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Polypropylene via Gas Phase Process

#TEC004B Technology Economics Polypropylene Production via Gas Phase Process 2013

Abstract Polypropylene is a thermoplastic polymer with low specific gravity, high stiffness, relatively high temperature resistance and good resistance to chemicals and fatigue. These exceptional properties, combined with this material’s versatility have made it one of the most widely used polymers, second only to polyethylene in terms of global demand. The global market for polypropylene was over 50 million metric tons in 2011 as it was utilized in a broad and diverse range of end-uses from injection molding applications to film and sheet, raffia and fiber, among others. Growth in polyolefin consumption will be largely driven by the rapid economic development of numerous transition countries in the Asia Pacific region, Central Europe, the Middle East and South America. On the supply side, the shift in global steam cracker production toward lighter, natural gas-based feedstock is increasingly limiting by-product propylene output. The resulting tight supply of propylene has led to higher propylene and polypropylene prices, which are encouraging investments in alternate propylene sources, as the on-purpose technologies. High propylene feedstock prices also rendered the construction of standalone polypropylene plants infeasible, making upstream integration indispensable for most of the new polypropylene projects. Gas phase polypropylene production technology is the fastest growing route for producing polypropylene homopolymers and random copolymers. In this report, the production of polypropylene through the polymerization of propylene via a gas phase process is reviewed. Included in the analysis is an overview of the technology and economics of a method similar to the Dow UNIPOL TM process. Both the capital investment and the operating costs for plants erected on the US Gulf Coast are presented. The economic analysis presented in this study is based on a 400 kta polypropylene plant. Two scenarios are analyzed: a standalone unit, obtaining feedstock at market prices and a plant integrated upstream with a propylene source, acquiring feedstock at a transfer price, below market average. The economic feasibility of both scenarios is presented and the actual market conditions for polypropylene production are discussed. Propylene elevated market prices in the USA make it unprofitable to operate a stand-alone PP unit in that country. However, when

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

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

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

Study Background ........................................................................................................................................................ 10 About Polypropylene............................................................................................................................................................................................................10 Types of Polypropylene Resins ...........................................................................................................................................................................................10 Applications.................................................................................................................................................................................................................................... 11

Polypropylene Manufacturing........................................................................................................................................................................................11 Types of Process........................................................................................................................................................................................................................... 11 The Role of Catalyst in Process ...........................................................................................................................................................................................12

Licensor & Historical Aspects ...........................................................................................................................................................................................13

Technical Analysis......................................................................................................................................................... 14 Chemistry.......................................................................................................................................................................................................................................14 Raw Material ................................................................................................................................................................................................................................14 Technology Overview...........................................................................................................................................................................................................15 Detailed Process Description & Conceptual Flow Diagram.......................................................................................................................16 Area 100: Purification & Reaction.....................................................................................................................................................................................16 Area 200: Resin Degassing & Pelleting .........................................................................................................................................................................17 Area 300: Vent Recovery........................................................................................................................................................................................................ 17 Key Consumptions ..................................................................................................................................................................................................................... 18 Technical Assumptions ........................................................................................................................................................................................................... 18 Labor Requirements.................................................................................................................................................................................................................. 18

ISBL Major Equipment List.................................................................................................................................................................................................23 OSBL Major Equipment List ..............................................................................................................................................................................................26 Other Process Remarks ........................................................................................................................................................................................................27 Improvements in Fluidized-Bed Polymerization Technology ........................................................................................................................27 Propylene-Polypropylene Integration Alternatives...............................................................................................................................................28

Economic Analysis ........................................................................................................................................................ 29 2

General Assumptions............................................................................................................................................................................................................29 Project Implementation Schedule...............................................................................................................................................................................30 Capital Expenditures..............................................................................................................................................................................................................30 Fixed Investment......................................................................................................................................................................................................................... 30 Working Capital............................................................................................................................................................................................................................ 32 Other Capital Expenses ...........................................................................................................................................................................................................32 Total Capital Expenses ............................................................................................................................................................................................................. 33

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

Economic Datasheet .............................................................................................................................................................................................................34

Regional Comparison & Economic Discussion.................................................................................................... 37 Regional Comparison............................................................................................................................................................................................................37 Capital Expenses.......................................................................................................................................................................................................................... 37 Operational Expenditures......................................................................................................................................................................................................37 Economic Datasheet................................................................................................................................................................................................................. 37

Economic Discussion ............................................................................................................................................................................................................38

References....................................................................................................................................................................... 40 Acronyms, Legends & Observations....................................................................................................................... 41 Technology Economics Methodology................................................................................................................... 42 Introduction.................................................................................................................................................................................................................................42 Workflow........................................................................................................................................................................................................................................42 Capital & Operating Cost Estimates ............................................................................................................................................................................44 ISBL Investment............................................................................................................................................................................................................................ 44 OSBL Investment ......................................................................................................................................................................................................................... 44 Working Capital............................................................................................................................................................................................................................ 45 Start-up Expenses ....................................................................................................................................................................................................................... 45 Other Capital Expenses ...........................................................................................................................................................................................................46 Manufacturing Costs................................................................................................................................................................................................................. 46

Contingencies ............................................................................................................................................................................................................................46 Accuracy of Economic Estimates..................................................................................................................................................................................47 Location Factor..........................................................................................................................................................................................................................47

Appendix A. Mass Balance & Streams Properties............................................................................................... 49 Appendix B. Utilities Consumption Breakdown ................................................................................................. 54 3

Appendix C. Process Carbon Footprint ................................................................................................................. 55 Appendix D. Equipment Detailed List & Sizing................................................................................................... 56 Appendix E. Detailed Capital Expenses................................................................................................................. 62 Direct Costs Breakdown ......................................................................................................................................................................................................62 Indirect Costs Breakdown ..................................................................................................................................................................................................63

Appendix F. Economic Assumptions...................................................................................................................... 64 Capital Expenditures..............................................................................................................................................................................................................64 Construction Location Factors ...........................................................................................................................................................................................64 Working Capital............................................................................................................................................................................................................................ 64 Other Capital Expenses ...........................................................................................................................................................................................................64

Operational Expenses ...........................................................................................................................................................................................................65 Fixed Costs ...................................................................................................................................................................................................................................... 65 Depreciation................................................................................................................................................................................................................................... 65

Appendix G. Latest & Upcoming Reports ............................................................................................................. 66 Appendix H. Technology Economics Form Submitted by Client ................................................................. 67

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List of Tables Table 1 – Construction Scenarios Assumptions (Based on Degree of Integration) ......................................................................................9 Table 2 – Locations & Pricing Basis ..................................................................................................................................................................................................9 Table 3 – General Design Assumptions .......................................................................................................................................................................................9 Table 4 – Polypropylene End-uses................................................................................................................................................................................................11 Table 5 – Catalyst Advances..............................................................................................................................................................................................................12 Table 6 - Raw Materials & Utilities Consumption (per ton of product)................................................................................................................18 Table 7 – Design & Simulation Assumptions.........................................................................................................................................................................18 Table 8 – Labor Requirements for a Typical Plant..............................................................................................................................................................18 Table 9 – Main Streams Operating Conditions and Composition..........................................................................................................................23 Table 10 – Inside Battery Limits Major Equipment List...................................................................................................................................................23 Table 11 - Outside Battery Limits Major Equipment List ...............................................................................................................................................26 Table 12 – Base Case General Assumptions...........................................................................................................................................................................29 Table 13 - Bare Equipment Cost per Area (USD Thousands)......................................................................................................................................30 Table 14 – Total Fixed Investment Breakdown (USD Thousands) ..........................................................................................................................30 Table 15 – Working Capital (USD Million) ................................................................................................................................................................................32 Table 16 – Other Capital Expenses (USD Million) ...............................................................................................................................................................33 Table 17 – CAPEX (USD Million)......................................................................................................................................................................................................33 Table 18 – Manufacturing Fixed Cost (USD/ton) ................................................................................................................................................................34 Table 19 – Manufacturing Variable Cost (USD/ton)..........................................................................................................................................................34 Table 20 – OPEX (USD/ton)................................................................................................................................................................................................................34 Table 21 – Technology Economics Datasheet: Polypropylene via Gas Phase Process on the US Gulf Coast.........................36 Table 22 – Technology Economics Datasheet: Polypropylene via Gas Phase Process in Client-Defined Location ...........39 Table 23 – Project Contingency......................................................................................................................................................................................................46 Table 24 – Criteria Description.........................................................................................................................................................................................................46 Table 25 – Accuracy of Economic Estimates .........................................................................................................................................................................47 Table 26 – Detailed Material Balance & Stream Properties..........................................................................................................................................49 Table 27 – Utilities Consumption Breakdown ......................................................................................................................................................................54 Table 28 – Assumptions for CO2e Emissions Calculation.............................................................................................................................................55 Table 29 – CO2e Emissions (ton/ton prod.)............................................................................................................................................................................55 Table 30 – Compressors .......................................................................................................................................................................................................................56 Table 31 – Heat Exchangers ..............................................................................................................................................................................................................56 Table 32 – Pumps......................................................................................................................................................................................................................................57 5

Table 33 – Separation Equipment.................................................................................................................................................................................................58 Table 34 – Special Equipment .........................................................................................................................................................................................................58 Table 35 – Utilities Supply...................................................................................................................................................................................................................58 Table 36 – Reactor....................................................................................................................................................................................................................................59 Table 37 – Columns.................................................................................................................................................................................................................................59 Table 38 – Vessels & Tanks..................................................................................................................................................................................................................59 Table 39 – Indirect Costs Breakdown for the Base Case (USD Thousands) ......................................................................................................63 Table 40 – Detailed Construction Location Factor............................................................................................................................................................64 Table 41 – Working Capital Assumptions (Base Case) ....................................................................................................................................................64 Table 42 – Other Capital Expenses Assumptions (Base Case) ...................................................................................................................................64 Table 43 – Other Fixed Cost Assumptions ..............................................................................................................................................................................65 Table 44 – Depreciation Value & Assumptions ....................................................................................................................................................................65

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List of Figures Figure 1 – OSBL Construction Scenarios .....................................................................................................................................................................................8 Figure 2 – Polypropylene from Multiple Sources...............................................................................................................................................................13 Figure 3 – Process Block Flow Diagram.....................................................................................................................................................................................15 Figure 4 – Inside Battery Limits Conceptual Process Flow Diagram.....................................................................................................................19 Figure 5 – Project Implementation Schedule.......................................................................................................................................................................29 Figure 6 – Total Direct Cost of Different Integration Scenarios (USD Thousands) ......................................................................................31 Figure 7 – Total Fixed Investment of Different Integration Scenarios (USD Thousands) .......................................................................32 Figure 8 – Total Fixed Investment Validation (USD Million)........................................................................................................................................33 Figure 9 – OPEX and Product Sales History (USD/ton) ...................................................................................................................................................35 Figure 10 – EBITDA Margin & IP Indicators History Comparison..............................................................................................................................35 Figure 11 – CAPEX per Location (USD Million).....................................................................................................................................................................37 Figure 12 – Operating Costs Breakdown per Location (USD/ton) .........................................................................................................................38 Figure 14 – Methodology Flowchart...........................................................................................................................................................................................43 Figure 15 – Location Factor Composition...............................................................................................................................................................................47 Figure 16 – ISBL Direct Costs Breakdown by Equipment Type (Base Case).....................................................................................................62 Figure 17 – OSBL Direct Costs by Equipment Type (Base Case) ..............................................................................................................................62

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About this Study This study follows the same pattern as all Technology Economics studies developed by Intratec and is based on the same rigorous methodology and well-defined structure (chapters, type of tables and charts, flow sheets, etc.). This chapter summarizes the set of information that served as input to develop the current technology evaluation. All required data were provided through the filling of the Technology Economics Form available at Intratec’s website.

Figure 1 – OSBL Construction Scenarios

Non-Integrated

Partially Integrated

Products Storage

Products Storage

ISBL Unit

ISBL Unit

Raw Materials Storage

Raw Materials Provider

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

Object of Study This assignment assesses the economic feasibility of an industrial unit for homopolymer polypropylene (PP) production via gas phase process, implementing technology similar to the Dow UNIPOL process. The current assessment is based on economic data gathered on Q3 2011 and a chemical plant’s nominal capacity of 400 kta (thousand metric tons per year).

Source: Intratec – www.intratec.us

Analysis Performed

Location Basis

Construction Scenarios

Intratec | About this Study

The economic analysis is based on the construction of a plant partially integrated to a petrochemical complex. A nearby unit continuously provides polymer-grade (PG) propylene. Thus, no storage for propylene is required. However, since there are no polypropylene consumers in the complex, the product must be stored in warehouses and silos. Facilities for supplying the required utilities are also included in the analysis.

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Petrochemical Complex

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

The regional comparison analysis is performed for two similar units operating on the US Gulf Coast. The main difference between the two units is the price assumption for PG propylene. While the base case considers a stand-alone polypropylene plant, obtaining PG propylene at average market prices, available at Intratec database, the alternative scenario defined by the client (referred as “Client-Defined”) approaches a unit, which is integrated to an upstream propylene plant, obtaining feedstock at a transfer price, provided by the client, lower than market price. The remaining prices are assumed to be the same. The assumptions that distinguish the two scenarios analyzed in this study are provided in Table 2.

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

Storage Capacity (Area 700) Feedstock & Chemicals

20 days of operation

Not included

End-products & By-products

20 days of operation

20 days of operation

All required

All required

Utility Facilities Included (Area 800) Support & Auxiliary Facilities (Area 900)

Control room, labs, gate house, maintenance shops, warehouses, offices, change house, cafeteria, parking lot

Control room, labs, maintenance shops, warehouses

Source: Intratec – www.intratec.us

Design Conditions Table 2 – Locations & Pricing Basis The process analysis is based on rigorous simulation models developed on Aspentech Aspen Plus and Hysys, which support the design of the chemical process, equipment and OSBL facilities. The design assumptions employed are depicted in Table 3.

Table 3 – General Design Assumptions Cooling water temperature

24 °C

Cooling water range

11 °C

Steam (Low Pressure)

7 bar abs

Wet Bulb Air Temperature

25 °C

Source: Intratec – www.intratec.us USD/manhour Supervisor

USD/man-

Salaries

hour

Intratec | About this Study

Source: Intratec – www.intratec.us

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Study Background About Polypropylene Polypropylene (PP) is a thermoplastic material formed by the reaction of polymerization of propylene, resulting in a macromolecule that contains from 10,000 to 20,000 monomer units. As a thermoplastic, PP is capable of melting and flowing (in a reversible physical transformation) when subjected to increases in temperature and pressure, assuming a specified form when those conditions cease. Based on its exceptional mechanical and thermal properties, it is suitable for applications in fibers, injection molding, thermoforming, film and blow molding. In a qualitative approach, PP is a colorless, translucent to transparent solid with a glossy surface, with very good resistance to chemicals (except for hydrocarbons and chloride compounds), greater scratch resistance than other polyolefins, good environmental stress cracking resistance, good processability via injection molding and extrusion, and a low moisture absorption rate. Polypropylene annual consumption worldwide exceeds 50 million tons, with an expanding market in its core applications as well as in inter-material substitution. The use of polypropylene has increased at rates slightly faster than one of its main competitor materials, polyethylene; while linear low and high density polyethylene are growing faster than polypropylene, low density polyethylene drags down overall polyethylene growth.

Intratec | Study Background

The discovery of polypropylene homopolymer is generally credited to the independent work of Karl Ziegler and Giulio Natta, in 1954. The organometallic catalyst system used became known as Ziegler-Natta catalysts, still one of the most remarkable components of PP production. Natta was able to synthesize polypropylene and, additionally, associate the resulting polymer high melting point with the distribution of methyl groups along the carbon chain.

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Phillips Petroleum was developing the polypropylene technology concurrently with Natta’s work and Phillips was awarded the composition of matter patent in the US in 1983. Polypropylene producers around the world celebrated on March 1, 2000 – the day the Phillips’ patent expired.

Unlike the symmetrical ethylene molecule, for example, the way each propylene monomer unit links to the other generates polymers with distinct characteristics. Those structural chains can be summarized as follow: Atactic. The pendant methyl groups are attached in a random manner on the polymer backbone chain. At room temperature, atactic polypropylene is a waxy and tacky solid. Isotactic. All the methyl groups are on the same side of the winding spiral chain molecule. Since it is difficult to completely control the polymerization reaction, isotactic polypropylene always presents atactic content. It is important to keep such content to a minimum, to provide a higher stiffness and a wider spectrum of applications. Syndiotactic. The pendant methyl groups are attached in an alternating pattern on the polymer backbone chain. It is soft and clear, in addition to having a good gloss, but its production costs are high when compared to the other existing structural chains. Only isotactic polypropylene has the requisite properties of a useful commodity plastic material. Compared with HDPE or LDPE, its higher stiffness at lower density and superior working temperature when not subjected to mechanical stress are key factors to isotactic polypropylene’s preferential use in certain applications. However, recently, technological improvements in the catalyst system allowed the synthesis of crystalline syndiotactic polymer. Commercially, this kind of polypropylene is produced with a metallocene catalyst system. Companies involved in syndiotactic PP production claim that it has enhanced properties, but a more detailed evaluation is yet to be made for a proper comparison with isotactic PP. This kind of information will be fundamental to determining the real competitiveness of such material, through the balance of better properties and its higher cost. Until now, the low molecular mass atactic PP had only a few commercial outlets for adhesives and roofing materials.

Types of Polypropylene Resins Polypropylene production advances in both the manufacturing process and catalyst allowed the creation of

three major types of resins: homopolymers, random copolymers and impact (or block) copolymers. All PP processes are capable of producing homopolymer and random copolymer PP, and all require one or more additional reactors to produce impact copolymer. Homopolymers. Produced through polymerization of propylene in the presence of a stereospecific catalyst, homopolymers have an isotactic index in the range of 92-99%. As stiffness and resistance to impact are directly dependent on the equilibrium between the atactic and isotactic fractions, they are more rigid and have better resistance to high temperatures than copolymers, but with inferior impact strength below 0°C. Thus, this kind of polymer is indicated for high temperature applications such as hair dryer, sterilizers, irons, coffee makers and toasters. Woven bags, fine denier fibers, windshield washer tanks and shrouds for fans toasters can also use homopolymers. Random copolymers. Random copolymers are obtained by copolymerization of propylene with ethylene or higher olefins (e.g. butene-1), which represents from 1.5 to 6 wt% of the product. Those molecules are randomly dispersed along the carbon chain by their addition during the reaction; the resulting product offers improved impact strength and clarity, as well as a softer feel. Typical applications of random copolymer are films, injection-molding and blow-molding. Typical applications are battery cases, blow-molded bottles, bumper filler supports, interior trim, glove boxes, package trays and window moldings, video cassette boxes, office furniture, disposable containers, boxes and appliance housings.

Applications This combination of physical, chemical, mechanical, thermal and electrical properties explains polypropylene’s immediate industrial application and continuous growth. In terms of current global representativeness, polypropylene is the second largest consumed plastic material after polyethylene (PE) and before polyvinyl chloride (PVC). Furthermore, PP processes are able to improve polymer properties through orientation, i.e., the previously mentioned methyl groups’ distribution. This unique aspect is only found in a limited number of the other major plastics (e.g. PET), and contributes to expanding the range of polypropylene applications. Table 4 lists polypropylene end-uses, as well as respective examples, considering all the spectrum of grades that can be produced – varying methyl groups’ distribution, copolymers and additives employed.

Table 4 – Polypropylene End-uses

Film and sheet

Food packaging

Injection molding

Automotive components

Fibre

Medical garment and carpets

Blow molding

Bottles

Extrusion and piping

Civil piping

Raffia

Sports fabrics and bags

Source: Intratec – www.intratec.us

Polypropylene Manufacturing Types of Process In order to properly explain the technology involved in PP manufacturing it is useful to define some concepts about the forms in which propylene polymerization is conducted. Traditionally, the following are the most representative: Hydrocarbon Slurry or Suspension. Consists of using a liquid inert hydrocarbon diluent in the reactor to facilitate transfer of propylene to the catalyst, the removal of heat from the system, the deactivation/removal of the catalyst as well as

Intratec | Study Background

Impact copolymers. Similar to random copolymers, impact copolymers use olefins other than propylene for polymerization. The main difference is that polymerization of those olefins occurs in another reactor, forming a dispersed phase within the PP matrix. Copolymers content in this kind of material ranges from 5-25% and its large rubber content serves to improve impact strength. This characteristic suits impact copolymer for use in automotive and appliance parts, industrial products and as compounds blendstocks. It’s used by automakers for door panels, quarter-panel trim, lower trim, doors, seat shields, pillars, headers, rib cartridges, head impact and air bags.

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dissolving the atactic polymer. The range of grades that could be produced was very limited. (The technology had fallen into disuse). Bulk (or Bulk Slurry). Uses liquid propylene instead of liquid inert hydrocarbon diluent. The polymer does not dissolve into a diluent, but rather rides on the liquid propylene. The formed polymer is withdrawn and any unreacted monomer is flashed off. Gas Phase. Uses gaseous propylene in contact with the solid catalyst, resulting in a fluidized-bed medium. Hybrid. Uses a slurry loop reactor followed by a gas phase reactor, combining the bulk slurry and gas phase processes.

The Role of Catalyst in Process Technology for polypropylene manufacturing has kept pace with the catalysts’ evolution. Traditionally, because of the technical breakthrough that each one represented, polypropylene catalysts are divided into generations. Table 5 depicts those advances, although this division may vary, since the recognition of a breakthrough is, to some extent, subjective. The plants built in the 1960s and 1970s using hydrocarbon slurry process (based on the first generation catalyst) were very cost-intensive because of the large amount of equipment required for handling the solvent related steps, the large space and complicated plot plans.

Also, labor requirements, energy inefficiency and catalyst poor activity (1kg of polypropylene produced per gram of catalyst) made production costs very high. In addition, PP produced had very narrow range of applications due to its poor properties. Despite such high production costs, hydrocarbon slurry process remained economically feasible in the following years due to the advances in catalyst (second generation). However, the introduction of the third generation enabled the production of polypropylene via bulk slurry and via gas phase in the late 1970`s. Both processes presented much lower capital and operating costs, since the steps related to hydrocarbon solvent became unnecessary, simplifying plot plans and significantly reducing space required. Third generation catalyst provided yields of 12-15 kg of polypropylene per gram of catalyst. The fourth generation took polypropylene production to the level of about 30kg of PP produced per gram of catalyst employed. Such catalysts are currently the most popular in the industry and have already achieved mileages as high as 120 kg of PP per gram of catalyst. The fifth and sixth generations of catalysts are not still fully developed and considerable effort is being to enable them to be fully commercialized. Meanwhile, fourth generation catalysts are still the most widely used in polypropylene production

Table 5 – Catalyst Advances

1st (1957-1970)

3TiCl3AlCl3/AlEt2Cl

0.8–1.2

88–91

2nd (1970-1978)

TiCl3/AlEt2Cl

3–5

95

3rd (1978-1980)

TiCl4/Ester/MgCl2 + AlEt3/Ester

5–15

98

20–60

99

50–120

99

5–9 x 103 (on Zr)

90–99

5–9 x 103 (on Zr)

90–99

TiCl4/Diester/MgCl2 + AlEt3/silane three th

dimensional catalyst granule architecture

4 (1980) RGT TiCl4/Diether/MgCl2 + AlEt3 three dimensional Intratec | Study Background

catalyst granule architecture

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Metallocenes

Zirconocene + MAO

Multicatalyst RGT (Reactor

Mixed catalysis: ZN + radical initiators, ZN +

Granule Technology)

single site (catalysts)

Source: Intratec – www.intratec.us

.

Figure 2 – Polypropylene from Multiple Sources

Propylene

Polypropylene (PP)

Bulk Phase Processes LyondellBasell Spheripol Mitsui HYPOL II ExxonMobil PP Process Gas Phase Process: Fluidized Bed Reactor Dow Unipol™ Gas Phase Process: Stirred Bed Reactor Lummus Novolen® INEOS Innovene™

JPP Horizone Gas Phase Process: Multi-zone Circulation Reactor LyondellBasell Spherizone Hybrid Process Borealis Borstar

Source: Intratec – www.intratec.us

Olefin polymerization in gas phase fluidized-bed reactors has been recognized as being among the most economical methods of manufacturing commodity polymers, including polyethylene (PE), polypropylene (PP) and ethylenepropylene rubber (EPR). In the 1960s, BASF developed a gas phase, mechanically stirred polymerization process for making PP. In that process, the particle bed in the reactor was either not fluidized or not fully fluidized.

In 1968, the first gas phase fluidized-bed polymerization process, i.e., the UNIPOL™ Process, was commercialized by Union Carbide to produce polyethylene. This process was quickly licensed to other manufacturers. In the mid-1980s, it was further extended to produce polypropylene. The features of the fluidized-bed process, including its simplicity and superior product quality, made it widely accepted all over the world. As of today, the fluidized-bed process is the dominant means of producing PE (especially LLDPE), as is one of the two most widely used technologies for producing PP.

Intratec | Study Background

Licensor & Historical Aspects

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Technical Analysis Chemistry The main reaction that occurs in the polymerization of propylene to polypropylene is shown in the following.

Propylene

Polypropylene

A Ziegler-Natta catalyst is utilized to achieve this. The original catalyst for propylene polymerization was aluminum alkyl and titanium trichloride, but much work has been done to find better catalysts. The main objective is to enable a controlled polymerization reaction with a narrow molecular weight distribution of the product and enhanced properties, as well as an increase in the catalyst productivity (or mileage), defined as the kilograms of PP produced per gram of catalyst. The continuous back-mixed reactor operates at about 33 – 35 bara and contains a fluidized bed of granular polypropylene with a trace of catalyst. Temperature is mild (65 – 80ºC) and is controlled by adjusting the temperature of the cycle gas returned to the reactor. An overall yield of about 99+ wt% of propylene is expected.

Intratec | Technical Analysis

Raw Material

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In terms of raw materials, polypropylene is the largest downstream derivative made from propylene. Typically, PP manufacturers use polymer grade (PG) propylene, with 99.5 wt% purity, as feedstock. Due to the high cost related to transport of highly pressurized or refrigerated liquids, propylene produced or purchased from local steam crackers, FCC units or even on-purpose plants tends to be most cost-effective. In some cases, propylene is refined to achieve a purity compatible with the sensitivity of the catalyst system and/or to avoid the accumulation of inert substances. The major PG propylene feed impurity is propane. Similar to other inert components such as methane, nitrogen, ethane and other higher alkanes, propane works as a diluent to reduce polymerization rate, not having any other

adverse effect. Thus, the use of the propylene feed as polymerization monomer is more impacted by the levels of trace impurities, which affect the activity and stereospecificity of propylene polymerization catalysts, rather than specifically by the propane content. The polymerization catalysts are sensitive to certain impurities, including the oxygen, carbon monoxide, carbon dioxide, water, and alcohols potentially present in the various feed streams. Based on the typical purity of raw materials available on the US Gulf Coast, the following topics summarize the raw materials and respective purification facilities required to protect the catalyst against the effects of impurities. Ethylene, Nitrogen, and Hydrogen: Filtration Propylene: Two fixed bed dryers, one operating, one on standby, for removal of water and other polar impurities. The purification steps included in the process are primarily considered to be guard beds for spike protection. Bed life between regenerations is relatively long (measured in months, not days).

Technology Overview The process is separated into three different areas: purification & reaction; resin degassing & pelleting; and vent recovery. Fresh propylene and the other raw materials fed to the unit are passed through the purification facilities, in which trace quantities of impurities are removed. The purified raw materials are then fed to the reaction system. Only one reaction system, consisting of a fluidized bed reactor, a cycle gas compressor and cooler, and product discharge tanks, is required to produce homopolymer and random copolymer. The raw materials and a recycle stream from the vent recovery system are fed continuously to the reactor. The cycle gas compressor circulates reaction gas upward through the reactor, providing the agitation required for fluidization, backmixing, and heat removal. No mechanical stirrers or agitators are needed in the process reactors. The cycle gas leaving overhead from the reactor passes through the cooler that removes the heat of reaction. Catalyst is continuously fed to the reactor.

Resulting granular polypropylene is removed from the reactor by the discharge tanks and sent to a purge bin where residual hydrocarbons are stripped with nitrogen from the resin and are sent to the vent recovery system. The purged resin is sent to the pelleting system. The vent gas is processed to separate hydrocarbons and nitrogen purge gas, which is returned to the process. The condensed components are separated into a propylene stream, which is returned to the reaction system, and a propane stream. Solid additives are metered and sent to the pelleting system. The resin and the additives are mixed, melted and pelleted in the pelleting system. The pellets are dried, cooled and sent to product blending and storage.

Figure 3 – Process Block Flow Diagram

Recovered Propylene

Recycled Nitrogen

PG Propylene

Area 100 Purification & Reaction

Area 200 Resin Degassing & Pelleting

Unreacted Monomer

Area 300 Vent Recovery

Fresh Nitrogen

Source: Intratec – www.intratec.us

Polypropylene

Intratec | Technical Analysis

Catalyst & Chemicals

15

16

Intratec | Technical Analysis

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Intratec | Technical Analysis

Key Consumptions

Table 6 - Raw Materials & Utilities Consumption (per ton of product)

Table 7 – Design & Simulation Assumptions

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

Labor Requirements

Table 8 – Labor Requirements for a Typical Plant

Non-Integrated Plant

7

1

Partially Integrated Plant

7

1

Intratec | Technical Analysis

Source: Intratec – www.intratec.us

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Source: Intratec – www.intratec.us

Intratec | Technical Analysis

Figure 4 – Inside Battery Limits Conceptual Process Flow Diagram

19

Intratec | Technical Analysis

Figure 3 – Inside Battery Limits Conceptual Process Flow Diagram (Cont.)

20

Source: Intratec – www.intratec.us

P-303A/B

Source: Intratec – www.intratec.us

Intratec | Technical Analysis

Figure 3 – Inside Battery Limits Conceptual Process Flow Diagram (Cont.)

21

Intratec | Technical Analysis

Figure 3 – Inside Battery Limits Conceptual Process Flow Diagram (Cont.)

22

Source: Intratec – www.intratec.us

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

ISBL Major Equipment List Table 10 shows the equipment list by area. It also presents a brief description and the construction materials used. Find main specifications for each piece of equipment in “Appendix D. Equipment Detailed List & Sizing.”

Intratec | Technical Analysis

Table 9 presents the main streams composition and operating conditions. For a more complete material balance, see the “Appendix A. Mass Balance & Streams Properties.”

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24

Intratec | Technical Analysis

25

Intratec | Technical Analysis

OSBL Major Equipment List

Intratec | Technical Analysis

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

26

Table 11 shows the list of tanks located in the storage area and the energy facilities considered in the construction of a non-integrated unit.

27

Intratec | Technical Analysis

28

Intratec | Technical Analysis

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

Table 12 – Base Case General Assumptions

In Table 12, the IC Index stands for Intratec chemical plant Construction Index, an indicator, published monthly by Intratec, to scale capital costs from one time period to another. This index reconciles prices trends of fundamental components of a chemical plant construction such as labor, material and energy, providing meaningful historical and forecast data for our readers and clients. The assumed operating hours per year indicated do not represent any technology limitation; rather, it is an assumption based on common industrial operating rates. Additionally, Table 12 discloses assumptions regarding the project complexity, technology maturity and data reliability, which are of major importance for attributing reasonable contingencies for the investment and for evaluating the overall accuracy of estimates. Definitions and figures for both contingencies and accuracy of economic estimates can be found in this publication in the chapter “Technology Economics Methodology.”

Source: Intratec – www.intratec.us

Figure 5 – Project Implementation Schedule

Basic Engineering Detailed Engineering Procurement Construction

Start-up

Source: Intratec – www.intratec.us

Intratec | Economic Analysis

Total EPC Phase

29

Project Implementation Schedule The main objective of knowing upfront the project implementation schedule is to enhance the estimates for both capital initial expenses and return on investment. The implementation phase embraces the period from the decision to invest to the start of commercial production. This phase can be divided into five major stages: (1) Basic Engineering, (2) Detailed Engineering, (3) Procurement, (4) Construction, and (5) Plant Start-up. The duration of each phase is detailed in Figure 5.

installation bulks). The total direct cost represents the total bare equipment installed cost. Table 14 shows the breakdown of the total fixed investment (TFI) per item (direct & indirect costs and process contingencies). “Appendix E. Detailed Capital Expenses” provides a detailed breakdown for the direct expenses, outlining the share of each type of equipment in total.

Table 14 – Total Fixed Investment Breakdown (USD Thousands)

Capital Expenditures Fixed Investment Table 13 shows the bare equipment cost associated with each area of the project.

Table 13 - Bare Equipment Cost per Area (USD Thousands)

Intratec | Economic Analysis

Source: Intratec – www.intratec.us

30

Table 14 presents the breakdown of the total fixed investment (TFI) per item (direct & indirect costs and process contingencies). For further information about the components of the TFI please see the chapter “Technology Economics Methodology.” Fundamentally, the direct costs are the total direct material and labor costs associated with the equipment (including

Source: Intratec – www.intratec.us

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

It is important to emphasize that capital expenditures for the propylene plant are not included in the present study. Indirect costs are defined by the American Association of Cost Engineers (AACE) Standard Terminology as those "costs which do not become a final part of the installation but which are required for the orderly completion of the installation."

For example, if there are nearby facilities consuming a unit’s final product or supplying a unit’s feedstock, the need for storage facilities significantly decreases, along with the total fixed investment required. This is also true for support facilities that can serve more than one plant in the same complex, such as a parking lot, gate house, etc. This study analyzes the total fixed investment for two distinct scenarios regarding OSBL facilities:

The indirect project expenses are further detailed in “Appendix E. Detailed Capital Expenses.”

Non Integrated Plant

Alternative OSBL Configurations

Plant Partially Integrated

The total fixed investment for the construction of a new chemical plant is greatly impacted by how well it will be able to take advantage of the infrastructure already installed in that location.

The detailed definition, as well as the assumptions used for each scenario is presented in the chapter “About this Study.” The influence of the OSBL facilities on the capital investment is depicted in Figure 6 and in Figure 7.

Figure 6 – Total Direct Cost of Different Integration Scenarios (USD Thousands)

Intratec | Economic Analysis

Source: Intratec – www.intratec.us

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Figure 7 – Total Fixed Investment of Different Integration Scenarios (USD Thousands)

Source: Intratec – www.intratec.us

Table 15 – Working Capital (USD Million)

Source: Intratec – www.intratec.us

Intratec | Economic Analysis

Other Capital Expenses

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

Figure 8 – Total Fixed Investment Validation (USD Million)

Source: Intratec – www.intratec.us

Initial costs are not addressed in most studies on estimating but can become a significant expenditure. For instance, the initial catalyst load in reactors may be a significant cost and, in that case, should also be included in the capital estimates. The purchase of technology through paid-up royalties or licenses is considered to be part of the capital investment.

Other capital expenses frequently neglected are land acquisition and site development. Although these are small parts of the total capital expenses, they should be included. A summary of other capital expenses is presented in Table 16. Assumptions used to calculate them are provided in “Appendix F. Economic Assumptions.”

Total Capital Expenses Table 16 – Other Capital Expenses (USD Million)

Table 17 presents a summary of the total Capital Expenditures (CAPEX) detailed in previous sections.

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

Intratec | Economic Analysis

Table 17 – CAPEX (USD Million)

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Operational Expenditures Table 18 – Manufacturing Fixed Cost (USD/ton)

Manufacturing Costs The manufacturing costs, also called Operational Expenditures (OPEX), are composed of two elements: a fixed cost and a variable cost. All figures regarding operational costs are presented in USD per ton of product. Table 18 shows the manufacturing fixed cost, while Table 19 details the manufacturing variable cost breakdown.

Source: Intratec – www.intratec.us

To learn more about the assumptions for manufacturing fixed costs, see the “Appendix F. Economic Assumptions.” Table 20 shows the OPEX of the presented technology.

Table 19 – Manufacturing Variable Cost (USD/ton) Table 20 – OPEX (USD/ton)

Source: Intratec – www.intratec.us

Historical Analysis

Source: Intratec – www.intratec.us

Figure 9 depicts Sales and OPEX historic data. Figure 10 compares the project EBITDA trends with Intratec Profitability Indicators (IP Indicators). The Basic Chemicals IP Indicator represents basic chemicals sector profitability, based on the weighted average EBITDA margins of major global basic chemicals producers. Alternately, the Chemical Sector IP Indicator reveals the overall chemical sector profitability, through a weighted average of the IP Indicators calculated for three major chemical industry niches: basic, specialties and diversified chemicals.

Intratec | Economic Analysis

Economic Datasheet

34

The Technology Economic Datasheet, presented in Table 21, is an overall evaluation of the technology's production costs in a US Gulf Coast based plant. The expected revenues in products sales and initial economic indicators are presented for a short-term assessment of its economic competitiveness.

Figure 9 – OPEX and Product Sales History (USD/ton)

Source: Intratec – www.intratec.us

Source: Intratec – www.intratec.us

Intratec | Economic Analysis

Figure 10 – EBITDA Margin & IP Indicators History Comparison

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Intratec | Economic Analysis

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

Figure 11 summarizes the total Capital Expenditures (CAPEX) for the locations under analysis.

Operational Expenditures Specific regional conditions influence prices for raw materials, utilities and products. Such differences are thus reflected in the operating costs. An OPEX breakdown structure for the different locations approached in this study is presented in Figure 12.

Economic Datasheet The Technology Economic Datasheet, presented in Table 22, is an overall evaluation of the technology's capital investment and production costs in the alternative location analyzed in this study.

Source: Intratec – www.intratec.us

Intratec | Regional Comparison & Economic Discussion

Figure 11 – CAPEX per Location (USD Million)

37

Figure 12 – Operating Costs Breakdown per Location (USD/ton)

Intratec | Regional Comparison & Economic Discussion

Source: Intratec – www.intratec.us

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39

Intratec | Regional Comparison & Economic Discussion

Intratec | References

References

40

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

LLDPE: Linear Low Density Polyethylene

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

OPEX: Operational Expenditures OSBL: Outside battery limits

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

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

CAPEX: Capital expenditures

PDH: Propane dehydrogenation

CC: Distillation column condenser

PE: Polyethylene

CP: Distillation column reflux pump

PG: Polymer grade

CR: Distillation column reboiler

PP: Polypropylene

CT: Cooling tower

PSA: Pressure swing adsorption

CV: Distillation column accumulator drum

PVC: Polyvinyl chloride

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

R: Reactors, treaters (e.g., R-101 would denote a reactor tag) ROCE: Return on the capital employed

EBIT: Earnings before Interest and Taxes SB: Steam boiler EBITDA: Earnings before Interests, Taxes, Depreciation and Amortization

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

EPR: Ethylene-propylene rubber

TFI: Total Fixed Investment

F: Filter(e.g., F-101 would denote a filter tag)

TPC: Total process capital

FCC: Fluid catalytic cracking

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

HDPE: High Density Polyethylene IC Index: Intratec Chemical Plant Construction Index WD: Demineralized water IP Indicator: Intratec Chemical Sector Profitability Indicator ISBL: Inside battery limits

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

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

Intratec | Acronyms, Legends & Observations

VOC: Volatile organic compounds

41

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

Introduction The same general approach is used in the development of all Technology Economics assignments. To know more about Intratec’s methodology, see Figure 14. While based on the same methodology, all Technology Economics studies present uniform analyses with identical structures, containing the same chapters and similar tables and charts. This provides confidence to everyone interested in Intratec’s services since they will know upfront what they will get.

Workflow Once the scope of the study is fully defined and understood, Intratec conducts a comprehensive bibliographical research in order to understand technical aspects involved with the process analyzed.

Intratec | Technology Economics Methodology

Subsequently, the Intratec team simultaneously develops the process description and the conceptual process flow diagram based on:

42

a.

Patent and technical literature research

b.

Non-confidential information provided by technology licensors

c.

Intratec's in-house database

d.

Process design skills

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

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

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

b.

The capital and operating costs for a second different plant location

1

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

Figure 13 – Methodology Flowchart

Study Understanding Validation of Project Inputs Patent and Technical Literature Databases

Non-Confidential Information from Technology Licensors or Suppliers

Bibliographical Research

Technical Validation – Process Description & Flow Diagram

Vendor Quotes

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

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

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

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

Economic Analysis

Analyses of Different Construction Scenarios and Plant Location

Project Development Phases Information Gathering / Tools

Source: Intratec – www.intratec.us

Final Review & Adjustments

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

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

Intratec | Technology Economics Methodology

Intratec Internal Database

43

Capital & Operating Cost Estimates

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

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

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

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

Intratec | Technology Economics Methodology

Process water treating systems and supply pumps

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

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

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

For the purposes of this study, 2 working capital is defined as the funds, in addition to the fixed investment, that a company must contribute to a project. Those funds must be adequate to get the plant in operation and to meet subsequent obligations. The initial amount of working capital is regarded as an investment item. This study uses the following items/assumptions for working capital estimation: Accounts receivable. Products and by-products shipped but not paid by the customer; it represents the extended credit given to customers (estimated as a certain period – in days – of manufacturing expenses plus depreciation). Accounts payable. A credit for accounts payable such as feedstock, catalysts, chemicals, and packaging materials received but not paid to suppliers (estimated as a certain period – in days – of manufacturing expenses). Product inventory. Products and by-products (if applicable) in storage tanks. The total amount depends on sales flow for each plant, which is directly related to plant conditions of integration to the manufacturing of product‘s derivatives (estimated as a certain period – in days – of manufacturing expenses plus depreciation, defined by plant integration circumstances).

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

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

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

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

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

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

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

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

Intratec | Technology Economics Methodology

Working Capital

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

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

Intratec | Technology Economics Methodology

Contingencies

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

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

Table 23 – Project Contingency Plant Complexity

Complex

Typical

Simple

Project Contingency

25%

20%

15%

Source: Intratec – www.intratec.us

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

Table 24 – Criteria Description

Simple

Complexity

Typical

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

Complex

temperature or pressure, more instrumentation

New & Maturity

Proven Licensed

From 1 to 2 commercial plants 3 or more commercial plants

Source: Intratec – www.intratec.us

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

Table 25 – Accuracy of Economic Estimates

Reliability

Accuracy

Very

Low

Moderate

High

+ 30%

+ 22%

+ 18%

+ 10%

- 20%

- 18%

- 14%

- 10%

High

Source: Intratec – www.intratec.us

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

Location Factor

A properly estimated location factor is a powerful tool, both for comparing available investment data and evaluating which region may provide greater economic attractiveness for a new industrial venture. Considering this, Intratec has developed a well-structured methodology for calculating Location Factors, and the results are presented for specific regions’ capital costs comparison. Intratec’s Location Factor takes into consideration the differences in productivity, labor costs, local steel prices, equipment imports needs, freight, taxes and duties on imported and domestic materials, regional business environments and local availability of sparing equipment. For such analyses, all data were taken from international statistical organizations and from Intratec’s database. Calculations are performed in a comparative manner, taking a US Gulf Coast-based plant as the reference location. The final Location Factor is determined by four major indexes: Business Environment, Infrastructure, Labor, and Material. The Business Environment Factor and the Infrastructure Factor measure the ease of new plant installation in different countries, taking into consideration the readiness of bureaucratic procedures and the availability and quality of ports or roads.

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

Relative Steel Prices Labor Index Taxes and Freight Rates Spares Taxes and Freight Rates Spares

Source: Intratec – www.intratec.us

Relative Salary Productivity

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

Readiness of Bureaucratic Procedures Legal Protection of Investors Taxes

Intratec | Technology Economics Methodology

Figure 14 – Location Factor Composition

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Labor and material, in turn, are the fundamental components for the construction of a plant and, for this reason, are intrinsically related to the plant costs. This concept is the basis for the methodology, which aims to represent the local discrepancies in labor and material. Productivity of workers and their hourly compensation are important for the project but, also, the qualification of workers is significant to estimating the need for foreign labor. On the other hand, local steel prices are similarly important, since they are largely representative of the costs of structures, piping, equipment, etc. Considering the contribution of labor in these components, workers’ qualifications are also indicative of the amount that needs to be imported. For both domestic and imported materials, a Spare Factor is considered, aiming to represent the need for spare rotors, seals and parts of rotating equipment. The sum of the corrected TFI distribution reflects the relative cost of the plant, this sum is multiplied by the Infrastructure and the Business Environment Factors, yielding the Location Factor.

Intratec | Technology Economics Methodology

For the purpose of illustrating the conducted methodology, a block flow diagram is presented in Figure 15 in which the four major indexes are presented, along with some of their components.

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(kJ/kg K) Liquid Thermal Conductivity (W/m K) Liquid Heat Capacity (kJ/kg K)

Intratec | Appendix A. Mass Balance & Streams Properties

Gas Heat Capacity

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50

Intratec | Appendix A. Mass Balance & Streams Properties

51

Intratec | Appendix A. Mass Balance & Streams Properties

52

Intratec | Appendix A. Mass Balance & Streams Properties

53

Intratec | Appendix A. Mass Balance & Streams Properties

54

Intratec | Appendix B. Utilities Consumption Breakdown

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

The assumptions for the process carbon footprint calculation are presented in Table 28 and the results are provided in Table 29.

Table 29 – CO2e Emissions (ton/ton prod.)

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

Source: Intratec – www.intratec.us

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

Source: Intratec – www.intratec.us

Intratec | Appendix C. Process Carbon Footprint

Table 28 – Assumptions for CO2e Emissions Calculation

55

56

Intratec | Appendix D. Equipment Detailed List & Sizing

57

Intratec | Appendix D. Equipment Detailed List & Sizing

58

Intratec | Appendix D. Equipment Detailed List & Sizing

59

Intratec | Appendix D. Equipment Detailed List & Sizing

Intratec | Appendix D. Equipment Detailed List & Sizing

Table 39 – Vessels & Tanks (Cont.)

60

61

Intratec | Appendix D. Equipment Detailed List & Sizing

Appendix E. Detailed Capital Expenses Direct Costs Breakdown Figure 15 – ISBL Direct Costs Breakdown by Equipment Type (Base Case)

Source: Intratec – www.intratec.us

Intratec | Appendix E. Detailed Capital Expenses

Figure 16 – OSBL Direct Costs by Equipment Type (Base Case)

62

Source: Intratec – www.intratec.us

63

Intratec | Appendix E. Detailed Capital Expenses

Appendix F. Economic Assumptions Capital Expenditures

Working Capital

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

Table 41 – Working Capital Assumptions (Base Case)

Construction Location Factors

Table 40 – Detailed Construction Location Factor

Source: Intratec – www.intratec.us

Table 42 – Other Capital Expenses Assumptions (Base Case) days of all labor

Intratec | Appendix F. Economic Assumptions

costs

64

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

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

Table 43 – Other Fixed Cost Assumptions

Source: Intratec – www.intratec.us

Source: Intratec – www.intratec.us

Intratec | Appendix F. Economic Assumptions

Table 44 – Depreciation Value & Assumptions

65

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

Intratec | Appendix G. Latest & Upcoming Reports

Propylene Production via Propane Dehydrogenation, Part II: Propane dehydrogenation (PDH) in fixed bed reactors, in a process is similar to Lummus CATOFIN®.

66

Sodium Hypochlorite Chemical Production: Sodium hypochlorite (bleach) production, in a widely used industrial process, similar to that employed by Solvay Chemicals, for example. Propylene Production via Propane Dehydrogenation, Part III: Propane dehydrogenation (PDH) by applying oxydehydrogenation, in a process similar to the STAR PROCESS® licensed by Uhde.

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

Appendix H. Technology Economics Form Submitted by Client

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

Acetic Acid

Acetone

Acrylic Acid

Acrylonitrile

Adipic Acid

Aniline

Benzene

Butadiene

n-Butanol

Isobutylene

Caprolactam

Chlorine

Cumene

Dimethyl Ether (DME)

Ethanol

Ethylene

Bio-Ethylene

Ethylene Glycol

Ethylene Oxide

Formaldehyde

HDPE

Isoprene

LDPE

LLDPE

MDI

Methanol

Methyl Methacrylate

Phenol

Polypropylene (PP)

Polybutylene Terephthalate

Polystyrene (PS)

Polyurethanes (PU)

Polyvinyl Chloride (PVC)

Propylene

Propylene Glycol

Propylene Oxide (PO)

Terephthalic Acid

Vinyl Chloride (VCM)

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

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

Gas phase technology - similar to Dow UNIPOL E. g. technology for propylene production from methanol - similar to Lurgi MTP

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

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

New Jersey, USA

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

Industrial Unit Description Plant Nominal Capacity

Operating Hours

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

150 kta

Operating Hours

300 kta Other (kta)

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

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

400

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

Year

Q3

2011

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

20 days

By-Products

20 days

Other

Other

Raw Materials

20 days Other

0

0

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

Yes

No

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

Unit

Default Value

User-specified value

Cooling water temperature

ºC

24

DSPEC1

Cooling water range

ºC

11

DSPEC2

Steam (Low Pressure)

bar abs

7

DSPEC3

Steam (Medium Pressure)

bar abs

11

DSPEC4

Steam (High Pressure)

bar abs

28

DSPEC5

Refrigerant (Ethylene)

ºC

-100

DSPEC6

Refrigerant (Propane)

ºC

-40

DSPEC7

Refrigerant (Propylene)

ºC

-45

DSPEC8

Dry Bulb Air Temperature

ºC

38

DSPEC9

Wet Bulb Air Temperature

ºC

25

DS10

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

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

United States

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

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

Custom Location Description. Describe both capital investment and prices at your custom location. A) Capital Investment. Provide the relative capital cost at your custom location in comparison to the United States (U.S. Gulf Coast) Custom Location Relative Cost (%)

1

130% means that the capital costs in the custom location are 30% higher than the costs in the United States. B) Raw Materials Prices. Describe the raw material prices to be considered in the custom location. Item Description Raw1

Polymer grade Propylene

Price Unit RU1

USD/metric ton

Price RP1

Raw2

RU2

RP2

Raw3

RU3

RP3

E.g.

Propane

USD/metric ton

420

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

Price Unit

Price

Prod1

PU1

PP1

Prod2

PU2

PP2

Prod3

PU3

PP3

E.g.

Polypropylene

USD/metric ton

1700

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

Price Unit

Price

Electricity

UP1

Steam (Low Pressure)

UP2

Steam (High Pressure)

UP3

Fuel

UP4

Clarified Water

UP5

Util6

UU6

YP6

Util7

UU7

UP7

Util8

UU8

UP8

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

Price Unit

Price

Operating Labor

USD/operator/hour

LP1

Supervision Labor

USD/supervisor/hour

LP1

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

Price Unit

Price

Other1

OU1

OP1

Other2

OU2

OP2

Other3

OU3

OP3

E.g.

Catalyst

USD/metric ton

5000

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

I have filled just the propylene price field, because a propylene source already exists and may provide propylene at prices below market average. Regarding the reamining prices, please use the same of your internal database for the US Gulf.

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

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

6 months

24 months

36 months

Never Disclosed

Non-Disclosure Period

Price

6 months

$8,000 (9 x $899)

Save 84%

24 months

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

Save 44%

automatically, in equal and pre-defined installments

36 months

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

Save 20%

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

Never Disclosed

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

- Payment of our advisory service is conducted

credit card or PayPal account.

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

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

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

v.1-mar-13

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