Profitability Analysis

Our client is evaluating a number of scenarios How does our process compare with the others?

Basis of Comparison Cost a demo unit, not a world scale

plant Include both the syngas section

and the methanol section (from natural gas to methanol)

The syngas plant contributes $10M to capital cost, $7M to annual operating cost – exclusive of natural gas cost

CapCost Available on the CD Covers everything from equipment cost

estimation to profitability analysis CD also contains a tutorial which

describes how to run the program It is strongly recommended that you

view this (requires a computer with sound)

Where parameters are not given in the notes, use the defaults in CapCost

Sheet “User Options” is used to set various parameters

Sheet “Equipment Summary” is used to estimate equipment

costs

Change the names to something reasonable e.g. “Compressor Drive”

Sheet “Utilities Summary” is used to estimate costs of steam, cooling water etc.

Click on the “Unspecified” cells to enter type and rate of utility (it knows the unit cost)

Sheet “COM Summary” is used to enter costs of raw

materials and revenue from products

COM is Cost Of Manufacturing“

Sheet “COM Summary”also allows enter of various economic parameters

Sheet “Cash Flow Analysis” displays the calculations

0

250

500

750

1000

-60 -40 -20 0 20 40 60 80

Net Present Value (millions of dollars)

Cum

ulat

ive

Num

ber

of D

ata

Poi

nts

Sheet “Monte Carlo Simulation” does a sensitivity

analysis

Most probable value of NPV is $5M

25% chance that it is worse than -7M

25% chance that it is better than 18M

Cost Data CapCost has data on utilities,

waste disposal, manpower requirements (take these as current costs)

The waste (mixed alcohols) is classified as hazardous

The “Course Description” on the web site has references to costs of chemicals and commodities

More Cost data Natural gas prices are normally quoted in

$ per million BTU’s – assume a heat value of 23,000 BTU’s/pound

With long term contracts we can expect to get natural gas at 80% of the spot price

CO2 is a waste product we will get at zero cost

Purge gas streams have heating value but contain components that are not good for the furnaces. Overall they have zero value.

Catalyst Cost Include the cost of initially filling the

reactors in the capital cost Calculate the annual operating cost

by assuming a lifetime of two years The cost is $24 per litre of reaction

space This includes a disposal fee (the

manufacturer takes it back)

Additional Documentation See the CD sections “Profitability

Analysis” and “Wrap-up Session” The workshop on “Economic Analysis”

also contains information on the concepts behind profitability assessment

You will want a copy of the HYSYS Costing Version case to get rates, reactor volumes etc.

Material to Submit Paper:

A three page executive summary The group notebook

In folder “Final Report” in group folder: Copy of CapCost spreadsheet (this will

cover both my Profitability assignment, and Dave Mody’s Capital Cost assignment)

By 11:00 AM on December 5

Wrap-up Session

Three of the reports will be selected, and the groups asked to discuss their findings

No slides, but be prepared to stand up and talk about your report for 5-10 minutes

Content of Report State our objectives and the capital cost Give a brief description of the process Identify any issues of concern in the design

(e.g. designs or costs on shaky grounds) Summarize the groundrules for the

economic analysis Answer the three questions at the end of

the CD document “Profitability Analysis”