Economics

The economics of the Fischer Tropsch Refiney plant will determine if this plant should be

built. There are various factors that must be considered in order to determine if this process is

worth considering to being built. These factors are the total capital investment, the Net Present

Value, and the payback period.

The total capital investment of the plant has various factors that must be considered.

The largest factor of the total capital investment is the equipment needed for the plant. The

main pieces of equipment within the process are the SBCR, Hydrocracker and the

Oligomerization unit. The minor pieces of equipment are multiple units of 19 heat exchangers, 7

compressors, 7pumps,1 fired heaters and 7 distillation columns. Pricing of the major equipment

such as the Hydrocracker and Oligomerization unit was obtained through a private conversation

with UOP, all that they required were the lb/hr of H2 feed and the bbl/day of products and then

multiplied the figure by a factor of 3 as suggested by Jacobs Engineering. The SBCR was

obtained through the journal of catalysis. The price was scaled up to the bbl/day produced as

products. The minor pieces of equipment were determined from ASPEN ICARUS Equipment Cost

Simulator. From the sizing, one was able to determine the price of each piece of equipment. A

detailed list of the equipment and its pricing is shown in the appendices. The total equipment

cost for the plant is $370 million TIC.

The total capital investment for the plant takes into account the price of catalysts

needed for the process to start. The SBCR, Hydrocracker and Oligomerization unit all need

catalysts for this process. The price, type, and catalyst life can be found within the appendices.
The initial loading of catalysts for the process will be 4.4 million $. The last cost for the total

capital investment is the cost of land. For a thousand twelve hundred and eighty eight acres of

land in the Williston Basin, it will cost $92 million out of which storage will cost $91 million. This

brings the total capital investment to be $526 million.

INSTALLATION

The installation cost is typically 3-4 times the amount of the equipment cost. The

installation cost included. Since our total equipment cost is $130 million, the total installed cost

of the plant will be $520 million. For preliminary estimates of the plant economics, it is typical

for the piping of the plant to be 20-30% of the fixed capital investment (Perrys). Since our total

capital investment is $520, the piping will cost $130. The electrical cost of the plant can also be

estimated in preliminary economics by using 5-10% of the fixed capital investment. Typically the

piping and electrical cost become more detailed during the second stage gate.

Typically done by hand factors. These are found within literature. Perrys 9-15

PLANT STAFFING

There will have to be four operators on site at all times. The shifts will be split between

morning and night shifts. The changing hours will be at 6 P.M. and 6 A.M. There will be 40

people hired for operators of the plant. They will be salaried at $20/hr. This brings the total cost

of the operators to be $9.3 million per year.

 Four managers will be on site at all times. There will be eight hired managers to run the

plant. There will be two morning managers and two night managers. The scheduling will be

similar to that of the operators. They will be on a two week schedule, totaling seven work days

every two weeks. This means that one week a manager will work three shifts, while the next

week the manager will work four. The managers will be paid more than the operators and will

be salaried at $70,000 per year. The total wages paid to the managers will be $780,000 per year.

This bring the plant staffing cost per year to be a total of $10.2 million. This total includes

fringes that will be associated with their salaries. Fringes for the employees are benefits,

bonuses, and other incentives. For the first stage gate, fringes will be assumed to be around

40% of the total amount paid to the workers. This brings the salaries including fringes to be $2.8

million per year.

Land Cost

$92 million for 1288 acres

http://www.loopnet.com/Listing/17254582/Hwy-2-and-58th-St-Williston-ND/
 11
Payback Period
$2,500,000,000.00

$2,000,000,000.00

$1,500,000,000.00
US Dollars

Total Capital Cost

$1,000,000,000.00 Total Profit

$500,000,000.00

$0.00
1 2 3 4 5 6 7 8 9 101112131415161718192021
Years

Expected simple payback period is 4.24 years.

Sensitivity Analysis:

A sensitivity analysis of the plant will incorporate factors of variation in pricing for our reactants

and our product. The Fischer Tropsch plant will be supplied with 250,000 lb/hr of Syngas priced

derived from Natural gas at $4.24/MMBTU price of natural gas is extremely volatile. Four years

ago the price of wellhead natural gas cost $14/MMBTU. Since then, the price has fallen to

$4/MMBTU. The main reason being that four years ago there was a natural gas shortage causing

the price to be at a near all-time high. Since then, the mild winters has contributed to less

demand for natural gas. This caused a surplus of Syngas to be created, which ultimately drove

down the price to where it is today. Clearly the price will fluctuate a great deal over the 20 year

period for the plant. Syngas was provided to the Fischer Tropsch Plant .

To determine if the plant is profitable, it will be necessary to estimate the amount of money

that will be made from the process by seeing the profit margin on selling these. The price for

both of these is typically set in stone. These don’t fluctuate depending on time but rather on

quality of the game. For the preliminary stages, there were no transfer prices incurred, which

implies that the Syngas is being sent to the Fischer Tropsch plant at no cost. The prices of LPG,

Diesel, Jet and Naphtha are based off the spot pipeline prices from eia.gov. A sensitivity analysis

was done to see how the NPV changes with a 10% increase in the pipeline prices and 10%

decrease in the pipeline prices, this will also allow to demonstrate how profitable the plant

could be.
For a 10 % increase in the pipeline prices for LPG, Naphtha, Diesel and Jet fuel, the NPV was

calculated to be $877 million with an IRR of 26.19% and the breakeven period was calculated to

be 3.82 years excluding the startup time. Below is a graph that shows the payback period. Over

the project life of 20 years, the plant will be making a profit of $2.6 Billion.

Payback Period
$2,500,000,000.00

$2,000,000,000.00

$1,500,000,000.00
US Dollars

Total Capital Cost

$1,000,000,000.00 Total Profit

$500,000,000.00

$0.00
1 2 3 4 5 6 7 8 9 101112131415161718192021
Years

Revenue from
Products
Products Year 1 Year 5 Year 10 Year 20

LPG 6232800 6746583.167 7448772.962 9080012.676

Naphtha 50110830 54241573.96 59887080.54 73002017.01
Jet Fuel 44335200 47989846.3 52984668.05 64588014.7
Diesel 110801250 119934836.4 132417750.5 161416498.9
Total Revenue 211480080 228912839.8 252738272 308086543.3
Total
Expenses 56,393,365 59,336,692 63,438,144 73,295,208
Total Profit 105,740,834 552,821,526 1,169,511,704 2,620,563,102
* NO TRANSFER PRICES
* NO LOANS
With a 10 % decrease in the pipeline prices of LPG, Diesel, Jet and Naphtha, the NPV was

calculated to be $645 million with an IRR 21.66 and by the end of the project life of 20 years, a

total profit of was calculated to be $2.06 Billion Dollars. Below is the graph that demonstrates

the payback period.

Payback Period
$2,500,000,000.00

$2,000,000,000.00

$1,500,000,000.00
US Dollars

Total Capital Cost

$1,000,000,000.00 Total Profit

$500,000,000.00

$0.00
1 2 3 4 5 6 7 8 9 101112131415161718192021
Years

Revenue from
Products
Products Year 1 Year 5 Year 10 Year 20

LPG 6232800 6746583.167 7448772.962 9080012.676

Naphtha 50110830 54241573.96 59887080.54 73002017.01
Jet Fuel 44335200 47989846.3 52984668.05 64588014.7
Diesel 110801250 119934836.4 132417750.5 161416498.9
Total Revenue 211480080 228912839.8 252738272 308086543.3
Total
Expenses 56,393,365 59,336,692 63,438,144 73,295,208
Total Profit 83,069,209 434,837,480 921,263,738 2,069,702,251
* NO TRANSFER PRICES
* NO LOANS
 The plant will operate with 40 operators at the rate of 20$/hr and 8 manager at the rate of

70,000$/year. The major cost is mainly the equipment and the land. A detailed cost summary

can be seen in the table below

Table_Cost_Summary

TIC