Propylene production from methanol

Propylene from Methanol

#TEC002B Technology Economics Propylene Production from Methanol 2013

Abstract Propylene has established itself as the second major member of the global olefins business, only after ethylene. Globally, the largest volume of propylene is generated as by-product in steam crackers and through the fluid catalytic cracking (FCC) process. With ethane prices falling in the USA, due to the exploration of shale gas reserves, the low price ethylene produced from this raw material has given chemical producers in North America a feedstock advantage. Such change has put naphtha-fed steam crackers at a disadvantageous position, with many of them shutting down or revamping to use ethane as feedstock. Nevertheless, the propylene output rates from ethane-fed crackers are negligible. The result is a tight propylene market. For this reason, new and novel lower-cost chemical processes for on-purpose propylene production technologies are of high interest to the petrochemical marketplace. Such processes include: Metathesis, Propane Dehydrogenation (PDH), Methanol-toOlefins/Methanol-to-Propylene (MTO/MTP), High Severity FCC, and Olefins Cracking. Among those, MTO/MTP and PDH stand out due to the use of low-cost raw materials. The main raw material used in the MTP process is methanol that is produced from synthesis gas which, in turn, can be obtained in large-scale from natural gas or coal. Natural gas extracted from shale gas has become the fastest-growing source of gas in the USA, while China possesses large reserves of coal, making both countries competitive when comparing to others with high-cost feedstock. In this report, the production of propylene from methanol (MTP) is reviewed. Included in the analysis is an overview of the technology and economics of a process similar to the Lurgi MTP® and JGC/Mitsubishi DTP® processes. Both the capital investment and the operating costs are presented for a plant constructed in the US Gulf Coast and China. The economic analysis presented in this report is based upon a plant fully integrated with a petrochemical complex and capable of producing 557 kta of polymer-grade propylene. The estimated CAPEX for such a plant in US Gulf Coast is about USD 380 million. China is the most attractive place to start-up a MTP plant, which justifies the fact that the only two existing MTP plants are located in China. However, with the advent of shale gas in the USA, natural gas prices are low, favoring the construction of a MTP plant also in the country. This fact is proved by the calculated internal rate of return of above 25% per year in both regions.

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Terms & Conditions Information, analyses and/or models herein presented are prepared on the basis of publicly available information and non-confidential information disclosed by third parties. Third parties, including, but not limited to technology licensors, trade associations or marketplace participants, may have provided some of the information on which the analyses or data are based. Intratec Solutions LLC (known as “Intratec”) does not believe that such information will contain any confidential information but cannot provide any assurance that any third party may, from time to time, claim a confidential obligation to such information. The aforesaid information, analyses and models are developed independently by Intratec and, as such, are the opinion of Intratec and do not represent the point of view of any third parties nor imply in any way that they have been approved or otherwise authorized by third parties that are mentioned in this publication. The application of the solutions presented in this publication without license from the owners infringes on the intellectual property rights of the owners, including patent rights, trademark rights, and rights to trade secrets and proprietary information. Intratec conducts analyses and prepares publications and models for readers in conformance with generally accepted professional standards. Although the statements in this publication are derived from or based on several sources that Intratec believe to be reliable, Intratec does not guarantee their accuracy, reliability, or quality; any such information, or resulting analyses, may be incomplete, inaccurate or condensed. All estimates included in this publication are subject to change without notice. This publication is for informational purposes only and is not intended as any recommendation of investment. Reader agrees it will not, without prior written consent of Intratec, represent, directly or indirectly, that its products have been approved or endorsed by the other parties.

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Contents About this Study .............................................................................................................................................................. 8 Object of Study.............................................................................................................................................................................................................................8 Analysis Performed ....................................................................................................................................................................................................................8 Construction Scenarios ..............................................................................................................................................................................................................8 Location Basis ...................................................................................................................................................................................................................................9

Design Conditions......................................................................................................................................................................................................................9

Study Background ........................................................................................................................................................ 10 About Propylene ......................................................................................................................................................................................................................10 Introduction.................................................................................................................................................................................................................................... 10 Applications.................................................................................................................................................................................................................................... 10

Manufacturing Alternatives ..............................................................................................................................................................................................11 Licensor(s) & Historical Aspects......................................................................................................................................................................................13

Technical Analysis......................................................................................................................................................... 14 Chemistry.......................................................................................................................................................................................................................................14 Raw Material ................................................................................................................................................................................................................................14 Technology Overview...........................................................................................................................................................................................................16 Detailed Process Description & Conceptual Flow Diagram.......................................................................................................................17 Area 100: Reaction & Regeneration................................................................................................................................................................................17 Area 200: Quench & Compression ..................................................................................................................................................................................18 Area 300: Product Fractionation.......................................................................................................................................................................................18 Key Consumptions ..................................................................................................................................................................................................................... 19 Technical Assumptions ........................................................................................................................................................................................................... 19 Labor Requirements.................................................................................................................................................................................................................. 19

ISBL Major Equipment List.................................................................................................................................................................................................23 OSBL Major Equipment List ..............................................................................................................................................................................................26 Other Process Remarks ........................................................................................................................................................................................................27 Technology Comparison........................................................................................................................................................................................................27 Integration with FCC & Naphtha Crackers...................................................................................................................................................................27

Economic Analysis ........................................................................................................................................................ 29 General Assumptions............................................................................................................................................................................................................29 2

Project Implementation Schedule...............................................................................................................................................................................30 Capital Expenditures..............................................................................................................................................................................................................30 Fixed Investment......................................................................................................................................................................................................................... 30 Working Capital............................................................................................................................................................................................................................ 33 Other Capital Expenses ...........................................................................................................................................................................................................34 Total Capital Expenses ............................................................................................................................................................................................................. 34

Operational Expenditures ..................................................................................................................................................................................................34 Manufacturing Costs................................................................................................................................................................................................................. 34 Historical Analysis........................................................................................................................................................................................................................ 35

Economic Datasheet .............................................................................................................................................................................................................35

Regional Comparison & Economic Discussion.................................................................................................... 38 Regional Comparison............................................................................................................................................................................................................38 Capital Expenses.......................................................................................................................................................................................................................... 38 Operational Expenses............................................................................................................................................................................................................... 38 Economic Datasheet................................................................................................................................................................................................................. 38

Economic Discussion ............................................................................................................................................................................................................39

References....................................................................................................................................................................... 41 Acronyms, Legends & Observations....................................................................................................................... 42 Technology Economics Methodology................................................................................................................... 43 Introduction.................................................................................................................................................................................................................................43 Workflow........................................................................................................................................................................................................................................43 Capital & Operating Cost Estimates ............................................................................................................................................................................45 ISBL Investment............................................................................................................................................................................................................................ 45 OSBL Investment ......................................................................................................................................................................................................................... 45 Working Capital............................................................................................................................................................................................................................ 46 Start-up Expenses ....................................................................................................................................................................................................................... 46 Other Capital Expenses ...........................................................................................................................................................................................................47 Manufacturing Costs................................................................................................................................................................................................................. 47

Contingencies ............................................................................................................................................................................................................................47 Accuracy of Economic Estimates..................................................................................................................................................................................48 Location Factor..........................................................................................................................................................................................................................48

Appendix A. Mass Balance & Streams Properties............................................................................................... 50 Appendix B. Utilities Consumption Breakdown ................................................................................................. 55 Appendix C. Carbon Footprint ................................................................................................................................. 56 3

Appendix D. Equipment Detailed List & Sizing................................................................................................... 57 Appendix E. Detailed Capital Expenses................................................................................................................. 66 Direct Costs Breakdown ......................................................................................................................................................................................................66 Indirect Costs Breakdown ..................................................................................................................................................................................................67

Appendix F. Economic Assumptions...................................................................................................................... 68 Capital Expenditures..............................................................................................................................................................................................................68 Construction Location Factors ...........................................................................................................................................................................................68 Working Capital............................................................................................................................................................................................................................ 68 Other Capital Expenses ...........................................................................................................................................................................................................68

Operational Expenses ...........................................................................................................................................................................................................69 Fixed Costs ...................................................................................................................................................................................................................................... 69 Depreciation................................................................................................................................................................................................................................... 69

Appendix G. Released Publications ........................................................................................................................ 70 Appendix H. Technology Economics Form Submitted by Client ................................................................. 71

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List of Tables Table 1 – Construction Scenarios Assumptions (Based on Degree of Integration) ......................................................................................9 Table 2 – Location & Pricing Basis ....................................................................................................................................................................................................9 Table 3 – General Design Assumptions .......................................................................................................................................................................................9 Table 4 – Major Propylene Consumers......................................................................................................................................................................................10 Table 5 - Raw Materials & Utilities Consumption (per ton of product)................................................................................................................19 Table 6 – Design & Simulation Assumptions.........................................................................................................................................................................19 Table 7 – Labor Requirements for a Typical Plant..............................................................................................................................................................19 Table 8 – Main Streams Operating Conditions and Composition..........................................................................................................................23 Table 9 – Inside Battery Limits Major Equipment List......................................................................................................................................................23 Table 10 - Outside Battery Limits Major Equipment List ...............................................................................................................................................27 Table 11 – Base Case General Assumptions...........................................................................................................................................................................29 Table 12 - Bare Equipment Cost per Area (USD Thousands)......................................................................................................................................30 Table 13 – Total Fixed Investment Breakdown (USD Thousands) ..........................................................................................................................30 Table 14 – Working Capital (USD Million) ................................................................................................................................................................................33 Table 15 – Other Capital Expenses (USD Million) ...............................................................................................................................................................34 Table 16 – CAPEX (USD Million)......................................................................................................................................................................................................34 Table 17 – Manufacturing Fixed Cost (USD/ton) ................................................................................................................................................................34 Table 18 – Manufacturing Variable Cost (USD/ton)..........................................................................................................................................................35 Table 19 – OPEX (USD/ton)................................................................................................................................................................................................................35 Table 20 – Technology Economics Datasheet: Propylene Production from Methanol on the US Gulf Coast.......................37 Table 21 – Technology Economics Datasheet: Propylene Production from Methanol in China ....................................................40 Table 22 – Project Contingency......................................................................................................................................................................................................47 Table 23 – Criteria Description.........................................................................................................................................................................................................47 Table 24 – Accuracy of Economic Estimates .........................................................................................................................................................................48 Table 25 – Detailed Material Balance & Streams Properties........................................................................................................................................50 Table 26 – Utilities Consumption Breakdown ......................................................................................................................................................................55 Table 27 – Assumptions for CO2e Emissions Calculation.............................................................................................................................................56 Table 28 – CO2e Emissions (ton/ton prod.)............................................................................................................................................................................56 Table 29 – Compressors .......................................................................................................................................................................................................................57 Table 30 – Heat Exchangers ..............................................................................................................................................................................................................57 Table 31 – Pumps......................................................................................................................................................................................................................................61 Table 32 – Columns.................................................................................................................................................................................................................................62 5

Table 33 – Utilities Supply...................................................................................................................................................................................................................63 Table 34 – Vessels & Tanks..................................................................................................................................................................................................................63 Table 35 – Indirect Costs Breakdown for the Base Case (USD Thousands) ......................................................................................................67 Table 36 – Detailed Construction Location Factor............................................................................................................................................................68 Table 37 – Working Capital Assumptions (Base Case) ....................................................................................................................................................68 Table 38 – Other Capital Expenses Assumptions (Base Case) ...................................................................................................................................68 Table 39 – Other Fixed Cost Assumptions ..............................................................................................................................................................................69 Table 40 – Depreciation Value & Assumptions ....................................................................................................................................................................69

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List of Figures Figure 1 – Construction Scenarios Assumptions (Based on Degree of Integrations) ..................................................................................8 Figure 2 – Propylene from Multiple Sources .........................................................................................................................................................................12 Figure 3 – MTP Reaction Diagram.................................................................................................................................................................................................14 Figure 4 – US Natural Gas Production History and Forecast (Trillion Cubic Feet)........................................................................................15 Figure 5 – Process Block Flow Diagram.....................................................................................................................................................................................16 Figure 6 – Inside Battery Limits Conceptual Process Flow Diagram.....................................................................................................................20 Figure 7 – MTP Integrated with FCC/Naphtha Cracker Units ....................................................................................................................................28 Figure 8 – Project Implementation Schedule.......................................................................................................................................................................29 Figure 9 – Total Direct Cost of Different Integration Scenarios (USD Thousands) ......................................................................................32 Figure 10 – Total Fixed Investment of Different Integration Scenarios (USD Thousands) ....................................................................32 Figure 11 – Total Fixed Investment Validation (USD Million).....................................................................................................................................33 Figure 12 – OPEX and Product Sales History (USD/ton) ................................................................................................................................................36 Figure 13 – EBITDA Margin & IP Indicators History Comparison..............................................................................................................................36 Figure 14 – CAPEX per Location (USD Million).....................................................................................................................................................................38 Figure 15 – Operating Costs Breakdown per Location (USD/ton) .........................................................................................................................39 Figure 16 – Methodology Flowchart...........................................................................................................................................................................................44 Figure 17 – Location Factor Composition...............................................................................................................................................................................49 Figure 18 – ISBL Direct Costs Breakdown by Equipment Type (Base Case).....................................................................................................66 Figure 19 – OSBL Direct Costs by Equipment Type (Base Case) ..............................................................................................................................66

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About this Study This study follows the same pattern as all Technology Economics studies developed by Intratec and is based on the same rigorous methodology and well-defined structure (chapters, type of tables and charts, flow sheets, etc.).

Analysis Performed

This chapter summarizes the set of information that served as input to develop the current technology evaluation. All required data were provided through the filling of the Technology Economics Form available at Intratec’s website.

The economic analysis is based on the construction of a plant inside a petrochemical complex, in which methanol feedstock is locally provided and propylene product is consumed by a nearby polypropylene unit. Therefore, no storage for product or raw material is required. Additionally, the petrochemical complex supplies most utilities.

Construction Scenarios

You may check the original form in the “Appendix H. Technology Economics Form Submitted by Client”.

Since the Outside Battery Limits (OSBL) requirements– storage and utilities supply facilities – significantly impact the capital cost estimates for a new venture, they may play a decisive role in the decision as to whether or not to invest. Thus, in this study three distinct OSBL configurations are compared. Those scenarios are summarized in Figure 1 and Table 1

Object of Study This assignment assesses the economic feasibility of an industrial unit for propylene production from methanol, implementing technology similar to the Lurgi MTP® and JGC/Mitsubishi DTP® processes. The current assessment is based on economic data gathered on Q3 2011 and a chemical plant’s nominal capacity of 557 kta (thousand metric tons per year).

Figure 1 – Construction Scenarios Assumptions (Based on Degree of Integrations) Petrochemical Complex

Non-Integrated Products Storage Products Storage

ISBL Unit ISBL Unit

Intratec | About this Study

Raw Materials

8

Partially Integrated Petrochemical Complex

Fully Integrated Products Consumer Petrochemical Complex

Products Consumer

Products Consumer

Products Storage

ISBL Unit ISBL Unit

Raw Materials

ISBL Unit ISBL Unit

Raw Materials

RawStorage Materials Storage

Provider Raw Materials Storage

Provider Raw Materials Provider

Grassroots unit

Unit is part of a petrochemical complex

Most infrastructure is already installed Petrochemical Complex

Source: Intratec – www.intratec.us

Table 1 – Construction Scenarios Assumptions (Based on Degree of Integration)

Storage Capacity

(Base Case for Evaluation)

Feedstock & Chemicals

20 days of operation

20 days of operation

Not included

End-products & By-products

20 days of operation

Not included

Not included

All

All

Only refrigeration unit

Utility Facilities Included

Control room, labs, gate house, Support & Auxiliary Facilities

maintenance shops,

(Area 900)

warehouses, offices, change house, cafeteria, parking lot

Control room, labs, maintenance shops,

Control room and labs

warehouses

Source: Intratec – www.intratec.us

Location Basis

Table 2 – Location & Pricing Basis

Regional specific conditions influence both construction and operating costs. This study compares the economic performance of two identical plants operating in different locations: the US Gulf Coast and China. The assumptions that distinguish the two regions analyzed in this study are provided in Table 2.

Design Conditions The process analysis is based on rigorous simulation models developed on Aspentech Aspen Plus and Hysys, which support the design of the chemical process, equipment and OSBL facilities. The design assumptions employed are depicted in Table 3.

Source: Intratec – www.intratec.us

Cooling water temperature

24 °C

Cooling water range

11 °C

Steam (High Pressure)

28 bar abs

Steam (Medium Pressure)

11 bar abs

Steam (Low Pressure)

7 bar abs

Refrigerant (Propylene)

-45 °C

Wet Bulb Air Temperature

25 °C

Source: Intratec – www.intratec.us

Intratec | About this Study

Table 3 – General Design Assumptions

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Study Background About Propylene Introduction Propylene is an unsaturated organic compound having the chemical formula C3H6. It has one double bond, is the second simplest member of the alkene class of hydrocarbons, and is also second in natural abundance.

Propylene 2D structure Propylene is produced primarily as a by-product of petroleum refining and of ethylene production by steam cracking of hydrocarbon feedstocks. Also, it can be produced in an on-purpose reaction (for example, in propane dehydrogenation, metathesis or syngas-to-olefins plants). It is a major industrial chemical intermediate that serves as one of the building blocks for an array of chemical and plastic products, and was also the first petrochemical employed on an industrial scale. Commercial propylene is a colorless, low-boiling, flammable, and highly volatile gas. Propylene is traded commercially in three grades: Polymer Grade (PG): min. 99.5% of purity.

While CG propylene is used extensively for most chemical derivatives (e.g., oxo-alcohols, acrylonitrile, etc.), PG propylene is used in polypropylene and propylene oxide manufacture. PG propylene contains minimal levels of impurities, such as carbonyl sulfide, that can poison catalysts. Thermal & Motor Gasoline Uses Propylene has a calorific value of 45.813 kJ/kg, and RG propylene can be used as fuel if more valuable uses are unavailable locally (i.e., propane – propene splitting to chemical-grade purity). RG propylene can also be blended into LPG for commercial sale. Also, propylene is used as a motor gasoline component for octane enhancement via dimerization – formation of polygasoline or alkylation. Chemical Uses The principal chemical uses of propylene are in the manufacture 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 polypropylene production, which accounts for about two-thirds of total propylene demand.

Chemical Grade (CG): 90-96% of purity. Refinery Grade (RG): 50-70% of purity.

Intratec | Study Background

Applications

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The three commercial grades of propylene are used for different applications. RG propylene is obtained from refinery processes. The main uses of refinery propylene are in liquefied petroleum gas (LPG) for thermal use or as an octane-enhancing component in motor gasoline. It can also be used in some chemical syntheses (e.g., cumene or isopropanol). The most significant market for RG propylene is the conversion to PG or CG propylene for use in the production of polypropylene, acrylonitrile, oxo-alcohols and propylene oxide.

Table 4 – Major Propylene Consumers Polypropylene

Mechanical parts, containers, fibers, films

Acrylonitrile

Acrylic fibers, ABS polymers

Propylene oxide

Propylene glycol, antifreeze, polyurethane

Oxo-alcohols

Coatings, plasticizers

Cumene

Polycarbonates, phenolic resins

Acrylic acid

Coatings, adhesives, super absorbent polymers

Source: Intratec – www.intratec.us

Propylene is commercially generated as a co-product, either in an olefins plant or a crude oil refinery’s fluid catalytic cracking (FCC) unit, or produced in an on-purpose reaction (for example, in propane dehydrogenation, metathesis or syngas-to-olefins plants). Globally, the largest volume of propylene is produced in NGL (Natural Gas Liquids) or naphtha steam crackers, which generates ethylene as well. In fact, the production of propylene from such a plant is so important that the name “olefins plant” is often applied to this kind of manufacturing facility (as opposed to “ethylene plant”). In an olefins plant, propylene is generated by the pyrolysis of the incoming feed, followed by purification. Except where ethane is used as the feedstock, propylene is typically produced at levels ranging from 40 to 60 wt% of the ethylene produced. The exact yield of propylene produced in a pyrolysis furnace is a function of the feedstock and the operating severity of the pyrolysis. The pyrolysis furnace operation usually is dictated by computer optimization, where an economic optimum for the plant is based on feedstock price, yield structures, energy considerations, and market conditions for the multitude of products obtained from the furnace. Thus, propylene produced by steam cracking varies according to economic conditions. In an olefins plant purification area, also called separation train, propylene is obtained by distillation of a mixed C3 stream, i.e., propane, propylene, and minor components, in a C3-splitter tower. It is produced as the overhead distillation product, and the bottoms are a propaneenriched stream. The size of the C3-splitter depends on the purity of the propylene product. The propylene produced in refineries also originates from other cracking processes. However, these processes can be compared to only a limited extent with the steam cracker for ethylene production because they use completely different feedstocks and have different production objectives. Refinery cracking processes operate either purely thermally or thermally – catalytically. By far the most important process for propene production is the fluid- catalytic cracking (FCC) process, in which the powdery catalyst flows as a fluidized bed through the reaction and regeneration

areas. This process converts heavy gas oil preferentially into gasoline and light gas oil. The propylene yielded from olefins plants and FCC units is typically considered a co-product in these processes, which are primarily driven by ethylene and motor gasoline production, respectively. Currently, the markets have evolved to the point where modes of by-product production can no longer satisfy the demand for propylene. A trend toward less severe cracking conditions, and thus to increase propylene production, has been observed in steam cracker plants using liquid feedstock. As a result, new and novel lower-cost chemical processes for on-purpose propylene production technologies are of high interest to the petrochemical marketplace. Such processes include: Olefin Metathesis. Also known as disproportionation, metathesis is a reversible reaction between ethylene and butenes in which double bonds are broken and then reformed to form propylene. Propylene yields of about 90 wt% are achieved. This option may also be used when there is no butene feedstock. In this case, part of the ethylene feeds an ethylene-dimerization unit that converts ethylene into butene. Propane Dehydrogenation. A catalytic process that converts propane into propylene and hydrogen (byproduct). The yield of propylene from propane is about 85 wt%. The reaction by-products (mainly hydrogen) are usually used as fuel for the propane dehydrogenation reaction. As a result, propylene tends to be the only product, unless local demand exists for the hydrogen by-product. Methanol-to-Olefins/Methanol-to-Propylene. A group of technologies that first converts synthesis gas (syngas) to methanol, and then converts the methanol to ethylene and/or propylene. The process also produces water as by-product. Synthesis gas is produced from the reformation of natural gas or by the steam-induced reformation of petroleum products such as naphtha, or by gasification of coal. A large amount of methanol is required to make a world-scale ethylene and/or propylene plant. High Severity FCC. Refers to a group of technologies that use traditional FCC technology under severe conditions (higher catalyst-to-oil ratios, higher steam injection rates, higher temperatures, etc.) in order to maximize the amount of propylene and other light products. A high severity FCC unit is usually fed with

Intratec | Study Background

Manufacturing Alternatives

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gas oils (paraffins) and residues, and produces about 20-25 wt% propylene on feedstock together with greater volumes of motor gasoline and distillate byproducts.

These on-purpose methods are becoming increasingly significant, as the shift to lighter steam cracker feedstocks with relatively lower propylene yields and reduced motor gasoline demand in certain areas has created an imbalance of supply and demand for propylene.

Olefins Cracking. Includes a broad range of technologies that catalytically convert large olefins molecules (C4-C8) into mostly propylene and small amounts of ethylene. This technology will best be employed as an auxiliary unit to an FCC unit or steam cracker to enhance propylene yields.

Figure 2 – Propylene from Multiple Sources

Naphtha NGL

Steam Cracker

Gas Oil

Refinery FCC Unit

RG Propylene

Propane

PDH

Ethylene/ Butenes

Metathesis

Methanol

MTO/MTP

Intratec | Study Background

Gas Oil

12

High Severity FCC

C4 to C8 Olefins

Source: Intratec – www.intratec.us

Olefins Cracking

CG/PG Propylene

Licensor(s) & Historical Aspects The continuous rise in petroleum prices in addition to the increase in world demand for propylene led to innovation by the chemical industry in the development of production routes other than those involving oil. Thus, the economic and environmental benefits arising from the use of natural gas encouraged an alternative route for olefins production by using inexpensive methanol, which is deemed to be a readily stored and managed intermediate product generated from the natural gas. Since the 1980s, hydrocarbons production from methanol over a zeolite (especially of the ZSM-5 type) catalyst has been known. It was found that methanol could be converted into olefins ranging from C2 to C8, depending on the reaction conditions. However, at that time, the commercialization of routes such as MTG (methanol-togasoline) by Mobil (now ExxonMobil) and the first tests of methanol into olefins conversion conducted by Lurgi, were not possible on a commercial scale due to the high price of methanol and the complexity of the required reactor systems. Propylene production from methanol started to become technically feasible in 1999, when Lurgi made the choice of a proper zeolite as the catalyst and started a pilot plant for optimization tests. A demonstration unit was then built in Norway in order to prove that the catalyst life under realistic conditions was long enough to make the process economically feasible. The main objective was accomplished and PG propylene production through methanol-to-propylene (MTP) was also proved.

Intratec | Study Background

A similar technology that converts dimethyl-ether into propylene, named as DTP® (Dominant Technology for Propylene), has been jointly developed by the Japanese corporations JGC and Mitsubishi Chemicals since 2007. This technology can be considered a Lurgi MTP® competitor. A demonstration plant was built in Mitsubishi Chemical’s Mizushima Plant, Japan, and started the operations in August 2010. However, till the present date, there is no commercial unit in operation of the DTP® technology.

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Technical Analysis Chemistry The process of converting methanol into propylene can be put in simpler form by splitting it into two reactions. The first reaction, which occurs in a pre-reactor (DME reactor), partially converts methanol into dimethyl-ether (DME) and following equation shows the reaction:

Methanol

DME

Water

The reaction is exothermic, and the reaction equilibrium is nearly independent of the operating pressure. The licensors claim catalysts with high activity and high selectivity, achieving almost thermodynamic equilibrium. In the main reactor, dimethyl-ether and unconverted methanol mixture from the DME reactor are converted on zeolite-based catalyst (of type ZSM-5) with a high selectivity toward low-molecular-weight olefins ranging from C2 to C8 and with the peak for propylene. The main reactions are summarized in the following equation:

DME

C2-C8 Olefins

Relatively high operating temperatures and low operating pressures favor the high selectivity toward olefins. Also, in MTP processes, olefins are recycled to the main reactor in order to increase the propylene yield by the conversion of olefins by-products. A simplified scheme, Figure 3, illustrates the typical reactions that occur in the MTP reactor. The balance between “Generated” and “Consumed” indicates the reaction’s equilibrium and the thickness of the arrow indicates the amount of compound produced.

Raw Material As previously explained, the raw material for the production of propylene via MTP is methanol. Methanol, CH3OH, also termed methyl alcohol or carbinol, is one of the most important chemical raw materials. About 85% of the methanol produced is used in the chemical industry as a starting material or solvent for synthesis. The remainder is used in the fuel and energy sector.

Figure 3 – MTP Reaction Diagram

Consumed Generated

Methanol / DME

C2

C3

C4 and C5

Intratec | Technical Analysis

C6+

14

Saturated Naphthenes Aromatics Paraffins

Source: Intratec – www.intratec.us

Water

Methanol is currently produced on an industrial scale exclusively by catalytic conversion of synthesis gas. Processes are classified according to the pressure used:

Figure 4 – US Natural Gas Production History and Forecast (Trillion Cubic Feet)

High-pressure process: 250 – 300 bar abs. Medium-pressure process: 100 – 250 bar abs.

Non-associated onshore

Associated with oil

Coalbed methane

Alaska

Non-associated offshore

Tight gas

Shale gas

Low-pressure process: 50 – 100 bar abs. 30

The main advantages of the low-pressure process are lower investment and production costs, improved operational reliability and greater flexibility in the choice of plant size.

History

Forecast

25 20

Industrial methanol production can be subdivided into three main steps: production of synthesis gas; synthesis of methanol; and processing of crude methanol.

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All carbonaceous materials such as coal, coke, natural gas, petroleum, and fractions obtained from petroleum (asphalt, gasoline, and gaseous compounds) can be used as starting materials for synthesis gas production. Economy is of primary importance with regard to choice of raw materials. Long-term availability, energy consumption, and environmental aspects must also be considered.

5

10

0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Source: US Energy Information Administration (EIA) AOE2012

Natural gas is generally used in the large-scale production of synthesis gas for methanol synthesis. In a few processes (e.g., acetylene production), residual gases are formed which have roughly the composition of the synthesis gas required for methanol synthesis. Natural gas extracted from shale gas has become the fastest-growing source of gas in the United States and could become a significant new global energy source. This will enable the United States to consume a predominantly domestic supply of gas for many years and produce more natural gas than it consumes.

MTP technology has a favorable outlook for end-users who have access to cost-advantaged feedstocks.

Intratec | Technical Analysis

According to the forecast from the US Energy Information Administration (EIA), in 2035, about half of the natural gas production in the US will be from shale gas. Figure 4 shows the US natural gas production history and forecast.

15

Technology Overview The MTP technology is based on the efficient combination of two main features: Fixed-bed reactor system, selected as the most suitable reaction system from a technological and economic point of view; Highly selective and stable zeolite-based fixed-bed catalyst commercially manufactured. In the process, methanol fed to the MTP plant is first converted to DME and water in a DME pre-reactor. Using a highly active and selective catalyst, thermodynamic equilibrium is achieved, resulting in the methanol-waterDME mixture at appropriate operating conditions. Hydrocarbon recycle and steam generated from water recycle are added to this mixture before it enters the first MTP reactor of the multi-stage adiabatic reactor system. The methanol/DME conversion rate exceeds 99%, with propylene as the essential compound. Additional reaction proceeds in the downstream reactor stages. The product mixture leaving the reactor system consists of product gas, organic liquid and water. This mixture is cooled and compressed.

After product gas compression, traces of water and DME are removed and the gas is further processed, yielding polymergrade propylene. Several hydrocarbon-containing streams are recycled to boost the propylene yield. Propylene is the single main product, as shown in the simplified flow diagram. Gasoline, LPG, fuel gas and water are by-products. To avoid accumulation of inert materials in the system, a small purge is required for light- and heavy-ends. The excess water resulting from the methanol conversion is also purged. It can be used as raw water or for irrigation after inexpensive standard treatment. It can even be processed to potable water. Occurrence of coke formed on the active catalyst surfaces is a crucial issue and inherent in catalytic conversion to olefins due to inevitable side reactions. The amount of coke formed is decisive for choosing the most adequate reactor operation mode and catalyst. For this reason, propylene synthesis is conducted in a semi-continuous manner, with one or two reactor systems effectively conducting the reactions, while the other or a third one is in regeneration or on stand-by mode. Regeneration is conducted by burning the coke with a nitrogen/air mixture, after a cycle of approximately 500-600 hours of operation. The regeneration is carried out at temperatures similar to the reaction itself, hence the catalyst particles do not experience any unusual temperature stress during the in-situ catalyst regeneration procedure.

Figure 5 – Process Block Flow Diagram

Olefins Recycle

Intratec | Technical Analysis

Methanol

16

Area 200 Quench & Compression

Area 100 Reaction

Fuel Gas

PG Propylene

Area 300 Fractionation

LPG Gasoline

Water Recycle Water

Source: Intratec – www.intratec.us

17

Intratec | Technical Analysis

18

Intratec | Technical Analysis

Key Consumptions

Table 5 - Raw Materials & Utilities Consumption (per ton of product)

Source: Intratec – www.intratec.us

Labor Requirements

Source: Intratec – www.intratec.us

Intratec | Technical Analysis

Table 7 – Labor Requirements for a Typical Plant

19

Intratec | Technical Analysis

Figure 6 – Inside Battery Limits Conceptual Process Flow Diagram

20

Source: Intratec – www.intratec.us

Source: Intratec – www.intratec.us

Intratec | Technical Analysis

Figure 6 – Inside Battery Limits Conceptual Process Flow Diagram (Cont.)

21

Intratec | Technical Analysis

Figure 6 – Inside Battery Limits Conceptual Process Flow Diagram (Cont.)

22

Source: Intratec – www.intratec.us

Information regarding utilities flow rates is provided in “Appendix B. Utilities Consumption Breakdown.” For further details on greenhouse gas emissions caused by this process, see “Appendix C. Carbon Footprint.”

ISBL Major Equipment List Table 9 shows the equipment list by area. It also presents a brief description and the main materials used. Find main specifications for each piece of equipment in “Appendix D. Equipment Detailed List & Sizing.”

Intratec | Technical Analysis

Table 8 presents the main streams composition and operating conditions. For a more complete material balance, see the “Appendix A. Mass Balance & Streams Properties.”

23

24

Intratec | Technical Analysis

25

Intratec | Technical Analysis

OSBL Major Equipment List

Intratec | Technical Analysis

The OSBL is divided into three main areas: storage (Area 700), energy and water facilities (Area 800), and support & auxiliary facilities (Area 900).

26

Table 10 shows the list of tanks located in the storage area and the energy facilities required in the construction of a non-integrated unit.

27

Intratec | Technical Analysis

Figure 7 – MTP Integrated with FCC/Naphtha Cracker Units

C4 and C5 Hydrocarbons from FCC or Naphtha Cracker

Hydrogenation Reactor

DME

Fuel Gas PG Propylene

MTP Reactor

Recycled Olefins

Intratec | Technical Analysis

Source: Intratec – www.intratec.us

28

Quenching, Compression & Fractionation

LPG Gasoline

Water

Economic Analysis General Assumptions The general assumptions for the base case of this analysis are outlined below.

Table 11 – Base Case General Assumptions

In Table 11, the IC Index stands for Intratec chemical plant Construction Index, an indicator, published monthly by Intratec, to scale capital costs from one time period to another. This index reconciles prices trends of fundamental components of a chemical plant construction such as labor, material and energy, providing meaningful historical and forecast data for our readers and clients. The assumed operating hours per year indicated does not represent any technology limitation; rather, it is an assumption based on usual industrial operating rates Additionally, Table 11 discloses assumptions regarding the project complexity, technology maturity and data reliability, which are of major importance for attributing reasonable contingencies for the investment and for evaluating the overall accuracy of estimates. Definitions and figures for both contingencies and accuracy of economic estimates can be found in this publication in the chapter “Technology Economics Methodology.”

Source: Intratec – www.intratec.us

Source: Intratec – www.intratec.us

Intratec | Economic Analysis

Figure 8 – Project Implementation Schedule

29

Project Implementation Schedule

“Appendix E. Detailed Capital Expenses” provides a detailed breakdown for the direct expenses, outlining the share of each type of equipment in total.

The main objective of knowing upfront the project implementation schedule is to enhance the estimates for both capital initial expenses and return on investment.

After defining the total direct cost, the TFI is established by adding field indirects, engineering costs, overhead, contract fees and contingencies.

The implementation phase embraces the period from the decision to invest to the start of commercial production. This phase can be divided into five major stages: (1) Basic Engineering, (2) Detailed Engineering, (3) Procurement, (4) Construction, and (5) Plant Start-up.

Table 13 – Total Fixed Investment Breakdown (USD Thousands)

The duration of each phase is detailed in Figure 8.

Capital Expenditures Fixed Investment Table 12 shows the bare equipment cost associated with each area of the project.

Table 12 - Bare Equipment Cost per Area (USD Thousands)

Source: Intratec – www.intratec.us

Intratec | Economic Analysis

Source: Intratec – www.intratec.us

30

Table 13 presents the breakdown of the total fixed investment (TFI) per item (direct & indirect costs and project contingencies). For further information about the components of the TFI please see the chapter “Technology Economics Methodology”. Fundamentally, the direct costs are the total direct material and labor costs associated with the equipment (including installation bulks). The total direct cost represents the total bare equipment installed cost.

Indirect costs are defined by the American Association of Cost Engineers (AACE) Standard Terminology as those "costs which do not become a final part of the installation but which are required for the orderly completion of the installation." The indirect project expenses are further detailed in “Appendix E. Detailed Capital Expenses”

Alternative OSBL Configurations The total fixed investment for the construction of a new chemical plant is greatly impacted by how well it will be able to take advantage of the infrastructure already installed in that location. For example, if there are nearby facilities consuming a unit’s final product or supplying a unit’s feedstock, the need for storage facilities significantly decreases, along with the total fixed investment required. This is also true for support facilities that can serve more than one plant in the same complex, such as a parking lot, gate house, etc. This study analyzes the total fixed investment for three distinct scenarios regarding OSBL facilities: Non-Integrated Plant Plant Partially Integrated Plant Fully Integrated The detailed definition, as well as the assumptions used for each scenario is presented in the chapter “About this Study”

Intratec | Economic Analysis

The influence of the OSBL facilities on the capital investment is depicted in Figure 9 and in Figure 10.

31

Figure 9 – Total Direct Cost of Different Integration Scenarios (USD Thousands)

Source: Intratec – www.intratec.us

Intratec | Economic Analysis

Figure 10 – Total Fixed Investment of Different Integration Scenarios (USD Thousands)

32

Source: Intratec – www.intratec.us

Working Capital Working capital, described in Table 14, is another significant investment requirement. It is needed to meet the costs of labor; maintenance; purchase, storage, and inventory of field materials; and storage and sales of product(s). Assumptions for working capital calculations are found in “Appendix F. Economic Assumptions.”

Table 14 – Working Capital (USD Million)

Source: Intratec – www.intratec.us

Source: Intratec – www.intratec.us

Intratec | Economic Analysis

Figure 11 – Total Fixed Investment Validation (USD Million)

33

Other Capital Expenses Start-up costs should also be considered when determining the total capital expenses. During this period, expenses are incurred for employee training, initial commercialization costs, manufacturing inefficiencies and unscheduled plant modifications (adjustment of equipment, piping, instruments, etc.).

Table 16 – CAPEX (USD Million)

Initial costs are not addressed in most studies on estimating but can become a significant expenditure. For instance, the initial catalyst load in reactors may be a significant cost and, in that case, should also be included in the capital estimates.

Source: Intratec – www.intratec.us

The purchase of technology through paid-up royalties or licenses is considered to be part of the capital investment.

Manufacturing Costs

Other capital expenses frequently neglected are land acquisition and site development. Although these are small parts of the total capital expenses, they should be included.

Operational Expenditures

The manufacturing costs, also called Operational Expenditures (OPEX), are composed of two elements: a fixed cost and a variable cost. All figures regarding operational costs are presented in USD per ton of product. Table 17 shows the manufacturing fixed cost.

Table 15 – Other Capital Expenses (USD Million)

To learn more about the assumptions for manufacturing fixed costs, see the “Appendix F. Economic Assumptions.”

Table 17 – Manufacturing Fixed Cost (USD/ton)

Source: Intratec – www.intratec.us Source: Intratec – www.intratec.us

Intratec | Economic Analysis

Assumptions used to calculate other capital expenses are provided in “Appendix F. Economic Assumptions.”

34

Total Capital Expenses Table 16 presents a summary of the total Capital Expenditures (CAPEX) detailed in previous sections.

Table 18 discloses the manufacturing variable costs.

Economic Datasheet

Table 18 – Manufacturing Variable Cost (USD/ton)

The Technology Economic Datasheet, presented in Table 20, is an overall evaluation of the technology's production costs in a US Gulf Coast based plant. The expected revenues in products sales and initial economic indicators are presented for a short-term assessment of its economic competitiveness.

Source: Intratec – www.intratec.us

Table 19 – OPEX (USD/ton)

Source: Intratec – www.intratec.us

Figure 12 depicts Sales and OPEX historic data. Figure 13 compares the project EBITDA trends with Intratec Profitability Indicators (IP Indicators). The Basic Chemicals IP Indicator represents basic chemicals sector profitability, based on the weighted average EBITDA margins of major global basic chemicals producers. On the other hand, the Chemical Sector IP Indicator reveals the overall chemical sector profitability through a weighted average of the IP Indicators calculated for three major chemical industry niches: basic, specialties and diversified chemicals.

Intratec | Economic Analysis

Historical Analysis

35

Figure 12 – OPEX and Product Sales History (USD/ton)

Source: Intratec – www.intratec.us

Intratec | Economic Analysis

Figure 13 – EBITDA Margin & IP Indicators History Comparison

36

Source: Intratec – www.intratec.us

37

Intratec | Economic Analysis

Regional Comparison & Economic Discussion Regional Comparison Capital Expenses Variations in productivity, labor costs, local steel prices, equipment imports needs, freight, taxes and duties on imports, regional business environments and local availability of sparing equipment were considered when comparing capital expenses for the different regions under consideration in this report. Capital costs are adjusted from the base case (a plant constructed on the US Gulf Coast) to locations of interest by using location factors calculated according to the aforementioned items. For further information about location factor calculation, please examine the chapter “Technology Economics Methodology”. In addition, the location factors for the regions analyzed are further detailed in “Appendix F. Economic Assumptions.”

Intratec | Regional Comparison & Economic Discussion

Figure 14 – CAPEX per Location (USD Million)

38

Source: Intratec – www.intratec.us

Figure 14 summarizes the total Capital Expenditures (CAPEX) for the locations under analysis.

Operational Expenses Specific regional conditions influence prices for raw materials, utilities and products. Such differences are thus reflected in the operating costs. An OPEX breakdown structure for the different locations approached in this study is presented in Figure 15.

Economic Datasheet The Technology Economic Datasheet, presented in Table 21, is an overall evaluation of the technology's capital investment and production costs in the alternative location analyzed in this study.

Figure 15 – Operating Costs Breakdown per Location (USD/ton)

Intratec | Regional Comparison & Economic Discussion

Source: Intratec – www.intratec.us

39

40

Intratec | Regional Comparison & Economic Discussion

Intratec | References

References

41

Acronyms, Legends & Observations AACE: American Association of Cost Engineers

LP ST: Low-pressure steam

AOE2012: US Energy Information Administration's Annual Energy Outlook 2012

LPG: Liquefied petroleum gas

C: Distillation, stripper, scrubber columns (e.g., C-101 would denote a column tag) C2, C3, ... Cn: Hydrocarbons with "n" number of carbon atoms

MTO: Methanol-to-Olefins MTP: Methanol-to-Propylene NGL: Natural gas liquids

CAPEX: Capital Expenditures

NPV: Net Present Value

CC: Distillation column condenser

OPEX: Operational Expenditures

CG: Chemical grade

OSBL: Outside battery limits

CP: Distillation column reflux pump

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

CR: Distillation column reboiler

PDH: Propane Dehydrogenation

CT: Cooling tower (e.g., CT-801 would denote an equipment tag)

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

CW: Cooling water

RF: Refrigerant (Flowsheet) or Refrigeration Unit (e.g., RF801 would denote an equipment tag)

DME: Dimethyl-ether

RG: Refinery grade

DTP: Dominant Technology for Propylene

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

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

Intratec | Acronyms, Legends & Observations

MTG: Methanol-to-Gasoline

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

CV: Distillation column accumulator drum

42

MP ST: Medium-pressure steam

ST: Steam

EBIT: Earnings before Interest and Taxes

Syn-gas: Synthesis gas

EBITDA: Earnings before Interests, Taxes, Depreciation and Amortization

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

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

TPC: Total process cost

FCC: Fluid catalytic cracking

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

HP ST: High-pressure steam IC Index: Intratec Chemical Plant Construction Index

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

IP Indicator: Intratec Chemical Sector Profitability Indicator

WP: Process water

IRR: Internal Return Rate

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

ISBL: Inside battery limits

Obs.: 1 ton = 1 metric ton = 1,000 kg K: Compressors, blowers, fans (e.g., K-101 would denote a compressor tag) kta: thousands metric tons per year

Technology Economics Methodology

Introduction The same general approach is used in the development of all Technology Economics assignments. To know more about Intratec’s methodology, see Figure 16. While based on the same methodology, all Technology Economics studies present uniform analyses with identical structures, containing the same chapters and similar tables and charts. This provides confidence to everyone interested in Intratec’s services since they will know upfront what they will get.

Workflow Once the scope of the study is fully defined and understood, Intratec conducts a comprehensive bibliographical research in order to understand technical aspects involved with the process analyzed. Subsequently, the Intratec team simultaneously develops the process description and the conceptual process flow diagram based on: a.

Patent and technical literature research

b.

Non-confidential information provided by technology licensors

c.

Intratec's in-house database

d.

Process design skills

Next, all the data collected are used to build a rigorous steady state process simulation model in Aspen Hysys and/or Aspen Plus, leading commercial process flowsheeting software tools.

From this simulation, material balance calculations are performed around the process, key process indicators are identified and main equipment listed. Equipment sizing specifications are defined based on Intratec's equipment design capabilities and an extensive use of AspenONE Engineering Software Suite that enables the integration between the process simulation developed and equipment design tools. Both equipment sizing and process design are prepared in conformance with generally accepted engineering standards. Then, a cost analysis is performed targeting ISBL & OSBL fixed capital costs, manufacturing costs, and overall working capital associated with the examined process technology. Equipment costs are primarily estimated using Aspen Process Economic Analyzer (formerly Aspen Icarus) customized models and Intratec's in-house database. Cost correlations and, occasionally, vendor quotes of unique and specialized equipment may also be employed. One of the overall objectives is to establish Class 3 cost estimates 1 with a minimum design engineering effort. Next, capital and operating costs are assembled in Microsoft Excel spreadsheets, and an economic analysis of such technology is performed. Finally, two analyses are completed, examining: a.

The total fixed investment in different construction scenarios, based on the level of integration of the plant with nearby facilities

b.

The capital and operating costs for a second different plant location

1

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

Intratec | Technology Economics Methodology

Intratec Technology Economics methodology ensures a holistic, coherent and consistent techno-economic evaluation, ensuring a clear understanding of a specific mature chemical process technology.

43

Figure 16 – Methodology Flowchart

Study Understanding Validation of Project Inputs Patent and Technical Literature Databases

Intratec Internal Database

Intratec | Technology Economics Methodology

Non-Confidential Information from Technology Licensors or Suppliers

44

Bibliographical Research

Technical Validation – Process Description & Flow Diagram

Vendor Quotes

Material & Energy Balances, Key Process Indicators, List of Equipment & Equipment Sizing

Pricing Data Gathering: Raw Materials, Chemicals, Utilities and Products

Capital Cost (CAPEX) & Operational Cost (OPEX) Estimation

Construction Location Factor (http://base.intratec.us)

Economic Analysis

Analyses of Different Construction Scenarios and Plant Location

Project Development Phases Information Gathering / Tools

Source: Intratec – www.intratec.us

Final Review & Adjustments

Aspen Plus, Aspen Hysys Aspen Exchanger Design & Rating, KG Tower, Sulcol and Aspen Energy Analyzer

Aspen Process Economic Analyzer, Aspen Capital Cost Estimator, Aspen InPlant Cost Estimator & Intratec In-House Database

Capital & Operating Cost Estimates

Process equipment (e.g., reactors and vessels, heat exchangers, pumps, compressors, etc.) Process equipment spares

The cost estimate presented in the current study considers a process technology based on a standardized design practice, typical of a major chemical company. The specific design standards employed can have a significant impact on capital costs. The basis for the capital cost estimate is that the plant is considered to be built in a clear field with a typical large single-line capacity. In comparing the cost estimate hereby presented with an actual project cost or contractor's estimate, the following must be considered: Minor differences or details (many times, unnoticed) between similar processes can affect cost noticeably. The omission of process areas in the design considered may invalidate comparisons with the estimated cost presented. Industrial plants may be overdesigned for particular objectives and situations. Rapid fluctuation of equipment or construction costs may invalidate cost estimate. Equipment vendors or engineering companies may provide goods or services below profit margins during economic downturns. Specific locations may impose higher taxes and fees, which can impact costs considerably.

Housing for process units Pipes and supports within the main process units Instruments, control systems, electrical wires and other hardware Foundations, structures and platforms Insulation, paint and corrosion protection In addition to the direct material and labor costs, the ISBL addresses indirect costs, such as construction overheads, including: payroll burdens, field supervision, equipment rentals, tools, field office expenses, temporary facilities, etc.

OSBL Investment The OSBL investment accounts for auxiliary items necessary to the functioning of the production unit (ISBL), but which perform a supporting and non-plant-specific role. OSBL items considered may vary from process to process. The OSBL investment could include the installed cost of the following items: Storage and packaging (storage, bagging and a warehouse) for products, feedstocks and by-products Steam units, cooling water and refrigeration systems Process water treating systems and supply pumps

ISBL Investment The ISBL investment includes the fixed capital cost of the main processing units of the plant necessary to the manufacturing of products. The ISBL investment includes the installed cost of the following items:

Boiler feed water and supply pumps Electrical supply, transformers, and switchgear Auxiliary buildings, including all services and equipment of: maintenance, stores warehouse, laboratory, garages, fire station, change house, cafeteria, medical/safety, administration, etc. General utilities including plant air, instrument air, inert gas, stand-by electrical generator, fire water pumps, etc. Pollution control, organic waste disposal, aqueous waste treating, incinerator and flare systems

Intratec | Technology Economics Methodology

In addition, no matter how much time and effort are devoted to accurately estimating costs, errors may occur due to the aforementioned factors, as well as cost and labor changes, construction problems, weather-related issues, strikes, or other unforeseen situations. This is partially considered in the project contingency. Finally, it must always be remembered that an estimated project cost is not an exact number, but rather is a projection of the probable cost.

45

Working Capital For the purposes of this study, 2 working capital is defined as the funds, in addition to the fixed investment, that a company must contribute to a project. Those funds must be adequate to get the plant in operation and to meet subsequent obligations. The initial amount of working capital is regarded as an investment item. This study uses the following items/assumptions for working capital estimation: Accounts receivable. Products and by-products shipped but not paid by the customer; it represents the extended credit given to customers (estimated as a certain period – in days – of manufacturing expenses plus depreciation). Accounts payable. A credit for accounts payable such as feedstock, catalysts, chemicals, and packaging materials received but not paid to suppliers (estimated as a certain period – in days – of manufacturing expenses).

Intratec | Technology Economics Methodology

Product inventory. Products and by-products (if applicable) in storage tanks. The total amount depends on sales flow for each plant, which is directly related to plant conditions of integration to the manufacturing of product‘s derivatives (estimated as a certain period – in days – of manufacturing expenses plus depreciation, defined by plant integration circumstances).

46

Cash on hand. An adequate amount of cash on hand to give plant management the necessary flexibility to cover unexpected expenses (estimated as a certain period – in days – of manufacturing expenses).

Start-up Expenses When a process is brought on stream, there are certain onetime expenses related to this activity. From a time standpoint, a variable undefined period exists between the nominal end of construction and the production of quality product in the quantity required. This period is commonly referred to as start-up. During the start-up period expenses are incurred for operator and maintenance employee training, temporary construction, auxiliary services, testing and adjustment of equipment, piping, and instruments, etc. Our method of estimating start-up expenses consists of four components: Labor component. Represents costs of plant crew training for plant start-up, estimated as a certain number of days of total plant labor costs (operators, supervisors, maintenance personnel and laboratory labor). Commercialization cost. Depends on raw materials and products negotiation, on how integrated the plant is with feedstock suppliers and consumer facilities, and on the maturity of the technology. It ranges from 0.5% to 5% of annual manufacturing expenses.

Raw material inventory. Raw materials in storage tanks. The total amount depends on raw material availability, which is directly related to plant conditions of integration to raw material manufacturing (estimated as a certain period – in days – of raw material delivered costs, defined by plant integration circumstances).

Start-up inefficiency. Takes into account those operating runs when production cannot be maintained or there are false starts. The start-up inefficiency varies according to the process maturity: 5% for new and unproven processes, 2% for new and proven processes, and 1% for existing licensed processes, based on annual manufacturing expenses.

In-process inventory. Material contained in pipelines and vessels, except for the material inside the storage tanks (assumed to be 1 day of manufacturing expenses).

Unscheduled plant modifications. A key fault that can happen during the start-up of the plant is the risk that the product(s) may not meet specifications required by the market. As a result, equipment modifications or additions may be required.

Supplies and stores. Parts inventory and minor spare equipment (estimated as a percentage of total maintenance materials costs for both ISBL and OSBL).

2 The accounting definition of working capital (total current assets minus total current liabilities) is applied when considering the entire company.

Prepaid Royalties. Royalty charges on portions of the plant are usually levied for proprietary processes. A value ranging from 0.5 to 1% of the total fixed investment (TFI) is generally used. Site Development. Land acquisition and site preparation, including roads and walkways, parking, railroad sidings, lighting, fencing, sanitary and storm sewers, and communications.

Manufacturing Costs Manufacturing costs do not include post-plant costs, which are very company specific. These consist of sales, general and administrative expenses, packaging, research and development costs, and shipping, etc. Operating labor and maintenance requirements have been estimated subjectively on the basis of the number of major equipment items and similar processes, as noted in the literature. Plant overhead includes all other non-maintenance (labor and materials) and non-operating site labor costs for services associated with the manufacture of the product. Such overheads do not include costs to develop or market the product. G & A expenses represent general and administrative costs incurred during production such as: administrative salaries/expenses, research & development, product distribution and sales costs.

Contingencies Contingency constitutes an addition to capital cost estimations, implemented based on previously available data or experience to encompass uncertainties that may incur, to some degree, cost increases. According to recommended practice, two kinds of contingencies are assumed and applied to TPC: process contingency and project contingency. Process contingency is utilized in an effort to lessen the impact of absent technical information or the uncertainty of that which is obtained. In that manner, the reliability of the information gathered, its amount and the inherent complexity of the process are decisive for its evaluation. Errors that occur may be related to:

Uncertainty in process parameters, such as severity of operating conditions and quantity of recycles Addition and integration of new process steps Estimation of costs through scaling factors Off-the-shelf equipment Hence, process contingency is also a function of the maturity of the technology, and is usually a value between 5% and 25% of the direct costs. The project contingency is largely dependent on the plant complexity and reflects how far the conducted estimation is from the definitive project, which includes, from the engineering point of view, site data, drawings and sketches, suppliers’ quotations and other specifications. In addition, during construction some constraints are verified, such as: Project errors or incomplete specifications Strike, labor costs changes and problems caused by weather

Table 22 – Project Contingency Plant Complexity

Complex

Typical

Simple

Project Contingency

25%

20%

15%

Source: Intratec – www.intratec.us

Intratec’s definitions in relation to complexity and maturity are the following:

Table 23 – Criteria Description

Simple

Complexity

Typical

Somewhat simple, widely known processes Regular process Several unit operations, extreme

Complex

temperature or pressure, more instrumentation

New & Maturity

Proven Licensed

From 1 to 2 commercial plants 3 or more commercial plants

Source: Intratec – www.intratec.us

Intratec | Technology Economics Methodology

Other Capital Expenses

47

Accuracy of Economic Estimates The accuracy of estimates gives the realized range of plant cost. The reliability of the technical information available is of major importance.

Table 24 – Accuracy of Economic Estimates

Reliability

Accuracy

Very

Low

Moderate

High

+ 30%

+ 22%

+ 18%

+ 10%

- 20%

- 18%

- 14%

- 10%

High

Source: Intratec – www.intratec.us

The non-uniform spread of accuracy ranges (+30 to – 20 %, rather than ±25%, e.g.) is justified by the fact that the unavailability of complete technical information usually results in under estimating rather than over estimating project costs.

Location Factor A location factor is an instantaneous, total cost factor used for converting a base project cost from one geographic location to another.

Intratec | Technology Economics Methodology

A properly estimated location factor is a powerful tool, both for comparing available investment data and evaluating which region may provide greater economic attractiveness for a new industrial venture. Considering this, Intratec has developed a well-structured methodology for calculating Location Factors, and the results are presented for specific regions’ capital costs comparison.

48

Intratec’s Location Factor takes into consideration the differences in productivity, labor costs, local steel prices, equipment imports needs, freight, taxes and duties on imported and domestic materials, regional business environments and local availability of sparing equipment. For such analyses, all data were taken from international statistical organizations and from Intratec’s database. Calculations are performed in a comparative manner, taking a US Gulf Coast-based plant as the reference location. The final Location Factor is determined by four major indexes: Business Environment, Infrastructure, Labor, and Material. The Business Environment Factor and the Infrastructure Factor measure the ease of new plant installation in

different countries, taking into consideration the readiness of bureaucratic procedures and the availability and quality of ports or roads. Labor and material, in turn, are the fundamental components for the construction of a plant and, for this reason, are intrinsically related to the plant costs. This concept is the basis for the methodology, which aims to represent the local discrepancies in labor and material. Productivity of workers and their hourly compensation are important for the project but, also, the qualification of workers is significant to estimating the need for foreign labor. On the other hand, local steel prices are similarly important, since they are largely representative of the costs of structures, piping, equipment, etc. Considering the contribution of labor in these components, workers’ qualifications are also indicative of the amount that needs to be imported. For both domestic and imported materials, a Spare Factor is considered, aiming to represent the need for spare rotors, seals and parts of rotating equipment. The sum of the corrected TFI distribution reflects the relative cost of the plant, this sum is multiplied by the Infrastructure 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 17 in which the four major indexes are presented, along with some of their components.

Figure 17 – Location Factor Composition

Location Factor

Material Index Domestic Material Index Relative Steel Prices Labor Index Taxes and Freight Rates Spares Imported Material Taxes and Freight Rates Spares

Labor Index Local Labor Index Relative Salary Productivity Expats Labor

Infrastructure Factor Ports, Roads, Airports and Rails (Availability and Quality) Communication Technologies Warehouse Infrastructure Border Clearance Local Incentives

Business Environment Factor Readiness of Bureaucratic Procedures Legal Protection of Investors Taxes

Intratec | Technology Economics Methodology

Source: Intratec – www.intratec.us

49

50

Intratec | Appendix A. Mass Balance & Streams Properties

51

Intratec | Appendix A. Mass Balance & Streams Properties

52

Intratec | Appendix A. Mass Balance & Streams Properties

53

Intratec | Appendix A. Mass Balance & Streams Properties

54

Intratec | Appendix A. Mass Balance & Streams Properties

55

Intratec | Appendix B. Utilities Consumption Breakdown

Appendix C. Carbon Footprint The process’ carbon footprint can be defined as the total amount of greenhouse gas (GHG) emissions caused by the process operation. Although it is difficult to precisely account for the total emissions generated by a process, it is possible to estimate the major emissions, which can be divided into:

The assumptions for the process carbon footprint calculation are presented in Table 27 and the results are provided in Table 28

Table 28 – CO2e Emissions (ton/ton prod.)

Direct emissions. Emissions caused by process waste streams combusted in flares. Indirect emissions. The ones caused by utilities generation or consumption, such as the emissions due to using fuel in furnaces for heating process streams. Fuel used in steam boilers, electricity generation, and any other emissions in activities to support process operation are also considered indirect emissions. In order to estimate the direct emissions, it is necessary to know the composition of the streams, as well as the oxidation factor. Estimation of indirect emissions requires specific data, which depends on the plant location, such as the local electric power generation profile, and on the plant resources, such as the type of fuel used.

Intratec | Appendix C. Carbon Footprint

Table 27 – Assumptions for CO2e Emissions Calculation

56

Source: Intratec – www.intratec.us

Source: Intratec – www.intratec.us

Equivalent carbon dioxide (CO2e) is a measure that describes the amount of CO2 that would have the same global warming potential of a given greenhouse gas, when measured over a specified timescale. All values and assumptions used in calculations are based on data provided by the Environment Protection Agency (EPA) Climate Leaders Program.

Inlet (m3/h)

5,825

77,898

30,080

6,417

1,679

2,151

2nd DME Cooler

Intratec | Appendix D. Equipment Detailed List & Sizing

Actual gas flow rate

57

58

Intratec | Appendix D. Equipment Detailed List & Sizing

59

Intratec | Appendix D. Equipment Detailed List & Sizing

60

Intratec | Appendix D. Equipment Detailed List & Sizing

61

Intratec | Appendix D. Equipment Detailed List & Sizing

Intratec | Appendix D. Equipment Detailed List & Sizing

Design gauge pressure

(barg)

62

63

Intratec | Appendix D. Equipment Detailed List & Sizing

64

Intratec | Appendix D. Equipment Detailed List & Sizing

65

Intratec | Appendix D. Equipment Detailed List & Sizing

Appendix E. Detailed Capital Expenses Direct Costs Breakdown Figure 18 – ISBL Direct Costs Breakdown by Equipment Type (Base Case)

Source: Intratec – www.intratec.us

Intratec | Appendix E. Detailed Capital Expenses

Figure 19 – OSBL Direct Costs by Equipment Type (Base Case)

66

Source: Intratec – www.intratec.us

67

Intratec | Appendix E. Detailed Capital Expenses

Appendix F. Economic Assumptions Capital Expenditures

Working Capital

For a better description of working capital and other capital expenses components, as well as the location factors methodology, see the chapter “Technology Economics Methodology.”

Table 37 – Working Capital Assumptions (Base Case)

Construction Location Factors

Table 36 – Detailed Construction Location Factor Supplies and Stores

Source: Intratec – www.intratec.us

Intratec | Appendix F. Economic Assumptions

Table 38 – Other Capital Expenses Assumptions (Base Case)

68

Source: Intratec – www.intratec.us

Source: Intratec – www.intratec.us

Operational Expenses Fixed Costs Fixed costs are estimated based on the specific characteristics of the process. The fixed costs, like operating charges and plant overhead, are typically calculated as a percentage of the industrial labor costs, and G & A expenses are added as a percentage of the operating costs.

The goal of depreciation is to allow a credit against manufacturing costs, and hence taxes, for the nonrecoverable capital expenses of an investment. The depreciable portion of capital expense is the total fixed investment. Table 40 shows the project depreciation value and the assumptions used in its calculation.

Table 40 – Depreciation Value & Assumptions Table 39 – Other Fixed Cost Assumptions

Source: Intratec – www.intratec.us

Intratec | Appendix F. Economic Assumptions

Source: Intratec – www.intratec.us

69

Appendix G. Released Publications The list below is intended to be an easy and quick way to identify Intratec reports of interest. For a more complete and up-to-date list, please visit the Publications section on our website, www.intratec.us. TECHNOLOGY ECONOMICS Propylene Production via Metathesis: Propylene production via metathesis from ethylene and butenes, in a process similar to Lummus OCT. Propylene Production via Propane Dehydrogenation: Propane dehydrogenation (PDH) process conducted in moving bed reactors, in a process similar to UOP OLEFLEX™. Propylene Production from Methanol: Propylene production from methanol, in a process is similar to Lurgi MTP®. Polypropylene Production via Gas Phase Process: A gas phase type process similar to the Dow UNIPOL™ PP process to produce both polypropylene homopolymer and random copolymer. Polypropylene Production via Gas Phase Process, Part 2: A gas phase type process similar to Lummus NOVOLEN® for production of both homopolymer and random copolymer.

Intratec | Appendix G. Released Publications

Sodium Hypochlorite Chemical Production: Sodium hypochlorite (bleach) production, in a widely used industrial process, similar to that employed by Solvay Chemicals, for example.

70

Propylene Production via Propane Dehydrogenation, Part 2: Propane dehydrogenation (PDH) in fixed bed reactors, in a process is similar to Lummus CATOFIN®. Propylene Production via Propane Dehydrogenation, Part 3: Propane dehydrogenation (PDH) by applying oxydehydrogenation, in a process similar to the STAR PROCESS® licensed by Uhde.

CONCEPTUAL DESIGN Membranes on Polyolefins Plants Vent Recovery: The Report evaluates membrane units for the separation of monomer and nitrogen in PP plants, similar to the VaporSep® system commercialized by MTR. Use of Propylene Splitter to Improve Polypropylene Business: The report assesses the opportunity of purchasing the less valued RG propylene to produce the PG propylene raw material used in a PP plant.

Appendix H. Technology Economics Form Submitted by Client

Appendix H. Technology Economics Form Submitted by Client

Chemical Produced by the Technology to be Studied Define the main chemical product of your interest. Possible choices are presented below. Choose a Chemical

Acetic Acid

Acetone

Acrylic Acid

Acrylonitrile

Adipic Acid

Aniline

Benzene

Butadiene

n-Butanol

Isobutylene

Caprolactam

Chlorine

Cumene

Dimethyl Ether (DME)

Ethanol

Ethylene

Bio-Ethylene

Ethylene Glycol

Ethylene Oxide

Formaldehyde

HDPE

Isoprene

LDPE

LLDPE

MDI

Methanol

Methyl Methacrylate

Phenol

Polypropylene (PP)

Polybutylene Terephthalate

Polystyrene (PS)

Polyurethanes (PU)

Polyvinyl Chloride (PVC)

Propylene

Propylene Glycol

Propylene Oxide (PO)

Terephthalic Acid

Vinyl Chloride (VCM)

If the main chemical product of your target technology is not found above, please check the "Technology Economic Form - Specialties".

Chemical Process Technology to be Studied Identify the mature chemical process technology you would like us to assess. Intratec considers mature technologies the ones already used on a commercial scale plant. Technology Description

Methanol-to-propylene similar to Lurgi MTP E. g. technology for propylene production from methanol - similar to Lurgi MTP

Commercial Scale Unit. Inform the exact location of one commercial scale plant under operation. Plant Location:

I don't know I know the location of a commercial plant:

Ningxia, China

If there is no commercial scale plant based on the technology of your interest, you are referred to Intratec's Research Potential advisory service at www.intratec.us/advisory/research-potential/overview

Industrial Unit Description Plant Nominal Capacity

Operating Hours

Inform the plant capacity to be considered in the study. Provide the main product capacity in kta (thousands of metric tons per year of main chemical product). Plant Capacity

150 kta

Operating Hours

300 kta Other (kta)

Inform the assumption for the number of hours the plant operates in a year.

8,000 h/year Other (h/year)

557

Analysis Date Define the date (quarter and year) that will be considered in the analysis. Our databases can provide consolidated values from the year 2000 up to the last closed quarter, quarter-to-date values are estimated. Quarter

Year

Q3

2011

Storage Facilities Define the assumptions employed for the storage facilities design. Products

20 days Other

By-Products

20 days Other

0

Raw Materials

20 days Other

0

0

Utilities Supply Facilities The construction of supply facilities for the utilities required (e.g. cooling tower, boiler unit, refrigeration unit) impacts the capital investment for the construction of the unit. Consider construction of supply facilities ?

Yes

No

General Design Conditions General utilities and environmental conditions that may be relevant to the process simulation are presented below. Provide other assumptions if you deem necessary. Specification

Unit

Default Value

User-specified value

Cooling water temperature

ºC

24

DSPEC1

Cooling water range

ºC

11

DSPEC2

Steam (Low Pressure)

bar abs

7

DSPEC3

Steam (Medium Pressure)

bar abs

11

DSPEC4

Steam (High Pressure)

bar abs

28

DSPEC5

Refrigerant (Ethylene)

ºC

-100

DSPEC6

Refrigerant (Propane)

ºC

-40

DSPEC7

Refrigerant (Propylene)

ºC

-45

DSPEC8

Dry Bulb Air Temperature

ºC

38

DSPEC9

Wet Bulb Air Temperature

ºC

25

DS10

Industrial Unit Location The location of an industrial unit influences in prices for both construction and operation of the unit. In this study, the economic performances of TWO similar units erected in different locations are compared. The first plant is located in the United States (US Gulf Coast) and the second location is defined by YOU. Plant Location

I would like to keep the plant location confidential. Country (or region) to be considered.

China

E.g. Louisiana (USA), China or Saudi Arabia. Please define only one location. Plant Location Data Provider

I will use Intratec's Internal Database containing standard chemical prices and location factors (only for Germany, Japan, China or Brazil). I will provide location specific data. Please fill the Custom Location topic below.

Custom Location Description. Describe both capital investment and prices at your custom location. A) Capital Investment. Provide the relative capital cost at your custom location in comparison to the United States (U.S. Gulf Coast) Custom Location Relative Cost (%) 130% means that the capital costs in the custom location are 30% higher than the costs in the United States. B) Raw Materials Prices. Describe the raw material prices to be considered in the custom location. Item Description Raw1

Methanol

Price Unit RU1

USD/ton

Price RP1

Raw2

RU2

RP2

Raw3

RU3

RP3

E.g.

Propane

USD/metric ton

420

C) Product Prices. Describe the products prices to be considered in the custom location. Item Description

Price Unit

Price

Prod1

PG Propylene

PU1

USD/ton

PP1

Prod2

Gasoline

PU2

USD/ton

PP2

Prod3 E.g.

PU3 Polypropylene

PP3 USD/metric ton

1700

D) Utilities Prices. Describe the utilities prices to be considered in the custom location. Item Description

Price Unit

Electricity

USD/kWh

UP1

Steam (Low Pressure)

USD/ton

UP2

Steam (High Pressure)

USD/ton

UP3

Fuel

USD/MMBtu

UP4

Clarified Water

Price

UP5

Util6

UU6

YP6

Util7

UU7

UP7

Util8

UU8

UP8

E) Labor Prices. Describe the labor prices to be considered in the custom location. Item Description

Price Unit

Price

Operating Labor

USD/operator/hour

LP1

Supervision Labor

USD/supervisor/hour

LP1

F) Others. Describe any other price you deem necessary to be considered in the custom location. Item Description

Price Unit

Price

Other1

OU1

OP1

Other2

OU2

OP2

Other3

OU3

OP3

E.g.

Catalyst

USD/metric ton

5000

Other Remarks If you have any other comments, feel free to write them below: Co m m en ts:

I provided the main prices I would like to include in my analysis. Please, use Intratec's prices for China in the other fields I have not filled.

Complementary Files Along with this form, you may also upload any other chemical document deemed relevant for the description of the project, such as articles, brochures, book sections, patents, etc. Multiple files may be uploaded. If you are filling this form offline please upload this form and any complementary files at www.intratec.us/advisory/technology-economics/ order-commodities

Non-Disclosure Period & Pricing You can keep your study confidential or get discounts, by allowing Intratec to disclose it to the market as a publication, after an agreed non-disclosure period, starting at the date you place your order. Choose an Option

6 months

24 months

36 months

Never Disclosed

Non-Disclosure Period

Price

6 months

$8,000 (9 x $899)

Save 84%

24 months

$28,000 (9 x $3,111)

Save 44%

automatically, in equal and pre-defined installments

36 months

$40,000 (11 x $3,636)

Save 20%

- Every 15 days, an installment will be charged to your

Never Disclosed

$50,000 (13 x $3,846)

- Payment of our advisory service is conducted

credit card or PayPal account.

Pay Less! Benefit From a 5% Discount Inform us the email address of the Intratec Agent that introduced you to our advisory services you will benefit from a 5% discount on the total price of your service. To know more about Intratec New Business Development Agents, please visit www.intratec.us/be-our-agent. Intratec Agent Email

Evaluate our Intratec Agent. Your opinion will be kept confidential. Unsatisfied Knowledge about Intratec offerings and presentation skills Kindness and Helpfulness

DOWNLOAD EXAMPLES OF FILLED FORMS HERE. DOWNLOAD A PDF VERSION OF THIS FORM HERE. NEED ASSISTANCE ? SEND AN EMAIL TO [email protected].

v.1-mar-13

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Technology Economics Standardized advisory services developed under Intratec’s Consulting as Publications pioneer approach. Technology Economics studies answer main questions surrounding process technologies: - How is the technology? What are the main pieces of equipment required? - What are the raw materials and utilities consumption rates? - What are the capital and operating expenses breakdown? - What are the economic indicators? - In which regions is this technology more profitable?