CBE 160 Final Project Report

Design and Cost Analysis of a Methanol

Production Plant
Along the Gulf Coast

Team 3
Daniel Du, Apurva Pradhan, Sonal Rangnekar

Date of Submission: May 3rd, 2016

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Executive Summary:
This report describes the design of a methanol plant that produces 1000 metric tons per

day of commercial grade methanol. Commercial grade is defined here as 99.85% purity

with a maximum of 500 PPM water content. This plant was designed with three feedstocks:

sour natural gas, water, and carbon dioxide. The final process was split into four major

sections: acid gas removal (AGR), steam methane reformation (SMR), methanol

synthesis reactors, and product purification. The overall capital cost is $180M. The

production costs amount to $65M yearly before inflation, with annual revenue at $84M.

Revenue is primarily generated from sale of the methanol product, although 2% of

revenue is attributed to selling commercial grade sulfur that is produced by an auxiliary

Claus plant. Over a 30 year period, the rate of return is 6.5%. A sensitivity analysis shows

that the parts of the process that affect the economic stability the most are the sales prices

of our final product and the price of natural gas. It is recommended that steps be taken to

mitigate drastic changes such as an agreement to a seller of natural gas or consumer of

methanol in order to avoid major sudden deviations in prices.

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Table of Contents:
Introduction……………………………………………………………………………………4

Design Basis………………………………………………………………………………….5

Alternatives and Options Considered……………………………………………………...5

Block Flow Diagram………………………………………………………………………….8

Process Block Description…………………………………………………………………..9

Acid Gas Removal…………………………………………………………………...9

Steam Methane Reformation……………………………………………………….10

Methanol Synthesis………………………………………………………………….11

Purification……………………………………………………………………………11

Usage of Unreacted Synthesis Gas……………………………………………….12

Critical Control Points……………………………………………………………….12

Unit Sizing……………………………………………………………………………12

Capital Expenses……………………………………………………………………………13

Operating Expenses………………………………………………………………………...14

Financial Analysis……………………………………………………………………………17

Conclusions and Recommendations………………………………………………………19

References……………………………………………………………………………………20

Appendices…………………………………………………………………………………...21

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Introduction:
Methanol is a key feedstock material for synthesizing a variety of chemicals, such as

formaldehyde, acetic acid, and dimethyl ether. Methanol can also be used as a high

performance fuel and as an octane booster in gasoline fuel. In 2014, the global demand

for methanol was 65 million metric tons, and that number has been projected to increase

to over 90 million metric tons by 2020.1 We aim to enter this lucrative market by setting

up a small methanol production plant in the United States Gulf Coast. The following report

describes a design for a plant that can produce 1000 mt/day of methanol with a purity of

at least 99.85 mol-% and containing at most 0.05 mol-% water.

This plant has been designed in ASPEN, and it contains four primary subprocess

units, three feedstock streams, and two product streams. The key feedstocks for our

methanol process are methane, carbon dioxide, and steam. The methane is provided via

a pipeline of crude natural gas. Acid gas removal (AGR) is first performed to remove H 2S

from the natural gas to prevent degradation of reaction catalysts. The H 2S gas is sent to

a Claus plant to produce sulfur as a saleable byproduct. The purified natural gas and

steam undergo steam methane reformation (SMR) to produce carbon monoxide and

hydrogen gas. Carbon dioxide, the third feedstock, is added to this stream before

methanol synthesis. The final step is purification of the product methanol.

In addition to establishing the process flow diagram, an economic analysis was

performed. We weighed capital costs, such as the prices of key equipment, installment

costs, contingency, and production costs, including employee salaries, feedstock costs,

and utilities costs, against the revenue generated from selling methanol and sulfur. Rate

of return was determined from these economic analyses.

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Design Basis:
The natural gas concentration is brought to the factory by pipeline at 25 ⁰C and 1000 psi.

It contains, by molar concentration, 87% methane, 5% nitrogen, 4.2% ethane, 2.6% H 2S,

1% CO2, 0.2% propane, and 0.05% water. It is assumed that the water for the SMR

furnace and the CO2 for the methanol synthesis reactors come in as pure compounds.

The product methanol must exit at a rate of 1000 metric tons per day with a purity of at

least 99.85%. The maximum water concentration in the product is 500 PPM.

The foremost assumption in this project was that the simulations done in ASPEN

were close to or near 100% accurate in our initial design of this production plant. Our next

assumption was the absence of pressure drop from pipelines and units that incorporated

no major pressure losses (e.g. columns, condensers, heaters, and coolers) in the overall

simulation. We assumed that the SMR reactor reached equilibrium so long as heat was

supplied to keep the reaction mixture at 850⁰C. We assumed that the feedstocks would

not vary in composition and that our overall process would be perfectly controlled and not

deviate from steady-state at all during operation. Our final set of assumptions was that

there would be no major unexpected deviations from market conditions during our

financial analysis and that the production quantity we would bring to the market would not

drastically change the current economy.

Alternatives and Options Considered:

A large amount of consideration was put into the removal of H2S from natural gas in order

to prevent the poisoning of the catalysts being used in both SMR and methanol synthesis.

First attempts at simulating the acid gas removal process utilized Selexol ®, commonly

known as DEPG, as the solvent. We encountered difficulties in simulating this compound

in ASPEN and, upon further review, realized that Rectisol ® was a better option due to its

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main component being methanol. The reason why DEPG was first considered was that it

operated best at near room temperature, which allowed us to remove any need for

refrigeration costs.

Nitrogen was initially considered as the stripping solvent. However, our group was

advised and agreed that the easier option was to simply remove saturated methanol from

the system. This allowed for the cost of necessary nitrogen feedstock to be removed from

production costs.

Rectisol® operates best between -20⁰C and -40⁰C. We initially considered simply

having our AGR process operate at -40 ⁰C, but in order to mitigate refrigeration costs, this

number was brought up to -30⁰C. This required an additional absorption column in order

to obtain the desired H2S concentration.

For the first couple iterations of our process, we entertained the idea of simply

passing methanol through the AGR process once before adding it back to the main

product for sale. However, it was revealed that even a small amount of H2S in our final

product would de-value the entire product as a whole and, as such, the single-pass

method was scratched in favor of a recycling AGR process.

Initially, we had planned to use pure oxygen in our furnace, but it was found that

air was more than adequate to provide the heat duty to the SMR reactor with leftover heat

going to steam generation. This removed the cost of an air-separations plant within our

process.

Production of CO2 in house was also considered by purifying the outlet flue gases

from the SMR furnace. It was found that by locating our production plant near an ammonia

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plant, it would be possible to buy CO2 side products from that ammonia plant at a heavily

reduced price.

The methanol synthesis reactor system also underwent a large amount of review.

In order to obtain larger than 50% single-pass conversions, large-diameter methanol

reactors were used. However, this proved to be highly expensive and infeasible in terms

of sheer volume. Thus, smaller diameter reactors were used and condensers were placed

between reactors in order to push the reaction away from equilibrium at each inlet. Since

the single-pass conversion was reduced, the number of reactors was raised from two to

three.

In order to waste as little synthesis gas as possible, the remaining gas that comes

out of the final reactor is recycled after condensing the methanol out. However, it was

found that if the recycle rate became too large, the gases would go through the reactors

far too fast for the reaction to occur at a reasonable rate. Thus, various recycle rates were

analyzed and the final split ratio of 76% recycled to 24% removed was chosen.

Our heat exchange system had the strict rule of no cross-facility heat exchange

imposed upon it. As such, if a stream from AGR was needed to heat or cool a stream

from the purification step, both streams simply used utilities instead of adding a heat

exchanger and extra piping to go from one end of the facility to the other.

We chose to use floating roof tanks in order to stockpile our final product for a

capacity of a week. It was mentioned that non-floating roof tanks may be preferable, but

we chose to stay with the floating roof tanks due to the strong recommendation provided

by the Methanol Institute.2

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 Our vent gases contained excess H2, CO, and water that could have been sold or

used in previous points of the process. However, we chose to use the excess H 2 as fuel

for our furnace, steam generation, and providing fired heat to some of our utility

requirements. Due to the minimal amount of CO that exited the process, it was found that

separating CO from the gases and selling it would not be profitable. Finally, we simply did

not recycle the wastewater due to the possibility of impurities within the streams.

Block Flow Diagram: Table 1: Flowrates of Key Streams

The block flow diagram (BFD) fold-out can be
Flow Flow
Flowrates
(kmol/hr) (MT/d)
referenced in the next couple pages. Pressure and
Sour NG 2200 1000
heat change equipment have been disregarded for Makeup Methanol 0.3 0.25
Methanol Recycle 175 100
the sake of readability. The overall process flow Sweet NG 1800 800
SMR Steam 8500 3700
diagram with pressure and heat changers can be SMR Input 10300 4400
SMR Output 13600 4400
seen in Appendix A. The pressures and
Synthesis CO2 2000 2100
Reactor 1 Syngas 18700 8000
temperatures of key streams and units have been
Raw Methanol 4000 2500
given on the fold-out itself. Product Methanol 1300 1000
H2 Fuel 3500 1900
The BFD can be split into four overall Waste Purif Water 2100 1000
Waste SMR Water 6200 2700
sections: Acid Gas Removal (AGR), Steam Methane Claus Gas 400 200

Reformation (SMR), Methanol Synthesis, and Purification. AGR is characterized by two

absorption columns and a stripping column, which allows us to use methanol (Rectisol ®)

as a recoverable solvent to remove H2S from sour natural gas. The SMR reactor takes in

a steam stream and sweet natural gas to produce H2, which is crucial for the methanol

synthesis step. The methanol synthesis step contains three reactors and inter-stage flash

drums. These flash drums condense out methanol and feed the remaining synthesis gas

to the next reactor in the chain. The overall methanol synthesis step has a recycle stream

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after the third flash drum to prevent waste of remaining synthesis gas. The flowrates and

compositions are listed in Tables 1 and 2, with green being overall process inlet streams

and orange being overall process outlet streams. The compositions of SMR Steam and

Synthesis CO2 were assumed to be pure.

Table 2: Molar Compositions of Key Streams
Mole Fractions CH3OH C3H8 C2H6 CO2 H2S N2 O2 H2O CH4 H2 CO
Sour NG --- 0.002 0.042 0.01 0.026 0.05 0.0005 --- 0.87 --- ---
Makeup Methanol 0.999 --- --- --- --- --- --- 0.0005 --- --- ---
Methanol Recycle 0.998 --- --- --- --- --- --- 0.002 --- --- ---
Sweet NG --- --- 0.007 0.003 --- 0.057 --- --- 0.932 --- ---
SMR Input --- --- 0.001 --- --- 0.01 --- 0.822 0.166 --- ---
SMR Output --- --- --- 0.06 --- 0.008 --- 0.445 0.008 0.419 0.061
Reactor 1 Syngas --- --- --- 0.166 --- 0.022 --- 0.003 0.021 0.486 0.301
Raw Methanol 0.319 --- --- 0.125 --- 0.001 --- 0.529 0.003 0.001 0.021
Product Methanol 0.999 --- --- --- --- --- --- 0.0005 --- --- ---
H2 Fuel 0.002 --- --- 0.178 --- 0.029 --- --- 0.029 0.305 0.455
Waste Purif Water 0.001 --- --- --- --- --- --- 1 --- --- ---
Waste SMR Water --- --- --- 0.019 --- --- --- 0.977 --- 0.001 0.002
Claus Gas --- 0.012 0.224 0.046 0.16 0.009 --- --- 0.548 --- ---

Process Block Description:

For the sake of readability, the process flow diagram (PFD) will be located in Appendix A,

with the specific sections stated previously clearly labelled. Compressors, pumps,

turbines, heaters, and coolers are all listed in Appendices C, D, E, and F, and are again

referenced on the PFD. The temperature and pressure profiles of all major units are

shown in Appendix H. Detailed sizing and economics of all the units are given in the

previously mentioned Appendices.

Acid Gas Removal

The natural gas used in the process arrives as sour natural gas. As such, the acid gases

must be removed from the rest of the natural gas. Methanol is used as the solvent for

absorption of H2S in the AGR process. The absorption occurs at -30⁰C and 69 bar. Sour

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natural gas enters the first column from the bottom and exits at the top. This slightly

sweeter natural gas then enters a second column from the bottom to drop the H 2S

concentration to the desired 50 PPB. In each column, 3 metric tons per hour of chilled

methanol is used as the solvent. Both columns have 20 stages. The stripping distillation

column also has 20 stages and operates at 20 bar, with a feed temperature of 250 ⁰C and

reflux ratio of 3. The feed enters at stage 10. The tops exit to the Claus Process at -10 ⁰C

and the bottoms exit at 170⁰C. The bottoms are recycled to the absorption columns as

purified methanol after passing through coolers and pumps. There is a make-up stream

of 250 kg per day of methanol to the overall AGR process.

Steam Methane Reformation

SMR is necessary in order to generate the H2 used as synthesis gas in the methanol

reactors. Sweet natural gas exits from the top of the second absorption column in AGR

and is combined with steam in a 1:5 molar ratio in order to prevent coking within the SMR

packed bed. Due to the heavily endothermic nature of the SMR reaction, the SMR reactor

is a series of 1600 Nominal 5” Schedule 80 tubes within a box furnace. Discussions in

class revealed that GHSV and kinetic curves for SMR reactions are generally

untrustworthy as the rate-limiting factor is heat-exchange to the surrounding heat bath. It

is simulated using an adiabatic REquil block instead of RGibbs due to the presence of the

Ni/Al2O3 catalyst. A void fraction of 0.3 was assumed within the packed bed. A major

design point in the sizing of this reactor was keeping the pressure drop of the reacting

gas lower than 1 bar. The reactor is, on average, operating at a temperature of 850 ⁰C and

pressure of 20 bar. The box furnace is simulated with an RGibbs block and has an

adiabatic flame temperature of 2000⁰C and leaves the furnace at around 950⁰C. The

remaining duty from 950⁰C to the Low Heating Value (LHV) of 175⁰C is used to generate

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steam. The SMR flash drum operates at 50⁰C and 20 bar. Condensed SMR waste water

exits from the bottom and synthesis gas, primarily H 2, exits from the top.

Methanol Synthesis
The synthesis reactors were designed to operate adiabatically with an average operating

temperature of 250⁰C and pressure of 51 bar. All reactors have inlet temperatures of

230⁰C. The first reactor is a series of five hundred 10m long Nominal 10” diameter tubes.

The second and third reactors are each two hundred and fifty 10m long Nominal 20”

diameter tubes. All reactors have Cu/ZnO catalyst with a void fraction of 0.3. The kinetics

for the methanol synthesis and water-gas shift reactions were taken from literature. 3,4 The

interstage flash drums operate at 30⁰C and 51 bar in order to condense methanol out the

bottoms and send synthesis gas to the next reactor. The synthesis gas coming out of the

third flash drum has 76% of its molar flowrate sent back to the beginning of the reactor

chain while the other 24% exits as synthesis gas to be used as fired heat in other parts

of the plant. The overall conversion of synthesis gas is 58.7%. The raw unpurified

methanol is sent to purification. Due to the temperature variation between reactors, heat

exchangers are employed to mitigate the heat duties between flash drums and reactors.

There are three heat exchangers total. Their configuration is given in detail in Appendix

E.

Purification System
The purification system consists of two distillation columns, one to remove excess

synthesis gas and one to remove the water that is generated during the synthesis reaction.

The first column consists of 6 trays and has a reflux ratio of 3. The feed is to stage 3 at a

temperature of 30⁰C. The second column is 21 trays and has a reflux ratio of 4. The feed

is to stage 10 at a temperature of 90⁰C. The entire purification process is completed at 51

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bar. The final product has a composition of 99.85% methanol, 450 PPM water and various

compounds in trace quantities. 0.25 MT/day of this product stream is taken to make up

the amount of methanol lost to the AGR process. The amount of methanol product leaving

the process is at the required 1000 MT/day requirement.

Usage of Unreacted Synthesis Gas

It was found that the unreacted synthesis gas could be used as a fired heat source. This

source of fuel replaced the natural gas required to generate steam for the SMR reaction,

the natural gas required to fuel the SMR furnace, and some of the fired heat requirements

in the rest of the process. The LHV was used to calculate useable heat duty in all heat

balances. The LHV of the combusted synthesis gas is 50 ⁰C.

Critical Control Points

Valve locations include the feed flow to the furnaces, the inlet stream to the acid gas

removal system, and the inlets and outlets to every single column. Reactor feed flowrates

are also included in this list, in addition to the reactor flow compositions. Of particular

importance is the H2S composition coming out of the second AGR absorber. The last

control point is the purity of the product. Purity and composition must be monitored closely

in order to prevent catalyst poisoning in the reactors. Emergency cutoff switches should

be placed on the furnaces and the methanol synthesis reactors in order to prevent a

runaway reaction. All pressure vessels should have safety valves in accordance to ASME

regulations.

Unit Sizing
All of the units in our process were sized based on their operating parameters. Flash

drums, reactors, and columns were all modeled as pressure vessels. The diameter and

height of the flash drums were determined based on the settling velocity of the fluid they

contain as shown in chapter 16.3 of Towler. It is assumed that no demisters are present.

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The diameter and length of the reactor vessels were determined based on the desired

flow rate and conversion of hydrogen and carbon dioxide into methanol. The temperature

and composition profiles of the reactors can be found in Appendix H. The diameter of

columns were found using ASPEN’s sizing feature while the number of trays were based

on the desired quality of the distillate and bottoms based on an optimized reflux ratio and

stream flow rates. The thickness of pressure vessel walls were found based on the

maximum allowable stress of the material being used based on the temperature and

pressure of the process as specified in chapter 14 of Towler along with a contingency for

an assumed 85% joint efficiency. In addition to carbon steel, 304 stainless steel and 316

stainless steel were also analyzed when determining minimum pressure vessel

thicknesses. Due to the absence of useable tabulated heat transfer coefficients at our

operating conditions, the surface area of heat exchangers were obtained using ASPEN’s

sizing feature.

Capital Expenses:
All unit capital costs were estimated based on Table 7.2 from Towler. 5 The cost of all

pressure vessels, including reactor shells and column shells, were determined based on

the volume of the shell itself along with the material used to construct the shell. This

volume is based on the operating conditions for the pressure vessel along with the

material being used to construct it. The cost of shells made from carbon steel, 304

stainless steel, and 316 stainless steel were analyzed, and it was found that carbon steel

was cheaper and met the requirements of all our units except for the SMR reactor, for

which 316 stainless steel is required due to high operating temperatures. Reactors were

priced by calculating the cost of the shell as a pressure vessel and adding the price of the

required catalyst. Columns were costed by approximating them with tray sizing parameter

13
references and adding on the cost of a shell simulated as a pressure vessel as described

in Table 7.2 of Towler. Heat exchangers were costed based on their required heat transfer

area while pumps, turbines, and compressors were costed based on their volumetric flow

rate or energy use as described in Towler. Each pump, turbine, and compressor include

an identical backup in order to ensure continuous operation of our plant even if one breaks

down. The capital cost for the Claus Plant, found to be $10 million, was determined using

Garrett6 after accounting for inflation. The specific costs of all of the units along with their

costing parameters and installed costs can be found in Appendix I. The total ISBL costs

of our facility were found to be $109 million.

Table 3: A Summary of Process Capital Expenses In addition to the inside

boundary limit costs described above,

other costs include outside boundary

limit costs, working capital, and

contingency costs. OSBL costs are

assumed to include infrastructure,

piping, and utilities construction, and were assumed to be 40% of our ISBL costs, or $44

million. Working capital was assumed to be 15% of our ISBL costs at $16 million.

Contingency costs were assumed to be 10% of our total ISBL costs at $11 million. The

total capital cost of our plant is $180 million. According to Garrett, the typical capital

expenses for a methanol production facility is $120 million, and our estimate is within the

range of this average value.6 Table 3 shows a summary of the capital costs.

Operating Expenses:
Our production costing, or annual expenses, are composed of a variety of employee,

maintenance, tax, feedstock, and utility related costs. Our plant is assumed to require five

14
operators at all times. Assuming a total of four 6-hour shifts every day, we would require

a total of 20 operators who each have a 42 hour work week. A reasonable salary for an

operator working in the Gulf Coast is fifty thousand dollars per year. This results in a total

operating labor cost of $1 million per year. Operator supervision is assumed to be 25%

of the cost of the operating labor and has an annual cost of $250k. Direct salary overhead,

which includes the costs of employee insurance and health care benefits is an additional

60% of the sum of operating labor and supervision costs at $750k. Maintenance costs for

our facility were assumed to be five percent of our installed ISBL costs at $5.5 million.

Property taxes and insurance for our facility were assumed to have an annual cost worth

two percent of our installed ISBL costs at $1 million. Garrett was used to determine the

operating costs of our Claus Plant based on a throughput of 44 tons of sulfur per day.

After accounting for inflation since 1987, when Garrett was published, the annual

operating costs of the Claus plant were found to be $2.3 million.

Feedstock costs make up a significant majority of our overall operating costs and

are calculated based on the amount of natural gas needed for our process and our fired

heat, the amount of water needed for our steam methane reformer, and the amount of

carbon dioxide needed for our methanol synthesis process. A total of 380 thousand metric

tons of natural gas is needed annually for our process. At a cost of $90 per ton, this results

in a net cost of $34.2 million per year for the natural gas. In order to compensate for the

excess hydrogen being produced by our steam methane reformer, we will be purchasing

carbon dioxide from ammonia production plants near our facility. Based on sources from

the Dakota Gasification Company, the price of CO2 on the Gulf Coast was found to be $5

per ton.7 As we are consuming 722 thousand tons of carbon dioxide per year, the net

15
expenses on carbon dioxide feed will be $3.6 million. Finally, our process uses 1.3 million

tons of water annually. Based on Towler, the cost of process water on the Gulf Coast is

$1.1 per ton, resulting in a net annual expense of $1.4 million on water. 5 In our costing,

we are assuming that make-up water for cooling systems have a negligible cost, and as

a result, are not included in our analysis. The sum of all of our feedstock costs result in

an annual expense of $39 million.

The costs of utilities were based on the amount of electricity needed to operate the

pumps and compressors in our system after accounting for the energy provided by the

turbines in our process, and accounting for the electricity costs of refrigeration. After

Table 4: A Summary of Production Expenses accounting for energy generation from

the turbines, we found that we will

require 58.2 million kilowatt-hours of

energy for pumps and compressors

annually and an additional 74.4 million

kilowatt-hours of energy for refrigeration.

Based on an estimate of $0.06 per

kilowatt hour found in Towler, energy

use for pumps and compressors will

cost $3.49 million per year and the energy use for refrigeration will cost $4.46 million per

year.5 Our net annual electricity cost are $8 million per year.

In order to meet EPA standards, our final operating expenses involve superfund

payments and waste water treatment expenses. Superfund payments are paid to the

Environmental Protection Agency to help clean up sites that are contaminated with

16
hazardous substances and pollutants. Typically, superfund payments are one percent of

the sum of ISBL and OSBL costs. For our process, $1.5 million will be spent annually on

superfund payments. It is important to ensure the waste water produced in our process

is properly treated. Our plant produces 841 million gallons of waste water per year. Based

on Towler, wastewater treatment typically costs $6 per 1000 gallons. 5 This results in an

annual cost of $5 million on waste water treatment.

Altogether, our production costs are a total of $64.6 million per year. Table 4 shows a

breakdown of our production costs. Appendix J shows a more thorough breakdown of all

our specific expenses.

Financial Analysis:
It is important to complete a financial

analysis on our process to ensure that it

will remain viable, even if market prices

in feed or product costs change. First,

the rate of return of our process was

determined, and then a sensitivity Figure 1: Cumulative Discounted Cash Flow

analysis was completed on our process to see how market disturbances will affect our

cash flow. In our methanol facility’s financial analysis, we are assuming a thirty year tax

lifetime with a twenty year straight line depreciation. Furthermore, we are assuming that

there is a two percent rate of inflation and a tax rate of 40%. Assuming that it will take five

years to construct our facility, and that the plant will be operational for 30 years, our rate

of return will be 6.5% and our average return on investment over the plant’s thirty year

lifespan will be 10.2%. Figure 1 shows the cumulative discounted cash flow over the thirty-

17
year lifespan of the methanol plant. A summary of the calculations done to determine the

discounted cash flow and the rate of return can be found in Appendix L.

In order to determine how

robust our methanol plant is to

economic fluctuations, a sensitivity

analysis was completed on various

capital and production costs in order to

Figure 2: Sensitivity Analysis on Capital Costs see how it affects our rate of return.

First, the capital cost of the three most expensive units in our facility were varied in order

to see how much they affected our rate of return. As can be seen in Figure 2, variations

in the price of reactors has the greatest impact on our rate of return while furnaces and

pumps only cause minor deviations in our rate of return.

On the other hand, a sensitivity

analysis on the feedstock costs

showed that the cost of natural gas

made a major impact on the rate of

return. Based on a thirty percent

decrease or thirty percent increase on Figure 3: Sensitivity Analysis on Feedstock Costs

the cost of natural gas, our plant’s rate of return will vary from 9.5 to 2.6 respectively. This

can be seen in Figure 3. This suggests that although our plant is currently viable due to

the unusually low cost of natural gas, if natural gas prices were to rise to levels seen in

the early 2000’s, our facility may not remain lucrative. Figure 4 shows how our facility

18
responds to changing production

costs, but as mentioned before, the

cost of the feedstock makes the

largest impact on our rate of return

compared to the other production

costs. Figure 4: Sensitivity Analysis on Feedstock Costs

In addition to the production costs, the market price of our product was also found

to make a major impact on our plant’s rate of return. As seen in Figure 5, a nineteen

percent drop in the market price of methanol will result in our rate of return dropping to

zero. Similarly, a thirty percent increase in the price of methanol will result in a rate of

return of thirteen percent. The price of sulfur makes a minimal impact on our facility’s rate

of return. When considering whether

or not to build the proposed methanol

production facility, great care will need

to be taken in order to ensure that the

price of natural gas will not increase

and that the market price of methanol

Figure 5: Sensitivity Analysis on Product Costs
does not fall.

Conclusions and Recommendations:

Our plant meets the desired specifications of producing 1000 metric tons of methanol per

day at a purity of 99.85%. We recommend that our methanol plant be built along the Gulf

Coast, preferably near an ammonia plant which may supply us with carbon dioxide. Our

capital costs were found to be $180 million, and this estimate is corroborated by typical

costs for methanol plants found in texts such as Garrett. We expect our annual revenue

19
to be $84 million and our expenses to be $64 million, resulting in a net margin of $20

million. With a tax rate of 40%, a 20 year straight line depreciation, and a 2% annual

inflation rate, we expect our cumulative cash flow to reach $369 million at the end of our

plant’s thirty year tax life. We would be able to pay off our capital investment after 11

years.

However, a financial analysis of our process shows that we are unable to meet the

desired hurdle rate of 15% after thirty years of operation. Our finances show a great

dependence on the market price of natural gas and methanol. Unexpected spikes in the

price of natural gas or sudden crashes of the price of methanol will be detrimental to our

finances and may make our operation unsustainable. Nevertheless, we do have a margin

of $20 million per year, resulting in a rate of return of 6.5% and a return on investment of

10.2%. If these estimates for our ROI and rate of return are acceptable to our investors,

we recommend that contracts be signed with natural gas suppliers and methanol

purchasers to ensure that we will not be impacted by sudden changes in methanol and

natural gas market prices before construction on our plant begins. Although our rate of

return is not as high as was desired, we believe that constructing a methanol facility is a

lucrative investment and will produce a profit in the long run.

References:
(1) Nash, M. The changing face of methanol demand
http://www.chemweek.com/lab/The-changing-face-of-methanol-
demand_72206.html (accessed May 3, 2016).
(2) Alliance Consulting International. 2008, No. October, 1–37.
(3) Kubota, T.; Hayakawa, I.; Mabuse, H.; Mori, K.; Ushikoshi, K.; Watanabe, T.;
Saito, M. 2001, No. September 1999, 121–126.
(4) GKT Project: Methanol Synthesis Reactor/Kinetic Information. 2005.
(5) Towler, G.; Sinnott, R. K. Chemical Engineering Design - Principles, Practice and
Economics of Plant and Process Design (2nd Edition); Elseiver, 2013.
(6) Garrett, D. E. Chemical Engineering Economics; Van Nostrand Reinhold, 1989.
(7) Loop, G. In IEA GHG Financial Conference; New York, 2008.

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 Appendices:
A. Overall Process Flow Diagram
B. Subprocess Steam Data
C. Compressors, Pumps, and Turbines
D. Heaters and Coolers
E. Heat Exchangers
F. Pressure Vessels and Separation Columns
G. Reactors
H. Temperature and Concentration Profiles
I. Capital Cost Expenses
J. Production Expenses
K. Revenue
L. Cash Flow Charts
M. Gantt Chart

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