FS PP Dung Quat

Houston - London – Singapore - Dubai Chemical Market Associates, Inc.

Feasibility Study of a Polypropylene Facility at Dung Quat, Vietnam

DRAFT Rev 1

Presented to

LG International Corp.

June 2006

www.cmaiglobal.com

Independent advisor to petrochemical industry participants in strategic and commercial planning, feasibility and financial studies, due diligence support, competitive and market analysis.

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TABLE OF CONTENTS WARRANTY & DISCLAIMER

5

1. INTRODUCTION

6

1.1

Historical Background

6

1.2

Project Purposes And Configuration

7

2. BUSINESS CONCEPT

9

2.1

Group of participants

9

2.2

Legal structure & Legal nature

9

2.3

Project financing

9

2.4

Project Management

11

2.5

Contractual Relationships

12

2.6

Operating philosophy

12

3. MARKETING STUDY

13

3.1

Worldwide polypropylene market and the feedstock for its production

13

3.2

Vietnam Polypropylene Market

22

3.3

Cost competitiveness ANALYSIS

30

4. TECHNICAL DESCRIPTION

34

4.1

Initial Data

34

4.2

Licensor Offers. Polypropylene Technology Description

41

4.3

Polypropylene Technology Selection

80

4.4

Off-site Facilities

96

4.5

Site Plot Plan

101

4.6

Civil and Architectural Concept

106

4.7

Basic Principles of Process Control

114

4.8

Electrical concept

115

4.9

Basic Provisions for Fire Fighting System

118

4.10

Basic Provisions for Telecommunication and Alarm Systems

120

4.11

Basic Provisions for Security System

123

4.12

Recommended Production Organization Chart and Personnel Requirements 124

4.13

Laboratory Equipment

133

4.10

Initial List Of Major Equipment And Recommendations For Vendors

136

5. PLANT SAFETY AND ENVIRONMENTAL IMPACT ASSESMENT

139

5.1

Safety

139

5.2

Environment Impact Assessment

141

This section of the document was compiled by CMAI from information obtained from LGI and PetroVietnam, and it is based on the original feasibility study completed by JSC VNIPINEFT in 2001. CMAI has undertaken to compile and update the original feasibility study based on the LGI/PetroVietnam gaining permission from the original author.

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VIETNAM PP PLANT FEASIBILITY STUDY

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6. Budget Estimates and Project Schedule

148

6.1

Budget Estimates

148

6.2

Overall Project Schedule

150

7. RISKS AND RISK MANAGEMENT 7.1

153

General Provisions

153

8. FINANCIAL AND ECONOMICAL STUDY OF THE PROJECT

161

8.1

Project Financing

161

8.2

Taxation Principles

161

8.3

Technical and Economic Analysis

166

8.4

Economic Profit for Vietnam

192

9. CONCLUSIONS AND RECOMMENDATIONS

193

ATTACHMENTS

199

Attachment 1 – CMAI Contract

199

Attachment 2 – Environmental Impact Assessment by PetroVietnam Research + Development Centre for Petroleum Safety and Environment

199

Attachment 3 – Market Survey for Polypropylene in Vietnam by Vietnam Oil + Gas Corporation Research + Development Centre for Petroleum Processing

199


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WARRANTY & DISCLAIMER This service, reports and forecasts are provided for the sole benefit of the client. Neither the report, portions of the report, forecasts, nor access to services shall be provided to third parties without the written consent of CMAI. Any third party in possession of the report or forecasts may not rely upon their conclusions without written consent of CMAI. Possession of the report or forecasts does not carry with it the right of publication. CMAI conducted this analysis and prepared this report utilizing reasonable care and skill in applying the methods of analysis consistent with normal industry practice. All results are based on information available at the time of review. Changes in factors upon which the review is based could affect the results. Forecasts are inherently uncertain because of events or combinations of events that cannot reasonably be foreseen including the actions of government, individuals, third parties and competitors. NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE SHALL APPLY. Some of the information on which this report is based has been provided by others including published data. CMAI has utilized such information without verification unless specifically noted otherwise. CMAI accepts no liability for errors or inaccuracies in the information provided by others. While CMAI believes the results presented herein are reflective of actual costs and revenues, these estimates are either curve type or study estimates about future conditions. As such they have a customary +/-30% range assumed for this type of feasibility study. Accordingly, more detailed engineering and market analysis would be required before proceeding further with any of the recommendations contained herein. CMAI has prepared this feasibility study based on the previous feasibility study prepared by JSC VNIPINEFT in 2001. The reproduction of drawings and text from the original report has been completed by CMAI under the instruction of LG International and PetroVietnam, who have sought permission from the JSC VNIPINEFT to utilize the previous study. To this end, CMAI does not accept any copyright liability should LGI and PetroVietnam have not secured consent from JSC VNIPINEFT to update the original document.


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1. INTRODUCTION 1.1

HISTORICAL BACKGROUND

The Dung Quat Refinery is the first refinery to be built in Vietnam. PetroVietnam has awarded Technip as the EPC contractor for this project and the refinery is now in the detailed engineering stage, with commercial operation for overall refinery planned for February 2009. In line with the construction schedule of the refinery, PetroVietnam plans to build a Polypropylene (PP) plant which will utilize propylene produced from the refinery as its feedstock. The polypropylene plant will add value to the propylene stream from the refinery, and at the same time it will provide an outlet for the propylene from the FCC unit of the refinery. The intention is that the refinery will supply enough polymer grade propylene to allow for 150,000 tons per year of on-spec polypropylene to be made. Should the PP plant not be able to take the full amount of propylene, it can be sold on the merchant market. The construction polypropylene plant in Vietnam is warranted du to the following factors: 1. The current and growing demand for polypropylene in Vietnam, which at this point in time is being satisfied by the importation of PP resin. 2. The ability to add value to the refinery propylene stream and thus increase the profitability of the overall refinery project. Based on these factors, LGI was invited into the partner selection process which was used to select PetroVietnam’s partner in developing the PP project. LGI was successful in this process, and as a result, PetroVietnam and LGI agreed to start a new feasibility study for the PP project and prepare necessary documents for the JV setup. The two partners signed a MOU on 24th March 2006. In order to proceed with the feasibility study report, including the market study and economic modeling, PetroVietnam and LGI entrusted the development of the new feasibility study to CMAI, a third party industry consultant.


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1.2

PROJECT PURPOSES AND CONFIGURATION

The Detailed Feasibility Study (DFS) for the Dung Quat polypropylene production plant was performed according to the MOU signed between LGI and PetroVietnam on the 24th March 2006. Two PetroVietnam subsidiaries, RDCPP and RDCPSE, developed a local market analysis for PP product and an Environmental Impact Assessment respectively. CMAI performed the overall combined market analysis, and competitive assessment, as well as the projects financial analysis. In addition to this, CMAI also agreed to update the previous JSC VNIPINEFT feasibility study report by compiling the data and information provided by LGI and PetroVietnam. The purpose of this work is to establish the economic feasibility for the project as well the expediency for the PP plant construction in the industrial area in Dung Quat, Quang Nai Province, Vietnam. PetroVietnam, LGI and CMAI had to resolve the following objectives during DFS development; ¾ To select licensed polypropylene technology that will be a base for further calculations ¾ To clarify the system configuration of Polypropylene plant ¾ To define Polypropylene plant construction cost estimation ¾ To provide maximum integration with the Refinery facilities ¾ To define possible investments for the expansion of certain Refinery off-sites and utility facilities resulted from construction of new PP production complex. ¾ To define markets and conditions for propylene product sales ¾ To perform economic analysis for the project ¾ To provide Environmental Impact Assessment caused by the PP complex facilities This document will make it possible for the parties involved in Joint Venture to start negotiating all matters concerned with the PP complex development, and to obtain an approval for this production facility construction from local government authorities. Polypropylene Complex comprises the following units; o PP Plant o Intermediate Propylene storage o Control / Substation Building o Fire water tanks and pump station The Polypropylene Complex is located directly adjacent to the Refinery. Integration with the following Refinery systems is provided to the PP complex. • • •

Power supply system Flare System Plant / Instrument Air System


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• • • • • • • • • •

Fuel System Steam / Condensate System Service Water System Demineralized Water System Potable Water System Cooling Water System Hydrogen Gas System DCS and ESD System (in regard to emergency alarms) Fire and Gas detection system (in regard to emergency alarms) Phone, etc. system

The following Refinery facilities are provided to be used as well • • • • • •

Treatment facilities Maintenance Workshops Jetty Topsides Propylene Storage Laboratory Fire Station / Gas Rescue Station, etc.


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2. BUSINESS CONCEPT 2.1

GROUP OF PARTICIPANTS

Considering the fact that Dung Quat Refinery project is being implemented solely by PetroVietnam without having any direct foreign investment and the Project is requiring considerable amount of capital, it is desirable to perform the construction of the polypropylene plant through setting up the independent legal entity in Vietnam. Polypropylene Complex project will be developed via a joint venture (JV) to be founded under the law of Vietnam. The JV will be composed of the following parties: Vietnamese Party – Vietnam General Company of Oil and Gas “PetroVietnam” Korean Party - LG International Corp. Nevertheless, PetroVietnam and LGI agreed that other foreign investment sources might participate in the Project in order to increase the feasibility and may help to facilitate project implementation. Therefore the participants in the JV may be altered at a later date.

2.2

LEGAL STRUCTURE & LEGAL NATURE

The planned legal structure & legal nature of the plant to be constructed is based on a joint venture company (JVC) which will distribute profits amongst the Vietnamese, Korean and other foreign party, if any. The legal form of the JVC will be limited liability company (LLC) under the new Investment Law of Vietnam to be effective as of July 01, 2006. The specific equity stake that each Party will take in the JVC shall be determined upon the final results of the DFS and be provided in the JV Agreement. The required capital for the JVC is anticipated about USD 175 million (excluding Working capital) and will be provided by Vietnamese, Korean and other foreign (if any) parties, respectively. Implementation of the polypropylene plant construction project will require sufficient capital from the JVC and structured financing by the competent financiers 2.3

PROJECT FINANCING

The project cost is expected to be met from a combination of shareholder equity and debt sourced from commercial banks and Korean export credit agencies. It is assumed that the financing of the project for PP plant construction will be provided within the framework of a common strategy for financing the JVC, which will be established, and the financing mechanisms will be provided by the financial consultants.


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From the point of view of the sources of the project assets formation, the financing is subdivided into; Equity investment, which forms capital of the Project Company at the expense of the founders and other participants of the project; The equity investment in the project financing represents the risk capital. It forms the basis for lenders or investors advancing more senior forms of capital to the project. This is the motivating factor for investors providing equity capital. Equity is typically advanced as the subscription price for common or preferred stock. Debt investment provided to the Project Company in the form of the bank credits and loans or commercial credits. The latter are provided by the equipment vendors, contractors in the form of delay of payment against contracts, etc. The senior debt of a project financing usually constitutes the largest portion of the financing and is usually the first debt to be placed. The senior debt will be more than 60 per cent of the total financing. Most borrowings from commercial bank lenders for a project financing will be in the form of senior debt. There is a wide range of funding sources available to the project. The Project Company may be capable of obtaining funding opportunities outside of its domestic financial market or the financial market of the shareholder’s countries. The possible sources for loans can be divided into two groups: Commercial lenders: international commercial banks, commercial finance companies, institutional investors, investment management companies. Export credit agencies Export credit agencies have the following characteristics; Loans and guarantees: export credit agencies provide support in the form of loans and guarantees, or in a combination of both. The Korean Export Import Bank, for example, itself provides funding and guarantees. The export credit agencies in some countries provide a guarantee of the financing, which is then used to secure a loan from the regular commercial banking sources of the country. Buyer credit: In a buyer credit financing, the loan is made to the buyer instead of to the supplier. Typical terms: long tenors (around 10 years), low interest rate and fees compared to commercial sources.


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2.4

PROJECT MANAGEMENT

The “Owner” is the Joint Venture Company, which will be founded at a later date. One of the conditions for acquiring project financing from export credit agencies and other financial institutions, is the use of proven management methods and project execution systems. According to the Vietnamese Construction and Investment Management Regulations, and in consideration of the Client’s management abilities and project implementation schedule, it is recommended that the Owner shall directly manage the project execution. Furthermore, the Project Consultant, Inspection Legal organization (for certification) will assist Owner during time of Design, Engineering, Procurement, Construction, Pre-commissioning, Commissioning and Operation the polypropylene Plant with the objective of providing: • • • • •

Uniform approach to design and engineering Work schedule management Resources management Cost control Safety assurance

For the early identification of the critical problems during all the stages of project execution and their resolution, the Project Management Team should develop the Project Master Schedule. For the closest tie-in of the polypropylene production project in Vietnam with the Refinery project, the polypropylene plant project management should be combined with the Refinery construction project management. Decisions on the supply of some types of equipment shall be permanently updated to meet the schedule. In this case, the purchase and procurement plan shall be linked with the project financing plan. When planning the construction works, the peak values of manpower demand shall be defined by the EPC Contractor in advance. This is in order to have enough time for personnel hiring and training. After studying the specific technical requirements for goods transportation and unloading, the demand in special cranes shall be developed in advance by the EPC Contractor. The functions of the Project Management Team also include the organization of project risks management and insurance.


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2.5

CONTRACTUAL RELATIONSHIPS

Issues regarding the contractual relationship are solved on the basis of the selected financing schemes. All relations between the Client and numerous enterprises and companies, which will participate in the polypropylene plant project construction & realization in Vietnam, will be determined by the contractual arrangement. For solving the disputable issues, which are regulated by the Vietnamese laws, the Prime Minister’s permission shall be obtained. At first priority, the following contracts shall be concluded for proceeding with PP plant construction based on fast track: • • • • •

2.6

Agreement on land allocation (long-term is desirable) License agreement with the licensor Contract with ЕРС General Contractor Contract for technical maintenance with the equipment vendors Contract for importing propylene for additional feedstock required for reaching the possible maximum capacity of 150,000 tons per year of the polypropylene plant under design. OPERATING PHILOSOPHY

The main operating philosophy principle is to provide the maximum profitability of the plant at its optimum ratio with the capital and operating costs (Capex vs Opex vs Revenue) during the polypropylene plants operational stage. With respect to maximizing the project economics, the following three points are considered in the PP technology evaluation: • • •

Process Flexibility Product Quality Operating Economics

Catalyst development for the production of propylene polymers is on-going and continually breaking new ground both for PP production efficiency and quality. It is therefore imperative that the technology selected has a suitable catalyst research and development center, in order to allow flexibility and maintain optimal production over the life of the PP asset. Bulk polymerization in loop reactor by itself presents the highest potential in being adapted to new operating conditions.


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3. MARKETING STUDY In 2006 the Research and Development Centre for Petroleum Processing (RDCPP) prepared a report on the “Vietnam Polypropylene Market” for JVC. This section combines the relevant information from that report and adds in CMAI’s supply & demand forecasts as well as its price forecast for both propylene and polypropylene. 3.1

WORLDWIDE POLYPROPYLENE MARKET AND THE FEEDSTOCK FOR ITS PRODUCTION

3.1.1

Polypropylene

Polypropylene (РР) demand over the past 30 years has been very dynamic. This thermoplastic continues to find new applications in all sectors of the global economy, from household containers, packaging, automotive and furniture. This ever increasing market for PP has seen the global demand increase from just under 13 million tons in 1990, to just under 41 million tons in 2005. 2005 World Polypropylene End Use Demand Raffia 13%

Other 8%

Fiber 16%

Blow Molding 1%

Film & Sheet 21%

Extrusion Coating 0.2% Pipe & Extrusion 3%

Injection Molding 38%

2005 Demand = 40.7 Million Metric Tons

The major end use sectors for PP globally continue to be injection molding applications, as well as film & sheet applications for the packaging industry. This thermoplastic which is characterized by good “processability” and impact strength has continued to see a solid demand growth during the own between 2000 & 2002. From 2000 to 2005, CMAI estimates that the global demand growth rate (Average Annual Growth Rate, AAGR) was 6.0%. Global PP demand is projected to grow at an AAGR of 4% through too 2025, reaching 87 million tons of demand. This is as a result of yearly growth rates which are typically equal to or higher than GDP growth rates on a global basis.


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World Polypropylene Supply and Demand Million Metric Tons

Operating Rate %

120

100 FORECAST

100

90

80 80 60 70 40 60

20

0

50 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

%AAGR (00-05, 05-20)

Demand (6 / 4.3)

Nameplate Capacity (4.2 / 2.2)

Hypo. Add'l Capacity (4.2 / 4.4)

Oper. Rate

The major demand centres in terms of volume will continue to be North America and Europe and Northeast Asia. Demand growth will be the strongest in Asia, and in particular China, where the current 8 million ton demand will reach almost 19 million by 2020. Southeast Asia is also forecast to see good annual demand growth rates for PP over the same period, as many of its economies continue to develop.

Polypropylene Demand Growth by Regions Re gions North America

2005

2020

05-10

10-15

15-20

(MM Tons)

(MM Tons)

% AAGR

% AAGR

% AAGR

8.18

13.64

4.15

3.48

2.79

South America

1.93

4.20

6.91

4.90

4.17

NE Asia excl. China

4.69

7.12

3.25

2.73

2.50

China

8.12

18.93

7.50

5.54

4.41

Southeast Asia

3.26

6.62

5.95

4.60

3.95

Indian Subcontinent

1.67

4.25

9.64

5.60

4.18

Europe

9.65

14.76

3.70

2.71

2.21

Africa/Middle East W orld

3.17

6.79

6.94

4.78

3.93

40.67

76.33

5.39

4.09

3.39

Currently there is a great deal of activity globally in terms of capacity additions. By the end of this decade the major PP producing regions will be NEA, North America, West Europe and the Middle East. In total, some 60 million tons of capacity will be available to produce PP by 2010. The current schedule for PP additions on a global basis indicates that year on year capacity additions are likely to meet the year demand increases for PP. However 2009 is currently indicating a dramatic yearly increase in the yearly capacity increase. This excess supply will bring down both the global utilization rates of the installed PP capacity, as well as the prices and margins for PP.


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The majority of the PP additions are in Asia and the Middle East. Within Asia, China commands the bulk of the additions, while the rest of Asia adds capacity in increments. World PP Capacity Expansions vs. Demand Growth Million Metric Tons 5.0 FORECAST

4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 95

96

97

98

99

00

01

02

03

04

05

Capacity Expansions

06

07

08

09

10

11

12

13

14

15

Demand Growth

Northeast Asia Polypropylene is a leading polymer in Northeast Asia with the region’s capacity growth rate averaging at 4.8 percent annually from 2000-2005. The capacity growth is forecast to grow by around 4 percent per year through 2025. Polypropylene capacity in 2000 was 9.8 million tons and grew to 12.4 million tons in 2005 and projected to grow to 18.1 million tons in 2015.


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With modest capacity growth and a strong growing demand, Northeast Asia is set to become a large net importer of polypropylene. The region is forecast to have a net import amount of close to 2.2 million metric tons of polypropylene resin each year during 2005-2010. This is mainly driven by China’s demand, which is forecast to remain as the world’s largest importer and consumer of polypropylene for many years to come. China naturally accounts for more than 90 percent of the entire region’s import requirement. To meet its growing demand, exports are forecast to decline steadily throughout the forecast years while imports will gradually increase. Southeast Asia Polypropylene plant capacity in the region grew by 3.4 percent annually from 2000 to 2005; from 3.1 million tons to 3.7 million tons. By 2015, the region’s capacity will grow to 6.2 million tons primarily due to new PP plant being planned in Thailand. With polypropylene demand growing at healthy rate around the world and around the region due to the wide diversity of end use application, the region’s demand growth will have to be met more by imported polypropylene. Domestic demand in the region will start to overtake total production in 2005, which would mean that imports would grow strongly and steadily to help supplement production. Additional hypothetical capacities would need to be built in 2007 and the years beyond in order to support the growth in demand. However, it should be noted that capacity growth is likely to be restricted by the availability of propylene feedstock in the region. Malaysia and Indonesia are the two most likely countries to increase polypropylene resin capacities during the forecast period. Demand for polypropylene is forecast to grow at an annual average rate of around 5 percent annually to around 5.4 million metric tons by 2015 and to around 7.8 million metric tons by 2025. Generally, a significant portion of polypropylene’s demand and consumption falls in the category of “durable goods” and it is therefore more susceptible to economic conditions and outlook compared to polymers that are heavily used in packaging and other non-durable or commodity-based applications that will be widely consumed regardless of economic conditions or outlook Overall, Asia will have highest demand growth for polypropylene consumption, based on the increased consumption generated by the developing economies in that region. In particular, China will command the majority of the Asian regions demand growth, as it strives to become the manufacturing floor of the world.


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ASIA POLYPROPYLENE SUPPLY/DEMAND BALANCE Million Metric Tons

Operating Rate, %

50

100

Forecast 40

95

30

90

20

85

10

80

0

75 95

96

97

98

99

00

01

02

03

04

05

06

07

08

Demand

09

10

11

Capacity

12

13

14

15

16

17

18

19

20

21

22

23

24

25

~

Operating Rate

Global Trade and Target Markets Polypropylene will experience changing trade patterns relative to history. The significance of the Middle East will be more evident in the forecast period. Asia will definitely be the world’s largest import destination (specifically China), but the U.S. will play a declining role in the exports of PP resin over the next several years. South Korea will continue to be the leader in world export of polypropylene, but it will be challenged by the new Middle East capacity. Japan is predicted to become a minor polypropylene exporter.

World Polypropylene Net Trade Million Metric Tons

8 FORECAST

Net Exporter

6 4 2 0 -2 -4

Net Importer

-6 -8 95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

N. America

S. America

W. Europe

C. Europe

CIS & Baltic States

Africa

Middle East

NE Asia

SE Asia

Indian Sub.

14

15

The excess polypropylene supplies in Asia will be aimed for China market and some emerging Indo-China countries market.


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The JVC will have to compete against an ever increasing amount of export material. In particular, the producers of SEA will be looking at Vietnam as a close alternate to the Chinese market, thereby gaining a better “netback” on their resin. With significant capacity coming on line in 2009 and the bottom of the petrochemical cycle forecast at that time, a large number of PP producers will be looking for alternate markets. 3.1.2

Propylene market

Global propylene demand has historically grown by 5.0-6.0 percent per year. The size of the world polymer/chemical grade (PG/CG) propylene market grew only moderately in 2005 to about 63.6 million metric tons (4.3 percent growth versus 2004). Over the next several years, world PG/CG propylene demand growth is expected to average 4.8 percent, with polypropylene being the dominant driver for growth. Propylene demand growth to 2025 is expected to advance at a rate of 3.5 percent, on average, per year. Approximately 49 million tons of propylene additions will be necessary by 2025 to meet this demand. World Propylene Supply & Demand M illion Metric Tons 180

Operating Rate % 100 Forecast

160

95 90

140

85

120

80 100 75 80 70 60

65

40

60

20

55 50

0 95

96

97

98

Demand

99

00

01

02

03

04

Nameplate Capacity

05

06

07

08

09

Hypo. Capacity

10

11

12

13

14

15

20

25

Operating Rate

In the future, propylene production growth from steam crackers is expected to be slightly lower than the corresponding ethylene production growth, due to the addition of large amounts of low-propylene-yielding ethane-based steam cracking capacity in the Middle East. Propylene production from new and existing FCC units has grown more quickly than production from steam crackers, and this trend is expected to continue in the long term forecast with 3.7 percent per year through 2025 for FCC units and 2.6 percent for steam cracker production. As propylene demand maintains growth at a rate that is stronger than ethylene demand growth, questions regarding future propylene supply sources continue to emerge. Regional propylene prices appear to be trending to higher levels relative to


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ethylene, which helps to support on-purpose supply sources and more product is being extracted from refineries as well. Investments in “on-purpose” propylene technologies are becoming more common throughout the world, although this production source continues to represent a minor portion of total world supply (3 percent in 2005) of PG/CG propylene. Metathesis units are planned in the U.S., Japan and China; others will likely be announced officially in the next few years. New propane dehydrogenation units are planned in Saudi Arabia and Egypt. An investment in Superflex (olefin cracking) is planned in South Africa, and an investment in methanol to olefins is planned in Nigeria. Global propylene demand is expected to be about 90 million tons by 2015.

2005 World Propylene Demand by Region Middle East 4%

NE Asia 27%

SE Asia 7%

Africa 1%

Indian Sub. 3%

CIS & Baltic States 2% C. Europe 2% N. America 27% W. Europe 23%

S. America 4%

2005 Demand = 67.1 Million Metric Tons

.

Southeast Asia New alternative sources of propylene other than from steam crackers or propane dehydrogenation units continue to pose a challenge to the region to meet current and potential propylene shortfalls. Countries such as Singapore and Thailand are embarking on feasibility studies to seek alternative means to increase the propylene supply through new technology such as metathesis.


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Southeast Asia Propylene Supply & Demand Million Metric Tons 12

Operating Rate % 100 95

Forecast 10

90 85

8

80 6

75 70

4

65 60

2

55 0

50 95

96

97

98

99

00

Demand

01

02

03

04

05

Nameplate Capacity

06

07

08

09

10

Hypo. Capacity

11

12

13

14

15

20

25

Operating Rate

Northeast Asia New alternative sources of propylene other than from steam crackers or propane dehydrogenation units continue to pose a challenge to the region as countries such as Japan are seeking ways to increase the supply of propylene through “Olefins Conversion Technology,” specifically known as the metathesis process. Northeast Asia Propylene Supply & Demand Million Metric Tons 45

Operating Rate % 105 Forecast

100

40

95 35 90 30

85

25

80

20

75 70

15

65 10 60 5

55

0

50 95

96

97

98

Demand

99

00

01

02

03

04

Nameplate Capacity

05

06

07

08

09

Hypo. Capacity

10

11

12

13

14

15

20

25

Operating Rate

Japan and South Korea are significant exporters of propylene monomer to Taiwan and a few countries in Southeast Asia. In the coming years, exports of propylene monomer will gradually decline as more propylene is being consumed internally. Overall the balance for propylene both globally and within Asia will continue to be tight. With the demand growth of all the major propylene derivatives showing solid growth over the forecast period, particularly the demand growth for PP. available propylene molecules will tend tom command a premium in order to secure them.


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As such, integrated propylene derivative producers will command a level of advantage, as they have both a secure propylene source, as well as some form of cost advantage. It is recommended that the JVC does not rely on imported propylene for any length of time. It is likely to make the asset uneconomic, and it would be one of the highest costs of production assets in Asia. All attempts to leverage the integration with the refinery should be made, particularly the propylene feedstock price.

3.1.3

Propylene and polypropylene global prices

The cost of production from local suppliers will effectively provide a floor value for the spot CFR price. Propylene generated from local steam crackers and FCC units is well integrated with either local derivatives or LPG markets. There is very little local swing supply capability and therefore little impact of traditional propylene cost and alternative value influences. The Southeast Asia propylene market must be balanced either through propane dehydrogenation or by imports. With this higher cost structure, the price forecast for Southeast Asia is considerably higher than the U.S., which will be the marginal supplier to Asia. During these time periods when the market needs product from the U.S., the CFR import price will rise to levels high enough to encourage propylene deliveries from the U.S. Southeast Asia countries are forecast to remain the largest net importers of propylene monomer in the world. Asia polypropylene markets have a significant influence on local propylene prices. During weak polypropylene market periods, such as market conditions since 1997, the resin producers are only willing to pay propylene prices that provide “break even” economics, setting a maximum price. Improvements in market conditions of polypropylene, as forecast for the 2005 to 2006 period, will allow propylene prices to increase again.

POLYPROPYLENE TO PROPYLENE (FORMULA) SPREAD 1995 -2030 Dollars Per Ton

1,600 1,400

Forecast

1,200 1,000 800 600 400 200 0 95

97

99

Spread

01

03

05

07

09

11

13

PP GP Homopolymer, CFR SEA

15

17

19

21

23

25

Propylene (formula), CFR SEA

27

29

~


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3.2

VIETNAM POLYPROPYLENE MARKET

3.2.1

Vietnam Economy Outlook. Plastics Industry

The Renovation and Open-Door policy was initiated in 1986. These changes have begun to create a favourable environment for economic development. Vietnam has succeeded in achieving a high GDP growth rate based on good macroeconomic performance. After the Asian financial crisis, the Vietnamese economy has continued to see GDP growth rats greater than 6%. VIETNAM GDP GROWTH 2000 - 2020 Percent 9 8

Forecast

7 6 5 4 3 2 1 0 00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

~

Based on the forecasts of the World Bank and the International Monetary Fund (shown above), Vietnam is projected to continue its economic performance with a trend line at just under 5% through to 2020. As mentioned previously, the demand for PP is determined largely by the GDP growth within a particular country. With such a healthy GDP outlook, the demand for PP is also forecast to be robust. With this strong economic performance is an increasingly wealthier population, which will tend to spend this wealth and purchase goods that contain PP. The population of Vietnam is also forecast to increase from the current 84 million to 104 million by 2025. Vietnam Plastics Industry has developed strongly with the plastics consumption per capita in Vietnam growing in previous years based on the above trends.


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Table 11: Growth of PP Consumption Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Thousand ton 25 39 42 45 48 52 62 104 135 155 184 198 211 268 282 306 329

kg per capita 0.4 0.6 0.6 0.6 0.7 0.7 0.8 1.4 1.8 2.0 2.4 2.5 2.7 3.3 3.5 3.7 3.9

Nevertheless, up to now, Vietnam has to import most of raw materials (resins) used in plastics industry. The five main exporters of resins in this region are South Korea, Singapore, Taiwan, Thailand, and the USA.

VIETNAMESE POLYPROPYLENE IMPORTS 2003 - 2005 Thousand Metric Tons 200 180 160 140 120 100 80 60 40 20 0 h ut So

a re Ko

nd la ai h T

d ite Un

a St

s te

a di In

e or ap g n Si

an iw Ta

M

sia ay al

n pa Ja

15 EU

lT na er t x (E

) de ra

m iu lg e B

na hi C

nt ge Ar

d ite Un

a in

m do ng i K

(C

m to us

s) G

m er

ce an Fr

y an

h nc re F (

C

to us

s) m

~

In Vietnam polymer materials are used in construction, consumer goods, technical plastics and packing. Major plastics manufacturers are small and medium enterprises.


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Table 12: Structure of Plastics Consumption in Vietnam Total (thousand ton) Application share (%) Consumer goods Packing Building materials Engineering

1994 200

1995 300

1996 440

1997 560

65 20 8 7

50 2

55 25 12 8

55 25 12 8

15 10

For two years (1997-1998), the Vietnam plastics industry has marked the turning point with the birth of the raw material production industry: one plant producing PVC (polyvinyl chloride) resin (capacity of 80,000 ton per year) and DOP (dioctylphthalate) (total capacity of 30,000 ton per year). In coming time, demand in plastics in Vietnam is expected to growth strongly due to the economic development along with the 2004 expansion and development of other sectors in the domestic economy (agriculture, automobile industry, electronics, construction, and consumer goods). By the year of 2005, plastics output is estimated to reach nearly 1.5 million ton (approximately 16 kg per capita) and by the year of 2010 plastics output in Vietnam is predicted to reach 2.3 million ton. Currently, the South areas with the centre in Ho Chi Minh shares 80% of plastics market, 15% fall to the North areas with the centre in Hanoi/Hai Phong and 5% to the central areas with the centre in Da Nang. In the future the situation will change slightly with increasing the shares of North and central areas. 2006 PP DEMAND WITHIN VIETNAM 30% of total demand Ha Noi

5% of total demand Da Nang

VIETNAM

65% of total demand Ho Chi Minh

At present, there are more than 800 medium and small plastics processing factories and about 130 foreign plastics supplier representative offices in Vietnam. Large companies typically buy raw materials for manufacturing plastic products, including polypropylene, directly from foreign companies or through company’s representative offices in Vietnam. Small private companies are not permitted to import polypropylene and other raw materials for plastics manufacturing directly from abroad and they have to use government brokers to import materials on their behalf.

2005 Domestic Demand = 329,000 tons


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Multiple agents are common in Vietnamese plastics industry. They all have to their own transportation serve door to door. After completion of the polypropylene plant in Vietnam, PP will be supplied for the first time directly to end users from a domestic source. 3.2.2 Demand for Polypropylene in Vietnam From 1990 to 2005 demand for PP grew from 39,000 ton to 329,000 tons, almost 20,000 tons per year growth rate. This rapid growth was due to the tremendous versatility of polypropylene, and the sudden economic growth that the domestic economy went through. One of the reasons for the growth in PP demand is an increase in the urban population, which results in keen demand for household goods, namely, plastic furniture, domestic use container, etc. A considerable portion of polypropylene consumed in Vietnam is used for manufacturing woven products, namely, bags, ropes, etc. Vietnam is an agricultural country and a major rice exporter. Grain production increased from 17 million ton in 1988 up to 31.4 million ton in 1999 or 1.85 times; coffee production increased from 31 up to 510 thousand ton or 16.5 times for the same period. Due to mechanization in agriculture as well as the use of fertilizers and new breeds, agricultural production continues to grow. Consequently, the demand for PP woven bags used in agricultural production (packaging for fertilizers, rice, coffee, etc.) also shows a rapid growth Another factor influencing the growth of polypropylene demand is the construction boom in Vietnam. This boom leads to increasing demand for PP bags for packaging and shipping cement and building materials made of polypropylene. Geotechnical textiles are needed for soil treatment during civil works for roads, dams, sea dikes, and hydraulic works. South of Vietnam is a main market due to a weak soil quality. A significant increase in consumption of this product has been notified during the last decade. The main suppliers are Thailand, South Korea, Taiwan, Malaysia, and China. There is a domestic production of this product at capacity of 500 ton per year. The current demand in polypropylene for these textiles is around 1,200 ton per year with an annual growth rate of 30%.


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PP demand within Vietnam is forecast to grow at 5.5% AAGR through to 2025. This would see the domestic demand reach 966,000 tons in 2025. Raffia grade is still projected to dominate the end-use segment with its use in agriculture and bagging and construction. Film & sheet and injection moulding applications are forecast to grow as the economy and the population become wealthier. Year

2005

2010

2015

2020

Demand (000’s MT)

329

489

641

790

Anticipated PP expansions subsequent to the JVC are in line with the projected domestic demand growth. However, as the subsequent PP plants are ear-marked to be built in the North and the south, these facilities will have a distinct logistical advantage over the JVC located at Dung Quat, as the subsequent PP plants will be located in the larger demand regions. VIETNAM POLYPROPYLENE SUPPLY/DEMAND BALANCE Operating Rate, %

Million Metric Tons 1.0

100 Forecast

0.8

80

0.6

60

0.4

40

0.2

20

0.0

0 95

96

97

98

99

00

01

02

03

04

05

06

Demand

07

08

09

Capacity

10

11

12

Imports

13

14

15

16

17

18

19

20

21

22

23

24

25

~

Operating Rate


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3.2.4

PP Consumption Quality Structure in Vietnam

There are three polypropylene quality types: homopolymer (НРР), random copolymer (RCP), and impact copolymer (ICP). In Vietnam the majority of the PP consumed is homopolymer (>95%), i.e. polypropylene of lower quality compared with copolymers. As for electrical appliances and automobile industries, where copolymers are in wide use, Vietnam is in its infancy. Under the effect of Asian economic crisis, these industries in Vietnam are developing slowly and at present the PP demand in these industries is too small. The share of copolymer will gradually increase. However, due to the low starting level of Vietnamese polypropylene market, homopolymer will be the dominant grade, with potentially 10% of the total Vietnamese demand consisting of Copolymer.

3.2.5

Forecast Prices of Propylene and Polypropylene in Vietnam

Prices of propylene and polypropylene have the important effect on the project’s economics. LOGISTICS COSTS FOR PP WITHIN VIETNAM

According to the current laws of Vietnam, the import duty for propylene in case of encouraged investments is to be 5%.

Ha Noi

The rates of import and export duties for polypropylene are to be 0 (zero) percent, i.e. users and exporters are practically exempted from import/export duties.

US$21.2/MT

US$19.5/MT US$27/MT

Dung Quat

US$20.6/MT US$25/MT US$19/MT

Ho Chi Minh

Ocean transport Rail transport Road transport

The overriding propylene import price for the JVC asset would therefore be “Spot CFR SEA”, which is on a delivered basis within SEA. For a Vietnam domestic PP price, a “CFR SEA” price + port and handling charges + local truck transport will be used.


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Polypropylene is transported by sea in 20 feet (20 ton) containers. A standard marine ship carries 1000 containers when transporting freight from overseas. The berths at the refinery can also be used for exporting polypropylene. Polypropylene is also exported by road. The freight cost of containers for domestic lines in Vietnam is more expensive because of the lack of competition monopoly of transporters. For domestic lines the standard marine shipload is to be 400 containers. It is believed that around 90% of the total polypropylene flow from the planned PP plant shall be transported by sea to the North and South areas of Vietnam and to export also, when required. Polypropylene will be transferred to the central areas of Vietnam (Da Nang) by truck or rail. The above diagram outlines the transportation cost associated with moving PP around Vietnam.


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PETROCHEMICAL PRICE FORECAST CURRENT U.S. DOLLARS Product, Grade

Indexes, GDP Deflator, Percent Change from Last Year

Crude Oil, Dubai

Origin

North America

Middle East

Southeast Asia

Southeast Asia

North America

West Europe

Spot, Avg.

Spot, Avg.

Spot, Avg.

Contract Market

Contract Market

US$ / Barrel

US$ / Metric Ton

US$ / Metric Ton

US$ / Metric Ton

US$ / Metric Ton

Propylene Contract Formula estimate

Polypropylene GP Homopolymer

Ethylene

Southeast Asia

Southeast Asia

Spot, Avg.

Spot, Avg.

US$ / Metric Ton

US$ / Metric Ton

Delivery Basis

Index

Deflator 2006 = 1.00

FOB Fateh

CFR SE Asia

FOB SE Asia

CFR USGC

CFR WEP

CFR SE Asia

CFR SE Asia

1995

2.05

0.80

16.11

522

474

462

524

497

913

411

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

1.89 1.67 1.11 1.44 2.14 2.44 1.74 2.03 2.63 2.91 2.57 2.30 2.10 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00

0.82 0.84 0.85 0.86 0.87 0.89 0.91 0.93 0.95 0.97 1.00 1.02 1.04 1.07 1.09 1.11 1.13 1.15 1.18 1.20 1.22 1.25 1.27 1.30 1.32 1.35 1.38 1.41 1.43 1.46 1.49 1.52 1.55 1.58 1.61

18.55 18.13 12.17 17.20 26.15 22.81 23.80 26.79 33.63 49.30 60.92 58.00 43.47 40.06 37.82 37.48 37.82 38.66 39.57 40.59 41.79 43.21 44.90 46.79 48.75 50.59 52.26 53.74 55.08 56.35 57.57 58.78 59.98 61.20 62.44

478 502 309 398 487 405 472 572 846 976 992 886 801 719 689 701 729 805 753 739 757 779 804 831 859 886 911 934 956 977 997 1,017 1,038 1,059 1,080

429 452 258 346 435 351 417 517 789 918 932 824 738 655 624 634 661 736 682 667 684 704 727 753 780 805 828 850 870 889 908 926 945 964 983

383 418 281 296 486 376 390 460 688 882 949 919 723 613 579 594 644 713 678 661 676 693 714 736 759 781 801 819 836 853 870 887 904 921 939

384 467 323 323 504 413 416 539 684 885 997 942 784 673 633 619 668 720 685 674 689 706 725 746 768 789 809 827 844 860 876 892 909 925 942

411 458 301 335 488 394 422 519 732 905 970 906 762 661 627 631 674 739 698 684 700 719 740 763 787 811 832 851 870 888 905 923 941 959 977

803 705 469 532 611 532 583 706 947 1,071 1,149 1,151 1,017 914 882 931 996 1,153 1,041 1,001 1,024 1,049 1,078 1,110 1,143 1,175 1,205 1,232 1,259 1,284 1,309 1,334 1,359 1,385 1,411

464 553 358 451 603 450 422 513 930 918 1,004 878 783 700 659 670 716 805 774 766 786 808 834 862 891 920 946 969 992 1,014 1,035 1,056 1,077 1,099 1,121

US$ / Metric Ton

The prices presented herein are strictly the opinion of CMAI and are based on information collected within the public sector and on assessments by CMAI staff. CMAI MAKES NO GUARANTEE OR WARRANTY AND ASSUMES NO LIABILITY AS TO THEIR USE.


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3.3

COST COMPETITIVENESS ANALYSIS

Methodology CMAI has developed cash cost of production models for polypropylene. This model is based on CMAI price forecasts, and involves the use of CMAI’s database of producer information such as technologies, capacities and feedslates. CMAI has developed a methodology that ensures that consulting services requiring insight into competitive production costs can be undertaken to provide the appropriate conclusions, but still retain the privileged status of the client input data. CMAI has an extensive database, including a broad range of cost models for the full spectrum of products it analyzes. This database is routinely updated and is used for producer comparisons by adjusting data inputs to reflect each producer’s situation. Factors considered include, technology elements of local fixed and variable cost, fixed cost variance due to plant scale and feedstock, and product value adjustment due to integration and location. CMAI cost analyses are based upon the following inputs: •

Raw material usage and product yield by technology.

•

Raw material and co-product prices adjusted for location and site specific factors.

•

Utilities usage by technology, with prices adjusted by location.

•

Direct fixed costs.

•

Estimates of manpower costs.

•

Maintenance (as factor of replacement capital).

•

Indirect fixed costs.

•

Estimates of local taxes and insurance.

•

Plant overhead (as a factor of direct fixed costs).

Our assessment includes delivered cost analyses to the South Vietnamese market, identified as one of the target markets for the project. No Duty was included, in order to compare the competitive position of international producers to the JVC domestic producer. The results of CMAI’s cost assessment should be evaluated relative to each other as opposed to absolute. There has been no attempt to incorporate specific producer data into the cost analysis beyond those factors described in this study. The following is a graphical overview of the model structure for the PP cost of production model.


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PP Cash Cost Model Fixed Variable Net Feedstock

CASH COST PRODUCTION

Insurance = n (plant capacity) Administration = n (plant capacity + regional costs) Maintenance = n (plant size) Labour = n (plant size +regional costs) Miscellaneous chemicals = n (technology) Electricity, Fuel, Cooling water = n (regional cost)

Feedstock cost = n (integration level & regional price)

PRODUCER “A” NOTE: Model does not include: interest on working capital, depreciation, debt services, R&D, corporate overheads

CMAI maintains a database for the following Regional cost •Labour •Electricity •Fuel •Cooling Water

S GIE LO O HN TEC & I ES CIT A S P CA UNIT L NA CES I GIO RE CT PR DU O PR TO DS FEE

CK

CMAI has evaluated the cost competitiveness of the proposed JVC Vietnam PP facility in comparison to other regional competitors. Several important factors are considered in generating such an analysis: Feedstock Costs: The single most important factor in developing a total cost. CMAI examines the source of the monomer to the polymer facility to determine whether the economics should be based upon a local “market price”, an integrated cash cost, or more likely, a mix of the two. CMAI’s understanding of buyer-seller relationships plays an important role in this determination. Furthermore, it is important to be aware that integrated producers will also have different means of evaluating their own businesses. Margin that may normally be credited to the cracker may indeed by forgone in order to provide a lower cash cost to the downstream polymer unit, thus providing a more competitive price in export markets. Such are the variables in an evaluation such as this. Variable Operating Costs: These costs will vary from producer to producer based upon location. Energy values account for the majority of the differences in costs. Fixed Operating Costs: While producers have many different methods of accounting for fixed costs, CMAI’s method is to examine the size of the production unit and the corresponding fixed investment. Fixed costs are modelled as a direct relationship to the fixed investment (which has location factored in as well as size). Labour costs are also embedded within this category. Logistics Costs: CMAI examines several costs, which combined; give a total delivered cost to the end user. CMAI includes: bagging the polymer, transport to load facilities, ocean freight, receiving costs and finally, local delivery to customer.


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Duties: Lastly, CMAI uses published import tariff data to determine the applicable tariffs or duties on the products. No attempt is made to calculate duty drawback or any other form of credits. JVC Vietnam PP Cash Cost of Production CMAI has examined the competitiveness of the proposed JVC PP plant against imports using the following methodology: When examined on a delivered-to-customer basis, the issues of freight, handling and duties must be included in the analysis. Naturally these values fluctuate based upon market conditions and individual contracts, but the relative value of each is the key criteria. CMAI identifies several key components of this cost: • • • • • •

Bagging of pellets Transport / handling to load port Ocean shipping Receiving costs Delivery to end user Applicable duties

Modelling carried out for the year 2010 was done without the addition of duty in order to reflect long term competitiveness within an ASEAN FTA, and in general freer trade globally. Where CMAI has examined an integrated facility, the propylene monomer has been transferred at cost from the cracker to the polypropylene unit. This provides an understanding of the “floor” costs achievable. The exact mechanisms employed by individual producers to allocate profitability to these symbiotic units are thereby rendered moot. A world scale cracker needs the associated derivatives to be commercially viable in an area such as Southeast Asia where there isn’t an active trade of monomer via pipeline networks (such as the U.S.G.C. or Northern Europe). Differences in the plant sizes are reflected in the fixed cost components of this analysis. Again, all companies treat these costs differently and CMAI has therefore used the industry-accepted practice of relating fixed costs to asset replacement costs. Labour costs are also embedded within these fixed costs, so areas of lower rates such as China enjoy an advantage over areas such as Japan, Korea and Australia. Variable operating costs fluctuate due to energy costs in the producing country, and this advantage can be seen in particular when a Saudi Arabian producer’s costs are examined. It is therefore the summation of not only the integrated cash costs of production that determine the competitiveness of an export-oriented producer, but also the distance from market and the effects of duties and tariffs as well. A higher cost of production in the receiving market can be offset with higher logistical costs to import materials from lower cost production areas.


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Additional advantages that are not quantitative and therefore are not included in this type of analysis, but may allow the proposed JVC PP plant to maintain a domestic market share include: • • • •

The apparent quality of product Stated after sales service Stated reliability of supply & relative distance to customers Logistical delivery time

PP Delivered South Vietnam The delivered cash cost of production for the proposed JVC PP unit is based on the 2010 FOB Singapore propylene price forecast. The competitors feedstock costs are based on the light olefin production cash cost for the respective olefin units, based on CMAI’s internal cash cost model of these producers. The propylene cost is the single largest factor in determining the cash cost of polypropylene for each producer, and in this case this is the determining factor for the estimated position of the JVC PP plant against imports. This however does not mean that the JVC PP plant would not make money, it only reflects the fact that if at the bottom of the price/margin cycle, a price war was to ensue, and the JVC PP plant would be disadvantaged.

Polypropylene Production Cash Cost Delivered South Vietnam

2010

US Dollar per Ton 1000

900 800 700 600 500 400 300 200 100 0

PetroRabigh, Saudi

SABIC, Saudi Arabia

Thai PP, Thailand

Titan, Malaysia

Honam PC, S.Korea

JVC Vietnam (FOB)

JVC Vietnam (Blended)

Total Cash Cost

399

492

602

702

743

Logistics

135

135

65

60

75

771

783

805

820

840

110

75

90

25

Fixed Costs

95

78

80

83

25

93

78

86

105

88

Variable Costs

64

45

51

88

55

63

70

67

69

71

Feedstock

105

234

406

71

504

512

513

555

541

636

656

Formosa, ExxonMobil, Reliance, Taiwan Singapore India

~ This section of the document was compiled by CMAI from information obtained from LGI and PetroVietnam, and it is based on the original feasibility study completed by JSC VNIPINEFT in 2001. CMAI has undertaken to compile and update the original feasibility study based on the LGI/PetroVietnam gaining permission from the original author.

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4. TECHNICAL DESCRIPTION 4.1

INITIAL DATA

All potential bidders of polypropylene technology selection were provided by the assignments with initial data description, required performance features, scope of PP Plant, product quality and required scope of information for each technology. Initial data used as a base for Licensors proposals and this DFS are given below: Plant capacity - 150 MTA polypropylene production. Turndown range: 50 % - 100 % The plant shall be operated 8,000 hours per year. Polymerization section: one (1) reactor shall be provided to produce homopolymers and random copolymers (in future). Plot shall be provided for future impact copolymer reactor. A single-train extrusion section shall provide for extrusion of 100% output. Products: unpainted heat and light stabilized polypropylene (homopolymer) pellets. Highly effective catalyst, maximum specific consumption of 0.033 to 0.05 kg per ton of polypropylene. Duration of polypropylene storage in silos: 5 days. Shipment: by trucks in 25-kg bags on Euro pallets. Machine for packing in bags: Train number:

2

Design working time:

2 shifts per day 8 hours per shift 5 days per week.

The plant shall include: • • • • • •

Catalyst preparation and storage section Section for polymerization and production of powdered homopolymer (with random and impact copolymer production in future) Polypropylene powder extrusion (granulation) section Machine for packing product polypropylene into 25-kg bags and palletizing Machine for automatic pallet wrapping Silos for polypropylene homogenization and storage


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• • • • • • • •

Product storage including an automatic handling and warehousing system Machine for producing polyethylene film for manufacturing bags, including flexographic printing Machine for producing shrink polyethylene film to wrap pallets with bags containing polypropylene Emergency emptying system Local wastewater treatment unit (treated waste water quality shall allow for sending to biological treatment facilities). Automatic fire alarm and fire-fighting system Unit for thermal incineration of liquid effluents Plant control room including DCS and ESD.

The product polypropylene will be used for fibers, packaging film production and in household application. Feedstock Polymer grade propylene is sent to the polypropylene plant from the Propylene Recovery Plant via the pipeline. Processing of imported propylene delivered by tankers and stored at the Product Tankage (Unit 052) propylene spheres is provided as well. Conditions at the Battery Limits are as follows: • • •

Pressure: 26 kg/cm2 g Temperature: Ambient State: Liquid

Propylene specification: Grade Composition: - Propylene - Hydrogen Inerts: - Propane - Uncondesables (N2, CH4) - Ethane - C4, C5, sat. hydrocarbons Copolymerizing monomers: - Ethylene - Butene - Pentene Poisons: - Acetylene - Methylacetylene - Propadiene

Chemical

Polymer

95 20

99.5% by vol. min. 20 ppm by vol. max.

5 300 500 1000

0.5% by vol. max. 100 ppm by vol. max. 200 ppm by vol. max. 200 ppm by vol. max. 100 ppm by vol. max. 100 ppm by vol. max. 10 ppm by vol. max. 5 ppm by vol. max. 3 ppm by vol. max. 5 ppm by vol. max.


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Grade - Propadiene - Butadiene - Green oil (C6 – C12) - Oxygen - Carbon monoxide - Carbon dioxide - COS - Total sulphur - Methanol - Isopropanol - Water - Arsine - Phosphine - Ammonia - Cyclopentadiene

Chemical

Polymer 5 ppm by vol. max. 50 ppm by vol. max. 20 ppm by vol. max. 2 ppm by vol. max. 0.03 ppm by vol. max. 5 ppm by vol. max. 0.02 ppm by vol. max. 1 ppm by wt. max. 5 ppm by vol. max. 15 ppm by vol. max. 2 ppm by wt. max. 0.03 ppm by vol. max. 0.03 ppm by vol. max. 5 ppm by wt. max. 0.05 ppm by vol. max.

Hydrogen containing gas specification: Hydrogen containing gas from the Refinery Reformer is supplied to PP Plant under the following conditions: Pressure – 50 kg/сm2g Temperature – Ambient State - Gas Grade Composition: - Hydrogen content - Inerts (N2, CH4) to balance Poisons: - Carbon monoxide - Carbon dioxide - Oxygen - Water - Total sulphur - Mercury (electrolysis) - Acetylene (cracking) - Ammonia (fertilizer)

Polymer 99.5% by vol. min. 0.5 ppm by vol. max. 5 ppm by vol. max. 5 ppm by vol. max. 2 mg/Nm3 max. 1 ppm by wt. max. 2 mg/Nm3 max. 10 ppm by vol. max. 5 ppm by wt. max.

Utilities As a minimum requirement, the following utilities supplies are expected to be available at plant B.L.: • Low pressure steam (supply pressure 2.7 barg min).


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• Demineralized water (supply pressure 6 barg min (*)). - Total hardness (as Ca) 1 mg/1 max - Total alkalinity (as CaCO3) 5 ppm max. (*) In case available supply pressure is lower, buffer pump can be provided. • Cooling water /Jacket Water supply temperature 33 oC max - Supply pressure 4.5 bar g min - Return pressure 2.5 bar g ) • Instrument air (dust and oil free) - Dew point = -40 °C • Plant air (dust and oil free, no free water) • Nitrogen (dust and oil free) - Purity 99.9% vol. min. - Oxigen 5 ppm vol. max. Carbon monoxide 5 ppm vol. max. Carbon dioxide 50 ppm vol. max. - Dew point -65 oC • Electric power (3 phase, 3 wires, 50 or 60 Hz) - The standard voltage ratings are acceptable. Raw Material and Utility Consumption Specific consumption per 1,000kg of Products and Plant Capacity – Homopolymer. Consumption Raw Material - Propylene - PSC Catalyst ZN 111 Special ZN 178 Aluminum Alkyl Utilities - LP Steam - Cooling Water - Electric Power (Polymerization) - Electric Power (Extruder PKG) - Nitrogen

Unit Kg Kg Kg Kg

YD 1004 0.038

Product Type (Sample) Q S/YS S28C/F 1004 0.038

1004 0.032

1004

0.2

0.2

0.2

0.038 0.2

Kg M3 KWh

360 130 110

330 125 100

330 120 100

330 120 100

KWh

420

380

350

350

kg

12

9

9

9


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Fuel Gas

- LHV - Mol Wt Composition (% Vol) - Hydrogen - Methane - Ethane - Ethylene - Propane - Propylene - Butane - Butylene - Pentane and above - Hydrogen Sulphide - Nitrogen

(MJ/tonne) (Kg/Kmol)

Norm Mol Wt 107,376 6.06

Max Mol Wt 45,598 54.85

Min Mol Wt 117,639 2.75

82.42 7.89 4.64 3.44 0.19 0.47 0.39 0.52 0.03 0.0003 0.02

0.00 0.00 0.00 0.00 15.28 1.90 33.59 47.80 1.43 0.00 0.00

96.78 1.19 1.82 0.00 0.09 0.00 0.07 0.00 0.03 0.00 0.02

Climatic Data Air Temperature Maximum recorded Minimum recorded Maximum monthly average Minimum monthly average Design maximum Design minimum

41.4° C 12.4° C 34.4° C 21.8° C 36.0° C 16.0o C

Relative Humidity Maximum monthly average Minimum monthly average Average monthly humidity Design maximum Design minimum

89% 80% 85% 100% 40%

Rainfall Maximum recorded annual Minimum recorded annual Average annual Maximum recorded in 24 hours Maximum rainfall intensity

3052 mm 1374 mm 2268 mm 525 mm 40 mm for 10 minute period 60 mm for 30 minute period 108.1 mm for 60 minute period


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Barometric Pressure Maximum Minimum Average Design

1023.6 mbar 988.8 mbar 1009 mbar 1013 mbar

Environmental data Extreme moisture – tropical climate Seismicity - Non-seismic area


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Applicable Codes and Standards Design, fabrication, inspection and testing, construction, pre-commissioning and commissioning will be in accordance with the following Codes and Standards: • • • • •

International Codes and Standards Buyer’s Codes and Standards Manufacturer country Standards Manufacturer Standards Licensor and Contractor Standards and Specifications

International Codes and Standards specified in the below table are proposed for use in the Project. Vendor and Manufacturer country Codes and Standards can be used when their application is justified from a technical and economic point of view. Licensor and Contractor Standards, Specifications, Practices and Procedures shall be applied for specific equipment items and activities at site. Codes and Standards applicable to the equipment and materials will be defined in Contractor Specifications. The following International Codes and Standards, but not limited to, will be selected for Contractor Scope of Work and Supply: 1

Engineering Standard

2 3

Material Specification Pressure vessels and boilers Code Heat exchangers Pumps Compressors Another Machines Piping Tanks Instrumentation Electrical

4 5 6 7 8 9 10 11 12 13 14

Hazardous classification Civil code Pressure devices

area relieving

Detail Engineering Contractor Standards, Vietnamese National Standards, Buyer’s Codes and Standards ASTM ASME TEMA, ASME API, Manufacturer Standards API, Manufacturer Standards API, Manufacturer Standards ANSI API IEC, ISA NEC, IEC, CELENEC, BS, Vietnamese National Standards NFPA UBC API


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4.2

LICENSOR OFFERS. POLYPROPYLENE TECHNOLOGY DESCRIPTION

4.2.1

“UNIPOL” Process Description

Dow’s Unipol technology has been successful in licensing a substantial amount of new polypropylene technology over the last 10 years. Some of the success is likely due to the strength of the Unipol technology in linear polyethylene. With its strong patent position, the Unipol process is the only totally gas phase process that uses the “fluid bed” technology. Shell (SHAC) originally developed the high activity catalysts, but Dow now owns the catalyst rights. Dow’s efforts in metallocene for polyethylene have brought metallocene capability to polypropylene. Unipol is also known for its extensive range of resins with different melt flows and for product consistency. This technology is probably not as suitable as others if the product slate involves many product transitions. Shortcomings can be helped by careful planning of the product wheel (schedule of the sequence of resin types).

The process flowsheet shown above is for the gas phase polyethylene process. Dow polypropylene process is very similar. Advantages of the Dow Process: ¾ Dow has a big brand name in Europe and Asia ¾ Licensing fees are marginally lower


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¾ Extensive range of resins Raw Materials Purification Section Polymer grade liquid propylene (99.6% wt.) from the Intermediate Storage is pumped to the Raw Materials Purification Section. In this Section propylene is dried in series on the molecular sieves for H2O removal and catalytic treatment from remaining COS traces. This guard is required, as all polymerization catalysts are sensitive to certain impurities available in the feedstock. Hydrogen containing gas from the Refinery is supplied to PSA Unit where this gas is recovered up to hydrogen content of 99.9% mol., compressed and further supplied to the reaction area. Nitrogen from the Oxygen and Nitrogen Separation Station is treated to remove minor (ppm) O2, H2O and another polar impurity, compressed and further supplied to the reaction circuit, low pressure nitrogen is supplied to another process area. Ziegler-Natta catalysts of the 3-rd and the 4-th generation on titanium base (SHAC Series 200 and 300 catalysts) in the form of slurry in mineral oil, co-catalyst – concentrated TEAL (100%, approx.) and donor – stereomodifier are supplied from the Refinery Chemicals Store in vendor containers (drums, etc.) to feed drums with further accurate metering to the reaction area. Reaction Section Reactor circuit comprises fluidized bed reactor, cycle gas compressor and cycle gas cooler. Propylene, hydrogen, catalyst, co-catalyst and donor are fed to the reactor where polymerization takes place under the following conditions: • • •

Pressure: approx. 3.5 MPa; Temperature: 60-70oC Residence time: approx. 1.25 hours

The cycle compressor circulates reaction gas through the catalyst bed in the reactor providing required fluidization and heat of reaction removal. Reaction heat is removed from the circulating gas in water cooling shell-and-tube heat-exchanger by circulating propylene cooling and partial condensation. Fluidized bed provides proportional mass and heat exchange. Produced polymer has a uniform particle size distribution. The polymerization reaction can be stopped, if necessary, with a “kill gas” (CO) injection (covered by Reaction Section equipment). Polymer powder discharge from the reactor is provided automatically via product discharge system as per the height of fluidized bed. The product shall be separated


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from entrained monomer in the in sequent chambers having different pressure and further supplied to the purge system. Polymer Degassing and Vent Gases Recovery Section Polymer leaving the reactor contains non-reacted hydrocarbons. hydrocarbons are purged from the polymer and recycled to the process.

These

Polymer is supplied to the separator where it is purged with counterflow recycle nitrogen to remove hydrocarbons. Vent gas flowing overhead separator is supplied to Vent Gas Recovery system via the filter. In this system the gas is compressed and chilled to condense monomers. Light gases without removed condensed hydrocarbons are discharged to the flare. Condensed hydrocarbons are supplied to the simple tower for rough separation. Tower overhead rich propylene stream is recycled to the reaction area, tower bottom propane rich stream can be recycled to the process or utilized as a fuel. Polymer powder from the separator is supplied by rotary feeder to the purge bin for entrained monomers final removal and catalyst reminder deactivation. Fresh nitrogen is supplied to the bottom of purge bin to vent hydrocarbons from polymer. Purge nitrogen containing a small amount of hydrocarbons is routed to nitrogen/hydrocarbons separation with further recovery of that stream. A small amount of steam is fed to the bottom of purge bin to deactivate any reminder of catalyst and co-catalyst. Polymer powder from the purge bin is supplied to Additive Handling Section and further to Extrusion and Pelleting Section. Additive Handling Section Facilities are provided for handling both, solid and liquid additives. Solid additives are fed to the pelleting system in the form of mastermix. Mastermix is made in a batch process by diverting a small quantity of polymer from the common stream. This small stream is fed to the water- jacketed vessel where it is fluidized with nitrogen and cooled as required to facilitate blending with solid additives. The cooled polymer flows by gravity to the horizontal ribbon blender. Solid additives are charged by hand and blended with the polymer. Resulted mastermix is fed to the extruder feed bin. Liquid additives are transferred from the drums by gravity to the storage tank and pumped to the extruder feed bin. Extrusion and Pelleting Section Polymer powder and prepared additives are supplied to the extruder feed bin. In the extruder they are melted, homogenized, gelled, filtrated and pelletized. Pelleting is provided in the subaqueous pelletizer.


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Polymer pellets are run away by circulation (demineralized) water to the separator for polymer and water separation. Separated water is collected in the drum and then recycled by pump to the pelletizer. Polymer pellets from the separator are supplied to pellet classifier. On-spec pellets are conveyed by air to blending and storage silos, off-spec pellets are collected in the container. Polymer pellet blending silos are provided to obtain homogeneous polymer batches. Storage capacity of polymer storage silos provides a possibility to store the product within 5 days maximum. Bagging and Palletization Section Commercial polypropylene is bagged automatically into 25 kg PE bags. The bags are automatically palletized and wrapped by PE shrink film and transported to the warehouse by a forklift. The PP Plant comprises facilities for PE bags and shrinks film production. Emergency Discharge System In case of emergency (e.g. power failure) recycle gas shall be purged out from the reactor and discharged to the Refinery flare header via blow-down drum and cyclone. Effluent Treatment System Oily water which may contain traces of hydrocarbons due to possible oil leaks at the PP plant is routed to the oily water pit via oily water sewage. Water from paving which may be contaminated with solids, mainly from the Extrusion and Pelleting Section is routed to the water pit. Water from the pits after oil skimming and polymer powder separation shall be pumped out to the Refinery treatment facilities. Effluents Disposal Effluent disposal section covered by the PP Plant is provided for effluents incineration. Spent oil from the PP Plant and non-diluted laboratory wastes (acetone, xylene, etc.) are to be combusted in the incinerator on intermittent base. Effluents are to be delivered to the incinerator in bottles by trucks. Flue gas filtration from solids (ash, polymer powder) is provided at the bag filter for environmental protection purpose prior to flue gas discharge to incinerator stack.


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4.2.2

“SPHERIPOL” Process Description

Basell’s Spheripol technology is supported by one of the strongest R&D groups in the industry and the world. As such, Basell has excellent catalysts that are continually being modified and improvements incorporated into their operations. Basell has such a strong position in Ziegler-Natta catalyst systems that it has not emphasized metallocene catalysts as much as some other polypropylene producers. With the merger of Targor and Montell to form Basell, its metallocene position was strengthened by the efforts of Targor in this area. The Spheripol technology offers a broad range of products utilizing its multiple reactor capability. As the global leader in capacity, Basell is in a better position to provide resin for market seeding and actually using some of the new unit’s material in the markets.

In the Basell process, a homogeneous mixture of polypropylene spheres is circulated inside the reactor loop. If the production of random copolymer or terpolymer is desired, ethylene and/or butene-1 are introduced in small quantities into the loop reactor. This process achieves very high solid concentration (>50% by weight), excellent heat removal (by water circulation in the reactor jacket) and temperature control (no hot spots). The resulting polymer is continuously discharged from the reactor through a flash heater into a first-stage de-gassing cyclone. Unreacted propylene from the cyclone is recovered, condensed and pumped back into the loop reactor.


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For the production of impact and specialty impact copolymers, polymer from the first reactor is fed to a gas-phase fluidised bed reactor that operates in series with the loop reactor (this gas-phase reactor is bypassed when homopolymer or random copolymer is produced). In this reactor, an elastomer (ethylene/propylene rubber) formed by the introduction of ethylene is allowed to polymerize within the homopolymer matrix that resulted from the first reaction stage. The carefully developed pores inside the polymer particle allow the rubber phase to develop without the sticky nature of the rubber to disrupt the operation by forming agglomerates. Fluidisation is maintained by adequate recirculation of reacting gas: reaction heat is removed from the recycled gas by a cooler, before the cooled gas is recycled back to the bottom of the gas-phase reactor for fluidization. This type of gas-phase reactor is efficient because it maintains a high degree of turbulence in order to enhance monomer diffusion and reaction rates, and offers an efficient heat removal system. Some specialty products, incorporating two different ethylene content copolymers, require a second gas phase reactor in series. Advantages of the Basell process ¾ Basell has a big brand name and is the most focused of all the potential licensors on PP licensing. ¾ Most experience in the markets ¾ Basell have been the driver for polypropylene growth in the past and are focused to do so for the future. ¾ Basell have been very successful in catalyst as well as polypropylene grade developments. The following describes in more detail the process characteristics: Spheripol plant generally composes of the following process sections: - Sect. 100:

Co catalysts and Catalyst Preparation Catalyst Metering System Co catalyst Washing Circuit and Liquid Additive Feeding

- Sect. 200 :

Prepolymerization Bulk Polymerization in Loop Reactor

- Sect. 300 :

Polymer Degassing Propylene Scrubbing and Storage

- Sect. 400 :

Gas phase copolymerization (option)

- Sect. 500 :

Polymer Steaming Polymer Drying

- Sect. 600 :

ISBL Process Facilities

- Sect. 700 :

ISBL Monomers Purification


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- Sect. 800 :

Additivation and Extrusion plus, for reference only:

- Sect. 900:

PP pellets blending, bagging and palletizing (to be part of engineering scope)

Co catalyst and Solid Catalyst Preparation and Metering (See flow sheet No. 1A/1B) Co catalyst 1, an electron Donor, available in drums in the liquid state, is transferred into D110 A/B tanks and there is diluted to improve accuracy in metering with HC oil. The Donor solution is delivered to catalyst precontacting by P104 A/B metering pumps. Co catalyst 2, TEAL, available in cylinders at 100% concentration, is discharged to D 101 tank. From here it is fed to the catalyst activation unit (precontacting) by P 101 A/B metering pumps. HC oil and grease, are discharged into the heated tanks D 105 A/B, mixed and then transferred to catalyst mud preparation unit X101, where the Solid Catalyst Component is fed from drum by hoist Z 104. The solid catalyst component is dispersed in the HC oil, then adding grease, at a prefixed temperature and then with continued agitation, cooled down to set the dispersion into a stable mud. Low temperature is maintained during metering of the solid catalyst mud to catalyst activation unit X 101. Catalyst Activation (See flow sheet No. 2) Catalyst activation unit X 201 consists of two steps. Catalyst mud is first mixed with both co catalysts in a precontacting pot. Then the active catalyst mixture is mixed in line with chilled liquid propylene and then held for a short residence time in the small loop reactor where additional propylene is fed and a prepolymerization takes place at low temperature in order to ensure morphology control by adopting mild conditions during the very first polymerization step. TEAL washing circuit – Liquid Additive Feeding System (See flow sheet No. 1A) HC oil is still used to wash piping and equipment containing TEAL in case of maintenance. Return HC oil from washing is sent for neutralization to D 607 through pump P 102. A two-drum system for liquid additive storage and metering, with dewatering facilities ensures reservoir for continuous metering of dry chemical when necessary and for all discontinuous feeding points, thus ensuring protection against catalyst activity decay due to water presence in polymerization and against the risk of generating Alumina in low pressure degassing (items D112 – D115 – P110 – P111). Bulk polymerization


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(See flow sheet No. 2) Polymerization is performed in liquid phase in loop-type reactor. The prepolymerized catalyst slurry from X201 enters the loop reactor R 201 with additional propylene and hydrogen for molecular weight control. A portion of propylene polymerizes while the remaining, in the liquid state, serves as diluent for the solid polymer. Circulation pump P 201 maintains high velocity and very uniform mixing inside reactor. The slurry density is kept constant at 50-55% wt of polymer. During the production of random copolymers or terpolymers, ethylene (and/or butene-1) is fed to the reactor at a controlled ratio according to the desired comonomer(s) content. The heat of reaction is removed in E 208 by circulating water into the jacket through pump P 205. Pressure, temperature, and slurry density are monitored and automatically controlled. Reactor pressure is automatically stabilized and controlled by means of a pressurization drum D 202 in order to guarantee the required slurry subcooling. Spheripol design grants high hydrogen response, excellent morphology control, high flexibility of the cooling circuit, and a more accurate control and operability on a much wider range of products families (very broad MWD and very high fluidity grades are a typical example of increased capability through new catalyst families). The polymer slurry is continuously discharged from R 201 through a steam jacketed pipe, so as to ensure monomer vaporization during polymer conveyance to the cyclone type drum D 301, which operates at a pressure in the range of 15-18 barg. Polymer degassing and steaming (See flow sheets No. 3A/3B/5A) When producing homopolymers, random copolymers or terpolymers, the polymer collected on the D 301 bottom is conveyed to the bag filter F301, which is maintained at approximately atmospheric pressure, in order to separate the remaining unreacted monomer(s) from the polymer. The relatively small stream of unreacted monomer, after scrubbing in T 302 column to separate any entrained polymer fines, is compressed by the PK 301 compressor and then conveyed to the propylene recovery section. High pressure propylene degassing section ensures enhanced monomers stripping. Higher degassing rate and outlet temperature allows for lower flow rates to the recycle compressor, high efficiency in the steaming unit and lower specific energy consumption in extrusion step resulting from higher temperature on polymer feed. From F301, the polymer powder is discharged by gravity to the steaming unit D 501 where live steam is injected to complete removal of any dissolved monomer and propane and to deactivate catalyst residual activity so as to improve product quality. Steam is condensed and discharged from the steamer to the sewer after passing through the scrubber T 501. Residual unreacted monomer(s) and propane,


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compressed by means of PK 501, can be sent to battery limits for propane purging, after water removal in PK 502 (if necessary for upstream recovery conditions). Polymerization of Heterophasic Copolymers, Polymer degassing and Ethylene Stripping (future option) (See flow sheets No. 4) When producing heterophasic (Impact and Specialty Impact) copolymers, the polymerization is carried out in two different phases. In this case, the homopolymer discharged from the flash drum is fed to the first gas phase reactor R 401. In the gas phase reactor a rubber ethylene-propylene phase is added to the homopolymer matrix (coming from bulk polymerization carried out inside loop reactor) to improve impact resistance of the final material. Gas phase reactor R 401 The rubber phase is produced in a vertical cylindrical reactor fed with homopolymer matrix from D 301. Polymer is fluidized by means of reacting gas recycled by compressor C 401 and distributed under the polymer bed. Gas surface velocity is in the range of 0.7 m/s and operating conditions of the gas phase reactor are the following: • pressure: 14 barg • temperature : 80/90oC • average residence time: 0.3 hours • average bed density : 300/350 kg/m3 The copolymer produced is bottom discharged under reactor level control. New gas phase rector design without agitator has been introduced in the new Spheripol process plant of BASELL for commercial testing (started-up at end of 1998) and included in process design package following successful experience, while extreme reliability has been achieved in process control due to a new design in gas phase sampling system. Ethylene stripper Polymer from F 301 bottom is discharged to steaming and drying section. Filter top stream is recompressed by PK 301 and fed, after cooling in E 403, to ethylene stripper T 402. Ethylene-rich top gas is recycled to R 401 while propylene/propane bottom joins D 301 gas stream to T 301. T 402 condenser temperature set is adjusted in order to keep the desired inerts content inside R 401. By proper configuration of T 402 condenser, the ethylene stripping tower can also be used as butene-1 recovery tower at the end of terpolymer runs (gas phase units not in operation), in order to shorten transition time. Polymer drying


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(See flow sheet No. 5B) Whichever run, the polymer is discharged from the steamer to the fluid bed drying unit D 502 where removal of surface water is effected by means of hot nitrogen. The wet nitrogen is sent to T 502 column to separate entrained powder and condense water before recycling it to the dryer. Circulation of nitrogen is maintained by C 502 blower. Dry polymer is transferred to the finishing unit surge silos by nitrogen closed loop Pneumatic conveyor PK 801. Propylene scrubbing and feed tank (See flow sheet No. 3B) Unreacted propylene and propane stream recovered from the flash drum D 301, together with the discharge of compressor PK 301 (when producing homopolymers and random copolymers) or with T 402 bottom stream (in case of gas phase reactor operation), are sent to the propylene scrubber T 301 in order to separate any trace of entrained powder from the recycle stream. Vapors from T 301 are then condensed in E 301. The condensed recycle stream is collected into the propylene feed tank D 302 which also receives the fresh propylene make-up. High head centrifugal pumps P 301 A/B ensure the liquid propylene/propane feed to bulk polymerization unit. The vaporizer E 302 keeps a constant overpressure in D 302 to avoid pump P 301 A/B cavitation; while pumps flow rate is kept at design value acting on flow bypass through E 305 cooler I.S.B.L. Process facilities (See flow sheets No. 6A/6B) Condensated steam recovery All the condensated steam recovered from the PP unit is collected in D 606 and sent to battery limits by pump P 603 or used as make-up water in cutting water tank D 806. Reactors blow down Two blow-down vessels are provided to collect polymer from emergency discharges to flare. The cyclone S 601 and the third blow-down D 603 are also provided as a guard to separate possible polymer entrainment from any vent sent to the flare header. Polymer recovered in the blow down is treated with steam, and dried with nitrogen before discharging in box, generally to be sold as off-spec product. Refrigeration unit A small flow rate of refrigerated water is required in the plant. The chilled water is prepared in the plant through PK 601 (propylene refrigeration pack.), stored in D604 and pumped through P601A/B.


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Refrigerated water circuit configuration is a pressurized one in order to improve pumping efficiency. Nitrogen compressor If not available at B.L., a nitrogen compressor can be provided I.S.B.L. for high pressure nitrogen supply during pressurization tests. Instrument Air buffer drum On line back up is provided I.S.B.L. for Instrument Air in order to guarantee at least a 30 minutes supply in case of failure, which enables controlled plant shut-down operation. Centralized oil system HC oil used in several process units Centralized storage and distribution system provides improved and cleaner plant operation and ensures water removal. Exhaust HC oil treatment The section works discontinuously. From TEAL circuit and T 302, the HC oil polluted by cocatalyst 2 is collected into D 607 vessel. Liquid additive used for neutralization is added to D 607 in semi batch mode to deactivate trialkylaluminium. Temperature is controlled by water circulation in the jacket. Oil is then disposed from D 607 bottom into drums and normally sent to incineration. Waste water treatment Waste water from process plant is collected in the underground basin Z601 (fllow sheet No. 6C), where it is separated from oil and powder contaminants and then is sent to the centralized biological treatment facility OSBL by means of vertical pumps P610 A/B. Contaminated rain or washing water from polluted areas is also reaching the basin through a diverting box, which diverts such water to the clean sewer when the level in the basin reaches a maximum. When level inside the collection basin is high, P610 A/B alternatively and automatically, activated by level control inside the basin, start to send the waste water to B.L. Pumps can be operated manually by means of a push button, either separately or together. Z601 internal baffle keeps water normal operating level with a retention time high enough to obtain good sedimentation. The volume between maximum and normal level is calculated in order to ensure at least 10 min of collecting capacity in case of heavy rain or fire fighting intervention. The basin is located underground and must be opened to atmosphere for safety reasons. The area shall be classified for Unconfined Vapor Claud Explosion (UVCE) due to potential presence of organic vapors. Underwater steam injectors ensure winterizing. Floating polymer powder can be removed manually from water surface.


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Additives feeding and extrusion (See flow sheet No. 8) In most typical finishing unit configuration presently adopted, PP polymer from the dryer D502 is fed to intermediate silos D 802 on top of the extrusion building by means of nitrogen closed loop pneumatic haulage PK 801. Polymer powder is continuously discharged from the surge silo through W 801 metering device and SF 801 screw feeder, to the extruder. Additives (pure liquid and solid or solid masterbatches) metering units are designed to improve additivation section flexibility and quality reproducibility. Additives are continuously proportioned, through suitable metering devices, to the extruder according to the desired stabilization recipe. In EX 801 extruder, polymer and additives are homogenized, gelled, extruded and granulated through underwater cut. After granulation the polypropylene pellets are fed to D 805 dryer, where water is separated, and then to S 803 screen. After screening for coarse and fines elimination, polypropylene pellets are fed to the pneumatic haulage PK 802 conveying them to blending and storage. Demineralized water is collected in D 806 basins and recycled by means of P 801 A/B pumps to the extruder head after filtering in F 801 A/B and cooling in E 803. Monomers purification (subject to feedstock specs confirmation) Assuming PP production facilities being part of an integrated complex, monomers purification units are typically included in the olefins production plant. Depending on specifications of monomers available at PP B.L., I.S.B.L. facilities can be installed as a guard for light ends, and most frequent poisons, such as: COS, and water for propylene and Sulfur, CO, CO2 and water for ethylene (random copolymers and future impact copolymers production, if applicable). A booster pump for propylene as well as compressors for ethylene and hydrogen, if necessary, can be provided I.S.B.L. Need for raw materials purification will be confirmed based on final determination of the available feedstock composition. Polymer pellets homogenization and storage Detailed configuration of homogenization and storage facilities is highly affected by local conditions (namely: bagging frequency and shipping characteristics) and is part of engineering scope. For reference only, the following paragraphs summarize some general configuration, to be discussed and confirmed during KOM.


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Assuming continuous bagging on two shifts, 7 days per week, bagging section would consist of one bagging line 1800 bags per hour (tubular film machines), a standard configuration for homogenization section would includes 4 blenders 600 m3 each for both lines (1 silo enable about 12 hours storage, one silo is filling, one silo is emptying while one empty silo can be kept as additional capacity or for grade change). The number of storage silos merely depends on the plant production rate to be bulk loaded (if any) and from the actual stock policy. For lot characterization consistency the size of storage silos is usually balanced to the size of blending silos, corresponding to an average of 12 hours of production for PP line. Product bagging, palletizing and storage facilities specifications are out of Licensor's scope and do not involve any process design consideration. Based on the definition of the plant output, the stock size and logistic optimization vs local constraints, it is typically Contractor’s scope to select a proper layout and to procure standard equipment available on the market.


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4.2.3 NOVOLEN Process Description ABB Lummus has another gas phase process, Novolen, which has had recent success in new licensees in Saudi Arabia and South Africa. The vertical reactor process uses agitation, rather than a fluidized bed, which allows for somewhat quicker transitions from one polypropylene resin type to another. When the Targor polypropylene process was acquired by ABB and Equistar, technology capabilities were included and supported by Equistar. The early BASF/Targor units were generally smaller than Unipol units, which raised the question of size limitation for this process because of the mechanical agitation. The limitations appear to be overcome as new units have been announced for Saudi Arabia.

Propylene, ethylene and any other required comonomers are fed into the reactor(s). Hydrogen is added to control the molecular weight. Polymerization conditions (temperature, pressure and reactant concentrations) are set by the polymer grade being made. The reaction itself is exothermic and reactor cooling is achieved by flash heat exchange, where liquefied reactor gas is mixed with fresh feed and injected into the reactor; flash evaporation of the liquid in the polymer bed ensures maximum heat exchange. The polymer powder is discharged from the reactor and separated in a discharge vessel at atmospheric pressure. Any unreacted monomer separated from the powder is compressed and either recycled or returned to the upstream olefins unit for recovery. The polymer is flushed with nitrogen in a purge vessel to strip it of residual propylene. The purge vessel offgas is passed to a recovery system; the


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powder is transported to powder silos and is then converted into pellets that incorporate a full range of well-dispersed additives. Advantages of the Novolen process: ¾ Grade changes faster than Dow process ¾ Products cover a broad range of applications ¾ Small reactor volume minimizes residence time ¾ QP can negotiate a favorable deal with ABB Lummus for the EPC contract The disadvantage with the Novolen process is that the stirred bed reactor is more prone to mechanical failure which may cause the operating factor to be lower. The following describes in more detail the process characteristics: Raw Materials Purification Section Co-catalyst – concentrated TEAL (100% approx.) and donor – stereomodifier are supplied in vendor containers (drums, etc.), to feed drums with further metering to the polymerization reactor. Mineral oil from the drums is fed to the drum which is used as a hydraulic seal. Atmer 163 – catalyst deactivation additive as well as liquid and fusible additives are supplied in vendor containers (drums, etc.) to feed drums with further injection to the extruder by metering pumps. Fusible additives are to be preheated up to melt flow temperature prior to supply to the feed drum and the drum itself is traced as well to maintain the additives in liquid form. Polymer grade liquid propylene (99.6% wt.) from the Intermediate Storage is pumped to the Raw Materials Purification Section. In this Section propylene is dried in series on the molecular sieves for H2O removal and catalytic treatment from remaining COS traces. Nitrogen from the Oxygen and Nitrogen Separation Station is treated to remove minor (ppm) O2, H2O traces. There are two grades of pressure for nitrogen consumers at the PP Plant, some portion of nitrogen is supplied to low-pressure nitrogen consumers, and another portion of nitrogen is compressed up to approx. 100 barg and fed to the surge drum with further supply to the reactor when required. Polymerization and Polymer Degassing Section Ziegler-Natta catalyst of the forth generation PTK4 is supplied in vendor containers to catalyst preparation unit with its further metering to the reactor. Purified propylene is also fed to the vertical reactor with mechanical agitator. Cocatalyst, donor and compressed hydrogen containing gas are fed upstream the reactor. Continuous propylene polymerization takes place in the reactor under the following conditions:


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• • •

Pressure: Temperature: Residence time:

approx. 2.2-3.0 MPa; 65-90oC approx. 1.0-1.2 hours

Heat of polymerization reaction is removed by circulating monomer. Circulating monomer from the top of the reactor is passed cyclone and filter, partially condensed in water condenser and collected in the separator. Circulating gas is cycled by compressor from the separator to propylene make-up line. Small portion of circulating gas from the top of reactor is discharged via cyclone to the Refinery flare for inerts removal. Liquid monomer from the separator is pumped to the top of reactor where monomer evaporates with polymer bed cooling. Polymer powder and removed monomers are cyclic discharged from the top of the reactor to discharge drum via discharge valve. Monomer separation from polymer is provided in the discharge drum. Separated monomers are supplied to monomer recovery unit via cyclone and filter. Polymer powder from the discharge drum is fed to the purge bin by two rotary feeders. In this bin monomer reminder (mainly propylene) is vented by nitrogen. Powder purge prevents hydrocarbon accumulation in the powder conveying system. Purge bin off-gas is routed to the membrane where monomer is separated from nitrogen. Nitrogen is recycled to the discharge drum and separated monomer – to monomer recovery unit. Polymer powder from the purge bin is conveyed by nitrogen to powder silos. Buffer Silos for Polymer Powder and Peroxide Preparation Polymer powder is collected in two silos. One silo is used as a buffer when extruder shutdown and another one – when polymer grades changing. Polymer powder from the silos is supplied to the extrusion. Peroxide (an additive to reduce polymer molecular weight) is fed from the bottles to feed drum with further metering to the extruder. Extrusion and Pelleting Section Screw feeder via metering device supplies polymer powder from buffer silos to the extruder feed bin to be mixed with pelletized and solid additives. Feeder controls supply of pelletized additive from feed drum to the extruder feed bin. Solid additives are fed from discharge hopper to two parallel blenders with their further metering to the extruder feed bin. Parallel blender is provided to obtain fast additive change in case of polymer grade changing.


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Liquid and fusible additives, atmer and peroxide are metered to the extruder directly. Polymer powder and additives are melted, homogenized, gelled and filtrated in the extruder. A small quantity of demineralized water is injected to the extruder for catalyst reminder deactivation. Any fugitive reminders (water, reaction by-products with low molecular weights, nitrogen, and propylene) are removed from polymer melt in the extruder by vacuum. Pelleting is provided in the subaqueous pelletizer. Polymer pellets are run away by circulation (demineralized) water to the separator for polymer and water separation and further to air drier. Separated water is collected in the drum and then recycled by pump to the pelletizer via cooler. Polymer pellets from the drier are supplied to pellet classifier. On-spec pellets are conveyed by air to the deodorizing section, off-spec pellets are collected in the container. Deodorizing Section, Vacuum Unit, Blending and Storage Silos Polymer pellets upstream deodorizer are separated from the conveying air in cyclone and supplied by two screw feeders to the deodorizer. Nitrogen is injected between the feeders for safety reason. Any fugitives and odorants are removed from polymer pellets in the deodorizer by nitrogen and steam. Deodorizer steam jacket is provided to prevent steaming gas condensation. Steaming gas is supplied to the vacuum unit from the top of deodorizer. Polymer pellets from the bottom of deodorizer are supplied by screw feeder to the air cooler where they are cooled by air directly. Cooled pellets are supplied to vibration screen, agglomerates separated at this screen are to be crushed and recycled to the main stream. Polymer pellets are conveyed by air from the intermediate drum to the blending silos. Vacuum unit is provided for deodorizer and extruder degassing. Deodorizer vapors and the majority of extruder vapors are liquefied by compressing and cooling, and any extruder vapors reminder is separated in the separator and discharged to the flare. Liquefied vapors are supplied to the phase separator where water is separated from monomers and discharged to treatment facilities. Monomers are collected in organic wastes tank and intermittently pumped out to incineration.


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Polymer pellets are blended in two blending silos provided to get homogeneous polymer batches. Polymer pellets storage silos serve as buffers between production sections and bagging lines. Storage capacity enables to store the product within 5 days maximum. Circulating Propylene Recovery Unit Vent gases from the polymer degassing section are supplied to TEAL deactivation tower where TEAL reminder is deactivated and removed by circulating absorbent. Spent absorbent is used as a fuel. Deactivation tower overhead vent gases are supplied by compressor to deethanizer in order to get propane/propylene cut. Deethanizer overhead vapors are partially condensed in water condenser and supplied to separator where they are separated to the vapor phase that is discharged to the flare, and liquid one that is pumped to the deethanizer as a reflux stream. Deethanizer bottoms are fed to the propane/propylene splitter. Propylene and tower overhead light gas reminder via receiver are fed by compressor to cooling and further condensation in water cooler and splitter reboiler, then condensed gas is collected in splitter reflux drum. Some portion of the condensed gas is fed back to the splitter and another portion (recovered propylene) is pumped to the raw materials purification section. Splitter bottoms are discharged to incineration. Bagging and Palletization Section Commercial polypropylene is bagged automatically into 25 kg PE bags. The bags are automatically palletized and wrapped by PE shrink film and transported to the warehouse by a forklift. The PP Plant comprises facilities for PE bags and shrink film production. Emergency Discharge System The system comprises vessels to collect all process discharges. Provision for liquid evaporation in case of condensation is provided. Removed polymer powder collected in the emergency discharge system is discharged to the containers after its treatment with steam and nitrogen mixture. Gaseous vents are supplied to the Refinery flare system. Effluent Treatment System


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Oily water which may contain traces of hydrocarbons due to possible oil leaks at the PP plant is routed to the oily water pit via oily water sewage. Water from paving which may be contaminated with solids, mainly from the Extrusion and Pelleting Section is routed to the water pit. Water from the pits after oil skimming and polymer powder separation shall be pumped out to the Refinery treatment facilities. Effluents Disposal Effluents disposal section covered by the PP Plant is provided for effluents incineration. Spent oil from the PP Plant and non-diluted laboratory wastes (acetone, xylene, etc.) are to be combusted in the incinerator on intermittent base. Effluents are to be delivered to the incinerator in bottles by trucks. Flue gas filtration at the bag filter is provided for environmental protection purpose prior to flue gas discharge to incinerator stack.


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4.2.4 “INNOVENE” Process Description BP’s Innovene technology has a unique approach to making polypropylene. Rather than having standup reactors, the reactors are horizontal. The agitated “plug flow” type reactor has one of the shortest transition times, with consistent product uniformity. BP has its own catalyst system that is supplied to its licensees by Englehard. The technology appears to be capable of producing a broad range of products from general purpose homopolymers to high impact copolymers. The second reactor used for producing impact copolymers is the same size as the first reactor, which is different from most of the other processes. It might be possible with the right piping alignment to have the capability of producing polypropylene as if you had two separate units. BP provides extensive R&D funding to maintain a strong technology position for its Innovene process. A large polypropylene producer in the U.S. switched from another technology to a process very similar to Innovene when it added new capacity because it felt that the new process made better impact copolymers.

Advantages of the Innovene Process ¾ Simple and efficient process design and operation that leads to high onstream time ¾ Very quick transition time due to the plug flow process as well as very small amount of off-spec material made. ¾ Attractive economics with low investment and operating costs


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¾ Easily and economically scaled up and debottlenecked to higher plant capacities ¾ A single catalyst to make all products ¾ Rapid product transitions (and thus minimal off-grade products during transition) ¾ Excellent product consistency, superior product properties, wide application range and high potential for future product development The Innovene polypropylene resins have a have a very sharp and very narrow molecular weight distribution. While this results in superior quality resins, running the resin especially for BOPP film has been problematic for converters. The other issue with Innovene process is the catalyst development is not “in-house”. The following describes in more detail the process characteristics: Section 100: Catalyst Feeding Ti-Mg catalyst CSTR of the 4-th generation in the form of slurry in mineral oil is supplied from the Refinery Chemicals Store in vendor containers (drums, etc.) to feed drums with further accurate metering to the reactor. Co-catalyst – concentrated TEAL (100% approx.) and donor – stereomodifier are metered to the reactor from vendor drums directly. The feed rate and the ratios of the tree components are controlled accurately to achieve the desired production rate and make the desired product grades. Section 200: Polymerization Purified raw propylene, catalyst, co-catalyst, donor and properly compressed hydrogen containing gas (92,27 % mol. of hydrogen) supplied from the Refinery are fed to the horizontal reactor with mechanical agitator. In the reactor polymer particles are formed continuously by gas phase polymerization of propylene under the following conditions: • • •

Pressure: Temperature: Residence time:

approx. 2.0 MPa 70 oC approx. 1.4-1.5 hours

All particles in the reactor are not only equally stirred over the whole reactor volume, but they also move under the same velocity and residence time in the reactor is also the same for all particles. All these features result in product uniformity. Evaporated monomer leaving overhead the reactor is mixed with recovery monomer and after cooling and partial condensation in water cooled heat-exchanger is supplied to the separator for blending with make-up propylene from the Propylene Purification Section. Liquid propylene from the separator bottom is recycled by pump to the top of the reactor providing required reaction heat removal by propylene evaporation. The


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minor flow of liquid from the separator is pumped out from pump discharge to the battery limits for inerts removal. Liquid flow is controlled to achieve a desirable temperature profile in the reactor. Recycle gas from the top of separator is combined with hydrogen and compressed to the reactor bottom. The polymerization reaction can be stopped, if necessary, with a “kill gas” (CO) injection (covered by the Polymerization Section equipment). Section 300: Polymer Powder Deactivation Homopolymer powder from the reactor contains non-reacted hydrocarbons. Pressure release in the separator these hydrocarbons are separated from the polymer, compressed and recycled to the process. Polymer powder downstream the separator still contains absorbed monomers. That is why it comes to the purge column. Wet nitrogen for monomers stripping from polymer powder and any remainder of catalyst and co-catalyst deactivation is supplied to the bottom of purge column. Overhead vent gas from the purge column is supplied to vent gas recovery system for monomer separation and recycle to the process. Polymer powder from the purge column is supplied to blending with additives and further to Extrusion and Pelleting Section. Section 400: Product Finishing Polymer powder from the purge column is supplied by screw feeder via metering system to extruder feed been for blending with metered quality of solid and liquid additives. In the extruder they are melted, homogenized, gelled, filtrated and pelletized. Pelleting is provided in the subaqueous pelletizer. Polymer pellets are run away by circulation (demineralized) water to the separator for polymer and water separation. Separated water is collected in the drum and then recycled by pump to the pelletizer. Polymer pellets from the separator are supplied to pellet classifier. On-spec pellets are conveyed by air to blending silos, off-spec pellets are collected in the container. Section 500: Blending silos Polymer pellets are blended in three blending silos provided to get homogeneous polymer batches.


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Section 510: Storage silos Polymer pellets storage silos serve as buffers between production sections and bagging lines. Storage capacity enables to store the product within 5 days maximum. Section 550: Bagging and Palletization Section Commercial polypropylene is bagged automatically into 25 kg PE bags. The bags are automatically palletized and covered by PE shrink film and transported to the warehouse by a forklift. Facilities for PE bags and shrink film production are comprised of the PP plant. Section 600: Propylene Purification Polymer grade liquid propylene (99.6% wt.) from the Intermediate storage is pumped to the Propylene Purification Section. In this Section propylene is in sequent dried on the molecular sieves for H2O removal and catalytic treatment . Remaining COS traces. This guard is required, as all polymerization catalysts are sensitive to certain impurities available in the feedstock. Section 700: Emergency Discharge System The system comprises two drums; one drum is operated under pressure and another one – under the flare header back pressure. All emergency discharges from the PP Plant are discharged to the first drum. Steam jacket is provided at the bottom of the drum to flash liquid monomers. Polymer can be transferred from the first drum to the second one. In the second drum polymer is collected, treated by steam and nitrogen mixture and discharged to the containers. High pressure and low pressure gaseous discharges are routed to the Refinery flare header. Effluent Treatment System Oily water which may contain traces of hydrocarbons due to possible oil leaks at the PP plant is routed to the oily water pit via oily water sewage. Water from paving which may be contaminated with solids, mainly from the Extrusion and Pelleting Section is routed to the water pit. Water from the pits after oil skimming and polymer powder separation shall be pumped out to the Refinery treatment facilities. Effluents Disposal


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Effluents disposal section covered by the PP Plant is provided for effluents incineration. Spent oil from the PP Plant and non-diluted laboratory wastes (acetone, xylene, etc.) are to be combusted in the incinerator on intermittent base. Effluents are to be delivered to the incinerator in bottles by trucks. Flue gas filtration at the bag filter is provided for environmental protection purpose prior to flue gas discharge to incinerator stack.


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2.5 HYPOL-II Process Description The Mitsui “Hypol” polypropylene process has tended to make more specialty resins, including TPO’s and very high impact copolymers. With multiple reactors in series, the unit costs are typically higher than the larger capacity single reactors. The “Hypol II” process is relatively new with a large new plant being built by Mitsui in Japan. The following describes the process characteristics: Feedstock and Raw Materials Preparation Co-catalyst (concentrated TEAL, 100% approx.) and donor – stereomodifier are supplied in vendor containers (drums, etc.) to feed drums with further metering to catalyst activation section. Solid Ti-Mg catalyst HY-HS of the 4-generation is supplied in drums from the chemicals store to catalyst preparation and metering section. Solid Ti-Mg catalyst shall be dispersed in the blend of mineral oil and grease (thickener) and further metered to the catalyst activation section. Mineral oil shall be discharged from the drums to oil feed drum. From this drum mineral oil shall be used for TEAL piping washing and degassing and for jacketed vessel with agitator filling. Mineral oil from this jacketed vessel with agitator is supplied to the catalyst preparation and metering section. Grease from the drums is also discharged to jacketed vessel with agitator with further supply to the catalyst preparation and metering section. Additive for catalyst de-activation and washing oil degassing is to be discharged to two feed drums. From the first drum it shall be supplied to low pressure propylene washing tower and rich oil receiver, and from the second drum it shall be supplied to the jacketed pipe provided for discharge of polypropylene slurry in propylene from the reactor to high pressure separator. Bulk Polymerization In the catalyst activation section, the catalyst suspended in oil and grease is mixed with co-catalyst and donor and is further mixed with small portion of liquid propylene for pre-polymerization in small loop reactor. Polymerization is performed in liquid phase in two loop reactors in series. Reactors are of the same volume and operated under the same conditions, as follows: • • •

Pressure – 4.5 MPa, approx. Temperature – 80oC Total residence time – 1.5 hours, approx.


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Axial pumps are installed at the bottom section of the reactor. Reaction blend circulation by these pumps provides a proportional temperature profile over the whole length of the reactors. Heat removal in the reactors is provided via demineralized water circulation in the reactor jackets. Hydrogen containing gas from the battery limits is fed to the hydrogen recovery (up to 99.5% vol.) and compression section with its further supply to propylene feed line upstream the reactors. Liquid propylene from the propylene feed drum and hydrogen as well are supplied to the both reactors. Some portion of propylene shall be evaporated upstream the reactor for pressure control in the surge drum. This drum is provided to fill the reactors completely and to avoid pressure swing in the reactors. Blend from the catalyst activation section is injected to the propylene stream that is fed to the first reactor only. Polymer slurry from the first loop reactor feeds directly to the second loop reactor to finalize polymerization. Polypropylene slurry from the second reactor is discharged via jacketed pipe to the high-pressure separator for polymer separation from the recycle propylene. Polymer Degassing and Propylene Recovery High-pressure separator is provided to separate polymer from the recycle propylene. Polymer resin from the separator is discharged to the filter for polymer degassing. The resin is further supplied to the steaming section for polymer steam-out. Stabilization additives shall be injected into the polymer resin prior to steam-out. Filter overhead gas is fed to washing scrubber where oil washing is provided for fines removal in recycle gas. Specific additive shall be added to the oil for TEAL traces removal. Upon saturation with polymer rich washing oil shall be replaced with fresh one. Rich oil is pumped out to recovery. Scrubber off-gas is compressed, mixed with high-pressure separator off-gas and supplied to the propylene recovery tower. Tower overhead vapors are condensed and recycled to the tower as a reflux. Balanced recovered propylene is collected in the receiver where fresh purified propylene is to be fed. Propylene from the receiver is fed to the polymerization reactors. Propylene recovery tower bottoms are supplied to the polymer filter inlet via jacketed pipe. Polymer Steaming and Drying


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Downstream the filter polymer resin by gravity flow is supplied to the polymer steaming section where catalyst reminder is deactivated and entrained hydrocarbons are steamed out by direct steam. Vapor and gas mixture from the steaming section is supplied to water scrubber for steaming and water washing. Water condensate and steamed hydrocarbons are fed to the separator from scrubber draw-off tray. Liquid from the separator is recycled to the scrubber and vapor and gas phase is to be combined with scrubber overhead monomers and to be supplied to water cycle compressor. Cooled downstream water cycle compressor vapor and gas phase shall be either routed to the flare system or recycled to the process after drying. Organic liquid separated in the water cycle compressor (oligomers) shall be discharged into drums after separation. Wet polymer from the steaming section is conveyed to drying by circulating nitrogen. Dried polymer is supplied by closed nitrogen transportation system to the surge silo. Wet nitrogen from the polymer drying section shall be washed and cooled in the scrubber. Then it is recycled to the drying section by blower via preheater. Water is supplied to the scrubber for nitrogen washing. Water condensate with polymer traces is discharged from the scrubber bottom to the waste water sump. Flare KO Drums and Auxiliary Equipment Emergency Discharge System Emergency discharge from the reactor safety valves is routed to steam jacketed high-pressure emergency blow-down drum. Discharges from the reactors shall be routed to low-pressure drum when shutdown is required. Polymer powder collected in the high-pressure drum is transferred to the lowpressure drum by steam and nitrogen mixture. After polymer powder de-activation by circulating steam and nitrogen mixture, the powder shall be discharged to containers. Gas vents from both drums are discharged to the Refinery flare system via cyclone. Refrigeration Unit Chilled water (diethyleneglycol solution in demineralized water) is prepared at the package supplied refrigeration unit where propylene is used as a cooling agent. Then chilled water is collected in the receiver under nitrogen blanket (to prevent corrosion) and pumped out to consumers. Condensate Return All steam condensate from the PP Plant is collected in condensate receiver and further pumped out to the battery limits. Some portion of condensate is cooled and supplied for expansion vapors condensing.


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Washing Oil Recovery This section is under intermittent operation. Mineral oil contaminated with TEAL is collected in the recovery vessel, liquid additive for TEAL neutralization is supplied to this vessel as well. Recovered oil is routed to incineration. Feedstock Preparation Polymer grade propylene (99.6% wt.) is pumped from the intermediate storage to the feed preparation section. In this section propylene is dried at molecular sieves for water removal and treated by catalyst for COS traces removal. These treatments are required, as polymerization catalyst is very sensitive to certain impurities in the feedstock. Silos, Extrusion, Pelletizing, Homogenization and Storage Polymer from the surge silo is metered to blender. Solid and liquid additives are also metered to the blender continuously. Polypropylene with additives from the blender is fed to the extruder. Fusible additives can be added to the extruder as well, if required. In the extruder polymer and additives are homogenized, gelled and filtrated. Pelletizing is performed in subaqueous pelletizer. Pellets are supplied by circulating water (demin water) to separator and further to air dryer. Dry pellets are fed by gravity to the classifier. On-spec polymer pellets are supplied to the feed drum with further air conveying to the homogenization and storage silos. Off-spec pellets are collected in the container. Water separated from the polymer is collected in the drum with further recycle to the pelletizer via cooler. Polymer homogenization and storage silos are provided to get homogeneous polymer batches. They serve as a buffer between production sections and bagging lines. Storage capacity enables to store the product within 5 days maximum. Bagging and Palletization Section Commercial polypropylene is bagged automatically into 25 kg PE bags. The bags are automatically palletized and wrapped by PE shrink film and transported to the warehouse by a forklift. The PP Plant comprises facilities for PE bags and shrink film production. Local Effluent Treatment


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Condensate and industrial and rainwater effluents, as well as floor washing effluents are collected in the waste water sump. Water from the sump after oil and polymer powder removal is to be pumped out to the Refinery treatment facilities. Effluents Disposal Effluents disposal section covered by the PP Plant is provided for effluents incineration. Spent oil from the PP Plant and non-diluted laboratory wastes (acetone, xylene, etc.) are to be combusted in the incinerator on intermittent base. Effluents are to be delivered to the incinerator in bottles by trucks. Flue gas filtration at the bag filter is provided for environmental protection purpose prior to flue gas discharge to incinerator stack.


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4.3

POLYPROPYLENE TECHNOLOGY SELECTION

4.3.1 Brief Overview of Polypropylene Industry Development Commercial polypropylene production has existed for over 40 years. “Montecatini” company (Italy) established the first commercial technology of polypropylene production in 1957. There was a solution slurry polymerization (gasoline was used as a diluent) taken place at the temperature of 55-60oC and pressure of 1 MPa with Ziegler-Natta catalyst of the first generation produced as per the reaction between metal-organic compound, mainly (C2H5)3Al, and TiCl3. Catalyst efficiency was less than 1 kg of polypropylene per 1 g of catalyst. In the 1960-s different companies developed modified polypropylene production technologies based on the “Montecatini” process. Technologies with first generation catalyst application are still widely used. In 1985 the share of polypropylene produced with the first generation catalyst application was found to be 42% of the total production of 2.6 MMTA in USA, 79% of the total production of 1.35 MMTA in Japan and 71% of the total production of 2.3 MMTA in Western Europe. This technology has serious shortages, mainly as follows: • Catalyst decomposition is required after polymerization due to propylene high sensitivity to the catalyst; • •

Atactic component removal from polymer (it’s concentration may be up to 20%) is required; High polypropylene production expenses compared to another thermal plastics due to higher capital investments for additional equipment required for catalyst deactivation.

Nevertheless, the share of solution slurry polypropylene technology was found to be 31% of worldwide polypropylene production in 1990 and 20% - in 1999. In 1970-1983 high efficient and stereospecific catalysts of the second (with catalyst efficiency of 10-15 kg PP per 1 g of catalyst) and the third (with catalyst efficiency of 20-30 kg PP per 1 g of catalyst) generations were developed. These catalysts apply TiCl4 on MgCl2 carrier with Al-alkyl and organic additive for polymer isotacticity control. By the middle of 1980-s different companies implanted the technologies based on that catalysts. Propylene polymerization with high efficiency catalyst applications is provided either as a bulk or gas-phase polymerization. 4.3.2 Justification of Polypropylene Technology Selection


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Polypropylene processes involve two key ingredients, the actual physical process components/mechanics and the catalyst system. Of the two components, the catalyst system is probably the more important, as exhibited in the schematic below. Physical Process + Catalyst = Product Good Process + Bad Catalyst = Poor Product Poor Process + Excellent Catalyst = Acceptable Product Good Process + Good Catalyst = Good Product The physical process generally identifies polypropylene processes, allowing for categorization of the different process types. There are three basic processes for making homopolymer or random copolymer polypropylene. These are the bulk slurry (loop reactors), bulk slurry (continuous stirred tank slurry reactors) and gas phase reactor processes. If an impact copolymer is desired, an additional gas phase reactor (possibly two reactors) is added to the process sequence. Polypropylene can be produced in three forms: isotactic, syndiotactic and atactic. Isotactic polypropylene is a polymer in which the propylene units are attached in a head to tail fashion and the methyl groups are aligned on the same side of the polymer backbone. This highly crystalline structure gives the polymer stiffness, good tensile strength and resistance to acids, alkalis and solvents. Syndiotactic polypropylene has methyl groups on alternating sides of the polymer chain in a regular pattern. The resultant polymer has low crystallinity and is difficult to make. Some syndiotactic polypropylene has been made recently using a metallocene catalyst. No significant commercial use for this polymer has been identified. Atactic polypropylene is a non-crystalline polymer that is too soft and rubbery for most applications, similar in appearance and properties to an uncured elastomer. Each time the desired isotactic polypropylene is produced, some atactic polypropylene is also made. The objective is to keep the atactic component of the polypropylene to a minimum. Atactic polypropylene that is removed from production is either sold for use in hot melt adhesives, roofing and other specialized applications or incinerated. Significant changes in isotactic polypropylene technology occurred during the 1980s that broadened its use in many applications. The most important change in technology has been the development of high-yield and higher selectivity catalysts. These catalysts have essentially eliminated the need for atactic and catalyst residue removal. Polypropylene homopolymer has high stiffness, good clarity, low density (0.900 0.906 grams per cubic centimeter), chemical resistance, and relatively high temperature resistance. However, the homopolymer has poor impact resistance, especially at low temperatures. Polypropylene copolymers are produced to improve properties for certain applications. The use of metallocene catalysts in the manufacture of polypropylene is being developed. As with polyethylene, metallocene catalysts appear to be the next generation of catalysts. Several companies have seen significant differences in properties while using these catalysts in the pilot plant and in selected full-scale


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production runs. The following improvements in using metallocene catalysts have been noted: • • • •

Lower melting point of the polypropylene resin The incorporation of new comonomers, such as hexene-1 Higher clarity in reactor product Ability to achieve resin properties in reactor (i.e., higher melt flow) without the use of the CR technique

A key alliance has been formed by ExxonMobil and Basell to further the development of metallocene PP. ExxonMobil brings strength in the development of metallocenes in fiber applications, whereas, Basell (through its Targor background) has developed strength in injection molding applications. ATOFINA is also a strong player in the PP metallocene arena. The key licensors and their respective processes are as follows: Basell “Spheripol” Dow “Unipol” BP “Innovene” ABB Lummus “Novolen”

Loop slurry reactor Gas phase reactor Gas phase reactor Gas phase reactor

Others that offer licenses, but have not been very active in new capacity additions are: Mitsui “Hypol” Sumitomo

Gas phase reactors Gas phase

While mentioned, the Sumitomo process is generally part of a Sumitomo business venture. Borealis has also developed a process based on its polyethylene technology. In addition to the identified processes, Basell has announced a new polypropylene process called the “Spherizone” process that is available for license. The development of this multi-zone circulating reactor process (MZCR) was driven by a desire to accomplish bimodality in a single reactor. The MZCR technology uses two separate but connected reactors. There are several reaction zones, some having variable residence time. Basell claims that this process can enhance rigidity, impact resistance and improve the properties of polypropylene. In doing so, the process can produce a larger product range including homopolymer, monomodal, bimodal, random and twin random copolymers (bimodal capability has potential polyethylene use). Product properties, enhanced by MZCR, are identified as improved stiffness, improved thermal resistance, better melt strength and softness. No independent (non-Basell ownership) licensees have been announced for this new process. Indelpro (Basell joint venture) in Mexico has announced a new 350,000 metric ton per year Spherizone process plant to startup in the last half of 2006. Basell appears to have only a couple of units with this capability in its operations.


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Major PP Expansions By Process (2003-2006) Spheripol 36%

Unknown 9% Other 2%

Innovene 11%

Novolen 14%

Unipol 28%

7.2 Million Metric Tons

In examining the technologies selected for startup in the 2003-2006 time period, the Spheripol process leads the group with 36.0 percent of the total, followed by Unipol with 28.0 percent. Novolen and Innovene have had some success as well, as illustrated in the pie chart. If you expand the time period from 1998 to 2008, Spheripol’s share increases to 39.0 percent, but Unipol is slightly less at 24.0 percent. The other category is bigger with a wider time period representing the earlier use of Mitsui and Chisso technologies.

Major PP Expansions By Process (1998-2008) Unknown 10% Other 9% Spheripol 39% Innovene 9%

Novolen 9%

Unipol 24%

18.3 Million Metric Tons


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For selection of a polypropylene production technology (homopolymers) at the proposed JVC PP facility, CMAI has studied the publicly available information from the 5 Licensors as well as its own internal database... As indicated, the most widely used bulk slurry polymerization technology is the SPHERIPOL process by “Basell” Company and HYPOL/HYPOL-II process by Mitsui Company. In these processes polymerization takes place in loop reactors with slurry circulation by integrated pump. However, consumption and utility features of the SPHERIPOL process are currently higher compared to the HYPOL-II process. Mostly widespread gas-phase technologies differ by the type of reactor applied and agitator design: • Polymerization in UNIPOL process by “Union Carbide” Company takes place in fluidized bed reactor without agitator; • •

Polymerization in NOVOLEN process by “BASF” (now “ABB Novolen Division GmBH”) Company takes place in vertical reactor with mechanical agitator; Polymerization in INNOVENE process by BP Company takes place in horizontal reactor with mechanical agitator.

Fluidized bed UNIPOL process is found to be the most attractive gas-phase process as heat and mass exchange is provided under better conditions. Probability of “hot spots” formation is much less compared to the stirred bed technologies and this improves the quality of produced polymer. By 2000 basic technologies of above worldwide leading polypropylene production companies did not change greatly. However, polypropylene producers are constantly improving catalyst and process technologies in order to improve polymer competitiveness, product quality and to extend the range of produced polymers. Serious successes have been achieved in regard to quality improvement of photopolymers with high Melt Flow Rates. All leading polypropylene producers are able to produce all grades of homopolymers required at the market with some differences in property ranges (e.g. Melt Flow Rate). For better demonstration and in order to have a concise approach to the selection of the technology licensor, a table format of all the available data of the proposed technologies follows: •

Polymerization performance

•

Catalysts and chemicals cost and performance

•

Equipment characteristics


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•

Raw materials, catalyst, additives and utilities consumption per 1 tone of produced polypropylene

•

Quality of produced polymer

• •

Number of gaseous emissions, liquid effluents and solid wastes, Other features.

Item No 1 2

BASELL

ABB

BP

Mitsui

SPHERIPOL 4

NOVOLENE 5

INNOVENE 6

HYPOL - II 7

Gas phase polymeriz ation

Bulk polymerizati on

Gas phase polymerizati on

Gas phase polymerizati on

Bulk polymerizati on

Fluidized bed

Loop reactor with circulation pump

Vertical stirred bed

Horizontal stirred bed

Loop reactor with circulation pump

By gas

By circulation pump

Mechanical

Mechanical

By circulation pump

By gaseous propylen e and liquid propylen e partial vaporizati on

By water (reactor jacket)

By monomer circulation and liquid propylene vaporization

By monomer circulation and liquid propylene vaporization

By water (reactor jacket)

- Pre-polymerization (yes / no)

No

Yes

No

No

Yes

- Preliminary blending of the components (yes / no)

No

Yes

No

No

Yes

2 Process characteristics - Type of the process

- Type of the reactor

- Way of mixing

- Way of heat removal

Union Carbide UNIPOL 3


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Item No 1 3


BASELL

ABB

BP

Mitsui

SPHERIPOL 4

NOVOLENE 5

INNOVENE 6

HYPOL - II 7

80 – 220

40 – 400

60 – 360

65 – 280

40 – 275

- Number of reactors in one line required for the capacity of 180 MTA

1

2

1

1

2

- Polymerization reactor capacity, m³

200 – 300

45 x 2

75

100 – 120

45 x 2

- Yearly reactor treatment from polymer required (yes / no)

Once per 5 years

No

N/A

N/A

No

- Operability, % (plant operation, hours per year, min)

95 (8200 hours)

97.7 (8440 hours)

N/A (over 8000 hours)

97 (8380 hours)

N/A (N/A)

- Required time for polymer grades changing, hours

1–4

1–3

2–4

1–3

1–3

No

Yes (for some polymer grades)


No


3.5

4.5

3

2

3.5

- Temperature, ° C

60 – 70

80

80

70

70

- Residence time, hr

1.1 – 1.4

1.5

1 – 1.2

1.4 – 1.5

1.5

2 Process flexibility

3.1

- Capacity of one line, MTA

- Possibility of polymer product production without extrusion (yes / no) 3.2

Process parameters - Pressure, MPa


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Item No 1

2

3.3

Union Carbide

BASELL

ABB

BP

Mitsui

UNIPOL 3

SPHERIPOL 4

NOVOLENE 5

INNOVENE 6

HYPOL - II 7

- Reactor

- Reactor with circulation pump

Vertical stirred reactor

- Horizontal stirred reactor

Reactor with circulation pump

- Cocatalyst supply pump

- Co-catalyst feed pump

- Co-catalyst feed pump

- Cocatalyst feed pump

- Cocatalyst feed pump

- Catalyst injection system





- Recycle gas compressor

- Recycle gas compressor

- Equipment - Unique items: (applied to specific technology only)

- Recycle gas compress or 3.4

Catalyst - identification

SHAC 201, 205, 302

MCM 1

PTK 4

GPCD

HY-HS

- morphology

Controlled

Controlled

Uncontrolled

Controlled

N/A

- catalyst vendor

Own

Own

Purchased

Purchased

Own

- cost, $ /t of PP

20 – 23 (catalyst+ cocatalyst+ donor)

11 – 12 (catalyst+ cocatalyst+ donor)

13.1 (catalyst+ co-catalyst+ donor)

17.1 (catalyst+ co-catalyst+ donor)

13 (catalyst+ cocatalyst+ donor)


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Item No 1 4


BASELL

ABB

BP

Mitsui

SPHERIPOL 4

NOVOLENE 5

INNOVENE 6

HYPOL - II 7

1.013

1.002 – 1.005

1.010

1.015

1.005

- catalyst, g /t of PP

28.5 – 40

25 – 30

50

33

45

- co-catalyst, kg /t of PP

N/A

0.14 – 0.20

0.37

N/A

0.08

- donor, kg /t of PP

N/A

0.006 – 0.010

0.0143

N/A

0.026

- hydrogen, nm³ /t of PP

1.12

1.12 – 5.6

1.5

0.6

1.8

- power, kW / t of PP

270

260

320

320

320

- steam, kg / t of PP

255

300 – 305

300

100

LP310 HP 90

- cooling water, m³ /t of PP

60 (115 max)

120 – 130

110

100

100

- nitrogen, nm³ /t of PP

50

20 – 30

50

40

60

- air / nm³ /t of PP

35

25

N/A

40

12

- demin. Water, m³ /t of PP

0.2

0.02

0.2

0.2

0.2

2 Raw materials and utilities consumption

4.1

4.2

- propylene, t /t of PP

Utilities


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Item No 1 5


BASELL

ABB

BP

Mitsui

SPHERIPOL 4

NOVOLENE 5

INNOVENE 6

HYPOL - II 7

- product range (molding, extrusion, film, fibers), number of grades

35

54

29

47

34

- particle size, mm (from reactor)

0.8

0.3 – 5

0.8

0.7

N/A

- isotacticity index (xylene insolubles), %

94.5 – 99

90 – 99

90 – 99

Up to 98

96 – 98

- melt flow range, g/10 min

0.6 – 35

0.2 – 40

0.5 – 50

0.5 – 38

0.5 – 40

- flexural modulus, MPa

1100 – 1500

2400

1400 – 2400

1230 – 1770

800 – 2000

- melt temperature, °C

N/A

N/A

163 – 165

95 – 130

N/A

2 Polymer specification


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Item No


BASELL

ABB

BP

Mitsui

SPHERIPOL 4

NOVOLENE 5

INNOVENE 6

HYPOL - II 7

33800

150000

30000

40000

110000

- fugitive emissions;

0.06

0.01

0.026

NA

0.02

- process vents

0.09

N/A

N/A

0.02

0.002

6.3

Liquid effluents, kg /t of PP

0.03

0.037

0.13

0.1

0.095

6.4

Contaminated water to Local treatment facilities, kg /t of PP

N/A

85 – 178

170

20

80 – 280

6.5

Solids, kg /t of PP - emissions to the atmosphere;

0.01

0.005

0.04

N/A

N/A

- solid wastes (offspec, product) spent catalyst and dryer beds

N/A

N/A

0.06

0.3

0.017

1 6

2 Emissions and wastes:

6.1

Max. emergency discharge to the flare, kg/hr

6.2

Gaseous emissions to the atmosphere, kg /t of PP


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Item No

Union Carbide UNIPOL 3 135 x 135

BASELL

ABB

BP

Mitsui

SPHERIPOL 4 250 x 100

NOVOLENE 5 150 x 120

INNOVENE 6 180 x 90

HYPOL - II 7 140 x 50

24 – 32

N/A

27

30

N/A

4 per shift

6 per shift

5 per shift

5 per shift

6 per shift

- Maintenance;

8

3

8

3

6

- Common;

7

-

7

-

-

- Laboratory

2 per shift

3 per shift

3 per shift

-

1 per shift

1 7

2 Unit overall dimensions, M x M

8

Project duration, months

9

Personnel staff - ISBL;

CMAI has developed a brief listing of grade properties for the different producers by the major applications. Injection Molding Resin Property Comparison Basell Novolen Dow MFR (g/ 10 min) 22 17 20 Density g/ cc 0.905 0.9 0.9 Flexural Modulus MPa 1150 1400 1725 Tensile Strength MPa 29 33 36 Notched Izod Impact Strength KJ/m2 2

Innovene 25 0.907 1200 2.5

Mitsui 17 0.9 1370 34.3 2

MFR Density Flexural Modulus Tensile Strength Elongation

Fiber Resin Property Comparison Basell Novolen Dow (g/ 10 min) 25 25 g/ cc 0.9 0.9 MPa 1300 1300 MPa 30 30 % >100 >50 -

Innovene 18 0.906 1380 29 100

Mitsui 21 0.9 1370 31.4 650

MFR Tensile Strength Elongation Tensile Modulus

Raffia Resin Property Comparison Basell Novolen Dow (g/ 10 min) 1.7 3.5 1.4 MPa 32 35 35 % >100 >50 MPa 1500 1500 1590

Innovene 3.2 36 >200 1280

Mitsui 2.5 44.1 850 1370

Thermoforming Property Comparison


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MFR Flexural Modulus Tensile Strength

(g/ 10 min) MPa MPa

Basell 2 1400 34

Novolen 2.4 900 25

Dow 3.2 1600 35

Innovene 3 1800 39

Mitsui 2.8 1370 47.1

Melt Flow Rate (MFR) is a value obtained when a product is tested on an extrusion plastometer. MFR provides a measure of the amount (in grams) of material that flows through an orifice of a specified size in a specified length of time (10 minutes). The procedure is described in ASTM D 1238. The higher the measured quantity, the easier the material flows under a given temperature and pressure. This index is inversely related to the viscosity (resistance to flow) and the average molecular weight of the material. In other words, the higher the viscosity or molecular weight, the lower the MFR. Flexural Modulus: The ratio, within the elastic limit, of the applied stress on a test specimen in flexure, to the corresponding strain in the outermost fibers of the specimen. Tensile strength: Measures the force required to pull something such as rope, wire, or a structural beam to the point where it breaks Points to consider when selecting a new process technology Process flexibility – broad product range: All of the producers have the capability to make the same grade products. The Basell has a greater control over product specs due to the loop process followed by the gas phase. Based on the technology, Basell has the capability to manufacture the broadest product slate. Each of the technologies are capable of producing impact grade PP. Target market – Needs: Since the primary market for polypropylene will be Vietnam and Asia, the brand value for the product is very important. Basell, is established players in this market, with Dow brand gaining increasing recognition. Innovene has also been aggressively pursuing business in the region and have set up licensing agreements in China and Malaysia. Catalyst development: Basell has been ahead of its competition in the polypropylene market in area of catalyst developments. Dow also making strides in this area. Innovene is disadvantaged here since their catalyst development is not “in-house” Process transition time: Innovene Process has the fastest grade transition time and the lowest off spec material produced due to the nature of the plug-flow reactor process on the front end. Basell can transition fairly quickly since having the advantage of the loop reactor on the front end. Size of the plant: Each of the producers is capable of setting up a world scale Polypropylene plant of the discussed size.


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Does the process have the latest product and process advances: polypropylene process is standard and CMAI does not see any break through.

The

Reasonably low production costs: the operating costs for all the processes are fairly similar. The operating costs tend to be slightly lower for the gas phase technologies. Lower capital costs: Basell process is more capital intensive than the others. Dow and Innovene process are comparatively lower in terms of capital investment. However, if JVC choose to make impact co-polymers in the future, the capital cost of Dow and Innovene processes increases significantly. Licensor offers resins for market seeding: Basell operates several PP plants around the world and hence supplying resin for market seeding will be available. ABB is only a provider of technology and not a manufacturer, and hence resin provision for market seeding may be difficult.. Innovene will have facilities in China that could supply the resin. Licensor offers technology support before and after completion of the plant: Since Basell have several units they operate in various regions of the world, CMAI expects them to provide the best licensing support. ABB is only a provider of technology and not a manufacturer, and hence licensing support will be limited. What is the licensor attitude in negotiations: To be determined by JVC during negotiations. Since these technologies yield fairly similar returns, it is difficult for CMAI at this stage to identify one particular technology. JVC will have to evaluate and discriminate between the licensors based on the hard data and bids they receive. Having said that however, compared to the main competitors, the “Spheripol” technology is keeping its leading position in such fields as process flexibility, product quality and economic performance features. This technology provides a possibility to obtain wider range of products of different specifications and higher versatility. Compared to other technology reviewed in this Feasibility Study, the “Spheripol” technology has the following advantages under comparable investment and operational costs: •

Volume of the whole reactor is used effectively in the bulk polymerization, while separation section for polymer separation from circulating monomer is required in gas phase technologies. This eliminates possible product pollution during discharge as there is no interface in the reaction volume;

•

Heat transfer efficiency in loop reactors is higher than in gas phase ones, as loop reactors provide higher heat transfer velocities as well as more equilibrium heat

•

removal from polymerization particles. This provides reaction temperature better control and stability (no “hot spots”);


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TECHNOLOGY MATRIX In order to help evaluate the different polypropylene processes, CMAI has developed a matrix that compares they key polypropylene processes against key parameters, including some licensing benefits.

Technology

Impact

Basell “Spheripol”

Yes

BP “Innovene”

Yes

ABB “Novolen”

Technology Type

World Scale Plant Size

Catalyst Availability

Relative License Fee

Licensor Support for Seeding Market

400 kt

Full range + metallocene (2)

High

More than average

350 kt

Full range + metallocene

Moderate

Some

Yes

BS w/ GP for impact GP w/ GP for impact(1) GP w/ GP for impact

400 kt

Catalyst purchased

Moderate

Likely limited

Dow “Unipol”

Yes

GP w/ GP for impact

350 kt

Catalyst supplied by Shell

Moderate

Some

Mitsui “Hypol”

Yes

GP w/ GP for impact

300 kt

Own catalyst

Moderate

Likely limited

Technology

Licensor Off Take of Production

Plant Capital Investment (4)

Engineering/ Design Support

PP Product Capability

Cost Competitivenes s Factor

Process Plant in Region

Basell “Spheripol”

More than others

$550/annual MT

Excellent

Broad

100

Yes

BP “Innovene”

Some – ltd time

$515/annual MT

Excellent

Broad

99

No

ABB “Novolen”

Low Amount

$550/annual MT

Good

Limited

103

No

Dow “Unipol”

Some – ltd time

$525/annual MT

Excellent

Broad

101

Yes

Mitsui “Hypol”

Some – ltd time

$610/annual MT

?

Limited

105

Yes

(1) BP uses a second reactor for impact copolymers that is the same size as the first reactor. Might lend itself to two line capability with material flow flexibility. (2) Likely the strongest metallocene catalyst position of licensors. Producers with strong PP metallocene position are ExxonMobil and ATOFINA in addition to Basell (Targor work before Basell merger). (3) Only used internally so far – no licensees. Fallout of HDPE technology. (4) Fixed investment estimate including ISBL and OSBL.

This section of the document ing was compiled by CMAI, it’s use is conditioned upon the users agreement not to reproduce the document in whole or in part, nor the material described thereone, nor to use the document for any other purpose other than specified in writing by CMAI

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•

Loop reactor design features provide more flexibility in the PP Plant capacity increasing. Capacity increasing in case of gas phase polymerization requires serious engineering study because of more stringent requirements to the reactor design and limitations in the field of heat transfer;

•

Isotacticity and melt flow controls are more efficient in loop reactors compared to fluidized bed or horizontal/vertical stirred bed reactors as co-catalysts and hydrogen are injected to highly turbulent circulating stream (polymer slurry in liquid monomer). This provides homogeneous and stable polymerization conditions;

•

The “Spheripol” technology makes it possible to provide fast changing in product range without operating cost increasing. Normal experience for “Spheripol” plants is to produce 15-18 grades of product per month. The share of off-spec product in case of homopolymers production (off-spec product could be sold as well) is found to be 0.2%.

•

Due to high catalyst activity, providing high yield of polymer, residual catalyst content in polymer (and metal content as a result) is very low. This results in better color of product (low yellowness). Moreover, polymer powder treatment with direct steam provides low soluble and fugitive components content in the polymer. This results in good polypropylene product application in food and medicine industries;

•

In case of controlled morphology catalyst application, production of polymer powder with particle sizes from 0.3 to 5 mm is possible without plant configuration changing as particle sizes do not impact on fluidization efficiency in the loop reactors. Each catalyst produces the polymers with very narrow particle size distribution and uniform polymer morphology. Spherical polymer powder made from the polypropylene with very high or very low melt flow rates could be used with the additives in non-pelletized form in extrusion applications;

•

The “Spheripol” technology provides higher reliability and operability compared to the gas phase technologies. This is resulted from the following: low reliable reciprocating compressors (their failure results in the whole plant shutdown) are not used in bulk polymerization; controlled morphology of the polymer and process features make it possible to obtain easily transported solid polymer where limitations in performance ranges due to availability of “hot spots”, “dead volumes”, plug starting point and risk of sticky product obtaining are absent at all process stages;

•

Broad range and high quality of products produced as per the “Spheripol” technology makes it possible to keep leading positions at worldwide polypropylene markets in the “high-quality” applications. These applications for homopolymers are to be as follows: Production of biaxially oriented polypropylene (BOPP) film in high-speed tenters;

-


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-

Production of single and multi-layer films in high-speed equipment;

-

Production of fine-fiber filaments and non-woven fibers;

-

Production of food, agriculture and medicine applications, including one-time syringes; Production of very rigid polymers (with Flexural Modulus of 2300 MPa) for thermoforming applications.

-

Polypropylene Technology Recommendation JVC’s final choice of technology will be driven by: • Meeting target market needs • Primary grade profile • Licensing support • Investment cost • Operating cost With these qualities in mind, CMAI would recommend that JVC utilize Basell Spheripol for the proposed Vietnam unit for the following reasons: The market acceptance of Basell resins will be very good The cost position / grade capabilities are similar to competitive processes Basell have developed a strong internal knowledge base Market seeding can be done via utilization of material from other Basell units Basell has both in-house catalyst and technical support 4.4

OFF-SITE FACILITIES

4.4.1 General This Detailed Feasibility Study is developed with Polypropylene plant maximum integration with the Refinery and application of the Refinery off-site facilities for PP plant needs. PP plant supply with power, steam, cooling and demineralized water, plant air, instrument air, fuel gas and other utilities is provided to be fed from the Refinery offsites that shall be further extended with accounting of the PP plant demands, if required. Moreover, Refinery flare system, laboratory and catalyst/chemicals store will be used as well. Based on above, the PP Complex shall comprise the following off-site facilities: • Nitrogen and Oxygen separation station with oxygen bottles filling, •

High-pressure nitrogen receivers,

•

Polymer grade propylene intermediate storage with pumps.


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Propylene from the Refinery Propylene Recovery Unit will be used as a feed for PP Plant. Moreover, polymer grade propylene shall be imported as well. Propylene imported via the Refinery Jetty Topsides shall be supplied to the intermediate storage spheres via propylene export line and tanker loading/unloading system in reverse direction. Imported propylene supply from the Jetty Topsides to Product Tankage spheres via the propylene export pipeline shall be done by pumps installed on board the ships. Based on the size of the pipeline and generally accepted transferring velocities a capacity of propylene pumping by the pipeline will be 10% of the Product Tankage pump capacities. Therefore, in case of propylene import on regular base special pumps shall be provided at the Product Tankage. In case of propylene import on intermittent base the pumps at the Product Tankage could be used, but in this case pumps will be bypass operated at 90% and this is not expedient from economic point of view. Spheres capacity is enough to receive imported propylene. 4.4.2 Nitrogen and Oxygen Separation Station with Oxygen Bottle Filling Local cryogenic oxygen and nitrogen separation station shall be provided to meet the demand of the PP Complex in gaseous nitrogen. The station capacity by nitrogen conforms to PP Complex continuous nitrogen consumption of 1125 nm3/hr. Air separation process results in the following products: • Gaseous nitrogen to PP Plant under pressure of 8 kg/cm2g and to high pressure receivers under pressure of 200 kg/cm2g • Gaseous oxygen to oxygen bottles filling under pressure of 200 kg/cm2g. The station is package designed. This provides its high readiness to installation. In accordance with the assignment oxygen bottles filling section is provided. This section capacity shall be 50-60 bottles per hour according to the station capacity and bottle volume (40-50 liters). Oxygen bottle filling section shall provide the following: • • •

Filling of bottles Empty bottles unloading from consumer truck Bottle rejection


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•

Filled bottles loading to consumer trucks

The station shall be operated all day round in 3 shifts. Oxygen bottles shall be filled when air separation section is under operation. Oxygen bottles dispatch to consumers is provided in one shift. 4.4.3 High Pressure Nitrogen Receivers The receivers are provided to meet intermittent peak demand in both, low-pressure nitrogen and high-pressure nitrogen (which is required for 1000 m3 spheres pressure testing). There are 10 receivers with each receiver capacity of 25 m3 and pressure of 200 kg/cm2g. Total receivers capacity provides nitrogen storage for 1.6 days based on continuous consumption of low-pressure nitrogen as 1125 nm3/hr. Supply of high-pressure (33 kg/cm2g) and low-pressure (8 kg/cm2g) nitrogen is arranged via pressure controllers. 4.4.4 Propylene Intermediate Storage with Pumps Intermediate polymer grade propylene storage is provided to feed the PP Plant. Two spheres with each sphere capacity of 1000 m3 are provided to store the propylene. Total capacity of the propylene intermediate storage is 2000 m3 equal to propylene storage capacity for 1.85 days based on PP Plant design capacity of 180 MTA. Each sphere shall provide the following: • • • •

To get propylene from the Refinery Propylene Recovery Unit To get import propylene from the Product Tankage of the Refinery To get pump spillback streams To pump out propylene to the Polypropylene Plant.

The spheres are connected with a surge line. Safety valves with gas phase discharge to the Refinery flare system in case of sphere internal pressure increase shall be provided on each sphere. Quick action shut-off valves with automatic and remote control shall be provided at propylene inlet/outlet lines outside bund wall. Two sealed pumps (1 operating and 1 spare) are provided for propylene supply to the PP Plant. Each pump capacity conforms to design capacity of the PP Plant equal to 180 MTA and is to be 45 m3/hr.


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A spillback line shall be provided at the discharge of each pump for pump capacity control. Furthermore, emergency pumping from one sphere to another one could be done by this spillback line application. Pumps shall be located under shelter. Fixed gas detectors shall provide continuous monitoring of explosive vapor concentration at spheres and pumps location area of the intermediate storage. Deluge system is provided for spheres fire fighting. 4.4.5 Steam and Demineralized Water Supply LP steam in amount of 6 t/hr (8 t/hr maximum) shall be supplied to the PP plant from the Refinery thermal system. De-mineralized water in amount of 4.5 m3/hr (15 m3/hr maximum, during 2 hours) shall be supplied to the PP Complex from the Refinery. Pressurized chilled steam condensate in amount of 8 t/hr shall be discharged from the PP plant to the Refinery. Thermal supply shall be fed from the Refinery Thermal Power Station. Thermal Power Station expansion in relation to steam and demineralized water production and condensate collection is not required. 4.4.6 Water Supply System The following water supply systems are to be provided ISBL Polypropylene plant: • • • •

Potable water Fire water Fresh water Cooling water

Potable Water System Water of potable water quality is used for domestic needs of PP plant personnel (washers and WC) and for Oxygen/Nitrogen station laboratory. Drinking water shall be supplied in bottles. Potable water consumption is to be 2.1 m3/hr or about 7 m3/day. Potable water to the production system shall be supplied from the Refinery system. Fire Water System Refer to Section 4.9.


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Fresh Water Supply Fresh water is used intermittently for floor washing, equipment washing prior to maintenance and for fire tanks filling. Fresh water to the production system is supplied from the Refinery system. Cooling Water System Cooling water is used for the process equipment cooling. Chilled cooling water is supplied to the production system from the Refinery system. Cooling water return is provided to the Refinery system as well. Maximum cooling water consumption is to be 3835 m3/hr or 92040 m3/day. Existing Cooling Water Unit (031) at the Refinery shall be designed to meet the requirements of the PP plant.. 4.4.7 Sewer systems The following sewer systems shall be provided at the PP plant area: • • •

Domestic sewage Industrial and Storm water sewage Rainwater sewage (refer to Section 4.5 “Site Plot Plan”)

Domestic sewage Domestic waste water from the PP Complex facilities shall be collected and discharged to septic with their further delivery to the Refinery treatment facilities. Waste water quantity conforms to potable water consumption. No additional capital investments are required for the Refinery treatment facilities expansion. Industrial and Storm Water Sewage Industrial waste water from the process equipment (e.g. pump seal leaks, etc.), floor washing waste water, water from equipment and piping washing prior to repair shall be discharged into the industrial and storm water sewer system. Rainwater from curbed areas with the process equipment where contamination with hydrocarbons and polymer powder is possible shall be also discharged into this system. All the effluents discharged into the industrial and storm water sewage shall be locally treated in the ISBL sump. The sump is to be RC buried tank. Effluent specification at the sump outlet is to be as follows: • Oil products – not more than 4 mg/L


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•

Suspended solids – not more than 40 mg/L.

Industrial and storm water effluents shall be discharged into the Refinery industrial and storm water sewage. No additional capital investments are required for the Refinery treatment facilities expansion. 4.4.8 Pipe racks Piping at the PP plant area (including off-sites) shall be routed on the pipe racks having elevation of 6.0 m from site area level, rack spacing of 12.0 m and crosspiece width of 6.0; 4.8; 2.4; 1.2 m. Additional elevated structures might be required for flare header routing. Line route turns and П–shape expansion pieces shall be used for thermal expansion compensation. Line route from the Refinery pipe track to coordinate N.1400 is done in trench on pipe supports having width of 6.0 m. The flare header is routed on the pipe rack with rack spacing of 12.0 m. Mainly carbon steel pipes and carbon steel flanged valves shall be used for piping systems. Steel platforms with stairways shall be provided for valve maintenance on the pipe racks. 4.5

SITE PLOT PLAN

4.5.1 Site Area Selection In accordance with item 21.2 of Quang Ngai Protocol of Meeting on clarification of scope of work dated July 14-21,2000 it is suggested to review 2 options of PP Complex construction area from the Western side of the Refinery (see figure “Options of PP Complex Location”). The options of certain area locations from the northern and the southern parts of existing road going along N.1416 coordinate were studied. Site Area No.1 (300 x 500 m2) is adjacent to the Western part of the Refinery area and it is located in close proximity to the main process units, so this area can be viewed as an expansion of the Refinery process area. Location of the PP Complex at this area provides direct proximity to the Refinery PRU and to utilities and off-site facilities as well. This provides a possibility to shorten the length of process piping and another engineering works. However, about 80 houses and rice fields are currently located at the Site Area No.1. There are two schools, a market, and a channel also located in that Area. Those


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elements affect directly to the Site preparation schedule of the PP Complex and raise the budget cost. Site Area No. 2 (400 x 385 m2) is also adjacent to the Western part of the Refinery area and it is located in close proximity to Refinery Tankages - the southern part of existing road, this area also can be reviewed as a continuation of the Refinery process area. Site Area relief is characterized with hills and mountains and the elevations are varying from 17.00m to 2.00m, part of the area is covered with scrubs that is why appropriate site preparation activities are required Location of the PP Complex at area No. 2 provides adjacency to the Refinery PRU and to utilities and off-site facilities, as well. This provides an ability to save the length of process piping and other engineering networks. Although, the length of process piping and other engineering works to the PP Complex in this case will be increased at 20% (average). This Area is considered to be the best option because of speed with which the site preparation process could be completed, thereby reducing the investment cost. By studying of all options of the PP Complex location, the Site Area No.2 has been found to be the most favorable option. This option is not much further from refinery and maintains shorter piping lengths as does Site Area No. 1, however Site Area No.2 reduces the scope of earth works and reduces the total investment cost of the PP Complex construction.

4.5.2 Plot Plan PP Complex area plot plan is developed based on PetroVietnam Standards, PetroVietnam Refinery plot plan, Licensors recommendations regarding PP Plant overall dimensions and with accounting of some off-site and administration facilities. 4.5.2.1 Location of the PP Plant facilities Location of PP Plant facilities at the new area is provided within the following limits: No.1: X=1697600/Y=588300 No.2: X=1697710/Y=588520 No.3: X=1697350/Y=588770 No.4: X=1697200/Y=588460 Site geological structure is represented by clays, engineering and geological investigations are provided with Client’s fax No. 113/VR-GSKT dated October 30,2000. Civil coordinate network is taken as 200 x 200 m.


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Polypropylene Production Complex comprises the following facilities: • PP Plant • Propylene Intermediate Storage • Control/Substation Building All designed buildings and structures are shown on the Plot Plan drawing. RC wall shall be provided over above ground group of spheres periphery. 4.5.2.2 Vertical leveling, Water removal Prior to the construction the following area preparation activities shall be performed: • Elimination of existing village with 40 houses • Site area mine clearing • Site area de-scrubbing Hills and mountings are located at the site area. In order to perform rough vertical leveling hills and mountains shall be cut at 10m in average (up to the area design elevation). Soil from hills and mountains cutting shall be used for the backfilling at the remaining area. Soil at the construction site area shall be compacted. Earthworks shall be performed up to the absolute elevation of +07.00m. Scope of the earthworks for site area preparation is to be as follows: • Soil excavation – 211000 m3 approx. • Backfilling during leveling – 504200 m3 approx., with accounting of cut soil. Vertical leveling elevations of the PP Plant facilities, group of spheres and individual facilities are taken with accounting of process pumping and air conveying system and to provide water removal and engineering services and commercial polypropylene shipment. Road beds are to be elevated above surrounding areas. In average, roads shall be located at 0.6 m above the leveling of surrounding quarters. Road heights can be increased at cross points with on-ground piping. Annular water passage PC culverts with the culvert heads shall be used for water passage under the roads at the cross points. Culvert size varies from 1.0 to 1.5 m depending on rainwater flow; culvert slope is taken as 5% minimum. Rainwater removal from the unbuilt areas shall be provided as an open type removal via the trenches having slope towards the Refinery water removal trenches. A slope of water removal trench bottoms is to be 2%. Width of side ditch bottoms is taken as 0.4 m, slopes are taken as 1:1.5. Water removal trench bottoms and slopes are to be reinforced with cement concrete. 4.5.2.3 Roads Polypropylene Complex area is divided in quarters as per the scheme that provides roads through passage. This approach provides optimum conditions for free traffic of fire and gas rescue vehicles in case of emergency and/or fire and trucks for pallets and oxygen bottles transportation.


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Turn radii at road cross points are to be taken as 8 m over the road side. Road lateral profiles shall field-type profile with road shoulders. Lateral slope of 2% for the road itself and 4% for the road shoulder shall be taken for all roads. Roads inside the quarters shall be considered as minor roads. 4.5.2.4 Footpaths and passage ways Paved footpaths having width of 1.0 m shall be provided for personnel passage in unbuilt areas where required. RC cross bridges over the water removal trenches shall be provided where required. Passage ways shall be provided to all buildings and facilities. 4.5.2.5 Engineering services and paving Bottom and slopes of water removal trenches inside and outside embankments are to be covered with cast-in-situ concrete. Design of plant road pavement shall be as follows: • Hot-laid asphalt concrete, H(height) = 50 mm, • Crushed stone, H = 200 mm, • Sand, H = 250 mm, • Geotextile membrane, • Compacted soil. Design of the polypropylene loading site pavement shall be as follows: • B25 concrete, H = 200 mm, with steel reinforcement from bottom and top, • Crushed stone base (0-30 mm fraction), H = 100 mm, • Sand base, H = 100 mm, • Geotextile membrane. Monolithic concrete steps shall be provided at the road slopes. Cross bridges shall be provided at footpath crosses points with side ditches. When road height exceeds surrounding areas at more than 0.6 m, road guarding made from the carbon steel (grade 40) 4” pipes shall be provided. 4.5.2.6 Engineering networks In general piping shall be above ground. Sewage piping and firewater piping shall be underground. Electrical cables shall be routed underground in trenches. 4.5.2.7 Fencing Mesh fencing is to be provided over PP Complex periphery. This type of fencing provides good aeration


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This section of the document ing was compiled by CMAI, it’s use is conditioned upon the users agreement not to reproduce the document in whole or in part, nor the material described thereone, nor to use the document for any other purpose other than specified in writing by CMAI

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4.6

CIVIL AND ARCHITECTURAL CONCEPT

The Polypropylene Plant shall include the following buildings and structures: • Administrative Building; • Polypropylene Bagging Building and Warehouse; • Extrusion Building; • Nitrogen and Oxygen Station; • Control Building/Substation; • Pump House at Polypropylene Warehouse; • Firewater Pump House; • Pipe racks. • Laboratory • Maintenance Workshop • Car Park • Gatehouse Since the scope of survey is not adequate to decide on design of foundations for buildings and structures, the final decision should be made after receipt of outstanding data (i.e. at the stage of basic & detailed design development). 4.6.1 Extrusion Building The extrusion building shall be five-storied. Production premises shall be located at all the stories. Apart from that, the ground floor shall accommodate a controller room and a switchgear room, both having floating floor. The building shall have two staircases with outlet to the roofing. The building frame shall be made of monolith reinforced concrete. Outer and inner walls shall be made of local red bricks, which shall be then plastered. Floor slabs shall be made of monolith reinforced concrete. For the ground floor, flooring underlay shall be a monolith concrete slab. Columnar foundations of monolith reinforced concrete shall be used for the building frame. Strip foundations of monolith reinforced concrete shall be used for walls. Roofing of one-storied and two-storied parts of the building and the staircases shall have a slope towards holes in the protruding floor slab to provide for rainwater flow. Internal water drain shall be provided in the 5-storey part of the building. The roofing shall be coated with solar-reflecting screed.


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External and internal doors shall be of aluminum. Window frames shall be of anodized aluminum. The engineering design of interior finishing is described in the “Interior Finishing of Rooms” section. 4.6.3 Polypropylene Bagging Building and Warehouse The building, where polypropylene is bagged, shall be assembled with the outdoor warehouse, where containers with bags filled with polypropylene are stored and polypropylene is shipped. The building shall accommodate the following premises: propylene bagging plant, PE film production plant, battery charging room, fork-lift washing plant, electrical rooms, amenity premises, dispatch room, drivers’ facility, and service premises. The adjoining polypropylene warehouse shall be constructed as a shed. Due to its large area it shall be divided into two compartments with a fire break. A frame shall be provided along the shed from a truck loading side. The warehouse shall have light mesh fencing. Truck balance could be adjacent to the warehouse area, if required. Cost of the truck balance is outside cost estimate. The frame of the polypropylene bagging building shall be of monolith reinforced concrete. Outer and inner walls shall be made of local red bricks, which shall be then plastered. The building floor slab shall be made of monolith reinforced concrete. Flooring underlay shall be a monolith concrete slab. A lattice three-dimensional structure made of tubes and coated with a shaped steel plate shall be the shed floor. Columns shall be made of monolith reinforced concrete. A warehouse flooring underlay slab and a retaining wall of ramp shall be made of monolith reinforced concrete. Columnar foundations of monolith reinforced concrete shall be used for the building frame and shed columns. Strip foundations of monolith reinforced concrete shall be used for walls. Thickened parts of monolith slabs with additional mesh reinforcement shall be used as foundations for partitions. The building roofing shall have a slope towards holes in the protruding floor slab to provide for rainwater flow. The roofing shall be coated with solar-reflecting screed. The shed roofing shall have a slope towards a tray, from which water falls via piping into catch drains.


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External and internal doors shall be of aluminum. Window frames shall be of anodized aluminum. Light-protective canopies shall be provided over windows of office and amenity premises. Mesh gates shall be provided in the shed mesh fencing. The engineering design of interior finishing is described in the “Interior Finishing of Rooms” section. 4.6.3 Control Building / Substation The building shall be one-storied with annexed boxes for transformers. The building shall accommodate the following premises: control room, controller room, gas-extinguishing plant, amenity premises, electrical substation, and battery room. Floating floor and suspended ceiling shall be provided in the control room and the controller room. The building shall be of blast resistant design. Outer walls shall be made of monolith reinforced concrete; inner ones shall be made of local red bricks, which shall be then plastered. The building floor slab shall be made of monolith reinforced concrete. Flooring underlay shall be a monolith concrete slab. Partitions between the transformers shall be made of prefabricated concrete blocks. The front wall shall represent mesh fencing with mesh gates. Columnar foundations of monolith reinforced concrete shall be used for the building frame. Strip foundations of monolith reinforced concrete shall be used for walls. Thickened parts of monolith slabs with additional mesh reinforcement shall be used as foundations for partitions. Foundations for the transformers shall present solid monolith concrete. External doors shall be of painted steel, internal ones shall be of aluminum. Lightprotective canopies shall be provided over the windows of amenity premises. The engineering design of interior finishing is described in the “Interior Finishing of Rooms” section. 4.6.4 Administration/Office Building with Gatehouse The administration building shall be two-storied. The ground floor shall accommodate the following premises: lobby, laissez-passer office, security room, electrical rooms, service and amenity premises, and canteen. The first floor shall accommodate management offices, conference hall and service premises. The building frame shall be made of monolith reinforced concrete. Outer and inner walls shall be made of local red bricks, which shall be then plastered. Walls of a prominent part of the first floor lobby shall be made of shadow glass.


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Floor slabs shall be made of monolith reinforced concrete. For the ground floor, flooring underlay shall be a monolith concrete slab. Columnar foundations of monolith reinforced concrete shall be used for the building frame. Strip foundations of monolith reinforced concrete shall be used for walls. Thickened parts of monolith slabs with additional mesh reinforcement shall be used as foundations for partitions. Roofing shall have a slope towards holes in the protruding floor slab to provide for rainwater flow. The roofing shall be coated with solar-reflecting screed. External and internal doors shall be of aluminum. Window frames shall be of anodized aluminum. Light-protective canopies shall be provided over the windows. The engineering design of interior finishing is described in the “Interior Finishing of Rooms” section. 4.6.5 Nitrogen and Oxygen Station The Nitrogen and Oxygen Station shall present a building and two sheds assembled. The building shall accommodate the following premises: laboratory, electrical rooms, instrumentation switchboard room, battery charging room, premises for painting and drying bottles, repair and test shop, compartment for bottles analyzing and warehouse. The sheds shall be equipped with 3.2-t suspended mast cranes. Ramps shall be provided for truck access, when loading the bottles, and fork-truck passage along the shed. A canopy shall be provided along the ramp. The sheds shall be equipped with wind barriers to protect against atmospheric precipitation. The building frame shall be made of monolith reinforced concrete. Outer and inner walls and partitions shall be made of local red bricks. The building floor slab shall be made of monolith reinforced concrete. Flooring underlay shall be a monolith concrete slab. Steel trusses with parallel chords shall be used as shed bearing structures. Columns shall be made of monolith reinforced concrete. Shed columns and wind barriers shall be made of shaped steel plates. Shed flooring underlay slabs and retaining walls of ramp shall be made of monolith reinforced concrete. Columnar foundations of monolith reinforced concrete shall be used for the building frame and shed columns. Strip foundations of monolith reinforced concrete shall be used for walls. Thickened parts of monolith slabs with additional mesh reinforcement shall be used as foundations for partitions.


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Building roofing shall have a slope towards holes in the protruding floor slab to provide for rainwater flow. The roofing shall be coated with solar-reflecting screed. Water will be removed from the shed roofing due to sloped bearing structures. External and internal doors and gates shall be of aluminum. Window frames shall be of anodized aluminum. The engineering design of interior finishing is described in the “Interior Finishing of Rooms” section. 4.6.6 Firewater Pump Station and Pump Station at the Intermediate Storage The pump houses shall be constructed as sheds. The frames of sheds shall be of steel. Roofing shall be made of steel shaped plate. Foundations of monolith reinforced concrete shall be used for the building. Floor shall be constructed as a monolith reinforced concrete slab. Pump foundations shall be monolith reinforced concrete. Monorail shall be provided to maintain the pumps. All metalwork shall be protected against aggressive atmosphere influence by painting with perchlorovinyl enamel. 4.6.7 Pipe racks Single-layer pipe racks shall be provided to lay process pipelines across the Polypropylene Plant area. Steel middle strips and cross-beams shall be used. Columns shall be of monolith reinforced concrete. Columnar foundations of monolith reinforced concrete shall be used. Pipelines from the Refinery to the Polypropylene Plant shall be laid in trenches. Columnar foundations of monolith reinforced concrete shall be used as pipe supports. When passing under motor roads, small reinforced concrete bridges shall be provided. 4.6.8. Laboratory The laboratory for the PP Plant shall accommodate all equipment and facilities to fulfill functions as required by the production process of PP Plant. Conceptual design of laboratory shall be developed in basic design stage. 4.6.9.Maintenance Workshop The building shall be located in a non-hazardous area. The Maintenance Workshop Building will comprise but not limited to the following: electrical workshop, mechanical workshop, test room, office(s) for receipt and dispatch, HVAC room, instrument workshop, calibration room, storage rooms, analyzer shop, overhaul areas, piping workshop, cleaning and painting room, tool storages, first aid room, toilets, mess area, material offices, training room for maintenance staff.


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The Workshops shall be a fully equipped building with associated offices, changing, toilet and washing facilities. The workshop facilities shall be designed to allow staff service of up to 100 persons. The building shall be equipped with a sufficient number of machinery and tools to carry out maintenance works. The equipment list of the Maintenance Shop shall be developed and specified during front end engineering design phase. Construction of the building will be structural steel framework with pitched roofs, reinforced in-situ concrete floors, and painted rendered masonry plinth walls. The area of the Maintenance Workshop shall be defined during basic design and detail design phase. 4.6.10. Warehouse A building shall be provided to store various spare part, products, machinery, equipment, etc of the PP Plant. The Warehouse Building shall be fully equipped building with areas dedicated to spare part maintenance shop stores, part storage and associated offices, toilets and other facilities. All area shall be provided with dedicated air-conditioning units including all necessary fresh and exhaust air systems. The sizing of the building needs to be such so as to provide enough space to accommodate all spare part of maintenance shop, equipments, tools in normal operation as well as during commissioning of the refinery and occupying of staff without any interference. Construction of the building shall be structural steel framework with pitched roofs, reinforced in-situ concrete floors, and painted rendered masonry plinth walls.


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4.6.8 Interior finishing Building Products Warehouse

Control Building including Substation

Nitrogen & Oxygen Station

Description Warehouse with shed, ramp Bagging, film production and printing Battery charging, preparation of battery liquid Offices, drivers’ facility, dispatch room (janitor) WCs, shower rooms Corridors Electrical room Controller room, control room Corridors, lounge Shower rooms, WC Gas extinguishing room Electrical substation Outdoor transformer substation Nitrogen & oxygen station (shed), Bottle filling (shed), ramp Bottle drying and painting, battery charging Duty personnel room, stockrooms, corridors, laboratory, smoking-room HVAC Electrical room

Receiver area Administra tion Building

Extrusion Building

Lobby, corridor Janitor’s room, laissezpasse office, canteen, offices, security room, secretary Man’s cloakroom, woman’s cloakroom WCs, shower rooms, cleaners’ equipment rooms Stockrooms Conference hall Staircases Gallery Control room Electrical room Staircases, tambours HVAC Production premises

Symbol of interior finishing type Floor Walls Ceiling F1 C7 F1 W4 C1 F6

W3

C6

F5

W2

C1

F4 F5 F2 F3

W4 W2 W1 W2

C1 C1 C3 C1

F5 F4 F2 F2 F2

W2 W4 W2 W1 W3

C1 C1 C2 C3 -

F1

W5

C7

F6

W3

C6

F5

W2

C4

F2 F2 F2

C2 C3 -

F5 F5

W2 W1 Mesh fenci ng W2 W2

F5

W4

C1

F4

W4

C1

F5 F5 F5 F5 F3 F3 F5 F2 F4

W2 W2 W2 W6 W2 W1 W2 W2 W4

C2 C1 C1 C1 C1 C3 C1 C2 C6

C1 C1


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Legend Floors: F1 F2 F3 F4

- Mosaic concrete coating - Concrete coating with polished surface - Double floors on jacks - Ceramic non-glazed tiles on cement-sand mortar. Waterproofing: two Hydroisol layers. Screed: cement-sand mortar - Ceramic non-glazed tiles on cement-sand mortar - Acid-proof concrete coating

F5 F6 Walls: W1 W2 W3 W4 W5 W6

- Polymer cement painting from top to bottom - Water-dispersion painting from top to bottom - Chemically stable enamel up to 1.8 m, silicate painting above - Ceramic piles up to a door/gate top height, water-dispersion painting above - Shaped steel plate painted at manufacturer’s with chemically stable enamel - Walls made of sash pulleys

Ceiling: C1 C2 C3 C4 C5 C6 C7

- Armstrong-type suspended ceiling - Glue painting - Polymer cement painting - Water-dispersion painting - Silicate painting - Chemically stable enamel - Shaped steel plate painted at manufacturer’s with chemically stable enamel


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4.7

BASIC PRINCIPLES OF PROCESS CONTROL

Polypropylene production is provided with Distributed Control System (DCS) and Emergency Shutdown System on electronic and micro-processor base. These systems provide automatic process control and safe process shutdown. Process control will be provided from the following control rooms: • Central control building • Extrusion control room • Oxygen / Nitrogen station control room. Work places for PP Plant process operator, off-sites operator as well as fire and gas detection panels shall be provided in the central control building. Extruder and additives metering control systems shall be provided in the extrusion control room. These systems shall be connected to the central control building via the data bus to provide remote control of extruder and additive metering operation. Operator’s work place shall be provided in the nitrogen/oxygen station control room. This work place shall be connected to the off-sites operator work place in the central control building via the data bus. Package supplied machinery shall be provided with local control panels. Common trouble alarms from that panel shall be sent to the central control building.


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4.8

ELECTRICAL CONCEPT

4.8.1 Power supply PP plant shall be power fed from the Refinery main substation with 22 kV voltage level by two cable lines from 2 independent sources (two bus sections at the Power Station 22 kV switchgear). Substation with the switchgears at 22,6.6, 0.4kV and contactor panels is to be located in the same building with the PP Complex central control building. Two types of critical electrical consumers are available: • Allowing small interruption in power supply • Not allowing interruption in power supply. These consumers shall be fed, respectively, from the emergency 6.6 kV switchgear via 6.6/0.4 kV transformer located in the substation at the control building and from UPS located at the same place. Delta connection shall be provided for 6.6/0.4 kV transformer primary windings and star connection – for secondary ones. Neutral wire in this case shall be dead grounded (winding connection is to be identified as ∆/Y – 11). Extruder motor (4100 kW, approx.) is to be fed from 22 kV switchgear. Step-down transformers at the Extrusion section and Nitrogen/Oxygen station are to be fed from 3.3 kV switchgear.

substation

at

the

Firewater pump station, control building itself and outdoor lighting are to be fed from the substation at the control building. Propylene intermediate storage consumers and Nitrogen/Oxygen station 0.4 kV consumers are to be fed from the Nitrogen/Oxygen station substation. Polymerization section consumers, bagging and storage consumers and incinerator consumers are to be fed from the Extrusion section substation. 0.4 kV switchgear fed from the Extrusion section substation is to be located at the Bagging section. Office building is to be fed from this switchgear. Reactive power compensation is provided at 6.6 kV and 0.4 kV voltage levels. Ventilation with air excessive pressure shall be provided in all electrical premises in order to obtain a non-explosive environment inside the premises.


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Power consumption is specified in the below table: Item Consumer Power No. consumption, kW 1 2 3

Polymerization section Extrusion section Bagging and Storage section Incinerator Nitrogen/Oxygen station Propylene intermediate storage Ventilation and Air Conditioning Lighting TOTAL

4 5 6 7 8

1900 4500 2000

Power annual consumption, thousand kW 15200 33750 15000

130 980

80 7500

125

1000

830

6640

485 10950

1805 80975

DCS and ESD system on micro-processor base are provided for electrical drivers control and monitoring. Cable routings shall be provided as follows: • On cable structures of the cable racks and pipe racks – outdoor area • On walls, in steel hoses and behind false ceilings – indoor area • In cable channels – in the substations. Automatic gas extinguishing unit is provided for fire fighting in the cable channels. 4.8.2 Lighting Lighting is divided in two groups connected to the different sources of power. Escape lighting (220 VAC) is provided as well. Floodlighting partial application could be provided for outdoor lighting. 4.8.3 Grounding Common grounding circuit for personnel protection, static electricity protection and lighting protection as well as special grounding system for computers is to be provided. 4.8.4 Lightning protection Floodlight stacks shall be used for lightning protection. Lightning adsorption steel mesh laid on building roofs and connected to grounding points as well as steel


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structure frameworks also connected to grounding points could be used for lightning protection of the individual facilities.


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4.9

BASIC PROVISIONS FOR FIRE FIGHTING SYSTEM

Fire fighting system comprises: • Firewater Pump Station • Firewater Tanks • Firewater Network 4.9.1 Firewater Consumption Firewater demand is based on the extinguishing of the largest fire on the PP Plant – at the Polymerization Section area. Therefore, Fire Fighting System is to provide enough firewater consumption for deluge systems in the Polymerization Section as well as for three fire monitors in this area. Total firewater consumption shall be as follows: • 1450 m3/hr – for deluge system • 270 m3/hr – for simultaneous operation of 3 fire monitors Pressure at any point of the fire water network is to be at least 7 bar. 4.9.2 Firewater Tanks Firewater margin is designed for firewater supply during 20 hours. Firewater shall be stored in 2 tanks; the capacity of each tank is to be 20000 m3. 4.9.3 Firewater Pump Station Two groups of pumps shall be provided in the Firewater Pump Station, namely as follows: a) Fire extinguishing pumps b) Pumps to maintain the constant pressure in the network. a). Fire extinguishing pumps Two diesel engine driven pumps and one motor driven pump with the following performances (for each pump) are to be provided: • Capacity – 1032 m3/hr • Head – 10 bar. b). Pumps to maintain the constant pressure in the network Two motor driven pumps with the following performances (for each pump) are to be provided: • Capacity – 60 m3/hr • Head – 6 bar. In case of fire absence the pressure in the firewater network shall be maintained at 6 bar.


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Motor driven pump shall be automatically started first by the signal from fire detector. Then one of diesel engine driven pumps shall be started with 10 minutes time delay. In case of one fire extinguishing pump failure the second diesel engine driven pump shall be started automatically. Constant pressure maintaining pump shall be shutdown automatically when fire extinguishing pump starts. 4.9.4 Looped Firewater Network Underground looped firewater network with installed hydrants shall be provided around the PP Plant. Fire monitors and deluge systems shall be fed from this firewater network.


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4.10

BASIC PROVISIONS SYSTEMS

FOR

TELECOMMUNICATION

AND

ALARM

4.10.1 Telecommunication Systems The following telecommunication systems shall be provided at the Polypropylene plant: • Phone system; • Radio communication system; • Paging system; • Closed TV system; • Internal process communication system, • Optic-fiber telecommunication cable. Phone system Phone system shall be connected to the Refinery and public phone systems. Radio communication systems Portable radio stations shall be provided for the radio communication system. This system shall cover Polypropylene plant and shall also provide radio communication link with the Refinery facilities. Area classifications shall be taken into consideration when radio communication system is to be selected. Paging system Paging system shall allow connection to the Refinery Automatic telephone station. A possibility to make a call via special switchboard connected to the basic paging station located at the Refinery Administration building shall be provided also. Closed TV system Closed TV system shall be used for Polypropylene plant safety and monitoring purpose. Closed TV system monitors shall be located in the Control building. Internal process communication system Internal process communication system shall be provided for two-way operative communication at the Polypropylene plant area. Optic-fibber telecommunication cable Optic-fiber telecommunication cables shall be routed from the Polypropylene plant to the Refinery Control building and automatic phone station.


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4.10.2 Fire and Gas Detection System Fire and Gas detection system shall be an addressable system and thus any detector in alarm shall be identifiable from the panel. Manual Call Points Each building / facility shall have manual alarm call points (break glass units) located at each exit of the building/facility. Each call point shall be of explosion-proof design and be located close to exit ways. Heat detectors Buildings/facilities protected with sprinkler or deluge systems shall be provided with the heat detection alarms on the fusible bulbs in the water or twin pneumatic fusible tube heat detectors. Smoke detectors Point type smoke detectors shall be provided for all premises in the buildings / facilities including corridors and electrical rooms. The signals from these detectors shall initiate sound alarms in the buildings/facilities and report the incident to the Unit Fire and Gas detection panel. Point type smoke detectors shall be also provided in the premises protected with gas extinguishing systems. Beam smoke detectors shall be fitted along the roof apex levels of the warehouses. Flame detectors Flame detectors shall be located to monitor the Propylene spheres and pumps/compressors handling hydrocarbons. No automatic operation of water deluge systems shall be initiated by the flame detector signals. Gas detectors Gas detectors shall be located over plant periphery and in at the point of any possible hydrocarbon and hydrogen containing gas leaks (pump and compressor seals, etc.). Gas detectors shall be also located at the air inlets to ventilation and air conditioning systems. Alarm systems All buildings / facilities shall be fitted with alarm bells to automatically sound on the initiation of a fire detector in the building / facility itself. Sound and flash alarms shall be initiated automatically in case of the operation of gas detectors.


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In operation of any sprinkler / deluge system a sound alarm shall be activated to inform about these systems initiation. All fixed gas extinguishing systems shall have sound alarm activated prior to extinguishing gas discharge to the protected area. This signal shall sound for a set period of time after fire detection and before extinguishing gas discharge. Moreover, all entrances to the protected areas shall have an outside warming lamp to indicate if the gas extinguishing system is locked off, set to automatic mode or discharged. Control panel Fire and Gas detection system addressable panel shall be located in the PP plant Control Building with associated Gas detection system racks (PCB). This panel shall receive the signals from the Fire and Gas detection system. These signals identify signal activation point. The panel shall provide a possibility to start-up fire pumps at the PP Plant. Common fire signal shall be also transmitted to the Refinery Fire Station and common gas leakage signal – to the Refinery Gas Rescue Station. A mimic panel repeating the information transmitted to the PP plant Fire and Gas detection system panel shall be provided at the Refinery Fire Station.


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4.11

BASIC PROVISIONS FOR SECURITY SYSTEM

PP Complex Security System shall protect the PP Complex from theft and trespassers unauthorized entry to the territory. Security complex shall comprise the following systems: • Plant area periphery and field facilities security alarm system; • Access control system; • TV observation system; • Plant area periphery guard lighting; • Information gathering and processing system. Area Periphery and Field Facilities Security Alarm System The system shall provide the receipt and processing of information from the alarm facilities installed at the periphery and/or in the field facilities of the PP Complex, information display at the indicator board and monitor (in a simple way for the security service easy understanding), and deliver commands to execution units initiation (TV camera, lighting, etc.). Access Control System PP plant personnel shall use plastic cards when passing through the turnstile at the check entry post. Vehicle entry / exit to the PP plant area shall be also provided with plastic cards. TV Observation System TV observation system shall allow monitoring of the situation at the most important areas of the PP plant. This system arrangement and location shall be determined during engineering phase. Guard Lighting System Guard lighting shall be provided along the area periphery. Guard lighting can operate either in a continuous mode or being initiated on alert. Information Gathering and Processing System Information gathering and processing equipment and TV monitors shall be installed at the Refinery security service building and at the Plant check entry post.


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4.12

RECOMMENDED PRODUCTION PERSONNEL REQUIREMENTS

ORGANIZATION

CHART

AND

The Operations Management Organizational Chart is in compliance with Licensor’s recommendations, experience in operating the similar Russian and foreign plants as well as the planned configuration of the Plant. The organizational chart was formed based on a concept of integration of the Polypropylene Plant into the PetroVietnam Refinery as a process unit and all offsite services are integrated into corresponding centralized services of the Refinery: • • • • • • • •

Electric power and heat supply; Water supply; Air and fuel supply; Instrumentation; Chemicals and warehouse services; Repair service; Transport and other general services; Flare system, rescue and security services, non-production group.

The Laboratory personnel supporting the operation of the Polypropylene Plant is under managerial control of a head of the Plant and reports functionally to a head of the Main Refinery Laboratory. The management organizational chart is developed considering the selected process flow chart, equipment, production control means and a distributed control system of process control. The Plant is headed by a Plant Manager bearing functions of process and administrative management in respect of all personnel of the Polypropylene Plant. As for professional background, managers and personal qualities, the Plant Manager should have the modern higher education and be capable of taking critical decisions. The Polypropylene Plant Manager reports to a Refinery Operations Director in administrative and technical aspects. Qualification requirements: relevant higher education, experience of working at executive positions not less than 5 years, fluent English. Heads of operational sections and groups of sections execute the operational and administrative & technical management of the sections. Qualification requirements are the same as for the plant manager. The main operational sections are combined on a process basis.


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The day-to-day plant and personnel management is executed by a shift supervisor. Qualification requirements: special higher education, experience of work, fluent English. Labor of workers shall be managed based on the number of serviced equipment items, a complexity of servicing and a field of operations. Where bag handling, out packaging, etc. take place, the mechanization of manual labor is utilized. A team and shift form of the work shall be employed. At the Polypropylene Plant, senior operators and control panel operators have the highest qualification of workers. Field operators have lower qualification, etc. Senior operators should have the higher education and the highest skill category. They execute operational supervision of the corresponding sections from a control room, take care of the field equipment operation. Control panel operators should also have the higher education and the highest skill category. They control the process via monitors from the control room, where they have fixed workplaces. The background and work experience of senior operators and control panel operators shall allow them to replace each other if operational need arises. Field operators shall monitor the field equipment operation, carry out preventive inspections of their areas and report their findings to a Senior Operator; they make necessary marks of the performed inspection in special cards placed at every serviced unit («Inspection done – Time”). The inspection shall be carried out on a regular basis at discretion of a shift supervisor. PE film section operators shall conduct film production, PE bag manufacturing and flexographic printing processes, monitor production of the shrinkable film used for palette wrapping, packing product polypropylene into bags and palleting bags, handling bags. Fork-lift truck drivers carry out handling operations. Qualification requirements for operators and forklift truck drivers: secondary technical education (vocational school). To maintain process equipment, electrical equipment and instrumentation with the aim of assuring trouble-free and stable operation, the Polypropylene Plant staff shall include a group of engineers in the following disciplines: Mechanical Engineer; Electrical Engineer; Instrumentation Engineer.


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An emergency response team, being on round-the-clock duty and including workers of necessary occupations, shall arrive from a Refinery Response Service to take efficient and fast actions in emergencies on a request from the Polypropylene Plant control room. When establishing the staff, a principle of rational splitting of works and operations, shift duration and holding of more than one function for some worker categories were considered. The planned plant shall be operated in 8-hour working shifts. The operating schedule shall be sliding, in 3 shifts with 4 teams. This schedule assures continuous round-the-clock process services and creates safe labor conditions. Shift relief personnel of ≈ 12% of the shift personnel shall be provided to assure the process continuity during vacation and high sick rate periods, holidays and days of rest. The staff shall be provided for maintenance of the process during normal routine operation, strict execution of operating practices and qualified servicing the equipment and operating mechanisms. A control room shall be provided for maintaining the polypropylene production process. Special spaces, being readily accessible and convenient for the regular use, shall be provided for keeping job descriptions, schedules, engineering documentation and organizational documents. The Polypropylene Plant shall include a nitrogen & oxygen plant. In addition to supply the planned Polypropylene Plant with nitrogen, it shall provide for loading sales oxygen in cylinders. Consumer services and medical aid for the additional personnel will be provided by the existing refinery facilities having adequate capacities. It is necessary to provide cleaners for keeping order within the outdoor territory and in administration rooms of the planned plant in the general service of the refinery. No additional operating personnel is required for servicing the intermediate feed (propylene) tank farm, local waste treating facilities and a liquid waste incinerator. No personnel shall be provided for servicing the automatic fire-fighting system. Product Shipment The bulk of the product polypropylene will be shipped by sea transport using facilities at the planned dry cargo ship port included in the Refinery configuration.


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The product polypropylene will be delivered to the port by trucks from the storage at the Polypropylene Plant. Product handling and expediting will be carried out mainly by the existing port services. In connection with an increase in the volume of work an estimated additional operating personnel employed for the above-mentioned works will be three (3) workers per shift, totally six (6) workers at the two-shift operation. The number of the Plant operational staff, personnel occupations and qualifications Table 4.12-1 Position, occupation

Labor category

Shift number

3

4

5

6

Technical staff -“-

1

1

1

1

1

1

Mechanical Engineer

-“-

1

2

2

Piping Engineer

-“-

1

2

2

Instrumentation Engineer

-“-

1

2

2

Electrical Engineer

-“-

1

1

1

Civil Engineer

-“-

1

1

1

Head of Sections 100 to900

-“-

3

1

4

Non-manual worker Non-manual worker

3

2

8

1

1

1

14

23

3

1

4

3

5

20

3

3

12

1

1

1

2

12

39

2 Administrative and production staff Polypropylene Plant Manager Manager

Janitor at entrance Secretary

Number of employees Peak shift Total

Total administrative staff: Production staff: Shift Supervisor Senior Operator, Sec. 100-700 Senior Operator, Sec. 800

Technical staff Technical staff -“-

Head of Section 900 Supervisor of Section 900

2

Total:


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Position, occupation

Labor category

Shift number

Number of employees Peak shift Total

Technical staff Technical staff Worker

1

1

1

3

2

8

3

2

8

6

17

Laboratory*) Senior Chemist Chemist Laboratory Assistant Total: Plant Total

79

* Not considering operational personnel in a dry cargo ship port (tentatively 6 employees).


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Labor and Rest Schedule The employees are planned to work considering an efficient labor and rest schedule with alternating periods of labor and rest being justified from the physiological and economic aspects, which guarantee a high efficiency and productivity of labor. Rest breaks shall be short and their number shall allow for the recreation without detriment to the optimal process maintenance and with the observance of all safety rules. All the operators shall be adequately trained prior putting the plant into operation to relief regularly their coworkers for a short period during short breaks and lunchtime. The efficient alternation of labor activity and regular short breaks within a shift will allow to eliminate overworking and tiredness of workers and conserve the acuity of response and vision. The team working schedule for round-the-clock operation of the Plant is given in the table below (Sections 100-700, 800). The Government of Vietnam established a 40-hour, 5-day working week. This decree shall be valid for employees at institutions and a managerial staff of plants. Where a process runs continuously 24 hours a day, an appropriate operating schedule shall be established. In this event the working week shall contain 40 hours and the days-off may take place in any day of week according to the operating schedule. Recommended Duty Chart at 3-shift, 4-team operation Table 4.13-2 Team No. Team No.1 Team No.2 Team No.3 Team No.4 M E N (-)

– – – –

1 M N E

2 M N E

3 E N M -

4 E M N

5 M E N

6 N M E -

7 N E M

8 E N M

9 M N E

10 M N E

11 E N M -

12 E M N

13 M E N

14 N M E -

15 N E M

morning (8.00-16.00) evening (16.00-24.00) night (24.00 – 8.00) day off

Industrial environment factors such as noise, vibration, illumination, dust and gas levels in the air, air temperature and humidity in the working area have been designed at the stage of equipment, instrument and design selection within allowable limits and shall not adversely affect the human life. To prevent potential impact of hazards on the human life at process upset, every worker shall be equipped with adequate means of self-help and individual protection,


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namely, working clothes and shoes, gloves, eyeglasses, respirators, gas-masks, first-aid kits, etc. Personnel training When buying the license, the licensor's scope of services also normally includes the services for operating personnel training. This is related to the engineers, administrative staff and specialists Polypropylene Plant Manager Heads of Section Shifts Supervisors This is also related to the specialists having responsible posts when the process is carried out around the clock, i.e. Senior Operators and Control Panel Operators. The training program for these specialists should cover not only process and control, but also regular training prior to the beginning of the shift (2-3min.) and before the work start after the leave (up to 1week). This training shall be provided at the special simulator installed in the immediate vicinity of the control room. In the simulator premises it is necessary to provide working places which duplicate operator work stations in the control room. It is recommended that the above mentioned management and operation personnel be trained abroad. Training of the lower category operators and other workers can be provided in Vietnam. The issue related to the selection and training of the skilled person for the work at the plant is a very flexible issue. The development of technologies, high cost of equipment and strict requirements of the environment protection do not actually allow making mistakes. The working staff shall acquire at least three main aspects of knowledge: regulations for operation at site; process and engineering knowledge; safety knowledge On the first subject. The training will be provided for personnel from the operator level to the management level. Graduates from schools and specialized schools, who wish to work at the Refinery at this plant, can also undergo training. However, this training shall be primarily focused on the middle level managers, who later on can train the remaining personnel. On the second subject. Each newly hired specialist for operator position must undergo training.


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On the third subject. Refinery Safety Engineer will train the operating personnel. The essence of the training principle is to train people not only to new processes, methods, but also to refresh their knowledge on those subjects, which are known to them. Therefore, the process of personnel training is continuous both for the working staff as well as for the newly hired specialists. This process will continue in future during the process of plant commissioning, mastering of production and further operation. Training shall be provided from 3 to 9 months up to 1 year. Operating personnel training in Vietnam. Transfer of experience at site Training shall be provided by both the foreign teaching personnel as well as by the experienced Vietnamese personnel, which had undergone training abroad, with the help of Contractor’s representatives during the process of construction and installation works and commissioning. Operating personnel will be practically trained during all the stages of work under the guidance of the above-mentioned specialists. Operating staff training in accordance with the program. The program shall cover the principle specific features of the process, nature of the plant, various modes of operation (continuous, discrete). It is advisable to divide this training program into the following stages: Prior to start-up, to check the equipment, apparatus and valves, check carefully all the most complicated units, perform necessary control and adjustment, and check again. Start-up and shutdown at the normal mode. Operation. Process monitoring. Identification of the causes of failure, deviations from normal operation or accidents. Methods of failure elimination for each specific case. This type of training will be continuous during the process of plant operation and be provided at special sessions using computer installed at the simulator room. The strategy of approach to the training of maintenance personnel for the Polypropylene Plant shall not be fundamentally different from the approach adopted at PetroVietnam Refinery.


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Personnel training abroad shall be also in compliance with the level and principles set forth by PetroVietnam Refinery. It is recommended that the training program shall consider not only the operating staff of the Plant for today, but also long term planning of the forecast for the demand in personnel. There are many reasons for the variations of the staff number at the Plant, but the most important among them are the following: Raising the level of personnel's skill Replacement due to the rise of personnel professional skill Engineers promotion Dismissal of engineers and workers due to various reasons. As a result of long term planning the number of newly hired personnel is identified by position, discipline, categories which require training. It is advisable to perform this work systematically.


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4.13

LABORATORY EQUIPMENT

List of major laboratory equipment required for polypropylene homopolymers production is specified in the below table. Pos.

0-01 0-02

0-10

0-20

0-21 0-22 0-23 0-24

1-01

Test Equipment Quantity Comment Supplier General Laboratory Equipment Mettler, Sartorius 1 Analytical balance 0-200 g / 0,1mg Mettler, Sartorius 1 Lab balance 0-5.000 g / 0,2g or better Neolab, Buddeberg 1 Stop watch (0,1 s) Mahr 1 Thickness gage 10 mm / According to ISO Mahr 1 10 ㎛ 4593 or DIN 53 370 Film thickness indicator Heraeus 1 micrometer caliper Vacuum drying oven incl. W&P, Perkin Elmer, 1 vacuum pump Shimadzu Temperature controlled lab plate press Option: Injection Moulding of Test Specimens for Impact Testing et. N 37 Arburg, Boy Option for Option Injection molding machine homopolymer / (1) statistical Conditioning chamber copolymer;necessary Option with cooling unit for block copolymer (1) Together with injection moulding machine Gas Analysis of Raw Gas Analysis of Raw Materials Materials Gas chromatograph 0-20 Gas chromatograph for for C1 – C4 only if not C1 – C4 only if not measured by measured by Propylene Propylene source 0-21 source Gas chromatograph 0-22 Gas chromatograph for for CO / CO2 0-23 CO / CO2 Automatic 0-24 Automatic hygrometer, hygrometer, portable portable O2 measurement, O2 measurement, portable portable Sample bombs for Sample bombs for gas gas samples samples 1-01 Melt Flow Rate – Melt Melt Flow Rate – Melt Volume Rate N Volume Rate N 01/N 01/N 01 Draft/N 01-1 01 Draft/N 01-1 Melt volume index Melt volume index apparatus apparatus


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Pos.

1-02 1-03 1-04

1-05 1-06 1-07

1-08

1-09

1-12

1-13

1-14

Test Equipment PC host program for melt indexers Xylene Solubles N 03 Reflux apparatus (glass) with agitator Rotational evaporator Vacuum pump for rotary evaporator Atactic Content (NMR) N 40 1H-Broadine NMR Thermostat Yellowness Index (ASTM – DIN ISO) N 16/N 16/2 Tristimulus colorimeter

Elemental Analysis (for Cat Residues & Polymer Additivds) A 02-1/A 051/A 07-1/A 08-1/A 19-1/A 20/A 23-2 X-Ray fluorescence Software Film Quality Test N 07/N 07-2 Film testing equipment

Moisture Content of Polymer N 21 Karl-Fischer coulometer Particle Size Distribution N 08 Mechanical sieving set Sample divider Comonomer Content of Statistical Copolymers N 28 DSC melting point apparatus

Quantity

1-02 1-03 1-04

1-05 1-06 1-07

1

Comment PC host program for melt indexers Xylene Solubles N 03 Reflux apparatus (glass) with agitator Rotational evaporator Vacuum pump for rotary evaporator Atactic Content (NMR) N 40 1H-Broadine NMR Thermostat Yellowness Index (ASTM – DIN ISO) N 16/N 16/2 1-07a) ASTM; 1-07b) DIN; Licensee to specify necessary standard

1 1

1

1-07a) ASTM : Hunter Lab 1-07b) DIN : Lange/Hach, Minolta

Philips, Bruker, Oxford Philips

Extruder + die + winding unit + camera On-line installation possible

1

1 Optional (1) 1-14

Supplier

OCS

Metrohm

Retsch, Engelsmann, Fritsch Fritsch Comonomer Content of Statistical Copolymers N 28 DSC melting point apparatus


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Pos. 1-50

1-51 1-52

Test Equipment Pourability N 33 Standardized funnel Slip Agent Content (Oleamide/Erucamide) A 10/A 10b FT – IR – spectrometer Chemobeck extraction apparatus

Quantity 1-50

1-51 1-52

1-53

Elemental Analysis Ca, Mg, Al, Ti A 023/A 08-3/A 23 Atomic absorption AAS

1-53

1-54

Elemental Analysis CI A 19-2 Coulometric test Haze of Films Hazemeter

1-54

Gloss of Films N 14 Glossmeter Impact Testing N 10/N 12 Impact tester charpy / izod Cryostat Notching equipment Profile projector

1-56

Heptane Solubles N 02

1-58

1-55

1-56

1-57

1-58

1-59

Soxhlet extraction apparatus (Glass) Stabilizer Content A 01/A 03/A 04-a/A 04b/A 11-1/A 12-1/A 12-2/A 14/A 16/A 17/A 21 HPLC Extraction apparatus according to measured components (Soxhlet, Chemobeck etc.)

1-55

1-57

1-59

Comment Pourability N 33 Standardized funnel Slip Agent Content (Oleamide/Erucamide ) A 10/A 10b FT – IR – spectrometer Chemobeck extraction apparatus Elemental Analysis Ca, Mg, Al, Ti A 02-3/A 08-3/A 23 Atomic absorption AAS Elemental Analysis CI A 19-2 Coulometric test Haze of Films Hazemeter

Supplier

Gloss of Films N 14 Glossmeter Impact Testing N 10/N 12 Impact tester charpy / izod Cryostat Notching equipment Profile projector Heptane Solubles N 02 Soxhlet extraction apparatus (Glass) Stabilizer Content A 01/A 03/A 04-a/A 04-b/A 11-1/A 12-1/A 12-2/A 14/A 16/A 17/A 21 HPLC Extraction apparatus according to measured components (Soxhlet, Chemobeck etc.)


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4.10

INITIAL LIST OF MAJOR EQUIPMENT AND RECOMMENDATIONS FOR VENDORS

4.14.1 Item No.

Preliminary List of Major Equipment Facility

Equipment Designation and Tag Number 3 SPHERIPOL process

1 1

2 PP Plant

2

Intermediate Spheres, TK-1A/B Propylene Storage with Sealed Pumps, P-1A/B Pumps

3 Oxygen/ Nitrogen Station with Oxygen Bottle Filling 4 Receivers

5

Firewater Tanks and Pump Station

Package Unit

Number

Technical Performance

4

5

Net capacity – 1000 m3 D = 12.9 m 2 (1 Design press. – 23 oper.+ 1 kg/cm2g standby) Capacity – 45 m3/hr Differential head – 520 m 1 Capacity by nitrogen – 1125 nm3/hr Capacity by oxygen – 382 nm3/hr

Notes 6 Licensor to provide equipment data on engineering phase

2

High-pressure Nitrogen Receivers (200 kg/cm2g), D1A/B/C/D/E/F/G/H/I/J Firewater Pumps: P-2A(motor driven)

10

V = 25 m3

1

P-2B/C (diesel driven)

2

Pumps to maintain constant pressure, P3A/B

2 (1 oper.+1 standby)

Capacity – 1032 m3/hr Head – 100 m Ditto Capacity – 60 m3/hr Head – 60 m

Firewater Tanks, TK2A/B

2

Package supply

Each Tank Capacity – 20000 m3


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4.14.2 Recommendations on Equipment Vendors The Licensors and LGI propose the following companies to be vendors of major equipment items: Equipment designation Propylene Spheres with each sphere capacity of 1000 m3

Nitrogen/Oxygen Station Reactor

Centrifugal Pumps

Axial Pumps Metering Pumps Centrifugal Compressors

Reciprocating Compressors

Nitrogen Compressor

Reciprocating Air Compressor Extruder

Manufacturer 1. Toyo Kanetsu K.K. 2. Samsung Heavy Industries Co., Ltd. 3. CB&I Europe B.V. 1. DSD Saarlouis 2. JSC EMK Atommash 1. JSC Geliymash 2. Air Liquide 1. NUOVA CO MI. 2. MAG 3. Zepplin 4. Pitton Gessner landruf 1. Worthington Ingersoll Dresser 2. HMD/KONTRO SEAL/LESS PUMPS Ltd. 3. Sulzer 4. Lewa 5. KSB 6. JSC Volgogradneftemash 7. JSC Livgidromash 1. Sulzer 2. David Brown 3. Lawrence 1. Lewa 2. Bran-Luebbe 3. Hydroservice 1. Sulzer 2. KSB 3. NUOVO PIGNONE 4. JSC Kazancompressormash 5. Flowserve 6. Shin Nippon 7. Gould Pump 8. Ebara 1. Japan Steel Works 2. Sulzer Burckhardt 3. ABB Industry 4. Marubeni Corp. 5. Sundyne Corporation 6. Nikkiso Sundustrand 1. SUNDYNE 2. FIMA 3. S.I.A.D. MAC 4. Hofer 5. PPI 6. Burton 1. ATLAS COPCO 2. NUOVO PIGNONE 3. JSC Borets 1. WERNER & PFLEIDERER


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Silos (aluminum)

Fire Tanks Pressure Vessels

2. 3. 4. 1. 2. 3. 4. 1. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Japan Steel Works Farrel KOBE JANSEN & DIEPERINCK B.V. Zeppelin Coperion Waeschle Motan-Fuller JSC Koxohimmontazh MAG Pitton Geasner Landruf Zeppelin Doosan Mecatec Daekyung Machinery Sewon Cellontec Sungjin Geotec Hitachi Zosen Smitomo Heavy


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5. PLANT SAFETY AND ENVIRONMENTAL IMPACT ASSESMENT 5.1

SAFETY

Polypropylene production is characterized by the use of fuel hydrocarbon gases and LPG, pyrophoric aluminum alkyls (TEA) in the process and by the conditions at which industrial accidents can occur as a result of product leakage. The probability of such accidents depends on the equipment quality, as well as on the operation conditions, performance of timely repair works and their quality. Quality of the equipment at the similar plants is demonstrated by its long trouble-free operation. At the similar type plants great attention is paid to the monitoring of the equipment condition (rotational equipment bearing temperature monitoring, vibration level monitoring, availability of big number of emergency interlocks and alarms, etc). In spite of the above mentioned the presence of large volumes of fuel gas and LPG does not allow the elimination of the possibility of an accident completely. The most likely accident source is a hydrocarbon leak to the atmosphere, for instance, as a result of flange leak at a rather big diameter pipeline. Let’s assume that the probability of flange leak is 8.9*10 –4 and the number of flanges at the pipeline with the diameter of 3 inches and more equals to 50 flanges. Then the probability of leak of one of the flanges will be 4.4*10-2 per year. Such a leak can lead to inflammation and fire and in this case the probability of such events will be from 4.4* 10-7 to 4.4* 10-8 per year. At the same time the probability of explosion-hazard air-gas mixture dispersion will be considerably higher. The Polypropylene production is referred to so-called “clean” process, which contaminates the environment to minimum and has no industrial nonutilizable waste. Permanent discharge to the atmosphere due to the leak of flanges, shutoff, control valves and equipment includes low-hazard substances for the human being health, i.e. hydrocarbons. Periodic and emergency discharges are directed to flare for burning. Plant environment will be monitored by fixed gas analyzers with the alarm to the control room in case of fuel gases or vapor lower concentration inflammation limits are reached. The Plant fire protection is based on the assumption that one big fire source can occur at the plant at one time which shall be eliminated by means of fixed firefighting means. In accordance with NFPA code flooding systems, fire monitors, hydrants, gas fire–fighting units for electric rooms, water sprinklers, movable and handheld fire extinguishers shall be provided for this purpose. Automatic fire-fighting units will be activated by automatic fire detectors. Besides, electric fire alarm transmitters will be provided at the unit. Automatic powder extinguishing system will be provided for TEA extinguishing. DCS will be provided for process control that will ensure safe operation and monitoring reliability.


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ESD will be provided to prevent the Plant from emergency situations. In accordance with API the explosion-hazard areas will be indicated in which it is prohibited to use electrical equipment without necessary means of protection. The level of electrical equipment protection from the explosion will be selected depending on the explosion-hazard mixture properties. All the equipment of the Plant will be protected from static electricity and high potential accumulation by protective grounding. For normal work organization and personnel evacuation in case of accident the working, emergency working and emergency evacuation lighting will be provided.


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5.2

ENVIRONMENT IMPACT ASSESSMENT

Environment Impact Assessment (EIA) Report was performed by Vietnamese Research and Development Center For Petroleum Safety and Environment (RDCPSE). In the Environment Impact Assessment (EIA) Report, the assessment of potential environmental impacts from the implementation of the Polypropylene Project has been made based on the project components, processes, waste discharge/emission and environmental characteristics in the proposed project area. Impacts from project implementation has been assessed based on the following stages: • • •

Construction/ installation and commissioning; Operations; and Decommissioning (if required under Vietnamese Law).

The activities during 3 stages of project will increase solid waste, domestic waste, etc. Wastewater includes effluents from producing area such as waste from the process (Degassing section, Extrusion section), industrial wastewater, domestic wastewater, rainwater run-off and fire fighting water. Gas discharges in case of emergency are routed to the flare system, emissions resulted from leaks have also taken place. 5.2.1. Air pollution1 The operation of the PP Complex will have an impact on air quality but the scale of effect will depend on many factors such as the selection of technology, maintenance of equipment, appropriate operation, etc. The main sources of air pollution during operation will be the release from process units through the Extrusion stack, Incinerator stack and the Refinery main flare. Emission characteristics Discharge from Extrusion stack is provided to be arranged via bag filters with purification rate from polymer fines in amount of less than 20 mg/m3, that is why this flow does not impact significantly on the environmental pollution. PP Complex flare header purge with a flowrate of 80-100 m3/hr is the only permanent discharge to the Refinery flare. Table 5.2.1

STACK AND FLARE CONFIGURATION [EIA report, item IV-15]

Flare/Stack number Discharge location X (m) Discharge location Y (m) Stack height (m) 1

1 588165 1698000 30

2 589156 1697644 89

Refer to Section 4 of EIA Report for details


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Stack diameter (m) Notes:

0.6

1.371

1 – Incinerator Stack 2 – Refinery Main Flare

The emission characteristics of gases from incinerator stack and main flare under normal operation, which will be utilized in the dispersion modeling of the emission from the PP Complex, are specified in below table: Table 5.2.2 CHARACTERISTICS OF EMISSIONS FROM PP PLANT [EIA report, P.IV-14]

Incinerator Stack Exit gas temperature (0С) 100 Volume flowrate (m3/h) 14976 Pollutant emissions (g/s) SO2 0.0012 CO 0.00484 NOx 0.01935 Fines (polypropylene) 0.00212 Unburned hydrocarbons Pollutant concentration (mg/m3) SO2 0.28846 CO 1.1575 NOx 4.6274 Fines (polypropylene) 0.5096 Unburned hydrocarbons -

Main Flare Normal Abnormal operation operation of the PP of the PP Plant Plant 50 50 2162589 2055379 0.0034 0.34134 0.07296 0.15

0.0034 833.63 124.96 208.53

5.66 568 121.46 249.7

0.006 1460 218 365

Vietnamese Standard TCVN 6991-2001

150 150 300 -

In normal operating conditions, almost all concentrations of pollutants in emissions are under permissible discharge standards (according to TCVN 6991-2001 Standard) with the only exception for CO concentration (586.49 and 568 mg/m3 ). In abnormal case (operation of polymerization reactor safety valves) almost all concentrations of pollutants are under allowable discharge standards (as per the Standard TCVN 5939-1995) with the only exception for CO concentration (1460 mg/m3). The maximum emergency discharge will occur on very rare occasions and over a short period of time (not more than 10 minutes). Moreover, as per the Licensor’s information the operation of safety valves has not occurred during over 3,500,000 hours of operation of PP Plants all over the world and this corresponds to over 400 years of safe operation. That is why the impact on air quality from the emergency case shall be considered as intermittent case. Dispersion results


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The dispersion results of emitted gases from Incinerator Stack and Main Flare in normal operating case show that all maximum predicted ground level concentrations (GLC) of major pollutants, like SO2, NOx, CO and polypropylene fines, are rather small compared to Vietnamese allowable concentrations for both, 1-hour and 24hour average. Maximum GLC of major pollutants are summarized in table below:

Table 5.2.3 MAXIMUM PREDICTED GROUND LEVEL CONCENTRATIONS UNDER NORMAL OPERATION (µg/Nm3) [EIA report, p.IV-16] Pollutant

1-hr

24-hr

Annual

NOx CO SOx Fines (polypropylene) Unburned hydrocarbons

102.26 66.73 70.12 5.08

49.18 27.22 27.92 1.84

10.76 5.50 6.19 0.41

Vietnamese Standard TCVN 5937-1995 1-hr 24-hr 400 100 40000 5000 500 300 300 200

2.09

0.76

0.08

-

300*

*The Vietnamese standard for ambient air quality (TCVN 5937-1995) does not identify criteria for hydrocarbons. The provisional environmental criterion of 300 µg/Nm3 (24-hour) set by MoSTE is used here for comparison.

All predicted ground level concentrations of pollutants during normal operation of the PP Plant are lower than the ambient concentration standard (TCVN 5937-1995). Maximum hourly, 24 hourly and annual predicted GLC during abnormal operation of the PP Plant are summarized in table below: Table 5.2.4 MAXIMUM PREDICTED GROUND LEVEL CONCENTRATIONS UNDER ABNORMAL OPERATION (µg/Nm3) [EIA report, p.IV-17] Pollutant

1-hr

24-hr

Annual

NOx CO SOx Fines (polypropylene) Unburned hydrocarbons

1738.5 11597.8 70.12 5.08

784.91 4368.26 27.92 1.81

81.34 521.76 9.19 0.41

Vietnamese Standard TCVN 5937-1995 1-hr 24-hr 400 100 40,000 5000 500 300 300 200

2908.3

1062.11

113.61

-

300*

*The Vietnamese standard for ambient air quality (TCVN 5937-1995) does not identify criteria for hydrocarbon. The provisional environmental criterion of 300 µg/Nm3 (24-hour) set by MoSTE is used here for comparison.


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The dispersion modeling predictions indicate that the maximum 1-hour and 24 hourly GLC of NOx during abnormal operation of the PP Plant are about 4 and 8 times (accordingly) higher than the permitted Vietnamese Limits. Similarly, maximum 24 hourly GLC of unburned hydrocarbons is about 4 times higher than the provisional criterion. However, as it is anticipated that the emergency case will occur very rarely and over a short period of time only (not more than 10 minutes), the impact of NOx and unburned hydrocarbons GLC on the air quality of the area may be considered as minor. According to the results of dispersion modeling, the maximum predicted GLC of CO, SOx and polypropylene fines are small and lower than permitted Vietnamese limits. That is why they will not have a significant impact on local air quality. 5.2.2. Aquatic pollution2 When the project is being operated, wastewater from different sources inside the PP Plant shall be collected and pre-treated appropriately. a) Sewage from Process Area Wastewater containing oily surface water, areas washing water and fire water (in case of fire) from the PP Complex may come from the following sources: • • •

Polymer Degassing Section; Extrusion section; Intermittent clean-up of process equipment, etc.

All these effluents will be collected at the Refinery’s Effluent Treatment Plant (ETP) for further treatment. Typical flow and quality of process wastewater after the biological treatment facilities of the Refinery ETP are: • • • • • •

Flow rate BOD5 COD pH Temperature Polypropylene fines

2-4 m3/hour 50-100 ppm 150-200 ppm 7-8 45-50 0C <100 ppm

The final discharge will be checked to satisfy environmental standards for industrial wastewater before discharging into the Viet Thanh bay. The impact of wastewater from the PP Plant is considered to be insignificant. b) Rain water run-off

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Drains from drainage systems and rainwater run off from the project area with a risk of potential oil spillage shall be collected into the second main section of Local Wastewater Treatment and routed to the Refinery Storm Water sewage for treatment of oily surface water that shall not be discharged directly to Viet Thanh bay. c) Domestic Sewage This type of wastewater will be collected and routed to the septic tank system. After the general sewage treatment and recovery system of the project environment impacts from domestic sewage are therefore considered to be negligible. d) Cooling water Cooling water supply for the PP Plant shall be provided from the Refinery cooling water system. Freshwater cooling water will be circulated, but not disposed to environment. 5.2.3. Soil pollution3 The proposed area for construction of the PP Plant is of 15 ha, most of which is poor and agricultural land with low cultivation capacity. Main environmental impacts during construction phase are to cause physical disturbance and loss of vegetation at the project area. The clearance of project area causes not only the loss of biota but also destroying living environment of creatures. These activities will last for full duration of project operation, at least 30 years. However, due to the fact that the construction site is already planned for constructing the Dung Quat industrial zone, the impacts from these activities are not considered to have a direct effect on environment. Under normal operation of the PP Plant, the main sources of soil pollution are solid process wastes: • Catalyst for propylene purification from COS (0.5 % platinum, aluminum dioxide as base; 6.8 tones/once per 3-5 years). • Molecular sieves for propylene drying (synthetic alumosilicate; 4.6 tones/once per 3 years). • Polymer produced during extruder start-up and off-spec polymer (61.5 tones per year). Catalyst will be sent to the noble metal recovery factory. After treatment molecular sieves will be sent to an allowable landfill. Collected polymers will be sold as offspec product. The environment impacts from solid wastes on soil are therefore considered to be negligible. 5.2.4 Solid and liquid wastes

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The sources and characteristics of process wastes are shown in below table 5.2.5: Table 5.2.5 SOURCES AND CHARACTERISTICS OF SOLID AND LIQUID WASTES [EIA Report, p.IV-23] Section Propylene Treatment and Hydrogen Recovery

Waste type and contaminants Catalyst for propylene purification from COS

Production and frequency 6.8 T/ 3-5 years

Hazard Class I

4.6 T / 3 years

I

Synthetic alumosilicate for propylene drying

Extrusion and Pelletizing

Proposed disposal route Return to the manufacturer for recovery of noble metal Dispose to waste yard located ISBL Refinery To be sold as off-spec product

Polymer produced during 61.5 T / year III start-up of the extruder and off-spec polymer Polymer fines recovered 0.96 T / year III To be sold as from Extrusion stack off-spec product All sections Waste oil 6.7 T / year I Incineration Laboratory Non-diluted lab effluents 13.2 T / year I Incineration (acetone, xylene, heptane) Note: class I – hazardous waste; class II – non-hazardous waste, which are biodegradable, but not likely to cause damage to local environment; class III – water insoluble inert waste.

Under normal operation of the PP Plant, the impacts from solid and liquid wastes on the local environment are considered to be minor. 5.2.5 Emergency situations4 Accident of fire/explosion is very dangerous and easy to be happens at the propylene storage due to evaporating, leaking (dripping) if no safe measures have been applied. Risk assessment for equipment and pipelines will be done by the project operator during designing process to have efficient protection measures. Carrying out safe working procedure, transportation procedure and storage procedure to prevent fire/explosion accident is a part of operating plan of the project. 4


5.2.6 Environmental management system5 To manage strictly the project implementation and to minimize adverse impacts on the environment as well as to provide the guidelines on proper applying environmental standards and ensuring the control of waste discharge in compliance with the environmental standards, the JVC PP Plant will establish an environmental management system, which comprises programs on the environmental monitoring, environmental management training as well as an emergency response plan. The


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environmental monitoring will be implemented before and after construction phase of the project and every 3 month during project operation. 5

Refer to EIA Report in the Attachments for details


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6. BUDGET ESTIMATES AND PROJECT SCHEDULE This Section presents a brief description of the initial data taken to perform budget estimates and to arrange the construction. 6.1

BUDGET ESTIMATES

6.1.1 Budget Estimate Basis PP production capital investments estimate is based on the “Spheripol” technology by BASELL and capital information given to LGI by Basell Based on a recent West Europe project. It is standard practice in the industry to use the preliminary cost estimates and technology selections provided in this type of study as the first step in moving a project from the initial planning phase into the financing and construction phases. These cost estimates and technology evaluations are by their nature preliminary and general in nature. These estimates and evaluations do not replace the need for more detailed engineering studies, which may have a higher level of accuracy, before the project can be financed and constructed. Moreover, they must be verified by more detail before embarking on financing and construction. Therefore, CMAI does not warrant that the capital estimates and information provided in this study can be used for any purposes other than as a planning document to support making decisions on moving forward to the next steps in developing a project of this type. The following investments are outside capital investments summary: • • •

Import Tax Value Added Tax (VAT) Construction cost escalation because of inflation.

6.1.2 Accuracy Capital investment costs are determined within +30% accuracy. The Capital Investment cost supplied by LGI has several components: ISBL – In Side Battery Limits. This is the cost to engineer, procure, and construct on plot plant and equipment to the extent that the ISBL unit is ready to commission. ISBL costs typically account for 50 to 60% of total installed costs to construct a facility. OSBL – Outside Battery Limits. This is the cost to engineer, procure, and construct plant and equipment required within a complex to support the ISBL unit. This would include roads, connecting piping, or utility systems like steam and electricity within the complex. A good number for OSBL costs is 30% of ISBL costs and depends somewhat on site type (brown field or green field). For the Dung Quat PP facility LGI has estimated that there is a 10% cost saving for the OSBL requirement due to


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the high level of system integration with the refinery and the parallel construction. This implies that OSBL is calculated as 20% of ISBL instead of 30%. Off-Plot Costs: These include costs outside of a complex such as pipelines, tanks, railroad track connections, schools, hospitals, etc. that would be required to service a facility and its’ people. These costs can obviously range from zero to a significant portion of total cost depending upon location and stage of infrastructure development. For purpose of this project, LGI has not included these costs due to the high level of integration with the refinery. Owners Costs: Include project development costs for legal fees, basic process engineering and design, buildings, site preparation, spare parts, licensing fees, and project management costs. A good number for total owners’ costs is in the range of 10 to 15% of total installed cost and depend somewhat on site type (brown field or green field) but also highly dependent on the technologies implemented and the cost of a Project Management Contractor. For purpose of this project, we have assumed 10% owners’ costs, excluding license fees. Up front licensing fees and basic engineering were supplied by LGI based on information from the licensor. The final cost must be negotiated with the licensor once selected. LGI has indicated that a payment of USD$15 million is required. Location factors are applied to ISBL + OSBL costs, and typically a percentage of a US Gulf Coast or West Europe capital investment cost, depending on location. LGI has assumed that capital costs to build the plant in Vietnam are similar to the West Europe capital cost. Non-recurring expenditures for start-up and commissioning expenses plus preoperation staffing and training as well as operating spares. A good number for these types of expenditures is between 5 and 10% of total installed cost, depending on whether the site is a brown or green field. We have assumed that these items are covered in the owners cost. Contingency: The LGI supplied capital cost numbers are from a technology licensor and are based on West Europe capital numbers. This project does include a contingency which covers any cost overrun for non-EPC costs, license fees, owners costs, as well as any unforeseen EPC cost overrun. Since the EPC cost in the current market is the very tight among the mentioned factors, a 30% of ISBL + OSBL (EPC cost) contingency factor was applied. Capital estimates provided are feasibility grade, +/- 30%. Capital costs are based on widely commercialized technology and escalated to the startup year. Total Plant capital estimates include ISBL, OSBL and Off-Sites. Capital costs are inclusive of the first charge of catalyst. The capital expense profile is assumed 5, 15, 40, 40% for years one through four respectively. Component

US$ (Millions)


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ISBL OSBL Owner’s Costs Technology License & Eng Contingency Total

92 18 18 15 32 175

This excludes working capital. 6.2

OVERALL PROJECT SCHEDULE

Based on the proposal obtained from the Licensor and on LGI’s experience, LGI estimates that the overall project schedule duration is 37 months including 24 months for EPC execution, from the time the contract is signed, up to the Mechanical Completion. This is the best case scenario and is subject to the direct selection of an EPC contractor without tendering. and the selected EPC contractor to start early engineering work. (refer to attached Overall Project Schedule). This schedule covers Implementation Planning, Licensor & EPC Contractor Selection, Basic Engineering, EPC and Commissioning activities. The schedule shall be further developed taking into account specific Engineering, Procurement and Construction by EPC Contractor. In order to achieve a start-up date of the PP plant that is in-line with the completion schedule of the Refinery, it is crucial to “fast-track” the project, and the following major contracts should be concluded as a first priority. License Agreement In consideration of the project schedule to complete the plant construction by the first half of the year 2009, the Process Design Package (PDP) and the Basic Engineering Package (BEP) shall be made available to the EPC contractor in the second half of 2006, hence the selection of the licensor should be made by the end of first half of 2006. Usually, an open bidding process is used to select the licensor, and this process takes a minimum of four to six months from the inception of bidding to the awarding of the licensor. Thereafter, the completion of the PED & BEP takes another six months by the licensor. This means that the normal bidding process would be too long for the desired schedule of the project. Under present circumstances, the project is facing an extremely tight schedule. The selection of licensor by direct negotiation would be recommended in order to meet the schedule. This report compares the five major technologies currently available. The Project Owner should be able to select the most suitable technology based on the information provided herein, and discussions with the selected vendor.


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Another critical aspect to be considered in order to meet the timeline proposed is the ability of starting detailed engineering work by the EPC contractor, which should be done in close cooperation with the selected licensor during the basic engineering stage. The detailed engineering work could start within three months after the commencement of basic engineering work and this would enable the EPC Contractor to curtail the schedule for engineering and for placing orders for long lead equipments. There is a potential to save a significant amount of time should this cooperation be put into practice. The critical issue for the implementation of a Project on a “fast track” schedule is the ability of the technology and EPC contractor to closely work together during the engineering stage, thereby saving time. If the EPC contractor does not interface adequately during the basic engineering stage, critical time will be lost in the transferring of critical information and long lead orders, thus extended unnecessarily the EPC schedule. Selection of EPC Contractor Over the last 20~30 years, the industry has become accustomed to an excess of EPC contractors but this situation has dramatically changed in the last few years due to the fact that there is currently a substantial amount of investment activities underway in the hydrocarbon processing industry in Middle East and other regions. The combination of high refining and petrochemical margins and very high oil prices has stimulated numerous projects in the Middle East where oil & gas, hydrocarbon processing, power and infrastructure, and major commercial construction are booming. Today, all qualified EPC contractors are exceptionally busy and the pendulum has swung to the point where contractors can be more selective about the projects they accept to bid. The present market is facing difficulty in attracting adequate number of EPC contractors who are willing to bid on a competitive LSTK basis and the industry is suffering shortage of the contractors. One of the prerequisites of this project is to complete the construction of the plant in time to match the completion of the Dung Quat Refinery plant in order to utilize the propylene stream from the refinery. The completion schedule is very challenging and would not be accomplished with the normal contracting strategy such as on an open bidding process. In order to achieve the schedule, a different contracting strategy should be established to select the EPC contractor in a timely manner in order to move the project onto a “fast track” timeline.


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Vietnam PP Project Overall Schedule 2006

2008

2007

M

A

M

J

J

A

S

O

N

D

J

F

M

A

M

J

J

A

S

O

N

D

J

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

2009

F

M

A

M

J

J

A

S

O

N

23

24

25

26

27

28

29

30

31

32

D

J

F

M

A

M

J

J

A

S

O

N

D

33

34

35

36

37

38

39

40

41

42

43

44

45

42

43

44

45

LGI's Proposal (37 M) MOU Signing F/S & Government Approval

J/V Agreement

JV Agreement

License Agreement

License Quotation/Evaluation

PDP & Basic Engineering

6M

FEED / ITB Preparation

3M

EPC Pricing

3M

Evaluation & Negotiation

1M

EPC Contract

Mechanical Completion 24M

EPC Implement 2M

Commissioning & Start-up

Commerical Operation

RFP Preparation, Banks' proposals, Evaluation, Mandate Award

Appointment of F/A

Risk Allocation, Appointment of Lenders' Advisors, PIM, MLAs' proposals, Evaluation, Mandate Award

Appointment of MLAs

Documentation, Conditions Preceedent, Signing of Financial Documents

Doc. & Financial Closing Feedstock Supply, Offtake & Marketing, Utility Supply, Sub-usufruct Agreement, etc.

Project Agreement for Financing 0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41


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7. RISKS AND RISK MANAGEMENT 7.1

GENERAL PROVISIONS

Uncertainty associated with the potential occurrence of unfavorable situations and consequences in the course of the project realization is characterized by a risk notion. Project risks are a set of risks jeopardizing the investment project implementation or being capable of reducing its efficiency. One of the important functions of Project Management is Project Risk Management. Problems associated with protection of the project participants against various risks are solved when establishing financial requirements, calculating its cost-estimate and budget, preparing and sighing contracts, and in the course of Project Control activity. Inasmuch as risks present at all the stages and phases of project implementation, the Project Risk Management function remains until the project close-out. The most modern and reliable equipment cannot assure completely industrial safety, when the organization is weak and behavior is erroneous. Therefore, establishing a Safety Management System is as important for an enterprise as improving safety measures. Taking into account that the polypropylene plant closed to Refinery Project, it would be appropriate to develop a unified system of protection against risks. A system designed to manage risks for complicated industrial systems is generally called a Risk Management system. The purpose of the Risk Management is to assist to an entity in protecting its assets against detrimental consequences of unforeseeable events or unfavorable circumstances. The main milestones of Risk Management activity are as follows: Risk identification Risk assessment Selection of a method and tools of Risk Management Implementation of the chosen method 4a. Risk prevention and control 4b. Risk financing Two first stages are commonly called a Risk Analysis. Risk identification is related to a qualitative analysis and risk assessment belongs to a quantitative analysis. 7.2 Risk Analysis The purpose of the Risk Analysis is to provide potential project participants with information required for making a decision of advisability of the project implementation.


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The common practice is that all the Project Risk Management activity is coordinated by a Project Manager. In case of a lack of the sound methodological basis for Project Risk Management serious problems may arise in the course of the project implementation, right up to the project failure, even if the project management organization is efficient on the whole. Therefore, it is appropriate that the Project Manager resorts to the help of consulting companies being capable of analyzing risks associated with special project activity aspects such as financing, insurance, etc. to analyze all project risks in full. The Project Risk Analysis should be a permanent function of Project Risk Management, present at all the stages and phases of the project life rather than a separate (initial) stage of it. The risks are classified by stages and phases of project activity as follows: preinvestment risks, investment (construction) risks, pre-commissioning risks, operational risks. The main risks at various stages of the Polypropylene Plant Project implementation are as follows: Phase of Project Implementation

Risk Type

1. Pre-investment phase

1.1 Risk of low quality of design and engineering documentation 1.2 Financing risk

2. Investment phase, Precommissioning Phase

2.1 Risk of low quality of works

3. Operational phase

3.1

2.2 Risk of going beyond the project budget 2.3 Risk of delay in commissioning 2.4 Financing risk Operational risks

3.1.1 Engineering and process risk 3.1.2 Managerial risk 3.1.3 Risk of feed & power supply 3.1.4 Transport risk 3.2 Commercial risks: risks of sales of products 3.3 Environmental and other civil liability risks 3.4 Financial risks


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3.4.1 Loan risk 3.4.2 Interest change risk 3.4.3 Currency risk 3.4.4 Currency exchange risk and risk of transferring the proceeds abroad 4.All Project life

4.1 4.2 4.3 4.4

Country risks Administrative risks Legal risks Force majeur risks

Full development of the risk analysis matters is complicated and labor-consuming work to be carried out, as a rule, by specialists of insurance companies and banks crediting the project. The specialists assess the likelihood and consequences of technical and other risks and define levels of comfort. The performance of this work in full takes two or three months after receipt of detailed engineering data on the project. It is recommended to develop the risk analysis of the Polypropylene Plant Project in conjunction with the Dung Quat Refinery. This Detailed Feasibility Study covers key components of the commercial risk assessment, i.e. verification of the project stability along with a project sensitivity analysis. 7.3 Risk Management Taking a decision to begin the project implementation should follow a stage of selecting Risk Management techniques and tools. As well as the Risk Analysis, the selection of Risk Management techniques and tools cannot be considered as a separate stage of Project Risk Management and Project Management as a whole. It should be the permanent function thereof. Four main methods for Risk Management were developed in theory and in practice: Risk abrogation, i.e. a waiver of performing this activity or a significant activity transformation to eliminate this risk; Risk prevention and control, i.e. such activity arrangement that project participants could influence to the greatest extent on risk factors, reduce the likelihood of unfavorable events and limit losses in case of the occurrence of the unfavorable event; Risk insurance, i.e. a method for reducing damages that arise in the course of the project implementation due to financial indemnity from insurance funds; Risk uptake, when one of the project participants or all the participants take damages upon themselves in the insurance event (this method is commonly used when the likelihood of risk is low, or when potential damages exert no strong detrimental influence on the activity participants). The use of the risk uptake method requires the even risk distribution among the project participants, risk redistribution and engagement of additional participants to mitigate the risk consequence.


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On the basis of recommendations of advisors analyzing the risks, Project Management should develop Emergency Risk Management Plans enabling to minimize the loss severity and to make the enterprise effective and profitable as soon as possible. The general methods of risk prevention and control are as follows: Physical protection (e.g., safeguarding, automatic fire-fighting systems, etc.); Organization measures (regular inspections, development of appropriate guidelines); Personnel training, setting up the safe labor conditions; Mitigation measures (special services and equipment for emergency response). We recommend using one of the most effective tools of Risk Management, namely, the Risk Based Inspection. Inspection is an activity, which consists in examining a production facility against a specific standard in compliance with national and regional laws and allows to: Provide the capability to define and quantify the risk of process equipment failure; Reduce the likelihood of failure by allocating inspection measures to high-risk equipment; Allow management to take substantiated decisions on scheduling equipment repair and maintenance. Since 1994, a sponsor group through the American Petroleum Institute (API) is developing a Base Resource Document (BRD) for Risk Based Inspection. The document is oriented to refinery activities. (http:/ /www.api.org/programs services/cat/abstracts/doc0758.html) The key to developing the inspection procedure is the ability to quantify the risk associated with each item of equipment to determine the most effective inspection techniques for that piece of equipment. The Inspection Plan shall be developed on the basis of such evaluations. Using Risk Based Inspection Methodology favors the organization of working groups into Technology Teams, where people with the specialist backgrounds can focus their efforts on continuously improving the reliability of the process. Generally speaking, Risk Based Inspection Methodologies are classified in two approaches: quantitative approach, the final result of which is a risk indicator used for establishing priority of subsequent works rather than the evaluation of risk itself, and qualitative approach. The foundations for plant safety are laid still at the stage of designing process units. At the subsequent stages of engineering, after the Feasibility Study development for the polypropylene plant, the following engineering solutions should be used to reduce operational risks due to:


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Selection of reliable equipment; Reasonable equipment layout; Using engineering means for monitoring the equipment status; Automatic process control; Reliable control of critical variables; Selection of an efficient mode of operation for non-critical variables; Using fire alarm systems; Etc. However, it is practically impossible to make technical risks equal to zero by using the engineering methods only. Risks that cannot be eliminated or reduced to an acceptable level should be financed. A set of risk financing measures includes all possible means of covering financial consequences of losses. In practice this means to secure the ability of an enterprise to withstand potential hazards and to insure non-protected risks. The following financial measures intended for the risk event can be used: repayment of losses as required directly from current funds; a sum is placed annually to an internal fund. From this fund, forming capital reserves, money for covering the losses are drawn (self-insurance); risks are transferred to insurance companies. The insurance allows the conversion of a risk of an indefinite amount into fixed expenses, namely, insurance premium. Various combinations of the above-mentioned measures can assure the reliable protection of company’s assets. The main form of risk financing is insurance. Recommendations on setting up the insurance protection of the polypropylene plant project are given below (ref. to para.7.1). In many cases the risk financing method does not exclude the simultaneous application of the risk prevention and control method. Many risk insurance agreements contain articles stipulating the implementation of necessary preventive actions by the insured (fire-fighting, safety, equipment maintenance, etc.). 7.4 Insurance Every enterprise and every investment project should have a technology of setting up the insurance protection of its facilities considering their specific character. This technology should consider a well thought-out and worked-through scenario developed on the basis of: Knowledge of required components, understanding of objectives and expected results of works in every lines; Understanding of detail actions to be undertaken at each stage and using special tools for achieving the objectives.


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Insurance permits to minimize the financial risk moving extraordinary expenses for covering accident losses up to a category of planned and acceptable insurance payments. In order to the insurance cover all extraordinary losses, it must be integrated into an insurance protection system. Taking into account that the polypropylene plant closed relationship to Dung Quat Refinery Project, it would be appropriate to develop a unified insurance system for protection against risks. In this case PetroVietnam Insurance Company (PVIC) will become a general insurer for the polypropylene plant project. PVIC is implementing cooperation programs with the leading Vietnamese insurance company BaoViet . The insurance company is preparing a reinsurance program for the project that has to meet PP JV Company’s control requirements and is oriented to the preferable use of services provided by Vietnamese insurance companies considering their financial status and experience in reinsurance. An insurance agreement documenting mutual obligations of an insured (enterprise) and an insurer (insurance company) is the outcome of works on the development of a specific system of insurance protection. Probably, the parties will need in services of an insurance advisor and an insurance broker. The insurance broker is a mediator acting as a go-between at concluding the insurance (reinsurance) agreements. He is an agent of the insured and must be an expert in the insurance laws and the practical insurance. The insurance agent is not obliged to guarantee solvency of an insurer. However, if he commits some negligence while discharging his obligations and, as a result of this negligence, the insured suffered damages, the latter is eligible to seek damages from the insurance agent. The structure and terms of the insurance agreement depend greatly on the results of a risk analysis being prepared, as a rule, jointly with the insurance company. As regards risk components that contribute mostly in the amount of expected losses of the enterprise, the insurance company can propose a system of organizational and technical measures aimed at reducing the losses. It is appropriate to implement this system before the insurance agreement is concluded, which permits to reduce insurance payment rates to a reasonable level. Common practice in the insurance is setting limits for a minimum amount of losses the insurance company is liable for (deductible). The point is that extraordinary expenses in case of small accidents (production failures) are comparable with or less than expenses incurred by parties for expert’s evaluation of insured accidents and settling possible claims. The cooperation of an enterprise and an insurance company at this stage lies in striving for making the enterprise risk “transparent”.


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From the fiscal planning standpoint, it is worth to distinguish the following types of potential losses: Property of the enterprise (process equipment and products) demolished or destroyed during accidents; Third party liability (both legal and contractual liability) arising from accidents. This type of losses has a form of compensation (indemnification) to inhabitants or enterprise personnel dead or suffered during the accident, penalties for environmental pollution (ecological legislation), and forfeit for incomplete product delivery under contracts; Business interruption due to unscheduled full or partial suspension of the production. This type of losses is the loss of profit (lost profits) from the financial standpoint. Section 7 classified main risks for the polypropylene plant construction in Vietnam by individual phases of the project. Accordingly, insurance operations can be classified as follows: ⇒ insurance of business risk at the pre-investment stage: professional liability insurance for developers of design estimates, etc. ⇒ insurance of business risk at the investment stage: insurance of cargo (insurance terms depend on the base terms of delivery Incoterms), insurance against various construction risks, insurance against risk of non-payment under contractual obligations, etc. ⇒ insurance of business risk at the production stage: various types of property insurance; insurance against ecological risks and other types of liability insurance; insurance against downtime and suspension of production; equipment insurance against breakage and fire; insurance against commercial risks, against failure to deliver, against non-payment for supplied products, etc. The following types of insurance can be used by individual participants of the investment project to reduce project risks: Project Participant (Insured) Design documentation developers Consulting companies Investment commodities suppliers Construction &

Insurance Type Professional liability insurance Professional liability insurance Cargo insurance 1. Insurance against construction/installation risks


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installation start-up contractors

and

Clients

Creditors Operators (users) of investment project

2. Insurance of building equipment and other property of Contractor 3. Insurance of performance guarantee for post startup period 4. Third party insurance during carrying out the works 5. Insurance against project work completion risks (as alternative to bank guarantee) 1. Insurance of equipment and other investment commodities received from vendors 2. Insurance of facilities to be commissioned before the completion of all contractual works (if the contract is not on the turnkey basis) 1. Export loan insurance against political risks 2. Insurance against not returning commercial loans 1. Insurance of real assets and income of project: - Insurance against fire and natural calamities - Equipment insurance against breakage - Insurance against downtime - Other 2. Civil liability insurance: - Environmental insurance - Product quality liability insurance

The insurance company PVIC should see to those types of insurance that are used by contractors, see to it that contractors implement all types of insurance according to ЕРС contracts and that policy provisions, insurance terms, and limits of insurance liabilities are checked up. In order to obtain credit, PP JV Company must have the policy of insurance of the construction against all risks (Construction All Risk - CAR) to the amount of a total cost of the Plant. After putting the polypropylene Plant into operation, PP JV Company will have to insure real assets at least for the maturity of loan. Once the insurance agreement comes into force, the relationship between an enterprise and an insurance company turns into a new phase, the main subject of which is comprehensive control of enterprise risks and reduction of any extraordinary losses. Natural objectives of this phase are the reduction of extraordinary losses and the increase in a degree of covering the loss at the expense of an insurance protection system, and the establishment of a risk management system as well. Undoubtedly, PP JV Company must have a program of training of insurance specialists and experts in risk analysis and loss distribution to secure the effective operation of the above-mentioned systems. The training of experts in domestic/abroad insurance will take 2 to 6 months or over, training for executives will require from 1 to 4 weeks with subsequent workshops.


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8. FINANCIAL AND ECONOMICAL STUDY OF THE PROJECT 8.1

PROJECT FINANCING

It is assumed to perform project financing by borrowing funds in the form of a long– term investment credit from foreign banks. Approximate amount of credit is $123 million US dollars (based on 70% debt) in money of the day. The credit annual interest rate of 10%. during construction will be added to the principle. Debt repayment interest rate post start-up will be a total percentage of LIBOR plus 3%. Debt amortization will be paid straight-line for the period of 12 years [(construction (3 yrs) + Repayment (9 yrs)). The scrap value will be four times the net operating cash flow at the end of the plant’s operating life. Furthermore, the base case of 70% loan is taken into account. This scenario obtains the good result in financial and economical analysis. Sensitivities of +/- 20% equity from the base case were also conducted. The remaining part of investments will be covered by the JVC partners. 8.2

TAXATION PRINCIPLES

This section is prepared on the basis of documents submitted by the Research & Development Center for Petroleum Processing (RDCPP) in its Report of Vietnam Polypropylene Market. Description of Vietnamese Tax System In compliance with the current Vietnamese laws, the tax system involves the following main taxes, fees and duties: • Corporate income tax; • Dividends remittance tax; • Assignment tax; • Personal income tax (for Vietnamese individuals and foreigners); • Import and export taxes; • Value-added tax (VAT); • Special consumption tax; • Others (rent of land and water surface, insurance premium including property insurance, social and medical insurance, etc.) Proposed Tax Structure for the Polypropylene Plant The Polypropylene plant under design is integral part of the refinery from technological, organizational, territorial and legal standpoints with the respective consequences for the implementation of the investment project as regards: • Capital construction and putting in operation • Business activities including import/export operations, land use, property insurance, capital consumption


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• Labour relations • Taxation. In compliance with the License N2097 issued by the Planning & Investment Ministry to establish the refinery, as well as the Charter of JVC, the enterprise shall pay taxes, fees and duties at preferential tax rates. The tax structure, payment terms and tax, fee and duty rates are as below. Corporate income tax The rate of corporate income tax shall be 10% (ten per cent) on the corporate income earned and is valid within all the period of contractual business activity of JV, i.e. for 25 years. JV shall be exempted from corporate income tax for a period of 4 (four) years commencing from the first profit-making year and be entitled to a 50% (fifty per cent) reduction of corporate income tax for a period of 4 (four) successive years. The taxable income of JV is total revenue minus aggregate expenditures. For this project, the income includes sales proceeds from commodity output – polypropylene to be sold at domestic and global markets, and oxygen cylinders to be sold at domestic regional market; the aggregate expenditures include: • Expenditures for purchase of raw material (propylene), materials and utilities for basic production • Labor costs (wages and bonuses), social and medical insurance payments • Capital consumption • Costs of purchasing or using technical documentation, licenses, “know-how” and technical services • Enterprise (plant) management expenses • Paid taxes, fees, duties, and other payments of tax nature (except income tax) • Paid interests on credit • Property insurance premium • Other expenses. The Following is estimated based on the applicable rate for Dung Quat refinery and in Dung QuatEconomic Zone : Corporate Tax Rate 1st - 4th year 0% 5th - 13th year 5% 14th - 15th year 10% 28% - From 16th year onwards

Dividends Remittance Tax The dividends remittance tax shall be 5% (five per cent) of corporate income earned in Vietnam and transferred abroad in respect of foreign investors contributing at least 10 (ten) million USD to the legal capital.


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Personal Income Tax In compliance with the Income Tax Law currently in effect in Vietnam, foreign and Vietnamese individuals working in JV must pay income tax depending on their monthly wages and according to progressive tax rates. In accordance to circular 81/2004/TT-BTC dated 13th, August, 2004 providing guideline for PIT, the income is subjected to income tax at the following rates: For Vietnamese: Unit: 1000 VND Level 1 2 3 4 5

Income (Vietnamese dong per month) Up to 5.000 Above 5.000 to 15.000 Above 15.000 to 25.000 Above 25.000 to 40.000 Above 40.000

Tax rate (%) 0 10 20 30 40

For foreigner: Unit: 1000 VND Lev el 1 2 3 4 5

Income (Vietnamese dong per month) Up to 8.000 Above 8.000 to 20.000 Above 20.000 to 50.000 Above 50.000 to 80.000 Above 80.000

Tax rate (%) 0 10 20 30 40

Reference exchange rate: 1 USD= 16.000 VND Investors and people working in Dungquat are entitled to a half deduction of payment of personal high-income tax. Import and Export Duties The two major points pertaining the JVC and Import - Export duties are: 1. Free-duty import of materials, raw materials, accessories, semi-finished products, which have not been manufactured domestically (in Vietnam) at standard quality, for the first 5 years of production. 2. Free-duty import of machinery and equipment used for forming fixed assets. Therefore machinery, process equipment, materials, and means of transportation imported into Vietnam for the purpose of forming the fixed assets of the planned PP


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plant shall be exempted from import duty for the period of capital construction by JVC. It is assumed that in the course of JVC business activities after commissioning of the PP plant the following shall be in force: • • • •

Propylene shall be exempted from import duty (if required). Imported catalysts, chemicals, additives, stabilizers, granulated polyethylene (for manufacturing packing film), and spare parts for the planned PP plant may be exempted from import duty. This assumption was made taking into account the Vietnam policy aimed at promoting the implementation of advanced technologies including preferential tax rates. No export duty will be levied in case of exporting the polypropylene produced at the JVC PP plant.

Value Added Tax (VAT) The rate of VAT is 10 % for goods and services. Added value of commodities and services is subjected to taxation at every stage of production, distribution and consumption. • When purchasing equipment at domestic markets, the buyer (JVC) shall pay for its cost including VAT. The VAT sum shall be refunded to the buyer in full within 3 months after the purchase of equipment, i.e. the tax can be refunded within a period of construction and installation. • When purchasing equipment abroad, the buyer (JVC) shall pay only its contractual price, because equipment, machinery and special means of transportation which are not produced in Vietnam yet and used for the purpose of forming the fixed assets of the plant are exempted from both import duty and import VAT. • Services of construction and erection companies engaged for the capital construction shall be paid for including VAT. • The VAT sum for the construction period shall be calculated separately. It shall not be transferred to the fixed assets of a facility under construction. VAT shall be refunded to the tax payer within the same period. • In case of business activity VAT payable to the state budget of Vietnam shall be calculated as VAT received from sales of finished products at domestic market (export VAT rate is currently 0 (zero) % for every commodity) minus VAT paid while purchasing material resources for current production needs. The tax rate is 10 % of a price of commodity or costs of services. The present project provides for maximum integration of the PP plant into the Refinery. The additional VAT paid to the budget by JVC is equal to VAT received on sales of polypropylene inside Vietnam minus VAT paid for any imported propylene, catalysts, chemicals, additives, stabilizers, polyethylene and spare parts of equipment designed for this plant.


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The rate of import VAT is 5 % of CIF price. Other taxes, fees and duties -

Rental price of land at 115 USD/hectare/year Power price: U.S$ 0.07/Kwh on average Industrial Water Price: US$ 0.1/m3 Portable water price: US$ 0.25/m3 Wastewater treatment fee: US$ 0.2/m3 The social and medical insurance premium shall be charged on payroll fund at the following rates: Social insurance Medical insurance

15 % 2 %

Role of Taxes in Economic Analysis All the taxes, fees and duties discussed above were taken into consideration in preparation of DFS to perform an economic analysis of the PP plant project and assessment of cost-performance of its realization for Vietnam as a whole. The taxes like import and export duties, rent of land use, property insurance premium payment, social and medical premium payments are to be included in the production cost and, therefore, influence on the taxable profit value. Production costs shall not be subjected to VAT. All taxes, fees and duties except VAT, income tax and dividends remittance tax are included in an algorithm of calculating cash flow and project economic indices, namely, net present value (NPV), internal return rate (IRR), and investment payback period. VAT is not included in the algorithm of calculating the project cash flow for the following reasons: - VAT does not influence on profit and project economic indices. - The project calculation assume that all taxes, fees and duties, including VAT, to be charged and paid within a period of business activity of the planned PP plant are equal as of the end of every year of the period under consideration. VAT, income tax and dividends remittance tax are taken into account when evaluating the cost-performance of the PP plant project for Vietnam as a whole.


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8.3

TECHNICAL AND ECONOMIC ANALYSIS

8.3.1 Basic Data and Provisions Evaluation of investment effectiveness on the polypropylene plant construction project was performed taking into account technical and economic parameters of processes provided by the licensors, Vietnam polypropylene market study, price forecast for polypropylene and the feedstock for its manufacturing, i.e. propylene. Calculations were performed based on the following provisions and data: 1. General Currency of calculation - US Dollars Project life (calculation horizon) - 20 years Project life start – 1st half 2009 Planning interval duration - 1 year 2. Polypropylene plant capacity The plant capacity is set at 150,000 tons per year. 3. Construction, commissioning, plant development Construction duration: 26 months 1st half 2009

Commissioning: Plant development

Years %

Year 1 40

Year 2+ 100

5. Capital Assumptions Capital Investment provided by LGI has several components : ISBL – In Side Battery Limits. This is the cost to engineer, procure, and construct on plot plant and equipment to the extent that the ISBL unit is ready to commission. ISBL costs typically account for 50 to 60% of total installed costs to construct a facility. OSBL – Outside Battery Limits. This is the cost to engineer, procure, and construct plant and equipment required within a complex to support the ISBL unit. This would include roads, connecting piping, or utility systems like steam and electricity within the complex. A good number for OSBL costs is 30% of ISBL costs and depends somewhat on site type (brown field or green field). For the Dung Quat PP facility LGI has estimated that there is a 10% cost saving for the OSBL requirement due to


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the high level of system integration with the refinery and the parallel construction. This implies that OSBL is calculated as 20% of ISBL instead of 30%. Off-Plot Costs: These include costs outside of a complex such as pipelines, tanks, railroad track connections, schools, hospitals, etc. that would be required to service a facility and its’ people. These costs can obviously range from zero to a significant portion of total cost depending upon location and stage of infrastructure development. For purpose of this project, LGI has not included these costs due to the high level of integration with the refinery. Owners Costs: Include project development costs for legal fees, basic process engineering and design, buildings, site preparation, spare parts, licensing fees, and project management costs. A good number for total owners’ costs is in the range of 10 to 15% of total installed cost and depend somewhat on site type (brown field or green field) but also highly dependent on the technologies implemented and the cost of a Project Management Contractor. For purpose of this project, we have assumed 10% owners’ costs, excluding license fees. Up front licensing fees and basic engineering were supplied by LGI based on information from the licensor. The final cost must be negotiated with the licensor once selected. LGI has indicated that a payment of USD$15 million is required. Location factors are applied to ISBL + OSBL costs, and typically a percentage of a US Gulf Coast or West Europe capital investment cost, depending on location. LGI has assumed that capital costs to build the plant in Vietnam are similar to the West Europe capital cost. Non-recurring expenditures for start-up and commissioning expenses plus preoperation staffing and training as well as operating spares. A good number for these types of expenditures is between 5 and 10% of total installed cost, depending on whether the site is a brown or green field. We have assumed that these items are covered in the owners cost. Contingency: The LGI supplied capital cost numbers are from a technology licensor and are based on West Europe capital numbers. This project does include a contingency which covers any cost overrun for non-EPC costs, license fees, owners costs, as well as any unforeseen EPC cost overrun. Since the EPC cost in the current market is the very tight among the mentioned factors, a 30% of ISBL + OSBL (EPC cost) contingency factor was applied. Capital estimates provided are feasibility grade, +/- 30%. Capital costs are based on widely commercialized technology and escalated to the startup year. Total Plant capital estimates include ISBL, OSBL and Off-Sites. Capital costs are inclusive of the first charge of catalyst. The capital expense profile is assumed 5, 15, 40, 40% for years one through four respectively. Component

US$ (Millions)


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ISBL OSBL Owner’s Costs Technology License & Eng Contingency Total

92 18 18 15 32 175

This excludes working capital. Working Capital is defined as the cash required to run the business plus build initial inventories plus accounts receivable less accounts payable. These factors vary depending on marketing assumptions. Project investment requirements are defined as the total cost for polypropylene plant construction plus owners’ and royalties’ costs. Financing costs in the form of credit interest accrued during the credit utilization period are not included in the investment because the terms and conditions for credit granting provide for delay of payment up to the end of construction period. Initial working capital requirements are assumed as maximum annual requirements for project current assets. However, it would not be included in the calculation for total fixed investment. Rather, it is included as a separate segment in CMAI’s financial analysis. The working capital is calculated based on standard inventory and standard manufacturing expenses given a maximum propylene price, maximum charges for depreciation, repair and maintenance of fixed assets (funds), operating personnel numbering 80 employees with an average wage of 547 USD a month and rent for land of USD 115 per ha, inflated for forecast years. The calculation of maximum annual requirements for working capital would be based on 30 days each for payables; 30 and 60 days receivables for PP delivered domestically and exported respectively. 5. Product sales market Polypropylene Vietnam domestic market (which makes up 40% of the PP production): Regions Share , %

South 25

Center 67

North 8

The remaining 60% of PP production will be exported out of Vietnam. 6. Prices Propylene (feedstock) and polypropylene (finished product) prices.


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The financial analysis would be based on 3 different feedstock pricing scenarios: 1. Imported Polymer Grade Propylene – which is based on CMAI’s price forecast for “Propylene CFR Southeast Asia”, which is on a delivered basis to SEA countries including Vietnam. 2. Propylene on a FOB basis. – which is based on CMAI’s price forecast for “Propylene FOB Singapore”, which does not include shipping costs. 3. Propylene on a LGI-defined blend basis – which is based on 30% Imported PGP and 70% FOB Singapore. This represents the 47,000 tons of imported propylene. The forecast prices for both Propylene and Polypropylene are based on CMAI’s consultants views on the market. Like other standard economic forecasts, CMAI’s price forecast is “surprise free”, meaning that it does not anticipate unknown events, such as regional political conflicts, that may cause a sudden rise or decline in prices. The methodology that CMAI has adopted for our price forecast will be mentioned under the “Pricing Methodology” of this section of the report. The Polypropylene price used in the economics will be a netback value , with the transportation costs to different parts of Vietnam as follows: • • •

North: US$ 25 / metric ton Central US$ 5/metric ton South US$25/metric ton

The transportation cost for exporting Polypropylene is US$20/metric ton. Prices for utilities and fuel coming from the Refinery:

Utility Electric power LP steam Demineralized water Wastewater treatment Cooling water (return) Fresh and potable water Compressed air Fuel

USD 0.07 6.62 0.88 0.20 0.022 0.1571 0.0064 91.2

Per kW/hr. T m3 m3 m3 m3 Nm3 T

7. Other Consumption indices per year and specific indices per ton of polypropylene as per recommended SPHERIPOL technology:


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Units

Yield/Ton PP

Feedstock Propylene

1.02

Product Polypropylene

1.00

Utilities Fuel Electricity Fresh & potable water Cooling water Wastewater treatment LP Steam Compressed air Nitrogen Demineralized water

Ton/Ton Kwh/Ton m3/Ton m3/Ton m3/Ton Ton/Ton Nm3/Ton MCF/Ton m3/Ton

0.00061 438 0.04 169 0.15 0.38 47 1.23 0.08

• Operating personnel and salary The number of polypropylene plant personnel, including laboratory and oxygen & nitrogen station personnel is 80 employees. Working day duration on weekdays and pre-holidays Number of working days per week Working week duration

8 hours; 5 days; 40 hours;

The monthly wage of each personnel is taken to be 547 USD. • Depreciation Depreciation method % of capital depreciated each year

Straightline 15%

• Occupied area Polypropylene plant occupied area in accordance with the plot plan is 15.4 hectares (385m х 400m) . The rental charge per annum is 115 USD/ha. •

Fixed Operating Costs

The elements of the fixed operating costs are a percentage of the Total Fixed Investment and are as follows:


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Fixed Operating Costs % of TFI Maintenance 3% Overhead 2% Insurance 0.25% Sales and Admin. 2%

Pricing Methodology Over the long term, international commodity petrochemical prices are ultimately a function of production costs plus some level of profitability for the high cost producer. Three elements are therefore necessary to generate price forecasts. The first is to generate a production cost forecast, the second a margin/profitability forecast and the third, where applicable, a forecast of trade patterns and freight cost to insure price linkages between regions. To generate a forecast of production costs, one must generate a forecast of feedstock cost and, in most cases these feedstocks are either other petrochemicals or petrochemical feedstocks, such as naphtha, propane and ethane. It is therefore necessary to generate a price forecast for the feedstocks first that is related to basic energy values. For petrochemical products, a price forecast for ethylene must be generated before generating a price forecast for polyethylene, but the polyethylene supply/demand forecast must be done before ethylene. As a result, some iteration is required. The supply/demand balance is used to generate the forecast of margins and profitability. High operating rates lead to good margins and low operating rates lead to poor margins. Historic trends are used to derive these forecasts. The following is a schematic representation of CMAI’s forecast methodology.


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CMAI Price Forecast Methodology Profit Margins Trade Flows Demand Economy Capacity Operating Rates

The third element of an international price forecast is linkage between regions. The petrochemical demand forecast provides an estimate of domestic requirements. While cost structures are important in determining the level of domestic production, some iteration is necessary between supply/demand analysis and price forecasting. Ultimately, the price forecasts must support the cost of freight inherent in the expected trade flows of the petrochemical and its derivatives and also support regional investment economics. Forecasts of freight are important when making price forecasts for countries that are importing or exporting products. Competitive cost curves set the floor prices for both a world and regional basis. Mid term forecast CMAI generates a mid-term cyclic price forecast for one future cycle, generally 5-7 years, and then reverts to a long term trend line forecast. Petrochemical business cycles are influenced by periods of over and under-capacity. The typical corporate planning cycle, combined with design and construction schedules, allows for companies to announce firm investment plans only four to five years in advance of start up. Supply/demand pressures and cash costs can therefore be evaluated to generate a margin forecast based on actual investment plans only five years out. The forecast based on actual investment plans inevitably results in a cyclic forecast. CMAI applies a “cost-plus-margin” methodology in order to arrive at a price. The forecast is a combination of the supply/demand balance (generating a nameplate operating rate forecast) and the cash cost forecast (based on the forecast of energy and feedstocks). The forecast is reviewed between regions to assess impact on trade flows of major derivatives, which are a key part of the supply/demand balance. CMAI takes care to examine those products that exist as part of a “chain” of products on the way to a final petrochemical. CMAI examines the profitability and


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costs of an entire chain of products to ensure that the long term pricing being forecast results in adequate return to build all the necessary assets. Like economic forecasts, CMAI’s price forecast is “surprise-free”, namely it does not anticipate unknown events, such as natural calamities or regional political conflicts that may cause rise or decline in prices. 8.3.2. General Methodology Basis Commonly used in the world practice criteria based on the cash flow analysis were considered to be main indicators of the project cost efficiency within the effective tax laws. Project Total Net Income This indicator describes a surplus of cash inflow from sales of products over a sum of capital expenses and operational costs incurred by an investor, as well as taxes, duties and other obligatory fees paid by the investor according to the existing laws for a project life (investment and operations periods). Discounted Cash Flow This indicator is a time-reduced cash flow for the project life. It allows comparison of expenses incurred at different times by means of discounting. Payback Period This indicator means the first year after the beginning of the project, for which the accumulated non-discounted cash flow becomes positive for the first time. Maximum Negative Cash Flow This indicator characterizes requirements for equity or loan capital to be obtained for the project implementation. Internal Rate of Return (IRR) This indicator is the rate of discount at which total discounted cash flow (discounted income) becomes equal to zero. Economically, the IRR means an average annual rate of return on invested capital (by analogy with a bank deposit rate) that is guaranteed to the investor as a result of the project implementation. The IRR value (in money of the day) defines also the highest interest rate on which capital can be borrowed to finance the project and which guarantees 100% repayment of the used credit resources. Investor’s Internal Rate of Return in real terms shall be determined from the following equation: Investor’s Internal Rate of Return in money of the day shall be determined from the following equation: ANCFN ANCF2 ANCFK + ..... + + ..... + =0 DCF ( IRR) = ANCF1 + (1 + IRR / 100) (1 + IRR / 100) ( K −1) (1 + IRR / 100) ( N −1) Where


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K is a subsequent number of the year starting from the year of beginning of the project to be defined as the 1st year; N is the project life in years; ANCFK is annual net cash flow of the investor in kth year; I K is an integral industrial product price index for the period calculated as a product of average annual industrial product price indices (in fractions) from the 2nd year up to the kth year inclusive; DCF (IRR) is a cash flow discounted at the discount rate equal to IRR.


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8.3.3. Economic Analysis of PP Plant Project All calculations performed in this study are in USD of the day (considering inflation) and in real terms (not considering inflation). The inflation rate is assumed the same for expenses and income and equal to 2% per annum. The feasibility of the PP plant operations considered for construction is conducted over different scenarios with sensitivities related to Feedstock & Product pricing, capital, equity and plant capacity. The three main feedstock pricing basis are as follows: 1. Imported Polymer Grade Propylene 2. Propylene on FOB basis. 3. Propylene on LGI-defined blend basis (30% Imported PGP; 70% FOB) Technical and economic indicators were calculated for all cases under the same financial conditions of the project implementation, i.e. prices for raw materials, products, auxiliary materials, utilities, fuel, etc. Direct operational costs The structure and dynamics of operational costs were calculated on the basis of engineering and technological solutions for the planned project. Consumption indices, prices and standard costs have been reviewed above. The operational costs were calculated considering the following cost fractions: – Raw materials; – Catalysts, chemicals, additives; – Utilities; – Fuel; – Labor costs; – Repair/maintenance costs; – Other expenses.


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8.3.4 Results SUMMARY TABLE OF MAIN PROJECT COST EFFICIENCY INDICATORS FOR THE BASE CASES (UP TILL 2028) INDICATOR

UNITS

FOB

BLEND

Polypropylene yield

MMTA

150

150

Polypropylene sales (excluding the 1.5% product off-spec)

000’s T

2,955

2,955

Total receipts from product sales (exclusive of VAT)

Millions USD

3,151

3,151

Capital investment (exclusive of VAT )

Millions USD

175

175

Direct operational costs (exclusive of VAT and other taxes, duties and fees)

Millions USD

2,926

2,998

Negative cash flow period from the beginning of the project

years

12

12

Payback schedule

year

N/A

N/A

%

-5.7

-11.8

Millions

-81.1

-96.2

0.46

0.37

In money of the day

Internal Rate of Return (IRR) NPV (at 13% discount rate) Debt Coverage Ratio (Avg to 2017)

Ratio

Debt Coverage Ratio (Avg from 201728)

Ratio

4.51

2.89

Payment for Land

Millions USD

0.041

0.041

Property insurance premium

Millions USD

7.62

7.62

Payroll deductions

Millions USD

5

5

Personal income tax

Millions USD

6

6

VAT

Millions USD

142

142

Corporate income tax

Millions USD

10

3


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SUMMARY TABLE OF MAIN PROJECT COST EFFICIENCY INDICATORS AT 16% IRR (UP TILL 2028) UNITS

FOB 16%

BLEND 16%

Polypropylene yield

MMTA

150

150

Polypropylene sales

000’s T

2,955

2,955

Total receipts from product sales (exclusive of VAT)

Millions USD

3,151

3,151

Capital investment (exclusive of VAT )

Millions USD

175

175

Direct operational costs (exclusive of VAT and other taxes, duties and fees)

Millions USD

2,458

2473

Negative cash flow period from the beginning of the project

years

5

6

Payback schedule

year

9

9

%

16.0

16.0

Millions

17.2

13.8

Debt Coverage Ratio (Avg to 2017)

Ratio

1.24

1.27

Debt Coverage Ratio (Avg from 201728)

Ratio

15.27

14.94

Payment for Land

Millions USD

0.041

0.041

Property insurance premium

Millions USD

7.62

7.62

Payroll deductions

Millions USD

5

5

Personal income tax

Millions USD

6

6

VAT

Millions USD

142

142

Corporate income tax

Millions USD

55

54

INDICATOR

In money of the day

Internal Rate of Return (IRR) NPV (at 13% discount rate)


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8.3.5 Sensitivity Analysis The following values are assumed to be main cost efficiency indicators: 1) Internal rate of return (IRR) 2) Net Present Value (NPV) Single-Factor Sensitivity Analysis The following parameters were assumed to be critical for the project cost efficiency: ¾ Propylene price ¾ Capital investment ¾ Polypropylene price ¾ Equity Stake Propylene Price Growth Risk The analysis was performed for potential variation in propylene prices within the range of + 5% of base values. A 5% increase in of the propylene price is deemed to be critical, and all feedstock cases showed an extreme sensitivity to feedstock price. Capital Investment Increase Risk The analysis was performed for potential variation in capital investment within the range of + 10 % of base values. Polypropylene Price Reduction Risk The analysis was performed for potential variation in polypropylene prices within the range of + 5% of base values. Changing the polypropylene price has a strong impact on the project cost performance. Equity Level The analysis was performed for potential variation in the level of debt to equity for the project within the range of + 20% of base values.

16% IRR Sensitivity For the FOB Singapore feedstock case and the blended feedstock case, the above sensitivities for a relevant feedstock cost that yields 16% IRR will also be given.


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IRR:

NPV (13% discount rate) :

-5.7%

Feedstock at FOB price Polypropylene production (kta)

Payback period:

-81.09

NO PAYBACK

Plant capacity: 150

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

0

0

0

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

Feedstock costs Propylene

0

0

0

100

95

97

101

113

104

102

105

108

111

115

119

123

127

130

133

136

139

142

145

147

150

By products Net Feedstock costs

0 0

0 0

0 0

0 100

0 95

0 97

0 101

0 113

0 104

0 102

0 105

0 108

0 111

0 115

0 119

0 123

0 127

0 130

0 133

0 136

0 139

0 142

0 145

0 147

0 150

Revenue from PP

0

0

0

128

124

131

140

162

146

140

143

147

151

156

160

165

169

173

176

180

183

187

190

194

198

Fuel Demineralized water

0.00 0.00

0.00 0.00

0.00 0.00

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

Condensate Electricity Firm Fresh & potable water Cooling Water Wastewater Treatment LP Steam HP Steam Compressed air Nitrogen

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

-0.02 4.92 0.00 0.60 0.00 0.41 0.00 0.05 0.24

-0.02 5.02 0.00 0.61 0.00 0.42 0.00 0.05 0.25

-0.02 5.12 0.00 0.62 0.00 0.42 0.00 0.05 0.26

-0.02 5.23 0.00 0.63 0.00 0.43 0.00 0.05 0.26

-0.02 5.33 0.00 0.65 0.01 0.44 0.00 0.05 0.27

-0.02 5.44 0.00 0.66 0.01 0.45 0.00 0.05 0.27

-0.02 5.54 0.00 0.67 0.01 0.46 0.00 0.05 0.28

-0.02 5.66 0.00 0.68 0.01 0.47 0.00 0.06 0.29

-0.02 5.77 0.00 0.70 0.01 0.48 0.00 0.06 0.29

-0.03 5.88 0.00 0.71 0.01 0.49 0.00 0.06 0.30

-0.03 6.00 0.00 0.73 0.01 0.50 0.00 0.06 0.31

-0.03 6.12 0.00 0.74 0.01 0.51 0.00 0.06 0.32

-0.03 6.24 0.00 0.76 0.01 0.52 0.00 0.06 0.32

-0.03 6.37 0.00 0.77 0.01 0.53 0.00 0.06 0.33

-0.03 6.50 0.00 0.79 0.01 0.54 0.00 0.06 0.34

-0.03 6.63 0.00 0.80 0.01 0.55 0.00 0.06 0.35

-0.03 6.76 0.00 0.82 0.01 0.56 0.00 0.07 0.36

-0.03 6.89 0.00 0.83 0.01 0.57 0.00 0.07 0.36

-0.03 7.03 0.00 0.85 0.01 0.58 0.00 0.07 0.37

-0.03 7.17 0.00 0.87 0.01 0.59 0.00 0.07 0.38

-0.03 7.32 0.00 0.89 0.01 0.61 0.00 0.07 0.39

-0.03 7.46 0.00 0.90 0.01 0.62 0.00 0.07 0.40

0.00 0.00

0.00 0.00

0.00 0.00

1.83 2.41

1.87 2.46

1.91 2.51

1.95 2.56

1.99 2.61

2.02 2.66

2.07 2.71

2.11 2.77

2.15 2.82

2.19 2.88

2.24 2.94

2.28 3.00

2.33 3.05

2.37 3.12

2.42 3.18

2.47 3.24

2.52 3.31

2.57 3.37

2.62 3.44

2.67 3.51

2.73 3.58

2.78 3.65

0

0

0

10

11

11

11

11

12

12

12

12

13

13

13

13

14

14

14

14

15

15

15

16

16

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.66 5.05 3.36 0.42 3.36 0.00

0.67 5.17 3.45 0.43 3.45 0.00

0.68 5.30 3.54 0.44 3.54 0.00

0.70 5.44 3.62 0.45 3.62 0.00

0.71 5.57 3.72 0.46 3.72 0.00

0.73 5.71 3.81 0.48 3.81 0.00

0.74 5.86 3.90 0.49 3.90 0.00

0.76 6.00 4.00 0.50 4.00 0.00

0.77 6.15 4.10 0.51 4.10 0.00

0.79 6.31 4.21 0.53 4.21 0.00

0.80 6.47 4.31 0.54 4.31 0.00

0.82 6.63 4.42 0.55 4.42 0.00

0.83 6.80 4.53 0.57 4.53 0.00

0.85 6.97 4.64 0.58 4.64 0.00

0.87 7.14 4.76 0.60 4.76 0.00

0.89 7.32 4.88 0.61 4.88 0.00

0.90 7.50 5.00 0.63 5.00 0.00

0.92 7.69 5.13 0.64 5.13 0.00

0.94 7.89 5.26 0.66 5.26 0.00

0.96 8.08 5.39 0.67 5.39 0.00

0.98 8.29 5.52 0.69 5.52 0.00

1.00 8.49 5.66 0.71 5.66 0.00

Total Fixed costs

0

0

0

13

13

14

14

14

15

15

15

16

16

16

17

17

18

18

19

19

20

20

20

21

22

Total Cash costs Cash Margin (EBITDA)

0

0

0

123

119

121

126

138

130

129

132

136

140

144

149

154

158

162

166

169

173

177

180

184

188

0

0

0

5

5

9

14

24

16

12

12

11

11

11

11

11

11

11

11

10

10

10

10

10

10

Cash costs (USD/Ton PP) Cash Margin (USD/Ton PP)

0

0

0

823

795

809

840

920

870

858

879

904

932

962

994

1024

1053

1079

1105

1129

1153

1177

1202

1227

1252

0

0

0

32

30

61

92

159

104

78

77

76

76

75

74

73

73

72

71

70

69

68

67

66

65

Capital Costs

175

160

164

168

172

177

181

186

190

195

200

205

210

216

221

227

232

238

244

250

256

263

269

276

283

Net Cash flow DSCR

-3

-8

-21

-33

-23

-20

-14

-6

-9

-15

-17

-18

6

6

6

5

5

5

5

3

3

3

39

3

2

0.00

0.00

0.00

0.15

0.17

0.35

0.55

0.96

0.62

0.46

0.44

0.42

5.37

5.17

4.98

5

5

4

4

4

4

4

4

4

4

Utilities

Others Cats & Chems Packaging or Terminalling Variable costs

Fixed costs Plant site personnel M aintenance Overhead Insurance Sales and Admin. Land Rental


4

May 06

Rev.

Date


~

179 of 199

IRR:


-11.8%

Feedstock at LGI defined blend Polypropylene production (kta)

Payback period:

-96.20

NO PAYBACK

Plant capacity: 150

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

0

0

0

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150


0

0

0

103

98

100

104

116

108

105

108

111

115

119

123

127

130

134

137

140

143

146

149

152

155


0 0

0 0

0 0

0 103

0 98

0 100

0 104

0 116

0 108

0 105

0 108

0 111

0 115

0 119

0 123

0 127

0 130

0 134

0 137

0 140

0 143

0 146

0 149

0 152

0 155

Revenue from PP

0

0

0

128

124

131

140

162

146

140

143

147

151

156

160

165

169

173

176

180

183

187

190

194

198


0.00 0.00

0.00 0.00

0.00 0.00

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02


0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

-0.02 4.92 0.00 0.60 0.00 0.41 0.00 0.05 0.24

-0.02 5.02 0.00 0.61 0.00 0.42 0.00 0.05 0.25

-0.02 5.12 0.00 0.62 0.00 0.42 0.00 0.05 0.26

-0.02 5.23 0.00 0.63 0.00 0.43 0.00 0.05 0.26

-0.02 5.33 0.00 0.65 0.01 0.44 0.00 0.05 0.27

-0.02 5.44 0.00 0.66 0.01 0.45 0.00 0.05 0.27

-0.02 5.54 0.00 0.67 0.01 0.46 0.00 0.05 0.28

-0.02 5.66 0.00 0.68 0.01 0.47 0.00 0.06 0.29

-0.02 5.77 0.00 0.70 0.01 0.48 0.00 0.06 0.29

-0.03 5.88 0.00 0.71 0.01 0.49 0.00 0.06 0.30

-0.03 6.00 0.00 0.73 0.01 0.50 0.00 0.06 0.31

-0.03 6.12 0.00 0.74 0.01 0.51 0.00 0.06 0.32

-0.03 6.24 0.00 0.76 0.01 0.52 0.00 0.06 0.32

-0.03 6.37 0.00 0.77 0.01 0.53 0.00 0.06 0.33

-0.03 6.50 0.00 0.79 0.01 0.54 0.00 0.06 0.34

-0.03 6.63 0.00 0.80 0.01 0.55 0.00 0.06 0.35

-0.03 6.76 0.00 0.82 0.01 0.56 0.00 0.07 0.36

-0.03 6.89 0.00 0.83 0.01 0.57 0.00 0.07 0.36

-0.03 7.03 0.00 0.85 0.01 0.58 0.00 0.07 0.37

-0.03 7.17 0.00 0.87 0.01 0.59 0.00 0.07 0.38

-0.03 7.32 0.00 0.89 0.01 0.61 0.00 0.07 0.39

-0.03 7.46 0.00 0.90 0.01 0.62 0.00 0.07 0.40

0.00 0.00

0.00 0.00

0.00 0.00

1.83 2.41

1.87 2.46

1.91 2.51

1.95 2.56

1.99 2.61

2.02 2.66

2.07 2.71

2.11 2.77

2.15 2.82

2.19 2.88

2.24 2.94

2.28 3.00

2.33 3.05

2.37 3.12

2.42 3.18

2.47 3.24

2.52 3.31

2.57 3.37

2.62 3.44

2.67 3.51

2.73 3.58

2.78 3.65

0

0

0

10

11

11

11

11

12

12

12

12

13

13

13

13

14

14

14

14

15

15

15

16

16

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.66 5.05 3.36 0.42 3.36 0.00

0.67 5.17 3.45 0.43 3.45 0.00

0.68 5.30 3.54 0.44 3.54 0.00

0.70 5.44 3.62 0.45 3.62 0.00

0.71 5.57 3.72 0.46 3.72 0.00

0.73 5.71 3.81 0.48 3.81 0.00

0.74 5.86 3.90 0.49 3.90 0.00

0.76 6.00 4.00 0.50 4.00 0.00

0.77 6.15 4.10 0.51 4.10 0.00

0.79 6.31 4.21 0.53 4.21 0.00

0.80 6.47 4.31 0.54 4.31 0.00

0.82 6.63 4.42 0.55 4.42 0.00

0.83 6.80 4.53 0.57 4.53 0.00

0.85 6.97 4.64 0.58 4.64 0.00

0.87 7.14 4.76 0.60 4.76 0.00

0.89 7.32 4.88 0.61 4.88 0.00

0.90 7.50 5.00 0.63 5.00 0.00

0.92 7.69 5.13 0.64 5.13 0.00

0.94 7.89 5.26 0.66 5.26 0.00

0.96 8.08 5.39 0.67 5.39 0.00

0.98 8.29 5.52 0.69 5.52 0.00

1.00 8.49 5.66 0.71 5.66 0.00

Total Fixed costs

0

0

0

13

13

14

14

14

15

15

15

16

16

16

17

17

18

18

19

19

20

20

20

21

22


0

0

0

126

122

124

129

141

134

132

135

139

143

148

153

157

162

166

170

173

177

181

185

188

192

0

0

0

2

1

6

11

21

12

8

8

8

8

8

7

7

7

7

7

6

6

6

6

6

5


0

0

0

843

815

830

861

942

891

880

902

927

955

986

1018

1049

1078

1105

1131

1156

1181

1205

1231

1256

1282

0

0

0

13

10

41

71

138

83

56

55

53

52

51

50

48

47

46

44

43

41

40

38

37

35

Capital Costs

175

160

164

168

172

177

181

186

190

195

200

205

210

216

221

227

232

238

244

250

256

263

269

276

283

Net Cash flow DSCR

-3

-8

-21

-34

-26

-23

-17

-9

-13

-18

-21

-22

3

2

2

2

2

1

1

0

0

0

25

-1

-1

0.00

0.00

0.00

0.06

0.06

0.23

0.42

0.83

0.49

0.33

0.31

0.30

3.70

3.51

3.34

3

3

3

3

3

2

2

2

2

2

Utilities




4

May 06

Rev.

Date


~

180 of 199

FOB SINGAPORE PROPYLENE

Cumulative net cash flow FOB price

0 -20 -40 -60 -80 -100 -120 -140 -160 -180 -200 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Polypropylene Unit Sensitivities FOB price Base IRR = -5.7%

+20%

Equity

-20%

+10%

Capital

-10%

-5%

Product

+5%

+5%

Feedstock

-12%

-10%

-8%

-6%

-4%

-2%

-5%

0%

2%

4%

6%

8%

10%


4

June 06

Rev.

Date


~

181 of 199

Feedstock sensitivity vs IRR IRR 40% 35% 30% 25% 20%

16% IRR hurdle rate

15% 10% 5% 0% -5% -10% -15% -20% -25% -30% 100%

95%

80%

75%

70%

Capital sensitivity vs IRR IRR 35% 30% 25% 20%

16% IRR hurdle rate

15% 10% 5% 0% -5% -10% -15% -20% -25% -30% 110%

100%

90%

80%


4

June 06

Rev.

Date


~

182 of 199

MIXED PROPYLENE SOURCE CASE: LGI DEFINED

Cumulative net cash flow LGI defined blend

0

-50

-100

-150

-200

-250 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Polypropylene Unit Sensitivities LGI defined blend Base IRR = -11.8%

+20%

Equity

-20%

+10%

Capital

-10%

-5%

Product

+5%

+5%

Feedstock

-6%

-4%

-2%

-5%

0%

2%

4%

6%

8%

10%

12%


4

June 06

Rev.

Date


~

183 of 199

Feedstock sensitivity vs IRR IRR 40% 35% 30% 25% 20%

16% IRR hurdle rate

15% 10% 5% 0% -5% -10% -15% -20% -25% -30% 100%

95%

80%

75%

70%

Capital sensitivity vs IRR IRR 35% 30% 25% 20%

16% IRR hurdle rate

15% 10% 5% 0% -5% -10% -15% -20% -25% -30% 110%

100%

90%

80%


4

June 06

Rev.

Date


~

184 of 199

Additional Bank Loan From the above analysis of the two base cases, it can be seen that the cash flow for the project based on FOB Singapore feedstock price, and the blended feedstock price, are both negative. In this case, for the project to continue to operate and to ensure working capital is available, the facility would be required to take out a 2nd loan after the initial loan has reached its tenure. The financial model has a toggle on the dashboard to initiate this 2nd loan adjustment. However, as any positive cash flow years are removed from the base cases by taking out a 2nd loan, the excel IRR calculation is unable to calculate the final IRR for the 2nd bank loan case. In this instance, the NPV can only be calculated for the second loan scenario, and the resulting NPV’s for the 2nd bank loan are compared to the base cases below:

NPV comparison with & without additional bank loan 0 -50 -100 -150 -200 -250 -300 FOB basis Without add'l bank loan

LGI defined blend With add'l bank loan

All four cases are destroying money, however taking out the second loan destroys even more money as the NPV values for these cases are more negative than the base feedstock cases without the additional bank loan.


4

June 06

Rev.

Date


~

185 of 199

16% IRR CASES

Cumulative net cash flow LGI defined blend

400 350 300 250 200 150 100 50 0 -50 -100 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Cumulative net cash flow FOB price

450 400 350 300 250 200 150 100 50 0 -50 -100 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28


4

June 06

Rev.

Date


~

186 of 199

IRR:


15.8%

Feedstock at LGI defined blend Polypropylene production (kta)

Payback period:

13.83

9 years

Plant capacity: 150

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

0

0

0

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150


0

0

0

81

77

78

82

91

84

82

85

87

90

93

96

99

102

105

107

110

112

114

116

119

121


0 0

0 0

0 0

0 81

0 77

0 78

0 82

0 91

0 84

0 82

0 85

0 87

0 90

0 93

0 96

0 99

0 102

0 105

0 107

0 110

0 112

0 114

0 116

0 119

0 121

Revenue from PP

0

0

0

128

124

131

140

162

146

140

143

147

151

156

160

165

169

173

176

180

183

187

190

194

198


0.00 0.00

0.00 0.00

0.00 0.00

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02


0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

-0.02 4.92 0.00 0.60 0.00 0.41 0.00 0.05 0.24

-0.02 5.02 0.00 0.61 0.00 0.42 0.00 0.05 0.25

-0.02 5.12 0.00 0.62 0.00 0.42 0.00 0.05 0.26

-0.02 5.23 0.00 0.63 0.00 0.43 0.00 0.05 0.26

-0.02 5.33 0.00 0.65 0.01 0.44 0.00 0.05 0.27

-0.02 5.44 0.00 0.66 0.01 0.45 0.00 0.05 0.27

-0.02 5.54 0.00 0.67 0.01 0.46 0.00 0.05 0.28

-0.02 5.66 0.00 0.68 0.01 0.47 0.00 0.06 0.29

-0.02 5.77 0.00 0.70 0.01 0.48 0.00 0.06 0.29

-0.03 5.88 0.00 0.71 0.01 0.49 0.00 0.06 0.30

-0.03 6.00 0.00 0.73 0.01 0.50 0.00 0.06 0.31

-0.03 6.12 0.00 0.74 0.01 0.51 0.00 0.06 0.32

-0.03 6.24 0.00 0.76 0.01 0.52 0.00 0.06 0.32

-0.03 6.37 0.00 0.77 0.01 0.53 0.00 0.06 0.33

-0.03 6.50 0.00 0.79 0.01 0.54 0.00 0.06 0.34

-0.03 6.63 0.00 0.80 0.01 0.55 0.00 0.06 0.35

-0.03 6.76 0.00 0.82 0.01 0.56 0.00 0.07 0.36

-0.03 6.89 0.00 0.83 0.01 0.57 0.00 0.07 0.36

-0.03 7.03 0.00 0.85 0.01 0.58 0.00 0.07 0.37

-0.03 7.17 0.00 0.87 0.01 0.59 0.00 0.07 0.38

-0.03 7.32 0.00 0.89 0.01 0.61 0.00 0.07 0.39

-0.03 7.46 0.00 0.90 0.01 0.62 0.00 0.07 0.40

0.00 0.00

0.00 0.00

0.00 0.00

1.83 2.41

1.87 2.46

1.91 2.51

1.95 2.56

1.99 2.61

2.02 2.66

2.07 2.71

2.11 2.77

2.15 2.82

2.19 2.88

2.24 2.94

2.28 3.00

2.33 3.05

2.37 3.12

2.42 3.18

2.47 3.24

2.52 3.31

2.57 3.37

2.62 3.44

2.67 3.51

2.73 3.58

2.78 3.65

0

0

0

10

11

11

11

11

12

12

12

12

13

13

13

13

14

14

14

14

15

15

15

16

16

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.66 5.05 3.36 0.42 3.36 0.00

0.67 5.17 3.45 0.43 3.45 0.00

0.68 5.30 3.54 0.44 3.54 0.00

0.70 5.44 3.62 0.45 3.62 0.00

0.71 5.57 3.72 0.46 3.72 0.00

0.73 5.71 3.81 0.48 3.81 0.00

0.74 5.86 3.90 0.49 3.90 0.00

0.76 6.00 4.00 0.50 4.00 0.00

0.77 6.15 4.10 0.51 4.10 0.00

0.79 6.31 4.21 0.53 4.21 0.00

0.80 6.47 4.31 0.54 4.31 0.00

0.82 6.63 4.42 0.55 4.42 0.00

0.83 6.80 4.53 0.57 4.53 0.00

0.85 6.97 4.64 0.58 4.64 0.00

0.87 7.14 4.76 0.60 4.76 0.00

0.89 7.32 4.88 0.61 4.88 0.00

0.90 7.50 5.00 0.63 5.00 0.00

0.92 7.69 5.13 0.64 5.13 0.00

0.94 7.89 5.26 0.66 5.26 0.00

0.96 8.08 5.39 0.67 5.39 0.00

0.98 8.29 5.52 0.69 5.52 0.00

1.00 8.49 5.66 0.71 5.66 0.00

Total Fixed costs

0

0

0

13

13

14

14

14

15

15

15

16

16

16

17

17

18

18

19

19

20

20

20

21

22


0

0

0

104

101

103

107

116

110

109

112

115

118

122

126

130

133

137

140

143

146

149

152

155

159

0

0

0

24

23

28

33

46

36

31

32

32

33

33

34

35

35

36

36

37

37

38

38

39

39


0

0

0

693

673

685

710

774

735

727

746

766

789

814

840

865

889

911

932

953

973

994

1015

1036

1057

0

0

0

162

152

186

222

306

238

208

211

214

218

223

228

232

236

240

243

246

249

251

254

257

260

Capital Costs

175

160

164

168

172

177

181

186

190

195

200

205

210

216

221

227

232

238

244

250

256

263

269

276

283

Net Cash flow DSCR

-3

-8

-21

-25

-4

-1

5

16

11

4

2

1

26

27

28

28

29

27

28

22

23

23

140

23

23

0.00

0.00

0.00

0.73

0.87

1.07

1.33

1.84

1.42

1.22

1.20

1.19

15.50

15.39

15.29

15

15

15

15

15

15

14

14

14

14

Utilities




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IRR:


16.4%

Feedstock at FOB price Polypropylene production (kta)

Payback period:

17.17

9 years

Plant capacity: 150

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

0

0

0

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150

150


0

0

0

80

76

78

81

90

83

82

84

86

89

92

95

98

101

104

106

109

111

113

116

118

120


0 0

0 0

0 0

0 80

0 76

0 78

0 81

0 90

0 83

0 82

0 84

0 86

0 89

0 92

0 95

0 98

0 101

0 104

0 106

0 109

0 111

0 113

0 116

0 118

0 120

Revenue from PP

0

0

0

128

124

131

140

162

146

140

143

147

151

156

160

165

169

173

176

180

183

187

190

194

198


0.00 0.00

0.00 0.00

0.00 0.00

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.01

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02

0.01 0.02


0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

-0.02 4.92 0.00 0.60 0.00 0.41 0.00 0.05 0.24

-0.02 5.02 0.00 0.61 0.00 0.42 0.00 0.05 0.25

-0.02 5.12 0.00 0.62 0.00 0.42 0.00 0.05 0.26

-0.02 5.23 0.00 0.63 0.00 0.43 0.00 0.05 0.26

-0.02 5.33 0.00 0.65 0.01 0.44 0.00 0.05 0.27

-0.02 5.44 0.00 0.66 0.01 0.45 0.00 0.05 0.27

-0.02 5.54 0.00 0.67 0.01 0.46 0.00 0.05 0.28

-0.02 5.66 0.00 0.68 0.01 0.47 0.00 0.06 0.29

-0.02 5.77 0.00 0.70 0.01 0.48 0.00 0.06 0.29

-0.03 5.88 0.00 0.71 0.01 0.49 0.00 0.06 0.30

-0.03 6.00 0.00 0.73 0.01 0.50 0.00 0.06 0.31

-0.03 6.12 0.00 0.74 0.01 0.51 0.00 0.06 0.32

-0.03 6.24 0.00 0.76 0.01 0.52 0.00 0.06 0.32

-0.03 6.37 0.00 0.77 0.01 0.53 0.00 0.06 0.33

-0.03 6.50 0.00 0.79 0.01 0.54 0.00 0.06 0.34

-0.03 6.63 0.00 0.80 0.01 0.55 0.00 0.06 0.35

-0.03 6.76 0.00 0.82 0.01 0.56 0.00 0.07 0.36

-0.03 6.89 0.00 0.83 0.01 0.57 0.00 0.07 0.36

-0.03 7.03 0.00 0.85 0.01 0.58 0.00 0.07 0.37

-0.03 7.17 0.00 0.87 0.01 0.59 0.00 0.07 0.38

-0.03 7.32 0.00 0.89 0.01 0.61 0.00 0.07 0.39

-0.03 7.46 0.00 0.90 0.01 0.62 0.00 0.07 0.40

0.00 0.00

0.00 0.00

0.00 0.00

1.83 2.41

1.87 2.46

1.91 2.51

1.95 2.56

1.99 2.61

2.02 2.66

2.07 2.71

2.11 2.77

2.15 2.82

2.19 2.88

2.24 2.94

2.28 3.00

2.33 3.05

2.37 3.12

2.42 3.18

2.47 3.24

2.52 3.31

2.57 3.37

2.62 3.44

2.67 3.51

2.73 3.58

2.78 3.65

0

0

0

10

11

11

11

11

12

12

12

12

13

13

13

13

14

14

14

14

15

15

15

16

16

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.66 5.05 3.36 0.42 3.36 0.00

0.67 5.17 3.45 0.43 3.45 0.00

0.68 5.30 3.54 0.44 3.54 0.00

0.70 5.44 3.62 0.45 3.62 0.00

0.71 5.57 3.72 0.46 3.72 0.00

0.73 5.71 3.81 0.48 3.81 0.00

0.74 5.86 3.90 0.49 3.90 0.00

0.76 6.00 4.00 0.50 4.00 0.00

0.77 6.15 4.10 0.51 4.10 0.00

0.79 6.31 4.21 0.53 4.21 0.00

0.80 6.47 4.31 0.54 4.31 0.00

0.82 6.63 4.42 0.55 4.42 0.00

0.83 6.80 4.53 0.57 4.53 0.00

0.85 6.97 4.64 0.58 4.64 0.00

0.87 7.14 4.76 0.60 4.76 0.00

0.89 7.32 4.88 0.61 4.88 0.00

0.90 7.50 5.00 0.63 5.00 0.00

0.92 7.69 5.13 0.64 5.13 0.00

0.94 7.89 5.26 0.66 5.26 0.00

0.96 8.08 5.39 0.67 5.39 0.00

0.98 8.29 5.52 0.69 5.52 0.00

1.00 8.49 5.66 0.71 5.66 0.00

Total Fixed costs

0

0

0

13

13

14

14

14

15

15

15

16

16

16

17

17

18

18

19

19

20

20

20

21

22


0

0

0

103

100

102

106

116

110

108

111

114

118

121

125

129

133

136

139

142

145

148

151

155

158

0

0

0

25

24

29

34

46

37

32

32

33

34

34

35

36

36

37

37

38

38

39

39

39

40


0

0

0

690

668

680

706

770

730

722

740

760

784

809

835

860

884

906

927

948

968

989

1009

1030

1051

0

0

0

166

157

191

226

309

243

214

217

220

224

228

233

238

241

245

248

251

254

257

260

262

265

Capital Costs

175

160

164

168

172

177

181

186

190

195

200

205

210

216

221

227

232

238

244

250

256

263

269

276

283

Net Cash flow DSCR

-3

-8

-21

-25

-4

0

6

16

11

5

2

2

27

28

28

29

29

28

29

23

23

23

143

24

24

0.00

0.00

0.00

0.74

0.90

1.10

1.36

1.86

1.45

1.25

1.24

1.22

15.91

15.77

15.65

16

15

15

15

15

15

15

15

15

14

Utilities




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16% IRR SENSITIVITY RESULTS The final set of sensitivity analyses were completed for the following two cases: 1) FOB Singapore feedstock price discounted in order to obtain 16% IRR 2) Blended Feedstock discounted in order to obtain 16% IRR For both cases, a decrease of 10% in capital cost for the project results in a 6+% increase in IRR. For both cases, a product price increase of 5% also yields an increase in IRR of just under 6%. The FOB Singapore feedstock case is more sensitive to further feedstock price reductions, as all of the feedstock volume is discounted, as opposed to the blended feedstock case where only two thirds of the feedstock volume (that from the refinery) would be discounted.

Polypropylene Unit Sensitivities FOB price Base IRR = 16.0%

Equity

-20%

+10%

Capital

-10%

-5%

Product

+5%

+5%

Feedstock

+20%

-8%

-6%

-4%

-2%

-5%

0%

2%

4%

6%

8%

10%

Required FOB feedstock disount rate to hit 16% IRR: 20

As in all the sensitivity cases, the JVC owners can only gain a significant increase in IRR by the capital cost reduction or propylene feedstock cost reduction. Product pricing is determined by market conditions and is not under the control of the JVC.


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Polypropylene Unit Sensitivities LGI defined blend Base IRR = 16.0%

Equity

-20%

+10%

Capital

-10%

-5%

Product

+5%

+5%

Feedstock

+20%

-8%

-6%

-4%

-2%

-5%

0%

2%

4%

6%

8%

10%

Required FOB feedstock disount rate to hit 16% IRR: 32

8.3.6 Analysis of Financial Modeling Results Both of the cases analyzed displayed both negative IRR and negative NPV, and as a result, neither could service the yearly debt repayment. Blended Feedstock Case: (47,000 tons of imported propylene) IRR NPV DSCR (from ’09 to ’17)

-11.8% - $96 million 0.34

FOB Singapore Feedstock Case: IRR NPV DSCR (from ’09 to ’17)

-5.7% - $81 million 0.46

The most important factor in determining the success of the PP plant is the propylene feedstock cost. The feedstock case which utilizes an FOB Singapore price for the feedstock is the best case analyzed in this study, even though the financial indicators were negative.


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In order to facilitate this project, the owners must agree on an “advantaged feedstock” position. This would allow the project to accomplish two things: 3) Be financial viable and thus return a profit to the owners 4) Allow the facility to compete more effectively with imported material from integrated facilities. The actual reduction of feedstock cost is dependent on the quantity coming from the refinery. If all of the PP plants propylene requirement can be met by the refinery, then the propylene feedstock should be discounted by 20% from the FOB Singapore price in order to achieve a 16% IRR. If the refinery is going to supply only two thirds of the propylene requirement of the PP plant (The remainder to be imported = Blended case), then the refinery volume would have to be discounted from FOB Singapore by 32% in order to achieve a 16% IRR. An alternate way in which to price the propylene feedstock is to use a “PP minus” type formula. This formula is calculated on a monthly basis and is in US$/ton: Import Parity PP Price – Conversion Cost of PP plant – 16% return = Propylene Cost

The calculation is completed for the previous months production, and the actual conversion costs and PP prices are used. Using this type of propylene price formula allows both parties to calculate the propylene price and ensures a return on investment for the PP facility and its owners. 16% IRR Cases For the 16% IRR modeling, were the feedstock price for both the FOB Singapore case and the Blended case were adjusted to give a 16% IRR, the following results were indicated from the model. 16% IRR Blended Feedstock Case: (47,000 tons of imported propylene) IRR NPV DSCR (from ’09 to ’17)

16.0% $13 million 1.21

16% IRR FOB Singapore Feedstock Case: IRR NPV DSCR (from ’09 to ’17)

16.0% $17 million 1.24


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8.4

ECONOMIC PROFIT FOR VIETNAM

This section covers the results of calculation of the economic gains from the polypropylene plant project realization for Vietnam in general. The following main aspects are considered, which can be shown in cost parameter estimate: • Additional inflow of taxes, dues, payments to SRV budget • Saving of currency at the expense of reduction of currency expenditure for polypropylene import. • Polypropylene plant shall be operated with normal capacity of 150MTA of the finished product Cash Inflow to SRV Budget Cash inflow includes:

• • • •

Taxes on sales paid ultimately by the product consumer (VAT); Dues and payments charged to the finished product prime cost (cash inflow to personnel social and medical insurance, land lease payment, property insurance); Taxes charged to the financial results of the enterprise activity (corporate income tax) ; Other taxes (personnel income tax for Vietnamese and foreign citizens).

Cash inflow to the Government during the whole period reviewed (22 years) in money of the day Inflow VAT Dues and payments included in the prime cost Corporate income tax Personnel income tax Total:

Millions USD 142 10 60 6 218

Saving of Foreign Currency As a result of construction and putting into operation the polypropylene plant within the configuration of refinery it becomes possible to save foreign currency for Vietnam. The currency saving is achieved by decreasing the foreign currency expenditure for the polypropylene import, the decreased currency expenditure is estimated at US$56 million per year (Based on 2009 CFR SEA PP price and 40% domestic market sales).


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9. CONCLUSIONS AND RECOMMENDATIONS Based on the analysis completed in this study, the following summarizes the conclusions and recommendations: Conclusions 1. Benefits to Vietnam The implementation of the proposed PP plant provides a significant economic gain to Vietnamese economy. Not only is the proposed PP plant providing permanent employment for approximately 100 locals, but the associated business generated by such a facility within the local economy is also substantial. In addition, the completion of the PP plant would also reduce foreign currency outflows by approximately US$56 million per year, based on reduced PP imports. The proposed PP plant will enhance the economic potential of the national mega project - Dung Quat Refinery - currently under construction, by providing an outlet for propylene sales on a long term guaranteed basis and will ensure the safe operation of the refinery. The implementation of the PP plant by the JVC will play as an accelerator for inducing further foreign investors in the petrochemical industry in Vietnam and Dung Quat Economic Zone would benefit from new investment in a big scale. Furthermore, the PP plant will create benefits for the national and regional economy with the inflow of taxes, duties, fees, and creation of new jobs and related industries in the regions, as well as reservation of hard currency out flow for purchasing imported PP which is currently 100% being imported. 2. Market Demand The Global demand for polypropylene is forecasted to continue to grow at a solid pace averaging 4.0% through to 2025. The Asian region, in particular China, has the largest projected PP demand growth globally, with NEA 4.5% and SEA 4.4% projected demand growth through to 2025. There is currently a significantly polypropylene demand in Vietnam which relies on the importation of PP resin to meet the demand. Current domestic demand is estimated at 329,000 tons. A projected demand growth rate of 5.5% through to 2025 has the domestic demand reaching 966,000 by 2015. 3. Technology & Capital Various processes are used globally to produce the polypropylene. This feasibility study considered 5 process technologies. Basell, Unipol, Novalen, Innovene and Mitsui.


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The most widespread polypropylene process is Basell’s SPHERIPOL, with 29% of the installed capacity between 2003 – 2006. It also has in-house catalyst and technical assistance and allows for the full range of grades to be produced. As a result of these qualities, Basell’s SPHERIPOL was used for financial and economic analysis in this study. The capital estimate for the PP facility was estimated at US$175. million, including royalty, owner’s costs, and contingency. This is based on a saving of 10% of the West Europe indicative capital given to LGI from Basell. This saving is based on the significant integration savings assumed as a result of its parallel construction with the refinery. A contingency of 30% was used given the low level of engineering completed to date 4. Production Capacity The production capacity of PP plant currently being built in the world scale plant is in the range of 300,000 to 400,000 ton per year and the largest single train is 450,000 tons per year. Over time the unit capacity for polypropylene plants trends higher in order to achieve a lower fixed cost per ton cost. This is evident in the Middle East, where the gas based feedstock/utilities at very low cost are combined with larger capacity to enhance the project economics and to produce some of the lowest cash cost of production for polymers in the market. In contrast, the capacity of the proposed JVC PP plant is comparatively small compared to the global average, and it is therefore going to have a higher conversion cost per ton of product than many of the producers exporting to Vietnam. This fundamental disadvantage in plant capacity results in low rate of return on the investment cost, and it reduces the overall project attractiveness. In order to offset this capacity handicap and to help make the project financially viable, other aspects such as the feedstock cost and utilities costs could be adjusted. 5. Project Economic & Cost Competitiveness The base case IRR based on the cost factors of feedstock price forecasts supplied by CMAI, and utility costs provided by PetroVietnam shows the project not financially viable for either feedstock case.: Blended Feedstock Case: (47,000 tons of imported propylene) IRR NPV DSCR (from ’09 to ’17)

-11.8% - $96 million 0.34

FOB Singapore Feedstock Case: IRR

-5.7%


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NPV DSCR (from ’09 to ’17)

- $81 million 0.46

In terms of competitiveness, the polypropylene production cash cost of the proposed JVC facility, based on the blended feedstock case and the FOB feedstock case would be one of the higher cost production facilities when compared to imported material on a “Delivered South Vietnam” basis. For the purpose of determining how to improve the project economics with various factors, CMAI modeled the optimum case which provided an IRR of 16% by discounting the feedstock price from the refinery. 16% IRR Blended Feedstock Case: (47,000 tons of imported propylene) IRR NPV DSCR (from ’09 to ’17)

16.0% $13 million 1.21

16% IRR FOB Singapore Feedstock Case: IRR NPV DSCR (from ’09 to ’17)

16.0% $17 million 1.24

6. Implementation schedule The proposed PP Plant is planned to be fed with propylene from the Dung Quat Refinery which is under construction due to be completed by Feb., 2009. The targeted time for completion of the proposed PP plant is to match the completion of the Refinery plant. This is very critical task to must be achieved from the standpoints of both of proposed PP plant and Dung Quat Refinery for the following reasons. The trading market for non-polymer grade propylene is not well established in Asia. Though the Refinery plant is designed to handle 11 days of propylene storage and has export facilities, the propylene from the Dung Quat Refinery plant is too high in saturated water ethane, CO and COS content. This would mean that the propylene is not as saleable as polymer grade propylene. In this case, if the proposed PP plant was not completed on time, then the refinery must find an outlet for this non-polymer grade propylene. This is assuming that the refinery has not internal use for the propylene. As a last resort the refinery may have to flare this product stream if the propylene storage reaches “tank top”. Flaring propylene is both financially and environmentally negative. Therefore the implementation & construction of the proposed PP plant is the time critical task.


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The proposed PP plant is given 33 months only from now for the total implementation time. (June 2006 to the targeted completion time of the Refinery plant, Feb 2009). The normal time span for the execution via the bidding process requires a minimum of 1.5 years for the licensor selection, PDP/Basic Engineering and EPC bidding & selection. This is will not allow the targeted schedule for the project to be met. In order to meet the targeted schedule, the major contracts including the License and EPC and the execution of related activities should be “fast-tracked” in any way possible in order to meet the desired startup date.

Recommendations In order to implement the proposed PP plant project to international standards and with a structured financing some beneficial adjustments need to be made in order to secure the financial viability of the project. To this end, to achieve an IRR of 16%, the following factors need to be considered. 1. Feedstock The IRR of the facility is most sensitive to the capital cost, and the product and feedstock price. Most PP plants being built are integrated. That is they are integrated physically to either a refinery or olefins unit, and they are also integrated on a business level as well. This allows the PP plants to secure the feedstock at a discount. thus enhancing the economics and competitiveness of the project. The product price during the project life is dependent on the market ad is beyond the control of the project owners. Therefore the adjustment by the propylene price is the mostly used tool to improve the economic once the plant is built. In order to meet the targeted IRR 16%, the propylene would have to be supplied to the PP Plant at the price discounted by 32% from the FOB Singapore price for the minimum guaranteed quantity of 107,000 tons per year from the Dung Quat Refinery (based on the minimum propylene production quantity from refinery plant under diesel maximized mode) If the entire PP plant requirement is to be supplied by the refinery, then the propylene price would only have to be discounted by 20% from the FOB Singapore price. Alternatively the owners of the PP facility could utilize a “PP minus” propylene pricing formula. This formula is calculated on a monthly basis and is in US$/ton: Import Parity PP Price – Conversion Cost of PP plant – 16% return = Propylene Cost

The calculation is completed for the previous months production, and the actual conversion costs and PP prices are used. Using this type of propylene price formula


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allows both parties to calculate the propylene price and ensures a return on investment for the PP facility and its owners. 2. Utilities High utility cost could have a detrimental effect on the PP plant financials. The utilities for the proposed PP plant are designed to be supplied by the Dung Quat Refinery. These utilities should be supplied at the reasonable cost to the PP plant. The utility costs used in the financial modeling are based on information obtained from PetroVietnam, however any further discount could help the PP financials, although to a much lesser extent than a propylene feedstock discount. A comparison to Middle East average costs is also given.

Utility Electricity LP Steam

Vietnam PP Project US$0.07/kwh US$7 /metric ton

Typical Middle East US$0.03/kwh US$5 /metric ton

3. EPC Cost The current EPC market is very tight resulting in a cost escalation over the last few years. This situation is expected to continue for the next several years as the number of projects in the Middle East and China continue to draw away EPC resources from other regions. Most projects currently under construction are facing budget overruns due to the drastically increased EPC costs from those original budgeted for. Under this current EPC market situation, it is risky to estimate the EPC cost by taking the reference EPC cost of similar projects recently completed. Therefore it is recommended that the estimated EPC cost shall be taken with a certain level of contingency as indicated. 4. Implementation Strategy With 33 months remaining (from June 2006) for the engineering and design and commissioning to be completed for the PP plant, the following activities should be undertaken with a level of urgency in order to achieve the desired commissioning date: License Agreement - Considering the tight schedule for both PDP & Basic Engineering Package, in order to make available both of these items in the 2nd half of 2006 the Licensor should be selected within the next month to allow the commencement of both the PDP & BEP work. The selection by the JVC among the listed licensors in this report should also be fast-tracked. EPC Contract - The early possible start to the EPC work is necessary in order to meet the targeted completion schedule by the first half of 2009. The time required for the EPC work to commence and for the contractor to interface with Licensor and


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Dung Quat Refinery during PDP & Basic Engineering period suggests that the EPC contract should be established at the very latest by the 3rd quarter of 2006. The normal bidding process for the EPC contract however would not be able to meet this deadline. As an alternative, the JVC could nominate the EPC contractor by direct negotiations in order to reduce the schedule. The EPC contractor shall be retained on the basis of experience and strong guarantee to cover the completion and cost overrun risk. In addition the EPC contractor should meet the required standards of potential lenders, and would be able to prepare a lump sum EPC cost estimate within the limited timeframe given. Special attention to the above issues is required by the JVC in order to meet the tight commissioning deadline.


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ATTACHMENTS Attachment 1 – CMAI Contract Attachment 2 – Environmental Impact Assessment by PetroVietnam Research + Development Centre for Petroleum Safety and Environment Attachment 3 – Market Survey for Polypropylene in Vietnam by Vietnam Oil + Gas Corporation Research + Development Centre for Petroleum Processing


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FS PP Dung Quat

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