In any pipeline project, an economic analysis has to be performed to ensure the project is a viable investment. The major capital components of a pipeline system consists of the pipeline, Booster station, ancillary machinery such as mainline valve stations, meter stations, pressure regulation stations, SCADA & Telecommunications. The project costs would additionally consist of environmental costs & permits, Right of Way (ROW) acquisitions, Engineering & Construction management to name a few.
The following tutorial is aimed at conducting a pipeline economic analysis using the method of Weight Average Capital Cost (WACC) to estimate gas tariffs, project worth in terms of Net Present Value (NPV), Internal Rate of Return (IRR), Profit to Investment Ratio (PIR) and payback period. The cost of equity is estimated using the Capital Asset Pricing Model (CAPM).
PROCESS STORAGE TANK LAH & LAHH LEVEL CALCULATIONVijay Sarathy
The document contains parameters for a process storage tank including a diameter of 14 feet, height of 18 feet, normal liquid level of 6 feet, and pump inflow of 250 USGPM. It details calculations for the liquid alarm high-high level of 14.74 feet based on filling the tank from the overfill level to that point within 15 minutes, and liquid alarm high level of 8.23 feet calculated from filling within 45 minutes.
Urea reactor liner leakage(a case study)Prem Baboo
The document discusses liner leakage issues in the urea reactor of a fertilizer plant in India. It describes two instances of leakage detected through the weep hole monitoring system, in 2006 and 2017. Both times, the plant underwent shutdowns to locate and repair the leak. Detection methods like soap solution, ammonia testing, and differential pressure checks were used. The 2017 leak took longer to locate and required welding repairs between trays. The shutdown lasted 72 hours before feed was restored. Proper monitoring and maintenance of weep holes and liners is important for preventing corrosion and leaks.
This document provides an overview of city gas distribution in India. It begins with acknowledgements and outlines the objectives of studying this topic. It then provides an executive summary that discusses key aspects of city gas distribution systems, including the network layout, pressure regimes, safety parameters, and examples from other countries like the US, Australia and China. The main focus is on the evolution, demand and supply scenario, challenges, players and regulatory framework for city gas distribution in India. Benefits and the future outlook for demand and supply in India are also summarized.
Centrifugal Compressors
SECTION ONE - ANTI-SURGE PROTECTION AND THROUGHPUT REGULATION
0 INTRODUCTION
1 SCOPE
2 MACHINE CHARACTERISTICS
2.1 Characteristics of a Single Compressor Stage
2.2 Characteristic of a Multiple Stage Having More
Than One Impeller
2.3 Use of Compressor Characteristics in Throughput
Regulation Schemes
3 MECHANISM AND EFFECTS OF SURGE
3.1 Basic Flow Instabilities
3.2 Occurrence of Surge
3.3 Intensity of Surge
3.4 Effects of Surge
3.5 Avoidance of Surge
3.6 Recovery from Surge
4 CONTROL SCHEMES INCLUDING SURGE PROTECTION
4.1 Output Control
4.2 Surge Protection
4.3 Surge Detection and Recovery
5 DYNAMIC CONSIDERATIONS
5.1 Interaction
5.2 Speed of Response of Antisurge Control System
6 SYSTEM EQUIPMENT SPECIFICATIONS
6.1 The Antisurge Control Valve
6.2 Non-return Valve
6.3 Pressure and flow measurement
6.4 Signal transmission
6.5 Controllers
7 TESTING
7.1 Determination of the Surge Line
7.2 Records
8 INLET GUIDE VANE UNITS
8.1 Application
8.2 Effect on Power Consumption of the Compressor
8.3 Effect of Gas Conditions, Properties and Contaminants
8.4 Aerodynamic Considerations
8.5 Control System Linearity
8.6 Actuator Specification
8.7 Avoidance of Surge
8.8 Features of Link Mechanisms
8.9 Limit Stops and Shear Links
APPENDICES
A LIST OF SYMBOLS AND PREFERRED UNITS
B WORKED EXAMPLE 1 COMPRESSOR WITH VARIABLE INLET PRESSURE AND VARIABLE GAS COMPOSITION
C WORKED EXAMPLE 2 A CONSTANT SPEED ~ STAGE COMPRESSOR WITH INTER-COOLING
D WORKED EXAMPLE 3 DYNAMIC RESPONSE OF THE ANTISURGE PROTECTION SYSTEM FOR A SERVICE AIR COMPRESSOR RUNNING AT CONSTANT SPEED
E EXAMPLE OF INLET GUIDE VANE REGULATION
FIGURES
2.1 TYPICAL COMPRESSOR STAGE CHARACTERISTIC PLOTTED WITH FLOW AT DISCHARGE CONDITIONS
2.2 TYPICAL COMPRESSOR STAGE CHARACTERISTIC PLOTTED WITH FLOW AT INLET CONDITIONS
2.3 PERFORMANCE CHARACTERISTICS OF A COMPRESSOR STAGE AT VARYING SPEEDS
2.4 SYSTEM WORKING POINT DEFINED BY INTERSECTION OF PROCESS AND COMPRESSOR CHARACTERISTICS
2.5 DISCHARGE THROTTLE REGULATION
2.6 BYPASS REGULATION
2.7 INLET THROTTLE REGULATION
2.8 INLET GUIDE VANE REGULATION
2.9 VARIABLE SPEED REGULATION
3.1 GAS PULSATION LEVELS FOR A CENTRIFUGAL COMPRESSOR
3.2 REPRESENTATION OF CYCLIC FLOW DURING SURGE OF LONG PERIOD
3.3 TYPICAL WAVEFORM OF DISCHARGE PRESSURE DURING SURGE
3.4 MULTIPLE SURGE LINE FOR A MULTISTAGE CENTRIFUGAL COMPRESSOR
3.5 TYPICAL MULTIPLE SURGE LINES FOR SINGLE STAGE AXIAL-FLOW COMPRESSOR
4.1 GENERAL SCHEMATIC FOR COMPRESSORS OPERATING IN PARALLEL TO FEED MULTIPLE USER PLANTS
4.2 ILLUSTRATION OF SAFETY MARGIN BETWEEN SURGE POINT AND SURGE PROTECTION POINT AT WHICH ANTISURGE SYSTEM IS ACTIVATED
4.3 ANTISURGE SYSTEM FOR COMPRESSOR WITH FLAT PERFO ..........
This document provides an introduction and overview of the book "Power Piping: The Complete Guide to ASME B31.1" by Charles Becht IV. It discusses the book's coverage of the ASME B31.1 code for power piping systems, the qualifications and experience of the author, and the book's table of contents. The introduction also provides brief biographies of Charles Becht and an overview of his extensive experience with pressure vessels and piping codes and standards.
The document provides a detailed design report for a redesigned hydrogen production plant. The base case design produces 8,000 kg/hr of pure hydrogen gas using steam methane reforming and pressure swing adsorption. The plant can also flexibly operate at 60% capacity. Total capital investment is $112 million over 2 years. The plant is economically viable with a 9% internal rate of return over 30 years of operation. Gaseous emissions are a concern and various abatement methods are discussed to improve sustainability.
CENTRIFUGAL COMPRESSOR SETTLE OUT CONDITIONS TUTORIALVijay Sarathy
Centrifugal Compressors are a preferred choice in gas transportation industry, mainly due to their ability to cater to varying loads. In the event of a compressor shutdown as a planned event, i.e., normal shutdown (NSD), the anti-surge valve is opened to recycle gas from the discharge back to the suction (thereby moving the operating point away from the surge line) and the compressor is tripped via the driver (electric motor or Gas turbine / Steam Turbine). In the case of an unplanned event, i.e., emergency shutdown such as power failure, the compressor trips first followed by the anti-surge valve opening. In doing so, the gas content in the suction side & discharge side mix.
Therefore, settle out conditions is explained as the equilibrium pressure and temperature reached in the compressor piping and equipment volume following a compressor shutdown
PROCESS STORAGE TANK LAH & LAHH LEVEL CALCULATIONVijay Sarathy
The document contains parameters for a process storage tank including a diameter of 14 feet, height of 18 feet, normal liquid level of 6 feet, and pump inflow of 250 USGPM. It details calculations for the liquid alarm high-high level of 14.74 feet based on filling the tank from the overfill level to that point within 15 minutes, and liquid alarm high level of 8.23 feet calculated from filling within 45 minutes.
Urea reactor liner leakage(a case study)Prem Baboo
The document discusses liner leakage issues in the urea reactor of a fertilizer plant in India. It describes two instances of leakage detected through the weep hole monitoring system, in 2006 and 2017. Both times, the plant underwent shutdowns to locate and repair the leak. Detection methods like soap solution, ammonia testing, and differential pressure checks were used. The 2017 leak took longer to locate and required welding repairs between trays. The shutdown lasted 72 hours before feed was restored. Proper monitoring and maintenance of weep holes and liners is important for preventing corrosion and leaks.
This document provides an overview of city gas distribution in India. It begins with acknowledgements and outlines the objectives of studying this topic. It then provides an executive summary that discusses key aspects of city gas distribution systems, including the network layout, pressure regimes, safety parameters, and examples from other countries like the US, Australia and China. The main focus is on the evolution, demand and supply scenario, challenges, players and regulatory framework for city gas distribution in India. Benefits and the future outlook for demand and supply in India are also summarized.
Centrifugal Compressors
SECTION ONE - ANTI-SURGE PROTECTION AND THROUGHPUT REGULATION
0 INTRODUCTION
1 SCOPE
2 MACHINE CHARACTERISTICS
2.1 Characteristics of a Single Compressor Stage
2.2 Characteristic of a Multiple Stage Having More
Than One Impeller
2.3 Use of Compressor Characteristics in Throughput
Regulation Schemes
3 MECHANISM AND EFFECTS OF SURGE
3.1 Basic Flow Instabilities
3.2 Occurrence of Surge
3.3 Intensity of Surge
3.4 Effects of Surge
3.5 Avoidance of Surge
3.6 Recovery from Surge
4 CONTROL SCHEMES INCLUDING SURGE PROTECTION
4.1 Output Control
4.2 Surge Protection
4.3 Surge Detection and Recovery
5 DYNAMIC CONSIDERATIONS
5.1 Interaction
5.2 Speed of Response of Antisurge Control System
6 SYSTEM EQUIPMENT SPECIFICATIONS
6.1 The Antisurge Control Valve
6.2 Non-return Valve
6.3 Pressure and flow measurement
6.4 Signal transmission
6.5 Controllers
7 TESTING
7.1 Determination of the Surge Line
7.2 Records
8 INLET GUIDE VANE UNITS
8.1 Application
8.2 Effect on Power Consumption of the Compressor
8.3 Effect of Gas Conditions, Properties and Contaminants
8.4 Aerodynamic Considerations
8.5 Control System Linearity
8.6 Actuator Specification
8.7 Avoidance of Surge
8.8 Features of Link Mechanisms
8.9 Limit Stops and Shear Links
APPENDICES
A LIST OF SYMBOLS AND PREFERRED UNITS
B WORKED EXAMPLE 1 COMPRESSOR WITH VARIABLE INLET PRESSURE AND VARIABLE GAS COMPOSITION
C WORKED EXAMPLE 2 A CONSTANT SPEED ~ STAGE COMPRESSOR WITH INTER-COOLING
D WORKED EXAMPLE 3 DYNAMIC RESPONSE OF THE ANTISURGE PROTECTION SYSTEM FOR A SERVICE AIR COMPRESSOR RUNNING AT CONSTANT SPEED
E EXAMPLE OF INLET GUIDE VANE REGULATION
FIGURES
2.1 TYPICAL COMPRESSOR STAGE CHARACTERISTIC PLOTTED WITH FLOW AT DISCHARGE CONDITIONS
2.2 TYPICAL COMPRESSOR STAGE CHARACTERISTIC PLOTTED WITH FLOW AT INLET CONDITIONS
2.3 PERFORMANCE CHARACTERISTICS OF A COMPRESSOR STAGE AT VARYING SPEEDS
2.4 SYSTEM WORKING POINT DEFINED BY INTERSECTION OF PROCESS AND COMPRESSOR CHARACTERISTICS
2.5 DISCHARGE THROTTLE REGULATION
2.6 BYPASS REGULATION
2.7 INLET THROTTLE REGULATION
2.8 INLET GUIDE VANE REGULATION
2.9 VARIABLE SPEED REGULATION
3.1 GAS PULSATION LEVELS FOR A CENTRIFUGAL COMPRESSOR
3.2 REPRESENTATION OF CYCLIC FLOW DURING SURGE OF LONG PERIOD
3.3 TYPICAL WAVEFORM OF DISCHARGE PRESSURE DURING SURGE
3.4 MULTIPLE SURGE LINE FOR A MULTISTAGE CENTRIFUGAL COMPRESSOR
3.5 TYPICAL MULTIPLE SURGE LINES FOR SINGLE STAGE AXIAL-FLOW COMPRESSOR
4.1 GENERAL SCHEMATIC FOR COMPRESSORS OPERATING IN PARALLEL TO FEED MULTIPLE USER PLANTS
4.2 ILLUSTRATION OF SAFETY MARGIN BETWEEN SURGE POINT AND SURGE PROTECTION POINT AT WHICH ANTISURGE SYSTEM IS ACTIVATED
4.3 ANTISURGE SYSTEM FOR COMPRESSOR WITH FLAT PERFO ..........
This document provides an introduction and overview of the book "Power Piping: The Complete Guide to ASME B31.1" by Charles Becht IV. It discusses the book's coverage of the ASME B31.1 code for power piping systems, the qualifications and experience of the author, and the book's table of contents. The introduction also provides brief biographies of Charles Becht and an overview of his extensive experience with pressure vessels and piping codes and standards.
The document provides a detailed design report for a redesigned hydrogen production plant. The base case design produces 8,000 kg/hr of pure hydrogen gas using steam methane reforming and pressure swing adsorption. The plant can also flexibly operate at 60% capacity. Total capital investment is $112 million over 2 years. The plant is economically viable with a 9% internal rate of return over 30 years of operation. Gaseous emissions are a concern and various abatement methods are discussed to improve sustainability.
CENTRIFUGAL COMPRESSOR SETTLE OUT CONDITIONS TUTORIALVijay Sarathy
Centrifugal Compressors are a preferred choice in gas transportation industry, mainly due to their ability to cater to varying loads. In the event of a compressor shutdown as a planned event, i.e., normal shutdown (NSD), the anti-surge valve is opened to recycle gas from the discharge back to the suction (thereby moving the operating point away from the surge line) and the compressor is tripped via the driver (electric motor or Gas turbine / Steam Turbine). In the case of an unplanned event, i.e., emergency shutdown such as power failure, the compressor trips first followed by the anti-surge valve opening. In doing so, the gas content in the suction side & discharge side mix.
Therefore, settle out conditions is explained as the equilibrium pressure and temperature reached in the compressor piping and equipment volume following a compressor shutdown
Project Control Practical Way by Herve Baronignitetribes
Here are some key ways to measure procurement progress:
- % Progress based on weighted value of POs, broken down into steps like PO placement, material receipt, inspection, etc.
- Milestones like:
- % of PO value placed
- % of line items with approved submittals
- % of line items where material is received/inspected
- % of line items fully delivered
Tracking procurement progress through milestones helps ensure critical items are on track and identifies delays early. Milestones should reflect major stages from PO placement through delivery and inspection. This provides a more objective view than % progress alone.
Both % progress and milestone tracking are needed to effectively monitor procurement.
This document provides guidelines for inspecting unfired pressure vessels. It discusses inspection frequency, qualifications of inspectors, pre-inspection activities, the inspection procedure, and aspects of external, internal, thickness, stress, and pressure testing. Specific items to examine include vessel connections, structural attachments, evidence of leakage, surface condition, welded joints, and safety devices. Record keeping and common causes of deterioration are also outlined. The goal is to safely operate and maintain pressure vessels by preventing damage and improving reliability.
This document describes gas sweetening processes used to remove acid gases like H2S and CO2 from natural gas. It focuses on chemical absorption processes using alkanolamine solvents like MEA, DGA, DEA, and MDEA in aqueous solutions. The general process involves absorbing acid gases from the feed gas in an absorber column, regenerating the solvent in a regenerator column, and recycling the regenerated solvent. Key unit operations discussed include the absorber, flash drum, amine/amine heat exchanger, regenerator, reboiler, and condenser. Process conditions and equipment details are provided for the typical operation of each unit.
There are three main methods for storing liquid ammonia: storage at ambient temperature and pressure in cylindrical vessels holding 2.5-150 tons; storage under pressure in spherical vessels holding thousands of tons; and storage at atmospheric pressure by reducing the temperature to -33°C in flat-bottomed cylindrical tanks holding over 3000 tons. Safety measures for ammonia storage include instrumentation and alarms for critical parameters like pressure, temperature, and level, as well as a flare system to safely vent excess pressure and ammonia detectors to monitor for leaks.
This presentation is a talk given at the 14 November Philadelphia area AIChE meeting. Chemical engineers, especially those in the US, are increasingly being asked to develop incremental increases in plant capacity, say up to 20%. Many plants are now running at maximum capacity, yet tight capital funding and requirements for short payback periods make it difficult to have large investment for new, grassroots facilities. In some cases, engineers need to meet demand increments much less than the capacity of a new plant, while further demand growth is uncertain. The manufacturer must then choose the appropriate capacity increment, instead of overdesigning Debottlenecking projects are undertaken to deliver these capacity increases, by implementing select changes to specific parts of a plant to relieve restrictions. In this session, we will discuss tools and analyses for assessing the process bottlenecks. We will address means of debottlenecking numerous unit operations, while listing points often forgotten in such projects. Finally we will discuss how debottlenecking projects are different from conventional grass roots projects, while treating the practical aspects of how to manage such projects. A list of references is included for further, deeper study. Many of the facts and figures presented in the talk were taken from these references.
Key words:
capacity, debottlenecking, process engineering, chemical projects optimization, asset utilization, theory of constraints, TOC, revamp, distillation, fouling, throughput, practical
World Class Manufacturing:Plant Start Up and Commissioning Procedure HIMADRI BANERJI
The document provides an overview of plant commissioning and start-up procedures. It discusses the commissioning process which includes preparation and planning, mechanical completion and integrity checking, pre-commissioning and operational testing, start-up and initial operation, performance and acceptance testing, and post-commissioning. It then goes into more detail on specific aspects of the commissioning process such as developing start-up procedures, commissioning utilities, pressure testing, cleaning and flushing, and pre-commissioning operational testing.
Accumulation and Over-pressure: difference between accumulation and overpressureVarun Patel
Accumulation is pressure above the maximum allowable working pressure that vessel experience during high pressure event. Hence, when we say ‘accumulation’, its mean we are talking about the vessel or equipment.
On the other hand, Overpressure is pressure above the set pressure of the pressure safety valve that PSV experience during high pressure event. Hence, when we say ‘accumulation’, its mean we are talking about the pressure relief valve.
A piping and instrumentation diagram/drawing (P&ID) is defined by the Institute of Instrumentation and Control as follows: A diagram which shows the interconnection of process equipment and the instrumentation used to control the proces
This document discusses challenges and opportunities in turbomachinery control. It provides an overview of compressor and gas turbine control systems, including their components and how they work. Advanced control systems integrate controllers for better performance than conventional independent PID controllers. Simulation examples show how compressors can surge during process upsets and how controls work to prevent surge by opening anti-surge valves and reducing turbine output. Overall the document focuses on improving machinery reliability and efficiency through advances in control system design.
This document discusses the aMDEA process for removing carbon dioxide from process gas. It begins with an introduction and table of contents, then covers the need for CO2 removal, desirable solvent properties, commercially available processes, differences between physical and chemical absorption, selection criteria for processes, and an overview of the aMDEA process including constituents and reactions. It also discusses why the Rectisol process is not suitable, favorable absorption and regeneration parameters, common problems encountered, handling precautions, process interlocks, and problems and mistakes to avoid.
Oil and-gas-facilities-and-pipelines-110906055120-phpapp01Philippe Porta
The document summarizes KBR's expertise in designing and executing oil and gas facilities and pipeline projects. It describes a project in Algeria where KBR designed carbon capture and storage facilities. It highlights KBR's ability to deliver projects on schedule and budget while balancing logistics, safety and sustainability even in remote locations. KBR has over 30 years of experience successfully delivering complex projects.
The document discusses engineering management in the EPC (engineering, procurement, and construction) industry. It outlines the typical project phases and risks involved in EPC contracts. It also identifies common challenges such as scope changes, commodity price volatility, and ensuring vendor and subcontractor quality. The presentation emphasizes the importance of effective engineering management throughout the project lifecycle from bidding through construction and commissioning. Key focus areas include integrated planning, competency of resources, communication, and change management. Success relies on collaboration, responsiveness, contingency planning, and working as a cohesive team.
This document provides an overview of an oil and gas engineering training program. It covers topics like project engineering, design basis, engineering disciplines, process design, equipment, piping and instrumentation, civil works, and health and safety. The training aims to give participants a detailed understanding of the engineering activities in various disciplines and show sample deliverables. It also explains the challenges of oil and gas engineering projects. The document contains several figures to illustrate engineering workflows, project organization, and more.
Demand Analysis And Selection Of City For Cgd Network Establishment On Propos...Subodh Maithani
This document analyzes the demand for and selection of cities for establishing a natural gas distribution network along a proposed pipeline from Dadri to Panipat. It provides background on natural gas as a fuel, describing its sources and supply in India. It discusses city gas distribution networks and outlines Indian Oil Corporation's interest in establishing such networks. The document assesses potential demand for natural gas in various districts of Haryana and Uttar Pradesh along the proposed pipeline route. Regulations for establishing gas networks are also reviewed before conclusions are drawn about selecting the most suitable city.
Tube Wall Temperature Measurement On Steam Reformers - Best PracticesGerard B. Hawkins
GBH Enterprises provides guidance on best practices for measuring tube wall temperatures in steam reformers using optical pyrometers. It is important to measure temperatures accurately to prevent overheating tubes while maximizing plant efficiency. GBH recommends taking multiple temperature and background readings per tube using handheld pyrometers and an emissivity correction factor. Safety precautions like protective equipment are also advised. Detailed procedures are outlined for top-fired, side-fired and terrace wall furnace configurations.
This document provides design calculations for the seismic and wind loading of an oil storage tank. It calculates the overturning moment due to seismic forces and wind forces acting on the tank. It then calculates the required strength of the tank shell, bottom plate, and anchorage to resist these overturning forces, taking into account the weight and distribution of the tank, contents, roof and supporting structures. Design requirements including allowable stresses and load factors are considered to ensure the structural integrity of the tank under the specified loading conditions.
The Presentation discusses the Air-Heater Performance Indices and the Boiler Performance calculation. One can Calculate the air ingress in the air-heater and the boiler and losses incurred thereby. The presentation also describes in details about the boiler efficiency and its calculation.
This document provides an overview and summary of a basic training course on petroleum storage tanks. It discusses various tank types including fixed roof tanks, internal floating roof tanks, and floating roof tanks. It covers tank design elements like the structure of the tank bottom and floor, thickness of bottom plates, and attachment of the bottom to the shell. It also addresses tank foundations, including the need for foundations to allow for leak detection. The goals of the training are identified as learning to identify tank types and equipment, understand tank limitations, perform volume calculations, and operate tanks safely.
This document outlines several special decision situations in capital budgeting, including:
1) Choosing between projects of unequal life by converting costs to a uniform annual equivalent
2) Determining optimal timing by examining net future value at alternative dates
3) Calculating economic life by minimizing total annual costs over an asset's life
It also discusses adjusting net present value for financing effects using the adjusted present value (APV) method and adjusting the cost of capital. Additional topics covered are inflation, international capital budgeting, and investing in organizational capabilities.
This chapter discusses special capital budgeting situations including choosing between projects of unequal life, optimal timing decisions, determining economic life, adjusting the cost of capital for financing effects, considering inflation, international capital budgeting, and investing in organizational capabilities. It provides formulas and examples for calculating uniform annual equivalents, adjusted present value, weighted average cost of capital, and the impact of inflation and foreign exchange rates. Key organizational capabilities mentioned are external integration, internal integration, flexibility, and capacity to experiment.
Project Control Practical Way by Herve Baronignitetribes
Here are some key ways to measure procurement progress:
- % Progress based on weighted value of POs, broken down into steps like PO placement, material receipt, inspection, etc.
- Milestones like:
- % of PO value placed
- % of line items with approved submittals
- % of line items where material is received/inspected
- % of line items fully delivered
Tracking procurement progress through milestones helps ensure critical items are on track and identifies delays early. Milestones should reflect major stages from PO placement through delivery and inspection. This provides a more objective view than % progress alone.
Both % progress and milestone tracking are needed to effectively monitor procurement.
This document provides guidelines for inspecting unfired pressure vessels. It discusses inspection frequency, qualifications of inspectors, pre-inspection activities, the inspection procedure, and aspects of external, internal, thickness, stress, and pressure testing. Specific items to examine include vessel connections, structural attachments, evidence of leakage, surface condition, welded joints, and safety devices. Record keeping and common causes of deterioration are also outlined. The goal is to safely operate and maintain pressure vessels by preventing damage and improving reliability.
This document describes gas sweetening processes used to remove acid gases like H2S and CO2 from natural gas. It focuses on chemical absorption processes using alkanolamine solvents like MEA, DGA, DEA, and MDEA in aqueous solutions. The general process involves absorbing acid gases from the feed gas in an absorber column, regenerating the solvent in a regenerator column, and recycling the regenerated solvent. Key unit operations discussed include the absorber, flash drum, amine/amine heat exchanger, regenerator, reboiler, and condenser. Process conditions and equipment details are provided for the typical operation of each unit.
There are three main methods for storing liquid ammonia: storage at ambient temperature and pressure in cylindrical vessels holding 2.5-150 tons; storage under pressure in spherical vessels holding thousands of tons; and storage at atmospheric pressure by reducing the temperature to -33°C in flat-bottomed cylindrical tanks holding over 3000 tons. Safety measures for ammonia storage include instrumentation and alarms for critical parameters like pressure, temperature, and level, as well as a flare system to safely vent excess pressure and ammonia detectors to monitor for leaks.
This presentation is a talk given at the 14 November Philadelphia area AIChE meeting. Chemical engineers, especially those in the US, are increasingly being asked to develop incremental increases in plant capacity, say up to 20%. Many plants are now running at maximum capacity, yet tight capital funding and requirements for short payback periods make it difficult to have large investment for new, grassroots facilities. In some cases, engineers need to meet demand increments much less than the capacity of a new plant, while further demand growth is uncertain. The manufacturer must then choose the appropriate capacity increment, instead of overdesigning Debottlenecking projects are undertaken to deliver these capacity increases, by implementing select changes to specific parts of a plant to relieve restrictions. In this session, we will discuss tools and analyses for assessing the process bottlenecks. We will address means of debottlenecking numerous unit operations, while listing points often forgotten in such projects. Finally we will discuss how debottlenecking projects are different from conventional grass roots projects, while treating the practical aspects of how to manage such projects. A list of references is included for further, deeper study. Many of the facts and figures presented in the talk were taken from these references.
Key words:
capacity, debottlenecking, process engineering, chemical projects optimization, asset utilization, theory of constraints, TOC, revamp, distillation, fouling, throughput, practical
World Class Manufacturing:Plant Start Up and Commissioning Procedure HIMADRI BANERJI
The document provides an overview of plant commissioning and start-up procedures. It discusses the commissioning process which includes preparation and planning, mechanical completion and integrity checking, pre-commissioning and operational testing, start-up and initial operation, performance and acceptance testing, and post-commissioning. It then goes into more detail on specific aspects of the commissioning process such as developing start-up procedures, commissioning utilities, pressure testing, cleaning and flushing, and pre-commissioning operational testing.
Accumulation and Over-pressure: difference between accumulation and overpressureVarun Patel
Accumulation is pressure above the maximum allowable working pressure that vessel experience during high pressure event. Hence, when we say ‘accumulation’, its mean we are talking about the vessel or equipment.
On the other hand, Overpressure is pressure above the set pressure of the pressure safety valve that PSV experience during high pressure event. Hence, when we say ‘accumulation’, its mean we are talking about the pressure relief valve.
A piping and instrumentation diagram/drawing (P&ID) is defined by the Institute of Instrumentation and Control as follows: A diagram which shows the interconnection of process equipment and the instrumentation used to control the proces
This document discusses challenges and opportunities in turbomachinery control. It provides an overview of compressor and gas turbine control systems, including their components and how they work. Advanced control systems integrate controllers for better performance than conventional independent PID controllers. Simulation examples show how compressors can surge during process upsets and how controls work to prevent surge by opening anti-surge valves and reducing turbine output. Overall the document focuses on improving machinery reliability and efficiency through advances in control system design.
This document discusses the aMDEA process for removing carbon dioxide from process gas. It begins with an introduction and table of contents, then covers the need for CO2 removal, desirable solvent properties, commercially available processes, differences between physical and chemical absorption, selection criteria for processes, and an overview of the aMDEA process including constituents and reactions. It also discusses why the Rectisol process is not suitable, favorable absorption and regeneration parameters, common problems encountered, handling precautions, process interlocks, and problems and mistakes to avoid.
Oil and-gas-facilities-and-pipelines-110906055120-phpapp01Philippe Porta
The document summarizes KBR's expertise in designing and executing oil and gas facilities and pipeline projects. It describes a project in Algeria where KBR designed carbon capture and storage facilities. It highlights KBR's ability to deliver projects on schedule and budget while balancing logistics, safety and sustainability even in remote locations. KBR has over 30 years of experience successfully delivering complex projects.
The document discusses engineering management in the EPC (engineering, procurement, and construction) industry. It outlines the typical project phases and risks involved in EPC contracts. It also identifies common challenges such as scope changes, commodity price volatility, and ensuring vendor and subcontractor quality. The presentation emphasizes the importance of effective engineering management throughout the project lifecycle from bidding through construction and commissioning. Key focus areas include integrated planning, competency of resources, communication, and change management. Success relies on collaboration, responsiveness, contingency planning, and working as a cohesive team.
This document provides an overview of an oil and gas engineering training program. It covers topics like project engineering, design basis, engineering disciplines, process design, equipment, piping and instrumentation, civil works, and health and safety. The training aims to give participants a detailed understanding of the engineering activities in various disciplines and show sample deliverables. It also explains the challenges of oil and gas engineering projects. The document contains several figures to illustrate engineering workflows, project organization, and more.
Demand Analysis And Selection Of City For Cgd Network Establishment On Propos...Subodh Maithani
This document analyzes the demand for and selection of cities for establishing a natural gas distribution network along a proposed pipeline from Dadri to Panipat. It provides background on natural gas as a fuel, describing its sources and supply in India. It discusses city gas distribution networks and outlines Indian Oil Corporation's interest in establishing such networks. The document assesses potential demand for natural gas in various districts of Haryana and Uttar Pradesh along the proposed pipeline route. Regulations for establishing gas networks are also reviewed before conclusions are drawn about selecting the most suitable city.
Tube Wall Temperature Measurement On Steam Reformers - Best PracticesGerard B. Hawkins
GBH Enterprises provides guidance on best practices for measuring tube wall temperatures in steam reformers using optical pyrometers. It is important to measure temperatures accurately to prevent overheating tubes while maximizing plant efficiency. GBH recommends taking multiple temperature and background readings per tube using handheld pyrometers and an emissivity correction factor. Safety precautions like protective equipment are also advised. Detailed procedures are outlined for top-fired, side-fired and terrace wall furnace configurations.
This document provides design calculations for the seismic and wind loading of an oil storage tank. It calculates the overturning moment due to seismic forces and wind forces acting on the tank. It then calculates the required strength of the tank shell, bottom plate, and anchorage to resist these overturning forces, taking into account the weight and distribution of the tank, contents, roof and supporting structures. Design requirements including allowable stresses and load factors are considered to ensure the structural integrity of the tank under the specified loading conditions.
The Presentation discusses the Air-Heater Performance Indices and the Boiler Performance calculation. One can Calculate the air ingress in the air-heater and the boiler and losses incurred thereby. The presentation also describes in details about the boiler efficiency and its calculation.
This document provides an overview and summary of a basic training course on petroleum storage tanks. It discusses various tank types including fixed roof tanks, internal floating roof tanks, and floating roof tanks. It covers tank design elements like the structure of the tank bottom and floor, thickness of bottom plates, and attachment of the bottom to the shell. It also addresses tank foundations, including the need for foundations to allow for leak detection. The goals of the training are identified as learning to identify tank types and equipment, understand tank limitations, perform volume calculations, and operate tanks safely.
This document outlines several special decision situations in capital budgeting, including:
1) Choosing between projects of unequal life by converting costs to a uniform annual equivalent
2) Determining optimal timing by examining net future value at alternative dates
3) Calculating economic life by minimizing total annual costs over an asset's life
It also discusses adjusting net present value for financing effects using the adjusted present value (APV) method and adjusting the cost of capital. Additional topics covered are inflation, international capital budgeting, and investing in organizational capabilities.
This chapter discusses special capital budgeting situations including choosing between projects of unequal life, optimal timing decisions, determining economic life, adjusting the cost of capital for financing effects, considering inflation, international capital budgeting, and investing in organizational capabilities. It provides formulas and examples for calculating uniform annual equivalents, adjusted present value, weighted average cost of capital, and the impact of inflation and foreign exchange rates. Key organizational capabilities mentioned are external integration, internal integration, flexibility, and capacity to experiment.
Learning ObjectivesUpon completion of Chapter 10, you will.docxSHIVA101531
Learning Objectives
Upon completion of Chapter 10, you will be able to:
• Understand the meaning of the weighted average cost of capital (WACC).
• Be able to estimate the weights in the WACC.
• Be able to estimate the cost of debt and how it is affected by taxes.
• Be able to estimate the cost of preferred stock.
• Know three approaches for estimating the cost of equity.
• Understand flotation costs and how they affect the WACC.
• Know when the WACC is the appropriate approach for estimating the required return for a project.
• Know an alternative approach for estimating a project’s required return when the WACC is not
the appropriate measure.
Cost of Capital
10
Nina Mourier/Getty Images
byr80656_10_c10_245-270.indd 245 3/28/13 3:35 PM
CHAPTER 10Section 10.1 Estimating the Discount Rate
Corporate managers use various capital budgeting techniques. Among these tech-niques, net present value (NPV) emerges as the best measure of a project’s con-tribution to shareholder wealth. In NPV analysis, the present value of a project’s
expected future cash flows is compared to the initial investment, and the project is accepted
if the present value exceeds the initial investment. Calculation of NPV requires the analyst
to estimate cash flows and an appropriate discount rate. Techniques for estimating cash
flows were covered in Chapter 6. In this chapter you will learn how to estimate the dis-
count rate. The same estimates of cash flows and discount rate are also used in internal
rate of return analysis. Used in IRR, the discount rate becomes a hurdle rate against which
to compare the project’s IRR.
10.1 Estimating the Discount Rate
To illustrate the calculation and use of the discount rate, we introduce a case study of Pacific Offshore Ltd. (POL). POL is considering the manufacture and sale of har-nesses to be used by sailors who must be tethered to their boats in the high seas.
The harnesses can save the lives of sailors who are washed overboard in rough water and
storms. The NPV of POL’s harness project is $9,110, which was found by discounting the
project’s net cash flows by 12.5%. The project’s internal rate of return of 17.2% is greater
than the 12.5% required rate of return on the harness project. Therefore, whether we use
NPV or IRR, the harness project appears to be acceptable because it meets the respective
decision criteria. Had the required return been 20%, for example, the project would have
been rejected using either criterion.
We have referred to the 12.5% as the harness project’s required rate of return. To be more
specific, 12.5% is the weighted average return demanded by the company’s investors. The
weightings reflect the proportional values of their investments. The cost of the harness
project is $64,384, meaning that the owners must raise that amount from their investors
to fund tools, equipment, and working capital and to pay the cost of reconfiguring the
plant. The owners decided to fund futu ...
This presentation is an overview Cost of Capital.
Dr. Soheli Ghose ( Ph.D (University of Calcutta), M.Phil, M.Com, M.B.A., NET (JRF), B. Ed).
Assistant Professor, Department of Commerce,St. Xavier's College, Kolkata.
Guest Faculty, M.B.A. Finance, University of Calcutta, Kolkata
Chapter 8Cost of CapitalAssociated PressLearning O.docxmccormicknadine86
Chapter 8
Cost of Capital
Associated Press
Learning Objectives
A�er studying this chapter, you should be able to:
Show how the discount rate is calculated and used.
Explain how the weighted average cost of capital is calculated, and outline the significance of its components.
Describe how to es�mate the discount rate for individual projects and how risk factors into the process.
Processing math: 0%
Ch. 8 Introduction
Chapter 6 described the various capital budge�ng techniques employed by corporate managers. Among the techniques, net present value (NPV) emerges as the best measure
of a project's contribu�on to shareholder wealth. In NPV analysis, the present value of a project's expected future cash flows is compared to the ini�al investment, and the
project is accepted if the present value exceeds the ini�al investment. Calcula�on of NPV requires the analyst to es�mate cash flows and an appropriate discount rate.
Techniques for es�ma�ng cash flows were covered in Chapter 6. In this chapter, you will learn how to es�mate the discount rate. The same es�mates of cash flows and
discount rate are also used in internal rate of return analysis. Used in IRR, the discount rate becomes a hurdle rate against which to compare the project's IRR.
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Financing mix and cash flows for the Pogo harness project.
8.1 Estimating the Discount Rate
To illustrate the calcula�on and use of the discount rate, we elaborate on the Chapter 6 example of Pacific Offshore Ltd. (POL). Recall the NPV of POL's Pogo harness project
is $9,110, which was found by discoun�ng the project's net cash flows by 12.5% (the required rate of return). The project's internal rate of return of 17.2% is greater than
the 12.5% required rate of return on the harness project; therefore, whether we use NPV or IRR, the harness project appears to be acceptable because it meets the
respec�ve decision criteria. Had the required return been 20%, for example, the project would have been rejected using either criterion. Table 8.1 reviews the details of
POL's Pogo harness project from Chapter 6.
Table 8.1: Review of POL's Pogo harness project details
Data Category Value
Project cost $64,384
Required rate of return 12.5%
Internal rate of return 17.2%
Net present value $9,110
We have referred to the 12.5% as the harness project's required rate of return. To be more specific, 12.5% is the weighted average return demanded by the company's
investors. The weigh�ngs reflect the propor�onal values of their investments. From Chapter 6, the cost of the harness project is $64,384, meaning that Paula Bauer must
raise that amount from her inves ...
Sheet4Assignment 1 LASA # 2—Capital Budgeting Techniques
Sheet1
Solution
:-A) Computation of WACC:-Cost of equity (Ke) will be calculated using dividend discount model which is as under:-Price of share (P0) = D1/(Ke-g)Ke = (D1/(P0*(1-f))) + gWhere,D1 = D0*(1+g)F = Flotation costKe = ((2.50*(1+6%))/(50*(1-10%))) + 6%Ke = 11.89%i) Equity financing and debt financing are two different sources of financing being used by the organizations to procure funds. Equity and debt are two different sources of financing, equity financing represents internal source of finance whereas debt financing represent external source of finance. Mixture of both is always used by the business organizations to procure funds and is most commonly known as target ratio or capital structure ratio. This ration varies from industry to industry and company and company depending upon various circumstances, equity financing can be raised only through issuing shares in market by the help of initial public offer whereas debt financing can be raise from many sources such as bonds, long term loans, money market instruments etc.Equity Financing has following advantages:1. The total cash flows generated can be used solely for investment purpose, rather than paying back the investors.2. Funds can be raised in shorter time as compared to other sources of funds.However, in equity financing, dilution of ownership easily occurs and more investors can lead to loss of Control.Cost of debt (Kd) will be calculated as follows:-Kd = Market rate of deb*(1-tax rate)Kd = 5%*(1-35%)Kd = 3.25%Debt is a more common source of finance used by most of the organizations, the reason for the same is as follows:-a. Debt is cheaper source of finance as compared to equity the reason being the cost associated with issuing the common stock like. Underwriters commission, legal expenses, various registration charges, issuing of prospectus, printing of various documents etc.b. Debt financing provide leverage to the company which will increase the Earning per Share (EPS) which in turn leads to increase in market value of share, this helps organization to maximize its market capitalization.However, if the expansion venture does not work in favour of the company, then these obligations of repayment of principal and interest may turnout to be a burden to the company. WACC = (Ke*We) + (Kd*Wd)WACC = (11.89%*70%) + (3.25%*30%)WACC = 9.30%B) Computation of NPV of project A:-Depreciation = Cost of the asset – salvage value Life of the asset = 1,500,000/ 3 = 500,000Calculation of cash flows:Revenue – 1,200,000Less Cost – 600,000Less Depreciation – 500,000Profit - 100,000Less taxes (35%) 35,000Profit after taxes .
This document discusses methods for calculating the cost of capital, including the cost of debt, equity, and preference shares. It outlines the Capital Asset Pricing Model (CAPM) approach for estimating the cost of equity, as well as other methods like the dividend yield plus risk premium approach and the dividend discount model. It also discusses how to calculate the weighted average cost of capital (WACC) using target capital structure weights. Additionally, it notes some issues that companies face in estimating their cost of capital and common misconceptions about the concept.
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EQT Corporation released updated numbers on May 31, 2013 for their estimated ultimate recovery (EUR) rates in the Marcellus Shale. EQT says the average well in southwest PA and WV will produce close to 10 billion cubic feet of natural gas per well over their lifetimes, while wells in central PA will produce around 6 1/2 billion cubic feet on average. The EUR numbers are up from previous estimates.
This document discusses capital budgeting and various techniques used to evaluate capital expenditure projects. It defines capital budgeting as evaluating long-term investments to maximize shareholder wealth. Various criteria used to evaluate projects are discussed, including traditional non-discounted methods like average rate of return and payback period, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. The advantages and disadvantages of each method are also summarized.
This document discusses the cost of capital. It defines cost of equity, cost of debt, weighted average cost of capital (WACC), and the capital asset pricing model (CAPM) approach for calculating cost of equity. An example is provided to illustrate calculating WACC for a company with both debt and equity financing using the costs of equity and debt and their weights. The advantages and disadvantages of the CAPM and discounted cash flow approaches are also summarized.
Any incorporated company at the end of the financial year is required to prepare financial statements showing the assets & liabilities, profit or loss for the period, a cash flow statement &get it audited. the audited statements along with the auditor's report & directors report with all schedules is to be submitted to the ROC, shareholders at the annual general meeting, banks, financial institutions, all stakeholders.etc
These statements form the basis of ANALYSIS, WHICH CAN BE (A) VERTICAL ANALYSIS ( B)HORIZONTAL ANALYSIS (C )COMPARITIVE STATEMENTS (D)COST ANALYSIS (E)CASH FLOW ANALYSIS AND SO ON 'The main feature of these analyses will be explained with illustrative examples
The document provides an analysis of the levelized cost of electricity (LCOE) from wind power generation in India. It discusses the key cost components that make up the LCOE calculation, including capital costs, operation and maintenance costs, the production tax credit, depreciation, taxes, and royalties. It then provides an example calculation of the LCOE for a hypothetical 600 kW wind turbine over a 20 year project lifetime, accounting for the turbine and installation costs, annual income from electricity sales, operation and maintenance costs, and discounting future cash flows to calculate the net present value.
- India is the second largest cement producer globally and is expected to reach 550 million tons of annual production capacity by 2020, dominated by private players. Cement demand is recovering faster than expected.
- ACC is uniquely positioned to benefit from India's cement market growth, with over 10% market share. However, high operating costs and vintage plants may hamper its growth.
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Natural Gas Pipeline Transmission Cost & Economics
1. Page 1 of 11
Natural Gas Pipeline Transmission Cost & Economics
Jayanthi Vijay Sarathy, M.E, CEng, MIChemE, Chartered Chemical Engineer, IChemE, UK
In any pipeline project, an economic analysis
has to be performed to ensure the project is a
viable investment. The major capital
components of a pipeline system consists of
the pipeline, Booster station, ancillary
machinery such as mainline valve stations,
meter stations, pressure regulation stations,
SCADA & Telecommunications. The project
costs would additionally consist of
environmental costs & permits, Right of Way
(ROW) acquisitions, Engineering &
Construction management to name a few.
The following tutorial is aimed at conducting
a pipeline economic analysis using the
method of Weight Average Capital Cost
(WACC) to estimate gas tariffs, project worth
in terms of Net Present Value (NPV), Internal
Rate of Return (IRR), Profit to Investment
Ratio (PIR) and payback period. The cost of
equity is estimated using the Capital Asset
Pricing Model (CAPM).
Problem Statement
A pipeline project is proposed to be built to
transport natural gas from a gas processing
facility to a city power station. The scope of
gas supply is expected for a period of 25 years
& availability of 8,040 hours/year. Prior
calculations indicate a 16” pipeline & a
booster station will be required. The
undertaking requires a CAPEX & OPEX
estimation to explore project viability &
profitability. Project funding is through a
60:40 debt [D] to equity [E] ratio. The cost of
debt is at a lender’s average prime lending
rate [r] of 17%. The cost of equity is taken at
an average risk free interest rate [rf] of 17%
and expected market portfolio return [rm] of
24%. Considering inflation, Annual O&M costs
is taken as 2%. Beta ratio [] & linear
depreciation rate [dr] is taken as 0.9 and 8%.
Table 1. Pipeline & Booster Station Details
Description Value Units
Upstream Pipeline PSL 1 X 65
Size 16 Inch
Length incl. fittings [L] 20.4 km
Outer Diameter [OD] 406.4 mm
Inner Diameter [ID] 393.7 mm
Wall Thickness [WT] 6.35 mm
Construction Material (MOC) Carbon Steel
MOC Density [] 7,850 kg/m3
Downstream Pipeline PSL 1 X 65
Size 16 Inch
Length incl. fittings [L] 30.6 Km
Outer Diameter [OD] 406.4 mm
Inner Diameter [ID] 392.1 mm
Wall Thickness [WT] 7.14 mm
Construction Material (MOC) Carbon Steel
MOC Density [] 7,850 kg/m3
Booster Compressor
Absorbed Power 2,097 kW
Margin on Absorbed Power 20 %
Installed Capacity [P] 2,517 kW
The production profile is as follows,
Figure 1. Production Profile at Processing Facility
The associated costs are as follows,
2. Page 2 of 11
Table 2. Associated Pipeline Construction Costs
Parameter Description
Total Material Costs [CostPMC] $700/ tonne
Coating & Wrapping [CostPCW] $15/m
Labour Costs [CostLC] $50/m
Install. Cost per inch-km [CostPIC] $11,926/in.km
The pipeline installation cost per inch-dia-km
is taken by fitting the typical installation cost
data from Table 10.1, page 332 of Ref [1] as,
𝑃𝐼𝐶 [$] = −2.103𝐷2
3
+ 153.39𝐷2
2
− 2883.42𝐷2 +
26606.36 (1)
Table 3. Associated Station Construction Costs [2]
Parameter Description
Station Material Cost [SMC] $2,877/hP
Station Labour Cost [SLC] $916/hP
Station Misc Cost [SMiC] $367/hP
Station Land Cost [SLaC] $13/hP
The station material costs is taken as, Ref [2],
𝑆𝑀𝐶 [$/ℎ𝑃] = 13035 × 𝑃−0.186
(2)
The station labour costs is taken as, Ref [2],
𝑆𝐿𝐶 [$/ℎ𝑃] = 2274.4 × 𝑃−0.112
(3)
The sales gas tariff allowed for the gas
pipeline project is $2/Mscf. The sales tax rate
[Tsale] on the sold gas is 35% and the effective
corporate tax [TC] is 30%. The Booster station
consists of a gas turbine driven centrifugal
compressor (Single GT/CC). In case of other
configurations, the installed cost can be taken
as a factor of Single GT/CC configuration as,
Table 4. Associated Station Construction Costs
Parameter Comparison Factor
Single GT/CC 1.00
Multiple GT/CC 1.29
EM/High Speed RC 1.30
High Speed Engine/RC 1.32
Slow Speed Engine/RC 1.54
Cost Estimation Aspects & Assumptions
1. The weight average capital cost (WACC)
comprises of a firm’s cost of capital in
which each category of capital is
proportionately weighed. All sources of
capital, including common stock &
preferred stock, bonds & any other long-
term debt, are included in a WACC
calculation. For the following tutorial, the
cost of equity [ke] & cost of debt [kd], (Sum
of which is the cost of capital), expressed
as a percentage for the pipeline proposal
are included to estimate the WACC.
2. The revenue generated comes from the gas
tariffs delivered to the power station.
Capital is necessary to initiate a project for
which some of the capital can come from
private equity (where investors lend for
the project) and debt, where the money is
borrowed from an institution (e.g., bank).
3. In order to set the minimum gas tariff &
pay for the equity, lenders/investors or
financial institutions impose a hurdle rate
or minimum acceptable rate of return
(MARR) (i.e., rate at which NPV = 0 at IRR =
WACC) to offset the cost of the investment
(i.e., break-even). Generally the hurdle rate
is equal to the company’s cost of capital. In
the current tutorial cost of capital is taken
as a weighted average, the WACC becomes
the hurdle rate i.e., at IRR = WACC.
4. The internal rate of return (IRR) is the
expected annual cash flows, (expressed as
a percentage) that the investment can be
expected to produce over and above the
hurdle rate. Therefore for a project’s
acceptability, IRR > MARR.
5. The prime lending rate [r] is the rate
imposed by the bank to service the project.
The average risk free interest rate [rf]
represents the rate of return where there
is no risk of defaulting/loss. This can be the
3. Page 3 of 11
interest offered as government/treasury
bonds. In actual practice, inflation is
deducted from the interest rate to get a
real risk free interest rate.
6. The expected market portfolio return [rm]
is a measure of the expected returns on the
investments made. This is however
correlated to market risks that is
quantified by the beta [] ratio and is
useful in determining the volatility when
arriving at the equity costs using CAPM.
<1 indicates that the security issued by
the lender providing the equity, is less
volatile (i.e., less risky) than the systematic
market risks. Whereas a >1 indicates that
the security issued by the lender is more
volatile (i.e., more risky) than the
systematic market risks. For this tutorial,
of 0.9 is taken assuming the venture is by
an established firm with a history of low
volatility. In actual practice, low values
need not necessarily show lower volatility
if the security’s value changes minimally in
the short run but indicates a downward
trend in the long run. Therefore the
estimation of requires historical data to
arrive at a suitable value.
7. The term [rm – rf] is expressed as the equity
risk premium which indicates the
additional compensation for the risk taken
by the investors/institutions towards
providing equity. When multiplied by the
value, it accounts for the responsiveness of
the venture to market changes. With
higher value, the gains/return on
investment risks is higher. Similarly, with
lower value, the return on the investment
risks is lower.
8. Assets over time depreciate in value due to
wear and tear. Two methods used to
depreciate an asset are the straight line
depreciation method and declining balance
depreciation method. In the straight line
method, the depreciation rate is
considered to be annually uniform, where
the total life of the asset is divided by the
operational years. Whereas in declining
balance method, the asset is considered to
lose more value in the early years and less
in later years of operation. For this tutorial,
a straight line depreciation method is
applied for the stipulated period of 25
years. It must be noted that the salvage
value at the end of the operational period
becomes zero. However the asset is
considered to have a salvage value which is
estimated at a depreciation rate of 10% for
this exercise.
9. Depreciation also relates to taxable
income, since the annual depreciation cost
is neglected from the annual gross tax on
revenue. Annual Cash flow is estimated by
addition of the annual tax benefit from
depreciation [ATBD] to the net annual
revenue [NAR] before subtracting from the
annual gross tax on revenue [AGTR] (i.e.,
Net Annual revenue – Annual Gross Tax on
Revenue + Annual Tax Benefit from
Depreciation). It may be noted that when
companies tend to depreciate the asset
value more, the tax payable decreases and
increases the annual savings from
depreciation.
10. The profit to Investment ratio (PIR) is a
measure of investment efficiency. It is
estimated as the ratio of NPV to the
discounted capital costs (Disc. CAPEX). For
a project to be viable, the PIR > 1.
11. The key differences between using NPV,
IRR & PIR is that NPV and PIR measure a
project value, while PIR allows screening a
project against a company benchmark. For
project to be viable, NPV>0, PIR>1 and
IRR>WACC. The IRR value indicates the
returns possible above which break even
cannot be achieved and NPV<0.
4. Page 4 of 11
CAPEX Estimation
To estimate CAPEX, the pipeline and booster
station tonnage and installed power is
required to be estimated. The pipeline
tonnage is estimated as,
𝑃𝑖𝑝𝑒 𝑇𝑜𝑛𝑛𝑎𝑔𝑒 [𝑡𝑜𝑛𝑛𝑒𝑠] =
𝜋×𝐿×𝜌
4×1000
[𝑂𝐷2
− 𝐼𝐷2] (4)
𝑃𝑀𝐶 [$] = 𝐶𝑜𝑠𝑡 𝑃𝑀𝐶 × 𝑃𝑖𝑝𝑒 𝑇𝑜𝑛𝑛𝑎𝑔𝑒 (5)
𝑃𝐶𝑊 [$] = 𝐶𝑜𝑠𝑡 𝑃𝐶𝑊 × 𝑃𝑖𝑝𝑒 𝑇𝑜𝑛𝑛𝑎𝑔𝑒 (6)
𝐿𝐶 [$] = 𝐶𝑜𝑠𝑡 𝐿𝐶 × 𝑃𝑖𝑝𝑒 𝑇𝑜𝑛𝑛𝑎𝑔𝑒 (7)
𝑃𝐼𝐶 [$] = 𝐶𝑜𝑠𝑡 𝑃𝐼𝐶 × 𝑃𝑖𝑝𝑒 𝑇𝑜𝑛𝑛𝑎𝑔𝑒 (8)
The total pipeline [PC] cost becomes,
𝑃𝐶 [$] = 𝑃𝑀𝐶 + 𝑃𝐶𝑊 + 𝐿𝐶 + 𝑃𝐼𝐶 (9)
The Station Compressor cost is estimated as,
𝑆𝐶[$] = 𝑆𝑀𝐶 + 𝑆𝐿𝐶 + 𝑆𝑀𝑖𝐶 + 𝑆𝐿𝑎𝐶 (10)
Total Cost of Booster Station based on
Comparison factor [Cf] for various GT/CC,
𝑇𝑜𝑡𝑎𝑙 𝑆𝐶[$] = 𝑆𝐶 × 𝐶𝑓 (11)
The other machinery costs [OMC] including
mainline valve stations [MVS], meter stations
[MS] & pressure regulator stations [PRS] can be
computed by accounting them as a percentage of
the pipeline costs as,
𝑀𝑉𝑆[$] = 𝑃𝐶 × %𝑓𝑎𝑐𝑡𝑜𝑟 (12)
𝑀𝑆[$] = 𝑃𝐶 × %𝑓𝑎𝑐𝑡𝑜𝑟 (13)
𝑃𝑅𝑆[$] = 𝑃𝐶 × %𝑓𝑎𝑐𝑡𝑜𝑟 (14)
For SCADA & Telecommunications, the cost is
taken as a percentage of pipeline & station,
𝑆&𝑇[$] = [𝑃𝐶 + 𝑆𝐶] × %𝑓𝑎𝑐𝑡𝑜𝑟 (15)
The total machinery costs are calculated as,
𝑂𝑀𝐶[$] = 𝑀𝑉𝑆 + 𝑀𝑆 + 𝑃𝑅𝑆 + 𝑆&𝑇 (16)
The project costs involving environmental
costs & permits [ECP], Right of Way
Acquisition [ROWA], Engineering &
Construction Management [ECM],
Contingency [Con] is estimated similarly as,
ECP[$] = [ 𝑃𝐶 + 𝑆𝐶] × %𝑓𝑎𝑐𝑡𝑜𝑟 (17)
ROWA[$] = [ 𝑃𝐶 + 𝑆𝐶] × %𝑓𝑎𝑐𝑡𝑜𝑟 (18)
ECM[$] = [ 𝑃𝐶 + 𝑆𝐶] × %𝑓𝑎𝑐𝑡𝑜𝑟 (19)
Con[$] = [ 𝑃𝐶 + 𝑆𝐶] × %𝑓𝑎𝑐𝑡𝑜𝑟 (20)
The total project costs are calculated as,
𝑃𝑟𝑜𝑗𝑒𝑐𝑡[$] = 𝐸𝐶𝑃 + 𝑅𝑂𝑊𝐴 + 𝐸𝐶𝑀 + 𝐶𝑜𝑛 (21)
In addition to the pipeline costs, total station
costs, other machinery costs & project costs, a
working capital [WC] & AFUDC is included.
AFUDC which stands for “Allowance for funds
used during construction” represents costs
associated with financing the project during
various stages of construction.
Total Capex is now calculated as,
𝐶𝐴𝑃𝐸𝑋[$] = 𝑃𝐶 + 𝑇𝑜𝑡𝑎𝑙 𝑆𝐶 + 𝑂𝑀𝐶 + 𝑃𝑟𝑜𝑗𝑒𝑐𝑡 +
𝑊𝐶 + 𝐴𝐹𝑈𝐷𝐶 (22)
OPEX Estimation
To estimate annual OPEX, the basis is made
on the annual salaries payable [S] and
multiplying the annual salary by a %factor in
this tutorial.
Salary[$] = 𝑆 (23)
Payroll[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (24)
Administrative Expenses[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (25)
Vehicle Expenses[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (26)
Office Expenses[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (27)
Misc Materials & Tools[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (28)
Similarly the related costs for compressor
station maintenance is estimated as,
Consumables[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (29)
Periodic Maintenance[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (30)
ROW Payments[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (31)
Utilities[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (32)
Gas Control[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (33)
SCADA Maintenance[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (34)
Corrosion Inspection[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (35)
Cathodic Protect. Survey[$] = 𝑆 × %𝑓𝑎𝑐𝑡𝑜𝑟 (36)
The Total O&M [OPEX] is computed as,
𝑂𝑃𝐸𝑋[$] = 𝑆 + 𝐸𝑞. 23 + ⋯ + 𝐸𝑞. 36 (37)
5. Page 5 of 11
CAPEX & OPEX Cost Factors
Mainline Valve Stations
Block Valves on mainlines are installed to
isolate pipeline sections for safety &
maintenance such as blow down. In case of
any pipeline rupture, block valves close to
isolate the pipeline section and shut-off flow.
For mainline valve stations a lump sum figure
may be obtained from a construction
contractor based on the size.
Meter & Pressure Regulating Stations
Meter Stations are installed for the purpose of
measuring gas flow rates. Similar to mainline
valve stations, a lump sum can be quoted for a
given size that includes meters, valves,
fittings, instrumentation & controls. Pressure
regulation stations are installed for the
purpose of reducing gas delivery pressure
prior to delivering to the buyer. The price can
be quoted as a lump sum figure.
SCADA & Telecommunications
SCADA allows pipeline process conditions
data to be transmitted by electronic signals
from remote control units installed on valves
& meters. The signal transmission can be
either by telephone lines, microwave or
satellite communications. The pricing of these
provisions can be expressed as a percentage
of the total project cost, typically 2% to 5%.
Environmental Costs & Permits
Costs associated with environment and
permits pertain to the modification of
pipeline and booster station to prevent
pollution. The costs also include
compensation for acquisition of land to
compensate for the areas disturbed due to
pipeline construction. Permitting costs also
include environmental study, environmental
impact report and permits for rail road,
stream & river crossings. These costs for a gas
pipeline project can vary from 10% to 15% of
the total project costs.
Right of Way (ROW) Acquisitions
Right of Way Acquisitions can be applied from
private and government entities. The fee may
be lump sum based at the time of acquisition,
with additional fees paid on an annual basis.
The initial cost for acquiring the ROW will be
included in the capital cost, whereas annual
ROW lease would be included as an O&M cost.
For most gas pipelines, the initial ROW would
be typically in the range of 6% to 10%.
Engineering & Construction Management
E&C management costs are associated with
preparing design documents & drawings at
both front end & detailed design phases.
Details would also include specifications,
operating manuals, purchase documents &
equipment acquisition. Construction
management costs would also include costs
for field personal, transportation, rentals & all
associated costs to manage the pipeline
construction efforts. Engineering &
Construction costs can typically vary from
15% to 20% of total project costs.
Other Project Costs
As the pipeline project progresses, it is
expected that there could always be some
unforeseen issues during project execution.
To account for these uncertainties,
contingencies & allowances for funds used
during construction (AFDU) are also allotted.
These costs can vary from 15% to 20% of the
total project costs.
Salvage & Depreciation Costs
Pipeline infrastructures experience wear and
tear thereby rendering depreciation to the
project value. The salvage value [SV] based on
the depreciation rate over the operational life
of the project is computed as,
𝑆𝑉[$] = [𝑃𝐶 + 𝑆𝐶 + 𝑂𝑀𝐶 + 𝑅𝑂𝑊𝐴] × [1 − 𝑑 𝑟] 𝑛
(38)
Where, n = Project Operational Life [Years]
6. Page 6 of 11
The pipeline salvage deduction [SD] is
computed as the difference between the
Salvage value [SV] & the initial investment
cost i.e., [PC+SC+OMC+ROWA]. Therefore the
salvage costs is as follows,
SD[$] = [𝑃𝐶 + 𝑆𝐶 + 𝑂𝑀𝐶 + 𝑅𝑂𝑊𝐴] − 𝑆𝑉 (39)
Annual depreciation of the Asset [ADA]
ADA[$] = 𝑆𝐷 𝑛⁄ (40)
Annual Tax Benefit from Depreciation [ATBD]
ATBD[$] = 𝐴𝐷𝐴 × 𝑇𝑠𝑎𝑙𝑒 (41)
Cost of Capital
Based on the cost of capital structure of the
project (that involves both debt & equity), the
appraisal is made using the Weight average
Cost of Capital [WACC] from which all the
cash flows generated will be discounted to
arrive at the Net Present Value [NPV]. WACC
can be expressed as
WACC[%] =
𝐸
𝐶
𝑘 𝑒 +
𝐷
𝐶
𝑘 𝑑 (42)
Where, C = E +D
The cost of debt [kd] is taken as after-tax cost
of debt and the cost of equity [ke] is based on
CAPM. The cost of debt is estimated as
𝑘 𝑑[%] = 𝑟 × [1 − 𝑇𝐶] (43)
The cost of equity is estimated as,
𝑘 𝑒[%] = 𝑟𝑓 + [𝛽 × [𝑟 𝑚 − 𝑟𝑓]] (44)
The loan annual amortization cost [AAC] is
computed as,
AAC[$] =
[𝐷×𝐶𝐴𝑃𝐸𝑋]×𝑟
1−[
1
1+𝑟
]
𝑛 (45)
where, n=Loan period during project life [Yrs]
The Annual Revenue on Equity Capital
[AREC] adjusted to effective corporate tax
rate [TC] is,
AREC[$] =
𝐸×𝑘 𝑒
1−𝑇𝑐
(46)
Gas Tariff & Economic Viability
The minimum gas tariff required for
economic viability is estimated based on the
total cost of capital for an NPV = 0 at IRR =
WACC and yearly gas production. The pipeline
operational availability is 8,040 hours/year.
Therefore, the yearly gas production is,
Gas Rate[𝑀𝑠𝑐𝑓] =
1000×𝑄 𝑀𝑀𝑠𝑐𝑓𝑑
24
× 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑖𝑙𝑖𝑡𝑦[ℎ𝑟]
(47)
The Annual cost of service [ACOS] is
computed as,
ACOS[$] = 𝑂𝑃𝐸𝑋 + 𝐴𝐴𝐶 + 𝐴𝑅𝐸𝐶 + 𝐴𝐷𝐴 (48)
The Gas Transportation Tariff is estimated as,
Tariff 𝑇𝑟𝑎𝑛𝑠[$/𝑀𝑠𝑐𝑓] =
𝐴𝐶𝑂𝑆[$]
𝐺𝑎𝑠 𝑅𝑎𝑡𝑒[𝑀𝑆𝑐𝑓]
(49)
Setting an initial guess sales tariff [MinTariff],
the Net Annual Cash Flow [CF] is calculated
for the condition NPV=0 and IRR=WACC. The
Annual Revenue [AR] without tax is found as,
AR[$] = 𝑀𝑖𝑛 𝑇𝑎𝑟𝑖𝑓𝑓 × 𝐺𝑎𝑠 𝑅𝑎𝑡𝑒[𝑀𝑠𝑐𝑓] (50)
The Net Annual Revenue [NAR] becomes,
NAR[$] = 𝐴𝑅 − 𝐴𝐶𝑂𝑆 (51)
The Annual Gross Tax on Revenue [AGTR] is,
AGTR[$] = 𝑁𝐴𝑅 × 𝑇𝑠𝑎𝑙𝑒𝑠 (52)
The Tax Payable is calculated as,
Tax Payable[$] = AGTR − ADA (53)
The Annual Cash Flow [ACF] is calculated as,
CF[$] = NAR − AGTR + ATBD (54)
The Net Present Value (NPV) is calculated as,
NPV[$] = {∑ [ 𝐶𝐹] 𝑛[1 + 𝑖]−𝑛𝑛=𝑛
𝑛=1 } − 𝐶𝐴𝑃𝐸𝑋
(55)
Where,
n = Operational Life [years]
i = Internal Rate of Return (IRR) at WACC
In MS-Excel, the NPV can be calculated as,
= (𝑁𝑃𝑉(𝑊𝐴𝐶𝐶, 𝐶𝐹1: 𝐶𝐹𝑛)) − 𝐶𝐴𝑃𝐸𝑋 (56)
7. Page 7 of 11
Similarly in MS-Excel, the Internal Rate of
Return (IRR) can be calculated as,
= 𝐼𝑅𝑅(𝐶𝐹1: 𝐶𝐹𝑛) (57)
To calculate the “MinTariff” at NPV=0 and
IRR=WACC, an MS-Excel Macro is written as,
Sub salestariff()
Range("NPV").GoalSeek Goal:=0.000001,
ChangingCell:=Range("MinTariff")
End Sub
The Profit to Investment Ratio (PIR) is then
calculated based on the discounted cash flow
[DCF] as follows,
PIR[−] =
𝐶𝑎𝑠ℎ 𝑂𝑢𝑡𝑓𝑙𝑜𝑤
𝐶𝑎𝑠ℎ 𝐼𝑛𝑓𝑙𝑜𝑤
=
[ 𝐶𝐹] 𝑛[1+𝑖]−𝑛
𝑁𝑃𝑉
(58)
In the above PIR expression, after the
discount factor [1+i]-n is applied to each year,
the negative cash flow, i.e., cash outflow of
each year is summed up and divided by the
NPV value. At NPV=0 and WACC=IRR, PIR=0.
Calculations & Results
Based on the estimation methods, the
following results are arrived at,
Table 5. Pipeline & Booster Station Costs
Description % Cost
Upstream Pipeline
Total Material Costs 15% $894,614
Coating & Wrapping 5% $306,000
Labour Costs 17% $1,020,000
Install. Cost per inch-km 64% $3,892,719
Sub-Total - $6,113,333
Downstream Pipeline
Total Material Costs 16% $1,505,351
Coating & Wrapping 5% $459,000
Labour Costs 16% $1,530,000
Install. Cost per inch-km 63% $5,839,078
Sub-Total - $9,333,429
Total Pipeline Costs - $15,446,761
Booster Compressor Station
Station Material Cost 69% $9,705,175
Station Labour Cost 22% $3,089,159
Station Misc Cost 9% $1,238,196
Station Land Cost 0.3% $43,860
Sub-Total - $14,076,390
Total [Incl. Installed
Cost Comparison]
1.00 $14,076,390
Other Machinery Costs
Mainline Valve Stations 0.5% $77,234
Meter Stations 0.5% $77,234
Pressure Regulator
Stations
0.1% $15,447
SCADA & Telecomm 5.0% $1,476,158
Total - $1,646,072
Project Costs
Environmental Costs &
Permits
15.0% $4,428,473
Right of Way (ROW)
Acquisition
10.0% $2,952,315
Engineering &
Construction
Management
15.0% $4,428,473
Contingency 10.0% $2,952,315
Total - $14,761,576
Working Capital [WC] - $5,000,000
AFUDC 20.0% $5,904,630
TOTAL CAPEX - $56,835,429
The Total O&M [OPEX] Costs estimated are as
follows,
Table 6. Total O&M Costs
Description % Cost
Salaries - $1,000,000
Payroll Overhead 20.0% $200,000
Administrative Expenses 50.0% $500,000
Vehicle Expenses 8.0% $80,000
Office Expenses 10.0% $100,000
Misc Materials & Tools 10.0% $100,000
8. Page 8 of 11
Compressor Station Maintenance
Consumable Materials 6.0% $60,000
Periodic Maintenance 18.0% $180,000
ROW Payments 40.0% $400,000
Utilities 18.0% $180,000
Gas Control 12.0% $120,000
SCADA Maintenance 25.0% $250,000
Internal Corrosion
Inspection
30.0% $300,000
Cathodic Protection
Survey
12.0% $120,000
TOTAL O&M COSTS - $3,590,000
Salvage Costs
The Salvage Costs estimated are as follows,
𝑆𝑉[$] = [15,446,761 + 14,076,390 + 1,646,072 +
2,952,315] × [1 − 0.08]25
= $4,243,501 (59)
The pipeline salvage deduction is,
𝑆𝐷[$] = [15,446,761 + 14,076,390 + 1,646,072 +
2,952,315] − 4,243,501 = $29,878,037 (60)
The Annual depreciation of the asset is,
𝐴𝐷𝐴[$] = $29,878,037 25⁄ = $1,195,121 (61)
The Annual Tax benefit from depreciation is,
ATBD[$] = 1,195,121 × 0.35 = $418,293 (62)
Cost of Capital
The cost of debt is first estimated as,
𝑘 𝑑[%] = 0.17 × [1 − 0.3] = 11.90% (63)
The cost of equity is estimated as,
𝑘 𝑒[%] = 0.17 + [0.9 × [0.24 − 0.17]] = 23.3% (64)
The weighted average capital cost [WACC] is,
WACC[%] = 0.4 × 23.3 + 0.6 × 11.9 = 16.46% (65)
Loan Amortization Costs
The loan annual amortization cost [AAC] is
computed as,
AAC =
[0.6×56,835,429]×0.17
1−[
1
1+0.17
]
25 = $5,913,957 (66)
The Annual Revenue on Equity Capital is,
AREC =
0.4×56,835,429×0.233
1−0.3
= $7,567,231 (67)
Gas Tariff, NPV, IRR & PIR Estimates
Taking the annual availability of 8,040 hours,
the yearly gas production is as follows for
Year 7. It is to be noted calculations are
shown for a set of sample data.
Gas Rate =
1000×122.3
24
× 8,040 = 40,981,711𝑀𝑆𝑐𝑓 (68)
The Annual O&M Costs considering inflation is,
Annual O&M = $3,590,000 × 1.027−1
= $4,042,923
(69)
The Annual Cost of Service [ACOS] is,
ACOS[$] = 4,042,923 + 5,913,957 + 7,567,231 +
1,195,121 = $18,719,233 (70)
The Gas Transportation Tariff is estimated as,
Tariff 𝑇𝑟𝑎𝑛𝑠 =
18,719,233
40,981,711
= $0.4568/𝑀𝑠𝑐𝑓 (71)
With a guess value of $0.998/Mscf as
minimum gas tariff, the Annual Revenue
without tax rate included is,
AR = 0.998 × 40,981,711 = $40,894,302 (72)
The Net Annual Revenue [NAR] becomes,
NAR = 40,894,302 − 18,719,233 = $22,175,069 (73)
The Annual Gross Tax on Revenue [AGTR] is,
AGTR = 22,175,069 × 1.35 = $7,761,274 (74)
The Tax Payable is calculated as,
Tax Payable = 7,761,274 − 1,195,121 = $6,566,153
(75)
The Annual Cash Flow [ACF] for Year 7 is
calculated as,
CF[$] = 22,175,069 − 7,761,274 + 418,293 =
$14,832,087 (76)
Upon calculating CF for all years, using MS-
Excel for NPV=0, IRR is calculated as 16.46%.
The Discounted Cash Flow [DCF] at
IRR=WACC is,
DCF = 14,832,087 × [1 + 0.1646]−7
= $5,104,636
(77)
9. Page 9 of 11
With the calculations performed for NPV=0 at
IRR=WACC, the minimum sales gas tariff
comes to $0.998/Mscf or, ~ $1/Mscf [Refer to
Appendix A] and PIR is 0.
For end of operational life [Year 25], the
salvage value of the asset is treated as part of
the Annual Revenue [AR]; therefore the cost
estimation for Year 25 alone changes to,
AR 𝑌𝑒𝑎𝑟 25[$] = [𝑀𝑖𝑛 𝑇𝑎𝑟𝑖𝑓𝑓 × 𝐺𝑎𝑠 𝑅𝑎𝑡𝑒[𝑀𝑠𝑐𝑓]] + 𝑆𝑉
(78)
The calculations are similarly repeated for
Sales Tariff rate of $2/Mscf to check for NPV,
IRR, PIR and estimate payback period. The
results are as follows,
Table 7. Economic Analysis for $2/Mscf
Description Cost
Total Annual Cash Flow $664,457,040
Net Present Value [NPV] $127,053,012
IRR 45.80%
PIR 2.24
Payback Period
With detailed NPV calculations [Refer to
Appendix A], the payback period for $2/Mscf
can be computed as,
Payback Period =
𝐶𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 𝐶𝑎𝑠ℎ 𝐹𝐿𝑜𝑤
𝑇𝑜𝑡𝑎𝑙 𝐶𝐴𝑃𝐸𝑋
(79)
Payback Period =
664,457,040
56,835,429
= 4.212 𝑌𝑟𝑠 (80)
The same can be estimated graphically as
follows,
Figure 2. Payback Period – Gas Tariff at $2/Mscf
References
1. “Gas Pipeline Hydraulics”, E. Sashi Menon,
2005, Taylor & Francis
2. “Pipeline Compressor Station Construction
Cost Analysis”, Y. Zhao, Z. Rui, Int J. Oil, Gas
and Technology, Vol. 8No. 1, 2014
(https://www.researchgate.net/publicatio
n/275590240)
3. “Economic Analysis of Gas Pipeline Project
in Nigeria”, Ahmed Adamu, Journal of
Economics and Sustainable Development,
Vol.8, No.2, 2017