1.

EXECUTIVE SUMMARY

1.1 PROBLEM DEFINITION

As a project engineer who is working in a mutli-billion consultant company and the task given

was to find the potential project as well as do engineering economic and profitability analysis

in this project. At the same time,

1.2 STUDY APPROACH AND METHODS

1.3 MAJOR FINDINGS

1.4 RECOMMENDATIONS

As a project engineer who is working that related based on

1.5 SUMMARY

The project name is “The economic and profitability analysis for the production of butadiene

with a capacity of 62045 tonne/year”. The process of producing butadiene from propylene

involving five different sections which are metathesis, distillation, oxidative hydrogenation,

extractive distillation and recycling of propylene. The main unit operations of the production

of 1,3-Butediene is Oxidative Dehydrogenation. The reason choosing Oxidative

Dehydrogenation as the part of the process to produce 1,3-Butediene via propylene is more

suitable for heat balance (exothermic reaction). It is also not a complicated process that

required complex equipment and simple process thus the equipment cost and utilities cost

would be lower. The project is assigned to find the bare module, total module and

grassroots cost of the project. The bare module, total module and grassroots cost of the

project have different types of equipment used in the project such as heat exchanger,

vessels, compressor with different type of material of construction (MOC) and different cost

of the equipment. The total module cost and grassroots cost to produce 1,3-butadiene are

RM 18, 400, 000 and RM 22,100, 000 respectively. From the discrete non-discounted and
discounted (to year 0) cash flow diagram shows increasing after 2 years operation of

producing 1,3-butadiene. While, the profitability analysis from the table for net present value,

discounted cash flow rate of return, discounted payback period, cumulative cash position,

rate of return on investment data, payback period shows that increase in data per years and

ringgit Malaysia.

2.1 DESCRIPTION OF PROJECT

For the past few decades, world economic situations were in unsatisfactory condition

and thus give a quite major adverse impact to company performance. Target market has

been affected by the world economic situations due to number of customers and businesses

secured for the first half of this year did not meet the company’s target and provide less profit

than expected. So, the purpose of the project is to determine the cost estimation of plant

and the cost for process plant with production butadiene. Butadiene is a primarily used as a

chemical intermediate and as a monomer in the manufacture of polymers. Chemical

intermediates manufactured from butadiene include adiponitrile and chloroprene. Adiponitrile

is used to make nylon fibers while chloroprene makes variety of products such as wet suits,

gaskets and hoses. Polymers made from butadiene include synthetic rubbers such as

styrene-butadiene rubber and poly-butadiene rubber and nitrile rubber. Butadiene also used

in commercial production of butanediol and tetrahyrofuran.

 Butadiene is produced primarily via the steam cracking of saturated hydrocarbons.

Butadiene is extracted from olefin cracker crude streams. Besides, butadiene has two other

commercial methods of productions known as the Houdry process and oxyhydrogenation

where as houdry process involves the dehydrogenation of butane gas to form butadiene,

while oxyhydrogenation coverts 2-butenes to butadiene. All three processes require readily

butane molecules and also quite expensive.

More recently, methods for the production of butadiene from 2-butene and 1-butene

by oxidative dehydrogenation process have been perfected. Butadiene is produced from

propylene where propylene undergoes metathesis process forming 2-butene, 1-butene and

other by-products. Both 2-butene and 1-butene then undergoes oxidative hydrogenation

where it converts butenes to butadiene.

2.2 OBJECTIVE OF THE STUDY

 To determine the cost estimation of plant and the cost for process

plant with production of butadiene.

 To study the profit for the company by using the CAPCOST system.

2.3 APPROACHES

Oxidative dehydrogenation is a well-known industrial process, often used for

converting 2-butenes to 1, 3-butadiene. The reaction mechanism works by utilizing

oxygen to facilitate the removal of two hydrogen atoms from 2-butene in order to

form an additional double bond, resulting in a molecule of 1,3-butadiene and a

molecule of water. This process has a large advantage over the non-oxidative

process in that it achieves 100% conversion of 2-butenes and high yields of 1,3-

butadiene, all at relatively lower temperature. In order to achieve these high

conversions and yields, a catalyst must be used to facilitate the reaction. A variety of

catalysts will work for this, with the traditional option being a ferrite catalyst, and over

recent years a number of catalysts have been developed to achieve even higher

yields of 1,3-butadiene. Two primary reactions occur inside this reactor, one being

the desired oxidative dehydrogenation of 2-butenes to 1,3-butadiene, and the

second being the undesired combustion reaction of 2-butenes to produce CO2 and

water. The stoichiometry of these reactions is as below:

1. Oxidative dehydrogenation of 2-butenes (cis and trans) to 1,3-butadiene:

a. C4H8-2 + 0.5 O2 C4H6 + H2O

2. Combustion of 2-butenes:

a. C4H8-2 + 6 O2 4 CO2 + H2O

BOUNDARY CONDITION

3.0 PROCESS FLOW DIAGRAM

 Figure 1.0: Overall Process of 1, 3 Butadiene

The process of producing butadiene through converting propylene is composed of

five different sections. First propylene feed undergoes metathesis which is the first section of

the process where as to produce cis-2-butene, trans-2-butene, ethylene, and hexane. The

metathesis also considers isomerisation of both 2-butene and 1-butene while remaining

propylene is recycled. Products from metathesis are then fed to the distillation which is the

second section where butenes are separated in oxidative dehydrogenation as the third

section. A reactor is fed with the effluent butane from distillation and fresh air where the

reactor converts the butenes into 1, 3-butadiene, the final product of the process. The

hydrogenation also contains combustion reaction with the products of CO2, O2, N2, and H2O

along with the butadiene and butenes. These by products are sent to a column where the

non-condensable vapours are vented. As a final part of the process, using n-methyl-2-

pyrrolidone as the solvent to remove 1,3-butadiene from the remaining impurities.

3.1 PROCESS DESCRIPTION

Steam in

S-305 S-306
S-304

E-301
C-301
Steam out

S-303 V-301-A
S-307

Steam in

V-301- B
Steam out
E-303
S-302 S-301

V-301
 Figure 1.1: Diagram of the Oxidative Dehydrogenation Process

Figure above shows that the system consists of heat exchangers, compressor, and

reactor vessels. In this design, purified butane mixture leaves as the distillate in stream S-

208. The stream has been condensed and cooled to a liquid at 143˚F and 100 psia, and

must be heated and vapourized prior to entrance to the oxidative dehydrogenation reactor,

that runs at 752˚F and 44 psia. To meet this requirement, stream is heated in a shell-and-

tube heat exchanger, H-301, which uses the outlet stream from the reactor stream S-306 as

the hot fluid and stream and stream S-208 as the cold fluid. This heats the stream to

449.2˚F. Pressure is relieved from the stream using a valve, which reduce pressure from 100

psia to reactor operating pressure of 44 psia. The stream is then heated to its final

temperature of 752˚F and 44 psia and is fed to packed bed reactor.

The oxidative dehydrogenation reaction is carried out in a fixed-bed shell-and-tube

packed bed reactor operating at 752 ℉ and 44 psia. The reactor is carried out in a single

shell, though a second shell is purchased for the purpose of catalyst regeneration and

maintenance. The reaction uses a multimetal oxide catalyst to achieve optimal conversion.

In this case, the chosen catalyst, and the reaction that occurs is highly exothermic with four

primary reactions occurring simultaneously.

The combustion reaction in which either cis- or trans-2-butene reacts with oxygen to
form carbon dioxide and water is an undesired side reaction, and while the catalyst yields

greater selectivity for the primary reaction in which 1,3-butadiene is produced, it cannot

entirely eliminate the side reactions. The reactor conditions of 752 ℉ and 44 psia were

selected in order to give this optimal selectivity for 1,3-butadiene production. The oxidative

dehydrogenation reaction is maintained at the isothermal operating condition of 752 ℉ by

using a cooling fluid in the shell-side of the reactor.

Heat Exchanger

E-301

Heat Exchanger 301 is a single-pass shell and tube heat exchanger, which receives

compressed air on the tube side that is heated from 372 F to 752F. On the shell side, steam

enters at 50 psig. The tube is made of carbon steel, and the shell made of low alloy steel. On

the hot side, the heat exchanger cools and condenses. The tube pitch is 1.25 inches, tube

length 20 ft and effective heat transfer area is 250 square feet.

E-302

Heat Exchanger 302 is a single-pass shell and tube heat exchanger, which on the tube side

receives stream S-307 at 752 F and releases S-301 at 449 F. The tube is made of low alloy

steel and the shell of carbon steel. The shell side receives the bottoms from distillation at

143 F in S208, and gets heated to 485 F before entering F-401 via S-308. The tube pitch is

1.25 inches, tube length 20 ft and the effective heat transfer area is 250 square feet.

E-303

Heat Exchanger 302 is a single-pass shell and tube heat exchanger, which on the tube side

receives stream S-302, meanwhile shell receives steam at 50 psia. The tube and shell side

is made of low alloy steel. The shell side receives the feed to oxydehydrogenation 445 F in

S-208, and gets heated to 485 F before entering F-401 via S-308. The tube pitch is 1.25

inches, tube length 20 ft, effective heat transfer area 110 square feet.
Vessel

V-301

V-301 is split into two reactors, V-301-A and V-301-B. These are packed bed reactors that

uses compressed air to convert 2-butene to 1,3-butadiene and water. Streams enter the

reactor at 44 psia and 752 F and leaves at the same temperature and pressure. The flow

rate leaving the reactor sets is 52,120 lb/hr. The height of the reactor is 86ft and the

diameter 20ft. The pressure drop calculated by the Ergun Equation was very low and thus

neglected. The purchase and bare module costs of each reactor are $442,900 and $

1,842,000, respectively

Compressor

C-301

The material of construction of the compressor is carbon steel. It is an axial compressor that

compressed air before it is fed to the oxidative dehydrogenation reactor, R-301. The

pressure change across the compressor is 35psia. The brake power required for the

compressor is 945hp.

3.2 THE MAIN UNIT OPERATIONS OF THE PRODUCTION OF 1,3-BUTEDIENE.

Figure 1.2: The Oxidative Dehydrogenation Process to Produce 1,3-Butediene from

Propylene.

The focus of this study is to make 1,3-butediene via propylene which involves a process

known as oxidative dehydrogenation. At 752 ℉ and 44 psia, the oxidative dehydrogenation

reaction is carried out in a fixed-bed shell-and-tube packed bed reactor to operate. The

reactor is carried out in a single shell, and while a second shell is obtain for the purpose to
catalyst regeneration and maintenance. The catalyst uses is multimetal oxide catalyst to

achieve optimal conversion. In this case, the catalyst that has chosen with the formula

Mo12BiFe0.1Ni8ZrCr3K0.2O53, and the reaction is highly exothermic with four primary reactions

occurring simultaneously. Fraction conversion is given on a molar basis (Nestlerode et al,

2015).

Table 1.2: The reaction specification for the oxidative dehydrogenation process.

Conversion

C4H8-2 (cis) (butene) + 0.5 O2 C4H6-4 (butediene) + H2O 95% ∆H= -53,881

C4H8-3 (trans) (butene) + 0.5 O2 C4H6-4 (butediene) + H2O 95% ∆H= -53,335.5

C4H8-2 (cis) (butene) + 6 O2 4 CO2 + H2O 5% ∆H= -1,089,600

C4H8-3 (trans) (butene) + 6 O2 4 CO2 + H2O 5% ∆H= -1,088,050

The combustion reaction for both cis- or trans-2-butene reacts with oxygen to produce

carbon dioxide and water is an undesired reaction, and while the reaction which has greater

catalyst yields selectivity will produced 1,3-butadiene. At 752 ℉ and 44 psia were the better

selection for reactor condition in order to produce 1,3-butadiene. The cooling fluid in the

shell-side of the reactor is used to maintain the isothermal operating condition at 752 ℉. The

liquid heat transfer that has chosen in this oxidative dehydrogenation was potassium nitrate

due to its ability to handle high heats up to 914 ℉.

The effluent that leaves the reactor must be at 752 ℉ and 44 psia, and must be cooled

before being purified in the extractive distillation (Nestlerode et al, 2015).

3.3 POSSIBLE ALTERNATIVES

There are several possible alternatives processes to produce butadiene. But the three main

processes are steam cracking, catalytic dehydrogenation and oxidative dehydrogenation. All
the processes produce the same product which is butadiene, however the mechanisms and

conditions are different.

3.3.1 Steam Cracking

Figure 1.3.1: Production of Butadiene by Stream Cracking

Basically, in steam cracking, over 95% of butadiene is produced as a by-product of ethylene

production. The production is about 0.5 - 4wt% of 1,3-butadiene which depends on the

feedstock type (Harrie, 1994) The process begins with the indicated feedstocks which are

ethane, butane, propane, naphtha and gas oil are fed into a pyrolysis furnace where there is

steam. The steam is heated to temperature range between 790oC-830oC. At this range of

temperature, the feedstocks crack in order to produce hydrogen, butadiene, propylene,

ethylene, toluene and other co-products. Then, the pyrolysis reaction is quenched where the

rest of plant separates the desired products into streams that encounter the several product

specifications. The process contain compression, process gas drying, distillation,

hydrogenation (of acetylenes), and heat transfer. The quantity of butadiene produced is

depends on the hydrocarbon used at the feed.

3.3.2 Catalytic dehydrogenation (the Houdry Process)

Figure 1.3.2: Production of Butadiene by Catalytic Dehydrogenation

There are two steps process in catalytic dehydrogenation which is also known as Houdry

Process. The two step process have a higher yield and the by-products are smiliar in both

reactions. Firstly, going from n-butanes to n-butenes and then to butadiene. Those steps are

endothermic reaction. The temperature of catalyst bed decreases and the coke is deposited

as the endothermic reaction proceeds. The first reactor is on-line, the second is being

regenerated and the third one is being purged prior to regeneration. In the Houdry process,

n-butane is dehydrogenated over catalyst which is chromium or alumina. Basically, the

normal condition for the reactor to operate is at 12-15 centimeters Hg absolute pressure and

approximately 600oC-680oC. Next, due to the catalyst deactivation the run duration is

restricted to 15 minutes, which the regeneration process is required (Francis & Gilbert,

1976). However, the reactor has to be purged before the regeneration is started. Then, the

butene is fed again and new cycle starts.

The effluent from the reactors is directly goes to the quench tower as it is need to be cooled.

Then the stream is compressed before proceed to the inlet of absorber or stripper system. It
is a process where the C4 concentrate is produced which need to be fed to the extraction

system for the recovery of butadiene.

3.3.3 Oxidative dehydrogenation

Figure 1.3.3 : Production of Butadiene by Oxidative Hydrogenation

Oxidative dehydrogenation is a process that is often used in converting n-butenes to

butadiene. The reaction mechanism works by utilizing the oxygen to remove two hydrogen

atoms from n-butenes and form double bond, which resulting to butadiene and water

molecule. The process begins with a mixture of steam, air and n-butenes is passed through

the catalyst bed in the reactor which normally at low pressure and approximately 500oC-

600oC. Oxidative dehydrogenation is a continuous process. It is carried out in a fixed bed

shell and tube packed bed reactor with a temperature and pressure operates at 400oC and
44 psia respectively. This reactor conditions to give optimal selectivity for 1,3-butadiene

production. When the effluent leaves the reactor, it must be cooled before being purified in

the extractive distillation. The stream is used as the hot fluid in countercurrent shell and tube

heat exchanger which also used to heat up the reactor feed. With that, the reactor effluent is

cooled to 234oC and the pressure raised to 300 psia. Lastly, the reactor effluent is fed to the

extractive distillation part of the process.

The advantages of oxidative dehydrogenation is that the oxygen in the vapor phase

constrains the accumulation of carbon on the catalyst so that the duration are measured in

months rather than in minutes or hours (John & Howard, 1974).

3.3.4 Finalize process

Among the three alternatives processes, oxidative dehydrogenation is chose for the

butadiene production. The reason is because oxidative dehydrogenation is more suitable for

heat balance, for although the conventional dehydrogenation is endothermic while oxidative

dehydrogenation is exothermic reaction. It is also not a complicated process that required

complex equipment. When it is a simple process thus the equipment cost and utilities cost

would be lower.

3.4 PROCESS TECHNICAL INFORMATION

Table 1: Mass flowrate information of oxidative hydrogenation process (Nestlerode, Ngo &

Haidermota, 2015)
 Inlets Outlets

Component Flow S-208 S-306 S-307

(lb/hr)

Tran-Butene 10025

Cis-Butene 7032

1:3 Butadiene 15622

Carbon Dioxide 2676

Oxygen 7566 27

H2O 6298

Total mass 17057 7566 24623

flowrate

Table 2: Operating temperature and pressure of oxidative hydrogenation process stream

(Nestlerode et al, 2015)

Stream Temperature (OF) Pressure (Psia)

S-208 143 100

S-301 449.2 100

S-302 449.2 44

S-303 752 44

S-304 68 15

S-305 372 44

S-306 752 44

S-307 752 44

S-308 485.3 300

 535 lb/hr Propylene, 10025 lb/hr Tran-Butene, 7032 lb/hr Cis-Butene, 1247 lb/hr 1-

Butene, 1 lb/hr Trans-C6, 208 lb/hr Cis-C5 and 633 lb/hr Trans-C5 with total mass flowrate

19681 lbs/hr are in the S-208 stream. The stream (S-208) was condensed and cooled from

240OF and 103 psia to a liquid at 143OF and 100 Psia. The compressed air mixture (7566

lb/hr Oxygen and 24919 lb/hr Nitrogen) were heated from 372OF to 752OF in a single-pass

shell and tube heat exchanger (H-301). The compressed air mixture at 752OF and 44 psia in

S-307 entered the tube side of H-302 and heated the liquid stream in S-208 from 143OF and

100 psia to 449.2OF and 100 psia at S-301. The pressure is relieved from the stream using

V-301,that reduce the operating pressure from 100 psia to 44 psia. The stream (S-302) is

further heated in a shell-and-tube heat exchanger, H-303 from 449.2OF to 792OF. The

stream (S-303) and compressed air stream (S-306) entered the fixed-bed shell and tube

packed bed reactor operating at 752OF and 44 psia. The oxidative dehydrogenation occurred

in the fixed-bed shell and tube packed bed reactor. The reactor effluent leaves at 752OF and

44 psia, the stream is cooled in a shell-and-tube heat exchanger (H-302) from 752OF to

485.3OF and pressure is raises to 300 psia. The effluent consists of 535 lb/hr Propylene,

1247 lb/hr 1-Butene, 15622 1:3 Butadiene, 2676 lb/hr Carbon Dioxide, 27 lb/hr Oxygen,

24919 lb/hr Nitrogen, 6298 lb/hr water, 1 Trans-C6, 208 lb/hr Cis-C5 and 633 lb/hr Trans-C5

(Nestlerode et al, 2015).

4.0 DETERMINATION OF BARE MODULE, TOTAL MODULE AND GRASSROOTS COST

FOR THE PROJECT.

4.1 Heat Exchanger

4.1.1 E-301

Type of heat exchanger for E-301 is fixed shell and tube heat exchanger. The most

suitable material construction (MOC) for tube is carbon steel in term of cost since the inlet of

the tube is compressed air and suitable material of construction for shell is low alloy steel

since the inlet of the shell is steam that can corrode the shell of heat exchanger. Wet steam

accelerated corrosion induced by flow due to the breakdown of a protective oxide film from

the surface of the carbon steel (Tanarro & Gonzalez). In capcost, there is no combination of

MOC carbon steel for tube and low alloy steel. Hence, it is decided to choose stainless

steel for both tube and shell since compressed air and steam both have the potential to

initiate corrosion. From Task 1, the maximum operating pressure (tube side) is 29.30

psig, maximum operating (shell side) is 50 psig, heat transfer area is 250 square feet

and single pass heat exchanger.

Figure 2.1.1 : E-301 equipment summary

4.1.2 E-302

Type of heat exchanger for E-302 is fixed shell and tube heat exchanger. Based on Task

1, the MOC for tube is low alloy steel and shell is carbon steel. The tube side received S-

307, the component flow of S-307 are 1-butene, 1:3 Butadiene, Carbon Dioxide, Oxygen,
Nitrogen, H2O, Trans-C6, Cis-C5 and Trans-C5 at 752F (400°C). The shell side received S-

208, the component flow of S-207 are 1 butene and 2 butene at 147F (64°C). A mixed

stream comprised of CO2, O2 and N2 at high temperature may lead to corrosion

(Sharobem,2016). In capcost, the suitable MOC for tube is stainless steel and for shell

is carbon steel. From Task 1, the maximum operating pressure (tube side) is 29.30

psig, maximum operating (shell side) is 85.30 psig, heat transfer area is 250 square

feet and single pass heat exchanger.

Figure 2.1.2 : E-302 equipment summary

4.1.3 E-303

Type of heat exchanger for E-303 is fixed shell and tube heat exchanger. Based on task 1,

the suitable MOC for shell and tube is low alloy steel. The tube side received S-302 at

449.2F (232°C). The shell side received steam to increased the S-302 temperature from

449.2F to 752F which is operating temperature in oxidative hydrogenation reactor vessel. In

capcost, the MOC choose for tube and shell is stainless steel. From Task 1, the

maximum operating pressure (tube side) is 29.30 psig, maximum operating (shell
side) is 35.30 psig, heat transfer area is 110 square feet and single pass heat

exchanger.

Figure 2.1.3: E-303 equipment summary

4.2 Vessels (V-301)

Type of vessel for V-301-A and V-301-B is packed bed reactor. The material of construction

is chose to be stainless steel since oxidative hydrogenation is an exothermic reaction. The

orientation of the vessel is vertical. The diameter of vessel is 20ft and height is 86ft and the

maximum pressure is 29.30 psig.

 Figure 2.2.1: V-301 equipment summary

4.3 Compressor

Based on Task 1, the type of compressor for C-301 is an axial type of compressor. The

MOC is carbon steel since only involve compression of air at 68F (20C) and 15 psia. The

fluid power required for the compressor is 945hp.

Figure 2.3.1: C-301 equipment summary

4.4 Bare Module Cost of Equipment

Table 2.4.1: Bare Module Cost for compressor, heat exchangers and vessels

Based on CapCost Equipment Summary, the purchase equipment cost for compressor is

RM326,000 and the bare module cost is RM1,250,000. For heat exchanger with MOC

stainless steel for both shell and tube, the purchased equipment cost is RM68,400.

Meanwhile the purchase equipment cost for heat exchanger with MOC carbon steel for tube

and stainless steel for shell is about RM 45, 400. It shows that heat exchanger with MOC of

both shell and tube with stainless steel have a higher price. For both shell and tube with

MOC stainless steel but different area (square meters), the price of heat exchanger with

smaller surface area is cheaper than the higher surface area. For vessels, V-301 and V-302

the purchase equipment cost are RM2,930,000. The MOC, height and diameter of V-301 is

the same with V-302 since the oxidative hydrogenation process used V-302 when the V-301

is in a maintenance.
4.5 Total Module Cost and Grass Roots Cost

Table 2.4.2: Total Module Cost and Grass Roots Cost for Production of 1,3 Butadiene

Name Total Module Cost Grass Roots Cost

C-301 RM 1,470,000 RM 2,100,000

E-301 RM 182,072 RM 223,000

E-302 RM 137,000 RM 178,000

E-303 RM 170,000 RM 208,000

V-301 RM 8,200,000 RM 9,700,000

V-302 RM 8,200,000 RM 9,700,000

Totals $ 18,400,000 $ 22,100,000

5.0 ESTIMATION OF CAPITAL COST

Table 3.1: Cost of raw material

Raw Material Cost ($/kg) Material flow (lb/hr)

2-Cis-Butene 5 (Millet, 2016) 7032 (Nestlerode, 2015)

2-Trans-Butene 2 (Millet, 2016) 10025 (Nestlerode, 2015)

Oxygen 0.06 (Hardie, 2014) 7566 (Nestlerode, 2015)

Table 3.2: Selling price of product

Product Cost ($/kg) Material flow (lb/hr)

1, 3 Butadiene 5.5 15615 (Nestlerode, 2015)

 Table 3.3 : Cost of By-Product

By-Product Cost ($/kg) Material flow (lb/hr)

H2O 0.04 6298 (Nestlerode, 2015)

CO2 0.04 2676 (Nestlerode, 2015)

Project details

Land cost = $10,000,000

Fixed capital investment: 70% at end of year 1, 30% at end of year 2

Start-up at end of year 2

Tax rate = 40%

Depreciation method = Current MACRS over 5 years

Length of time over which profitability is to be assessed = 10 years after start up

Internal rate of return = 12% p.a.

Salvage value = 10% from the initial value

CEPCI value for year 2019 (assumed) =605

Grassroot Cost = $22,100,000

Total Modul Cost = $18,400,000

Revenue Cost = $324,188,898

Cost of Raw Material = $ 210,120,104

Input Utility Cost = $ 6,407,940 (Nestlerode, 2015)

 Table 3.4 : Utilities cost

Utility Type Equipment ID Cost ($/hr)

Electricity Compressor C-301 $42.26

Steam Heat Exchanger E-301 $31.63

Heat Exchanger E-303 $657.61

Total Annual Cost $ 6, 407,940

Input Working Capital = $9,329,279 (Nestlerode, 2015)

Table 3.4: Annual Cost of Raw Material, Product and Waste Material

Material Name Classification Price ($/kg) Flowrate Annual Cost

(kg/h)

2-Cis-Butene Raw Material $ 5.00 3189.66 RM 132,721,836

2-Trans-Butene Raw Material $ 2.00 4547.26 RM 75,684,662

Oxygen Raw Material $ 0.06 3431.88 RM 1,713,606

1,3 Butadiene Product $ (5.50) 7082.85 RM (324,188,898)

Water Non- $ 0.04 2856.73 RM 855,852

Hazardous

Waste

Carbon Dioxide Non- $ 0.04 1213.81 RM 363,649

Hazardous

Waste
6.0 ENGINEERING ECONOMIC ANALYSIS

6.1 Discrete non-discounted Cash Flow Diagram (MACRS over 5 years)

6.2 Determination of after-tax profit for each year

After tax profit = Revenue – Expenses – Income Tax = (R-COMd-dk)*(1-t)

Year Investment dk R COMd (R-COMd-

dk)*(1-t)
0 10.00
1 12.86
2 14.84
3 3.67 324.19 273.54 28.19
4 5.88 324.19 273.54 26.86
5 3.53 324.19 273.54 28.27
6 2.11 324.19 273.54 29.13
7 2.11 324.19 273.54 29.13
8 1.07 324.19 273.54 29.75
9 324.19 273.54 30.39
10 324.19 273.54 30.39
11 324.19 273.54 30.39
12 324.19 273.54 31.49

6.3 Determination of after-tax cash flow for each year

After tax cash flow = Net profit + Depreciation = (R-COMd-dk)*(1-t)+dk

Year Investment dk FCIL- R COMd (R-COMd- Cash Flow Cumulative

Sdk dk)*(1- (Non- Cash Flow
t)+dk discounted) (Non-
discounted)
0 10.00 18.37 (10.00) (10.00)
1 12.86 18.37 (12.86) (22.86)
2 14.84 18.37 (14.84) (37.70)
3 3.67 14.70 324.19 273.54 31.86 31.86 (5.84)
4 5.88 8.82 324.19 273.54 32.74 32.74 26.90
5 3.53 5.29 324.19 273.54 31.80 31.80 58.71
6 2.11 3.18 324.19 273.54 31.24 31.24 89.94
7 2.11 1.07 324.19 273.54 31.24 31.24 121.18
8 1.07 - 324.19 273.54 30.82 30.82 152.00
9 - 324.19 273.54 30.39 30.39 182.39
10 - 324.19 273.54 30.39 30.39 212.78
11 - 324.19 273.54 30.39 30.39 243.17
12 - 324.19 273.54 31.49 50.82 293.99
6.3 Discrete discounted (to year 0) cash flow diagram

6.4 Cumulative discounted (to year 0) cash flow diagram

6.5 Net present value (year 0) of this process

The cumulative cash position of non-discounted cash flow for MACRS method is

293.99 million. The pay-back period of non-discounted cash flow is 0.6 years with rate of

return on investment of 160.04%. The after-tax profit for non-discounted cash flow increased

from year 3 until year 12. The highest after-tax profit is after 12 year of the plant operation

which is 31.49 million. The after-tax cash flow for non-discounted cash flow decreased from

year 4 until year 11 and increased back in year 12. The highest after-tax cash flow is after 12

year of the plant operation which is 31.49 million. The payback period is the amount of time

for a project to break even in cash collections using nominal dollars. The project takes only 6

months to break even. Return of investment is a net gain from an investment. The rate of

return on investment (ROROI) for non-discounted cash flow diagram have a high

percentage, 160.04%. Higher ROROI is favourable since it portrays profitable project.

The net present values (NPV) for discounted to year 0 cash flow is 113.15 million.

The discounted payback period is 0.7 years with discounted cash flow rate of return of

54.04%. Net present value is the difference between the present value of cash inflows and

the present value of cash outflows over a period of time. A positive net present value shows

the projected earnings generated from a project and investment. The NPV for discounted to

year 0 cash flow is a positive value, hence the project is profitable. A discounted payback

period gives the number of years it takes to break even from undertaking the initial

expenditure, by discounting future cash flows and recognizing the time value of money. The

production of the 1,3 Butadiene takes only 7 months to break even and it shows that the
project discount rate is at 54.04% when NPV is equal to zero. When the discount rate is

further increased the NPV value will be a negative value.

To conclude, the cash flow diagram with discount factor have a low net present value

(113.15 million) than cumulative cash position from non-discounted cash flow diagram

(293.99 million) and have a longer discounted payback period (0.7 years) than payback

period from non-discounted cash flow diagram (0.6 years). This is due to non-discounted

cash flow diagram does not considered on time value of money.

7.0 PROFITABILITY ANALYSIS

7.1 Net Present Value

By using the Monte-Carlo method, the profitability of the project can be analysed based on

the profitability curve. As for the net present value (NPV) data, the range is between -56.6 to

249.1. The median NPV is about $95 million, and only about 17% of the values calculated

lies above $150 million. It can be seen that there is about a 2% chance that the project will

not be profitable. Basically, the NPV of a project is influenced by the level of fixed capital

investment therefore the choice with the least negative NPV will be the best choice. This is

because the present value of cash inflows is greater than the cash outflows, hence the NPV

is declared to be positive and the investment is considered as acceptable.

7.2 Discounted Cash Flow Rate of Return

The DCFROR represents the highest after-tax interest or discount rate at which the project

can just break even. The project can be considered as profitable if the DCFROR is greater

than the internal discount rate. Based on the profitability curve shown in figure above, the

range of DCFROR is between 0 to 0.87 which means it is less than 90%. When comparing

alternatives investment, it is preferred not to choose a project that have a highest DCFROR.

However, in this case, the higher the DCFROR, the more attractive the individual

investment.
7.3 Discounted Payback Period

Discounted payback period is used to evaluate the profitability and feasibility of a project.

from the curve obtained, the result for low DPBP is 0.4 years while for high DBPB is 12.3

years. As can be seen, the graph is rapidly increase from 0.4 until 1.8 and start to slow from

second years until 12.3 years. This shows that the discounted payback period of the project

is low so it is profitable for the project.

7.4 Cumulative Cash Position

By using the Monte-Carlo simulation, the result for cumulative cash position based on the

profitability curve is between $-82.7 to $577.17. From the graph, we can see that the project

make a profit most of the time. So, about 2% of the CCP values less than $0 while 94% of

the CCP values more than $100 million.

7.5 Rate of Return on Investment Data

The rate of return of investment (ROROI) is used to evaluate the efficiency of an investment.

The ROROI data obtained from the Monte-Carlo method have huge values. The range of

ROROI is between -44% and 350%. From the graph shows above, the highest possible

ROROI data for the project is 350%. The higher ROROI, the more favourable because it can

give more profit to the project.

7.6 Payback Period

Payback period is defined as the time required to recover the fixed capital investment after

start-up. The range of DPBP obtained from the simulation is between 0.3 years and 9.7

years. However, the curve shows increasing rapidly at 0 until 1.7 years and start to slow

from 2 years until 9.7 years. To be conclude, the shorter the payback period, the more

profitable the project.

8.0 CONCLUSION

The objective of the project is to determine cost estimation of plant and the cost for

process plan with production of butadiene and study the profit for the company by using the

CAPCOST software. For this production of butadiene, the total module cost obtained is

$18,400,000 and the grassroots cost is $ 22,100,000. Next, the cost of operating labor, COL

is $ 869,830, the cost of utilities, CUT is $ 6,407,940 and the cost of manufacturing, COMd is

273.54 million. This production of butadiene contribute a positive net present value of 113.15

million meaning a positive net present value indicates that the projected earnings generated

by a project or investment exceed the anticipated costs. Moreover, the discounted cash flow

rate of return (DCFROR) obtained is 54.04%, giving this project a good opportunity to be

successful. The value for discounted payback period (DPBP) that obtained in this project is

0.7, indicate that the project does not take too much of years to take a break from

undertaking the initial expenditure. Besides, the cumulative cash position that was obtained

from this project is 293.99 million proves that this project has financial strength and liquidity

giving profit for the company. The rate of return investment (ROROI) that was obtained for

this project is 160.04% means that the company will gain the investment that was the

income received plus capital gains realized on the sale of investment. The recommendations

to improve the production and maximize profit are the catalyst used in oxidative

dehydrogenation where it consists of multimetal oxide. This one of the newest catalyst

developed for the oxidative dehydrogenation of 2-butenes to 1,3-butadiene and highly

selective. Thus, it is recommended washing the catalyst with steam until carbon dioxide and

carbon monoxide are present in only trace amounts. This ensures improved efficiency in

time required for regeneration. In addtition, in order to sustain production during catalyst

regeneration and replacement periods, a second reactor vessel must be purchased, so that

production and be rotated between vessels whenever one needs maintenance. Besides that,

establish a preventive maintenance to promote continuous system operation. As preventive

maintenance is a practice of replacing components or subsystems before failure. Since cost

is mainly factor in scheduling of preventive maintenance. Moreover, maintenance also can

be done by corrective maintenance. This includes activities that generated from planned

inspections, routine operational request, and routine service requirements. This approach is

most cost-effective way to perform maintenance. To sum up, the production of 1,3-butadiene

based on current economy gives a high profit to the company.

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