COST ESTIMATION

THE ECONOMICS OF ACRYLONITRILE MANUFACTURE The raw materials for the production of Acrylonitrile are either Propylene or Ammonia. Acrylonitrile is the desired product. Propylene and Ammonia are sold in the market. The economics of Acrylonitrile manufacture thus is strongly influenced by forces affecting the markets of raw materials required. An economic evaluation of an Acrylonitrile manufacturing facility has to take cognizance of the fact that the monetary values of feed stocks and products are, to a considerable degree, interrelated with the values of hydrocarbon materials in the fuel market. The typical Acrylonitrile plant produces by-products in significant volumes. The combined by-products volume of ,for example, Acetonitrile, HCN and Carbon Oxides,exceeds the production rate of Acrylonitrile by more than a factor of two. Economic Analysis of Acrylonitrile Manufacturing Facilities Given the present uncertainties surrounding the markets for hydrocarbons and petrochemicals, an economic analysis is best based on a segregation of the costs and revenues of Acrylonitrile manufacture. By the simplest definition, economic feasibility requires that the sum of total revenues from all products of an Acrylonitrile production facility less the cost of raw materials is at least equal to or exceeds the cost of processing the raw materials in the facility. By definition, the cost of processing includes all operational expenses as well as capital-related charges. In mathematical terms,

Y V
i 1

Vf Cp

Where Yi = net yield of the i th product leaving the plant as mass-fraction per unit feedstock Vi = value of the i th product ($/t) Vf = value of the feedstock ($/t) Cp = cost of processing per unit mass of feedstock ($/t) The left-hand side of this inequality, often referred to as the "gross margin," contains the major cost elements that are market dependent. Over the life of a plant, these costs may change considerably. Product yields will change relatively more slowly as technological advances are being made.

Elements of the Cost of Processing

The cost of processing is made up of three different and distinct elements Charges related to the total capital investment of the plant; Operating costs, exclusive of fuel, vary with the production rate; The cost of operating labor and supervision plus charges normally classified as overhead.

Capital-Related Charges
The total capital cost of Acrylonitrile plants per annual ton of Acrylonitrile produced prevailing in the U.S. Gulf Coast is 700U.S.$/ton year of Acrylonitrile, which is the cost reference location of the petrochemical industry.

Depreciation represents the annual rate at which the plant investment is to be written off or retired as a result of wear, age, and obsolescence.Maintenance is another capital-related charge. Obviously, the plant must be maintained in operating order, whether or not it is operated. Permanently engaged maintenance crews must be on hand to service all parts of the plant. These charges nominally range from about 3 to 5% of the total investment annually, about half of it being for material replacements and half for maintenance labor. Still other capital-related charges are insurance and property taxes. Insurance costs vary somewhat over the life of the plant and depend on whether the plant owner-operator is self-insured, i.e., he assumes the risks of losses due to accidents, or he contracts with insurance companies. Local property tax rate varies with location and tends to increase with time. The actual return on investment over the life of the plant will vary with the gross margin realized and the operating rate. The cash flow associated with the operation of a plant may vary substantially with time as is often the case with very large plants which may reach full capacity only several years after start-up. In these cases the discounted cash flow method of economic analysis, which takes into account the time-dependent value of money, will yield a more realistic picture of the profitability of a venture than would the return on investment based on full capacity utilization. The return on investment is used as the measure of profitability in this section. The desired pretax annual rate of return for a facility producing commodity petrochemicals is typically in the range of 20 to 30% of the investment. The total of the annual capital-related charges as described above will thus be in the range of 30 to 50% of the investment cost.

Variable operating costs

Variable operating costs are processing expenses that vary with the rate of production; they comprise the cost of electric power, chemicals, catalysts, desiccants, fresh water, and steam to the extent that the latter is imported rather than internally generated. Variable operating costs represent only a relatively small fraction of the total cost of processing. They are typically in the range of 10 to 15% of the cost of processing.

Labor, Supervision and overhead Costs

The operation of an Acrylonitrile plant requires cadres of skilled plant operators and technical supervisors. A typical 10 t/hr Acrylonitrile plant requires approximately 15 to 20 operators per shift for the operation of the process facilities and the support systems. Supervision and overhead costs cover a variety of expenses including the cost of the plant's management (both technical and administrative), technical, and laboratory services as well as corporate charges. Application of the Cost of Processing Method Its realistic to assume that the cost of processing will increase proportionally with inflation of the cost of capital goods.. Given a product yield pattern and the projected prices of products and feed stocks, the gross margin can be calculated and compared with the cost of processing, escalated as necessary, to estimate the economic feasibility of a planned Acrylonitrile manufacturing facility. By product values were calculated on the value of the by-product componentsThe value ranges, do reflect the different yields obtained from different quality feed stocks.

Revenues could shrink by the equivalent of 15 $/t of feedstock or conversely the price of feedstock could rise by 15 $/t without this change having an effect on the stipulated return on investment. Propane would appear to be the least desirable feedstock. All others seem grouped together within a range that borders the estimated accuracy of this analysis so that conclusions can only be drawn on a case to case basis. Extraneous factors not here considered, such as long-term feedstock availability, stable consumer contracts, the energy situation in general, and the economic feasibility of Acrylonitrile Manufacture from different Feedstocks.

Application of the Cost of Processing Method

Its realistic to assume that the cost of processing will increase proportionally with inflation of the cost of capital goods. Given a product yield pattern and the projected prices of products and feed stocks, the gross margin can be calculated and compared with the cost of processing, escalated as necessary, to estimate the economic feasibility of a planned Acrylonitrile manufacturing facility. Based on the projected costs of feed stocks and product values, the gross margin may be compared with the cost of processing feed stocks

ESTIMATION OF PURCHASED EQUIPMENT COST (Hot section)

Different components of purchased equipment cost are

Fluidized Bed Reactor R101 Quencher Absorber T-101 Distillation Column T-101 Distillation Column T-102 Distillation Column T-103 Distillation Column T-104 Reboiler E-1 Reboiler E-2 Reboiler E-3 Reboiler E-4 Condenser E-5 Condenser E-6 Condenser E-7 Condenser E-8

$235100

Rs. 14,106,000

$43200 $23000 $56200 $52500 $63420 $ 58700 $ 8675 $ 8579 $ 9490 $7767 $9100 $8975 $ 9500 $ 8150

Rs. 2,592,000 Rs. 1,380,000 Rs. 3,372,000 Rs. 3, 15,000 Rs.3, 805,200 Rs. 3,522,000 Rs. 520500 Rs. 514740 Rs. 569400 Rs. 466020 Rs. 546000 Rs. 538500 Rs. 570,000 Rs. 489,000

ESTIMATION OF TOTAL CAPITAL INVESTMENT Direct Cost (Rs)

Purchased equipment cost

Rs. 33306360

Purchased equipment installation = 0.47 33306360 = Rs. 15653990 Instrumentation & Process Control = 0.12 33306360 = Rs. 3996763 Piping (installed) = 0.66 33306360 = Rs. 21982200 Building (Including Services) = 0.18 33306360 = Rs. 5995145 Yard improvements = 0.1 33306360 = Rs. 3330636 Service facilities (installed) = 0.7 33306360 = Rs. 23314452 Land = 0.06 33306360 = Rs. 1998382 Total direct plant cost = Rs. 109577928

Indirect Cost
Engg & Supervision = 0.33 33306360 = Rs. 10991100 Construction expenses = 0.41 33306360 = Rs. 13655610 Total Indirect Cost = Rs. 24646710 Total Direct & Indirect Cost = Rs.134224628 Contractors fee = 0.05 134224628 = Rs. 6711232 Contingency = 0.1 134224628 = Rs. 13422463 Fixed Capital Investment = Total direct + indirect cost + contingency + Contractors fee = Rs. 154358322 Total Capital Investment = F.C.I + W.C. Now W.C W.C = 0.15 (T.C.I) = 0.15 (154358322 + W.C) = Rs. 27239704

T.C.I

= 154358322 + 27239704

= Rs. 181598026