Chapter 1 - Process Background And Analysis.pdf

CHAPTER 1

1.1

PROCESS BACKGROUND AND ANALYSIS

1.1.1

INTRODUCTION

Polyethylene Glycol (PEG) is a polymer of ethylene oxide with a structure of HO (CH2CH2O)nH where n represents the number of ethylene oxide units contained in the PEG polymer as shown in Figure 1.1.1 below.

HO OH Ethylene Glycol

x4

HO

O O

OH O

Polyethylene Glycol (PEG4)

Figure 1.1.1: Polyethylene Glycol (PEG) structure Source:PEG (Polyethylene Glycol) Reagents

PEG is known as polyethylene oxide (PEO) or polyoxyethylene (POE), depending on the molecular weight (Mehvaret al., 2000). PEG is also known as ‘macrogols’ in the European pharmaceutical industry. Normally ‘macrogols’ contains very high molecular weight (WHO Geneva, 1980). PEG is soluble in most organic solvents such as benzene, carbon tetrachloride, chloroform, dimethyl formamide (DMF), acetonitrile. PEG is perfectly soluble in water but solubility decreases with increasing molecular weight. PEG is generally non-toxic, odourless, colorless, noniritating and

2 does not evaporate easily. PEG is inert thus it does not react with other material (Henning, 2002)

Since, the products of PEG posses their mean molecular weight of 200 to 35000 ‘polyethylene glycol’ is normally technical name polyethylene oxides. Product that made by polymerization of EO with molecular weight up to several million will be known as polyethylene oxide (Henning, 2002).

Basically, the ethylene glycol, 1, 2-ethylenediol or glycol is the simplest diol. Therefore, polymerization process is the main method to produce PEG. The monomer of PEG is normally produced from the hydrolysis of ethylene oxide. The following polymerization to obtain PEG then, takes place usually under alkaline catalyst (Henning2002).

Products are designed based on mean molecular weight of the polymer such as PEG 200, PEG 400, PEG 600, PEG 1500 and PEG 4000. The lower molecular weight of PEG contains 2 - 4 ethylene glycol units per polymer and exists as clear liquid. While, PEG containing up to 700 ethylene glycol units per polymeric product are clear, thick liquids and PEG having 1,000 or more ethylene glycol units per polymeric product are waxy solids (Siegfried Rebsdat and Dieter Mayer, 1992).The physical and chemical properties were shown in Table 1.1.1.

Table 1.1.1 Chemical and physical properties of Polyethylene Glycol Moisture

Types of

Molecular

PEG

Weight

PEG 200

190-210

Clear liquid

0.2

5-7

1.12-1.13

50 cp @ 25 °c

PEG 300

280-320

Clear liquid

0.2

5-7

1.12-1.13

70 cp @ 25 °c

PEG 400

380-420

Clear liquid

0.2

5-7

1.12-1.13

90 cp @ 25 °c

Appearance

Content

pH

%

Specific Gravity

Viscosity

3

PEG 600

PEG 1000

570-630

Clear liquid

0.2

5-7

1.12-1.13

135 cp @ 25 °c 20 cp (50%

950-1050

White paste

0.1

5-7

1.08-1.09

aqueous solution)

PEG

1800-

2000

2200

PEG

3500-

4000

4500

PEG

5000-

6000

7000

40 cp (50% White flake

0.1

5-7

1.08-1.09

aqueous solution) 100 cp (50%

White flake

0.1

5-7

1.08-1.09

aqueous solution) 100 cp (50%

White flake

0.1

5-7

1.08-1.09

aqueous solution)

Continuation of table 1.1.1 Source: chemicalland

Table 1.1.2 Chemical and physical properties of Mono, Di, Tri, Tetra ethylene Glycol

Physical Properties Formula Molecular Weight (g/mol)

Monoethylene

Diethylene

Triethylene

Tetraethylene

Glycol

Glycol

Glycol

Glycol

(MEG)

(DEG)

(TEG)

(TREG)

C2H802

C4H10O3

C6H14O4

C8H1805

62

106.12

150

194.2

197 (387)

245 (473)

288 (550)

0.06

0.002

<0.01

<0.01

1.115

1.118

1.125

1.124

Boiling Point @ 760 mmHg, °C (°F)

329 (625) Decomposes

Vapor Pressure at 20°C (68 °F) mmHg Density (g/cc) @ 20°C (68°F)

4 Density (g/cc) @ 60°C (140°F)

1.085

1.087

1.093

1.096

9.26

9.27

9.35

9.37

-13.4 (7.9)

-9.0(16)

-4.3(24)

-4(25)

<-59 (<-75)

-54(-65)

-58(-73)

-41(-42)

16.9

35.7

49.0

58.3

5.2

7.3

10.3

11.4

48

44.8

45.5

44.0

1.430

1.447

1.455

1.459

0.58

0.55

0.52

0.52

1.096 Pounds Per Gallon @ 25°C (77° F) Freezing Point, °C (°F) Pour Point , °C (°F) Viscosity , cp @ 25°C (68°F) Viscosity , cp @ 60°C (140°F) Surface Tension dynes/cm @ 25°C (77°F) Refractive Index @ 20°C (68°F) Specific Heat @ 25°C (77°F)Btu/Ib/°F Flash point, °C (°F) 116 (241)

116 (241) (2)

154 (310)(2)

177 (350)(2)

202 (395) (2)

Thermal Conductivity, Btu hr-1 ft-1 °F-1

0.1490

25°C (77°F) Continuation of table 1.1.2 Source: Ethylene Glycol Properties

0.1175

0.1133

0.1106

5 1.1.2

PRODUCTION OF ETHYLENE GLYCOL: HISTORY AND BACKGROUND

As mentioned earlier, monoethylene glycol is the ‘starting material’ for the polymerization process in the manufacturing of PEG. Here, the history of ethylene glycol production is therefore presented.

Ethylene glycol was first prepared in 1859 by the Frenchchemist CharlesAdolphe Wurtzfrom ethylene glycol diacetate via saponification with potassium hydroxide and, in 1860, from thehydrationofethylene oxide. There appears to have been no commercial manufacture or application of ethylene glycol prior toWorld War I, when it was synthesized fromethylene dichloridein Germany and used as a substitute for glycerolin theexplosivesindustry (Hollis et al.,2002) .

In the United States, semi commercial production of ethylene glycol via ethylene chlorohydrins started in 1917. The first large-scale commercial glycol plant was erected in 1925 atSouth Charleston, West Virginia, by Carbide and Carbon Chemicals Co. which now known asUnion Carbide Corp. In 1929, ethylene glycol was being used by almost alldynamitemanufacturers and in 1937Carbide started up the first plant based on Lefort's process for vapor-phase oxidation of ethylene to ethylene oxide. Then, Carbide maintained a monopoly on the direct oxidation process until 1953, when the Scientific Design process was commercialized and offered for licenses(Hollis et al., 2002).

The polymerization exists in 1863 by Wurtz, who heated the oxide with water in a sealed tube. Prior to that, Laurenco had obtained the polymer from ethylene glycol and ethylene bromide. Then, Staudinger and Lehmann had prepared the polymer with variety of catalyst like alkali and alkaline earth metals in seven decades later(A.Wurtz.Ann, 1859).

Although ethylene glycol has been known since 1859, it was not produced industrially until World War I. Its synthesis was then based on the hydrolysis of ethylene oxide produced by the chlorohydrins process (S.A. Miller, 1969). Production from formaldehyde and carbon monoxide was used commercially from 1940 to 1963. Direct oxidation of ethylene to ethylene glycol was also employed commercially for a short time, but was abandoned, probably due to problems caused by corrosion

6 (A.M.Brownstein, 1975). Nowadays, the common practice in the industry to produce PEG is from the polymerization of ethylene glycol which was first produced from the hydrolysis of ethylene oxide. 1.1.3

USES OF PEG

Polyethylene glycols (PEG) with varying molecular masses find numerous uses in the pharmaceutical industry such as in ointments, liquids and tableting. Due to the, fast growth of cosmetic industry, PEG becomes a vital compound in manufacturing process of cream, lotions, pastes and soaps. It is also used in the textile industry as a cleaning or dyeing aids and widely used in rubber and ceramic industriesas lubricants and bonding agent (Henning et al., 2007).

PEG also findsa large number of applications in medical application due to its interesting properties of making superficial contact with the skin of living creatures especially humans or being administered orally or parentally to human. In this applications, PEG used as a solvent for active ingredients, flavouring or fragrance in medicinal drop (Henning et al., 2007). Different types of PEG and their uses are given in Table 1.1.3 below (Henning et al., 2007).

Table 1.1.3 the usage of PEG Types of PEG PEG 200

Usage - In brake fluid and intermediate for esterification in ceramic industries.

PEG 400

- Base for pharmaceuticals syrup and intermediate for esterification

PEG 600

- Toiletries and intermediates.

PEG 1500

- Base for creams and ointments & toothpaste.

PEG 4000

- Base for cream and ointments.

PEG 8000

- Cosmetics, clinical purposes, research work

Source: aasthashubh.tradeindia.com

7 1.1.4

PROCESS SELECTION

Generally, there are three most common ways to produce Ethylene glycol (EG): 

Hydrolysis of Ethylene Oxide (EO) ( Bhawan and Nagan, 2008)



Transesterification of Methanol and Ethylene Carbonate (Duranleauet al.,1987)



Hydrolysis Ethylene Carbonate to Ethylene Glycol (Becker et al., 1985)

Then, in order to produce polyethylene glycol, the polymerization process takes place where it is manufactured by polymerization of ethylene oxide (EO) with either water, monoethylene glycol, diethylene glycol or triethylene glycol as starting material, under alkaline catalysis (Henning, 2002). 1.1.4.1 Hydrolysis of Ethylene Oxide (EO) to Ethylene Glycol

Introduction

In this process, the main step involved is a reaction between ethylene oxide (EO) and water to produce Monoethylene glycol (MEG). Hydrolysis of ethylene oxide isthe most widely used method in the industry for the production of ethylene glycol due to its simplicity and reliability of the process. Also it is observed as the most common method applied in the integrated plants that produce ethylene oxide and glycol simultaneously (Bhawan and Nagar, 2008). Process Description

Ethylene Glycol is produced industrially by the uncatalyzed hydrolysis of ethylene oxide. The reaction of ethylene oxide (EO) with molecular formula (C2H4O) and water (H2O) is carried out in a plug flow reactor. Generally, the reaction of ethylene oxide and water in a plug flow reactor produces three types of main products which are Monoethylene glycol (MEG), Diethylene glycol (DEG) and Triethylene glycol (TEG). There is presenceof heavier residual products but are usually found in very small quantity. In order to maximize the production of MEG and reduce the production of DEG and TEG,

8 large amounts of water are used. The ratio of feed water/ethylene oxide is manipulated in order to determine the selectivity of the process (Bhawan and Nagar, 2008).The MEG produced from this process is then used as the starting material for the polymerization process to produce PEG. The chemical reactions involve in this manufacturing are: C2H4O + H2O  C2H6O2 Ethylene oxide (EO) + water

monoethylene glycol (MEG)

C2H6O2 + C2H4O  C4H10O3 MEG + EO

Diethylene glycol (DEG)

3C4H10O3 + C2H4O  C6H14O4 DEG + EO

Triethylene glycol (TEG)

Although the process is typically run without catalyst, the hydrolysis is done with a considerable molar excess of water which therefore needs to be separated from the monoethylene glycol (MEG) product, usually by multiple-effect evaporators, and recycled. In some process designs, the quality of the water used for hydrolysis is critically important and these processes therefore incorporate ion exchange systems to remove impurities that would otherwise recycle with the process water. The separation process is needed to separate the MEG from other by-products which are DEG and TEG. The process is carried out with greater than 20 times molar excess of water in order to minimize higher glycol by product. The distillation column is used in order to purify the MEG up to 99.99 wt%. The block diagram of hydrolysis process to produce MEG is shown in figure 1.1.2.

9

Figure 1.1.2: Block Diagram for Production of Ethylene Glycol via Hydrolysis Source: (Duranleauet al., 1987)

1.1.4.2

Transesterification of Methanol and Ethylene Carbonate

Introduction Ethylene glycol can also be manufactured by the transesterification of ethylene carbonate. In transesterification method, the monomer (i.e. ethylene glycol) is first produced by the reaction between ethylene carbonate and methanol. As previous method, in order to produce polyethylene glycol (PEG), the produced ethylene glycol is later undergoes a polymerization step.

10 Process Description

During the transesterification process, methanol and ethylene carbonate are reacted and producing ethylene glycol and dimethyl carbonate. In order to proceed, the reaction needs the presence of a series of various heterogeneous catalyst systems such as ion exchange resins with tertiary amine, quaternary ammonium, sulfonic acid and carboxylic acid functional groups, alkali and alkaline earth silicates impregnated into silica and ammonium exchanged zeolites (Duranleauet al, 1987).

The chemical reaction involve in transesterification process is:

2CH4O Methanol + ethylene carbonate

+

C3H4O3

C2H6O3 + C3H6O3

ethylene glycol + dimethyl carbonate

Figure 1.1.3: Diagram of process for simultaneously making ethylene glycol and dimethyl carbonate Source: Duranleau et al, 1987

11 Recovery of the desired ethylene glycol and dimethyl carbonate can be carried out by distillation and crystallization. Besides, the by product of the process is Diethylene glycol and Dimethyl ether. Normally in this method, to produce polyethylene glycol usually Diethylene glycol will become the starting material for the polymerization step. There are several advantages of the process. One of them is that it requires only low concentration of methanol in the methanol-ethylene carbonate feed. Another advantage of this method is the catalysts used can be recovered and recycled. It is also reported that with this method, corrosion of metal equipment can be avoided. However, this process is not suitable for PEG production as Diethylene glycol only produced as a by-product and the process does not focus on producing the required starting material. Therefore, it is not worth to use the transesterification process in producing polyethylene glycol. Furthermore, the needs of heterogeneous catalyst system suitable for the practice of this invention generally comprise an insoluble acid or base system (Duranleauet al, 1987).

1.1.4.3 Hydrolysis of Ethylene Carbonate to Ethylene Glycol

Introduction

Preparation of ethylene glycol from ethylene carbonate has received an attention because of its possibility to produce higher glycols with reduced utility cost.In this method, ethylene oxide is converted to an intermediate, ethylene carbonate by reaction with carbon dioxide, which is then hydrolyzed by water to give up ethylene glycol. This process was applied in the late 1970s, but nowadays this process has been replaced bythe ethylene oxide-glycol integrated plant.

Process Description

Theprocess consists of two parts which are:

1) Production of ethylene carbonate from ethylene oxide. In this part ethylene carbonate is formed from the reaction of ethylene oxide with carbon dioxide in the presence of catalyst. The catalysts for this reaction are alkali halides, quaternary

12 ammonium halides and quaternary phosphonium halides. The chemical reactionof this process is : O O CH2

KI

C

CH2 + CO2

O O

Ethylene oxide + carbon dioxide

ethylene carbonate

2) The second part involvesthe reaction of ethylene carbonate and water in the presence of catalyst to produce ethylene glycol. In this part, ethylene carbonate will be hydrolysed by adding a suitable amount of water. The normally used catalyst for this reaction is potassium carbonate:

O C O

Na2CO3 O + H2O

Ethylene carbonate + water

HOCH2CH2OH + CO2 ethylene glycol

In this method ethylene carbonate is formed as an intermediate, some of ethylene carbonate could present in the product.This is undesirable because ethylene carbonate can decompose into ethylene oxide and carbon dioxide. Therefore a purification process is required to reduce ethylene carbonate to the desired level. (Becker et al, .1985).

The reaction is carried out in a suitable vessel such as the plug flow reactor or continuously mixed reactor. The product mixture is withdrawn and refined by using distillation column to produce purified ethylene glycol by removing water, catalyst, unreacted ethylene carbonate and higher glycols. However it is difficult to remove ethylene carbonate, since it forms a low boiling point azeotrope with ethylene glycol. Various methods might be considered for merely removing unreacted ethylene carbonate such as decomposing ethylene carbonate to ethylene oxide or providing additional residence time in hydrolyzer. The sufficient separation of ethylene glycol from

13 higher glycols and the catalyst can be made by merely heating and flashing at lower pressure on the hydrolysis reactor effluent (Becker et al., 1985).

1.1.5

SELECTION PROCESS

All the processes described earlier are summarized and the comparison is given in Table 1.1.4 below. Table 1.1.4: Comparison process

Process

Information

Advantages

Disadvantages

Hydrolysis of

Raw Mat(s):

Produce additional ethylene

The presences of certain

Ethylene

Ethylene Carbonate

glycol during completely

amount of unhydrolyze

Carbonate

Catalyst(s): Organic

hydrolyzing of ethylene

ethylene carbonate in

Phosphonium

carbonate process and

ethylene glycol which can

Halides

remove completely

decompose to ethylene

unreacted ethylene

oxide and carbon dioxide.

carbonate. Existing of low boiling Sufficient separation with low

azeotrope to separate

pressure by heating or

unhydrolyzed ethylene

flashing

carbonate by distillation is difficult.

Additional time added to hydrolyzer in order to remove unreacted ethylene carbonate thus having a longer time to produce ethylene glycol. Need to consume high temperature in separation of unreacted ethylene carbonate

14 

Transesterification of Methanol and

Little of diethylene glycol and higher glycol

Ethylene

Raw Mat(s):

Carbonate

ethylene carbonate and methanol



solid catalysts for reuse 

Catalyst(s): heterogeneous

recycling the recovered



catalyst

produced 

Existing of azeotrope

excellent selectivity of

condition at distillation

ethylene glycol achieve

where an overhead

lack of corrosion of metal

comprising an

equipment

azeotrope of ethylene carbonate and ethylene glycol is produced

Hydrolysis of

Raw Mat(s):

Ethylene oxide

ethylene oxide and water

 

Catalyst(s): None

Commercially use due to



require capital

simplicity and reliability

investment in

No catalyst used that will

evaporators

cut the cost 

Purity up to 99.9 wt%



No azeotrope conditions



energy intensive in distillation column

exist in separation process.

1.1.5

CONCLUSION

1.1.5.1 Selection of Ethylene Glycol Process

Comparing all the processes stated above (see Table 1.1.4), it can be seen that the hydrolysis of ethylene oxide is the most suitable process to manufacture ethylene glycol. Furthermore,this method is by far the most widely used method for the production of ethyleneglycol. This process has been selected in the following Project and will hence be dealt in detail.The hydrolysis process is chosen since no catalyst is utilizedand thus it reduces the cost. Catalyst are not advice to use as this process is very simple where hydrolysis is a reaction where water is one of the reactants, and a larger molecule is split into two smaller molecules, one of which has the hydrogen from the water and the other has the OH group from the water as the structure of ethylene glycol shown in figure 1.1.1 (ILKnunyants, 1988). The chemical reaction of this process is:

15

(CH2CH2)O + H2O → HOCH2CH2OH Ethylene oxide +Water → Monoethylene Glycol

The advantage of using hydrolysis of ethylene oxide isdue to its simplicity of the reactions involved in the process. This includes the advantage of lower production cost as no catalyst is needed during the reaction. The reliability of this method contributes excellent reputation of this process compared to other process. This process provide cost effective for operations cost. Another significant advantage of using hydrolysis of ethylene oxide compared to the other two processes that the formation of azeotrope at distillation can be eliminated. Separation process is difficult during azeotrope condition because special technique is required and an infinite number of stages above the feed would be required to approach azeotropic concentrations(Turton et al, 1998). Another upside to this process is the by-product which DEG that can be sold to make profit. Thus, this will turn down the drawback of requiring capital investment inrequire capital investment in evaporator.All these reasons can bring down the total costs of this process exponentially when compared to the other processes.

1.1.5.2

Polymerization Process

The second part of manufacture of PEG is the polymerization process which the liquid of ethylene oxide can formpolyethyleneglycols. MEG produced from the hydrolysis process will be polymerized to PEG. The polymerization process is via chainreaction polymerization, sometimes calledaddition polymerization and requires aninitiatorto start the growth of the reaction (Principle of Polymerization, 2004). Prior to polymerization process, MEG produced from the first step has to be separated in a separation unit from other glycols. The chemical reaction of the polymerization process is: C2H6O2 + C2H4O  HO-(C2H4O) n-H MEG + EO

polyethylene glycol (PEG)

16 1.1.5.3

Batch Process Descriptions

The polymerization of MEG to PEG is carried out in batch reactor.Monoethylene glycol was utilized to be raw material in polymerization. MEG is chosen over the other oligomers (DEG and TEG) as it is easier to maximize the selectivity as compared to the other two (Bhawan and Nagan, 2008).

The catalyst used for the polymerization process can be anionic and cationic. In this process anionic mechanism is more preferable as its mechanism allows the production of PEG with low poly dispersity. The polymerization process involved in the method is addition type and it is an exothermic process. There are several acids that can be used as catalyst such as sulphuric acid, phosphoric acid and acetic acid. Looking at thecost of these acids, sulphuric acid appears to have the lowest price compared to others but it is too dangerous to apply in this industry. Considering the less reactivity of a weak acid compared to strong acid like sulphuric acid and the production safety as a whole, phosphoric acid has been chosen as the catalyst in this project.

There are two important aspects with regard to the control of molecular weight in polymerization. In the synthesis of polymers, it is usually interested in obtaining a product of very specific molecular weight, since the properties of the polymer will usually be highly dependent on molecular weight. Molecular weights higher or lower than the desired weight are equally undesirable. Since the degree of polymerization is a function of reaction time, the desired molecular weight can be obtained by quenching the reaction at the appropriate time. The quenching is via cooling water to lower the temperature. However, the polymer obtained in this manner is unstable in that it leads to changes in molecular weight because the ends of the polymer molecule contain functional groups that can react further with each other. Thus, as for the neutralization part, sodium hydroxide is going to be used to stop the reaction. The neutralizer is only added to the reactor once the viscosity of the product reached the required value of the desired molecular weight. A viscosity controller is therefore crucial and need to be used.

Another method is avoided by adjusting the concentrations of the two monomers so that they are slightly nonstoichiometric. One of the reactants is present in slight excess. The polymerization then proceeds to a point at which one reactant is

17 completely used up and all the chain ends possess the same functional group of the group that is in excess. Further polymerization is not possible, and the polymer is stable to subsequent molecular weight changes. The problem with this neutralization process is precipitation of salt resulting from the formation of insoluble salt when catalyst (acidic form) reacts with neutralizer (basic form). Therefore, the filtration process will be used to separate the polyethylene glycol (PEG) and the existing salt.

Over all series of PEG, the PEG 400 was selected due to high demand in this world. In addition, this compound has many uses for industry. PEG - 400 is harmless towards skin, easily soluble in water and faintly sweet in taste. This makes it an attractive ingredient in cosmetics such as creams, jellies and lotions. Other uses of PEG - 400 are as lubricant in tyre manufacturing, plasticiser for sponges and synthetic leather, paper softener, anti curl agent, flux for soldering and intermediate in resin manufacturing. Other than that, PEG - 400 also find uses in toothpaste to remove dirt on the teeth and in cosmetics soaps as a wetting agent preventing the soap from cracking. So, this product has high chance to make profit.

1.1.5.4

Process Flow Diagram and Process Description

The Process Flow Diagram for the production of Polyethylene Glycol process is attached in Appendix. The process begins with pumping P-100 liquid of ethylene oxide initially at 10°C and 240kPa from storage tank to a mixer MIX-101in which it is combined with water and heated to 26.37°C and 1800kPa in liquid phase. Then entering the condenser E-100 to condense the mixture and leaving at 52.9°C and 1750kPa.Leaving the condenser, the mixture is sent to the reactor R-100 where ethylene oxide is then reacted with water to produce ethylene glycol. The main reaction that occurs in the reactor is: C2H4O + H2O  C2H6O2 Ethylene oxide (EO) + water

monoethylene glycol (MEG)

However, the side reactions between the produced ethylene glycol with ethylene oxide will also occur as shown below:

23 C2H6O2 + C2H4O  C4H10O3 MEG + EO

Diethylene glycol (DEG)

C4H10O3 + C2H4O  C6H14O4 DEG + EO

Triethylene glycol (TEG)

In order to maximize the production of MEG and reduce the production of DEG and TEG, a large amount of water will be used as described earlier (Bhawan and Nagar, 2008). The reactor effluent at 205.5 °C and 1700 kPa which consist of MEG, DEG, and TEG is then fed into the multi effect evaporators, V-100-V103 to remove water. The overhead streams contain water at the first evaporator (separator) V-100, is condensed in E102 at 158.6 °C and 595kPa which then enters the tank before it condense to E-100. The bottom stream is then entering the second evaporator V-101 at 160.6 °C and 600 kPa which consist of portion MEG, DEG, TEG and TREG. The overhead consist of water remove to condenser E103 at 135.4°C and 300 kPa. The process is repeated in the third and fourth evaporators, V-102 and V-103 then, the overhead streams contains water which will remove by condenser E104 and E105 before stored in tank. The bottom stream consist a mixture of MEG, DEG, TEG TREG and small amount of water were then purified by distillation column T-100 at 48.6°C and 10 kPa.

A series of distillation columns will be used to achieve 99.5% purity before being fed to the batch polymerization process. Here, this overhead water which then recycles back to the feed water by pumping at 32.89 °C and 101.3kPa via pump P103 whereas the bottom line consist of Monoethylene glycol, Diethylene glycol, Triethylene glycol and higher glycol at 136.5 °C and 10 kPa. Separating and purifying the mixture of MEG, DEG, TEG, TREG via T-100 ends up with MEG in the overhead stream, which later isstored in TK-100 before being polymerized in batch process to produce PEG. DEG, the major component in the bottom stream will be purified from TEG and TREG by column T-102. Purified DEG is the by product that can be sold.

In order to produce PEG, the monoethylene glycol (MEG) produced from this process is then used in the second part of the plant which is the polymerization process. The addition type polymerization process begins with the reaction of MEG and

24 EO in three batch reactor R-101,102,103 in parallel. Then, in the batch reactor, the batch is running with 9 cycles per day which 1 cycle consists of 5 hour running operation and approximates to produce 10 tonne of PEG per cycle. The acidic catalyst, phosphoric acid (H3PO4) is added to increase the reaction between MEG and EO once the required PEG with the desired molecular weight is achieved.The quenching process needed via cooling water to lower the temperature. The PEG form from this reaction is hold in a tank and the neutralizer of sodium hydroxide (basic form) is added to this process to stop the reaction and PEG is completely produced.Thus, there are many types of PEG due to its molecular weight and each type has its own value of viscosity. Thus, the reaction will stop due to its viscosity by neutralization step. For example, the value of viscosity for PEG-400 is at 90 cP at 25 0C thus, the chemical reaction of polymerization is: C2H6O2 + C2H4O  HO-(C2H4O) n-H MEG + EO

polyethylene glycol (PEG)

The problem with this neutralization process is the precipitation of salt resulting from the reaction between acidic catalyst and basic neutralizer. Therefore, a filtration process F100 will be used to separate the polyethylene glycol (PEG) and the existing salt. Finally the end product, Polyethylene Glycol (PEG 400) will be collected and stored in a storage tank, TK107 before transported to the customer.

25 REFERENCES

A.M.Brownstein (1975) Hydrocarbon Process, 71: 72-76

A.Wurtz Ann (1859) Chemical Pharmaceutical. 55: 406

Chemical and Physical Properties of Polyethylene Glycol, http//www.chemicalland.com, retrieve on October 13, 2011

Daniel A.Crowl/Joseph F.Louvar, Chemical Process Safety Fundamentals with Applications, 2rd Ed, PearsonEducation International.

DOW Ethylene Glycol Properties, http//www.dow.com retrieved on Retrieve on October 1, 2011Ethylene Carbonate. (U.S. Patent 4, 519, 875) For Petrochemical Plant.Ministry of Environment and Forest, Government of India. September 2008. George Odian. 2004. Principles of Polymerization. 4th Ed. College of Staten Island New York.John Wiley & Son Publisher.

ILKnunyants, ed (1988). "Ethylene". Chemical Encyclopedia. "Soviet encyclopedia".984–985.

J.M Hollis, F.J.Loyas (2002) Interstellar Antifreeze Ethylene Glycol.

Klaus Weissermel, Hans-JurgenArpe. 1997. Industrial Organic Chemistry. John Wiley & Sons

Mitchell Becker and Howard M. Sachs (1985) Purification of Ethylene Glycol Derived

PariveshBhawan and East Arjun Nagar (2008) Development of National Emission Standard PEG (Polyethylene Glycol) Reagents,http://www.piercenet.comretrieved on Retrieve on October 13, 2011

26

Roger G. Duranleau, Edward C.Y. Nieh and John F. Knifton (1987) Process for ProductionEthyleneGlycon and Dimethyl Carbonate.(U.S. Patent 4, 691, 041).

S.A Miller (1969) Ethylene and its Industrial Derivatives. London: Benn Limited Publisher

Siegfried Rebsdat and Dieter Mayer (1992) Ethylene Glycol A10:108-111 The Astro Physical Journal: 571

The usage of Polyethylene Glycol, http//www.aasthahubh.tradeindia.com Retrieve on October 13, 2011

Torsten Henning (2002) Polyethylene Glycols (PEG) and The Pharmaceutical Industry: 57 Turton, R., Bailie, R. C., Whiting, W. B. &Shaeiwitz, J. A. 1998. Analysis, Synthesis, Design of Chemical Processes.Prentice Hall Publisher.

27

1.2

MARKET ANALYSIS

1.2.1

INTRODUCTION

The petrochemical industry in Malaysia has grown rapidly from early 1990s and now become the leading industry compared to oleochemical (MPA, 2011). The rapid growth of petroleum industry is due to the government’s positive and flexible policies (MPA, 2011) and other important factors such as the availability of the feedstock, good infrastructure, a strong base of supporting services, the country’s cost competitiveness and strategic location within ASEAN (MIDA, 2011). Furthermore, Malaysian Government and Petroleum National Berhad (PETRONAS) who has support a lot the petrochemical industry determined to make Malaysia the regional hub and base for petrochemicals in ASEAN market (MPA, 2011).

1.2.2 SUPPLY AND DEMAND OF POLYETHYLENE GLYCOL 1.2.2.1 Production of polyethylene glycol worldwide Polyethylene glycol (PEG) is commonly used in pharmaceutical, cosmetics, polymer, detergents and rubber industries. It consist of many type of PEG depends on its molecular weight. For this plant, PEG 400 is chosen as main product as it is widely use in pharmaceutical industry (Advance Petro, 2011) as it is used in ointment production and it is expected to increase in demand for the future. The first company that commercializes the production of PEG was The Dow Chemical Company which is in 1940 (Dow Chemical, 2008). The PEG plant of Dow Chemical Company is located at Hahnville, Louisiana (Dow Chemical, 2008). Nowadays, there are several PEG plants built all over the world. However most of these plants produce PEG as by-product rather than main product. The information on production and consumption of PEG worldwide is difficult to obtain because many of producers consume the output for internal feedstock for other chemicals products. From the production of ethylene oxide worldwide, it is about 2% of ethylene oxide used for polyethylene glycol industry in 2007 (IARC MONOGRAPHS, 2008). Figure 1.2.1 below shows the percentage of ethylene oxide use in 2007:

28

Industrial products made from ethylene oxide Diethylene and triethelene glycols 7%

Ethoxylates 13% Ethanolamines 6% Glycol ethers 4% Polyols 3%

Monoethylene glycol 65%

Polyethylene glycols 2%

Figure 1.2.1: Industrial products made from ethylene oxide Source: (Devanney, 2007; IARC MONOGRAPHS, 2008)

Based on the report by Sriconsulting (2011), the global consumption of ethylene oxide is increased to 21 millions tonnes per annum in 2010. It is assume that, the percentage is nearly constant or did not much changes from 2007 untill 2010. Therefore the use of ethylene oxide for PEG industry is 420,000 tonnes per annum. Since the production of PEG worlwide is unknown, therefore the production of PEG from Optimal Chemical Sdn Bhd is use as the guideline. Optimal Chemical Sdn Bhd produce ethylene oxide (385k tonnes/annum) for various of their products such as ethylene glycol (365k tonnes/annum), polyethylene glycol (25k tonnes/annum), diethylene glycol (20k tonnes/annum), ethoxylates (30k tonnes/annum) and ethonolamines (75k tonnes/annum) (Optimal, 2008). As reported by Wolfgang et al., (1987), 84% of ethylene oxide use to produce ethylene glycol. Therefore for Optimal, 84% (322,440 tonnes/annum) of ethylene oxide use to produce ethylene glycol. So, the other 62,560

29 tonnes/annum ethylene oxide will be used for other products. Figure 1.2.2 below is the pie chart show the production percentage by Optimal Sdn Bhd:

Polyethylene glycol

Diethylene glycol

Ethoxylates

Ethonolamines

17%

13%

50%

20%

Figure 1.2.2: Production rate percentage by Optimal Sdn Bhd

From the pie chart above, it is about 10 427 tonnes/annum ethylene oxide use for PEG production. The ratio of PEG production to ethylene oxide production is 2.4 :1. Then, the ratio times the worldwide ethylene oxide production for PEG which gives 1, 007, 001 tonnes/annum PEG. Since the demand of PEG will not deviate so far from the production of PEG, therefore, the value of 1, 007, 001 tonnes/annum is assumed as the demand of PEG in that year. The PEG 400 demand is estimated proportional to pharmaceutical industry demand due to the use of PEG 400 as the raw material for pharmaceutical product. The growth rate of pharmaceutical industry is expected at 4.4% from 2011 to 2013 (Lin and Izatulshima, 2008). The growth rate will expected to be at the same rate for 2014. Table 1.2.1 below show the expected consumption of PEG from 2010 to 2014.

30 Table 1.2.1: The Estimation of Worldwide Consumption for PEG Year

Consumption (million tonnes)

2010

1.01

2011

1.04

2012

1.09

2013

1.14

2014

1.19

We expected to built our plant in 2012 and after two years we will start to produce PEG. Therefore, the expected consumption of PEG will be 1.19 million tonnes on 2014.

1.2.2.2 Polyethylene glycol in Malaysia In Malaysia, the well known company that has a PEG plant is Optimal Malaysia Sdn Bhd. The company produces many types of PEG that gives the total about 25 kilo metric tonnes per annum at Kertih, Terengganu (Optimal, 2008). Figure 1.2.3 shows that China has the largest demand on Malaysia PEG which accounts 96% of the percentage followed by Taiwan, Korea and Germany. This also shows that Malaysia exports most of PEG to Asian countries. It shows that the market of PEG is not only in Malaysia but also include Asian countries depending on different types of PEG.

31

Export of Polyethylene Glycol in 2010 Taiwan 2% Korea 1%

Germany 1%

China 96%

Figure 1.2.3: Export of Polyethylene Glycol in 2010 Source: MATRADE, 2011

Based on the global market study of PEG as well as in Malaysia, the capacity of this plant have been decided. Optimal Chemical Sdn Bhd produce about 25k tonnes/annum PEG for 2010 as compare to the world which is around 1.01 million tonnes. Therefore, the percentage of PEG production by Optimal Chemical Sdn Bhd to the world is about 2.5%. It is assumed that there will maybe not much difference of Malaysia’s PEG contribution to the world in 2014. Therefore the capacity for this plant is about 30k tonnes/annum of PEG 400. 1.2.2.3 Price of PEG The average export price of overall type of PEG is RM 3.39/kg in 2010 while the average import price is RM 10.50/kg (Matrade, 2010). The high difference of price is due to the different type of PEG that being exported or imported. Besides, it maybe due to the tax cost that incurred during the import of PEG. However, the market price for PEG 400 is RM 21.98/kg (Buychemicaldirect, 2011). The price is higher than the Matrade’s price maybe because it is specific price for PEG 400 or it is a retail price. For this plant, the decided selling price for PEG 400 is RM9.12 which is much lower than the market price.

32 1.2.3 ETHYLENE OXIDE (RAW MATERIAL) Ethylene oxide is the main raw material for producing ethylene glycol (monoethylene glycol, diethylene glycol and triethylene glycol) as well as polyethylene glycol. From Sriconsulting (2011), the production and consumption of ethylene oxide in 2010 globally were both around 21 million metric tons. The consumption of ethylene oxide in 2010 is increased from 2009 by 8.7% and it is forecast to grown by 3.4% per year from 2010 to 2015, and around 3.1% per year from 2015 to 2020 (Sriconsulting, 2011). From Figure 1.2.4, ethylene oxide is mostly used in the manufacture of (mono) ethylene glycol, which accounted for more than 70% of total Ethylene Oxide consumption in 2010. Production of ethoxylates consumes 9.7%, and smaller amounts are used to make higher glycols, ethanolamines, glycol ether, and polyols.

Figure 1.2.4: World consumption of Ethylene Oxide in 2010 Source: www.sriconsulting.com

33 The production of ethylene oxide worldwide is summarized in the Table 1.2.2:

Table 1.2.2 Production of ethylene oxide by region Region

Production (thousand tones)

North America

5443

South America

394

Europe

3905

Middle East

2332

Asia /Pacific

4991

Source: Anon (2004); IARC MONOGRAPHS (2008)

In Malaysia, Optimal Malaysia Sdn Bhd is the main producer of ethylene oxide. They produce about 385 000 tonnes of ethylene oxide per year (Optimal, 2008). The export of ethylene oxide is increased from 2008 to 2010. Figure 1.2.5 shows the export of ethylene oxide in Malaysia:

The Export of Ethylene Oxide by Year 250000

Quantity,kg

200000 150000 100000 50000 0 2008

2009

2010

Year

Figure 1.2.5: The Export of Ethylene Oxide by Year Source: MATRADE, 2011

34 From Figure 1.2.5, there was a sudden increase of export in 2009 to 2010 from 81, 271 to 229, 905 kg translated in 283% increment. This increase is due to the increased of ethylene glycol demand in the world for polyethylene terepthalate and polyester fiber in China (Chemicalweek, 2011). Before that, the decreased of export in 2008 and 2009 is because of global economic recession (Chemicalweek, 2011). Malaysia has exported the ethylene oxide to Sri Lanka, United States, Germany, South Korea, Hong Kong and Belgium (Matrade, 2011).

The Import of Ethylene Oxide in 2010 Hong Kong 3% Germany 4% spain 5%

Bulgaria 1% Australia China 0% 2%

United states 8%

Japan 46%

France 9% Belgium 22%

Figure 1.2.6: Import of Ethylene Oxide in 2010 Source: MATRADE, 2011

From figure 1.2.6, the country that imports most ethylene oxide is Japan which accounted 46% and the second is Belgium, 22%. Other countries import less than 10% of ethylene oxide to Malaysia.

Manufacturer and supplier of ethylene oxide in Asian Region

Since the production of PEG needs ethylene oxide as the raw material, the supplier of ethylene oxide need to be identified. Table 1.2.3 shows the manufacturers of ethylene oxide in Asian countries which may be the potential supplier for this new plant.

35 Table 1.2.3: Potential Manufacturer and supplier of ethylene oxide in Asian Region Country (supplier)

Company

Indonesia Singapore

 

Thailand China

    

Prima Ethycolindo PT Ethylene Glycols Singapore PTE Ltd TOC Glycol Co Ltd CNOOC and Shell Petrochemicals Co Ltd (CSPCL) Jilin Petrochemicals Ltd (JLPL) Shanghai Petrochemical Co Ltd - (SPC) Sinopec Sabic Tianjin Petrochemical Co

Average Price (RM)/kg 6.06 5.47 6.32 5.72

Source:UN Comtrade, 2011 From this information, after assuming the ethylene oxide is not being banned in Malaysia, ethylene oxide from Ethylene Glycols Singapore PTE Ltd is chosen to supply the raw material for this plant. Ethylene Glycol Singapore PTE Ltd seems to be the best ethylene oxide supplier for this new plant because it is near to the plant site which cost less in transportation and it is more lowers in price than the other company. Although Optimal Chemical Sdn Bhd has the potential to become one of the suppliers, unfortunately they did not sell the ethylene oxide produce as it is for internal use only.

Price of ethylene oxide The price of ethylene oxide is actually varies from year to year. The price of ethylene oxide for 2008 is RM 5.47 (Icis, 2011) and is estimated not change much for 2011 until 2014.

36 1.2.4 WATER (RAW MATERIAL)

Water is another raw material required in PEG 400 plant. Water is used in the hydrolysis process where it will be reacted with ethylene oxide. The use of water in the process is also high as the ratio of water to ethylene oxide is 20:1.

Since the phase of water for the hydrolysis process is in liquid form, therefore the supplier of water is come from the local company. Laku Manegement Sdn Bhd is the wholly owned company of State Government of Sarawak that responsible for the production, distribution of portable water and collection of water revenue in Miri, Bintulu and Limbang (Laku Management, 2009). Therefore, Laku Management is chosen to supply the water where the rate is under the industrial rate which is RM 1.21/1000 liters (Laku Management, 2009).

1.2.5 DIETHYLENE GLYCOL (BY-PRODUCT)

Diethylene glycol is produce as by-product in polyethylene glycol plant. Diethylene glycol is used in the tobacco industry, the treatment of paper, cork, glue, and cellophane and it is utilised as a dehydrant in the natural gas industry where it removes the water from the gas pipelines. It is also used as a chemical intermediate in the manufacture of unsaturated polyester resins, plasticisers, acrylate and methacrylate resins, and urethanes (Solventis, 2011). Production of diethylene glycol is generally based on the demand as it is produce as a by-product. Figure 1.2.7 show the export of diethylene glycol to the world.

37

Export of diethylene glycol 140,000

Quantity, kg

120,000 100,000 80,000 60,000

Quantity, kg

40,000 20,000 0 2002 2003 2004 2005 2006 2007 2008 Year

Figure 1.2.7: The export of diethylene glycol Source: UN.Comtrade, 2011

Figure 1.2.7 indicates that export of diethylene glycol is drastically decreased from 2003 to 2006. However, it is slightly increased in 2007. The market price of diethylene glycol is RM 3.92/kg (Icis, 2008). For this plant, the selling price of diethylene glycol is RM 2.00/kg.

1.2.6 PHOSPHORIC ACID (CATALYST)

Phosphoric acid is been used as a catalyst in production of PEG. The specification of phosphoric acid needed in this plant is about 99% in purity. Supplier of phosphoric acid

There are several supplier of phosphoric acid in Malaysia and Asian region. Table 1.2.4 shows the list of suppliers for phosphoric acid.

38 Table 1.2.4: Potential Supplier for Phosphoric Acid Country

Company

Average price (RM/kg)

China

Guangxi Qinzhou Esum Industry&Trade

2.61

CO.,LTD, Guangxi

Guangxi Mingli Phosph-Chemicals Co., LTD, Guangxi

Malaysia

Huntsman chemical, Kedah

2.77

Obetech Pacific Sdn Bhd, Kuching, Sarawak

Source: UN Comtrade, 2011

The Obetech Pacific Sdn Bhd is chosen as the supplier of phosphoric acid for the new plant. Although the price is higher than companies in China, however the cost of transportation is taking into consideration as Obetech Pacific Sdn Bhd is near to the plant site. Furthermore, the company produces high purity phosphoric acid that meet the company needs. The price of phosphoric acid is RM 2.77/kg (Matrade, 2011).

1.2.7 SODIUM HYDROXIDE

Sodium hydroxide (NaOH) is used as neutralizer in order to stop the polymerization reactions in the batch process. Actually NaOH has a lot of uses. For neutralizing agent, it contributes about 54% of consumption. It includes pulp and paper production 24%, soaps and detergents 10 %, alumina 6 %, petroleum 7 %, textiles 5%, water treatment 5%, miscellaneous 43 %. The other uses of NaOH are for organic chemical (35%) and inorganic chemical (11%). Figure 1.2.8 is the pie chart of sodium hydroxide uses:

39

11%

Neutralizing agent Organic Chemical 54%

35%

Inorganic Chemical

Figure 1.2.8: Uses of sodium hydroxide Source: www.the-innovation-group.com

Suppliers of sodium hydroxide There are several potential sodium hydroxide suppliers for the proposed PEG plant. They are listed as below in Table 1.2.5. Table 1.2.5: Potential Supplier of Sodium Hydroxide in Asian Country

Company

Average Price (RM)/kg

Malaysia

Mey Chern Chemicals Sdn

2.15

Bhd, Port Klang,Selangor Centre West Chemicals Sdn Bhd Selangor Taiko Marketing Sdn. Bhd. Shah Alam, Selangor Premier Chemicals Engineering (M) Sdn Bhd Kuching, Sarawak China

Zhengzhou Goldenstar Chemicals Co., Ltd, Zhengzhou, Henan Shijiazhuang Long Cheng Chemicals Co.,Ltd, Hubei

0.81

40 Premier Chemicals Engineering (M) Sdn Bhd is the chosen company to supply the sodium hydroxide for the PEG plant since it is near to the plant site and can decrease the transportation cost. The sodium hydroxide is in liquid form with high purity (99%) which can achieve the specification for the neutralization process. The price of sodium hydroxide is RM 2.15/ kg (Matrade, 2011).

1.2.8 POLYETHYLENE GLYCOL MARKET POTENTIAL

The market for PEG 400 is mostly in pharmaceutical and textile industry (Advance Petrochemical, 2011). However, we want to focus in pharmaceutical industry as PEG 400 is widely used in ointment production. The market study for pharmaceutical industry globally as well as market in Malaysia is an essential in order to capture the demand. Lin and Izatulshima (2008) in their report on Malaysian Pharmaceutical Industry Outlook 2008 stated that the pharmaceutical market for global is estimated to reach $818 billion by 2013. Below is the trend of global pharmaceutical industry based on Annual sales value.

Figure 1.2.9: Global pharmaceutical industry based on Annual sales value Source: Lin and Izatulshima (2008)

From Figure 1.2.9, the growth rate of pharmaceutical industry decreased from 2001 to 2002. Then the rate increase back to 9% and constant until 2004 before dropped to 6.9%, 7% and 4% from 2005, 2006 and 2007 respectively. The growth rate

41 slightly increase in 2009 and constant in 2010. Then the growth rate is expected to be at 4.4% for the coming 3 years (2011, 2012, 2013). In overall, the figure shows as year increasing the sales increase with maintained growth rate. From this, it can be concluded that PEG 400 has brighter future as it is use as raw material in pharmaceutical industry. The positive trend of pharmaceutical industry will also help in PEG market to grow.

1.2.9 BREAKEVEN ANALYSIS The goal of built a company is to make money or profit. It is necessary for any plant design to achieve its goal to yield profits by evaluating different types of cost involved for the plant operation and establishment. Breakeven point is the point at which the product stops costing money to produce and sell, and starts to generate a profit for company. In order to determine the breakeven point, the fixed cost, variable cost and total revenue must be calculated. The breakeven point is equal to equation 2.1: (2.1) Source: http://bizfinance.about.com/od/pricingyourproduct/a/Breakeven_Point.htm

1.2.9.1 Estimation of Fixed Capital Investment Grass-root cost Fixed capital is the capital investments that are needed to start up and conduct business, even at a minimal stage (Investopedia, 2011). For a new plant, the total grass root cost is the sum of purchased equipment cost, contingency, fee and auxiliary (Ulrich, 1984). Table 1.2.6 shows the cost of equipment:

42 Table 1.2.6 Cost of Equipment Equipment

Unit

Cost per Unit Total (RM)

(RM)

Purchased

Cost Bare

Cop,i

Module Cost

(RM)

CBMi Reactor

3

300,000

900,000

1,145,420

Mixer

1

82,000

82,000

519,000

Distillation Column

3

590,000

1,770,000

4,600,00

Pumps

19

29,000

551,000

2,430,300

Storage tank

8

170,000

1,360,000

1,500,000

Heat Exchanger

5

82,000

410,000

888,000

4-Multieffect

1

789,000

789,000

2,280,000

evaporater Total

13,364,470

The values of purchased cost were estimated by using Capcost software with CEPCI (Chemical Engineering Plant Cost Index) 2009 due to lack of information on equipment sizing and also the cost of equipments of a real plant. CEPCI is use to adjust the process plant construction costs from one period to another. For this plant, the estimated value is calculated by using the latest CEPCI (2010) which is 550.8. The bare module cost, CBMi for every equipment is calculated by using equation 2.2 below (Richard et al., 2009): CBM= CopFBM

(2.2)

Where: CBM=bare module equipment cost: direct and indirect cost for each unit FBM=bare module cost factor: multiplication factor to account for the items needed in table 7.6 (page 191) in Analysis, Synthesis, and Design of Chemical Processes plus the specific materials of construction and operating pressure = purchased cost for base conditions: equipment made of the most common material, usually carbon steel and operating at near ambiet pressures

43 Usually the estimation of bare module cost is at base conditions. The conditions specified for the base case are (Richard et al., 2009): 

Unit fabricated from most common material, usually carbon steel (CS)



Unit operated at near-ambient pressure

The bare module cost is calculated as below: Example of Reactor cost: Bare Module Factor, FBM From Capcost software in Analysis, Synthesis, and Design of Chemical Processes by Richard et al., (2009), the bare module factor FBM for jacketed agitated reactor is 1.5. Purchase Cost, The purchased cost from the capcost software when the volume of reactor is 20m3 is $78, 800. Therefore the Bare Module Cost, CBM =$ 78,800 x 1.5= $118, 200 For 3 reactors, total bare module cost: =$118, 200 x 3 = $354, 600 (RM 1, 145, 420) Therefore, the bare module cost in 2010 is, Bare Module cost (2010) = Bare Module Cost (2009) x = RM 13, 364, 470x 550.8/500 = RM 14, 700, 000

44 Contingency and fee Contingency and fee is the cost as protection against the oversights and faulty information. The values of 15% for contingency cost and 3% for fee from bare module cost give the total of 18% of total bare module cost (Richard et al., 2009). Contingency and fee = Total Bare Module Cost x 18% (Ulrich, 1984) = RM 14, 700, 000 x 0.18 = RM 2,650, 000 Auxiliary facilities Auxiliary facilities cost is the cost that include the site development, auxiliary buildings, and off-sites and utilities. Auxiliary cost is 30% of total bare module cost and contingency fee. Auxiliary facilities = (Total Bare Module Cost + Contingency and fee) x 30% (Ulrich, 1984) = (RM 14, 700, 000 + RM 2,650, 000) x 0.3 = RM 5, 210, 000 So, the grass- root cost = RM 14, 700, 000 + RM 2,650, 000 + RM 5, 210, 000 = RM 22, 600, 000

Fixed Capital Investment Fixed capital is the capital for the installment of equipments and auxiliaries in a new plant. Since this is a new built plant, fixed capital investment can be estimated as grass root cost (Ulrich, 1984). Fixed capital investment, FCI = RM 22, 600, 000

45 Fixed cost Fixed costs are the cost that are incurred but not change with plant production rate (Sinnott and Towler, 2009). Fixed cost is the total of operating labor cost, maintenance and repair cost, insurance cost, overhead cost, operation supplies, research and development (R&D), direct supervising and clerical labor, laboratory charges, patent and royalties and local taxes (Sinnott and Towler, 2009).

Operating labor cost Operating labor cost (COL) is the costs of personnel required for operating a plant (Richard et al., 2009). Operating labor cost is the operator hired for each operator needed in a plant (NON) times the number of operators per shift (NOL) times the wages rate of operator (semi-skilled) per year, Po (Richard et al., 2009). NOL= [6.29 + 31.7 P2 + 0.23 NNP] 0.5

2.2

Assumptions: Plant performed (shift) = 3 shifts per day Plant running in a day

= 24 hour

Maintenance work per year = 15 days Operation days per year = 350 days Minimum an operator rest in a year = 21 days (Average operator works in a year is 49 weeks) Working days of an operator in a year = 329 days Shift needed for a plant in a year = (3 shifts)/(1 day) x (350 days)/(1 year) = 1050 shift An operator can obtain shift = (1 shifts)/(1 day) x (5 days)/(1 week) x (50 weeks)/(1 year)

/operator

= 250 shift/year.operator

46 Operator hired for each operator needed in a plant, NON = (1050 shifts)/year x (year.operator)/(250 shifts) = 4.2 Wages rate of operator (semi-skilled) per month = RM 1547 Wages rate of operator (semi-skilled) per year, Po = RM 18564 Table 1.2.7 below shows the number of nonparticulate processing steps (NNP). Nonparticulate process includes compression, heating, cooling, mixing, and reaction.

Table 1.2.7: Number of nonparticulate processing steps (NNP) Equipment type

Number of equipment

Nnp

Heat exchanger

5

5

Reactors

3

3

Distillation column

3

3

Total

11

NOL = [6.29 + 31.7 (0)2 + 0.23 (11)] 0.5 = 3.008 COL = NOL x NON x Po = RM 235, 000

Direct supervisory and clerical labor, DS& CL The estimation of direct supervisory and clerical labor is based on operating labor. It is falls within the range of 10% to 20% depending on process complexity. The more complex the process the higher fraction will be used. However, for a general estimation, 15% of operating labor is acceptable (Ulrich, 1984). 15% of COL

= 0.15 x RM 235, 000 = RM 35, 250

47 Maintenance and repairs, MNR Maintenance and repair cost is cost of necessary budget item for a healty manufacturing operation (Ulrich, 1984). It is between 2 to 10% of fixed capital. The higher percentage is assumed for unconventional or speculative processes while the lower percentage shows for the relatively simple process. 6% is a reasonable and most estimates (Ulrich, 1984). 6% of FCI

= 0.06 x RM 22, 600, 000 = RM 1, 360, 000

Operation supplies, OS Operation supplies is the cost of replaceable materials such as instrument charts, lubricants, custodial supplies and other item that not considered as part of regular maintenance. The value is recommended from 10 to 20% where 15% is a relevant estimation (Ulrich, 1984). 15% of MNR

= 0.15 x RM 1, 360, 000 = RM 203, 000

Laboratory charges, LC Laboratory charges cost is necessary to control the quality of the product produce in order to get the desire purity and also to identify the fault in the process. It is depend on the complexity and sophistication of the process as well as operating labor. Therefore, typical laboratory cost range from 10 to 20% of operating labor. 15% of operating labor cost is a reasonable estimation (Ulrich, 1984). 15% of COL

= 0.15 x RM 235, 000 = RM 35, 250

48 Pattern and royalties, PR The cost is including the licensed from other firm when there is use of any process from that firm. The fee usually based on the sales income and may represent 3% of the total expenses (Ulrich, 1984) 3% Total of product cost = 0.03x X= Total product cost

Overhead cost, OVH The overhead cost include fringe benefits, social security, unemployment insurance, and other compensation paid indirectly to plant personnel. The range of 50 to 70% of the sum of operating labor cost, direct supervisory and clerical labor and maintenance and repair represent the overhead cost. 60% for the overhead cost is quite reasonable. 60% of sum COL, DS&CL and MNR = 0.6 x (RM 235, 000+ RM 35, 250+ RM 1,360, 000) = RM 975, 000 Local taxes and insurance, LTI The local taxes and insurance also important in built a plant. The value usually falls on 2% of fixed capital (Ulrich, 1984). Local taxes 1.5% of FCI

= 0.015 x RM 22, 600, 000 = RM339, 000

Insurance 0.5% of FCI

= 0.005 x RM 22, 600, 000 = RM 113, 000

Total fixed cost = RM3, 290, 000 + 0.03x

49 1.2.9.2 Estimation of variable cost Variable cost is proportional to the plant output. It is the sum of raw material cost, utilities cost, consumables (acids and bases) and effluent disposal. Price Ethylene oxide = RM 5.47 / kg (Icis, 2008) H2O = RM 0.00121 / kg (Laku Management, 2009) Phosphoric acid = RM 2.77 / kg (Matrade, 2010) Sodium hydroxide = RM 2.15 / kg (Matrade, 2010)

Utilities Electricity = RM 0.288 / kW (TNB, 2011) Water = RM 1.21/m3 (Laku Management, 2009)

Rate Ethylene oxide = 502.2361 kg/hr H2O = 4109.1006 kg/hr Polyethylene glycol 400 = 30000000 kg/year Phosphoric acid = 35 kg/batch Sodium hydroxide = 35 kg/batch The value is taken from Mass Balance (Analysis in Chapter 5) Raw material Costs Ethylene oxide

= RM 5.47/kg x 502.2361 kg/hr x 24 hr/day x 350day/year = RM 23, 100, 000/year

H2O

= RM 0.00122 / kg x 4109.1006 kg/hr x 24 hr/day x 350 day/year = RM 42, 100/year

Phosphoric acid

= RM 2.77 / kg x 35kg/batch x 2100 batch/year = RM 203,595/year

Sodium hydroxide

= RM 2.15 / kg x 72kg/batch x 2100 batch/year = RM 325,080/year

Total cost of raw material = RM 23, 600, 000/year

50 Utilities Cost Electricity = RM 0.288 / kWh x 6700 kWh x 350 day/year (TNB, 2011) = RM 676, 000 Water

= RM 1.21/m3 x 30m3 x 350 day/year (Laku Management, 2009) = RM 12, 710

Total utilities cost = RM 688, 000/year

Waste Disposal Waste disposal produce from this proposed plant is salt (Natrium phosphate) which in solid form. The salt is produce from the reaction of sodium hydroxide and phosphoric acid in order to stop the polymerization process. The equation 2.4 below represents the reaction: H2PO4 + 2NaOH

Na2PO4 + 2H2O

(2.4)

From (Mida, 2011) the value for inorganic waste is RM 450/tonne. Therefore, the waste disposal cost become, 6 batch produce/day = 35kg salt produce x 6 = 210kg/day For a year, = 350 day x 210 kg/day x RM450/1000kg = RM 33, 075

Total variable cost = RM 24, 400,000

51 1.2.9.3 Estimation of General expenses

General expenses are the sum of administrative cost, distribution and selling and research and development cost.

Administrative cost, AD The costs are proportional to the plant staff and approximately 25% of overhead cost is a reliable estimation (Ulrich, 1984). 25% Overhead cost = 0.25 x RM 975,000 = RM 244, 000

Distribution and selling cost, D&S The distribution and selling cost usually based on product value includes cost of sales and marketing to sell chemical products. 10% of total product cost is a relevant value of estimation (Ulrich, 1984). 10% of Total product cost = 0.1x X= represent the total product cost

Research and development cost, R&D Research and development cost is the cost of research related to the process involves and product (Richard et al., 2009). Research and development cost comprises 5% of total product cost (Ulrich, 1984). 5% of Total product cost =0.05x Total general expenses = RM 244, 000 + 0.15x

52 1.2.9.4 Total Product Cost Total Product Cost, x =Total fixed cost +Total variable cost +Total general expenses x = RM3, 290, 000 + 0.03x + RM 24, 400,000+ RM 244, 000 + 0.15x x= RM 27, 934,000 + 0.18x x = RM 34, 000, 000 Total Fixed Cost = RM3, 290, 000 + 0.03x = RM 4, 310, 000 Total Variable Cost = RM 24, 400, 000 Total General Expenses = RM244, 000+ 0.15x = RM 5, 350, 000

1.2.9.5 Total Revenue Selling price for Polyethylene glycol 400 (SP) Since diethylene glycol is by-product, the production rate of diethylene glycol will be added to production of PEG in a year in order to get the selling price of PEG 400 and also diethylene glycol. The production rate of diethylene glycol is about 113 kg/hr or 940 tonnes/annum. Total production cost = Total fixed cost + Total variable cost =RM 4, 310, 000 + RM 24, 400, 000 = RM 28, 700, 000 Gross price = Total production cost/Production rate = RM 28, 700, 000/ 30, 940 tonnes = RM 927/tones or RM 9.27/kg RM 9.27/kg means the gross price for both PEG 400 and diethylene glycol. The market price for PEG is around RM 10.50/kg (Matrade, 2011) and RM 3.92/kg (Matrade, 2011) for diethylene glycol. Therefore, the total market prices for both products are RM 14.42.

53 In order to estimate the selling price of product and by –product, it is an essential step to calculate the margin. Margin calculation is important to determine the profit of the company. It is also as a safe step when the selling price going down, the company still can produce the product in low cost. Take the margin 10%, 10% x RM 9.27 = RM 0.93 So, the selling price would be = RM 9.27 + RM 0.93 = RM 10.20 Take the margin 20%, 20% x RM 9.27 = RM 1.85 So, the selling price would be = RM 9.27 + RM 1.85 = RM 11.12 Take the margin 30%, 30% x RM 9.27 = RM 2.78 So, the selling price would be = RM 9.27 + RM 2.78 = RM 12.05 Take the margin 40%, 40% x RM 9.27 = RM 3.71 So, the selling price would be = RM 9.27 + RM 3.71 = RM 12.98 50% x RM 9.27 = RM 4.64 So, the selling price would be = RM 9.27 + RM4.64 = RM 13.91 60% x RM 9.27 = RM 5.56 So, the selling price would be = RM 9.27 + RM 5.56= RM 14.83 From these calculations, the percentage margins from 10% until 50% are under the market price. While at 60% of margin the price has exceed the market price. Therefore, it is a must to estimate the selling price under the market price. It is decided to take the price with 20% margin (RM 11.12/kg), with PEG 400 price is about RM 9.12/kg while

54 diethylene glycol is RM 2.00/kg. This is because as a new plant the selling price should be lower than the market price in order to capture the demand. Total revenue = RM 11.12 x 30, 940, 000 = RM34, 405, 280 2.9.7 Breakeven point calculation Total variable cost/tonne = RM 24, 400, 000/ year x 1/30940 tonne/year = RM 788/tonne Breakeven point = FC/ (SP-VC) = RM 4, 310, 000/ (RM 1112/tonne - RM 788/tonne) =13, 275 tonne per annum

55

Table 1.2.8 Breakeven analysis

Capacity, Q (tonne) 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 27000 30000 35000

Fixed cost, FC 4.31E+06 4.31E+06 4.31E+06 4.31E+06 4.31E+06 4.31E+06 4.31E+06 4.31E+06 4.31E+06 4.31E+06 4.31E+06 4.31E+06 4.31E+06 4.31E+06

Total cost, Variable TC Total revenue, TR cost, VC (FC+VC) (P x Q) 0.00E+00 4.31E+06 0 1.58E+06 5.89E+06 2224000 3.15E+06 7.46E+06 4448000 4.73E+06 9.04E+06 6672000 6.30E+06 1.06E+07 8896000 7.88E+06 1.22E+07 11120000 9.45E+06 1.38E+07 13344000 1.10E+07 1.53E+07 15568000 1.26E+07 1.69E+07 17792000 1.42E+07 1.85E+07 20016000 1.58E+07 2.01E+07 22240000 2.13E+07 2.56E+07 30024000 2.36E+07 2.79E+07 33360000 2.76E+07 3.19E+07 38920000

*The example of calculation is shown in Appendix B.

56

Breakeven Graph 4.50E+07 4.00E+07 3.50E+07 3.00E+07 2.50E+07 RM

Fixed cost, FC Variable cost, VC

2.00E+07

Total cost, TC (FC+VC) Total revenue, TR (P x Q)

1.50E+07 1.00E+07 5.00E+06 0.00E+00 0

5000 10000 15000 20000 25000 30000 35000 40000 Quantity, tonnes

Figure 1.2.9: Breakeven graph

57 1.2.10 CONCLUSION From the market analysis, the fixed capital investment is about RM22.6 millions. The total product cost consists of total fixed cost which is RM 4.31 million and total variable cost is RM 788/tones or RM 24.4 million. The selling price of PEG 400 is RM 9.12/kg and RM 2.00/kg for diethylene glycol which gives 20% margin. Based on the breakeven calculation, the breakeven point is 13, 275 tonnes.

58 REFERENCES Advance petrochemical (2011), Polyethylene Glycol, http://www.advancepetro.com/peg.htm, retrieved on 27/11/2011 2 Bizfinance (2011), Breakeven Point, http://bizfinance.about.com/od/pricingyourproduct/a/Breakeven_Point.htm, retrieved on 20/1/2012 Carbowax, http://www.dow.com, retrieved on 10/10/2011 Caustic soda market, http://www.the-innovation-group.com, retrieved on 9/10/2011 Chemical week (2011), Ethylene Glycol Market Firms, http://www.meglobal.biz/news/2011/08/09, retrieved on 24/1/2012 Ethylene oxide consumption, http://monographs.iarc.fr/ENG/Monographs/vol97/mono97-7A.pdf retrieved on 29/11/2011 Ethylene oxide market, http://www.sriconsulting.com/CEH/Public/Reports, retrieved on 10/10/2011 Ethylene oxide price, www.icis.com, retrieved on 10/10/2011

Fixed cost, http://www.investopedia.com/terms/f/fixed-capital.asp#ixzz1gHg2bkc3, retrieved on 1/12/2011 Petrochemical industry, http://www.mpa.org.my/business.htm, retrieved on Lin Hui Tham and Izatulshima Yahya (2008), Malaysian Pharmaceutical Industry Outlook 2008, http://www.frost.com/prod/servlet/market-insighttop.pag?docid=126369590, retrieved on 28/10/2011 at 2p.m Malaysia Petrochemicals Report 2011,

59 http://www.reportlinker.com/p0172318/Malaysia-PetrochemicalsReport.html#ixzz1BOeLZqY8 retrieved on 29/10/2011 Petrochemical and Polymer Industry, http://www.mida.gov.my/env3/index.php?page=

petrochemical, retrieved on

29/10/2011 Polyethylene glycol price, www.buychemicaldirect.com, retrieved on 25/10/2011 at 3 p.m Product Capacity & Market Applications, http://www.optimal.com.my, retrieved on 9/10/2011 Richard Turton, Richard C. Bailie, Wallace B. Whiting, Joseph A. Shaeiwitz (2009) Analysis, synthesis and Design of Chemical Process. Third Edition. United States. Pearson International Editon. Scale of Charges for Bintulu Water Supply, http://www.lakumanagement.com.my, retrieved on 25/10/2011

Ulrich, G.D. (1984) A guide to chemical Engineering Process Design and Economics. New York. John Wiley and Sons. UnComtrade (2011), United Nations Commodity Trade Statistics Database, http://comtrade.un.org/, retrieved on 27/1/2012 Wolfgang G., YamamotoY.S., Lydia K., James F.R. and Gail S.(1987) Ethylene Glycol. In: Siegfried R. Ullmann’s Encylopedia of Industrial Chemistry. German. VCH. 101-115

60 1.3

PLANT LOCATION AND SITE SELECTION

1.3.1

Plant Location and General Site Selection Criteria

Generally, the selection of the location of the plant can have a crucial effect on the profitability of a project and the scope for future expansion. A good location is required to optimize the production of the plant (Sinnott, 2005). A few sites have been studied in order to determine the best place to set up the poly ethylene glycol plant. The studied areas are Senawang Industrial Park in Negeri Sembilan, Gebeng Industrial Estate in Pahang, Tanjung Kidurong Industrial Park Bintulu, Sarawak, Pulau Indah Industrial Park in Selangor and Pasir Gudang Industrial Park in Johor. The study has been made based on the following consideration:

1.3.1.1 Location with respect to the marketing area

Marketing plays major roles in presenting the product. This consideration will be less important for low volume production high-priced products such as pharmaceuticals. In addition, with the trend toward just-in-time production, suppliers want to locate near customer to speed deliveries. Thus, the location of the plant should be located near to customer or immediate agencies. If the plant is located near to customer, the transportation period and payment can be reduced. (Sinnott and Towler ,2009)

1.3.1.2

Raw Material Supply

The availability and price of suitable raw materials will often determine the site location. Without sufficient supply of raw material, the plant will not be able to run accordingly. The raw material used in order to produce polyethylene glycol is ethylene oxide. Therefore, when the plant location is located close to the raw material sources the transportation fees can be reduced and raw material can be obtained easily. (Sinnott and Towler ,2009)

61 1.3.1.3

Transport Facilities

There are four major forms of transport that should be close to a site selected which are road, rail, waterway and air. Road transport is suitable for local distribution from a central warehouse. Rail transport will be cheaper for the long-distance transport of bulk chemicals. Air transport is convenient and efficient for the movement of personnel and essential equipment and supplies and the proximity of the site to a major airport should be considered. So, the site selected should have good transportation lines to smooth the operation and reduce the cost. These will increase the import and export business. (Sinnott and Towler , 2009)

1.3.1.4

Availability of labour

Labour will be needed for construction of the plant and its operation. Skilled construction workers will usually be brought in from outside the site area but they should train or share their experience and knowledge with unskilled workers, which available locally. This action will provide the availability and inexpensive manpower from surrounding area and subsequently reduce the operating cost for the plant. (Sinnott and Towler , 2009)

1.3.1.5 Availability of Utilities: Water, Fuel, Electricity

Utilities such as electric supply, water supply and steams are one of the main key to run a plant. Electricity is necessary to run unit operations, generate heats and a few more tasks while water is needed in scrubbing, washing and cooling processes. Chemical plant usually requires a large volume of water for cooling and other processes use should be investigate for water reservoirs before the selection of plant. By having sufficient water and electricity supply, the plant is ensured to operate smoothly. (Sinnott and Towler ,2009) 1.3.1.6 Reasonable Land Price Reasonable land cost can reduce the investment cost and the total capital cost. It is important to choose the lowest land price to build a new plant in order to gain the highest economic value for the plant. (Sinnott and Towler ,2009)

62

1.3.1.7 Environmental impact and effluent disposal All industrial processes produce waste products and full consideration must be given to the difficulties and cost of the disposal. The disposal of toxic and harmful effluents will be covered by local regulations and the appropriate authorities must be consulted during the initial site survey to determine the standards that must be met. (Sinnott and Towler , 2009) 1.3.1.8 Local Communities Consideration At different locations, different community may have different characters and facilities. Therefore, community factors will have a significant effect on proposed plant since the site location is different. The plant organizer shall give full consideration to the safety of the plant so that it does not bring any significant risk or hazard to the community. (Sinnott and Towler , 2009) 1.3.1.9 Climate The climate, especially the extreme weathers may influence the economic operation of the plant. Since the site locations are in Malaysia, there are not many factors to be considered since Malaysia has uniform temperature throughout the year. (Malaysian Meteorological Department, General Climate of Malaysia, Retreived on 25 Oct 2011)

1.3.1.10 Political and Social Stability The most important in starting a business is earning profit. Therefore, a company needs to consider how much the government or state government can offer the opportunities for their business. Most state governments that have at least an industrial area where offer attractive incentives. These incentives can influence foreign and local investors to invest their money at stake in the designated area. If more incentives are offered, then it will give more feasibility for the plant to be built.

63 1.3.2

Summary of the study

Assuming there is no act saying that no ethylene oxide shall be import or export in Malaysia, the poly ethylene glycol plant was set to build in Malaysia. Below is the result from the study performed on the site location. Basically, there are five locations that had been identified to have potential to build the plant. Ranking method has been used in order to determine the best site location to set up the poly ethylene glycol plant. The local regulations and the appropriate authorities have been consulted during the initial site survey to determine the standards that must be met in order to determine the most suitable site selection. The score has been determined by the number 1 to 5 where 1 indicate the poor rating and 5 indicate the best rating. Table 1.3.1: Score for site selection Senawang, N.Sembilan

Gebeng, Pahang

Bintulu, Sarawak

P. Indah, Selangor

P.Gudang, Johor

Industrial land price

3

4

5

1

2

Facilities

2

3

3

5

3

Utilities

3

5

4

2

1

Effluent treatment

4

4

5

4

4

Land Incentives

0

0

5

0

0

Total

12

16

22

12

10

For the availability of industrial land, the summarized information in the Table 1.3.1 indicated the available land for every industrial area. The area of the required land for this project has been estimated by the comparison with other medium scale industry plant area. Since our production is 30000 tonne per annum, the required area for setting up the plant was estimated to be 10 acres where the entire five sites have excessive land than the required area. The actual required area for the plant set up is 8 acres but 10 acres of land will be required for the purpose of future development planning.

64 Table 1.3.2: Table of available industrial land and the price Site Location

Senawang, N.Sembilan

Gebeng, Pahang

Bintulu, Sarawak

P. Indah, Selangor

P. Gudang, Johor 1000 acres

Available Industrial 13 acres land

3777acre 240 acres s

3870 acres

Industrial land price (psf)

RM19.00

RM11.00

RM 7.20

RM38

RM 20

Price for 10 acres

RM8.28 mil

RM4.80 mil

RM3.14 mil

RM16.55mi l

RM 8.7 mil

Second criteria that has been studied for the site location selection is the industrial land price. Tanjung Kidurong Industrial Park, Bintulu has the highest score as the price is the lowest compared to the other site’s price which is RM 7.20 psf. It is important to get the suitable land with reasonable price in order to control the cost of the project. The available land in Tanjung Kidurung Industrial Park, Bintulu does not only offer low land price, the geographic condition of the land is also good. Geographic condition should be considered to ensure that the plant is suitable to be set up at the area. Sarawak Shell Bintulu Plant (SSBP) formerly known as Bintulu Crude Oil Terminal (BCOT) was the first major industrial project to go off the ground Tanjung Kidurong in 1979. Asean Bintulu Fertilizer (ABF) also one of the most important industry that been set up in this industrial area. Since there is a lot of other industries have been developed around this area, it is convinced that Tanjung Kidurong Industrial Park is a very suitable place for this project. Table 1.3.3: Available facilities in the studied site locations Site Locatio n Facilitie s

Senawan g, N Sembilan -Highways and Road Links -Nilai Inland Port

Gebeng, Pahang

Bintulu, Sarawak

Pulau Indah, Selangor

Pasir Gudang, Johor

-East Coast Highway -The Sultan Ahmad Shah Airport -Kuantan Port

-Highways and Road Links -Bintulu Port -Bintulu Airport

-Highways and Road Links -Railway Facilities -KLIA -Subang Airport -Klang Port

-Highways and Road Links -Senai International Airport -Pasir Gudang Port -Port of Tanjung Pelepas

65 Four major forms of transportation that should be close to a selected site include road, rail, waterway and air. So, the site selected should have good transportation lines to smooth the operation and reduce the cost. Table 3.4 indicates the available facilities in every site locations. The reason for Pulau Indah Industrial Park ranked with the highest score is due to the transportation facilities including highways and road links, railway facilities, Kuala Lumpur International Airport, Subang Airport and Klang Port facilities. The scores given were based on the availability of the facilities and the distance between the site and the facilities. The nearer the distance between the site and the facilities will be credit with higher score. Tanjung Kidurong Industrial Park has good highways and road links, port and airport but lacking in the railway facilities compared to the Pulau Indah Industrial Park. From the study, the unavailability of the railway facilities will not give high impact for the operation since our plant is easy to reach by the road links. So, highways and road links are more preferable. Table 1.3.4: Score given based on the water tariff Water Price Range (per m3) RM

<1.00

1.00-1.50

1.51-2.00

2.01-2.50

>2.50

SCORE

5

4

3

2

1

Table 1.3.5: Score for water utilities for each site location Site Location

Industrial tariff (per m3) Rating Score

Senawang, Gebeng, N Pahang Sembilan RM1.60 RM 0.84

Bintulu, Sarawak

P.Indah, Selangor

P.Gudang, Johor

RM 1.21

RM 2.28

RM2.96

3

4

2

1

5

Utilities are focused on electricity and water supply. The score were given based on the industrial tariff. Tanjung Kidurong Industrial Park, Bintulu has been rated with the second highest score for the water utilities study. Electric is necessary in order to supply energy to run unit operations, generate heats and a few more tasks .Electricity rate for all site is same for the four site location except for Bintulu since electricity in Bintulu is supplied by Syarikat SESCO Sdn Bhd with a lower tariff rate. Water is the raw

66 material for our process, and also needed in scrubbing, washing and cooling processes. Selecting the lowest facilities charge rate will contribute in reducing the operation costs. For the effluent treatment, it is well known that all industrial processes produce waste products. Full consideration must be given for the disposal difficulties and the disposal cost. The local regulations and the appropriate authorities must be consulted during the initial site survey to determine the standards that must be met in order to deal with the disposal of toxic and harmful effluents. The scoring was made based on five criteria consist of waste transportation availability, waste analysis service, government incentives, state incentive and the service charge, Tanjung Kidurong Industrial Park, Bintulu is rated with the highest rate in the effluent treatment due to the effluent treatment facility of scheduled waste offered by Trienekens (Sarawak) Sdn. Bhd. Attractive incentives offered by the state government will influence foreign and local investors to invest their money at stake in the designated area. Tanjung Kidurong Industrial Park, Bintulu has the highest score during the land incentives study because only government of Sarawak offered land incentives compared to other state. These incentives will give more feasibility for the plant to be built. Overall result of the site location study showed that Tanjung Kidurong Industrial Park ranked with the highest score .The description of the Tanjung Kidurong Industrial Park, Bintulu will be discussed in detail in the next section.

1.3.3

Tanjung Kidurong Industrial Park, Bintulu

1.3.3.1 Available Industrial land: Tanjung Kidurong Industrial Area is the latest efforts of Sarawak government to encourage developments of heavy, sea related, petrochemical, steel production and offshore industry in Bintulu, Sarawak.

Total available industrial land in Tanjung

Kidurong Industrial Park is 97.3 hectares (240.434 acres). (Bintulu Development Authority,Sarawak Land Development Board, Malaysian Industrial Development Authority, 2011)

67

Figure 1.3.1: Map of Malaysia (Google earth , retrieved on 23rd Jan 2012)

Figure 1.3.2: Tanjung Kidurong Industrial Park (Google earth, 23rd Jan 2012)

68

Figure 1.3.3: Selected land in Tanjung Kidurong Industrial Park (Google earth, 23rd Jan 2012)

1.3.4

Manpower Supply

In Sarawak, there is free mobility of labour among the districts and labour can be easily attracted into Bintulu from other districts. This is so as survey has revealed that over half of the populations in Bintulu are migrants who migrated to Bintulu for economic and related reason especially during the first boom period. (www.dba.gov.my,retreived on 25th Oct 2011) Sarawak maintains an excellent standard of education centred on high quality schools, colleges, polytechnics and universities. The English language is widely used, and educational and training institutions are continually developed to meet the growing needs of industry. Sarawak’s labour force can provide educated, skilled, semi-skilled, and young workers to meet the needs of a high-technology business environment (www.sarawak.gov.my, retrieved on 25th Oct 2011).

69 1.3.4.1 Resident area The estimated population of Sarawak in 2000 was 2.013 million. In 2000, Bintulu Division has an estimated population of 161,134 which Bintulu District has 138,269 and Tatau District 22,865. The 1999 census for Malaysia showed that the total population of Bintulu Division was 142,400. The significant increase in population in Bintulu can be attributed to the discovery of gas reserves and other resources which resulted in unprecedented industrial development in the area. In 2010, the estimated population in Bintulu

is

about

200000,

which

is

the

fourth

largest

urban

in

Sarawak.

(www.bda.gov.my, retrieved on 25th Oct 2011).Besides, the resident area is far from the plant location and out from the buffer zone set by the Department of Environment which is set to be 250m.

1.3.4.2 Raw material supply The raw material for the production of the poly ethylene glycol is ethylene oxide which is known as a highly reactive substance and the supply should be as near as possible with the plant. Since our plant is located in Bintulu, Sarawak, raw material supply selection was made on the transportation time and the cost .Due to the business strategy, the raw material was decided to be imported from Singapore .With the excellent and modern transportation facilities, the raw material supplying process will be safe and easier.

1.3.4.3 Facilities Bintulu Port

Bintulu port is one of the most modern and efficient multipurpose port in South East Asia located strategically along the busy sea lanes. Bintulu Port is not far away from Tanjung Kidurong Industrial Park. It provides complete and modern facilities for both international and coastal vessels. The port is well equipped with dedicated berths and state of the art facilities to handle variety of cargo and ship efficiently. A wide range of cargo handling equipment and ancillary facilities to meet the expanding and demanding

70 requirements of the trade at the port are also available. (www.bpa.gov.my, retreived on 25th Oct 2011)

Bintulu Airport

Bintulu Airport is located 5.5 km southwest of Bintulu and is able to handle aircrafts as large as the Boeing 747 and Boeing 737. It also services the needs of the local community living and working in the center of Sarawak's main coastal region. (www.malaysiaairports.com.my, retrieved on 26th Oct 2011) 1.3.4.4 Utilities The Sarawak SESCO Berhad is the main supplier of electricity in the State. SESCO Berhad provides ample electricity for industrial, commercial and residential use. SESCO Berhad offers competitive industrial tariffs for its electricity supply. Table 1.3.6: Industrial electricity tariff in Sarawak, (Syarikat SESCO Berhad www.sesco.com.my October 2011) TARIFF I1 - INDUSTRIAL

RATE PER UNIT

For the first 100 units per month

40 sen

For the next 2900 units per month

30 sen

For each additional unit per month

27 sen

Minimum monthly charge

RM 10.00

ARIFF I2 - INDUSTRIAL DEMAND

RATE PER UNIT

For each kilowatt of maximum demand per month

RM 16.00

For each unit

22.2 sen

Minimum monthly charge

RM 16.00 per kW X Billing Demand

TARIFF

I3

-

INDUSTRIAL

PEAK/OFF-PEAK RATE PER UNIT

DEMAND For each kilowatt of maximum demand per month RM 20.00 during the peak period

71 For each unit during the peak period

23.4 sen

For each unit during the off peak period

14.4 sen

Minimum monthly charge

RM 20.00 per kilowatt X Billing Demand

1.3.5

Political and strategic consideration

The State government strongly supports business-friendly and customerfocused policies and also encourages economic activities that enhance economic growth and investment potential. There are strong cooperation and collaborative efforts by both the Federal and State governments on industrial and investment policies. This provides long term security that is conducive to business profitability for investors. The stable political environment is a major factor that lures foreign investors to this land of great potential. (www.mids.sarawak.gov.my, www.mida.gov.my, www.sarawak.gov.my , retrieved on 25 Oct 2011) Procedures for obtaining licenses and permits are transparent and not burdensome. In general, Sarawak has put in place clear policies, efficient and transparent government machinery and effective mechanisms to facilitate investors' participation in its economy. (www.dba.gov.my, www.mids.sarawak.gov.my, www.sarawak.gov.my, retrieved on 25th Oct 2011)

1.3.6

Effluent treatment

All discharges and emissions shall meet the relevant Environmental Quality Regulations as stipulated in the Environmental Quality Act, 1974 and using appropriate control measures. Among the incentives given by the government for the industrial treatment and disposal systems including:(Department of Environment Ministry of Natural Resources and Environment, Eleventh Edition , 25 Oct 2010)

72 

Incentives for the storage, treatment and disposal or toxic and hazardous

wastes To encourage proper industrial waste management, the following incentives are currently available:

(a)

Pioneer Status incentive for 5 years to companies which are principally engaged

in an integrated operation for the storage, treatment and disposal of toxic and hazardous wastes; (b)

As a further incentive for both the above categories of companies, the

Government also extends the current import duty and sales tax exemption scheme for machinery, equipment, raw materials and components. All facilities for storage, treatment and disposal of toxic and hazardous wastes must be approved by the Department of Environment before the application is made for the incentives. 

Incentives for the installation of pollution control equipment

Under Income Tax Act 1967, Income Tax (Qualifying Plant Allowances) (Control Equipment) Rules 1998, the Government has provided special capital allowance incentive for the Companies which install pollution control equipment in the setting up of the plants. This allowance is at initial rate 40% and an annual rate of 20% for the qualifying plants stipulate under Schedule 3 of Income Tax Act 1997. Trienekens (Sarawak) Sdn. Bhd. Sarawak Wastes Management Sdn. Bhd. (SWM) appointed Trienekens (Sarawak) Sdn. Bhd. as the operator to develop, implement and operate Sarawak’s Integrated Solid Waste Management System (ISWMS).In Kuching and Bintulu, Trienekens covers the service scope of municipal waste collection services for the majority of the population, besides also providing collection, treatment and disposal services for scheduled and hazardous waste throughout Sarawak, Labuan and Sabah. All Trienekens’ scheduled waste operations and facilities are licensed by the Department of Environment, Malaysia (DOE). Trienekens’ collection, transportation, treatment and disposal procedures comply with the Environmental Quality Regulations (Scheduled Waste) Act 1989. (http://trienekens.com.my, retrieved on 2nd Nov 2011)

73 1.3.7

Incentives

Sarawak state government also gives incentives for high technology companies. The incentives are such as full tax exemption at statutory income level for a period of a year, or investment Tax Allowance of 60% on qualifying capital expenditure incurred within a period of 5 years. The allowance can be off-set against the statutory income for each assessment year without any restriction. (www.mida.gov.my, www.sarawak.gov.my, retrieved on 25th Oct 2011) Some incentive includes pioneer status i.e. partial exemption from payment of income tax; investment tax allowance; incentive for research and development and training; incentive for high technology industries. Incentive such as paying 30 % of the cost of industrial land within 2 weeks upon recipient of offer letter and then pay the remaining 70% within 6 month from the date of offer letter. (www.mids.sarawak.gov.my, www.mida.gov.my, www.sarawak.gov.my, retrieved on 25th Oct 2011)The additional benefits that Sarawak enjoys from the Federal Government under the Eastern Corridor Package are summarised as follows: Table 1.3.7: Additional Incentives for Manufacturing Sector Given by Federal Government, (www.mida.gov.my, retrieved on 25th Oct 2011) Peninsular Malaysia

Added Incentive for Sarawak

Pioneer Status 70% tax exemption on statutory 100% tax exemption on statutory (PS)

income for 5 years.

income for 5 years.

Investment Tax 60% allowance on the qualifying 100% allowance on the qualifying Allowance

capital expenditure incurred within 5

capital expenditure incurred within a

(ITA)

years.

period of 5 years.

The allowance could be utilized to The allowance could be utilized to offset 70% of statutory income for offset against 100% of statutory each year of assessment.

income

for

each

year

of

assessment. Reinvestment

60% allowance on qualifying capital Free to offset RA against 100% of

Allowance

expenditure incurred, and could be statutory income.

(RA)

utilized to offset against 70% of statutory income.

74 Other

Infrastructure Allowance of 85% of

Infrastructure Allowance of 100% of

Incentives

statutory income in the year of

the qualifying expenditure.

assessment. Double deduction on freight charges incurred for exporting rattan and wood-based

products

(excluding

sawn timber and veneer). Double deduction on sea freight charges incurred for shipping goods from

Sarawak

to

Peninsular

Malaysia via ports in Peninsular Malaysia. The State Government gives the following additional incentives:

Table 1.3.8: Additional incentives given by State Government, (www.mida.gov.my, and www.sarawak.gov.my, retrieved on 25th Oct 2011) Incentives Industrial Land

30-50% rebate for industrial land if project is satisfactorily completed and started operation within 36 months from date of alienation of land. (exclude for Samajaya Free Industrial Zone)

75 1.3.8 Conclusion The selected site location for this project is the Tanjung Kidurong Industrial Area which is the latest efforts of Sarawak government to encourage developments of heavy, sea related, petrochemical, steel production and offshore industry in Bintulu, Sarawak. Sarawak can easily accessible from the major cities of the world such as Hong Kong, Japan, Australia, Indonesia, Singapore and Brunei. The selling price of Tanjung Kidurung Industrial Park is RM7.20 per Square Feet which is cheaper than the other studied land prices. The required land for this project is only 10 acres with the price estimation of RM3.14 million. Sarawak offered attractive incentive which is 30% to 50% rebate for industrial land if project is satisfactorily completed and started operation within 36 months from date of alienation of land. The State Government does not only offers generous incentives in term of the competitive price of land, but also low down payment for the purchase of industrial land; cheap electricity and other facilities to ensure that start-up and operating costs for companies are competitive. Water charges for industrial usage are very reasonable. SESCO Berhad offers competitive industrial tariffs for its electricity supply. Sarawak state government also gives incentives for high technology companies.

In Sarawak, labour can be easily

attracted into Bintulu from other districts who migrated to Bintulu for economic reason. Sarawak’s labour force can provide educated, skilled, semi-skilled, and young workers to meet the needs of a high-technology business environment. Excellent highways and road links, Bintulu port and Bintulu Airport are the available facilities offered in this industrial area. The State government strongly supports business-friendly and customer-focused policies and also encourages economic activities that enhance economic growth and investment potential. In order to facilitate investors' participation in its economy, Sarawak has put in place clear policies, efficient and transparent government machinery and effective mechanisms.

76 REFERENCES

Bintulu Development Authority, http://www.bda.gov.my/ ( 25 Oct 2011) Bintulu Port Holding Berhad, http://www.bpa.gov.my/ ( 25 Oct 2011) Department of Environment Ministry of Natural Resources and Environment, Eleventh Edition (25 Oct 2011) Malaysia Airports, http://www.malaysiaairports.com.my/ ( 26 Oct 2011) Malaysian Industrial Development Authority, http://www.mida.gov.my/ ( 25 Oct 2011) Malaysian Meteorological Department, http://www.met. gov. my/?lang=english , (25 Oct 2011) Official portal of Sarawak Government, http://www.sarawak.gov.my/ ( 25 Oct 2011) Official site of Trienekens (Sarawak) Sdn. Bhd, http://trienekens.com.my/ (2 Nov 2011) Ray Sinnott and Gavin Towler(2009), Chemical Engineering Design, Fifth Edition, 10681070 Sarawak Land Development Board, http://www.mlds.sarawak.gov.my/ (25 Oct 2011) Syarikat Sesco Berhad, http://www.sesco.com.my/sesco/english/(25 October 2011)