Chemical Engineering Plant Design 1

Transcription

1 Chemical Engineering Plant Design 1 Costing of Ethylene Oxide Plant CHE 4181 By: Abdullah Kurdi Khalid Almansoori Nasser Almakhmari Report Submitted: 12/2/2015 Instructor: Dr. Jonathan Whitlow

2 Table of Content Summery 2 Capital Cost 3 I. Methodology 4 II. Results 7 Manufacturing Cost 8 I. Methodology 9 II. Results 10 Profitability I. Methodology 14 II. Results 15 References 16 Appendix A: Detailed Capital Cost Information 17 Appendix B: Manufacturing Cost Detailed Calculations 18 Appendix C: Electricity Price Extrapolation 22 Appendix D: Profitability Detailed Calculations 23 1

3 Summery The following report shows and discusses the methodology for the costing of a chemical plant. The plant discussed specifically in this report is an Ethylene Oxide Production Plant (1). The costing of a chemical plant has three main section: the capital cost, the manufacturing cost, and the profitability. Each of the three sections is described on its own, and all results are shown. Sample calculations and specific results are available in the Appendix section of this report for demonstration and clarification. A supporting electronic spreadsheet, showing all the calculations and graphs, is uploaded on the Canvas.fit.edu website. In summary, the cost of an ethylene oxide production plant has been estimated; it has a capacity of producing 130,318 metric tons annually. The plant needs a total capital cost of $ 1,077,715,000 and has an estimated $577,785,000 for manufacturing cost. The land cost is projected to be 5 million, and it is expected that the construction period will take two years; and operation will start on the third year. If the plant doubles the production rate of ethylene oxide, from the current specified one (1), the breakeven point is estimated to be between the fifth and sixth year of operation. 2

4 Capital Cost The following section discusses the capital cost of the production plant of Ethylene Oxide using the methodology discussed in appendix A of the Analysis, Synthesis and Design of Chemical Processes, by Turton (1) ; the appendix consists of several sources and helpful parameters in estimating the cost of process equipment. The capital cost is basically the sum of the costs of all process units. It is important to note that the data used in the calculations are based on a survey of equipment manufacturers that were taken in the year of 2001 (2) ; the average Chemical Engineering capital Cost Index (CEPCI) in 2001 was 397, and it must be used to account for inflation (2). The CEPCI for the year 2016 was given by Dr. Whitlow as 604 and was used to update the total capital cost to the year There were some assumptions made in the design, all of which are mentioned in the following Table 1. Table 1: Assumptions Made in Calculating the Cost of certain Equipment Unit Assumptions Over Design Factor A safety over design factor of 10 % The pressures in the in the tube side were the same as the inlet pressure of the process multiplied by 10% The pressures in the shell side were chosen to be 35 psi because it was assumed to be cooling water and multiplied by 10 % Heat Exchangers Some heat exchangers found to have capacity not within the range. The capacity was forced to be within the range by dividing by lowest possible number of exchangers. The final cost was multiplied also by the number of exchangers. 3

5 Table 1 (Cont.): Assumptions Made in Calculating the Cost of certain Equipment Reactors Vessels Unit Assumptions Reactors are modeled as Heat Exchangers Floating Head Effective diameter is the diameter of the reactor using the volume and height Some of Towers were modeled as Process Vessels (vertical). The assumptions were made to find F P,Vessel, FM, B1, and B2. B1 and B2 were found in Ethylene oxide table (1) Costing Correction to the year 2016 Linear extrapolation between 2001 and 2010, then using the line equation to get the 2016 index number I. Capital Methodology Purchased Equipment Cost The following equation was used for calculating the purchased cost of the equipment, assuming ambient operating pressure and using carbon steel construction (2) : log 10 C o p = K 1 + K 2 log 10 (A) + K 3 [log 10 (A)] 2 C o p : Purchased cost A: Capacity or size parameter for the equipment K1, K2, and K3: given constants in Turton (2) 4

6 Purchased Equipment Cost (for capacities out of the range) The following correction was used to accommodate the capacity values that were out of the range of specifications mentioned in Turton (2) : C a = C b ( A 2 a ) A b Where Ca is the cost of the equipment with the out of range capacity, Cb is the cost of the equipment at the maximum capacity, Aa is the out of range capacity value, and Ab is the maximum capacity value. Pressure Factors for Process Vessels F P,Vessel (P + 1) D 2[ (P + 1)] The previous equation was used to determine the pressure factors for Vessels and Towers. P is the pressers in barg, and D is the diameter in meter. There are three Towers and one Vessel; two of the towers are the same, and the third one has a different operating pressure and diameter. The values of F P,Vessels were found to effects the cost due to the high pressure factors value (2). Pressure Factor for other Process Equipment The pressure factor, FP, for other equipment such as Pumps, Heat Exchangers, Compressors, and Reactors in the plant was found using the following equation: log 10 F p = C 1 + C 2 log 10 (P) + C 3 [log 10 (P)] 2 P: Design pressure in barg C1, C2, and C3: given constants in Table A.2 in Turton (2) 5

7 Material Factors for Heat Exchangers, Process Vessels, and Pumps The values of the material factors, FM, for heat exchangers, process vessels and pumps are obtained from figure A.18 in Turton (2) and the identification numbers are also listed in Table A.3 in Turton (2) Bare Module Factor for Heat Exchangers, Process Vessels, and Pumps C BM = C p o F BM = C p o (B 1 + B 2 F M F p ) CP o : Purchased Cost FBM: Bare module factor B1 and B2; Given constants in Table A.4 in Turton (2) FM: Material Factor Fp: Pressure Factor Bare Module and Material Factors for the Remaining Process Equipment The values of the Bare Module and Material Factors, FBM and FM for the remaining equipment can be found using Figure A.19 and Table A.6 in Turton (2). Bare Module Cost for Sieve Trays In the case of Sieve trays, the bare Module cost is calculated differently; the value of CBM is obtained using the following equation: C BM = C o p NF BM F q CP o : Purchased Cost N: number of trays FBM: Bare module factor Fq: Quantity factor for trays The quantity factor for trays, Fq, for N 20: Fq = 1 6

8 Costing Correction to 2016 C a = C b ( A 2 a ) A b Where Ca is the cost of the equipment in 2016, Cb is the cost of the equipment in 2001, Aa is the CEPCI in 2016 given by Dr. Whitlow to be 605, as a fixed assumption, and Ab is the CEPCI in II. Capital Results The following Table 2 shows the total costs of the equipment used in the plant. Table 2: Total Cost of Equipment Equipment Total Cost (2016) Percentage of Capital Cost Pump $51, % Vessel (horizontal) $264, % Heat Exchangers $906,300, % Compressors $260, % Towers $166,000, % Sieve Trays $4,640, % Reactors $200, % The total capital cost is $ 1,077,715,000. From Table 2, it can be noticed that the Heat Exchangers govern the majority of the capital cost with %, and the second large cost is for the Towers, occupying % of the total capital cost. A more detailed costing for each unit is presented in Appendix A of this report. 7

9 Manufacturing Cost After calculating the capital investment needed to build the Ethylene Oxide plant, the operational investment is to be determined. There are three types of manufacturing costs to take into account: Direct Manufacturing costs, Fixed manufacturing costs, and General Expenses. Direct Costs are dependent on production rate, and it includes raw materials, utilities, labor, waste treatment, supplies, maintenance, lab charges, and patents & royalties. Fixed costs are independent of production rate, and it includes taxes & insurance and plant overhead. Finally general expenses costs are loosely tied to the production rate, and it includes sales and marketing, research & development and administrative costs. The following report shows the manufacturing cost for the ethylene oxide plant, using the methodology stated in Turton (2). 8

10 I. Manufacturing Methodology Utility Cost: In this section, the expenses associated with electricity, cooling water, process steam and many other utilities are accounted for. It is important to note that the cost of utilities are dependent on both inflation and energy cost. The main utilities needed in the plant are electricity, cooling water, high pressure steam and boiling feed water; these utilities are used in the plant in the heat exchangers, reactors and compressors. Table 3 shows the total amount of each utility needed in the plant annually, and the price and annual cost of each utility. For the cost of electricity, the cost was linearly extrapolated using the data found in the U.S. Energy Information Administration (3) to find the estimated price in All the calculation that are involved in the manufacturing cost of ethylene oxide plant are presented in Appendix B. For cooling water, high pressure steam and boiling feed water. The cooling water cost was based on the total annual increase in the cost of electricity between 2006 and The high pressure steam and the boiler feed water are based on the total annual increase between 2009 and 2015 for natural gas. The data presented in Appendix C shows the linear extrapolation that was used the electricity cost. 9

11 II. Manufacturing Results The following Table 3 shows a summary of the costs included in the manufacturing of the plant. Table 3: Summary of the Costs included in the Manufacturing Cost Direct Manufacturing Costs $401,419,00 Direct Supervisory and Clerical Labor $193,000 Maintenance and Repairs $64,654,000 Fixed Manufacturing Cost $74,033,000 Local taxes and Insurance $34,483,000 Plant Overhead costs $39,551,000 Raw Materials $21,732,000 Utilities $286,330,000 Operating Labor $1,071,000 Waste treatment $250,000 Lab Charges $161,000 Patents and Royalties $17,334,000 Fixed Capital Investment $1,077,564,000 Cost of Manufacturing $577,785,000 General Expenses $102,334,000 Administration Costs $9,925,000 Distribution and Selling Costs $63,557,000 Research and Development $28,890,000 Form Table 3, the total manufacturing cost of the plant is $577,785,000 while the fix capital investment is $1,077,564,000. The direct manufacturing cost is $401,419,000; the fixed manufacturing cost is $74,033,000 and the general expenses have a total of $102,334,

12 0.06% 0.27% 0.04% 4.43% Direct Costs 73.13% 16.51% 5.55% Maintenance and Repairs Raw Materials Utilities Operating Labor Waste treatment Lab Charges Patents and Royalties Figure 1: Direct Costs Distribution Figure 1 above shows the distribution of the direct costs between its elements; it can be noticed that utilities take a large part of the pie chart with a 73.13% of the total direct cost. The second largest cost is for the maintenance and repairs of the plant which occupies 16.51% of the pie chart. The third largest segment in the pie chart is for raw materials occupying 5.55% of the direct costs. Patents and royalties occupy 4.43%, while operating labor, waste treatment, and lab charges occupy 0.27%, 0.06% and 0.04% respectively. 11

13 The following Table 4 shows the utility cost of each utility needed in the plant annually. Table 4: Price, Total Amount, and Cost Annually Needed for Utilities Cost (2016 $) Total Amount Needed Cost ($/yr) in 2016 Electricity ($/kw-hr) ,100,000,000 $225,000,000 Cooling water ($/kg) ,600,000,000 $2,000,000 High Pressure Steam ($/kg) ,000,000,000 $140,000,000 Boiler Feed Water ($/kg) ,600,000 $600,000 The total utility cost, from Table 3, is $286,330,000. It can be noticed from Table 4 that the cost of electricity occupies a large part of the total with % of the cost. The next largest utility is high pressure steam with a total cost of $140,000,000, which is 20.63% of the total utility cost. Fixed Manufacturing Costs 53% 47% Local taxes and Insurance Plant Overhead costs Figure 2: Fixed Manufacturing Cost Distribution From Table 3, the total fixed manufacturing cost is $74,033,000; Figure 2 shows the distribution of the cost between the local taxes and insurance and the plant overhead costs, which occupy 53% and 47% respectively. 12

14 General Expenses 28% 10% Administration Costs Distribution and Selling Costs 62% Research and Development Figure 3: General Expenses Distribution From Table 3, the general expenses in the plant have a total of $102,334,000; this total is divided by the administration costs, 10%, research and development, 28%, and the distribution and selling cost, 62% of the total expenses. 13

15 Profitability I. Profitability Methodology: Profitability of the ethylene oxide plant was determined through several steps. The product annual flow rate and the cost of the product were calculated in order to find the revenue. Some assumptions were made in the profitability calculation; details are shown in Appendix D. The land cost was assumed to be equal to 5 million dollars. In addition, the annual interest rate was assumed to be 6 %. The revenue was assumed to increases by 5 % annually, and the operation cost by 2 % annually. The tax rate was assumed to be 25%; while the working capital was assumed to be 15% of the fixed capital investment. The construction period was assumed to be two years, with an expected plant life time of ten years. It was noticed that there is no breakeven point when the product flow rate is as given. An assumption was made in order to find a breakeven point which was doubling the annual production of the product, ethylene oxide. The total cost of doubling the ethylene oxide was found to be $1.120 billion. The cost of ethylene oxide was found using linear extrapolation from the costing data found for the years and assuming a fixed annual increase of 15.64% (6). 14

16 Cash Flow II. Profitability Results: $6,000,000,000 Discrete Cash Flow $5,000,000,000 $4,000,000,000 $3,000,000,000 $2,000,000,000 $1,000,000,000 $0 -$1,000,000, $2,000,000,000 -$3,000,000,000 Time (years) Figure 4: Cumulative Future vs. Time Based on Figure 4 above, it can be concluded that the breakeven point is going to be between the fifth and sixth year of operation. The revenue in the sixth year will be $ 671,100,000. It is important to note that this prediction assumes the doubling of the production of ethylene oxide, i.e. twice the output flow rate specified. The discounted cash flow rate of return (DCFROR) was found to be at a 27.31% annually interest rate. 15

17 References 1) Analysis, Synthesis and Design of Chemical Processes, by Turton, Baillie, Whiting, Shaeiwitz & Bhattacharyya 4 th Edition, Prentice Hall, 2012, Ethylene Oxide Production, Unit ) Analysis, Synthesis and Design of Chemical Processes, by Turton, Baillie, Whiting, Shaeiwitz & Bhattacharyya 4 th Edition, Prentice Hall, ) U.S. Energy Information Administration, Electric Power Monthly, August 2015, Table 5.3. Average Price of Electricity to Ultimate Customers 4) Chemical Equipment Operators and Tenders." U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics. Web. 2 Dec ) "Ethylene Prices, News & Market Analysis ICIS.com." Ethylene Prices, News & Market Analysis ICIS.com. Web. 2 Dec ) Nigam, Shirish. "Impact of Crude Oil Price Trends on Feed Additives' Prices." Engormix. Animal Feed, 26 May Web. 1 Dec ) "CHE_4181_Economics_Profitability_2015.pptx." 16 Nov Lecture. 16

18 Appendix A: Detailed Capital Cost Information Table 5: Cost of Each Piece of Equipment Equipment Unit # Cost (2016 $) Pump P-701 A/B $50,623 Vessel (horizontal) V-701 $264,033 E-701 $5,176,300 E-702 $86,965,925 E-703 $171,762,029 E-704 $202,704,703 Heat Exchangers E-705 $201,336,855 E-706 $207,954,249 E-707 $18,322,587 E-708 $10,368,570 E-709 $1,675,570 C-701 A/B $66,018 C-702 A/B $81,291 Compressors C-703 A/B $75,561 C-704 A/B $15,808 C-705 A/B $15,808 T-701 $10,640,056 Towers T-702 $10,640,056 T-703 $144,608,451 T-701 $793,233 Sieve Trays T-702 $793,233 T-703 $3,053,945 Reactors R-701 $99,514 R-702 $99,514 Table 6: Total Capital Cost Total Module Cost (2001) Total Module Cost (2016) $664,274,660 $1,077,563,932 17

19 Appendix B: Manufacturing Cost Detailed Calculations Operating labor Cost: As shown in Table (1), there are 52 weeks in one year, 3 weeks for vacation, 8 hours in each shift, and 5 shift per week. To calculate the total hours per year, the number of week should be 49 by subtracting 52 from 3. Calculating Total hour is by Multiplying = 1960 and total hour/year is = To obtain the number of operator hired for each operators is by using this equation (Total hours of operation / Total hour/year) which gives =4.5 and this number should be rounded to 5. N OL = P N np (1) This Equation (1) represent the number of operators per shift. P is the number of steps involving particulate solids handling. Nnp is the number of steps not involving particulate solids handling. P will be zero because there are no solids that need handling such as no transportation or Particulate removal. Nnp is the number of none particulate process includes reactors, towers, compressor, and heat exchanger, Pump and Vessel are not included (2). Nnp will be 19. Putting P and Nnp in the equation of N OL will give and this number should be rounded to 4. Labor Wages and Total number of operators are needed to calculate the COL. Annual Labor wages were found to be 52500$ in 2014 (2). The Annual labor wages in 2016 is $53550 by assuming 2 percent increasing from To calculate the total number of operators is by using this equation N OL # of operator hired for each operator = 5 4 = 20. COL = The Annual labor wages Total number of operators = 1,071,000 $ 18

20 Table 7: Operating labor cost variable Number of week in year 52 Number of weeks for vacation 3 Number of shift per week 5 Hours each shift 8 Total hours /year 1960 Total hours of operation 8760 Number of operator hired for each operator 4.5 NOL 4 Annual mean Wages in ,550 Total number of operators 20 COL $1,071,000 Cost of Raw Materials: The raw materials in the Ethylene Oxide production are Ethylene, air, and process water. The mass flowrate of ethylene was given in the process description. Moreover, the price of ethylene was found to be 39 $/tonne therefore the mass flowrate was converted in tonne / year in order to find the final cost in unit of $/year. The cost of the process water and air were calculated using the same methodology. Since air does not affect the reaction of producing ethylene oxide, the source of air was considered to be from the atmosphere. Ethylene: The price of ethylene was found to be equal to 39 $/tonne. Air: the price of air was assumed to be equal to zero Process water: it was assumed to be hot water. The price of process water found to be equal to $/tonne Cost of Waste treatment Waste water: the only waste of the process is water. Using the given mass flow rate. The price found to be equal to 0.041$/tonne. 19

21 Direct Manufacturing Costs: The direct manufacturing cost was calculated by summing the following: CRM + CWT + CUT COL COM FCL Where CRM is the cost of raw materials CWT is the cost of waste treatment CUT is the cost of utilities COL is the cost of operating labor FCL is the fixed capital cost COM is cost of manufacturing Using the correlation above, the direct manufacturing cost found to be $ 489,242,558. Direct Supervisory and Clerical Labor: The Direct Supervisory and Clerical Labor was calculated using the formula below. Direct Supervisory and Clerical Labor = 0.18 (Operating Labor) Using the correlation above, the Direct Supervisory and Clerical Labor cost found to be $ 192,780. Maintenance and Repairs: Maintenance and Repairs was calculated using the formula below. Maintenance and Repairs = 0.06 (Fixed Capital Investment) Using the correlation above, the Maintenance and Repairs cost found to be $ 65,870,122. Fixed Manufacturing: Fixed Manufacturing Cost = (Operating Labor) (Fixed Capital Investment) Using the correlation above, the Fixed Manufacturing cost found to be $ 78,411,

22 Local taxes and Insurance: Local taxes and Insurance = (Fixed Capital Investment) Using the correlation above, Local taxes and Insurance cost found to be $ 35,130,732. Plant Overhead costs: Plant Overhead costs = (Operating Labor) (Fixed Capital Investment) Using the correlation above, the Plant Overhead costs cost found to be $ 40,280,314. Lab Charges: Lab Charges = 0.15 (Operating Labor) Using the correlation above, the Lab Charges costs cost found to be $ 160,650. Patents and Royalties: Patents and Royalties = 0.03 (Cost of Manufacturing) Using the correlation above, the Patents and Royalties costs cost found to be $ 20,525,847. Cost of Manufacturing : COM = (1/0.81) (Raw Materials+ Waste treatment+ Utilities) (Operating Labor) FCI Where FCI is Fixed Capital Investment Using the correlation above, the Cost of Manufacturing found to be $ 684,194,901. General Expenses: General Expenses = (Operating Labor) ((Fixed Capital Investment) (COM) Using the correlation above, the Cost of Manufacturing found to be $ 119,541,

23 Price in Cents/kW-hr Administration Costs: Administration Costs = (Direct Supervisory and Clerical Labor) ( FCI) Using the correlation above, the Administration Costs found to be $ 10,107,420. Distribution and Selling Costs: Distribution and Selling Costs = 0.11 (Raw Materials) Using the correlation above, the Distribution and Selling Costs found to be $ 75,261,439. Research and Development: Research and Development = 0.05 (COM) Using the correlation above, the Distribution and Selling Costs found to be $ 34,209,745. Appendix C: Electricity Price Extrapolation year cent/kwh Price of Electricity y = x R² = Year The data in the table was used to plot the correlation in the figure above and extrapolate linearly to find the cost of electricity in

24 Appendix D: Profitability Detailed Calculations 1. Revenue Calculation: To get the revenue calculation, we need to get the product price ($/MT) and also the amount annually that the plant will produce (MT/year) to get the total price. Total Price = Amount Annually Price = = 1,120,272,081 $ year MT Year $ MT 2. Taxes: Taxes = (Revenue Operating Cost Depreciation) Tax rate = (1,120,272, ,784, ,576,393) 0.25 = $108,682, After tax (Net Profit) : Taxes = (Revenue Operating Cost Depreciation Taxes) = (1,120,272, ,784, ,576, ,682,790) = $108,682, Present Worth Discrete Cash Flow (P): P = A [ (1 + i)n 1 i(1 + i) n ] = 22,449,249 $ [ ( ) ( ) 12] = $260,836,294 Where A is the monthly distributed cash flow and i is the Annual or monthly interest rate and n is the annual or monthly period. 5. Future Worth Discrete Cash Flow (F): F = P[(1 + i) n ] = $260,836,294 ( ) 144 = $534,910,243 23