Jan-2002

Using surplus equipment in hydroprocessing units

An examination of the economics, maintenance considerations, design and other questions in purchasing used versus new equipment for plants, not only in revamps but also for installation in new grassroots facilities

Weldon H Lybarger and Gerald D Lamb
Mustang Engineers and Constructors

Article Summary

The low sulphur fuel regulations in the USA, mandated by the Environmental Protection Agency, are approaching: 1 January 2004 for gasoline and 1 January 2006 for diesel. The economics of adding new hydroprocessing facilities to remove sulphur from existing gasoline blend streams for most refiners has a negative rate of return, irrespective of the chosen technology. While refinery margins were good in late 2000 and through the first half of 2001, managers and decision-makers are looking for ways to minimise the capital expenditures needed to meet these regulations.

Revamps of existing units are being evaluated against new grassroots facilities and the use of surplus equipment is being considered to reduce the cost and enhance the project schedule. Surplus equipment is being considered not only in the revamp units but also in the new grassroots facilities as well. This paper addresses the economics, schedule impact, design, fit-for-service analysis, and maintenance considerations in using surplus equipment as a part of these projects.

Among the economic considerations, how do you determine the purchase price of surplus equipment? The first step in this process is to know what that same piece of equipment will cost new. The new price can be established by asking your favourite vendor for a price and delivery. The required information to provide the vendor is the equipment data sheets and your company’s standards and specifications for that piece of equipment. Alternatively, there are estimating programmes for equipment costs that can provide a plus or minus 20 per cent – or better – price for new equipment.

If the cost of the surplus equipment is the only consideration, then try to negotiate the lowest percentage of new equipment price as possible. Typically this will be in the range of 20 to 50 per cent of the new equipment price. Factors that can have an effect on the price that can be justified for the project include the current equipment owner, rehab and modification costs, how well the equipment fits into the process, dismantling and shipping, re-engineering, and the project schedule.

Ownership
The next step is to establish who owns the equipment. This is important not only for obtaining title to the equipment, but it can speed up the negotiations if you can deal directly with the owner or an equipment broker that has been given contractual authorisation to sell the equipment. Dealing with a broker that does not have the authority to negotiate can be very frustrating and time consuming.

It is a lot like buying a used car “on consignment”, the owner has to approve the final sales price. If your company owns the equipment, then consulting your company’s accountant should allow you to determine the value remaining on the books for that piece of equipment.
The new price has been established and you know who owns the equipment and presumably the asking price. Before you buy or start to negotiate, there are other economic factors that must be addressed before you can determine what the equipment is worth to your project. These include: rehabilitation and modifications, process configuration, shipping cost and re-engineering.

Cost factors
Several questions must be answered in order to determine the rehabilitation and modification costs.
1. What is the current condition of the equipment, internal and external?
2. What is the age of the equipment?
3. What inspections and tests need to be conducted?
4. What are the jurisdictional requirements?
5. Does the equipment meet the process and mechanical design requirements?

Establishing rehabilitation costs start with knowing the current condition of the equipment, including how the equipment was taken out of service and stored. This usually begins with a visual inspection and obtaining operating and inspection records. This “kick the tyres” approach by a qualified inspector will provide enough information to determine if the equipment is worth spending additional money on further inspection and tests.

The cost for this initial look is usually moderate if the equipment is in close proximity and basically nothing if the operating company owns the equipment. Many times the owner will provide the operating history and inspection records for review at little or no costs. With a digital camera, pictures of the equipment can be sent electronically to those involved in the review. This does not take the place of a visual inspection, but it can help initiate approval of money for further inspections and tests.

The age of the equipment is very important for several reasons. First, it can help establish the number of operating cycles the equipment has been through. Second, the year the equipment was manufactured will determine what revision of the code was governing at that time. The year of manufacture can be important if there have been significant changes to the design codes. Most codes have had changes in the last 20 to 30 years, and while some of these changes will not affect the equipment design, some changes like ”allowable stress values” for the metallurgy can affect your intended use of the equipment.

For example, in the case of a vessel, it is possible that it will meet (your) design conditions under its original design code, but will not under the current code. It is possible to still use the vessel, but the number of inspections, tests on the equipment, and calculations that will need to be completed may prove to be too costly in both time and money. If this situation arises, the best approach is to let an experienced vessel design engineer review the information and provide a recommendation. There are some guidelines stipulated in the US National Board Inspection Code (NBIC), where current allowable stress values can be used in the repairs and alterations of pressure vessels.

Questions one and two have been addressed, you have the inspection records and operating history, and the equipment is still viable for use in the project. It is then time to ascertain what test(s) need to be conducted to prove that the equipment is fit for the intended service and at what cost. The previous service will influence and provide direction for the type of inspections and metallurgical tests to be performed.