1

CHAPTER 1

FEASIBILITY STUDY

1.1 PHYSICAL AND CHEMICAL PROPERTIES OF BUTYL ACETATE

Table 1.1: Physical and Chemical Properties of Butyl Acetate

Molecular Formula C6H12O2

Molecular Weight 116.16 g/mole
Colorless, flammable liquid with fruity
 Appearance
odor
Boiling Point 126.5 °C
Melting Point -77.9 °C
Flash Point 24 °C
Critical Temperature, Tc 305.9 °C
Critical Pressure, P c 3090 kPa
Specific Gravity 0.9 (water = 1)
Density Relative to Air 4.1 (air = 1)
Density Relative to Water 0.88 (water = 1)
Molar Volume at 25°C 0.0001325 m3
Heat of Combustion -305.4 × 105 J/kg
Latent Heat of Vaporization 3.09 × 105 J/kg
Specific Heat at 20°C 223.11 J/mol K
Enthalpy of Formation of Gas at
-566.0 kJ/mol
Standard Conditions
Enthalpy of Formation of Liquid at
-609.6 kJ/mol
Standard Conditions
Enthalpy of Reaction at Standard
174 kJ/mol
Conditions
Viscosity at 20°C 0.832 centistokes
Vapor Pressure at 20°C 1.2 kPa
 2

1.2 PROCESS BACKGROUND

The synthesis of butyl acetate is commonly carried out by:

a) Esterification process
b) Transesterification process

1.2.1 Esterification Process

Esters are produced when carboxylic acids are heated with alcohols in the presence
of an acid catalyst. The reaction is called an esterification reaction. The esterification
reaction is both slow and reversible. Butyl acetate is synthesized by the reaction of
acetic acid and butanol in the presence sulfuric acid as the catalyst. The following is
the chemical equation of the reaction:

CH3COOH + C4H9OH ↔ CH3COOC4H9 + H2O

 Acetic Butanol Butyl Water
 Acid  Acetate

The synthesizing process is known as the Fisher esterification which is an

equilibrium process. The reaction is a reversible and the equilibrium constant is only
slightly greater than unity (between 1 and 10). The reaction reaches equilibrium after
a few hours of refluxing. The position of the equilibrium can be shifted by adding
more of the acid or of the alcohol, depending on cost or availability. Butyl acetate
synthesized by esterification process forms a binary azeotrope with water at 90.2°C
and ternary azeotrope with water and butanol at 89.4°C.

The esterification process has a broad spectrum of uses from the

preparation of highly specialized esters in the chemical laboratory to the production
of millions of tons of commercial ester products.

1.2.1.1 Reaction Mechanism of Esterification

Esterification Process

The reaction mechanism of the acid-catalyzed esterification of an alcohol with a

carboxylic acid is known as Fisher esterification. The reaction type is nucleophilic
acyl substitution and considered to consist of six steps. The first step is the
protonation of the carbon acid which is acetic acid. Acetic acid does not react with
butanol unless a strong acid is used as a catalyst, this step make the carbonyl group
more electrophilic and enable it to react with butanol, which is a nucleophile.
 3

The step is relatively fast and considered to be always in equilibrium. The

second step is the reaction between the protonated carbon acid with butanol. The
butanol O act as the nuclephile attacking the electrophilic C of the carbonyl group
C=O. This reaction step is kinetically controlled.

The third step is the deprotonation of the intermediate. A proton is

transferred from one oxygen atom to another yields a second tetrahedral
intermediate.
 4

The fourth step is the tetrahedral intermediate being protonated at another

site to convert the OH group into a good leaving group.

The fifth step is the expulsion of the leaving group, a neutral water molecule
by the help of the electrons of adjacent oxygen.

The sixth step is the deprotonation of the oxonium ion which gives the ester
product and regenerates the acid catalyst.
 5

 All subsequent reaction steps

ste ps are very fast and considered
co nsidered to be always in
equilibrium. Thus, the second and all subsequent reaction steps can be summarized
into one kinetically controlled reaction step.

CH3C(OH)2+ + C4H9OH ↔ CH3COOC4H9 + H2O + H+

1.2.1.2 Kinetic Considerations of Esterification

Esterification Process

The rate of esterification with acid catalyst is proportional to acid or hydrogen-ion

concnetrations, as well as the concentration of the alcohol and organic acid. The
effect of temperature on the reaction rate is given by the well-known Arrhenius
equation.

Where
k = Rate constant
 A = Frequency factor and pre-exponential factor
fa ctor
E A = Activation energy
R = Gas constant
T = Temperature in Kelvin

The kinetics of the reaction of n-butyl alcohol with acetic acid have been
studied by Leyes and Othmer over the temperature range of 0°C to 120°C using
sulfuric acid as catalyst, with molar ratio of n-butyl alcohol to acetic acid varied from
3 to 19.6 and concentration from 0% to 0.14% by weight. The order of this reaction
is influenced by temperature and catalyst concentration. Therefore, at 100°C with 5
moles of alcohol per mole of acid and no catalyst, straight-line plots were obtained
for first order, second order and third order reaction over an 8 hours reaction period
with 32% conversion of acid to ester. At 100°C and low catalyst concentration which
is 0.0147%, a second order or third order reaction is indicated, however above
0.015% catalyst well-defined straight line plots were obtained for a second order
reaction up to 70% to 80% conversion of acetic acid. With 0.03% catalyst and 5
moles of alcohol per mole of acid, the order of the reaction is not ascertainable at
0°C to 30°C, but at 100°C or higher the esterification is second order up to 80% to
85% completion.
 6

1.2.2 Transesterification
Transesterification Process

Butyl acetate is synthesized by the reaction of methyl acetate and butanol in the
presence of strongly acidic catalyst. The following is the chemical equation of the
reaction:

CH3COOCH3 + C4H9OH ↔ CH3COOC4H9 + CH3OH

Methyl Butanol Butyl Methanol
 Acetate  Acetate

The reaction convert the alkyl group of an ester to another alkyl group.The
reaction is reversible and the equilibrium constant is close to one.

1.2.2.1 Reaction Mechanism of Transesterificat

Transesterification
ion Process
Process

Ester exchange or transesterification occurs under similar conditions as

esterification. The reaction type is nucleophilic acyl substitution and considered to
consist of four steps as shown below.

The protonation of the ester gives the intermediate (1) and followed by the
addition of the exchanging alcohol to give the intermediate (2), which can be
dissociated via the transitions state (3) to give the ester (4). Again, each step is
reversible and in the presence of a large excess of the alcohol, the equilibrium point
of the reaction is displaced so that the product is almost entirely the required ester
(4). Water must once more be excluded, as it would produce some hydrolysis by
dissociation of an intermediate analogous to (2) to a free acid. The preferred
conditions for transesterification of existing esters are therefore a large excess of the
appropriate alcohol and absence of water.
 7

1.2.2.2 Kinetic Considerations of Transesterification

Transesterification Process

The kinetic expression for the forward and reverse reactions of methanol and methyl
acetate is shown as below.

Where
R = Overall reaction rate having a first-order dependence on
R = the two reactants and products
kF and kR = Temperature dependence of the forward and reverse
kF and kR = specific reaction rates
CMeAc = Concentration of methyl acetate in kmol/m3
CBuOH = Concentration of butanol in kmol/m3
CMeOH = Concentration of methanol in kmol/m3
CBuAc = Concentration of butyl acetate in kmol/m3
R = Gas constant
T = Temperature in Kelvin

The activation energies are basically the same, which indicatess that the
heat of reaction is small and also that the equilibrium constant decreases only
slightly with increasing temperature. The forward reaction rate depends on the
concentration of methyl acetate and butanol. The same production rate can be
achieved by having any number of reactant concentrations, just so the product of
the concentrations is the same. The methanol concentration could be large, and the
butanol concentration could be small, or the reverse could be true. These
concentrations depend on the relative flow rates of the two recycles.
 8

1.3 PROCESS DESCRIPTION

On a commercial basis, the production of butyl acetate may be carried out by:
1) Conventional Esterification
2) Esterification by Reactive Distillation
3) Conventional Transesterification
4) Transesterification by Reactive Distillation

1.3.1 Conventional Esterification

This is the most common process for producing butyl acetate on a commercial
scale. In the commercial processes, the reaction is proceed to completion by
maintaining an excess of one of the reactants. The limiting reactant usually acetic
acid and removing one or both of the products. Based on Figure 1.1, butanol, acetic
acid and catalyst are charged to the esterification reactor producing an ester-water
azeotrope which then brought to reflux through the esterification column. The water
layer containing some butanol and butyl acetate is continuously removed from the
decanter and fed to the refining column. Butanol and butyl acetate distillate returned
to the reactor and the water, essentially free of all organics, is collected and sent to
waste treatment facilities. A portion of the organic phase is returned to the column
as reflux and the remainder is fed to a refining column. Butanol, water and some
butyl ester are being removed from the top of the column and returned to the
esterification reactor while n-butyl acetate of purity usually up to 99 % mass is
withdrawn as a bottom product.

1.3.1.1 Catalyst Selection

The catalyst used in this esterification reaction is the concentrated sulfuric acid in
the liquid form. This catalyst is used because of its advantages over others catalyst
such as the hydrochloric acid, Amberlyst 15, Smopex-101, various zeolites,
sulphated zirconia and niobium acid.

Concentrated sulfuric acid is a stable compound and exists in liquid with a

nearly pure form, unlike other catalyst such as the hydrochloric acid that exists in
gas form and need to be dissolved in water. The esterification reaction produces
water as one of its product. If the amount of water increases, it will increase the rate
of the reverse reaction thus decreasing the yield. This is where the sulfuric acid
 9

shows its role as a great dehydrating agent and absorbs the water produced. Dilute
sulfuric acid will not act as a dehydrating compared to concentrated sulfuric acid.

Sulfuric acid is neither a strong oxidant, which readily transfers oxygen

atoms nor a strong reductant, which donates its electron to other. This characteristic
will reduce the possibilities for undesired side reactions. Finally, sulfuric acid is
cheap compared to the other catalyst. Table 1.2 shows that the sulfuric acid activity
is the highest with the smallest usage.

Table 1.2: The Activity for Different Catalyst in the Esterification Reaction of Acetic
 Acid and Butanol at 75°C.
Catalyst Amount (g)  (m mol-  s- )
kobs (m  (m mol-  gcat-  s- )
kc (m
No Catalyst - 1.30 × 10⁻⁸ -
Sulphuric Acid 0.9 1.7 × 10⁻⁷ 1.9 × 10⁻⁷
 Amberlyst-15 1.9 3.0 × 10⁻⁸ 1.6 × 10⁻⁸
p-Toluenesulphuric
1.77 1.7 × 10⁻⁷ 9.4 × 10⁻⁸
 Acid
 10

Figure 1.1: Block Flow Diagram for Conventional Esterification

Esterification Process

11

1.3.2 Esterification
Esterificati on by Reactive Distillation
Distillati on

The reactive distillation provides an attractive alternative for reaction/separation

processes with reversible reactions, especially for etherification and esterification. It is
usually consisting of rectifying, reactive and stripping sections. The nonreactive
rectifying and stripping sections were packed with fine metallic wires while the middle
reactive zone was packed with KATAPAK-S packing embedded with ion exchange
resins Amberlyst-15 as a catalyst.

Based on Figure 1.2, pumps are used to transfer the liquid from the feed tank
to the column and the reactions occur in the reactive part of the distillation column. The
reaction mixture consisting of acetic acid, butanol, butyl acetate and water or an
equilibrium mixture from the reactor is fed continuously to the column. The mixture is
the heated by the reboiler to almost its boiling point and fed into the catalytic zone of the
column. Butyl acetate is withdrawn from the bottom of the column as it is the highest
boiling point as well as heaviest key component in the system.

In the condenser, two immiscible phases were formed, an aqueous phase

 11

1.3.2 Esterification
Esterificati on by Reactive Distillation
Distillati on

The reactive distillation provides an attractive alternative for reaction/separation

processes with reversible reactions, especially for etherification and esterification. It is
usually consisting of rectifying, reactive and stripping sections. The nonreactive
rectifying and stripping sections were packed with fine metallic wires while the middle
reactive zone was packed with KATAPAK-S packing embedded with ion exchange
resins Amberlyst-15 as a catalyst.

Based on Figure 1.2, pumps are used to transfer the liquid from the feed tank
to the column and the reactions occur in the reactive part of the distillation column. The
reaction mixture consisting of acetic acid, butanol, butyl acetate and water or an
equilibrium mixture from the reactor is fed continuously to the column. The mixture is
the heated by the reboiler to almost its boiling point and fed into the catalytic zone of the
column. Butyl acetate is withdrawn from the bottom of the column as it is the highest
boiling point as well as heaviest key component in the system.

In the condenser, two immiscible phases were formed, an aqueous phase

(almost pure water) and organic phase containing water, butanol and butyl acetate. A
phase separator was used with the condenser to provide reflux to the column and to
continuously withdraw water that formed during the reaction. The overhead distillate
consisting of butanol, water and butyl acetate is condensed and cooled to a
temperature sufficiently low to allow two phase separation to take place in a decanter.
The aqueous phase is removed from the column while the organic phase is totally
refluxed to the stage below the condenser.

12
 12

Figure 1.2: Block Flow Diagram for Esterification by Reactive Distillation

Distillation Process

13

1.3.3 Conventional Transesterification

Transesterificat ion

Based on Figure 1.3, feedstock with a composition of 60% methyl acetate and 40%
methanol are fed into a reactor which operates at 200°F and 100 psia. Fresh butanol is
also fed to the CSTR along with a butanol recycle stream and a methyl
acetate/methanol recycle. Reactor effluent is fed to column DC1 in which methyl
acetate and methanol are taken overhead and butanol and butyl acetate leave in the
bottoms. The column has 30 trays. The distillate stream is fed to column DC2, which
produces methanol in the bottoms and a distillate stream whose contains gaseuous
mixture which is near that of the azeotrope. The distillate is recycled back to the reactor.
The column has 30 trays.
tra ys. The bottoms from DC1 is fed to column DC3, which produces
butyl acetate in the bottoms and a butanol-rich distillate that is recycled back to the
reactor.
 13

1.3.3 Conventional Transesterification

Transesterificat ion

Based on Figure 1.3, feedstock with a composition of 60% methyl acetate and 40%
methanol are fed into a reactor which operates at 200°F and 100 psia. Fresh butanol is
also fed to the CSTR along with a butanol recycle stream and a methyl
acetate/methanol recycle. Reactor effluent is fed to column DC1 in which methyl
acetate and methanol are taken overhead and butanol and butyl acetate leave in the
bottoms. The column has 30 trays. The distillate stream is fed to column DC2, which
produces methanol in the bottoms and a distillate stream whose contains gaseuous
mixture which is near that of the azeotrope. The distillate is recycled back to the reactor.
The column has 30 trays.
tra ys. The bottoms from DC1 is fed to column DC3, which produces
butyl acetate in the bottoms and a butanol-rich distillate that is recycled back to the
reactor.

14
 14

Figure 1.3: Block Flow Diagram for Conventional Transesterification Process

15

1.3.4 Transesterification
Transesterifi cation by Reactive Distillation
Distillati on

Based on Figure 1.4, butanol is fed into an upper section of the reactive section of the
reactive distillation column. Methyl acetate is fed into a lower section of the reactive
section of the reactive distillation column. Butanol and methyl acetate undergone the
transesterification reaction catalysed by Amberlyst  –  15 in the reactive section.
Theoritically, after the transesterification reaction, the components presence in the
reactive distillation column consist of methyl acetate, butanol, butyl acetate and
methanol. The continuous heating process by the reboiler make methyl acetate and
methanol of lower boiling point convert from a liquid phase to gaseous phase. The
gaseous state of methyl acetate and methanol rise to the top of the reactive distillation
column. The ester product deposited on the bottom of the reactive distillation column
and proceed to its reservoir through a pump. The methyl acetate/methanol mixture is
discharged from the top of the reactive distillation column. The condenser liquefied the
methyl acetate/methanol mixture from the top of the reactive distillation column. The
liquefied methyl acetate/methanol mixture is fed to the reflux drum. The liquefied methyl
acetate/methanol mixture is bypassed into the reactive distillation column with major
 15

1.3.4 Transesterification
Transesterifi cation by Reactive Distillation
Distillati on

Based on Figure 1.4, butanol is fed into an upper section of the reactive section of the
reactive distillation column. Methyl acetate is fed into a lower section of the reactive
section of the reactive distillation column. Butanol and methyl acetate undergone the
transesterification reaction catalysed by Amberlyst  –  15 in the reactive section.
Theoritically, after the transesterification reaction, the components presence in the
reactive distillation column consist of methyl acetate, butanol, butyl acetate and
methanol. The continuous heating process by the reboiler make methyl acetate and
methanol of lower boiling point convert from a liquid phase to gaseous phase. The
gaseous state of methyl acetate and methanol rise to the top of the reactive distillation
column. The ester product deposited on the bottom of the reactive distillation column
and proceed to its reservoir through a pump. The methyl acetate/methanol mixture is
discharged from the top of the reactive distillation column. The condenser liquefied the
methyl acetate/methanol mixture from the top of the reactive distillation column. The
liquefied methyl acetate/methanol mixture is fed to the reflux drum. The liquefied methyl
acetate/methanol mixture is bypassed into the reactive distillation column with major
composition of methyl acetate. The mixture will continuously proceeding further
transesterification process. The liquefied methyl acetate/methanol mixture is bypassed
into the distillation column with major composition of methanol for further distillation.
Methyl acetate is fed to the distillation column. The gaseous state of methyl
m ethyl acetate rise
to the top of the distillation column. The methanol solution deposited on the bottom of
the distillation column and proceed to its reservoir through a pump. The gaseous
mixture which contains rare amount of butyl acetate and butanol and higher amount of
methanol and water is discharged from the top of the distillation column. The condenser
liquefied the gaseous mixture from the top of the distillation column. The liquefied
gaseous mixture is fed to the reflux drum. After refluxion, the liquefied gaseous mixture
is then discharged from the reflux device through a pump. The T-type bypassing tube
bypasses the liquefied gaseous mixture into two portions, the first portion and the
second portion. The first portion is sent to the lower section of the reactive distillation
column for further conversion. The second portion is recycled to the distillation column
for further separation of methanol and methyl acetate.

16
 16

Figure 1.4: Block Flow Diagram for Transesterification by Reactive Distillation Process

17

1.4 PROCESS SELECTION

Butyl acetate can be synthesized in a number of different ways such as esterification

and transesterification.

The most common manufacturing process for producing butyl acetate on a

commercial scale is the direct esterification of butyl alcohol with acetic acid in a batch or
continuous unit. Transesterification has been applied in polyvinyl alcohol producing
plant. The manufacturing process of polyvinyl alcohol is always accompanying by the
large production of the by-product, methyl acetate. Commonly, the impure is discharged
into the atmosphere after it is scrubbed in a wastewater treatment system or burned in
an incinerator. Since methyl acetate has low application in industrial and methanol is a
feedstock for polyvinyl alcohol synthesis, the most attractive way would be to recycle
methyl acetate to be transesterified into methanol and butyl acetate, since butyl acetate
is an important solvent and has higher economical value than methyl acetate.

The selected process is esterification, since it has been widely used in industry
for the production of butyl acetate for years. One of the factors in choosing esterification
 17

1.4 PROCESS SELECTION

Butyl acetate can be synthesized in a number of different ways such as esterification

and transesterification.

The most common manufacturing process for producing butyl acetate on a

commercial scale is the direct esterification of butyl alcohol with acetic acid in a batch or
continuous unit. Transesterification has been applied in polyvinyl alcohol producing
plant. The manufacturing process of polyvinyl alcohol is always accompanying by the
large production of the by-product, methyl acetate. Commonly, the impure is discharged
into the atmosphere after it is scrubbed in a wastewater treatment system or burned in
an incinerator. Since methyl acetate has low application in industrial and methanol is a
feedstock for polyvinyl alcohol synthesis, the most attractive way would be to recycle
methyl acetate to be transesterified into methanol and butyl acetate, since butyl acetate
is an important solvent and has higher economical value than methyl acetate.

The selected process is esterification, since it has been widely used in industry
for the production of butyl acetate for years. One of the factors in choosing esterification
process over transesterification process is the availability of raw materials. The
feedstock of esterification process is acid acetic and butanol. Those chemicals are
available in Malaysia and some of the suppliers are Optimal Chemicals (M) Sdn. Bhd.,
BP Petronas Acetyls Sdn. Bhd. and BASF Petronas Chemicals Sdn. Bhd. On the other
hand, the feedstock of transesterification process are methyl acetate and butanol.
Butanol is can be found locally, however, methyl acetate are not avaiable in Malaysia.
The nearest methyl acetate suppliers or distributors are in Singapore and Thailand.

 As stated earlier, in the production of polyvinyl alcohol, methyl acetate is

typically produced as a byproduct. It is usually in the form of azeotrope mixture of
methyl acetate/methanol. The end product of transesterification process is methanol
and butyl acetate, however, the production of methanol is larger than that of butyl
acetate. Thus, it is not applicable for us to select this process since methanol is the
major product.

In addition, both reactions are equilibrium process. They need to shift the
reaction system to the product side to greatest degree. In this respect, it may be said
that esterification is more advantageous because, the water co-product is readily

18
 18

separated from the reaction medium because of its incompatibility with organic
solvents. Organic solvent which is butyl acetate has a lower density than water, which
means butyl acetate is lighter and will form a separate layer on top of water.

Now that the esterification process is selected, another thing need to be

considered is the system to be use, either conventional process or reactive distillation
process. The most common method used in industry to produce butyl acetate is
conventional esterification in which the chemical reaction and the purification of the
desired products are carried out in separate unit operations. Reactive distillation is an
integrated system in which reaction and distillation is combined in a single vessel.

Conventional distillation is more practicable compared to the reactive

distillation process which has complexities in column design, process synthesis and
operability of reactive distillation processes resulting from the interaction of reaction and
distillation. “The lack of systematical and universal design tools makes the industrial
community hesitate on firmly adopting this new kind of process. The interaction
between reaction and phase equilibrium in the same device makes the design and
control of these processes much more difficult than it is for conventional reactors or
[1]
traditional distillation processes” .

Other limitation of reactive distillation is regarding the temperature mismatch.

There must be no mismatch in the temperatures that are favorable for reaction and the
temperatures that are favorable for separation. Both reaction and separations occu r in a
single vessel at essentially a single pressure and the temperatures throughout the
column are fixed by tray composition, thus both the reaction and vapor-liquid
equilibrium see the same temperatures. In contrast with what can be done in a
conventional distillation process, the reactors and distillation columns can be operated
at their optimum pressures and temperatures that are selected to be the most favorable
for their given chemical kinetics and vapor-liquid equilibrium properties respectively.

[1]
 Preliminary Design Of Reactive Distillation Columns,
Columns , R. Thery, X. M. Meyer, X. Joulia and M. Meyer

19
 19

Table 1.3: Summary of the Comparison between Four Processes

Esterification Transesterification
Conventional Distillation Reactive Distillation Conventional Distillation Reactive Distillation
Butanol Butanol Butanol Butanol
Raw Material
 Acetic Acid  Acetic Acid Methyl Acetate Methyl Acetate
By-product Water Water Methanol Methanol
Esterification Reactor Reactor Reactive Distillation
Reactive Distillation
Major Equipments Two Distillation Column Three distillation Column
Column
Decanter columns Distillation Column
Catalyst Sulfuric Acid Amberlyst - 15 Amberlyst – 15 Amberlyst – 15
Methyl acetate
cannot be found
locally.
Complexities in The catalyst is
column design, expensive than the
process synthesis liquid catalyst.
and operability Methyl acetate cannot
Complexities in
Higher capital cost-due be found locally.
Relatively new column design,
to the number of technology Higher capital cost-due process synthesis
Disadvantages
reactor and separator to the number of
Limited applications and operability.
installed reactor and separator
Complex modeling Relatively new
installed.
needs technology
Significant Limited applications
development costs Complex modeling
needs
Significant
development costs

20

1.5 MARKET ANALYSIS

Market analysis is to determine the attractiveness of a market of a product and to

understand its evolving opportunities and threats as they relate to the strengths and
weaknesses of a firm. In this chapter, butyl acetate supply and demand are being
discussed other than providing information of the average pricing for butyl acetate
recently. Worldwide markets of butyl acetate which includes United States, Europe
and Asia are being analyzed to see the trend of butyl acetate sales.

Butyl acetate is specialty solvents which are very importance in printing ink
and paint production. Butyl Acetate is part of the acetic acid and acetaldehyde group
of chemicals. Business in this solvent has change worldwide base on demand and
supply. About 87% world consumption of butyl acetate is in coatings which are
particularly in paints and inks. The moving of solvent produced from oxygenated to
halogenated solvent has shown positive impact to production of butyl acetate
worldwide. Due to environmental impact pose to the planet, producer of coating and
 20

1.5 MARKET ANALYSIS

Market analysis is to determine the attractiveness of a market of a product and to

understand its evolving opportunities and threats as they relate to the strengths and
weaknesses of a firm. In this chapter, butyl acetate supply and demand are being
discussed other than providing information of the average pricing for butyl acetate
recently. Worldwide markets of butyl acetate which includes United States, Europe
and Asia are being analyzed to see the trend of butyl acetate sales.

Butyl acetate is specialty solvents which are very importance in printing ink
and paint production. Butyl Acetate is part of the acetic acid and acetaldehyde group
of chemicals. Business in this solvent has change worldwide base on demand and
supply. About 87% world consumption of butyl acetate is in coatings which are
particularly in paints and inks. The moving of solvent produced from oxygenated to
halogenated solvent has shown positive impact to production of butyl acetate
worldwide. Due to environmental impact pose to the planet, producer of coating and
paint has taken the initiatives to reduce the volatile organic compounds (VOCs) and
hazardous air pollutants (HAPs) in their products. Government has increased
environmental regulations to accelerate these moves which show that environmental
awareness has become priority nowadays. The consumption of butyl acetate has
shown a steady increase which as it has replaced methyl ethyl ketone (MEK) as a
solvent. In 1990, MEK was defined as a hazardous air pollutant (HAP).
 21

1.5.1 Supply and Demand of Butyl Acetate

Source: The Dow Chemical Company, 2006

Figure 1.5: World Consumption of Butyl Acetate

1.5.1.1 Global Supply

Supply And Demand of
of Butyl
Butyl Acetate
Acetate

The demand of butyl acetate in the world has been increases since 1998. From
1998 to 2008, world production is said to be growing with an average of 2.2% per
year. In 1999, world production was 608000 tonnes and the consumption is about
the same capacity. In 2000, the demand was predicted to reach 625000 tonnes.
Butyl acetate demand expected to increase from rapidly turning industrial countries
like China and India and the demand may be higher than United States and Europe.

In United States, butyl acetate consumption has steadily increased in

recent years due to its replacement of methyl ethyl ketone, which has been defined
as a hazardous air pollutant (HAP) and that includes methyl isobutyl ketone. In
addition, BP company has operates 80000 tonnes per year butyl acetate facility at
its Yangtze River Acetyls partnership in China, Chuanwei plant. BP Amoco has
finished the plan to extend the Chuanwei plant, increasing the capacity by 150000
tonnes per year to 350000 tonnes per year of butyl acetate since 2002. European
and United States markets are relatively balanced with steady demand.
 22

Table 1.4: Major Global n-Butyl Acetate Capacity, ’000 tonnes per year 

Capacity (‘000
Company Location
TPA)
Europe

BASF Ludwigshafen, Germany 80

Celanese Frankfurt, Germany 40

Dwory Oswiecim, Poland 6

European Oxo Marl, Germany 100

Ineos Oxide Antwerp, Belgium 60

JSC Ashinsky Asha, Russia 3.5

JSC Nevinnomyssky Azot Nevinnomyssk, Russia 18

Plastificantes de Lutxana Baracaldo, Spain 7

Slovenske Lucobne
Hnust’a, Slovakia 10
Zavody
Asia

Celanese Pulau Sakra, Singapore 100

Chang Chun
Miao-Li, Taiwan 30
Petrochemical
Changhua Chemical Jiangyin, China 80
China National Blue Star
Shanghai, China 10
Chemical
Continental Solvindo Merak, Indonesia 20

Daicel Chemical Ohtake, Japan 22

Guangzhou Solvent Plant Guangzhou, China 30

International Ester Ulsan, South Korea 25

Jiangmen Solvent Plant Jiangmen, China 25

Jiangsu Sanmu Yixing, China 30

Kyowa Hakko Chemical Yokkaichi, Japan 54

Nanchang Ganjiang
Nanchang, China 20
Solvent Plant
Optimal Kerteh, Malaysia 50
Shandong Jinyimeng
Linshu, China 8
Group
Shinko Yuki Kobe, Japan 10

Shiny Chemical Industrial Kaohsiung, Taiwan 36

 23

Capacity (‘000
Company Location
TPA)
United States

Celanese Celanese Celanese

Dow Chemical Dow Chemical Dow Chemical

Eastman
Eastman Chemical Eastman Chemical
Chemical

Source: ICIS, 2004

Source: ICIS Pricing 22 Jun 2010

Figure 1.6: Graph of Butyl

Butyl Acetate And Butanol Price

It is shown from the graph that the price of butyl acetate has kept
increasing due the increase of price of raw material (butanol) and strong demand
mainly driven by Asian strong growth.
 24

1.5.1.2 Demand of Butyl Acetate

1.5.1.2.1 Demand of Butyl Acetate in USA

The steady increases of production of n-butyl acetate in the United States is driven
because of demand from export markets and the replacement of aliphatic ketone
and aromatic hydrocarbon solvents in the United States. However due to economic
crisis that plague United States economy, the demand of butyl acetate is uncertain
in long term. United States export its butyl acetate mostly in region that has higher
demand than supply like China and India.

1.5.1.2.2 Demand of Butyl Acetate in Europe

The demand of butyl acetate in Europe is quite healthy although many sources
described the demand as quiet. The demand to raise production of butyl acetate
came more from the pressure on butanol. Butanol was limited for some producers
due to propylene shortages. Propylene stock has become short due to the facts that
there are many ongoing production issues and strong export demand for derivatives.

1.5.1.2.3 Demand of Butyl Acetate in Asia

 Asia’s butyl acetate solvent market is expected to recover in the second half of
2010, driven by robust growth in China and an improving United States property
market. Based on China’s gross domestic product (GDP) growth in 2010 which is
8.5% and the United States property market that has been improving, the butyl
acetate market will be better in the latter half of 2010. Other factor is also because of
the rapid pace of industrialization and industrial production.

Operating rates at Asian butyl acetate plants has rise to above 50% of
capacity in 2010, from the average of 30% to 50% in 2009 showing good economy
prospects.

In Asia, there is always supply for butyl acetate however the demands are
low in 2007 due to economic crisis. It is proven by facts that major producers in
Southeast Asia at that time had been operating at half as they could not find
markets to export their cargoes after meeting domestic demand due to economic
crisis. However things are moving fast in 2010. Economic growth in country like
China and India are rocketing and thus causes increasing demand of chemical
products like butyl acetate. Producer is currently targeting the China market as
 25

China domestic demand of butyl acetate were able to keep up with butanol
feedstock cost increases.

Table 1.5: Global Raw Material and Product Price

Material Region Price

Butyl Acetate Europe RM 3011.25 - 3093.75 /tonne

RM 3904 – 4096 /tonnes
Butyl Acetate Southeast Asia
Cost And Freight

Butyl Acetate Thailand and Philippines RM 4000 /tonne

Butyl Acetate China RM 5200 – 5250 /tonne

 Acetic Acid Southeast Asia RM 1312 – 1376 /tonne

Butanol Southeast Asia RM 4800 /tonne

1.5.1.3 Malaysian Production and Demand

Demand of Butyl Acetate
Acetate

In South East Asia, PETRONAS and Union Carbide venture already starts their
plant of butanol and derivatives complex since fourth quarter 2001. Optimal
Chemicals (oxoalcohol and other chemicals) which located in Kerteh, Terengganu is
the only producer of butyl acetate in Malaysia. In 2009, PETRONAS acquired all
Dow's stakes in Optimal.

Kerteh (Optimal Olefins) Integrated Petrochemicals Complex is an ethylene

steam cracker plant that received its feedstock from nearby PETRONAS gas
processing plant. The cracker will crack ethylene and propylene to its derivatives
which one of it is the raw material for butyl acetate production, butanol with capacity
of 140,000 tonnes/yr and producing butanol derivatives which are butyl acetate,
butyl acrylate and butyl cellosolve glycol ethers. The butyl acetate capacity
produced by Optimal Chemicals (M) Sdn. Bhd. is 50000 tonnes per year. The
specification of the ethylene plant is shown in the Table 1.6.
 26

Table 1.6: Specification of Optimal Integrated Petrochemical Complex

Key Data
Order Year 1998
Plant Type Integrated petrochemical Site
Location Kerteh
Estimated Investment $300 million
Completion 2001
Key Players
Sponsor PETRONAS, Union Carbide
Lead Contractor Linde AG
Output Chemicals (tones per year)
Ethylene 600,000
Ethylene Glycol 360,000
Ethylene Oxide 385,000
Ethoxylates 85,000
Butanol 140,000
Butanol Derivatives 160,000

Source: www.chemicals-technology.com
Source: www.chemicals-technology.com
 27

1.5.2 Malaysia Import and Export of Butyl Acetate

1.5.2.1 Malaysia Import and

and Export of Butyl
Butyl Acetate in Quantity

Import And Export of Butyl Acetate

16000000

14000000

12000000

10000000

8000000 Import
6000000 Export
4000000

2000000

0
2007 200 8 2 00 9

Source: MATRADE, 2010

Figure 1.7: Malaysia Import and Export of n-Butyl Acetate in Year 2007-2009
(Quantity, kg)

Import And Export of Butyl Acetate

8000000

7000000

6000000

5000000

4000000 Import

3000000 Export

2000000

1000000

0
2 008 2 0 09 2010

Source: MATRADE, 2010

Figure 1.8: Malaysia Import and Export of n-Butyl Acetate for Mid-Term Year 2008-
2010 (Quantity, kg)
 28

The above graph show the overall quantity of Malaysia import and export of butyl
acetate quantity in kilogram, kg. Export of butyl acetate is much higher than import
of butyl acetate as global demand of butyl acetate from overseas is greater.
However, Malaysia still imports some of butyl acetate to meet domestic demand.
From the graph, butyl acetate import has kept decreasing as Malaysia local
producer keep increasing production of butyl acetate. Malaysian export fell in Jan –
Dec 2008 due to economic crisis that hit global petrochemical market. However in
Jan – Dec 2009 Malaysia export has increased because of world economic recovery
that is much driven by growth in Asia region. The world economic recovery shows
positive outlook for butyl acetate.

1.5.2.2 Malaysia Import

Import and Export
Export of n-Butyl
n-Butyl Acetate in Average
Average Pricing

5
   a
   i
   s
   y
   a 4
    l
   a
   M
   t
   i
   g 3
   g
   n
   i
   R
2

0
20 07 20 08 20 09

Year

Source: MATRADE, 2010

Figure 1.9: Average Pricing of n-Butyl Acetate for Import, Year 2007-2009
 29

50

45

40

   a 35
   i
   s
   y
   a 30
    l
   a
   M 25
   t
   i
   g
   g 20
   n
   i
   R 15

10

0
2 0 08 2009 20 1 0

Year

Source: MATRADE, 2010

Figure 1.10: Average Pricing of Butyl Acetate for Import, Mid-Term Year 2008-2010

The prices of butyl acetate that were imported tend to increase year by year. This is
not good as it can affect the industry and reduce company’s profit. Butyl acetate is
mainly used in paint and coating industries that generate billion of Ringgit every year
and it is important for companies to have cheaper raw material to reduce cost and
increase profit. Our local butyl acetate supplier is trying to increase capacity to meet
local demand and further expand their market to overseas. If the average price was
compared from Jan-May for 2008-2010, the price of butyl acetate that was imported
are decreasing from year to year.
 30

4.5

   a 3.5
   i
   s
   y
   a
    l 3
   a
   M 2.5
   t
   i
   g
   g 2
   n
   i
   R 1.5

0.5

0
2007 2 008 2009

Year

Source: MATRADE, 2010

Figure 1.11: Average Pricing of n-Butyl Acetate for Export, Year 2007-2009

4.5

3.5

   a
   i
3
   s
   y
   a
    l
   a 2.5
   M
   t
   i
   g 2
   g
   n
   i
   R 1.5

0.5

0
2008 2 009 2010

Year

Source: MATRADE, 2010

Figure 1.12: Average Pricing of n-Butyl Acetate for Export, Mid-Term Year 2008-
2010
 31

Malaysia price of exported Butyl Acetate is decreasing as the demand of butyl

acetate from outside Malaysia decreased. Most of the consumer tends to buy butyl
acetate from their own country such as China which the production increased
proportionally with its demand. Plus the abundance of supply compared to the
demand of butyl acetate further reduces the price of butyl acetate. Malaysia’s butyl
acetate price is quite competitive and this has increased our export where many
countries purchase more of Malaysia’s butyl acetate.

1.5.3 Raw Material Supply and Demand

Butyl acetate can be produced by two processes which are esterification process
and transesterification process. In this report, esterification process has been
selected and the raw materials used to produce butyl acetate by this process are
butanol and acetic acid. This section discussed on the supply and demand for the
raw materials.

1.5.3.1 Acetic Acid

 Acetic acid is used largely in the manufacturing of  vinyl

  vinyl acetate monomer (VAM),
(VAM),
which accounts for one-third of acetic acid consumption. VAM is majorly used in the
production of emulsions as base resins for water-based paints, adhesives and textile
finishes. Other purpose of acetic acid is its second largest derivative which
is purified
is purified terephthalic acid (PTA).Demand
(PTA).Demand for PTA is being driven by huge growth
of  polyethylene
 polyethylene terephthalate (PET)
(PET) bottle resins and polyester fiber.

Consultant has forecasted that the long term global demand for acetic acid
will grow at 3% to 4% per year from 2010 onwards. The healthy growth of acetic
acid will ensure that supply of essential raw material to produce butyl acetate is
sufficient. The global demand for acetic acid is at around 6.5 million metric tons per
year. Growth is much higher in Asia, pulled by China where it is estimated to grow
by up to 8% per year back up by it tremendous Gross Domestic Product (GDP)
value.

Exports were up by nearly 10% in 2008 at 817000 tonnes compared to

745000 tonnes
t onnes in 2007.
2 007. The market is looking bright in Asia particularly China,
where it is experiencing the fastest growth. India is also a country which has strong
acetic acid demand. The demand of acetic acid in India has shown big potential
growth in the future as increase demand of  vinyl
 vinyl acetate monomer (VAM)
(VAM) recently.
 32

In Malaysia, petrochemical plant that produced acetic acid is BP

PETRONAS Acetyls (M) Sdn. Bhd. in Kerteh, Terengganu which is the supplier for
butyl acetate plant that has been proposed.

1.5.3.2 Butanol

Butanol is an important organic raw material, where it’s mainly used to produce
phthalic acid and aliphatic binary lipid plasticizers. It is also widely used in the
production of various plastic and rubber products. Butanol also used to produce n-
butyl acetate, n-butyl acrylate, butyraldehyde, and other chemical. Butanol is used in
resins, paints, solvents, and adhesives as a defoamer.

The average annual growth of butanol in 2005 to 2010 is 3.6%. The world
demand of butanol is expected to reach 3.442 million tonnes in 2010. Demand
growth is the fastest in Asia, the Middle East, Europe and Africa.

In 2010 worldwide, butanol production capacity is expected to reach 3.657

million tonnes per year while the demand will reach 3.442 million tonnes. In 2015,
the world butanol production capacity will be expected to be 3.925 million tonnes per
year and the demand will reach 3.842 million tonnes. The sufficient supply of
butanol is very important to make sure that we do not have shortage of raw material
that can affect the productivity of our Butyl Acetate plant.

In Malaysia, butanol suppliers of the proposed plant are Optimal Chemicals

(M) Sdn. Bhd. in Kerteh, Terengganu and BASF PETRONAS Chemicals Sdn. Bhd.
in Gebeng, Pahang.
 33

1.5.4 Economic Analysis

Analysis

In building a plant, profit is the main reason for a chemical plant to be built.
However, profitability can only be obtained when total investment and cost of
production estimation are known. In this section, fixed capital investment of the plant
which includes total direct and indirect cost, equipment costs, raw material costs and
other costs required before starting up a plant were estimated.

Estimation accuracy of a plant is depend on three main factors which are

the accuracy of the cost data available, the amount of design detail available and
the time spent on preparing the estimate. The accuracy of the costs estimated must
be nearly accurate since it will provide reliable decisions. Thus, factors affecting
costs must be understood such as sources of equipment, price fluctuations,
company policies, operating time and rate of production and governmental policies.

1.5.4.1 Total Capital Investment

Total capital investment is summation of money spent before a plant ready to

operate. Total capital investment included two major investment which are fixed
capital investment and working capital investment. Fixed capital investment is an
investment in manufacturing and plant facilities purposes while working capital
investment is necessary for operation of the plant.

1.5.4.1.1 Estimation of Fixed Capital Investment, FCI

 As mentioned earlier, fixed capital

capita l investment is an investment in manufacturing
manufactu ring and
plant facilities purposes. In fixed capital investment, the cost is a once-only cost and
cannot be recovered after the plant had runs. It includes the cost for:
1. Design and engineering and supervision
2. Equipments and its installation
3. All piping, instrumentation
instrumentation and control systems
4. Buildings and structures
5. Auxiliary facilities

Fixed capital investment is divided into two which are direct and indirect
cost. Direct cost focus more towards cost of equipments and its installation while
indirect cost is about plant supervision and construction. Thus, fixed capital
investment can be determined as follow:
Fixed Capital Investment = Direct Costs + Indirect Costs (2.1)
 34

Estimation of the Total Direct Cost

 According to McKetta, the equipments needed

n eeded to construct a unit at an existing plant
site (1974) for continuously producing butyl acetate at daily rate 30000 to 50000
lb/day should at a minimum consist of the following: four distillation columns, five
tube and shell condensers, two tube and shell steam heaters, two process tanks,
one process decanter, two analysis tanks, storage tanks, and associated piping,
pumps, and instrumentation. The purchase cost of the above equipment would be
RM 769514.90 to RM 923417.88 (Marshall and Swift Equipment Cost Index =
414.2). Table 1.7 shows the summary of the estimated cost of designing,
purchasing, and installing a complete continuous ester unit.

Table 1.7: Summary of the Estimated Cost of Designing, Purchasing, and Installing
a Complete Continuous Ester Unit
RM

Equipment cost 769514.90 to 923417.88

Equipment installation 269330.21 to 323196.26
Instrumentation 307805.96 to 369367.15
Piping and pumps 769514.90 to 923417.88
Engineering 230854.47 to 277025.36
Electrical 153902.98 to 184683.58
Building 384757.45 to 461708.94
Outside (roads and services) 307805.96 to 369367.15

3193486.83 to 3832184.19

To estimate the total direct cost the following principles can be used, namely:

1. The six-tenths-rule (n set to 0.6) may be used to scale up/down to a new

capacity.
2. The Chemical Engineering Plant
Plant Cost Index should bed to update the capital
capital
costs.
 35

Therefore, the total direct cost can be determined as below:

(2.2)

Thus, the total direct cost is estimated to be RM 32636766

Estimation of Indirect Cost

Table 1.8: Summary of Estimation of Indirect Cost

Item Purchase Cost Estimation Cost (RM)
Design and engineering 30% of total direct cost 9791030
Contractor's fee 5% of total direct cost 1631838
Contingency 10% of total direct cost 3263677
Total Indirect Cost 14686544.7

Thus, fixed capital investment can be determined as below,

(2.3)

Therefore, the fixed capital investment is determined to be RM 47323310.70

1.5.4.1.2 Estimation of Working Capital Investment

Working capital investment is necessary for operation of the plant. It is an

investment costs required to operate the plant from the starting point until profits are
gained. The cost of working capital includes:
1. Start-up plant
2. Initial catalyst charges
3. Raw materials and intermediates in the process
4. Finished product inventories
5. Funds to cover outstanding accounts from customers

Working capital can be recovered after the plant had runs not like fixed
capital. Working capital are 5 per cent of the fixed capital investment. Thus the
working capital investment can be estimated as below,
 36

(2.4)

Therefore, the working capital investment is determined to be RM 2366165.535.

The total capital investment is the sum of the fixed and working capital.

(2.5)

Therefore, the total capital investment is determined to be RM 49689476.24

1.5.4.2 Total Production Cost

Total production cost is also known as total operating costs. Total production cost is
total of fixed cost and variable cost. Fixed cost is the cost that is unaffected by plant
production when it was operating or when it was shutting down. Fixed cost includes
maintenance, operating labor, laboratory cost, supervision, plant overheads, capital
charges, insurance, local taxes, and royalties. Variable cost is a cost depending on
production of plant and the amount of product produced. This cost includes raw
materials, miscellaneous materials and utilities. Total production cost can be
estimated as below.

Total Production Cost = Fixed Cost + Variable Cost (2.6)

 37

1.5.4.2.1 Estimation of Variable Costs

Cost of Raw Materials

Table 1.9: Summary of Raw Materials Cost

Annual Usage
Component Cost (RM/kg) Annual Cost (RM)
(kg/year)
 Acetic Acid 1.111 23760000.00 26397360.00
Butanol 2.628 39600000.00 104068800.00
Sulfuric Acid
0.6176 6336.000 3913.11
(Catalyst)
Total 130470073.00

Cost of Utilities

Table 1.10: Summary of Utilities Cost

Utilities Annual Cost (RM)

Electricity 1500000.00
Cooling Water 783452.34
Saturated Steam 284089.07
Total 2567541.41
 38

1.5.4.2.2 Estimation of Fixed Costs

Cost of Operating Labor

Table 1.11: Summary of Calculation on Cost of Operating Labor

Operator Units

Working hours 8 hours/shift

Working shifts for an operator 5 shifts/week
 Average working weeks 49 weeks/year

Total shift per year for an operator shifts per

245
[Average working weeks × Working shifts for an operator ] operator/year

Plant

Plant running 24 hours/day

Plant operates 3 shifts/day
Operating days 330 days/year

Total plant operating shift per year

990 shifts/year
[Operating days × Plant operates]

Number of operators needed to provide the total plant

operating shift per year [Total plant operating shift per 4.04 operators
year/Total shift per year for an operator]

Table 1.12: The Number of None Particulate Processing Steps and Handing Steps,
Nnp

Number of
Equipments Types Nnp
Equipments
Reactor 1 1
Distillation Column 3 3
Heater 2 2
Exchanger 5 4
Vessel 5 -
Total 10
 39

 According to Alkayat and Gerrard method:

NOL = (6.29 + 31.7P2 + 0.23Nnp) 0.5  (2.7)

Where
NOL = the number of operators per shift.
P = the number of processing step involving the handling particulate solids.
Nnp = the number of none particulate processing steps, handing steps and
includes compression, heating and cooling, mixing and reaction.

P is assumed to be zero because no particulate solids handling involves

NOL = (6.29 + 31.7(0)2 + 0.23(10)) 0.5

= 2.93
≈ 3 operators per shift

Operating labor = 4.04 operators × 3 operators per shift

shift
= 12.12
≈ 13 operators

Labor cost = 13 operators × RM 1000 per month × 12 month per year

= RM 156000.00 / year

Therefore, the operating labor cost annually is determined to be RM 156000.00

 40

Table 1.13: Summary of Production Costs

Purchase Cost Estimation Cost (RM)
Variable Costs, VC
1. Raw materials - 130470073.1
2. Miscellaneous materials 10% of item (4) 3312631.75
3. Utilities - 2567541.41
Sub-total A 136350246.30
Fixed Costs
4. Maintenance 7% of fixed capital 33126317.49
5. Operating labor - 156000.00
6. Laboratory cost 20% of item (5) 31200.00
7. Supervision 20% of item (5) 31200.00
8. Plant overheads 50% of item (5) 78000.00
10. Capital charges 15% of fixed capital 7098496.61
11. Insurance 1% of fixed capital 473233.11
12. Local taxes 2% of fixed capital 946466.21
13. Royalties 1% of fixed capital 473233.11
Sub-total B 42414146.53
Direct production costs A + B 178764392.80
13. Sales expense
25% of the direct production
14. General overhead 44691098.20
cost
15. Research and development
Sub-total C 44691098.20
Annual production cost = A + B + C 223455491.00

Production cost RM/kg = 4.03

 41

1.5.5 Breakeven
Breakeven Analysis

Break-even analysis is a type of cost-volume-profit analysis. The purpose of doing

the break even analysis is to determine the desirable output need to recover all the
costs from sales revenue. Describing break-even analysis involves computing the
break-even point and constructing a cost-volume-profit chart. It also requires an
estimation of fixed cost, variable cost and total revenues.

Breakeven point = FC/ (P - VC) (2.8)

Where
TC =Total cost
FC = Fixed cost
VC = Variable cost
P = Price per unit butyl acetate (RM)
Q = Production rate (metric tonne/year)
r =Revenue /total production rate (RM / tonne)
v =Variable cost/total production rate (RM / tonne)

Equations involved
TR =rQ
TC =FC+VC
VC =vQ

Table 1.14: Summary of TR, VC, FC and TC Values

Q TR VC FC TC
0 0 0 0 0
10000 57701648 40945288 47323310 88268598
20000 115403296 81890576
81890 576 47323310 129213886
30000 173104944 122835864 47323310 170159174
40000 230806593 163781152 47323310 211104462
50000 288508241 204726440 47323310 252049750
60000 346209889 245671728 47323310 292995038
70000 403911537 286617016 47323310 333940326
80000 461613185 327562304 47323310 374885614
90000 519314833 368507592 47323310 415830902
100000 577016482 409452880 47323310 456776190

 A graph of TR and TC versus Q respectively is plotted as below,

 42

Figure 1.13: Graphical Breakeven Point

Figure 2.9 shows that the breakeven point (intersection of TR and TC) is 30000
tonnes per year which is the amount of butyl acetate required to recover the
production cost of butyl acetate.
 43

1.5.6 Cash Flow Analysis

In order to find profit in a business, final step must be taken is to determine the
payback period (PBP), cumulative cash position (CCP), cumulative cash ratio (CCR)
and rate of return on investment (ROROI). For this butyl acetate plant, total
operating period is 10 years with start-up operation at the end of year two. The
capital investment used in the first year of the plant is 10 % from Total Capital
Investment (TCI) while it increased to 25 % of TCI during the second year.

Payback period is the time required after plant start up to recover the fixed
capital investment, FCI for the project. In illustration PBP is the point, where
undiscounted cash flow rises to the level of negative working capital. Undiscounted
cash flow is calculated to find the payback period. From the calculated value of net
cash income it’s clearly that the Pay -back period (PBP) is estimated of sixth year
after 3 years of the start up.

Table 1.15: Cash Flow ROROI Payback Period

Cost of land RM 2178000.00
Fixed Capital Investment, FCI RM 47323310.00
Fixed Capital Investment Year 1, FCI1 RM 4968947.62
Fixed Capital Investment Year 2, FCI2 RM 12422369.06
Working Capital RM 2366165.54
Revenue RM 342144000.00
Cost of Manufacturing RM 285200705.60
Salvage Value RM 2178000.00
Taxation Rate, t 30 %

FCI = Fixed Capital Investment

FCI1 = 10% from Total Capital Investment for the first year
FCL2 = 25% from Total Capital Investment for the second year
 44

Table 1.16: Nondiscounted After Tax Cash Flows

Cumulative Cash
End of Year Investment dk FCIL - ∑dk R COMd (R-COM-dk)×(1-t)+dk Cash Flow
Flow
0 -2178000 - 47323310.7 - - - -2178000 -2178000
1 -4968947.624 - 47323310.7 - - - -4968947.624 -7146947.624
2 -12422369.06 - 47323310.7 - - - -12422369.06 -19569316.68
3 - 9464662.14 37858648.56 342144000 285200705.6 42699704.72 181108295.2 161538978.5
4 - 15143459.42 22715189.14 342144000 285200705.6 44403343.91 175372709.9 336911688.4
5 - 9086075.654 13629113.48 342144000 285200705.6 42586128.78 173918937.8 510830626.2
6 - 5451645.393 8177468.089 342144000 285200705.6 41495799.7 173046674.6 683877300.8
7 - 5451645.393 2725822.696 342144000 285200705.6 41495799.7 171411180.9 855288481.7
8 - 2725822.696 0 342144000 285200705.6 40678052.89 171165856.9 1026454339
9 - - 0 342144000 285200705.6 40678052.89 40678052.89 1067132392
10 - - 0 342144000 285200705.6 40678052.89 40678052.89 1107810444
11 - - 0 342144000 285200705.6 40678052.89 40678052.89 1148488497
12 4544165.535 - 0 344322000 285200705.6 41384906.08 45929071.62 1194417569

45

Cumulative Cash Flow vs End of Year

1.4E+09

1.2E+09
   w 1E+09
   o
    l
   F
    h
   s80000000
   a
   C
   e60000000
   v
   i
   t
   a40000000
    l
   u
   m
   u20000000
   C
0

-2E+08 1 2 3 4 5 6 7 8 9 10 11
11 12
12 13
13

End of Year

Figure 1.14: Graph of Cumulative Cash Flow versus End of Year

Payback period =

= 3.43 years
 45

Cumulative Cash Flow vs End of Year

1.4E+09

1.2E+09
   w 1E+09
   o
    l
   F
    h
   s80000000
   a
   C
   e60000000
   v
   i
   t
   a40000000
    l
   u
   m
   u20000000
   C
0

-2E+08 1 2 3 4 5 6 7 8 9 10 11
11 12
12 13
13

End of Year

Figure 1.14: Graph of Cumulative Cash Flow versus End of Year

Payback period =

= 3.43 years

Cumulative cash position, CCP = RM 1194417569.00

Cumulative cash position is the amount of cash flows in and out. This plant is a big
investment as seen by the amount of CCP involved.

Cumulative cash ratio, CCR =

= 62.0352

Cumulative cash ratio is positive and big and has good prospect value.

Rate of return on investment, ROROI = -

Rate of return on investment, ROROI =

ROROI = 0.7807
Rate of return on investment, ROROI =
ROROI = 78.07%
 46

1.6 SITE SELECTION

In selecting a site location for building a plant, site location is one of the important
things to be considered. A
considered. A good site selection can help in maximizing the production
of a plant. In Malaysia, several locations have been designated for industries
ranging from light to heavy industries. The choice of final site selected should be the
best site based on the complete survey of advantages and disadvantages. There
are four main industrial locations that have been shortlisted which are:

1. Kerteh Industrial Estate, Terengganu

2. Pasir Gudang Industrial Estate, Johor

3. Prai Industrial Complex, Prai, Penang

4. Gebeng Phase
Phase (IV) Industrial Area, Pahang
 47

1.6.1 Criteria of Selection

The assessment of site location for sitting a plant would depend mainly on several
factors such as:

1.6.1.1 Production and Distribution Factors

a) Freight rates
Competitive points

Differentials

Favorable territory

b) Markets
Local area

Favorable area

Competitive area

National area

c) Competitive, feeder and consumer industries

d) Municipal restriction
Nuisance laws relating to fumes

Waste disposal

e) Corporation fees and taxes

f) Fuel
Types of fuel

Thermal efficiency

Reserve and alternate sources

 48

1.6.1.2 Specific Factors

a) Transportation facilities
Highways - Regularly used for short distance and generally small quantities.
 Availability of various services and project rates.
Water - cheaper but may be slow and irregular.
Railroads - dependable for light and heavy shipping aver all distance.
Pipelines - for gases and liquids, particularly for petroleum product.
 Air - for business transportation for personnel.

b) Regulatory Laws
Zoning ordinances.
Highway ordinances.
Building codes.
Waste-disposal codes.

c) Site characteristics
Soil structure.
Costs of site.
Control of site.
Room of expansion.
 Access to railroads, highways and water.
Site and facilities available by expansion on present company owned
property.

d) Flood and fire control

Flood history.
Flood control.
Fire hazards in surrounding area.

e) Community factors
Rural or urban.
Medical facilities - hospitals, doctors, etc.
Housing costs.
Recreation facilities.
Cultural and religion aspects - mosque, surau, libraries, theatres, etc.
School system.
 49

f) Waste disposal
Regulation laws.

Steams carry - off possibilities.

p ossibilities.

 Air - pollution possibilities.

g) Vulnerability to wartime attack

General industry concentration.

Distance from important facilities.

h) Taxes
States and local taxes.

i. Income
ii. Property
iii. Use
iv. Franchise
v. Unemployment insurance
Low assessment or limited term exemption to attract industry.

1.6.1.3 Major Factors

a) Reasonable Land Price

The land will influence the working capital. In terms of reasonable, it means that
with the good incentive from local government and low land price. If the land
chosen is not classified as industrial area, the condition should be change first.
State and local tax rates on property income, unemployment insurance and
similar items vary one location to another.

b) Labors
The types and supply of labor available in the vicinity of proposed plant site must
be examined. Some of the factors that should be considered on labor are supply,
kinds, nationality, diversity, intelligence, wage scales, efficiency and costs.
Consideration also should be given to prevailing pay scales, restrictions on
number of hours worked per week, competing industries that can cause
dissatisfaction or high turnover rates among the workers and variations in the skill
and productivity of the workers there for industrial housing, safety-first movement,
welfare institutions, better sanitation and lunchroom have all contributed to the
 50

solution of labor welfare and problems as well as the radio and automobile, also
have helped towards building up and maintaining a supply satisfied and
contented laborers. This factor can contribute to the saving of the operation cost.

c) Distance from Market

Demand versus distance, inventory storage requirements, growth or decline,
competition-present and future. The location of market or intermediate distribution
centers affects the cost of product distribution and the time required for shipping.
The buyer usually finds that it is more advantage to purchase from nearby
sources. Market of major final product and by-product should be considered.

d) Waste Disposal
 Another serious consideration
con sideration that
t hat should be made before choosing a site is the
disposal of waste liquors and waste products from the chemical plant. If there is a
sewer in the street adjoining to the property, the quantity of waste liquors to be
disposed off should be estimated and the size of the street sewer should be
checked to determine whether it could take care of the liquors. If the waste liquors
such as acids or alkaline, contain solids, or has other objectionable features, it is
advisable to learn from the local authorities whether the disposal of such liquor in
the sewerage system is permissible. Any waste from atomic energy plants cannot
 just be disposed of by dumping it into sewers or rivers.

Usually most chemical plants often simply dispose of their waste by

locating on a stream, rivers or at the tidewater. However, this is no longer
satisfactory, for there is a growing list of state, which has instituted legislation
against such pollution by industrial wastes. Seepage through the ground is also
can be used as another method of waste disposal. Before that, soil tests should
be made to determine whether the soil is porous enough to permit the disposal of
considerable quantities of liquor without accumulation.

It is also advisable to check the topographic factor of the area to determine

where the liquor will sleep in order to avoid trouble from neighboring plants or the
local authorities. Towns lower down the valley mat draw their water supply from
the drainage shed upon which the plant is situated.

Nevertheless, a systematic toxic and industrial waste will be more effective

as disposal waste will be treated accordingly. This method is getting popular and
encourages using as will product non-polluting, clean and environmental friendly.
 51

e) Climate
Seasonal range
Precipitation
Humidity and temperature conditions.
Wind
Hurricane, tornado and earthquake history.
Investment required for construction.

f) Raw materials or Semi-Finished Products

These particularly important if large volumes of raw material are consumed
because these permit considerable reduction in transportation and storage
charge. Any way attention should be given to the purchased price of the raw
materials, distance from the source of supply, purity of the raw materials, reserve
stock and storage requirements. In order to save the transportation costs, the
plant should be located near to the raw material supply and sources.

g) Transportation Facilities
The relation of railways, ports or road facilities to market is so close in making a
prudent investigation of transportation rates before definitely deciding upon a
plant location. Water, railroads and highways are the common means of
transportation used by major industrial concern. There is usually need for
convenient air and rail transportation facilities. A location which has several
competing railroads, ports and road networks as well as waterways in order that
the competition will help to maintain low rates and give better service should be
chosen.

h) Government Incentives
In order to attract new investors, the government will offer an incentive to them,
the better the incentive offered the feasibility to build the plant there would be
better.

i) Water supply
Sources
Mineral analysis
Bacterial content
Quantity
Temperatures
Costs
 52

The process industries use a lot of water for cooling, washing steam
generation and as raw material. So the plant must be located where supply water is
available. The temperature, mineral content, silt or sand content and cost for supply
must also be considered when choosing a water supply.

 j) Energy Supply

Hydroelectric
Public service
 Alternate source

Power and steam requirement is high in most industrial plants and fuel is
ordinarily to supply this utilities. Location should near to the hydroelectric
installation if the plant using electrolytic process. If the plant requires large
quantities of oil or coal, location near a source of supply may be essential for
economic operation. The local cost of power can help determine whether power
should be purchased or self-generated.
 53

1.6.2 Site Characteristic

Characteristic of Each Location

 As stated earlier, the suggested sites for the production of butyl acetate plant
includes:

1. Kerteh Industrial Estate, Terengganu

2. Pasir Gudang Industrial Estate, Johor
3. Prai Industrial Complex, Prai, Penang
4. Gebeng Phase
Phase (IV) Industrial Area, Pahang

1.6.2.1 Kerteh Industrial Estate, Terengganu

Formerly a quiet fishing village, Kerteh has now transformed into a petrochemical
hub. It houses the PETRONAS Petrochemical Integrated Complex (PPIC) that links
the entire range of the oil and gas value chain beginning from upstream exploration
and production to the final stage of petrochemical manufacturing.

Kerteh Industrial area is located 35km from Kemaman town. The selling
price is RM RM 5.57 psf. The type of industry develop in this area is chemical and
petrochemical industry.

In terms of water supply and electricity, this area is supplied with water from
Terengganu Waterworks Department capacity of some 75.3 mgd. For electricity, the
suppliers are the Paka Power Plant (900MW), IPP YTL Power Generation Sdn. Bhd.
(600MW) and Tasik Kenyir Hydroelectric Power (400MW).
(400 MW).

a) Facilities and Infrastructure

Gas processing plants
Peninsular Gas Utilization (PGU) project
Centralized utility facilities
 Supply of utilities such as power, industrial gases, water and
steam
Institut Teknologi Petroliam
 Training centre
Kertih Port
 Centralized tankage facilities
 Mainly bulk liquid port
 54

Kuantan Port
 Centralized tankage facilities
 Container and bulk liquid port
 Railway linking Kerteh, Gebeng and Kuantan Port
East Coast Highway

Terengganu State Government has also embarked on the projects including

expansion of Kuala Terengganu Airport and express highway Connecting Kuala
Lumpur-Kuantan-Kuala Terengganu-Gua Musang.

Incentives offered by Terengganu State Government to both foreign and

local investors are special land premium, reduction of land premiums, man power
training allowance, deferred payment, discount on assessment rate, and incentive
for water supply.

1.6.2.2 Pasir Gudang Industrial Estate, Johor

Located in Johor Bahru, Pasir Gudang is a well developed industrial area. It is

located 35 km at eastern end of Johor Bahru with populations of 100,000. The main
industries in Pasir Gudang are transportation and logistics, shipbuilding,
petrochemicals and other heavy industries, and oil palm storage and distribution.

Pasir Gudang Industrial Estate is an industrial area developed by Johor

State Economic Development Corporation. Pasir Gudang which located in South
East Asia, one of the world’s fastest growing economic regions is one of t he
potential sites selected because of:

a) Political and Social Stability

b) Economic Strength

Natural resources

Low inflation rate

Fastest developed state in Malaysia

c) Well Developed Infrastructure

Network of well-maintained highways and railways

Well-equipped seaports and airports

 All year round deep water sea port

High quality telecommunications network and services

 55

d) Educated Workforce
Talented, young, educated and productive workforce
Multilingual workforce speaking two or three languages, including
English
Comprehensive system of vocational and industrial training including
advanced skills training
Harmonious industrial relations with minimal trade disputes

e) Geographical and Location Advantage

Strategically located in the heart of Southeast Asia, one of the world's
fastest growing economic region
Within easy access to the rest of the world and is serviced by all
major shipping lines

f) Supportive Government Policies

Pro-business policies
Responsive government
Liberal investment policies
 Attractive tax and other incentives
Liberal exchange control regime

g) A vibrant Business Environment

Market oriented economy
Well-developed financial & banking sector
Wide usage of English especially in business

h) Quality of Life
Friendly and hospitable Malaysians
Safe & comfortable living environment
Excellent Educational institutions including international schools for
expatriate children
Good recreational and sport facilities
Excellent shopping with goods from all over

i) Within easy access to the rest of the world and is serviced by all major
shipping lines
 j) Good infrastructure facilities
 56

k) Strong institutional support from government department and local authority

authority
l) A stable and far sighted government
m) Young and energetic labor supply with cheap labor cost

Other than the listed reasons, Johor has a well developed highways
transportation facilities and other infrastructure amenities that conform to
international standard which gives benefits for import and export purposes. Under
the Peninsular Gas Utilisation (PGU) project, Pasir Gudang (Tanjung Langsat area)
will further develop in petrochemicals industries, steel plants and chemical
industries.

Electrical supply should not be a problem since Tenaga Nasional Berhad

supplies 24 hours electricity for customer usage with distribution voltages at 33kV,
11kV, 6.6kV and 0.415kV. For industries in Pasir Gudang, 6 berths are provided to
cater for containers, general and dry bulk cargoes besides from a special jetty for
handling liquid cargo and hazardous cargo jetty for fuel oil and chemicals.
Warehouse facility also provided at the port.

Within Pasir Gudang, there is an easy access to the region's specialist

facilities and higher education institution, which companies in the innovation center
and high technology industries can relate for technological research and
consultation if needed.

For an investment made in chemical and petrochemical industry, incentives

are provided by Malaysian Industrial Development Authority (MIDA) which covers:

1) Incentives for Manufacturing Companies

a. Pioneer Status: Applications received by 31 December 2010 are are

eligible for an income tax exemption of 70% or 100% on the statutory
income for five years or

b. Investment Tax allowance: Investment tax allowance

allowance of 60% or 100%
on the qualifying capital expenditure for five years. The allowance
can be utilized to offset against 70% or 100% of the statutory income

c. Reinvestment Allowance: Reinvestment allowance

allowance of 60% for 15
years on the qualifying capital expenditure. The allowance can be
offset against 70% or 100% of the statutory income.

d. Accelerated Capital Allowance: An accelerated capital allowance

consisting of an initial allowance of 40% and an annual allowance of
 57

20% is available for three years after the reinvestment allowance

period

e. Incentives for High Technology Companies

f. Pioneer Status with a tax exemption
exemption of 100% on the statutory income
for five years or
g. Investment Tax Allowance of 60% on the qualifying capital
expenditure for five years which can be offset against 100% of the
statutory income

2) Incentives for Strategic Projects

a. Pioneer Status with
with a tax exemption of 100% on the statutory income
for ten years or
b. Investment Tax Allowance of 100% on the qualifying capital
expenditure for five years which can be offset against 100% of the
statutory income

3) Pre-packaged Incentives
a. Customized packages that cover tax and non-tax incentives

4) Incentives to Strengthen Industrial Linkages

5) Incentives for R&D

6) General Incentives
a. Industrial Building Allowance
b. Infrastructure Allowance
c. Tariff Related Incentives

1.6.2.3 Prai Industrial Complex, Prai, Penang

Seberang Perai is connected to Penang Island by the Penang Bridge and by ferry
services. There is a Keretapi Tanah Melayu (KTM) train station and a container
terminal at Butterworth. In Prai Industrial area, the industries are focusing on
chemical, petrochemical, sea related industry, oleochemical industry and light,
medium and heavy industry.

Penang airport is one of the international airports in Malaysia. It provides

facilities for exports and imports and also cargo for easy transportation of raw
 58

materials and products. Raw material supply for butyl acetate is supply from Gebeng
and Kerteh. Prai Industrial Complex is located 619 km from Kerteh by roadways and
548 km from Gebeng by roadways.

The selling price of industrial land at Prai is RM 18.00 psf. However, there
are no lands that are still available for investment to build butyl acetate plant. For an
investment made in chemical and petrochemical industry, incentives are provided by
Malaysian Industrial Development Authority (MIDA) which covers:

1) Incentives for Manufacturing Companies

a. Pioneer Status: Applications received
received by 31 December 2010 are
eligible for an income tax exemption of 70% or 100% on the statutory
income for five years or
b. Investment Tax allowance: Investment tax allowance
allowance of 60% or 100%
on the qualifying capital expenditure for five years. The allowance
can be utilized to offset against 70% or 100% of the statutory income
c. Reinvestment Allowance: Reinvestment allowance
allowance of 60% for 15
years on the qualifying capital expenditure. The allowance can be
offset against 70% or 100% of the statutory income
d. Accelerated Capital Allowance: An accelerated capital allowance
consisting of an initial allowance of 40% and an annual allowance of
20% is available for three years after the reinvestment allowance
period

2) Incentives for High Technology Companies

a. Pioneer Status with
with a tax exemption of 100% on the statutory income
for five years or
b. Investment Tax Allowance of 60% on the qualifying capital
expenditure for five years which can be offset against 100% of the
statutory income

3) Incentives for Strategic Projects

a. Pioneer Status with
with a tax exemption of 100% on the statutory income
for ten years or
b. Investment Tax Allowance of 100% on the qualifying capital
expenditure for five years which can be offset against 100% of the
statutory income
 59

4) Pre-packaged Incentives
a. Customized packages that cover tax and non-tax incentives

5) Incentives to Strengthen Industrial Linkages

6) Incentives for R&D

7) General Incentives

a. Industrial Building Allowance

b. Infrastructure Allowance

c. Tariff Related Incentives

1.6.2.4 Gebeng Phase (IV) Industrial Area,

Area, Pahang
Pahang

The Gebeng Industrial Estate which located at East Coast of Peninsular Malaysia
houses a world-class chemical and petrochemical industrial zone. 
zone.  With four
development phases totalling 8,600 hectares of land, it is strategically located only 5
kilometres from the Kuantan Port. With excellent infrastructure and facilities,
Gebeng Industrial Estate is rapidly expanding to become the leading chemical and
petrochemical hub of the region.

Gebeng (Phase IV) is a new developed phase at north of other phases in

Gebeng industrial area. With 1000 acres developed area in Phase IV, it selling price
is RM 10 psf. With much area still available, it is easy for plant expansion if
investment for butyl acetate plant is made here.

Transportation in Gebeng is excellent. For roadways, the Gebeng bypass

eases traffic flow from the industrial estate to Kuantan Port, links Kuala Lumpur and
Kuantan directly via the East Coast Highway. The East Coast Highway connects
Kuala Lumpur to Pahang makes it convenient for promoting economic activities in
major districts in Pahang. The highways connect Kuantan Port to the national grid
and also link to the North South Expressway on the West Coast. This will save some
travelling time from Kuala Lumpur to Kuantan which only 3 hours taken via the
expressway.East-Coast-Expressway.

The Kertih-Kemaman-Kuantan railroad connects the integrated petrochemical

complex in Kerteh, Terengganu to Gebeng, Pahang and the Kuantan Port. The
railway line is capable of hauling cargo in large volumes and in bulks, thus making it
 60

a highly economical, safe, reliable and consistent mode of transportation for the
movement of raw materials and finished products of petrochemical materials.

Several incentives provided by government for investor in Gebeng are:

1. Incentives for Relocating Manufacturing Activities to Promoted Areas

2. Incentives for Automotive Component Modules and Systems
3. Incentives for the Machinery and Equipment Industry
4.  Additional Incentives for the Manufacturing Sector
5. Incentives for Small and Medium-scale Companies
6. Incentives for the Utilisation of Oil Palm Biomass
7. Incentives to Strengthen Industrial Linkages
8. Incentives for High Technology Companies
9. The East Coast Economic Region (ECER)
10. Incentive for Investment Tax Allowance
11. Incentives for Strategic Projects
12. Incentive for Pioneer Status
 61

Table 1.17: Site Selection Comparisons

Kerteh Industrial Estate, Pasir Gudang Gebeng (Phase IV ) Prai Industrial
Terengganu Industrial Estate Industrial Area Complex
Location Kemaman, Terengganu Pasir Gudang, Johor Kuantan, Pahang Prai, Penang
BP Petronas Acetyls Sdn BP Petronas Acetyls Sdn BASF Petronas BP Petronas
Bhd, Kerteh (Acetic Acid) Bhd, Kerteh (Acetic Acid) Chemicals Sdn Bhd,  Acetyls Sdn Bhd,
Gebeng (Butanol) Kerteh (Acetic
BASF Petronas Chemicals BASF Petronas Chemicals  Acid)
Raw Material Sdn Bhd, Gebeng (Butanol) Sdn Bhd, Gebeng BP Petronas Acetyls Sdn
Supply (Butanol) Bhd, Kerteh (Acetic Acid) BASF Petronas
Chemicals Sdn
Bhd, Gebeng
(Butanol)

Land Price (RM per

RM 5.57 RM 18.00 – 19.00
square feet)
Federal Road Kuala
Terengganu-Kerteh-Teluk
Kalong-Gebeng-Kuantan-
Kuala Lumpur
Road
Transportation Terengganu-Johor Highway
Karak-Kuantan Highway
RM 10.00 RM 18.00
Pasir Gudang to Kim Kim
River Main road to KL, JB,
Singapore
Bridge over Kim Kim River
340km East-Coast North-South
Bridge to Johor River Highway, linking Karak Highway (Bukit
and Terengganu via Kayu Hitam to
North-South Highway Kuantan Singapore)
(Bukit Kayu Hitam to
Singapore) Kuala Lumpur- Kuantan Pulau Pinang
travel reduced to at least Bridge
Highway from Pasir two hours.
Gudang- Tanjung Kupang-
Tuas, Singapore

62

Kerteh Industrial Estate, Pasir Gudang Gebeng (Phase IV ) Prai Industrial

Terengganu Industrial Estate Industrial Area Complex
Kemaman Port Johor Port (Pasir Gudang) Kuantan Port Pulau Pinang Port
Kerteh Port Tanjung Pelepas Port Transportation under
Water Kuantan Port
Transportation Consortium
(KPC)

Kuala Terengganu Airport Sultan Ismail Airport, Senai Bayan Lepas

Kuantan Airport
Kerteh Airport Changi International International
Air Transportation Kerteh Airport
Kuantan Airport  Airport, Singapore  Airport

Kuantan Port- Gebeng- Butterworth-Pasir Gudang- Kuantan Port- Gebeng- Butterworth-Pasir

Railway Kemaman Port- Kerteh to Singapore (KTM) Kemaman Port- Kerteh Gudang-
Transportation Tuk Arun in Terengganu to Tuk Arun in Singapore(KTM)
Terengganu
Small, medium and heavy Transportation and Small and medium scale Chemical industry
industry logistics industries Petro-chemical
Chemical industry Shipbuilding Chemical and Sea related
Petrochemical industry Oleochemical industry petrochemical industries industry
Small, medium and heavy Oleochemical
Types of Industry
industry industry
Petrochemical industry Light, medium
Other heavy industries and heavy
Oil Palm storage and industry
distribution
 62

Kerteh Industrial Estate, Pasir Gudang Gebeng (Phase IV ) Prai Industrial

Terengganu Industrial Estate Industrial Area Complex
Kemaman Port Johor Port (Pasir Gudang) Kuantan Port Pulau Pinang Port
Kerteh Port Tanjung Pelepas Port Transportation under
Water Kuantan Port
Transportation Consortium
(KPC)

Kuala Terengganu Airport Sultan Ismail Airport, Senai Bayan Lepas

Kuantan Airport
Kerteh Airport Changi International International
Air Transportation Kerteh Airport
Kuantan Airport  Airport, Singapore  Airport

Kuantan Port- Gebeng- Butterworth-Pasir Gudang- Kuantan Port- Gebeng- Butterworth-Pasir

Railway Kemaman Port- Kerteh to Singapore (KTM) Kemaman Port- Kerteh Gudang-
Transportation Tuk Arun in Terengganu to Tuk Arun in Singapore(KTM)
Terengganu
Small, medium and heavy Transportation and Small and medium scale Chemical industry
industry logistics industries Petro-chemical
Chemical industry Shipbuilding Chemical and Sea related
Petrochemical industry Oleochemical industry petrochemical industries industry
Small, medium and heavy Oleochemical
Types of Industry
industry industry
Petrochemical industry Light, medium
Other heavy industries and heavy
Oil Palm storage and industry
distribution

63

Kerteh Industrial Estate, Pasir Gudang Gebeng (Phase IV ) Prai Industrial

Terengganu Industrial Estate Industrial Area Complex
Availability of Labor Yes Yes Yes Yes
Availability of
Yes Yes Yes Yes
Utilities
Availability of
Fully Occupied 127.953 acres 1000 acres Fully Occupied
Suitable Land
Local Community
 Approve Approve Approve Approve
Considerations
41.8 km from Kemaman 33 km from Johor Bahru 45 km from Kuantan 118 km from Alor Setar
Political and
93.4 km from Kuantan 5 km from Johor Port Town 25 km from Kulim
Strategic
4 km from Kuantan Port 37 km from Sungai Petani
Considerations
40 km from Butterworth
Terengganu Waterworks Syarikat Air Johor Holdings Jabatan Bekalan Air Perbadanan Bekalan Air
Department Sdn Bhd Pahang Pulau Pinang Sdn Bhd

Tariff Tariff Tariff Tariff

Water Supply RM 1.15/m3 0 - 20 m3 : RM 2.22
Minimum payment/m3 : 21 - 40 m3 : RM 2.96
RM 50.00 40 m3 above : RM 2.96
Minimum payment/m3 :
RM 18.48
Tenaga Nasional Berhad Tenaga Nasional Berhad
0 – 227 m3 : RM 0.92
227 m3 above : RM 0.84
Minimum payment/ m3 :
RM 30.00
Tenaga Nasional Berhad
Flat rate : RM0.35/ m3
Minimum payment/m3 :
RM 26.00
Tenaga Nasional Berhad

Electricity Supply
RM 0.266/kW RM 0.266/kW RM 0.266/kW RM 0.266/kW

Source: Malaysian Industrial Development Authority (MIDA)

 63

Kerteh Industrial Estate, Pasir Gudang Gebeng (Phase IV ) Prai Industrial

Terengganu Industrial Estate Industrial Area Complex
Availability of Labor Yes Yes Yes Yes
Availability of
Yes Yes Yes Yes
Utilities
Availability of
Fully Occupied 127.953 acres 1000 acres Fully Occupied
Suitable Land
Local Community
 Approve Approve Approve Approve
Considerations
41.8 km from Kemaman 33 km from Johor Bahru 45 km from Kuantan 118 km from Alor Setar
Political and
93.4 km from Kuantan 5 km from Johor Port Town 25 km from Kulim
Strategic
4 km from Kuantan Port 37 km from Sungai Petani
Considerations
40 km from Butterworth
Terengganu Waterworks Syarikat Air Johor Holdings Jabatan Bekalan Air Perbadanan Bekalan Air
Department Sdn Bhd Pahang Pulau Pinang Sdn Bhd

Tariff Tariff Tariff Tariff

Water Supply RM 1.15/m3 0 - 20 m3 : RM 2.22
Minimum payment/m3 : 21 - 40 m3 : RM 2.96
RM 50.00 40 m3 above : RM 2.96
Minimum payment/m3 :
RM 18.48
Tenaga Nasional Berhad Tenaga Nasional Berhad
0 – 227 m3 : RM 0.92 Flat rate : RM0.35/ m3
227 m3 above : RM 0.84 Minimum payment/m3 :
Minimum payment/ m3 : RM 26.00
RM 30.00
Tenaga Nasional Berhad Tenaga Nasional Berhad

Electricity Supply
RM 0.266/kW RM 0.266/kW RM 0.266/kW RM 0.266/kW

Source: Malaysian Industrial Development Authority (MIDA)

64

Table 1.18: Weightage for Site Selection

Pasir Gebeng
Kerteh Prai
Weight Gudang (Phase IV)
Criteria Industrial Industrial
Industrial Industrial
Estate Complex
Estate Area
Location 5 3 5 5 5

Butanol 5 5 3 4 3
Raw Material
Supply
Acetic Acid 5 4 3 5 3

Land Price (RM per square

5 5 3 5 3
feet)
Roadways 5 5 5 5 5
Transport Seaport 5 3 5 5 5
Facilities Airways 5 4 3 5 3
Railways 5 4 4 5 3
Types of Industry 5 5 5 5 5
Availability of Labor 5 5 5 5 5
Availability of Utilities 5 5 3 5 3
Future
5 2 4 5 2
Expansion
Site Ideally Flat 5 5 5 5 5
Consideration Well Drained 5 5 5 5 5
Load-Bearing
 64

Table 1.18: Weightage for Site Selection

Pasir Gebeng
Kerteh Prai
Weight Gudang (Phase IV)
Criteria Industrial Industrial
Industrial Industrial
Estate Complex
Estate Area
Location 5 3 5 5 5

Butanol 5 5 3 4 3
Raw Material
Supply
Acetic Acid 5 4 3 5 3

Land Price (RM per square

5 5 3 5 3
feet)
Roadways 5 5 5 5 5
Transport Seaport 5 3 5 5 5
Facilities Airways 5 4 3 5 3
Railways 5 4 4 5 3
Types of Industry 5 5 5 5 5
Availability of Labor 5 5 5 5 5
Availability of Utilities 5 5 3 5 3
Future
5 2 4 5 2
Expansion
Site Ideally Flat 5 5 5 5 5
Consideration Well Drained 5 5 5 5 5
Load-Bearing
5 5 5 5 5
Characteristic
Climate 5 5 5 5 5
Local Community
5 5 5 5 5
Consideration
Total 85 75 73 84 70
Ranking 2 3 1 4

Notes: [1] – [2] : Not suitable for choosing the location

[1] – [2]
[3] : Suitable for choosing.
[4] – [5] : Very suitable for choosing.
[4] – [5]
 65

1.6.3 Selected Site Location

In order to select a strategic location for a plant site, several factors have been
considered. The factors are the location for the plant, availability of raw materials,
reasonable land price and characteristic, transport facilities and utilities which
includes water and electricity, availability of labors, local community considerations
and political and strategic factors. After some considerations regarding the factors,
Gebeng (Phase IV) Industrial Area in Kuantan, Pahang has been chosen as the
butyl acetate plant site location. The reasons are listed later in this chapter.

Gebeng (Phase IV) Industrial Area is listed in the development of 8600 acres
Gebeng industrial under a plan to build an environmental friendly eco-complex
which known as Environmental Technology Park (ETP). Hope to join in with mission
of eco-complex to be the regional leader in the research and implementation of
environmental technologies and industrial green programs, Gebeng was chosen as
the location for butyl acetate plant.

The development of Gebeng industrial area as a cluster for chemical and

petrochemical industry attracts many companies to invest in Gebeng. Thus,
choosing Gebeng is a right decision as butyl acetate plant is a chemical plant and
suits the industries in Gebeng. Other major companies who had invested in Gebeng
are BASF, Kaneka, Flexsys, Eastman Chemicals and W.R. Grace (ETP website).

1.6.3.1 Industry Type and Location

Suitability of Gebeng (Phase IV) Industrial Area in Kuantan to build our plant is good
since this area is an established industrial area with most of the industries here is
related industries. This area is also located far from any residential area.

1.6.3.2 Reasonable Land Price and Land Characteristic

Characteristic

In Gebeng industrial area, the price of land per square feet found is RM 10. The
price of the land is way cheaper compared to other industrial area and complete with
many facilities such as waste disposal, storage and workforce.

 According to Nationmaster website, Pahang has 35,964 square-km

squ are-km area with
Kuantan as its state capital is the third largest state in Malaysia after Sarawak and
Sabah, and is located in east Malaysia. At the south of Pahang, it is bordered by the
State of Johor, on the west by the States of Selangor and Negeri Sembilan, with the
 66

South China Sea and on the north by the State of Terengganu. It is a strategic
location since it is surrounded by other developed states that will give benefits in
selling our products.

1.6.3.3 Raw Material Supply

Comparing the four site locations, Gebeng (Phase IV) is the most suitable location
since it is the nearest location to the suppliers of raw materials and this is the major
important role in the industry. The nearest suppliers are BASF Petronas Chemicals
Sdn Bhd and BP Petronas Acetyls Sdn Bhd. Gebeng is also close to Kuantan Port
which is well facilitated with facilities for storage purpose to store raw materials from
suppliers. By choosing Gebeng, cost for transportation can be reduced and
possibility of shortage of raw material supply is low.

1.6.3.4 Availability of Labor 

The growth in chemical and petrochemical industry in Gebeng has also increased
demand for workers. In Gebeng industrial area, the nearest training centers such as
Industrial Training Institute (ILP) of Kuantan facilitates workforce in-line with
requirements for the industries. Recognition of ILP training schemes by National
Vocational Training Council proved that the workforces supplied are qualified and
readily available and course offered are related to the industries. Skill labors are
also not a problem and easy to get. Malaysia has many well trained chemical
engineering students. Some famous institutes which have students of chemical
engineering and located within reach from Gebeng are Universiti Teknologi MARA
Shah Alam, Universiti Malaysia Pahang, Universiti Teknologi Malaysia and Universiti
Teknologi PETRONAS. Jobs of high skilled labor can be filled by them.

1.6.3.5 Utilities

Gebeng (Phase IV) is located under Environmental Technology Park project of

Pahang. Water supply, electricity supply and other utilities are readily there. There
also new Centralized Utilities Facilities (CUF), a division of PETRONAS Gas Berhad
(PGB). In Peninsular Malaysia, there are two Centralized Utilities Facilities (CUF),
and one of them is located in Gebeng. CUF provides centralized utilities such as
steam, power, demineralized water, nitrogen gas and others to be used by our plant.
By having these facilities, there will be no problem regarding required utilities and
focus on the business of butyl acetate can be maintained.
 67

1.6.3.6 Availability of Suitable Land

 Availability of suitable land is sufficient to build our plant. Gebeng (Phase IV) is a
new phase with area of 4000 acres to attract investors from other countries other
than Malaysian investors. The site selected still has much space for future plant
expansion (Refer Appendix).

1.6.3.7 Climate

Malaysia is a safe country. The weather is nearly the same all over Malaysia. Thus,
climate is not an important factor to be considered since Malaysia is free of major
natural disasters, like tornados, hurricanes, volcanic eruptions and earthquakes,
making it a very safe destination. Malaysia is also breezed by light winds, bringing a
gentle cooling effect on the climate.

1.6.3.8 Political and Strategic Location

In Malaysia, politic is relatively stable. Any site whether led by the opposition or
governing party did not affect industries since industries will bring income to the
country. Gebeng is strategic which its located 45 km from Kuantan Town and just 4
km from Kuantan Port for import and export purposes.

1.6.3.9 Transport Facilities

There are many good roads to access Gebeng from all directions in Malaysia.
Gebeng is near to Gebeng Bypass, Jerangau Highway (Malaysian Federal Route
14), East Coast Expressway, and Karak Highway. On land, state of Pahang can be
accessed by The East Coast Expressway which is 350 km long from other parts of
Peninsula Malaysia.

Gebeng industrial area is near to Kuantan Port which is about 4 km. Kuantan
Port is facilitated with production and bulking facilities for import or export purposes.
Kuantan Port is the busiest port in the east coast. Broad transportation networks
allow for fast transportation of goods throughout the state (Nationmaster website).
Other than Kuantan Port, export and import purposes can be made through
Kemaman Port in Kemaman which is located about 35 km from Gebeng industrial
area. Both Kemaman Port and Kuantan port is under one roof of Kuantan Port
Consortium (KPC) Sdn Bhd.
 68

Other than that, Gebeng industrial has Sultan Haji Ahmad Shah Airport
(commonly known as Kuantan Airport) located 15 km from Kuantan City. This airport
boasts of avant-garde cargo facilities. Ranging from warehouses and air-conditioned
storages to deep freeze storages and Transit zone. Other airports around this airport
are Kuala Lumpur International Airport, Penang International Airport and Singapore
 Airport which are all international airports.

There is a 73 km railway link that connects Kerteh-Kemaman-Kuantan

(including Gebeng Kuantan Port). The railway link is capable to haul cargo in large
volumes and in bulks making it a highly economical, safe, reliable and consistent
mode of transportation for the movement of raw materials and finished products of
petrochemical materials both in liquid and solid state which butyl acetate raw
materials are being transport between these two locations.

Source: ETP website (http://www.envirotechpark.com)

Figure 1.15: Location of Gebeng (Phase IV)

 69

Source: ETP website (http://www.envirotechpark.com)

Figure 1.16: Transport Facilities Connecting Gebeng

 70

1.7 CONCLUSION

Table 1.3 describe on the summary of those four processes suggested. It can be
seen that the conventional esterification process are more practicable compared to
the other method. Thus, the selected process for the production of butyl acetate
plant is the conventional esterification process which the major equipment consist of
a reactor, three distillation columns and a decanter.

In this chapter, economy analysis has been analyzed to see the cost
involved and profit gain. The summation of direct and indirect cost of plant indicates
the fixed capital investment which is RM 47323310.70. The profit was determined to
be RM 342144000.00 and this is very financially attractive. The payback period was
determined to be 3.43 years. Rate of return on investment, ROROI was determined
to be 78.07%. The breakeven analysis has been done and is 30000 tonnes per year
which is the amount of butyl acetate required to recover the production cost of butyl
acetate.

Gebeng (Phase IV) Industrial Area in Kuantan, Pahang has been chosen as
the butyl acetate plant site location. It is located at the East Coast of Peninsular
Malaysia. The price of land per square feet is RM 10 which is quite cheap compare
to other sites. Raw materials can be bought from BASF Petronas Chemicals Sdn
Bhd and BP Petronas Acetyls Sdn. Bhd. Gebeng (Phase IV) Industrial Area is a
strategic location since it located near to Kuantan Port which makes it easy for
import and export of products.
 71

REFERENCES

 Amornchai Arpornwichanop, Kittipong Koomsup, Worapon Kiatkittipong, Piyasan

Praserthdam, Suttichai Assabumrungrat. 2009. Production of n-butyl acetate
from dilute acetic acid and n-butanol using different reactive distillation
systems: economic analysis. Journal of the Taiwan Institute of Chemical
Engineers (40): 21-28.
William L. Luyben, Kristin M. Pszalgowski, Michael R. Schaefer, Cory Siddons.
2004. Design and control of conventional and reactive distillation processes
for the production of butyl acetate. Journal of the Industrial & Engineering
Chemistry Research (43): 8014-8025.
Laureano Jime´nez, Jose´ Costa-Lo´pez. 2002. The Production of Butyl Acetate and
Methanol via reactive and extractive distillation. ii. process modeling,
dynamic simulation, and control strategy. Journal of the Industrial &
Engineering Chemistry Research (41): 6735-6744
 Ajay Singh, R. Hiwale, S. M. Mahajani, R. D. Gudi, J. Gangadwala, A. Kienle. 2005.
2 005.
Production of butyl acetate by catalytic distillation. theoretical and
experimental studies. Journal of the Industrial & Engineering Chemistry
Research (44): 3042-3052
Sven Steinigeweg, Jurgen Gmehling. 2002. n-butyl acetate synthesis via reactive
distillation: thermodynamic aspects, reaction kinetics, pilot-plant
experiments, and simulation studies. Journal of the Industrial & Engineering
Chemistry Research (41): 5483-5490
 Anthony J. Papa, St. Albans, David R. Bryant, South Cha rleston, 1993, Esterification
process, US Patent 5231222.
Jerome Martin, Ignace J. Krchma, 1988, Production of esters, US Patent 1770414.
Carl David Murphy, R. Jay Warner, 2003, Production of tertiary butyl acetate, US
Patent 6593491 B2.
Hsiao Ping Huang, Cheng Ching Yu, Ming Jer Lee, Jyun Hong Chen, Jian Kai
Cheng, 2008, Transesterification process of methyl acetate, US Patent
0161595 A1.
John J. McKetta, William Aaron Cunningham. 1988. Encyclopedia of chemical
processing and design. Volume 5. CRC Press.
William L. Luyben, Cheng Ching Yu. 2008. Reactive distillation design and control.
New Jersey: John Wiley & Sons, Inc.
 72

Kai Sundmacher, Achim Kienle. 2002. Reactive distillation. Germany: Wiley-VCH

Verlag GmbH & Co. KGaA.
John J. McKetta, William Aaron Cunningham. 1988. Encyclopedia of chemical
processing and design. Volume 5. CRC Press.
Weast, R. C. 1981. CRC Handbook of Chemistry and Physics. 2nd Ed. Boca Raton,
Florida.
Ullman. 2003. Encyclopedia of industrial chemistry. 6th  Ed. Volume 1. Weinheim,
Germany: Wiley-VCH.
George J. Kress, Taryn Webb, John Snyder.1994. Forecasting and market analysis
techniques. Westport, CT: Quorum Books.
Gale, T. 2010. Butyl Acetate (on-line) http://www.bookrags.com/research/butyl-
acetate-chmc (22 July 2010).
Internet Center for Management and Business Administration, Inc. 2010. Market
 Analysis. (on-line) http://www.netmba.com/marketing/market/analysis (23
July 2010).
Chemical Industry News & Intelligence, ICIS.com. 2000. n-Butyl Acetate. (on-line)
http://www.icis.com/Articles/2000/12/11/128269/n-butyl-acetate.html (20
 August 2010).
Chemical Industry News & Intelligence, ICIS.com. 2004. Product profile: n-butyl
acetate (on-line) http://www.icis.com/Articles/2004/10/22/622318/ product-
profile-n-butyl-acetate.html (20 August
(20 August 2010).
LookChem.com. 2010., Butyl acetate domestic market dynamics (online)
http://www.lookchem.com/news/price/2010-9-28/2546.html (20  August
2010).
Chemical Industry News & Intelligence, ICIS.com. 2004. Butyl acetate methodology.
(online) http://www.icis.com/StaticPages/Butyl_Acetate.htm
http://www.icis.com/StaticPages/Butyl_Acetate.htm (20 August
2010).
Helen Lee. 2010. Sample report butyl acetate (Asia Pacific) (online)
http://www.icispricing.com/il_shared/Samples/SubPage207.asp (20 August
2010).
Data on Malaysia export and import of butyl acetate, Retrieved on August 12, 2010.
From Malaysia External Trade Development Corporation (MATRADE)
database.
Sinnot, R. K. 1983. Chemical Engineering Design.  Third Edition. Volume 6.
Burlington: Butterworth-Heinemann Publishers.
Malaysian Industrial Development Authority Website. www.mida.gov.my. Accessed
www.mida.gov.my. Accessed
on 12th August 2010.
 73

Environmental Technology Park Website. www.envirotechpark.com.

www.envirotechpark.com.   Accessed on
1st August 2010.
Nationmaster Website. www.nationmaster.com. Accessed on 1st August 2010.
Website. www.nationmaster.com. Accessed
Pahang State Development Corporation Website. 
Website.  www.pknp.gov.my. 
www.pknp.gov.my.  Accessed on
1st August 2010.
Kuantan Port Authority Website. www.lpktn.gov.my Accessed on 1st August 2010.
Website. www.lpktn.gov.my Accessed
Kuantan Port Consortium Sdn Bhd Website. www.ijm.com.  Accessed on 20th August
Website. www.ijm.com. Accessed
2010.
TPM Technopark Sdn Bhd Website.  www.tpmtechnopark.com.my. Accessed on 7th
Website.  www.tpmtechnopark.com.my. Accessed
November 2010.
www.investpenang.gov.my.   Accessed on 7th  November
InvestPenang Website. www.investpenang.gov.my.
2010.
www.pdc.gov.my.  Accessed on 7th
Penang Development Corporation Website. www.pdc.gov.my. 
November 2010.
Unit Perancang Ekonomi Negeri, Negeri Terengganu Darul Iman.
 Accessed on 7th November 2010.
http://upen.terengganu.gov.my. Accessed
http://upen.terengganu.gov.my.
Penang Port Website. www.penangport.com.my. Accessed on 7th November 2010.
Website. www.penangport.com.my. Accessed
www.investinpahang.gov.my.   Accessed on 10th
Invest In Pahang Website. www.investinpahang.gov.my.
November 2010.