Economics

Project evaluation and costing are vital part of the process design as petrochemical plants
are constructed to gain revenue. There are numerous methods in literature to evaluate plant
capital investments and profits [1], [2] and [3]. To estimate capital investment, two ways can be
followed; either equipment costs can be calculated firstly, then related costs are considered
(instrumentation, piping, instrumentation, electrical) to find total capital investment [2]. The other
route suggests the evaluation of overall capital investment by considering purchased equipment
together with all related costs and taking summation of them [3].

Fixed Capital Cost: in the case of ethylene glycol production plant, both routes have been
referred in the individual reports. Not all equipment has been designed in individual reports,
hence, certain approximations were done to obtain rough values. Here, land cost is also included
for plant construction. One hectare is bought in SCIP (Sumgait Chemical Industrial Park) and the
cost for land is 1 million dollars. Following table contains equipment cost including all related costs
for sections of plant.

Table 1. Fixed Capital Cost for Ethylene Glycol Plant

Sections FCC, $
100-200 (EO Production-CO2 Purification) 1.47E+05
300 (EO Purification) 3.38E+07
400 (EG Production) 2.34E+07
500 (EG Purification) 1.14E+07
600 (Air Separation) 3.57E+06
Total: 7.23E+07

Working Capital Cost: this is the cost for plant openings including; initial raw material, catalyst,
product inventories, start-up and certain advertisement costs. Working capital is certain
percentage of fixed capital cost, generally between 10-30%. 15% of FCC is reasonable
assumption for petrochemical industries as a starting point [2] which is recovered at the end.
Hence, WCC will be:

𝑊𝐶𝐶 = 7.68 × 107 × 0.15 = 1.08 × 107 $

Total capital investment can be evaluated taking summation of working, fixed and land costs:

𝑇𝑜𝑡𝑎𝑙 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 = 7.68 × 107 + 1.15 × 107 + 106 = 8.41 × 107 $

Sales Income: the main product is mono-ethylene glycol besides that di- and tri-ethylene glycol
are obtained as valuable products. The plant capacity is 100,000 tones of MEG annually. The
price for MEG is 1200 $/ton. Following table represents products and incomes:

Table 2. Income from Product Sales

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 Product Flow rate, Price, Cost,
ton/yr. $/ton $/yr.
MEG 100000 1058.2 1.06E+08
DEG 9352.5 1124 1.05E+07
TEG 970.5 1250 1.21E+06
Total: 1.18E+08

Operating Expenses (OpEx): this annual cost involves raw material, plant overheads, operating
labor, plant overheads and etc. Operating costs have been calculated following [2] and obtained
data are tabulated as follows:

Table 3. Operating Expenditure

Production cost $/yr.

Miscellaneous 5.06E+05
Utilities 1.38E+07

Maintenance 5.06E+06
Operating Labor 1.44E+06
Laboratory cost 2.88E+05
Fixed Cost

Supervision 2.88E+05
Plant Overheads 7.20E+05
Capital Charges 7.23E+06
Insurance 7.23E+05
Local taxes 1.45E+06
Royalties 7.23E+05
Annual production cost 7.58E+07
Production cost $/kg 758

Annual maintenance cost has been calculated taking 7% of FCC which is generally, between 5-
10%. Labor salaries have been calculated firstly, finding typical number of workers in the plant
(60) [1] and average engineering salary in Azerbaijan (3400 manats/ 2000 $/months) [4]. Hence,
annual labor salary will be:
2000$ 𝑚𝑜𝑛𝑡ℎ𝑠 106 $
𝐿𝑎𝑏𝑜𝑟 𝑐𝑜𝑠𝑡 = 𝑚𝑜𝑛𝑡ℎ𝑠 × 60 × 12 𝑦𝑒𝑎𝑟
= 1.44 × 𝑦𝑒𝑎𝑟

Following table contains utility costs which encompasses whole plant.

Table 4. Utility costs

Utility Amount Unit Price Unit Cost($/yr.)

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 Catalyst 1.49E+04 ton/yr. 0.07805 $/ton 1.17E+03
Electricity 2.13E+06 kWh/yr. 0.0647 $/kWh 1.38E+05
Water 1.18E+07 ton/yr. 0.206 $/ton 2.50E+06
Steam 2.53E+06 ton/yr. 4.4 $/ton 1.11E+07
Total: 1.38E+07

Lastly, another essential point is to calculate raw material costs for ethylene glycol production.
The main raw materials are ethylene and oxygen, however as air separation section (600) is
present, only ethylene feed will be evaluated. The required amount is 5.81E+04 tones per annum
and the price is 750 $/ ton. The cost is 4.36E+07 $/yr. Methane is also needed for ethylene oxide
reactor as a diluent. The needed amount is 2.82E+02 tons per annum and to evaluate its cost,
volume is needed which is 4.29E+05 m3 per year. The price is 0.117 $/m3 and the cost will be
5.02E+04 $/yr.

Cumulative Cash return: after evaluating income and expenses, cumulative cash return for
ethylene glycol plant through its lifetime. The profile is given as follows:

Cumulative Cash return

600

500

400

300

200

100

0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
-100

-200

Figure 1.Cumulative Cash Return Profile

Plant will be constructed in 2020 and will last 3 years and plant is planned to have 22 years of
lifespan. Fixed capital cost will be invested with certain phasing. 50% of it will be invested in the
first year, the 30% in the second year and the remaining 20% will be invested in the third year.
The phasing is done to reduce the effect of the inflation on capital investment. Working capital
cost is also invested in the three consecutive years. The phasing will be 70%, 15% and 15%,
respectively. In a 3-3.5 years period, breakeven period is reached. About 18 years, the plant will
have increasing trend. To the end, the profit will be stabilized and plant will be closed. Working

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capital, salvage and land cost will be recovered. The increased point at the last year is occurred
due to this recovery. The payback time of the plant 7.6 years as after reaching this period,
cumulative cash return becomes positive. Net positive value is calculated as NPV=186,250,472$
by taking 7.35% interest rate in Azerbaijan [6]. IRR (internal rate of return) has been calculated
which represents economical sustainability of the plant as 18% which is generally, between 18-
22%. The other vital economic term, ROI (return on investment) has been calculated as 22%
which should be in the range of 20-30%.

Sensitivity Analysis: using sensitivity analysis economic sustainability of the plant can be
represented, however its basic purpose is to indicate which factor (cost, price) influences plant
economics and how (most, least). The way of representation of sensitivity analysis has been
represented via Tornado diagram. As it can be seen from the plot below, net present value is
sensitive to MEG and Ethylene prices mostly. Maintenance and labor salary have also impacts
on NPV:

Figure 2. Tornado Plot for the Plant

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Decommissioning
To proceed decommissioning process, three basic steps which are called 3D procedures;
Decontamination, Dismantling and Disposal should be followed [5]. Each step will be referred to
understand their procedure.
Decontamination: in this phase, contamination removal is considered in terms of certain
treatment including washing, mechanical, chemical cleaning and heating. Contamination is
referred to denote the undesirable chemical substance present within plant. Both sides (internal
and external) surfaces of the equipment expose to chemicals during process. Hence,
decontamination process is done to meet objectives:
a. To decrease industrial exposure
b. Equipment salvage as much as possible
c. The plant site should be restored for future use which may not be only industrial
There certain types of contaminants; solids (residue), liquids (residual liquids in equipment),
vapors (some chemicals with high volatility), and suspension of liquid and solids (powder, dust)
in air which is called aerosols. Following routes can be performed to clean contaminants:
a. Usage of water and compressed air-standard method
b. Usage of steam, detergents etc.-non-standard methods
Dismantling: the dismantling is the second D of the decommissioning which is the separation of
the parts of equipment. The process should be in a planned way by experienced contractors. The
dismantling process can be followed with stages and after first phase, secondary decontamination
can be done. Then further dismantling of equipment can be continued. The dismantled parts
should be kept as plant can be assembled at other location. Additionally, each equipment should
be packed properly for protection.
Disposal: the complete disposal process of the dismantled plant can be done and also complete
shifting of the plant to another site can be performed. Partial disposal is also possible in which
remaining parts can be salvaged to use in the new site. Disposal of wastes, contaminants or
effluent should be performed under proper environmental regulations.

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References-Economics
Max S.Peters, K. D. R. E. W., 2003. Plant Design and Economics for Chemical Engineers. 5th
ed. New York: Mc.Graw-Hill. [1]
Sinnott, R., 2005. Chemical Engineering Design. 4th ed. Oxford: Elsevier. [2]
Ulrich, G. D., 1984. A Guide to Chemical Engineering Process Design and Economics. 1 ed.
s.l.:s.n. [3]
http://www.salaryexplorer.com/salary-
survey.php?loc=15&loctype=1&job=22&jobtype=1#disabled [4]
http://abhisam.com/downloads/white-papers/how-to-decontaminate-dismantle-docommission-
process-chemical-plants/ [5]

https://tradingeconomics.com/azerbaijan/inflation-cpi [6]