You need to estimate the cost of a new feed pre-heater furnace, with a firing rate of 80 MW. Your company bought a similar furnace for 2.3 million USD in 2014 with a firing rate of 40 MW. If the CE PCI is now 580, and the scaling exponent is 0.8, what is the expected cost of the new furnace? Use a simple exponential scaling rule to estimate the cost.

Q1:

You need to estimate the cost of a new feed pre-heater furnace, with a firing rate of 80 MW. Your company bought a similar furnace for 2.3 million USD in 2014 with a firing rate of 40 MW. If the CE PCI is now 580, and the scaling exponent is 0.8, what is the expected cost of the new furnace? Use a simple exponential scaling rule to estimate the cost.

Q2:

Estimate the cost of a Hastelloy^TM C, vertical, flash drum with the following basis:

• Tangent-to-tangent height of twelve feet
• Diameter of six feet
• 2:1 elliptical heads
• Wall thickness throughout the vessel of 0.5-inches
• Add 10 % to the vessel mass for internals and nozzles
• Use a density for Hastelloy C of 0.321 lb/in³
• Use a CE PCI of 585 to bring the estimate to the current date

To estimate the vessel cost at the fabricators gate, use Table 7.2 in Towler & Sinnott. Add 50 USD/T for freight to the project site.

Use the factors from slides 15 and 16 in 10-Cost Estimation to estimate the total installed cost of the drum if installed in a fluid processing plant.

The surface area (A) of a 2:1 elliptical head is A = 1.084D², where D is the diameter.

Q3:

Owl Exploration is preparing to bid on an offshore oil lease. Owl believes that its competitor, Cougar Oil, will also bid on the lease. Owl’s bid team believes that Cougar will bid between 50 MUSD and 100 MUSD. They assess the probability of a 50 MUSD bid at 60 % and the probability of a 100 MUSD bid at 40 %.

Based on available seismic data, Owl’s exploration team defined three approximate outcome scenarios:

• Large find       – valued at 1 billion USD   – 10 % probability
• Average find   – valued at 100 MUSD      – 40 % probability
• Dry hole.         – valued at –80 MUSD      – 50 % probability

Owl thinks they need to bid at least 70 MUSD to be in the running and can’t afford to bid more than 150 MUSD based on their free cash flow.

1. Develop a decision tree in PrecisionTree to determine if Owl should make the low or the high bid.
2. All other things being equal, should Owl change its bid if new data arrives indicating that the probability of a large find is 20 % and the probability of an average find is 30 %.
3. All other things being equal, should Owl change its bid if their management gets nervous and believes Cougar might bid as high as 120 MUSD?