Chemical Engineering Progress, Dec. 2017

Authors are: Chi Zhang & Mahmoud M. El-Halwagi, Chemical Engineering Progress, December 2017

As the number of shale-gas monetization options has increased, so has the need to develop quick, preliminary estimates of the cost of proposed projects and manufacturing pathways. This article presents a method for an order-of-magnitude cost estimation.

Discovery of substantial shale gas reserves in the U.S. has spurred a boom in production of chemicals and fuels. U.S. production of shale gas jumped from about 2 trillion ft3 in 2007 to about 15 trillion ft3 in 2015 (1). This increase is expected to continue over the coming decades. Some estimates predict a cumulative production of 459 trillion ft3 of shale gas from 2014 to 2040 (2).

As shale gas gains an advantage as a competitive feedstock in the U.S., a concomitant growth in the chemical industry is taking place. The American Chemistry Council reports that 264 shale-gas-dependent projects had been announced by April 2016 with estimated capital investments totaling $164 billion (3). About half of these projects have already been completed or are in construction and implementation phases.

Shale-gas monetization refers to the physical and/or chemical transformation of shale-gas constituents into value-added products. A wide variety of chemicals and fuels can be produced from shale gas (4–6). In addition to the conventional manufacturing chemistries and production routes, there are significant opportunities to create novel pathways and technologies. There is a critical need to quickly assess the economic viability of these new and emerging alternatives before detailed design and cost estimates are carried out.

This article develops and explains an order-of-magnitude correlation for estimating the capital investment required for a shale-gas monetization plant. Technology developers and process engineers can use this correlation — along with other preliminary cost-estimation techniques — to help make technology selection and design decisions prior to chartering laborious and costly techno-economic studies.

Capital cost estimation methods

The fixed capital investment (FCI) or capital expenditure (CAPEX) of a plant refers to the money required to design, procure, deliver, and install the process equipment, ancillary units, piping, instrumentation and controls, civil and electrical installations, and service facilities needed to ready the process for operation. The total capital investment (TCI) of a plant is the sum of the FCI and the working capital investment (WCI) that is necessary to cover the operating expenses up to the start of operation.

There are several approaches for estimating the TCI of a project (7):

> manufacturer’s quotation
> computer-aided tools
> capacity ratios (e.g., six-tenths factor rule)
> cost indices (e.g., Chemical Engineering Plant Cost Index [CEPCI])
> factors based on equipment cost (e.g., Lang method, Hand’s factors)
> empirical correlations.

The accuracy of each method varies, depending on the available information and level of project definition.

The Association for the Advancement of Cost Engineering-International (AACE-International) recommends five levels (or classes) of cost estimates. The least-detailed level is referred to as an order-of-magnitude estimate, and is given a Class Level 5. Such an estimate is based on very little information (0–2% of project definition) and is used mostly for preliminary and rapid assessment of the economic viability of a proposed project. The accuracy of a Class Level 5 estimate is typically on the order of ±30–50%. The most-detailed level (i.e., check estimate, contractor’s estimate, or Class Level 1 estimate) is based on almost full detailing of the project, and is used to issue bids and tenders. Its accuracy is on the order of ±5–10%.

A commonly used approach for an order-of-magnitude estimate is to use information from similar processes or technologies. In this context, correlations based on the type of industry, plant capacity, and number of functional units are particularly useful (8–11). We adopted this approach to develop an order-of-magnitude cost estimation method for rapidly predicting the FCI required for a proposed shale-gas monetization process. Coupling this order-of-magnitude cost estimate with other sustainability criteria and performance targets can allow preliminary assessment of the sustainability of a gas monetization project (12).

Data collection and correlation development

We collected and analyzed economic data for 50 gas conversion plants from various sources, including databases, company websites, published techno-economic analyses, and reported information. The data were not always available as FCI. Other forms of reported data included TCI and inside battery limit capital expenditure (ISBL CAPEX). We then processed the data using equations to create a consistent basis for cost correlation. The processed data are shown in Table 1. (See full article for data).

Table 1. Economic data for 50 gas conversion plants were collected and processed to create a consistent basis for cost correlation. References are included in the online version of the article, available at www.aiche.org/cep.

Process Relevant Technology and/or Company*

Ethylene Production via Cracking of Ethane-Propane (Steam-Cracking), Ethylene: Ethane and Ethane/Propane mix, Ethylene Glycol Production (OMEGA catalytic process), Hydrogen Production from Natural (Gas Intratec Solutions), Hydrogen Production from Natural Gas, Propane Dehydrogenation: Oxydehydrogenation, Propylene Production via Propane Dehydrogenation, Propylene Production via Propane Dehydrogenation, D,L-Methionine Production via the Carbonate Process, Hydrogen Cyanide Production, Methanol-to-Olefins Process, Methanol-to-Propylene Technology, Polypropylene Production via Gas-Phase Process, Polypropylene Production via Gas-Phase Process, Ethylene Production via Ethanol Dehydration.

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Bio for Chi Zhang — Chi Zhang is a PhD candidate at the Artie McFerrin Dept. of Chemical Engineering, Texas A&M Univ. He has a BS with double majors in chemical engineering and mathematics from Univ. of Wisconsin-­Madison. His research activities are in process design and integration.

Bio for Mahmoud M. El-Halwagi — Mahmoud M. El-Halwagi, PhD, holds the McFerrin Professorship at the Artie McFerrin Dept. of Chemical Engineering, Texas A&M Univ., and is the Managing Director of the Texas A&M Engineering Experiment Station Gas and Fuels Research Center (Email: el-halwagi@tamu.edu). His main research area is sustainable design of industrial systems through process integration. He has published more than 250 refereed papers and 85 book chapters. He has also authored three textbooks and coedited six books.

Conventional GTL Processing

Velocys Postpones Northeast Ohio GTL Facility, Citing Project Financing Challenges

From an Article by Jamison Cocklin, NGI News, July 7, 2016

United Kingdom-based Velocys plc said Thursday that it would postpone the development of its small-scale 5,000 b/d gas-to-liquids (GTL) plant in Northeast Ohio, citing the commodities downturn and the effects it’s had on the company’s ability to raise capital for the project.

“Given the challenges in raising equity for capital projects of this nature at present, and in order to defer costs, Velocys has put its development of Ashtabula on hold, pending reassessment as part of the broad review of the strategy of the business that the company is currently undertaking,” Velocys said.

The company acquired Houston-based Pinto Energy LLC in an all-stock deal in 2014. Pinto first announced the GTL facility in Ashtabula, OH, in 2013. The facility would be located on an 80-acre site near ports and refineries on Lake Erie and would convert Marcellus and Utica shale natural gas into specialty products such as solvents, lubricants, waxes and transportation fuels.

Velocys, which develops, licenses and supplies small-scale GTL technology, had said early last year that it would soon make a final investment decision on the project. The company said an analysis of the wax market conducted in the first half of this year showed that the plant still remains economically viable, but didn’t say when it might consider moving forward with development.

Velocys formed a joint venture in 2014 with Waste Management Inc., NRG Energy Inc. and Ventech Engineers International LLC to develop GTL facilities in the United States, Canada, the UK and China. The JV broke ground last year for the Envia Energy GTL plant in Oklahoma City at Waste Management’s East Oak Landfill. That plant will use landfill gas to produce clean diesel fuel, synthetic waxes and naphtha.

Velocys said Thursday that construction at the site is ongoing. All modular process units, cooling towers and other major equipment have been installed. Velocys has sent a team of its engineers to the site to aid Ventech, the engineer, in the plant’s start-up and commissioning. Velocys added that it continues to pursue other opportunities in the United States and said it has completed its part of an engineering study for a national gas company in Central Asia for a project there.

Velocys technology is in the early stages of commercialization.Its equipment is significantly smaller, which enables the modular plants to be deployed more cost-effectively in remote regions that wouldn’t otherwise be able to accommodate larger refinery-sized GTL facilities that have been built on coastlines overseas. Just a handful of the larger, conventional GTL plants are operating globally, with capacities ranging up to 140,000 b/d. Those facilities can cost billions of dollars to construct, while smaller-scale facilities cost about $100 million, according to an estimate provided last year by Velocys.

Other GTL plants have been proposed for the Appalachian Basin in recent years, but none have been completed. They include Marcellus GTL LLC’s 84,000 gallon/d facility in Blair County that was announced in 2013; EmberClear Corp.’s 500,000 gallon/d plant in Southeast Pennsylvania that was announced in 2014, and Primus Green Energy Inc.’s proposal this year to build a small-scale GTL plant somewhere in the basin that would use Marcellus Shale gas to make methanol.

EmberClear dropped its plans last year for its Southeast Pennsylvania plant, citing administrative concerns and local opposition. Marcellus GTL’s facility is expected to be complete this year, according to the company’s website.

See also: www.FrackCheckWV.net