Saturday, April 25, 2009

Costing of Pipelines - 1

1. Introduction

• The selection of the optimal pipeline route, diameter, material, wall thickness, pump station location, pump units and operational equipment or facilities is typically the result of economic analysis and investment capital evaluation of the most reasonable scenarios developed through
the design phase.

• Typically, even before the detailed design of a pipeline system has begun, an order-of-magnitude cost study will be performed, with the goal of determining the feasibility of continuing to invest time and capital in the design phase of the project.

• For a typical cross country pipeline project, the cost of pipe and its
associated construction and installation costs can be as much as 80% of
the capital investment , therefore , the selection of the pipe, with regard
to the type of material, size etc. is very important.

• A piping works engineer requires not only wide engineering knowledge
– not necessarily in depth , but certainly an understanding but he must
also have an understanding of engineering economics, costs of
metallurgical, methods of pipe fabrication, erection and sufficient
knowledge of mechanical, civil, electrical and instrumentation
engineering to discuss the requirements.

2. Direct and Indirect Costs Associated with Piping

• The direct cost of piping is related to the purchase and installation of
piping along with accessories. i.e. it deals with raw materials, labour,
energy etc.

• Indirect cost includes:

• Design and engineering cost, which cover the cost of design and cost of
“engineering” of the piping system, purchasing, procurement and
construction supervision.

• Contractor‘s fees (Technology Fee)

• Contingency allowance, this is an allowance to cover for unforeseen
circumstances ( labour disputes, design errors etc.).

3. Economic Evaluation of the Piping System

• As the purpose of investing money in modern piping system is to earn
money, some means of comparing the economic performance of piping
is needed.

• For a small piping system , and for simple choices between alternative
processing schemes , the decisions can usually be made by comparing
the capital and operating costs. More sophisticated evaluation
techniques and economic criteria are needed when decisions have to be
made between large, complex piping systems, particularly when the
piping systems differ widely in scope, time scale, etc.

• Making major investment decisions in the face of uncertainties that
will undoubtedly exist about plant performance, costs, the market
Government policy and the world economic situation, is a difficult and
complex task (if not an impossible task) and in a large design
organisation, the evaluation would be done by a specialist group.

4. Economics of Pipe Diameter – Concept

• The sizing of process lines can be divided into two categories

  • Lines which do not contain pumping equipment
  • Lines which contain pumps or compressors

Lines in the first group are sized on the basis of available pressure drop,
while those in the second must be based on an economical pipe size ( the
smaller the pipe , the less the pipe costs but the higher the pumping costs, and thus an optimum size must exist).

Paradoxically, however, it is uneconomical to make economic studies on each process line for a proposed plant. The designer, therefore, must have some means of determining which lines justify careful cost analysis.

The designer can select a conservative line size which will definitely fulfill the requirements. But will the next smaller size be more economical? The only manner in which this can be determined definitely is by careful economic analysis.

If the possible saving , however, is not far from the cost in the man-hours required to make the study, it is better to select the conservative size without further use of valuable time.

If, on the other hand, the possible savings are substantial, then further detailed study is indicated.

5. Inch Meter and Inch Diameter Concept


The purpose of inch meter and inch diameter is :

a. To find out piping erection load
b. Manpower planning
c. Piping work progress monitoring
d. Costing

The following example will illustrate the concept of the inch-meter and the inch-dia:

Q.1 Elbow 2" size, 20 nos., are to be fitted in a pipeline. Find out the inch dia?

Ans: Inch dia : size x no. of weld joints x no. of elbows
= 2 x 2 x 20 = 80 inch dia.

Q. 2 Find out the inch meter for 20 m pipeline of 2" size

Ans: Inch meter = Pipe size in inches x length in m
= 2" x 20 = 40 inch meter

Note : Inch meter will be more relevant in case of yard piping whereas inch dia will be more relevant in case of plant piping.

6. Dividing the Cost of the Pipe Work

The costs of process industry pipe work are usually sub-divided as below:

1. Piping design and engineering: The cost of design work associated
with the pipe work including layout studies , scheming , analysis and

2. Materials: The cost of all bought out materials , i.e. pipe flanges, fittings, valves, expansion units, etc.

3. Fabrication: The cost of site fabrication , off-site fabrication, done in a
shop away and adjacent to site.

4. Erection: The cost of erecting on-site fabricated pipe work and pressure testing. This includes preliminaries, variation orders and error
rectification if any.

Fluid Velocity (ft/s)
Pipe diameter d (in)
Pressure drop available
(Ib/in2) / 100 ft
Pump discharge pipe
(d/3 + 5) ft/s
Pump suction pipe
(d/6 + 1.3) ft/s
Steam or gas line
20 d ft/s

For liquids, a velocity in excess of 20 ft/s should never be specified in order to avoid erosion of the pipe. On suction lines to the pump, the pressure drop should always be less than 50% of the total head developed by the pump.

7. Suggested Steam Pipe Velocities in Pipe Connecting Steam Turbines

Inlet to turbine 100 - 150
Exhaust, non-condensing 175 - 200
Exhaust - condensing 400 – 500

8. Relative Economics of Various Materials of Construction

S.No. Material Connection Factor
1 Carbon steel (C.S.), A-53, seamless Welded 1.00
2 Carbon steel (C.S.), A-53, welded galvanised Screwed 0.84
3 Wrought iron, galvanised Screwed 1.61
4 Unplasticised polyvinyl chloride Sock, weld 1.79
5 Carbon steel, lead lined Flanged 4.11
6 Carbon steel, PVC lined Flanged 4.76
7 Stainless steel Welded 15.00

9. Material Estimation

There are three main topics of pipe work estimation as mentioned below:

S.No. Stage Accuracy Basis
1 Preliminary +/- 25% Based on %age of total plant cost
2 First control +/- 20 % Based on completed P and I’s etc.
3 Second control +/- 10 % Final P and I, all pipe work details, drawings, material list etc.

10. Fabrication Cost Estimation

The contents of fabrication cost estimation comprise the following:

1. Fabrication
2. Fabrication / Welding
3. Welding
4. Supports

11. Erection Cost Estimation

The contents of fabrication cost estimation comprise the following:

1. Erection
2. Supports
3. Testing of completed pipelines

12. Rates for Fabrication and Erection

The schedule of rates under the fabrication and erection work are established in “man hours” which should be representative of the gang time to complete the operation. The type of rate will depend on the client and contractor relationship on the basis of the contractor’s tenders.

The rates shall be included or excluded, allowances for construction plant, tools, tackle and consumables.

Typical rates for various piping materials are enclosed for reference. These include labour, consumables, tools, tackles and overheads.

13. Typical Rates for Fabrication, Erection and Testing of Pipelines for Costing with Example

a) Mild steel (MS), B and C class piping: Rs. 45/- per inch dia per metre

b) SS 304 piping ( Sch 5): Rs. 90/- per inch dia per metre length.

c) PVC Piping: Rs.45/- per meter length.

d) Cu Piping: Rs. 100/- per inch dia metre.

e) Pipe fitting reducer, bend etc.

SS 304: Rs. 125/- per inch dia
MS: Rs. 60/- per inch dia
Copper: Rs.140/- per inch dia

f) Fabrication and erection of MS supports= Rs. 4500/- per MT.

Q. Find out the labour cost for making a MS reducer of 2" x 4" size?

Ans: MS Reducer 2" x 4" = 4x60 = Rs.240/- (Considering 4" dia)

Q. Find out the labour charges for fabrication and erection of a MS pipeline of 50 NB (2") MS “B” or MS “C” of 400 m length fabrication and erection?

Ans: 2 x 400 x 45 = Rs.36,000/-

Typically the quantum of pipe fabrication, erection and testing of pipe work shall be expressed as shown below:

1. MS “B” and “C” class piping : 12450 inch mtr
2. SS 304 piping : 2850 inch mtr
3. PVC piping : 285 inch mtr
4. Cu piping: 695 inch mtr

14. Typical Calculation for Piping Cost

Raw material Factors SS Condensor tube Copper
Condensor tube
Sheet width mm      
Raw material base rate Rs/kg   78.50 140.00
Packing and forwarding Rs/kg 1.00 0.79 1.40
Conversion Rs/kg   40.00 50.00
Excise % 16.00 19.09 30.62
Sales tax/ VAT % 4.00 5.53 8.88
Insurance % 0.20 0.29 0.46
Transportation Rs/kg   2.00 2.00
Total Cost Rs/kg   146.19 233.37
Modvat Benefit Rs/kg   19.09 30.62
Cost to Co. Rs/kg 127.11 202.74
Rs/mtr 93.81 246.74

15. General Scope of Work for Piping Fabrication and Erection

• Fabrication, cutting, welding, assembly in position as per drawing.

• All raw material i.e. pipe, reducers, bends, flanges, sockets etc. and
hardware i.e. nut, bolts, gaskets etc. shall be supplied by client.

• Fitment includes assembly of fittings i.e. flanges, bends, valves, reducer, fabrication of tees, fitment of non return valve, valves, gaskets, nut bolts, sockets for pressure gauges fabrication and fitment of thermowell, etc. Pipe work shall be carried out as per piping drawings/ specifications/ instructions given to construction engineer.

• After assembly, complete pipeline to be welded by taking necessary
precautions to avoid stresses. If stresses developed , those are to be
removed and welded as per standard practice and instructions of the
site co-ordinator.

• One in-position weld is allowed for line which cannot be welded on

• After welding , finishing and grinding , pipeline to be hydraulically tested at pressure specified in the order.

• After hydraulic testing, pipeline to be painted with red–oxide ( one coat).

• After painting, pipeline to be assembled in position and with necessary
clamps and supports.

16. List of Tools, Tackles and Machinery Required to Carry Out the Piping Works

To be arranged by contractor:

1. Rectifier
2. H.F. unit
3. Transformer
4. Grinders- AG7
5. Winch – 5 MT
6. Chain block 3 MT 11 mtr. Lift
7. Ropes / pulleys
8. FF2 grinder
9. Hacksaw/Files etc. and other tools and tackles.
10. Pipe voice
11. G Q 4 Grinder
12. Abrasive cutting machine
13. Gas cutting

17. Contractor Manpower List of Piping, Fabrication and Erection

For piping, fabrication and erection:

1. Experienced Mechanical Engineer as in-charge
2. Supervisor
3. Highly skilled fitter for SS 304
4. Highly skilled fitter for MS B and C class piping and fabrication
5. Welders for SS TIG, Welders for SS Tacking, Welders for MS Tacking
6. Helpers/Riggers

18. Additional Cost Information

• Piping cost may vary between 20 to 66 %.
• Piping cost may be a headache to the estimator as he/she is asked to
give the cost even before engineering and execution.
• The estimator needs to convert the preliminary flow sheet into a fair
approximation of an actual design.
• The estimator should have the skill to draw quick and rather accurate
free hand isometric sketches, which will be of inestimable value.

19. Methods used for Estimation

• Piece by piece method ( Detailed costing)
• Finagling factor ( 40 % of equipment cost)
• N system.

20. N System

The N system is based on the fact which has been tested many times, that the costs of strings of pipes of different sizes but of the same material and class of pipe bear constant relations to each other. The N system was introduced by R.A. Dickson (Chem. Eng. Nov 1947, PP 121-123)

21. How to use the N System

Step I : Calculate the cost of the reference sizes of the strings of pipe in question.

StepII : Then use the N factors to get the cost of the same string in the required size.

Continued to Costing of Pipelines - 2


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