Technology Economics: Propylene via Propane Dehydrogenation

Propylene via Propane Dehydrogenation

#TEC003B

Technology EconomicsPropylene via Propane Dehydrogenation2013

AbstractPropylene has been established as a major component of the global olefins business, second only to ethylene. Globally, the greatest volume of propylene is generated as a by-product in steam crackers and through the fluid catalytic cracking (FCC) process. With ethane prices falling in the USA due to the exploration of shale gas reserves, the low price of ethylene produced from this raw material has given ethane-fed steam crackers in North America a feedstock advantage. This has put naphtha-fed steam crackers at a disadvantage, with many of them shutting down or revamping to use ethane as feedstock. Nevertheless, the propylene output rates from ethane-fed crackers are negligible. This, combined with the rise in propylene demand, has resulted in a tight propylene market. For this reason, new and novel lower-cost chemical processes for on-purpose propylene production technologies are of great interest to the petrochemical marketplace. Such processes include: Metathesis, Propane Dehydrogenation (PDH), Methanol-toOlefins/Methanol-to-Propylene (MTO/MTP), High Severity FCC, and Olefins Cracking. Among those, MTO/MTP and PDH stand out due to their use of low-cost raw materials. In the US, some major companies, including Dow Chemical, are building PDH plants to take advantage of shale gas, the fastest growing source of gas in the country. In Middle East, the propane output is expected to be capable of supplying not only domestic needs, but also the demand from China, where many PDH projects are scheduled to go on stream within the next few years. In this report, the production of propylene through the dehydrogenation of propane is reviewed. Included in the analysis is an overview of the technology and economics of a method similar to the UOP OleflexTM process, a technology selected by Dow Chemical to produce propylene at its production site in Texas. Both the capital investment and the operating costs are presented for plants constructed on the US Gulf Coast and China. The economic analysis presented in this report is based upon a plant fully integrated with a petrochemical complex and capable of producing 550 kta of polymer-grade propylene. The estimated CAPEX for such a plant on the US Gulf Coast is about USD 490 million. While China presented the lowest CAPEX, the USA presented the most advantageous operational margins, due to the rise of shale gas, which lowered propane prices, justifying Dow`s choice for a new PDH plant in Texas. Although China still depends on imported propane from Middle East, being subjected to shortages of supply, the historical operational margins are high enough to explain the number of PDH planned projects in the country. The attractiveness of each area is proven by the calculated internal rate of return of more than 25% per year in both regions.

Copyrights 2013 by Intratec Solutions LLC. All rights reserved. Printed in the United States of America.

This Publication Was Not a Publication It was actually an advisory service ordered by one of our clients, now disclosed to our readership with his consent.It results from the innovative concept, designed by Intratec for leading companies in the chemical and allied sectors who have asked for more affordable and reliable studies to plan their investments. Intratecs strategy works by charging clients lower-than-market fees to conduct a technology advisory service with the understanding that such studies may be released, after an agreed upon period of time, as publications. Available through well-known sales channels such as Amazon, Google Books and HP MagCloud, our publications can be purchased by any interested reader.

How Readers Benefit?From academics to industry executives, our readers benefit by gaining access to real consulting cases, released for the first time to the market as one-of-a-kind publications at affordable prices. Through our university discount policy, students and faculty members will be able to become familiar with challenges faced by industry for a price similar to a usual textbook.

How Clients Benefit?While traditional consulting firms charge their clients hundreds of thousands of dollars, Intratec offers, from the convenience of a web browser, a much better advisory experience for a price 80% lower than market.

What is Technology Economics?Advisory services targeting investments on new chemical units, answering: What is the process? What equipment is necessary? What are the raw materials and utilities consumptions? What are the operating and capital expenses? In which locations is this technology more profitable? Each new assignment comprises of a study structured like this publication, valuable spreadsheets and broad support.

In short, our clients receive traditionally expensive studies for a fraction of the cost, and our readers get unprecedented access to real professional publications at steep discounts.

ii

Consulting as Publications at a GlanceReshaping the Advisory Industry1) Our publications are accessed and attested to by a huge audience . . . 2) . . . including potential clients who like the publication structure . . . 3) . . . and order advisory services based on the same format. 4) If our clients agree, their advisory services are disclosed as publications.

Everyone Benefits from Cost Sharing & Online Experience1) Readers purchase our publications at steep discounts online . . . 4) . . . because they were actually consulting cases . . . 3) . . . requested online by the initial client . . . 2) . . . who shared the costs with the readers.

For a better understanding of our innovative concept, please visit www.intratec.us.iii

Terms & ConditionsInformation, analyses and/or models herein presented are prepared on the basis of publicly available information and non-confidential information disclosed by third parties. Third parties, including, but not limited to technology licensors, trade associations or marketplace participants, may have provided some of the information on which the analyses or data are based. Intratec Solutions LLC (known as Intratec) does not believe that such information will contain any confidential information but cannot provide any assurance that any third party may, from time to time, claim a confidential obligation to such information. The aforesaid information, analyses and models are developed independently by Intratec and, as such, are the opinion of Intratec and do not represent the point of view of any third parties nor imply in any way that they have been approved or otherwise authorized by third parties that are mentioned in this publication. The application of the solutions presented in this publication without license from the owners infringes on the intellectual property rights of the owners, including patent rights, trademark rights, and rights to trade secrets and proprietary information. Intratec conducts analyses and prepares publications and models for readers in conformance with generally accepted professional standards. Although the statements in this publication are derived from or based on several sources that Intratec believe to be reliable, Intratec does not guarantee their accuracy, reliability, or quality; any such information, or resulting analyses, may be incomplete, inaccurate or condensed. All estimates included in this publication are subject to change without notice. This publication is for informational purposes only and is not intended as any recommendation of investment. Reader agrees it will not, without prior written consent of Intratec, represent, directly or indirectly, that its products have been approved or endorsed by the other parties. In no event shall Intratec, its employees, representatives, resellers or distributors be liable to readers or any other person or entity for any direct, indirect, special, exemplary, punitive, or consequential damages, including lost profits, based on breach of warranty, contract, negligence, strict liability or otherwise, arising from the use of this publication, whether or not they or it had any knowledge, actual or constructive, that such damages might be incurred. Reader shall indemnify and hold harmless Intratec and its resellers, representatives, distributors, and information providers against any claim, damages, loss, liability or expense arising out of readers use of the publication in any way contrary to the present terms and conditions. Intratec publications are the product of extensive work and original research and are protected by international copyright law. Products supplied as printed reports or books should not be copied but can be included in schools, universities or corporate libraries and circulated to colleagues to the extended permitted by copyright law. Products supplied digitally are licensed, not sold. The purchaser is responsible for ensuring that license terms are adhered to at all times. PDF documents may be supplied watermarked with the customers name, email and/or company. Digital documents are supplied with an enterprise license and can be shared by all employees and on-site contractors of a single organization. Members of the organization may make such copies as are necessary to facilitate this distribution. An enterprise license does not permit sharing with external organizations. Reader agrees that Intratec retains all rights, title and interest, including copyright and other proprietary rights, in this publication and all material, including but not limited to text, images, and other multimedia data, provided or made available as part of this publication.

1

ContentsAbout this Study...................................................................................................................................................................8Object of Study.....................................................................................................................................................................................................................8 Analyses Performed ...........................................................................................................................................................................................................8Construction Scenarios ..............................................................................................................................................................................................................8 Location Basis ...................................................................................................................................................................................................................................9

Design Conditions ..............................................................................................................................................................................................................9

Study Background ............................................................................................................................................................ 10About Propylene...............................................................................................................................................................................................................10Introduction.................................................................................................................................................................................................................................... 10 Applications.................................................................................................................................................................................................................................... 10

Manufacturing Alternatives .......................................................................................................................................................................................11 Licensor(s) & Historical Aspects ...............................................................................................................................................................................13

Technical Analysis ............................................................................................................................................................. 14Chemistry ..............................................................................................................................................................................................................................14 Raw Material ........................................................................................................................................................................................................................15 Technology Overview ...................................................................................................................................................................................................16 Detailed Process Description & Conceptual Flow Diagram...................................................................................................................17Area 100: Purification and Reaction.................................................................................................................................................................................17 Area 200: Product Recovery .................................................................................................................................................................................................17 Key Consumptions ..................................................................................................................................................................................................................... 18 Technical Assumptions ...........................................................................................................................................................................................................18 Labor Requirements.................................................................................................................................................................................................................. 19

ISBL Major Equipment List ..........................................................................................................................................................................................22 OSBL Major Equipment List .......................................................................................................................................................................................24 Other Process Remarks .................................................................................................................................................................................................25PDH-Integration Alternatives...............................................................................................................................................................................................25 Technology Advances.............................................................................................................................................................................................................. 25 Catalyst Regeneration System ............................................................................................................................................................................................26

Economic Analysis ............................................................................................................................................................ 28Project Implementation Schedule.........................................................................................................................................................................292

Capital Expenditures.......................................................................................................................................................................................................29Fixed Investment......................................................................................................................................................................................................................... 29 Alternative OSBL Configurations.......................................................................................................................................................................................30 Fixed Investment Discussion ...............................................................................................................................................................................................32 Working Capital............................................................................................................................................................................................................................ 32 Other Capital Expenses ........................................................................................................................................................................................................... 33 Total Capital Expenses ............................................................................................................................................................................................................. 33

Operational Expenditures ...........................................................................................................................................................................................33Manufacturing Costs................................................................................................................................................................................................................. 33 Historical Analysis........................................................................................................................................................................................................................ 34

Economic Datasheet ......................................................................................................................................................................................................34

Regional Comparison & Economic Discussion....................................................................................................... 37Regional Comparison ....................................................................................................................................................................................................37Capital Expenses.......................................................................................................................................................................................................................... 37 Operational Expenditures......................................................................................................................................................................................................37 Economic Datasheet................................................................................................................................................................................................................. 37

Economic Discussion .....................................................................................................................................................................................................38

References............................................................................................................................................................................ 40 Acronyms, Legends & Observations .......................................................................................................................... 41 Technology Economics Methodology ...................................................................................................................... 42Introduction.........................................................................................................................................................................................................................42 Workflow................................................................................................................................................................................................................................42 Capital & Operating Cost Estimates......................................................................................................................................................................44ISBL Investment............................................................................................................................................................................................................................ 44 OSBL Investment......................................................................................................................................................................................................................... 44 Working Capital............................................................................................................................................................................................................................ 45 Start-up Expenses ....................................................................................................................................................................................................................... 45 Other Capital Expenses ........................................................................................................................................................................................................... 46 Manufacturing Costs................................................................................................................................................................................................................. 46

Contingencies ....................................................................................................................................................................................................................46 Accuracy of Economic Estimates............................................................................................................................................................................47 Location Factor..................................................................................................................................................................................................................47

Appendix A. Mass Balance & Streams Properties.................................................................................................. 49 Appendix B. Utilities Consumption Breakdown .................................................................................................... 523

Appendix C. Process Carbon Footprint..................................................................................................................... 53 Appendix D. Equipment Detailed List & Sizing...................................................................................................... 54 Appendix E. Detailed Capital Expenses .................................................................................................................... 62Direct Costs Breakdown ...............................................................................................................................................................................................62 Indirect Costs Breakdown ...........................................................................................................................................................................................63

Appendix F. Economic Assumptions ......................................................................................................................... 64Capital Expenditures.......................................................................................................................................................................................................64Construction Location Factors............................................................................................................................................................................................64 Working Capital............................................................................................................................................................................................................................ 64 Other Capital Expenses ........................................................................................................................................................................................................... 64

Operational Expenditures ...........................................................................................................................................................................................65Fixed Costs ...................................................................................................................................................................................................................................... 65 Depreciation................................................................................................................................................................................................................................... 65 EBITDA Margins Comparison...............................................................................................................................................................................................65

Appendix G. Released Publications............................................................................................................................ 66 Appendix H. Technology Economics Form Submitted by Client.................................................................... 67

4

List of TablesTable 1 Construction Scenarios Assumptions (Based on Degree of Integration) ...................................................................................9 Table 2 Location & Pricing Basis..............................................................................................................................................................................................9 Table 3 General Design Assumptions.................................................................................................................................................................................9 Table 4 Major Propylene Consumers................................................................................................................................................................................10 Table 5 Raw Materials & Utilities Consumption (per ton of Product)...........................................................................................................18 Table 6 Design & Simulation Assumptions...................................................................................................................................................................19 Table 7 Labor Requirements for a Typical Plant ........................................................................................................................................................19 Table 8 Main Streams Operating Conditions and Composition .....................................................................................................................22 Table 9 Inside Battery Limits Major Equipment List ................................................................................................................................................22 Table 10 Outside Battery Limits Major Equipment List .........................................................................................................................................24 Table 11 Catalyst Advances....................................................................................................................................................................................................26 Table 12 Base Case General Assumptions.....................................................................................................................................................................28 Table 13 Bare Equipment Cost per Area (USD Thousands)................................................................................................................................29 Table 14 Total Fixed Investment Breakdown (USD Thousands)......................................................................................................................29 Table 15 Working Capital (USD Million)..........................................................................................................................................................................32 Table 16 Other Capital Expenses (USD Million)..........................................................................................................................................................33 Table 17 CAPEX (USD Million)...............................................................................................................................................................................................33 Table 18 Manufacturing Fixed Cost (USD/ton) ..........................................................................................................................................................33 Table 19 Manufacturing Variable Cost (USD/ton) ....................................................................................................................................................34 Table 20 OPEX (USD/ton).........................................................................................................................................................................................................34 Table 21 Technology Economics Datasheet: Propylene via Propane Dehydrogenation at US Gulf........................................36 Table 22 Technology Economics Datasheet: Propylene via Propane Dehydrogenation in China............................................39 Table 23 Project Contingency...............................................................................................................................................................................................46 Table 24 Criteria Description..................................................................................................................................................................................................46 Table 25 Accuracy of Economic Estimates ...................................................................................................................................................................47 Table 26 Detailed Material Balance and Stream Properties................................................................................................................................49 Table 27 Utilities Consumption Breakdown.................................................................................................................................................................52 Table 28 Assumptions for CO2 e Emissions Calculation .......................................................................................................................................53 Table 29 CO2 e Emissions (ton/ton prod.)......................................................................................................................................................................53 Table 30 Compressors Specifications................................................................................................................................................................................54 Table 31 Drivers..............................................................................................................................................................................................................................54 Table 32 Heat Exchangers .......................................................................................................................................................................................................555

Table 33 Pumps .............................................................................................................................................................................................................................58 Table 34 Columns.........................................................................................................................................................................................................................59 Table 35 Utilities Supply ...........................................................................................................................................................................................................60 Table 36 Vessels & Tanks Specifications..........................................................................................................................................................................60 Table 37 Indirect Costs Breakdown for the Base Case (USD Thousands)...................................................................................................63 Table 38 Detailed Construction Location Factor ......................................................................................................................................................64 Table 39 Working Capital Assumptions for Base Case............................................................................................................................................64 Table 40 Fixed Cost Assumptions.......................................................................................................................................................................................65 Table 41 Depreciation Value & Assumptions ..............................................................................................................................................................65

6

List of FiguresFigure 1 OSBL Construction Scenarios...............................................................................................................................................................................8 Figure 2 Propylene from Multiple Sources ...................................................................................................................................................................12 Figure 3 Propane Dehydrogenation Reaction Network.......................................................................................................................................14 Figure 4 US Natural Gas Production History and Forecast (Trillion Cubic Feet) ....................................................................................15 Figure 5 Process Simplified Flow Diagram....................................................................................................................................................................16 Figure 6 Inside Battery Limits Conceptual Process Flow Diagram.................................................................................................................20 Figure 7 Continuous Catalyst Regenerator Simplified Scheme.......................................................................................................................27 Figure 8 Project Implementation Schedule .................................................................................................................................................................28 Figure 9 Total Direct Cost of Different Integration Scenarios (USD Thousands)...................................................................................31 Figure 10 Total Fixed Investment of Different Integration Scenarios (USD Thousands)..................................................................31 Figure 11 Total Fixed Investment Validation (USD Million) ................................................................................................................................32 Figure 12 OPEX and Product Sales History (USD/ton)...........................................................................................................................................35 Figure 13 EBITDA Margin & IP Indicators History Comparison .........................................................................................................................35 Figure 14 CAPEX per Location (USD Million)...............................................................................................................................................................37 Figure 15 Operating Costs Breakdown per Location (USD/ton).....................................................................................................................38 Figure 16 Methodology Flowchart....................................................................................................................................................................................43 Figure 17 Location Factor Composition.........................................................................................................................................................................47 Figure 18 ISBL Direct Costs Breakdown by Equipment Type for Base Case.............................................................................................62 Figure 19 OSBL Direct Costs Breakdown by Equipment Type for Base Case ..........................................................................................62 Figure 20 Historical EBITDA Margins Regional Comparison ..............................................................................................................................65

7

About this StudyThis study follows the same pattern as all Technology Economics studies developed by Intratec and is based on the same rigorous methodology and well-defined structure (chapters, type of tables and charts, flow sheets, etc.). This chapter summarizes the set of information that served as input to develop the current technology evaluation. All required data were provided through the filling of the Technology Economics Form available at Intratecs website. You may check the original form in the Appendix H. Technology Economics Form Submitted by Client.

Analyses PerformedConstruction ScenariosThe economic analysis is based on the construction of a plant inside a petrochemical complex, in which propane feedstock is locally provided and propylene product is consumed by a nearby polypropylene unit. Therefore, no storage for product or raw material is required. Additionally, the petrochemical complex supplies most utilities. However, since the Outside Battery Limits (OSBL) requirements storage and utilities supply facilities significantly impact the capital cost estimates for a new venture, they may play a decisive role in the decision as to whether or not to invest. Thus, this study also performs an analysis of the OSBL facilities impact on the capital costs. Three distinct OSBL configurations are compared. Those scenarios are summarized in Figure 1 and Table 1.

Object of StudyThis assignment assesses the economic feasibility of an industrial unit for propylene production via propane dehydrogenation implementing technology similar to the UOP OleflexTM process. The current assessment is based on economic data gathered on Q3 2011 and a chemical plants nominal capacity of 550 kta (thousand metric tons per year).

Figure 1 OSBL Construction ScenariosNon-Integrated Partially IntegratedPetrochemical Complex Products Storage Products Consumer

Fully IntegratedPetrochemical Complex Products Consumer

ISBL Unit

ISBL Unit

ISBL Unit

Raw Materials Storage Grassroots unit

Raw Materials Storage Unit is part of a petrochemical complex

Raw Materials Provider Most infrastructure is already installed

Intratec | About this Study 8

Source: Intratec www.intratec.us

Table 1 Construction Scenarios Assumptions (Based on Degree of Integration)NON-INTEGRATED PARTIALLY INTEGRATED FULLY INTEGRATED

Storage Capacity Feedstock & Chemicals End-products & By-products Utility Facilities Included Support & Auxiliary Facilities (Area 900) 20 days of operation 20 days of operation All required Control room, labs, gate house, maintenance shops, warehouses, offices, change house, cafeteria, parking lot Source: Intratec www.intratec.us 20 days of operation Not included All required Control room, labs, maintenance shops, warehouses

(Base Case for Evaluation) Not included Not included Only refrigeration units

Control room and labs

Location BasisRegional specific conditions influence both construction and operating costs. This study compares the economic performance of two identical plants operating in different locations: the US Gulf Coast and China. The assumptions that distinguish the two regions analyzed in this study are provided in Table 2.

Table 2 Location & Pricing Basis

Design ConditionsThe process analysis is based on rigorous simulation models developed on Aspentech Aspen Plus and Hysys, which support the design of the chemical process, equipment and OSBL facilities. The design assumptions employed are depicted in Table 3.

Table 3 General Design AssumptionsSource: Intratec www.intratec.us Cooling water temperature Cooling water range Steam (Low Pressure) Refrigerant (Propylene) Wet Bulb Air Temperature Source: Intratec www.intratec.us 24 C 11 C 7 Bar abs -45 C 25 C

9

Study BackgroundAbout PropyleneIntroductionPropylene is an unsaturated organic compound having the chemical formula C3H6. It has one double bond, is the second simplest member of the alkene class of hydrocarbons, and is also second in natural abundance. While CG propylene is used extensively for most chemical derivatives (e.g., oxo-alcohols, acrylonitrile, etc.), PG propylene is used in polypropylene and propylene oxide manufacture. PG propylene contains minimal levels of impurities, such as carbonyl sulfide, that can poison catalysts. Thermal & Motor Gasoline Uses Propylene has a calorific value of 45.813 kJ/kg, and RG propylene can be used as fuel if more valuable uses are unavailable locally (i.e., propane propene splitting to chemical-grade purity). RG propylene can also be blended into LPG for commercial sale. Also, propylene is used as a motor gasoline component for octane enhancement via dimerization formation of polygasoline or alkylation. Chemical Uses The principal chemical uses of propylene are in the manufacture of polypropylene, acrylonitrile, oxo-alcohols, propylene oxide, butanal, cumene, and propene oligomers. Other uses include acrylic acid derivatives and ethylene propene rubbers. Global propylene demand is dominated by polypropylene production, which accounts for about two-thirds of total propylene demand.

Propylene 2D structure Propylene is produced primarily as a by-product of petroleum refining and of ethylene production by steam cracking of hydrocarbon feedstocks. Also, it can be produced in an on-purpose reaction (for example, in propane dehydrogenation, metathesis or syngas-to-olefins plants). It is a major industrial chemical intermediate that serves as one of the building blocks for an array of chemical and plastic products, and was also the first petrochemical employed on an industrial scale. Commercial propylene is a colorless, low-boiling, flammable, and highly volatile gas. Propylene is traded commercially in three grades: Polymer Grade (PG): min. 99.5% of purity. Chemical Grade (CG): 90-96% of purity. Refinery Grade (RG): 50-70% of purity.

Table 4 Major Propylene ConsumersPolypropylene Acrylonitrile Propylene oxide Oxo-alcohols Cumene Acrylic acid Mechanical parts, containers, fibers, films Acrylic fibers, ABS polymers Propylene glycol, antifreeze, polyurethane Coatings, plasticizers Polycarbonates, phenolic resins Coatings, adhesives, super absorbent polymers

ApplicationsThe three commercial grades of propylene are used for different applications. RG propylene is obtained from refinery processes. The main uses of refinery propylene are in liquefied petroleum gas (LPG) for thermal use or as an octane-enhancing component in motor gasoline. It can also be used in some chemical syntheses (e.g., cumene or isopropanol). The most significant market for RG propylene is the conversion to PG or CG propylene for use in the production of polypropylene, acrylonitrile, oxo-alcohols and propylene oxide.

Intratec | Study Background


10

Manufacturing AlternativesPropylene is commercially generated as a co-product, either in an olefins plant or a crude oil refinerys fluid catalytic cracking (FCC) unit, or produced in an on-purpose reaction (for example, in propane dehydrogenation, metathesis or syngas-to-olefins plants). Globally, the largest volume of propylene is produced in NGL (Natural Gas Liquids) or naphtha steam crackers, which generates ethylene as well. In fact, the production of propylene from such a plant is so important that the name olefins plant is often applied to this kind of manufacturing facility (as opposed to ethylene plant). In an olefins plant, propylene is generated by the pyrolysis of the incoming feed, followed by purification. Except where ethane is used as the feedstock, propylene is typically produced at levels ranging from 40 to 60 wt% of the ethylene produced. The exact yield of propylene produced in a pyrolysis furnace is a function of the feedstock and the operating severity of the pyrolysis. The pyrolysis furnace operation usually is dictated by computer optimization, where an economic optimum for the plant is based on feedstock price, yield structures, energy considerations, and market conditions for the multitude of products obtained from the furnace. Thus, propylene produced by steam cracking varies according to economic conditions. In an olefins plant purification area, also called separation train, propylene is obtained by distillation of a mixed C3 stream, i.e., propane, propylene, and minor components, in a C3-splitter tower. It is produced as the overhead distillation product, and the bottoms are a propaneenriched stream. The size of the C3-splitter depends on the purity of the propylene product. The propylene produced in refineries also originates from other cracking processes. However, these processes can be compared to only a limited extent with the steam cracker for ethylene production because they use completely different feedstocks and have different production objectives. Refinery cracking processes operate either purely thermally or thermally catalytically. By far the most important process for propene production is the fluid- catalytic cracking (FCC) process, in which the powdery catalyst flows as a fluidized bed through the reaction and regeneration

phases. This process converts heavy gas oil preferentially into gasoline and light gas oil. The propylene yielded from olefins plants and FCC units is typically considered a co-product in these processes, which are primarily driven by ethylene and motor gasoline production, respectively. Currently, the markets have evolved to the point where modes of by-product production can no longer satisfy the demand for propylene. A trend toward less severe cracking conditions, and thus to increase propylene production, has been observed in steam cracker plants using liquid feedstock. As a result, new and novel lower-cost chemical processes for on-purpose propylene production technologies are of high interest to the petrochemical marketplace. Such processes include: Olefin Metathesis. Also known as disproportionation, metathesis is a reversible reaction between ethylene and butenes in which double bonds are broken and then reformed to form propylene. Propylene yields of about 90 wt% are achieved. This option may also be used when there is no butene feedstock. In this case, part of the ethylene feeds an ethylene-dimerization unit that converts ethylene into butene. Propane Dehydrogenation. A catalytic process that converts propane into propylene and hydrogen (byproduct). The yield of propylene from propane is about 85 wt%. The reaction by-products (mainly hydrogen) are usually used as fuel for the propane dehydrogenation reaction. As a result, propylene tends to be the only product, unless local demand exists for the hydrogen by-product. Methanol-to-Olefins/Methanol-to-Propylene. A group of technologies that first converts synthesis gas (syngas) to methanol, and then converts the methanol to ethylene and/or propylene. The process also produces water as by-product. Synthesis gas is produced from the reformation of natural gas or by the steam-induced reformation of petroleum products such as naphtha, or by gasification of coal. A large amount of methanol is required to make a world-scale ethylene and/or propylene plant. High Severity FCC. Refers to a group of technologies that use traditional FCC technology under severe conditions (higher catalyst-to-oil ratios, higher steam injection rates, higher temperatures, etc.) in order to maximize the amount of propylene and other light products. A high severity FCC unit is usually fed with11

gas oils (paraffins) and residues, and produces about 20-25 wt% propylene on feedstock together with greater volumes of motor gasoline and distillate byproducts. Olefins Cracking. Includes a broad range of technologies that catalytically convert large olefins molecules (C4-C8) into mostly propylene and small amounts of ethylene. This technology will best be employed as an auxiliary unit to an FCC unit or steam cracker to enhance propylene yields. Figure 2 Propylene from Multiple Sources

These on-purpose methods are becoming increasingly significant, as the shift to lighter steam cracker feedstocks with relatively lower propylene yields and reduced motor gasoline demand in certain areas has created an imbalance of supply and demand for propylene.

Naphtha NGL

Steam Cracker

Gas Oil

Refinery FCC Unit

RG Propylene

CG/PG Propylene

Propane

PDH

Ethylene/ Butenes

Metathesis

Methanol

MTO/MTP

Gas Oil

High Severity FCC

Intratec | Study Background

C4 to C8 Olefins

Olefins Cracking


12

Licensor(s) & Historical AspectsThe continuous rise in petroleum prices, in addition to the increase in world demand for propylene, led the chemical industry to innovate in the development of production routes utilizing sources other than oil. In this context, the recent success of shale gas exploitation in the US is playing a key role in the shift to natural gas as a source of feed to olefins production. This happens because natural gas comprises, besides methane, C2-C4 paraffins, such as propane, which is increasingly being used in production of propylene by dehydrogenation process. Paraffin dehydrogenation for the production of olefins has been used since the 1930s. During World War II, catalytic dehydrogenation of butanes by a chromia-alumina catalyst was used to produce butenes, which were then dimerized to octenes and hydrogenated to octanes to yield highoctane aviation fuel. In the late 1980s, Houdry extended the application of chromia-alumina catalysts to the dehydrogenation of propane to propylene. Commercial interest in propane dehydrogenation (PDH) has been increasing. Numerous plants dedicated to the process are currently under construction outside the United States and some are planned to be constructed in the US. There are already five licensed technologies: CATOFIN from Lummus Technology; Oleflex from UOP; Fluidized Bed Dehydrogenation (FBD) from Snamprogetti/Yarsintez; STAR process from Krupp Uhde; and PDH from Linde/BASF. The main differences between those technologies center on the type of catalyst and regeneration methods used; the design of the reactor; and the methods used to achieve better conversion rates (e.g., operating pressure, use of diluents, and reaction temperatures). By the end of March 2012, there were at least 16 propane dehydrogenation units in operation, with an aggregate capacity of 5,260 thousand metric tons per annum (kta). Plans for increasing propylene capacity to 12,590 kta through 13 propane dehydrogenation units have also been announced, scheduled to start-up between now and 2015.

Specifically in the USA, four PDH projects have already been announced. The largest of such projects, carried out by Dow Chemicals, a 750 kta OleflexTM plant, is scheduled to go on stream in 2015. China built its first unit PDH in mid-2010, but has six plants currently under construction and three more in the engineering design stage, all scheduled to start operating in 2013 or 2014, increasing its production capacity in 5,070 kta.

13

Technical AnalysisChemistryPropane dehydrogenation is an endothermic equilibrium reaction generally carried out in the presence of a noble- or heavy-metal catalyst such as platinum or chromium. The following equation shows the propane dehydrogenation reaction: Although higher process temperatures increase the propylene yield, they also provoke thermal cracking reactions. Those reactions generate undesirable byproducts and consequently increase purification costs downstream. Therefore, PDH reaction temperatures usually range between 500 and 700C, while reaction pressures are near atmospheric pressure. Typical thermal cracking side reactions are shown in Figure 3.

Propane

Propylene

Hydrogen

Overall yields of about 90 wt% of propylene are claimed by licensors of the commercially available PDH technologies. The propylene conversion is favored by higher temperatures and lower pressures.

Figure 3 Propane Dehydrogenation Reaction Network

CH4 cracking

CH3 CH2 CH3Dehydrogenation

CH2 = CH2

C2H2n+2

CH3 CH = CH2Aromatization

Oligomerization

CH2 = CH CH2 CH3

CH3 CH CH2 CH = CH2 CH3Alkylation Polymerization

Dehydrogenation

CH2 = CH CH2 = CH3

R

CnH2nSide Chain Aromatization Coking

CnH(n+y)

Intratec | Technical Analysis

Side reactions increase with temperature and conversion Coke

Source: Encyclopedia of Hydrocarbons, Volume II

14

Raw MaterialThe feedstock to a PDH process unit is propane. Propane is recovered from propane-rich liquefied petroleum gas (LPG) streams from natural gas processing plants. Propane may also be obtained in smaller amounts as a by-product of petroleum refinery operations, such as hydrocracking and fluidized catalytic cracking (FCC). As natural gas offerings in the USA are significantly increasing due to the rising exploitation of shale gas, propane and ethane prices are decreasing. This changes both ethylene and propylene industrial production by prompting new steam crackers to use ethane as feedstock and causing existing naphtha crackers to shut down (or to be reconfigured to crack ethane). Such a shift to lighter feedstock in crackers reduces both ethylene production costs and propylene output as a by-product, since cracking ethane does not yield propylene as occurs with cracking naphtha. However, in certain regions, propylene production must compete with the use of propane. Propane prices may be elevated in cold countries where it is used as fuel for transportation and for domestic heating. Therefore, PDH units may have elevated raw material costs in Western Europe countries during the winter due to the demand for propane as fuel.

The large amounts of shale gas reserves in the US are considered to be capable of supplying ethane to crackers for many years. According to the forecast from the US Energy Information Administration (EIA), in 2035, about half of the natural gas production in the US will be from shale gas. This, along with the increasing trends in both propylene demand and propane supply, makes the PDH process an attractive chemical route to evaluate, not only in the US, but also in China, where feedstock propane imported from Middle East is available at low prices, allowing attractive margins for PDH processes.

Figure 4 US Natural Gas Production History and Forecast (Trillion Cubic Feet)Non-associated onshore Coalbed methane Non-associated offshore Shale gas 30 25 20 15 10 5 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Associated with oil Alaska Tight gas

History

Forecast

Source: US Energy Information Administration (EIA) AOE2012

15

Technology OverviewThe process is separated into two different areas: the purification and reactor area; and the product recovery area. The purification and reaction area consists of four radialflow reactors, charge and interstage heaters, and a reactor feed-effluent heat exchanger. It also comprises cooling, compression and drying of reaction effluent as well as the Continuous Catalyst Regenerator (CCR) unit. The CCR is an apparatus that continuously regenerates the catalyst used in the dehydrogenation of propane. In PDH process, the catalyst is placed in moving beds in such a way that it continuously passes through the four radial reactors before being sent to the regeneration unit, which regenerates the catalyst and returns it to the top of the first reactor. This entire scheme works independently of reaction, i.e., if regeneration stops, reaction will continue to occur normally, but without catalyst regeneration.

In the product recovery area, the reactor effluent is sent to a cryogenic system, where a hydrogen-rich stream is separated from the hydrocarbon stream. This hydrogen vapor stream is recovered at 85 to 93 mol-% hydrogen purity. The hydrocarbon liquid stream is then sent to a selective hydrogenation unit (SHP) to eliminate diolefins and acetylenes. The product mixture then goes to a deethanizer, where light hydrocarbons and hydrogen traces resulting from selective hydrogenation are removed, so it is possible to recycle the unreacted propane to reactors without impurities. The last separation step occurs in the propane-propylene (P-P) splitter, where PG propylene product is acquired as vapor and propane liquid returns to the reaction area.

Figure 5 Process Simplified Flow Diagram

Hydrogen-rich stream

Propane

Area 100: Purification & Reaction

Area 200: Product Recovery

Light Ends Fuel PG Propylene

Recovered Propane

Intratec | Technical Analysis 16


17

Key Consumptions

Table 5 Raw Materials & Utilities Consumption (per ton of Product)RAW MATERIALS & UTILITIES

UTILITIES GENERATION


Labor Requirements

Table 7 Labor Requirements for a Typical Plant



19

Figure 6 Inside Battery Limits Conceptual Process Flow Diagram



Figure 6 Inside Battery Limits Conceptual Process Flow Diagram (Cont.)


21

Table 8 presents the main streams composition and operating conditions. For a more complete material balance, see the Appendix A. Mass Balance & Streams Properties Detailed information regarding utilities flow rates is provided in Appendix B. Utilities Consumption Breakdown. For further details on greenhouse gas emissions caused by this process, see Appendix C. Process Carbon Footprint.

ISBL Major Equipment ListTable 9 shows the equipment list by area. It also presents a brief description and the construction materials used. Find main specifications for each piece of equipment in Appendix D. Equipment Detailed List & Sizing.


23

OSBL Major Equipment ListThe OSBL is divided into three main areas: storage (Area 700), energy and water facilities (Area 800), and support & auxiliary facilities (Area 900).

Table 10 shows the list of tanks located in the storage area and the energy facilities required in the construction of a non-integrated unit.


25



Figure 7 Continuous Catalyst Regenerator Simplified Scheme


27

Economic AnalysisThe general assumptions for the base case of this study are outlined below. In Table 12, the IC Index stands for Intratec chemical plant Construction Index, an indicator, published monthly by Intratec, to scale capital costs from one time period to another. This index reconciles price trends of the fundamental components of a chemical plant construction such as labor, material and energy, providing meaningful historical and forecast data for our readers and clients. The assumed operating hours per year indicated does not represent any technology limitation; rather, it is an assumption based on usual industrial operating rates. Additionally, Table 12 discloses assumptions regarding the project complexity, technology maturity and data reliability, which are of major importance for attributing reasonable contingencies for the investment and for evaluating the overall accuracy of estimates. Definitions and figures for both contingencies and accuracy of economic estimates can be found in this publication in the chapter Technology Economics Methodology.

Table 12 Base Case General Assumptions


Figure 8 Project Implementation Schedule

Basic Engineering Detailed Engineering Procurement Construction Total EPC Phase Start-up

Intratec | Economic Analysis 28


Project Implementation ScheduleThe main objective of knowing upfront the project implementation schedule is to enhance the estimates for both capital initial expenses and return on investment. The implementation phase embraces the period from the decision to invest to the start of commercial production. This phase can be divided into five major stages: (1) Basic Engineering, (2) Detailed Engineering, (3) Procurement, (4) Construction, and (5) Plant Start-up. The duration of each phase is detailed in Figure 8.

Appendix E. Detailed Capital Expenses provides a detailed breakdown for the direct expenses, outlining the share of each type of equipment in total. After defining the total direct cost, the TFI is established by adding field indirect costs, engineering costs, overhead, contract fees and contingencies.

Table 14 Total Fixed Investment Breakdown (USD Thousands)

Capital ExpendituresFixed InvestmentTable 13 shows the bare equipment cost associated with each area of the project.

Table 13 Bare Equipment Cost per Area (USD Thousands)


Table 14 presents the breakdown of the total fixed investment (TFI) per item (direct & indirect costs and process contingencies). For further information about the components of the TFI, please see the chapter Technology Economics Methodology. Fundamentally, the direct costs are the total direct material and labor costs associated with the equipment (including installation bulks). In other words, the total direct expenses represent the total equipment installed cost.


Indirect costs are defined by the American Association of Cost Engineers (AACE) Standard Terminology as those "costs which do not become a final part of the installation but which are required for the orderly completion of the installation."

29

The indirect project expenses are further detailed in Appendix E. Detailed Capital Expenses.

Alternative OSBL ConfigurationsThe total fixed investment for the construction of a new chemical plant is greatly impacted by how well it will be able to take advantage of the infrastructure already installed in that location. For example, if there are nearby facilities consuming a units final product or supplying a units feedstock, the need for storage facilities significantly decreases, along with the total fixed investment required. This is also true for support facilities that can serve more than one plant in the same complex, such as a parking lot, gate house, etc. This study analyzes the total fixed investment for three distinct scenarios regarding OSBL facilities: Non-Integrated Plant Plant Partially Integrated Plant Fully Integrated The detailed definition, as well as the assumptions used for each scenario is presented in the chapter About this Study. The influence of the OSBL facilities on the capital investment is depicted in Figure 9 and in Figure 10.


Figure 9 Total Direct Cost of Different Integration Scenarios (USD Thousands)


Figure 10 Total Fixed Investment of Different Integration Scenarios (USD Thousands)


31

Working CapitalWorking capital, described in Table 15, is another significant investment requirement. It is needed to meet the costs of labor; maintenance; purchase, storage, and inventory of field materials; and storage and sales of product(s). Assumptions for working capital calculations are found in Appendix F. Economic Assumptions.

Table 15 Working Capital (USD Million)


Figure 11 Total Fixed Investment Validation (USD Million)



Other Capital ExpensesStart-up costs should also be considered when determining the total capital expenses. During this period, expenses are incurred for employee training, initial commercialization costs, manufacturing inefficiencies and unscheduled plant modifications (adjustment of equipment, piping, instruments, etc.). Initial costs are not addressed in most studies on estimating but can become a significant expenditure. For instance, the initial catalyst load in reactors may be a significant cost and, in that case, should also be included in the capital estimates. The purchase of technology through paid-up royalties or licenses is considered to be part of the capital investment. Other capital expenses frequently neglected are land acquisition and site development. Although these are small parts of the total capital expenses, they should be included. Table 17 CAPEX (USD Million)


Operational ExpendituresManufacturing CostsThe manufacturing costs, also called Operational Expenditures (OPEX), are composed of two elements: a fixed cost and a variable cost. All figures regarding operational costs are presented in USD per ton of product. Table 18 shows the manufacturing fixed cost.

Table 16 Other Capital Expenses (USD Million)

To learn more about the assumptions for manufacturing fixed costs, see the Appendix F. Economic Assumptions

Table 18 Manufacturing Fixed Cost (USD/ton)

Source: Intratec www.intratec.us Source: Intratec www.intratec.us

Assumptions used to calculate other capital expenses are provided in Appendix F. Economic Assumptions.

Total Capital ExpensesTable 17 presents a summary of the total Capital Expenditures (CAPEX) detailed in this chapter.

Table 19 discloses the manufacturing variable cost breakdown.

33

Economic DatasheetTable 19 Manufacturing Variable Cost (USD/ton) The Technology Economic Datasheet, presented in Table 21, is an overall evaluation of the technology's production costs in a US Gulf Coast based plant. The expected revenues in products sales and initial economic indicators are presented for a short-term assessment of its economic competitiveness.


Table 20 OPEX (USD/ton)


Historical AnalysisFigure 12 depictures Sales and OPEX historic data. Figure 13 compares the project EBITDA trends with Intratec Profitability Indicators (IP Indicators). The Basic Chemicals IP Indicator represents basic chemicals sector profitability, based on the weighted average EBITDA margins of major global basic chemicals producers. Alternately, the Chemical Sector IP Indicator reveals the overall chemical sector profitability, through a weighted average of the IP Indicators calculated for three major chemical industry niches: basic, specialties and diversified chemicals.


Figure 12 OPEX and Product Sales History (USD/ton)


Figure 13 EBITDA Margin & IP Indicators History Comparison


35

Intratec | Economic Analysis

36

Regional Comparison & Economic DiscussionRegional ComparisonCapital ExpensesVariations in productivity, labor costs, local steel prices, equipment imports needs, freight, taxes and duties on imports, regional business environments and local availability of sparing equipment were considered when comparing capital expenses for the different regions under consideration in this report. Capital costs are adjusted from the base case (a plant constructed on the US Gulf Coast) to locations of interest by using location factors calculated according to the items aforementioned. For further information about location factor calculation, please examine the chapter Technology Economics Methodology. In addition, the location factors for the regions analyzed are further detailed in Appendix F. Economic Assumptions. Figure 14 summarizes the total Capital Expenditures (CAPEX) for two locations.

Operational ExpendituresSpecific regional conditions influence prices for raw materials, utilities and products. Such differences are thus reflected in the operating costs. An OPEX breakdown structure for the different locations approached in this study is presented in Figure 15.

Economic DatasheetThe Technology Economic Datasheet, presented in Table 22, is an overall evaluation of the technology's capital investment and production costs in the alternative location analyzed in this study.

Figure 14 CAPEX per Location (USD Million)


37

Figure 15 Operating Costs Breakdown per Location (USD/ton)


Intratec | Regional Comparison & Economic Discussion 38

39

Intratec | References

40

References

Acronyms, Legends & ObservationsAACE: American Association of Cost Engineers C: Distillation, stripper, scrubber columns (e.g., C-101 would denote a column tag) C2, C3, ... Cn: Hydrocarbons with "n" number of carbon atoms C2=, C3=, ... Cn=: Alkenes with "n" number of carbon atoms CAPEX: Capital expenditures CC: Distillation column condenser CCR: Continuous catalyst regenerator CG: Chemical grade CK: Distillation column compressor CP: Distillation column reflux pump CR: Distillation column reboiler CT: Cooling tower CV: Distillation column accumulator drum E: Heat exchangers, heaters, coolers, condensers, reboilers (e.g., E-101 would denote a heat exchanger tag) EBIT: Earnings before Interest and Taxes EBITDA: Earnings before Interests, Taxes, Depreciation and Amortization EIA: Energy Information Administration F: Furnaces, fired heaters (e.g., F-101 would denote a furnace tag) FCC: Fluid catalytic cracking IC Index: Intratec Chemical Plant Construction Index IP Indicator: Intratec Chemical Sector Profitability Indicator ISBL: Inside battery limits K: Compressors, blowers, fans (e.g., K-101 would denote a compressor tag) KPI: Key Performance Indicator kta: thousands metric tons per year LPG: Liquefied petroleum gas MTO: Methanol-to-Olefins MTP: Methanol-to-Propylene NGL: Natural gas liquids OCT: Olefin Conversion Technology OPEX: Operational Expenditures OSBL: Outside battery limits P: Pumps (e.g., P-101 would denote a pump tag) PDH: Propane dehydrogenation PG: Polymer grade PP: Polypropylene P-P: Propane-Propylene PSA: Pressure swing adsorption R: Reactors, treaters (e.g., R-101 would denote a reactor tag) RF: Refrigerant RG: Refinery grade SB: Steam boiler SHP: Selective hydrogenation process Syngas: Synthesis gas T: Tanks (e.g., T-101 would denote a tank tag) TFI: Total Fixed Investment TPC: Total process cost V: Horizontal or vertical drums, vessels (e.g., V-101 would denote a vessel tag) WD: Demineralized water X: Special equipment (e.g., X-101 would denote a special equipment tag) Obs.: 1 ton = 1 metric ton = 1,000 kg

41

Technology Economics MethodologyIntratec Technology Economics methodology ensures a holistic, coherent and consistent techno-economic evaluation, ensuring a clear understanding of a specific mature chemical process technology.From this simulation, material balance calculations are performed around the process, key process indicators are identified and main equipment listed. Equipment sizing specifications are defined based on Intratec's equipment design capabilities and an extensive use of AspenONE Engineering Software Suite that enables the integration between the process simulation developed and equipment design tools. Both equipment sizing and process design are prepared in conformance with generally accepted engineering standards. Then, a cost analysis is performed targeting ISBL & OSBL fixed capital costs, manufacturing costs, and overall working capital associated with the examined process technology. Equipment costs are primarily estimated using Aspen Process Economic Analyzer (formerly Aspen Icarus) customized models and Intratec's in-house database. Cost correlations and, occasionally, vendor quotes of unique and specialized equipment may also be employed. One of the overall objectives is to establish Class 3 cost estimates 1 with a minimum design engineering effort. Next, capital and operating costs are assembled in Microsoft Excel spreadsheets, and an economic analysis of such technology is performed. Finally, two analyses are completed, examining: a. The total fixed investment in different construction scenarios, based on the level of integration of the plant with nearby facilities The capital and operating costs for a second different plant location

IntroductionThe same general approach is used in the development of all Technology Economics assignments. To know more about Intratecs methodology, see Figure 16. While based on the same methodology, all Technology Economics studies present uniform analyses with identical structures, containing the same chapters and similar tables and charts. This provides confidence to everyone interested in Intratecs services since they will know upfront what they will get.

WorkflowOnce the scope of the study is fully defined and understood, Intratec conducts a comprehensive bibliographical research in order to understand technical aspects involved with the process analyzed. Subsequently, the Intratec team simultaneously develops the process description and the conceptual process flow diagram based on: a. b.Intratec | Technology Economics Methodology

Patent and technical literature research Non-confidential information provided by technology licensors Intratec's in-house database Process design skills b.

c. d.

Next, all the data collected are used to build a rigorous steady state process simulation model in Aspen Hysys and/or Aspen Plus, leading commercial process flowsheeting software tools.

1

These are estimates that form the basis for budget authorization, appropriation, and/or funding. Accuracy ranges for this class of estimates are + 10% to + 30% on the high side, and - 10 % to - 20 % on the low side.

42

Figure 16 Methodology Flowchart

Study Understanding Validation of Project Inputs Patent and Technical Literature Databases

Intratec Internal Database

Bibliographical Research

Non-Confidential Information from Technology Licensors or Suppliers

Technical Validation Process Description & Flow Diagram

Aspen Plus, Aspen Hysys Aspen Exchanger Design & Rating, KG Tower, Sulcol and Aspen Energy Analyzer

Vendor Quotes

Material & Energy Balances, Key Process Indicators, List of Equipment & Equipment Sizing

Pricing Data Gathering: Raw Materials, Chemicals, Utilities and Products

Capital Cost (CAPEX) & Operational Cost (OPEX) Estimation

Aspen Process Economic Analyzer, Aspen Capital Cost Estimator, Aspen InPlant Cost Estimator & Intratec In-House Database

Construction Location Factor (http://base.intratec.us)

Economic Analysis

Analyses of Different Construction Scenarios and Plant Location

Project Development Phases Information Gathering / Tools

Final Review & Adjustments


43

Capital & Operating Cost EstimatesThe cost estimate presented in the current study considers a process technology based on a standardized design practice, typical of a major chemical company. The specific design standards employed can have a significant impact on capital costs. The basis for the capital cost estimate is that the plant is considered to be built in a clear field with a typical large single-line capacity. In comparing the cost estimate hereby presented with an actual project cost or contractor's estimate, the following must be considered: Minor differences or details (many times, unnoticed) between similar processes can affect cost noticeably. The omission of process areas in the design considered may invalidate comparisons with the estimated cost presented. Industrial plants may be overdesigned for particular objectives and situations. Rapid fluctuation of equipment or construction costs may invalidate cost estimate. Equipment vendors or engineering companies may provide goods or services below profit margins during economic downturns. Specific locations may impose higher taxes and fees, which can impact costs considerably. In addition, no matter how much time and effort are devoted to accurately estimating costs, errors may occur due to the aforementioned factors, as well as cost and labor changes, construction problems, weather-related issues, strikes, or other unforeseen situations. This is partially considered in the project contingency. Finally, it must always be remembered that an estimated project cost is not an exact number, but rather is a projection of the probable cost.

Process equipment (e.g., reactors and vessels, heat exchangers, pumps, compressors, etc.) Process equipment spares Housing for process units Pipes and supports within the main process units Instruments, control systems, electrical wires and other hardware Foundations, structures and platforms Insulation, paint and corrosion protection In addition to the direct material and labor costs, the ISBL addresses indirect costs, such as construction overheads, including: payroll burdens, field supervision, equipment rentals, tools, field office expenses, temporary facilities, etc.

OSBL InvestmentThe OSBL investment accounts for auxiliary items necessary to the functioning of the production unit (ISBL), but which perform a supporting and non-plant-specific role. OSBL items considered may vary from process to process. The OSBL investment could include the installed cost of the following items: Storage and packaging (storage, bagging and a warehouse) for products, feedstocks and by-products Steam units, cooling water and refrigeration systems Process water treating systems and supply pumps Boiler feed water and supply pumps Electrical supply, transformers, and switchgear Auxiliary buildings, including all services and equipment of: maintenance, stores warehouse, laboratory, garages, fire station, change house, cafeteria, medical/safety, administration, etc. General utilities including plant air, instrument air, inert gas, stand-by electrical generator, fire water pumps, etc. Pollution control, organic waste disposal, aqueous waste treating, incinerator and flare systems

Intratec | Technology Economics Methodology 44

ISBL InvestmentThe ISBL investment includes the fixed capital cost of the main processing units of the plant necessary to the manufacturing of products. The ISBL investment includes the installed cost of the following items:

Working CapitalFor the purposes of this study, 2 working capital is defined as the funds, in addition to the fixed investment, that a company must contribute to a project. Those funds must be adequate to get the plant in operation and to meet subsequent obligations. The initial amount of working capital is regarded as an investment item. This study uses the following items/assumptions for working capital estimation: Accounts receivable. Products and by-products shipped but not paid by the customer; it represents the extended credit given to customers (estimated as a certain period in days of manufacturing expenses plus depreciation). Accounts payable. A credit for accounts payable such as feedstock, catalysts, chemicals, and packaging materials received but not paid to suppliers (estimated as a certain period in days of manufacturing expenses). Product inventory. Products and by-products (if applicable) in storage tanks. The total amount depends on sales flow for each plant, which is directly related to plant conditions of integration to the manufacturing of products derivatives (estimated as a certain period in days of manufacturing expenses plus depreciation, defined by plant integration circumstances). Raw material inventory. Raw materials in storage tanks. The total amount depends on raw material availability, which is directly related to plant conditions of integration to raw material manufacturing (estimated as a certain period in days of raw material delivered costs, defined by plant integration circumstances). In-process inventory. Material contained in pipelines and vessels, except for the material inside the storage tanks (assumed to be 1 day of manufacturing expenses). Supplies and stores. Parts inventory and minor spare equipment (estimated as a percentage of total maintenance materials costs for both ISBL and OSBL).

Cash on hand. An adequate amount of cash on hand to give plant management the necessary flexibility to cover unexpected expenses (estimated as a certain period in days of manufacturing expenses).

Start-up ExpensesWhen a process is brought on stream, there are certain onetime expenses related to this activity. From a time standpoint, a variable undefined period exists between the nominal end of construction and the production of quality product in the quantity required. This period is commonly referred to as start-up. During the start-up period expenses are incurred for operator and maintenance employee training, temporary construction, auxiliary services, testing and adjustment of equipment, piping, and instruments, etc. Our method of estimating start-up expenses consists of four components: Labor component. Represents costs of plant crew training for plant start-up, estimated as a certain number of days of total plant labor costs (operators, supervisors, maintenance personnel and laboratory labor). Commercialization cost. Depends on raw materials and products negotiation, on how integrated the plant is with feedstock suppliers and consumer facilities, and on the maturity of the technology. It ranges from 0.5% to 5% of annual manufacturing expenses. Start-up inefficiency. Takes into account those operating runs when production cannot be maintained or there are false starts. The start-up inefficiency varies according to the process maturity: 5% for new and unproven processes, 2% for new and proven processes, and 1% for existing licensed processes, based on annual manufacturing expenses. Unscheduled plant modifications. A key fault that can happen during the start-up of the plant is the risk that the product(s) may not meet specifications required by the market. As a result, equipment modifications or additions may be required.

2 The accounting definition of working capital (total current assets minus total current liabilities) is applied when considering the entire company.

45

Other Capital ExpensesPrepaid Royalties. Royalty charges on portions of the plant are usually levied for proprietary processes. A value ranging from 0.5 to 1% of the total fixed investment (TFI) is generally used. Site Development. Land acquisition and site preparation, including roads and walkways, parking, railroad sidings, lighting, fencing, sanitary and storm sewers, and communications.

Uncertainty in process parameters, such as severity of operating conditions and quantity of recycles Addition and integration of new process steps Estimation of costs through scaling factors Off-the-shelf equipment Hence, process contingency is also a function of the maturity of the technology, and is usually a value between 5% and 25% of the direct costs. The project contingency is largely dependent on the plant complexity and reflects how far the conducted estimation is from the definitive project, which includes, from the engineering point of view, site data, drawings and sketches, suppliers quotations and other specifications. In addition, during construction some constraints are verified, such as: Project errors or incomplete specifications Strike, labor costs changes and problems caused by weather

Manufacturing CostsManufacturing costs do not include post-plant costs, which are very company specific. These consist of sales, general and administrative expenses, packaging, research and development costs, and shipping, etc. Operating labor and maintenance requirements have been estimated subjectively on the basis of the number of major equipment items and similar processes, as noted in the literature. Plant overhead includes all other non-maintenance (labor and materials) and non-operating site labor costs for services associated with the manufacture of the product. Such overheads do not include costs to develop or market the product. G & A expenses represent general and administrative costs incurred during production such as: administrative salaries/expenses, research & development, product distribution and sales costs.

Table 23 Project ContingencyPlant Complexity Project Contingency Complex 25% Typical 20% Simple 15%


ContingenciesContingency constitutes an addition to capital cost estimations, implemented based on previously available data or experience to encompass uncertainties that may incur, to some degree, cost increases. According to recommended practice, two kinds of contingencies are assumed and applied to TPC: process contingency and project contingency. Process contingency is utilized in an effort to lessen the impact of absent technical information or the uncertainty of that which is obtained. In that manner, the reliability of the information gathered, its amount and the inherent complexity of the process are decisive for its evaluation. Errors that occur may be related to:

Intratecs definitions in relation to complexity and maturity are the following: Table 24 Criteria DescriptionSomewhat simple, widely known processes Regular process Several unit operations, extreme Complex temperature or pressure, more instrumentation New & Maturity Proven Licensed From 1 to 2 commercial plants 3 or more commercial plants

Intratec | Technology Economics Methodology

Simple Typical

Complexity


46

Accuracy of Economic EstimatesThe accuracy of estimates gives the realized range of plant cost. The reliability of the technical information available is of major importance.

A properly estimated location factor is a powerful tool, both for comparing available investment data and evaluating which region may provide greater economic attractiveness for a new industrial venture. Considering this, Intratec has developed a well-structured methodology for calculating

Documents

Technology Economics: Propylene via Propane Dehydrogenation