Cost, operating

The fixed costs for operators and other personnel, taxes, insurance, repairs, and maintenance are about the same for all three processes. The 20 % lower depreciation of the membrane process is offset by the additional expense for purchase and replacement of the membranes and for the more elaborate brine purification. 

The price of electrical energy varies widely from region to region. The relatively broad range of possible current densities combined with the steep increase in the cell 

Elertrifity for elecirolysis, kW (i 2. flXl-230n tiofi- t40o 2200-2S(KI 

In spite of the advantages of the membrane technolc, about 75% of all chlorine is produced in mercury and diaphragm cells, operating in ca. 500 plants around the world. Diaphragm technolc prevails in the United States (70%), Russia, and China, and mercury technology in Western Europe (64 %). Continued production from these plants is economical under special circumstances. 

For mercury cell users, the question of today is whether the old. depreciated plant is competitive with new membrane cell plants. The alternatives are  

An estimate of the operating costs, the cost of producing the product, is needed to judge the viability of a project, and to make choices between possible alternative processing schemes. These costs can be estimated from the flow-sheet, which gives the raw material and service requirements, and the capital cost estimate. 

The cost of producing a chemical product will include the items listed below. They are divided into two groups. 

Fixed operating costs costs that do not vary with production rate. These are the bills that have to be paid whatever the quantity produced. 

Variable operating costs costs that are dependent on the amount of product produced. 

The division into fixed and variable costs is somewhat arbitrary. Certain items can be classified without question, but the classification of other items will depend on the accounting practice of the particular organisation. 

Guthrie, K. M., Capital and Operating Costs, Chemical Engineering, June 15, 1970, pp. 140-156. 

Conceptual Estimating Manual for Process Plant Design and Construction, Gulf Publishing Co., Houston, Texas, 1984. 

Branan, C. and Mills, J., The Process Engineer s Pocket Handbook, Vol. 3, Gulf Publishing Co., 1984. 

A systematic method of developing operating costs should be devised. A table or form that everyone becomes familiar with helps to make all studies uniform and complete. Reference 1 presents a good form and checklist. 

The amount of raw materials needed is supplied by the licensor or process developer. However, unless similar plants are in operation, allowances for unforeseen 

The plant supervisor/manager has no control over fixed operating costs, whereas he/she is held accountable for the variable costs. In addition to those costs incurred due to the construction of the plant and/or its operation, each plant, site or product is usually required to contribute towards the general operating expenses of the company. These expenses include general overheads, research and development costs, sales expenses, etc. Each company decides how these costs are apportioned, however as a general indication they may add 20-30% to the direct production costs at site. 

The following items represent the more common operating costs, although the list should not be considered complete for any plant. Operating costs are usually calculated on an annual basis, and subsequently calculated per tonne of product (for example) when determining the profitability and selling price of the chemical. 

More detailed discussion of these items and a worked example can be found in Coulson and Richardson, Volume 6 (1983 pp. 194202). 

From the plant operator s point of view, utility cost ought generally to be kept as low as possible. Responsible for the level of utility costs is predominantly the chosen method. In order to minimize the costs for raw materials, for example, the output has to be maximized. This involves the corresponding instrumental expenditures (e.g. larger reactor volume) and growing investments. And again the mutual requirements are contradictory and lead to another optimization task. Furthermore the costs for raw materials depend on their quaUty or purity. Depending on the aspired product quality, they are to be optimized as weU. 

With regard to the energy costs, the kind of energy required has to be defined at first  

It is possible to operate a seawater desalination plant with live steam (e.g. multiple effect evaporation plant) or with electric power (e.g. vapour compression plant). 

The availability of raw materials and energy has to be taken into account, too. This, however, is a matter of the location. But these problems are only resolvable within the context of cost accounting or cost optimization. 

Another problem occurring when determining the utility costs is the fact that usually the operator has no influence on price development. The long-term assessment of the cost development is clearly afflicted by entrepreneurial risks. 

When synthesizing a flowsheet, these criteria are applied at various stages when there is an incomplete picture. Hence it is usually not possible to account for all the fixed and variable costs listed above. Also, there is little point in calculating taxes until a complete picture of operating costs and cash flows has been established. 

The preceding definitions of economic potential and total annual cost can be simplified if it is accepted that they will be used to compare the relative merits of difierent structural options in the flowsheet and difierent settings of the operating parameters. Thus items which will be common to the options being compared can be neglected. 

Let us now briefly review the most important costs which will be needed to compare options. 

In most processes, the largest individual cost is raw materials. Raw materials costs and product prices tend to have the largest influence on the economic performance of the process. The value of raw materials and products depends on whether the materials in question are being bought and sold under a contractual arrangement (either within or outside the company) or on the open market (the spot price). Open-market prices can fluctuate considerably with time. Products are normally sold at below open-market price when under a contractual arrangement. 

The values of raw materials and products can be found in trade journals such as Chemical Marketing Reporter (Schnell Publishing Company) and European Chemical News (Reed Business Publishing 

Once the volume of raw material is set. the price must be estimated. In some studies, a captive source is available with a set transfer price. In other studies, contracts for raw materials will be far enough along to establish the price. However, in some studies, contacts with vendors and the literature is the only source of raw material prices. 

Carbon Dioxide Supply. A production system is designed to recycle at least 95% of the carbon dioxide circulating in the system, therefore 5% must be replaced after each cycle. All systems require an initial charge of carbon dioxide and provisions for carbon dioxide makeup. 

The quality of the supply and makeup carbon dioxide as well as the purity of the carbon dioxide circulating in the system is also important to consistent processing. Supply and makeup carbon dioxide, in liquid form, is preferred for production systems. Liquid carbon dioxide is delivered in bulk and requires a storage system (usually leased from the supplier). However, it is less expensive and is more consistent in quality than bottled carbon dioxide. Liquid carbon dioxide is available from several suppliers. The carbon dioxide from all suppliers is consistent in quality and the purity is very satisfactory for most processes. 

Bulk liquid carbon dioxide is supplied at approximately 300 PSIG. The minimum pressure in the carbon dioxide recycle system of a precision cleaning system is approximately 500 PSIG, therefore the pressure of the bulk liquid carbon dioxide must be increased when it is transferred to the cleaning system. Although this pressurization adds capital cost to the system, the lower price of bulk carbon dioxide will rapidly pay for the initial investment. Currently, the bulk cost is less than 10 cents per pound as compared to 50 to 70 cents per pound for other forms. 

If the anticipated use is small or the cleaning requirements are not so rigorous, gas cylinders or small liquid dewars can be used. 

Utilities. Los Alamos National Laboratory (LANL) has performed extensive analysis of the operating cost and energy consumption of a production size supercritical system based on actual running performance. The LANL data indicated electrical cost at. 090 

In the calculation of the gas consumption, it is assumed that this is regulated by a modem controller of the type installed in the latest gas chromatographs. The programmable control of the split reduces gas consumption by the equipment and hence considerably reduces the cost of the carrier gas (helium). 

The useful life of the column is subject to many influences. When analyzing prepared urine samples for addictive substances, we make 800 measurements using a 25 m SE-54-CB column with an inside diameter of 0.25 mm and a film thickness of 0.25 pm. 

Many users shorten the column by a small amount at each end after 600-800 measurements, as the film quality usually deteriorates initially at the interface with the mass spectrometer and close to the injector. This procedure reduces the costs of the washer plus ferrule. No figure for the added useful life of a shortened column can be stated, as we have no experience of this. These potential cost reductions are therefore not included in the calculation. 

Every time a measurement is made, the septum of the injector is pierced so that the sample can be injected. However, the septum cannot repeatedly reseal itself perfectly for an indefinite period of time, and it is therefore recommended that it should be changed after 100 injections to prevent air from passing into the injector. 

To increase the sensitivity of measurement of many substances (e.g. morphine, oxazepam, amphetamine), it is strongly recommended that the silanized glass insert and the silanized glass wool which it contains should be changed every week. Inserts and ferrules can be used many times, but prices used in the calculation are of new items, labor costs of cleaning and silanizing used inserts for reuse being accounted for as expediency costs. 

---

Both vacuum operation and the use of refrigeration incur capital and operating cost penalties and increase the complexity of the design. They should be avoided if possible. For a first pass through... 

In the case of a liquid recycle, the cost of this pressure increase is usually small. Pumps usually have low capital and operating costs relative to other plant items. On the other hand, to increase the pressure of material in the vapor phase for recycle requires a compressor. Compressors tend to have a high capital cost and large power requirements giving higher operating costs. 

Raw materials costs dominate the operating costs of most processes (see App. A). Also, if raw materials are not used efficiently, this creates waste, which then becomes an environmental problem. It is therefore important to have a measure of the efficiency of raw materials use. The process yield is defined as... 

It is often possible to use the energy system inherent in the process to drive the separation system for us by improved heat recovery and in so doing carry out the separation at little or no increase in operating costs. 

Incineration. Incinerators were discussed in Sec. 11.1. When incinerators are used to treat gaseous pollutants in relatively low concentration, auxiliary firing from fuel or other waste material normally will be necessary. The capital and operating costs may be high. In addition, long duct lines are often necessary. 

The capital cost of most aqueous waste treatment operations is proportional to the total flow of wastewater, and the operating cost increases with decreasing concentration for a given mass of contaminant to be removed. Thus, if two streams require different treatment operations, it makes no sense to mix them and treat both streams in both treatment operations. This will increase both capital and operating costs. Rather, the streams should be segregated and treated separately in a distributed effluent treatment system. Indeed, effective primary treatment might mean that some streams do not need biological treatment at all. 

Sludge disposal typically can be responsible for 25 to 40 percent of the operating costs of a biological treatment system. Treatment of sludge is aimed primarily at reducing its volume. This is so because the sludge is usually 95 to 99 percent water and the cost of disposal... 

Utility operating costs are usually the most significant variable operating cost after raw materials. Utility operating costs include... 

The cost of the capital depends on its source. The source of the capital often will not be known during the early stages of a project, and yet there is a need to select between process options and carry out preliminary optimization on the basis of both capital and operating costs. This is difficult to do unless both capital and operating costs can be expressed on a common basis. Capital costs can be expressed on an annual basis if it is assumed that the capital has been borrowed over a fixed period (usually 5 to 10 years) at a fixed rate of interest, in which case the capital costs can be annualized according to... 

Maintenance and operating costs represent the major expenditure late in field life. These costs will be closely related to the number of staff required to run a facility and the amount of hardware they operate to keep production going. The specifications for product quality and plant up-time can also have a significant impact on running costs. 

Working down this list, we see more innovative approaches. The unmanned option using computer assisted operation (discussed in Section 11.2) would improve safety of personnel and reduce operating cost. This is an example of innovation and the use of technology by the engineer, and is driven by an awareness of safety. 

Capital and operating costs will increase as more separator stages are added to the process line, so a balance has to be struck between increased oil yield and cost. It is uncommon to find that economics support more than 3 stages of separation and one or two stage separation is more typical. The increased risk of separation shut down is also a contributing factor in limiting numbers. 

Operations Maintenance Engineering Operating costs - maintenance - workover - manpower requirements... 

It is worth noting that typically personnel and logistics represent 30% to 50% of operating costs while maintenance costs represent 20% to 40% of operating costs. These are particular areas in which cost control and reduction should be focused. This may mean reviewing the operations and maintenance philosophies discussed in Section 11.0, to check whether they are being applied, and whether they need to be updated. 

Wells are worked over to increase production, reduce operating cost or reinstate their technical integrity. In terms of economics alone (neglecting safety aspects) a workover can be justified if the net present value of the workover activity is positive (and assuming no other constraints exist). The appropriate discount rate is the company s cost of capital. 

In high permeability reservoirs, wells may produce dry oil for a limited time following a shut-in period, during which gravity forces have segregated oil and water near the wellbore. In fields with more production potential than production capacity, wells can be alternately produced and shut in (intermittentproduction) to reduce the field water cut. This may still be an attractive option at reduced rates very late in field life, if redundant facilities can be decommissioned to reduce operating costs. 

As solution gas drive reservoirs lose pressure, produced GORs increase and larger volumes of gas require processing. Oil production can become constrained by gas handling capacity, for example by the limited compression facilities. It may be possible to install additional equipment, but the added operating cost towards the end of field life is often unattractive, and may ultimately contribute to increased abandonment costs. 

Handling production from, and providing support to, a satellite field from an older facility is at first glance an attractive alternative to a separate new development. However, whilst savings may be made in capital investment, the operating cost of large processing facilities may be too much to be carried by production from a smaller field. 

Initially, if operating costs can be divided based on production throughput, the satellite development project may look attractive. However, the unit costs of the declining host field will eventually exceed income and the satellite development may not be able to support the cost of maintaining the old facilities. If the old facilities can be partly decommissioned, and provision made for part of the abandonment cost, then the satellite development may still look attractive. The satellite development option should always be compared to options for independent development. 

---