1. Propylene via Propane Dehydrogenation, Part 3

2. #TEC008BTechnology Economics Propylene via Propane Dehydrogenation, Part III 2013Abstract Propylene 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. The STAR process was originally developed by Phillips Petroleum, but now it is commercialized by Krupp-Uhde, which increased the process performance by the insertion of an oxydehydrogenation step which enhanced the process economics in terms of investment and operating costs. Included in the analysis is an overview of the technology and economics of a method similar to the Uhde STAR process. Both the capital investment and the operating costs are presented for plants constructed on the US Gulf Coast and in China. The economic analysis presented in this report is based on a plant that is fully integrated with a petrochemical complex and capable of producing 450 kta of polymer-grade propylene. The estimated CAPEX for such a plant on the US Gulf Coast is about USD 400 million. Although China still depends on imported propane from Middle East, being subject to supply shortages, the historical operational margins are high enough to explain the number of PDH planned projects in the country.Copyrights 2013 by Intratec Solutions LLC. All rights reserved. Printed in the United States of America. 3. 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. 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Contents About this Study .............................................................................................................................................................. 8 Object of Study.............................................................................................................................................................................................................................8 Analyses Performed...................................................................................................................................................................................................................8 Construction Scenarios ..............................................................................................................................................................................................................8 Location Basis ...................................................................................................................................................................................................................................9Design Conditions......................................................................................................................................................................................................................9Study Background ........................................................................................................................................................ 10 About Propylene ......................................................................................................................................................................................................................10 Introduction.................................................................................................................................................................................................................................... 10 Applications.................................................................................................................................................................................................................................... 10Manufacturing Alternatives ..............................................................................................................................................................................................11 Licensor(s) & Historical Aspects......................................................................................................................................................................................13Technical Analysis......................................................................................................................................................... 14 Chemistry.......................................................................................................................................................................................................................................14 Raw Material ................................................................................................................................................................................................................................15 Technology Overview...........................................................................................................................................................................................................16 Detailed Process Description & Conceptual Flow Diagram.......................................................................................................................17 Area 100: Reaction...................................................................................................................................................................................................................... 17 Area 200: Raw Gas Compression.......................................................................................................................................................................................18 Area 300: CO2 Separation.....................................................................................................................................................................................................18 Area 400: Gas Separation ......................................................................................................................................................................................................18 Area 500: Fractionation............................................................................................................................................................................................................18 Key Consumptions ..................................................................................................................................................................................................................... 19 Technical Assumptions ........................................................................................................................................................................................................... 19 Labor Requirements.................................................................................................................................................................................................................. 19ISBL Major Equipment List.................................................................................................................................................................................................24 OSBL Major Equipment List ..............................................................................................................................................................................................27 Other Process Remarks ........................................................................................................................................................................................................28Economic Analysis ........................................................................................................................................................ 29 Project Implementation Schedule...............................................................................................................................................................................30 Capital Expenditures..............................................................................................................................................................................................................30 2 7. Fixed Investment......................................................................................................................................................................................................................... 30 Working Capital............................................................................................................................................................................................................................ 33 Other Capital Expenses ...........................................................................................................................................................................................................34 Total Capital Expenses ............................................................................................................................................................................................................. 34Operational Expenditures ..................................................................................................................................................................................................34 Manufacturing Costs................................................................................................................................................................................................................. 34 Historical Analysis........................................................................................................................................................................................................................ 35Economic Datasheet .............................................................................................................................................................................................................35Regional Comparison & Economic Discussion.................................................................................................... 38 Regional Comparison............................................................................................................................................................................................................38 Capital Expenses.......................................................................................................................................................................................................................... 38 Operational Expenditures......................................................................................................................................................................................................38 Economic Datasheet................................................................................................................................................................................................................. 38Economic Discussion ............................................................................................................................................................................................................39References....................................................................................................................................................................... 41 Acronyms, Legends & Observations....................................................................................................................... 42 Technology Economics Methodology................................................................................................................... 43 Introduction.................................................................................................................................................................................................................................43 Workflow........................................................................................................................................................................................................................................43 Capital & Operating Cost Estimates ............................................................................................................................................................................45 ISBL Investment............................................................................................................................................................................................................................ 45 OSBL Investment ......................................................................................................................................................................................................................... 45 Working Capital............................................................................................................................................................................................................................ 46 Start-up Expenses ....................................................................................................................................................................................................................... 46 Other Capital Expenses ...........................................................................................................................................................................................................47 Manufacturing Costs................................................................................................................................................................................................................. 47Contingencies ............................................................................................................................................................................................................................47 Accuracy of Economic Estimates..................................................................................................................................................................................48 Location Factor..........................................................................................................................................................................................................................48Appendix A. Mass Balance & Streams Properties............................................................................................... 50 Appendix B. Utilities Consumption Breakdown ................................................................................................. 55 Appendix C. Process Carbon Footprint ................................................................................................................. 56 Appendix D. Equipment Detailed List & Sizing................................................................................................... 57 Appendix E. Detailed Capital Expenses................................................................................................................. 70 3 8. Direct Costs Breakdown ......................................................................................................................................................................................................70 Indirect Costs Breakdown ..................................................................................................................................................................................................71Appendix F. Economic Assumptions...................................................................................................................... 72 Capital Expenditures..............................................................................................................................................................................................................72 Construction Location Factors ...........................................................................................................................................................................................72 Working Capital............................................................................................................................................................................................................................ 72 Other Capital Expenses ...........................................................................................................................................................................................................72Operational Expenditures ..................................................................................................................................................................................................73 Fixed Costs ...................................................................................................................................................................................................................................... 73 Depreciation................................................................................................................................................................................................................................... 73 EBITDA Margins Comparison...............................................................................................................................................................................................73Appendix G. Released Publications ........................................................................................................................ 74 Appendix H. Technology Economics Form Submitted by Client ................................................................. 754 9. List of Tables Table 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)...............................................................................................................19 Table 6 Design & Simulation Assumptions.........................................................................................................................................................................19 Table 7 Labor Requirements for a Typical Plant..............................................................................................................................................................19 Table 8 Main Streams Operating Conditions and Composition..........................................................................................................................24 Table 9 Inside Battery Limits Major Equipment List......................................................................................................................................................24 Table 10 Outside Battery Limits Major Equipment List ..............................................................................................................................................28 Table 11 Base Case General Assumptions...........................................................................................................................................................................29 Table 12 Bare Equipment Cost per Area (USD Thousands).....................................................................................................................................30 Table 13 Total Fixed Investment Breakdown (USD Thousands) ..........................................................................................................................30 Table 14 Working Capital (USD Million) ................................................................................................................................................................................33 Table 15 Other Capital Expenses (USD Million) ...............................................................................................................................................................34 Table 16 CAPEX (USD Million)......................................................................................................................................................................................................34 Table 17 Manufacturing Fixed Cost (USD/ton) ................................................................................................................................................................34 Table 18 Manufacturing Variable Cost (USD/ton)..........................................................................................................................................................35 Table 19 OPEX (USD/ton)................................................................................................................................................................................................................35 Table 20 Technology Economics Datasheet: Propylene via Propane Dehydrogenation at US Gulf..........................................37 Table 21 Technology Economics Datasheet: Propylene via Propane Dehydrogenation in China .............................................40 Table 22 Project Contingency......................................................................................................................................................................................................47 Table 23 Criteria Description.........................................................................................................................................................................................................47 Table 24 Accuracy of Economic Estimates .........................................................................................................................................................................48 Table 25 Detailed Material Balance and Stream Properties ....................................................................................................................................50 Table 26 Utilities Consumption Breakdown ......................................................................................................................................................................55 Table 27 Assumptions for CO2e Emissions Calculation.............................................................................................................................................56 Table 28 CO2e Emissions (ton/ton prod.)............................................................................................................................................................................56 Table 29 Compressors Specifications .....................................................................................................................................................................................57 Table 30 Drivers......................................................................................................................................................................................................................................57 Table 31 Heat Exchangers ..............................................................................................................................................................................................................58 Table 32 Pumps......................................................................................................................................................................................................................................65 5 10. Table 33 Columns.................................................................................................................................................................................................................................66 Table 34 Utilities Supply...................................................................................................................................................................................................................67 Table 35 Vessels & Tanks Specifications ................................................................................................................................................................................67 Table 36 Indirect Costs Breakdown for the Base Case (USD Thousands) ......................................................................................................71 Table 37 Detailed Construction Location Factor............................................................................................................................................................72 Table 38 Working Capital Assumptions for Base Case................................................................................................................................................72 Table 39 Other Capital Expenses Assumptions for Base Case...............................................................................................................................72 Table 40 Other Fixed Cost Assumptions ..............................................................................................................................................................................73 Table 41 Depreciation Value & Assumptions ....................................................................................................................................................................736 11. List of Figures Figure 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 Block Flow Diagram.....................................................................................................................................................................................16 Figure 6 Inside Battery Limits Conceptual Process Flow Diagram.....................................................................................................................20 Figure 7 Equilibrium Data (Partial Pressure 1 bar, Molar Oxygen to Propane Ratios) ...........................................................................28 Figure 8 Project Implementation Schedule .......................................................................................................................................................................29 Figure 9 Total Direct Cost of Different Integration Scenarios (USD Thousands) ......................................................................................32 Figure 10 Total Fixed Investment of Different Integration Scenarios (USD Thousands) ....................................................................32 Figure 11 Total Fixed Investment Validation (USD Million).....................................................................................................................................33 Figure 12 OPEX and Product Sales History (USD/ton) ................................................................................................................................................36 Figure 13 EBITDA Margin & IP Indicators History Comparison..............................................................................................................................36 Figure 14 CAPEX per Location (USD Million).....................................................................................................................................................................38 Figure 15 Operating Costs Breakdown per Location (USD/ton) .........................................................................................................................39 Figure 16 Methodology Flowchart...........................................................................................................................................................................................44 Figure 17 Location Factor Composition...............................................................................................................................................................................48 Figure 18 ISBL Direct Costs Breakdown by Equipment Type for Base Case ................................................................................................70 Figure 19 OSBL Direct Costs Breakdown by Equipment Type for Base Case..............................................................................................70 Figure 20 Historical EBITDA Margins Regional Comparison ...................................................................................................................................737 12. About this Study This 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.).Analyses PerformedThis 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.The 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.Construction ScenariosYou may check the original form in the Appendix H. Technology Economics Form Submitted by Client.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 1and Table 1.Object of Study This assignment assesses the economic feasibility of an industrial unit for propylene production via propane dehydrogenation implementing technology similar to the Uhde STAR process. The current assessment is based on economic data gathered on Q2 2012 and a chemical plants nominal capacity of 450 kta (thousand metric tons per year).Figure 1 OSBL Construction Scenarios Fully Integrated Petrochemical ComplexProducts StorageProducts ConsumerProducts ConsumerISBL UnitISBL UnitISBL UnitRaw Materials StorageRaw Materials StorageRaw Materials ProviderGrassroots unit8Partially Integrated Petrochemical ComplexIntratec | About this StudyNon-IntegratedUnit is part of a petrochemical complexMost infrastructure is already installedSource: Intratec www.intratec.us 13. Table 1 Construction Scenarios Assumptions (Based on Degree of Integration)Storage Capacity(Base Case for Evaluation)Feedstock & Chemicals20 days of operation20 days of operationNot includedEnd-products & By-products20 days of operationNot includedNot includedAll requiredAll requiredOnly refrigeration unitsUtility Facilities IncludedControl room, labs, gate house, Support & Auxiliary Facilitiesmaintenance shops,(Area 900)warehouses, offices, change house, cafeteria, parking lotControl room, labs, maintenance shops,Control room and labswarehousesSource: Intratec www.intratec.usLocation BasisTable 2 Location & Pricing 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.Design Conditions The 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 AssumptionsCooling water range11 CSteam (Low Pressure)2 Bar absSteam (Medium Pressure)8 Bar absSteam (High Pressure)45 Bar absRefrigerant (Propylene) Source: Intratec www.intratec.us24 C-45 CRefrigerant (Ammonia)-14 CWet Bulb Air Temperature24 CSource: Intratec www.intratec.usIntratec | About this StudyCooling water temperature9 14. Study Background About Propylene Introduction Propylene 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.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.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.Chemical Grade (CG): 90-96% of purity. Refinery Grade (RG): 50-70% of purity.Intratec | Study BackgroundApplications10The 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.Table 4 Major Propylene Consumers PolypropyleneMechanical parts, containers, fibers, filmsAcrylonitrileAcrylic fibers, ABS polymersPropylene oxidePropylene glycol, antifreeze, polyurethaneOxo-alcoholsCoatings, plasticizersCumenePolycarbonates, phenolic resinsAcrylic acidCoatings, adhesives, super absorbent polymersSource: Intratec www.intratec.us 15. Propylene 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 regenerationphases. 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 (syn-gas) 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 withIntratec | Study BackgroundManufacturing Alternatives11 16. gas oils (paraffins) and residues, and produces about 20-25 wt% propylene on feedstock together with greater volumes of motor gasoline and distillate byproducts.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.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 SourcesNaphtha NGLSteam CrackerGas OilRefinery FCC UnitRG PropylenePropanePDHEthylene/ ButenesMetathesisMethanolMTO/MTPIntratec | Study BackgroundGas Oil12High Severity FCCC4 to C8 OlefinsSource: Intratec www.intratec.usOlefins CrackingCG/PG Propylene 17. Licensor(s) & Historical Aspectscommercialized in the 1990s with the dehydrogenation of isobutane to isobutene for the production of MTBE.The 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.Since 1999, the STAR process has been commercialized by Uhde, which acquired the technology including process know-how, related patents, and the catalyst from Phillips. Since the acquisition, Uhde has significantly increased the performance of the STAR process by adding an oxydehydrogenation step, but it was only in November 2010 that the first plant employing the STAR process with oxydehydrogenation came on stream. The plant is located in Port Said, Egypt, with a propylene capacity of 350 kta.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 STAR process, which is the acronym for STeam Active Reforming, was initially developed by Phillips Petroleum Company (now ConocoPhillips). It uses an idea similar to that normally used in the steam reforming of hydrocarbons to produce synthesis gas. The process which can be applied to the dehydrogenation of light paraffins including propane, butanes and pentanes was initiallyIntratec | Study BackgroundThe 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).13 18. Technical Analysis ChemistryAlthough higher process temperatures increase the propylene yield, they also provoke thermal cracking reactions. Those reactions generate undesirable byproducts and consequently increase purification costs downstream. Typical thermal cracking side reactions are shown in Figure 3.Propane 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:PropanePropyleneTherefore, PDH reaction temperatures usually range between 500 and 700C, while reaction pressures are near atmospheric pressure. However, as the STAR process operates in the presence of steam, the absolute pressure of the reaction can be increased while keeping partial pressure of hydrocarbons low.HydrogenAbout 85 wt% of propane is converted to propylene. The propylene conversion is favored by higher temperatures and lower pressures.Figure 3 Propane Dehydrogenation Reaction Network CH4 crackingCH3 CH2 CH3CH2 = CH2C2H2n+2DehydrogenationCH3 CH = CH2OligomerizationCH2 = CH CH2 CH3AromatizationCH3 CH CH2 CH = CH2 DehydrogenationCH3 CH2 = CH CH2 = CH3 AlkylationRPolymerizationCnH2n Side Chain AromatizationCnH(n+y)CokingIntratec | Technical AnalysisSide reactions increase with temperature and conversion14CokeSource: Encyclopedia of Hydrocarbons, Volume II 19. Raw Material The 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.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.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.Figure 4 US Natural Gas Production History and Forecast (Trillion Cubic Feet) Non-associated onshore Coalbed methane Non-associated offshore Shale gasAssociated with oil Alaska Tight gas30 HistoryForecast25 20 155 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035Source: US Energy Information Administration (EIA) AOE2012Intratec | Technical Analysis1015 20. Technology OverviewThe process gas is further cooled and compressed in the raw gas compression area.The Uhde STAR process for propylene production consists of five areas: (1) Reaction; (2) Raw Gas Compression; (3) CO2 Separation; (4) Gas Separation; and (5) Fractionation. The simplified block flow diagram presented in Figure 5 summarizes the process.The compressed gas containing propylene, propane and hydrogen, as well as methane, ethane, ethylene and CO2, is sent to the CO2 separation area, which comprises an MDEA absorption system.Propane feed is combined with propane recycle and steam diluent, heated and fed to the process reformer reactor. The reformer is an externally fired tubular reactor, where most of the propane conversion takes place. The reformer reactor is connected in series with a second reactor, the oxyreactor. In the oxyreactor, oxygen selectively converts the hydrogen from the reformer effluent, which shifts the thermodynamic equilibrium of the dehydrogenation reaction to higher equilibrium conversion and, at the same time, provides the necessary heat for the further dehydrogenation reaction.In a low temperature separation system (cold box), propylene and propane are recovered from light ends. The separated liquid C3 fraction is sent to the fractionation area, which consists of a deethanizer column for the removal of C2- and a P-P splitter column for the production PG propylene. Unconverted propane from the P-P splitter bottoms is recycled to the reaction area.Figure 5 Process Block Flow DiagramH2 By-ProductProcess SteamPropane FeedArea 100 Reaction SectionArea 200 Raw Gas CompressionArea 300 CO2 SeparationCO2Intratec | Technical AnalysisPropane Recycle16Light Ends Fuel GasArea 400 Gas SeparationSource: Uhde STAR process prospect, Intratec analysisArea 500 FractionationPG Propylene 21. 17Intratec | Technical Analysis 22. 18Intratec | Technical Analysis 23. Key ConsumptionsTable 5 Raw Materials & Utilities Consumption (per ton of Product)Technical Assumptions All process design and economics are based on world-class capacity units that are competitive globally. Assumptions regarding the thermodynamic model used, reactor design basis and the raw materials composition are shown in Table 6. All data used to develop the process flow diagram was based on publicly available information.Table 6 Design & Simulation AssumptionsSource: Intratec www.intratec.usLabor RequirementsTable 7 Labor Requirements for a Typical PlantSource: Intratec www.intratec.usIntratec | Technical AnalysisSource: Intratec www.intratec.us19 24. Intratec | Technical AnalysisFigure 6 Inside Battery Limits Conceptual Process Flow Diagram20Source: Intratec www.intratec.us 25. Source: Intratec www.intratec.usIntratec | Technical AnalysisFigure 6 Inside Battery Limits Conceptual Process Flow Diagram (Cont.)21 26. Intratec | Technical AnalysisFigure 6 Inside Battery Limits Conceptual Process Flow Diagram (Cont.)22Source: Intratec www.intratec.us 27. Source: Intratec www.intratec.usIntratec | Technical AnalysisFigure 6 Inside Battery Limits Conceptual Process Flow Diagram (Cont.)23 28. Table 8 presents the main streams composition and operating conditions. For a more complete material balance, see the Appendix A. Mass Balance & Streams PropertiesIntratec | Technical AnalysisDetailed information regarding utilities flow rates is provided in Appendix B. Utilities Consumptions Breakdown. For further details on greenhouse gas emissions caused by this process, see Appendix C. Process Carbon Footprint.24ISBL Major Equipment List Table 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. 29. 25Intratec | Technical Analysis 30. 26Intratec | Technical Analysis 31. OSBL Major Equipment List The OSBL is divided into three main areas: storage (Area 700), energy & water facilities (Area 800), and support & auxiliary facilities (Area 900).Intratec | Technical AnalysisTable 10 shows the list of tanks located on the storage area and the energy facilities required in the construction of a non-integrated unit.27 32. Intratec | Technical AnalysisFigure 7 Equilibrium Data (Partial Pressure 1 bar, Molar Oxygen to Propane Ratios)28Temperature (C) Source: Uhde STAR prospect, Intratec analysis 33. Economic Analysis The general assumptions for the base case of this study are outlined below.Table 11 Base Case General AssumptionsIn Table 11, 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.Source: Intratec www.intratec.usAdditionally, Table 11 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.Source: Intratec www.intratec.usIntratec | Economic AnalysisFigure 8 Project Implementation Schedule29 34. Project Implementation Schedule The 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.Capital ExpendituresFundamentally, 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. 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 13 Total Fixed Investment Breakdown (USD Thousands)Fixed Investment Table 12 shows the bare equipment cost associated with each area of the project.Table 12 Bare Equipment Cost per Area (USD Thousands)Intratec | Economic AnalysisSource: Intratec www.intratec.us30Table 13 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.Source: Intratec www.intratec.us 35. 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." The indirect project expenses are further detailed in Appendix E. Detailed Capital Expenses Alternative OSBL Configurations The 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.Intratec | Economic AnalysisThe influence of the OSBL facilities on the capital investment is depicted in Figure 9 and in Figure 10.31 36. Figure 9 Total Direct Cost of Different Integration Scenarios (USD Thousands)Source: Intratec www.intratec.usIntratec | Economic AnalysisFigure 10 Total Fixed Investment of Different Integration Scenarios (USD Thousands)32Source: Intratec www.intratec.us 37. Working Capital Working capital, described in Table 14, 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 14 Working Capital (USD Million)Source: Intratec www.intratec.usSource: Intratec www.intratec.usIntratec | Economic AnalysisFigure 11 Total Fixed Investment Validation (USD Million)33 38. Other Capital Expenses Start-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.).Table 16 CAPEX (USD Million)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.Source: Intratec www.intratec.usThe purchase of technology through paid-up royalties or licenses is considered to be part of the capital investment.Manufacturing CostsOther capital expenses frequently neglected are land acquisition and site development. Although these are small parts of the total capital expenses, they should be included.Operational ExpendituresThe 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 17 shows the manufacturing fixed cost.Table 15 Other Capital Expenses (USD Million)To learn more about the assumptions for manufacturing fixed costs, see the Appendix F. Economic AssumptionsTable 17 Manufacturing Fixed Cost (USD/ton)Source: Intratec www.intratec.us Source: Intratec www.intratec.usIntratec | Economic AnalysisAssumptions used to calculate other capital expenses are provided in Appendix F. Economic Assumptions.34Total Capital Expenses Table 16 presents a summary of the total Capital Expenditures (CAPEX) detailed in this section.Table 18 discloses the manufacturing variable cost breakdown. 39. Historical Analysis Table 18 Manufacturing Variable Cost (USD/ton) Propane648.3Catalyst Make-up8.0Process Fuel Gas1.1Oxygen Enriched Air20.6Light Ends Fuel(14.2)C4+ Fuel(6.1)LP Steam Generated(26.8)HP Steam Generated(17.3)MP Steam Generated(7.8)Cooling Water0.07LP Steam26.6MP Steam7.7HP Steam64.4Inert Gas0.1Boiler Feed Water0.02Electricity13.2FuelFigure 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.20.8Economic Datasheet The Technology Economic Datasheet, presented in Table 20, 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.Source: Intratec www.intratec.usTable 19 shows the OPEX of the presented technology.Table 19 OPEX (USD/ton) 32.2Manufacturing Variable Cost738.8Source: Intratec www.intratec.usIntratec | Economic AnalysisManufacturing Fixed Cost35 40. Figure 12 OPEX and Product Sales History (USD/ton)Source: Intratec www.intratec.usIntratec | Economic AnalysisFigure 13 EBITDA Margin & IP Indicators History Comparison36Source: Intratec www.intratec.us 41. Working Capital1Intratec | Economic AnalysisSupervision Labor CostOther Capital Exp.37 42. Regional Comparison & Economic Discussion Regional Comparison Capital Expenses Variations 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.Intratec | Regional Comparison & Economic DiscussionFigure 14 CAPEX per Location (USD Million)38Source: Intratec www.intratec.usFigure 14 summarizes the total Capital Expenditures (CAPEX) for two locations.Operational Expenditures Specific 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 Datasheet The Technology Economic Datasheet, presented in Table 21, is an overall evaluation of the technology's capital investment and production costs in the alternative location analyzed in this study. 43. Figure 15 Operating Costs Breakdown per Location (USD/ton)Intratec | Regional Comparison & Economic DiscussionSource: Intratec www.intratec.us39 44. Intratec | Regional Comparison & Economic DiscussionWorking Capital40Other Capital Exp. 45. Intratec | ReferencesReferences41 46. Acronyms, Legends & Observations AACE: American Association of Cost EngineersLPG: Liquefied petroleum gasC: Distillation, stripper, scrubber columns (e.g., C-101 would denote a column tag)MTO: Methanol-to-Olefins MTP: Methanol-to-PropyleneC2, C3, ... Cn: Hydrocarbons with "n" number of carbon atomsNGL: Natural gas liquidsC2=, C3=, ... Cn=: Alkenes with "n" number of carbon atomsOPEX: Operational ExpendituresCAPEX: Capital expendituresOSBL: Outside battery limitsCC: Distillation column condenserP: Pumps (e.g., P-101 would denote a pump tag)CG: Chemical gradePDH: Propane dehydrogenationDistillation column compressorPG: Polymer gradeCP: Distillation column reflux pumpPP: PolypropyleneCR: Distillation column reboilerP-P: Propane-PropyleneCT: Cooling towerPSA: Pressure swing adsorptionCV: Distillation column accumulator drumR: Reactors, treaters (e.g., R-101 would denote a reactor tag)E: Heat exchangers, heaters, coolers, condensers, reboilers (e.g., E-101 would denote a heat exchanger tag)RF: RefrigerantEBIT: 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)RG: Refinery grade SB: Steam boiler STAR: Steam Active Reforming Syngas: Synthesis gas T: Tanks (e.g., T-101 would denote a tank tag) TFI: Total Fixed InvestmentIntratec | Acronyms, Legends & ObservationsFCC: Fluid catalytic cracking42TPC: Total process costIC Index: Intratec Chemical Plant Construction IndexV: Horizontal or vertical drums, vessels (e.g., V-101 would denote a vessel tag)IP Indicator: Intratec Chemical Sector Profitability Indicator ISBL: Inside battery limits K: Compressors, blowers, fans (e.g., K-101 would denote a compressor 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 kgKPI: kta: thousands metric tons per year 47. Technology Economics MethodologyIntroduction The 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.Workflow Once 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.Non-confidential information provided by technology licensorsc.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 facilitiesb.The capital and operating costs for a second different plant locationIntratec's in-house databased.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.Patent and technical literature researchb.From this simulation, material balance calculations are performed around the process, key process indicators are identified and main equipment listed.Process design skillsNext, 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.1These 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.Intratec | 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.43 48. Figure 16 Methodology FlowchartStudy Understanding Validation of Project Inputs Patent and Technical Literature DatabasesIntratec Internal DatabaseNon-Confidential Information from Technology Licensors or SuppliersBibliographical ResearchTechnical Validation Process Description & Flow DiagramCapital Cost (CAPEX) & Operational Cost (OPEX) EstimationConstruction Location Factor (http://base.intratec.us)44Material & Energy Balances, Key Process Indicators, List of Equipment & Equipment SizingPricing Data Gathering: Raw Materials, Chemicals, Utilities and ProductsIntratec | Technology Economics MethodologyVendor QuotesEconomic AnalysisAspen Plus, Aspen Hysys Aspen Exchanger Design & Rating, KG Tower, Sulcol and Aspen Energy AnalyzerAnalyses of Different Construction Scenarios and Plant LocationProject Development Phases Information Gathering / ToolsSource: Intratec www.intratec.usFinal Review & AdjustmentsAspen Process Economic Analyzer, Aspen Capital Cost Estimator, Aspen InPlant Cost Estimator & Intratec In-House Database 49. Capital & Operating Cost EstimatesProcess equipment (e.g., reactors and vessels, heat exchangers, pumps, compressors, etc.) Process equipment sparesThe 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.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 Investment The 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 pumpsISBL Investment The 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: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 systemsIntratec | Technology Economics MethodologyIn 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.45 50. Working Capital For 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).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 Expenses When 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.Intratec | Technology Economics MethodologyRaw 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).46Start-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.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).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.Supplies and stores. Parts inventory and minor spare equipment (estimated as a percentage of total maintenance materials costs for both ISBL and OSBL).2 The accounting definition of working capital (total current assets minus total current liabilities) is applied when considering the entire company. 51. Prepaid 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.Manufacturing Costs Manufacturing 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.Contingencies Contingency 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: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 weatherTable 22 Project Contingency Plant ComplexityComplexTypicalSimpleProject Contingency25%20%15%Source: Intratec www.intratec.usIntratecs definitions in relation to complexity and maturity are the following:Table 23 Criteria DescriptionSimpleComplexityTypicalSomewhat simple, widely known processes Regular process Several unit operations, extremeComplextemperature or pressure, more instrumentationNew & MaturityProven LicensedFrom 1 to 2 commercial plants 3 or more commercial plantsSource: Intratec www.intratec.usIntratec | Technology Economics MethodologyOther Capital Expenses47 52. Accuracy of Economic Estimates The accuracy of estimates gives the realized range of plant cost. The reliability of the technical information available is of major importance.Table 24 Accuracy of Economic EstimatesReliabilityAccuracyVeryLowModerateHigh+ 30%+ 22%+ 18%+ 10%- 20%- 18%- 14%- 10%HighSource: Intratec www.intratec.usThe non-uniform spread of accuracy ranges (+30 to 20 %, rather than 25%, e.g.) is justified by the fact that the unavailability of complete technical infor