Cost estimation and energy price forecasts for economic evaluation of retrofit projects

A cost estimate can have a major impact both on project profitability and influences the technical solution. This leads to a commitment of substantial amounts of money and manpower over an extended time. Various methods often provide different results. These differences can be rather significant towards the real cost of a project and selection of the right arrangements. It is therefore important to use a proper estimate that generates enough confidence to choose the right alternative. Another source of uncertainty during the economic analysis of design and retrofit projects is the future energy price value as part of operating costs. This value can significantly affect the project viability and profitability. This paper gives a summary of the most common methods used for cost estimation of heat exchange equipment in the process industry and the sources of energy price projections. It shows the relevance of the choice of the right method and the most reliable source of energy price forecast used when choosing between alternative retrofit projects or when trying to determine the viability of a retrofit project. Ten methods for heat exchanger costing procedure are considered. Oil, natural gas and electricity price projection figures published in reports of nine established analytical centres are discussed. Web sites of institutions and companies are also included.