• Warehouse and spare parts inventory
Any spare items kept in storage on a regular basis are included as part of the
working capital. Excluded are items ordered and kept in storage on a short-term
temporary basis until installed. Typical working capital items would be spare
loads of adsorbents or catalysts and spare parts such as compressor rotors, rotary
valve gaskets, replacement pumps, etc. Since a detailed inventory of spare parts
is not usually available for a preliminary economic analysis, it is common
practice to assume that the total amounts to, say, 2 % or 3 % of the erected
cost within battery limits.
Subtractive items
Accounts payable
Typically assumed as 1 month’s worth of raw materials and other consumables at
delivered prices
Cost of Production
The concepts usually included as part of the cost of production summary were
itemized in the opening section. Essentially, they were grouped under five major
sections:
• Variable costs
– Materials
– Utilities
• Operating costs
• Operating expenses
• Capital items
• Taxes
Variable Costs
Variable costs are those that can be directly associated with the production process
as concerns the consumption of materials and services or utilities. A characteristic
of variable costs is that they are roughly proportional to the amounts produced.
Thus, if the total annual production were to increase by, say, 20 %, the annual
variable costs would be expected to also increase by roughly 20 % (any differences
would be due to changes in production efficiencies only) so as to maintain a
uniform variable cost of production per unit item. Typical variable costs of
production are:
• Raw materials costs
• Catalysts and chemicals
• Utility requirements
In general, any other consumables expended in the production process.
Petroleum Refinery Planning and Economics
751
Any spare items kept in storage on a regular basis are included as part of the
working capital. Excluded are items ordered and kept in storage on a short-term
temporary basis until installed. Typical working capital items would be spare
loads of adsorbents or catalysts and spare parts such as compressor rotors, rotary
valve gaskets, replacement pumps, etc. Since a detailed inventory of spare parts
is not usually available for a preliminary economic analysis, it is common
practice to assume that the total amounts to, say, 2 % or 3 % of the erected
cost within battery limits.
Subtractive items
Accounts payable
Typically assumed as 1 month’s worth of raw materials and other consumables at
delivered prices
Cost of Production
The concepts usually included as part of the cost of production summary were
itemized in the opening section. Essentially, they were grouped under five major
sections:
• Variable costs
– Materials
– Utilities
• Operating costs
• Operating expenses
• Capital items
• Taxes
Variable Costs
Variable costs are those that can be directly associated with the production process
as concerns the consumption of materials and services or utilities. A characteristic
of variable costs is that they are roughly proportional to the amounts produced.
Thus, if the total annual production were to increase by, say, 20 %, the annual
variable costs would be expected to also increase by roughly 20 % (any differences
would be due to changes in production efficiencies only) so as to maintain a
uniform variable cost of production per unit item. Typical variable costs of
production are:
• Raw materials costs
• Catalysts and chemicals
• Utility requirements
In general, any other consumables expended in the production process.
Petroleum Refinery Planning and Economics
751