move into management, where economic knowledge is a
major part of the job.
Engineering
A. Because of the extreme specialization of most engineering companies
and many company engineering departments, cost estimating and
economics may not be directly required in many engineering company or
department jobs. However, other jobs will deal exclusively with cost
estimating and economic analysis, and all will benefit from a good,
fluent knowledge of the basic economic procedures. Engineering depart-
ments or companies usually have well developed in-house methods and
data that must be used, but the basics are still applicable.
General
A. All chemical engineers are assumed to know the rudiments of cost
estimating, economic evaluation, and the economics of their industry. A
high percentage will find this knowledge useful or necessary throughout
their careers.
(table continued on next page)
723
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Fortran Programs for Chemical Process Design
Table 9-1
(continued)
B. All work situations are more or less competitive, and one means of
maintaining the highest advancement potential with most jobs is to
convince superiors of your knowledge and interest in management,
business, and economics. Associated with this is the demonstration of
ability, an interest in accepting responsibility, and ability to communi-
cate. Many companies promote people whom they think can "manage,"
such as those with MBA (master of business administration) degrees or
with perceived equivalent capabilities, ahead of people with a better
performance record. Basically, a confidence that you can learn manage-
rial skills as you need them and a knowledge of economics should make
most chemical engineers equal or preferred candidates for advancement.
Source: Garrett [10], Courtesy of Chapman and Hall
Project Evaluation
Investment decisions are often based upon several criteria, such as
annual return on investment (ROI), payback period (PBP), net present
value (NPV), the average rate of return (ARR), present value ratio (PVR),
or the internal rate of return (IRR). Discounted cash flow rate on return
(DCFRR) is another popular means of evaluating the economic viabil-
ity of a proposed project. Horwitz [ 1] recommended the DCFRR as the
best means to determine the return on investment, because it accounts
for the time value of money. The internal rate of return as an investment
criterion gives the possibility that given cash flows may result in more
than one internal rate of return. Cannaday
et al.
[2] developed a method
for determining the relevance of an internal rate of return. They inferred
that an internal rate of return is relevant, if its derivative with respect to
each of the cash flows is positive.
Powell [3] reviewed the basics of various discounted cash flow tech-
niques for project evaluation. Discounting is a method that accounts for
the time value of money to provide either for the capital or to convert
the cash flows to a common point in time so that they are summed.
Ward [4] proposed a new concept known as the net return rate (NRR)
that provides a better indication of a project's profitability. Techniques
and criteria for economic evaluation of projects are widely available in
the literature and texts [5,6,7,8,9,10]. A summary of the conventional
decision criteria is given here.
Engineering Economics 725
Cash Flows
Return On Investment (ROI)
In engineering economic evaluation, rate of return on investment is
the percentage ratio of average yearly profit (net cash flow) over the
productive life of the project, divided by the total initial investment.
This is calculated after income taxes have been deducted from the gross
or pre-tax income. The remainder or net income may be used either for
paying dividends, reinvestment, or can be spent for other means. ROI is
defined by
Annual return
ROI = x 100 (9-1)
Investment
The annual return may be the gross income, net pre-tax income, net
after-tax income, cash flow, or profit. These may be calculated for one
particular year or as an average over the project life. Investment may be
the original total investment, depreciated book-value investment, life-
time average investment, fixed capital investment, or equity investment.
The investment includes working capital and sometimes capitalized
expenses such as interest on capital during construction.
Payback Period (PBP)
Payback period is widely used when long-term cash flows are difficult
to forecast, because no information is required beyond the break-even point.
It may be used for preliminary evaluation or as a project screening device
for high risk projects in times of uncertainty. Payback period is usually
measured as the time from the start of production to recovery of the capital
investment. The payback period is the time taken for the cumulative net
cash flow from start-up of the plant to equal the depreciable fixed capital
investment (CFc - S). It is the value of t that satisfies the equation
t=(PBP)
CcF - (CFc - S) (9-2)
t=0
where CcF = net annual cash flow
CFc = fixed capital cost
S = salvage value
Figure 9-1 shows the cumulative cash flow diagram for a project. The
PBP is the time that elapses from the start of the project, A, to the
726
Fortran Programs for Chemical Process Design
Cumulative cash flow
$
§
Land value A -
\
Working capital
, ,
I
Recovered Capital = i
Land value + Salvage value l
+ Working capita] J
- I ' F
Start- up
O ' E '
)
/ Effect of
"D tax credits
Figure
9-1. Cumulative cash flow diagram.
break-even point, E, where the rising part of the curve passes the zero
cash position line. The PBP thus measures the time required for the
cumulative project investment and other expenditure to be balanced by
the cumulative income.
Present Worth (Or Present
Value)
In an economic evaluation of a project, it is often necessary to evalu-
ate the present value of funds that will be received at some definite time
in the future. The present value (PV) of a future amount can be consid-
ered as the present principal at a given rate and compounded to give the
actual amount received at a future date. The relationship between the
indicated future amount and the present value is determined by a dis-
count factor. Discounting evaluates each year's flow on an equal basis.
It does this by means of the discount, or present value factor, and the
reciprocal of the compound interest factor (1 + i)" with
i = interest rate
n = the year in which the interest is compounded