Use of Propylene Splitter to Improve Polypropylene Business

Use of Propylene Splitter to Improve

Polypropylene Business

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Improvement Economics

Use of Propylene Splitter to Improve Polypropylene Business

2012

Abstract

Propylene is a major industrial chemical intermediate that serves as one of the building blocks for an array of chemical and plasticproducts, and was also the first petrochemical employed on an industrial scale. Globally, the largest volume of propylene isgenerated as by-product in steam crackers and through the fluid catalytic cracking (FCC) process in petroleum refineries. FCCunits are by far the largest source of this material.

Low purity propylene streams containing large amounts of propane – commonly called refinery grade (RG) propylene – are usedinternally in refineries to manufacture gasoline or as fuel. These streams may also be sold as a chemical feedstock to plantsdedicated to the enhancement of their propylene content, so as to generate a more valuable product. The most pure gradeavailable, polymer grade (PG) propylene, is used as feedstock to various chemicals, including polypropylene, its greatest output.There are several large, centralized facilities on the US Gulf Coast that process propylene/propane streams gathered fromsurrounding refineries and petrochemical plants into high-purity propylene. Some refineries chose to conduct this separation on-site.

In addition to refineries, PG propylene consumers are also constructing propylene/propane separation units to become morecompetitive and to diversify their raw material supplier base and production cost structure. As an example, in July 2012, Braskem,a major petrochemical player, acquired the propylene/propane splitter assets at the Marcus Hook refinery, Pennsylvania, togenerate PG propylene for its polypropylene plant.

This report is a review of the purification of RG propylene into PG propylene. Also, a comparison of constructing this unit inside arefinery and inside a polypropylene plant is included. Both capital investment and operating costs for a propylene purificationunit operating in the US Gulf Coast, China, and Germany are presented. The economic analysis presented in this report is based ona purification unit installed in a 400 kta polypropylene plant. The estimated CAPEX for such unit is USD 67 million on the US GulfCoast. China presented the lowest CAPEX and OPEX, followed by the USA and Germany, respectively.

Although the internal rate of return (IRR) in building a propylene purification unit inside a polypropylene plant is more than 30%on US Gulf Coast, the best results are obtained in constructing this unit inside a refinery. This is based on the fact that refinerieshave excess low-level heat sources available, as well as a supply of cooling water, which minimizes additional utilities supply unitsinstallation. Polypropylene manufacturing plants, however, do not usually have this advantage. The improvement installation inrefineries leads to IRR of more than 35%.

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Contents

Terms and Conditions .......................................................................................................................................................6

About Propylene ................................................................................................................................................................ 7

Introduction.........................................................................................................................................................................................................................7

Applications.........................................................................................................................................................................................................................7

Thermal & Motor Gasoline Uses.........................................................................................................................................................................................7

Chemical Uses...............................................................................................................................................................................................................................7

Manufacturing Processes ............................................................................................................................................................................................8

Process & Economics Overview ................................................................................................................................... 9

Improvement Summary...............................................................................................................................................................................................9

Brief Description & Block Flow Diagram .......................................................................................................................................................................9

Economic Summary .......................................................................................................................................................................................................10

Other Remarks....................................................................................................................................................................................................................10

Propylene-Propane Splitter Designs...............................................................................................................................................................................10

Mechanical Design & Installation......................................................................................................................................................................................11

Column Design Advancements.........................................................................................................................................................................................11

Process Analysis................................................................................................................................................................. 12

Process Description & Conceptual Flow Diagram.......................................................................................................................................12

Pre-Separation & Separation Steps ..................................................................................................................................................................................12

Treatment Step.............................................................................................................................................................................................................................12

Key Consumption ............................................................................................................................................................................................................12

Technical Assumptions.................................................................................................................................................................................................13

ISBL Major Equipment List ..........................................................................................................................................................................................15

OSBL Major Equipment List .......................................................................................................................................................................................15

Construction Scenarios.................................................................................................................................................................................................16

Economic Analysis ............................................................................................................................................................ 18

General Assumptions.....................................................................................................................................................................................................18

Capital Expenditures.......................................................................................................................................................................................................18

Fixed Investment.........................................................................................................................................................................................................................18

Fixed Investment Discussion ..............................................................................................................................................................................................19

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Other Capital Expenses ...........................................................................................................................................................................................................19

Total Capital Expenses .............................................................................................................................................................................................................21

Regional Comparison...............................................................................................................................................................................................................21

Operational Expenditures ...........................................................................................................................................................................................22

Manufacturing Costs.................................................................................................................................................................................................................22

Depreciation...................................................................................................................................................................................................................................22

Regional Comparison...............................................................................................................................................................................................................22

Economic Datasheet & Discussion ........................................................................................................................................................................24

Economic Assumptions................................................................................................................................................................................................24

References............................................................................................................................................................................ 26

Acronyms, Legends & Observations .......................................................................................................................... 27

Methodology of the Analysis........................................................................................................................................ 28

General Approach............................................................................................................................................................................................................28

Assumptions........................................................................................................................................................................................................................28

General Considerations...........................................................................................................................................................................................................28

Fixed Investment.........................................................................................................................................................................................................................30

Start-up Expenses .......................................................................................................................................................................................................................30

Other Capital Expenses ...........................................................................................................................................................................................................30

Manufacturing Costs.................................................................................................................................................................................................................31

Contingencies & Accuracy of Economic Estimates.....................................................................................................................................31

Location Factor ..................................................................................................................................................................................................................32

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List of Tables

Table 1 – Major Propylene Consumers................................................................................................................................................................................7

Table 2 – Capital Cost & Economic Summary.................................................................................................................................................................10

Table 3 - Raw Materials & Consumption (per ton of Product) ............................................................................................................................12

Table 4 – Design & Simulation Assumptions...................................................................................................................................................................13

Table 5 – Main Streams Operating Conditions and Composition .....................................................................................................................15

Table 6 – Outside Battery Limits Major Equipment List ............................................................................................................................................15

Table 7 – Inside Battery Limits Major Equipment List ................................................................................................................................................15

Table 8 – Construction Scenarios Assumptions (Based on Degree of Integration) ................................................................................17

Table 9 – Base Case General Assumptions........................................................................................................................................................................18

Table 10 – Bare Equipment & Direct Cost per Area (USD Thousands) ............................................................................................................18

Table 11 – Total Fixed Investment Breakdown (USD Thousands)......................................................................................................................19

Table 12 – Other Capital Expenses (USD Million)..........................................................................................................................................................19

Table 13 – CAPEX (USD Million) ...............................................................................................................................................................................................21

Table 14 – Manufacturing Fixed Cost (USD/ton) ..........................................................................................................................................................22

Table 15 – Manufacturing Variable Cost (USD/ton) ....................................................................................................................................................22

Table 16 – OPEX (USD/ton).........................................................................................................................................................................................................22

Table 17 – Depreciation Value & Assumptions ..............................................................................................................................................................22

Table 18 – Fixed Cost Assumptions.......................................................................................................................................................................................24

Table 19 – Technology Economics Datasheet: Propylene Purification Unit...............................................................................................25

Table 20 – Project Contingency...............................................................................................................................................................................................31

Table 21 – Accuracy of Economic Estimates ...................................................................................................................................................................31

Table 22 – Criteria Description..................................................................................................................................................................................................33

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List of Figures

Figure 1 – Process Simplified Flow Diagram....................................................................................................................................................................9

Figure 2 – Propylene Splitter with Heat Pump Design .............................................................................................................................................10

Figure 3 – Propylene Splitter with Heat Pump Design .............................................................................................................................................10

Figure 4 – Researches on Distillation Columns..............................................................................................................................................................11

Figure 5 – Inside Battery Limits Conceptual Process Flow Diagram.................................................................................................................14

Figure 6 – Construction Scenarios: Sketch........................................................................................................................................................................16

Figure 7 – Total Direct Cost of Different Scenarios (USD Thousands)..............................................................................................................20

Figure 8 – Total Fixed Investment of Different Scenarios (USD Thousands) ...............................................................................................20

Figure 9 – CAPEX per Location (USD Million)..................................................................................................................................................................21

Figure 10 – OPEX and Polymer Grade Propylene Price History (USD/ton PG Propylene)...................................................................23

Figure 11 – Operating Costs Breakdown per Location (USD/ton).....................................................................................................................23

Figure 12 – IRR vs. RG Propylene Purity (US Gulf)..........................................................................................................................................................24

Figure 13 – Methodology Flowchart ....................................................................................................................................................................................29

Figure 14 – Location Factor Composition.........................................................................................................................................................................34

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Terms and Conditions

Information, analyses and/or models herein presentedare prepared on the basis of publicly availableinformation and non-confidential information disclosedby third parties. Third parties, including, but not limitedto technology licensors, trade associations ormarketplace participants, may have provided some ofthe information on which the analyses or data are based.Intratec Solutions LLC (known as “Intratec”) does notbelieve that such information will contain anyconfidential information but cannot provide anyassurance that any third party may, from time to time,claim a confidential obligation to such information.

The aforesaid information, analyses and models aredeveloped independently by Intratec and, as such, arethe opinion of Intratec and do not represent the point ofview of any third parties nor imply in any way that theyhave been approved or otherwise authorized by thirdparties that are mentioned in this publication.

The application of the solutions presented in thispublication without license from the owners infringes onthe intellectual property rights of the owners, includingpatent rights, trademark rights, and rights to tradesecrets and proprietary information.

Intratec conducts analyses and prepares publicationsand models for readers in conformance with generallyaccepted professional standards. Although thestatements in this publication are derived from or basedon several sources that Intratec believe to be reliable,Intratec does not guarantee their accuracy, reliability, orquality; any such information, or resulting analyses, maybe incomplete, inaccurate or condensed. All estimatesincluded in this publication are subject to changewithout notice. This publication is for informationalpurposes only and is not intended as anyrecommendation of investment.

Reader agrees it will not, without prior written consent ofIntratec, represent, directly or indirectly, that its productshave been approved or endorsed by the other parties.

In no event shall Intratec, its employees, representatives,resellers or distributors be liable to readers or any otherperson or entity for any direct, indirect, special,exemplary, punitive, or consequential damages,including lost profits, based on breach of warranty,contract, negligence, strict liability or otherwise, arisingfrom the use of this publication, whether or not they or ithad any knowledge, actual or constructive, that suchdamages might be incurred.

Reader shall indemnify and hold harmless Intratec and itsresellers, representatives, distributors, and informationproviders against any claim, damages, loss, liability orexpense arising out of reader’s use of the publication inany way contrary to the present terms and conditions.

Intratec publications are the product of extensive workand original research and are protected by internationalcopyright law.

Products supplied as printed reports or books should notbe copied but can be included in schools, universities orcorporate libraries and circulated to colleagues to theextended permitted by copyright law.

Products supplied digitally are licensed, not sold. Thepurchaser is responsible for ensuring that license termsare adhered to at all times. PDF documents may besupplied watermarked with the customer’s name, emailand/or company. Digital documents are supplied withan enterprise license and can be shared by all employeesand on-site contractors of a single organization.Members of the organization may make such copies asare necessary to facilitate this distribution. An enterpriselicense does not permit sharing with externalorganizations.

Reader agrees that Intratec retains all rights, title andinterest, including copyright and other proprietary rights,in this publication and all material, including but notlimited to text, images, and other multimedia data,provided or made available as part of this publication.

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Introduction

Propylene is an unsaturated organic compound having thechemical formula C3H6. It has one double bond, is thesecond simplest member of the alkene class ofhydrocarbons, and is also second in natural abundance.

Propylene 2D structure

Propylene is produced primarily as a by-product ofpetroleum refining and of ethylene production by steamcracking of hydrocarbon feedstocks. Also, it can beproduced in an on-purpose reaction (for example, inpropane dehydrogenation, metathesis or syngas-to-olefinsplants). It is a major industrial chemical intermediate thatserves as one of the building blocks for an array of chemicaland plastic products, and was also the first petrochemicalemployed on an industrial scale.

Commercial propylene is a colorless, low-boiling,flammable, and highly volatile gas. Propylene is tradedcommercially in three grades:

Polymer Grade (PG): min. 99.5% of purity.

Chemical Grade (CG): 90-96% of purity.

Refinery Grade (RG): 50-80% of purity.

Applications

The three commercial grades of propylene are used fordifferent applications. RG propylene is obtained fromrefinery processes. The main uses of refinery propylene arein liquefied petroleum gas (LPG) for thermal use or as anoctane-enhancing component in motor gasoline. It canalso be used in some chemical syntheses (e.g., cumene orisopropanol). The most significant market for RG propyleneis the conversion to PG or CG propylene for use in theproduction of polypropylene, acrylonitrile, oxo-alcohols andpropylene oxide.

While CG propylene is used extensively for most chemicalderivatives (e.g., oxo-alcohols, acrylonitrile, etc.), PGpropylene is used in polypropylene and propylene oxidemanufacture.

PG propylene contains minimal levels of impurities, such ascarbonyl sulfide, that can poison catalysts.

Thermal & Motor Gasoline Uses

Propylene has a calorific value of 45.813 kJ/kg, and RGpropylene can be used as fuel if more valuable uses areunavailable locally (i.e., propane – propene splitting tochemical-grade purity). RG propylene can also be blendedinto LPG for commercial sale.

Also, propylene is used as a motor gasoline component foroctane enhancement via dimerization – formation ofpolygasoline or alkylation.

Chemical Uses

The principal chemical uses of propylene are in themanufacture of polypropylene, acrylonitrile, oxo-alcohols,propylene oxide, butanal, cumene, and propene oligomers.Other uses include acrylic acid derivatives and ethylene –propene rubbers.

Global propylene demand is dominated by polypropyleneproduction, which accounts for about two-thirds of totalpropylene demand.

Polypropylene Mechanical parts, containers, fibers, films

Acrylonitrile Acrylic fibers, ABS polymers

Propylene oxidePropylene glycol, antifreeze,

polyurethane

Oxo-alcohols Coatings, plasticizers

Cumene Polycarbonates, phenolic resins

Acrylic acidCoatings, adhesives, super absorbent

polymers

About Propylene

Table 1 – Major Propylene Consumers

Source: Intratec – www.intratec.us

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Manufacturing Processes

Propylene is commercially generated as a co-product, eitherin an olefins plant or a crude oil refinery’s fluid catalyticcracking (FCC) unit, or produced in an on-purpose reaction(for example, in propane dehydrogenation, metathesis orsyngas-to-olefins plants).

Globally, the largest volume of propylene is produced inNGL (Natural Gas Liquids) or naphtha steam crackers, whichgenerates ethylene as well. In fact, the production ofpropylene from such a plant is so important that the name“olefins plant” is often applied to this kind of manufacturingfacility (as opposed to “ethylene plant”). In an olefins plant,propylene is generated by the pyrolysis of the incomingfeed, followed by purification. Except where ethane is usedas the feedstock, propylene is typically produced at levelsranging from 40 to 60 wt% of the ethylene produced. Theexact yield of propylene produced in a pyrolysis furnace is afunction of the feedstock and the operating severity of thepyrolysis.

The pyrolysis furnace operation usually is dictated bycomputer optimization, where an economic optimum forthe plant is based on feedstock price, yield structures,energy considerations and market conditions for themultitude of products obtained from the furnace. Thus,propylene produced by steam cracking varies according toeconomic conditions.

In an olefins plant purification section, also called separationtrain, propylene is obtained by distillation of a mixed C3stream, i.e., propane, propylene, and minor components, ina C3-splitter tower (also called propylene-propane splitter,or simply P-P splitter). It is produced as the overheaddistillation product, and the bottoms are a propane-enriched stream. The size of the C3-splitter depends on thepurity of the propylene product.

The propylene produced in refineries also originates fromother cracking processes. However, these processes can becompared to only a limited extent with the steam crackerfor ethylene production because they use completelydifferent feedstocks and have different productionobjectives.

Refinery cracking processes operate either purely thermallyor thermally – catalytically. By far the most importantprocess for propene production is the fluid catalyticcracking (FCC) process, in which the powdery catalyst flowsas a fluidized bed through the reaction and regeneration

sections. This process converts heavy gas oil preferentiallyinto gasoline and light gas oil.

The propylene yielded from olefins plants and FCC units istypically considered a co-product in these processes, whichare primarily driven by ethylene and motor gasolineproduction, respectively. Currently, the markets haveevolved to the point where modes of by-productproduction can no longer satisfy the demand for propylene.

A trend toward less severe cracking conditions, and thus toincrease propylene production, has been observed in steamcracker plants using liquid feedstock. As a result, new andnovel lower-cost chemical processes for on-purposepropylene production technologies are of high interest tothe petrochemical marketplace. Such processes include:

Olefin Metathesis

Propane Dehydrogenation

Methanol-to-Olefins/Methanol-to-Propylene

High Severity FCC

Olefins Cracking

For a better understanding of some of these technologies,see our Technology Economics Reports, available in thePublications section on our website, www.intratec.us.

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Improvement Summary

The current publication provides a detailed assessment ofan opportunity to improve the polypropylene business bythe purchase of RG propylene to produce the PG propyleneused in the process. This is achieved through theconstruction of a propylene purification unit inside thepolypropylene plant.

Also, as an alternative, the propylene purification unit canbe constructed inside a refinery, i.e., inside the plant whichprovides the RG propylene. In this case, the refinery can sella more valued product (PG propylene) instead of a lowvalued one (RG propylene).

All the data and figures presented were prepared based onpublicly available information. This information wascarefully analyzed through a structured methodologyinvolving process simulations, design procedures andmathematical models developed by Intratec.

Brief Description & Block Flow Diagram

The process can be separated in three different steps: pre-separation, separation, and treatment.

Figure 1 shows a simplified block flow diagram for theprocess.

The refinery grade propylene from refinery processes is sentto a pre-separation, where lights (ethylene/ethane) areextracted from the stream. Typical specifications forpolymer grade propylene limit ethylene and ethaneconcentrations to around 30 and 500 ppm mol.

Optionally, if necessary, the pre-separation step can bemodified to also remove some excess heavies(butylenes/butane).

Then, the stream is sent to the separation unit, wherepropylene and propane are separated, achieving apropylene purity of, at least, 99.5 wt%. This is the minimumpurity required for polypropylene units’ raw material.Propane by-product is separated in this step.

Contaminants that are not removed in the previous steps,must be removed to reach the limits of polymer gradepropylene. These contaminants are: water, oxygenates,sulphur compounds, COS, arsine, and phosphine. This isaccomplished in a treatment unit, placed after theseparation section.

Process & Economics Overview

Figure 1 – Process Simplified Flow Diagram

Source: Intratec analysis

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Economic Summary

The table below summarizes the main economic indicatorsof the improvement proposed, including the CAPEX, OPEX,Sales, and EBITDA. All figures are additions to theeconomics of a polypropylene plant, following a typicalimprovement design.

If heat sources that can be used to heat the splitter reboilerare available in the facility in which the propylenepurification system is installed, a non-heat pump systemmay be the best choice. However, if no source of sufficientlow-grade heat is available, the use of a heat pump istypically the most economical choice.

Table 2 – Capital Cost & Economic Summary


Figure 2 – Propylene Splitter with Heat Pump Design


Figure 3 – Propylene Splitter with Heat Pump Design


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Mechanical Design & Installation

Dependent on the number of trays needed to achieve thepropylene purity in the separation, two towers may berequired. Contingent on the tray spacing, 150 to 200 trayscan be used in a single column, which could lead toextremely high towers (up to 100 m).

Proprietary tray designs allow narrow spacing between trays(25 cm, for instance) and are ideally suited forpropylene/propane separation because of the relativelyhigh liquid loads.

These trays are typically less efficient than conventionalhigh-capacity trays and are more costly on a per-tray basis.However, the possibility of accommodating more trays in agiven tower height is beneficial since reduces towerdiameter, reboiler area and compressor horsepower.

A major consideration for the tower mechanical design isthe ratio of the length to diameter (L/D), which shouldgenerally not exceed 20-25. Also, depending on the towerlength (more than 50 – 60 m), other factors such as wind orseismic loads may govern the vessel design and increasethe overall cost, to the extent that a two-tower systemshould be considered.

The construction of a P-P splitter can be done in two ways,either shop-fabrication and transportation to the job site, orfield fabrication. This choice has a significant impact oncapital costs and is dictated by the capability of thefabrication shop, the column dimensions, and available ofland/water transportation limitations.

Commonly, towers with diameters of 3.5 – 4.5 m can beshop-fabricated and transported to the site. If towerheights exceed 35 m, fabrication in two or more parts maybe necessary.

Column Design Advancements

Other distillation column designs are also in development,such as the Heat-Integrated Distillation Columns (HIDiC),which, according to the researchers, are capable ofreducing energy consumption by up to 50%, compared toconventional columns. One technology based on this is theSuperHIDiC, recently developed by Toyo Engineering Corp.,in collaboration with the National Institute of AdvancedIndustrial Science and Technology (AIST).

The system divides the distillation column into two sectionsof rectifying and stripping, with heat exchange performedat the middle part of each section. A thermo-siphon systemwas adopted for recycling the mixture without using apumping operation. A compressor is used to raise thepressure and temperature within the column, and thecombination of side heat exchange and heat-pumping issaid to reduce energy consumption by half.

Figure 4 – Researches on Distillation Columns

Source: Toyo Engineering Corp.

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Process Description &Conceptual Flow Diagram

This section describes the unit for purification of RGpropylene into PG propylene. Some differences may befound in comparison with similar units, since all theinformation presented is based on publicly availableinformation and Intratec analysis.

For a better understanding of the process, please refer tothe Inside Battery Limits Conceptual Process Flow Diagram;the Main Streams Operating Conditions and Composition;and the Inside Battery Limits Major Equipment List,presented in the following pages.

Pre-Separation & Separation Steps

First, the refinery grade propylene is sent to a deethanizer toreduce ethylene and ethane to less than 500 ppm mol. Thisstep is called pre-fractionation. RG propylene from a C3-C4splitter of a refinery will normally have 5,000 to 10,000 ppmmol ethylene/ethane and 1-2 mol% or morebutylenes/butane. The ethylene/ethane stream leaving thetop of the deethanizer can be used as fuel.

Then, the column bottom stream is sent to a propylene-propane splitter system that consists of two columns, dueto size limitations. The columns operate at pressuresranging from 18 to 20 bara.

The first column generates propane in its bottom, whichcan be sold as HD5 grade, the most widely sold anddistributed grade of propane in the US market. Theminimum propane composition of HD5 grade propane is 90wt%. The majority of butylenes/butane from the feed ispresent in such a stream.

The overhead of the first column still contains significantamounts of propane and, hence, must be sent to a secondfractionation column. This column acts as a continuation ofthe first tower and generates the PG propylene products inits top. Propylene is then sent to the treatment step.

Process Analysis

Table 3 - Raw Materials & Consumption (per ton of

Product)


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Technical Assumptions

All process design and economics are based on world-classcapacity units that are installed in globally competitivepolypropylene plants.

Assumptions regarding the thermodynamic model used inthe process simulation, main improvement design basis andthe raw materials composition are shown in Table 4. Alldata used to develop the process flow diagram is based onpublicly available information.

The assumed operating hours per year indicated does notrepresent any technology limitation; it is rather anassumption based on usual industrial operating rates.

Table 4 – Design & Simulation Assumptions


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Figure 5 – Inside Battery Limits Conceptual Process Flow Diagram


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ISBL Major Equipment List

Table 7 shows the equipment list, besides a briefdescription and the main materials used.

For complete equipment list, including sizing, see theChapter titled “Premium Tools: Deepen Your Analysis”,presented in this publication.

OSBL Major Equipment List

Table 6 shows the list of the energy and water facilitiesconsidered in a scenario where the improvement isconstructed inside a polypropylene production plant.

Table 6 – Outside Battery Limits Major Equipment List


Table 7 – Inside Battery Limits Major Equipment List


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Construction Scenarios

Capital cost estimates are greatly impacted by the degree towhich an industrial unit will be able to take advantage ofthe preexisting infrastructure.

For instance, if there are nearby facilities that consume aunit’s final product or supply its feedstock, the need forstorage facilities significantly decreases, along with the totalfixed investment required. In the present analysis, twoconstruction scenarios were considered:

1st Scenario: The propylene purification unit buildinside a refinery

2nd Scenario: The propylene purification unit builtinside a polypropylene plant

Figure 6 presents a simplified block flow diagram of bothscenarios. A “propylene purification unit” includes theequipment shown in the Inside Battery Limits ConceptualProcess Flow Diagram: deethanizer, P-P splitter, andtreatment equipment.

In the first construction scenario, the refinery adds value toits selling product, which will be PG propylene instead of RGpropylene.

In the second construction scenario in which the propylenepurification unit is built inside a polypropylene plant, bychanging the PG propylene to RG propylene, themanufacturers are able to purchase a less expensive rawmaterial.

The economic analysis showed in the next pages is donefrom the standpoint of the unit to be constructed, i.e., thepropylene purification unit “buys” RG propylene and “sells”PG propylene. The gain is the difference between thesevalues, and is earned by the plant that contains thepropylene purification unit, be it either the refinery or thepolypropylene plant.

For this reason, investment differences rely only in the OSBLrequirements of each scenario considered. Table 8 presentsthe assumptions regarding the utilities, support andauxiliary facilities considered for each scenario.

Figure 6 – Construction Scenarios: Sketch


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Table 8 – Construction Scenarios Assumptions (Based on Degree of Integration)


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General Assumptions

This study is restricted to an evaluation of the earnings,operating and capital expenditures associated with theimprovement itself. All figures are in addition to theeconomics of a suitable existing plant. Such plants’operating and capital expenditures are not in the scope ofthe present publication.

The general assumptions for the base case of this analysisare outlined below.

Engineering &

Construction Location

attributing reasonable contingencies for the investmentand for evaluating the overall accuracy of estimates.Definitions and figures for both contingencies and accuracyof economic estimates can be found in this publication inthe chapter “Methodology of the Analysis”.

Capital Expenditures

Fixed Investment

Table 10 shows the bare equipment and direct costsassociated with ISBL and OSBL of the project.

Fundamentally, the direct costs are the total direct materialand labor costs associated with the equipment (includinginstallation bulks). The total direct cost represents the totalbare equipment installed cost.

Economic Analysis

Table 9 – Base Case General Assumptions


Table 10 – Bare Equipment & Direct Cost per Area (USD

Thousands)


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Indirect costs are defined by the American Association ofCost Engineers (AACE) Standard Terminology as those"costs which do not become a final part of the installationbut which are required for the orderly completion of theinstallation".

Figure 7 and Figure 8 compare the total direct cost and thetotal fixed investment for different construction scenarios.Each differs in terms of OSBL infrastructure required.

Fixed Investment Discussion

To become more competitive and diversify their rawmaterial supplier bases and production cost structures,some companies construct a propylene purification unitupstream from their polypropylene plants. As an example,in July 2012, Braskem, a major petrochemical player,acquired the propylene splitter assets at the Marcus Hookrefinery, Pennsylvania.

Validation of the total fixed investment estimated in theprevious section can be made through a comparison withactual investments publicly disclosed in international pressduring the last few years. Investment announcements arenot easily found and, many times, the assumptions adoptedfor each investment publicly disclosed may hindercomparisons. Based on Intratec internal data, investmentare gross estimated to range from USD 50 to 100 million.

Other Capital Expenses

In addition to fixed investments, improvement of a plantincurs other expenses, such as start-up costs and initialcatalyst loads. During this period, other expenses includeemployee training, manufacturing inefficiencies andunscheduled modifications (adjustment of equipment,piping, instruments, etc.).

Initial costs are not addressed in most studies on estimatingbut can turn into a significant total expenditure.

Other capital expenses usually neglected are minor plantlayout modifications for the improvement installation.Although these are small segments of the total capitalexpenses, they should be included.

Table 11 – Total Fixed Investment Breakdown (USD

Thousands)


Table 12 – Other Capital Expenses (USD Million)


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Figure 7 – Total Direct Cost of Different Scenarios (USD Thousands)


Figure 8 – Total Fixed Investment of Different Scenarios (USD Thousands)


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Total Capital Expenses

Table 13 presents a summary of the total CapitalExpenditures (CAPEX) detailed in previous sections.

Capital costs are adjusted from the base case (theimprovement of a plant on the US Gulf Coast) to locationsof interest by using location factors calculated according tothe aforementioned items. For further information aboutlocation factor calculation, please examine the chapter“Methodology of the Analysis”.

Figure 9 summarizes the total Capital Expenditures (CAPEX)for three locations.

Table 13 – CAPEX (USD Million)


Figure 9 – CAPEX per Location (USD Million)


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Operational Expenditures

Manufacturing Costs

The manufacturing costs, also called OperationalExpenditures (OPEX), are composed of two elements: a fixedcost and a variable cost. OPEX figures presented regardexclusively the operation of the improvement underanalysis. Table 14 shows the manufacturing fixed cost.

Regional Comparison

An OPEX breakdown structure for three different locations ispresented in Figure 11.

Table 14 – Manufacturing Fixed Cost (USD/ton)


Table 15 – Manufacturing Variable Cost (USD/ton)


Table 16 – OPEX (USD/ton)


Table 17 – Depreciation Value & Assumptions


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Figure 10 – OPEX and Polymer Grade Propylene Price History (USD/ton PG Propylene)


Figure 11 – Operating Costs Breakdown per Location (USD/ton)


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Economic Datasheet &Discussion

This section assesses the economic attractiveness of animprovement opportunity. Operational costs are only oneof the items to be considered when analyzing a project’sfeasibility. It is also necessary to determine if operationalgains are high enough to justify the capital investment. Onthat matter, an indicator such as internal rate of return (IRR)is needed to predict the profitability of an improvementunder consideration.

China presented the lowest CAPEX, with USD 53 million,followed by USA and Germany, with USD 67 and 80 million,respectively. Considering these investments, an IRR of morethan 30% is expected for a unit installed on the US Gulf andmore than 35% for a unit on China.

Depending on the content of propylene in the RGpropylene to be purified, different internal rates of returnare achieved. Low propylene contents in the RG propylenefeed implies in larger columns, which raises the investment.Figure 12 shows a rough sensitivity analysis of the IRR fordifferent RG propylene purities for the improvement buildinside a 400 kta polypropylene plant.

The analysis in Figure 12 is only valid for a typical RGpropylene purity, i.e., with a propylene content ranging of55% to 75%. Outside this range, the price assumptions aredifferent, and could lead to misleading results.

The difference between RG and PG propylene prices plays asignificant role in the economic feasibility of theimprovement it is also vital to consider the sale of thepropane. OPEX in USA is evaluated at about USD 1,388 perton of PG propylene, approximately 5% below those verifiedfor Germany and 10% above those for China. In Germany,the elevated investment and utility costs make the buildingof this improvement infeasible.

The Technology Economic Datasheet (Table 19) is an overallevaluation of the technology's production costs in US GulfCoast-based plant. To extend your analysis of the propylenepurification unit presented in this report, check our availabletools presented in the final chapters of this report:

Premium Tools: Deepen Your Analysis

Economic Data Bank: Free Economic Updates

Economic Assumptions

Fixed costs are estimated based on the specificcharacteristics of the improvement. Table 18 shows theindustrial labor requirements for the improvementoperation. Other fixed costs, such as operating charges, arealso shown.

Figure 12 – IRR vs. RG Propylene Purity (US Gulf)


Table 18 – Fixed Cost Assumptions


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1 The RG propylene price considers a composition of 70 wt.% ofpropylene, and includes the price contribution of the propane.

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American Chemistry Council, 2007. s.l.:s.n.

Anon., n.d. [Online]Available at:http://www.propane101.com/propanegradesandquality.htm[Accessed 17 September 2012].

Arons, J. d. S., van der Kooi, H. & Sankaranarayanan, K., 2004.Separations. In:

s.l.:Marcel Dekker, Inc..

Braskem S.A., 2012. s.l.:s.n.

(n.d.) Koch-Glitsch.

Davison Catalagram, 2004. s.l.:s.n.

Eisele, P. & Killpack, R., 2002. Propene Section. In: s.l.:Wiley-Interscience.

KLM Technology Group, 2012. s.l.: s.n.

Malik, Z. I. & Slack, J. W., n.d. Tulsa,

Oklahoma: Linde Process Plants, Inc..

Olujic, Z., Sun, L., Rijke, A. d. & Jansens, P. J., 2006.

Palmer, E. et al., Q2 2012. High-Purity Propylene fromRefinery LPG. , pp. 55-65.

Rhinesmith, R. B., Archer, P. J. & Watson, S. J., 2001. Bailey, Colorado: Pearl

Development Co..

Romero, K., 2012. Optimize Olefin Operations. , April.

(n.d.) Sulzer Chemtech.

References

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AACE: American Association of Cost Engineers

AIST: National Institute of Advanced Industrial Science andTechnology

C: Distillation, stripper, scrubber columns (e.g., C-101 woulddenote a column tag)

C2, C3, ... Cn: Hydrocarbons with "n" number of carbonatoms

C2=, C3=, ... Cn=: Alkenes with "n" number of carbon atoms

CAPEX: Capital Expenditures

CC: Distillation column condenser

CP: Distillation column reflux pump

CR: Distillation column reboiler

CW: Cooling water

E: Heat exchangers, heaters, coolers, condensers, reboilers(e.g., E-101 would denote a heat exchanger tag)

EBITDA: Earnings before Interests, Taxes, Depreciation andAmortization

F: Furnaces, fired heaters (e.g., F-101 would denote afurnace tag)

FCC: Fluid-catalytic cracking

HIDiC: Heat-Integrated Distillation Columns

IC Index: Intratec Chemical Plant Construction Index

IRR: Internal rate of return

ISBL: Inside battery limits

K: Compressors, blowers, fans (e.g., K-101 would denote acompressor tag)

kta: thousands metric tons per year

LPG: Liquefied petroleum gas

NGL: Natural gas liquids

OPEX: Operational Expenditures

OSBL: Outside battery limits

P: Pumps (e.g., P-101 would denote a pump tag)

PG: Polymer grade

PP: Polypropylene

P-P: Propylene-propane

R: Reactors, treaters (e.g., R-101 would denote a reactor tag)

RF: Refrigerant (Flowsheet) or Refrigeration Unit (e.g., RF-801 would denote an equipment tag)

RG: Refinery grade

SB: Steam boiler (e.g., SB-801 would denote an equipmenttag)

ST: Steam

T: Tanks (e.g., T-101 would denote a tank tag)

TFI: Total Fixed Investment

TPC: Total process cost

V: Horizontal or vertical drums, vessels (e.g., V-101 woulddenote a vessel tag)

WD: Demineralized water (Flowsheet) or Demineralizer(e.g., WD-801 would denote an equipment tag)

WP: Process water

X: Special equipment (e.g., X-101 would denote a specialequipment tag)

Obs.: 1 ton = 1 metric ton = 1,000 kg

Acronyms, Legends & Observations

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General ApproachImprovement Economics’s approach ensures a holistic, coherent and consistent techno-economic evaluation, which carries a clear understanding of a specific improvement opportunity. Although each improvement carries its own degree of complexity and range of implementation possibilities, the methodology hereby presented aims to briefly describe the factors that may be considered during the technology evaluation.

The general methodology used in the development of the Improvement Economics publications is depicted in Figure 13. The first step is an evaluation of the global chemical industry, in order to identify improvement opportunities trends in areas of interest to the chemical and allied industries. At the end of the initial research the scope of the present study is defined.

Subsequently, Intratec team simultaneously develops thetechnology description and the process flow diagram basedon: (a) patent and technical literature; (b) non-confidentialinformation provided by vendors or technology licensors;and (c) Intratec's in-house database and process designskills. Next, all the data collected is used to build a rigoroussteady state process simulation model in Aspen Hysysand/or Aspen Plus, leading commercial process flowsheeting software tools.

From this simulation, material balance calculations areperformed around the process, key process indicators areidentified and main equipment listed. Equipment sizingspecifications are defined based on (a) Intratec's equipmentdesign capabilities; and (b) extensive use of AspenONEEngineering Software Suite that enables the integrationbetween the process simulation developed and equipmentdesign tools. Both equipment sizing and process design areprepared in conformance with generally acceptedengineering standards.

The next step is to gather pricing data encompassing rawmaterials, chemicals and products, followed by a costanalysis targeting fixed capital costs, manufacturing costs,and other expenses associated with the examinedtechnology. Equipment costs are primarily estimated fromAspen Process Economic Analyzer customized models and

occasionally, vendor quotes of unique and specializedequipment may also be employed. Aspen ProcessEconomic Analyzer, formerly Aspen Icarus, is a powerfulproject scoping tool that enables our personnel to promptlyevaluate the economic impact of their process designs.

Simplified estimation methods require no design work,while others require process design to account for themajor equipment items, estimating the costs of these items,and applying factors for field costs. Intratec's methodologyis based on the latter type. One of the overall objectives isto establish Class 3 cost estimates2 with minimum designengineering effort.

Finally, capital and operating costs are assembled inMicrosoft Excel spreadsheets, and an economic analysis ofsuch technology is performed in which differentconstruction locations are considered. The improvement isalso analyzed under the optic of specific economicparameters, aiming to assist decision-makers withmeaningful appraisals.

Assumptions

General Considerations

The cost estimate presented in the current report is for atechnology based on a standardized design practice, typicalof a major chemical company. The specific designstandards employed can have a significant impact oncapital costs.

The basis for the capital cost estimate is that theimprovement is implemented in a plant that follows typicaldesign practices described by technology licensors or in theliterature. In comparing the cost estimate hereby presentedwith an actual system's costs or contractor's estimate, thefollowing observations must be considered:

Minor differences or details (many times unnoticed)between similar processes can appreciably affect cost.

2 These are estimates that form the basis for budget authorization,appropriation, and/or funding. Accuracy ranges for this class ofestimates are + 10% to + 30% on the high side, and - 10 % to - 20 %on the low side.

Methodology of the Analysis

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Figure 13 – Methodology Flowchart


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Similar manufacturing processes may presentsignificant differences in some specific sections. Suchdifferences may limit the suitability of theimprovement under analysis.

Industrial plants may be overdesigned for particularobjectives and situations.

Rapid fluctuation of equipment or construction costsmay invalidate cost estimate.

Equipment vendors or engineering companies mayprovide goods or services below profit margins duringeconomic downturns.

Specific locations may impose higher taxes and fees,which can impact costs considerably.

In addition, no matter how much time and effort aredevoted to accurately estimating costs, errors may occurdue to the aforementioned factors, as well as cost and laborchanges, construction problems, weather-related issues,strikes, or other unforeseen situations. This is partiallyconsidered in the project contingency. Finally, it mustalways be remembered that an estimated project cost is notan exact number; rather, it is an appraisal of the probablecost.

Fixed Investment

Investment includes the fixed capital cost of the mainprocessing units necessary to accomplish improvement’sgoals. It may include the installed cost of the followingitems:

Process equipment (e.g., reactors and vessels, heatexchangers, pumps, compressors, etc.)

Process equipment spares

Housing for process units

Pipes and supports within the main process units

Instruments, control systems, electrical wires and otherhardware

Foundations, structures and platforms

Insulation, paint and corrosion protection

In addition to the direct material and labor costs, indirectcosts, such as construction overheads, including: payrollburdens, field supervision, equipment rentals, tools, fieldoffice expenses, temporary facilities, among others may alsobe addressed.

Start-up Expenses

There are certain one-time expenses related to bringing aprocess or a plant modification on stream. From a timestandpoint, a variable undefined period exists between thenominal end of construction and the production of qualityproduct in the quantity required. This period is looselyreferred to as start-up. In this period, expenses are incurredfor operator and maintenance employee training,temporary construction, auxiliary services, testing andadjustment of equipment, piping, and instruments, etc. Ourmethod of estimating start-up expenses consists of fourcomponents:

Labor component. Represents costs associated withplant crew training for start-up, estimated as a certainnumber of days of total labor costs associated with theimprovement (operators, supervisors, maintenancepersonnel and laboratory labor).

Commercialization cost. Depends on raw materialsand products negotiation, on how integrated the plantis with feedstock suppliers and consumer facilities, andon the maturity of the technology. It ranges from 0.5%to 5% of annual manufacturing expenses.

Start-up inefficiency. Takes into account thoseoperating runs when production cannot bemaintained or false starts. The start-up inefficiencyvaries according to the process maturity: 5% for newand unproven processes, 2% for new and provenprocesses, and 1% for existing licensed processes,based on annual manufacturing expenses.

Unscheduled system adjustments. A key fault thatcan happen during the start-up of the new system isthe risk that the product(s) may not meetspecifications required. As a result, equipmentmodifications or additions may be necessary.

Other Capital Expenses

Prepaid Royalties. Royalty charges on portions of theplant are usually levied for proprietary processes. Avalue ranging from 0.5 to 1% of the total fixedinvestment (TFI) is generally used.

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Plant Layout Modifications. Plant preparation,including any modifications required in the existingunit to make space for the new equipment acquired.

Manufacturing Costs

Manufacturing costs do not include post-plant costs, whichare very company-specific. These consist of sales, generaland administrative expenses, packaging, research anddevelopment costs, and shipping, etc.

Operating labor and maintenance requirements have beenestimated subjectively on the basis of the number of majorequipment items and similar processes, as noted in theliterature.

Plant overhead includes all other non-maintenance (laborand materials) and non-operating site labor costs forservices associated with the manufacture of the product.Such overheads do not include costs to develop or marketthe product and are dependent on the improvementproposed. Systems relatively simple in comparison to theplants in which they are implemented do not represent anaddition to plant overhead costs.

Contingencies & Accuracy ofEconomic Estimates

Contingency constitutes an addition to capital costestimations, implemented based on previously availabledata or experience to encompass uncertainties that mayincur, to some degree, cost increases. According torecommended practice, two kinds of contingencies areassumed and applied to TPC: process contingency andproject contingency.

Process contingency is utilized in an effort to surpass theabsence of technical information or the uncertainty of thosepossessed. In that manner, the reliability of the informationgathered, its amount and the inherent complexity of thetechnology are decisive for its evaluation. Errors that occurmay be related to:

Uncertainty in process parameters, such as severity ofoperating conditions and quantity of recycles

Addition and integration of new process steps

Estimation of costs through scaling factors

Off-the-shelf equipment

Finally, the accuracy of estimates gives the realized range ofplant cost. For this reason, the ability to compare theprocess with others (reflected in the phase of estimates)and the reliability of the technical information available is ofmajor importance. The non-uniform spread of accuracyranges (+50 to – 30 %, rather than ±40%, e.g.) are justifiedby the fact that the unavailability of complete technicalinformation usually results in under-estimating instead ofover-estimating the project costs.

Table 20 – Project Contingency


Table 21 – Accuracy of Economic Estimates


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Intratec’s definitions in relation to complexity, maturity andproject cost estimation phase are the following:

Location Factor

A location factor is an instantaneous, total cost factor usedfor converting a base project cost from one geographiclocation to another. As such, a properly estimated locationfactor is a powerful tool both for comparing availableinvestment data and evaluating which region may providegreater economic attractiveness for a new industrialventure. Considering this, Intratec has developed a rigorousand reliable methodology for calculating Location Factors,and the results are presented for specific regions’ capitalcosts comparison.

Intratec’s Location Factor takes into consideration thedifferences in productivity, labor costs, local steel prices,equipment imports needs, freight, taxes and duties onimported and domestic materials, regional businessenvironments and local availability of sparing equipment.For such analysis, all data were taken from internationalstatistical organizations and from Intratec’s database.Calculations are performed in a comparative manner, taking

a US Gulf Coast-based plant as the reference location. Thefinal Location Factor is determined by four major indexes:Business Environment, Infrastructure, Labor, and Material.

The Business Environment Factor and the InfrastructureFactor measure how easy it is for a new plant to be installedin different countries, taking into consideration thereadiness of bureaucratic procedures, and the availabilityand quality of ports or roads, for example.

Labor and material, in turn, are the fundamentalcomponents for the construction of a plant and, for thisreason, are intrinsically related to the plant costs. Thisconcept is the basis for Intratec’s Location Factormethodology, which aims to represent the localdiscrepancies in labor and material.

Productivity of workers and their hourly compensation areimportant for the project but, also, the qualification ofworkers is decisive to estimate the need for foreign labor.

On the other hand, local steel prices are similarly important,since it is largely representative of the costs of structures,piping, equipment, etc. Considering the contribution oflabor in these components, workers’ qualifications are alsoindicative of the amount that needs to be imported. Forboth domestic and imported materials, a Spare Factor isconsidered, aiming to represent the need for spare rotors,seals and parts of rotating equipment.

The sum of the corrected TFI distribution reflects the relativecost of the plant, and this sum is multiplied by theInfrastructure and the Business Environment Factors,yielding the Location Factor.

For the purpose of illustrating the conducted methodology,a block flow diagram is presented in Figure 14, in which thefour major indexes are presented, along with some of theircomponents.

Table 22 – Criteria Description


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Figure 14 – Location Factor Composition


BACK COVER

Improvement Economics

Standardized advisory services developed by Intratec under its Consulting as Publications pioneer approach. Improvement Economics projects present unbiased analyses of technical solutions and their economics, answering:

- What is the most likely process design of this technology?

- How the plant operates after the implementation? What are the changes in the key process indicators?

- How is the capital and operating costs breakdown?

- What is the value creation potential of the project?

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Use of Propylene Splitter to Improve Polypropylene Business

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