CHAPTER I

INTRODUCTION AND ITS BACKGROUND

INTRODUCTION

Nowadays, global economy continuously progresses into further development

to sustain the living of every individual in this planet, function of things are getting

more attention, demand for materials with numerous functions and applications

are needed. The integration of a material to different things is crucial to find it of

high value.

Petrochemical industry is an indispensable field in this modern world.

Petrochemicals are converted into multitude of industrial and consumer products

which play is converted into highly demanded products used as packaging and

insulating materials significant functions in everyday life. One of these

petrochemicals is the acetic acid which is an important commodity used in

chemical industries, with about 9 million tons of world demands per year. The

primary use of this chemical is in the manufacture of assorted acetate esters,

fungicide, organic compounds, organic solvents and the preparation of

pharmaceuticals, cellulose acetate that is important in making film and plastic

wares, perfumes and synthetic fiber.

Acetic acid (CH3COOH), is a corrosive organic acid having a sharp

odor,burning taste, andpernicious blistering properties.It is found in ocean

water, oilfield brines, rain, and at trace concentrations in many plant and animal

1
liquids. It is central to all biological energy pathways. Fermentation of fruit and

vegetable juices yields 2–12% acetic acid solutions, usually called vinegar. Any

sugar-containing sap or juice can be transformed by bacterial or fungal

processes to dilute acetic acid.

Acetic acid production industry is one of the high feasibility industries out

there. Also, various applications for the use of acetic acid reinforce the

continuous demand for the product. The demand is also global and as long as

development and industrialization progress further, the, acetic acid industry will

retain its importance.

Currently there is no existing acetic acid production plant in the Philippines

and acetic acid is supplied through imports from other countries such as China,

Japan, United States, Middle East and Western Europe countries, which are

account as the major producers of acetic acid worldwide. Though classified as a

third world country, the Philippines don’t lag when it comes to industrialization.

Therefore, the demand for acetic acid is present and although supply is available

in the global aspect, a local supply may pose better economic conditions.

The erection of Acetic Acid Production Plant in the Philippines will add

possibilities such as labour opportunities, global competency in the acetic acid

industry, and easier access to acetic acid locally. With that in mind, not only do

various industries benefit from the acetic acid plant but it will also have a positive

impact on the economy of the Philippines. Having an acetic plant in the

Philippines will give it another product to endorse in the global market. With

2
enough planning, it may even be a major product of the Philippines apart from

our major exports such as agricultural products.

In general, the nonexistence of acetic acid plant in the Philippines requires the

planning and erection of a production plant. It will open up opportunities towards

lower cost and higher availability of acetic acid locally and with higher production

can lead to be a major export product as well. The development of such project

will help improve the economy of the Philippines and eventually benefit the

Filipinos for whatever purpose acetic acid may be helpful.

A market study on glacial acetic acid discloses a large gap between its

demand and supply. The production of acetic acid is sound globally but recent

data shows a decreasing producing capacity of Asia worldwide. Most of Acetic

acid produced in Asia is consumed internally and the excess is being imported

due to its cheapness in the process involved.

Acetic Acid Global Demand

3
 Figure 1. Acetic Acid Supply

LOCATION

The prospect location for the plant is at Lumbang Calzada, Calaca, Batangas

in where Philippine Prosperity Chemicals Inc. is located and is a chemical

company that offers methanol, which is the primary raw materials for the

production of acetic acid. Many companies and industrial plants located here in

order to take advantage of the vast supply of water which is used for cooling

purposes and the availability of cheap land.

The short distance reduces fuel costs and labour hours for the transportation

of methanol. The shorter the distance travelled, the less likely an accident will

occur during the delivery of methanol, wherein travelling with hazardous

chemicals over great distances is perilous.

4
10 YEARS PROJECTION

Because of the non-existent of an acetic acid production plant in the country,

the demand and production capacity of the proposed plant will drastically

increase after 10 more years based on historical data regarding the trend o the

acetic acid.

5
Figure 2. Acetic Acid Projection after 10 years

6
 CHAPTER II

DESIGN OBJECTIVES AND REQUIREMENTS

The general objective of the study is to design an Acetic Acid Production

Plant in Lumbang Calzada, Calaca, Batangas City which will supply the load

demand of Calaca Batangas.. Specifically, the main objectives are as follows:

1. To present and analyze three design options for acetic acid production plant

using standard calculations and design trade-offs taking into account the

standard efficiency of the equipment and operating conditions, cycle diagrams,

and schematic diagrams.

2. To comply with the standard technical design specifications (e.g. ASME, ASTM,

and PSME) to be used in the design and design trade-offs.

3. To conduct and prepare an economic analysis to each design options.

4. To prepare an environmental management, health and safety assessment plan.

5. To provide and organize a project construction execution plan for the chosen

design of the proposed acetic acid production plant.

7
 CHAPTER III

TECHNICAL DESIGN AND REQUIREMENTS

MATERIAL BALANCE

Material balance is the basis of process design. A material balance

taken on complete process determines the quantities of material

required and the products produced. Balance over individual process

unit sets the process stream flows and compositions.

Material balances are also useful tool for study of plant

operation and trouble shooting. They can be used to check the

performance against design to check instrument calibration and to

locate the source of material loss.

From literature, selectivity to acetic acid = 99% (based on Methanol Route).

Yield of Acetic Acid = 90%

Basis: 100 ton per day of Glacial Acetic Acid (product)

It is known that 99.8% acetic acid by weight is to be obtained as the overhead

product.

Assumed capacity of the plant = 100 TPD

= 33400 TPA

8
Because the total working hours for a plant under operation per a

year are 8000 hours so 334 days.

6.2. MATERIAL BALANCE FOR ACETIC ACID PURIFICATION COLUMN (DC-

II):

Hence for the 2nd distillation column (acetic acid purification

column) the following data is known

We have, XD = 0.998, XB = 0.00085, XF = 0.876 (all in

Wt %)]

And D = 100 TPD

= 4166.67 kg/hr of Acetic acid

Taking wt. Per hour basis of acetic acid

B= 4166.67 x (0.876-0.998) / (0.00085-0.876)

=580.853 kg

Thus, F = D + B = 4747.523 kg.

Hence, the weight and wt. fraction can be arranged for DC-II in the table as:

9
The composition of the above components can be known from the tables

Table 1. Material Balance for Distillation Column – 2

FEED BOTTO BOTTOM(wt) overhead

COMPONENT FEED (wt) M Overhead

(wt %) in kg (wt %) in kg

17.83
H2O 0.376 5 1.7209 9.996 8.39 0.02

4158. 4158.3 0.99

CH3COOH 87.6 828 - - 3 8

12.02 570.8
C2H5COOH 4 57 98.279 570.857 - -

4747. 4166.7
TOTAL 100 523 100 580.853 2 100

Now, assumed remaining methanol is converted to methyl acetate during the

throttling operation. Hence, the amount of acetic acid remains constant and can be

used to find the moles (and thus the wt.) of methanol to be used.

Main Reactions:

CH3OH + CO CH3COOH

Side Reactions:

CH3OH + 1/2CO CH3COOH

CH3OH + CH3COOH CH3COOH

10
Let the moles of methanol taken be x Kmol.

Also, yield = conversion × selectivity

∴ We have conversion = 90.91%.

Taking mole balance on the reactor itself, we have:

CH₃OH + CO CH₃COOH

x Kmoles of MeOH + x Kmoles of CO 0.9091×x Kmoles of AA

unreacted MeOH = (1-.9091) × x = 0.0909 × x kmoles

Hence, this methanol is used in the production of methyl acetate in the flash tank

during the throttling process. But it is known that we obtain 1000 ppm of methanol

from the tank output.

Thus,

Methanol consumed in flash tank = 0.0909 × x – 0.001 × x = 0.0899 × x kmoles

CH₃OH + CH₃COOH CH₃COOCH₃ + H2O

0.0899 × x kmoles of reactants 0.0899 × x kmoles of products

∴ Total CH3COOH to light end distillation feed = 0.9091 × x – 0.0899 × x

= 0.8192 × x Kmoles

But, the kmoles of Acetic acid in the flash tank output = 69.28 Kmoles

11
 Hence, actual methanol requirement = 69.28/0.8192

= 84.57 Kmoles

Also, total water is produced in propionic acid and methyl acetate reaction.

∴ Total water produced = 0.01× 0.9091 × 84.57 + 0.0899 × 84.57

= 8.37 Kmoles

Total water in light end distillation column feed = 9.13 Kmoles

Carbon monoxide is taken 7.2%in excess than the methanol feed.

∴ Moles of carbon monoxide = 107.2% × 84.57 = 90.66 Kmoles

CO is the excess reagent and Methanol is the limiting reaget.

Considering overall material balance assuming the reactor,

scrubber and flash tank as a complete system we have,

Mass of gas in vent = Mass of methanol in + Mass of carbon monoxide in

– Mass of feed in light end distillation column

Mass of vent from scrubber = 2709.6228 + 2538.48 – 4945.73

= 296.56 kg

12
Also, 20% in excess promoter, i.e. Hydrogen Iodide and Iridium Catalyst is

assumed to be used in the reactor.

Hence, weight of catalyst = 20% excess of

feed methanol = 12981.36 Kg = 12.98 Tons

This catalyst is recycled back to the reactor from the flash tank and

hence is not required to be fed again and again.

MATERIAL BALANCE FOR THE LIGHT END DISTILLATION

COLUMN (DC-I):

13
 Table 2.Material Balance for Distillation Column – I

F
e
Fee e
d Fe d Bott
ed om Bot Over
wei K to Botto head
ght W m Wt m m Wt Overhe
t ol Over ad
Compon (Kg/ e (Kg/ Wt Kmol (Kg/hr head
ents hr) % s hr) % es ) Wt% Kmoles

6
9
Acetic . 415
415 2 8.8 87. 69.25
acid 8.83 84 6 3 6 6 - - -

9. 17.
163 3. 0 835 0.3 0.990 145.6
Water .455 31 8 6 76 8 2 71 8.09

0
.
0. 0
Methano 1.7 03 5 1.713
l 133 4 3 - - - 3 0.839 0.0535

7
Propioni .
c 11 7 570 12.
570 .5 1 .85 02
acid .857 2 4 7 4 7.71

1.
Methyl 14 0.
56. 7 27.
acetate 88 8 7 - - - 56.88 8 0.7686

8
6 474
495 10 . 7.5 10 204.2
Total 1.73 0 8 2 0 77.96 17 100 8.912

14
 Material Balance for Reactor

Component Kmoles Wt (Kg/hr) Wt %

Methanol 7.6028 243.3 4.92

Water 1.527 27.486 0.55

Acetic
acid 76.88 4616.644 93.37

Propionic
acid 0.77 56.98 1.1

Total 86.78 4944.41 100

Table 3. Material balance for Reactor

ENERGY BALANCE

As acknowledged from literature, the methanol carbonylation reaction is exothermic.

The heat of reaction is therefore calculated with the aid of enthalpies of each stream

(reactants and products) seen in the figure.

Energy Balance of inlet, outlet and recycle stream

The negative sign of heat reaction means that the system releases energy in the

form of heat. This heat of reaction has been calculated within the simulation through

the basic formula:

15
 cal
Δ HProducts - Δ HReactants = q = Energy generated in mol of product

The specific enthalpies of each stream have been obtained by the simulation. As

far as simulation is concerned, the water inlet stream’s purpose is to enable the

catalyst and promoter activity. It is not involved in any chemical reaction and it is in

fact separated later on in the process from the product stream, and recycled back

into the reactor continuously. For this reason, it is possible to state that its energy

contribution is negligible and not relevant to take into account for energy balance

purposes. The same principle is applied to the recycling streams connecting the

reactor to scrubber and reactor to drying column respectively; therefore they have

not been included in this energy balance.

For the purpose of design optimization and practice, heat needs to be

continuously removed from the system and applied to an appropriate heat

integration system.

Reactor – Design Data

Vessel Volume 138.42 m3

Vessel shell diameter (internal) 4.45 m

Internal pressure 30 bara= 30.59

kg/cm2

External pressure 1 bara

16
Design pressure (10% of Operating pressure) 32.12 kg/cm2 = 33

bara

Allowable stress (Hastelloy B) 351.63 N/mm2

Hydrostatic test pressure 39.77 kg/cm2

Density of material 9022 kg/cm3

Corrosion allowance (CA) 4 mm

Similarly to most systems to which the laws of thermodynamics can be applied

to, there is dissipation of energy in the form of heat to the surrounding areas. This

rate of energy exchange is governed by Fourier’s Law, which states:

𝑑𝑇
Q = heat transfer = k A 𝑑𝑆

Where:

Q = heat transfer

k = thermal conductivity of material

A = area of the vessel

dT = temperature gradient

dS = thickness of material

Q = 67,301,345 kJ/hr

17
 Normally, the issue of heat dissipation from a vessel can be overcome by

applying an approximate insulation system on the internal lifting of the vessel. In this

case, however, the heat dissipated is negligible in relation to the heat of reaction

produced within the reactor:

Heat of reaction produced = 5.49 x 1011 kJ/hr

Q = heat dissipation = 67,301,345 = 6.7 x 107 kJ/hr

Therefore, by taking into account this specific system, it is fair to assume that

heat dissipation is not relevant in relation to the rate of heat of reaction produced, so

the conclusion is that no insulation is required for this vessel.

18
 CHAPTER IV

ECONOMIC ANALYSIS

This chapter will present the economic analysis in putting up an acetic acid

manufacturing plant which includes the different data, calculations of the cost

estimation and economics of the proposed project to enable to justify the overall

expenditures.

Capital Costs

Using the ratio technique, the fixed capital investment estimate can be calculated

based on the previous plant and its cost index at that year.

Smith (2005) stated that the estimated present cost of the plant is equals to

the original cost multiplied by the ratio of the present cost index and the past cost

index.

The cost of Acetic Acid Manufacturing Plant with a size of 100 TPD in 1965

is Php 115,157,737.5 Chemical Engineering Plant Cost Index:

Chemical Plant Cost index in the year 1965 = 126

Chemical Plant Cost index in the year 2012 = 521.6

Present cost of Plant = (original cost) × (present cost index)/(past cost index)

19
 Present cost of Plant = (73,875,900.56) × (521/126)

Present Cost of Plant = Php 305,470,985.6

Smith (2005) stated that the present cost of plant which is base on the calculation

using the ratio technique will be use as the apparent fixed capital investment that

will be serves as the basis of the other parameters that will be estimate.

Fixed Capital Investment = FCC= Php 305,470,985.6

Estimation of Capital Investment Cost:

Detailed Cost Analysis

I. Direct Costs:

Direct cost includes all the costs such as

A. Purchased cost

It contains the equipment cost-15-40% of fixed capital investment

Assume 30% of the fixed capital investment = 0.3 ×305,470,985.6

= Php 91,641,295.69

B. Installation cost

It include insulation and painting costs-25-55% of purchased cost

Considering 40% of purchased cost = 0.4 × 91,641,295.69

= Php 36,656,518

20
C. Instrumentation and controls cost (6-30% of purchased cost )

Considering 13% of purchased cost = 0.13 × 91,641,295.69

= Php 11,913,368.44

D. Piping installation cost (10-80% of purchased cost)

Assume 45% of purchased cost = 0.45 × 91,641,295.69

= Php 41,238,582.75

E. Electrical cost (10-40% of purchased cost )

Assume 15% of purchased cost = 0.15 × 91,641,295.69

=Php 1,374,6194.25

F. Building process and auxiliaries (10-70% of purchased cost )

Assume 40% of purchased cost = 0.4 × 91,641,295.69

= Php 36,656,518

G. Service facilities (40-100% of purchased cost )

Assume 70% of purchased cost = 0.7 × 91,641,295.69

= Php 64,148,906.98

H. Land (4-8% of purchased cost )

Assume 6% of purchased cost = 0.06 × 91,641,295.69

= Php 5,498,477.741

21
 Table 4. Total Direct costs

Type of Cost Amount (Php)

Purchased cost 91,641,295.69

Installation Cost 36,656,518

Instrumentation and Control cost 11,913,368.44

Piping installation cost 41,238,582.75

Electrical cost 13,746,194.25

Building Process and Auxiliaries 36,656,518

Service Facilities 64,148,906.98

Land 5,498,477.741

Total Direct Costs 301,499,861.9

II. Indirect Costs

The expenses that are not directly involved with material and labor of

actual installation of complete facility.

Indirect costs include the following such as:

A. Engineering Supervision (5-30% of direct costs)

Assume 15% of direct costs = 0.15 ×301,499,861.9

= Php 45,224,979.29

B. Construction expenses (6-30% of direct costs)

Assume 10% of direct costs = 0.1 × 301,499,861.9

22
 = 30,149,986.19

C. Contractor fee (2-7% of direct costs )

Assume 4% of direct cost = 0.04 × 301,499,861.9

= Php 12,059,994.48

D. Contingency costs (5-15% of present cost )

Assume 12% of present cost = 0.12 × 301,499,861.9

= Php 36,179,983.43

Table 5. Total indirect costs

Type Cost Amount (Php)

Engineering Supervision 45,224,979.29

Construction Expenses 30,149,986.19

Contractor Fee 12,059,994.48

Contingency Costs 36,179,983.43

Total Indirect Costs 123,614,943.4

III. Fixed Capital Investments

Fixed capital investments = Direct + Indirect costs

23
 = 301,499,861.9 +123,614,943.4

=Php 425,114,805.3

IV. Working Capital

Working capital = 10-20% of fixed capital investment

Assume 15% of fixed capital investment = 0.15 × 425,114,805.3

= Php 63,767,220.79

V. Capital Expenditure (CAPEX)

The capital expenditure is the money invested by the company to acquire or fixed

physical non-consumable assets such as buildings and equipment or new business.

Capital Expenditure = Total Fixed Capital + Working Capital

Capital Expenditure = 425,114,805.3 + 63,767,220.79

=Php 488,882,026.1

Estimation of Manufacturing Cost

I. Fixed costs

There are mainly four types of fixed costs. They are:

1. Depreciation

24
 10% of fixed capital investment for machinery and 3% of building value for building

= 0.1×425,114,805.3+ 0.03×36,656,518

= 42,511,480.53 +1,099,695.54

=Php 43,611,176.07

2. Local taxes (3-4% of fixed capital investment )

Assume 4% of fixed capital investment = 0.04×425,114,805.3

= Php 17,004,592.21

3. Insurances (0.4-1% of fixed capital investment )

Assume 0.6% of fixed capital investment = 0.006×425,114,805.3

= Php 2,550,688.832

4. Rent (8-12% of the rented land and buildings )

Assume 10% of building value = 0.1×36,656,518

=Php 3,665,651.8

Fixed charges = 18% of product cost

= Total fixed costs

= Php 66,832,108.84 which is summation of

costs present in Table.

Total product cost = Php 371,717,084.10

25
 Table 6. Total Fixed Costs

Type Cost Amount (Php)

43,611,176.07
Depreciation
17,004,592.21
Local Taxes
2,550,688.832
Insurances
3,665,651.8
Rent
66,832,108.84
Total Fixed Costs

II. Direct production costs:

These direct production costs are mainly divided into following categories. They

are:

A. Raw materials-10-50% of total product cost

Assumed value, 30% of the total product cost = 0.3×371,717,084.10

= Php 111,515,125.2

B. Operating Labor-10-20% of the total product cost

Assume 15% of total product cost = 0.15×371,717,084.10

=Php 55,757,562.62

C. Direct supervisory and electrical labor-10-25% of operating labor

Assume 12% of operating labor = 0.12×55,757,562.62

= Php 6,690,907.514

D. Utilities-10-20% of total production cost

26
 Assume 13% of total production cost = 0.13×371,717,084.10

= Php 48,323,220.93

E. Maintenance and repairs-2-10% of fixed capital investment

Assume 8% of fixed capital investment = 0.08×425,114,805.3

= Php 34,009,184.42

F. Operating supplies-10-20% of cost of maintenance and repairs

Assume 15% of maintenance and repairs = 0.15×34,009,184.42

= Php 5,101,377.664

G. Laboratory charges-10-20% of operating labor

Assume 15% of operating labor = 0.15×55,757,562.62

= Php 8,363,634.392

H. Patents and royalties-2-6% of total product cost

Assume 5% of total product cost = 0.05×371,717,084.10

= Php 18,585,854.21

Table 7. Total Direct Product Costs

Type Cost Amount (Php)

111,515,125.2
Raw materials
55,757,562.62
Operating labor
6,690,907.514
Direct supervisory and electrical labor
48,323,220.93
Utilities
34,009,184.42
Maintenance and repairs
5,101,377.664
Operating supplies
8,363,634.392
Laboratory charges

27
 18,585,854.21
Patents and royalties
288,346,867
Total direct product costs

III. Plant overhead costs:

Plant overhead costs

50-70% of operating labor + direct supervisory + Maintenance cost

Assume 60% of total costs

= Php 74,193,794.97

Total manufacturing cost = Fixed costs + Direct production costs + plant overhead

costs

= 66,832,108.84+ 288,346,867+ 74,193,794.97

= Php 429,372,770.8

GENERAL EXPENSES

General expenses include various costs in it. They are:

A. Administration costs-40-60% of the operating labor cost

Assume 50% of the operating labor cost = 0.5×8,363,634.392

= Php 4,181,817.196

B. Distribution cost-2-20% of total product costs

Assume 10% of the total product cost = 0.1×371,717,084.10

= Php 37,171,708.41

C. Research and development cost-0-5% of total product cost

28
 Assume 3% of the total product cost = 0.03×371,717,084.10

= Php 111,515,112.51

Table 8. Total General Expenses

Type Cost Amount (Php)

4,181,817.196
Administration costs
Distribution costs 37,171,708.41
111,515,112.51
Research and development cost
19,045,038.13
Total general expenses

Total Product Cost

Total Product Cost = Operating Cost + General Expenses

= 429,372,770.8 + 19,045,038.13

Total Product Cost = Php 448,417,808.9

Current selling price:

Cost of Acetic acid= Php 44.08 per kg

Total selling price per annum = (100×103) × 334 × 44.08

= Php 1,472,272,000 per annum

29
Gross earnings:

Gross earnings = Total selling price – Total product rate

= 1,472,272,000– 448,417,808.9

= Php 1,023,854,191 per annum

Tax:

Assume the local tax rate as 40%

Tax on the gross earnings = 0.4×1,023,854,191 = Php 409,541,676.4

Net profits:

Net profits = Gross earnings – Tax

= 1,023,854,191 -409541676.4

= Php 614312514.6

Payback Period:

Payback Period = TCI /Net Annual Income

489,126,598.30
=0.79 years
614312514.6

Rate of return:

Net Profit
Rate of return=Fixed Capital Investments

614,312,514.6
=425,114,805.3

=67.8%

30
 CHAPTER V

ENVIRONMENTAL MANAGEMENT

The sustainability of our environment is one of the constraints to be considered

in the design of the Acetic Acid Manufacturing Plant. The acetic acid ought not be

actually and economically feasible but rather be a guide in the development of the

environment and community. The development of the Environment Impact

Assessment is developed to determine potential impacts and identification of

procedures that may be used to mitigate these effects. The Acetic Acid

manufacturing plant, through the EIA, aims to the optimization of positive impacts

and minimizing negative impacts resulting from the proposed plants.

Table 9. General information of the project

Title Of The Project: Acetic Acid Manufacturing Plant

Type Of Project: The project is under the

petrochemical industry. The

proposed project will be

processing acetic acid reformate

from methanol

31
A. Project site Description

Table 10. Project Site Description

Location Lumbang Calzada, Calaca,

Batangas

Site Description vast supply of water which is

used for cooling purposes and

the availability of cheap land.

Existing Land Use The land is vacant

Infrastractures Adjacent  Philippine

Industries Prosperity

Chemical Inc.

 South Luzon

Thermal

Energy

Corporation

 Steel Asia

Roads Palico-

Balayan

Batangas

Road

32
 Maximum Land And/Or Water Hectares

Area

Source(s) of Water Seawater

Quality Seawater for cooling

Demineralized water for cooling

and heating

Energy Requirement Source And Bunker fuel (oil)

the Rate Of Consumption.

The Type Of Human Settlements nearby human settlements

Socioeconomic Activity Agricultural, industrial

Demography 70,521 Population

Culture. Religion is dominated by

Catholism

Health And Safety Issues  petty crime

 natural disaster

Employment Issues unemployment rate

Identifying Potential Environmental Emissions

When designing and building any chemical production plant, we must take

into consideration the impact that such a plant will have on the environment and try

to build the plant in such a way as to minimize this impact. To help us understand
33
the potential environmental emissions associated with the production of acetic acid,

we will classify these environmental emissions into Land, Water and Air.

Potential Environmental Emissions– AIR

In our production plant, during the production of acetic acid, we release quite

a significant amountof gas into the atmosphere. The air emissions which are

discharged are from the light separator,which separates the carbon dioxide and

hydrogen from the rest. This separator expels about 18.924kg/ min of carbon

dioxide into the atmosphere, which on the grand scale is 9,944,352 kg/

year(9944.352 tons per year).

In 2011 China was the world’s greatest contributor of Co2, by producing

8715.31 Million tons per year, which means that we would only be contributing

0.0001 % to china’s Co2 emissions. Compared to an average 500 Megawatt power

station which produces 3 million tons per year of carbon dioxide, are plant is fairly

low on carbon dioxide emissions. As we all know carbon dioxide is one of the

biggest contributors to global warming as a greenhouse gas, and every effort has to

be made to reduce our emissions of carbon dioxide. It is possible to install a

scrubber which would remove the carbon dioxide from the gasses being emitted,

but then again this would increase the cost of the plant, and isn’t worth it for the

amount of carbon dioxide the plant produces. Even though carbon dioxide is

present in our air at a level of 0.0035% , it can become harmful to humans and

animals if that level rises. It would take an air concentration of 30% carbon dioxide

to lead to unconsciousness, which are plant wouldn’t be able to do.

34
 Potential Environmental Emissions– Land

Our land doesn’t produce a great amount of emissions in respect to land.

The plant is built in an industrial trade free zone where there was no previous

agricultural land in this area, meaning that there was no conversion of land. The

only emissions that are produced by our chemical plant is noise pollution, which is a

result of noise coming from components in our plant such as the pump/compressor

or the heater. Indirect noise pollution from our plant would be any vehicles, such as

transportation vehicles entering or exiting the facility and in the public highways .

However with very minimal or even no housing within in the immediate vicinity, this

noise pollution will not have a big effect on humans. Again as the plant is not near

any agricultural land the effect this noise pollution will have on animal and plant life

will be kept to a bare minimum.

Potential Environmental Emissions– Water

According to our mass balances, we have calculated that there will be 9.861

Kg/ min of water being discharged into water sources such as rivers. This means

that per year we are discharging a total of 5,182 tons of water. This water has a

concentration of 16.4% of acetic acid and 0.02% concentration of carbon dioxide.

The acetic acid can pose a risk to humans and animal life when it is in higher

concentrations and as it is a corrosive chemical it can cause severe corrosion of the

mouth and gastrointestinal tract causing various symptoms such as vomiting and

diarrhea. However the water that we would be discharging this solution into would

not end up in a drinking water source but instead end up in the sea where the acetic

35
acid would rapidly degrade into harmless substances and pose no risk to aquatic

life.

Potential Accident Scenarios and Waste Prevention Involving Waste

Materials

From this chemical plant, there are several waste products to store on site or

to be removed, exhausted from the plant to the surrounding area. The waste

streams in question are, pressurized hydrogen, gaseous carbon dioxide, and liquid

propionic acid.

Hydrogen

The first of these produced is the hydrogen which is separated in the flash

separator with carbon dioxide. Hydrogen is extremely valuable to the plant as it will

generate income, however this means that the hydrogen must be pressurized and

stored in the high pressurized tanks, ideally in relatively small volumes while it is

being stored before transported from the plant to the buyer. This is due to hydrogen

being pressurized to increase its density; this means there is a very concentrated

flammable substance within the confines of the plant. If this hydrogen leaks or is

exposed to a heat source, the hydrogen will catch alight, increase the pressure

within the vessel and explode, scorching the surrounding land. An example of this is

Muskingum River Power Plant were the delivery of hydrogen one day caused an

explosion damaging several buildings, killing one person and injuring ten others,

because of a faulty relief valve. Although hydrogen is a dangerous substance to

hold in large quantities, there is no wastage of resources as hydrogen can be

36
quickly sold to fuel plants and ammonia plants for example. The sale of hydrogen

increases the resource efficiency as a larger percentage of the output streams can

generate a profit. Minimal exposure to the environment and minimal wastage of

resource makes it worth storing and selling the hydrogen produced.

Carbon Dioxide

Carbon dioxide is the next waste stream produced also in the flash

separator. As the acetic acid plant is situated in China Calaca, Batangas, there is no

demand for carbon dioxide or at the moment, any pressure from the government to

decrease carbon emissions. So the most economic option has the worst outcome

for the environment, which is simply exhausting the gases into the atmosphere via a

flue pipe. Consequences from this are global, as the plant is added to the carbon

footprint potentially increasing the effects of global warming. The health effects of

this are things like asthma and lung cancer as studies have shown it’s the

equivalent to smoke several cigarettes a day.

The smog has an effect on the local farming community as the smog

prevents growth of plants and damages soil quality. As previously mentioned

carbon dioxide is not a high demand product in China, and carbon dioxide isn’t

reusable for the plant unless changed into carbon dioxide which is an expensive

process and isn’t cheaper than buying carbon monoxide. However reduction in the

carbon footprint can be done by scrubbing which is storing carbon dioxide in

37
limestone or carbon capture storage which is storing carbon underground,

sometimes in previous oil deposits.

Propionic Acid

Lastly propionic acid is produced. Formed in the reactor and separated out in

the distillation columns. Similarly to hydrogen, propionic acid is stored and sold to a

buyer most likely in the farming industry. Stored as a liquid it is generally safer than

hydrogen. However there is always a potential for leakage, and if the acid comes

into contact with an ignition source above 54°C, it could catch fire and in an

environment surrounded by other flammable substances this could cause a chain

reaction damaging building, the surrounding area and endangering lives. Other

potential accidents, if the propionic acid leaks due to a faulty connection, and into a

river or a water supply. If this happens because it cause chemical burns if inhaled,

the aquatic would suffer. If indigested it can cause burning sensation, nausea and

vomiting. Propionic acid benefits the resource efficiency as it is a useful product,

economically. As all that is required to process propionic acid after separation is

storing it in a tank, from which it can be transported and sold. Provided any

unforeseen events propionic acid shouldn’t leave the process and come into contact

with the environment or employees. Therefore there is no wastage or contamination

from propionic acid to the surrounding area.

Identify the basic requirements for regulatory compliance within the

Integrated Pollution Prevention and Control (IPPC) framework

38
 The IPPC is a directive of the European Union which is set up to manage

industrial pollution within the EU. As our plant will be based in China we will use this

as a rough guideline as to which procedures we must follow to ensure our plant

operates within the environmental restrictions. The European Union (EU) defines

the obligations with which industrial and agricultural activities with a high pollution

potential must comply. It establishes a procedure for authorizing these activities and

sets minimum requirements to be included in all permits, particularly in terms of

pollutants released. The aim is to prevent or reduce pollution of the atmosphere,

water and soil, as well as the quantities of waste arising from industrial and

agricultural installations, to ensure a high level of environmental protection. The

official act in place is The Directive 2008/1/EC of the European Parliament and of

the Council of 15 January 2008 concerning integrated pollution prevention and

control. This Directive requires industrial and agricultural activities with a high

pollution potential to have a permit. This permit can only be issued if certain

environmental conditions are met, so that the companies themselves bear

responsibility for preventing and reducing any pollution they may cause.

Mandatory environmental conditions

In order to receive a permit an industrial or agricultural installation must

comply with certain basic obligations. In particular, it must:

 Use all appropriate pollution-prevention measures, namely the best available

techniques (which produce the least waste, use less hazardous substances, enable

the substances generated to be recovered and recycled, etc.);

39
 Prevent all large-scale pollution;

 Prevent, recycle or dispose of waste in the least polluting way possible;

 Use energy efficiently;

 Ensure accident prevention and damage limitation;

 Return sites to their original state when the activity is over

 Emission limit values for polluting substances (with the exception of greenhouse

gases if the emission trading scheme applies);

 Any soil, water and air protection measures required;

 Waste management measures;

 Measures to be taken in exceptional circumstances (leaks, malfunctions, temporary

or permanent stoppages, etc.);

 Minimization of long-distance or transboundary pollution;

 Release monitoring; Our facility is more than capable of operating within the IPPC

limitations and should be able to receive an operating permit without any difficulties.

As the IPPC is a European Union directive if we can comply with its guideline we

will easily be able to meet the standards of the Philippine pollution directive

B. Safety and Health

1. Personal protective equipment

Personal Protective Equipment (PPE) is considered to be any device or

appliance designed to be worn or held by an individual for protection against one or

more safety hazards. Indonesian regulation implements the PPE Directive

(89/686/EEC) regulated by European Union. This applies to the safety products

intended for appropriate use within the premises of the proposed plant. The

40
 personal protective equipment are designed and tested for proper use and

application. The first step to check the quality of PPE is to conduct testing to assess

the compliance with relevant test standards. Harmonized standards have been

published for the PPE directive and compliance provides a presumption of

conformity with the Bureau of Health and Safety Regulations of the Directive.

2. Material handling and storage

2.1. Methanol

2.1.1. Hazard Identification

Overview : POISON! DANGER! Corrosive liquid and mist cause severe burns to all

body tissue may be fatal if swallowed. Harmful if inhaled. Inhalation may cause lung

and tooth damage. Flammable liquid and vapor.

Potential health effects:

Inhalation: Inhalation of concentrated vapors may cause serious damage to the

lining of the nose, throat, and lungs. Breathing difficulties may occur. Neither odor

nor degree of irritation are adequate to indicate vapor concentration.

Ingestion: Swallowing can cause severe injury leading to death. Symptoms

include sore throat, vomiting, and diarrhea. Ingestion of as little as 1.0 ml has

resulted in perforation of the esophagus.

Skin Contact: Contact with concentrated solution may cause serious damage to

the skin. Effects may include redness, pain, skin burns. High vapor concentrations

may cause skin sensitization.

41
 Eye Contact: Eye contact with concentrated solutions may cause severe eye

damage followed by loss of sight. Exposure to vapor may cause intense watering

and irritation to eyes.

Chronic Exposure: Repeated or prolonged exposures may cause darkening of the

skin, erosion of exposed front teeth, and chronic inflammation of the nose, throat,

and bronchial tubes.

Aggravation of Pre-existing Conditions: Persons with pre-existing skin disorders

or eye problems, or impaired respiratory function may be more susceptible to the

effects of the substance

2.1.2. Material handling

This material is a corrosive, combustible liquid. Inspect containers for damage or

leaks before handling. Immediately report leaks, spills or failures of the engineering

controls. Avoid all ignition sources. Use in the smallest possible amounts, in a well –

ventilated area, separate from the storage area. Avoid generating vapors or mists.

Prevent the release of vapors or mists into the air. Do not use with incompatible

materials .never return contemned material to its original container. Keep containers

tightly closed when not in use/empty containers may contain residues .never add

water to a corrosive. Always add corrosives to cold water. Never perform any

welding, cutting, soldering, drillings or other hot work on empty vessel, containers or

piping until all liquid and vapors have been cleared. Storage: Store in a segregated

and approved area. Keep container in a cool, well-ventilated area. Keep container

42
 tightly closed and sealed until ready for use. Avoid all possible sources of ignition

(spark or flame).

2.2. Acetic acid, methane carboxylic acid; ethanoic acid

2.2.1. Hazard identification

Classification: Flammable liquid, category 1, Acute toxic category1×,Reproductive

toxicity 1B, Specific target organ toxicity.

Hazard Communication: DANGER! Extremely flammable liquid and vapor.May

cause damage to eyes and central nervous system if ingested or inhaled.

Flammable liquid and vapor: Burns with a clean, clear flame, which is almost

invisible in daylight, or a light blue flame. Can decompose at high temperatures

forming carbon monoxide and formaldehyde. Confined space toxicity hazard. Mild

central nervous system depressant following inhalation, skin absorption or

ingestion. May cause headache, nausea, dizziness, drowsiness, and un-

coordination. Severe vision effects, including increased sensitivity to light, blurred

vision, and blindness may develop following an 8-24 hour symptom-free period.

Coma and death may result.

Irritant: Causes eye irritation. Aspiration hazard. Swallowing or vomiting of the

liquid may result in aspiration (breathing) into the lungs.

2.2.2. Material handling

Precautions for Handling: No smoking or open flame in storage, use or handling

areas. Use explosion proof electrical equipment. Ensure proper electrical grounding

procedures are in place. Storage: Store in totally enclosed equipment, designed to

avoid ignition and human contact. Tanks must be grounded, vented, and should

43
 have vapor emission controls. Tanks must be diked as per NFPA or API Standards.

A flammable mixture of methanol vapor and air is possible inside a storage tank or

transportation tank, and handlers should take appropriate precautions to reduce the

risk of ignition. Handlers must eliminate ignition sources or purge the tank with an

inert gas such as nitrogen. All equipment must be grounded - bonded when

transferring product in order to avoid static discharge from the equipment, and

subsequent possible fire. Avoid storage with incompatible materials. Anhydrous

methanol is non-corrosive to most metals at ambient temperatures except for lead,

nickel, Monel, cast iron and high silicon iron. Coatings of copper (or copper alloys),

zinc (including galvanized steel), or aluminium are unsuitable for storage. These

materials may be attacked slowly by the methanol. Storage tanks of welded

construction are normally satisfactory. They should be designed and built in

conformance with good engineering practice for the material being stored. While

plastics can be used for short term storage, they are generally not recommended for

long-term storage due to deterioration effects and the subsequent risk of

contamination.

Corrosion rates for several construction materials:

< 0.508 mm/year: Cast Iron, Monel, lead, nickel

<0. 051 mm/year: High silicon iron

2.3. Carbon Moxide

2.3.1. Hazard identification

Physical state: Gas (colorless gas, may be a liquid at low temperature or high

pressure) Emergency overview: Keep away from heat, sparks and flame. Do not

44
 puncture or incinerate container. Avoid breathing gas. May cause target organ

damage, based on animal data. Use only with adequate ventilation. Keep container

closed. Contact with rapidly expanding gases can cause frostbite.

Target organs: May cause damage to the following organs: blood, lungs, the

nervous system, heart, cardiovascular system, central nervous system (CNS).

Routes of entry: Inhalation Potential acute health effects: Eyes: Contact with

rapidly expanding gas may cause burns or frostbite.

Skin: Contact with rapidly expanding gas may cause burns or frostbite.

Inhalation: Toxic by inhalation.

Ingestion: Ingestion is not a normal route of exposure for gases.

2.3.2. Material handling

2.3.2.1. Handling

Use only with adequate ventilation. Use explosion-proof electrical (ventilating,

lighting and material handling) equipment. High pressure gas. Do not puncture or

incinerate container. Use equipment rated for cylinder pressure. Close valve after

each use and when empty. Keep container closed. Keep away from heat, sparks

and flame. To avoid fire, eliminate ignition sources. Protect cylinders from physical

damage; do not drag, roll, slide, or drop. Use a suitable hand truck for cylinder

movement.

2.3.2.2. Storage

Keep container in a cool, well-ventilated area. Keep container tightly closed and

sealed until ready for use. Avoid all possible sources of ignition (spark or flame).

Segregate from oxidizing materials. Cylinders should be stored upright, with valve

45
 protection cap in place, and firmly secured to prevent falling or being knocked over.

Cylinder temperatures should not exceed 52 °C (125 °F).

3. Accidental release measures

Small Spill: Dilute with water and mop up, or absorb with an inert dry material

and place in an appropriate waste disposal container. If necessary: Neutralize the

residue with a dilute solution of sodium carbonate.

Large Spill: Flammable liquid. Corrosive liquid. Keep away from heat. Keep

away from sources of ignition. Stop leak if without risk. If the product is in its solid

form: Use a shovel to put the material into a convenient waste disposal container. If

the product is in its liquid form: Absorb with dry earth, sand or other non-

combustible material. Do not get water inside container. Absorb with an inert

material and put the spilled material in an appropriate waste disposal. Do not touch

spilled material. Use water spray curtain to divert vapor drift. Prevent entry into

sewers, basements or confined areas; dike if needed. Call for assistance on

disposal. Neutralize the residue with a dilute solution of sodium carbonate. Be

careful that the product is not present at a concentration level above TLV. Check

TLV on the MSDS and with local authorities.

Waste disposal method: Burn in a chemical incinerator equipped with an after

burner and scrubber. According to all applicable regulations. Avoid run-off.

Spill prevention program: An effective spill prevention program will include

engineering controls, training and procedures, and spill response planning. Effective

engineering controls include overfill alarms, secondary containment for tanks, such

46
as dikes or bunds to contain large spills, and hydrocarbon detectors within dikes.

Workers must be trained to handle methanol in a safe manner. Systems and

procedures that protect the employees, the plant and the environment should be

implemented

47
 CHAPTER VI

PROJECT MANAGEMENT

CONSTRUCTION MANAGEMENT AND STRATEGY

The construction stage begins with a pre-construction meeting brought together

by the superintendent. The pre-construction meeting is meant to make decisions

concerning with work hours, material storage and handling, quality control and

assurance, and site access. After the decisions were made, construction materials

will be moved into the construction site and the set up stage will begin.

The most common strategy used in managing the construction phase is by

applying Contractor Progress Payment Schedule which is a schedule wherein

contractors and suppliers will be paid for the current progress of installed work.

Progress payments are partial payments for work completed during a portion

usually a month, during a construction period. Progress payments are made to

general contractors, subcontractors, and suppliers as construction projects

progress.

PROJECT SCHEDULING

The plant construction needs to follow a certain schedule to reach the payback

period in time and not to lose investment on the idle time. The project schedule will

include the period from the site preparation, building constructions, equipment

installations, and site completion.

48
 On the site preparation period, the acquisition of all the land lease and permits will

be acquired including the legal documents that need to be obtained. After all the

necessary documents are secured, the actual land preparation will be done. This

includes the clearing of the site and procurement of materials for building

constructions.

 The administration building and every other service facilities will be constructed

after the site has been cleared and all the construction materials have been

prepared.

 The equipments will be installed simultaneous with the building construction. This

will be apparent because the installation of the control systems will require the

presence of the equipments in the site.

 The plant will be inspected for the proper construction and installation of all the

components. Standards will be checked for the connections and requirements of the

equipments. To ensure that the plant runs the way it is intended to be, there will be

monitored test run. This process conditions will be observed and will be adjusted

accordingly if any of the equipments does not function as intended.

One and the most common way of doing work or project scheduling is by making a

Gantt chart to provide a graphical illustration of a schedule that helps to plan,

coordinate and track specific tasks in the project.

49
PROJECT COMMISSIONING

Project commissioning is the process of assuring that all systems and

components of an industrial plant is designed, installed, tested, operated and

maintained according to the operational requirements of the owner or final client. On

this design, commissioning lasts for four weeks. On this time span, engineers and

safety inspectors will check the installation of different equipment and its control to

ensure plant safety. The plant will then be operated, and checking of temperature

and pressure to ensure the quality of the products. After series of test run, the plant

is now ready for production.

QUALITY ASSURANCE AND CONTROL

Quality control is a very important aspect of a plant especially if the products of a

plant require following a certain set of standards of quality. Proper control of the

product specifications must be utilized to meet the consumer’s demand and need.

Quality control should be observed not only for ensuring the product quality must be

exercised throughout the whole production process including the process design

development, engineering, procurement and construction (EPC) phase, installation,

start-up phase, operation phase, service and maintenance and documentation. This

encompasses the canon of having both effectiveness and efficiency throughout the

whole system to ensure the quality of the final product.

50
 GANTT CHART

First Month Second Month Third Month Fourth Month

1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th

Land acquisition

Negotiations

Titling

Permits

Layouting and Site Preparation

Procurement/Bidding of materials

Foundation of Equipments

Buildings

Fabrication

Delivery

Equipment Installation

Insulation

Other Activities

51
 GANTT CHART

Fifth Month Sixth Month Seventh Month Eight Month

1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th

Land acquisition

Negotiations

Titling

Permits

Layouting and Site Preparation

Procurement/Bidding of materials

Foundation of Equipments

Buildings

Fabrication

Delivery

Equipment Installation

Insulation

Other Activities

52
 GANTT CHART

Ninth Month Tenth Month Eleventh Month Twelfth Month

1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th

Land acquisition

Negotiations

Titling

Permits

Layouting and Site Preparation

Procurement/Bidding of materials

Foundation of Equipments

Buildings

Fabrication

Delivery

Equipment Installation

Insulation

Other Activities

53
 CHAPTER VII

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

Conclusion

Acetic acid is an essential material for making acid anhydride, polyester,

pharmaceutical banner, food additives, vinegar, plastic, insecticides, and many

other products. Since acetic acid production is not so common or there is no

existing plant here in the Philippines, we are importing large quantity of it from other

countries, hence, construction of acetic acid production plant in the country will

reduce its price in the market.

The production of acetic acid by carbonylation of methanol used to be done by

the process named as Monsanto process where Rhodium catalyst was used as an

active catalyst with iodide of metals such as lithium. The rate of return is 67.8% and

the payback period is 0.79 years.

Most waste that will be produced in an acetic acid plant is liquid waste. Liquid

waste must undergo water treatment before disposal. Solid particles and

contaminants recovered from the treatment process can be disposed in a landfill

and the water can be discharged in the bodies of water.

Recommendation

For further development and improvement of an acetic acid production plant,

more critical calculations are recommended. The calculation of costs, all parameters

54
like taxes, royalties and others must be consider so that the payback period and the

rate of return will be accurate.

In terms of proper handling of materials and utilization of facilities and

equipments inside the plant, trainings should be given to the employee for them to

be aware and have additional knowledge when dealing with the raw materials used

in the production of acetic acid.

Since the production of the acetic acid will be larger than the demand needed in

the Philippines, importation of the product is also recommended if there is a future

plan for constructing a new plant that will produce acetic acid, choose a location that

is near in the raw materials supply to avoid delays and lesser cost for transportation.

55
 APPENDICES

APPENDIX A

 Economic Analysis

I. Direct Cost

Type of Cost Amount (Php)

Purchased cost 91,641,295.69

Installation Cost 36,656,518

Instrumentation and Control cost 11,913,368.44

Piping installation cost 41,238,582.75

Electrical cost 13,746,194.25

Building Process and Auxiliaries 36,656,518

Service Facilities 64,148,906.98

Land 5,498,477.741

Total Direct Costs 301,499,861.9

Table 11. Direct Production Cost

Direct cost includes all the costs such as

I. Purchased cost

It contains the equipment cost-15-40% of fixed capital investment

Assume 30% of the fixed capital investment = 0.3 ×305,470,985.6

= Php 91,641,295.69

56
J. Installation cost

It include insulation and painting costs-25-55% of purchased cost

Considering 40% of purchased cost = 0.4 × 91,641,295.69

= Php 36,656,518

K. Instrumentation and controls cost (6-30% of purchased cost )

Considering 13% of purchased cost = 0.13 × 91,641,295.69

= Php 11,913,368.44

L. Piping installation cost (10-80% of purchased cost)

Assume 45% of purchased cost = 0.45 × 91,641,295.69

= Php 41,238,582.75

M. Electrical cost (10-40% of purchased cost )

Assume 15% of purchased cost = 0.15 × 91,641,295.69

=Php 1,374,6194.25

N. Building process and auxiliaries (10-70% of purchased cost )

Assume 40% of purchased cost = 0.4 × 91,641,295.69

= Php 36,656,518

O. Service facilities (40-100% of purchased cost )

Assume 70% of purchased cost = 0.7 × 91,641,295.69

57
 = Php 64,148,906.98

P. Land (4-8% of purchased cost )

Assume 6% of purchased cost = 0.06 × 91,641,295.69

= Php 5,498,477.741

VI. Indirect Costs

The expenses that are not directly involved with material and labor of

actual installation of complete facility.

Indirect costs include the following such as:

E. Engineering Supervision (5-30% of direct costs)

Assume 15% of direct costs = 0.15 ×301,499,861.9

= Php 45,224,979.29

F. Construction expenses (6-30% of direct costs)

Assume 10% of direct costs = 0.1 × 301,499,861.9

= 30,149,986.19

G. Contractor fee (2-7% of direct costs )

Assume 4% of direct cost = 0.04 × 301,499,861.9

= Php 12,059,994.48

H. Contingency costs (5-15% of present cost )

Assume 12% of present cost = 0.12 × 301,499,861.9

58
 = Php 36,179,983.43

Type Cost Amount (Php)

Engineering Supervision 45,224,979.29

Construction Expenses 30,149,986.19

Contractor Fee 12,059,994.48

Contingency Costs 36,179,983.43

Total Indirect Costs 123,614,943.4

Table 12. Total Indirect Costs

VII. Fixed Capital Investments

Fixed capital investments = Direct + Indirect costs

= 301,499,861.9 +123,614,943.4

=Php 425,114,805.3

VIII. Working Capital

Working capital = 10-20% of fixed capital investment

Assume 15% of fixed capital investment = 0.15 × 425,114,805.3

59
= Php 63,767,220.79

IX. Capital Expenditure (CAPEX)

The capital expenditure is the money invested by the company to acquire or

fixed physical non-consumable assets such as buildings and equipment or new

business.

Capital Expenditure = Total Fixed Capital + Working Capital

Capital Expenditure = 425,114,805.3 + 63,767,220.79

=Php 488,882,026.1

Estimation of Manufacturing Cost

IV. Fixed costs

There are mainly four types of fixed costs. They are:

5. Depreciation

10% of fixed capital investment for machinery and 3% of building value for

building = 0.1×425,114,805.3+ 0.03×36,656,518

= 42,511,480.53 +1,099,695.54

=Php 43,611,176.07

6. Local taxes (3-4% of fixed capital investment )

Assume 4% of fixed capital investment = 0.04×425,114,805.3

= Php 17,004,592.21

60
 7. Insurances (0.4-1% of fixed capital investment )

Assume 0.6% of fixed capital investment = 0.006×425,114,805.3

= Php 2,550,688.832

8. Rent (8-12% of the rented land and buildings )

Assume 10% of building value = 0.1×36,656,518

=Php 3,665,651.8

Fixed charges = 18% of product cost

= Total fixed costs

= Php 66,832,108.84 which is summation of

costs present in Table.

Total product cost = Php 371,717,084.10

Table 13. Total Fixed Costs

Type Cost Amount (Php)

43,611,176.07
Depreciation
17,004,592.21
Local Taxes
2,550,688.832
Insurances
3,665,651.8
Rent
66,832,108.84
Total Fixed Costs

61
V. Direct production costs:

These direct production costs are mainly divided into following categories. They are:

I. Raw materials-10-50% of total product cost

Assumed value, 30% of the total product cost = 0.3×371,717,084.10

= Php 111,515,125.2

J. Operating Labor-10-20% of the total product cost

Assume 15% of total product cost = 0.15×371,717,084.10

=Php 55,757,562.62

K. Direct supervisory and electrical labor-10-25% of operating labor

Assume 12% of operating labor = 0.12×55,757,562.62

= Php 6,690,907.514

L. Utilities-10-20% of total production cost

Assume 13% of total production cost = 0.13×371,717,084.10

= Php 48,323,220.93

M. Maintenance and repairs-2-10% of fixed capital investment

Assume 8% of fixed capital investment = 0.08×425,114,805.3

= Php 34,009,184.42

N. Operating supplies-10-20% of cost of maintenance and repairs

Assume 15% of maintenance and repairs = 0.15×34,009,184.42

= Php 5,101,377.664

O. Laboratory charges-10-20% of operating labor

62
 Assume 15% of operating labor = 0.15×55,757,562.62

= Php 8,363,634.392

P. Patents and royalties-2-6% of total product cost

Assume 5% of total product cost = 0.05×371,717,084.10

= Php 18,585,854.21

Table 14. Total Direct Product Costs

Type Cost Amount (Php)

111,515,125.2
Raw materials
55,757,562.62
Operating labor
6,690,907.514
Direct supervisory and electrical labor
48,323,220.93
Utilities
34,009,184.42
Maintenance and repairs
5,101,377.664
Operating supplies
8,363,634.392
Laboratory charges
18,585,854.21
Patents and royalties
288,346,867
Total direct product costs

VI. Plant overhead costs:

Plant overhead costs

50-70% of operating labor + direct supervisory + Maintenance cost

Assume 60% of total costs

= Php 74,193,794.97

63
Total manufacturing cost = Fixed costs + Direct production costs + plant overhead

costs

= 66,832,108.84+ 288,346,867+ 74,193,794.97

= Php 429,372,770.8

GENERAL EXPENSES

General expenses include various costs in it. They are:

D. Administration costs-40-60% of the operating labor cost

Assume 50% of the operating labor cost = 0.5×8,363,634.392

= Php 4,181,817.196

E. Distribution cost-2-20% of total product costs

Assume 10% of the total product cost = 0.1×371,717,084.10

= Php 37,171,708.41

F. Research and development cost-0-5% of total product cost

Assume 3% of the total product cost = 0.03×371,717,084.10

= Php 111,515,112.51

Table 15. Total General Expenses

Type Cost Amount (Php)

4,181,817.196
Administration costs
Distribution costs 37,171,708.41
111,515,112.51
Research and development cost
19,045,038.13
Total general expenses

64
 Total Product Cost

Total Product Cost = Operating Cost + General Expenses

= 429,372,770.8 + 19,045,038.13

Total Product Cost = Php 448,417,808.9

Current selling price:

Cost of Acetic acid= Php 44.08 per kg

Total selling price per annum = (100×103) × 334 × 44.08

= Php 1,472,272,000 per annum

Gross earnings:

Gross earnings = Total selling price – Total product rate

= 1,472,272,000– 448,417,808.9

= Php 1,023,854,191 per annum

Tax:

Assume the local tax rate as 40%

Tax on the gross earnings = 0.4×1,023,854,191 = Php 409,541,676.4

Net profits:

65
Net profits = Gross earnings – Tax

= 1,023,854,191 -409541676.4

= Php 614312514.6

Payback Period:

Payback Period = TCI /Net Annual Income

489,126,598.30
=0.79 years
614312514.6

Rate of return:

Net Profit
Rate of return=Fixed Capital Investments

614,312,514.6
=425,114,805.3

=67.8%

66
APPENDIX C. View of the Plant

67
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