1
CHAPTER 1
FEASIBILITY STUDY
1.1
PHYSICAL AND CHEMICAL PROPERTIES OF BUTYL ACETATE
Table 1.1: Physical and Chemical Properties of Butyl Acetate Molecular Formula
C6H12O2
Molecular Weight
116.16 g/mole
Appearance
Colorless, flammable liquid with fruity odor
Boiling Point
126.5 °C
Melting Point
-77.9 °C
Flash Point
24 °C
Critical Temperature, Tc
305.9 °C
Critical Pressure, P c
3090 kPa
Specific Gravity
0.9 (water = 1)
Density Relative to Air
4.1 (air = 1)
Density Relative to Water
0.88 (water = 1)
Molar Volume at 25°C
0.0001325 m3
Heat of Combustion
-305.4 × 105 J/kg
Latent Heat of Vaporization
3.09 × 105 J/kg
Specific Heat at 20°C
223.11 J/mol K
Enthalpy of Formation of Gas at -566.0 kJ/mol Standard Conditions Enthalpy of Formation of Liquid at -609.6 kJ/mol Standard Conditions Enthalpy of Reaction at Standard 174 kJ/mol Conditions Viscosity at 20°C
0.832 centistokes
Vapor Pressure at 20°C
1.2 kPa
2 1.2
PROCESS BACKGROUND
The synthesis of butyl acetate is commonly carried out by: a) Esterification process b) Transesterification process 1.2.1
Esterification Process
Esters are produced when carboxylic acids are heated with alcohols in the presence of an acid catalyst. The reaction is called an esterification reaction. The esterification reaction is both slow and reversible. Butyl acetate is synthesized by the reaction of acetic acid and butanol in the presence sulfuric acid as the catalyst. The following is the chemical equation of the reaction: CH3COOH + C4H9OH ↔ CH3COOC4H9 + H2O Acetic Acid
Butanol
Butyl Acetate
Water
The synthesizing process is known as the Fisher esterification which is an equilibrium process. The reaction is a reversible and the equilibrium constant is only slightly greater than unity (between 1 and 10). The reaction reaches equilibrium after a few hours of refluxing. The position of the equilibrium can be shifted by adding more of the acid or of the alcohol, depending on cost or availability. Butyl acetate synthesized by esterification process forms a binary azeotrope with water at 90.2°C and ternary azeotrope with water and butanol at 89.4°C. The esterification process has a broad spectrum of uses from the preparation of highly specialized esters in the chemical laboratory to the production of millions of tons of commercial ester products. 1.2.1.1 Reaction Mechanism of Esterification Esterification Process
The reaction mechanism of the acid-catalyzed esterification of an alcohol with a carboxylic acid is known as Fisher esterification. The reaction type is nucleophilic acyl substitution and considered to consist of six steps. The first step is the protonation of the carbon acid which is acetic acid. Acetic acid does not react with butanol unless a strong acid is used as a catalyst, this step make the carbonyl group more electrophilic and enable it to react with butanol, which is a nucleophile.
3
The step is relatively fast and considered to be always in equilibrium. The second step is the reaction between the protonated carbon acid with butanol. The butanol O act as the nuclephile attacking the electrophilic C of the carbonyl group C=O. This reaction step is kinetically controlled.
The third step is the deprotonation of the intermediate. A proton is transferred from one oxygen atom to another yields a second tetrahedral intermediate.
4 The fourth step is the tetrahedral intermediate being protonated at another site to convert the OH group into a good leaving group.
The fifth step is the expulsion of the leaving group, a neutral water molecule by the help of the electrons of adjacent oxygen.
The sixth step is the deprotonation of the oxonium ion which gives the ester product and regenerates the acid catalyst.
5 All subsequent reaction steps ste ps are very fast and considered co nsidered to be always in equilibrium. Thus, the second and all subsequent reaction steps can be summarized into one kinetically controlled reaction step. CH3C(OH)2+ + C4H9OH ↔ CH3COOC4H9 + H2O + H+ 1.2.1.2 Kinetic Considerations of Esterification Esterification Process
The rate of esterification with acid catalyst is proportional to acid or hydrogen-ion concnetrations, as well as the concentration of the alcohol and organic acid. The effect of temperature on the reaction rate is given by the well-known Arrhenius equation.
Where k
= Rate constant
A
= Frequency factor and pre-exponential factor fa ctor
E A
= Activation energy
R
= Gas constant
T
= Temperature in Kelvin
The kinetics of the reaction of n-butyl alcohol with acetic acid have been studied by Leyes and Othmer over the temperature range of 0°C to 120°C using sulfuric acid as catalyst, with molar ratio of n-butyl alcohol to acetic acid varied from 3 to 19.6 and concentration from 0% to 0.14% by weight. The order of this reaction is influenced by temperature and catalyst concentration. Therefore, at 100°C with 5 moles of alcohol per mole of acid and no catalyst, straight-line plots were obtained for first order, second order and third order reaction over an 8 hours reaction period with 32% conversion of acid to ester. At 100°C and low catalyst concentration which is 0.0147%, a second order or third order reaction is indicated, however above 0.015% catalyst well-defined straight line plots were obtained for a second order reaction up to 70% to 80% conversion of acetic acid. With 0.03% catalyst and 5 moles of alcohol per mole of acid, the order of the reaction is not ascertainable at 0°C to 30°C, but at 100°C or higher the esterification is second order up to 80% to 85% completion.
6 1.2.2
Transesterification Transesterification Process
Butyl acetate is synthesized by the reaction of methyl acetate and butanol in the presence of strongly acidic catalyst. The following is the chemical equation of the reaction: CH3COOCH3 + C4H9OH ↔ CH3COOC4H9 + CH3OH Methyl Acetate
Butanol
Butyl Acetate
Methanol
The reaction convert the alkyl group of an ester to another alkyl group.The reaction is reversible and the equilibrium constant is close to one. 1.2.2.1 Reaction Mechanism of Transesterificat Transesterification ion Process Process
Ester
exchange
or
transesterification
occurs
under similar conditions
as
esterification. The reaction type is nucleophilic acyl substitution and considered to consist of four steps as shown below.
The protonation of the ester gives the intermediate (1) and followed by the addition of the exchanging alcohol to give the intermediate (2), which can be dissociated via the transitions state (3) to give the ester (4). Again, each step is reversible and in the presence of a large excess of the alcohol, the equilibrium point of the reaction is displaced so that the product is almost entirely the required ester (4). Water must once more be excluded, as it would produce some hydrolysis by dissociation of an intermediate analogous to (2) to a free acid. The preferred conditions for transesterification of existing esters are therefore a large excess of the appropriate alcohol and absence of water.
7 1.2.2.2 Kinetic Considerations of Transesterification Transesterification Process
The kinetic expression for the forward and reverse reactions of methanol and methyl acetate is shown as below.
Where R
= Overall reaction rate having a first-order dependence on
R
= the two reactants and products
kF and kR
= Temperature dependence of the forward and reverse
kF and kR
= specific reaction rates
CMeAc
= Concentration of methyl acetate in kmol/m3
CBuOH
= Concentration of butanol in kmol/m3
CMeOH
= Concentration of methanol in kmol/m3
CBuAc
= Concentration of butyl acetate in kmol/m3
R
= Gas constant
T
= Temperature in Kelvin
The activation energies are basically the same, which indicatess that the heat of reaction is small and also that the equilibrium constant decreases only slightly with increasing temperature. The forward reaction rate depends on the concentration of methyl acetate and butanol. The same production rate can be achieved by having any number of reactant concentrations, just so the product of the concentrations is the same. The methanol concentration could be large, and the butanol concentration could be small, or the reverse could be true. These concentrations depend on the relative flow rates of the two recycles.
8 1.3
PROCESS DESCRIPTION
On a commercial basis, the production of butyl acetate may be carried out by: 1) Conventional Esterification 2) Esterification by Reactive Distillation 3) Conventional Transesterification 4) Transesterification by Reactive Distillation 1.3.1
Conventional Esterification
This is the most common process for producing butyl acetate on a commercial scale. In the commercial processes, the reaction is proceed to completion by maintaining an excess of one of the reactants. The limiting reactant usually acetic acid and removing one or both of the products. Based on Figure 1.1, butanol, acetic acid and catalyst are charged to the esterification reactor producing an ester-water azeotrope which then brought to reflux through the esterification column. The water layer containing some butanol and butyl acetate is continuously removed from the decanter and fed to the refining column. Butanol and butyl acetate distillate returned to the reactor and the water, essentially free of all organics, is collected and sent to waste treatment facilities. A portion of the organic phase is returned to the column as reflux and the remainder is fed to a refining column. Butanol, water and some butyl ester are being removed from the top of the column and returned to the esterification reactor while n-butyl acetate of purity usually up to 99 % mass is withdrawn as a bottom product. 1.3.1.1 Catalyst Selection
The catalyst used in this esterification reaction is the concentrated sulfuric acid in the liquid form. This catalyst is used because of its advantages over others catalyst such as the hydrochloric acid, Amberlyst 15, Smopex-101, various zeolites, sulphated zirconia and niobium acid. Concentrated sulfuric acid is a stable compound and exists in liquid with a nearly pure form, unlike other catalyst such as the hydrochloric acid that exists in gas form and need to be dissolved in water. The esterification reaction produces water as one of its product. If the amount of water increases, it will increase the rate of the reverse reaction thus decreasing the yield. This is where the sulfuric acid
9 shows its role as a great dehydrating agent and absorbs the water produced. Dilute sulfuric acid will not act as a dehydrating compared to concentrated sulfuric acid. Sulfuric acid is neither a strong oxidant, which readily transfers oxygen atoms nor a strong reductant, which donates its electron to other. This characteristic will reduce the possibilities for undesired side reactions. Finally, sulfuric acid is cheap compared to the other catalyst. Table 1.2 shows that the sulfuric acid activity is the highest with the smallest usage. Table 1.2: The Activity for Different Catalyst in the Esterification Reaction of Acetic Acid and Butanol at 75°C. Catalyst Amount (g) kobs (m (m mol- s- ) kc (m (m mol- gcat- s- ) No Catalyst
-
1.30 × 10⁻⁸
-
Sulphuric Acid
0.9
1.7 × 10⁻⁷
1.9 × 10⁻⁷
Amberlyst-15
1.9
3.0 × 10⁻⁸
1.6 × 10⁻⁸
1.77
1.7 × 10⁻⁷
9.4 × 10⁻⁸
p-Toluenesulphuric Acid
10
Figure 1.1: Block Flow Diagram for Conventional Esterification Esterification Process
11 1.3.2
Esterification Esterificati on by Reactive Distillation Distillati on
The reactive distillation provides an attractive alternative for reaction/separation processes with reversible reactions, especially for etherification and esterification. It is usually consisting of rectifying, reactive and stripping sections. The nonreactive rectifying and stripping sections were packed with fine metallic wires while the middle reactive zone was packed with KATAPAK-S packing embedded with ion exchange resins Amberlyst-15 as a catalyst. Based on Figure 1.2, pumps are used to transfer the liquid from the feed tank to the column and the reactions occur in the reactive part of the distillation column. The reaction mixture consisting of acetic acid, butanol, butyl acetate and water or an equilibrium mixture from the reactor is fed continuously to the column. The mixture is the heated by the reboiler to almost its boiling point and fed into the catalytic zone of the column. Butyl acetate is withdrawn from the bottom of the column as it is the highest boiling point as well as heaviest key component in the system. In the condenser, two immiscible phases were formed, an aqueous phase
11 1.3.2
Esterification Esterificati on by Reactive Distillation Distillati on
The reactive distillation provides an attractive alternative for reaction/separation processes with reversible reactions, especially for etherification and esterification. It is usually consisting of rectifying, reactive and stripping sections. The nonreactive rectifying and stripping sections were packed with fine metallic wires while the middle reactive zone was packed with KATAPAK-S packing embedded with ion exchange resins Amberlyst-15 as a catalyst. Based on Figure 1.2, pumps are used to transfer the liquid from the feed tank to the column and the reactions occur in the reactive part of the distillation column. The reaction mixture consisting of acetic acid, butanol, butyl acetate and water or an equilibrium mixture from the reactor is fed continuously to the column. The mixture is the heated by the reboiler to almost its boiling point and fed into the catalytic zone of the column. Butyl acetate is withdrawn from the bottom of the column as it is the highest boiling point as well as heaviest key component in the system. In the condenser, two immiscible phases were formed, an aqueous phase (almost pure water) and organic phase containing water, butanol and butyl acetate. A phase separator was used with the condenser to provide reflux to the column and to continuously withdraw water that formed during the reaction. The overhead distillate consisting of butanol, water and butyl acetate is condensed and cooled to a temperature sufficiently low to allow two phase separation to take place in a decanter. The aqueous phase is removed from the column while the organic phase is totally refluxed to the stage below the condenser.
12
12
Figure 1.2: Block Flow Diagram for Esterification by Reactive Distillation Distillation Process
13 1.3.3
Conventional Transesterification Transesterificat ion
Based on Figure 1.3, feedstock with a composition of 60% methyl acetate and 40% methanol are fed into a reactor which operates at 200°F and 100 psia. Fresh butanol is also fed to the CSTR along with a butanol recycle stream and a methyl acetate/methanol recycle. Reactor effluent is fed to column DC1 in which methyl acetate and methanol are taken overhead and butanol and butyl acetate leave in the bottoms. The column has 30 trays. The distillate stream is fed to column DC2, which produces methanol in the bottoms and a distillate stream whose contains gaseuous mixture which is near that of the azeotrope. The distillate is recycled back to the reactor. The column has 30 trays. tra ys. The bottoms from DC1 is fed to column DC3, which produces butyl acetate in the bottoms and a butanol-rich distillate that is recycled back to the reactor.
13 1.3.3
Conventional Transesterification Transesterificat ion
Based on Figure 1.3, feedstock with a composition of 60% methyl acetate and 40% methanol are fed into a reactor which operates at 200°F and 100 psia. Fresh butanol is also fed to the CSTR along with a butanol recycle stream and a methyl acetate/methanol recycle. Reactor effluent is fed to column DC1 in which methyl acetate and methanol are taken overhead and butanol and butyl acetate leave in the bottoms. The column has 30 trays. The distillate stream is fed to column DC2, which produces methanol in the bottoms and a distillate stream whose contains gaseuous mixture which is near that of the azeotrope. The distillate is recycled back to the reactor. The column has 30 trays. tra ys. The bottoms from DC1 is fed to column DC3, which produces butyl acetate in the bottoms and a butanol-rich distillate that is recycled back to the reactor.
14
14
Figure 1.3: Block Flow Diagram for Conventional Transesterification Process
15 1.3.4
Transesterification Transesterifi cation by Reactive Distillation Distillati on
Based on Figure 1.4, butanol is fed into an upper section of the reactive section of the reactive distillation column. Methyl acetate is fed into a lower section of the reactive section of the reactive distillation column. Butanol and methyl acetate undergone the transesterification reaction catalysed by Amberlyst – 15 in the reactive section. Theoritically, after the transesterification reaction, the components presence in the reactive distillation column consist of methyl acetate, butanol, butyl acetate and methanol. The continuous heating process by the reboiler make methyl acetate and methanol of lower boiling point convert from a liquid phase to gaseous phase. The gaseous state of methyl acetate and methanol rise to the top of the reactive distillation column. The ester product deposited on the bottom of the reactive distillation column and proceed to its reservoir through a pump. The methyl acetate/methanol mixture is discharged from the top of the reactive distillation column. The condenser liquefied the methyl acetate/methanol mixture from the top of the reactive distillation column. The liquefied methyl acetate/methanol mixture is fed to the reflux drum. The liquefied methyl acetate/methanol mixture is bypassed into the reactive distillation column with major
15 1.3.4
Transesterification Transesterifi cation by Reactive Distillation Distillati on
Based on Figure 1.4, butanol is fed into an upper section of the reactive section of the reactive distillation column. Methyl acetate is fed into a lower section of the reactive section of the reactive distillation column. Butanol and methyl acetate undergone the transesterification reaction catalysed by Amberlyst – 15 in the reactive section. Theoritically, after the transesterification reaction, the components presence in the reactive distillation column consist of methyl acetate, butanol, butyl acetate and methanol. The continuous heating process by the reboiler make methyl acetate and methanol of lower boiling point convert from a liquid phase to gaseous phase. The gaseous state of methyl acetate and methanol rise to the top of the reactive distillation column. The ester product deposited on the bottom of the reactive distillation column and proceed to its reservoir through a pump. The methyl acetate/methanol mixture is discharged from the top of the reactive distillation column. The condenser liquefied the methyl acetate/methanol mixture from the top of the reactive distillation column. The liquefied methyl acetate/methanol mixture is fed to the reflux drum. The liquefied methyl acetate/methanol mixture is bypassed into the reactive distillation column with major composition of methyl acetate. The mixture will continuously proceeding further transesterification process. The liquefied methyl acetate/methanol mixture is bypassed into the distillation column with major composition of methanol for further distillation. Methyl acetate is fed to the distillation column. The gaseous state of methyl m ethyl acetate rise to the top of the distillation column. The methanol solution deposited on the bottom of the distillation column and proceed to its reservoir through a pump. The gaseous mixture which contains rare amount of butyl acetate and butanol and higher amount of methanol and water is discharged from the top of the distillation column. The condenser liquefied the gaseous mixture from the top of the distillation column. The liquefied gaseous mixture is fed to the reflux drum. After refluxion, the liquefied gaseous mixture is then discharged from the reflux device through a pump. The T-type bypassing tube bypasses the liquefied gaseous mixture into two portions, the first portion and the second portion. The first portion is sent to the lower section of the reactive distillation column for further conversion. The second portion is recycled to the distillation column for further separation of methanol and methyl acetate.
16
16
Figure 1.4: Block Flow Diagram for Transesterification by Reactive Distillation Process
17 1.4
PROCESS SELECTION
Butyl acetate can be synthesized in a number of different ways such as esterification and transesterification. The most common manufacturing process for producing butyl acetate on a commercial scale is the direct esterification of butyl alcohol with acetic acid in a batch or continuous unit. Transesterification has been applied in polyvinyl alcohol producing plant. The manufacturing process of polyvinyl alcohol is always accompanying by the large production of the by-product, methyl acetate. Commonly, the impure is discharged into the atmosphere after it is scrubbed in a wastewater treatment system or burned in an incinerator. Since methyl acetate has low application in industrial and methanol is a feedstock for polyvinyl alcohol synthesis, the most attractive way would be to recycle methyl acetate to be transesterified into methanol and butyl acetate, since butyl acetate is an important solvent and has higher economical value than methyl acetate. The selected process is esterification, since it has been widely used in industry for the production of butyl acetate for years. One of the factors in choosing esterification
17 1.4
PROCESS SELECTION
Butyl acetate can be synthesized in a number of different ways such as esterification and transesterification. The most common manufacturing process for producing butyl acetate on a commercial scale is the direct esterification of butyl alcohol with acetic acid in a batch or continuous unit. Transesterification has been applied in polyvinyl alcohol producing plant. The manufacturing process of polyvinyl alcohol is always accompanying by the large production of the by-product, methyl acetate. Commonly, the impure is discharged into the atmosphere after it is scrubbed in a wastewater treatment system or burned in an incinerator. Since methyl acetate has low application in industrial and methanol is a feedstock for polyvinyl alcohol synthesis, the most attractive way would be to recycle methyl acetate to be transesterified into methanol and butyl acetate, since butyl acetate is an important solvent and has higher economical value than methyl acetate. The selected process is esterification, since it has been widely used in industry for the production of butyl acetate for years. One of the factors in choosing esterification process over transesterification process is the availability of raw materials. The feedstock of esterification process is acid acetic and butanol. Those chemicals are available in Malaysia and some of the suppliers are Optimal Chemicals (M) Sdn. Bhd., BP Petronas Acetyls Sdn. Bhd. and BASF Petronas Chemicals Sdn. Bhd. On the other hand, the feedstock of transesterification process are methyl acetate and butanol. Butanol is can be found locally, however, methyl acetate are not avaiable in Malaysia. The nearest methyl acetate suppliers or distributors are in Singapore and Thailand. As stated earlier, in the production of polyvinyl alcohol, methyl acetate is typically produced as a byproduct. It is usually in the form of azeotrope mixture of methyl acetate/methanol. The end product of transesterification process is methanol and butyl acetate, however, the production of methanol is larger than that of butyl acetate. Thus, it is not applicable for us to select this process since methanol is the major product. In addition, both reactions are equilibrium process. They need to shift the reaction system to the product side to greatest degree. In this respect, it may be said that esterification is more advantageous because, the water co-product is readily
18
18 separated from the reaction medium because of its incompatibility with organic solvents. Organic solvent which is butyl acetate has a lower density than water, which means butyl acetate is lighter and will form a separate layer on top of water. Now that the esterification process is selected, another thing need to be considered is the system to be use, either conventional process or reactive distillation process. The most common method used in industry to produce butyl acetate is conventional esterification in which the chemical reaction and the purification of the desired products are carried out in separate unit operations. Reactive distillation is an integrated system in which reaction and distillation is combined in a single vessel. Conventional distillation is more practicable compared to the reactive distillation process which has complexities in column design, process synthesis and operability of reactive distillation processes resulting from the interaction of reaction and distillation. “The lack of systematical and universal design tools makes the industrial
community hesitate on firmly adopting this new kind of process. The interaction between reaction and phase equilibrium in the same device makes the design and control of these processes much more difficult than it is for conventional reactors or traditional distillation processes”
[1]
.
Other limitation of reactive distillation is regarding the temperature mismatch. There must be no mismatch in the temperatures that are favorable for reaction and the temperatures that are favorable for separation. Both reaction and separations occu r in a single vessel at essentially a single pressure and the temperatures throughout the column are fixed by tray composition, thus both the reaction and vapor-liquid equilibrium see the same temperatures. In contrast with what can be done in a conventional distillation process, the reactors and distillation columns can be operated at their optimum pressures and temperatures that are selected to be the most favorable for their given chemical kinetics and vapor-liquid equilibrium properties respectively.
[1]
Preliminary Design Of Reactive Distillation Columns, Columns , R. Thery, X. M. Meyer, X. Joulia and M. Meyer
19
19
Table 1.3: Summary of the Comparison between Four Processes Esterification Conventional Distillation
Butanol Acetic Acid Water
Raw Material By-product Major Equipments
Esterification Reactor Two Distillation Column Decanter Sulfuric Acid
Catalyst
Higher capital cost-due to the number of reactor and separator installed
Disadvantages
Reactive Distillation
Butanol Acetic Acid Water Reactive Distillation Column Amberlyst - 15
Complexities in column design, process synthesis and operability Relatively new technology Limited applications Complex modeling needs Significant development costs
Transesterification Conventional Distillation
Butanol Methyl Acetate Methanol Reactor Three distillation columns Amberlyst – 15
Methyl acetate cannot be found locally. Higher capital cost-due to the number of reactor and separator installed.
Reactive Distillation
Butanol Methyl Acetate Methanol Reactive Distillation Column Distillation Column Amberlyst – 15 Methyl acetate cannot be found locally. The catalyst is expensive than the liquid catalyst. Complexities in column design, process synthesis and operability. Relatively new technology Limited applications Complex modeling needs Significant development costs
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1.5
MARKET ANALYSIS
Market analysis is to determine the attractiveness of a market of a product and to understand its evolving opportunities and threats as they relate to the strengths and weaknesses of a firm. In this chapter, butyl acetate supply and demand are being discussed other than providing information of the average pricing for butyl acetate recently. Worldwide markets of butyl acetate which includes United States, Europe and Asia are being analyzed to see the trend of butyl acetate sales. Butyl acetate is specialty solvents which are very importance in printing ink and paint production. Butyl Acetate is part of the acetic acid and acetaldehyde group of chemicals. Business in this solvent has change worldwide base on demand and supply. About 87% world consumption of butyl acetate is in coatings which are particularly in paints and inks. The moving of solvent produced from oxygenated to halogenated solvent has shown positive impact to production of butyl acetate worldwide. Due to environmental impact pose to the planet, producer of coating and
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1.5
MARKET ANALYSIS
Market analysis is to determine the attractiveness of a market of a product and to understand its evolving opportunities and threats as they relate to the strengths and weaknesses of a firm. In this chapter, butyl acetate supply and demand are being discussed other than providing information of the average pricing for butyl acetate recently. Worldwide markets of butyl acetate which includes United States, Europe and Asia are being analyzed to see the trend of butyl acetate sales. Butyl acetate is specialty solvents which are very importance in printing ink and paint production. Butyl Acetate is part of the acetic acid and acetaldehyde group of chemicals. Business in this solvent has change worldwide base on demand and supply. About 87% world consumption of butyl acetate is in coatings which are particularly in paints and inks. The moving of solvent produced from oxygenated to halogenated solvent has shown positive impact to production of butyl acetate worldwide. Due to environmental impact pose to the planet, producer of coating and paint has taken the initiatives to reduce the volatile organic compounds (VOCs) and hazardous air pollutants (HAPs) in their products. Government has increased environmental regulations to accelerate these moves which show that environmental awareness has become priority nowadays. The consumption of butyl acetate has shown a steady increase which as it has replaced methyl ethyl ketone (MEK) as a solvent. In 1990, MEK was defined as a hazardous air pollutant (HAP).
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1.5.1
Supply and Demand of Butyl Acetate
Source: The Dow Chemical Company, 2006 Figure 1.5: World Consumption of Butyl Acetate 1.5.1.1 Global Supply Supply And Demand of of Butyl Butyl Acetate Acetate
The demand of butyl acetate in the world has been increases since 1998. From 1998 to 2008, world production is said to be growing with an average of 2.2% per year. In 1999, world production was 608000 tonnes and the consumption is about the same capacity. In 2000, the demand was predicted to reach 625000 tonnes. Butyl acetate demand expected to increase from rapidly turning industrial countries like China and India and the demand may be higher than United States and Europe. In United States, butyl acetate consumption has steadily increased in recent years due to its replacement of methyl ethyl ketone, which has been defined as a hazardous air pollutant (HAP) and that includes methyl isobutyl ketone. In addition, BP company has operates 80000 tonnes per year butyl acetate facility at its Yangtze River Acetyls partnership in China, Chuanwei plant. BP Amoco has finished the plan to extend the Chuanwei plant, increasing the capacity by 150000 tonnes per year to 350000 tonnes per year of butyl acetate since 2002. European and United States markets are relatively balanced with steady demand.
22
Table 1.4: Major Global n-Butyl Acetate Capacity, ’000 tonnes per year Company
Location
Capacity (‘000 TPA)
Europe
BASF
Ludwigshafen, Germany
80
Celanese
Frankfurt, Germany
40
Dwory
Oswiecim, Poland
6
European Oxo
Marl, Germany
100
Ineos Oxide
Antwerp, Belgium
60
JSC Ashinsky
Asha, Russia
3.5
JSC Nevinnomyssky Azot
Nevinnomyssk, Russia
18
Plastificantes de Lutxana
Baracaldo, Spain
7
Slovenske Lucobne Zavody
Hnust’a, Slovakia
10
Asia
Celanese
Pulau Sakra, Singapore
100
Chang Chun Petrochemical
Miao-Li, Taiwan
30
Changhua Chemical
Jiangyin, China
80
China National Blue Star Chemical
Shanghai, China
10
Continental Solvindo
Merak, Indonesia
20
Ohtake, Japan
22
Guangzhou Solvent Plant
Guangzhou, China
30
International Ester
Ulsan, South Korea
25
Jiangmen, China
25
Yixing, China
30
Kyowa Hakko Chemical
Yokkaichi, Japan
54
Nanchang Ganjiang Solvent Plant
Nanchang, China
20
Optimal
Kerteh, Malaysia
50
Shandong Jinyimeng Group
Linshu, China
8
Shinko Yuki
Kobe, Japan
10
Kaohsiung, Taiwan
36
Daicel Chemical
Jiangmen Solvent Plant Jiangsu Sanmu
Shiny Chemical Industrial
23
Company
Location
Capacity (‘000 TPA)
United States
Celanese
Celanese
Celanese
Dow Chemical
Dow Chemical
Dow Chemical
Eastman Chemical
Eastman Chemical
Eastman Chemical
Source: ICIS, 2004
Source: ICIS Pricing 22 Jun 2010 Figure 1.6: Graph of Butyl Butyl Acetate And Butanol Price It is shown from the graph that the price of butyl acetate has kept increasing due the increase of price of raw material (butanol) and strong demand mainly driven by Asian strong growth.
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1.5.1.2
Demand of Butyl Acetate
1.5.1.2.1
Demand of Butyl Acetate in USA
The steady increases of production of n-butyl acetate in the United States is driven because of demand from export markets and the replacement of aliphatic ketone and aromatic hydrocarbon solvents in the United States. However due to economic crisis that plague United States economy, the demand of butyl acetate is uncertain in long term. United States export its butyl acetate mostly in region that has higher demand than supply like China and India. 1.5.1.2.2
Demand of Butyl Acetate in Europe
The demand of butyl acetate in Europe is quite healthy although many sources described the demand as quiet. The demand to raise production of butyl acetate came more from the pressure on butanol. Butanol was limited for some producers due to propylene shortages. Propylene stock has become short due to the facts that there are many ongoing production issues and strong export demand for derivatives. 1.5.1.2.3
Demand of Butyl Acetate in Asia
Asia’s butyl acetate solvent market is expected to recover in the second half of
2010, driven by robust growth in China and an improving United States property market. Based on China’s gross domestic product (GDP) growth in 2010 which is
8.5% and the United States property market that has been improving, the butyl acetate market will be better in the latter half of 2010. Other factor is also because of the rapid pace of industrialization and industrial production. Operating rates at Asian butyl acetate plants has rise to above 50% of capacity in 2010, from the average of 30% to 50% in 2009 showing good economy prospects. In Asia, there is always supply for butyl acetate however the demands are low in 2007 due to economic crisis. It is proven by facts that major producers in Southeast Asia at that time had been operating at half as they could not find markets to export their cargoes after meeting domestic demand due to economic crisis. However things are moving fast in 2010. Economic growth in country like China and India are rocketing and thus causes increasing demand of chemical products like butyl acetate. Producer is currently targeting the China market as
25
China domestic demand of butyl acetate were able to keep up with butanol feedstock cost increases. Table 1.5: Global Raw Material and Product Price Material
Region
Price
Butyl Acetate
Europe
RM 3011.25 - 3093.75 /tonne
Butyl Acetate
Southeast Asia
RM 3904 – 4096 /tonnes Cost And Freight
Butyl Acetate
Thailand and Philippines
RM 4000 /tonne
Butyl Acetate
China
RM 5200 – 5250 /tonne
Acetic Acid
Southeast Asia
RM 1312 – 1376 /tonne
Butanol
Southeast Asia
RM 4800 /tonne
1.5.1.3 Malaysian Production and Demand Demand of Butyl Acetate Acetate
In South East Asia, PETRONAS and Union Carbide venture already starts their plant of butanol and derivatives complex since fourth quarter 2001. Optimal Chemicals (oxoalcohol and other chemicals) which located in Kerteh, Terengganu is the only producer of butyl acetate in Malaysia. In 2009, PETRONAS acquired all Dow's stakes in Optimal. Kerteh (Optimal Olefins) Integrated Petrochemicals Complex is an ethylene steam cracker plant that received its feedstock from nearby PETRONAS gas processing plant. The cracker will crack ethylene and propylene to its derivatives which one of it is the raw material for butyl acetate production, butanol with capacity of 140,000 tonnes/yr and producing butanol derivatives which are butyl acetate, butyl acrylate and butyl cellosolve glycol ethers. The butyl acetate capacity produced by Optimal Chemicals (M) Sdn. Bhd. is 50000 tonnes per year. The specification of the ethylene plant is shown in the Table 1.6.
26
Table 1.6: Specification of Optimal Integrated Petrochemical Complex Key Data
Order Year Plant Type Location Estimated Investment Completion
1998 Integrated petrochemical Site Kerteh $300 million 2001 Key Players Sponsor PETRONAS, Union Carbide Lead Contractor Linde AG Output Chemicals (tones per year) Ethylene 600,000 Ethylene Glycol 360,000 Ethylene Oxide 385,000 Ethoxylates 85,000 Butanol 140,000 Butanol Derivatives 160,000
Source: www.chemicals-technology.com Source: www.chemicals-technology.com
27
1.5.2
Malaysia Import and Export of Butyl Acetate
1.5.2.1 Malaysia Import and and Export of Butyl Butyl Acetate in Quantity
Import And Export of Butyl Acetate 16000000 14000000 12000000 10000000 8000000
Import
6000000
Export
4000000 2000000 0 2007
200 8
2 00 9
Source: MATRADE, 2010 Figure 1.7: Malaysia Import and Export of n-Butyl Acetate in Year 2007-2009 (Quantity, kg)
Import And Export of Butyl Acetate 8000000 7000000 6000000 5000000 4000000
Import
3000000
Export
2000000 1000000 0 2 008
2 0 09
2010
Source: MATRADE, 2010 Figure 1.8: Malaysia Import and Export of n-Butyl Acetate for Mid-Term Year 20082010 (Quantity, kg)
28
The above graph show the overall quantity of Malaysia import and export of butyl acetate quantity in kilogram, kg. Export of butyl acetate is much higher than import of butyl acetate as global demand of butyl acetate from overseas is greater. However, Malaysia still imports some of butyl acetate to meet domestic demand. From the graph, butyl acetate import has kept decreasing as Malaysia local producer keep increasing production of butyl acetate. Malaysian export fell in Jan – Dec 2008 due to economic crisis that hit global petrochemical market. However in Jan – Dec 2009 Malaysia export has increased because of world economic recovery that is much driven by growth in Asia region. The world economic recovery shows positive outlook for butyl acetate. 1.5.2.2 Malaysia Import Import and Export Export of n-Butyl n-Butyl Acetate in Average Average Pricing
7 6 5 a i s y a 4 l a M t i g 3 g n i R 2 1 0 20 07
20 08
20 09
Year
Source: MATRADE, 2010 Figure 1.9: Average Pricing of n-Butyl Acetate for Import, Year 2007-2009
29
50 45 40 35 a i s y a 30 l a M 25 t i g g 20 n i R 15 10 5 0 2 0 08
2009
20 1 0
Year
Source: MATRADE, 2010 Figure 1.10: Average Pricing of Butyl Acetate for Import, Mid-Term Year 2008-2010 The prices of butyl acetate that were imported tend to increase year by year. This is not good as it can affect the industry and reduce company’s profit. Butyl acetate is
mainly used in paint and coating industries that generate billion of Ringgit every year and it is important for companies to have cheaper raw material to reduce cost and increase profit. Our local butyl acetate supplier is trying to increase capacity to meet local demand and further expand their market to overseas. If the average price was compared from Jan-May for 2008-2010, the price of butyl acetate that was imported are decreasing from year to year.
30
5 4.5 4 3.5 a i s y 3 a l a M 2.5 t i g 2 g n i R 1.5 1 0.5 0 2007
2 008
2009
Year
Source: MATRADE, 2010 Figure 1.11: Average Pricing of n-Butyl Acetate for Export, Year 2007-2009 4.5 4 3.5 3 a i s y a l a 2.5 M t i 2 g g n i R 1.5 1 0.5 0 2008
2 009
2010
Year
Source: MATRADE, 2010 Figure 1.12: Average Pricing of n-Butyl Acetate for Export, Mid-Term Year 20082010
31
Malaysia price of exported Butyl Acetate is decreasing as the demand of butyl acetate from outside Malaysia decreased. Most of the consumer tends to buy butyl acetate from their own country such as China which the production increased proportionally with its demand. Plus the abundance of supply compared to the demand of butyl acetate further reduces the price of butyl acetate. Malaysia’s butyl
acetate price is quite competitive and this has increased our export where many countries purchase more of Malaysia’s butyl acetate.
1.5.3
Raw Material Supply and Demand
Butyl acetate can be produced by two processes which are esterification process and transesterification process. In this report, esterification process has been selected and the raw materials used to produce butyl acetate by this process are butanol and acetic acid. This section discussed on the supply and demand for the raw materials. 1.5.3.1 Acetic Acid
Acetic acid is used largely in the manufacturing of vinyl vinyl acetate monomer (VAM), (VAM), which accounts for one-third of acetic acid consumption. VAM is majorly used in the production of emulsions as base resins for water-based paints, adhesives and textile finishes. Other purpose of acetic acid is its second largest derivative which is purified is purified terephthalic acid (PTA).Demand (PTA).Demand for PTA is being driven by huge growth of polyethylene polyethylene terephthalate (PET) (PET) bottle resins and polyester fiber. Consultant has forecasted that the long term global demand for acetic acid will grow at 3% to 4% per year from 2010 onwards. The healthy growth of acetic acid will ensure that supply of essential raw material to produce butyl acetate is sufficient. The global demand for acetic acid is at around 6.5 million metric tons per year. Growth is much higher in Asia, pulled by China where it is estimated to grow by up to 8% per year back up by it tremendous Gross Domestic Product (GDP) value. Exports were up by nearly 10% in 2008 at 817000 tonnes compared to 745000 tonnes t onnes in 2007. 2 007. The market is looking bright in Asia particularly China, where it is experiencing the fastest growth. India is also a country which has strong acetic acid demand. The demand of acetic acid in India has shown big potential growth in the future as increase demand of vinyl vinyl acetate monomer (VAM) (VAM) recently.
32
In Malaysia, petrochemical plant that produced acetic acid is BP PETRONAS Acetyls (M) Sdn. Bhd. in Kerteh, Terengganu which is the supplier for butyl acetate plant that has been proposed. 1.5.3.2 Butanol Butanol is an important organic raw material, where it’s mainly used to produce
phthalic acid and aliphatic binary lipid plasticizers. It is also widely used in the production of various plastic and rubber products. Butanol also used to produce nbutyl acetate, n-butyl acrylate, butyraldehyde, and other chemical. Butanol is used in resins, paints, solvents, and adhesives as a defoamer. The average annual growth of butanol in 2005 to 2010 is 3.6%. The world demand of butanol is expected to reach 3.442 million tonnes in 2010. Demand growth is the fastest in Asia, the Middle East, Europe and Africa. In 2010 worldwide, butanol production capacity is expected to reach 3.657 million tonnes per year while the demand will reach 3.442 million tonnes. In 2015, the world butanol production capacity will be expected to be 3.925 million tonnes per year and the demand will reach 3.842 million tonnes. The sufficient supply of butanol is very important to make sure that we do not have shortage of raw material that can affect the productivity of our Butyl Acetate plant. In Malaysia, butanol suppliers of the proposed plant are Optimal Chemicals (M) Sdn. Bhd. in Kerteh, Terengganu and BASF PETRONAS Chemicals Sdn. Bhd. in Gebeng, Pahang.
33
1.5.4
Economic Analysis Analysis
In building a plant, profit is the main reason for a chemical plant to be built. However, profitability can only be obtained when total investment and cost of production estimation are known. In this section, fixed capital investment of the plant which includes total direct and indirect cost, equipment costs, raw material costs and other costs required before starting up a plant were estimated. Estimation accuracy of a plant is depend on three main factors which are the accuracy of the cost data available, the amount of design detail available and the time spent on preparing the estimate. The accuracy of the costs estimated must be nearly accurate since it will provide reliable decisions. Thus, factors affecting costs must be understood such as sources of equipment, price fluctuations, company policies, operating time and rate of production and governmental policies. 1.5.4.1
Total Capital Investment
Total capital investment is summation of money spent before a plant ready to operate. Total capital investment included two major investment which are fixed capital investment and working capital investment. Fixed capital investment is an investment in manufacturing and plant facilities purposes while working capital investment is necessary for operation of the plant. 1.5.4.1.1
Estimation of Fixed Capital Investment, FCI
As mentioned earlier, fixed capital capita l investment is an investment in manufacturing manufactu ring and plant facilities purposes. In fixed capital investment, the cost is a once-only cost and cannot be recovered after the plant had runs. It includes the cost for: 1. Design and engineering and supervision 2. Equipments and its installation 3. All piping, instrumentation instrumentation and control systems 4. Buildings and structures 5. Auxiliary facilities Fixed capital investment is divided into two which are direct and indirect cost. Direct cost focus more towards cost of equipments and its installation while indirect cost is about plant supervision and construction. Thus, fixed capital investment can be determined as follow: Fixed Capital Investment = Direct Costs + Indirect Costs
(2.1)
34
Estimation of the Total Direct Cost
According to McKetta, the equipments needed n eeded to construct a unit at an existing plant site (1974) for continuously producing butyl acetate at daily rate 30000 to 50000 lb/day should at a minimum consist of the following: four distillation columns, five tube and shell condensers, two tube and shell steam heaters, two process tanks, one process decanter, two analysis tanks, storage tanks, and associated piping, pumps, and instrumentation. The purchase cost of the above equipment would be RM 769514.90 to RM 923417.88 (Marshall and Swift Equipment Cost Index = 414.2). Table 1.7 shows the summary of the estimated cost of designing, purchasing, and installing a complete continuous ester unit. Table 1.7: Summary of the Estimated Cost of Designing, Purchasing, and Installing a Complete Continuous Ester Unit RM
Equipment cost
769514.90 to 923417.88
Equipment installation
269330.21 to 323196.26
Instrumentation
307805.96 to 369367.15
Piping and pumps
769514.90 to 923417.88
Engineering
230854.47 to 277025.36
Electrical
153902.98 to 184683.58
Building
384757.45 to 461708.94
Outside (roads and services)
307805.96 to 369367.15 3193486.83 to 3832184.19
To estimate the total direct cost the following principles can be used, namely: 1. The six-tenths-rule (n set to 0.6) may be used to scale up/down to a new capacity. 2. The Chemical Engineering Plant Plant Cost Index should bed to update the capital capital costs.
35
Therefore, the total direct cost can be determined as below: (2.2)
Thus, the total direct cost is estimated to be RM 32636766 Estimation of Indirect Cost
Table 1.8: Summary of Estimation of Indirect Cost Item
Purchase Cost Estimation
Cost (RM)
Design and engineering
30% of total direct cost
9791030
Contractor's fee
5% of total direct cost
1631838
Contingency
10% of total direct cost
3263677
Total Indirect Cost
14686544.7
Thus, fixed capital investment can be determined as below, (2.3)
Therefore, the fixed capital investment is determined to be RM 47323310.70 1.5.4.1.2
Estimation of Working Capital Investment
Working capital investment is necessary for operation of the plant. It is an investment costs required to operate the plant from the starting point until profits are gained. The cost of working capital includes: 1. Start-up plant 2. Initial catalyst charges 3. Raw materials and intermediates in the process 4. Finished product inventories 5. Funds to cover outstanding accounts from customers Working capital can be recovered after the plant had runs not like fixed capital. Working capital are 5 per cent of the fixed capital investment. Thus the working capital investment can be estimated as below,
36
(2.4)
Therefore, the working capital investment is determined to be RM 2366165.535. The total capital investment is the sum of the fixed and working capital.
(2.5)
Therefore, the total capital investment is determined to be RM 49689476.24 1.5.4.2 Total Production Cost
Total production cost is also known as total operating costs. Total production cost is total of fixed cost and variable cost. Fixed cost is the cost that is unaffected by plant production when it was operating or when it was shutting down. Fixed cost includes maintenance, operating labor, laboratory cost, supervision, plant overheads, capital charges, insurance, local taxes, and royalties. Variable cost is a cost depending on production of plant and the amount of product produced. This cost includes raw materials, miscellaneous materials and utilities. Total production cost can be estimated as below. Total Production Cost = Fixed Cost + Variable Cost
(2.6)
37
1.5.4.2.1
Estimation of Variable Costs
Cost of Raw Materials
Table 1.9: Summary of Raw Materials Cost Component
Annual Usage
Cost (RM/kg)
(kg/year)
Annual Cost (RM)
Acetic Acid
1.111
23760000.00
26397360.00
Butanol
2.628
39600000.00
104068800.00
0.6176
6336.000
3913.11
Total
130470073.00
Sulfuric Acid (Catalyst)
Cost of Utilities
Table 1.10: Summary of Utilities Cost Utilities
Annual Cost (RM)
Electricity
1500000.00
Cooling Water
783452.34
Saturated Steam
284089.07
Total
2567541.41
38
1.5.4.2.2
Estimation of Fixed Costs
Cost of Operating Labor
Table 1.11: Summary of Calculation on Cost of Operating Labor Operator
Units
Working hours
8
hours/shift
Working shifts for an operator
5
shifts/week
49
weeks/year
Average working weeks Total shift per year for an operator [Average working weeks × Working shifts for an operator ]
245
shifts per operator/year
Plant
Plant running
24
hours/day
Plant operates
3
shifts/day
Operating days
330
days/year
990
shifts/year
4.04
operators
Total plant operating shift per year [Operating days × Plant operates] Number of operators needed to provide the total plant operating shift per year [Total plant operating shift per year/Total shift per year for an operator]
Table 1.12: The Number of None Particulate Processing Steps and Handing Steps, Nnp Equipments Types
Number of Equipments
Nnp
Reactor
1
1
Distillation Column
3
3
Heater
2
2
Exchanger
5
4
Vessel
5
-
Total
10
39
According to Alkayat and Gerrard method: NOL = (6.29 + 31.7P2 + 0.23Nnp) 0.5
(2.7)
Where NOL
= the number of operators per shift.
P
= the number of processing step involving the handling particulate solids.
Nnp
= the number of none particulate processing steps, handing steps and includes compression, heating and cooling, mixing and reaction.
P is assumed to be zero because no particulate solids handling involves NOL
= (6.29 + 31.7(0)2 + 0.23(10)) 0.5 = 2.93 ≈ 3 operators per shift
Operating labor = 4.04 operators × 3 operators per shift shift = 12.12 ≈ 13 operators
Labor cost
= 13 operators × RM 1000 per month × 12 month per year = RM 156000.00 / year
Therefore, the operating labor cost annually is determined to be RM 156000.00
40
Table 1.13: Summary of Production Costs Purchase Cost Estimation
Cost (RM)
-
130470073.1
10% of item (4)
3312631.75
-
2567541.41
Variable Costs, VC
1. Raw materials 2. Miscellaneous materials 3. Utilities
Sub-total A
136350246.30
Fixed Costs
4. Maintenance
7% of fixed capital
33126317.49
5. Operating labor
-
156000.00
6. Laboratory cost
20% of item (5)
31200.00
7. Supervision
20% of item (5)
31200.00
8. Plant overheads
50% of item (5)
78000.00
10. Capital charges
15% of fixed capital
7098496.61
11. Insurance
1% of fixed capital
473233.11
12. Local taxes
2% of fixed capital
946466.21
13. Royalties
1% of fixed capital
473233.11
13. Sales expense
Sub-total B
42414146.53
Direct production costs A + B
178764392.80
25% of the direct production
14. General overhead 15. Research and development
cost
44691098.20
Sub-total C
44691098.20
Annual production cost = A + B + C
223455491.00
Production cost RM/kg =
4.03
41
1.5.5
Breakeven Breakeven Analysis
Break-even analysis is a type of cost-volume-profit analysis. The purpose of doing the break even analysis is to determine the desirable output need to recover all the costs from sales revenue. Describing break-even analysis involves computing the break-even point and constructing a cost-volume-profit chart. It also requires an estimation of fixed cost, variable cost and total revenues. Breakeven point = FC/ (P - VC)
(2.8)
Where TC
=Total cost
FC
= Fixed cost
VC
= Variable cost
P
= Price per unit butyl acetate (RM)
Q
= Production rate (metric tonne/year)
r
=Revenue /total production rate (RM / tonne)
v
=Variable cost/total production rate (RM / tonne)
Equations involved TR
=rQ
TC
=FC+VC
VC
=vQ Table 1.14: Summary of TR, VC, FC and TC Values Q 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000
TR VC FC 0 0 0 57701648 40945288 47323310 115403296 81890576 81890 576 47323310 173104944 122835864 47323310 230806593 163781152 47323310 288508241 204726440 47323310 346209889 245671728 47323310 403911537 286617016 47323310 461613185 327562304 47323310 519314833 368507592 47323310 577016482 409452880 47323310
TC 0 88268598 129213886 170159174 211104462 252049750 292995038 333940326 374885614 415830902 456776190
A graph of TR and TC versus Q respectively is plotted as below,
42
Figure 1.13: Graphical Breakeven Point Figure 2.9 shows that the breakeven point (intersection of TR and TC) is 30000 tonnes per year which is the amount of butyl acetate required to recover the production cost of butyl acetate.
43
1.5.6
Cash Flow Analysis
In order to find profit in a business, final step must be taken is to determine the payback period (PBP), cumulative cash position (CCP), cumulative cash ratio (CCR) and rate of return on investment (ROROI). For this butyl acetate plant, total operating period is 10 years with start-up operation at the end of year two. The capital investment used in the first year of the plant is 10 % from Total Capital Investment (TCI) while it increased to 25 % of TCI during the second year. Payback period is the time required after plant start up to recover the fixed capital investment, FCI for the project. In illustration PBP is the point, where undiscounted cash flow rises to the level of negative working capital. Undiscounted cash flow is calculated to find the payback period. From the calculated value of net cash income it’s clearly that the Pay -back period (PBP) is estimated of sixth year
after 3 years of the start up. Table 1.15: Cash Flow ROROI Payback Period Cost of land Fixed Capital Investment, FCI Fixed Capital Investment Year 1, FCI1 Fixed Capital Investment Year 2, FCI2 Working Capital Revenue Cost of Manufacturing Salvage Value Taxation Rate, t
RM 2178000.00 RM 47323310.00 RM 4968947.62 RM 12422369.06 RM 2366165.54 RM 342144000.00 RM 285200705.60 RM 2178000.00 30 %
FCI
= Fixed Capital Investment
FCI1
= 10% from Total Capital Investment for the first year
FCL2
= 25% from Total Capital Investment for the second year
44
Table 1.16: Nondiscounted After Tax Cash Flows
Cumulative Cash
End of Year
Investment
dk
FCIL - ∑dk
R
COMd
(R-COM-dk)×(1-t)+dk
Cash Flow
0
-2178000
-
47323310.7
-
-
-
-2178000
-2178000
1
-4968947.624
-
47323310.7
-
-
-
-4968947.624
-7146947.624
2
-12422369.06
-
47323310.7
-
-
-
-12422369.06
-19569316.68
3
-
9464662.14
37858648.56
342144000
285200705.6
42699704.72
181108295.2
161538978.5
4
-
15143459.42
22715189.14
342144000
285200705.6
44403343.91
175372709.9
336911688.4
5
-
9086075.654
13629113.48
342144000
285200705.6
42586128.78
173918937.8
510830626.2
6
-
5451645.393
8177468.089
342144000
285200705.6
41495799.7
173046674.6
683877300.8
7
-
5451645.393
2725822.696
342144000
285200705.6
41495799.7
171411180.9
855288481.7
8
-
2725822.696
0
342144000
285200705.6
40678052.89
171165856.9
1026454339
9
-
-
0
342144000
285200705.6
40678052.89
40678052.89
1067132392
10
-
-
0
342144000
285200705.6
40678052.89
40678052.89
1107810444
11
-
-
0
342144000
285200705.6
40678052.89
40678052.89
1148488497
12
4544165.535
-
0
344322000
285200705.6
41384906.08
45929071.62
1194417569
Flow
45
Cumulative Cash Flow vs End of Year 1.4E+09 1.2E+09 w 1E+09 o l F h s80000000 a C e60000000 v i t a40000000 l u m u20000000 C
0 -2E+08
1
2
3
4
5
6
7
8
9
10
11 11
12 12
13 13
End of Year
Figure 1.14: Graph of Cumulative Cash Flow versus End of Year
Payback period = = = 3.43 years
45
Cumulative Cash Flow vs End of Year 1.4E+09 1.2E+09 w 1E+09 o l F h s80000000 a C e60000000 v i t a40000000 l u m u20000000 C
0 -2E+08
1
2
3
4
5
6
7
8
9
10
11 11
12 12
13 13
End of Year
Figure 1.14: Graph of Cumulative Cash Flow versus End of Year
Payback period = = = 3.43 years Cumulative cash position, CCP = RM 1194417569.00 Cumulative cash position is the amount of cash flows in and out. This plant is a big investment as seen by the amount of CCP involved.
Cumulative cash ratio, CCR = = 62.0352 Cumulative cash ratio is positive and big and has good prospect value.
Rate of return on investment, ROROI = Rate of return on investment, ROROI = ROROI = 0.7807 Rate of return on investment, ROROI = ROROI = 78.07%
-
46
1.6
SITE SELECTION
In selecting a site location for building a plant, site location is one of the important things to be considered. A considered. A good site selection can help in maximizing the production of a plant. In Malaysia, several locations have been designated for industries ranging from light to heavy industries. The choice of final site selected should be the best site based on the complete survey of advantages and disadvantages. There are four main industrial locations that have been shortlisted which are: 1. Kerteh Industrial Estate, Terengganu 2. Pasir Gudang Industrial Estate, Johor 3. Prai Industrial Complex, Prai, Penang 4. Gebeng Phase Phase (IV) Industrial Area, Pahang
47
1.6.1
Criteria of Selection
The assessment of site location for sitting a plant would depend mainly on several factors such as: 1.6.1.1
Production and Distribution Factors
a) Freight rates Competitive points Differentials Favorable territory b) Markets Local area Favorable area Competitive area National area c) Competitive, feeder and consumer industries d) Municipal restriction Nuisance laws relating to fumes Waste disposal e) Corporation fees and taxes f) Fuel Types of fuel Thermal efficiency Reserve and alternate sources
48
1.6.1.2
Specific Factors
a) Transportation facilities Highways - Regularly used for short distance and generally small quantities. Availability of various services and project rates. Water - cheaper but may be slow and irregular. Railroads - dependable for light and heavy shipping aver all distance. Pipelines - for gases and liquids, particularly for petroleum product. Air - for business transportation for personnel. b) Regulatory Laws Zoning ordinances. Highway ordinances. Building codes. Waste-disposal codes. c) Site characteristics Soil structure. Costs of site. Control of site. Room of expansion. Access to railroads, highways and water. Site and facilities available by expansion on present company owned property. d) Flood and fire control Flood history. Flood control. Fire hazards in surrounding area. e) Community factors Rural or urban. Medical facilities - hospitals, doctors, etc. Housing costs. Recreation facilities. Cultural and religion aspects - mosque, surau, libraries, theatres, etc. School system.
49
f) Waste disposal Regulation laws. Steams carry - off possibilities. p ossibilities. Air - pollution possibilities. g) Vulnerability to wartime attack General industry concentration. Distance from important facilities. h) Taxes States and local taxes. i. Income ii. Property iii. Use iv. Franchise v. Unemployment insurance Low assessment or limited term exemption to attract industry. 1.6.1.3
Major Factors
a) Reasonable Land Price The land will influence the working capital. In terms of reasonable, it means that with the good incentive from local government and low land price. If the land chosen is not classified as industrial area, the condition should be change first. State and local tax rates on property income, unemployment insurance and similar items vary one location to another. b) Labors The types and supply of labor available in the vicinity of proposed plant site must be examined. Some of the factors that should be considered on labor are supply, kinds, nationality, diversity, intelligence, wage scales, efficiency and costs. Consideration also should be given to prevailing pay scales, restrictions on number of hours worked per week, competing industries that can cause dissatisfaction or high turnover rates among the workers and variations in the skill and productivity of the workers there for industrial housing, safety-first movement, welfare institutions, better sanitation and lunchroom have all contributed to the
50
solution of labor welfare and problems as well as the radio and automobile, also have helped towards building up and maintaining a supply satisfied and contented laborers. This factor can contribute to the saving of the operation cost. c) Distance from Market Demand versus distance, inventory storage requirements, growth or decline, competition-present and future. The location of market or intermediate distribution centers affects the cost of product distribution and the time required for shipping. The buyer usually finds that it is more advantage to purchase from nearby sources. Market of major final product and by-product should be considered. d) Waste Disposal Another serious consideration con sideration that t hat should be made before choosing a site is the disposal of waste liquors and waste products from the chemical plant. If there is a sewer in the street adjoining to the property, the quantity of waste liquors to be disposed off should be estimated and the size of the street sewer should be checked to determine whether it could take care of the liquors. If the waste liquors such as acids or alkaline, contain solids, or has other objectionable features, it is advisable to learn from the local authorities whether the disposal of such liquor in the sewerage system is permissible. Any waste from atomic energy plants cannot just be disposed of by dumping it into sewers or rivers. Usually most chemical plants often simply dispose of their waste by locating on a stream, rivers or at the tidewater. However, this is no longer satisfactory, for there is a growing list of state, which has instituted legislation against such pollution by industrial wastes. Seepage through the ground is also can be used as another method of waste disposal. Before that, soil tests should be made to determine whether the soil is porous enough to permit the disposal of considerable quantities of liquor without accumulation. It is also advisable to check the topographic factor of the area to determine where the liquor will sleep in order to avoid trouble from neighboring plants or the local authorities. Towns lower down the valley mat draw their water supply from the drainage shed upon which the plant is situated. Nevertheless, a systematic toxic and industrial waste will be more effective as disposal waste will be treated accordingly. This method is getting popular and encourages using as will product non-polluting, clean and environmental friendly.
51
e) Climate Seasonal range Precipitation Humidity and temperature conditions. Wind Hurricane, tornado and earthquake history. Investment required for construction. f) Raw materials or Semi-Finished Products These particularly important if large volumes of raw material are consumed because these permit considerable reduction in transportation and storage charge. Any way attention should be given to the purchased price of the raw materials, distance from the source of supply, purity of the raw materials, reserve stock and storage requirements. In order to save the transportation costs, the plant should be located near to the raw material supply and sources. g) Transportation Facilities The relation of railways, ports or road facilities to market is so close in making a prudent investigation of transportation rates before definitely deciding upon a plant location. Water, railroads and highways are the common means of transportation used by major industrial concern. There is usually need for convenient air and rail transportation facilities. A location which has several competing railroads, ports and road networks as well as waterways in order that the competition will help to maintain low rates and give better service should be chosen. h) Government Incentives In order to attract new investors, the government will offer an incentive to them, the better the incentive offered the feasibility to build the plant there would be better. i) Water supply Sources Mineral analysis Bacterial content Quantity Temperatures Costs
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The process industries use a lot of water for cooling, washing steam generation and as raw material. So the plant must be located where supply water is available. The temperature, mineral content, silt or sand content and cost for supply must also be considered when choosing a water supply. j) Energy Supply Hydroelectric Public service Alternate source Power and steam requirement is high in most industrial plants and fuel is ordinarily to supply this utilities. Location should near to the hydroelectric installation if the plant using electrolytic process. If the plant requires large quantities of oil or coal, location near a source of supply may be essential for economic operation. The local cost of power can help determine whether power should be purchased or self-generated.
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1.6.2
Site Characteristic Characteristic of Each Location
As stated earlier, the suggested sites for the production of butyl acetate plant includes: 1. Kerteh Industrial Estate, Terengganu 2. Pasir Gudang Industrial Estate, Johor 3. Prai Industrial Complex, Prai, Penang 4. Gebeng Phase Phase (IV) Industrial Area, Pahang 1.6.2.1 Kerteh Industrial Estate, Terengganu
Formerly a quiet fishing village, Kerteh has now transformed into a petrochemical hub. It houses the PETRONAS Petrochemical Integrated Complex (PPIC) that links the entire range of the oil and gas value chain beginning from upstream exploration and production to the final stage of petrochemical manufacturing. Kerteh Industrial area is located 35km from Kemaman town. The selling price is RM RM 5.57 psf. The type of industry develop in this area is chemical and petrochemical industry. In terms of water supply and electricity, this area is supplied with water from Terengganu Waterworks Department capacity of some 75.3 mgd. For electricity, the suppliers are the Paka Power Plant (900MW), IPP YTL Power Generation Sdn. Bhd. (600MW) and Tasik Kenyir Hydroelectric Power (400MW). (400 MW). a) Facilities and Infrastructure Gas processing plants Peninsular Gas Utilization (PGU) project Centralized utility facilities
Supply of utilities such as power, industrial gases, water and steam
Institut Teknologi Petroliam
Training centre
Kertih Port
Centralized tankage facilities
Mainly bulk liquid port
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Kuantan Port
Centralized tankage facilities
Container and bulk liquid port
Railway linking Kerteh, Gebeng and Kuantan Port
East Coast Highway Terengganu State Government has also embarked on the projects including expansion of Kuala Terengganu Airport and express highway Connecting Kuala Lumpur-Kuantan-Kuala Terengganu-Gua Musang. Incentives offered by Terengganu State Government to both foreign and local investors are special land premium, reduction of land premiums, man power training allowance, deferred payment, discount on assessment rate, and incentive for water supply. 1.6.2.2 Pasir Gudang Industrial Estate, Johor
Located in Johor Bahru, Pasir Gudang is a well developed industrial area. It is located 35 km at eastern end of Johor Bahru with populations of 100,000. The main industries in Pasir Gudang are transportation and logistics, shipbuilding, petrochemicals and other heavy industries, and oil palm storage and distribution. Pasir Gudang Industrial Estate is an industrial area developed by Johor State Economic Development Corporation. Pasir Gudang which located in South East Asia, one of the world’s fastest growing economic regions is one of t he
potential sites selected because of: a) Political and Social Stability b) Economic Strength Natural resources Low inflation rate Fastest developed state in Malaysia c) Well Developed Infrastructure Network of well-maintained highways and railways Well-equipped seaports and airports All year round deep water sea port High quality telecommunications network and services
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d) Educated Workforce Talented, young, educated and productive workforce Multilingual workforce speaking two or three languages, including English Comprehensive system of vocational and industrial training including advanced skills training Harmonious industrial relations with minimal trade disputes e) Geographical and Location Advantage Strategically located in the heart of Southeast Asia, one of the world's fastest growing economic region Within easy access to the rest of the world and is serviced by all major shipping lines f)
Supportive Government Policies Pro-business policies Responsive government Liberal investment policies Attractive tax and other incentives Liberal exchange control regime
g) A vibrant Business Environment Market oriented economy Well-developed financial & banking sector Wide usage of English especially in business h) Quality of Life Friendly and hospitable Malaysians Safe & comfortable living environment Excellent Educational institutions including international schools for expatriate children Good recreational and sport facilities Excellent shopping with goods from all over i)
Within easy access to the rest of the world and is serviced by all major shipping lines
j)
Good infrastructure facilities
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k) Strong institutional support from government department and local authority authority l)
A stable and far sighted government
m) Young and energetic labor supply with cheap labor cost Other than the listed reasons, Johor has a well developed highways transportation facilities and other infrastructure amenities that conform to international standard which gives benefits for import and export purposes. Under the Peninsular Gas Utilisation (PGU) project, Pasir Gudang (Tanjung Langsat area) will further develop in petrochemicals industries, steel plants and chemical industries. Electrical supply should not be a problem since Tenaga Nasional Berhad supplies 24 hours electricity for customer usage with distribution voltages at 33kV, 11kV, 6.6kV and 0.415kV. For industries in Pasir Gudang, 6 berths are provided to cater for containers, general and dry bulk cargoes besides from a special jetty for handling liquid cargo and hazardous cargo jetty for fuel oil and chemicals. Warehouse facility also provided at the port. Within Pasir Gudang, there is an easy access to the region's specialist facilities and higher education institution, which companies in the innovation center and high technology industries can relate for technological research and consultation if needed. For an investment made in chemical and petrochemical industry, incentives are provided by Malaysian Industrial Development Authority (MIDA) which covers: 1) Incentives for Manufacturing Companies a. Pioneer Status: Applications received by 31 December 2010 are are eligible for an income tax exemption of 70% or 100% on the statutory income for five years or b. Investment Tax allowance: Investment tax allowance allowance of 60% or 100% on the qualifying capital expenditure for five years. The allowance can be utilized to offset against 70% or 100% of the statutory income c. Reinvestment Allowance: Reinvestment allowance allowance of 60% for 15 years on the qualifying capital expenditure. The allowance can be offset against 70% or 100% of the statutory income. d. Accelerated Capital Allowance: An accelerated capital allowance consisting of an initial allowance of 40% and an annual allowance of
57
20% is available for three years after the reinvestment allowance period e. Incentives for High Technology Companies f.
Pioneer Status with a tax exemption exemption of 100% on the statutory income for five years or
g. Investment Tax Allowance of 60% on the qualifying capital expenditure for five years which can be offset against 100% of the statutory income
2) Incentives for Strategic Projects a. Pioneer Status with with a tax exemption of 100% on the statutory income for ten years or b. Investment Tax Allowance of 100% on the qualifying capital expenditure for five years which can be offset against 100% of the statutory income 3) Pre-packaged Incentives a. Customized packages that cover tax and non-tax incentives 4) Incentives to Strengthen Industrial Linkages 5) Incentives for R&D 6) General Incentives a. Industrial Building Allowance b. Infrastructure Allowance c. Tariff Related Incentives
1.6.2.3 Prai Industrial Complex, Prai, Penang
Seberang Perai is connected to Penang Island by the Penang Bridge and by ferry services. There is a Keretapi Tanah Melayu (KTM) train station and a container terminal at Butterworth. In Prai Industrial area, the industries are focusing on chemical, petrochemical, sea related industry, oleochemical industry and light, medium and heavy industry. Penang airport is one of the international airports in Malaysia. It provides facilities for exports and imports and also cargo for easy transportation of raw
58
materials and products. Raw material supply for butyl acetate is supply from Gebeng and Kerteh. Prai Industrial Complex is located 619 km from Kerteh by roadways and 548 km from Gebeng by roadways. The selling price of industrial land at Prai is RM 18.00 psf. However, there are no lands that are still available for investment to build butyl acetate plant. For an investment made in chemical and petrochemical industry, incentives are provided by Malaysian Industrial Development Authority (MIDA) which covers: 1) Incentives for Manufacturing Companies a. Pioneer Status: Applications received received by 31 December 2010 are eligible for an income tax exemption of 70% or 100% on the statutory income for five years or b. Investment Tax allowance: Investment tax allowance allowance of 60% or 100% on the qualifying capital expenditure for five years. The allowance can be utilized to offset against 70% or 100% of the statutory income c. Reinvestment Allowance: Reinvestment allowance allowance of 60% for 15 years on the qualifying capital expenditure. The allowance can be offset against 70% or 100% of the statutory income d. Accelerated Capital Allowance: An accelerated capital allowance consisting of an initial allowance of 40% and an annual allowance of 20% is available for three years after the reinvestment allowance period 2) Incentives for High Technology Companies a. Pioneer Status with with a tax exemption of 100% on the statutory income for five years or b. Investment Tax Allowance of 60% on the qualifying capital expenditure for five years which can be offset against 100% of the statutory income 3) Incentives for Strategic Projects a. Pioneer Status with with a tax exemption of 100% on the statutory income for ten years or b. Investment Tax Allowance of 100% on the qualifying capital expenditure for five years which can be offset against 100% of the statutory income
59
4) Pre-packaged Incentives a. Customized packages that cover tax and non-tax incentives 5) Incentives to Strengthen Industrial Linkages 6) Incentives for R&D 7) General Incentives a. Industrial Building Allowance b. Infrastructure Allowance c. Tariff Related Incentives 1.6.2.4 Gebeng Phase (IV) Industrial Area, Area, Pahang Pahang
The Gebeng Industrial Estate which located at East Coast of Peninsular Malaysia houses a world-class chemical and petrochemical industrial zone. zone. With four development phases totalling 8,600 hectares of land, it is strategically located only 5 kilometres from the Kuantan Port. With excellent infrastructure and facilities, Gebeng Industrial Estate is rapidly expanding to become the leading chemical and petrochemical hub of the region. Gebeng (Phase IV) is a new developed phase at north of other phases in Gebeng industrial area. With 1000 acres developed area in Phase IV, it selling price is RM 10 psf. With much area still available, it is easy for plant expansion if investment for butyl acetate plant is made here. Transportation in Gebeng is excellent. For roadways, the Gebeng bypass eases traffic flow from the industrial estate to Kuantan Port, links Kuala Lumpur and Kuantan directly via the East Coast Highway. The East Coast Highway connects Kuala Lumpur to Pahang makes it convenient for promoting economic activities in major districts in Pahang. The highways connect Kuantan Port to the national grid and also link to the North South Expressway on the West Coast. This will save some travelling time from Kuala Lumpur to Kuantan which only 3 hours taken via the expressway.East-Coast-Expressway. The Kertih-Kemaman-Kuantan railroad connects the integrated petrochemical complex in Kerteh, Terengganu to Gebeng, Pahang and the Kuantan Port. The railway line is capable of hauling cargo in large volumes and in bulks, thus making it
60
a highly economical, safe, reliable and consistent mode of transportation for the movement of raw materials and finished products of petrochemical materials. Several incentives provided by government for investor in Gebeng are: 1. Incentives for Relocating Manufacturing Activities to Promoted Areas 2. Incentives for Automotive Component Modules and Systems 3. Incentives for the Machinery and Equipment Industry 4. Additional Incentives for the Manufacturing Sector 5. Incentives for Small and Medium-scale Companies 6. Incentives for the Utilisation of Oil Palm Biomass 7. Incentives to Strengthen Industrial Linkages 8. Incentives for High Technology Companies 9. The East Coast Economic Region (ECER) 10. Incentive for Investment Tax Allowance 11. Incentives for Strategic Projects 12. Incentive for Pioneer Status
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Table 1.17: Site Selection Comparisons Kerteh Industrial Estate, Terengganu Location
Raw Material Supply
Land Price (RM per square feet)
Kemaman, Terengganu BP Petronas Acetyls Sdn Bhd, Kerteh (Acetic Acid) BASF Petronas Chemicals Sdn Bhd, Gebeng (Butanol)
RM 5.57
Pasir Gudang Industrial Estate
Pasir Gudang, Johor BP Petronas Acetyls Sdn Bhd, Kerteh (Acetic Acid) BASF Petronas Chemicals Sdn Bhd, Gebeng (Butanol)
RM 18.00 – 19.00 Pasir Gudang to Kim Kim River
Road Transportation
Federal Road Kuala Terengganu-Kerteh-Teluk Kalong-Gebeng-KuantanKuala Lumpur Terengganu-Johor Highway Karak-Kuantan Highway
Bridge over Kim Kim River Bridge to Johor River North-South Highway (Bukit Kayu Hitam to Singapore) Highway from Pasir Gudang- Tanjung KupangTuas, Singapore
Gebeng (Phase IV ) Industrial Area
Kuantan, Pahang BASF Petronas Chemicals Sdn Bhd, Gebeng (Butanol) BP Petronas Acetyls Sdn Bhd, Kerteh (Acetic Acid)
RM 10.00
Prai Industrial Complex
Prai, Penang BP Petronas Acetyls Sdn Bhd, Kerteh (Acetic Acid) BASF Petronas Chemicals Sdn Bhd, Gebeng (Butanol) RM 18.00
Main road to KL, JB, Singapore 340km East-Coast Highway, linking Karak and Terengganu via Kuantan
North-South Highway (Bukit Kayu Hitam to Singapore)
Kuala Lumpur- Kuantan travel reduced to at least two hours.
Pulau Pinang Bridge
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Kerteh Industrial Estate, Terengganu
Pasir Gudang Industrial Estate
Gebeng (Phase IV ) Industrial Area
Prai Industrial Complex
Kemaman Port Kerteh Port
Johor Port (Pasir Gudang) Tanjung Pelepas Port
Kuantan Port Transportation under Kuantan Port Consortium (KPC)
Pulau Pinang Port
Kuala Terengganu Airport Kerteh Airport Kuantan Airport
Sultan Ismail Airport, Senai Changi International Airport, Singapore
Kuantan Port- GebengKemaman Port- Kerteh to Tuk Arun in Terengganu
Butterworth-Pasir GudangSingapore (KTM)
Small, medium and heavy industry Chemical industry Petrochemical industry
Transportation and logistics Shipbuilding Oleochemical industry Small, medium and heavy industry Petrochemical industry Other heavy industries Oil Palm storage and distribution
Water Transportation
Air Transportation
Railway Transportation
Types of Industry
Kuantan Airport Kerteh Airport Kuantan Port- GebengKemaman Port- Kerteh to Tuk Arun in Terengganu Small and medium scale industries Chemical and petrochemical industries
Bayan Lepas International Airport Butterworth-Pasir GudangSingapore(KTM) Chemical industry Petro-chemical Sea related industry Oleochemical industry Light, medium and heavy industry
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Kerteh Industrial Estate, Terengganu
Pasir Gudang Industrial Estate
Gebeng (Phase IV ) Industrial Area
Prai Industrial Complex
Kemaman Port Kerteh Port
Johor Port (Pasir Gudang) Tanjung Pelepas Port
Kuantan Port Transportation under Kuantan Port Consortium (KPC)
Pulau Pinang Port
Kuala Terengganu Airport Kerteh Airport Kuantan Airport
Sultan Ismail Airport, Senai Changi International Airport, Singapore
Kuantan Port- GebengKemaman Port- Kerteh to Tuk Arun in Terengganu
Butterworth-Pasir GudangSingapore (KTM)
Small, medium and heavy industry Chemical industry Petrochemical industry
Transportation and logistics Shipbuilding Oleochemical industry Small, medium and heavy industry Petrochemical industry Other heavy industries Oil Palm storage and distribution
Water Transportation
Air Transportation
Railway Transportation
Types of Industry
Bayan Lepas International Airport
Kuantan Airport Kerteh Airport Kuantan Port- GebengKemaman Port- Kerteh to Tuk Arun in Terengganu Small and medium scale industries Chemical and petrochemical industries
Butterworth-Pasir GudangSingapore(KTM) Chemical industry Petro-chemical Sea related industry Oleochemical industry Light, medium and heavy industry
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Kerteh Industrial Estate, Terengganu Availability of Labor Yes Availability of Yes Utilities Availability of Fully Occupied Suitable Land Local Community Approve Considerations Political and Strategic Considerations
Water Supply
Electricity Supply
Pasir Gudang Industrial Estate
Gebeng (Phase IV ) Industrial Area
Prai Industrial Complex
Yes
Yes
Yes
Yes
Yes
Yes
127.953 acres
1000 acres
Fully Occupied
Approve
Approve
Approve
41.8 km from Kemaman 93.4 km from Kuantan
33 km from Johor Bahru 5 km from Johor Port
45 km from Kuantan Town 4 km from Kuantan Port
Terengganu Waterworks Department
Syarikat Air Johor Holdings Sdn Bhd
Jabatan Bekalan Air Pahang
118 km from Alor Setar 25 km from Kulim 37 km from Sungai Petani 40 km from Butterworth Perbadanan Bekalan Air Pulau Pinang Sdn Bhd
Tariff RM 1.15/m3 Minimum payment/m3 : RM 50.00
Tariff 0 - 20 m3 : RM 2.22 21 - 40 m3 : RM 2.96 40 m3 above : RM 2.96 Minimum payment/m3 : RM 18.48
Tariff 0 – 227 m3 : RM 0.92 227 m3 above : RM 0.84 Minimum payment/ m3 : RM 30.00
Tariff Flat rate : RM0.35/ m3 Minimum payment/m3 : RM 26.00
Tenaga Nasional Berhad
Tenaga Nasional Berhad
Tenaga Nasional Berhad
Tenaga Nasional Berhad
RM 0.266/kW
RM 0.266/kW
RM 0.266/kW
RM 0.266/kW
Source: Malaysian Industrial Development Authority (MIDA)
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Kerteh Industrial Estate, Terengganu Availability of Labor Yes Availability of Yes Utilities Availability of Fully Occupied Suitable Land Local Community Approve Considerations Political and Strategic Considerations
Water Supply
Electricity Supply
Pasir Gudang Industrial Estate
Gebeng (Phase IV ) Industrial Area
Prai Industrial Complex
Yes
Yes
Yes
Yes
Yes
Yes
127.953 acres
1000 acres
Fully Occupied
Approve
Approve
Approve
41.8 km from Kemaman 93.4 km from Kuantan
33 km from Johor Bahru 5 km from Johor Port
45 km from Kuantan Town 4 km from Kuantan Port
Terengganu Waterworks Department
Syarikat Air Johor Holdings Sdn Bhd
Jabatan Bekalan Air Pahang
118 km from Alor Setar 25 km from Kulim 37 km from Sungai Petani 40 km from Butterworth Perbadanan Bekalan Air Pulau Pinang Sdn Bhd
Tariff RM 1.15/m3 Minimum payment/m3 : RM 50.00
Tariff 0 - 20 m3 : RM 2.22 21 - 40 m3 : RM 2.96 40 m3 above : RM 2.96 Minimum payment/m3 : RM 18.48
Tariff 0 – 227 m3 : RM 0.92 227 m3 above : RM 0.84 Minimum payment/ m3 : RM 30.00
Tariff Flat rate : RM0.35/ m3 Minimum payment/m3 : RM 26.00
Tenaga Nasional Berhad
Tenaga Nasional Berhad
Tenaga Nasional Berhad
Tenaga Nasional Berhad
RM 0.266/kW
RM 0.266/kW
RM 0.266/kW
RM 0.266/kW
Source: Malaysian Industrial Development Authority (MIDA)
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Criteria Location Raw Material Supply
Table 1.18: Weightage for Site Selection Pasir Kerteh Weight Gudang Industrial Industrial Estate Estate 5 3 5
Gebeng (Phase IV) Industrial Area
Prai Industrial Complex
5
5
Butanol
5
5
3
4
3
Acetic Acid
5
4
3
5
3
5
5
3
5
3
5 5 5 5 5 5 5
5 3 4 4 5 5 5
5 5 3 4 5 5 3
5 5 5 5 5 5 5
5 5 3 3 5 5 3
5
2
4
5
2
5 5
5 5
5 5
5 5
5 5
Land Price (RM per square feet) Roadways Seaport Transport Facilities Airways Railways Types of Industry Availability of Labor Availability of Utilities Future Expansion Ideally Flat Site Consideration Well Drained Load-Bearing
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Table 1.18: Weightage for Site Selection Pasir Kerteh Weight Gudang Industrial Industrial Estate Estate 5 3 5
Criteria Location Raw Material Supply
Gebeng (Phase IV) Industrial Area
Prai Industrial Complex
5
5
Butanol
5
5
3
4
3
Acetic Acid
5
4
3
5
3
5
5
3
5
3
5 5 5 5 5 5 5
5 3 4 4 5 5 5
5 5 3 4 5 5 3
5 5 5 5 5 5 5
5 5 3 3 5 5 3
5
2
4
5
2
5 5
5 5
5 5
5 5
5 5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
85
75 2
73 3
84 1
70 4
Land Price (RM per square feet) Roadways Seaport Transport Facilities Airways Railways Types of Industry Availability of Labor Availability of Utilities Future Expansion Ideally Flat Site Consideration Well Drained Load-Bearing Characteristic Climate Local Community Consideration Total Ranking
Notes:
[1] – [1] – [2] [2] : Not suitable for choosing the location [3]
: Suitable for choosing.
[4] – [4] – [5] [5] : Very suitable for choosing.
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1.6.3
Selected Site Location
In order to select a strategic location for a plant site, several factors have been considered. The factors are the location for the plant, availability of raw materials, reasonable land price and characteristic, transport facilities and utilities which includes water and electricity, availability of labors, local community considerations and political and strategic factors. After some considerations regarding the factors, Gebeng (Phase IV) Industrial Area in Kuantan, Pahang has been chosen as the butyl acetate plant site location. The reasons are listed later in this chapter. Gebeng (Phase IV) Industrial Area is listed in the development of 8600 acres Gebeng industrial under a plan to build an environmental friendly eco-complex which known as Environmental Technology Park (ETP). Hope to join in with mission of eco-complex to be the regional leader in the research and implementation of environmental technologies and industrial green programs, Gebeng was chosen as the location for butyl acetate plant. The development of Gebeng industrial area as a cluster for chemical and petrochemical industry attracts many companies to invest in Gebeng. Thus, choosing Gebeng is a right decision as butyl acetate plant is a chemical plant and suits the industries in Gebeng. Other major companies who had invested in Gebeng are BASF, Kaneka, Flexsys, Eastman Chemicals and W.R. Grace (ETP website). 1.6.3.1
Industry Type and Location
Suitability of Gebeng (Phase IV) Industrial Area in Kuantan to build our plant is good since this area is an established industrial area with most of the industries here is related industries. This area is also located far from any residential area. 1.6.3.2
Reasonable Land Price and Land Characteristic Characteristic
In Gebeng industrial area, the price of land per square feet found is RM 10. The price of the land is way cheaper compared to other industrial area and complete with many facilities such as waste disposal, storage and workforce. According to Nationmaster website, Pahang has 35,964 square-km squ are-km area with Kuantan as its state capital is the third largest state in Malaysia after Sarawak and Sabah, and is located in east Malaysia. At the south of Pahang, it is bordered by the State of Johor, on the west by the States of Selangor and Negeri Sembilan, with the
66
South China Sea and on the north by the State of Terengganu. It is a strategic location since it is surrounded by other developed states that will give benefits in selling our products. 1.6.3.3
Raw Material Supply
Comparing the four site locations, Gebeng (Phase IV) is the most suitable location since it is the nearest location to the suppliers of raw materials and this is the major important role in the industry. The nearest suppliers are BASF Petronas Chemicals Sdn Bhd and BP Petronas Acetyls Sdn Bhd. Gebeng is also close to Kuantan Port which is well facilitated with facilities for storage purpose to store raw materials from suppliers. By choosing Gebeng, cost for transportation can be reduced and possibility of shortage of raw material supply is low. 1.6.3.4
Availability of Labor
The growth in chemical and petrochemical industry in Gebeng has also increased demand for workers. In Gebeng industrial area, the nearest training centers such as Industrial Training Institute (ILP) of Kuantan facilitates workforce in-line with requirements for the industries. Recognition of ILP training schemes by National Vocational Training Council proved that the workforces supplied are qualified and readily available and course offered are related to the industries. Skill labors are also not a problem and easy to get. Malaysia has many well trained chemical engineering students. Some famous institutes which have students of chemical engineering and located within reach from Gebeng are Universiti Teknologi MARA Shah Alam, Universiti Malaysia Pahang, Universiti Teknologi Malaysia and Universiti Teknologi PETRONAS. Jobs of high skilled labor can be filled by them. 1.6.3.5
Utilities
Gebeng (Phase IV) is located under Environmental Technology Park project of Pahang. Water supply, electricity supply and other utilities are readily there. There also new Centralized Utilities Facilities (CUF), a division of PETRONAS Gas Berhad (PGB). In Peninsular Malaysia, there are two Centralized Utilities Facilities (CUF), and one of them is located in Gebeng. CUF provides centralized utilities such as steam, power, demineralized water, nitrogen gas and others to be used by our plant. By having these facilities, there will be no problem regarding required utilities and focus on the business of butyl acetate can be maintained.
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1.6.3.6
Availability of Suitable Land
Availability of suitable land is sufficient to build our plant. Gebeng (Phase IV) is a new phase with area of 4000 acres to attract investors from other countries other than Malaysian investors. The site selected still has much space for future plant expansion (Refer Appendix). 1.6.3.7
Climate
Malaysia is a safe country. The weather is nearly the same all over Malaysia. Thus, climate is not an important factor to be considered since Malaysia is free of major natural disasters, like tornados, hurricanes, volcanic eruptions and earthquakes, making it a very safe destination. Malaysia is also breezed by light winds, bringing a gentle cooling effect on the climate. 1.6.3.8
Political and Strategic Location
In Malaysia, politic is relatively stable. Any site whether led by the opposition or governing party did not affect industries since industries will bring income to the country. Gebeng is strategic which its located 45 km from Kuantan Town and just 4 km from Kuantan Port for import and export purposes. 1.6.3.9
Transport Facilities
There are many good roads to access Gebeng from all directions in Malaysia. Gebeng is near to Gebeng Bypass, Jerangau Highway (Malaysian Federal Route 14), East Coast Expressway, and Karak Highway. On land, state of Pahang can be accessed by The East Coast Expressway which is 350 km long from other parts of Peninsula Malaysia. Gebeng industrial area is near to Kuantan Port which is about 4 km. Kuantan Port is facilitated with production and bulking facilities for import or export purposes. Kuantan Port is the busiest port in the east coast. Broad transportation networks allow for fast transportation of goods throughout the state (Nationmaster website). Other than Kuantan Port, export and import purposes can be made through Kemaman Port in Kemaman which is located about 35 km from Gebeng industrial area. Both Kemaman Port and Kuantan port is under one roof of Kuantan Port Consortium (KPC) Sdn Bhd.
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Other than that, Gebeng industrial has Sultan Haji Ahmad Shah Airport (commonly known as Kuantan Airport) located 15 km from Kuantan City. This airport boasts of avant-garde cargo facilities. Ranging from warehouses and air-conditioned storages to deep freeze storages and Transit zone. Other airports around this airport are Kuala Lumpur International Airport, Penang International Airport and Singapore Airport which are all international airports. There is a 73 km railway link that connects Kerteh-Kemaman-Kuantan (including Gebeng Kuantan Port). The railway link is capable to haul cargo in large volumes and in bulks making it a highly economical, safe, reliable and consistent mode of transportation for the movement of raw materials and finished products of petrochemical materials both in liquid and solid state which butyl acetate raw materials are being transport between these two locations.
Source: ETP website (http://www.envirotechpark.com) Figure 1.15: Location of Gebeng (Phase IV)
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Source: ETP website (http://www.envirotechpark.com) Figure 1.16: Transport Facilities Connecting Gebeng
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1.7
CONCLUSION
Table 1.3 describe on the summary of those four processes suggested. It can be seen that the conventional esterification process are more practicable compared to the other method. Thus, the selected process for the production of butyl acetate plant is the conventional esterification process which the major equipment consist of a reactor, three distillation columns and a decanter. In this chapter, economy analysis has been analyzed to see the cost involved and profit gain. The summation of direct and indirect cost of plant indicates the fixed capital investment which is RM 47323310.70. The profit was determined to be RM 342144000.00 and this is very financially attractive. The payback period was determined to be 3.43 years. Rate of return on investment, ROROI was determined to be 78.07%. The breakeven analysis has been done and is 30000 tonnes per year which is the amount of butyl acetate required to recover the production cost of butyl acetate. Gebeng (Phase IV) Industrial Area in Kuantan, Pahang has been chosen as the butyl acetate plant site location. It is located at the East Coast of Peninsular Malaysia. The price of land per square feet is RM 10 which is quite cheap compare to other sites. Raw materials can be bought from BASF Petronas Chemicals Sdn Bhd and BP Petronas Acetyls Sdn. Bhd. Gebeng (Phase IV) Industrial Area is a strategic location since it located near to Kuantan Port which makes it easy for import and export of products.
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