IAE-D111-06259-EN

Material being published

Compañia Patagonica de Petroleo (Revised Version, English)

In 2018, Compañia Patagonica de Petroleo (CPP), an independent refinery, was

experiencing difficulties pertaining to the disposal of sulphuric acid that had been
previously used in product purification processes. The company used to dispose of the
sulphuric acid by returning it to pure acid producers. Yet, whenever pure acid producers
were occasionally unable to receive impure sulphuric acid, the issue was getting worse.
Other refineries, experiencing the same problem had already built their own plants to treat
the acid to use it again. Recently, the treatment process to regenerate the acid had been
improved, such that CPP was considering the possibility to use the new process themselves.

During the last few years, the company had refined, on an annual basis,
approximately 500,000 barrels of oil into gasoline, kerosene, and other derivatives. The
total annual sulphuric acid consumption for refining purposes was of 1,800 tons. The acid
was purchased when needed, and was delivered to the plant by trucks, where it was stored
until needed. If the gasoline and kerosene were to be sold as engine fuel or fuel oil, the
product needed to be treated with sulphuric acid to eliminate impurities. To do so, acid was
bombed into a chamber full of gasoline or kerosene, where both liquids were mixed. The
The quantity and graduation of acid, as well as the required process time, depended on the
type of oil being treated. After shaking the mixture, the acid was left to stand, and then it
was removed, and stored in tanks. The resulting impure acid had no value for the company
since it could neither be sold, nor be disposed through the drains. For disposal, the impure
acid was loaded on trucks and returned to the acid producers. The weight of the returned
acid was almost the same as the original pure acid to be used in the process.

The transport of the acid was paid for in advance by CPP at a price of 250,000
pesos on a monthly basis. Aside from this cost, there was no other charge for the return
of the impure acid. Once in the plant, the producer pulverized the acid inside an oven
and the by-product of the combustion, chiefly sulfur anhydride, was taken to lead
chambers to be regenerated and regenerated into sulphuric acid again.

The regenerated acid using this process was not returned to CPP, since it could
not be used to treat oil components due to potential adverse effects caused by its high
nitrogen content. By returning the impure acid to the producer, CPP had no need to keep
a regeneration unit, which was a source of annoyance to the public due to the fumes and
odors it emitted. Notwithstanding, this disposal method was not totally satisfactory for
CPP. Not only the regenerated acid lost its value, but also, often times, acid producers
Copyright © by IAE Business School, Universidad Austral. This Working Paper was prepared in by P rof
Guillermo Perkins in Pilar, Buenos Aires, Argentina to serve as the basis for class discussion rather than to
illustrate the effective or ineffective handling of a specific situation.
Printed in ACES (IAE /Universidad Austral) M ariano Acosta s/n - Pilar (Derqui), Prov. de Bs. As. in December,
2013. No part of this publication may be reproduced without written permission from ACES. (IAE, Universidad
Austral).
1
 IAE IAE-D111-06259-EN
Universidad Austral M aterial being published

were not able to receive the impure acid immediately due to capacity limitations of their
tanks. When trucks for impure acid were scarce, trucks normally used for pure acid
transports were used for impure acid transports and needed to be cleaned before using
them again for pure acid transportation, with CPP incurring considerable costs.
Transport by truck were, often times, slow; by returning impure acid to producers, the
company was not able to control the supply of acid in the same way as if they had their
own regeneration plant. Studies indicated that supply conditions could not be improved
with other chemical products producers.

When CPP management had previously assessed the convenience of setting up a

regeneration plant, they decided against it due to the unpleasant odors emitted, and
because with the then existing chemical processes, it was impossible to re-use the acid
for refining purposes. However, the regeneration method had been improved recently,
and the unpleasant gases as well as the nitrogen content were eliminated. The cost of a
regenerating unit, capable of processing 10 tons a day was of 30,000,000 pesos. The
unit was expected to have a service life of about 20 years. Moreover, it required little
space for its installation. The handling of the regeneration equipment required only few
non-specialized workers, with minimum supervision by CPP chemists. The acid
regeneration costs (excluding amortizations) for different capacity utilization levels
were the following:

Capacity utilization (%) Cost per ton

30% $ 9,000.00
50% $ 8,000.00
100% $ 7,000.00

The regeneration unit would make 75% of the impure acid re-usable, such that the
company would depend on acid producers for only 25% of its pure acid needs, to be
mixed with the regenerated product.

Exhibit 1 shows sulphuric acid prices paid by CPP.

2
 IAE IAE-D111-06259-EN
Universidad Austral M aterial being published

EXHIBIT 1

COMPAÑÍA PATAGÓNICA DE PETRÓLEO

Sulphuric acid - Prices paid

Monthly average price per ton

Year
(without transport)

2004 $15,500
2005 $15,500
2006 $16,040
2007 $16,500
2008 $16,500
2009 $16,500
2010 $16,500
2011 $16,500
2012 $16,500
2013 $16,500
2014 $16,500
2015 $16,500
2016 $16,500
2017 $15,530
2018 $17,000

Should CPP purchase the regeneration unit?