Utilities
Utility requirements
Operating costs
Labor
Maintenance
Operating expenses
Plant insurance
Property taxes
Direct overhead
General plant overhead
Sales and administration (often accounted for as overhead)
Capital items
Depreciation
Amortization
Interest on capital
Interest on working capital
Taxes
(only if the analysis is to consider tax effects)
The following is an itemized summary of each section.
The final section of an economic analysis, instantaneous or over time, may be
referred to as “reporting parameters.” In this section, the project performance is
measured by using some commonly acceptable yardsticks: return on investment
(ROI), payback or payout time, internal rate of return (IRR), discounted cash flow
rate of return (DCFRR), etc. They will be discussed in more detail later.
Capital Items
The first part of an economic analysis requires an exposition of the capital items.
This includes those items that can be either depreciated, amortized, or that enter
indirectly in the cost of production through either a long-term or a short-term
interest charge. Typical entries are:
• Erected plant cost
• Erected offsites cost
• Interest during construction
• Royalties
• Catalyst and metals inventory
• Working capital
Erected Plant Cost
By erected plant cost, we mean the estimated cost of construction inclusive of
materials, equipment, and labor plus design, engineering, and contractor’s fees
within battery limits as usually provided by cost estimating [estimated erected
cost or EEC]. It is usually assumed that all the elements included within battery
limits qualify for the same depreciation rate; this need not be the case in real life.
Petroleum Refinery Planning and Economics
747
Utility requirements
Operating costs
Labor
Maintenance
Operating expenses
Plant insurance
Property taxes
Direct overhead
General plant overhead
Sales and administration (often accounted for as overhead)
Capital items
Depreciation
Amortization
Interest on capital
Interest on working capital
Taxes
(only if the analysis is to consider tax effects)
The following is an itemized summary of each section.
The final section of an economic analysis, instantaneous or over time, may be
referred to as “reporting parameters.” In this section, the project performance is
measured by using some commonly acceptable yardsticks: return on investment
(ROI), payback or payout time, internal rate of return (IRR), discounted cash flow
rate of return (DCFRR), etc. They will be discussed in more detail later.
Capital Items
The first part of an economic analysis requires an exposition of the capital items.
This includes those items that can be either depreciated, amortized, or that enter
indirectly in the cost of production through either a long-term or a short-term
interest charge. Typical entries are:
• Erected plant cost
• Erected offsites cost
• Interest during construction
• Royalties
• Catalyst and metals inventory
• Working capital
Erected Plant Cost
By erected plant cost, we mean the estimated cost of construction inclusive of
materials, equipment, and labor plus design, engineering, and contractor’s fees
within battery limits as usually provided by cost estimating [estimated erected
cost or EEC]. It is usually assumed that all the elements included within battery
limits qualify for the same depreciation rate; this need not be the case in real life.
Petroleum Refinery Planning and Economics
747