Equipments Specification For Power House: Economic Evaluation & Profitability

Production of LPG From Natural Gas
CHAPTER 12
ECONOMIC EVALUATION & PROFITABILITY
12.1 Total equipment cost estimation
Equipments Specification for Power house

No.reqd. Item and Description Size/cap MOC
1 Boiler 31 ton/hr SS
1 Furnace 491 m2 FB
1 Economizer 3.1 m3 SS
1 Steam Turbine 39 MW -
2 Centrifugal pump 26 m3/hr SS
Estimated purchased equipments for Power House
Item name No. of unit Purchase cost (Rs)
Boiler 1 6,16,40,942
Furnace 1 4,78,77,050
Economizer 1 23,17,662
Steam turbine 1 28,54,15,022
Centrifugal pump 2 34,74,423
Total Rs 40,07,25,099
Equipments Specifications for Fermentation unit
No. Req. Item description Size MOC
149
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2 Knock Out Drum 3.1m dia SS 316
2 Compressor 2.9 hp SS 304
1 Molecular Sieve bed 1.415 m dia SS 316
1 Chiller SS 304
1 Filter 901 ft2 CS
1 High Pressure Separator 3.1 m dia SS 304
1 Low Pressure Separator 3.1 m dia SS 304
1 LEF Column 2.21 m dia SS 316
1 LEF Reflux Tank 2.21 m dia SS 316
2 LPG Column 2.2164 m dia SS 316
1 Turbo-Expander 7kW-7.5MW/120000rpm SS 304
1+1=2 Condensor 22 ft2 & 216 ft2 SS 304
2+1+1=4 Heat Exchanger 1966 ft2, 191 ft2, 92 ft2 SS 304
1 Multiple Heat Exchanger 395 ft2 SS 304
8 Centrifugal pump 7.26 hp SS 304
1 Reflux Pump 9.8 hp SS 304
97 Storage tank 2001 m3 SS 304
3+1=4 Blower 941ft3/min & 431ft3/min SS 304
Estimated purchased equipments cost
No. Req. Item description Rate(Rs) Purchased cost(Rs)
2 Knock Out Drum 16,80,78,197 33,61,56,394
2 Compressor 64,13,371 1,28,26,742
1 Molecular Sieve bed 9,65,65,514 9,65,65,514
1 Chiller 10,89,50,735 10,89,50,735
1 Filter 1,91,18,075 1,91,18,075
150
1 High Pressure Separator 16,29,83,660 16,29,83,660
1 Low Pressure Separator 13,79,22,602 13,79,22,602
1 LEF column 20,77,52,662 20,77,52,662
1 LEF Reflux Column 31,08,981 31,08,981
1 LPG Column 25,55,06,965 25,55,06,965
1 Turbo Expander 10,77,43,003 10,77,43,003
1 Condenser Small 9,39,171 9,39,171
1 Condenser large 29,69,645 29,69,645
2 Heat Exchanger 1,72,72,117 3,45,44,234
1 Heat Exchanger for MSB 20,43,113 20,43,113
1 Heat Exchanger for Lean gas 27,41,948 27,41,948
8 Centrifugal Pump 15,00,515 1,20,04,120
1 Reflux pump 21,34,080 21,34,080
97 Storage Tank 1,85,67,526 1,80,10,50,022
4 Blower 2,75,274 11,01,096
1 Multiple Heat Exchanger 26,98,768 26,98,768
Total 3,31,74,07,786
Total equipment purchased cost = 3,31,74,07,786 +40,07,25,099
= 3,71,80,00,000 Rs
12.2 Fixed Capital Investment Estimate
Component %PEC Cost (Rs)
Purchased equipments (PEC) 3,71,80,00,000
Installation and insulation cost 40 48,72,00,000
Instrumentation & Control cost 15 55,77,00,000
Insulation cost 8 13,77,66,547
Piping (installed) 40 1,48,72,00,000
151
Electrical (installed) 25 92,95,00,000
Buildings (BPA) 40 1,48,72,00,000
Service facilities 50 1,85,90,00,000
Yard improvements 12 44,61,60,000
Land cost 5 18,59,00,000
Total direct cost 1,21,57,86,60,000
Engineering & supervision 10 1,21,57,86,000
Construction expenses 10 1,21,57,86,000
Contractor’s fees 4 4,63,14,400
Contingency 10 1,21,57,86,000
Total indirect cost 4,13,36,72,400
Total Direct And Indirect Cost 16,29,15,32,400
Total fixed capital cost is = 16,29,15,32,400
12.3 Working Capital Investment
The working capital for an industrial plant consists of the total amount of money invested
in
(1) Raw materials and supplies carried in stock
(2) Finished products in stock and semi finished products in the process of being
manufactured
(3) Accounts receivable
(4) Cash kept on hand for monthly payment of operating expenses, such as salaries, wages,
and raw-material purchases
(5) Accounts payable
(6) Taxes payable
152
The raw-materials inventory included in working capital usually amounts to an

l-month supply of the raw materials valued at delivered prices. Finished products in stock
and semi finished products have a value approximately equal to the total manufacturing
cost for 1 month’s production. Because credit terms extended to customers are usually
based on an allowable 30-day payment period, the working capital required for accounts
receivable ordinarily amounts to the production cost for 1 month of operation. The ratio of
working capital to total capital investment varies with different companies, but most
chemical plants use an initial working capital amounting to 10 to 20 percent of the total
capital investment. This percentage may increase to as much as 50 percent or more for
companies producing products of seasonal demand because of the large inventories which
must be maintained for appreciable periods of time.
Working capital investment = 15% of total capital investment(TCI)
TCI = Fixed capital investment (FCI) + Working capital investment (WCI)
Or TCI = FCI + 0.15 TCI
TCI = FCI/0.85
TCI = 16,29,15,32,400/0.85 = 19,16,50,87,100
FCI/0.85 = FCI + WCI
WCI = 3 x FCI / 17 = 2,87,49,76,30
12.5 Total Production Cost Estimation
12.5.1 Fixed Charges
Component % Cost (Rs)

Depreciation 10 % of FCI + 3% of BPA 16,73,76,92,400
Local Taxes 3% of FCI 48,87,45,972
Insurance 0.7% of FCI 11,40,40,726
Rent 10% of (Land + BPA) 16,73,00,000
Total Fixed Charges --- 2,44,38,65,939
12.5.2 Direct Production Cost (DPC) :-
153
Raw Material (RM) = Cost x Feed rate x Production Days x 24 hr
= 20 x 1,87,000 x 350 x 24
= Rs. 3,14,16,00,00
Variables % Cost (Rs)

Raw Material --- 3,14,16,00,000
Operating Labour (OL) 50% of RM 1,57,08,00,000
Direct supervisory & 12% of OL 18,84,96,000
Clerical Labour (DS & CL)
Utilities 80% of OL 1,25,66,40,000
Maintenance & Repair 5% of OL 7,85,40,000
(M&R)
Laboratory Charges 15% of OL 23,56,20,000
Operating Supplies 15% of M&R 1,17,81,000
Patent & Loyalties 33.33% of OL 52,36,00,000
Total DPC --- 7,00,70,77,000
Plant Overhead Cost (POC) = 60% of (OL + DS&CL + M&R)
=Rs 1,10,27,01,600
Manufacturing Cost (MC) = DPC + FC +POC
= Rs 10,79,80,31,130
12.5.5 General Expenses
Variables % of OL Cost (Rs)

Administration cost 50 78,54,00,000
Distribution & Selling cost 66.66 1,04,72,00,000
Research & Development cost 20 31,41,60,000
Total General Expenses (GE) ---- 2,14,67,60,000
Total Product Cost = MC + GE
= 10,79,80,31,130 + 2,14,67,60,000
= Rs 12,94,47,90,140
Total Earning / Income = Sum of selling price of all products and by products
154
The main product is LPG and by products are as follows:-
 Naphtha (from LPG column bottom)

 Lean Gas (from LP separator top and LEF column top product)
Selling price of the products and by products are as follows:-
 Wholesale selling price of LPG = Rs. 52.4

 Wholesale selling price of Naphtha = Rs. 43.88
 Wholesale selling price of Lean Gas = Rs. 9.50
Total selling price of LPG=selling price x quantity of production x operating days
= =52.4 x 33825 x 350 x 24= Rs. 14888412000
Total selling price of Naphtha=selling price x quantity of production xoperating days

=43.88 x 2882.9 x 350 x 24 = Rs. 1062613803
Total selling price of Lean Gas =selling price x available quantity x operating days
Available Quantity =Quantity of productionquantity used as fuel
=139663.2115 kg / hr 1301.234 kg / hr= 138361.9775 kg / hr
Total selling price of Lean Gas = 9.50 x 138361.9775 x 350 x 24= Rs. 11041285810
Therefore, total earning = 14888412000 + 1062613803 + 11041285810
Total earning = Rs. 26992311610
Gross Income = Total earning – Total Production Cost
=26,99,23,11610 - 12,94,47,90,140
= Rs 14,04,7521470
Taxes = 50% Of Gross Income
= Rs 7023760735
Net Profit = Gross Income – Taxes
=14047521470 - 7023760735
= Rs 7023760735
Rate Of Return = Net Profit / Total Capital Investment x 100

155
= 7023760735 / 19,16,50,87,100 x 100 = 36.649 %
Break Even Point =
= 67.551%
Payout period
Payout period, or payout time, is defined as the minimum length of time theoretically
necessary to recover the original capital investment in the form of cash flow to the project
based on total income minus all costs except depreciation. Generally, for this method,
original capital investment means only the original, depreciable, fixed-capital investment,
and interest effects are neglected.
Pay Back Period =
= 2.21 years.
156
fgure: Break- even chart
Cumulative cash flow diagram
Net cash flow to the project
Net profit after taxes=

Income tax =Rs Rs 7,02,37,79,433
Rs 7,02,37,79,433
Net profit before taxes= Si-Co-

d= Rs 14,04,76,38,660
Depreciation (d) = 1673769240

Profit =Si-Co = Rs 15721407900
Operation for
Total sales= Rs26,99,23,50,000 complete project Cost of operation Co= Rs

Rs 3141600000
W.C.I= Rs 2874976306
N.M.F.C.I= Rs4133672400
T.C.I= Rs 19,16,65,08,710
Stock M.F.C.I=Rs 121578600

Other
holders
investmen
dividen
t
d Capital
Repaymen
source and
t of loans
sink
Loans
Other capital input bonds common stock preferred stock
157
Fig 12.3 Cumulative cash flow diagram
CHAPTER 13
CONCLUSION
Plant design is a collaborative effort by the design and engineering firm with the
plant owners to optimize the yield, mass balance and integration with existing or new
feedstock facilities. It is unlikely any new plants will be constructed as “stand alone”
facilities. This allows optimization of feedstock and product storage and integration with
transportation and utilities. A continuous plant leads to better heat economization, better
product purity from phase separation by removing only the portion of the layer furthest
from the interface, better recovery of LPG in order to save on LPG cost and regulatory
issues, minimal operator interference in adjusting plant parameters, and lower capital costs
per unit of LPG produced.
The trend is towards large facilities instead of small. As with almost any process
industry, a large plant is more efficient than a small plant due to “economy of scale.”Based
on contemporary production processes and using current best values for equipment, and
supply costs employed to estimate the capital and production costs for the production of
LPG from Natural gas. It is not meant to replace the thorough engineering analysis that is
required in the final design and construction of such a plant, but rather is meant for use as a
tool in estimating capital and operating costs. The model is flexible, and is meant for use in
158
assessing the effects on estimated LPG production costs of changes in feedstock in

chemical or process technology employed, or in equipment specified for the facility.
Feedstock to the LPG production should be as consistent as possible. Although the

best feedstock for a LPG plant would be natural gas. Safety of the process has been
somewhat of a challenge not because it is not known how to make the process safer, but
because of determining what is actually necessary for designing a safe plant from the
processor’s point of view.
While working on this project, I achieved practical and thoughtful knowledge

regarding various aspects of chemical engineering subjects. This project work is a
milestone for me as it has increased my knowledge. According my point of view, it is
compulsory for every student as it has enhanced knowledge which will be helpful in my
future. I came to know what’s the exact work us in chemical industry. The Utilities
required in the production of LPG are Water i.e. 24,65,764.332 kg/hr and Steam is about
37.04 kg/hr. The Production of LPG from Natural Gas is a boon to many industries used
for many purposes. The growing demand of LPG has evoked the demand for Natural Gas
at a much cheaper rate .Natural gas is a cheap raw material compared to other raw
materials for producing LPG.
The Project has been made keeping in mind the growing demand of LPG in many
fields such as in domestic use, as a fuel, in our country which entirely depends upon the
Petroleum industries to fulfil the various demands arising globally. The selling cost of LPG
is set to be Rs.930 which is well according to the Competition in the Market. The
profitability analysis proves the project to be economically viable for industries to set up
such a plant as it would yield LPG at a cheaper rate compared to the availability of Natural
gas as it is depleting day-by-day.
159
REFERENCES
[1] Coulson & Richardson , “Chemical engineering design” , Vol.6, Elsevier, Oxford
bbbbbbfourth edition.
[2] Joshi, M. V., Mahajani, V. V., “Process equipment design”, Machmillan India Ltd
[3] “Ministry of Renewable & Non-renewable Energy” Government of India.
[4] Peters Max. S, and Timmerhaus Klaus D., “Plant design and economics for
ffffffff.chemical engineer “ 4th& 5th edition.
[5] www.matche.com.
[6] McCabe, Warren L; Smith, Julian C; Harriot, Peter; (1998), fifth Edition Unit
nnnnnnOperations of Chemical Engineering.
[7] Pipelines Transportation Systems for Liquid Hydrocarbons and other liquids.
[8] B31.4, 1998 Edition, ASME Code for Pressure Piping.
[9] Treybal, Robert E., Third Edition, Mass Transfer Operations.
[10] Perry, R.H. & Green, D.W., “Perry’s chemical engineers” Handbook.
[11] Reid, Prausnitz, and Sherwood, “The properties of gases and liquids” Mc Graw Hill
nn..nnninternational edition (2003).
[12] ONGC URAN Manuals.
160

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Production of LPG From Natural Gas

ECONOMIC EVALUATION & PROFITABILITY

12.1 Total equipment cost estimation

Equipments Specification for Power house

2 Centrifugal pump 26 m3/hr SS

Estimated purchased equipments for Power House

Item name No. of unit Purchase cost (Rs)

Steam turbine 1 28,54,15,022

Centrifugal pump 2 34,74,423

Equipments Specifications for Fermentation unit

No. Req. Item description Size MOC

2 Knock Out Drum 3.1m dia SS 316

2 Compressor 2.9 hp SS 304

1 Molecular Sieve bed 1.415 m dia SS 316

1 Filter 901 ft2 CS

1 High Pressure Separator 3.1 m dia SS 304

1 Low Pressure Separator 3.1 m dia SS 304

1 LEF Column 2.21 m dia SS 316

1 LEF Reflux Tank 2.21 m dia SS 316

2 LPG Column 2.2164 m dia SS 316

1 Turbo-Expander 7kW-7.5MW/120000rpm SS 304

1+1=2 Condensor 22 ft2 & 216 ft2 SS 304

2+1+1=4 Heat Exchanger 1966 ft2, 191 ft2, 92 ft2 SS 304

1 Multiple Heat Exchanger 395 ft2 SS 304

8 Centrifugal pump 7.26 hp SS 304

1 Reflux Pump 9.8 hp SS 304

97 Storage tank 2001 m3 SS 304

3+1=4 Blower 941ft3/min & 431ft3/min SS 304

Estimated purchased equipments cost

No. Req. Item description Rate(Rs) Purchased cost(Rs)

2 Knock Out Drum 16,80,78,197 33,61,56,394

2 Compressor 64,13,371 1,28,26,742

1 Molecular Sieve bed 9,65,65,514 9,65,65,514

1 Chiller 10,89,50,735 10,89,50,735

1 Filter 1,91,18,075 1,91,18,075

1 High Pressure Separator 16,29,83,660 16,29,83,660

1 Low Pressure Separator 13,79,22,602 13,79,22,602

1 LEF column 20,77,52,662 20,77,52,662

1 LEF Reflux Column 31,08,981 31,08,981

1 LPG Column 25,55,06,965 25,55,06,965

1 Turbo Expander 10,77,43,003 10,77,43,003

1 Condenser Small 9,39,171 9,39,171

1 Condenser large 29,69,645 29,69,645

2 Heat Exchanger 1,72,72,117 3,45,44,234

1 Heat Exchanger for MSB 20,43,113 20,43,113

1 Heat Exchanger for Lean gas 27,41,948 27,41,948

8 Centrifugal Pump 15,00,515 1,20,04,120

1 Reflux pump 21,34,080 21,34,080

97 Storage Tank 1,85,67,526 1,80,10,50,022

4 Blower 2,75,274 11,01,096

1 Multiple Heat Exchanger 26,98,768 26,98,768

Total equipment purchased cost = 3,31,74,07,786 +40,07,25,099

12.2 Fixed Capital Investment Estimate

Component %PEC Cost (Rs)

Purchased equipments (PEC) 3,71,80,00,000

Installation and insulation cost 40 48,72,00,000

Instrumentation & Control cost 15 55,77,00,000

Insulation cost 8 13,77,66,547

Piping (installed) 40 1,48,72,00,000

Electrical (installed) 25 92,95,00,000

Buildings (BPA) 40 1,48,72,00,000

Service facilities 50 1,85,90,00,000

Yard improvements 12 44,61,60,000