by Pınar Özbay Nihal Payza Zeynep Pekişen Deniz Uğurlar ISOPROPYL ALCOHOL PRODUCTION PLANT CHIPA by Pınar Özbay Nihal Payza Zeynep Pekişen Deniz Uğurlar

Information about... Isopropyl Alcohol IPA Manufacturing Processes Process Selection Market Research Design Capacity of IPA Process Flow Diagram Economical Evaluation Purchased Equipment Cost Capital Investment Calculations Total Product Cost Calculations Cash Flow Calculations Profitability Analysis Break-Even Point Assumptions Summary

Isopropyl Alcohol C3H7OH Flammable , colorless liquid with a strong and pleasant odor Miscible with water , ethanol , acetone and benzene Applications Pharmaceuticals ,pesticides ,coatings As cleaning agents used on electronic devices Anti-freeze agent in fuel C3H7OH

IPA Manufacturing Processes Direct Hydration combination of water and propylene with acidic cation exchange resin catalyst Indirect Hydration Reaction of propylene with sulfuric acid with a heterogenous polymeric acid catalyst Acetone Hydrogenation of acetone Advantages of Direct Hydration Thermally stable polymeric catalyst High product quality improvement Cost effective Environmental friendly High selectivity of IPA

Process Selection Process for producing isopropyl alcohol, US 5,763,693 COMPARED PROPERTIES Section 3.2.1 Patent no: US 4,352,945 Section 3.2.2 US 6,833,483 Section 3.2.3 US 4,760,203 Section 3.2.4 US 5,763,693 Raw materials (4) 10 9 End product (10) 7 Conversion (8) 3 Reactor Type (5) Catalyst type (6) Purity of products (7) 5 Environmental Effects (6) Operating Conditions (6) 10  Data Availability (10) Energy Consumption (6) 8 Complexity of the proces(9) Economic aspects (8) Total 626 597 631 728

Market Research Largest producers around the world : Shell, ExxonMobil, Sasol and Dow (72%) ARKEM KİMYA in Turkey : %34 of total market share

Design Capacity of IPA Reasons of fluctuation TUIK DATA Decrease in demand for IPA Economis crisis New substitute chemicals as ethyl alcohol Consumption data taken from ARKEM Kimya consistent with TUIK data

Design Capacity of IPA Year difference calculation between countries Population, GDP, growth rates and consumption of countries Calculation of future population and GDP of Turkey reference year: 2005 Calculation of consumption of Turkey per capita Final design capacity of Turkey

Design Capacity of IPA The best fit Logaritmic model Consumption Projections of IPA 3 year investment (2009-2010-2011) 2 year ramp up (2012-2013) 1st year  0.5 * capacity 2nd year 0.9 * capacity 3rd year  full capacity 14 year operation (2012-2025) The best fit Logaritmic model full capacity of IPA in 2025  43,000 tons/year

Process Flow Diagram Direct Hydration Unit (Packed Bed) Distillation No side reaction X = 0.75 adiabatic rxn at 80atm T : 418  423 Sulfonated ion exchange resin Distillation Ttop:337K Tbottom:348 Propylene recycle to mixer Bottom: propane Process Flow Diagram 96% propylene 4% propane Mixer Centrifugal Compressors Efficiency : 0.75 Pumps Efficiency :0.7 propane propane Gas-Liquid Separator T: 354 K Top: Propane Bottom: IPA + 10% water propane Extraction T: 410K Extraction agent: propane Top: Isopraponal, water, propane Bottom: Water recycle to mixer water 90% IPA 10% water

Purchased Equipment Cost Heat exchangers  Type of material-Carbon Steel Heat transfer area-500.8m2 Type factor for fixed tube sheet Compressors & Expanders  Required power Type-Centrifugal Pumps  Volumetric flow rate Pressure & Pressure adjustment factor Material adjustment factor (cast iron) Reactor  Type-Fixed bed jacketed type Construction material-Stainless Steel Capacity-98m3 @80 atm Distillation  Diameter- 0.8m Number of stages-50 Type of material-Carbon Steel Extraction  Diameter-1.5m Height-8m Mixer  Type-Rotary,Double Cone Volume-7m3 Valve  Nominal Diameter-0.13m Type-Pressure regulators for gases and liquids Storage Tanks & Flash Drum  Volume-9.12m3 (for flash drum) Chemical Engineering Plant Cost Index

Purchased Equipment Cost Example for Heat Exchanger Construction material-Carbon Steel, Total heat transfer area-500.8m2, Pressure adjustment factor- 1.5 ( for operating pressure 80atm) Type factor-0.8 (for fixed tube sheet) Figure 6.3b (from Sinnott) Purchased Cost is read as 100,000$ Sınnot grafık bak!!!

Total Purchased Equipment Cost

Capital investment calculations Fraction of delivered purchased equipment cost for fluid processing plant Multiplication of fractions with purchased equipment cost (million $) Direct Costs Delivered purchased equipment cost 1.100 6.887 Purchased equipment installation 0.470 3.560 Instrumentation&Controls(installed) 0.360 2.727 Piping (installed) 0.680 5.151 Electrical systems (installed) 0.110 0.833 Buildings (including services) 0.180 1.364 Yard improvements 0.100 0.758 Service facilities (installed) 0.700 5.303 Total direct costs 27.271 Indirect Costs Engineering and supervision 0.330 2.500 Construction expenses 0.410 3.106 Legal expenses 0.040 0.303 Contractor's fee 0.220 1.667 Contingency 0.440 3.333 Total indirect costs 10.908 Fixed capital investment (direct cost + indirect costs) 38.179 Working capital investment 0.890 6.742 Total capital investment 44.921 Capital investment calculations Fixed capital investment : Direct costs + Indirect costs Total capital investment : Fixed capital investment + Working capital investment Direct, Indirect costs and Working capital investment are calculated by multipyling with a certain fraction of purchased equipment cost

Total product cost without depreciation   TOTAL PRODUCT COST WITHOUT DEPRECIATION Item Default Factor Basis Basis Cost (million$/y) Cost (million$/y) Raw materials 9,688 Operating labor 0,825 Operating supervision 0,150 operating labor 0,124 Utilities 1,231 Maintenance and repairs 0,060 FCI 38,599 2,316 Operating supplies maintenance&repair 0,347 Laboratory charges oprating labor Royalties 0,010 TPC 20,471 0,205 Catalysts 1,281 Variable Cost 16,140 Taxes(property) 0,020 0,772 Financing(interest) 0,000 Insurance 0,386 Rent Fixed Charges 1,158 Plant overhead 0,600 lab&sprvision&main 3,264 1,959 Mnufacturing Cost 19,256 Administration 0,200 labor&sprvision&main 0,653 Distribution&Selling 0,050 1,024 R&D 0,040 0,819 General Expense 2,495 Total Product Cost without Depreciation Total product cost without depreciation TPC = Manufacturing cost + General Expenses Utility Facilities Range (%) Typical Unit Real Cost ($) Fixed-Capital Investment 100 38,179 Steam Generation 2.6 - 6.0 3 1,145 Steam Distribution 0.2 - 2.0 1 0,382 Water Supply, Cooling & Pumping 0.4 - 3.7 1,800 0,687 Water Treatment 0.5 - 2.1 1,300 0,496 Water Distribution 0.1 - 2.0 0,800 0,305 Electric Substitution 0.9 - 2.6 Electric Distribution 0.4 - 2.1 Gas Supply & Distribution 0.2 - 0.4 0,300 0,115 Air Compression & Distribution 0.2 - 3.0 Refrigeration & Distribution 1.0 - 3.0 Process Waste Disposal 0.6 - 2.4 1,500 0,573 Domestic Waste Disposal 0.2 - 0.6 0,400 0,153 Communication 0.1 - 0.3 0,200 0,076 Raw Material Storage 0.3 - 3.2 0,500 0,191 Final Product Storage 0.7 - 2.4 Fire Estinguishing System 0.3 - 1.0 Safety Installation Total Utility Cost 39951 1,231 Variable cost + Fixed charges + Plant overhead Administration Distribution & selling Research & Development Raw materials Operating labor Operating supervision Utilities Maintenance and repairs Operating supplies Laboratory charges Royalties (if not on lump-sum basis) Catalysts and solvents Taxes (property) Financing (interest) Insurance Rent Depreciation = Price($/kg)* Annual amount Unit price 267.9 $/kg Total catalyst cost during the roduction life: 12.812 million $

Cash Flow Calculation FCI2009=FCI*0.15*construction inflation rate0 5-year MACRS depreciation method is used The investments at the beginning of 2009, 2010 and 2011 are calculated FCI2009=FCI*0.15*construction inflation rate0 FCI2010=FCI*0.35* construction inflation rate1 FCI2011=FCI*0.50* =construction inflation rate2 WCI value is calculated with respect to the sum of these FCI values including inflation Total Capital Invesment = FCI + WCI Total Annual Value of IPA = price ($/kg) * annual amount(kg/y) = 1.17 * (43*10^6) = 50.31*10^6 $/y 1st and 2nd years -> operating rates are 0.5 and 0.9 respectively Lastly, Annual TPC is calculated

Total Product Cost Evaluation   Plant Age Land FCI WC+Startup TCI Operating Rate Annual Sales TPC w/o deprn 2009 -2 -0.73 -5.73 -6.45 2010 -1 0.00 -13.36 -13.63 2011 -19.09 -6.93 -26.79 2012 1 -3.92 0.50 25.16 -13.09 2013 2 0.90 45.28 -20.32 2014 3 1.00 50.31 -22.50 2015 4 -4.30 2016 5 2017 6 2018 7 2019 8 2020 9 2021 10 2022 11 2023 12 2024 13 2025 14 0.73 6.93 SUM -46.87 674.15 -103.18

dj = FCI * depreciation factor j Total Cash Flow In order to find annual cash flow, 5 years MACRS depreciation method is used After calculating depreciation values, cash flow can be obtained with corresponding equations dj = FCI * depreciation factor j Gross Profit = Annual Sales – TPC w/o dep’n – dep’n –startup costs Net Profit = Gross Profit * (1- tax rate) Cash flow = Net Profit + Depreciation Total Cash Flow = Annual Cash Flow – Planned Investments(0)

Cumulative Cash Flow Evaluation Date Plant age Annual depr’n Annual Gross Profit Annual Net Annual operating cash flow Total annual Cumulative cash position   factor 1/y 106 $/y 2009 -2 -6.45 2010 -1 -13.63 -20.08 2011 -26.79 -46.87 2012 1 0.20 7.84 0.30 0.19 8.04 -38.83 2013 2 0.32 12.55 12.41 8.07 20.62 -18.21 2014 3 7.53 20.28 13.18 20.71 2.50 2015 4 0.12 4.52 22.85 14.85 19.37 21.87 2016 5 22.39 14.55 19.07 40.94 2017 6 0.06 2.26 24.18 15.72 17.97 58.91 2018 7 25.96 16.87 75.78 2019 8 25.47 16.56 92.34 2020 9 24.97 16.23 108.57 2021 10 24.47 15.90 124.48 2022 11 23.95 15.57 140.05 2023 12 23.42 15.23 155.27 2024 13 22.89 14.88 170.15 2025 14 22.34 14.52 184.67 SUM 1.00 39.22 295.87 192.32 231.53

Graphical representation shows that in 2014 the plant starts to make profit

Profitability Analysis Time Value of Money not included Return on Investment (ROI)  mar=0.15 ROI=29% > mar=15% Payback Period (PBP) PBP=2.37 < PBPref=3.99 Net Return (NR) NR= 6.406*106 > 0

Present worth of annual Profitability Analysis Date Plant Age Present worth factor Total annual cash flow Present worth of annual 106$ cash flows, 106$ 2008 -3 1.521 2009 -2 1.323 -6.452 -8.533 2010 -1 1.15 -13.63 -15.675 2011 1 -26.786 2012 0.87 8.037 6.989 2013 2 0.756 20.618 15.591 2014 3 0.658 20.714 13.62 2015 4 0.572 19.367 11.073 2016 5 0.497 19.069 9.481 2017 6 0.432 17.974 7.771 2018 7 0.376 16.873 6.343 2019 8 0.327 16.556 5.412 2020 9 0.284 16.233 4.615 2021 10 0.247 15.904 3.931 2022 11 0.215 15.568 3.346 2023 12 0.187 15.225 2.846 2024 13 0.163 14.876 2.418 2025 14 0.141 14.519 2.052   Net present worth 106$ 44.492 Time Value of Money included with Discrete Cash Flows and Discounting Net Present Value interest rate, i=0.15 NPW=44.492 > 0 Discounted Cash Flow Rate of Return (DCFR) by trial error DCFR 29 % > 15%. Time Value of Money included with Continuous Cash Flows and Discounting PROFITABLE > rm= 0.14

Break-Even Point Break-Even Capacity  41,517 tons/year Production Capacity  43,000 tons/year Production Capacity > B.E Capacity  Profit

Assumptions for Economic Evaluation Investment in 3 years  2009 – 15% 2010 – 35% 2011 – 50% No additional planned investment such as plant replacement Salvage value is taken as zero Start-up expense  10% of FCI Construction inflation rate  2% Product price inflation rate  0% TPC inflation rate  2% Two-year ramp-up production rates  2012 – 0.5 2013 – 0.9 2014 – 1.0 5-year MACRS Depreciation Method mar = 0.15

As a summary . . . CHIPA Isopropyl Alcohol Total annual Cash Flow 184.67million $ 90% IPA as end product CHIPA Break-Even Capacity 41,517 tonnes/year Pay Back Period 2.37 years 43,000 tonnes per year Isopropyl Alcohol Result  A profitable IPA Manufacturing Plant

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