Process plant and economics
Microsoft Word - PROC2089 Process Plant Economics Assignment 2020.edited.docx SCHOOL OF ENGINEERING, CHEMICAL & ENVIRONMENTAL ENG PROC 2089 PROCESS PLANT DESIGN AND ECONOMICS PROCESS PLANT ECONOMICS - ASSIGNMENT 1. Summary and purpose of the assignment: • Summary: The assignment involves the complete economic analysis of a process industry project to determine its financial feasibility • Purpose: The purpose of the assignment is to help you to learn and demonstrate your skills in estimating the capital cost, operating cost and working capital for a process industry project and use them in a cash flow analysis. The aim is to determine key profitability parameters like payback period, net present value (NPV) and discounted cash flow rate of return (DCFR) and use them to determine the financial feasibility of the project. 2. Submission date: 11 October 2020 (Sunday), 23.59 hrs. A late penalty will apply 10% of marks per working day. Assignments submitted five working days after the due date will be returned unmarked. 3. It is an individual assignment. 4. This assignment is worth 20% of the overall marks for each student. 5. You are suggested to complete this assignment using MSExcel and save the file using the file name that contains "Last name. Student number". Also, please make sure that you show your full name and student number on the first page of your spreadsheet. Please do not attempt to show detailed calculations as shown in the worked examples provided in Canvas. 6. Assignments must be submitted in Canvas (not by email) through the links available on the assignment page. 7. Please take that the plant will operate in all 365 days per year for the analysis. 8. You are reminded about University anti-plagiarism rules. Assignments suspected for any form of plagiarism will be returned without marking. Prof. Raj Parthasarathy Email:
[email protected] Economic Evaluation of MEK plant A preliminary design has been made for a plant to produce 26,000 tonnes per year of methyl ethyl ketone (MEK) in an Australian Capital City. The major equipment items required for the process and their design details are listed below: Please note that if some of the following specifications are not complete, you should make the required assumptions to complete the cost estimations. Major equipment items 1. Butanol vapouriser: kettle type reboiler, heat transfer area 16 m2, design pressure 5 barg, the material of construction is carbon steel. 2. Reactor feed heaters (2 of them): shell and tube heat exchanger, fixed head (Fixed tube sheet), heat transfer area 26 m2, design pressure 5 barg, the material of construction is stainless steel. 3. Reactors (3 of them): shell and tube heat exchanger construction, fixed tube sheets, heat transfer area 52 m2, design pressure 5 barg, the material of construction is stainless steel. 4. Condenser: shell and tube heat exchanger, fixed tube sheets, heat transfer area 26 m2, design pressure 2 barg, the material of construction is stainless steel. 5. Absorption column (tower): packed column, diameter 0.6 m, height 6.5 m, packing height 4.8 m, packing 25 mm ceramic saddles, design pressure 2 barg, the material of construction is carbon steel. 6. Extraction column (tower): packed column, diameter 0.55 m, height 4.5 m, packing height 3.5 m, packing 25 mm stainless steel pall rings, design pressure 2 barg, the material of construction is carbon steel. 7. Solvent recovery column (tower): plate column, diameter 0.65 m, height 6.3 m, 12 stainless steel sieve plates, design pressure 2 barg, the material of construction of column is carbon steel. 8. Recovery column reboiler: thermosyphon, shell and tube heat exchanger, fixed tube sheets, heat transfer area 4.5 m2, design pressure 2 barg, the material of construction is carbon steel (Use the minimum value given by CAPCOST spreadsheet). 9. Recovery column condenser: double-pipe heat exchanger, heat transfer area 1.8 m2, design pressure 2 barg, the material of construction is carbon steel. 10. Solvent cooler: double-pipe heat exchanger, heat transfer area 2.4 m2, design pressure 2 barg, the material of construction is stainless steel. 11. Product purification column (tower): plate column, diameter 1.2 m, height 21 m, 16 stainless steel sieve plates, design pressure 2 barg, the material of construction of column is stainless steel. 12. Product column reboiler: kettle reboiler, heat transfer area 4.3 m2, design pressure 2 barg, the material of construction is stainless steel (Use the minimum value given by CAPCOST spreadsheet). 13. Product column condenser: shell and tube heat exchanger, floating head, heat transfer area 16 m2, design pressure 2 barg, the material of construction is stainless steel. 14. Feed compressor: centrifugal compressor, rating 800 kW, explosion-proof electric drive, the material of construction is carbon steel, one spare. 15. Butanol storage tank: fixed cone roof, capacity 420 m3, the material of construction is carbon steel. 16. Solvent storage tank: horizontal, fixed roof, diameter 1.6 m, length 5.3 m, the material of construction is carbon steel (Use the minimum value given by CAPCOST spreadsheet). 17. Product storage tank: fixed cone roof, capacity 450 m3, the material of construction is carbon steel. The performance and other costs for the plant have been estimated as follows. Note that all costs and prices are expressed in 2020 Australian dollars. Raw Materials Consumption Unit Cost 2-butanol 1.6 tonne/tonne MEK $700/tonne 2-butanol Solvent (tricholoroethane) 7000 kg/year $6/kg tricholoroethane Utilities Consumption Unit Cost Fuel oil (Heating value = 44 kJ/g) 3300 tonnes/year $7.5/GJ Steam (low pressure) 1.4 tonne/h $19/tonne steam Electricity 1 MW $78/MWh Cooling Water 140 tonnes/h 12 cents/m3 Process Labour The plant is expected to operate continuously throughout the year. Five (5) operators are required per operating shift. Each operator is required to work a 40-hour week necessitating four shift teams. Each operator is to be paid a wage of $85,000 per annum. Other costs Supervision labour 15% of process labour Payroll overheads 20% of process labour Plant overheads 20% of process and supervision labour Annual cost of maintenance Estimated at 10% of total fixed capital Annual depreciation Calculated using the straight-line method for ten years plant life Insurance and local taxes Estimated at 4% of fixed capital R & D 2.0% of annual manufacturing costs Selling expenses Estimated at 3.5% of annual direct manufacturing costs excluding depreciation Corporate administration 5.0% of annual manufacturing costs The plant is essentially a single-stream process. Further details required for the cash flow analysis are given below. Data for cash flow analysis Plant design capacity 26,000 tonne/year Plant construction programme • Construction commences in January 2021 and finishes in December 2022 • Plant ready for operation in January 2023 • 60% of the construction occurs in 2021 and the rest in 2022 • Working capital is spent fully in December 2022 The selling price of MEK $2200/tonne of product Tax payments 30% of taxable income paid in the same year in which the income is generated Plant operating life Ten years from the commencement of production Tax Allowances (Depreciation) Calculated using the straight-line method Nominal after-tax cost of capital (Nominal discount rate) 12% per annum Forecast production rates 2023 80% of design capacity 2024 90% of design capacity 2025 onwards 100% of design capacity You may assume the following: § Land and start-up costs are negligible § Scrap value of the plant at the end of its operating life is negligible Using the following information given above, complete the following questions. 1. Estimate the fixed capital required for this plant, taking that it is to be built in Australia in 2020. Use the bare module cost method. Assume that the project is 'greenfield (grassroots) development.' You may use CAPCOST spreadsheet for estimating the fixed capital. Once you have obtained the capital cost for greenfield development, inflate that value to 2020 value using cost inflation factors for the year CAPCOST estimations are applicable (2008). You have to find approximate CEPCI (Chemical Engineering Plant Cost Index) value for 2008 and 2020 (or 2019) and use them in your estimation. You may ignore the effect of location factor in the capital cost estimation. Note that the capital cost you estimate using CAPCOST is in US$. Therefore, you have to convert the inflated capital cost into Australian dollars using the current exchange rate (year 2020 or 2019) between US$ and A$. (15 MARKS) 2. Estimate total operating costs for the plant (expressed annually and per tonne of product) at the full plant output. (10 MARKS) 3. Estimate working capital requirements for the plant at the full output based on the following assumptions: a. 4 weeks of raw materials b. 6 weeks of finished products stock c. 1 month’s debtors d. 1 month’s creditors e. Materials in progress are 30% of finished product stock f. 4 weeks wages. (5 Marks) 4. Calculate the cash flows (after tax) for each year of the project life. Using the cash flow obtained, plot the cumulative cash flow diagram and determine the payback period. (15 MARKS) 5. Using the cash flow obtained in Question (4), calculate the discounted cash flows and then determine the Net Present Value and DCFR for the project. (5 MARKS) Useful references for cost data: 1. Turton, R., Bailie, R.C., Whiting, W.B., and Shaeiwitz, J.A., (2009), “Analysis, Synthesis, and