world bank document€¦ · craiova chemical project october 30, 1978 ... 3-2 domestic consumption...
TRANSCRIPT
Document of
The World Bank
FOR OFFICIAL USE ONLY iE Copy
Report No. 2144-RO
STAFF APPRAISAL REPORT
ROMANIA
CRAIOVA CHEMICAL PROJECT
October 30, 1978
Industrial Projects Department
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
Except where otherwise indicated, all figures are quoted inRomanian lei and US dollars. For all calculations, thefollowing conversion rate has been used:
US$1 = Lei 18Lei 1 = US$0.06
Lei 1,000 = US$55.56
WEIGHTS AND MEASURES
1 kilogram (kg) = 2.205 pounds (lb) = 1,000 grams1 metric ton = 1,000 kilograms1 kilometer (km) = 0.621 miles1 meter (m) = 39.37 inches
1 cubic meter (mi) = 35.31 cubic feet
PRINCIPAL ABBREVIATIONS AND ACRONYMS USED
The Borrower - Banca de Investitii (Investment Bank)The Central, CIICh - Central for Chemicals and FertilizersDANUBEXIM - Danubiana Export Import Agency
for the Chemical IndustryIITPIC - Technological Engineering and Design
Institute for Chemical IndustryROMCHIM - Import Agency for Chemical Equipment
and Technology under the Ministryof Chemical Industry
CIF - Cost, Insurance and FreightFOB - Free on Board
tpd - Metric To-s per Day
tpy - Metric Tons per Year
ROMANIAN FISCAL YEAR
January 1 - December 31
FOR OFFICIAL USE ONLY
ROMANIA
APPRAISAL OF CRAIOVA CHEMICAL PROJECT
TABLE OF CONTENTS
Page No.
I. INTRODUCTION ......................................... ............. 1
II. THE CHEMICAL INDUSTRY AND THE BORROWER ................. 1
A. Ministry of Chemical Industries ..... .............. 1
B. Development of the Chemical Industry Based onMethane Gas Processing .......................... 3
C. The Central and the Enterprise .................... 4D. Financial Situation and Prospects of the Central .. 5E. The Romanian Financial System and the Borrower .... 6
III. MARKET AND MARKETING . ................... .................. 7
A . The Romanian Market * .......... 8
B. Domestic Markets and Exportsfor Downstream Products ..... oo.o ....... 91. Methanol *........... o ... ........ 92. Acetic Acid and Derivatives ... ........ 11
C. Domestic Production, Consumptionand Exports of Craiova Chemicals ..... 12
D. The Western European Market ....... o..... 16E. Domestic and Export Prices ...o...... .... 19Fo Marketing ...... .............................. oo... ........ o..... 19
IV. THE PROJECT ..........-..... ....... ..... ........ 22
A. Project Scope ... 22B. Location, Raw Materials and Utilities ....... 24C. Technology, Employment and Training .. ............. 25D. Ecology and Safety .. ........... ....... *. 26E. Project Implementation .......... 26
V. CAPITAL COSTS AND FINANCING PLAN ............ ... 27
A. Capital Costs ... ...... .......... 27B. Financing Plan ... ...................................... ..o.... 29
C. Procurement .......... o .... o..o..oo ....... ...... 30D. Allocation and Disbursement of Bank Loan . ....... 31
This report has been prepared by Messrs. David Caplin, Philippe Lietardand Eus Tortorelli of the Industrial Projects Department and Mr. DavidSteel of the EMENA Country Programs Department.
This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
TABLE OF CONTENTS (Continued) Page No.
VI. FINANCIAL ANALYSIS ...................................... 31
A. Revenue and Operating Cost Estimates ............ .. 31B. Financial Projections ..... ........................ 32C. Financial Rate of Return . ......................... 34D. Auditing and Reporting ..... ....................... 34
VII. ECONOMIC ANALYSIS ..................................... 34
A. Economic Costs and Benefits .... ................... 34B. Economic Rates of Return and Major Risks .......... 35C. Other Benefits ...... ................... ........... 37
VIII. AGREEMENTS ........ ..................................... 37
ANNEXES
1 Glossary
2-1 Chemical Enterprises Under the Central (CIICh)2-2 Organization Chart of the Craiova Central and Craiova Enterprise2-3 Summarized Financial Statements of the Central and the Enterprise
3-1 Domestic Consumption of Project Products3-2 Domestic Consumption of Methanol, Acetic Acid, Vinyl Acetate and
Ethyl Acetate, the Project Products, by End Use3-3 Production, Domestic Consumption and Exports of End Use Products3-4 Planned Supply/Demand Balance of Project Products in Romania 1980-853-5 Romanian Estimates of Export Potential of Project Products 1980-85
4-1 Plant Layout4-2 Raw Materials and Utilities Requirements4-3 Acetylene Technology and Uses of Acetylene4-4 Water Pollution Standards4-5 Overall Project Construction Schedule
5-1 Project Cost and Financing Required - Assumptions5-2 Equipment and Services to be Financed by Bank Loan5-3 Estimated Disbursement Schedule for Bank Loan
A6 Assumptions Used in the Financial Analysis
7 Assumptions Used in the Economic Analysis
MAP IBRD No. 13591
DOCUMENTS CONTAINED IN PROJECT FILE
1. Preliminary Techno-Economic Study regarding
"The Development of the Chemical Complex - Craiova
during 1976 - 1980", April 1977 (prepared by IITPIC).
2. Questionnaire prepared by IBRD, listing information
requirements for Appraisal (May 1977).
3. IBRD Project Preparation Report, June 1977 (prepared
by Preparation Mission).
4. "Revised Techno-Economic Study", September 1977
(prepared by IITPIC).
5. File containing all statements and tables prepared by
the Romanians concerning appraisal of this project
(various dates).
6. "Market Prospects for Methanol and Acetic Derivatives",
the Pace Company Consultants and Engineers (consultant,
June 1977).
7. "Environmental and Safety Aspects of Craiova" - J. Tixhon
(IBRD Memo, MIarch 1978).
8. Technical Report from Mr. F. Pederzani, ANIC (consultant,
April 1978).
I. INTRODUCTION
1.01 The Government of Romania has requested a Bank Loan of US$40 millionequivalent for the expansion and modernization of the Craiova Chemical Complex,located about 10 km west of Craiova (Map 13591). The expansion will produceabout 350,000 tons per year (tpy) of a variety of chemical products, suchas methanol, acetic acid, acetic anhydride, vinyl acetate, polyvinyl acetateand ethyl acetate, using locally produced gas as feedstock. A glossary of thetechnical terms used in this report is given in Annex 1. The plant's outputis destined mainly for the domestic market. Except for the acetic acidand an auxiliary carbon-monoxide (CO) separation unit, technology will bebased on know-how previously purchased and adapted to Romanian conditions oron know-how locally developed. Preliminary work for the implementation of theProject has begun, and commissioning of the various plants will be spread overa period of two years, from December 1979 to December 1981.
1.02 Total financing required for the Project is estimated at Lei 2,819million (US$157 million), including Lei 1,075 million (US$60 million) inforeign exchange. The proposed Bank Loan would, therefore, provide 26% ofthe total and 67% of the foreign exchange financing needs. US$12.9 millionequivalent will be provided through a supplier's credit from the FederalRepublic of Germany and will be used to finance the acetic acid plant.The Government will provide the remainder of the funds required. The Projectwas approved by the Council of Ministers in October 1977.
1.03 The Project was first identified by a Bank mission to Romania inMay 1976, which, from a list of nine industrial projects, gave this project,together with three others, priority for Bank support. A Project PreparationMission in June 1977 recommended that further design work, including somechange of scope, be carried out before appraisal. The Project was appraisedin March 1978 by a mission consisting of Messrs. E. Tortorelli (Chief) andP. Lietard, of the Industrial Projects Department, and Mr. F. Pederzani,Consultant. Additional work on the Project's market aspects was carriedout in June 1978 by Mr. D. Caplin, also of the Industrial Projects Department.
II. THE CHEMICAL INDUSTRY AND THE BORROWER
A. Ministry of Chemical Industries
2.01 In Romania, manufacturing of chemicals comes under the Ministry ofChemical Industries. The organizational structure of the chemical industryhas the same three-step hierarchy as all industrial sectors in Romania, com-prising of the Technical Ministry, the Industrial Central and the Enterprise.The Ministry is responsible for the planning and performance of its sectorfor which it also approves proposed investments for subsequent submissionto the Council of State, the highest authority for final approval. The
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Industrial Central directs the operations of all enterprises in its partic-
ular sub-branch of the economy (e.g., Central for Cotton Products, Centralfor Glass and Fine Ceramics), allocates production programs and coordinates
purchase of raw materials and domestic sales. Also under the Ministry of
Chemical Industries are the following agencies: The Technological Engineer-
ing and Design Institute for Chemical Industry (IITPIC), the Import Agencyfor Chemical Equipment and Technology (ROMCHIM), and Danubiana Export Import
(DANUBEXIM), the agency for the exportation of many chemical products.
2.02 The chemical industry has been one of Romania's most dynamicsectors. Since 1950, it has attained an average growth of 21% a year and
ranks now in third place with a share of about 12% of total industrial out-
put, behind the machine building and metal working industries (33%) and the
food industries (13%). It absorbed about 13% of total industrial investmentand employed 7% of the industrial labor force in 1976.
Romania - Selected Indicators for the Chemical Industry
1950 1960 1965 1970 1975 1976
Gross Output Indices (1950 = 100)
Total Industry /a 100 340 650 1,140 2,100 2,300Chemical Industry 100 660 2,070 5,450 11,340 13,000Petroleum 100 270 380 480 590 650
Methane Gas 100 370 860 1,320 1,740 1,900
Average Annual Growth Rate /b n.a. 45.9 25.7 21.4 15.8 15.8
% Share of Chemical Industry in:
Total Gross Industrial Output 3.1 6.1 6.7 10.1 11.3 11.7Total Industrial Employment 2.6 4.2 5.4 6.5 6.8 6.8Total Country Exports 1.7 2.2 6.4 7.0 10.8 8.3Total Country Imports 4.5 7.4 6.3 6.7 6.5 6.8Total Investments in Industry 3.3 12.6 12.3 11.3 14.7 13.0
/a Including electric energy and fuels./b For chemical industry during preceding five years.
Source: Anuarul Statistic al Republicii Socialiste Romania.
The development strategy for the chemical industry has been largely designed to
increase the value added to the country's petroleum and methane gas resources.
Accordingly, the fastest growth has occurred in fertilizers, plastics andsynthetic rubber and fibers. Long-term plans continue to attribute a highpriority to petrochemicals which are expected to account for three-fourths of
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the chemical industry output by 1990 against about one-half today. Romania'smain competitive advantages in the chemical field are the availability oflocal hydrocarbon resources, considerable experience in chemical engineering,research and development, and the excellence of its manpower developmentprograms.
2.03 The industry is largely concentrated in the center and the southof the country, where large refinery and petrochemical complexes have beendeveloped around Ploesti and Pitesti to produce a broad range of refineryproducts, petrochemical intermediates, and end-products. The Government ismaking an effort to locate downstream industries, such as fertilizers, tires,and synthetic fibers, away from these traditional industrial centers, partlyto promote a more balanced regional development (thus also avoiding indus-trial congestion) and partly because of greater availability of labor andhousing.
B. Development of the Chemical Industry Based on Methane Gas Processing
2.04 Romania has had an established chemicals industry since the lastdecades of the 19th Century, based on its large petroleum and gas extractionindustry. But it is only in the last 15 years that methane gas processinghas become important. This is largely a result of the policy efforts de-scribed above under which the Government has restricted new gas connectionssolely to the chemical industry and is in the middle of a program convertingutilities and industries from gas-based to coal and lignite-based primaryfuels. As a result, the proportion of methane used as feedstock for thechemical industry has grown rapidly, and the trend is expected to continueuntil 1985 when about 30% of the projected more or less constant totalproduction of methane gas will be used for processing purposes.
Romania - Production and Consumption of Methane /a
(million m )
ConsumptionYear Production as Fuel as Feedstock
1960 6,710 6,250 4601965 13,040 12,150 8901970 19,970 17,950 2,0201975 27,000 24,300 2,7001980 27,700 21,000 6,7001985 28,000 19,400 /b 8,600 /b
/a Methane production accounts for about 90% of total gasproduction, including associated gas.
lb Mission estimates.
2.05 In the 1960s, methane gas was primarily used to produce ammonia(for nitrogenous fertilizer production) and carbon black. But recently,while ammonia production has remained predominant, production of methanoland a wide variety of specialized chemicals has become significantly moreimportant, and production of carbon black has declined in percentage terms.This trend is expected to continue in the future with an even strongercombined emphasis on ammonia and methanol production by 1980, as the tablebelow shows.
Romania - Chemical Uses of Methane Gas('000 tons)
1970 % 1975 % 1980 %
Ammonia 790 85 1,460 88 2,930 84Acetylene 42 5 71 4 86 2Methanol 70 7 107 6 446 13Carbon Black 24 2 10 1 14 -Other Uses 6 1 15 1 25 1
Total 932 100 1,663 100 3,501 100
2.06 These five methane-based intermediate products and the many endproducts derived from them account for all production of such products inRomania. There is one ethane-based plant in Romania, which, however, producesother ethylene-based intermediate and end products, which do not compete withthe methane-based products outlined above. But it is expected that thissituation will change in the future as Romania begins to rely to an increasingextent on ethylene based products from naphtha derived from imported crude oil.A major new petrochemical complex at Midia for production of ethylene basedchemicals is planned for 1980. This is both because methane output is notexpected to increase in the future (para 2.04) despite extensive efforts atsecondary and tertiary recovery and because ethylene-based derivatives areexpected to remain cheaper than methane-based processes for the foreseeablefuture. This trend will not affect intermediate and end products derived frommethanol and acetic acid, however, on which the proposed Project is based.
C. The Central and the Enterprise
2.07 The Industrial Central for Chemical Fertilizers (CIICh, or theCentral) was established in its present form in 1973, with a head officein Craiova responsible for eleven enterprises (plants) in Romania, includingthe project plant at Craiova. The two most recent plants are at Arad andat Bacau and were completed in 1971 and 1974, respectively. In additionto the proposed Project, the Central is responsible for executing six otherexpansion projects, among which is the Bank financed fertilizer project atBacau 1/ and two new projects, all to be completed before the end of thecurrent Five-Year Plan (1976-80). Details of the existing and new plantsare set out in Annex 2-1. The Central produces a very wide range of products,over 200 in all, but fertilizer production is overwhelmingly important. The
1/ Loan 1020-RO of June 28, 1974.
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organization chart for the Central is shown in Annex 2-2. The Central con-forms to the standard pattern of industrial organization in Romania with fourfunctional departments (production, technological, commercial and financial)and a number of staff departments, including personnel, which are alsodirectly under the General Manager. The Central's senior staff, under theDeputy Manager, also acts in responsible positions in one of the enterprises,in this case the Project Enterprise at Craiova. The Central also providestechnical assistance to all the enterprises under its authority.
2.08 The Project will be an expansion of the existing Craiova ChemicalComplex, the Enterprise at which the head office is situated and Romania'slargest center of methane based chemicals production. The Enterprise is anestablished organization with the legal authorities and jurisdictionsnormal under Romanian law. An organization chart for the Enterprise isshown in Annex 2-2. Decision making power at the Enterprise level formallybelongs to the Enterprise's General Assembly which includes all the workersand normally meets twice a year. A Working People's Executive Committee,chaired by the Enterprise's General Manager and consisting of elected workers'representatives and some members of the management, is responsible for opera-tions. The General and Technical Managers of the Enterprises are responsiblefor implementing the decisions of the Executive Committee. This type oforganization has worked satisfactorily in the day-to-day operations of theCraiova plant to date and is expected to be adequate for the future.
D. Financial Situation and Prospects of the Central
2.09 The Central is the focus for consolidation of the financial resultsof the individual enterprises, the overall surplus or deficit of the Centralthen being absorbed within the Ministry's accounts and eventually emerging inthe State budget. As mentioned in previous Bank appraisal reports on Romania,financial analyses and projections as generally applied by the Bank to eval-uate the performance and prospects of industrial enterprises are of limitedvalue in the Romanian system. However, to illustrate the scope of operationsunder present price and cost relationships, actual and projected financialstatements for the Central and the Enterprises are shown in Annex 2-3. Thosefor the Central are summarized below.
Romania - Summary Financial Indicators for the Central (CIICh)(million Lei)
-------Actual ------ ------ Projected----1973 1976 1977 1978 1979 1980
Sales 6,466 10,010 13,699 17,585 18,730 20,060Benefits Before Tax 888 1,298 4,494 6,074 6,833 7,521Net Benefits (After Tax) 631 908 3,227 2,981 3,545 3,425Net Fixed Assets 9,792 16,114 20,119 23,735 25,783 26,054Net Benefits/Sales (%) 10% 9% 24% 17% 19% 17%Net Benefits/Net Fixed Assets (%) 6% 6% 16% 13% 14% 13%
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2.10 The figures indicate that the Central's profitability is satisfac-tory, although the latter reflects not only efficient operations but alsoRomanian pricing policies.
E. The Romanian Financial System and the Borrower
2.11 The State determines all prices, and annual financial plans aremade by the Enterprises and the Industrial Centrals so as to meet the targetscontained in the Annual and Five-Year Plans. Since the primary responsibilityof an Enterprise is to meet established physical targets and inputs and out-puts are calculated at fixed prices, financial profitability for an Enter-prise - as related to capital employed and output - is established underthe direction of the Central, and the efficiency of an Enterprise's managementis measured by the achievement of the assigned production and profitabilitytargets. There has been a historical tendency for prices to remain stableover long periods of time. This implies not only that there is a lack ofclose correlation with shifting supply and demand relationships but also thatrelationships between costs and prices become distorted as industry expandsand technology and productivity improve. To remedy these distortions,periodic price resettings are undertaken for the whole economy, each sectorbeing reviewed separately. The last such price resetting (since 1963) wasundertaken in 1974-76, and the present internal prices for chemicals - whichare now more closely in line with international prices - are expected to bein force at least through the end of this Five-Year Plan period (1980).
2.12 The Investment Bank (the Borrower) administers and controls allinvestment funds of the State Budget (except for agriculture, water resourcesand food processing) and acts as the channel for all sources of major domesticinvestment financing in industry. Since 1970, the Investment Bank has alsomade credits on its own, though funds available for this purpose are rela-tively small. The President of the Investment Bank is responsible to theMinister of Finance, who has wide authority in the planning and financing ofall investments. The Investment Bank has wide ranging responsibilities inthe implementation of projects, reviewing the Techno-Economic Studies beforeeither approving those projects within its authority or submitting all otherprojects to either the Council of Ministers or for Presidential approval bydecree, depending on the size of the investment to be undertaken. It alsocontrols the flow of funds during project implementation. The Investment Bankhas no specific legal authority that enables it to bring its views to beardirectly on the management of an Enterprise, but it can recommend necessaryoperational actions to the Ministry of Finance, which in turn can act throughthe Ministry concerned with the project.
2.13 Certain aspects of the management and financial planning of Centralsand their Enterprises may change in 1979 as a result of Romania's new economicpolicy of some greater decentralization of economic and financial planningresponsibility for which guidelines were announced in a major policy speechby the President of Romania in March 1978. Under the new system, various newindicators will be introduced to reflect the efficiency of each Enterprise
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and provide greater incentive to each Enterprise to increase productivity.Each Enterprise will have greatly expanded responsibility for planning pro-
duction and marketing of output, for concluding import and export contracts,
and for providing housing and other social amenities for its workers, taking
into account its need to meet the new general indicators outlined earlier.Each Enterprise will also become financially more self-sufficient and will
enter into borrowing and lending relationships and will be responsible forrepayment of all credit obligations, including those in foreign exchange.The role of the central Government agencies such as the Centrals, Foreign
Trade Enterprises and the Investment Bank will also change. Details of all
these changes and the timing of their implementation remain to be worked out.However, the Government has indicated that they will not affect the arrange-
ments negotiated for the proposed Project between the Bank and the InvestmentBank.
III. MARKET AND MARKETING
3.01 The products to be manufactured by the complex are methanol, acetic
acid, vinyl acetate monomer (VAM), polyvinyl acetate (PVA), ethyl acetate
and acetic anhydride. All are intermediates which are used in the manufac-ture of a wide variety of chemicals, which in turn are further processedbefore appearing in products in the capital goods or consumer markets.Methanol, for instance, is a starting material for formaldehyde, which domi-
nates the thermosetting plastics field; methanol is also used in the manu-facture of polyisoprene rubber and for dimethyl terephthalate (DMT), a basicintermediate in the synthetic fibre industry. Recently attention has been
focused on some promising new uses for methanol - as a substitute for gasolineand as a boiler fuel, and as a substrate in the production of single cellprotein for animal feed. The Project will utilize a new process which usesmethanol as raw material for the production of acetic acid.
3.02 Acetic acid, besides being the raw material from which aceticanhydride, VAM, PVA and ethyl acetate are manufactured, is a basic chemicalintermediate, and has many applications in dyeing and bleaching of textiles,
and in the manufacture of cellulose acetate; this has long dominated theartificial fibre industry and is a basic input for the manufacture of photo-graphic stock. Acetic anhydride also finds outlets in the cellulose acetatemarket as well as in the manufacture of aspirin. VAM and PVA are major growthproducts, being used in the production of synthetic fibres and textile coat-ings. The major growth areas have been in the formulation of water-basedpaints, which have to a major extent eliminated the older lacquer-basedproducts, and in the production of a variety of adhesives used in such widelydisparate activities as the manufacture of shoes, furniture, industrial con-struction and transportation equipment. Ethyl acetate is a versatile solventused in chemical processes, and in the paints and coatings industries.
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3.03 The Romanian market for chemicals is still relatively small; thecapacities being installed in the Craiova Project are of a minimum economicsize and exceed current domestic requirements in anticipation of a buildupof domestic demand. It is therefore expected that part of the Project'soutput will have to be exported, at least in the early years of operation.Of total production over the first three years of operation, about one-thirdwill be exported, much of it to Comecon countries; by 1985, however, only 8%of output will be exported.
A. The Romanian Market
3.04 Domestic consumption of the chemicals produced by the CraiovaProject has grown at about the same rate as the total chemical industry,itself one of Romania's most dynamic sectors (para 2.02). In terms ofmethanol and acetic acid, consumption grew at an annual rate of 20% from1965-77. This rapid growth rate reflects the Romanian authorities' desireto establish a firm industrial base for the development of basic end useindustries. A logical policy was adopted by first encouraging the develop-ment of basic intermediates such as methanol and acetic acid, but by theearly 1970s the consumption of more sophisticated secondary products suchas PVA was already established. For the chemicals to be produced by theProject, the Romanian authorities plan a rate of growth in consumption of anaverage of 16.1% until 1983, with ambitious plans for major new outlets formethanol in the period 1983-1985 which would bring the overall annual growthrate from 1977-85 close to the growth rate in the last decade (Annex 3-1).
Romania - Domestic Consumption of Project Products a/('000 tons)
Average Annual----Actual----- Projected Growth Rates (%)
Product 1965 1970 1977 1983 1985 1965-77 1977-83 1977-85
Methanol 21.3 53.3 214.4 572.2 1,096.4 21.2 17.8 22.6
Acetic Acid 6.1 20.1 32.1 74.8 77.3 14.8 15.1 11.6
VAM c/ - 4.8 17.3 35.0 36.0 20.1 b/ 12.5 9.6
PVA c/ - 2.5 12.8 18.0 20.0 26.3 5.8 5.7
Ethyl Acetate c/ 1.1 1.8 3.2 4.8 5.6 9.3 7.0 7.3
Acetic Anhydride c/ 0.4 0.4 0.4 5.0 6.6 - 52.3 42.0
a/ Source: Ministry of Chemical Industry.b/ 1970-77.c/ Derivatives of acetic acid.
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As the above table indicates, Craiova's output can be classified into twogroups: (i) methanol, and (ii) acetic acid and its derivatives, i.e.,vinyl acetate monomer (VAM), polyvinyl acetate (PVA), ethyl acetate andacetic anhydride. The following section describes the domestic market (bothpast and future) for the major downstream products which can be made fromthese two product groups of intermediate chemicals in preparation for thediscussion (starting with para 3.13) of the past and future Romanian pro-duction, consumption and exports for Craiova's chemicals themselves, i.e.,methanol as well as acetic acid and their derivatives.
B. Domestic Markets and Exports for Downstream Products
1. Methanol
3.05 The major uses for methanol in the Romanian market are syntheticresins (via formaldehyde and methyl methacrylate), synthetic rubber (viapolyisoprene) and synthetic fibres (via dimethyl terephthalate (DMT)) asgiven in Annex 3-2. A major new outlet for methanol is the planned manu-facture of single cell protein. The following table shows a summary of enduse patterns for methanol.
Romania - Domestic Methanol Consumption by End-Use a/('000 tons)
Average AnnualActual Projected Growth Rates (%)
1965 1977 1983 1985 1965-77 1977-83 1977-85
Acetic Acid b/ - - 16.0 37.2 n.a. n.a. n.a.
Synthetic Resins 18.0 84.2 159.0 169.0 13.7 11.1 9.1
Synthetic Fibers 0.1 32.0 99.6 133.7 16.4 c/ 20.8 19.6
Synthetic Rubber 0.1 62.4 109.6 135.2 n.a.d/ 9.8 9.8
Single Cell Protein - - 45.0 450.0 - n.a. n.a.
Other 3.1 35.8 143.0 148.1 22.6 26.0 19.4
Total 21.3 214.4 572.2 1,073.2 21.2 17.8 22.3
a/ Source: IBRD estimates based on data supplied by Craiova Central.
b/ Excludes direct exports of Craiova Project products. Until the Projectcomes on stream in 1980, all acetic acid is produced from acetaldehyde.
c/ 1970-77.
d/ Full scale production of polyisoprene from methanol began in 1975.
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3.06 The future growth rate for methanol consumption in synthetic resinsis lower than in the past, reflecting a gradual shift towards thermoplasticsrather than thermosetting resins. Romanian per capita consumption of syn-thetic resins (excluding polyvinylchloride and polyethylene) is projectedto reach 7 kg in 1985, which is comparable to current per capita consumptionin developed countries. Exports of synthetic resins are planned to increaseat a slightly faster rate than local consumption, so that exports will repre-sent 60% of total production in 1985 compared with 56% in 1977 (Annex 3-3).
3.07 The use of methanol in synthetic fibres will grow at a faster ratethan total synthetic fibre production as the importance of polyester fibre inthe product mix increases. The Bank is financing one of the new polyesterfibre facilities, which require DMT as a raw material (Cimpulung-Muscel ReportNo. 1436-RO dated 5-24-77). That report estimated that Romanian mill con-sumption of synthetic fibres would reach 231,000 tons in 1985, compared withthe current Romanian projection of 205,000 tons (Annex 3-3). The report alsopointed out that, unless new polyester plants were to be built after thoseprojected in 1977, substantial fibre imports would be required by 1985. TheGovernment has now initiated new synthetic fibre projects to come on stream inthe early 1980s with the objective of reducing the net fibre deficit, andmaintaining an export position in synthetic fibres. Planned 1985 exports aresmall compared with gross imports into the E.E.C. even during the recent slumpconditions which have been prevailing in Western Europe. Thus, it can be seenthat the projections for methanol requirements in the domestic market, as faras these end uses are concerned, are reasonable.
3.08 The large tonnage of methanol devoted to synthetic rubber pro-duction arises from the production of polyisoprene rubbers, which are goodsubstitutes for natural rubber. Romania is following the precedent of theUSSR in reducing drastically its import of natural rubber and replacing itwith indigenously produced polyisoprene. All methanol from the CraiovaProject will be absorbed by the domestic market by 1983; methanol require-ments for single cell protein production will come from other methanol unitsunconnected with this Project.
3.09 Several industrial scale plants for the manufacture of single cellprotein (SCP) have already been commissioned in the USSR, Japan and Italy.All these units use alkanes as the substrate and yeast as the microorganism.The SCP produced, however, is about three times as expensive as the proteincontained in soya bean meal. Controversy has also arisen over the presenceof small quantities of unreacted alkanes in the product. In an attemptto overcome these disadvantages, I.C.I. (UK) are constructing a plant (tobe commissioned in 1980) to produce 55,000 tons per year of SCP using methanolas a substrate and a bacterium as the microorganism. Any unreacted methanolshould be completely removed from the SCP during the drying stage; bacteriahave a higher protein content than yeast and reproduce more quickly. Althoughthe cost of production of SCP from methanol is considerably lower than from
alkanes, it is still higher than that of protein contained in soya bean mealat current prices. There is no doubt that the Romanian market could absorbthe projected production of SCP if it could be produced efficiently. Romania
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has a pig population of about 10 million, which will increase to about 15
million by 1985. Their protein requirements would approach 400,000 tons by1985, compared with a planned production of at most 200,000 tons of SCP.The principal uncertainties about the SCP project relate to whether methanol-
based SCP will be able to compete with soya bean protein and whether tech-nical know-how will have reached a stage where a plant of such large capacitycould be brought on stream by the planned date of 1983-84.
2. Acetic Acid and Derivatives
3.10 A similar analysis of end uses for acetic acid and derivatives has
been attempted (Annex 3-2). For the sake of simplicity, all derivatives havebeen converted back into acetic acid, although Craiova ethyl acetate is manu-factured via acetaldehyde rather than acetic acid. Since D. P. Solventul,another Romanian chemical enterprise, uses acetic acid as the raw material forethyl acetate and because of the flexibility in use between ethyl and butylacetates as paint solvents, with the latter being manufactured from aceticacid, ethyl acetate end uses have been included in the following table.
Romania - Domestic Acetic Acid and Derivatives Consumption by End Use a/ b/('000 tons of Acetic Acid Equivalent)
Average AnnualActual Projected Growth Rates (%)
1965 1977 1983 1985 1965-77 1977-83 1977-85
Paints & Lacquers 1.0 5.4 11.2 14.3 14.7 12.9 12.9Furniture & Timber 0.1 0.6 1.2 1.4 17.0 12.0 12.0Synthetic Fibres - 2.2 4.0 4.9 10.2 c/ 10.4 10.4Artificial Fibres 0.6 0.6 6.0 9.2 - 46.8 42.0Other Textile Uses& Footwear 0.9 4.5 7.6 9.1 14.1 9.1 9.1
Misc. Adhesives - 0.5 0.8 1.0 5.8 c/ 9.1 9.1
Other 5.0 19.3 25.8 28.5 12.0 4.9 4.9
Total 7.6 33.1 56.6 68.4 23.4 9.3 9.5
a/ Source: IBRD estimates based on data supplied by Craiova Central and
Investment Bank.
b/ Excludes direct exports of Craiova project products, but includesethyl acetate.
c/ 1970-77.
3.11 Because of the multifarious uses of acetic acid (over 30 primaryderivatives alone are produced in Romania), it has not been possible to assigna large part of the current production to specific end uses; it is likely,
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however, that part of this unassigned quantity will in fact be utilized inone or other of the end uses identified. For future incremental production,on the other hand, more certainty exists at least as to the plans for utili-zation of these derivatives. The major identified outlets for acetic deri-vatives are for paints and lacquers and in textiles and footwear. Romaniaalso plans to complete by 1983 a triacetate plant which will utilize a sig-nificant proportion of acetic anhydride produced by the Craiova Project andwhich will manufacture the raw material for certain textiles and photographicstock which are currently imported into Romania. As shown in the table inpara 3.04, this will help to increase domestic consumption of acetic anhydridefrom about 400 tons per year today to over 6,000 tons per year by 1985.
3.12 The Romanian projection for domestic consumption of paints andlacquers in 1985 is equivalent to a per capita consumption of 13.3 kg com-pared to a projected 1985 per capita consumption in the F.R. of Germany of25.9 kg and about 14.3 kg in the UK and Belgium. The Romanian projectionfor artificial fibre consumption in 1985 is 30,000 tons higher than theIBRD projection contained in the Cimpulung Appraisal Report, thus aboutbalancing out the lower Romanian projection for synthetic fibre consumptionwhich is 26,000 tons less than the IBRD estimates for 1985. Thus, the pro-jected domestic consumption of acetic acid derivatives appears attainable.A lower proportion of end use products from acetic acids are destined forexport than is the case for end use products of methanol (Annex 3-3).
C. Domestic Production, Consumption, and Exports of Craiova Chemicals
3.13 The table on the following page summarizes the Romanian production,consumption, exports and imports of the chemicals the Craiova Project willproduce for the past (1965-77) and the future (1980-85) (Annex 3-4). As canbe seen from this table, domestic production of acetic acid, vinyl acetate andpolyvinyl acetate has more or less kept pace with domestic consumption, al-though acetic acid imports, which in 1977 accounted for 12% of domesticconsumption, are expected to rise until the Craiova Project comes on stream.Acetic anydride, which has had a static domestic consumption of about 400 tonsper year, is not yet produced in Romania, while production capacity of ethylacetate is inadequate and imports are now at a level of about 2,000 tonsannually. Methanol has been exported during several years in the past,although in 1975 and 1976 some imports were required to supplement domesticproduction. Romanian production of all project products grew on average atabout 18% per year between 1965 and 1977, and Romania is planning an equiva-lent rate of growth through 1983. By the mid-1980's, most of the Project'soutput will be absorbed domestically, and any exportable quantities will besmall compared with European consumption and trade in these products(para 3.17).
3.14 While domestic consumption growth as planned appears in generalreasonable, there is, however, some uncertainty in the opinion of Bank staffabout the methanol projections. By 1985, methanol production is plannedalmost to double over its 1983 production level to meet the requirement forsingle cell protein production. Three new methanol units would have to be
Romania - Production/Consumption Balance of Craiova Chemicals(000 tons)
1965 1970 1977Export Export Export Export Export Export
Historical Prod. Cons. (Imp.) ShareAa Prod. Cons. (Imp.) Share Prod. Cons. (Imp.) Share
Methanol 34 21 13 38% 90 53 37 41% 237 214 23 10%Acetic Acid 3 6 (3) - 20 20 - - 28 32 (4) -
Vinyl Acetate (VAM) - - - - 5 5 - - 17 17 - -
Polyvinyl Acetate (PVA) - - - - 3 3 - 15 13 2 13%
Ethyl Acetate 1 1 - - 1 2 (1) - 1 3 (2) -
Acetic Anhydride - 0.4 (0.4) - - 0.4 - - - 0.4 (0.4)
1980 1 9 8 3k/ 198_5___
Export Export Export Export Export ExportProjected by Romanian Prod. Cons. (Imp.) Share Prod. Cons. (Imp.) Share Prod. Cons. (Imp.) ShareAuthorities
MIethanol 477 377 70 16% 616 572 44 7% 1,191 1,096 95 8%Acetic Acid . 69 53 16 23% 89 75 14 16% 89 77 11 12%tVinyl Acetate (VAM) 20 17 3 15% 40 35 5 12% 40 36 4 10%Polyvinyl Acetate (PVA) 10 9 1 10% 23 18 5 22% 23 20 3 13%Ethyl Acetate 1 3 (2) - 0 5 4 '44% 9 6 3 33%
Acetic Anhydride 6 5 1 16% 10 5 5 50% 10 7 3 30%
a/ Export share as a % of production.b/ If the single cell protein project (para 3.09) is postponed to later than 1985 and no further methanol capacity is added
beyor.d what is now firmly planned, methanol production in 1983 will be only 526,000 tons and consumption 527,000 tons.Under the same assumption, methanol consumption in 1985 would be only about 618,000 tons, requiring imports of about90,000 tons.
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brought on stream, and 80% of their combined capacity is planned to be dedi-cated to this use. Bank staff are of the opinion that commitment of sucha substantial capacity may be premature in view of the current state oftechnology for single cell protein production and, without such use, it isexpected that methanol requirements will only be 700,000 tons in 1985 ratherthan the 1.1 million tons projected by the Romanian authorities. If thedecision is delayed to go ahead with the single cell protein plant, thenthe corresponding plants for the production of methanol feed would also bedelayed, since methanol exports are not envisaged in the Five-Year Plan exceptfor some short term balancing requirements. Without the addition of furthermethanol production capacity beyond what is already existing or planned forthe Craiova Project, methanol capacity in 1983 will stand at about 526,000tons as compared to domestic consumption of 527,000 tons in that year. Undersuch an assumption, all Craiova methanol will have been absorbed by the domes-tic market by the time the single cell protein project may be undertaken. Inview of uncertainties concerning the methanol projections, the Government hasagreed to prepare and submit to the Bank, by December 1979, an update of thedata made available to the Bank during appraisal with respect to the projecteddomestic methanol demand and supply and of the export marketing developmentplans, and to exchange views with the Bank on these data, their basis and con-clusions thereof.
3.15 Assuming alternatively that (a) no further methanol units are builtnor the single cell protein plant and that (b) the single cell protein plantis undertaken and with it the construction of three further methanol units,the following table gives the quantities of Romanian products of the typeproduced by the Project that are planned for export between 1980 and 1985 andtheir general destinations (Annex 3-5).
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Romania - Planned Exports of Products also Produced by the Project('000 tons)
1980 1981 1982 1983 1984 1985(a) (b) (a) (b) (a) (b)
MethanolCOMECON & China 15 14 8 - 13 - 10 - 17
Other 55 56 10 - 31 - 42 - 78
Total 70 70 18 - 44 - 2 - 95
Acetic AcidCOMECON & China 2 5 3 3 4 6
Other 14 22 14 11 9 6
Total 16 27 17 14 13 12
Vinyl Acetate (VAM)COMECON & China 2 2 2 2 2 2Other 1 3 4 4 3 2
Total 3 5 6 6 5 4
Polyvinyl Acetate (PVA)COMECON & China 1 - 3 3 2 2
Other - - - 2 2 1
Total T 5 4 3
Ethyl AcetateCOMECON & China - - 2 3 3 3
Other - - - 1 1 -
Total - - 2 4 4 3
Acetic AnydrideCOMECON & China 3 7 7 4 3 3
Other 2 1 2 2 - -
Total 5 8 9 6 3
a/ Assuming no further methanol units are built.
b/ Assuming SCP is undertaken and 3 further methanol units are built.
3.16 It can be seen from the above table that, with the exception ofmethanol and acetic acid, most of the export surpluses are expected to beabsorbed by COMECON countries and China. Exports of VAM and PVA are alsoplanned to neighboring countries such as Yugoslavia, Greece and Turkey, so
it is unlikely that any significant quantities of those products will have
to compete in Western European markets. The Romanian export organizationDANUBEXIM, after preliminary market contacts, estimates that up to 10,000tons per year of acetic acid can be placed in countries with which Romania
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has established special trading relationships, such as Israel, Singaporeand Malaysia. Thus in 1981, the year in which the largest export surplusis expected to be available, a maximum of about 12,000 tons of acetic acidand 55,000 tons of methanol will have to find markets in Western Europe(assuming that the construction of further methanol plants is postponed).
D. The Western European Market
3.17 The market for chemicals in Western Europe, which had grown moreor less steadily until 1974, suffered a serious setback in 1975 with consump-tion falling 15-20% in the space of a year. 1976 showed a return to 1974levels for acetic acid derivatives while methanol did not reach its 1974consumption level again until mid-1977. As noted above, the three principalexport items from the Craiova Project are methanol, acetic acid and vinylacetate; exports (other than trade with COMECON countries) of each of theother Project products is not expected to exceed 2,000 tons per year (in allcases less than 1% of W. European consumption), and no difficulty is antici-pated in disposing of such small quantities. The following table summarizesthe demand and supply picture for the three principal export products. Toput these figures in perspective, methanol exports would represent 1.4% andacetic acid exports 1.2% of Western Europe's consumption in the peak exportyear of 1981, while peak vinyl acetate exports in 1983 would amount to 0.6%of Western European consumption.
17 -
Demand/Supply Balance of Principal Pro ectExport Products in Western Europe -
(million tons)
Average AnnualGrowth Rate (%)
1970 1974 1976 1980 1983 1985 1970-74 1970-76 1976-85-----Actual----- --- Projected----
Consumption
Methanol 2.12 2.96 2.80 3.70 4.40 5.00 8.7 4.7 6.7
Acetic Acid 0.65 0.83 0.81 1.01 1.16 1.39 6.3 3.7 5.0
Vinyl Acetate 0.36 0.42 0.45 0.58 0.65 0.72 3.9 4.0 5.0
Production
Methanol 1.94 3.01 2.90 3.60 3.80 3.90 11.6 6.9 3.3
Acetic Acid 0.55 0.81 0.80 1.03 1.16 1.31 10.2 6.4 5.6
Vinyl Acetate 0.30 0.40 0.40 0.55 0.65 0.75 7.5 4.9 7.2
Production Surplus(Deficit)
Methanol (0.18) 0.05 0.10 (0.10)(0.60) (1.10)
Acetic Acid (0.10) 0.02 (0.01) 0.02 - (0.08)
Vinyl Acetate (0.06)(0.02)(0.05)(0.03) - 0.03
a/ Methanol consumption and production forecasts have been based on estimatesprovided by several consulting firms (including SRI International and the
Pace Company Consultants). Projections for acetic acid and vinyl acetateare based on a study prepared by the Bank's consultant (ANIC). Inreconciling these different estimates a conservative view has been takenin estimating the future production deficit.
3.18 As the above table indicates, the 1970-76 growth rates for consump-
tion of methanol and acetic acid are influenced by the 1975 market set back; thegrowth rates for the consumption of these products in the period 1970-74 were
considerably higher. The estimated future growth rates of consumption are
well below the pre-1975 growth rates. Vinyl acetate consumption, while
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suffering a fall in 1975, recovered in 1976 and slightly surpassed the pre-1975trend line. As stated in para 3.02, the use of vinyl acetate in paints and(via PVA) in adhesives is a major growth area, and this is reflected in thesomewhat higher rate of growth of consumption projected for this product inthe future. Production and consumption in Western Europe of acetic acid havebeen reasonably balanced on the whole, with only net marginal import require-ments; however, trading opportunities have led to both exports and imports ofthese products out of and into this region; therefore the disposal of therelatively small quantities of Romanian acetic acid into this market shouldnot cause any problems. Vinyl acetate has been imported for a long periodinto Western Europe; although plans have been announced to increase WesternEuropean production capacity (and these have been included in the abovetable), there is already some evidence that some of these capacity additionswill be delayed, in which case Western Europe will remain a net importerof vinyl acetate to about 1985.
3.19 The methanol picture is rather different, however. By 1980 name-plate capacity in Western Europe will stand at about 4.2 million tons. Theconsensus of opinion is that, except in unusual circumstances, an industrywide effective and sustainable capacity utilization of about 85% is realistic;this would give a production of about 3.6 million tons. Western Europeanproducers are discouraged from planning any major capacity extensions becauseof the anticipated change in the supply pattern, with OPEC countries and theUSSR entering the market with large capacity units. Saudi Arabia is planningto erect more than 1 million tons per year of methanol capacity; this howeverwill not come on stream until the mid 1980s at the earliest and most of theproduction is destined for the Japanese and the US markets. Two largemethanol plants (each of nameplate capacity of 825,000 tons per year) areunder construction in the USSR using British design and equipment from theFederal Republic of Germany; the plants will be paid for from the proceeds ofmethanol sales abroad. Although the output from these plants will have asignificant effect on the European market, their effect on exports of methanolfrom the Project are likely to be small; although these units were originallyscheduled to come on stream in 1981, recent information indicates that thefirst unit (at Gubaha in the Urals) will not now be completed until mid-1982,while the second (at Tomsk in Siberia) will not start up until towards the endof 1982, i.e. close to 1983 when no further methanol would be available fromRomania for exports, unless in fact the single cell protein plant and allthree methanol plants were built (paras 3.14 and 3.15).
3.20 Furthermore, Romanian methanol undoubtedly enjoys a freight advan-tage over these plants. The Russian methanol will be moved in rail-tank carsto Ventspils on the Baltic or to Odessa on the Black Sea. The rail distancefrom Gubaha to these ports is about 2,600 km, while the distance from Tomskis at least 4,300 km; these freight costs must outweigh the economics ofscale enjoyed by the Russian plants. Romanian material, on the other hand,can be moved up the Danube at a cost of about US$25/ton to North WesternEurope.
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E. Domestic and Export Prices
3.21 Domestic prices are Government controlled in Romania and are essen-tially based on financial (i.e. controlled) cost of production (raw materials,utilities, labor, depreciation, etc.) plus a margin which is fixed forthe industry as a whole (para 6.01). Raw materials may be charged at anarbitrarily low price in order to encourage their use in specific industries(as is the case with natural gas so that it is used for chemical processing,rather than as fuel). Part of the margin is retained by the enterprise to paybonuses and to finance reinvestment, but the greater part is returned to theCentral Government and added to the State Budget. Some changes are expectedin this system when the new economic guidelines will have been translatedinto rules for practical implementation. All prices are quoted on an ex-works basis. Products destined for exports are transferred at the prevail-ing domestic price, i.e. the enterprise receives the same revenue whetherit produces for exports or the home market.
3.22 Because of the current depressed state of the European chemicalmarket, prevailing European prices for certain products do not reflectthe prices which could be expected to be realized in the long term. There-fore, long term prices have been estimated by the Bank with the assistanceof consultants (including SRI International, the Pace Company Consultants andANIC) and have been used for the purpose of evaluating the Project. The tableon the next page shows these long-term equilibrium prices (based on fullrecovery of cost plus profit) and compares them with long term prices used inthe economic evaluation of the Project, current list (delivered) prices,prices provided by manufacturers in Germany, the Netherlands and Italy, andRomanian domestic (ex-factory) prices.
3.23 The following major conclusions can be drawn from the table:Firstly, as can be expected in the present depressed market situation forchemical products in Western Europe, actual market prices are on the whole,though not consistently, below list prices; secondly, long-term equilibriumprices have been assumed to be below current list prices (with the exceptionof methanol) even when taking into account that the equilibrium prices arequoted ex-factory while list prices are given on a delivered basis; thirdly,the prices used in the report's economic evaluation have been derived ona conservative basis; a discount ranging from 5% to 40% has been appliedto the equivalent long-term equilibrium (delivered) prices; and, fourthly,the Romanian domestic prices are not too far off international prices, exceptfor methanol (the price of which is only about half the Western Europeanprice) and for ethyl acetate (the price of which is between 50% and nearly100% above Western European prices).
F. Marketing
3.24 Domestic sales are basically determined through the medium of theFive-Year Plan which effectively sets production offtakes to other enter-prises. An annual plan is developed to which modifications may be intro-duced to the provisions within the Five-Year Plan for the year in question.
Chemical Product Prices(US$/ton)/a
Long-term Prices Used F.R. Germany Holland ItalyEquilibrium for Economic (Delivered) (Delivered) (Delivered)Prices Evaluation Manufac- Manufac- Manufac-
(ex-factory in Appraisal turers turers turers RomaniaWestern%, (Delivered c Informa- Informa- Informa- PricesEurope)- EEC) List-/ tion List-/ tion List-/ tion ex-factory
Methanol 130-137 125 120-122-/ 132-151 120-122 / - 120-122-= 115-125 59123-130-/ 123-130e/ 123-130-/
Acetic Acid 400-404 375 423-529 441-465 450 389-435 334-403 374-409 322
Vinyl Acetate 490-630 480 698 490-514 639 - 518 - 544
Polyvinyl Acetate 520-554 510 770 - - - 564 - 500
Acetic Anhydride 626 600 548 - 654 - 697 - 500
Ethyl Acetate - 510 650 - 665 - 506 - 998
a/ Prices are expressed in 1977 dollars, but reflect mid-1978 price levels.b/ Source: Various Consultantsc/ Source: European Chemical News, 5/12/78 (single deliveries). Tank cars 10-20 tons, except PVA which is in 5-10 ton lots.d/ Spote/ Contract
Industrial Projects DepartmentOctober 1978
- 21 -
The modifications may be made because of availability of new resources orbecause of variations in the rates of growth of domestic or external mar-kets from those assumed in the Five-Year Plan. After the Annual Plan hasbeen drafted, it is made concrete through the arrangement of supply and mar-keting contracts. Since equilibrium in material balances is crucial to planimplementation, enterprises must complete contracts for the purchase of in-puts and sale of outputs which are consistent with the Plan. The enter-prises are legally bound to their procurement contracts and, in general,changes in an enterprises' targets cannot be made without prior negotiationof the procurement contracts and the consent of the suppliers.
3.25 Export marketing of Craiova chemical products will be carried outby DANUBEXIM, a Foreign Trade Enterprise under the Ministry of ChemicalIndustry which is currently trading in fertilizers, explosives, tires, plas-tics, rubber, and fibres. DANUBEXIM becomes the formal owner of the goodswhich are transferred to it from the individual enterprises and undertakesto sell all the materials of which it takes possession. Some technicalservice is provided by the individual enterprises via DANUBEXIM to cus-tomers. Although preliminary contacts have been made with potential cus-tomers abroad, no firm commitments can yet be entered into because start-updates are still too far in the future. In addition, although DANUBEXIM hasseveral partnerships with distributors in the main European markets (FederalRepublic of Germany, France, UK and Italy), it has limited market intelligencecapabilities.
3.26 As noted above, Romanian authorities recently announced plans forgiving greater responsibility to individual enterprises, including in thefield of foreign trade. If Romania is to export Craiova products at economicprices it will need an efficient export marketing organization with a rapidmarket intelligence service in order to enable it to establish a continuingpreseace in the extremely competitive international marketplace. In thecase of certain products, there may well be a need for some form of techni-cal service to customers. DANUBEXIM and the Craiova enterprise are alreadycooperating both on technical service and identifying markets. Agreementhas been obtained that an export marketing development plan for Craiova'sproducts will be prepared and submitted to the Bank by December 1979.
3.27 Most of the Enterprise's products for export will be shipped viathe Black Sea port of Constanza, with which good rail communications exist,and where bulk storage for liquids has already been installed. Besides normalshiploading facilities, there will also be facilities for pipeline loadings ofbarges of 500-3,000 tons whose products are then in turn transferred to largerships for movement to Western Europe and elsewhere. Because of berth limita-tions, the maximum ship size is 5-6,000 tons capacity today, but extensionsare being made to receive ships up to 10,000 tons capacity. Some barge move-ments to Western Europe via the Danube are also planned; loading will takeplace at the Iron Gates, not far from Craiova.
- 22 -
IV. THE PROJECT
A. Project Scope
4.01 The Project, which consists of the expansion and modernization ofthe Craiova Chemical Complex, will produce the products at annual capaci-ties as shown in the flowsheet on page 23 and summarized below:
Project Unit Capacities and Net Production Capacities for Sale(tpy)
Net Production Sales Capacities as
Products Capacity for Sale / % of Unit Capacities
Acetylene 3 30,000 14,331 47Carbon Monoxide (m /h) 5,000 - -Methanol 210,000 172,200 82Acetic Acid 60,000 27,946 47Acetic Anhydride 10,000 10,000 100Vinyl Acetate 20,000 18,825 94Polyvinyl Acetate 13,000 13,000 100Ethyl Acetate 8,025 7,965 99
/a Net production for sale to other units of the Craiova Complex or outside;the balance is internally consumed in the Project.
The net production capacities for sale shown above represent the optimal mix,given the proposed size of the units and the projected market requirements.The Project, however, has some flexibility to adjust this mix to changingmarket prospects, with minimal impact on operating costs. For instance,production of acetic anhydride could be reduced or eliminated altogether,with a corresponding increase in the production of acetic acid, in the ratioof 1.0 ton to 1.3 ton.
4.02 The Project comprises the following major elements: 1/
(i) The core of the Project lies in the installation of a 30,000tpy acetylene unit based on methane feedstock; the unit will:replace the production of the Complex's old 16,000 tpy acety-lene plant based on carbide which will be taken out of commis-sion; provide additional acetylene intermediate to new orexpanded downstream units (see below); deliver offgases for use inan existing ammonia reactor and in the new acetic acid plant; andallow the full utilization of an existing acetaldehyde unit.
1/ The Romanian authorities have been considering for some time thepossibility of adding a 5,000 tpy polyvinyl alcohol plant and a10,000 tpy butyl acetate plant to the Craiova expansion program.No firm decision has been taken so far in view of their marginalprofitability (see Annex 7). Therefore, the Project as describedin this report does not include these two plants; the Bank willnot finance them should the Romanians decide on their implementation.
ROMANIA - CRAIOVA CHEMICAL PROJECTPROCESS FLOW SHEET
E3025 TYP Ethyf A-etahtACETIC etHYL 7sr.s TPY
6419TPY tEXISTING) 967b TP CEAE 6 Tt Y '9~y 825 TPY
_ A-rVytene -e! aJtoTPY _ __ I " | Polavinva AceACETYLENE
6175 TPYf POLYVINYL |13,000TPY
_ 2b 000 TPY
Ocff G., : LM TP_| a3G5 t 106 _ N V L _N-P.,- Nm pv ACETATE
Not., I Gas 82% Hvd ce 5 m0TP 106.4 X10 Nr , I,Pr yri216 . 106 rn- u __PNnrc Pm Year C
_ sEPARAT411c/ N _ C t-bor\ tnonU7>t . l _ ACET IWC Acet ic Anhydrk -t
210 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~1.0 TPYTP.~ ~ ~ ~~~~~~~~~~~~0 le AceHYOn ot 3EA __ __ 1e3.4 ^ 1d6 Nrnr p P . , v o w 0 e rT y z
220 ~~~~~~5 Xs 106 A.., Akl0 "
Nntc~ ~ ~ ~~~~ f Y., A-1,, A,i TI Wtsrl Tn-Y54
- 24 -
(ii) The capacities of the existing vinyl acetate and polyvinylacetate units will be expanded.
(iii) New acetic acid, acetic anhydride, ethyl acetate, and methanolunits will be built. In the case of acetic acid, new technologywill be introduced and acquired abroad.
(iv) A new plant for the separation of carbon monoxide (CO) willprovide CO to the new acetic acid plant and hydrogen to theexisting butanol plant.
4.03 The Project will divert about 360 million m3 of methane gas fromfuel to chemical feedstock uses, thus increasing the amount of gas processedin Romania into higher value chemicals by 11%. The Project has been veryingeniously designed so as to achieve the best possible utilization of thefeedstock. About half of the methane stream will be directed to the newacetylene unit; one-third of the carbon contained in this stream of gas wouldthus be transformed into acetylene and from there into a variety of high valueorganic chemicals. The remaining two-thirds of the carbon will be transferredin the form of offgas to other units, mainly to the existing ammonia/ureafacilities; the composition of the offgas permits direct use by the ammoniareactor and thus allows the replacement of pure methane gas. The other halfof the original methane stream will be used for the production of methanol.
4.04 The Project's location and design concept have been planned to makethe best possible use of pre-existing investments in the Complex. The exist-ing methane gas pipeline and many infrastructural facilities will be sharedby the new units, which will be closely integrated with existing processstreams. Spare capacity in some existing units will also be absorbed.Standardization of plants is to take place wherever possible so as to maximizethe benefits of existing expertise in building and operating similar units.
B. Location, Raw Materials and Utilities
4.05 The Craiova Chemical Complex is located near the village of Isalnita,about 10 km west of Craiova, at the confluence of the Jiu and Amarandia rivers.The Complex hosts facilities for the production of nitrogenous and complexfertilizers (270,000 nutrient tpy capacity) as well as for the production ofacetylene (49,000 tpy) 1/ and a range of acetylene-based organic chemicals.The inclusion in the Project of methanol and methanol-based products willdiversify the range of products manufactured in the Complex, away fromacetylene and fertilizer products. The plant layout is shown in Annex 4-1.
4.06 There is sufficient room on the Craiova site to accommodate thefacilities to be built under the Project. Some storage facilities will bemoved closer to the railway at the outskirts of the plant. Water is avail-able from the nearby Jiu river, and chemically impure water will be processed
1/ a. Acetylene via partial oxidation: 33,000 tpyb. Acetylene via carbide : 16,000 tpy
- 25 -
through a biological treatment unit. The plant units (mainly the methanol
unit) will generate part of the steam required for the Project, and residual
needs will be filled by existing facilities. Power is available from thenational grid as well as from the Complex network. Methane is readily avail-
able through an existing pipeline which connects the site to the Transylvaniagas fields, some 250 km away, and which has adequate capacity to meet the
demand of the Project. No difficulties are expected to meet the Project's
raw materials and utilities requirements, detailed in Annex 4-2, which, with
the exception of a few chemicals, will all be locally supplied.
C. Technology, Employment and Training
4.07 The transfer of new technologies from abroad will be sought for
one major plant unit to produce acetic acid and for the CO separation unit.
Local equipment suppliers will be involved as much as possible to facilitate
such transfers. At the same time and as mentioned previously, the existing
acetylene unit, which is based on carbide, will be phased out and replaced bya more modern partial oxidation unit using methane. The technology for this
unit has been developed in Romania on the basis of foreign know-how.
4.08 Acetylene has been used in metal cutting and welding for many years
and since the early part of the 20th century, has played an important role as a
chemical intermediate. Its maximum utilization was reached in the mid-1960s;since then, technologies based on lower cost ethylene and propylene from large
naphtha and ethane crackers have to a large extent replaced the processes
based on acetylene. However, for countries such as Romania, with an indige-nous source of natural gas (methane) and insufficient petroleum feedstocks,
such as naphtha, the use of acetylene-based processes can still be attractive.
Since acetylene is produced typically in units with much smaller capacities(10,000-80,000 tpy) than have become common for olefines production (300,000-
500,000 tpy), the acetylene-based processes continue to receive attention
when domestic demands for derivatives are at levels which do not justifylarge-scale production and where the technologies employed to produce these
derivatives do not exhibit significant economies of scale (Annex 4-3).
4.09 Estimated personnel requirements of the Project amount to about
1,110 people, out of whom 600 are operators, 450 are auxiliary workers, and
60 are engineers and technicians. The latter will be found among graduatesof chemistry schools (which work in close collaboration with the chemicalindustry) and/or are trained in the Complex. The number of existing adminis-
trative staff does not need to be expanded for the Project. In line withthe Government's objectives on industrial employment, up to 80% of the per-sonnel will be recruited in the judet of Dolj where the plant will be located.
Detailed training programs for the expansion have been submitted to and found
acceptable by the Bank. Training for selected personnel has already begun in
the existing facilities at Craiova to fill the needs of those plant units
which will be commissioned first.
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D. Ecology and Safety
4.10 The most important pollutants are organic compounds likely to bewashed away with the cooling water, particularly in the methanol and acetyleneplants. Water pollution, therefore, presents some potential risks. Hence,the Project authorities have decided to install biological treatment facil-ities to control the quality of the effluent water discharged into the Jiuriver (Annex 4-4). No problems are anticipated with regard to air pollu-tion levels on account of the particular process technology selected.
4.11 A variety of different chemicals, hot fluids, and high pressurefluids will be used in the new plants at Craiova. Such chemicals and fluidspresent a potential hazard if not properly handled. However, the operatingstandards already employed at the Complex are in line with the most up-to-date standards elsewhere in the world resulting in safety records which areremarkably good. No major hazards are expected with regard to the oxygenseparation plant. The two air inlets to the oxygen separation plant are 3 kmapart and so located that one inlet is always upwind from the Complex, what-ever the direction of the wind, thereby eliminating any risk of presence ofdissolved hydrocarbons in liquid oxygen due to air pollution above thechemical Complex and thus diminishing any potential risk of explosion.
4.12 Furthermore and also with the objective of avoiding any explosionrisks, the existing acetylene furnaces are fitted (and so will the new fur-naces) with proper vent and shut down instrumentation according to the presentsafety standards of all modern acetylene technologies. Purge acetylene ishandled and transferred according to safety standards which are even moreconservative than those of the USA and Germany. Higher acetylenes dissolvedin diesel oil and liquid ammonia are safely burned without exceeding themaximum concentration which is actually allowed in similar acetylene plants.The originally proposed CO cryogenic separation process has been abandonedand substituted by the COSORB 1/ process which should be quite safe due tothe non-corrosive absorbent liquor it employs. High and medium pressureunits, such as to be used in producing methanol and acetic acid, will bedesigned according to a proper and modern technology.
4.13 The engineering and operational standards adopted on safety werereviewed by a Bank expert and a consultant 2/ and found satisfactory. Agree-ment has been obtained that the Project facilities will be designed, con-structed, and operated with due regard to ecological, environmental, andsafety standards.
E. Project Implementation
4.14 The Project will be implemented under the supervision of the manage-ment of the Craiova Chemical Complex and the Craiova Central. The Central has
1/ Absorbtion process based on technology developed by KTI (Netherlands).
2/ Messrs. J. Tixhon (IBRD) and F. Pederzani (ANIC).
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considerable experience in the implementation of new projects and is providingexperienced project management and senior staff to the Enterprise. TheCentral, together with the Enterprise, has also direct responsibility forthe procurement of local equipment and raw materials and for the recruitmentand training of personnel. In line with the Romanian system of project imple-mentation, several areas of Project execution have been delegated to otherorganizations which are well versed in their respective tasks. Engineeringand design is the responsibility of the Technological Engineering and DesignInstitute for the Chemical Industry (IITPIC), which was established onFebruary 1, 1977, by joining several design institutes (IPROCHIM, IPUC, andCPRP). ROMCHIM, the foreign trade enterprise of the Ministry of ChemicalIndustries, is responsible for the procurement of imported goods and services.Construction and erection will be carried out by enterprises of the Ministryof Industrial Buildings. The Ministry for the Chemical Industries supervisesthe work and coordinates the tasks of the other ministries involved. Thisscheme for project implementation is standard practice in Romania and hasproven itself in the past. Except for foreign technical assistance requiredfor the acetic acid plant, overall and detailed plant layout will be done byIITPIC and the Central. Given the experience the organizations involved havebeen gaining on expansion projects over the last ten years, project implemen-tation arrangements are judged to be adequate.
4.15 Implementation schedules for the various plant units are given inAnnex 4-5. These schedules have been reviewed by the Bank and found satis-factory. Site preparation is underway. Preliminary process design of someof the units has been completed. For the acetic acid plant, a contract forthe supply of license and major equipment has been concluded with BASF(Germany) and will be financed through bilateral credit arrangements. Longdelivery items, such as methanol compressors and the CO separation unit,have been ordered (para 5.08). The commissioning dates of the various plantsare spread over a period of two years, from December 1979 to December 1981.
V. CAPITAL COSTS AND FINANCING PLAN
A. Capital Costs
5.01 Total financing required for the Project is estimated at US$156.8million equivalent, including US$59.7 million in foreign exchange. Detailsof the capital cost estimate and of the assumptions made are given inAnnex 5-1 and summarized below:
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Summary of Capital Costs
Lei Million US$ Million/a lb /a lb
Local- Foreignr- Total Local- Foreign- Total %
Land 3.6 - 3.6 0.2 - 0.2 -
Equipment, Materials& Spares 802.8 712.8 1,515.6 44.6 39.6 84.2 65
Freight & Insurance 16.2 12.6 28.8 0.9 0.7 1.6 1Erection 115.2 3.6 118.8 6.4 0.2 6.6 5Duties & Other Expenses 36.0 19.8 55.8 2.0 1.1 3.1 2Buildings & Civil Works 437.4 10.8 448.2 24.3 0.6 24.9 19Engineering, Licenses &
Technical Assistance 63.0 34.2 97.2 3.5 1.9 5.4 4Training 19.8 - 19.8 1.1 - 1.1 1Administration & Pre-
operating Expenses 57.6 - 57.6 3.2 - 3.2 3
Base Cost Estimate (BCE) 1,551.6 793.8 2,345.4 86.2 44.1 130.3 100
Physical Contingencies(3.2% of BCE) 48.6 27.0 75.6 2.7 1.5 4.2
Price Escalation (6.3%of BCE + Phys.Cont.) 19.8 133.2 153.0 1.1 7.4 8.5
Total Installed Costs 1,620.0 954.0 2,574.0 90.0 53.0 143.0
Working Capital 109.3 43.7 153.0 6.1 2.4 8.5
Expected Project Cost 1,729.8 997.2 2,727.0 96.1 55.4 151.5
Interest DuringConstruction 14.4 77.4 91.8 0.8 4.3 5.1
TOTAL FINANCING REQUIRED 1,744.2 1,074.6 2,818.8 96.9 59.7 156.6
/a Includes US$14.5 million in non-convertible foreign exchange costs./b Includes US$16.0 million in indirect convertible foreign exchange.
5.02 The estimates were prepared by IITPIC and the Central in January1978. Equipment costs for the imports required for the Project are based onprevailing world market prices and on fixed price contracts already signed forthe acetic acid plant, methanol compressors, CO separation unit and other longdelivery items representing together 18% of the Base Cost Estimate. Localcosts for equipment, civil works, and erection were estimated by IITPIC. Aphysical contingency of 3% has been added to the base cost estimate (equivalent
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to 4% of BCE not yet covered, by fixed price contracts) and is consideredadequate in view of the advanced stage of Project preparation. Price esca-
lation has been calculated on the basis of 1% annual increase for local costs
and 7.5% annually for foreign exchange costs.
B. Financing Plan
5.03 The Project is part of the Central's current Five-Year Plan
(1975-80). In establishing its investment and financing plan, the Central
aggregated all approved investments of its enterprises and set them against
the availability of funds from its enterprises' cash generation. However, for
the Plan period, the investment requirements exceed CIICh's cash generation by
about 20%. To ensure that the funds required for the investment program are
available when required, the Central, in accordance with common practice in
Romania, agreed with the Ministries of Chemical Industries and Finance that
CIICh's enterprises will not retain any funds for their individual investment
purposes but transfer nearly all internally generated cash to the State. The
only funds that will be retained are for paying bonuses to workers and for the
reserve fund for working capital increases, together totalling about 2% of total
annual cash generation. In turn, the Central's entire investment requirements
will be funded by the State budget and allocations made as required.
5.04 Interest during construction, which does not exist under the
Romanian system of industrial financing but which will accrue on the foreign
loans, i.e., IBRD loan and supplier's credit, will be borne by the State and
not charged to the Central or to the Enterprise. The financing plan will,therefore, be as follows:
Financing Plan
Lei US$ %(in million)
IBRD Loan 720 40.0 26German Supplier's Credit 232 12.9 8State Funds for
- Fixed Assets 1,622 90.1 58- Working Capital 153 8.5 5- Interest during Construction 92 5.1 3
Total State Funds 1,867 103.7 66
Total Funds Available 2,819 156.6 100
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5.05 The Council of Minister's approval of a project automaticallyincludes the provision of funds required for it in the Romanian budget. TheRomanian budget system has no simple mechanism for providing additional fundsonce this approval is given, since the Council of Minister's decision is lawand another decision of the Council would be required to authorize addi-tional funds. Agreement has been obtained that funds will be provided asneeded for carrying out the Project, including prompt allocation of Statefunds to cover any cost overrun.
5.06 The Bank loan is proposed to be extended to the Investment Bank for14 years, including 3-1/2 years of grace, and at a 7.35% interest rate. As inthe case of other Bank projects in Romania, the Investment Bank will pass onthe loan proceeds to the Enterprise, together with the State funds. There isno formal on-lending arrangement from the Investment Bank to the Enterprise,but agreement has been obtained that all actions needed will be taken toensure that annual remittances of funds by the Enterprise to the State budgetwill be sufficient to at least equal payments of interest and principal on theBank loan on terms assumed to be identical to those due to the Bank, exceptfor a notional interest rate of 10%. This arrangement is in line with ourpractice in all previous industrial projects in Romania and the 10% interestrate is the normal rate currently paid by our borrowers in Bank-financedindustrial projects in other countries. The supplier's credit from theFederal Republic of Germany, providing US$12.9 million to finance the aceticacid plant will be extended over 8 years, including 2-1/2 years of graceand at a 7.5% interest rate. Signing of the supplier's credit will be acondition of effectiveness of the Bank loan.
C. Procurement
5.07 Equipment and materials to be financed by the Bank will be procuredaccording to Bank's guidelines in the following manner: (i) internationalcompetitive bidding (ICB) will be used for procuring imported equipment, mate-rials and the know-how and services connected with such equipment estimatedat US$12.0 million; 1/ (ii) imported long-delivery items available from alimited number of suppliers and estimated at US$10.0 million may be purchasedthrough prudent international shopping, subject to prior approval by the Bankof such procurement procedure and of the list of items involved; (iii) importeditems costing less than US$100,000 each (and up to a total of US$2.0 million)may be purchased through international shopping on the basis of suitability,availabiltiy, and price considerations, subject to prior approval by the Bankof the list of items involved; and (iv) US$16.0 million of equipment and sub-assemblies which will also be subject to ICB and for which qualified Romaniansuppliers exist and may be expected to bid; for these items, Romanian supplierswill be accorded a preference of 15% or the applicable custom duty, whicheveris the lower. Procurement of the remaining equipment and services will behandled in Romania by the agencies responsible for the Project's implementa-tion (para 4.14).
1/ Services are an integral part of the equipment cost and no reliableman-month cost can be estimated.
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D. Allocation and Disbursement of Bank Loan
5.08 The Bank loan would cover 26% of the Project's total financingand about 67% of its estimated foreign exchange requirements. A detailed listof equipment and services proposed to be financed by the Bank is given inAnnex 5-2 and is summarized below in the following allocation of the Bankloan:
Allocation of Bank Loan(in US$ million)
Amount Disbursement
1. Imported equipment and services 22 100% of foreignexpenditures
2. Imported items costing less than 2 100% of foreignUS$100,000 expenditures
3. Equipment and sub-assemblies 16 100% of foreignexpenditures and100% of localexpendituresex-factory.
Total 40
It is expected that awards for most of the equipment and sub-assemblies listedunder item 3 in the above list will go to Romanian suppliers after ICB.Changes in this list will be made only by prior agreement between the Bank andthe Borrower. The Bank loan is expected to be completely disbursed by the endof 1981. A disbursement schedule is given in Annex 5-3. As already discussedin para 4.15, advanced contracting of about US$7.0 million is expected forlong-delivery items.
VI. FINANCIAL ANALYSIS
A. Revenue and Operating Cost Estimates
6.01 As discussed (paras 2.11 and 3.21), chemical product prices areset by the State using a pricing principle which takes into account actualproduction costs and provides for a margin to cover taxes and benefits whichin the case of the chemical industry amount to 30-35% over production costs,including depreciation. Prices for all inputs and outputs are administered
- 32 -
by the Government and have remained constant for long periods of time; mostprices were reset in 1974-76. In any case, whatever adjustments in input
and output prices may be made, they are not expected to affect the Project'sfinancial viability adversely in view of the Government pricing policy out-lined above. For chemical products exported, the Enterprise will receive
domestic prices for identical products and DANUBEXIM will absorb any pricedifference between Romanian and export prices.
6.02 Detailed assumptions used in the financial analysis are given inAnnex 6. Based on input prices prevailing in Romania and conservativelyassumed quantity requirements, the following cost structure results for
the Project:
Product Cost of Full Capacity of the Project(in constant 1980 terms)
Variable Costs Million Lei
Methane (Feedstock & Fuel) 37.9 7.7Fuel and Diesel Oils 24.2 4.9Utilities 123.5 24.9Chemicals 84.2 17.0
Total 269.8 54.5
Fixed Costs
Labor 45.0 9.1Maintenance and General 64.8 13.0Depreciation 115.8 23.4
Total 225.6 45.5
Total Product Costs 495.4 100.0
Sales Revenue 1,095.2 221.1
Variable costs account for about 55% of total product costs before financialcharges, which are not levied at the Enterprise level. The financial costof methIne, the Project's main raw material, is Lei 60 (or about US$3) per1,000 m . Depreciation charges, which under the Romanian system are theonly costs reflecting the value of the initially required investment, arerelatively small with an average depreciation period of about 22 years.
B. Financial Projections
6.03 Financial projections for the Project are summarized below fromAnnex 6:
- 33 -
Summary of Financial Indicators of the Project(in million constant 1980 Lei)
Year ending December 31 1980 1981 1982 1983 1984
Income and Cash Flow Statements
Sales Revenues 347.6 597.4 964.8 1,073.4 1,095.2
Cash Operating CostsVariable 80.8 125.8 227.9 261.6 269.8Fixed 109.8 109.Q 109.8 109.8 109.8
Depreciation 53.5 115.8 115.8 115.8 115.8
Gross Benefits (before interest) 103.5 246.0 511.3 586.2 599.8
Cash Flow (before interest) 157.0 361.8 627.1 702.0 715.6
Balance Sheet
Working Capital 30.0 94.5 153.0 153.0 153.0
Net Fixed Assets 2,326.1 2,371.3 2,288.9 2,173.1 2,057.3
Bank Loan 558.0 702.0 720.0 654.5 589.0
Supplier's Credit 233.0 209.7 163.1 116.5 69.9
Equity 1,565.4 1,555.3 1,561.5 1,559.3 1,557.1
Ratios
Current Ratio 1.2 1.7 1.3 1.3 1.4LT Debt/Equity Ratio /a 33/67 35/65 33/67 30/70 26/74
Debt Service Coverage /a 2.6 3.5 4.8 3.7 3.9
/a For this calculation, the Bank loan and the supplier's credit to theInvestment Bank have been assumed to be the Enterprise's debt in spite
of lack of formal on-lending.
The projections are based on a normal production build-up for each individual
product (75% capacity utilization in the first year (12 months) of operation,
95% in the second year, and 100% in the third year and thereafter) and the
gradual coming on stream of individual plant units between December 1979 and
December 1981. This build-up is considered achievable (i) because this type
of plant can normally reach full rated capacity fairly quickly after itssuccessful start-up; and (ii) because of Romania's history of rapid production
build-up and high capacity utilization. The uncertainties of the export mar-kets (paras 3.14 and 3.26) have been reflected in the sensitivity tests of
the economic analysis; for the purpose of the financial statements of the
Enterprise, the sales revenues are based on posted Romanian prices, inde-
pendently of domestic or export destination of the products.
6.04 The expected financial ratios of the Enterprise are satisfactory.Projects in Romania are financed fully on a "non-interest bearing capital"
basis, but funds are recovered by the State through payments from the enter-
prises into several State funds. However, the amount of interest and principalon the Bank loan and on the supplier's credit is shown in the projected cash
- 34 -
flow statement as a "notional" debt service coverage, relating benefits(before taxation) plus depreciation to debt service.
6.05 The Craiova Central enterprises retain only 2% of their generatedfunds, and the remainder is transferred to the State which in turn financesthrough the Investment Bank the investment program of the Central. The finan-cial projections are made in accordance with these arrangements. These arrange-ments ensure that the total remittances by the Enterprise to the State will besufficient to cover the equivalent in Lei of the interest (at a notional rateof 10%) and principal to be paid by the Investment Bank in that same year tothe Bank and agreement to that effect has been obtained from the Government.The table on page 7 of Annex 6, showing the net impact of the Project on theState budget, demonstrates the net flow to the State budget becoming positivein 1984.
C. Financial Rate of Return
6.06 The financial return of the Project, calculated in Annex 6 and basedon present Romanian prices, is 21% and is most sensitive to changes in salesrevenues: lowering them by 10% would reduce the financial return to 17%.Given the Romanian pricing system, however, this return is not very meaningfulfor judging the Project's viability, which is obtained through the economicrate of return (para 7.04).
D. Auditing and Reporting
6.07 Romania has an elaborate audit system under which enterprises sub-mit periodic operational and financial reports to their Central, technicalMinistries, the Investment Bank, and other banks concerned. These reportsserve to ensure achievement of Plan targets and proper use of funds. Thoughthe contents and presentation of these reports differ from those normallyreceived by the Bank, it has been possible to adjust them to provide suffi-cient information for the Bank to adequately monitor the progress of Projectimplementation and operations. Agreement has been obtained that the Bank willreceive from the Investment Bank quarterly progress reports prepared by theEnterprise and annual financial statements in a form satisfactory to the Bankand, within six months after the end of each year, copies of annual auditreports of the Enterprise prepared by the Ministry of Finance.
VII. ECONOMIC ANALYSIS
a
A. Economic Costs and Benefits
7.01 All economic benefits and costs for tradeable items have been deter-mined by using expected long-term international prices estimated to prevailin the mid-1980s (Chapter III). For non-tradeable items, domestic prices havebeen taken and, where applicable, adjusted to reflect the economic price of
- 35 -
their internationally traded components. Detailed assumptions are givenin Annex 7.
7.02 About half of the Project's total economic cost comes from methane.As mentioned in para 6.02, the domestic cost of methane is about US$3 per1,000 m , but such a cost does not reflect its most attractive alternativeuse, i.e., as fuel in power plants. In such use, methane would replaceeither locally available lignite or residual fuel oils. Lignite accounted forabout 28% of the power produced in Romania in 1975, and its share is expectedto increase to about 48% by 1985; based on a lignite production cosS of US$9-12 per ton, the corresponding value of methane is US$40 per 1,000 m . Fueloil accounted in 1975 for only 4% of the power produced, and its sharewill increase to about 16% by 1985. 1/ Based on an international price offuel oil of US$75 per ton, equivalent to US$13 per ~arrel of crude oil, thecorresponding value of methane is US$60 per 1,000 m. As a base cost of theanalysis presented in this report, the higher value of methane correspo5dingto the highest substitution cost at the margin, i.e., US$60 per 1,000 m , hasbeen retained.
7.03 About 17% of the economic revenues expected from the Project arein offgases; these will substitute for methane in other units of the CraiovaComplex and have been priced in the same way as the methane input, i.e., onthe basis of their energy content. Another 12% of the Project's revenuescomes from acetylene; this acetylene will replace the acetylene currentlyproduced from carbide, whose economic price is based on the internationalprice of carbide. The remaining 71% of the economic revenues are due tomethanol and acetylene-based products. Expected long-term economic pricesfor these products were discussed in Chapter III. For four major productsrepresenting 59% of the Project's total revenues (methanol, acetic acid, vinylacetate, and polyvinyl acetate), specialized consultants 2/ supplied the Bankwith information on capital and operating costs and on future demand andsupply data, and an assessment of long-term equilibrium prices. As mentionedin paras 3.22 and 3.23, the product prices used in the analysis presented inthis report are based largely on this information, but have been decreased(conservatively throughout the Project's life) depending on the product by5-40% to reflect the worldwide oversupply situation which is expected toprevail in the early 1980s.
B. Economic Rates of Return and Major Risks
7.04 Using the above assumptions, the Project's economic rate of returnwas calculated in 1977 terms, and is 16% versus a financial return of 21%;the drop stems mainly from a reduction in revenues proportionally higherthan the corresponding reduction in feedstock cost, when substituting inter-national for Romanian prices. Sensitivity tests (Annex 7) are summarizedbelow:
1/ During the same period, gas' share in power generation is expected todrop from 50% in 1975 to 15% in 1985.
2/ SRI International, the Pace Company Consultants and ANIC.
- 36 -
Economic Rates of Return
Overall Methanol AcetyleneProject Plant Based Plants
Base Case 16.2% 16.5% 16.0%Capital Cost up to 10% 14.3% 14.5% 14.2%Operating Cost up to 10% 12.1% 12.2% 11.6%Product Prices down 10% 11.8% 9.6% 12.0%
Like the financial rate of return, the economic return is most sensitive tochanges in product prices: it would decrease to 12% should chemical productprices drop by 10%, while a 10% increase would raise it to 20%. The return isless sensitive to investment and manufacturing costs, but is sensitive todelays in Project completion: were, under adverse circumstances, Project costto increase by 10% and the Project suffer a 6-month delay, the return woulddrop to 14%. Should the domestic market develop at a slower pace than anti-cipated and the Project have to export 2.5 times more, the return would dropto 15%. Should, however, the Project not be able to export at all and thedomestic market be equally unable to absorb the respective quantity, thecorresponding drop in capacity utilization (by 10%) would decrease the returnto 14%.
7.05 The major risk faced by the Project concerns the export of someof its production in the early years of operations (para 3.15) since DANUBEXIMis expected to face stiff competition from other suppliers in Western Europeand will have to absorb - as assumed in the export price assumptions - EECtariffs, at present equivalent to 10% of products prices on average. Sincethe quantities that can, or may have to, be exported will depend on the growthrate of consumption in Romania and most importantly on the pace of the addi-tional capacity which will come on stream both in Romania and elsewhere afterthe Project start-up, assurances have been obtained from the Government thatit will review the supply and demand projections before the Project's commis-sioning (para 3.14). This risk will be partly reduced by the operatingflexibility inherent in the Project design of switching production from oneproduct to another without affecting its overall profitability (para 4.01).It has been calculated that, should the export market for acetic anhydride notmaterialize to the extent envisaged at present, additional acetic acid couldbe produced and the rate of return would drop by only 0.3%.
7.06 A second potential risk, related to the first, refers to the limitedmarket intelligence capabilities of DANUBEXIM (para 3.25). Since an efficientmarketing organization with a rapid market intelligence service is critical ifRomania is to export part of the Project output at economic prices, assurancehas been obtained that DANUBEXIM, possibly with the cooperation of Craiova,will set up a suitable marketing group and develop an appropriate exportstrategy before the various plants of the Project are commissioned (para3.26).
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C. Other Benefits
7.07 Although most of the benefits have already been largely or entirelyaccounted for in the economic rate of return, the following benefits fromthe Project should also be highlighted. The Project will result in a transferof technology in the chemical sector (paras 4.07-4.08). Direct industrialemployment will increase by about 1,110 persons, corresponding to an invest-ment per person of about US$141,000.
VIII. AGREEMENTS
8.01 The following major assurances and agreements have been reached:
(i) The Investment Bank will cause to be prepared, byDecember 31, 1979, or such later date as the Bank andthe Investment Bank may agree, and furnish the Bankwith an update of the data made available to the Bankduring appraisal with respect to the projected domesticmethanol demand and supply (para 3.14) and of the exportmarketing development plans for all Project's productsmanufactured in Romania (para 3.26), and shall exchangeviews with the Bank on these data, their basis andconclusion thereof;
(ii) Project facilities will be designed, constructed andoperated with due regard to ecological, environmental andsafety standards acceptable to the Bank (para 4.13);
(iii) funds will be provided as needed to implement the Projectand to meet any cost overruns (para 5.05);
(iv) goods and services will be procured on the basis oflists agreed upon (para 5.08);
(v) total annual remittances by the Project Enterprise tothe State will be adequate to cover debt service (para6.05); and
(vi) the Investment Bank will submit quarterly project pro-gress reports and annual financial statements in a formsatisfactory to the Bank. Also, the Bank will receivewithin six months after the end of each year copies ofannual audit reports of the Enterprise prepared by theMinistry of Finance (para 6.07).
8.02 Based on the above agreements reached, the Project is suitable fora Bank loan of US$40 million to the Investment Bank to be repaid over 14years, including 3-1/2 years of grace. Signing of the supplier's credit fromthe Federal Republic of Germany to finance the acetic acid plant, will be acondition of effectiveness of the Bank loan (para. 5.06).
Industrial Projects DepartmentOctober 1978
- 38 -
ANNEX 1
Page 1
ROMANIA - CRAIOVA CHEMICAL PROJECT
GLOSSARY
Acetaldehyde (CH3 - COH). It is a stable and non-corrosive liquid, muchused as an intermediate in chemical synthesis. It may be obtained by afermentation process or from charcoal distillation, but most processes useethylene or acetylene as a feedstock. Among the synthetic routes, theacetylene based one continues to lose ground since ethylene represents acheaper feedstock. Acetaldehyde is obtained at Craiova in the existingproduction facilities by low pressure addition of water to acetylene.Mercuric sulphate is used as a catalyst.
Acetic Acid (CH3 - COOH). An organic acid, liquid at room temperature,obtained by oxidation of acetaldehyde or by synthesis of methanol andcarbon monoxide. Major outlets for acetic acid are vinyl acetate, aceticanhydride, various esters, monochloroacetic acid and terephthalic acidproduction, where it is used as a solvent. The catalytic combination ofmethanol and carbon monoxide was first used at BASF's plant in a highpressure process. Then MONSANTO's technology introduced lower pressuresynthesis. A high pressure process will be used at Craiova. Aceticacid is a highly corrosive chemical and requires the use of specialmaterials in equipment required to handle it. No major hazards orenvironmental problems are due to the acetic acid production.
Acetic Anhydride (CH3 - CO - 0 - CO - CH3). It is a highly reactiveliquid, used as an intermediate chemical for cellulose acetate fibers,film, plastics and acetylsalycylic acid production. It will be producedat Craiova by reaction of liquid acetic acid with ketene.
Acetylene (HC - CH). A gas which can be produced by reaction of calciumcarbide with water or by high temperature cracking of natural gas and higherhydrocarbons (see "Acetylene Furnace Gas"). Acetylene, possessing atriple bond, is a highly reactive chemical and can be used as the rawmaterial to produce a large number of common organic chemicals. It hasbeen used in metal cutting and welding for many years and since the earlypart of the zOth century has played an important role as a chemicalintermediate. Its principal end products are vinyl chloride, vinyl acetateand acetaldehyde. Acetylene is not chemically dangerous nor may cause moreenvironmental problems than other hydrocarbons. On the other hand, being a veryunstable chemical, it must not be compressed at more than 0.5 bar withoutespeciallv designed equipment nor heated up to 150°C nor exposed to shocksas pipe hammering, etc. Liquid acetylene is extremely expl* ive; therefore,
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ANNEX 1Page 2
process temperatures must never drop below the acetylene liquefactiontemperature.
Acetylene Furnace Gas. The output mixture of gases from the acetylenefurnace reactors. By reaction of preheated natural gas and oxygen, partof the natural gas is oxidized, the temperature rises up to about 1400°Cand the remaining natural gas is involved in a cracking. If an immediatequench follows, some unstable products as acetylene and higher acetylenescan be obtained. In the furnace gas, such acetylene generally ranges from 7to 8.5% and higher acetylenes below 1%. Small amounts of higher, mostlyaromatic, hydrocarbons are also produced in the furnace reactions. As aresult of the natural gas oxidation, carbon monoxide and carbon dioxideare produced. In the Craiova acetylene plant,the higher hydrocarbonsand part of the higher acetylenes, as well as the residual carbon soot,shall be removed by diesel oil. Carbon dioxide, acetylene and higheracetylenes shall be absorbed in liquid ammonia. The remaining gas isrecovered as "Acetylene Off-Gas."
Acetylene Off-Gas. A mixture of gases resulting as a by-product fromthe acetylene plant. Its average volumetric composition is 28% carbonmonoxide, 62% hydrogen, 7% methane, 3% nitrogen, argon and varioushydrocarbons. The commonest use of acetylene off-gas is for ammoniasynthesis, or as a source of carbon monoxide and hydrogen for chemicalsynthesis. The gas is poisonous due to its high content of carbonmonoxide.
Ammonia (NH3). A compound of nitrogen and hydrogen obtained by synthesisof nitrogen and hydrogen. It is a gas at normal atmospheric temperatureand pressure. It can be liquefied at -33oC at atmospheric pressure butit can also be liquefied at ordinary temperatures by application ofpressure. Ammonia is applied as a fertilizer because of its high nutrientcontent (82% N) but it is more commonly used as an intermediate chemicalfor production of solid fertilizers. It will be used in the acetyleneplant of Craiova as an absorbing liquor to remove carbon dioxide, acetyleneand higher acetylenes from the furnace gas. After carbon dioxide andacetylene desorbtion, part of the recycled liquid ammonia will be burnttogether with the higher acetylenes.
Butyl Acetate (CH3 - COO - C4H9). A liquid organic ester, mostly used asa solvent for paints,coatings and adhesives. It can be manufactured byreaction of acetic acid with butanol, as it is in the existing plant atCraiova. It can be produced also by trans-esterification, according tothe following reaction: methyl acetate + butanol F butyl acetate + methanol.This way of manufacturing butyl acetate allows methyl acetate from thepolyvinyl alcohol plant to be recovered, and methanol to be regenerated.
Carbide (Ca C2). A solid product very reactive with water. By reaction ofcarbide with water, acetylene and calcium hydroxide are produced as
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ANNEX 1Page 3
follows: Ca C2 + 2H20 = Ca (OH)2 + C2H2. The carbide itself is manufactur-ed by mixing lime and coke in a 60/40 mixture and heating it to over2000°C in an electric furnace. The process is extremely energy intensive,requiring 2,900 KWh per ton,of carbide, that is about 9,000 KWh per tonof acetylene.
Carbon Dioxide (CO2). The commonest result of a combustion. It resultsas a by-product from the partial oxidation of natural gas in the acetylenefurnaces, then absorbed in dilute ammonia and finally stripped by heatingthe ammonium carbonate solution. Carbon dioxide is also used in thesynthesis of methanol.
Carbon Monoxide (CO). A result of partial oxidation of natural gas as wellas any other hydrocarbon. High purity carbon monoxide will be producedin the CO separation unit at Craiova and supplied to the acetic acid plant.For the CO separation, the COSORB process will be chosen instead of themore expensive cryogenic process.
Carbonylation. It is the addition of a CO group to a hydrocarbon. In theacetic acid synthesis, due to carbonylation, acetic acid is produced byaddition of carbon monoxide to methanol: CH3 - OH + CO = CH3 - COOH. Thecarbonylation can be done both at low and at high pressure (see "AceticAcid").
COSORB Process. A KTI patented process for absorption and desorption ofcarbon monoxide. COSORB is a liquid absorption/desorption system whichuses a copper compound to complex the carbon monoxide, but unlike thatused in the conventional copper liquor process, the scrubbing liquor inthe COSORB process is non-corrosive, as the solvent is an aromatic hydro-carbon and the absorbent is cuprous aluminum chloride. The scrubbermake gas contains up to 82 *. 85% hydrogen, by volume, 10 12% methane,nitrogen, etc.
Cryogenic Separation of Gases. A separation of gases based on the lowtemperatures liquefaction and distillation of the liquefied gases. In thecase of carbon monoxide separation, compressed nitrogen is expanded to lowpressures. Due to Joule-Thomson effect, nitrogen is liquefied and can beused as a source of frigories as well as a solvent for residual carbonmonoxide. Due to nitrogen compression energy, the cryogenic separationof gases is more expensive than the chemical separation (see COSORBprocess) even if it provides higher purity products.
Diacetylene (HC G C - C E CH). This gaseous hydrocarbon is the most unstableand hazardous of higher acetylenes. It should never exceed a partialpressure of 0.05 bar (absolute pressure) in gaseous mixtures, and it shouldnever exceed 10% by weight in liquid phase. Gaseous or liquid-absorbeddiacetylene is progressively absorbed in solid hydrocarbons, as polymersand naphthaline and may be abruptly released if the solid phase is hammered,heated, dried or exposed to air. Released diacetylene may catch fire thus
- 41 -
ANNEX 1Page 4
accelerating the desorption up to a serious explosion. Most of incidentswhich are said to happen in the acetylene plants are due to diacetylenedecomposition. About 0.3% by volume of diacetylene is contained inthe acetylene furnace gas.
Diesel Oil. A light petroleum distillate between kerosine and gasoline,having a final boiling point up to 220°C. It will be used for higherhydrocarbon and residual carbon soot removal from the acetylene furnacegas, in the new acetylene plant at Craiova.
Ethyl Acetate (CH3 - COO - CH2 - CH3). This liquid, fruit-smelling ester,shall be produced at Craiova by direct reaction of acetaldehyde on aluminumcatalyst. It is a very good solvent for paints, laquers and varnishes.Unfortunately, its future growth is likely to be affected by economicfactors(acetates, generally, are higher quality,but also more expensivesolvents) and by the trend towards solventless paints and varnishes.
Higher Acetylenes. A small amount of higher acetylenes is produced togetherwith acetylene in the reaction furnaces. Methyl-acetylene, vinyl-acetylene and diacetylene are mostly produced. Their overall content inthe furnace gas does not exceed 1% by volume. Methyl- and vinyl-acetyleneare not more dangerous than acetylene itself, while diacetyleneis likely to cause many hazards.
Hydrogen (H2). A stream of average purity hydrogen shall be produced aspurge gas from the carbon monoxide separation plant. The 82% hydrogenshall be supplied to the existing butanol plant at Craiova for the hydro-genation of crotonaldehyde. Then a purge gas from the butanol plant,containing methane together with all impurities of the original hydrogenstream, shall be recovered and burnt.
Ketene. It is a product of the acetic acid pyrolysis, according to thefollowing reaction: CH3 - COOH -- CH2 = C = 0 + H20. Ketene is avery reactive chemical. By reacting with acetic acid, it producesacetic anhydride.
Methanol (CH3 - OH). It is a liquid alcohol which will be used as a rawmaterial in a series of processes leading to the production of formaldehyde,dimethyl terephthalate, acetic acid, methyl halides and other methylcompounds and is recently growing as a raw material also for the methyl-ter-butilic ester. Methanol will be obtained at Craiova by the followingreactions: (two step synthesis) 3 CH4 + C02 + 2H20 = 4 CO + 8 H2(reforming) 4 CO + 8 H2 = 4 CH3 - OH (synthesis). Reforming pressure shallbe about 50 bar.
Nitrogen Monoxide (NO). A product of ammonia oxidation and/or bactericmetabolism in the process cooling and scrubbing water. A few ppm of nitrogenmonoxide in the acetylene off-gas may cause serious hazards if the gas isused for cryogenic separation of CO and H2. Unstable nitro-resins may be
- 42 -
ANNEX 1Page 5
concentrated in the low temperature heat exchangers and liquid separatorsand may cause serious explosions when heated. This is why the Craiovacryogenic CO separation has been rejected.
Oxygen Separation. By partial liquefaction of air, achieved throughcompressed air expansion and cooling due to the Joule-Thomson effect,part of the oxygen from the compressed air can be separated at highpurity, the remaining impure oxygen is discharged together with nitrogen.Also, high purity nitrogen can be produced in the same plant. Thepresence of small amounts of dissolved hydrocarbons in the liquid oxygenmay be highly hazardous. To avoid a dangerous hydrocarbon concentrationin the liquid phase, each oxygen separation plant must be shut off every6 to 24 months, according to the hydrocarbon concentration. Also, theaccumulation of solid carbon dioxide and ice may cause the oxygenseparation plant to be shut off.
Polyvinyl Acetate. It is generally produced by polimerization of vinylacetate. Both solution and dispersion polimerizations are possible.Dispersion polimerization will be used at Craiova, with polyvinylalcohol and cellulosic compounds as main disperdent in water. Thereaction shall be promoted by hydrogen peroxide. Polyvinyl acetatedispersion is a dense, milk-white, viscous liquid, which does not causehealth or environmental hazards. The principal uses of polyvinylacetate dispersion are in emulsion paints, adhesives, paper coating,and textile auxiliaries. A lot of different qualities can be produced,due to different chemicals, reaction time, temperature, reactor mixing,etc.
Polyvinyl Alcohol. A dense liquid or solid product obtained by hydrolisisof a solution of polyvinyl acetate. Bulk polymerized vinyl acetate maybe dissolved into methanol, or simply a solution of vinyl acetate inmethanol may be polymerized. Then a change of pH leads to the followingreaction: Polyvinyl acetate + methanol - polyvinyl alcohol + methylacetate. A normal by-product of polyvinyl alcohol is methyl acetate or amethyl acetate/methanol azeotrope. Polyvinyl alcohol may be produced asa dense solution or dried up to a fine white powder. It is used fortextile warp sizing, in the manufacture of polyvinyl acetate emulsions,in paper coatings, etc.
Vinyl Acetate (CH3 - COO - CH = CH2 ). It is a clear, good smelling liquid,slightly corrosive if not pure enough, due to small amounts of waterand residual acetic acid. Vinyl acetate will be produced at Craiova bythe reaction of acetic acid with acetylene (vinylation) on active carbonand Zn salts as a catalyst. It can be produced also by the reaction ofacetic acid with ethylene. However, in Western Europe, most vinyl acetateproduction is obtained through acetylene, in contrast to the situation inthe USA, where most production is based on ethylene. Unlike
- 43 -
ANNEX 1Page 6
vinyl chloride, it is not dangerous for human health, nor causes environ-mental hazards.
Vinylation. The production of a vinyl compound by addition of anorganic or mineral acid into the triple bond of acetylene. The generalformula is (acid radical) - CH = CH2.
Industrial Projects DepartmentOctober 1978
Annex 2-144 - Page 1
ROMANIA
CRAIOVA CHEMICAL PROJECT
CHEMICAL ENTERPRISES UNDER THE CENTRAL (CI1Ch)
Date ofEnterprise Location Completion Principal Products
CIC Arad Arad 1971 Chemical fertilizers, ammonianitric acid
CIC Bacau Bacau 1974 Urea, complex fertilizers,ammonia, sulphuric acid,phosphoric acid, fluorine salts
CC Craiova Dolj 1962 Fertilizers, ammonia, aceticacid, chemical catalysts,methanol, acetylene, vinyl acetat'
CC Fagaras Brasov 1940 Chemical fertilizers, ammonia,nitric acid, formaldehyde basedproducts, pesticides, explosives
CIC Navodari Constanta 1948 Chemical fertilizers, sulphuricacid, phosphoric acid, fluorinesalts
CIC Peatra Neamt Neamt 1958 Chemical fertilizers, ammonia,nitric acid, oxygen, carbondioxide
CIC Slobozia Ialomita 1966 Chemical fertilizers, ammonia,nitric acid, furfurol
CIC Tirgu Mures Mures 1961 Chemical fertilizers, ammonia,nitric acid, photosensitivematerials
CIC Turnu Magurele Teleorman 1962 Chemical fertilizers, ammonia,nitric acid, sulphuric acid,phosphoric acid, fluorinesalts, pyrite ash recoveryproducts
CIC Valea Calugareasca Prahova 1890 Chemical fertilizers, sulphuricacid, phosphoric acid, salts,pigments
CC Victoria Brasov 1948 Methanol, formalin, macro-molecular products
- 45 - ANNEX 2-1
Page 2
Proposed Projects (up to 1980)
Date ofEnterprise Location Completion Principal Products
CIC Arad Arad 1979 300,000 tpy ammonia,420,000 tpy urea
CC Craiova Doli 1979 210,000 tpy methanol,60,000 tpy acetic acid
CIC Slobozia Ialomita 1979 300,000 tpy ammonia,420,000 tpy urea
CIC Tirgu Mures Mures 1980 Photosensitive materials
CC Victoria Brasov 1980 300,000 tpy ammonia,420,000 tpy urea
CIC Satu Mare Satu Mare 1980 300,000 tpy ammonia,420,000 tpy urea
Industrial Projects DepartmentOctober 1978
ROMANIA - CRAIOVA CHEMICAL PROJECTORGANIZATION CHART OF THE CRAIOVA CENTRAL AND CRAIOVA EXTERPRISE
GENERAL MANAGER
ORGANIZATION C I c ARAD
DEPARTMENT
CRAIOVA ENTERPRISETECHNICAL RODUC- I . CIC 8ACAU
TION DIVISION _TECHNICAL DIRECTOR D
_________________ : PRODUCTION SURVEY GENERAL OEPUTY MANAGER" QUALITY CONTROL
ENGINEERING DII
INVESTMENTS C .
I MECHANICAL- I I AVDREN ERG ETI CAL I j
t D E S I G N I |I| -| N E AMT
ECONOMIC DIVISION |ECONOMIC MANAGER r FERTILIER PLANT ORGANIC PRODUCT PLANT MAINREPAIRNC
P LAN%!N!zG - I | | OEVELOP"E--NT I__ ELPMN FRIIESETOI| ORAISETOt ELCIAL SECTION CJ
TRAINING -WVAGES I _ CIC TGMURES
[_MANAIING 4_ FERTIL:ZER SECTION II _ ORGANIC SECTION I1 ENERGETICAL SECTIONMANAG ING I R
CdC TR.CHIEF ACCOUNTANT CTION 4 MECHANICALSECTION MAGURELE
|-1 FINANCING i 2 4 AMMONIA - NITRIC ACID SPARES SECTION C IC VALEA
I ~~~CA LUG AREACACCOUNTING g C.C. CRAIOVA |l 1 CLGRAC
…|- , ___________ | EXTENSION t AUTOMATION SECTION1rSALES DIVISION I CC VICTORIASALES MANAGER FURFUROL I I I
I l | <~~~~~ ELECTRICAL SHOP- PURCHASING I I CIC SATUMARE
- SALES C
- IMPORT-EXPORT I |
- TRANSPORT L…-_ |-Note
1' The Deputy General Manager of the Central is also the General ')
Manager of the Craiova Enterprise. World Bank - 18976
Industrial Projects DepartmentOctober 1978
ANNEX 2-3-47- Page 1
ROMANIA: CRAIOVA CiHEMICAL PROJECT
SUMMARIZED FINANCIAL STATEMENTS OF TIIE CENTRAL(Years ending December 31)
(Million lei)
------- -------------- Actual--------------------- ---------- Projected----------
Income Account 1973 1974 1975 1976 1977 1978 1979 1980
Sales 6,466 7,612 9,456 10,010 13,699 17,585 18,730 20,060Raw Materials 2,330 2,900 3,193 3,512 3,733 4,966 5,050 5,410Depreciation 790 887 1,042 1,228 1,380 1,582 1,784 1,884Other Costs 2,458 2,777 4,571 3,972 4,092 4,963 5,063 5,245Gross Benefits 888 1,048 650 1,298 4,494 6,074 6,833 7,521Taxes 1/ 257 283 182 390 1,267 3,093 3,288 4,096Net Benefits 631 765 468 908 3,227 2,981 3,545 3,425
Ratios
Gross Benefits/Sales 14% 14% 7% 13% 33% 35% 36% 37%Net Benefits/Sales 10% 10% 5% 9%/ 24% 17% 19% 17%
Balance Sheet AccountsAssetsCurrent Assets
Cash 140 760 323 143 352 717 675 735Accounts Receivable 340 289 447 610 678 906 919 948Inventory
Raw Materials 632 769 1,217 1,269 1,408 1,886 1,938 2,000Work in Progress 28B 365 539 544 820 872 975 983Finished Goods 134 262 360 385 428 570 584 601
Total Inventory 1.054 1,39 2,116 2,198 2,656 3.328 3,497 3,584Total Current Assets 1,534 2,445 2,886 2,951 3,686 4,951 5,091 5,267
Gross Fixed Assets 14,626 17,857 21,295 23,755 29,143 34,363 38,195 40,351Accumulated Depreciation 4,834 5.569 6.518 7.641 9,024 10.628 12.412 14.297Net Fixed Assets 9,792 12,288 14,777 16,114 20,119 23,735 25,783 26,054
Construction in progress 7,569 8,200 9,199 9,073 4,633 5,574 3,382 2,155Benefits 1,089 1.364 1.159 1.188 4.380 5.956 6.716 7.396
Total Assets 19984 24297 28021 29326 32818 40.216 4097 40,872
Liabil itiesCurrent Liabilities
Accounts Payable 270 781 417 454 405 560 569 594Own Sources 495 790 961 1,891 1,812 2,440 2,504 2,592Short-term debt 943 586 1,651 496 1,355 1,833 1,901 1,956Other 27 604 366 - - - -
Total Current Liabilities 1,735 2,761 3,395 2,841 3,572 4,833 4,974 5,142
Fixed Assets Financing 9,792 12,288 14,777 16,114 20,119 23,735 25,783 26,054Construction in Progress 7,569 8,200 9,199 9,073 4,633 5,574 3,382 2,155
FinancingBenefits 888 1.048 650 1,298 4.494 6.074 6.833 7,521
Total Liabilities 19.984 24,297 28,021 29,326 32818 40216 40,972 40,872
Net Fixed Assets/Total Assets 49% 51% 53% 55% 61% 59% 63% 64%Gross Benefits/Net Fixed Assets 9% 97 4% 8% 227 26% 27% 29%Net Benefits/Net Fixed Assets 6% 6% 37 67 167 137. 14% 137.
1/ Up to and including 1976, this represents turnover tax on private consumption, averaging about 30% for the Central.Beginning with 1977, this includes a tax on benefits applied at the level of each enterprise which limits benefitsto 15% of sales.
- 48 -
ANNEX 2-3Page 2
ROMANIA: CRAIOVA CIEMICAL PROJECT
SUMMARIZED FINANCIAL STATEMENTS OF THE ENTERPRISE(Years ending December 31)
(Million lei)
---------------------Actual--------------------- --------- Projected---------
Income Account 1973 1974 1975 1976 19,7 1978 1979 1980.
Sales 1,569 1,771 1,884 1,947 2,604 2,927 2,928 3,193Raw Mlaterials 376 240 234 732 889 977 998 1,057Depreciation 208 225 230 183 270 298 302 422Other Costs 545 704 936 400 683 727 699 694Gross Benefits 440 602 484 632 762 925 929 1,020Taxes 1/ 91 186 299 219 316 554 575 574Net Benefits 349 416 185 413 446 371 354 446
Ratios
Gross Benefits/Sales 28% 34% 26% 32% 29% 32% 32% 32%Net Beniefits/Sales 227 23% 10% 21% 17% 13% 12% 14%
Balance Sheet AccountsAssetsCurrent AssetsCash 10 614 21 244 263 285 246 265Accounts Receivable 93 30 152 139 143 145 145 150InventoryRaw Materials 198 217 303 278 310 350 380 420Work in Progress 70 92 130 70 72 75 80 85Finished Goods 38 56 90 42 45 50 55 60
Total Inventory 306 365 523 390 427 475 515 565Total Current Assets 409 1,009 696 773 833 905 906 980
Gross Fixed Assets 3,884 4,061 4,173 5,337 6,310 6,310 10,643 11,018Accumulated Depreciation 1,320 1,524 1.744 2 003 2,274 2,572 2,874 3,296Net Fixed Assets 2,564 2,537 2,429 3,334 4,036 3,738 7,769 7,722
Construction in progress 657 986 1,695 794 436 300 1,130 1,100Benefits 327 417 195 408 755 916 920 1,010
Total Assets 3,957 4 !L5±A 5,309 6060 5.859 1
LiabilitiesCurrent Liabilities
Accounts Payable 70 668 72 86 96 116 102 115Own Sources 136 225 252 358 380 390 390 425Short-term debt 181 117 383 324 350 390 405 430Other - -_ _
Total Current Liabilities 387 1,010 707 768 826 896 897 970
Fixed Assets Financing 2,564 2,537 2,429 3,334 4,036 3,738 7,769 7,720Construction in Progress 657 986 1,695 794 436 300 1,130 1,100Financing
Benefits 349 416 184 413 762 925 929 1,020
Total Liabilities 3.957 4.949 5.015 5,309 6.060 5,859 10,725 L0,812
Net Fixed Assets/Total Assets 65 51 48 63 67 64 72 71Gross Benefits/Net Fixed Assets 17 24 20 19 19 25 12 13Net Benefits'Net Fixed Assets 14 16 8 12 11 10 5 6
1/ This includes a tax on benefits which limits net benefits to about 15% of sales.
Industrial Projects Department
October 1978
ROMANIA - CRAIOVA CHEMICAL PROJECT
DOMESTIC CONSUMPTION OF PROJECT PRODUCTS('000 tons)
Product 1965 1970 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985…-…----… …Actual --……------------ …------ == -------- Projected --------
Methanol 21.3 53.2 123.2 133.6 214.4 264.1 310.0 376.5 436.8 493.1 572.2 908.4 1096.3
Acetic Acid 6.1 20.1 28.8 30.1 32.1 35.0 38.9 52.6 61.4 71.6 74.7 76.1 77.3
Acetic Anhydride 0.4 0.4 0.4 0.4 0.4 0.4 0.4 1.0 1.0 1.0 4.0 6.6 6.6
Vinyl Acetate - 4.8 16.2 14.5 17.4 14.9 17.7 17.0 25.0 32.0 35.0 35.4 36.0
Polyvinyl Acetate - 2.5 6.5 9.3 12.8 5.6 5.2 9.4 14.5 17.0 18.0 19.0 20.0
Ethyl Acetate 1.1 1.8 2.6 2.4 3.2 3.3 3.4 3.4 4.1 4.4 4.8 5.2 5.6
1/ Includes production from all Romanian plants
Source: Techno Economic Report and Investment Bank
Industrial Projects DepartmentOctober 1978
ROMANIA: CRAIOVA CHEMICAL PROJECT
METHANOL - DOMESTIC CONSUMPTION BY END USE('000 tons)
1965 1970 1975 1976 1977 1978 1979 1980 1985.............. Actual ................ ........... Projected.
Acetic Acid-- - - - - - - - 28.0 60.0
Synthetic Resins 18.0 33.0 75.0 84.3 84.2 86.1 104.5 105.0 169.0
Synthetic Fibres 0.1 11.1 32.2 29.2 32.0 35.6 50.2 67.3 133.7
Synthetic Rubber 0.1 0.8 6.1 10.9 62.4 96.2 97.2 97.9 135.2
t-nSingle Cell Protein - - - - - - - - 450.0 C
Others 3.1 8.3 9.9 9.2 35.8 46.2 58.1 78.3 148.4
Total 21.3 53.2 123.2 133.6 214.4 264.1 310.0 376.5 l19.Total =z_= ~~~~~~~==3-= __= a3=_=== == = == aQQ =3_= ,,096.3
Of Which Imports - - 16.3 29.3 - - -
/1 Source;IBRD estimates based on data supplied by C. C. Craiova./2 Includes direct exports of Craiova Project products. If these are excluded, 1980 consumption of methanol
will be 18,000 tons, and 1985 consumption 37,200 tons for this purpose. Total domestic methanol consumptionin these two years would be 366,500 tons and 1,073,200 tons respectively.
PM atDX
l-
ROMANIA - CRAIOVA CHEMICAL PROJECT
ACETIC ACID - DOMESTIC CONSUMPTION BY END USE-('Q00 tons)
1965 1970 1975 1976 1977 197E, 1979 1980 1985- - - - - - - - -Actual- - - - - - - -- - -Projected - - - - -
V.A.M - 5.8 16.4 18.0 18.8 17.7 19.2 25.1 36.9
Acetic Anhydride - - - - - - - 7.0 14.0
Textiles 0.5 1.2 2.2 2.3 2.4 2.9 3.1 3.3 4.9
Paints 0.6 1.0 1.3 1.6 2.0 3.2 4.1 4.6 6.7
Other 5.0 12.1 8.9 8.2 8.9 11.2 12.5 12.6 14.8
Total 6.1 20.1 28.8 30 .1 32.1 35.0 38.9 52.6 77.3 U
Of which imports 3.2 - 0.8 - 4.2 12.4 12.9 - -
1/ Source IBRD estimates based on data supplied by Ministry of Chemical Industry and Investment Bank
e PL..)
ot z
ROMANIA - CRAIOVA CHEMICAL PROJECT
VINYL ACETATE - DOMESTIC CONSUMPTION BY END USE'(000 tons)
1965 1970 1975 1976 1977 1978 1979 1980 1985--------------- actual --------------- ------- projected --------
PVA - 3.6 12.2 12.1 15.0 12.3 14.8 14.5 30.7Synthetic Fibers - 1.2 4.0 2.4 2.4 2.6 2.9 2.5 5.3
Total - 4.8 16.2 14.5 17.4 14.9 17.7 17.0 36.0
Of which imports - - - - - - - - -
Un
POLYVINYL ACETATE - DOMESTIC CONSUMPTION BY END USE1/(000 tons)
1965 1970 1975 1976 1977 1978 1979 1980 1985--------------- actual --------------- ------- projected ---------------
Paints - 0.4 0.8 0.8 1.3 1.7 2.0 2.0 4.2Furniture & Timber - 0.2 0.5 0.5 0.4 0.5 0.6 0.7 1.5Textiles & Shoes - 0.5 1.2 1.2 1.3 1.2 1.3 1.5 3.2Other Adhesives - 0.2 0.3 0.3 0.4 0.3 0.5 1.5 3.2Others - 1.2 3.7 6.5 9.4 1.9 0.8 3.7 7.9
Total - 2.5 6.5 9.3 12.8 5.6 5.2 9.4 20.0
lbMOf which imports - - - - - - - - - CDt
1/ Source: Investment Bank
ROMANIA - CRAIOVA CHEMICAL PROJECT
ETHYL ACETATE - DOMESTIC CONSUMPTION BY END USE('000 tons)
1965 1970 1975 1976 1977 1978 1979 1980 1985
---------------- Actual ---------------- ---------- Projected ----------
Paints 0.5 1.1 1.8 1.7 2.2 2.3 2.4 2.4 3.9
Furniture 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2
Shoes 0.5 0.5 0.6 0.5 0.7 0.7 0.7 0.7 1.2
Others - 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.3
Total 1.1 1.8 2.6 2.4 3.1 3.3 3.4 3.4 5.6
of which imports 0.5 1.2 1.5 1.2 2.1 2.2 2.3 2.3 -
Source: Investment Bank
Industrial Projects DepartmentOctober 1978
-1GQZOQ'
M)
- 54 -
ANNEX 3-3Page 1
ROMANIA: CRAIOVA CHEMICAL PROJECT
PRODUCTION, DOMESTIC CONSUMPTION AND EXPORTS OF END USE PRODUCTS
1. The major downstream products of methanol are synthetic resins(via formaldehyde and methyl methacrylate), synthetic rubber (via poly-isoprene) and synthetic fibres (via dimethyl terephthalate). Acetic acidand its derivatives have many end uses, but the major outlets are in arti-ficial fibres, paints and lacquers, adhesives (used in many products rang-ing from footwear to furniture) and as bleaching agents and coatings inthe textile industry. The following table shows production, home consump-tion and gross exports for these end uses from 1965-1977, with projectionsuntil 1985.
2. Synthetic Resins. As can be seen from the table, production,consumption and exports of synthetic resins (excluding PVC and polyethy-lene) rose rapidly in the period 1965-1977, but much lower growth ratesare projected for the future. By 1985, domestic per capita consumptionwill have risen to 7 kg (compared with 4.1 kg in 1977). This is low com-pared with current per capita consumption in Western Europe. UK consump-tion per capita in the period 1974-76 stood at 17.8 kg when the FederalRepublic of Germany achieved a per capita consumption of 37.9 kg. Indeed,Romania per capita consumption of all synthetic resins (including PVC andpolyethylene) is only one third of the Western European level, and willnot have reached Western European per capita consumption levels by 1985.Romania has exported a large proportion of its production since the mid-1960s. Exports in 1976 and 1977 accounted for 74% and 56% respectivelyof domestic production; 59% is projected for export in 1985.
3. Synthetic Rubber. Methanol is used in the manufacture of poly-isoprene with which Romania is planning to replace most of its currentimports of natural rubher. A rapidly growing use for polyisoprene rubberis in the manufacture of radial tyres. Polyisoprene will, however, repre-sent only about 20% of synthetic rubber production by 1985. Much of theproduction of other synthetic rubber is destined for export. By 1985, percapita consumption of rubber in Romania is projected to reach 13.5 kg, com-pared with a projected per capita consumption in the same year (1985) forthe USA of 21.5 kg, the UK of 13.9 kg and for the Federal Republic ofGermany of 16.1 kg; thus the projected Romanian per capita consumptionwill still be somewhat below more developed countries.
4. Man Made Fibres. In IBRD report No. 1436-RO dated 5-24-77, whichdealt with the Cimpulung-Muscel Polyester Fibre Project, estimates were madeof the 1985 fibre production and mill consumption; the report stated that alarge deficit in fibre supplies would develop by 1985 if no new projectswere to be started after 1980. The report's projections, together with thecurrent Romanian estimates are shown below.
- 55 -
ANNEX 3-3Page 2
Projected Fibre Production and Mill Consumption - 1985(in '000 tons)
IBRD Cimpulung Report Current Romanian EstimatesMill MillCon- Deficit/ Con- Deficit/
Production sumtion (Surplus) Production sumption (Surplus)SyntheticFibres 182 231 49 360 205 (155)
ArtificialFibres 118 133 15 162 162 -
TotalMan-MadeFibres 300 364 64 522 367 (1552
It can be seen that the Romanian authorities are now planning to increaseproduction capacity in order to prevent the anticipated production deficit.At the same time, the product mix has changed; while total mill consumptionof man-made fibres is about the same as previously projected, a higher pro-portion of artificial fibres in the total mix is now contemplated. Romaniahas already established export markets for synthetic fibres; the projectedexports of 155,000 tons in 1985 are small compared with international tradein these products. Gross imports into Western Europe in 1976, for instance,were over 760,000 tons.
5. Paints and Lacquers. The Romanian paint industry is well organizedand product quality is high. Local consumption is expected to grow at aboutthe same rate as in the past. By 1985, per capita consumption will reach13.3 kg compared with projected per capita consumptions for the same yearof 25.9 kg in the Federal Republic of Germany, and 14.3 kg in the UK andBelgium. Gross exports of 86,000 tons are projected for 1985; these willbe mainly to the USSR and other Comecon countries.
ROMANIA - CRAIOVA CNRNICAL nOJECT
PllODUCTICtt DaMSTIC CONSUMPTION AND WIORTh OF END USI PKtDOcUA
?Tveuct n195 1970 1975 1976froduction ID_ Cross Productim nom Gross Production Rom Gross Production Rome Gross
Coosutti n Exports Consution Exports Conutmption Ixports Consumption Exports
Artificial Fibres 0e tons 18 35 - 47 67 - 63 83 - 65 74 -Synthetic Fibres 000 tons 3 7 30 25 5 96 72 24 114 67 47Synthetic Resins (excluding PVC 4 .1.Polyethylene) Q00 tos 36 19 17 5 40 4 15d 99 59 193 50 143Paints & Lacquers 56 t5ns 43 51 I a5 S3 17 130 *5 5d 145 118 50Plywood 560 a 200 U 112 246 143 103 269 169 100 275 157 118Furniture billin lAi 3 2 1 6 4 2 10 6 5 11 6 5Footwear llion ptirs 40 37 3 54 42 12 69 53 17 74 56 18Textiles d4liton a 431 415 36 60S 550 94 566 837 75 993 922 101Syrnthetic Rubber so tome n* 0* nn 61 ma na D9 a n 95 53 42
1977 J97j 1980 1985----- A- --- AC -tu - - ------- -------- ro- - - - -t- --- --- --- --- ----- Projected-Production Rome Gross Production Nme Grove Production ome Gross Production Rome Cross
Consumption gxports CosumptieLn Exports Consumption Exports Consumption Exports
Arrifictal Fibres 000 tons 60 76 - 68 82 - 103 103 - 162 162 -Synthetic Fibres 000 tons 124 98 27 130 99 34 206 125 84 360 205 135Synthetic Resins (excluding P &Polyethylene) 000 tons 200 5U 112 208 88 120 235 92 146 402 164 238Paints & Lacq'ers 000 tons 1I2 148 30 163 158 32 221 203 67 337 305 66 tjPl-w.od 000 * 264 159 126 292 165 127 305 167 138 352 174 1/8 q%Fjr,'rture billion Lsi 12 6 6 13 7 6 16 S S 23 12 11Foorwear million pirs 99 79 20 113 92 21 139 113 26 .201 163 38rextiles million ms 1051 943 136 1160 993 195 1426 1134 319 2098 157 267S. thetic Rubber 000 tons na VA n- na na na 318 170 163 520 295 235
e / Production does not alveys balane vmttb ho-e consuption plus experts becnee aert*iL products have been and will continus to be Imported With1a these catesories.
so,.rce: Investment BankCraiova Central and Tee_m Ic_memic Report(Reconcilistion by IR)
AVERAGE ANNUAL 011M RATES (2)
1965 - 1977 1977 - 1985
Production Consumption Gross Exports Product Exports
Artificial Fibres 10.6 6.6 - 13.3 9.9 2Synthetic Fibros 35.3 25.2 - 14.2 9.7 2494Synthetic Resin (excluding P1C & PolysthylGse) 15.4 13.6 17.0 9.1 8.2 9.9Paints & lacquers 11.1 9.2 32.7 10.5 9.4 14 1Plywaod 3.0 5.1 1.0 2.7 1.2 4.4Furniture 12.8 11.1 16.1 9.0 8.3 7.9Footwear 7.8 6.4 17,1 9.3 9.6 8.4Textiles 7.7 7.1 11.2 9.0 a 88 8.a/ 8 aSynthetic Rubber n5 n4 na 20.8- 21.0 21.1
Note: */ 1976-1985 0Q0
n,dustrial Projects DepartmentOctober 1978
ROMANIA - CRAIOVA CHEMICAL PROJECT
PLANNED SUPPLY/DEMAND BALANCE OF PROJECT PRODUCTS IN ROMANIA 1980-85('000 tons)
1980 1981 1982?rojecr Other Total Domestic Project Other Total Domestic Project Other Total Domestic
Pro- Pro- Pro- (Import) Con- Pro- Pro- Pro- (Import) Con- Pro- Pro- Pro- (Import) Con-duction duction duction export sumption duction duction duction export sumption duction duction duction export sumption
Methanol 150 297 447 70 377 210 297 507 70 437 210 301 511 18 493Acetic Acid 45 24 69 16 53 57 32 89 27 62 60 29 89 17 72Acetic Anhydride 6 - 6 5 1 9 - 9 8 1 10 - 10 9 1Vinyl Acetate - 20 20 3 17 11 20 31 6 25 18 20 38 6 32Polyvinyl Acetate - 10 10 1 9 - 11 11 (3) 14 10 10 20 3 17Ethyl Acetate - I 1 (2) 3 1 1 (3) 4 6 1 7 2 5
1983 1984 1985
Methanol 210 406 616 44 572 210 750 960 52 /1 908 210 981 1,191 95 11 1,096 1Acetic Acid 60 29 89 14 75 60 29 89 13 76 60 29 89 12 77Acetic Anhydride 10 - 10 6 4 10 - 10 3 7 10 - 10 3 7Vinyl Acetate 20 20 40 6 34 20 20 40 5 35. 20 20 40 4 36Polyvinyl Acetate 13 10 23 5 18 13 10 23 4 19 13 10 23 3 20Ethyl Acetate 8 1 9 4 5 8 1 9 4 5 8 1 9 3 6
L1 of which none is attributable to Craiova Project.
SOURCE: Techno Economic Report and Investment Bank
Industrial Projects DepartmentOctober 1978
- 58 -
ANNEX 3-5Page 1
ROMANIA - CRAIOVA CHEMICAL PROJECT
ROMANIAN ESTIMATES OF EXPORT POTENTIAL OF PROJECT PRODITCTS 1980-85(000 tons)
1980 1981 1982 1983 1984 1985
Methanol
Bulgaria 5 5 3 5 5 7East Germany 2 1 - - - 5
Czechoslovakia 5 5 5 5 5 5China 3 3 - 3 - -
Total -
COMECON & China 15 14 8 13 10 17
Iran 1 2 1 2 3 4Holland 5 4 - 4 4 5
Italy 7 10 2 8 7 12Yugoslavia 5 5 2 4 5 7Belgium 6 6 - 1 6 7
Turkey 5 5 3 5 4 5
USA 3 3 3 3 3 3Portugal 6 5 - 7 6 8
Japan 8 10 - - 3 12
West Germany 2 2 - - - -
France 2 3 - - - 4
Austria 5 1 - - 3 7
United Kingdom - - 2 2 - 5
Spain 5 5 2 - 4 5
Total 75 75 23 49 58 101
- 59 -
ANNEX 3-5Page 2
ROMANIA - CRAIOVA CHEMICAL PROJECT
ROMANIAN ESTIMATES OF EXPORT POTENTIAL OF PROJECT PRODUCTS 1980-85
('OOO tons)
1980 1981 1982 1983 1984 1985
Acetic Acid
Bulgaria 1 1 1 1 1 1
East Germany - 2 1 1 1 3
Czechoslovakia 1 2 1 1 2 2
Total COMECON 2 5 3 3 4 6
& China
Israel 4 4 3 3 7 8
Singapore 2 2 2 2 4 4
Malaysia 1 2 - - - 2
Pakistan 1 2 1 - - 2
Iran 2 2 2 2 4 7
Italy 2 3 2 2 6 7
Holland 1 2 1 2 6 5
West Germany 1 1 1 1 4 4
Belgium - 3 3 - - 4
United Kingdon 1 1 1 1 2 5
France 1 2 1 - - 2
Austria 1 2 - - - 1
Yugoslavia 1 1 1 1 2 2
Total 20 32 21 17 39 59
- 60 -
ANNEX 3-5Page 3
ROMANIA - CRAIOVA CHEMICAL PROJECT
ROMANIAN ESTIMATES OF EXPORT POTENTIAL OF PROJECT PRODUCTS 1980-85- ('000 tons)
1980 1981 1982 1983 1984 1985
Vinyl Acetate
Bulgaria 0.5 0.5 0.5 0.5 0.5 0.5Czechoslovakia 0.5 0.5 0.5 0.5 0.5 0.5Poland 0.5 0.5 0.5 0.5 0.5 0.5East Germany 0.5 0.5 0.5 0.5 0.5 0.5
Total COMECON 2.0 2.0 2.0 2.0 2.0 2.0
Yugoslavia 0.5 1.5 2.0 2.0 2.0 1.5Turkey 0.5 0.5 1.0 1.0 0.6 0.5West Germany 0.5 - 0.5 0.5 0.5 0.5Italy 1.0 - 2.0 2.0 1.0 1.0
Total 4.5 4.0 7.5 7.5 6.1 5.5
Polyvinyl Acetate
Bulgaria 1.5 1.5 2.5 2.5 2.0 1.5Ghana 0.5 0.5 1.5 1.5 1.0 0.5Greece 0.5 0.5 1.0 1.0 1.0 1.0Yugoslavia 0.5 0.5 0.5 0.5 0.5 0.5
Total 3.0 3.0 5.5 5.5 4.5 3.5
Acetic Anhydride
Bulgaria 1.0 2.0 2.0 1.0 1.0 1.0USSR 2.0 5.0 5.0 2.0 2.0 2.0
Total 3.0 7.0 7.0 3.0 3.0 3.0
Ethyl Acetate
Bulgaria - - 1.0 1.0 1.0 1.0USSR - - 2.0 2.0 2.0 2.0
Total - - 3.0 3.0 3.0 3.0
Source: DANUBEXIM
Industrial Projects DepartmentOctober 1978
| RO\?_:N~GI'A C¢AsAo a9 C'* 9S;AL PhJiA __
PLANT LAGYOUr
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I_ TArLN P~LANT r . .
A T POL'VI,TL ACEr*l SPLA.VT 2 / z2 -? / _ 7 1S I.LCETATE SLANr
S P-ODUCTS& MATERIAS STORAGErl
___UTIL.T @ I CEr--L
)- -W __l Lull , |1
I E 3( W ESTXNGAORGANIC ONPLN PLANA AREA LU
t ______ . _ ?<nN)K-RIT-''ZERS
_ ___ =0 ?5
I P~~~~~~~~ ~ ~ ~~~LANT AREAI t .~~~~~~~~~~~~~~~~~~~~~~N
ROMANIA- CRAIOVA CHEMICAL PROJECT
RAW MATERIAL AND UTILITIES REQUIREMENTS
RAW MATERIAL OXYGEN Co ACETIC ACETIC VINYL VINYL ACETIC ETHYLAJJJ T TT.ES UNIT SEPARATION ACETYLENE METHANOL SEPARATION D ;', ANHYDRIDE ACETATE POLYACETATE ALDEIYDE ACETATE UTILITIES TOTAL AYMUNT
NATURAL GAS(PROCESS & FUEL) 1,000 Nmc - 216,000 220,500 - 540 2,400 - - - - - 439,440
FUEL OIL ton - - - - 25,500 25,500
DIESEL OIL ton - 9,000 - - - - - - - - - 9,000
ELECTRIC POWER MwH 75,600 76,500 11,680 1,800 24,750 2,300 5,500 2,255 1,185 2,400 82,960 286,930
8 ATA STEAM ton 18,400 210,000 - 76,000 270,000 12,000 - 5,000 31,000 32,000 452,148 1,106,548
12 ATA STEAM ton - - - - 30,000 88,000 - - 40,000 6,940 164,940
INDUSTRIAL WATER 1,000 M3
- - - - - - 4 63 75 - 14,459 14,601
CHEMICALS '000 US$ 1/ _ 529.8 449.1 111.1 73.8 35.3 327.7 1,418.2 26.2 85.7 516.5 3,573.4
1/ In 1977 dollars, but reflecting anticipated 1980 price level.
Industrial Projects Department
October 1978
- 63 -
ANNEX 4- 3
ROMANIA - CRAIOVA CHEMICAL PROJECT Page 1
ACETYLENE TECHNOLOGY AND USES OF ACETYLENE
A. Introduction
1. Acetylene has been used in metal cutting and welding for many years
and since the early part of the 20th century has played an important role as
a chemical intermediate. Its maximum utilization was reached in the mid-1960s;
since then technologies based on lower cost ethylene and propylene from large
naphtha and ethane crackers have to a large extent replaced the processes
based on acetylene.
2. However, for countries with an indigenous source of natural gas
(methane) and insufficient petroleum feedstocks such a naphtha, the use of
acetylene based processes may still be attractive; since acetylene is pro-
duced typically In units with much smaller capacities (10,000-80,000 tpy)
than have become common for olefines production, the acetylene based pro-
cesses continue to receive attention when domestic demands for derivativesare at levels which would not justify large scale production, and where the
technologies employed to produce these derivatives do not exhibit significant
economies of scale.
B. Production Methods
3. Formerly, acetylene was produced mainly from calcium carbide. The
carbide itself is manufactured by mixing lime and coke in a 60/40 mixture
and heating it to over 2,000°C in an electric furnace. The process is ex-
tremely energy intensive, requiring 2,900 KWH per ton of carbide (over 9,000
KWH per ton of aoetylene), and was often used where cheap hydroelectric power
was available.
4. An alternative process, which has been used both in Europe and in
the USA, is via electric arc cracking of hydrocarbons. Also, this process
is extremely energy intensive, requiring over 12,000 KWH per ton of acetylene,
and has been generally abandoned.
5. The preferred route today for acetylene production is by the partial
oxidation of methane or a higher hydrocarbon, such as naphtha. By reaction
of a preheated hydrocarbon vapor and oxygen, part of the hydrocarbon is oxi-
dized, the temperature rises up to about 1,4000C and the remaining hydrocarbon
is involved in a cracking. If an immediate quench follows, some unstable Pro-
ducts, such as acetylene and higher acetylenes, can be obtained in the result-
ing gas mixture.
6. In the furnace gas, acetylene generally ranges from 7 to 8.5% if
the feedstock is methane, even more if the feedstock is a higher hydrocarbon.
Higher acetylenes are present as a rule in the range from 0.5 to 1.0%. As
a result of the oxidation of natural gas or naphtha, carbon monoxide and a
small amount of carbon dioxide are also produced. As a result of the crack-
ing, a large amount of hydrogen is produced, as well as carbon soot.
- 64 -
ANNEX 4- 3Page 2
7. The furnace gas is first quenched and scrubbed by water, thenfiltered in electro-filters or in coke-filled carbon scrubbers, to removethe carbon soot, which can be recovered and burned, thus allowing a worthyenergy saving.
8. The pyrolysis pressure must be as low as possible, while acetyleneseparation requires higher pressure, generally ranging from 7 to 15 bar.Therefore, before entering the acetylene separation unit, the furnace gasis compressed in centrifugal, reciprocating or helicoidal compressors.Increasing pressure allows more acetylenic polymers to build up, togetherwith residual carbon soot, inside the compressor, to such an extent thatsometimes the compressor itself has to be shut off, opened and cleaned.No major hazards are due to the presence of dilute acetylene and higheracetylenes as long as they remain at low concentration within the furnacegas. However, the partial pressure of acetylene should never exceed 30psia (Union Carbide maX4.pressure). In case of a higher partial pressure,a non-explosive decomposition may occur, leading to very hazardous localoverheating in compressors and pipes.
9. A further step in acetylene processing is the acetylene separation.It is achieved by absorption in organic or inorganic solvents, as acetone,N-methylpirrolidone and ammonia. After the absorption -- generally at lowtemperature and average pressure -- and the desorption -- generally at lowpressure and average temperature -- proper technologies and careful opera-tion are required, to prevent decompositions or even detonations ofacetylenes.
10. Pure acetylene must never be handled at high pressure. The maxi-mum allowable pressure depends on the inside diameter of pipes and vessels:the higher is the pressure, the smaller must be the pipe -- and the vessel --size. No size limits are required for pressure below 0.4 bar (gauge) /1.Higher acetylenes, as diacetylene, vinylacetylene and methylacetylene areeven more unstable gases. They must never be concentrated and their safeseparation and combustion is a matter of proper engineering and carefuloperation. Guidelines for safe handling of acetylene have been publishedby specific committees in the USA and in the F.R. Germany. No major hazardsare present today in an acetylene plant, provided that it is properlydesigned and operated.
11. The acetylene off-gas, after complete removal of acetylene andhigher acetylenes, is suitable for use as synthesis gas in ammonia plants;carbon monoxide and hydrogen may be separated from the off-gas and usedas raw materials in a variety of chemical synthesis products.
C. Uses of Acetylene
12. Acetylene, possessing a triple bond, is a highly reactive chemicaland can be used as the raw material to produce a large number of commonorganic chemicals. The principal end products are used in plastic manu-facture and in the production of coatings, paints, adhesives, solvents,textile auxiliaries, and pharmaceuticals. Among the major ones are:
/1 According to the TRAC standards, from Germany.
- 65 -
ANNEX 4-3Page 3
13. Polyvinyl Chloride (PVC) is the second most important thermo-plastic today, being used primarily for pipe manufacture, as a leathersubstitute, and as a metal substitute in industrial plants and the build-ing industry. Recent studies have demonstrated a high incidence of cancerin workers exposed to vinyl chloride monomer, and the future growth of PVCdemand is now in doubt.
14. Acrylates find outlets as coatings and in the textile industrywhere they are used to give permanent press characteristics to fabrics.
15. Polyvinyl Acetate has become extremely important as the maincomponent of water based paints which have made large inroads in themarket formerly dominated by lacquers. It is also used in the manufac-ture of adhesives.
16. Polyvinyl Alcohol is used for textile warp sizing, in the manu-facture of adhesives, in paper coatings, and as an emulsifier. A promisingnew use is in the production of a fibre with good heat insulation propertieswhich may find outlets in the manufacture of work clothes for steel workers,firemen, etc.
17. Chlorinated Solvents, particularly trichlorethylene, are used fordegreasing metal parts in metal fabrication and as grease solvents in thedry cleaning of fabrics.
18. A variety of organic solvents, such as ethyl and butyl acetates,can be manufactured from acetylene derivatives. They find their main usein paints, coatings, and adhesives. They lost ground in the nitrocelluloselacquer field to other cheaper solvents, but have recently gained somepopularity as they cause less air pollution compared with competing products.
19. Acetic Acid and Anhydride are used for the production of celluloseacetate, a classical intermediate for artificial fibres, films, and plastics.The use of cellulose acetate in the manufacture of cigarette filters is stillgrowing, but in all other uses, it is being displaced by synthetics based onolefines. Acetic anhydride is also used in the manufacture of aspirin;this market is expected to be stable for many years to come.
D. Other Routes to Acetylene-based Chemicals and Future Acetylene Demand
20. In many cases, however, competitive processes using lower costolefines as raw materials have displaced the acetylene routes, e.g., inthe production of vinyl chloride (or PVC) and in acrylonitrile production.
21. Chlorinated solvents, such as trichlorethane, trichlorethylene,and perchlorethylene are easily produced by reacting chlorine with acety-lene. Competitive routes, starting from methane or ethylene, exist, butmore than half of the trichlorethylene produced today is still obtained byusing acetylene as raw material.
- 66 -
ANNEX 4-3Page 4
22. Quantities of acrylics (used in the paint and textile industries)are still manufactured by carbonylation of acetylene, but technologies basedon propylene are popular. Nonetheless, about 40% of acrylics produced arestill based on the route via acetylene.
Industrial Projects DepartmentOctober 1978
- 67 -ANNEX 4-4
ROMANIA - CRAIOVA CHEMICAL PROJECT
WATER POLLUTION STANDARDS
Maximum allowable concentration of pollutants in superficialwaters, according to the Romanian Law Stas 4706-74.
Pollutant Product Maximum Allowable(mg/l)
NH3 0.3
NH4 3.0
NO3 30.0
CE 400.0
NA 200.0
+K
As 0.2
BOD5 7.0
COD (Mn) 15.0
COD (Cr) 20.0
Ca 200.0
Mg 1O.O
Fe 1.0
Mu 0.3
So4 400.0
NO2 3.0
Evaporation Residual 1,000.0
Industrial Projects DepartmentOctober 1978
ROMAN IACRAIOVA CHEMICAL PROJECT
OVERALL PROJECT CONSTRUCTION SCHEDULE
Projected Dates 1977 1978 1979 1980 1981 1982
Approval by the Council of IMinisters
Basic Engineering
Review of the Basic Engineering
Detail Engineering _
00
Long Delivery Items Contracting _ _
Civil Works
Main Equipment Delivery - - - -
Erection
Start Up Tests & Commissioning _ _ _n
World Bank - 18879
riL:.I , . l ,s
CRAIOVA CHEMICAL PROJECTCONSTRUCTION SCHEDULE
Projected Dates 1977 1978 1979 1980 1981 1982
Methanol
Detail Engineering
Long Delivery Items Contracting
Civil Works _ _ -_ _
Main Equipment Delivery
Erection
Start Up Tests& Commissioning
Acetic Acid
Detail Engineering
.Long Delivery Items Contracting
Civil Works- - - - - -Main Equipment Delivery KiaErection
Start Up Tests & Commissioning
Acetic Anhydride
Detail Engineering
Long Delivery Items Contracting
Civil Works
Main Equipment Delivery
Erection
Start Up Tests & Commissioning
Acetylene
Detail Engineering _ _ l
Long Delivery Items Contracting
Civil VVorkst
Main Equipment Delivery l._
Erectiun1lII _
World Bank-18880
ROMANIACRAIOVA CHEMICAL PROJECT
CONSTRUCTION SCHEDULE
Projected Dates 1977 1978 1979 1980 1981 1982
Vinyl Acetate
Detail Engineering
Long Delivery Items Contracting
Civil Works _ _ _ _
Main Equipment Delivery
Erection
Start Up Tests & Commissioning
Polyvinyl Acetate
Detail Engineering
Long Delivery Items Contracting
Civil Works -_ -
Main Equipment Delivery
Erection | t OStart Up Tests & Commissioning
Ethyl Acetate
Detail Engineering
Long Delivery Items Contracting
Civil Works m -:
Main Equipment Delivery
Erection _ - _
Start Up Tests& Commissioning
Utilities& Auxiliaries
Detail Engineering
Long Delivery Items Contracting
Civil Works -_Main Equipment Delivery
- U|Erection
Start Up Tests & Cornmissioning - - - -r
World Bank - 18881
- 71 -
ANNEX 5-1Page 1
ROMANIA - CRAIOVA CHEMICAL PROJECT
PROJECT COST AND FINANCING REQUIRED
ASSUMPTIONS MADE FOR ESTIMATION OF CAPITAL COSTS
1. Detailed capital cost estimates have been prepared by IITPICtogether with the Central. They are based on complete process engineer-ing, carried out up to First Quarter of 1978. Equipment cost estimates
are based on quotations in early 1978. For acetic acid plant, CO-separationplant, and methanol compressors, with an aggregate cost of US$16.6 millionor 40% of total foreign equipment cost, firm contract prices were used.
2. Romanian estimates are generally prepared including priceescalation and physical contingencies. To determine whether or not costestimates are realistic, physical contingencies and price escalation weresubtracted to arrive at a mid-1977 base cost estimate.
3. All equipment costs include foreign and local transportationcharges. Detailed equipment lists are provided in the Project File. Under
the Romanian system, spares are not included in the initial investmentcosts but are paid out of the operating budgets of the enterprises. Here,to fully reflect the foreign exchange costs of the project, a relativelysmall provision (3% of equipment value) for spares of imported equipment isincluded. Duty on imports is included.
4. Physical contingencies were added at an average 3.2% of the basecost estimate and are considered to be adequate in view of the advancedstage of project preparation. For provision of price escalation, locallyprocured items have been assumed to increase by 1% p.a. while for imports7.5% p.a. is assumed.
5. Interest during construction is calculated on the basis of US$40million Bank loan at 7.35% interest per year and a supplier's credit ofUS$12.9 million at 7.5% interest per year. The estimated disbursements forthe Bank loan are as follows:
US$ million 19791/ 1980 1981 1982 Total
Bank Loan 16.0 15.0 8.0 1.0 40.0
6. Working capital requirements and assumptions are given in Page 3.
7. Detailed capital cost estimates are given in the following page.
1/ Calendar years.
ROKkNIA: CRAIOVA CHEMICAL PROJECT
PROJECT COST AND FINANCING REQUIRED(in US$ million)
Direct ImportsEquipment Special Materials F. Ex. Cost of Total Total
and Instruments Local Suppliers & F. Exchange Local CurrencyTechnology and Supplies Other F. Ex. Costs Costs Costs Li Total Costs
Land and Site Improvement - - - - 0.2 0.2Equipment and Materials
- Process 19.8 6.0 10.6 36.4 40.2 76.6- Utilities 1.7 0.7 0.2 2.6 3.5 6.1- Spares 0.6 - - 0.6 0.9 1.5
Freight and Insurance - - 0.7 0.7 0.9 1.6Erection - - 0.2 0.2 6.4 6.6Duties and Other Expenses - - 1.1 1.1 2.0 3.1Buildings and Civil Works - - 0.6 0.6 24.3 24.9Engineering, Licenses and T.A. 1.9 - - 1.9 3.5 5.4Training - - - 1.1 1.1Administrative and
Pre-operating Expenses - - - - 3.2 3.1
Base Cost Estimate (BCE) 24.0 6.7 13.4 44.1 86.2 130.3
Contingencies- Physical 0.9 0.2 0.4 1.5 2.7 4.2- Price Escalation 4.0 1.2 2.2 7.4 1.1 8.5
Total Installed Cost 28.9 8.1 16.0 53.0 90.0 143.0
Working Capital - - 2.4 2.4 6.1 8.5
Expected Project Cost 28.9 8.1 18.4 55.4 96.1 151.5
Interest during Construction - - 4.3 4.3 0.8 5.1
TOTAL FINANCING REQUIRED 28.9 8.1 222 5=9.7 156..6 z_D x
i-n/1 Includes expenses in non-convertible currencies amounting to US$14.5 million.
Industrial Projects DepartmentOctober 1978
- 73 -
ANNEX 5-1Page 3
ROMANIA: CRAIOVA CHEMICAL PROJECT
WORKING CAPITAL REQUIREMENTS(in million Lei)
CURRENT ASSETS
Operating Cash 4.0Accounts Receivable (15 days) 93.0InventoryRaw Materials (15 days)- Domestic 36.0- Imported 14.0Work in Progress (10 days) 46.0Finished Goods (5 days) 23.0
Sub-total Inventory 119.0
Total 216.0
LIABILITIES
Current Liabilities- Accounts Payable (15 days) 63.0
NET WORKING CAPITAL 153.0
Of Which:- Local 109.3- Foreign 43.7
Industrial Projects DepartmentOctober 1978
- 74 ANNEX 5-2
ROMANIA - CRAIOVA CHEMICAL PROJECT
EQUIPMENT AND SERVICES TO BE FINANCED BY BANK LOAN
A. Imported Equipment Totaland Services (US$ million)
1. Acetylene - compressors, blowers, pumps, lifting equip-ment, instrumentation, erection materials,
technical assistance, spare parts.
2. Acetic Acid - compressors, lifting equipment, instrumentation,erection materials, technical documentation,
technical assistance, spare parts.
3. Acetic Anhydride - equipment for pyrolysis furnaces, pumps, liftingequipment, instrumentation, erection materials,
spare parts.
4. Vinyl Acetate - blowers, lifting equipment, instrumentation,erection materials, technical assistance, spare
parts.
5. Polyvinyl Acetate - electropumps, instrumentation, erection materials.
6. Ethyl Acetate - centrifuges, lifting equipment, instrumentation,
erection materials.
7. CO Separation - license, know-how, engineering, blowers, filters,
instrumentation, erection materials, technical
documentation, technical assistance, spare parts.
8. Methanol - compressors, turbines, electromotors, pumps,blowers, refractory and high alloy materials,
lifting equipment, catalysts and fillings, instru-mentation, erection materials, technical documen-
tation, technical assistance.
9. General Facilities - compressors, steam pressure reducers, laboratory
and Utilities equipment, low voltage equipment, instrumentation,erection materials, spare parts.
Estimated Value 24.0
B. Other Equipment and Sub-Assemblies
1. Columns2. Compressors and Blowers3. Pumps4. Heat Exchangers5. Boilers6. Furnaces
Estimated Value 16.0
TOTAL ESTIMATED VALUE: 40.0
Industrial Projects DepartmentOctober 1978
- 75 -
ANNEX 5-3
ROMANIA - CRAIOVA CHEMICAL PROJECT
ESTIMATED DISBURSEMENT SCHEDULE FOR BANK LOAN(US$ million)
Bank CumulativeFiscal Year Estimated Estimatedand Quarter Disbursements Disbursements
FY1979January-March 3.0 3.0April-June 4.0 7.0
FY1980July-September 4.0 11.0October-December (1979) 5.0 16.0January-March 6.0 22.0April-June 4.0 26.0
FY1981July-September 2.0 28.0October-December (1980) 3.0 31.0January-March 4.0 35.0April-June 2.0 37.0
FY1982July-September 1.0 38.0October-December (1981) 1.0 39.0January-March 1.0 40.0
Industrial Projects DepartmentOctober 1978
- 76 -ANNEX 6Page 1
ROMANIA: CRAIOVA CHEMICAL PROJECT
ASSUMPTIONS USED IN THE FINANCIAL ANALYSIS
A. General
1. Projections of the likely financial status of the projectare done in current terms, which are practically the 1977 Lei, since domesticinflation has been and is expected also in the future to be very small. Also, itis the general pricing policy in Romania to adjust output prices in line withchanges in the prices of inputs. Therefore, it is likely that any future pricerevisions, although changing the absolute level of revenues and costs,will not basically change the structure of the projections made here.
B. Product Mix
2. The product mix at full capacity is given in the table on page3, and the production build-up is in the table on page 4.
C. Product Prices
3. For all project's products, 1977 Romanian prices have been used.It is the pricing policy in Romania to set prices high enough to cover pro-duction costs and to provide for chemical products a margin of 30-35% fortaxes and benefits. The table on page 3 gives a summary of the productprices at full capacity; for comparison purposes, the table also giveseconomic price assumptions.
D. Production Costs
4. The table on page 3 gives the breakdown of the production costs.Quantities requirements for raw materials and utilities have been estimatedby IITPIC together with the Central and reviewed by the Bank. Prices ofdomestic raw materials and utilities are 1977 prices adjusted for deliveryto Craiova.
5. Labor requirements have been determined by IITPIC and the Central,and the average annual salary of 40,500 Lei (US$2,250 equivalent) is basedon present pay levels within Romania's industry.
6. Depreciation of fixed assets is based on the recently revisedschedule resulting for a chemical plant in a rate of 3.6-4.7% per year.An annual rate of 4.5% has been assumed here.
7. Other production costs, mainly maintenance materials and adminis-trative costs, have been estimated by IITPIC and the Central based on theactual costs of the existing chemical plants.
8. Again, for comparison, economic costs are given in the sametable.
- 77 -ANNEX 6Page 2
E. Production and Income Statements
9. The table on page 4 shows the projected production and incomestatements for the project for the first eight years of operation. Pro-duction of methanol and of acetic acid is assumed to start January 1, 1980,while production of other products would start in 1981 and 1982. Revenuesand production costs have been calculated in accordance with the assump-tions stated above. The benefit tax shown is calculated to limit thebenefits of the Enterprise to 15% of total production costs. The actualtax rate provided in the decree No. 104 is a function of the profitabilityof the enterprise but has, in essence, the effect of siphoning all benefitsabove 15% to the budget.
F. Cash Flow Statements and Balance Sheets
10. Tables on pages 5 and 6 show the projected cash flow and balancesheet accounts. Working capital requirements are as per Annex 5-1, page 3.Although the enterprise is not paying the debt service on the Bank loan,these are shown and a notional debt service coverage is calculated.The Bank loan of US$40 million will be made for a period of 14 years, in-cluding 3-1/2 years of grace, at an interest rate of 7.35%p.a.; and theGerman supplier's credit of US$12.9 million is assumed to be for fiveyears (with the first repayment due six months after the last disbursement)at an interest rate of 7.5% p.a. However, for the purpose of the analysis,it is assumed that the total remittances to the Investment Bank by the Enter-prise will be sufficient to cover the equivalent in Lei of the interest at arate of 10%.
11. Except for retention of funds to pay a bonus to workers (calcu-lated at 2% of labor cost) and for the reserve fund for increased require-ments of working capital (calculated at 1% of net working capital), allfunds are transferred to the State budget.
G. Financial Rates of Return
12. Financial rates of return are calculated for the expansion projectas a whole. The cash flows and results are given on page 6, all returnsare in 1977 constant terms.
-78-ANNEX 6Page 3
ROMANIA: CRAIOVA CHEMICAL PROJECT
PRODUCT MIX, PRICES AND OPERATING COSTS AT FULL CAPACITY
8/Quantities Financial Economic-Unit (Units/year) Lei/Unit Million Lei $/Unit Lei/Unit Million Lei
REVENUE:
Methanol t 172,200 1,060 182.5 130 2,340 402.9
Acetic Acid t 27,946 5,800 162.1 380 6,840 191.2Vinyl Acetate t 18,825 9,800 184.5 430 8,820 166.0Polyvinyl Acetate t 13,000 9,0001/ 117.0 520 9,360 121.7Acetic Anhydride t 10,000 9,000 90.0 590 10,620 106.2Ethyl Acetate t 7,965 17,9601/ 143.1 530 9,540 76.0
Acetylene t 3 14,331 10,490-/ 150.3 700 12,600 180.6Purge Gas from Acet. Acid '000 Nm
314,400 75 1.1 22.9 412 5.9
82% Hydrogen '000 Nm3
106,400 426.3/ 45.3 72.3 1,302 138.5Residual Methane in 3 4/
Hydrogen '000 Nm 10,600 200- 2.1 60 1,080 11.4Acetylene Off-gas '000 Nm
3163,400 1055/ 17.2 32 576 94.1
Total Revenues 1,095.2 1,494.5
PRODUCTIONi COST:
Variable Costs
Methane Feed '000 Nm3
357,500 60 21.5 60 1,080 386.1Methane Fuel '000 Nm
381,940 200 16.4 60 1,080 88.5
Fuel Oil t 25,500 5996/ 15.3 65 1,170 29.8Diesel Oil t 9,000 985 r 8.9 115 2,070 18.6Power MWh 286,930 269 p77.2 25 450 129.18 Ata Steam t 1,106,548 30 33.2 5.5 99 109.513 Ata Steam t 164,940 351/ 5.8 6.5 117 19.3Industrial Water '000 14,601 500-! 7.3 38 684 10.0Polyvinyl Alcohol t 497 67,0001/ 33.3 1,500 27,000 13.4Other Chemicals 41.6 41.6Chemicals for Utilities 9.3 9.3
Sub-Total 269.8 855.2
Fixed Costs
Labor 45.0 45.0Maintenance & General 64.8 64.8
Sub-Total 109.8 109.8
Total _Oerating Costs 379.6 965.0
1/ Neighted average price between several grades of products.2/ Based on a carbide cost of Lei 3,150/ton, and a yield of 300 kg of acetylene per ton of carbide.3/ Based on a price of 100% hydrogen of Lei 520,000/ton.4/ Based on price of methane.5/ Based on 1.25 times the value of the heat content.6/ Adjusted from diesel oil price by a 0.6 factor.7/ Estimated.8/ Based on analysis made in Chapter III.
Industrial Projects DepartmentOctober 1978
ROMANIA: CRAIOVA CIIEMICAL PROJECT
PROJECTED PRODUCTION AND INCOME STATEMFNTS
(Million Lei)
Start-upUnit Date 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987
Production
Methanol t 1/80 - - - 129,054 168,662 172,200 172,200 172,200 172,200 172,200 172,200
Acetic Acid t 1/80 - - - 20,960 26,549 27,946 27,946 27,946 27,946 27,946 27,946Vinyl Acetate t 3/81 - - - 10,354 15,625 18,449 18,825 18.825 18,825 18,825Polyvinyl Acetate t 1/82 - - - - - 9,750 12,350 13,000 13,000 13,000 13,000Acetic Anhydride t 3/80 . . 5,600 8,300 9,800 10,000 10,000 10.000 10,000 10,000Ethyl Acetate t 1/82 - - - 5,974 7,567 7,965 7,965 7,965 7,965
Acetylene t 9/81 - - * - 3,583 11,751 13,901 14,331 14,331 14,331 14,331Purge Gas from Acet. Acid '000 Nm3 1/80 - - - 10,000 13,680 14,400 14,400 14,400 14,400 14,400 14,40082% Hydrogen '000 Nm 10/79 - - 20,216 85,120 102,144 106,400 106,400 106.400 106,400 106,400 106,400Residual Methane in
Hydrogen '000 Nm3
10/79 - - 2,014 8,480 10,176 10,600 10,600 10,600 10,600 10,600 10,600Acetylene Off-gas '000 N.3 9/61 - - - - 40,850 113,988 158,498 163,400 163,400 163,400 163,400
Revenues
Methanol - - 136.8 178.8 182.5 182.5 182.5 182.5 182.5 182.5Acetylene plants - - - 172.0 330.2 598.5 679.9 696.7 696.7 696.7 696.7Other , 9.0 _ 38.8 88.4 183.8 211.0 216.0 216.0 216.0 216.0
Total . . 9.0 347.6 597.4 964.8 1,073.4 1,095.29 5.2 1,095.2 1,095.2
Variable Costs
Methane _ . - 16.6 22.5 34.4 36.8 37.9 37.9 37.9 37.9Utilities _ .0.5 46.9 72.8 123.4 143.5 147.7 147.7 147.7 147.7 1Chemicals 80.5 17. 30.5 70.1 81.3 84.2 84.2 84.2 84.2Total - 1.0 80.8 125.8 227.9 261,6 269.8 ~ 269.8 269.8 269.8
Fixed Costs
Labor, Maintenance andGeneral - - 13.7 109.8 109.8 109.8 109.8 109.8 109.8 109.8 109.8
Depreciation - - - 53.5 115.8 115.8 115.8 115.8 115.8 115.8 115.8
Cross Benefits - - (5.7) 103.5 246.0 511.3 586.2 599.8 599.8 599.8 599.8
Benefit Tax - - - 66.9 193.3 443.3 513.1 525.5 525.5 525.5 525.5
-Benefits - - (5.7) 36.6 52.7 68.0 73.1 74.3 74.3 74.3 74.3
Ratios
Sales Revenues/Production Costs - - - 1.42 1.70 2.12 2.20 2.21 2.21 2.21 2.21Benefits/Production Costs _ _ _ 0.15 0.15 0.15 0,15 0.15 0.1.5 0.15 0.15
Price Break-even Point _ _ _ 70% 59% 47% 45% 45% 45% 45% 45%
Industrial Projects DepartmentOctober'1978
gD M
-I> C.'
ROMANIA: CRAIOVA CHEMICAL PROJECT
PROJECTED CASH FLOW STATEMENT(Million Lei)
1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987
Cash Generation
Gross Benefits - - (5.7) 103.5 246.0 511.3 586.2 599.8 599.8 599.8 599.8
Depreciation - _ 53.5 115.8 115.8 115.8 115.8 115.8 115.8 115.8
Sub-Total - (5.7) 157.0 361.8 627.1 702.0 715.6 715.6 715.6 715.6
Capital Funds
State Funds- For Fixed Assets 2.0 233.2 807.1 552.0 17.0 15.4 - _ _ _ _
- For Working Capital - 4.0 - 26.0 64.5 58.5 - - - - -
IBRD Loan - - 288.0 270.0 144.0 18.0 - - - - -
Supplier's Credit 11.7 69.9 93.2 58.2 - - - _ _ _
Sub-Total 13.7 -7I 1,188.3 906.2 225.5 91.9 - - - _ _
Funds for Interest during Construction 0.4 3.5 28.3 59.8 - - _ _ _ _ _
Total Cash Available 14.1 310.6 1,210.9 1,123.0 587.3 719.0 702.0 715.6 715.6 715.6 715.6
Capital Expenditures X
Fixed Assets 13.7 303.1 1,182.6 880.2 161.0 33.4 - - _ _ _
Working Capital - 4.0 - 26.0 64.5 58.5 Sub-Total 13.7 307.1 1,182.6 906.2 225.5 91.9 - - - - -
Debt Service
IBRD Loan: Interest - - 18.7 44.5 63.6 71.2 68.7 62.2 55.6 49.1 42.5
Repayment - - - - - - 65.5 65.5 65.5 65.5 65.5
Supplier's Credit: Interest 0.4 3.5 9.6 15.3 16.6 14.0 10.5 7.0 3.5 0.9 -
Repayment - - - - 23.3 46.6 46.6 46.6 46.6 23.3 -
Sub-Total 0.4 3.5 28.3 59.8 103.5 131.8 191.3 181.3 171.2 13&b TW.70
Allocation to Funds
Benefit Taxes - - - 66.9 193.3 443.3 508.3 525.5 525.5 525.5 525.5
Workers Bonus _ - - 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9
Reserve Funzd - - - 0.3 0.9 1.5 1.5 1.5 1.5 1.5 1.5
State Budget - -- 88.9 _63.2 _49.6 _ 6.4 16.5 48.9 79.7
Sub-Total - - - 157.0 258.3 495.3 510.7 534.3 544.4 576.8 607.6
Total Cash Requirement 14.1 310.6 1,210.9 1,123.0 587.3 719.0 702.0 715.6 715.6 715.6 715.6
Debt Service Coverage (Notional) - - - 2.6 3.5 4.8 3.7 3.9 4.2 6.2 6.6 >X
Industrial Projects Department
October 1978
ROMANIA: CRAIOVA CHEMICAL PROJECT
PROJECTED BALANCE SHEET(Million Lei)
1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987
ASSETS
Current Assets
Cash - 5.5 5.5 26.7 64.3 64.3 64.3 64.3 64.3 64.3 64.3Receivables - - - 12.2 23.5 45.0 45.0 45.0 45.0 45.0 45.0
Inventories - - - - 27.5 64.5 64.5 64.5 64.5 64.5 64.5
Reserve Fund - - - 0.3 1.2 2.7 4.2 5.7 7.2 8.7 10.2
Sub-Total - 5.5 5.5 39.2 116.5 176.5 178.0 179.5 181.0 182.5 i84.0
Fixed Assets
Gross Fixed Assets 13.7 316.8 1,499.4 2,379.6 2,540.6 2,574.0 2,574.0 2,574.0 2,574.0 2,574.0 2,574.0
Less: Accum. Deprec. - - - 53.5 169.3 285.1 400.9 516.7 632.5 748.3 864.1
Net Fixed Assets 13.7 316.8 1,499.4 2,326.1 2,371.3 2,288.9 2,173.1 2,057.3 1,941.5 1,825.7 1,7C9.9
Total Assets 13.7 322.3 1,504.9 2,365.3 2,487.8 2,465.4 2,351.1 2,236.8 2,122.5 2,008.2 1-393.9
LLABILITIES
Current Liabilities
Payables - 1.5 1.5 8.9 20.8 20.8 20.3 20.8 20.8 20.8 20.8
Loan Current Portion - - - 23.3 46.6 112.1 112.1 112.8 &8.8 65.5 65.5Sub-Total - 1.5 1.5 32.2 67.4 132.9 132.9 132.9 109.6 86.3 86.3
Long-Term Funds
IBRD Loan - - 288.0 558.0 702.0 654.5 589.0 523.5 458.0 392.5 327.0
Supplier's Credit 11.7 81.6 174.8 209.7 163.1 116.5 69.9 23.3 - - -
State Funds 2.0 239.2 1,S40.6 1,565.1 1,554.1 1,558.8 1,555.1 1,551.4 1,547.7 1,520.7 1,470.4
Reserve Fund - 0.3 1.2 __ 2.7 4.2 5.7 7.2 8.7 10.2
Sub-Total 1Z.7 320.8 1,503.4 2,333.1 2,420o4 2,332.5 2,218.2 2,103.9 2,012.9 1,921.9 1,807.6
Total Liabilities 13.7 322.3 1,504.9 2,365.3 2,487.8 2,465.4 2,351.1 2,236.8 2,122.5 2,008.2 1,893.9
RPTI0S
Current Ratio _ 3.7 3.7 1.2 1.7 1.3 1.3 1.4 1.7 2.1 2.1
LT Debt/State and Reserve Fund - 25/75 31/69 33/67 35/65 33/67 30/70 26/74 23/77 20/80 18/82
Industrial Projects DepartmentOctober 1978 >|
01'
ROMANIA: CRAIOVA CHEMICAL PROJECT
FISCAL IMPACT OF THE PROJECT(Million Lei)
1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987
Budget Outflows
Funds for Fixed Assets 13.7 303.1 1,182.6 880.2 161.0 33.4 - - - - -Funds for Working Capital - 4.0 - 26.0 64.5 58.5 - - - - -
IBRD Debt Service - 14.9 33.3 47.5 52.9 116.0 111.2 106.4 101.6 96.7Suppliers' Credit Debt Service 0.4 3.5 9.6 15.3 16.6 14.0 10.5 7.0 3.5 0.9 -
Total Outflow 14.1 310.6 1,207.1 954.8 289.6 158.8 126.5 118.2 109.9 102.5 96.7
Budget Inflows
IBRD Loan - - 288.0 270.0 144.0 18.0 - - - - -Suppliers' Credit 11.7 69.9 93.2 58.2 - - - - - - -Benefit Tax - - - 66.9 193.3 443.3 508.3 525.5 525.5 525.5 525.5Allocation of Benefits to
Debt Service - - - 103.5 131.8 191.3 181.3 171.2 138.8 108.0Allocation of Benefits to State -88.9 63.2 49.6 - 6.4 16.5 48.9 79.7
Total6inflow -4. - 6 1 411.7 69.9 381.2 4E4.0 504.0 642.7 699.6 713.2 713.2 713.2 713.2
Net Budget Inflow (Outflow) (2.4) (240.7) (825.9) (470.8) 214.4 483.9 573.1 595.0 603.3 610.7 616.5C Umulative Inflow (Outflow) (2.4) (243.1) (1,069.0) (1,539.8) (1,325.4) (841.5) (268.4) 326.6 929.9 1,540.6 2,157.1
Industrial Projects DepartmentOctober 1978
09
- 83 -ANNEX 6Page 8
ROMANIA: CRAIOVA CHEMICAL PROJECT
FINANCIAL RATE OF RETURN AND SENSITIVITY ANALYSIS
A. Cash Flow for Financial Rate of Return (in Million Lei)
Investm9nt Operating Costs2/ Sales CashYear Costs-1 Variable Fixed Revenues2/ Flow
1977 13.7 - - - (13.7)1978 299.7 - - - (299.7)
1979 1,122.2 1.0 13.7 9.0 (1,127.9)1980 840.2 80.8 109.8 347.6 (683.2)1981 209.7 125.8 109.8 597.4 152.11982 88.5 227.9 109.8 964.8 538.61983 - 261.6 109.8 1,073.4 702.0
1984-92 269.8 109.8 1,095.2 715.61993 (153.0)3/ 269.8 109.8 1,095.2 715.6
1/ Investment costs (see Projected Cash Flow-Statement), less priceescalation of Lei 153.0 million.
2/ Operating costs and sales revenues (see Projected Income Statement).3/ Residual value is Net Working Capital, valued at Lei 153.0 million.
B. Financial Rate of Return and Sensitivity Analysis (%)
Base 21.1Capital Costs -10% 23.5
+10% 19.1+20% 17.3
Operating Costs -10% 22.4+10% 19.8
Revenues +10% 24.5-10% 17.4-20% 13.6
Capacity Utilization -10% 18.4-20% 15.5
Industrial Projects DepartmentOctober 1978
- 84 -ANNEX 7Page 1
ROMANIA: CRAIOVA CHEMICAL PROJECT
ASSUMPTIONS USED IN THE ECONOMIC ANALYSIS
A. General
1. The economic rates of return for the project have been calculatedin constant 1977 dollars. All benefits and costs for tradeable items havebeen determined by using expected long-term international prices estimatedby the Bank (on the basis of several consultants studies)to prevail in the 1980s. For non-tradeable items, domestic prices havebeen adjusted to reflect the international price level of their foreigncomponents. Labor, which accounts for only about 5% of total economicoperating costs, has not been shadow priced and its financial cost hasbeen used. Prices used are summarized in the table on page 3 of Annex o.
B. Capital Costs
2. The capital costs used for calculating the financial rate ofreturn have also been used here after deducting duties which represent Lei36 million, or 1.3% of project cost.
C. Operating Costs
3. About half of the project's total economic costs comes frommethane. The price of methane is that of its most attractive use, i.e,as fuel in power plants. In such a case, methane replaces either locallyavailable lignite or residual fuel oils which are produced during crude oilrefining:
(i) Based on a lignite production cost of US$9-12 per ton and adjust-ing for relative transportation cost and lignite's calorific value,the economic value of methane is US$40 per 1,000 m3 .
(ii) Based on international fuel oil prices of US$75 per ton (priceprevailing in Northwest Europe), equivalent to US$13 per barrelof crude oil, and after adjustment for relative transportationcost and calorific value, the corresponding economic value ofmethane is US$60 per 1,000 m3.
4. The higher value, iLe, US$60 per 1,000 m3 was retained as thebase case of the analysis, reflecting the substitution for fuel oil, andsensitivity tests for lower (US$40 per 1,000 m3) and also higher (US$70 per1,000 m3) were also carried out.
5. The economic costs of electricity and steam (at 13 Ata) have beenassumed at US¢2.5 per kWh and US$6.5 per ton respectively (US$5.5 per tonat 8 Ata) compared to Romanian prices of US1.5 per ktTh and US$1.9 per tonof steam at 13 Ata (US$1.7 per ton at 8 Ata).
6. The economic cost of polyvinyl alcohol has been assumed at US$1,500per ton, based on present and future prices estimated by several consultants,compared to the Romanian price of US$3,722 per ton. For other chemicals,labor and other operating costs, financial costs have been taken for theeconomic analysis.
- 85 -ANNEX 7Page 2
D. Economic Benefits
7. About 80% of the project's output will substitute for imPorts,while the rest is assumed to be exported. The economic prices (ex-factory) areshown in the table on page 3 in Annex 6. Prices are discussed in ChapterIII of the main report. Ex-factory prices have been derived as follows:
Product Prices Used in Economic Analysis(In 1977 US$ per ton)
Quantities Average Long-TermProduced at Percentage InternationalFull Capacity to be Price Cost of Cost of Ex-factory
(tons) ExportedA/ (delivered) Importin bl Exportingc/ Price
Methanol 172,200 10% 125 6 13 130
Acetic Acid 27,946 20% 375 16 38 380Vinyl Acetate 18,825 20% 480 24 49 490Polyvinyl Acetate 13,000 20% 510 26 52 520Acetic Anhydride 10,000 40% 600 29 59 590Ethyl Acetate 7,965 10% 510 26 53 530
a/ On the average over the 12-year life of the project; and assuming that(i) the project will export all production in excess of
the projected domestic market- and(ii) no additional plants are buili.
b/ On the average, 5% of the ex-factory price.c/ On the average, 10% of the ex-factory price, including the EEC tariffs.
E. Project Life and Terminal Value
10. Project life was conservatively estimated at 12 years, and asensitivity test for a 15-year life was carried out. No terminal valuewas credited to the project except for a notional working capital recovery.
ANNEX 7-86- Page 3
ROMASNIA: CRAIOVA CHEMICAL PROJECT
ECONOMIC RATE OF RETURN AND SENSITIVITY ANALYSIS
A. Cash-Flow for Economic Rate of Return (in Million Lei)
Investm tft Operating Costs.i Sales-/ CashCosts- Methane Other Variable Fixed Revenues Flow
1977 12.7 - - _ _ (12.7)1978 284.5 - - - - (284.5)1979 1,098.1 6.1 9.6 13.7 28.5 (1,099.0)1980 839.7 259.4 128.3 109.8 673.7 (663.5)1981 214.5 355.5 219.3 109.8 t,001.3 102.21982 88.5 445.7 334.8 109.8 1,366.5 387.71983 - 470.0 373.9 109.8 1,475.0 521.3
1984-92 - 474.5 380.7 109.8 1,494.6 529.61993 (153.0)3/ 474.5 380.7 109.8 1,494.6 682.6
Economic Rate of Returna 16.2%
1/ Investinent costs (see Annex 6 page 8), less duties of Lei 36.0 million.2/ Operating costs and sales revenues (see Annex 6 page 3).3/ Residual value is Net Working Capital, valued at Lei 53.0 million.
B. Sensitivity Analysis
Product Prices-15% -10% -5% Base Case +5% +10_ +15%
1. Base Case 9.4 11.8 14.0 16.2 18.2 20.2 22.2
2. Investment Costs up 10% 7.9 10.2 12.3 14.3 16.3 18.1 20.03. Investment Costs up 20% 6.6 8.7 10.8 12.7 14.5 16.3 18.14. Investment Costs down 10% 11.2 13.7 16.1 18.4 20.6 22.7 24.8
5. Operating Costs up 10% 4.6 7.3 9.8 12.1 14.4 16.5 18.56. Operating Costs down 10% 13.7 15.9 18.0 20.0 21.9 23.8 25.77. Ž,Lethane Price at US$40/'0OQ m3 16.5 18.6 20.6 22.5 24.4 26.2 28.08. Methane Price at US$70/'000 3 5.7 8.3 10.7 13.0 15.2 17.3 19.3
9. Capacity Utilization up 10% 12.3 14.5 16.6 18.7 20.6 22.6 24.410. Capacity Utilization down 10% 6.4 8.9 11.3 13.6 15.8 17.8 19.8
11. Delay of 6 months in Project Im-plementation 9.1 11.3 13.4 15.4 17.3 19.1 20.8
12. Capital Costs up 10% and Delay in Pro-ject Implementation 7.7 9.8 11.8 13.7 15.4 17.2 18.8
13. Export Volume up 150% and CorrespondingReduction in Domestic Sales 7.7 10.2 12.5 14,7 16.9 18.9 20.9
14. No Production of Acetic Anhydride andCorresponding Increased Productionof Acetic Acid 9.1 11.5 13.8 15.9 18.0 20.0 21.9
15. Including Polyvinyl Alcohol and ButylAcetate 8.5 11.0 13.2 15.4 17.5 19.5 21.5
16. Operating Life of 15 Years 10.9 13.1 15.2 17.2 19.2 21.1 22.9
Industrial Projects DepartmentOctobet 1978
ROMANIA: CRAIOVA CHEMICAL PROJECT
ECONOMIC RATE OF RETURN AND SENSITIVITY ANALYSIS
NETHANOL PLANT AND ACETYLENE BASED PLANTS
A. Cash-Flow for Economic Rate of Return (in Million Lei)
METHANOL PLANT ACETYLENE BASED PLANTS
Investment Operating Costs Sales Investment Operating Costs SalesCosts Methane Other Variable Fixed Revenues Costs Methane Methanol Other Variable Fixed Revenues
1977 8.6 4.1 4.1 - - _ _1978 169.5 _ _ _ _ 113.9 115.0 - -1979 441.8 - - - - 649.8 656.3 - 9.6 13.7 28.51980 217.8 201.5 35.6 39.4 390.3 615.7 621.9 43.4 92.7 70.4 326.81981 6.0 236.4 45.6 39.4 489.5 235.5 208.5 67.3 173.7 70.4 579.11982 - 238.1 48.5 39.4 491.4 58.5 88.5 75.8 286.3 70.4 950.51983 - 238.1 48.5 39.4 491.4 - - 86.6 325.4 70.4 1,070.2
1984-92 - 238.1 48.5 39.4 491.4 - _ 88.5 332.2 70.4 1,091.71993 (34.8) 238.1 48.5 39.4 491.4 (117.0) (118.2) 88.5 332.2 70.4 1,091.7
Economic Rate of Return: 16.5% Economic Rate of Return: 16.0% m
B. Economic Rate of Return and Sensitivity Analysis (%)
Methanol Acetylene basedPlant Plants
Base Case 16.5 16.0Investment Costs -10% 18.8 18.2
+10% 14.5 14.2+20% 13.1 12.6
Operating Costs -10% 20.6 20.2+10% 12.2 11.6
Methane Price at $bO/'000 m3 23.3 22.9$70/'000 m3 13.0 12.5
Product Prices: +10% 22.5 22.0-10% 9.6 12.0-20% 1.5 7.1
Industrial Projects DepartmentOctober 1978
-41
SOCIALIST REPUBLIC OF ROMANIA
4 ;i LOCATION OF MAIN CHEMICALCOMPLEXES
R.T .1 ~ X~~GUNDER CO TWUCTION UNDER STUDY
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