basic survey project for joint implementation, etc.' for

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NEDO-IC-OOER39 The Basic Survey Project for Joint Implementation, Etc." for Revamp Study on Feedstock Change and Energy Saving m India Fertilizer Plants March, 2001 New Energy and Industrial Technology Development Organization (NEDO) Entrusted to Toyo Engineering Corporation, Japan 020 005042-5

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Page 1: Basic survey project for joint implementation, etc.' for

NEDO-IC-OOER39

“The Basic Survey Project for Joint Implementation, Etc."

for

Revamp Study

on

Feedstock Change and Energy Saving

m

India Fertilizer Plants

March, 2001

New Energy and Industrial Technology Development Organization(NEDO)

Entrusted to Toyo Engineering Corporation, Japan

020 005042-5

Page 2: Basic survey project for joint implementation, etc.' for

The Basic Survey Project for Joint Implementation, Etc.

Revamp Study on Feedstock Change and Energy Saving in India Fertilizer Plants

Toyo Engineering Corporation

March, 2001

This feasibility study has been conducted under the program of “The Basic Survey Project

for Joint Implementation, Etc.” which aims to identify studies concerning the Joint

Implementation (JI) and the Clean Development Mechanism (CDM) to which Japan’s

technologies for energy conservation can be applied to reduce emissions of greenhouse

performance gases. This feasibility study has been conducted in order to identify studies

concerning “Clean Development Mechanism (CDM)” for the Revamp Study on

Feedstock Change and Energy Saving in India Fertilizer Plants which is under planning by

Zuari Industries Limited (Fertilizer Division) in Goa, India.___________________________

Page 3: Basic survey project for joint implementation, etc.' for

NEDO-IC-OOER39

"The Basic Survey Project for Joint Implementation, Etc."

for

Revamp Study

on

Feedstock Change and Energy Saving

m

India Fertilizer Plants

March, 2001

New Energy and Industrial Technology Development Organization(NEDO)

Entrusted to Toyo Engineering Corporation, Japan

Page 4: Basic survey project for joint implementation, etc.' for

INTRODUCTION

This feasibility study has been conducted under the program of “The Basic Survey Project for Joint

Implementation, Etc.” which aims to identify studies concerning the Joint Implementation (JI) and

the Clean Development Mechanism (CDM) to which Japan’s technologies for energy conservation

can be applied to reduce emissions of greenhouse performance gases. For this purpose, the

implementation of feasibility studies are entrusted to such Japanese corporations who have

potential projects and are aspiring to execute the projects.

This feasibility study report on the revamp study on feedstock change and energy saving in India

fertilizer plants has been prepared by Toyo Engineering Corporation, to which the feasibility study

were entrusted from NEDO as of September 1,2000.

March, 2001

Team Leader, T.Mii

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CONTENTS

ABBREVIATION

LIST of FIGURE and TABLE

SUMMARY, CONCLUSION AND RECOMMENDATION

CHAPTER 1 PROJECT BACKGROUND

1.1 Information on India................................................................................ 1-1

1.1.1 Political, Economy and Social Status............................................... 1-1

(1) Political Status

(2) Economy Status

(3) Social Status

1.1.2 Energy Strategy...................................................................................... 1-13

(1) Crude Oil

(2) Natural Gas

(3) Coal

1.1.3 Needs of Clean Development Mechanism (CDM) ..................... 1-22

1.2 Necessity of Technology Introduction for Energy Saving • • • 1-23

1.3 Purpose, Need and Effect of the Project........................................ 1-24

1.3.1 Purpose of the Project........................................................................... 1-24

1.3.2 Need of the Project............................................................................... 1-24

1.3.3 Effect of the Project............................................................................. 1-25

CHAPTER 2 PROJECT PLANNING

2.1 Project Plan............................................................................................... 2-1

2.1.1 Site Information...................................................................................... 2-1

(1) Location and Topography

(2) Geology

(3) Meteorological Conditions

-1 -

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2.1.2 Project Concept ...................................................................................... 2-4

2.1.3 Greenhouse Performance Gas to be examined ............................... 2-5

2.2 Outline of Zuari Industries Limited (ZIL)....................................... 2-6

2.2.1 Intention of ZIL........................................................................................ 2-7

2.2.2 Conditions and Status of Related Infrastructure and Facilities 2-8

2.2.3 Performance of Project Execution...................................................... 2-31

(1) Engineering Performance

(2) Management Organization

(3) Management Foundation and Management Policy

(4) Financial Performance

(5) Human Resources

(6) Project Execution Organization

2.2.4 Outline of the Project.............................................................................2-35

(1) Design Basis

(2) Outline of the Plant

(3) Plant Layout

(4) Plant Cost

(5) Raw Materials and Utilities Consumption

2.2.5 Scope of Supply.........................................................................................2-71

2.2.6 Conditions and Issues for Project Execution................................. 2-73

2.2.7 Project Execution Schedule..................................................................2-73

2.3 Financing Plan...........................................................................................2-75

2.3.1 Financing Plan for Project Execution............................................... 2-75

(1) Required Fund

(2) Debt/Equity Ratio

(3) Financing Plan

2.3.2 Conceptual Financing Plan....................................................................2-77

2.4 Conditions for Clean Development Mechanism (CDM)......... 2-78

2.4.1 Coordination Issues for Project Materialization.......................... 2-78

2.4.2 Possibility that India consents to apply CDM............................... 2-78

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CHAPTER 3 EFFECTS OF PROJECT

3.1 Effects on Energy Saving...................................................................... 3-1

3.1.1 Technical Background........................................................................... 3-1

3.1.2 Baseline....................................................................................................... 3-2

3.1.3 Quantitative Effects............................................................................... 3-3

3.1.4 Review and Confirmation...................................................................... 3-5

3.2 Reduction of Greenhouse Performance Gas..................................... 3-6

3.2.1 Technical Background..............................................................................3-6

3.2.2 Baseline...................................................................................................... 3-6

3.2.3 Quantitative Effects............................................................................... 3-8

3.2.4 Review and Confirmation.......................................................................3-10

3.3 Affects to Productivity......................................................................... 3-11

CHAPTER 4 PROFITABILITY

4.1 Financial Evaluation............................................................................... 4-1

4.1.1 Evaluation Method for Profitability................................................. 4-1

(1) Without Revamp (without case)

(2) With Revamp (with case)

(3) Evaluation for Revamp project

4.1.2 Required Fund........................................................................................... 4-2

(1) Basic Conditions of Calculation

(2) Erection Cost

(3) Pre-production Cost

(4) Initial Working Capital

(5) Interest during Construction

(6) Total Investment Cost

4.1.3 Operation of Plant.................................................................................... 4-6

(1) Production and Sales Plan

(2) Required Number of Employees

(3) Training Plan

(4) Recruiting Plan

(5) Variable and Direct Fixed Cost

-3 -

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(6) Production Cost

4.1.4 Financial Evaluation............................................................................... 4-17

(1) Conditions of Financial Evaluation

(2) Financial Statements

(3) Financial Internal Rate of Return (FIRR)

(4) Sensitivity Analysis on ROI before Tax

(5) Evaluation

4.2 Cost versus Effects................................................................................. 4-31

4.2.1 Cost versus Energy Saving Effect...................................................... 4-31

4.2.2 Cost versus Greenhouse Performance Gas Reduction................... 4-31

CHAPTER 5 SPREAD EFFECTS

5.1 Spread Possibility of the Applied Technology in other area •• 5-1

5.2 Effects under Spread Consideration................................................. 5-2

5.2.1 Effects on Energy Saving...................................................................... 5-2

5.2.2 Effects on Greenhouse Performance Gas Reduction........................5-3

CHAPTER 6 EFFECTS to OTHERS

6.1 Environmental Effects........................................................................... 6-1

6.2 Economical Effects................................................................................. 6-2

6.3 Social Effects............................................................................................. 6-3

CONCLUSION and RECOMMENDATION

ATTACHMENT

Reference List

-4-

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Project Team Member List

Name Role and Major Works Company

T. MiiProject Team Leader

General and Project Background

Toyo Engineering

Corporation

H. NakamuraProject Planning and Effects, Spread Effects

(Ammonia)

Toyo Engineering

Corporation

M. UchiyamaProject Planning and Effects, Spread Effects

(Ammonia-Assistant)

Toyo Engineering

Corporation

S. HiroseProject Planning and Effects (Ammonia-

Assistant)

Toyo Engineering

Corporation

H. MorikawaProject Planning and Effects, Spread Effects

(Urea)

Toyo Engineering

Corporation

Y. KojimaProject Planning and Effects, Spread Effects

(Urea-Assistant)

Toyo Engineering

Corporation

H. FujiiProject Planning and Effects (Urea-Assistant) Toyo Engineering

Corporation

Y. IkawaProject Planning and Effects, Profitability

Analysis, Spread Effects

Toyo Engineering

Corporation

S. YamazakiBasic Design of Facilities (Layout & Piping),

Project Planning and Effects

Toyo Engineering

Corporation

S. WatanabeBasic Design of Facilities (Layout & Piping -

Assistant), Project Planning and Effects

Toyo Engineering

Corporation

Y. KawamotoBasic Design of Facilities (Vessel), Project

Planning and Effects

Toyo Engineering

Corporation

Y. WadaBasic Design of Facilities (Rotating Machine),

Project Planning and Effects

Toyo Engineering

Corporation

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A. NaitoBasic Design of Facilities (Furnace), Project

Planning and Effects

Toyo Engineering

Corporation

T. SugitaBasic Design of Facilities (Material handling),

Project Planning and Effects

Toyo Engineering

Corporation

H. FurukawaBasic Design of Facilities (Instrumentation),

Project Planning and Effects

Toyo Engineering

Corporation

M. KuninagaBasic Design of Facilities (Electrical), Project

Planning and Effects

Toyo Engineering

Corporation

T. UenoBasic Design of Facilities (Civil &

Architectural), Project Planning and Effects

Toyo Engineering

Corporation

H. SatoProject Background, Market Survey, Project

Planning

Toyo Engineering

Corporation

H. EbisawaPlant Cost Estimation (Summary) Toyo Engineering

Corporation

S. KawakamiPlant Cost Estimation (Equipment) Toyo Engineering

Corporation

Y. OnodaFinancing Plan, Project Coordinator Toyo Engineering

Corporation

H. HeyaProject Background, Market Survey, Project

Planning (Part time)

Toyo Engineering

Corporation

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ABBREVIATION

A Monetary

INR(or Rs)Indian Local Currency, Rupee

US$ U.S. Dollar

MUSS Thousand US$

MMUSS Million USS

JPY Japanese Yen

MMJPY Million Japanese Yen

LAKH 100,000

CRORE 10,000,000

B. Contract

C&F Cost and Freight

CIF Cost, Insurance and Freight

FOB Free on Board

LSTK Lump Sum Turn Key

C. Organization

1. India

ZIL Zuari Industries Limited

CFCL Chambal Fertilizers and Chemicals Limited

GAIL Gas Authority of India Limited

CIL Coal India Ltd

SCCL Singareni Collieries Company Ltd

IOCL Indian Oil Corporation Limited

ONGC Oil and Natural Gas Corporation Ltd

2. Others

MET! Ministry of Economy, Trade and Industry

NEDO New Energy and Industrial Technology Development Organization

JBIC Japan Bank for International Cooperation

-1 -

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ADB Asian Development Bank

WTO World Trade Organization

TEC Toyo Engineering Corporation, Japan

KBR Kellogg Brown & Root, Inc., U.S.A

TEIL Toyo Engineering India Ltd., India

D. Unit

1. Length

cm centimeter

km kilometer

m meter

mm millimeter

2. Area

cm2 square centimeter

ha hectare

km2 square kilometer

m2 square meter

3. Volume

cm3 cubic centimeter

L, 1

m3

liter

cubic meter

Nm3 normal cubic meter at 0°C, 1 atm

Sm3 standard cubic meter at 20°C, 1 atm

bbl barrel

mmSm3 mil ion standard cubic meter at 20°C, 1 atm

MCM thousand cubic meter

4. Weight

g gram

kg kilogram

mg milligram

T, t, ton metric ton

Tonne metric ton

-2-

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Time

Y,y year

M,m month

D,d day

h, hr, H, Hr hour

min minute

s, sec, S second

Capacity and rate

kg/h kilogram per hour

m3/h cubic meter per hour

t/h metric ton per hour

t/y metric ton per year

t/d metric ton per day

MTPD metric tonne per Day

BPSD barrel per stream day

Pressure

A absolute

G gauge

Pa pascal

kPa kilo-pascal

Mpa mega-pascal

atm atmospheric pressure

kg/cm2 kilogram per square centimeter

mmHg millimeter of mercury column

Temperature

°C degree Celsius (centigrade)

Energy

cal calorie

kcal kilocalorie

Gcal gigacalorie

kWh kilowatt hour

MWh megawatt hour

-3-

Page 14: Basic survey project for joint implementation, etc.' for

10. Power

kW kilowatt

MW megawatt

11. Others

Hz Hertz (frequency)

k kilo (1,000)

kV kilovolt (voltage)

m milli (1/1,000)

M thousand (Roman) or mega (1,000,000)

MM million (Roman)

MW Molecular Weight

% percent

ppm parts per million

Economics

CIRR Commercial Interest Reference Rate

DCF Discounted Cash Flow

EIRR Economic Internal Rate of Return

FC Foreign Currency

FIRR Financial internal Rate of Return

FP Foreign Portion

GDP Gross Domestic Production

GNP Gross National Production

IDC Interest During Construction

IRR Internal Rate of Return

LC Local Currency

LP Local Portion

ROE Return on Equity, IRR on Equity

ROI Return on Investment

VAT Value-Added Tax

-4-

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F. Process

ACES Advanced Process for Cost and Energy Saving

KAAP Kellogg Advanced Ammonia Process

Miscellaneous

BFW Boiler Feed Water

BL Battery Limit

CW Cooling Water

DAP Di-Ammonium Phosphate

DM De-mineralized Water

EP End Point

F/S Feasibility Study

HBJ Hazira-Bijaipur-Jagdhishpur

IBP Initial Boiling Point

JSC Joint Stock Company

LNG Liquified Natural Gas

LPG Liquefied Petroleum Gas Propane and Butane

MAP Mono-Ammonium Phosphate

max. Maximum

min. Minimum

MOU Memorandum of Understanding

MSL Mean Sea Level

N/A Not Available or not applicable

NG Natural Gas

NGL Natural Gas Liquid

NPK Nitrogen Phosphate Potash

OSBL Out Side Battery Limit

vol. Volume

wt. Weight

-5-

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LIST of FIGURE and TABLE

CHAPTER I

Fig. 1.1-1 Map of India

CHAPTER!

Fig. 2.2-1 Ammonia Simplified Flow Diagram (Existing)

Fig. 2.2-2 Simplified Ammonia Plant Steam Balance (Existing)

Fig. 2.2-3 Zuari Industries Limited Organization Chart Fertilizer Division

Fig. 2.2-4 Ammonia Simplified Flow Diagram (After Revamp)

Fig. 2.2-5 Simplified Ammonia Plant Steam Balance (After Revamp)

Fig. 2.2-6 Urea Process Renovation Scheme

Fig. 2.2-7 Urea C02 Compression Section

Fig. 2.2-8 Urea Hydrogen Removal

Fig. 2.2-9 Urea Synthesis Section

Fig. 2.2-10 Urea Purification Section

Fig. 2.2-11 Urea Recovery Section

Fig. 2.2-12 Urea Steam System

Fig. 2.2-13 Conceptual Figure of Existing Plant Layout in Zuari Industries

Limited (ZIL)

CHAPTERS

Table 4.1-1(1) Production and Sales Plan for Without Case

Table 4.1-1(2) Production and Sales Plan for With Case

Table 4.1-2 Variable Cost Summary at 100 % Operation

Table 4.1-3 Fixed Cost Summary

Table 4.1-4(1) Production Cost (Variable & Fixed Direct Cost) for Without Case

Table 4.1-4(2) Production Cost (Variable & Fixed Direct Cost) for With Case

Table 4.1-5(1) Income Statements (Profit and Loss Statements) for Without Case

Table 4.1-5(2) Income Statements (Profit and Loss Statements) for With Case

Table 4.1-6(1) Cash Flow Statement (Funds Flow Statement) for Without Case

Table 4.1-6(2) Cash Flow Statement (Funds Flow Statement) for With Case

Table 4.1-7(1) Project Balance Sheet for Without Case

Table 4.1-7(2) Project Balance Sheet for With Case

Table 4.1-8 Internal Rate of Return

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CHAFFEH4 (coatmtie#

Fig. 4.1-1

Fig. 4.1-2

Fig. 4.1-3

Natural Gas Price vs ROI

Product Urea Sales price vs ROI

Total Investment Cost vs ROI

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SUMMARY, CONCLUSION AND RECOMMENDATION

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SUMMARY. CONCLUSION AND RECOMMENDATION

Information on India and Needs of the Project

The Indian economy is expected to grow by 5.9 per cent in 1999-2000. The

inflation rate dropped to international levels of 2 to 3 per cent for the first time in

decades. This was demonstrated by the continuing rise in foreign exchange

reserves and a relatively stable exchange rate.

The coal reserves of India is estimated as 211,600 million tonnes, which is the

sixth position in the world. Coal is used as energy source of about 60 % in India.

But most of power generation based on coal gasification become old and their

thermal efficincy is relatively low. The share of coal as energy supply in India

have been gradually dencreased. Crude oil production during 1998-99 was 32.7

million tonnes. The import of crude oil between April - November, 1999 was 31.5

million tonnes. The refining capacity has increased to 109.0 million tonnes per annum

making the country almost self-sufficient in the refining sector.

The production of natural gas during 1998-99 was around 75 mmSm3/D. The demand

of gas is of the order of 260 mmSm3/D and projections of gas demand indicate a wide

and growing gap between demand and supply. To meet this gap, the Government

have taken steps for import of natural gas from the Middle-East. The projects for

import of liquefied natural gas at Dahej and Kochi are being implemented by Petronet

LNG Limited.

C02 emission in India was fifth position in the world following U.S.A, China,

Russia and Japan. C02 emissions from petroleum and coal are dominant in the

total.

Population of India almost reaches one billion and is estimated to become above

China in near future. Therefore food, fertilizer, energy, social overhead capital

etc. should be increased. Most of fertilizers necessary for agricultural product have

been produced in India to secure domestic supply of food. The government of

India gives fertilizer sector subsidy to fix sales price of fertilizer to secure

domestic production.

Page 20: Basic survey project for joint implementation, etc.' for

Under such subsidy policy old fertilizer plants with less efficiency are still

operated and drastic improvement of fertilizer plants with feedstock of heavy

hydrocarbons such as coal, heavy oil, naphtha have been suspended. Therefore

production of fertilizer in India became less competitive compared with

international market. In order to improve such situation old fertilizer plants with

naphtha feedstock should be revamped to change feedstock to natural gas and to

reduce energy consumption, which are in compliance with the guideline of long

term policy on fertilizer sector being proposed by the government of India.

The fertilizer companies based on naphtha feedstock will suffer due to not only

reduction of subsidy, but also recent high naphtha price. Therefore old fertilizer

plants with naphtha feedstock should be revamped to change feedstock to natural

gas and to reduce energy for their survival. The necessity of technology

introduction for energy saving is very high in India.

2. Project Planning

Zuari Industries Limited (ZIL) in Goa, India produces ammonia with feedstock of

naphtha and also produces urea from ammonia and C02 produced in the ammonia

plant. These plants were constructed by Toyo Engineering Corp. (TEC) based on

TEC's own technologies and started the operation in 1973. The energy

consumption of these plants are considerably large compared with latest modern

plants and the ammonia plant uses expensive naphtha as feedstock and fuel.

These plants were ones of the largest, fully integrated, ammonia and urea complex

in India and Goa's first large industrial undertaking. ZIL expanded its fertilizer

plants by adding DAP (in 1984) in Goa. The fertilizers produced are supplied not

only to Goa, but also to Andhra Pradesh, Karnataka and Maharashtra.

The Project objectives are to reduce fertilizer production cost and to decrease

discharges of C02 gas into the atmosphere by feedstock change and energy saving.

The ammonia plant was constructed by Toyo Engineering Corporation based on its

Steam Reforming Process for producing ammonia starting with naphtha as feed.

The original design of ammonia production capacity was 660 metric tonnes per

-2-

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stream day. The ammonia plant has been modified by ZIL to mainly increase the

production capacity.

The plant was originally designed to produce 1140 metric tons of prilled urea per

stream day by single train using MITSUI-TOATSU Total Recycle C process. The

plant has been debottlenecked by ZIL several times, since its stand-up, to have the

production capacity about 1300 - 1350 metric tons per day.

The energy saving and feedsrock change were studied in the F/S at the design

capacity for the study is 750 tons per day ±10 % for ammonia and 1,300 tons per

day ±10 % for urea.

The major applied technologies for the ammonia plant are listed below.

1) aMDEA process for C02 removal

2) KAAP converter installed in ammonia synthesis

3) High pressure condensate stripper

4) Modification of compressors and turbines

The feedstock change from naphtha to natural gas is also applied for the ammonia

plant and also can achieve energy saving.

TEC's ACES 21 is applied for the urea plant. ACES 21 is featured with

improvement of reaction efficiency and effective recovery of heat to reduce energy

effectively and economically.

EPC cost of the revamp plants was estimated as below.

Category Estimated Cost (MUS$)

Engineering 9,404

Equipment and Material 38,264

Construction 8,679

Others 2,530

Total Plant Cost 58,877

-3-

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The raw material and utilities consumption of ammonia plant is summarized below

for before revamp, after energy saving and after feedstock conversion.

as per ton ammonia

before revamp after energy saving after feedstock change

Feedstock 5.501 5.389 5.611 Gcal

Fuel

Naphtha or NG 3.405 3.215 2.931 Gcal

Steam 0.775 -0.169 -0.411 Gcal

Power 0.110 0.170 0.166 Gcal

C.W 0.293 0.239 0.240 Gcal

sub-total 4.583 3.455 2.926 Gcal

Total 10.084 8.844 8.537 Gcal

The raw materials and utilities consumption of urea plant is summarized below in

comparison before and after renovation.

Existing Renovated

Steam (T/T)

Import 43.0 Kg/cnfG x 385°C 1.67 1.10

11.4 Kg/cm2G x 215°C 0.09 -

Export 21.5 Kg/cnrG x 318°C - -0.16

11.8 Kg/cnrG x 265°C -0.32 -

Net 1.44 0.94

Electricity (kWh/T)1} 86 77

Energy (Gcal/T)

Steam 1.101 0.717

Electricity 0.211 0.189

Total 1.312 0.906

Saving Base 0.406

Note 1} including power for cooling water

-4-

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Project execution schedule is planned as follows.

Work Item Schedule

Evaluation on F/S by India side Application of Japanese fund etc.

Apr. 2001 — Feb. 2002

Start of EPC works Mar. 2002

Basic and detailed design Mar. 2002 — Feb. 2003

Construction of the plant and Tie-in Feb. 2003 - Jul. 2004

Pre-commissiong/commissioning Aug. 2004 — Sep. 2004

Start of commercial operation Oct. 1st, 2004

Required fund as Total Investment Cost is 60,832 MUSS, breakdown of which is

summarized below:

(UNIT: M US$)

ITEM ForeignCurrency

LocalCurrency Total

Erection Cost 40,678 18,200 58,877

Pre-production Cost 0 0 0

Initial Working Capital 0 0 0

Interest during Construction 0 1,954 1,954

Total Investment Cost 40,678 20,154 60,832

After discussions with India, the required finance plan for the project has been

presumed as follows:

- Debt 40,678 MUSS (66.9 %)

- Equity 20,154 MUSS (33.1 %)

JBIC export credit loan will be applied to economic evaluation of this project.

-5-

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3. Effect of Project

Annual reduction of crude oil by energy saving of ammonia and urea plants is

55,705 toe/y.

Total quantity of the energy saving over the project life is 1,114,100 toe crude oil

equivalent as summarized below.

Total-Quantity of Energy Saving.

Period,Year Crude oil equivalent, toe/y Total Energy saving, toe

1st to 10th 55,705 557,050

11th to 20th 55,705 557,050

Total 1,114,100

Annual reduction of C02 of ammonia and urea plants is 245,139 t-C02/y.

Total quantity of the C02 reduction over the project life is 4,902,780 t-C02 as

summarized below.

Total Quantity of CQ2-Reduction

Period, Year C02 Reduction, CQ2/y

t- Total C02 Reduction, t-co2

1st to 10th 245,139 2,451,390

11th to 20th 245,139 2,451,390

Total 4,902,780

4. Profitability

250 US$/T as urea sales price, 333.43 US$/T as naphtha price (equivalent to 7.9

US$/MMBtu low heat value) and 6.0 US$/MMBtu (low heat value) are estimated

as FIRR calculation basis. The FIRR calculation results are shown below.

(a) FIRR on Investment (ROI)

Before Tax 35.21 %

-6-

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After Tax 28.19 %

(b) FIRR on Equity (ROE)

Before Tax 63.68 %

- After Tax 49.78 %

According to the sensitivity analysis the raw material natural gas shares more than

50 % of production cost and it is very sensitive on project profitability. But

product urea price does not affect project profitability, because production amount

is not changed by the project. Product urea is important for ZIL financial

soundness.

The project continues its negative profit without revamping project based on

estimated urea price of US$/Ton 250. The cashflow also continues its negative

figure. If urea price goes up by US$/Ton 11 or naphtha price comes down by

US$/Ton 21 from base price of US$/Ton 333.43, cashflow turns to positive.

When project is implemented, natural gas price is lower than naphtha one and

improvement of profit is expected with positive cashflow.The project profitability

is very high because of raw material conversion and energy consevation.

Current production cost is very high and is not competitive to international urea

price level. After proejct implementation, the same production cost goes down up

to US$/Ton 193 to 208, which is more than US$/Ton 50 cheaper than current one.

It is understood that conversion from naphtha to natural gas contributes very much

to proejct profitability improvement. There are many projects of LNG terminal

and pipeline to supply natural gas to fertilizer plants, but it would also take much

time to materialize. If raw material of naphtha is not changed to natural gas, ROI

before tax is calculated at 14.77 %.

5. Cost vs Effects and Spread Effect

The quantity of the energy saving over the project life is calculated as 55,705 toe/y.

Intial investment cost for the project is 60,832 MUS$ (6,378 million JPY). Thus,

-7-

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the cost versus energy saving of the project is 8.72 toe-y/million JPY.

The reduced quantity of CO? gas as the greenhouse performance gas is estimated

to be 245,139 t-C02/y. Thus, the cost versus greenhouse performance gas

reduction is 38.4t-C02-y/million JPY.

According to the survey in India for this F/S there are 3 fertilizer plants with

similar level of energy consumption as ZIL. Assuming that above all fertilizer

plants could save energy with applying energy saving technologies and feedstock

conversion like the project, total effects of energy saving could be estimated as

169,114 toe/y.

In similar approach to the above, the yearly reduction of C02 gas emission is

expected to be approximately 752,274 t-C02/y.

6. Summary

Fertilizer production in old plants in India became less competitive compared with

international market under the fertilizer subsidy policy by government of India.

The F/S result for without revamp case same as present condition shows minus

cash flow through the total project. The past minus cash flow has been

compensated by subsidy from the government, but the amount of subsidy was

reduced from 2000 and the government decided to phase out the urea subsidy by

April 2006. Therefore old fertilizer plants with naphtha feedstock should be

revamped to change feedstock to natural gas and to reduce energy consumption for

their survival.

The F/S result shows that the project including feedstock change and energy

saving could drastically reduce production cost compared with the without revamp

case. The quantity of C02 reduction including spread effect in India would be

relatively large. Therefore it is understood that urgent implementation of the

project would be necessary.

However, it would take time to decide a detailed government policy, which is

under planning to proceed phasing out the existing subsidy and to complete

decontrol of urea by April 2006. The government recommends to change

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feedstock from naphtha to natural gas in fertilizer plants. So there are many

projects of LNG terminal and pipeline to supply natural gas to fertilizer plants.

But it would also take much time to materialize.

We, Toyo Engineering Corp. will watch and follow the government policy and

investigate projects of LNG terminal and pipeline as well as will support Zuari

Industries Limited (ZIL) as required in every phase of the above development and

implementation of the project.

Following actions are required for further development and implementation of the

project:

Toyo to support ZIL to study and evaluate the result of this F/S based on the

government policy.

Toyo to investigate projects of LNG terminal and pipeline

Both Toyo and ZIL to enter into the preparation for Japanese fund

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CHAPTER 1

PROJECT BACKGROUND

Summary: Based on the present status of politics, economy, society and energy resources of India discussions were made on the project background

__________ such as purpose, needs and effects of the project.____________________

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CHAPTER 1 PROJECT BACKGROUND

1.1 Information on India

1.1.1 Political, Economy and Social Status

(1) Political Status

India, a union of states as shown in Fig. 1.1-1 (The map of India), is a Sovereign,

Secular, Democratic Republic with a Parliamentary system of Government. The

Indian polity is governed in terms of the Constitution, which was adopted by the

Constituent Assembly on 26 November 1949 and came into force on 26 January

1950.

The President is the constitutional head of Executive of the Union. Real executive

power vests in a Council of Ministers with the Prime Minister as head. The

Council of Ministers is headed by the Prime Minister to aid and advise the

President who shall, in exercise of his functions, act in accordance with such

advice. The Council of Ministers is collectively responsible to the Lok Sabha, the

House of the People.

The Council of Ministers comprises Cabinet Ministers, Minister of States

(independent charge or otherwise) and Deputy Ministers. Prime Minister

communicates all decisions of the Council of Ministers relating to administration

of affairs of the Union and proposals for legislation to the President. Generally,

each department has an officer designated as secretary to the Government of India

to advise Ministers on policy matters and general administration. The Cabinet

Secretariat has an important coordinating role in decision making at highest level

and operates under direction of Prime Minister

The present Indian Government is a coalition Government headed by Shri. Atal

Bihari Vajpayee as the Prime Miister. The unity of the caolition appears to be

strong and since the period of the Government is five years it can be mentioned

that the present Government is stable and is in a strong position to carry out

economic and social reforms.

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The only major International issues facing the Governmant of India are its dispute

with Pakistan over Kashmir and its unwillingness to sign the CTBT

(Comprehensive Nuclear Test Ban Trearty). Economic sanctions were imposed

by the International Community after India conducted nuclear tests in 1998,

however these sanctions have been largely relaxed.

In the states, the Governor, as the representative of the President, is the head of

Executive, but real executive power rests with the Chief Minister who heads the

Council of Ministers. The Council of Ministers of a state is collectively responsible

to the elected legislative assembly of the state.

The Legislative Arm of the Union, called Parliament, consists of the President,

Rajya Sabha and Lok Sabha. All legislation requires consent of both houses of

parliament. However, in case of money bills, the will of the Lok Sabha always

prevails.

A recognised political party has been classified as a National Party or a State Party.

If a political party is recognised in four or more states, it is considered as a

National Party.

The Congress, Bharatiya Janata Party, Janata Dal, Communist Party of India and

Communist Party of India (Marxist) are the prominent National Parties in the

Country. Telugu Desam in Andhra Pradesh, Asom Gana Parishad in Assam,

Jharkhand Mukti Morcha in Bihar, Maharashtrwad Gomantak Party in Goa,

National Conference in Jammu and Kashmir, Muslim League in Kerala, Shiv Sena

in Maharashtra, Akali Dal in Punjab, All-India Anna Dravida Munnetra Kazhagam

and Dravida Munnetra Kazhagam in Tamil Nadu, Bahujan Samaj Party and

Samajwadi Party in Uttar Pradesh and All-India Forward Block in West Bengal are

the prominent state parties.

The Supreme Court is the apex court in the country. The High Court stands at the

head of the state's judicial administration. Each state is divided into judicial

districts presided over by a district and sessions judge, who is the highest judicial

authority in a district. Below him, there are courts of civil jurisdiction, known in

different states as munsifs, sub-judges, civil judges and the like. Similarly, criminal

judiciary comprises chief judicial magistrate and judicial magistrates of first and

second class.

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(2) Economy Status

The Indian economy is expected to grow by 5.9 per cent in 1999-2000. More

importantly, an industrial recovery seems finally to be underway from the cyclical

downturn of the previous two years. Growth of GDP from manufacturing will

almost double to 7 per cent in 1999-2000 from 3.6 per cent in 1998-99. The

growth in GDP from the construction sector is expected to accelerate to 9.0 per

cent in 1999-2000 from 5.7 per cent in 1998-99. The performance of

infrastructure sectors improved markedly.

The inflation rate dropped to international levels of 2 to 3 per cent for the first time

in decades. The balance of payments survived the twin shocks of the East-Asian

crisis and the post-Pokhran sanctions with a low current account deficit and

sufficient capital inflows. This was demonstrated by the continuing rise in

foreign exchange reserves by over US $ 2.4 billion during the year until the end of

January, 2000 coupled with a relatively stable exchange rate. Export performance

has improved on par with the better performing emerging economies. The

restoration of confidence in industry has been best reflected in the rise in the stock

market during 1999. Primary issues have increased by almost half during the first

nine months of 1999-2000.

Inflation dropped dramatically in 1999, surprising many observers by remaining at

low levels. As of January 29, 2000, the annual inflation as measured by the

Wholesale Price Index was 2.9 per cent (point to point), down from a peak 8.8 per

cent on September 25, 1998 1}. The strong agricultural growth in 1998-99, the

increasing openness of the economy to manufactured imports along with the fall in

international prices has contributed greatly to this decline.

Exports showed a strong recovery in 1999, growing by 12.9 per cent in April-

Dee ember 1999 in US $ value (Director General of Commercial Intelligence &

Statistics customs data). Software exports, which are not captured in the customs

data, also continued to show vigorous growth of over fifty per cent during April-

September 1999. Despite a 57.8 per cent growth in the US $ value of oil imports

in April-December 1999, overall import growth remained at a manageable 9.0 per

cent. As a result the trade deficit was lower in value (US $) during April-

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December 1999 as compared to April-December 1998. Non-oil imports, however,

grew by only 1.1 per cent in this period, as prices of non-fuel primary commodities

were projected to fall in 1999 by over 11 per cent and unit values of manufactures

by about half a per cent.

The current account deficit, which defied gloomy forecasts based on the presumed

after effects of the Asian crisis and the economic sanctions, ended at 1 per cent of

GDP in 1998-99. Both portfolio investment and non-resident deposit inflows have

shown significant improvement. Foreign Direct Investment flows, however,

continue to be lower, and this is a source of serious concern, particularly given the

medium term target of US $ 10 billion of Foreign Direct Investment inflows.

There was a sharp upturn in GDP growth in 1998-99, which reversed the

deceleration in growth seen in 1997-98. GDP (at factor cost) growth accelerated to

6.8 per cent in 1998-99 from 5 per cent in 1997-98 2).

Agriculture

The century ended with the country’s foodgrains output crossing 200 million

tonnes. Foodgrains production in 1998-99 was 203 million tonnes 2). The country

has also emerged as a marginal exporter (2 to 4 million tonnes) of foodgrains.

Private investment in agriculture has been rising over the nineties. From 905.6

million INK in 1993-94 it has risen to 1258.1 million INR by 1998-99 (1993-94

prices). Public investment in agriculture has, however, declined during the same

period so that the growth in total investment is only 21.7 per cent during this

period. There is a need to shift the emphasis of public support for agriculture from

subsidies to investment in rural and agricultural infrastructure and effective

research and extension.

Industry

Industrial growth (as per the Index of Industrial Production) has shown a firm

recovery this year with 6.2 per cent growth in April-December 1999, as compared

to only 3.7 per cent in April-December 1998 1}. The cyclical downturn in

industrial growth, which started in 1996-97, showed some signs of recovery in

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1997-98. Manufacturing growth this year at 6.7 per cent during April-December

1999 was 1.7 times the 3.9 per cent witnessed in the corresponding period of last

year. The improved performance of the electricity sector also contributed to the

industrial recovery.

Fertilizer Industry

The Indian fertilizer industry has been supplying a substantial portion of the

growing demand of fertilizers. It had a very humble beginning in 1906, when the

first manufacturing unit was set up in Ranipet near Chennai with a production

capacity of 6,000 tonnes of Single Superphosphate per annum. The Fertilizer &

Chemicals Travancore Ltd. (FACT) at Cochin in Kerala and the Fertilizer

Corporation of India Ltd., Sindri in Bihar, were the first large sized fertilizer plants

to be set up in the forties and fifties with a view to establishing a base for

industrialization and achieving self-sufficiency in foodgrains.

The Green Revolution in the late sixties gave an impetus to the growth of the

fertilizer industry in India. The eighties witnessed a significant addition to the

fertilizer production capacity.

The installed capacity as on February 2000 has reached a level of 11.0 million

tonnes of nitrogen (inclusive of an installed capacity of 20 million tonnes of urea)

and 3.65 million tonnes of phosphate nutrients, making India the third largest

fertilizer producer in the world. The rapid build-up of fertilizer production

capacity in the country has been achieved as a result of a favorable policy

environment and substantial investments made over the years in the public, co­

operative and private sectors.

Today, there are 64 large sized fertilizer plants in the country, manufacturing a

wide range of nitrogenous, phosphatic and complex fertilizers. Nine of the units

produce ammonium sulphate as a by-product. Besides, there are about 79 medium

and small-scale single superphosphate units.

The sector-wise installed capacity of Nitrogen and Phosphatic fertilizers is given in

the table below:

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Sector-wise Nutrient-wise Installed Capacity of fertilizer as of February 2000

Sector Capacity (million tonnes) % share

N P N P

Public Sector 4.32 0.83 39.02 22.67

Cooperative Sector 2.35 0.52 21.21 14.23

Private Sector 4.40 2.30 39.77 63.10

Total 11.07 3.65 100.00 100.00

Sector-wise Installed Capacity of Urea and its percentage share as of February

2000.

Sector Capacity (million tonnes)

% Share

Public Sector 7.60 37.85

Co-operative Sector 4.67 23.28

Private Sector 7.80 38.87

Total 20.07 100.00

Feedstock Scenario

Of the three main nutrients required for various crops nitrogen, phosphate and

potash, indigenous raw materials are available mainly for nitrogen. The

Government’s policy has aimed at achieving the maximum possible degree of

self-sufficiency in the production of nitrogenous fertilizers based on utilisation of

indigenous feedstock. As of now, the country is self-sufficient to the extent of

about 92.1% in the case of nitrogen. Prior to 1980, nitrogenous fertilizer plants

were based mainly on naphtha as feedstock.

A number of fuel oil based ammonia-urea plants were also set up during 1978 to

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1982. In 1980, two coal-based plants were set up for the first time in the country

at Talcher (Orissa) and Ramagundam (Andhra Pradesh). With associated and free

gas becoming available from offshore Bombay High and South Bassein basins, a

number of gas based ammonia-urea plants have been set up since 1985.

In view of the limitations on availability of gas, a number of expansion projects

were taken up in the last few years with naphtha as feedstock with the flexibility

for switching over to gas as and when it is available. Feasibility of a delivery

system of Liquefied Natural Gas (LNG) to meet the demand of fertilizer units and

projects is also being explored.

In the case of phosphates, the paucity of domestic raw material constrains the

attainment of any degree of self-sufficiency. Recognising this, a deliberate

policy-mix has been adopted which involves the modulation of three options: i)

domestic production based on indigenous/imported rock phosphate and imported

sulphur; ii) domestic production based on imported intermediates, viz. ammonia

and phosphoric acid; and iii) import of finished fertilizer, viz. Di-Ammonium

Phosphate (DAP) and very rarely, Mono-Ammonium Phosphate (MAP) and

Nitrogen Phosphate Potash (NPK) complexes.

Roughly 66% of the requirement of phosphatic fertilizers is met through the first

two options. Since indigenous rock phosphate supplies meet only 5-10% of the

total requirement, phosphatic fertilizers produced in the country are essentially

based on imported raw materials and intermediates.

There are no known commercially exploitable reserves of potash in the country and

per force, the entire requirement of potassium fertilizers for direct application as

well as for production of complex fertilizers is met through imports.

In order to bridge the gap between demand and domestic availability, the country

may have to continue to depend on imports to meet the requirement of phosphatic

and potassic fertilizers, due to non-availability of indigenous raw-material.

Fertilizer Prices and Subsidy

The sale prices of controlled fertilizers are fixed by the Government of India

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(Department of Agriculture & Cooperation) under the Fertilizer (Control) Order,

1985 issued under the Essential Commodities Act, 1955. At present, only urea,

which is the main nitrogenous fertilizer constituting about 56% of the total

fertilizer consumption in the country, is under statutory price control. The

farmgate price of urea which is fixed at INR 4600 per tonne with effect from

Februrary 2000, excluding local levies, is amongst the lowest in the world and is

heavily subsidised.

The difference between the sale price and the retention price (the cost of

production as assessed by the Government plus reasonable return on net worth) is

paid as subsidy to the individual manufacturing units under the Retention Price-

cum-Subsidy Scheme (RPS). The cost of production of various fertilizer units

differ from unit to unit and even from month to month, depending upon the health

and vintage of the plant, the feedstock used, the levels of capacity utilisation,

energy consumption, distance from the source of feedstock/raw materials, cost of

inputs, etc.

In addition to the retention price subsidy, equated freight subsidy is paid to the

manufacturers of controlled fertilizers to cover the cost of transportation from the

production points to the consumption centres. Since the consumer prices of both

indigenous and imported fertilizers are fixed uniformly, subsidy is also paid on

imported fertilizers in order to bridge the difference between the cost of imports

and the statutorily fixed consumer price.

Concessions/Incentives to Domestic Fertilizer Industry

To encourage investment in the fertilizer sector, the following concessions are

available to the domestic industry:

(a) Concessional customs duty benefit on import of capital goods for setting of new

plants / substantial expansion / renovation / modernisation of existing units.

(b) Deemed export benefits to indigenous supplies of capital goods to

new/revamp ed/retrofit/modernisation of fertilizer projects provided such

supplies are made under the procedure of international competitive bidding and

no price preference is given to indigenous vendors.

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Infrastructure

Infrastructure performance has improved substantially during 1999-2000.

Electricity production increased by 7.4 per cent in April-December 1999 compared

to 7 per cent in the corresponding periods of 1998 3). The turn-around was due to

a significant acceleration of the growth rate in thermal power generation to 9.7 per

cent for April-December 1999 from 5.2 per cent in the corresponding period of

1998. The thermal plant load factor has also improved to 65.1 per cent in April-

November 1999 from 61.6 per cent in April-November 1998.

The telecommunications sector continued its fast growth. New telephone

connections provided (Direct Exchange Lines) increased by 33.4 per cent in April-

December 1999 compared to 26.1 per cent in April-December 1998 3). This was

faster than the growth rate of 27.1 per cent in 1997-98. Revenue earning goods

traffic on railways showed a sharp upturn of 8 per cent in April-December, 1999

after having fallen by 2 per cent in 1998-99. Cargo handled at major ports

showed a similar turn around with a growth of 9.2 per cent in April-December,

1999, compared to zero growth in 1998-99.

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(3) Social Status

India's process of development since 1947 has been accompanied by significant

social changes and an increasing awareness about issues affecting the poor, the

women and the children in India. The Government has made constant attempts to

promote values like democracy, freedom from discrimination, self-reliance and

independence of thought. It has also tried to improve the lot of the poor and weaker

sections of society. Women and children have figured prominently in the

government's agenda of social reforms and initiatives.

Today, India is working towards a society where the poor, marginalised and

underprivileged have equal opportunities in all spheres of life. Partnership and

collective action by the voluntary agencies, government and other like-minded

institutions and individuals have been the key to a meaningful thrust in this

direction.

Welfare State

As a welfare State, India is committed to the welfare and development of its people,

particularly the vulnerable sections like the scheduled castes (SCs), scheduled

tribes (STs), backward classes, minorities and the handicapped. This section of

the society constitutes nearly 85% of the population.

Welfare of the Scheduled Castes, Scheduled Tribes, Backward Classes and

others

Almost a quarter of India's population consists of Schedules Castes and Scheduled

Tribes, who had been grievously neglected for centuries. The government has

taken several steps for their welfare. The representation of the Scheduled Castes

and Scheduled Tribes in all Parliament and State Assemblies is assured.

Under the Special Assistance scheme, nearly 300, 000 families were expected to

benefit during 1994-95. There is a Special Component Plan for the Schedules

Castes. The central government participates in the share capital investment of the

Scheduled Caste Development Corporation, set up in the states. The National SC

and ST Finance and Development Corporation is a 100% government-owned no

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profit no loss corporation for developing entrepeneurial and other skills of this

section.

Family Welfare Programme

India has 2.4% of the world's land, but supports 16% of the entire global

population. According to the latest (1991) census report, India has a population of

846.30 million. Since the last census (1981), the country's population has

increased by 150 million. Thus the task of eradicating poverty is a daunting one,

indeed.

But the latest census figures have also brought some hope and indicated that efforts

being made in the field of family welfare have not entirely gone waste. For the

first time, the growth rate of population has declined from 2.22% (in 1981) to

2.14%. The Infant Mortality Rate, which was 140 per 1000 live births in 1981,

came down to 80. The death rate declined sharply from 15 per 1000 to 9.6. The

Eighth Plan goal is to achieve a birth rate of 7 per 1000, Infant Moritality Rate of

70 and death rate of 9 per 1000. The life expectancy is expected to hit 64 from 58

years at present.

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1.1.2 Energy Strategy

(1) Crude Oil

Crude oil production in the country during 1998-99 was 32.7 million tonnes against a

target of 34.0 million tonnes. The production target for the year 1999- 2000 is 33.0

million tonnes.

Several measures were taken by the Government to intensify exploration and enhance

hydrocarbon reserves. These included development of new fields, additional

development of existing fields, implementation of Enhanced Oil Recovery Schemes,

recourse to specialised technology, enlisting the services of international experts and

encouraging participation of private and joint venture companies in the exploration

programme.

Under the New Exploration Licensing Policy (NELP), 48 blocks were offered. By the

bid closing date of August. 1999, a total of 45 bids for 27 blocks were received from

both foreign and Indian companies including public sector undertakings. Out of these,

25 blocks have been awarded. Bids for 2 blocks were rejected, as they did not satisfy

the technical requirements.

The import of crude oil between April - November, 1999 was 31.5 million tonnes

valued at 196 billion INR and of other petroleum products 9.5 million tonnes valued at

71.95 billion INR. Exports upto November, 1999 were of 0.531 million tonnes

valued at 3.72 billion INR.

Refining Capacity and Throughput

The refining capacity of 69.14 million tonnes per annum as on January 1999 has

increased to 109.0 million tonnes per annum as on January 1, 2000, making the

country almost self-sufficient in the refining sector.

There are 17 refineries in the country, of which 7 are owned by Indian Oil Corporation

Limited (IOCL), two each by Hindustan Petroleum Corporation Limited (HPCL) and

Madras Refineries Limited (MRL), one each by Bharat Petroleum Corporation Limited

(BPCL), Cochin Refineries Limited (CRL), Bongaigoan Refinery & Petrochemicals

Limited (BRPL), Numaligarh Refinereis Limited (NRL), Mangalore Refinery &

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Petrochemicals Limited (MRPL) and Reliance Petroleum Limited (RPL).

Keeping in view the need of enhancing the refining capacity to meet the growing

demand of petroleum products, a number of grass root refineries as well as expansion

of existing refineries have been commissioned and some are under various stages of

implementation. As per the current outlook, the refining capacity is expected to go

upto 129 million tonnes per annum by the end of IX th Plan as against the estimated

demand of products of 110 million tonnes.

In the year 1998-99, about 39.8 million tonnes of crude oil was imported valued at

148.8 billion INR. Import of crude upto November 1999, was 31.5 million tonnes

valued at 196.1 billion INR.

During 1998-99, 18.78 million tonnes of products was imported at a cost of 98.4

billion INR. During the current year upto November, 1999 the import of petroleum

products was 9.51 million tonnes valued at 71.95 billion INR.

During 1998-99, the export of petroleum products (including supplies to Nepal) was

1.40 million tonnes for a value of 8.56 billion INR. The export of petroleum products

during April- November, 1999 was 0.53 million tonnes valued at 3.72 billion INR.

Crude Oil and Product Pricing

The administered pricing mechanism (APM) which was in vogue in the petroleum

sector since the mid 70's provided returns to the oil companies based on a

predetermined percentage. While the administered pricing mechanism (APM)

ensured price stability, it did not encourage cost minimisation, efficient use of capital,

customer friendly competitive environment etc. Subsidies/cross subsidies resulted in

wide distortions in consumer prices resulting in inefficient usage of scarce products.

Further, administered pricing mechanism (APM) was less transparent and therefore

investors were reluctant to commit large funds in petroleum sector. Infrequent revision

in product prices in line with international developments resulted in accumulation of a

large deficit in the Oil Pool Account in the last few years. Hence, it was considered

necessary to move towards a market driven price mechanism in a phased manner.

The process of deregulation and liberalisation will be continued during the transition

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period in further rationalisation in tariffs to provide effective tariff protection to the

refineries, reduction in transport subsidies/subsidies for kerosene and LPG (Domestic)

in a phased manner and the liberalisation of the EXIM Policy to reflect the process of

reforms.

(2) Natural Gas

Natural gas has been utilised in Assam & Gujarat since the sixties. There was a

major increase in the production & utilisation of natural gas in the late seventies with

the development of the Bombay High fields and again in the late eighties when the

South Bassein field in the Western Offshore was brought to production. The

production of natural gas during 1998-99 was around 75 mmSm3/D. Sale of natural

gas during 1998-99 was around 60 mmSm3/D out of which GAIL sold about 57.4

mmSm3/D.

Most of the production of gas comes from the Western offshore area. Assam, Andhra

Pradesh and Gujarat are other major producers of gas. Smaller quantities of gas are

produced in Tripura, Tamil Nadu and Rajasthan. 60% of the natural gas is produced

along with crude oil as associated gas. The rest is produced as free gas. The South

Bassein and Tapti fields in the Western Offshore and the gas fields in Tripura and

Andhra Pradesh(K.G. Basin) are the main producers of free gas.

The gas produced in the western offshore fields is brought to Uran in Maharashtra and

partly in Gujarat. The gas brought to Uran is utilised in and around Mumbai. The

gas brought to Hazira is sour gas which has to be sweetened by removing the sulphur

present in the gas. After sweetening, the gas is partly utilised at Hazira and the rest is

fed into the Hazira-Bijaipur-Jagdhishpur(HBJ) pipeline which passes through Gujarat,

MadhyaPradesh, Rajasthan, U P., Delhi and Haryana. The gas produced in Gujarat,

Assam, etc; is utilised within the respective states.

There have been demands from the Southern states for a Southern Grid to carry gas

from the Western offshore gas fields and other sources to Southern India. The

concept of Southern Grid has been accepted in principle. A pre-feasibility study to

estimate the potential demand has been completed. While the proposals for import of

gas through pipeline from Oman and Iran have not met with any progress for technical

& geo-political reasons, it was considered that importing Liquefied Natural Gas (LNG)

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for Southern India as well as other coastal locations would be viable alternative.

Import of Natural Gas

The production of natural gas in the country is expected to level-off at around 85

mmSm3/D. The demand of gas registered with GAIL upto 1992 itself is of the order

of 260 mmSm3/D. Projections of gas demand made by a number of agencies indicate

a wide and growing gap between demand & gas supply. To meet this gap, the

Government have taken steps for import of natural gas from the Middle-East. An

Agreement of Principal terms was signed with Oman in September’1994.

The project envisaged import of 56.6 mmSm3/D of gas by the end of decade. A

Memorandum of Understanding (MOU) was also signed with Iran in July 1993

followed by another MOU in November’1993. However, due to technical & geo­

political reasons, these projects have not materialised. Feasibility of importing gas

from Bangladesh and Myanmar to the eastern/Southern parts of the country are also

being explored.

The feasibility of importing LNG from sources such as Middle-East, south East Asia,

Australia, etc; is being pursued to meet the additional demand for gas. A joint

venture company M/s. Petronet LNG Ltd. has been formed consisting of GAIL,

ONGCL, IOCL and BPCL with equity participation of 50%. NTPC is also to join

this JV Company. M/s. Petronet LNG Ltd. has identified two locations namely, Dahej

(Gujarat) & Cochin (Kerala) for setting up LNG terminals. They have signed a Long

Term LNG Sale Purchase Agreement with M/s. Rasgas of Qatar. Work on setting up

of these terminals is under progress.

Gas Pricing

In 1990, the Government appointed the Kelkar Committee to recommend revisions

required in gas prices. After considering the recommendations of this committee, the

price of gas was revised January 1992 as follows:

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(Unit : MCM means thousand cubic meter)

Offshore gas at landfall point or onshore gas INR 1500/M CM

Transportation charges for sold along HBJ Pipeline INR 850/MCM

Gas Sold in North Eastern States INR 1000/M CM(with a concession of INR 400/MCM on case to case basis)

The aforesaid prices of natural gas were lower than the price of alternative fuels such

is fuel oil, naphtha etc. It was felt that gas prices needed to be increased to meet the

rising costs of production and transportation. A Committee was constituted under the

chairmanship of Shri T.L.Shankar, Principal, Administrative Staff College of India,

Hyderabad to recommend the levels of gas prices and the principles that should

determine gas prices.

In pursuance of the recommendations of the committee, it has been decided by the

Government that from January1997 and upto March 2000, the consumer price of gas at

landfall points would be linked to the price of a basket of Low sulfur/High sulfur fuel

oils as shown in the table below:

Year General Price Concessional Price for the North Eastern States

1997-98 55% 30%

1998-99 65% 40%

1999-2000 75% 45%

The prices would be reviewed before March 2000 for a further period.

The price would be determined and notified by GAIL with the approval of the

Ministry for every quarter depending upon the average price of the basket of fuel oils

based on figures obtained from Platts Oil Gram for the previous quarter. The general

price would vary between the floor price of INR 2150/MCM and the ceiling price of

INR 2850/M CM and the concessional price for the North Eastern States would have a

floor price of INR 1200/MCM and a ceiling of INR 1700/M CM. A discount of INR

300/MCM would also be available to the existing consumers in the North East on a

case to case basis and the concessional price and the discount of INR 300/MCM would

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be available on a case to case basis to the new units in the North Eastern States set up

during 1997-2002 for a period of five years.

The prices of natural gas as approved by the Ministry of Petroleum and Natural Gas

for the quarter ending October- December 1999 are as follows:

Other than HBJ Pipeline and North-Eastern States:

Producer Price (at 10,000 Kcal/Sm3): INR 2513/MCM

General Consumer Price(at 10,000 kcal/Sm3): INR 2850/M CM

HBJ Pipeline System:

Producer Price (at 10,000 Kcal/Sm3): INR 2513/MCM

General Consumer Price(at 10,000 kcal/Sm3) : INR 2850/M CM

HBJ Transportation Charges(at 8500 Kcal/MCM) : INR 1150/M CM

North Eastern States:

Producer Price (at 10,000 Kcal/Sm3) : INR 1700/M CM

General Consumer Price (at 10,000 kcal/Sm3): INR 1700/M CM

The above prices are exclusive of transportation/service charges, royalty, taxes, duties

and other statutory levies on production, transportation and sale of natural gas.

Major Projects recently implemented

The following projects relating to production/transportation/utilisation of natural gas

have recently been implemented:

The Gas Flaring Reduction Project

This project has been implemented by ONGC by setting up transportation and

compression facilities in the Western Offshore. The project comprises the NQP and

SHG processing platforms in the Bombay High, the ICP-Heera and the Second

Bassein - Hazira trunk pipeline and the expansion of the Hazira gas terminal. NQP

and SHG platforms, the ICP - Heera pipeline, the second Bassein-Hazira trunk

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pipeline have been commissioned. The expansion of the Hazira gas terminal was

also completed in 1997-98. Both the World Bank and the Asian Development Bank

(ADB) have participated in the funding of this project costing around 75.0 billion INR.

The HBJ Upgradation Project

This project was approved by the Government in March, 1994 at an estimated cost of

23.76 billion INR. The capacity of the HBJ pipeline which was 18.2 mmSm3/D has

been upgraded to 33.4 mmSm3/D by adding extra compression facilities and a new 36"

loop line from Bijaipur to Dadri at a cost of 237.6 million INR. The pipeline was

commissioned in March,'97 and the compressor stations during 1997-98.

LNG Projects at Dahej and Kochi

The projects for import of liquefied natural gas at Dahej and Kochi are being

implemented by Petronet LNG Limited. This company was incorporated in April,

1998 and is setting up LNG Terminals at Dahej (5 million tonnes per annum) and at

Kochi (2.5 million tonnes per annum). They have recently signed the sale purchase

agreement for LNG supplies with M/S Rasgas-Mobil of Qatar and work on setting up

of the terminals is progressing. The project at Dahej is scheduled to be completed in

2003 and that at Kochi by 2005.

(3) Coal

The coal reserves of India, upto the depth of 1200m, have been estimated by the

Geological Survey of India as 211,600 million tonnes as on January 2000

Currently, lignite reserves in the country have been estimated at around 30,300

million tonnes, most of which, occur in Tamil Nadu. Other states where lignite

deposits have been located are Rajasthan, Gujrat, Kerala, Jammu and Kashmir and

Union Territory of Pondicherry.

Coal Production

Coal production achieved during the year 1999-2000 (upto December, 99) has been

208 million tonnes as compared to the production of 206 million tonnes achieved

during same period of the previous year i.e. 1998-99( given below).

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About 86% of the total coal production in the country comes from the collieries of

Coal India Ltd. (CIL) is also the biggest supplier of coal in the country.

Company-wise details are given below:

(In million tonnes)

Company Target(Apr.-Dec. 99)

Actual production (Apr-Dee. 99)

Actual production (Apr-Dee. 98)

CIL 162.19 160.12 183.45

SCCL 18.65 15.55 18.31

TOTAL 185.21 179.64 206.39

Demand and Supply

During the year 1999-2000 (April-December), CIL and

following quantities of coal to various consumers:

Coal India Ltd (CIL) 1999-2000 (April-December)

SCCL supplied the

(million tonnes)

Target Actual Offtake Supply %

Power 136.736 140.999 103

Steel 14.122 10.946 78

Cement 4.363 4.807 110

Fertilizer 786 2.387 0. 3

Others 31.511 30.664 97

Total 189.518 189.803 100

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Singareni Collieries Company Ltd(SCCL) 1999-2000 (April-December)

(million tonnes)

SECTOR Target Acrual Offtake Supply %

Power 16.76 17.90 106.8

Cement 2.32 2.32 100.0

Fertiliser 0.44 - -100.0

Others 2.68 1.91 71.3

Total 22.46 22.35 99.5

During 1999-2000 offtake of Coal from SCCL has been 22.35 million tonnes

against a demand/linkage of 22.46 million tonnes. This reflects a demand

satisfaction of 99.5%.

Price of Coal

The latest average price of CIL coals as fixed on May 1999 is INR 596 per tonne

whereas the latest average base price of SCCL coal as fixed on Septemebr 1999 is

INR 775.62 per tonne.

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1.1.3 Needs of Clean Development Mechanism (CDM)

Population of India almost reaches one billion and is estimated to become above

China in near future. Therefore food, fertilizer, energy, social overhead capital

etc. should be increased. Most of fertilizers necessary for agricultural product have

been produced in India to secure domestic supply of food. The government of

India gives fertilizer sector subsidy to fix sales price of fertilizer to secure

domestic production.

Under such subsidy policy old fertilizer plants with less efficiency are still

operated and drastic improvement of fertilizer plants with feedstock of heavy

hydrocarbons such as coal, heavy oil, naphtha have been suspended. Therefore

production of fertilizer in India became less competitive compared with

international market. In order to improve such situation old fertilizer plants with

naphtha feedstock should be revamped to change feedstock to natural gas and to

reduce energy consumption, which are in compliance with the guideline of long

term policy on fertilizer sector being proposed by the government of India.

C02 emission 4) in India was approx. 893 million tonnes as C02 (total emissions

from the consumption and flaring of fossil fuels in 1999), which was fifth position

in the world following U.S.A, China, Russia and Japan. Breakdown of total

emissions in India was 269 million tons from petroleum (30 %), 573 million tons

from coal (64 %), 51 million tons from natural gas (6 %) respectively.

GDP of India reached approx. 17,700 billion INR (approx. 380 billion US$) in

1999-00. GDP per capita was approx. 18,200 INR (approx. 390 US$). India is

still one of under-developing countries from view points of social overhead capital

and technical capacity, thus it is required as well as expected to apply CDM which

will be collaboratively implemented between developed and under-developing

countries.

India can not only utilize modern technologies from Japanese corporations, but

also contribute to the reduction of greenhouse performance gas, by using Japanese

fund.

Judging from the above backgrounds, it can be seen that the application of CDM is

highly needed for India in view points of introduction of foreign technologies and

reduction of greenhouse performance gas.

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1.2 Necessity of Technology Introduction for Energy Saving

Ammonia production from naphtha feedstock is approx. 37 % in overall domestic

ammonia production including from natural gas, heavy oil and coal. Most of

naphtha feedstock ammonia plants are old and have less energy efficiency. These

plants have been revamped for capacity increase after commissioning under the

subsidy policy of the government of India.

Ammonia production capacity by feedstock in India

Naturalgas

Naphtha Fuel oil Coal Total

Daily 21,014 16,752 5,235 1,800 44,801capacity tons

Ratio 46.9 37.4 11.7 4.0 100 %

However the government of India recently proposed the guideline of fertilizer

subsidy policy with 3 steps reducing amount of subsidy in order to minimize

financial deficit due to increase of subsidy and to recover competitiveness of

fertilizer production cost considering the affiliation to WTO.

The fertilizer companies based on naphtha feedstock will suffer due to not only

reduction of subsidy, but also recent high naphtha price. Therefore old fertilizer

plants with naphtha feedstock should be revamped to change feedstock to natural

gas and to reduce energy for their survival.

The necessity of technology introduction for energy saving is very high in India.

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1.3 Purpose, Need and Effect of the Project

1.3.1 Purpose of the Project

The major purposes of the project are to reduce emission of the greenhouse

performance gasses as well as to reduce fertilizer production cost by feedstock

change and energy saving in a typical fertilizer plant in India. At the same time,

it is expected to spread applied technologies in similar fertilizer plants. It is

aimed to secure self-sufficiency in the production of food and to contribute to the

development of agricultural industry and fertilizer sector in India. It is also aimed

to contribute the successive involvement of Japanese corporations in Indian

projects.

This project could have a remarkable significance because it can contribute to

arresting global warming as well as to development of industry and economy in

India with involvement of Japanese corporations and introduction of Japan’s

technologies.

1.3.2 Need of the Project

This project was originally planned based on the strong request from Zuari

Industries Limited (ZIL) in India in order to survive in fertilizer business against

high feedstock price and reduction of fertilizer subsidy. The feedstock change

and energy saving incorporated in this project is in line with the expected long

term policy on the fertilizer sector by the government of India. Therefore this

project could be highly needed for India.

Since infrastructure such as railway and road are under developed, mass

transportation of fertilizer product is not easy in India. Fertilizers produced in

ZIL are distributed not only in Goa, but also in the neighboring states, so ZIL have

an important role as a supply center of fertilizers in south west coast in India.

This project is essential for local agricultural industry.

The energy saving of the project could reduce expensive naphtha used for

feedstock and fuel, thus have a large impact on production cost reduction and

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reduction of greenhouse performance gas (CO?) emission.

The feedstock change from naphtha to natural gas of the project could reduce

energy consumption and CO? emission. Natural gas supply to ZIL through pipe

line, however, might take more time. There are many under consideration

/implementation projects of LNG terminal and pipe lines in India because the

domestic reserve of natural gas is limited. Some projects have already been started

and under implementation. The existing pipe line network (HBJ) is located in

northern part of India and the LNG pipe line projects are planned for southern part

of India connecting ZIL with LNG terminal, but it might take more time.

1.3.3 Effect of the Project

In case that the project would be materialized, the following effects are expected

to;

- reduce the greenhouse performance gas (approx. 0.25 million tonnes/year as

CO,)

- spread applied technology in India

- contribute to the development of industry and economy in India,

- allow Japanese corporations to participate successively in India projects, and

- secure the C02 emission right of Japan

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CHAPTER 2

PROJECT PLANNING

Summary: Surveys were made on Zuari Industries Limited and its existing facilities, in order to develop the project planning. Reflecting the survey results, project scope and scheme of revamp, scope of supply, project execution, project schedule, estimation of plant cost, financing plan and issues for

CDM implementation were examined.

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CHAPTER 2 PROJECT PLANNING

2.1 Project Plan

2.1.1 Site Information

(1) Location and Topography

1) Site Name Zuarinagar

- City's or Region's Name Goa

- Country's Name India

2) Longitude and Latitude

- Longitude 74°15' East

- Latitude 15°25' North

3) Height above the Sea Level

- Above Sea Level 60 m

4) Approximate Location

- Distance

- Approx. Location from the River

- Approx. Location from the Sea

5) Topography

- Flat

- Other Description

Climate Tropical climate with rainy and

dry season

6) Topographical Survey Report

Not available

7) Access to the Site

- Road

30 km from the Panaji city

“Zuari River", 5 km East

on the coast of Arabian Sea

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(2) Geology

1) Geological Survey Data

Not available

2) Soil Investigation Report

Not available

3) Soil Data

Not available

(3) Meteorological Conditions

1) Atmosphere Temperature (1951-1980 average)

X\Month 1 2 3 4 5 6 7 8 9 10 11 12

Temp.^cN^ Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec.

Ave. Temp. (Max) 30.8 30.5 31.3 32.3 32.2 29.9 28.6 28.5 29.2 31.1 32.4 32.1

Ave. Temp. (Min) 21.4 22.1 24.4 26.3 26.8 24.7 24.0 24.0 24.0 24.4 23.4 22.2

Maximum Temperature Used in the design 36 °C

Minimum Temperature Used in the design 17 °C

2) Humidity (1951-1980 average)

Mean Monthly and Annual Relative Air Humidity (%)

1 2 3 4 5 6 7 8 9 10 11 12 Year

Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec.

63.5 67.5 71.0 71.0 72.5 84.0 87.5 86.5 84.5 78.5 64.5 61.0 74.5

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3) Wind (1951-1980 average)

Month

WinoX

Directions,

1 2 3 4 5 6 7 8 9 10 11 12

Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec.

Basic WindDirection

EastNorth

West

North

WestWest

North

West

South

WestWest West West West East East

Max. WindVelocity

10.5 11.8 12.2 13.1 14.9 18.4 21.7 18.3 11.5 9.2 9.1 9.3

Maximum Wind Velocity Specified in the Design 61 km/h

4) Rainfall (1951-1980 average)

Monthly and Yearly Rainfall (mm)

\Month 1 2 3 4 5 6 7 8 9 10 11 12 Year

Falls Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec.

Monthly & Yearly

0.2 0.0 0.2 9.0 75.7 782.1 874.1 444.0 237.5 113.3 28.6 14.2 2578.9

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2.1.2 Project Concept

Zuari Industries Limited (ZIL) in Goa, India produces ammonia with feedstock of

naphtha and also produces urea from ammonia and C02 produced in the ammonia

plant. The energy consumption of these plants are considerably large compared with

latest modern plants and the ammonia plant uses expensive naphtha as feedstock and

fuel.

The Project objectives are to reduce fertilizer production cost and to decrease

discharges of C02 gas into the atmosphere by feedstock change and energy saving.

In ammonia process a large quantity of energy is consumed. Reforming of

naphtha feedstock consumes a large quantity of steam and COz removal consumes

heat to regenerate C02. High pressure compressor also consumes a large quantity

of steam. Energy saving technologies are applied in the project to reduce energy

required in C02 removal, high pressure ammonia synthesis and steam turbines.

The major applied technologies are listed below.

1) aMDEA process for C02 removal

2) KAAP converter installed in ammonia synthesis

3) High pressure condensate stripper

4) Modification of compressors and turbines

The following rotor will be replaced to new ones with high efficiency.

- Synthesis gas compressor low pressure and high pressure

- Turbine of the synthesis gas compressor

- Ammonia compressor

Urea synthesis reaction occurs at high temperature and high pressure and consumes

a large quantity of power and steam. The total steam consumption has been

reduced by the improvement of process. TEC's ACES 21 process featuring

improvement of reaction efficiency and effective recovery of heat is applied to the

existing urea plant to reduce energy effectively and economically. Turbine of C02

booster compressor of urea plant will be replaced.

Energy saving is also achieved by feedstock conversion from naphtha to natural gas

in the ammonia plant.

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Project scope is revamp of existing ammonia and urea plants. Scope of works for

the project includes design, procurement, construction and supervising during

commissioning for the revamp.

In addition, financing of the fund required for the revamp, environment impact

assessment, transportation and custom clearance of goods and materials, and

statutory approval are also included in the project scope.

2.1.3 Greenhouse Performance Gas to be examined

The existing ammonia plant uses naphtha for feedstock and fuel. The urea plant

uses ammonia and C02 produced in the ammonia plant as feedstock and steam as

energy input. In the ammonia plant feedstock naphtha is reformed and the

reformed gas is purified to produce synthesis gas for ammonia production. C02 is

produced after purification of synthesis gas. If natural gas is used for feedstock,

produced C02 will be decreased compared with naphtha. The produced C02 will be

used as feedstock of urea, the balanced C02 will be vented to the atmosphere.

Required energy in ammonia and urea plants is produced by combustion of fuel and

C02 is vented to the atmosphere. Nitrogen oxides are also produced and vented, but

the quantity is very small.

The project plan in this feasibility study focuses on the reduction of C02 as the

greenhouse performance gas.

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2.2 Outline of Zuari Industries Limited (ZIL)

Zuari Industries Limited (ZIL) was established in 1967 as a private fertilizer

company jointly sponsored by the house of Birlas and U.S. Steel Corporation. In

1969 Toyo Engineering Corp. (TEC) in Japan was awarded to construct ammonia

660 t/d, urea 1,140 t/d and NPK 535 t/d plants in Goa.

The design, erection and construction of these plants were done by TEC using its

own technologies and these plants started production in 1973. These plants were

ones of the largest, fully integrated, ammonia and urea complex in India and Goa's

first large industrial undertaking.

ZIL expanded its fertilizer plants by adding DAP (in 1984) in Goa. The fertilizers

produced are supplied not only to Goa, but also to Andhra Pradesh, Karnataka and

Maharashtra. ZIL fertilizer division has the following plants in Goa.

- Ammonia 220,000 t/y (as original design)

- Urea 376,000 t/y (as original design)

- NPK 330,000 t/y

- DAP 330,000 t/y

- Power generation 7.5 MW (for internal use)

ZIL has other divisions in addition to fertilizer division in Goa. Other divisions,

related subsidiaries and Joint ventures are as follows.

Other divisions

- Cement, based in Yarraguntla, Andhra Pradesh

- Furniture, based in Chennai, Tamilnadu

Subsidiaries

- Birla Home Finance Ltd.

- Zuari Investments Limited

Joint ventures

- Zuari Seeds limited

- Simon India Limited

Chambal Fertilizers and Chemicals Limited (CFCL) promoted by ZIL was set up as

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large fertilizer plants at Gadepan, Kota, Rajasthan in 1985. CFCL started

production of ammonia 450,000 t/y and urea 750,000 t/y in 1993. TEC was

awarded CFCL's expansion project with same size of ammonia and urea which

were started in 1999.

2.2.1 Intention of Zuari Industries Limited (ZIL)

ZIL requested TEC, which constructed his ammonia and urea plants, to execute of

feasibility study of the feedstock change and energy saving of his ammonia and

urea plants in December 1999. TEC made a preliminary plant survey and clarified

ZIL's request.

The fertilizer production cost of ZIL was relatively high due to expensive naphtha

used for feedstock and fuel. ZIL needed improvement of production cost in order

to survive in fertilizer business against high feedstock price and reduction of

fertilizer subsidy. ZIL's top management directly requested TEC to study F/S.

ZIL has a keen interest in the result of study and after confirming economical

feasibility in detail and the fertilizer policy of the government ZIL could have an

intention to start the project.

The first plant visit for this feasibility study in September 2000 was featured on

ZIL’s house magazine. Not only top management, but also all memebers of ZIL

have committment to this project.

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2.2.2 Conditions and Status of Related Infrastructure and Facilities

2.2.2.1 Ammonia Plant

This ammonia plant was constructed by Toyo Engineering Corporation based on its

Steam Reforming Process for producing ammonia starting with naphtha as feed and

production was started in 1973. The original design of ammonia production

capacity was 660 metric tonnes per stream day (hereinafter referred to "MTPD").

This ammonia plant has been modified by ZIL to mainly increase the production

capacity. Major modification item is as listed below.

- Additional Purge Gas Recovery Unit, installed in 1980 (production was increased

by 90 t/d)

- internal of Ammonia Converter, modified in 1990

- Reformer tube, replaced in 1994

- Additional Air compressor, heat exchanger and etc. installed

- Additional Heat exchangers, installed for energy saving

The maximum ammonia production rate had reached 970 MTPD in 1999.

However, owing to the feedstock price and Indian government guide, the ammonia

production has been limited to 750 MTPD and the energy consumption has been

about 10.1 Gcal per ton of ammonia in 2000. This production rate and the energy

consumption were chosen as the basis of this feasibility study.

Under normal operating conditions, liquid ammonia product is delivered at 10°C

and 18 kg/cm2G directly as feed to the Urea Plant. If the urea plant is not operating,

total ammonia product will be delivered as liquid of 4°C to spherical storage tanks.

Adequate carbon dioxide (C02) to manufacture urea is produced and sent to the

Urea Plants.

An Ammonia Simplified Flow Diagram (Existing) is shown in Fig. 2.2-1.

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In)

<o

1ST REFORMER 2ND REFORMER SHIFT CONVERTERS

COMB. CHAMBER

AIR COMPRESSOR

STEAMFEEDNAPHTHA—►

STEAM CO, REGENERATORMETHANATOR CO,ABSORBER ^

CO, GAS TO UREA

PROCESSS CONDENSATESYN. GAS COMPRESSOR

AMMONIACONVERTERS

AMMONIA COMPRESSORPRODUCT LIQUID AMMONIA

Fig.2.2-1 Ammonia Simplified Flow Diagram (Existing)

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The Process Unit is grouped into the following sections for the explanation.

- Hydrotreating Section

- Feedstock Treating Section

- Reforming Section

Shift Conversion Section

Carbon Dioxide Removal Section

- Methanation Section

Synthesis Section

Refrigeration Section

- Ammonia Recovery Unit and Purge Gas Recovery Unit

- Process Condensate Stripping Section

Steam System

- Other Facilities

1) Hydrotreating Section

Sulfur contained in naphtha charged to steam reforming units acts as a poison

to the reforming catalysts, and must be removed by pretreatment.

Accordingly, a two-step desulfurization process is used, consisting of a

hydrotreater-stripper (HDS) operation followed by an "open sandwich"

catalytic desulfurization final cleanup. The latter will be included in the next

section.

In the Hydrotreater Reactor (A-DC001), the liquid feed, accompanied by a

hydrogen-rich recycle gas, is passed over a Cobalt-Molybdenum catalyst bed

and the sulfur compounds are catalytically hydrogenated to H2S. After

stripping out the H2S, it is expected that the sulfur content in the liquid feed is

reduced to less than 5 ppm by weight. In the second desulfurization step in

the next section, the remaining non-reactive sulfur compounds, not removed

in the first step, are again hydrogenated over a Cobalt-Molybdenum catalyst

bed to H2S, and removed by reacting with zinc oxide in a final bed, A-DA102.

The sulfur content is reduced to less than 0.1 ppm by weight in the A-DA102.

The activity to the primary reformer catalyst is related to the sulfur content in

the feed, and it is anticipated that by reducing the sulfur to 0.1 ppm in the

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liquid, full primary reformer catalyst activity and life are assured.

The hydrotreater unit has been designed to process sufficient liquid feed to

supply the ammonia plant reformer.

The liquid feed is pumped from storage and mixed with recycle gas from the

recycle compressor, the hydrogen rich makeup gas which provides the

hydrogen atmosphere over the hydrotreater catalyst. The mixture is first

preheated by passing through a No.l Hydrotreater Reactor Feed/Effluent Heat

Exchanger (A-EA002) and then heated to the hydrotreater reaction

temperature by a Raw Naphtha Heater (A-BA001). A stream of ammonia

synthesis gas taken from the feed to the ammonia synthesis loop is used as the

hydrogen rich makeup gas, and added at the discharge of the Recycle Gas

Compressor (A-GB001), to offset the purge gas and to maintain H2S and inerts

concentration in the recycle gas to a permissible operating level.

The completely vaporized mixture next passes through the Hydrotreater

Reactor (A-DC001) where the hydrogenation of sulfur compounds proceeds.

The Hydrotreater Reactor contains Cobalt-Molybdenum catalyst. In the

presence of the Co-Mo catalyst, organic sulfur compounds are hydrogenated

to H2S. On leaving the reactor, the effluent is cooled by heat exchangers

with hydrotreater feed and cooling water. In cooling, liquid is condensed

and then separated from the recycle gas. The liquid then flows to the

stripper. The large portion of vapor separated from the liquid is recycled to

the hydrotreater inlet via the recycle compressor. A small portion of the

vapor is purged to Primary Reformer as fuel gas.

The liquid flows to the H2S Stripper (A-DA001), where the dissolved H2S is

stripped with a small amount of light ends and passed off overhead. The

stripping heat is supplied at the bottom of the stripper by the H2S Stripper

Reboiler (A-EA001). The overhead vapor combined with the purge gas is

sent to Primary Reformer as fuel gas. The stripper tower contains trays.

The hot bottom product from the stripper, contains less than 5 ppm by weight

of sulfur.

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Auxiliary facilities are provided for various operations involved in start-up,

and shut-down. Piping is provided for circulating inert gas through both

desulfurizers for heating up the catalysts prior to introducing naphtha. By

using cracked ammonia as a hydrogen source, raw naphtha may be processed

in normal fashion and then routed to naphtha storage through the Treated

Naphtha Cooler (A-EA007), provided for this purpose. These facilities can

be also utilized to handle emergency dumping of the desulfurizing systems

when forward flow to the primary reformer must be discontinued. De-coking

facility is also provided for Raw Naphtha Heater (A-BA001).

2) Feedstock Treating Section

The desulfurized naphtha from the bottom of H2S stripper, is pumped by

Naphtha Feedstock Pump (T-GA103) to the Feedstock Preheater (A-BA102)

after mixing with recycle H2.

The Feedstock Preheater (A-BA102) is designed to achieve required

temperature of desulfurization. After preheating, the feedstock flows to

Hydrotreater catalyst to decompose organic sulfur to H2S on Cobalt-

Molybdenum catalyst as the first step. The following Desulfurizer catalyst

removes all sulfur down to 0.1 ppm as total sulfur by the reaction with packed

Zinc Oxide forming Zinc Sulfide as the second step. The volume of Zinc

Oxide is designed to last required years at the design sulfur load.

3) Reforming Section

Desulfurized naphtha from Desulfurizer is mixed with superheated steam in an

amount equivalent to a steam-organic carbon ratio of 3.3 to 1 for naphtha

feedstock. The gas-steam mixture is then preheated and distributed to

catalyst tubes suspended in the radiant section of 1st Reformer (A-BA101).

It passes down in contact with nickel reforming catalyst inside the tubes.

The Primary Reformer operates with down-firing of fuel naphtha between the

rows of tubes to raise the process gas temperature to required temperature at

the outlet of the catalyst tubes which will be controlled by total fuel flow to

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the arch burners. Under this condition, the gas will contain about 10 vol.%

dry unconverted methane. The pressure at the outlet of the catalyst tubes is

about 30 kg/cm2G.

The 1st Reformer is designed to attain good efficiency by recovering heat in

the convection section from the flue gas.

The convection heat is used for the following services:

(a) To preheat the steam feed

(b) To preheat the steam-air mixture to the 2nd Reformer

(c) To superheat high pressure steam

(d) To preheat combustion air

For firing the reformer furnace, the design is based on utilization of naphtha.

Water-washed purge and flash gas from the ammonia synthesis section is

utilized as fuel for Combustion Chamber of which flue gas duct is combined

with the dact of the reformer. Combustion Chamber is 99 Kg/cnfG steam

generator.

Partially reformed gas flows from the outlet of the Reformer to the refractory

lined 2nd Reformer (A-DC101) is mixed with an amount of air preheated in

the 1st Reformer convection section, fixed by the nitrogen requirement for the

ammonia synthesis. The gas, steam and air pass downward through a bed of

nickel catalyst. The heat liberated by the combustion of the partially

reformed gas elevated the temperature at the outlet to about 1000°C and

supplies the energy to complete the reforming and reduce the methane content

to approximately 0.3% on a dry gas basis. Maximum efficiency of the

overall reforming operation is required so that as much reforming as possible

be done in this reforming step. Utilization of combustion energy reduces

input of fuel gas to the Primary Reformer.

The air supply for the 2nd Reformer is provided by centrifugal steam turbine

driven Air Compressor (A-GB101).

A part of air is extracted from the intermediate stage of this air compressor to

entire complex use as instrument air.

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The purpose of preheating the air is to transfer a large part of the total

reforming conversion to the Secondary Reformer, thus reducing expensive

Primary Reformer catalyst volume in favor of the secondary reformer catalyst

volume. A small quantity of steam is continuously added to the air

preheating coil to protect it from burn out in case of upsets.

Reformed gas from Secondary Reformer passes directly to Reformed Gas

Waste Heat Boiler (A-EA102) in which 105 kg/cm2G saturated steam is

generated by cooling the process gas, and is cooled and fed to the 1st Shift

Converter (A-DC201).

These heat exchangers are provided with a by-pass in order to meet the

desired inlet temperature to the Shift Converter when the unit is new or

operating at reduced throughput. The boiler water required for this waste

heat exchanger is taken from Steam Drum (A-FA101).

4) Shift Conversion Section

The gas-steam mixture is introduced into the top of 1st Shift Converter (A-

DC201) in which a part of the CO in the process gas is converted to C02 with

an equivalent molar production of hydrogen. This vessel contains a single

bed of high temperature shift catalyst. The shift conversion reaction is a

reversible one. The equilibrium is favored by low temperature; rate of

reaction, however, is favored by high temperature. The design of the 1st

Shift Converter is based on reducing CO to a level of approximately 3% on a

dry gas basis. In passing through the 1st Shift Converter, the heat of reaction

causes the gas temperature to rise.

1st shift effluent then passes through heat exchanger, A-EA201, EA203

Methanator feed gas and boiler feed water is preheated in cooling the gas to

2nd Shift Converter (A-DC202).

A-DC202 inlet temperature is controlled by process gas by-pass flow of A-

EA203.

The partially shifted gas now enters 2nd Shift Converter (A-DC202). In

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passing through the vessel, the CO content of the process gas is reduced to

approximately 0.4% on a dry gas basis.

Following the shift conversion step, the hot shifted gas is cooled by heating

hot potassium carbonate solution. Condensed water is removed from the gas

in the Process Gas K.O. Drum (A-FA301). The separated condensate in this

vessel is sent to the Process Condensate Stripper where contaminants are

removed before it is recovered.

5) Carbon Dioxide Removal Section

The removal of carbon dioxide from the raw synthesis gas is carried out in

single absorption stage by countercurrent contacting gas with hot potassium

carbonate solution in C02 Absorber (A-DA301). The absorber contains

packed beds. The hot potassium carbonate solution flows downward by

gravity while the raw gas flows upward through the tower.

The C02 in raw gas is removed by contact with "lean" hot potassium

carbonate solution in the packed part of the absorber. The absorber effluent

gas, of which C02 content is reduced to 0.1% by dry gas volume at the

absorber outlet, is fed to the downstream Methanator (A-DC401).

The total "rich" solution from the bottom of C02 Absorber is let down through

a valve and is delivered to the top part of CO, Regenerator (A-DA302).

The C02 Regenerator contains packed beds, where the C02 and other

dissolved gas in the solution are stripped by steam which is generated in

Process Gas Reboiler (A-EA303).

The regenerated solution, that is "lean" solution, is heat-exchanged against the

feed stream to the C02 stripper in the A-EA302, pumped up by the Solution

Pump (A-GA301) and then delivered to the top of the absorber after cooling

by heat exchangers, A-EA303.

The overhead vapor from C02 Regenerator is cooled to condense water vapor

by Overhead Condenser (A-EA306). The C02 is separated from the

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condensed water in Condensate Separator (A-FA302), further cooled C02

Direct Cooler (A-DA304) and sent to Urea Plant at 0.14 kg/cm2G, 40°C.

6) Methanation Section

The synthesis gas from C02 Absorber containing 0.1% C02 as expected and

0.5% CO on a dry basis flows to the Methanation Section for further

purification after passing through the Mist Trap (A-DA301) at the C02

Absorber Overhead.

The synthesis gas is preheated and flows to Methanator (A-DC401).

Preheating is accomplished by heat exchange against the 1st Shift Converter

effluent gas.

Following preheating of the C02 Absorber overhead gas, the stream is

delivered to the methanator, a vessel containing a bed of high-nickel base

catalyst that is very active for reacting CO, C02 (and even 02) with hydrogen

to form methane and water. In passing through the catalyst bed, from an

inlet temperature the exothermic heat of the methanation reaction raises the

temperature of the effluent. The total amount of carbon oxides leaving

Methanator will be less than 5 ppm.

The Methanator effluent is then cooled in the Methanator Effluent Economizer

(A-EA401), the Gas Final Cooler (A-EA402) and chiller and delivered to

Synthesis K.O. Gas Drum (A-FA401) at the Compressor Suction.

7) Synthesis Section

Following the cooling of the Methanator effluent, the purified synthesis gas is

delivered to the suction of Syn. Gas Compressor at a pressure of about 20

kg/cm2 G.

The synthesis gas sent from the Methanation Section is compressed in the first

stage of A-GB501 Synthesis Gas Compressor. The synthesis gas enters into

inter Stage Cooler for Syn. Gas Compressor and Syn. Gas Comp. Interstage

Chiller, where the synthesis gas is cooled for H20 condensation.

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The compressed synthesis gas is mixed with the synthesis loop recycle gas

from Synthesis Converter. Then, the mixed is cooled by the Synthesis Cold

Exchangers and Ammonia Super Coolers for condensation of ammonia

product with refrigeration levels of -7°C and -29°C. H20 and C02, which are

poison for ammonia synthesis catalyst and remaining in the make-up synthesis

gas, are absorbed in to the condensed ammonia and removed from the

synthesis converter feed.

The converter effluent gas is cooled to -25°C in these exchangers and the

condensed ammonia is disengaged in Ammonia Separator.

A portion of the exit vapor from Synthesis Cold Exchanger is vented as

continuous purge to control the concentration of methane and argon as inerts.

These components would otherwise be built up in the system reducing the

effective synthesis pressure which would be reflected in lower conversion per

pass and production capacity. Then, the gas is recycled to the recirculator to

feed converter.

After it comes out from the compressor recycle stage for compression, the gas

is fed to A-DC501 Ammonia Synthesis Converter.

The converter feed is heated by Synthesis Hot Exchanger (A-EA501) and

enters to Ammonia Synthesis Converter (A-DC501).

Ammonia Synthesis Converter is vertical type and consists of a high pressure

shell containing the cartridge and Heat Exchangers. The cartridge is

cylindrical shell which fits inside the pressure shell of the vessel, leaving an

annulus between the two. The catalyst is contained devided sections. In

order to maintain all the catalyst at an optimum temperature for maximum

yield, cooling system is provided in the converter.

Located aside the cartridge is a heat exchanger which preheats the fresh inlet

gas against hot reacted gas from the catalyst bed. A bypass tube is provided

to permit introduction of feed gas without preheating and provides

temperature control to the top catalyst bed. Temperature indicators are

installed in the catalyst bed.

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The feed gas flows between the pressure shell and the wall of the cartridge.

It serves as a cooling medium for the shell and thus receives preheat prior to

entering the exchanger. It enters the exchanger in the converter and is

preheated against hot effluent. Because of indirect cooling, the temperature

is reduced but the ammonia content is not diluted. In the presence of the

promoted iron catalyst, a portion of the total hydrogen and nitrogen combines

at a temperature of about 400 - 500°C and a pressure of about 120 kg/cm2G to

yield ammonia in a concentration of about 12% in the effluent from the last

catalyst bed.

From the outlet of converter shell, the converter effluent flows to Synthesis

Economizer (A-EB501). Then the converter effluent undergoes heat

exchange with the feed to the converter, lowering the converter effluent

temperature.

8) Refrigeration Section

A two-stage ammonia refrigeration system provides refrigerant for ammonia

condensation in the synthesis loop and synthesis gas compressor suction and

intercase chilling.

The refrigeration system consists of a two-case centrifugal Ammonia

Compressor (A-GC501) with Intercoolers, Ammonia Refrigerant Condenser,

Refrigerant Receiver and Ammonia Super Cooler. The two refrigeration

levels are approximately -7°C, and -29°C.

Ammonia vapor from the second case of the Ammonia Refrigerant

Compressor is cooled and condensed at 45°C and 17 kg/cm2G and flows to

Refrigerant Receiver.

Liquid from Refrigerant Receiver are flashed into Refrigerant Flash Drum at

32°C and about 12 kg/cm2G.

The net liquid from the Flash drum is fed into 1st Ammonia Super Cooler and

evaporated at -7°C and about 2 kg/cm2G.

A portion of the entering liquid is diverted and flashed through Syn. Gas

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Compressor suction and Interstage Chillers, providing the necessary

refrigeration for this service.

The interstage chiller is operated with a back pressure of about 3.5 kg/cnfG at

1°C on the refrigerant side in order to prevent icing on the process side.

The net liquid from the 1st Ammonia Super Cooler is fed into 2nd Ammonia

Super Cooler and evaporated at -29°C and about 0 kg/cnfG.

The vapors generated in the various chillers or super coolers are taken and fed

to the appropriate case or stage of the two case centrifugal Ammonia

Compressor (A-GC501). These vapors are compressed, condensed, and

returned to the receiver, thus completing the refrigeration cycle. Ammonia

Refrigerant Compressor is driven by the steam turbine.

9) Ammonia Recovery Unit and Purge Gas Recovery Unit (A-103-L)

The H P. purge gas from synthesis loop is fed to the High Pressure Ammonia

Scrubber and the flash gases from the Ammonia Product Letdown Tank is fed

to the Low Pressure Ammonia Scrubber (A-DA601) to recover the ammonia

vapor.

The High and Low Pressure Ammonia Scrubber recover the ammonia vapor

by water scrubbing. The aqua-ammonia solution from the bottom of High

Pressure scrubber is fed to the Ammonia Stripper and the solution of low

pressure scrubber is delivered to the Urea plant.

The aqua-ammonia solution from the bottom of the H P. ammonia scrubber

are fed to the ammonia Stripper to regenerate by reboiling with heat. The

M.P. steam is used for the reboiler heat which is supplied by the Ammonia

Stripper Reboiler.

The overhead gas from H P. Ammonia Scrubber is fed to the Hydrogen

Recovery Unit and the gas from L.P. Scrubber is used as fuel.

The recovered ammonia from the top of the Ammonia Stripper is mixed with

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the main ammonia product. The stripped water from the bottom of the

stripper is cooled and returned to the top of the High Pressure Ammonia

Scrubber for reuse. H P. Ammonia Scrubber Feed Pump is used to return the

stripped water from the stripper to the High Pressure Ammonia Scrubber.

Purge gas recovery unit is applied to recover hydrogen from H P. purge after

scrubbed in the High Pressure Ammonia Scrubber. The overhead gases from

the Ammonia Scrubber is then sent to a cryogenic type purge gas recovery

unit, where in a major portion of the hydrogen is recovered for re-injection to

the synthesis loop.

Recovered hydrogen gas is returned to the suction of the Synthesis Gas

Compressor.

10) Process Condensate Stripping Section

The process condensate produced in the Ammonia Plant is sent to a process

condensate stripper, for recovery, after removal of the impurities.

The most parts of the impurities are removed from the process condensate in

Process Condensate Stripper of low pressure type.

The Stripper is the conventional low pressure type stripper.

The process condensate produced in the Ammonia Plant contains slight

amount of ammonia and methanol, both are formed as by-products in the

catalytic reaction, and C02 from the reformed gas is dissolved in the

condensate. The condensate is fed to the above mentioned stripper, where

the most parts of NH3, methanol and C02 are stripped by steam.

11) Steam System

The steam system is based upon high pressure steam generation at

approximately 105 kg/cnfG in Steam Drum (A-FA101) and combustion

chamber (A-EC108)

The steam system is arranged to provide good overall heat recovery from

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process waste heat and consumption by the various turbine and process duties

consistent with good plant operability.

High pressure steam is generated by waste heat recovery in Secondary

Reformer Waste Heat Boiler, Combustion chamber and other process waste

heat economizers. High pressure steam is then, superheated in the reformer

convection.

Good waste heat recovery and therefore overall furnace efficiency is achieved

by further recovering waste heat in the convection section of the Primary

Reformer. Process waste heat recovery is achieved in the demineralized

water and high pressure boiler feed water preheat trains.

High pressure steam (103 kg/cm2G, 490°) is let down to the medium pressure

level through the high pressure casing of and the Syn. Gas Compressor

Turbine. This affords practical means of controlling the medium pressure

steam levels.

The medium pressure steam system (37 kg/cm2G) will provide steam for

process purposes, for the remainder of the turbine drivers on the Ammonia

Plant.

The low pressure steam (2 kg/cm2G) system is mainly used for depending

steam to achieve the necessary equilibrium conditions, in the Deaerator dome.

A Simplified Ammonia Plant Steam Balance (Existing) is shown in Fig.2.2-2.

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-22-

to

.STEAMIMPORTH P. STEAM SUPERHEATING

STEAMDRUMCOMBUSTION

CHAMBER SYN. GASCOMPRESSORTURBINE

STEAMGENERATING

STEAM IMPORT

PROCESSSTEAM

M.P. STEAM

BACKPRESSURETURBINES

CONDENSINGTURBINES

BOILERFEEDWATER

HEATING (LOW PRESSURE LEVEL)

PROCESSHEATNG

SURFACECONDENSERS

MISCELLANEOUSSTEAMUSERS

VENT

POLISHER

DEAERATORBOILER

FEEDWATERHEATING

BOILERFEEDWATER

MAKE-UP

Fig.2.2-2 Simplified Ammonia Plant Steam Balance (Existing)

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12) Other Facilities

(a) A naphtha-fired Start-up heater (A-BA501) is provided for activating a fresh

charge of catalyst in the Ammonia Synthesis Converter and for heating the

catalyst up to a temperature where the reaction is self-sustaining. Aqua

ammonia product during the synthesis catalyst reduction period is sent to the

effluent treatment unit or treated in the Urea plant.

(b) Boiler feed water treatment system including a deaerator, boiler feedwater

pumps and facilities for addition of hydrazine, phosphate and ammonia into the

boiler feed water is provided. Hydrazine Injection System, includes a tank

with a diaphragm pump. Phosphate Injection System, includes a tank and

diaphragm pump. Aqueous Ammonia Injection System, includes a tank and a

diaphragm pump. Deaerated boiler feed water is delivered to Steam Drum by

Boiler Feed Water Pump.

(c) The following are provided for the C02 Removal System:

- Solution Storage Tank (A-FB301)

- Make-up Tank (A-FA303)

- Solution Make-up Pump (A-GA303)

- Side Stream Filter (A-FD301)

- Preparation Filter (A-FD302)

The filter is fed a slipstream of the lean solution in order to remove any solid

contaminants which may be present in the circulating liquid.

(d) Liquid ammonia is cracked in the Primary Reformer to provide a source of

hydrogen for start-up of the desulfurizers, if hydrogen is not imported from

outside B.L.

Ammonia is pumped from the Ammonia Receiver by the Ammonia Injection

Pump (A-GA103) to the primary reformer and is mixed with the steam from

the boiler.

Hydrogen stream from the raw gas separator is recycled by mixing it with the

naphtha feed by Recycle H2 Compressor.

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(e) Instrument Air Unit in the PLANT consists of 1+1 dryer system, wet air

reservoir with hold up of normal requirement in ammonia and urea plant and

dry instrument air reservoir with hold up of normal requirement in ammonia

and urea plant.

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2.2.2.2 Urea Plant

1) General

The plant was originally designed to produce 1140 metric tons of prilled urea

per stream day by single train using MITSUI-TOATSU Total Recycle C

process, and standard operation in 1973.

The plant has been debottlenecked by ZIL several times, since its stand-up in

1973, to have the production capacity about 1300 - 1350 metric tons per day.

The plant can be divided into four sections, namely Synthesis, Purification,

Recovery and Crystallization, and Prilling sections.

2) Synthesis Section

Urea is produced by the highly exothermic reaction of ammonia and carbon

dioxide to form ammonium carbamate with slightly endothermic dehydration of

ammonium carbamate to form urea.

2NH3 + C02 <#> NH2COONH4

(ammonia carbamate)

NH2COONH4 <=> NH2CONH2 + H20

(urea)

The reactions are reversible. The principal variables affecting the reaction are

temperature, pressure, feed composition and reaction time.

The conversation of ammonium carbamate to urea takes place only in the liquid

phase, so high pressure is required. High temperature and pressure increase

the conversion to urea. Reaction conditions are about 197 - 200° C and 220 -

250 kg/cm2G. The conversion to urea is decreased by the presence of water

and increased by the presence of excess ammonia. Urea synthesis is achieved

in a vertical, high pressure vessel called Urea synthesis reactor, which has

sufficient volume to allow the synthesis reaction to approach equilibrium

condition closely.

Due to the corrosive nature of the reactants and reaction products in Urea

synthesis reactor, suitable protective linings are employed on all the surface in

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contact with the reaction mixture. Urea synthesis reactor in this Plant is lined

with titanium.

Note : The Urea Reactor is proposed to be replaced by ZIL by a new Urea

reactor lined with stainless steel.

Normally, the reactants are also corrosive to stainless steel and titanium.

However, the addition of a small quantity of oxygen tends to passivate stainless

steel and titanium so that a satisfactory service life is obtained.

Since the overall reaction of ammonia and carbon dioxide to form urea is

exothermic, care must be taken to control the temperature in Urea synthesis

reactor. In ZIL Fertilizer plant, which uses Total Recycle C Process, the

reactor temperature is controlled by the combination of the following factors:

1. Excess ammonia to the rector

2. Recycle solution rate to the reactor

3. Pre heat temperature of liquid ammonia to the reactor

3) Decomposition Section

The products of the synthesis reaction consist of urea, biuret, (undesirable

dimer of urea), ammonium carbamate (hereinafter referred to as carbamate),

water and excess ammonia. Subsequent processing is required to separate

urea from reaction products.

In general, the processing proceeds in the following manner: carbamate,

excess ammonia and some water are removed by application of heat at reduced

pressure levels. Carbamate is decomposed to ammonia and carbon dioxide

gases.

NH2COONH4 = C02 + 2NH3

Decomposition is usually achieved at temperature of 120° C to 165° C.

Decreasing pressure favors decomposition as does increasing temperature.

During decomposition, hydrolysis of urea becomes an important factor.

Hydrolysis proceeds as indicated by the following reaction.

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nh2conh2 + h2o C02 + 2NH3

Since hydrolysis consumes urea, which is the desired product, conditions are to

be closely controlled to minimize loss of product. Hydrolysis is favored by high

temperature, low pressure and long residence time. Decomposition equipment

and conditions of operation are therefore carefully selected to avoid these

factors in order to maintain high yield of urea.

Biuret formation is another factor to be considered both in decomposition and

finishing processes. At low partial pressure of ammonia and temperature

above 90° C, urea converts to form ammonia and buiret as in the overall

reaction below,

2NH2CONH2

(urea)

NH2CONHCONH2 + NH-

(biuret)

The reaction is reversible, and the principal variables affecting the reaction are

temperature, ammonia concentration and residence time.

The rate at which biuret is produced in molten urea and in concentrated urea

solution, with low ammonia concentration, is very rapid. But in the synthesis

step, the excess ammonia helps to keep the biuret content low.

Three decomposition steps, from 17.0 kg/cm2G, 2.5 kg/cm2G to atmospheric

pressure are used to remove carbamate and excess ammonia completely from

urea solution, before it flows to Crystallizer.

Some amount of air is blown through the solution at the lower part of Gas

separator to strip off the residual ammonia in the solution. The concentration

of the urea solution entering Crystallizer is about 65 - 70 wt. %.

4) Recovery Section

The basic differences between various urea processes, relate to the method of

handling of the unreacted ammonia and carbon dioxide gases from the

ammonium carbamate decomposers. It is not practical to compress the NH3-

C02 mixture and return this to the urea synthesis reactor.

Compression causes a recombination of ammonia and carbon dioxide to solid

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ammonium carbamate and clogging the compressor. The methods for

recycling the unreacted gases can be classified into two types:

1. Separate and recycle as gases

2. Recycle in a solution or slurry form

In MITSUI-TOATSU Total Recycle C Process, the solution recycle process is

used. The NH3-C02 mixture gases from the decomposers are absorbed in water

and urea solution in the respective absorbers, and recycled back to Urea

synthesis reactor. The excess ammonia is purified in High Pressure absorber

and recycled separately to the reactor through Ammonia condensers, Ammonia

reservoir, Liquid ammonia feed pumps and Ammonia preheaters.

5) Crystallization & Prilling Section

The urea solution leaving the carbamate decomposers is vacuum crystallized

and urea crystals are separated by Centrifuge.

To use efficiently the heat of crystallization and to evaporate water at lower

temperature, vacuum crystallization is often used.

Crystals formed in the vacuum crystallizer are centrifuged, and then dried to

less than 0.3% moisture by hot air.

Dry crystals are conveyed to the top of Prilling tower passing through

Fluidizing dryer. There, the crystals are melted in a specially designed steam

heated melter.

The molten urea then flows through Distributors, and it is formed into droplets

and solidified in that shape by cooling air in the prilling tower. In order to

minimize biuret formation, the prilling section is designed to keep the residence

time of molten urea to a minimum.

It is also desirable to keep the moisture content of the melt as low as possible,

in order to produce hard prills and eliminate a drying step after prilling which

would weaken the prills and destroy the glassy surface. In this plant, the

crystals are dried to a moisture content as low as 0.2 - 0.3% before being sent

to Melter.

The prilled urea coming from the bottom of the tower is screened to remove

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oversize prills, and then stored in the bulk storage.

6) Utilities

Major utilities required for the operation of Urea Plant are steam, cooling water

(CW) treated water (TW), Boiler feed water (BFW), Well water (WW),

Drinking water (DW), Plant air (PA), Instrument air (IA), Inert gas (IG),

Electric power (EP), Instrument power (24V) etc.

Steam

Steam is required for driving steam turbines of C02 booster compressor and

centrifugal carbamate pumps as well as for process heating.

Approximately 82 T/Hr of SH steam (33 kg/cm2G, 378° C) drawn from Utilities

is put through the C02 booster compressor turbine and is extracted at 12-13

Kg/cm2G and 260-270° C. Most of the extracted steam is used for process

heating in decomposers, melter etc. and balance is partly used in Hydrolyser

Stripper and about 16-20 T/Hr is sent back to utilities. Approximately 9 T/Hr

of SH Steam (37 Kg/cm2G, 371° C) drawn from ammonia plant is put through

centrifugal carbamate pump turbine and is totally condensed.

Cooling water

There are two cooling towers supplying cooling water to Urea plant namely

CT2 and CT3. While CT3 cooling tower supplied water only crystalliser

barometric condenser, CT2 cooling tower meets the requirement of all other

coolers and condensers in Urea Plant, CT2 system requires continues make up

and blow down which is done by water treatment plant. CT3 water is free

from chloride and normally CT3 system does not require a blow down

(however provision is available to blow down to stripper tank) but may require

a very small pure water make up which is done through addition of TW and

CT3 water is used as make up water for process in Ammonia Recovery

Absorber & Off Gas Absorber. A Small quantity is also used for washing of

crystallizer concentrator top part which goes into the process. In addition

CT3 water is used for gland cooling/flushing requirements of all pumps (except

centrifugal carbamate pump where treated water is used) and also for prilling

system washing.

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Treated water

TW is supplied from water treatment plant and is used for rod packing cooling

of C02 compressor and for seal flushing of centrifugal carbamate pump.

Provision is available for adding TW to steam condensate tank, hot water tank

for plunger cooling of NH3 feed pumps.

Boiler Feed water (BFW)

Small quantity of BFW drawn from NH3 plant is used for desuperheating of

SML steam to melter.

Plant Air

Plant air, supplied by NH3 plant, meets the passivation air requirement in

reactor and High Pressure Decomposer and breathing air for air masks.

Instrument Air

Instrument air, supplied by ammonia plant meets the requirements for operation

of all instruments.

Inert Gas

Inert Gas supplied by ammonia plant, is used for purging NH3 reservoir and

high pressure decomposer during plant shut down/Start up, reactor draining,

reactor filling etc.

Electric Power

Electric power is supplied from power station and meets requirements of motor

drives and lighting.

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2.2.3 Performance of Project Execution

(1) Engineering Performance

ZIL has a long experience of almost 30 years in operation of ammonia and urea

plants and has modified and improved the plants to increase their capacity. This

project incorporates revamp of existing plants, accordingly ZIL's experiences will

be useful for the revamp project. In addition ZIL carried out several projects

including DAP and Argon Recovery.

ZIL has a technical background and enough capabilities in executing CDM project

between Japan and India.

(2) Management Organization

A Chairman, a Managing Director and eight Directors are the board members.

Fertilizer division in Goa is managed by a executive president and five vice

presidents. Vice President Technical, Mr. D. Deshpande is in charge of the

project.

The management organization was established based on its long operation. Refer to

Fig. 2.2-3 organization chart.

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(N>

U>K)

Vice Residmt CorpcrateFinance

R. S Ragtwan

GMFnaice 8 Accounting

L L Heda

Company Seaetary

R. Y. Prtll

Dy.GM Irtemd Audit

J. M. Lopes

Corpora e Vice Residait

Human Resources

D. P. Sinha

GM GMFinance Technical Servces

R. Ra^iurethan J R .Shgh

Chef Medicd Officer

Dr. A. A. Rabhudesd

Charm eh

K. K. Bria

ManagngD recta

H. S. Bava

Bcecuihe Resideit

Raman Machck

Vice Resident Technical

Bleep Deshpande

GMMan/as tiring & Sidhaan

Dy. GMAmrnoha UreaS

Utilles

V. N. S**ari

Dy.GMPH8RMH

V.K.Goyal

Dy GM Martei aice

AXE Gomes

Fig. 2.2-3

ZUARI INDUSTRIES LIMITED ORGANIZATION CHARTFERTILIZER DIVISION

Resdait Vice ResidentCorpaateAffairs

A V. Kanik V. Tcpa

Dy.GM Per samel 8IR

GMBusiness

Dadopment

L.M. Chan (has dcaai

Dy.GMRejects 8

Bigneaing

K G Dhume

GM - Corpaate Comnuricetons

Baium Baietji

Vice Res id ail Comma-art

GMMatoirts

GM

C V. Venkataamarti

Dy GM - Logistics 8 Strategic

Msrkrting

Dy. GM Marketing(RMOHydrsbad)

Dy. GMfvbrkeling (RMO Pune)

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(3) Management Foundation and Management Policy

ZIL fertilizer division has been operated as a core business since their foundation.

Sales of fertilizers including Urea, NPK, DAP etc. was about 60 % of total sales

turnover in 1999-2000. The management foundation is mainly a fertilizer

business. Recently ZIL entered business of cement in 1995 and furniture in 1998

and his business field is expanding.

Some of ZIL's missions are as follows.

- Become one of the largest fertilizer players in India

- Contribute to local economy

Protect environment

ZIL fertilizer division became a zero effluent plant, first in the fertilizer industry in

1989.

The project is to revamp the existing ammonia and urea plants which are core

business of ZIL. Considering his management foundation and management policy

ZIL's could have an enough capability of the project execution.

(4) Financial Performance

The sales volume has been increasing for last ten years and ZIL’s financial

performance has been positive except the previous year. In the previous year the

financial performance was negative due to high feedstock price and reduction of

subsidy.

The major economic indicators of ZIL are listed below:

(Unit: million INR)

Year 1995-96 1996-97 1997-98 1998-99 1999-00

Turnover 7,334 6,994 9,578 8,513 13,924

Profit before Tax 843 525 617 143 A241

Profit after Tax 593 405 538 160 A216

Net Worth 2,422 2,740 3,562 3,624 3,354

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ZIL's financial performance was relatively steady. ZIL belongs to Birla group,

which is No.2 financial group in India and the business field is expanding.

Therefore the financial performance could be enough for the project execution.

(5) Human Resources

The human resources of ZIL are enough, powerful and highly educated and having

many experiences from project development to operation. Number of employees

for last five years are listed below.

Year 1995-96 1996-97 1997-98 1998-99 1999-00

Employees 1,458 1,471 1,611 1,606 1,676

Most of the above employees are working in fertilizer division in Goa.

Therefore the project which will be executed in Goa could have enough human

resources.

(6) Project Execution Organization

Main frame for the project execution organization is illustrated below. The below

organization will include skilled man power in the past fertilizer projects.

Therefore the organization of ZIL could be sufficient for the project execution.

Contractor

Commercial

Manager

Zuari Ind. Ltd.

Project Manager

Mechanical ManagerOperation Manager

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2.2.4 Outline of the Project

(1) Design Basis

The basis for designing the project are summarized below.

The design for the study is based on the conditions specified hereunder and the

utilities and battery limit characterized hereunder.

1) Capacity and operating hours

(a) Ammonia Capacity

The ammonia production capacity is 750 tons per day ±10 %.

(b) Urea Capacity

The urea production capacity is 1,300 tons per day ±10 %.

(c) Operating Hours

Annual operation period is 330 days (7,920 hours).

2) Product specification

(a) Ammonia

Quantity

750 MTPD±10 % of contained 100% ammonia at essentially even rate.

Condition to urea unit:

Ammonia will normally be passed directly to the Urea Unit as follows:

Composition

Suitable for Urea production and export but at latest equal to:

Ammonia

h2o

Oil

Pressure

99.9 % w/w min.

0.1 % w/w max.

5 ppm w/w max.

18 kg/cnfG min.

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Temperature

Condition to storage:

10°C max.

The Ammonia Unit shall be capable of the total production of 750 MTPD +

10 %, going to storage directly at the following conditions:

Composition as above:

Pressure more than 18 kg/cm2G

Temperature 4°C max.

(b) Carbon dioxide (C02)

C02 will be sent directly to the Urea Unit at the following conditions:

Quantity

Approximately 1,157 MTPD, when producing ammonia at the rate of 750

MTPD with naphtha feedstock.

Composition

Suitable for urea production but at least equal to:

co2 99.0 % v/v min.

Hydrogen

Nitrogen

0.8 % v/v max.

0.2 % v/v max.

CH4+CO+Ar 0.02 % v/v max.

Sulfur essentially nil but in no event more than lppm

v/v

Abs. Chemical essentially nil

h2o Saturated

Pressure 0.14 kg/cm2G

Temperature 40 °C

(c) Urea

Urea will be produced as prill with the following specification.

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46.4 % by weight min.

0.3 % by weight max.

0.3-0.6 % by weight

4 ppm by weight

98 % by weight min.

3) Specification of raw materials

Total Nitrogen

Moisture

Biuret

Iron

Size (8-24 mesh)

Feedstock Naphtha Property

The analysis data on August 19, 2000 is adopted for design:

Property Unit MethodIS1448 Limits Analysis

Result

Appearance - Visual Clear & Bright

Clear & Bright

Colour - Visual Colourless Colourless

Density @ 15°C - P-16 Report 0.7204

Distillation

a) I B P. °C P-18 Report 48.0

b)50% recovered °C P-18 130.0 Max. 93.0

c) Final Boiling Point °c P-18 180.0 Max. 151.0

R.V.P. @ 37.8°C kg/cm2 P-39 0.7 Max. 0.48

Residue on evaporation mg/lOOml P-64/P-29 5.0 Max. 1.5

Total Sulphur

(Lamp Method)% by wt. P-34 0.15 Max. 0.03

Aromatics % by vol. P-23 20.0 Max. 9.4

Olefins % by vol. P-23 1.0 Max. 0.5

Calorific Value

(Calculated)BTU/Lb P-7 18,360 Min. 20,357

Net Calorific Value kcal/kg - - 10,580

Carbon & Hydrogen

Ratio(Calculated)- - 6.5 Max. 5.58

Lead Content ppb IP-224 200 max. 30

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Remarks: Meets specification w.r.t. above tests

Lab. Environmental Cond. Temp. 25-30°C, RH 45-80%

Feedstock Natural Gas Specification

Composition

Nitrogen 1.0 mol %

Methane 90.0 mol %

Ethane 5.0 mol %

Propane 3.0 mol %

Buthane 1.0 mol %

Net heat value

Pressure

Temperature

9,393 kcal/Nm3

40 kg/cm2G min. at the battery limit of ammonia

plant

Ambient

4) Specification of Utilities

(a) Steam

LP steam

Pressure (kg/cm2G)

Temperature (°C)

MP steam

Pressure (kg/cm2G)

Temperature (°C)

Hp steam

Pressure (kg/cm2G)

Temperature (°C)

Super HP steam

Pressure (kg/cm2G)

Temperature (°C)

Ammonia Plant Urea-Plant

2 2.5/5.0

210 - 230 sat./sat.

13.5 21.5/20

360 318

37 43

390 385

103

490

Utility

3.5

240

13

260

44

380

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(b) Raw water

Pressure 3 kg/cnfG

Temperature ambient

(c) Electricity

Voltage

Voltage deviation

Frequency

3.3 kV / 440 V / 220 V

3.3 kV / 440 V / 220 V±5%

50 Hz

(d) Instrument power and control system

Voltage 220 V / 110V (AC) / 50 Hz

24 V (DC)

(e) Instrumentation air

Pressure 6 kg/cnfG

Temperature

Quality

Dew point

ambient

free of oil, water and dust

-20°C (under 6 kg/cnfG)

(f) Cooling Water

Supply pressure

Supply temperature

Return temperature

4 kg/cnfG

32°C

42°C

(g) Plant air

Pressure 6 kg/cnfG

Temperature ambient

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(2) Outline of the Plant

1) Ammonia Paint

Several modifications are planed in order to achieve the target energy saving.

These modifications are grouped into 7 sections and explained as below.

Process for other section remains the same as existing as already explained in

the previous paragraph 2.2.2.

Carbon Dioxide Removal Section

Synthesis Gas Drying Section

Synthesis Section

Steam System

Process Condensate Stripping Section

Natural Gas Receiving Section

Bulk Material

An Ammonia Simplified Flow Diagram (After Revamp) is shown in Fig.2.2-4.

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1ST REFORMER 2ND REFORMER SHIFT CONVERTERS

COMB. CHAMBER

AIR COMPRESSOR

STEAMFEEDNAPHTHA—►

COMB. AIR

STEAM METHANATOR CO, REGENERATORCO,ABSORBERDRYER

CO, GAS TO UREA

PROCESSS CONDENSATESYN. GAS COMPRESSOR

AMMONIACONVERTERS D—(a)—CL

AMMONIA COMPRESSORPRODUCT LIQUID AM MONIA

Fig.2.2-4 Ammonia Simplified Flow Diagram (After Revamp)

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(a) C02 Removal Section

Process Feature of CO, Removal section

One of the largest consumers of energy in the ammonia process is carbon

dioxide removal. Therefore, a significant attention has been given to this

section of the Plant. A considerable amount of energy can be saved through

more advanced and efficient design.

In the energy saving modern ammonia plant, three C02 removal process can be

adopted and the feature of each C02 removal process is shown below.

BASF aMDEA process is selected due to the advantage of energy saving and

superiority for the environment.

LoHeat Benfield with ACT-1, improved activator, process can be selected as

alternate due to its chemical availability and it’s moderate energy saving

performance. BASF aMDEA process has disadvantage on the cost of chemical

but it is considered that the energy saving effect and superiority for the

environment can cancel the disadvantage.

Selexol process is not recommended because C02 recovery rate has limit that

does not suit to the combination of the Urea plant.

LoHeate Benfield aMDEA Selexol

Licensor UOP BASF ucc

Solution K2CO3 29-30 wt.% DEA 2.9-3.0 wt.% V205 0.7-1.0 wt/%

MDEA 35-40wt.% Dimenthyl ether of Polyethylene Glycol (DMPEG)

Absorption Type Chemical Physical/Chemical Physical

Regeneration Steam Reboiler Flash &Steam Reboiler

Flash & Air Stripping

Regeneration Heat 800 - 850 (kcal/Nm3 - C02)

350 - 550 (kcal/Nm3 - C02)

. -

C02 Recovery Rate 100% 99.0% (1) 75% (2)

C02 Purity (as dry) 99.0-99.3 vol.% 99.5 vol.% 98.5 vol.%

No. of Experience in Ammonia Plant

63 53 10

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Note: (1) If the H P. flash gas is recycled to absorber inlet, 100% recovery can

be attained.

(2) Remaining 25% C02 is stripped by air.

Process Description CQ2 ^Removal Section

The removal of carbon dioxide from the raw synthesis gas is carried out in two

(2) absorption stages by countercurrent contacting gas with aMDEA solution in

C02 Absorber (A-DA301). The absorber contains a total of four (4) packed

beds, two beds of structured packings and two beds of slotted rings. The

aMDEA solution flows downward by gravity while the raw gas flows upward

through the tower.

The bulk of C02 in raw gas is removed by contact with “semi-lean” solution in

the lower packed part of the absorber and the rest by contact with “lean”

solution in the upper packed part.

The absorber effluent gas, of which C02 content is reduced to approximately

1,000 ppm by dry gas volume at the absorber outlet, is fed to the downstream

Methanator (A-DC401).

The total “rich” solution from the bottom of C02 Absorber is let down through

Hydraulic Turbine (A-GA301C-HT) which drives Solution Pump (A-GA301C)

and is delivered to HP Desorber (A-DA305). The flashed liquid is then

delivered to LP Flash section of C02 Regenerator (A-DA302) where most of the

dissolved C02 is stripped from the rich solution.

The flash gas from the HP Desorb er (A-DA305) is fired in Combustion

Chamber (A-EC108).

Semi-lean solution from the bottom of LP Flash section of C02 Regenerator is

split into two streams. One stream is fed to the mid-section of C02 Absorber

by Solution Pump (A-GA301A,B,C) and the other stream is preheated and

delivered to the top of C02 Stripping Section of C02 Regenerator (A-DA302)

pumped up by the semi-lean solution Pump (A-GA306A,B). The stripping

section contains two (2) packed beds of slotted rings, where the remaining C02

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and other dissolved gas in the semi-lean solution are finally stripped by stream

which is generated in Process Gas Reboiler (A-EA301).

The regenerated solution, that is “lean” solution, is heat-exchanged against the

feed stream to the C02 stripper in the Solution Heat Exchanges (A-EA302)

pumped up by the Lean Solution Pump (A-GAS05A,B) and then delivered to the

top of the absorber after cooling by solution cooler (A-EA303).

C02 stripping section overhead vapor enters LP flash section (A-DA302 upper

part) and promotes the stripping of C02 from the rich solution. The overhead

vapor from LP flash section (upper part of A-DA302) is cooled to condense

water vapor by Regenerator Overhead BFW Heater (A-EA308) and Overhead

Condenser (A-EA306). The C02 product is separated from the condensed

water in Condensate Separator (A-FA302), Further cooled in C02 Direct Cooler

(A-DA304) and sent to Urea Plant.

The condensed water is pumped up by the Regenerator Reflux Pump (A-

GA302A,B) and then returned to the L.P. flash section of A-DA302.

Side Stream Filter (A-FD301) is reused to maintain solution quality. A

provision for intermittent anti-foam injection is also reused for the event of

foaming occurrence.

All available heat of effluent gas from 2nd Shift Converter is consumed for

solution regeneration heat by the Process Gas Reboiler in the existing plant.

This regeneration heat is considerably reduced by the application of aMEDA

process. The surplus heat of 2nd Shift Converter effluent gas is recovered by

heating boiler feed water with LTS Effluent HP BFW Heater (A-EA311) and LP

BFW Heater (A-EA312).

For the revised process scheme as described as above, following addition and

modification of equipments is required.

Addition of semi lean solution line

Internal modification of C02 Absorber (A-DA301) and C02 Regenerator (A-

DA302) for semi-lean solution lines.

Addition of HP Desorb er (A-DA305)

Addition of LTS Effluent HP BFW Heater (A-EA311) and LP BFW Heater (A-

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EA312)

Addition of Solution Pump (A-GA301C) and Hydraulic Turbine (A-GA301C-

HT)

Addition of Lean Solution Pump (A-GA305A,B) and Semi-lean Solution Pump

(A-GAS 0 6 A, B)

(b) Synthesis Gas Drying Section

Process Feature of Molecular Sieve Dryers

Molecular sieves are used in this design to remove water and trace amounts

of carbon dioxide, thus eliminating poisons to the synthesis catalyst and

thereby allowing the makeup synthesis gas to be routed directly to the

ammonia converter. This operation is used to reduce power requirements

in both the synthesis recycle loop and the ammonia refrigeration system.

By routing the fresh make up gas (along with recycle gas) to the converter, a

reduction in loop pressure prop can be achieved, which in turn reduces

recycle power requirements. By not mixing the fresh make up with

converter effluent gas prior to chilling for ammonia recovery, the

concentration of ammonia is increased in the chilled gas, thereby reducing

refrigeration requirements necessary for ammonia recovery.

The specification of Molecular Sieve Dryers is as follows;

Adsorbent Synthetic zeolite

Shape Pellet (typical)

Excepted effluent content C02 less than 1 ppm vol.

H20 less than 0.1 ppm vol.

Experience with such molecular sieve drying systems dates back a number

of years. Molecular sieve systems have been designed for such

installations at not only ammonia plant but also olefin plants, LPG plants,

and large helium extraction plants.

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Process Description of Synthesis Gas Drying

Following the cooling of the Methanator effluent, the synthesis gas is

delivered to the suction of Syn. Gas Compressor.

The synthesis gas sent from the Methanation section is compressed in the

first stage of Synthesis Gas Compressor (A-GB501) and enters Syn. Gas

Comp. Intercooler and Syn. Gas Comp. Interstage Chiller, where the

synthesis gas is cooled for H20 condensation. Then, the H20 and C02

remaining in the gas are removed by Molecular Sieve Dryers (A-

DA501A,B) to the C02 content of 1 ppm or less and H20 content of 0.1 ppm

or less.

The Dryers are comprised of two vessels and are arranged so that while one

is employed for C02 and H20 removal, the other can be regenerated by the

tail gas from Purge Gas Recovery Unit with Molecular Sieve Regeneration

Heater (A-EA505). The gas used for the regeneration is reused a as fuel.

A provision of regeneration of the Dryers is made alternatively with the

purified synthesis gas from the vessel employed for H20 and C02 removal.

(c) Synthesis Section

Current Performance of Synthesis Converter

The current operation is defined by plant data from September 5 and 6, 2000,

and analytical data from August 24 through September 6, 2000. This data

was obtained during first plant visit for the feasibility study.

An overall material balance for the current operation of the synthesis loop

shows reasonable closure. The flow meters for recycle gas and converter

feed, when corrected for stream conditions, show 10-17 percent lower flow

than calculated from the ammonia contents and the ammonia production.

A heat balance across the converters indicates an even lower recycle rate,

and we had difficulty reconciling the plant data with the performance curve

for the recycle compressor. Clearly, the current operation needs to be

verified during a firm design phase.

To determine the current catalyst activities, a kinetic simulation of each

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converter bed was performed. Calculated flow rates, the ammonia contents

from the laboratory data, and the temperatures from the plant log was used.

One free variable is needed in order to obtain heat balance closure, and the

inlet temperature to bed 1 to change in the simulation was allowed. This is

because the plant readings in train B appear incorrect, making the readings

from train A suspect also.

Process Description of Synthesis Section

The modification scheme of Synthesis Section is to install a small converter

with KBR(Kellogg Brown & Root)’s proprietary KAAP(Kellogg Advanced

Ammonia Process) catalyst, downstream of the existing two parallel

converters. With the KAAP converter, it will be possible to reach an

ammonia concentration of 17 volume-percent in the converter effluent, as

compared to the present 11.8 percent. Therefore, the recyle rate can be

reduced substantially, resulting in reduced compressor power.

A proven design for the KAAP converter and the new feed/effluent heat

exchanger are planned. A new boiler feed water heater is also needed.

For the KAAP catalyst to retain good efficiency, it is necessary to install

molecular sieve dryers on the makeup syngas as part of the modification.

Once the makeup syngas is dry, it can be routed directly to the synthesis

converters, instead of being routed to the ammonia separator. This results

in a lower ammonia content of the feed to the converters, thereby allowing

more conversion per pass and therefore lower recycle rate and reduced

energy consumption. During studies on other plants that this benefit

essentially justifies the cost of the dryers, regardless of the use of KAAP

catalyst.

MAKEUP GAS: The composition of the makeup gas is adjusted slightly,

so that the feed to the converters has a hydrogen-to-nitrogen ratio less than 3.

That is more optimum for the combination of iron and KAAP catalysts, as

KAAP catalyst has better performance at lower H/N ratios.

The makeup gas is dry and free of carbon oxides.

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The makeup gas joins the recycle gas and flows to the existing converters.

That will require a piping change. Water cooler A-GB502C3 can be

retired.

EXISTING CONVERTERS: Using the catalyst activities derived from the

plant data, the optimum temperature profile in each catalyst bed of the

exiting converters was determined. The load was also shifted, so that

converter B takes 55 percent of the total feed. That gave a (very slight)

improvement in overall conversion. The total stream leaving the existing

converters can reach 14.5 percent ammonia at the lower recycle rate.

The temperature of effluent from the existing converters will be higher than

the present. The reason is that when the recycle rate is decreased, the heat

of reaction is distributed over less total gas. Also, the conversion per pass

is increased.

NEW EQUIPMENT: The effluent from the existing converters flow

through a new KAAP feed/effluent exchanger, through a bed of KAAP

catalyst, through the feed/effluent exchanger, and through a new boiler feed

water heater. Therefore, the converter effluent flows through the existing

heat exchanger train.

KAAP FEED / EFFLUENT EXCHANGER: The new KAAP feed-effluent

heat exchanger is located together with the KAAP catalyst in a single vessel.

Similar designs have been used in three prior KAAP retrofit projects. The

exchanger heats the KAAP feed to the optimum reaction temperature. A

bypass is provided for control of the KAAP catalyst feed temperature.

KAAP CONVERTER: The KAAP catalyst is arranged in a radial bed.

The volume is chosen to give a reasonable approach to equilibrium in the

converter effluent, or, in other words, to obtain maximum practical

conversion from a catalyst bed. It is possible to reach an ammonia content

of 17 volume percent in the KAAP converter effluent with a reasonably low

amount of KAAP catalyst. This allows the recycle rate in the synloop to be

decreased substantially.

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Connections are provided from the startup heater and from synthesis hot

exchanger A-EA501, for warming up the KAAP catalyst. This provides

flexibility for cold and warm start.

NEW BOILER FEED WATER HEATER: The effluent from the

feed/effluent exchanger is available at higher temperature than the design

temperature of the inlet to the existing synthesis economizer A-EB501.

Therefore, a new heat exchanger is needed between the two. It is

anticipated that it can be useful as a boiler feed water heater.

SYNLOOP PURGE: The existing purge gas recovery unit should be

operated at full capacity, 12,000 Nm3/hr. That will constitute a purge of

5.2 volume percent of the recycle gas. The resulting inerts level in the

converter feed will be 7.3 volume percent.

PRESSURE PROFILE: The current pressure drop in the synthesis loop is

10 kg/cm2. At the new lower recycle rate, the pressure drop in the existing

equipment will be about 3 kg/cm2. The new equipment will add about 1.3

kg/cm2, for a total pressure drop of about 4.3 kg/cm2.

SYNTHESIS GAS COMPRESSOR AND AMMONIA COMPRESSOR:

The new compressor loads require modifications to the compressor internals

of both of Synthesis Gas Compressor and Ammonia Compressor. The

compressor internals of both two compressors should be replaced in order to

bring the compressor up to state-of-the-art efficiency.

(d) Steam System

Steam turbine for Synthesis Gas Compressor

Synthesis Gas Compressor has been driven by two steam turbines. One is

SX-SH (103 - 37 kg/cm2G) back pressure type and the other is SH (37

kg/cm2G) condensing type steam turbine. After the modification of

synthesis section including the addition of molecular sieve dryer, required

power for the Synthesis Gas Compressor is reduced considerably and can be

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supplied by only SX-SH back pressure steam turbine. Therefore SH

condensing steam turbine is no longer required and disconnected.

Steam Turbine for Fans

Air Blower (Forced Draft Fan) and Induced Draft Fan has been driven by

steam turbines. These steam turbines are small and efficiency is low or

energy consumption is high. These steam turbine are replaced by motors to

reduce the energy consumption.

A Simplified Ammonia Plant Steam Balance (After Revamp) is shown in Fig.

2.2-5.

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Fig.2.2-5 Simplified Ammonia Plant Steam Balance (After Revamp)

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(e) Process Condensate Stripper Section

Overhead vapor from the existing low pressure type process condensate stripper

has been condensed by condenser with cooling water. Therefore, heat of

overhead vapor has been discarded. Moreover, Impurities of process

condensate such as ammonia, methanol and C02 are non-condensable gas in the

overhead vapor and have been discharged to the atmosphere.

By applying high pressure type condensate stripper, overhead vapor is utilized

as reforming steam. Thus, heat of overhead vapor is fully recovered.

Impurities in the overhead vapor is reformed in the 1st reformer and is not

discharged to the atmosphere. High Pressure Condensate stripper System

consists of following equipments.

A-DA306 Process Condensate stripper

A-EA314 Condensate Stripper Feed/Effluent Exchanger

A-EA315 Stripped Condensate Cooler

A-GA307A,B Process Condensate Pump

(f) Natural Gas Receiving Section

In case the natural gas in future will be used as a feedstock, the natural gas

feed and fuel from NG Receiving and Meeting Station initially pass through

Feed Gas K.O. Drum where entrained liquids and solids are removed.

Then, a part of natural gas is divided as fuel. Natural gas as feedstock is

delivered to the Feedstock Preheater.

(g) Bulk Material

Complying with requirements after the plant modification, modification or

addition of system of instrument, electricity and piping is required.

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2) Urea Plant

General

Fig. 2.2-6 shows overall block diagram of the renovated urea plant.

The existing conventional urea process plant is renovated with the latest

stripping process by adding the following high pressure equipment operated at

principally same pressure as reactor:

- Stripper which decomposes un-reacted ammonium carbamate to separate

ammonia and C02 as gas phase

- Carbamate Condenser which condenses the ammonia and COz gas to form

ammonium carbamate and urea, and to fully recover the condensation heat

by generating low pressure steam

The targeted production capacity is 1,300 MTPD ±10%, basically maintaining

the same capacity as before renovation. In the renovated process, the

synthesis pressure at 155 Kg/cm2G is selected to reduce energy to pressurize

ammonia and C02 as raw materials and recycle ammonium carbamate solution

up-to the synthesis pressure. The addition of Stripper and Carbamate

Condenser further reduces operating load in downstream sections, resulting in

additional reduction of energy requirement.

Steam turbine for C02 booster compressor is replaced from back pressure

turbine to extraction-admission-condensing turbine to supply middle pressure

steam for heating Stripper and to utilize low pressure steam generated by heat

recovery in Carbamate Condenser.

Purification and recovery sections require minor modifications to meet the new

operating conditions after process renovation.

The following outlines the process of the renovated Urea Plant consisting of

five sections, namely Synthesis, Purification, Recovery and Prilling Sections.

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NH3 )ir MODIFICATION OF STEAM TURBINE

to

PURIFICATION

SYSNTHESIS (ACES 21)

CC02)nrC02

CONIPRESSION

RENOVATION

MINORMODIFICATION

► RECOVERY

1

CRYSTALLIZATIOI

IPRILLING

T

MINORMODIFICATION

1,300 T/D UREA

Fig. 2.2-6 Urea Process Renovation Scheme

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CP2 Compression Section

Fig. 2.2-7 shows a schematic flow diagram of the C02 compression section.

The make-up C02 gas is compressed up to the synthesis pressure by the steam

turbine driven centrifugal type C02 Booster Compressor and the reciprocating

C02 Compressor. The most part of C02 gas is fed to Stripper for C02

stripping purpose and remainder is fed to the reactor. C02 Compressor also

feeds anti-corrosion air for the synthesis loop

Fig. 2.2-8 shows a schematic flow diagram of hydrogen removal facility. Since

the oxygen content becomes ten times of that before process renovation,

hydrogen contained in the C02 gas is removed by catalytic combustion reaction

with oxygen to prevent flammable gas mixture formation due to hydrogen and

oxygen in the synthesis section.

Synthesis Section

Fig. 2.2-9 shows the process flow schemes of the synthesis section and C02

compression section respectively. The major equipment of the synthesis section

are Reactor, Stripper, Carbamate Condenser and HP Ejector. Urea is

synthesized by the reaction of liquid ammonia, gaseous C02 supplied from

Ammonia Plant, and the recycle carbamate solution from the Recovery Section

of Urea Plant. Synthesis urea solution is sent to the Purification Section for

further removal of ammonium carbamate and excess ammonia, after being

stripped by gaseous C02. The make-up liquid ammonia is pumped up and fed to

Reactor through Ammonia Preheater and HP Ejector by Ammonia Feed Pump.

HP Carbamate Ejector using high pressure liquid ammonia as the motive fluid

pumps carbamate solution from carbamate condenser to Reactor.

The recycle carbamate solution coming from the Recovery Section is pumped

up by a centrifugal type Carbamate Feed Pump, and is fed to Carbamate

Condenser.

Reactor is operated at 155 Kg/cm2G and 182 - 184°C, and at NH3/C02 molar

ratio of 3.7. Reactor is a vertical tower with internal baffle plates, and its

interior wall is lined with special stainless steel of urea grade. The operating

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- 56-

REPLACE+ STEAM TURBINE FOR

CO2 BOOSTER COMPRESSOR

0

0

In)

C02FROM AMMONIA PLANT

21.5 Kg/cm2 STM ______ |

TO SYNTHESIS SECTION

i▼

C02 TOSYNTHESIS SECTION

STEAM TURBINE FOR C02 BOOSTER

COMPRESSOR

TURBINE C02 BOOSTER CONDENSER COMPRESSOR C02 COMPRESSOR

Fig. 2.2-7 Urea C02 Compression Section

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DEHYDROGEN COLUMN CO2 GAS COOLER

1 jL>\

H2 02 ANALYZER

Fig. 2.2-8 Urea Hydrogen Removal

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ts>

Uloo

REACTOR STRIPPER CONDENSER

TO HP ABSORBER COOLER

ADD

BFW LPSTEAM

STRIPPERCARBAMATE CONDENSER HP EJECTOR

MODIFYNH3 PREHEATER C02 BOOSTER TURBINE

0

TO PURIFICATION SECTION

BFROM HP ABSORBER COOLER

C02 COMPRESSOR NH3PUMP CARBAMATE FEED PUMP

Fig. 2.2-9 Urea Synthesis Section

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pressure of Stripper and Carbamate Condenser are substantially same as that of

the Reactor.

The synthesis urea solution, after attaining high once-through C02 conversion

in Reactor, is led to Stripper. The synthesis urea solution from Reactor is

stripped by C02 gas and heated in the falling film type heater. Major volume

of ammonium carbamate and excess ammonia contained in the synthesis urea

solution is decomposed and separated in Stripper. The stripped off gas is sent

to Carbamate Condenser. After the C02 Stripping in Stripper, the solution

leaving Stripper is sent to Purification Section.

In Carbamate Condenser, NH3 and C02 gas condense to form ammonium

carbamate and urea in the shell side. The condensation heat is utilized to

generate 5.5 Kg/cm2G steam in the tube side. A packed bed is provided at the

top of carbamate condenser to absorb uncondensed ammonia and C02 gas in the

recycle carbamate solution from the Recovery Section. The gas from top of

the Carbamate Condenser is fed to HP Absorber Cooler for further recovery of

ammonia and C02 gas and the solution from the bottom is fed to Reactor

through HP Carbamate Ejector.

Purification Section

Fig. 2.2-10 shows a schematic flow of purification section. To utilize the

generated low pressure steam effectively in purification section, Preheater for

HP Decomposer heated by the low pressure steam is added.

Recovery Section

Fig. 2.2-11 shows a schematic diagram of recovery section. One shell of

Ammonia Recovery Absorber is added to absorb ammonia gas as inert gas

quantity increases after process renovation.

Crystallization and Prilling Sections

Crystallization and prilling sections are maintained same as before renovation.

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PREHEATERFOR HPD HP DECOMPOSER LP DECOMPOSER GAS SEPARATOR

N>

S

TO HP ABSORBER COOLER TO LP ABSORBER TO OFF GAS CONDENSERi-------- ► |------“► j-------- ►

♦ PREHEATER FOR HPDFROM STRIPPER

FROM OFF GAS ABSORBER - STM.

TOCRYSTALLIZER

Fig. 2.2-10 Urea Purification Section

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HP ABSORBERNH3 RECOVERY

ABSORBER

HP ABSORBER COOLER NH3 CONDENSER

ADDITIONAL NH3 RECOVERY

ABSORBER

wOS

III

NHa FROM NR & NC

FROM LP ABSORBER

FROM HP DECOMPOSER

CW

NH3

TO CARBAMATE FEED PUMP

▲ WATER^ ------

ifATi CW

ADD• ADDITIONAL NH3 RECOVERY I

ABSORBER *

AQUA. NH3

Fig. 2.2-11 Urea Recovery Section

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Steam System

Fig. 2.2-12 shows a simplified steam system. Steam system is optimized by

utilizing the generated low pressure steam for process heaters instead of 12 K

steam except Stripper. Excess low pressure steam is utilized for admission of

Steam Turbine of C02 Booster Compressor. Part of 21.5 K steam is exported to

be used for steam turbine for CT-2 pump. Total steam import to Urea Plant is

thus reduced by 35.85 t/h from that of existing plant.

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N>

a

EXISTING1297 T/D

90.3 T/H (1.67 T/T-U)

4.85 T/H (0.089 T/T-U)

24.2 T/H

1.65 T/H

E40.31 T/H

12 KG USER

7 KG

28.1 T/H

5 KG USER

RENOVATED1300 T/D

59.3 T/H(1.095 T/T-U) r—

"► TO HS & CT-2

____„ 17.09 T/H" (0.316 T/T-U)

4 KG

6.61 T/H

3 KG 3 KGUSER USER

Fig. 2.2-12 Urea Steam System

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(3) Plant Layout

1) Outline of existing Plant Layout

A conceptual layout of the existing plants in Zuari Industries Limited (ZIL) is

shown in Fig 2.2-13. Ammonia and Urea plants adjoin and these two plants

are connected through pipe rack which runs in the center of the plants from

north to south.

In the existing plants, many modifications had been carried out by ZIL by

themselves for the main purpose of capacity increase. Approximate 25

additional equipment had been already installed.

2) Outline of renovated Plant Layout

The renovated plant layout was determined considering the followings based on

the result of site survey.

- Modification in the existing plants should be minimized.

- Cost for piping material and construction, which is necessary for the

renovation, should be minimized.

- Accessibility inside the plant, which is at least necessary for plant operation,

should be kept after the renovation.

- Interference between the existing underground piping and newly added

equipment/structure should be prevented.

- Constructibity of newly added equipment should be considered at the

construction stage of the actual project.

- Availability of free space in the existing plants (on pipe rack, for example) to

install newly installed piping should be examined.

Renovated plant layout was submitted to Zuari Industries Limited (ZIL) at the

2nd site survey, and some comments were provided from view point of their

usual maintenance work. The renovated plant layout was finalized in

accordance with discussion between ZIL and TEC.

Sections in which plant layout will be renovated are stained in Fig 2.2-13.

The detail of the renovation for each section is explained as follows:

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N>

8

Ammonia Plant I Urea Plant◄----------- ;-----------►

Main pipe rack

Crystallizationsection

Prilling section

Control room / Switch room

section to be renovated

Fig2.2-13 Conceptual Figure of Existing Plant Layout in Zuari Industries Limited (ZIL)

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(a) C02 Removal section (Ammonia plant)

One tower, two heat exchangers, and two pumps (one of them is driven by a

turbine) are newly installed to apply aMDEA technology and new pipe rack is

provided between newly added equipment and the existing plant. Furthermore,

modification of internal is required for two existing towers.

(b) Compressor section (Ammonia plant)

Three compressors, which are all driven by stream turbines, are available in this

section. Two compressors and one turbine of these compressors driven by

turbines are modified because operating condition will be changed after

renovation.

Molecular Sieve Dryer and a succeeding heat exchanger are newly installed at

free space available in the east of this section.

(c) Process condensate stripping (PCS) section (Ammonia plant)

HP Condensate Stripper section which consists of one tower, two heat

exchangers, and one pump is newly installed at free space available in the west

of this section.

(d) Reforming section (Ammonia plant)

Burners for Reformer and Heater are replaced because raw materials for

producing ammonia is changed from naphtha to natural gas.

(e) Synthesis section (Ammonia plant)

An ammonia converter and a succeeding heat exchanger are newly installed at

free space available in the west of this section.

(f) Synthesis section (Urea plant)

To apply ACES 21 technology for urea synthesis, one tower, one reactor, three

heat exchangers, four drums, one pump, and one filter are newly installed at

free space available in the east of this section.

Existing underground piping is available under the free space where these new

equipment is installed. However, since there is no other space to install new

equipment, it is determined that new equipment is installed above the existing

underground piping considering interference between underground piping and

foundation of newly installed structure. TEC has experiences in the past

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projects to install equipment above underground piping, and no technical

problem could not be expected.

(g) Compressor / Pump section (Urea plant)

The existing turbine to drive a compressor in this section is replaced to new one

of extraction-admission-condensing type. Additionally a surface condenser

for this new turbine is installed at the north of compressor/pump building with

a structure.

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(4) Plant Cost

EPC cost of the revamp plants was jointly estimated by TEC and Toyo Engineering

India Ltd. (TEIL) based on many experiences of fertilizers plants in India.

Estimated plant cost is tabulated below.

Category Estimated Cost (MUS$)

Engineering 9,404

Equipment and Material 38,264

Construction 8,679

Others 2,530

Total Plant Cost 58,877

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(5) Raw Materials and Utilities Consumption

1) Ammonia Plant

The raw material and utilities consumption of ammonia plant is summarized

below for before revamp, after energy saving and after feedstock conversion.

as per ton ammonia

before revamp after energy saving after feedstock change

Feedstock 5.501 5.389 5.611 Gcal

Fuel

Naphtha or NG 3.405 3.215 2.931 Gcal

Steam 0.775 - 0.169 -0.411 Gcal

Power 0.110 0.170 0.166 Gcal

C.W 0.293 0.239 0.240 Gcal

subtotal 4.583 3.455 2.926 Gcal

Total 10.084 8.844 8.537 Gcal

Urea Plant

The raw materials and utilities consumption of urea plant is summarized

below in comparison before and after renovation.

Existing Renovated

Steam (T/T)

Import 43.0 Kg/cm2G x 385°C 1.67 1.10

11.4 Kg/cm2G x 215°C 0.09 -

Export 21.5 Kg/cm2G x 318°C - -0.16

11.8 Kg/cm2G x 265°C -0.32 -

Net 1.44 0.94

Electricity (kWh/T)1} 86 77

Energy (Gcal/T)

Steam 1.101 0.717

Electricity 0.211 0.189

Total 1.312 0.906

Saving Base 0.406

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Feedstock (T/T)

ammonia 0.58 0.58

C02 0.74 0.74

Note 2) including power for cooling water

Net steam consumption calculated by subtracting export steam from import

steam decreases by 0.50 T/T, approximately 40% reduction. Electric power

consumption decreases by 9 kWh/T, owing to less power requirement of C02

Compressor and Ammonia Feed Pump. Electric power consumption

includes those in CT-2 and CT-3.

Raw materials consumption, such as ammonia and C02 is principally

maintained same as before process renovation.

Energy consumption is calculated for evaluation purpose from 0 °C water-

based steam enthalpy and electric power. To convert electric power to

energy, 2,457 kcal/kWh is used considering thermal efficiency of ordinary

power plant.

The energy consumption of urea plant is reduced from 1.312 Gcal/T to 0.906

Gcal/T, thus 0.406 Gcal/T energy is saved.

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2.2.5 Scope of Supply

It is presumed that the EPC project execution will be performed based on LSTK

contract, however, ZIL will be deeply involved in the course of project

implementation and in the plant operation stage after completion of the plant

construction. Scope of works both for Japan and India side are described as below,

keeping the flow of project implementation in order.

Work Item India side Japan side

F/S by Japan side(this feasibility study) Support Execute

Evaluation on the above F/S by India side Execute Support*1

Priority ranking of projects in India Execute Support*1

Detailed F/S by India side Execute Support*1

Discussion on CDM conditions Execute Support*1

Request for Japanese fund*4 Execute Support*1

Environment Impact Assessment Execute Support*1

Statutory Approval Execute Support*1

Procurement of equity fund Execute -

Evaluation of the project by Japanese agency Support Execute*2

Execution of Loan Agreement Execute Execute*2

Selection of EPC contractor Execute -

EPC Contract(refer to *3 for details) Execute -

Pre-commissioning and Commissioning Execute'3 -

(Trade-off of C02 emission right) (Execute) (Support)

Commercial Operation Execute -

Note: M Toyo will support as a follow up of this F/S, if necessary.

*2 Japanese gavermental agency will execute.

*3 It is presumed that EPC project execution will be performed based on

LSTK contract, thus all equipment and materilas required for the plant

facilities are included in the scope of EPC contractor. Further details are

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defined as below.

1) Equipment and Materials

The following equipment and materials required for the construction of

the plant facilities are included in the scope of supply of EPC contractor.

(a) All itemized equipment

(b) All materials for piping, electrical, instrument and fire protection

(c) Catalyst and chemicals

(d) 2 years operation spare parts

2) Service

The following services are included in the scope of EPC contractor.

(a) Basic design and detailed engunering

(b) Procurement service, inspection, expediting and transportation of

equipment and materials

(c) Civil and building works

(d) Erection and assembly works

(e) Commissioning Supervision

The following services are, however, are included in the scope of

India side.

(a) Demolition and relocation of the existing facilities

(b) Works to get government approval

(c) Operation and maintenance of the plant

3) Fund

Amomg the fund required fot implementation of the project, foreign

currenvy portion will be by Japan side, while local currency portion will

be by India side. Refer to Chapter 4 for the exact amount of each portion. *

*4 Request for Japanese fund would be executed after agreed in the

international conference on CDM.

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2.2.6 Condition and Issues for Project Execution

The following presumptions are made for implementation of the project:

a) Required fund is procured under the presumption that 66.9 % of total

investment cost is by Japanese fund and the remainder 33.1 % is by equity.

b) All of gas emissions, liquid wastes, solid wastes and noise which will be

generated from the project facilities are within the limitation of environment

control sepecifications. There is no damage to ecological balance of the

region.

c) All equipment and materials for the plant facilities can be delivered to the

plantsite without any restrictions. Also, all materials and services for the

project are not subject to the restriction by import and export control.

d) There is neither ancient monument nor treasure trove in the candidate plant

site.

It can be said from the site survey conducted during the period of this study that

items b), c) and d) listed above would be resolved in the course of project

implementation. For Item a) the request for Japanese fund would be executed

after agreed in the international conference on CDM.

2.2.7 Project Execution Schedule

Project execution schedule is planned as follows.

Work Item

F/S by Japan side(this feasibility study)

Evaluation on the above F/S

Application of Japanese fund

Preparation of equity raising

Environment Impact Assessment

Selection of EPC contractor

Start of EPC works

Basic design

Schedule

Sep. 2000 — Mar. 2001

Apr. 2001 — Sep. 2001

Oct. 2001 - Jan. 2002

Nov. 2001 - Feb. 2002

Dec. 2001 — Jan. 2002

Dec. 2001 - Feb. 2002

Mar. 2002

Mar. 2002 - Oct. 2002

Duration(month)

7

6

4

4

2

3

8

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Statutory approval Apr. 2002 — Aug. 2002 5

Detailed engineering May, 2002 — Feb. 2003 10

Procurement of equipment & materials Jul. 2002 — Oct. 2003 16

Construction of the plant Feb. 2003 — Mar. 2004 14

1st Tie-in May, 2003 1

2nd Tie-in May, 2004 - Jul. 2004 3

Pre-commissiong/commissioning Aug. 2004 — Sep. 2004 2

Start of commercial operation Oct. 1st, 2004 —

Note M Request for Japanese fund would be executed after agreed in the

international conference on CDM.

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2.3 Financing Plan

2.3.1 Financing Plan for Project Execution

(1) Required Fund

Required fund as Total Investment Cost is 60,832 MUSS, breakdown of which is

summarized below:

(UNIT: M US$)

ITEM ForeignCurrency

LocalCurrency Total

Erection Cost 40,678 18,200 58,877

Pre-production Cost 0 0 0

Initial Working Capital 0 0 0

Interest during Construction 0 1,954 1,954

Total Investment Cost 40,678 20,154 60,832

(2) Debt/Equity Ratio

Considering the nature of the Project (this project is oriented for environment

measure and revamping of the existing plant, therefore, timing of implementation is

the most important) and the difficulty & high charge for foreign exchange

procurement in India, debt portion is planned to be maximized within a limitation

of finance amount of Japanese fund like Export Credit. For the evaluation of

profitability in this F/S, it is assumed that debt / equity ratio for required funds

would be procured from Export Credit of Japan Bank for International Corporation

(“JBIC”) and the ratio of debt would be maximized upto the limitation of the export

credit, i.e. 85% of the foreign currency portion of the contract price and for local

currecy portion, the same amount as the down payment of foreign currency portion:

- Debt 40,678 MUSS (66.9 %)

- Equity 20,154 MUSS (33.1 %)

(3) Financing Plan

Considering the difficulty of procurement of forcing currency (in terms of time and

capacity) and high charge in India, the most prefarable finance for the realization of

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the project is assumed to use the export credit to be provided by JBIC, especially

“Supplier’s Credit”.

The credit condition of “Supplier’s Credit” is one of the most advantageous finance

facilities which can be applied to India. The typical terms and conditions of

“Supplier’s Credit” is as follows:

Lender Japan Bank for International Corporation (JBIC)

and Commercial Banks (co-financing lenders) in

Japan

Borrower : Zuari Industries Limited (through Japanese

Company)

Finance Amount : 85% of the foreign currency portion of the contract

price for local currecy portion, the same amount as

the down payment of foreign currency portion

Interest Rate : CIRR (1.85% per annum for Japanese Yen as of

February 2001)

Repayment period : 10 years from 6 months after plant acceptance,

every six months, 20 times

Procurement condition More than 30% of Japanese Contents (hard & soft

portion)

Payment Security : Guarantee issued by Government or first class

local bank

The typical procedure of “Supplier’s Credit” is described as follows:

1) The outline and contract condition of the project shall be recognized by JBIC for

the project of Supplier’s Credit (to be explained by borrower from JBIC i.e.

Japanese Company). Japanese Company will find Commercial Banks (co­

financing lenders) in parallel.

2) Before the contract conclusion between Indian Client and Japanese Company,

the final condition of the contract should be approved by JBIC.

3) After the contract conclusion between Indian Client and Japanese Company,

Japanese Company will proceed with application to JBIC for "Supplier’s

Credit”.

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4) Loan Agreement will be concluded between JBIC and Japanese Company and

Japanese Company will borrow the money as per the progress of the project and

lend the same to Indian Client.

2.3.2 Conceptual Financing Plan

The total investment cost is estimated as 60,832 MUS$ with debt of 40,678

MUSS and equity of 20,154 MUSS. As described in section 2.2.3, Zuari

Industries Ltd. has gained the profit since its foundation of 1967 (in only 1999,

they lost due to special and unexpected reason) and it is expected that there are no

difficulties for the repayment of loan and procurement of capital is possible. Zuari

Industries Ltd. is one of leading companies of second largest financial combine

“Birla Group” in India and Zuari Industries Ltd. itself is diversificated to various

business field such as cement and therefore, has stable business foundation.

Also, the existing plant of Zuari Industries Ltd. was built with financial support of

former OECF in Japan and the repayment of the same is settled without any

problems. Furthermore, another fertilizer company of Birla Group i.e. Chambal

Fertilisers and Chemicals Ltd. built a fertilizer plant with utilizing former J-

EXIM’s Supplier’s Credit in 1999 and the repayment is smoothly being done.

Therefore, it can be said that Zuari Industries Ltd. has deep and broad knowledge

of Export Credit.

In the meantime, foreign exchange reservation of India is stablly increased with

following tendency:

March 1999 3,123 Million USD

March 2000 5,546 Million USD

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2.4 Conditions for Clean Development Mechanism (CDM)

2.4.1 Coordination Issues for Project Materialization

Coordination issues to be solved for the project materialization are described

below.

(1) Trade-off of C02 Emission Right

Zuari Industries Limited fully understands that this project is well suitable for

needs of CDM. Discussions were not made on trade-off issues of C02

emission right in the course of this feasibility study. Further discussions and

negotiations would be made in line with the conclusions that would be

determined in the international conference.

(2) Coodination Issue for CDM Condtion

Based on the presumption that this project be collaboratively inplemented

under CDM by Japan as develpoped country and India as developing country,

further discussions would be made between both governments as well as

between Toyo Engineering Corporation and Zuari Industries Limited, in order

to finalize the project scope and to define the scope of woks.

2.4.2 Possibility that India consents to apply CDM

The government of India is presently considering the guideline of fertilizer subsidy

policy with 3 steps reducing amount of subsidy in order to minimize financial

deficit due to increase of subsidy and to recover competitiveness of fertilizer

production cost considering the affiliation to WTO. The feedstock change and

energy saving incorporated in this project is fully in accordance with the long term

policy on the fertilizer sector under consieration by the government of India.

Zuari Industries Limited (ZIL) is a private corporation, but it is carrying out its

business activities in line with the government fertilizer policy. ZIL is, thus, in

position to make positive efforts to follow the decisions made by the Government

of India.

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CDM is to aim to reduce the greenhouse performance gasses through such projects

as to be collaboratively executed between developed and developing countries, and

therefore, India could probabry consent to apply CDM.

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CHAPTER 3

EFFECTS OF PROJECT

Summary: Effects achievable by implementation of the project such as energy saving and greenhouse performance gas reduction were examined through quantitative evaluation and estimation before and after project implementation. Reduction of the greenhouse performance gas was evaluated with a focus on the quantity of C02 gas reduction. In addition, discussions were made on the methods for review and confirmation of effects.

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CHAPTER 3 EFFECTS OF PROJECT

3.1 Effects on Energy Saving

3.1.1 T echnical Background

Zuari Industries Limited (ZIL) produces ammonia by using naphtha as feedstock and a large

quantity of fuel. Feedstock naphtha is mixed with steam and converted into hydrogen after

reformed at about 800 deg C. Then air is introduced and reformed further at about 1000

deg C. Carbon monoxide (CO) produced in steam reforming is converted to hydrogen by

the shift reaction. Then carbon dioxide (CO?) simultaneously produced is removed and the

removed carbon dioxide is used as a feedstock in urea plant. The synthesis gas after CO?

removed is further purified by complete removal of carbon oxides and pressurized in a

compressor. The pressurized synthesis gas is fed to an ammonia converter to produce

ammonia.

In ammonia process reaction occurs in each section at high temperature. Reaction

conversion and heat recovery from high temperature effluent stream are very important. In

ammonia process a large quantity of energy is consumed. Reforming of naphtha feedstock

consumes a large quantity of steam and C02 removal consumes heat to regenerate C02.

High pressure compressor also consumes a large quantity of steam.

Energy saving technologies are applied in the project to reduce energy required in CO?

removal, high pressure ammonia synthesis and steam turbines.

The major applied technologies are listed below.

1) aMDEA process for C02 removal

The solution of aMDEA process has a characteristic of chemical and physical absorption

compared with the existing process. Absorbed C02 is partially released by flashing in the

intermediate stage. Therefore required heat for regeneration can be reduced.

2) KAAP converter installed in ammonia synthesis

Although the existing ammonia converter uses iron catalyst, but KAAP converter at the

downstream uses ruthenium catalyst which is more active by 20-30 times than iron

catalyst. Therefore the outlet ammonia content of KAAP convertor can be increased and

the circulation rate of synthesis loop can be reduced. Accordingly the required power of

synthesis gas compressor and refrigerator can be reduced.

3) High pressure condensate stripper

The process condensate of the existing plant is flashed at atmosphere pressure. So energy

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loss exists due to vapor loss. In the revamp project the process condensate is stripped by

steam in a high pressure condensate stripper and the stripped vapor is recycled to primary

reformer without energy loss. Carbon dioxide, methanol and ammonia contained in the

stripped vapor is decomposed in the primary reformer without venting to atmosphere.

4) Modification of compressors and turbines

The internals of synthesis gas compressor, its turbine and refrigerant compressor will be

modified to improve efficiency. The modification plans were studied by manufacturers.

Urea is produced with ammonia and C02 supplied from ammonia plant Urea synthesis

reaction occurs at high temperature and high pressure and consumes a large quantity of

power and steam. The total steam consumption has been reduced by the improvement of

process. TEC's ACES 21 process featuring improvement of reaction efficiency and

effective recovery of heat is applied to the existing urea plant to reduce energy effectively

and economically. ACES 21 applies a stripper and a condenser to increase conversion of

urea reaction. Effluent from a urea reactor is stripped by C02 and unreacted materials is

recovered in a condenser and recycled to a urea reactor. A heat exchanging device is

provided in a stripper and a condenser to increase energy efficiency.

Energy saving is also achieved by feedstock conversion from naphtha to natural gas in the

ammonia plant

3.1.2 Baseline

If the project should not be materialized, the operating status would be assumed same as last

year (2000). Accordingly the actual operating data in 2000 is applied as the baseline of

energy consumption in the ammonia and urea plants.

The ammonia plant uses naphtha for feedstock and fuel and generated steam is exported to

the outside (urea and/or utility) after effective heat recovery. In case of shortage of steam in

the plant steam is imported from the outside.

The energy consumption in the ammonia plant is calculated as total energy consumption of

feedstock and fuel as low heat value basis, minus export steam as enthalpy basis, plus import

steam as enthalpy basis. Power consumption and cooling water consumption are added to

the above total energy consumption after converted into energy basis.

The urea plant uses steam, power and cooling water. The energy consumption in the urea

plant is calculated as total energy consumption of import steam as enthalpy basis, minus

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export steam as enthalpy basis. Power consumption and cooling water consumption are

added to the above total energy consumption after converted into energy basis.

Baseline of energy consumption in the ammonia and urea plants of ZIL is specified as

follows, based on the actual operating data in 2000.

Ammonia Urea

Energy consumption 10.084 Gcal 1.312 Gcal

per ton-product

Production capacity 750 tons 1,300 tons

per day

The above energy consumption is converted to crude oil consumption using 10,000 kcal/kg

as below.

Ammonia Urea

Crude oil consumption 1,008.4 kg 131.2 kg

per ton-product

Production capacity 750 tons 1,300 tons

per day Total

Annual crude oil consumption

Note: 330 days per year

249,579 toe/y 56,285 toe/y 305,864 toe/y

Quantitative Effects

Energy saving technologies applied in the ammonia and urea plants can reduce energy.

The feedstock change in the ammonia plant can also reduce energy and C02 emission

1) Quantity of Energy Saving

1-1) Ammonia plant

(a) by energy saving technologies

Baseline after energy saving

Production capacity per day 750 tons 750 tons

Feedstock and fuel naphtha naphtha

Energy consumption per ton 10.084 Gcal 8.844 Gcal

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Annual energy saving = 750 x (10.084 - 8.844) x 330 = 306,900 Gcal

(b) by feedstock change

after energy saving after feedstock change

Production capacity per day 750 tons 750 tons

Feedstock and fuel naphtha natural gas

Energy consumption per ton 8.844 Gcal 8.537 Gcal

Annual energy saving = 750 x (8. 844 - 8.537) x 330 = 75,983 Gcal

1-2) Urea plant

(a) by energy saving technologies

Baseline after energy saving

Production capacity per day 1,300 tons 1,300 tons

Energy consumption per ton 1.312 Gcal 0.906 Gcal

Annual energy saving = 1,300 x (1.312-0.906) x 330 = 174,174 Gcal

1-3) Total of Ammonia and Urea plants

Annual energy saving = 306,900 + 75,983 + 174,174 = 557,057 Gcal

The above energy saving figures are converted to crude oil equivalent using 10,000

kcal/kg as below.

1-4) Ammonia plant (energy saving and feedstock change)

Annual reduction of crude oil = 30,690 + 7,598 = 38,288 toe/y

1-5) Urea plant (energy saving)

Annual reduction of crude oil = 17,417 toe/y

1-6) Total of Ammonia and Urea plants

Annual reduction of crude oil = 38,288 + 17,417 = 55,705 toe/y

2) Total Energy Saving for Project Life

Total quantity of the energy saving over the project life is 1,114,100 toe crude oil

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equivalent as summarized below.

Total Quantity of Energy Saving

Period, Year Crude oil equivalent, toe/y Total Energy saving, toe

1* to 10th 55,705 557,050

11th to 20th 55,705 557,050

Total 1,114,100

3.1.4 Review and Confirmation

Effect on energy saving after implementation of the Project is planned to measure with

following provisions.

1) Row measurement devices (ordinary flow meter can be applied) will be installed on all

feed gas lines, which enables to determine the exact quantity of total feedstock and fuel.

2) Row measurement devices will be installed on all export and import lines such as steam

to measure the exact quantity of the respective stream.

3) Row measurement devices will be installed on all product streams such as ammonia and

urea.

4) Composition analysis on feedstock and fuel will be performed, which enable to calculate

and confirm the heating value of the respective stream.

5) Electric power consumption will be measured and monitored by kW meter.

6) Row measurement devices will be installed on cooling water circulation lines.

7) All of above flow rate and electric power consumption measurements are continuously

monitored and recorded, while composition analysis on process streams and feedstock

and fuel are performed periodically, for example, once per month.

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3.2 Reduction of Greenhouse Performance Gas

3.2.1 Technical Background

Zuari Industries Limited (ZIL) produces ammonia by using naphtha as feedstock and a large

quantity of fuel. Feedstock naphtha is mixed with steam and converted into hydrogen after

reformer and carbon dioxide is produced by the shift reaction. Most of C02 is used as a

feedstock in the urea plant, but the balanced C02 is vented to the atmosphere.

A big amount of Carbon Dioxide (C02) as the greenhouse performance gas is generated as a

result of combustion of fuel to supply the energy in the ammonia and urea plants.

Feedstock change from naphtha to natural gas in the ammonia plant can reduce COa

generation on reforming and shift reaction and all C02 is used as a feedstock in the urea plant

So no C02 is vented to the atmosphere. Natural gas feedstock can also reduce energy

consumption in the ammonia plant.

In addition to Carbon Dioxide, there is possibility to discharge Nitrogen Oxide (N20, NO,

NOx, etc.) as the potential greenhouse performance gas, but these gasses are not included in

the evaluation of effects on greenhouse performance gases due to the reason that quantities

of these gasses are very small compared to that of Carbon Dioxide (C02).

3.2.2 Baseline

If the project should not be materialized, the operating status would be assumed same as last

year (2000). Accordingly the actual operating data in 2000 is applied as the baseline of

Greenhouse Performance Gas in the ammonia and urea plants.

The ammonia plant uses naphtha for feedstock and fuel and generated steam is exported to

the outside (urea and/or utility) after effective heat recovery. In case of shortage of steam in

the plant steam is imported from the outside.

The energy consumption in the ammonia plant is calculated as total energy consumption of

feedstock and fuel as low heat value basis, minus export steam as enthalpy basis, plus import

steam as enthalpy basis. Power consumption and cooling water consumption are added to

the above total energy consumption after converted into energy basis.

The urea plant uses steam, power and cooling water. The energy consumption in the urea

plant is calculated as total energy consumption of import steam as enthalpy basis, minus

export steam as enthalpy basis. Power consumption and cooling water consumption are

added to the above total energy consumption after converted into energy basis.

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Energy consumption in the ammonia plant consists of feedstock and fuel. Fuel will be

reduced with energy saving. After feedstock change from naphtha to natural gas C02

produced in the process will be reduced and energy consumption will be also reduced

Baseline of Greenhouse Performance Gas in the ammonia and urea plants of ZIL is specified

as follows, based on the actual operating data in 2000.

1) C02 generation by fuel consumption in the ammonia plant

Among total energy consumption of 10.084 Gcal/ton, 4.583 Gcal/ton corresponds to

fuel.

Annual energy consumption as fuel = 750 x 4.583 x 330 = 1,134,293 Gcal

Crude oil equivalent = 113,429 toe/y (@10,000 kcal/kg)

Annual C02 generation =

113,429/1000 x 42.62 x 20 x 0.99 x 44/12 = 350,973 t-CO^y

2) C02 generation by feedstock in the ammonia plant

Daily produced C02 in the ammonia process is estimated 1,157 t-COyd based on the

simulation of 750 t/d capacity.

Annual C02 generation in the ammonia plant =1,157 x 330 =381,810 toe/y

3) C02 generation by fuel consumption in the urea plant

Annual energy consumption as fuel = 1,300 x 1.312 x 330 = 562,848 Gcal

Crude oil equivalent = 56,285 toe/y (@10,000 kcal/kg)

Annual C02 generation =

56,285/1000 x 42.62 x 20 x 0.99 x 44/12 = 174,158 t-COyy

4) C02 consumption as feedstock in the urea plant

C02 consumption is 0.74 t-COyt-urea.

Annual C02 consumption as feedstock in the urea plant base on 1,300 t/d capacity.

Annual C02 consumption = 1,300 x 0.74 x 330 =317,460 t-COyy

5) Total of Ammonia and Urea plants

Annual C02 generation =

350,973 + 381,810 + 174J '8 - 317,460 = 589,481 t-COyy

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3.2.3 Quantitative Effects

Energy saving technologies applied in the ammonia and urea plants can reduce C02. The

feedstock change in the ammonia plant can also reduce C02.

1) Reduction of C02 by energy saving in the ammonia and urea plants

(a) Ammonia plant

Baseline

Production capacity per day 750 tons

Feedstock and fuel naphtha

Fuel consumption per ton 4.583 Gcal

after energy-saving

750 tons

naphtha

3.455 Gcal

Annual energy saving = 750 x (4.583 - 3.455) x 330 = 279,180 Gcal

Annual reduction of crude oil equivalent 27,918 toe/y

Annual C02 reduction

27,918/1000 x 42.62 x 20 x 0.99 x 44/12 = 86,384 t-CO^y

(b) Urea plant

Baseline

Production capacity per day 1,300 tons

Energy consumption per ton 1.312 Gcal

after energy saving

1,300 tons

0.906 Gcal

Annual energy saving = 1,300 x (1.312-0.906) x 330 = 174,174 Gcal

Annual reduction of crude oil equivalent 17,417 toe/y

Annual C02 reduction

17,417/1000 x 42.62 x 20 x 0.99 x 44/12 = 53,892 t-COVy

(c) Total of Ammonia and Urea plants

Annual C02 reduction = 86,384 + 53,892 = 140,276 t-CO^y

2) Reduction of C02 by feedstock change in the ammonia plant

by energy saving

after energy .saving afteiieedstock change

Production capacity per day 750 tons 750 tons

Feedstock and fuel naphtha natural gas

Fuel consumption per ton 3.455 Gcal 2.926 Gcal

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Annual energy saving = 750 x (3.455 - 2.926) x 330 = 130,928 Gcal

Annual reduction of crude oil equivalent 13,093 toe/y

Annual C02 reduction

13,093/1000 x 42.62 x 20 x 0.99 x 44/12 = 40,513 t-CCVy

(b) C02 reduction in the process

before feedstock change after feedstock change

Production capacity per day 750 tons 750 tons

Feedstock and fuel naphtha natural gas

C02 generation by feedstock 1157 t-CCX/d 962 t-COyd

C02 consumption in urea 962 t-COyd 962 t-COyd

C02 vent to atmosphere 195 t-COyd 0 t-COyd

Annual C02 reduction 195 x 330 = 64,350 t-CCVy

(c) Total C02 reduction in the ammonia plant by feedstock change

Annual C02 reduction = 40,513 + 64,350 = 104,863 t-COyy

3) Total C02 reduction

Annual reduction of C02 = 140,276 + 104,863 = 245,139 t-CCVy

4) Total C02 reduction for Project Life

Total quantity of the C02 reduction over the project life is 4,902,780 t-C02 as

summarized below.

Total Quantity of C02 Reduction

Period, Year C02 Reduction, t-CCVy Total C02 Reduction, t-C02

1st to 10th 245,139 2,451,390

11th to 20th 245,139 2,451,390

Total 4,902,780

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3.2.4 Review and Confirmation

Effect on the reduction of C02 gas by the implementation of the Project is planned to review

and confirm by the following provisions and methods.

1) Flow measurement devices (ordinary flow meter can be applied) will be installed on all

feed gas lines, which enables to determine the exact quantity of total feedstock and fuel.

2) Flow measurement devices will be installed on all export and import lines such as steam

to measure the exact quantity of the respective stream.

3) Flow measurement devices will be installed on all product streams such as ammonia and

urea and C02 vent line.

4) Composition analysis on feedstock and fuel will be performed, which enable to calculate

and confirm the heating value of the respective stream.

5) Electric power consumption will be measured and monitored by kW meter.

6) Flow measurement devices will be installed on cooling water circulation lines.

7) All of above flow rate and electric power consumption measurements are continuously

monitored and recorded, while composition analysis on process streams and feedstock

and fuel are performed periodically, for example, once per month.

8) Reduction of C02 as greenhouse performance gas can be calculated based on the

measured flow and composition of feed gasses and products, and utilities consumption.

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3.3 Affects to Productivity

The ammonia and urea plants of ZIL have many experiences of more production than design

capacity for the project. In this F/S 10 % capacity allowance for production of ammonia

and urea was incorporated in the design in accordance with ZIL's request. So there will be

a flexibility in productivity.

If another 10 % capacity allowance (total 20%) is required, additional equipment should be

designed with 20 % allowance, but total investment cost will be increased The design

basis should be discussed in the stage of project execution with ZIL.

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CHAPTER 4

PROFITABILITY

Summary: Evaluation basis such as required fund (erection cost, pre-production cost, initial working capital and interest during construction), operation plan (production plan, sales plan, required number of employee, production cost, and so on), construction schedule, project life and taxation system were estimated and established in order to analyze the project profitability. Further evaluation was made through sensibility studies on FIRR against the key project values.

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CHAPTER 4 PROFITABILITY

4.1 F inancial Evaluation

4.1.1 Evaluation Method

(1) Without Case (Revamping Project is not implemented)

Ammonia and Urea plants of Zuari Industries Ltd (ZIL) are under operation and the

project in this feasibility study is revanping one for the those existing plants. In case that

the project is not implemented, it is assumed that the existing ammonia and urea plants

continue to their operation for producing 750 T/D ammonia and 1300 T/D urea. The

econmic study of "Without Case” is conducted based on expected sales revenue and

production cost, and actual depreciation amount of the existing facilities and debts.

Financial statements and cashflow for whole project life of 3 years poiject construction

period and 20 years operation period are made based on above and economic status are

evaluated.

ZIL produces ammonia form naphtha in the existing ammonia plant and the final product

urea are produced from ammonia and by-product of de-carbonate supplied from the

ammonia plant ZIL also produces compund fertilizer such as NPK and DAP by using

ammonia and urea. In this feasibility study, only cost for producing final prosuct of urea

are evaluated. The study is conducted only for ammonia and urea production facilities.

(2) With Case (Revamping Project is implemented)

In case that the project is implemented, additional cost for the revamping proejct and

improved production cost are taken into consideration for “With Case”. The econmic study

of “With Case” is conducted in the same manner of above “Without Case”. Financial

statements and cashflow for whole project life of 3 years poiject construction period and 20

years operation period are made based on above and economic status are evaluated

(3) Evaluation of Revamping Projec

For measuring contribution of the revamping project, differences of profit / loss between

“With Case” and “Without Case” are calculated Evaluation of the project is analysed

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4.1.2

(1)

based on those differences of profit / loss against investment cost for the project. The

differences of increment "With Case" minus “Without Case" is defined as “With -

Without Case".

Required Fund

Basic Conditions of Calculation

1) Currency Rates

The following currency rates are applied to this study based on the rates as of January

31% 2001.

1.00 US$ =105.00 JPY = 47 Rupees

US$ currency is basically used in this report

2) Escalation Rates

No escalation for any cost and price up to and after the commercial operation start is

applied to this study.

(a) Foreign Currency Portion

- up to the commercial operation start 0.00 %/year

- after the commercial operation start 0.00 %/year

(b) Local Currency Portion (Rupee Portion)

- up to the commercial operation start 0.00 %/year

- after the commercial operation start 0.00 %/year

Actually Rupee portion should be considered its price escalaion. But currency used

for this study is US dollars, and escalation for prices of Rupee portion indicated in US

dollars is not taken into account with cosideration of exchange rate between Rupee

and US dollars.

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Erection Cost

The erection cost of this revamp project is estimated and summarized as below. The

project facilities are installed inside of the existing ZIL plant area and land aquisitioncoast

is not required Physical coningency for unexpected additional cost requirement is taken

into account as 2.0 % of net erectin cost:

(UNIT: M US$)

ITEM ForeignCurrency

LocalCurrency Total

Land Acquisition Cost 0 0 0

License Fee 1,048 328 1,376

Engineering Fee 7,832 1,572 9,404

Equipment & Material Cost 28,239 10,025 38.264

Transportation Cost (Including above equipment & material cost)

Insurance (Including above equipment & material cost)

Erection & Civil Works 2,761 5,918 8,679Sub total 39,880 7%843

Physical Contingency 798 357 1,153

Price Escalation 0 0 0

Total Erection Cost 40,678 18,200 58,877

The above cos includes all customs duties and taxes in India.

The above cost is assumed to be allocated per following ratio during project construction

period

First year of project construction (-3 year) 20%

Second year (-2 year) 40%

Third year (-1 yer) 40%

Pre-production Cost

Pre-project cost are not taken into account because the project is revamping one and

owner’s existing personnels would work as the project members. Training for the

operators/maintenance staff are not required Materials for pre-commissioning and test

opeartion would be very small and could be negrected

Pre-production cost of the project is estimated and summarized as below:

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(UNIT: MUSS)

ITEM ForeignCurrency

LocalCurrency Total

Project Management Cost 0 0 0

Training Cost 0 0 0

Material Cost 0 0 0

Total Pre-production Cost 0 0 0

(4) Initial Working Capital (Additional Working Capital)

Additional working capital for the project is taken into account as Initial Working Capital.

But urea production amount and its price are not changed aftter the revamping project, and

hence product inventories, account receivable and operating cash are estimated unchanged

With change of raw materials from naphtha to natural gas, raw material of naphtha of 7

days storage is not required Two years spare pares are included in the erection cost They

are summarized as below:

(UNIT: M US$)

ITEM ForeignCurrency

LocalCurrency Total

Product Inventories 0 0 0

Material Inventories 0 -1,490 -1,490

Account Receivable 0 0 0

Operating Cash 0 0 0

Account Payable 0 0 0

2 years Spare Parts 0 0 0

Total Initial Working Capital 0 -1,490 -1,490

The above reduction of working capital is not evaluated as reduction of initial investment

cost for the revamping poiject and is assumed to contribute to cash balance.

(5) Interest during Construction

Interest during construction will be calculated to be 1,954 MUS$ based on the annual

interest of 7.00 % on foreign curency.

(6) Total Investment Cost

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1) Total Investment Cost

Total investment cost of the project is estimated and summarized below:

(UNIT: M US$)

ITEM ForeignCurrency

LocalCurrency Total

Erection Cost 40,678 18,200 58,878Pre-production Cost 0 0 0

Initial Working Capital 0 0 0

Interest during Construction 0 1,954 1,954

Total Investment Cost 40,678 20,154 60,832

2) Required Finance Plan

The required finance plan for the project is presumed as follows:

Total Investment Cost

Foreign Currency Portion

Local Currency Portion

Debt

Equity

60,823 MUSS (100 %)

40,678 MUSS (66.9%)

20,154 MUSS (33.1%)

40,678 MUSS (66.9%)

20,154 MUSS (33.1%)

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4.1.3 Operation of Plant

(1) Production and Sales Plan

Productions and sales plans of products during the project life are shown in Table 4.1-1

Production and Sales Plan.

Without Case Table 4.1-1 (1)

With Case Table 4.1-1 (2)

1) Production Schedule

(a) Annual operations days 330 days/year

(b) Commercial Operation Load

Project year Without Case With Case

- 3rd through -1st year 100% 100%

1st year 100% 80%

2nd through 20th year 100% 100%

(c) Production Rate at 100% load

Product Urea (Bagged) 1,300 Ton/Day

(429,000 Ton/Year)

2) Sales Schedule

(a) Sales Amount

Sales schedule of product urea is not changed after the proejct and all product are

assumed to be sold out, because the all produced urea is sold out to domestic market

and production amount is not changed after the project

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Table 41-1(1) PRODUCTION AND SALES PLAN FOR WITHOUT CASE MUSS

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOTAL

UREA (MAIN PRODUCT)

CAPACITY (Ton/Y ear) 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429.000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000

CAP. VniJ7A'nON(%) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

PRODUCTION (ToVYrar) 429,000 429,000 429,000 429.000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429.000 429,000 429,000 429.000 429,000 429,000 429,000 429,000 429,000 9,867,000

INCREASE IN INVENTORY (Ten) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

SAIT'S VOLUME (ToiVYear) 429,000 429,000 429,000 429.000 429,000 429,000 429.000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 9,867,000

VNIISAITS PRICE(L8$/Ton) 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250

SALES REVENUE 107,250 107,250 107,250 107,250 107,250 107,250 107.250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107.250 2,466,750

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Tabic 4.1-1 (2) PRODUCTION AND SALES PLAN FOR WITH CASE MUSS

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOTAL

UREA (MAIN PRODUCT)

CAPACITY (Tcn/Year) 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000

CAP. UTILIZATION (%) 100.0 100.0 100.0 80.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

PRODUCTION (Ton/Year) 429,000 429,000 429,000 343,200 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 9,781,200

INCREASE IN INVENTORY (Ton) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

SALES VOLUME (TorVYear) 429,000 429.000 429,000 343,200 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 9,781,200

UNITS AUS PRICE (LSVTon) 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250

SAIES REVENUE 107,250 107,250 107,250 85,800 107,250 107,250 107,250 107,250 107.250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 2445,300

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(b) Sales Prices

i) Urea farmer gate price in India is very much lower than the international market

price level which is decised by the Indian Government. But the urea production

cost in India is higher than the same of international price. The gap between

farmer gate price and production cost is compensated by the Governmental

subsidy and fertilizer production company could get profit based on the subsidy.

Now Government of India decided to reduce this subsidy and decleared to stop

the subsidy by the year of 2006. Hence it is impossible to evaluate the proejct

based on farmer gate price.

It is reported that Indian urea production cost in 1999 was US$/Ton 200 - 250.

The cost varies very widely depending on naphtha price. The current naphtha

price also fluctuated widely according to crude oil prices and it is now high price

level.

In this study sales price is assumed at US$/Ton 250 and sensitivity analysis on

urea price is conducted between US$/Ton 150 - 300.

ii) The all sales prices are not applied to the escalation for whole proj ect life.

(2) Required Number of Employees

The project is revamping project and no additional employees is required

(3) Training Plan

The operation and maintenance stuff in the existing ZIL ammonia and urea plants have

enough knowledge and capability. The newly introduced technology does not need special

training for such stuff. It is judged that training for the project can be carried out during pre­

commissioning and intital commissioning period

(4) Recruiting Plan

The project is revamping project and no additional employees is required No recruiting

plan is required

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(5) Variable and Direct Fixed Cost

Variable and Direct Fixed Cost during the project life is shown in Table 4.1-2 Variable

Cost and Table 4.1-3 Direct Fixed Cost, which consists of the items listed below.

1) Variable Cost

(a) Raw Material Cost

(b) Urea bag cost and bagging cost

(c) Utility Cost

(d) Catalyst and Chemical Cost

2) Direct Fixed Cost

(a) Labor Cost

Based on the lates actual cost in the existing ammonia and urea plants, labor cost

is assumed at 92 personnel with 24,730 US$ of average annual wage. The same

cost is applied for the cost for With Case.

(b) Factory Overhead Cost

Assumed at 78 % of the labor cost

(c) Maintenance Cost

For Without Case, annual maintenance cost is assumed at US$ 2,241 thousands

according to the existing plant actual cost For With Case, 1.5 % of erection cost

of the project is added on the above annual maintenace cost

ZIL plans replacement of Urea Reactor soon, and in the study the following cost

is assumed as special maintenace cost

Unit: 1,000 US$

Year Without Case With Case

-2nd Year 1,000 1,000

-1* Year 1,500 1,500

Total 2,500 2,500

(d) Tax and Insurance for Fixed Property

Base on the existing plant actual cost, it is assumed at US$/Year 720 thousands.

After revamping project, assumed at 1.79 % of the booked value of foreign

currency of equipment and materials cost is added on the above cost

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Table 4.1-2 Variable Cost Summary at 100 % Operation

Items Unit Without Case With Case

Unit price Daily Unit price Daily

(US$) Consumption (US$) Consumption

Naphtha MT 333.43 631.33 333.43 0.00

LNG MMBtu 6.000 0.00 6.000 25,422.62

Bags for Urea Bag 0.267 26,130 0.267 26,130

Catalyst US$/Y 850.09 _ 850.09

Chemicals US$/Y 196.06 _ 196.06

Variable Cost for Bagging MT-Urea 0.281 1,300 0.281 1,300Steam HP(100Kx490°C) Ton 16.943 830 17.706 0

Electricity KWH 0.074 132,148 0.073 140,795

Polished Water M3 0.830 1,335 0.812 1,335

CW Make-up Ton 3.659 9,600 3.659 7,734Steam SH(43Kx385°C) MMKcal 15.251 2,171 15.938 1,430Steam MP(37Kx366°C) Ton 14.771 -107 15.436 -413Steam SM-l(21.5Kx318°C) Ton 13.934 0 14.561 -208Steam SM-2(11.8Kx265°C) Ton 12.757 -416 13.331 0

Steam SM-3(11.8Kx215°C) Ton 12.248 117 12.799 0

Table 4.1-3 Direct Fixed Cost Summary

Items Fixed Cost (US$/Y)

Without Case With Case

Labor Cost for Ammonia & Urea Plants 2,274.8 2,274.8

Factory/Administration & Social Overhead Cost 1,777.8 1,777.8

Maintenance Cost 1,357.7 2,240.9

Tax & Insurance 719.9 1,225.4

Bagging Cost excluding Variable Cost 2,686.8 2,686.8

Sales Expense including Freight 1,190.0 1,190.0

Total 8,709.3 10,097.9

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(e) Fixed Cost for Urea Bagging

Base on the existing bagging plant actual cost it is assumed at US$/Year 2,687

thousands. The same rate is applied for With Case.

(6) Production Cost

Production Cost is summarized in Table 4.1-4 Production Cost Statement.

Without Case Table 4.1-4 (1)

With Case Table 4.1-4 (2)

The production cost includes the items listed below.

(a) Variable Cost

(b) Direct Fixed Cost

(c) Depreciation

The amount of depreciation is calculated based on the straight line method.

The un-depreciation amount of the existing plants at the tiem of project start is

assumed at US$ 6,350,000. The same amount is assmued to depreciate for ten years.

The project cost is assumed to depreciate per the following conditions;

Depreciation period 18 years

Residual value 3.16 %

(d) Corporate Tax on Profit

Applied at 38.85 % on Profit

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Table 4.1-4(1) PRODUCTION COST (VARIABLE & FIXED DIRECT COST) FOR WITHOUT CASE MUSS

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 •IOTAL

VARIAIiLECOST 101.612 101.612 101.612 101.612 101,612 101.612 101.612 101.612 101.612 101.612 101.612 101,612 101.612 101,612 101.612 101.612 101.612 101,612 101.612 101,612 101.612 101.612 101.612 2337,083RAW MA'II'KLAI. 71.769 71.769 71.769 71,769 71.769 71.769 71,769 71.769 71.769 71.769 71.769 71.769 71.769 71.769 71.769 71.769 71.769 71,769 71.769 71.769 71.769 71.769 71.769 1.650689

(4467 69.467 69.467 69.467 69.467 69.467 69,467 69.467 69,467 69.467 69,467 69.467 69,467 69.467 69,467 69.467 69.467 69,467 69,467 69.467 69.467 69,467 69.467 1.597.731LNG 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Raw Materia) 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

2502 2302 2502 2502 2502 2502 2502 2302 2502 2302 2502 2302 2302 2502 2302 2302 2502 2302 2502 2302 2302 2302 2302 52957CATAI.YST & Cl IEMICAI. 787 787 787 787 787 787 787 787 787 787 787 787 787 787 787 787 787 787 787 787 787 787 787 18111

Gtidysl 651 651 651 651 651 651 651 651 651 651 651 651 651 651 651 651 651 651 651 651 651 651 651 14.977136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 3.134

uiiuiYcosr 29,056 29.056 29.056 29.056 29.056 29,056 29,056 29.056 29,056 29,056 29,056 29,056 29.056 29.056 29,056 29.056 29.056 29.056 29,056 29,056 29.056 29,056 29.056 668283Viuiiililc GtJ for Digging 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 2771Su-i.il lll,(IOOKx4<X)) 4.642 4.642 4.642 4,642 4,642 4,642 4,612 4,642 4,642 4.642 4.642 4.642 4,612 4,642 4,612 4.642 4.642 4,6(2 4.6(2 4,642 4.6(2 4,6(2 4,6(2 106771fjeetriiity 3.211 3.211 3.211 3511 3.211 3.211 3.211 3.211 3.211 3.211 3.211 3.211 3.211 3.211 3.211 3.211 3,211 3,211 3.211 3.211 3.211 3,211 3.211 73.859

366 366 366 366 366 366 366 366 366 366 366 366 366 366 366 366 366 366 366 366 366 366 366 8425Raw Wider 0 0 l) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0CW Make 11590 11590 11590 11590 11590 11590 11590 11.590 11590 11590 11590 11590 11.590 11590 11.590 11.590 11590 11.590 11590 11590 11590 11590 11590 266574Sui.nSIV3K.x3KS) 10.9%; 1092? 10.927 10.927 10.927 10,927 10,927 10927 10927 10927 10927 10927 10927 10927 10927 10927 10927 10927 10927 10927 10927 10927 10927 251510Steitii MP(37Kx366) -521 -52! -521 -523 -523 -523 -523 -523 -523 -523 -523 -523 -523 -523 -523 -523 -523 -523 -523 -523 -523 523 -523 -12024SlinuSM l(215Kx318) 0 0 1) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0SUi.uSM 2(ll3tK.x265) -1.751 -1.751 1,751 -1.751 -1.751 1.751 -1,751 1.751 1.751 •1,751 -1.751 -1,751 -1.751 -1.751 1.751 -1.751 1.751 -1,751 -1.751 -1.751 -1.751 -1.751 -1.751 -40279Sunn SM-3(1 18Kx215) 473 473 473 473 473 473 473 473 473 473 473 473 473 473 473 473 473 473 473 473 473 473 473 10876Otlut Utility 6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

dirixtmxeixxxst 8.709 9.709 10,209 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 202814liJxmrCVfit 2.275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 52321S/V Ex]xitriideC<«t 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0I';u1ory OvtdiemlCost 1.670 1.670 1.670 1.670 1.670 1,670 1.670 1,670 1,670 1.670 1.670 1,670 1,670 1.670 1.670 1.670 1,670 1.670 1.670 1,670 1.670 1.670 1.670 38409

U58 2,358 2858 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 33.728720 720 720 720 720 720 720 720 720 720 720 720 720 720 720 720 720 720 720 720 720 720 720 16559

Iln^igCciG! ix dulilg Vjr'uilllo Cost 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 61.797

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOTAL

I'RODUCIIONOE MAIN PRODUCT 429,000 429.000 429.000 429.000 429,000 429.000 429,000 429.000 429.000 429.000 429.000 429.000 429.000 429,000 429.000 429.000 429,000 429,000 429.000 429,000 429,000 429.000 429.000 9.867.000

VARIAI It F. COST 101.612 101.612 101.612 101,612 101.612 101.612 101.612 101.612 101.612 101.612 101.612 101,612 101,612 101,612 101,612 101,612 101.612 101,612 101.612 101,612 101.612 101.612 101,612 2337.083DIRECT HXED COST 8.709 9,709 10209 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 8709 202814

CASH EACIORY COST 110322 111522 111.822 110522 110522 110522 110522 110322 110322 110322 110322 110322 110322 110322 110322 110322 110322 110322 110322 110322 110322 110,322 110322 2539,897

DEI’RECIAHON 635 635 635 635 635 635 635 635 635 635 0 0 0 0 0 0 0 0 0 0 0 0 0 6350ARMailZAIlON 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Dlil'RiriA'IlON AND AMOR MZA'IION 635 635 635 635 635 635 635 635 635 635 0 0 0 0 0 0 0 0 0 0 0 0 0 6350

TOI AI-EACIORY COST 110957 111.957 112457 110,957 11(1957 11(1957 110957 110957 110957 110957 110322 110522 110322 110322 110322 110322 110322 110322 110322 110522 110322 110322 110322 2546247

UNflTACIOKY COST(l SS/l'i.i) 259 261 262 259 259 259 259 259 259 259 257 257 257 257 257 257 257 257 257 257 257 257 257

SAITS EXI'ENKIS 1.190 1.190 1.190 1.190 1.190 1.190 1.190 1.190 1,190 1.190 1.190 1,190 1.190 1.190 1.190 1.190 1,190 1.190 1.190 1.190 1.190 1,190 1.190 27.370

Soda) (Xt-rim*) & Hints 10S 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 2480

SAIJiJ (VALUABLEADDED) TAX 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

OI’IKAHNG IXI’liTSIS 112254 113.254 113,754 112254 112254 112254 112254 112254 112254 112254 111.619 111,619 111,619 111.619 111,619 111.619 111.619 111.619 111.619 111,619 111.619 111,619 111,619 2576097

UNflOI'liR.IXriJvKI!(lSJ/li.i) 262 264 265 262 262 262 262 262 262 262 260 260 260 260 260 260 260 260 260 260 260 260 260 6005IN1ER1STON UONGimM 1 186 124 62 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 372INIERU>TONIjONGHJtM2 771 514 257 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1543lNIERI2>TONLONG'lliRM 3 345 166 83 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5941NIER1STON LONG TERM 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

INIERISTON IjONGIERM D 111 I f 1502 804 402 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2508

INIERISTONSIIORTIERM Dlilfl 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

TOTAL 1‘KODl CHON COST 113557 114,059 114.157 112254 112254 112254 112254 112254 112254 112254 111.619 111.619 111,619 111.619 111,619 111.619 111,619 111.619 111.619 111.619 111.619 111.619 111,619 2578605UNriT'ROD.COST(tSVIi.i) 265 266 266 262 262 262 262 262 262 262 260 260 260 260 260 260 260 260 260 260 260 260 260

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MUSSTable 4.1-4(2) PRODUCTION COST (VARIABLE & FIXED DIRECT COST) FOR WITH CASE

YEAH 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOTALVARIAI3IECOS T 101.612 101,612 101,612 57.063 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71,329 71329 1,717.149

RAW MA'Il'XIAI, 71.769 71,769 71,769 42111 52639 52639 52639 52639 52639 52639 52639 52639 52639 52639 52639 52639 52639 52639 52639 52639 52639 52639 52639 1.257365Najihtln 69.467 69.4<,7 69,467 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 208400IMG 0 0 0 40269 50337 50337 50337 50337 50337 50337 50337 50337 50337 50337 50337 50337 50337 50337 50337 50337 503.37 50.3.37 50337 996668Raw Malrrial 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Hog 2,302 2302 2302 1.842 2302 2302 2302 2302 2302 2302 2302 2302 2302 2302 2302 2302 2302 2302 2.302 2302 2302 2.302 2302 52497

CATALYST A Cl IHMICA1. 787 787 787 837 1.016 1,016 1,016 1.016 1.016 1,016 1,016 1.016 1,016 1.016 1.016 1.016 1.016 I.OI6 1,016 1.016 1.016 1.016 1,046 23,076Ciinlysl 6.51 651 651 680 850 850 850 850 850 850 850 850 850 850 850 850 850 850 850 850 850 850 850 18785Cliattiatb 1.36 1.36 1.36 157 196 196 196 196 196 196 196 196 196 196 196 196 196 196 196 196 196 196 196 4.291

uni JIY COST 29,056 29,056 29,056 14.115 17,613 17.643 17.643 17,643 17,613 17,643 17.613 17,613 17,643 17,643 17,643 17,643 17,643 17,643 17.613 17,64.3 17,613 17.613 17,61.3 4.36508Variable Cost for Hugging 120 120 120 96 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 2747Slrau IIP(100Kx490) 4,612 4.612 4,612 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13,927Hcctridly 3,211 3.211 3,211 2729 3,412 3,412 3,412 3,412 3.412 , 3.412 3,412 3,412 3.412 3,412 3,412 3,412 3,412 3,412 3.412 3,412 3,412 3.412 3,412 77,182Polished Water 366 366 366 286 358 358 358 358 358 358 358 358 358 358 358 358 358 358 358 358 358 358 358 8179Raw Wider 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0CW Makoa^i 11.590 11.590 11,590 7.470 9337 9337 9337 9337 9337 9337 9337 9337 9337 9337 9337 9337 9337 9337 9337 9337 9337 9337 9.337 219.650Strau SI l(43Kx385) 10,92.7 10927 10927 6017 7321 7321 7321 7321 7321 7321 7321 7321 7321 7321 7321 7321 7321 7321 7321 7321 7321 7321 7321 181.698S Irani MP(37Kx366) 523 523 523 -1,684 -2105 -2105 -2105 -2105 -2105 -2105 -2105 -2105 2105 -2105 -2105 2105 -2105 -2105 2105 2105 2105 -2105 -2105 43.249Strau SM 1(213Kx3I8) 0 0 0 -800 -999 -999 999 999 999 999 999 999 999 999 999 999 999 999 999 999 999 999 999 19.790Strait SM-2(ll.8K.x265) 1.751 1.751 1.751 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5.254StraiiSM.XH-8K.x2l5) 473 473 473 0 . o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.419Other Utility 6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

DIRECT ITXED COST 8,709 9,709 10209 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 230387IjihnurGnst 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 2275 52321S/V Exyxitri.'ie Cost 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Pa<tory Ovdfiral Cost 1.670 1.670 1.670 1,670 1,670 1,670 1,670 1,670 1.670 1,670 1,670 1,670 1,670 1,670 1,670 1,670 1,670 1.670 1,670 1,670 1,670 1,670 1.670 38409Main! (nmcE Cost 1.358 2358 2858 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 2241 51391Tax & Haunter 720 720 720 1,225 1.225 1,225 1,225 1,225 1.225 1325 1.225 1.225 1325 1,225 1.225 1,225 1,225 1,225 1,225 1,225 1,225 1.225 1,225 26668BogpugCost ex chidingVariable Cc«t 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 2687 61,797

YEAR 2002 2003 2001 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOTALPRODUCTION or MAIN PRODUCT 429,000 429,000 429,000 343,200 429,000 429,000 429.000 429,000 429.000 429,000 429.000 429,000 429.000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 429,000 9.781.200

VARIABLE COST 101,612 101,612 101,612 57.063 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 71329 1,717.149DIRECT FIXED COST 8709 9.709 10,209 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 10098 230587

CASH FACTORY COST 110322 111322 111.822 67.161 81,427 81,427 81,427 81,427 81,427 81.427 81,427 81.427 81,427 81,427 81,427 81,427 81,427 81,427 81,427 81,427 81.427 81,427 81,427 1,947.736

DLPRIE1AI10N 635 635 635 3,742 3,742 3,742 3,742 3,742 3,742 3,742 3,107 3,107 3,107 3,107 3,107 3,107 3,107 3,107 3.107 3,107 3,107 0 0 62283ARMOTIZATION 0 0 0 391 391 391 391 391 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,954

DEPRECIATION AND AM0R I17A110N 635 635 635 4,133 4,133 4,133 4,133 4,133 3.742 3,742 3.107 3,107 3,107 3,107 3.107 3,107 3,107 3,107 3,107 3,107 3,107 0 0 64.237

TOTAL FACTORY COST 110.957 111,957 112457 71,294 85360 85360 85360 85360 85,169 85,169 84334 84334 84334 84334 84334 84334 84334 84.534 84,534 813.34 81334 81,427 81,427 2011.973UNri'FACJORYCQST<LS$/IWi) 259 261 262 208 199 199 199 199 199 199 197 197 197 197 197 197 197 197 197 197 197 190 190

SALES EXTENDS 1.190 1.190 1,190 1.190 1,190 1.190 1,190 1.190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1.190 1.190 27370Sooal (Xnhtwl & IW»r 108 108 1(8 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 2480SAUS (VALUABIE ADDED) TAX 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

OPIKAIINGEXPENSES 112254 113,254 113,754 72392 86858 86858 86858 86858 86467 86467 85,832 85.832 85,832 85.832 85,832 85,832 85,832 85,832 85,832 85.832 85,832 82725 82725 2011.823UNTFOPER.EXPENSE (IS JTai) 262 264 265 212 202 202 202 202 202 202 200 200 200 200 200 200 200 200 200 200 200 193 193 4,802

INIERISTON LONGTERM 1 0 0 0 2847 2563 2278 1.993 1,708 1.424 1,139 854 569 285 0 0 -0 0 0 •0 0 0 -0 -0 15,661INIERGST ON LONG 1ERM 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0INIUREST ON LONG 1ERM 3 1302 801 402 T> 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.508

INIEREaTON LONG TERM 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0INTEREST ON LONG TERM DEBT 1302 801 402 2848 2563 2278 1,993 1,708 1,424 1,139 854 569 285 -0 0 0 -0 0 0 0 0 0 0 18170

[NIERESTONSIIORTTEKM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

TOTAL PRODUCTION COST 113357 114,059 114,157 75,440 89,421 89.136 88851 88566 87,891 87,606 86686 86402 86117 85,832 85,832 85,832 85,832 85.832 85,832 85,832 85,832 82725 82725 2059.992UNrrpROD.cosT(Xs$zrni) 265 266 266 220 208 208 207 206 205 204 202 201 201 200 200 200 200 200 200 200 200 193 193

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(e) Debts of Existing Plants and Repayments

The existing plants has the following long term loan at the start of the project. Their

loan amount and repqyment schedule are summarized below,

Unit: 1,000 DMR

Loan Amount 50,000 250,000 135,000

Repayment Period 3 years 3 years 3 years

Annual Interest Rate 17.5% 14.5% 12.0%

Repayment Schedule

-3rd Year 16,667 83,333 70,000

-2nd Year 16,667 83,333 32,500

—U Year 16,667 83,333 32,500

Unit:: 1,000 US$

Loan Amount 1,064 5,319 2,872

Repayment Period 3 years 3 years 3 years

Annual Interest Rate 17.5% 14.5% 12.0%

Repayment Schedule

—3rd Year 355 1,773 1,489

-2nd Year 355 1,773 691

—la Year 355 1,773 691

The above amount are taken into account for both Without and With Cases.

(f) Amount with Interest

Repayment

1st Repayment

Grace Period

Interest

Limit

on Foreign Long Term Loan

: 10 annual equal installments

: after the commercial operation start

: 0 year

: 7.0 % per year (Export Credit of JBIC is assumed for the

evaluation of profitability)

: US$40,678,000

Assumed all foreign currency of proejct cost, which is

66.9 % of total invenstment cost

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(g) Amount with Interest on Local Long Tarm Loan

Repayment 5 annual equal installments

1st Repayment

Grace Period

after the commercial operation start

0 year

Interest 13.75 % per year

Limit Not required because all local currency portion is assumed

to be covered by equity.

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4.1.4 F inancial Evaluation

(1) Conditions of Financial Evaluation

Conditions of financial evaluation of this project are as follows.

1) Construction Schedule

Construction Period 31 months after contract effective

Commissioning Period 2 months after mechanical completion

2) Operation Schedule

Commercial Operation Start Octorber, 2004

Operation Load:

Year Period Without With

- -3rd to -1* (Octorber 2001 to September 2004) 100% 100%

- 1st (Octorber 2004 to September 2005) 100% 80%

- 2nd to 20th (Octorber 2005 to September 2024) 100% 100%

3) Project Life

Project life for financial evaluation is counted for 20 years after revamping project,

that is, from the beginning of commercial operation Octorber 2004 to September

2024.

4) Currency Rate & Escalation Rate

Please refer to Section 4.1.1 (1) 1) & 2).

1.00 US$ = 105.00 JPY = 47.0 INR

(2) Financial Statements

(a) Production Cost Statement

Reference is made to Table 4.1-4 (1) & (2).

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(b) Profit and Loss Statements

Reference is made to Table 4.1-5 (1) & (2).

(c) Cash Flow Statement

Reference is made to Table 4.1-6 (1) & (2).

(d) Project Balance Sheet

Reference is made to Table 4.1-7 (1) & (2).

(e) Financial Rate of Return

Reference is made to Table 4.1-8.

(3) Financial Internal Rate of Return (F1RR)

Since the project is revamping project, the financial internal rate of return is calculated as

below.

- Investment Cost: Proejct cost for revamping

- Profit from the Project: Increment of cashflow between Without Case and With

Case

(a) FIRR on Investment (ROI)

- Before Tax 35.21 %

- After Tax 28.19 %

(b) FIRR on Equity (ROE)

- Before Tax 63.68 %

- After Tax 49.78 %

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MUS$Table 4.1-5(1) INCOME STATEMENTS (Profit and Loss Statements) FOR WITHOUT CASE

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOTAL

OPERATING INCOME 107,250 107,250 107,250 107,250 107.250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 2,466,750

TOTAL SALES REVENUE 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107.250 107,250 107,250 107,250 107,250 107,250 2466750

COSTOFSALES 110,957 111,957 112,457 110957 110957 110957 110957 110957 110957 110957 110322 110,322 110,322 110322 110322 110,322 110322 110322 110,322 110,322 110,322 110322 110322 2546247

VAIJABI £ COST 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101,612 101.612 101,612 2337,083DIRECT FIXED COST 8,709 9,709 10209 8,709 8,709 8,709 8.709 8,709 8,709 8.709 8,709 8,709 8,709 8,709 8,709 8,709 8,709 8,709 8.709 8,709 8,709 8,709 8,709 202814DEPRECIAHON AND AMORTIZATION 635 635 635 635 635 635 635 635 635 635 0 0 0 0 0 0 0 0 0 0 0 0 0 6350INCREASEPROD INVENTORY(M INLB) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

GROSS PROFTTONSALES -3,707 -4,707 5.207 -3,707 -3,707 -3,707 -3,707 -3,707 -3,707 -3,707 -3,072 -3,072 -3,072 -3,072 -3,072 -3,072 -3,072 -3,072 -3.072 -3,072 3,072 -3,072 -3,072 -79,497

SALES EXPENSES (PRODUCT) 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 27,370GENERA],AND ADMIN. EXPENSES 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 2480SALES (VALUABLE ADDED) TAX 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

OPERATING PROFIT -5,004 6004 6504 -5,004 -5,004 5.004 5,004 -5,004 5.004 -5,004 4,369 -4,369 -4,369 -4,369 -4,369 4369 4369 -4,369 4.369 -4,369 4369 -4,369 4,369 -109,347

NON OPERATING EXPENSES 1,302 804 402 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2508

INTEREST ON LONG TERM DEBT 1,302 804 402 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2508INIEREST ON SHORTTERM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

NET PROFIT OR (LOSS) BEFORE TAX 6.307 6809 -6907 -5,004 -5,004 -5,004 -5,004 -5.004 -5,004 -5,004 -4,369 -4,369 4369 4.369 4,369 -4,369 4,369 -4,369 4,369 4,369 -4,369 4369 4,369 -111,855

INCOMETAX 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

NET PROFIT OR (LOSS) AFTER TAX -6,307 -6809 -6907 -5,004 5,004 5,004 -5,004 -5,004 -5,004 -5,004 -4,369 -4,369 4,369 4.369 4,369 4369 4,369 -4,369 -4,369 -4,369 -4,369 -4,369 -4.369 -111,855

DIVIDENDS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

RETAINED EARNINGS 6,307 6809 -6907 5,004 -5,004 -5,004 5,004 -5,004 -5,004 -5,004 4,369 4,369 -4,369 -4,369 -4,369 -4,369 4369 -4,369 -4,369 4,369 -4.369 -4,369 -4,369 -111,855

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Table 4.1-5(2) INCOME STATEMENTS (Profit and Loss Statements) FOR WITH CASE M US$

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOTAL

OPERATING INCOME 107,250 107,250 107,250 85,800 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 2,445,300

TOTAL SALES REVENUE 107,250 107,250 107.250 85,800 107,250 107,250 107.250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 107,250 2,445,300

C06TOFSALES 110,957 111,957 112,457 71,294 85,560 85,560 85,560 85,560 85,169 85,169 84,534 84,534 84,534 84,534 84,534 84,534 84,534 84,534 84,534 84,534 84,534 81,427 81,427 2,011,973

VAITABLE COST 101,612 101,612 101,612 57,063 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 71,329 1,717,149DIRECT FIXED COST 8,709 9,709 10,209 10,098 10098 10098 10098 10,098 10,098 10098 10098 10,098 10,098 10098 10098 10098 10,098 10098 10098 10098 10,098 10,098 10098 230,587DEPRECIATION AND AMORTIZATION 635 635 635 4,133 4,133 4,133 4,133 4,133 3,742 3,742 3,107 3,107 3,107 3,107 3,107 3,107 3,107 3,107 3,107 3,107 3,107 0 0 64,237INCREASE PROD INVENTORY(MINIS) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

GROSS PROMT ON SALTS 3,707 -4,707 -5,207 14,506 21,690 21,690 21,690 21,690 22,081 22,081 22,716 22,716 22,716 22,716 22,716 22,716 22,716 22,716 22,716 22,716 22,716 25,823 25,823 433,327

SALES EXPENSES (PRODUCT) 1,190 1,190 1,190 1,190 1,190 1,190 1.190 1.190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 1,190 27,370GENERAL AND ADMIN. EXPENSES 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 2.480SALES (VALUABLE ADDED) TAX 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

OPERATING PROFIT -5,004 -6,004 -6,504 13,208 20392 20,392 20392 20392 20783 20783 21,418 21,418 21,418 21,418 21,418 21,418 21,418 21,418 21,418 21,418 21,418 24,525 24,525 403,477

NONOPERATING EXPENSES 1,302 804 402 2,848 2563 2,278 1,993 1,708 1,424 1,139 854 569 285 0 0 -0 -0 0 0 -0 -0 -0 0 18,170

INIERESTON LONG PERM DEBT 1,302 804 402 2,848 2,563 2,278 1,993 1,708 1,424 1,139 854 569 285 0 0 -0 -0 -0 0 0 0 -0 0 18,170INTEREST ON SHORT TERM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

NETPROFTPOR (LOSS) BEHDRETAX -6,307 -6,809 -6,907 10,360 17,829 18,114 18,399 18,684 19,359 19,644 20564 20848 21,133 21,418 21,418 21,418 21,418 21,418 21.418 21.418 21,418 24525 24,525 385.308

INCOMETAX 0 0 0 4,025 6,927 7,037 7,148 7,259 7,521 7,632 7,989 8,100 8,210 8,321 8,321 8,321 8,321 8,321 8,321 8.321 8,321 9,528 9528 157,470

NEP PROFIT OR (LOSS) AFTER TAX 6,307 6,809 6,907 6(335 10,903 11,077 11,251 11,425 11,838 12,012 12,575 12,749 12,923 13,097 13,097 13,097 13,097 13,097 13,097 13.097 13,097 14,997 14,997 227,837

DIVIDENDS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

RETAINED EARNINGS -6,307 -6,809 -6,907 6,335 10,903 11,077 11,251 11,425 11,838 12,012 12,575 . 12,749 12,923 13,097 13,097 13,097 13,097 13,097 13,097 13,097 13,097 14,997 14,997 227,837

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Table 4.1-6(1) CASHFLOW STATEMENT (FUNDS FLOW STATEMENT) FOR WITHOUT CASE M US$

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOTAL

SOURCEOFFUNDS -4.369 5,369 -5,869 -4,369 -4,369 4,369 -4,369 4,369 -4,369 -4,369 -4,369 -4,369 -4,369 -4,369 -4,369 4369 4,369 -4.369 -4,369 -4,369 -4,369 4369 4,369 102997

CASH GENERATED FROM OPERATION -4,369 -5,369 -5,869 -4,369 -4,369 -4,369 -4,369 4,369 -4,369 -4,369 -4,369 -4,369 -4,369 -4.369 -4,369 -4,369 -4,369 -4,369 4,369 4,369 4,369 -4,369 -4,369 -102997

PROETT AFT. TAX BER. INT. 5,004 ■6,004 6504 -5,004 5.004 -5,004 -5,004 -5.004 -5,004 -5.004 -4,369 -4,369 4,369 -4,369 4,369 4,369 -4,369 -4.369 -4,369 4,369 -4,369 4,369 -4,369 109,347DEPRECIATION AND AMORTIZAT. 635 635 635 635 635 635 635 635 635 635 0 0 0 0 0 0 0 0 0 0 0 0 0 6,350

FINANCIAL RESOURCES 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

SHARE CAPITAL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0LONG TERM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0SHORTTERM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

USES OF FUNDS 4,919 3,623 3,221 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11,763

FIXED CAPH'AL EXPENDHURE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

NON DEPRECIABLE ASSETS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0DEPRECIABLE FIXED ASSETS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0DEFERED ASS ETS(INCLUDE IDC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

CHANGE IN WORKING CAP H AL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

DEBTSERVKE 4,919 3,623 3,221 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11,763

REPAY. OF LONG TERM DEBT 3,617 2.819 2,819 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9,255REPAY. OFSHORTTERM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0INTEREST OF LONG TERM DEBT 1,302 804 402 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2508INTERESTOFSHORTTERM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

DIVIDENDS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

CASH INCREASE OR (DECREASE) -9,288 -8,993 9,091 4,369 -4,369 -4,369 4,369 4.369 -4,369 -4,369 -4,369 4,369 -4,369 -4.369 -4.369 -4,369 -4,369 -4,369 -4,369 -4,369 -4,369 4,369 -4.369 -114,760

BEGINNING CASH BALANCE 0 -9,288 -18,281 -27,372 -31,741 -36,111 40.480 44.849 49,219 -53,588 -57,958 -62,327 -66,696 -71,066 -75,435 -79.805 84,174 88,544 -92,913 -97.282 -101,652 -106,021 -110,391 -2667.553ENDING CASH BALANCE -9,288 -18,281 -27,372 -31,741 -36,111 -40,480 44,849 49,219 53,588 -57,958 -62,327 66,696 -71,066 -75,435 -79,805 -84,174 88,544 92,913 -97,282 101,652 -106,021 -110,391 -114,760 -2782313

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Table 4.1-6(2) CASHFLOW STATEMENT (FUNDS FLOW STATEMENT) FOR WITH CASE MUSS

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOTAL

SOURCEOFFUNDS 7,175 17,999 20,049 13,316 17,599 17,488 17.377 17,267 17,004 16894 16536 16426 16315 16204 16204 16204 16204 16204 16204 16204 16204 14,997 14,997 371,076

CASHGENERATED FROM OPERATION 4,369 -5,369 5^69 13,316 17,599 17,488 17.377 17.267 17,004 16894 16536 16426 16315 16204 16204 16204 16204 16204 16204 16204 16204 14,997 14,997 310244

PROITT AFT. TAX. BER. INI'. -5,004 -6,004 6,504 9,183 13,465 13,355 13,244 13,134 13,262 13,151 13,429 13.318 13,208 13,097 13,097 13,097 13,097 13,097 13,097 13,097 13,097 14,997 14,997 246007DEPRECIATION AND AMORTIZAT. 635 635 635 4,133 4,133 4,133 4,133 4,133 3.742 3,742 3,107 3,107 3,107 3,107 3,107 3,107 3,107 3,107 3,107 3,107 3,107 0 0 64,237

FINANCIAL RESOURCES 11,545 23,368 25,919 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 60832

S HARE CAPITAL 3.568 7,416 9,169 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20,153LONGTERM DEBT 7,976 15,952 16,750 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 40,678SHORTTERM DEBP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

LEES OF FUNDS 16,463 26,992 29,140 5,426 6.631 6346 6,061 5,776 5,491 5,207 4,922 4,637 4,353 -0 -0 -0 -0 0 -0 0 -0 0 0 127,445

FIXED CAPITAL EXPENDITURE 11,545 23,368 25,919 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 60832

NON DEPRECIABLE ASSETS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0DEPRECIABLE FIXED ASSEIS 11,545 23,089 24,244 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 58877DEFERED ASSEIS(INCLUDE IDC) 0 279 1,675 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,954

CHANGE IN WORKING CAPITAL 0 0 0 -1,490 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -1,490

DEBPSEKVICE 4,919 3,623 3,221 6.915 6.631 6,346 6061 5,776 5,491 5,207 4,922 4,637 4,353 -0 -0 0 0 0 -0 -0 -0 -0 -0 68103

REPAY. OF LONG TERM DEBT 3,617 2,819 2,819 4,068 4,068 4,068 4,068 4,068 4,068 4,068 4.068 4,068 4,068 0 0 0 0 0 0 0 0 0 0 49,933REPAY. OFSHORTTERM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0IN1ERESTOFLONGTERM DEBT 1,302 804 402 2,848 2.563 2,278 1.993 1,708 1,424 1.139 854 569 285 0 0 0 -0 -0 -0 -0 0 0 0 18170DMIERESTOFSHORTTERM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

DIVIDENDS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

CASH INCREASEOR (DECREASE) -9,288 -8,993 -9,091 7.890 10968 11,142 11,316 11,490 11,513 11,687 11,614 11,788 11,963 16204 16204 16204 16204 16204 16204 16204 16204 14,997 14,997 243,631

BEGINNING CASH BALANCE 0 -9,288 -18,281 -27.372 -19,481 -8,514 2,629 13,945 25,435 36948 48.635 60,249 72,038 84,000 100,205 116409 132,614 148.818 165,023 181,227 197,432 213,636 228.633 4,424,878ENDING CASH BALANCE -9,288 -18,281 -27,372 -19,481 -8,514 2,629 13,945 25,435 36948 48,635 66249 72,038 84,000 10Q.205 116409 132,614 148,818 165,023 181,227 197,432 213,636 226633 243.631 4,668509

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Table 4.1-7(1) PROJECT BALANCE SHEET FOR WITHOUT CASE MUSS

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

ASSETS -3,574 -13,201 -22,927 27.932 -32936 -37,940 -42945 -47.949 -52954 -57.958 62327 66697 -71,066 -75,436 -79,805 -84,175 -88,544 92913 97.283 -101,652 -106022 -110391 -114,760

CURRENT ASSETS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

OPERATING CASH 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0ACCOUNT RECEIVABLE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0INVENTORIES 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

ACCOUNT EXCESS CASH -9,288 18,281 -27,372 -31,741 -36111 -46480 -44,849 -49,219 -53,588 -57.958 62327 66696 -71,066 -75,435 -79,805 -84.174 -88,544 92913 -97,282 -101,652 -106021 -110391 -114,760

NET FIXED ASSETS 5,715 5,080 4,445 3,810 3,175 2540 1.905 1,270 635 0 -0 -0 0 0 0 0 0 0 0 0 -0 -0 -0

INVESTMENT 6,350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350

NON DEPRECIABLE ASSETS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0DEPRECIABLE ASSETS 6,350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350DEFERRED ASSETS(INC.IDC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

LESS: ACCOUNT DEPRECIATION 635 1,270 1,905 2540 3,175 3,810 4,445 5,080 5,715 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350 6350

IJABILmES 5,638 2,819 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

CURRENT IJABOJITES 2,819 2,819 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

ACCOUNT PAYABLE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0CURRENT PORTION OF L/T DEBT 2,819 2,819 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

SHORTTERM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

FIXED IJABILmES 2,819 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

LONG TERM DEBT BALANCE 2,819 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0OTHER FIXED IJABILmES 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

STOCK HOLDERS EQUITY 6307 13,115 -20,022 -25,026 30,031 -35,035 -40,039 -45,044 -56048 -55,053 -59.422 63,791 68.161 72530 -76900 -81,269 -85,639 90008 -94,377 98,747 -103,116 -107.486 111,855

SHARE CAPITAL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0ACCOUNT RETAINED EARNINGS -6,307 13.115 -26022 25,026 30,031 -35,035 46039 -45,044 -56048 -55,053 -59,422 63.791 68,161 -72530 -76900 -81,269 85.639 -90,008 -94,377 -98,747 -103,116 -107,486 111.855

UABiums &S/H EQUTIY -668 -10,296 20,022 -25,026 30,031 -35,035 -46039 -45,044 -50.048 -55,053 -59,422 63.791 68,161 -72530 -76900 -81,269 -85.639 -90,008 -94,377 -98,747 -103,116 -107,486 111,855

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-24-

Table 4.1-7(2) PROJECT BALANCE SHEET FOR WITH CASE M us$

YEAR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

ASSETS 7,971 21,712 37.904 40172 48,496 55,505 62,688 70045 77,816 85,760 94,267 102,948 111,803 124,900 137,998 151,095 164,192 177,289 190,386 203,483 216580 231,577 246574

CURRENT ASSETS 0 0 0 -1,490 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

OPERATING CASH 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0ACCOUNT RECEIVABLE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0INVENTORIES 0 0 0 -1,490 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

ACCOUNT EXCESS CASII -9,288 -18,281 -27,372 -19,481 8,514 2,629 13,945 25,435 36,948 48,635 60,249 72,038 84,000 100205 116409 132,614 148,818 165.023 181,227 197,432 213,636 228,633 243,631

NET FIXED ASSETS 17.259 39.993 65,276 61,143 57,010 52,877 48,743 44,610 40868 37,125 34,018 30,911 27.803 24,696 21,588 18,481 15,373 12,266 9,159 6051 2,944 2,944 2944

INVESTMENT 17,894 41,263 67,181 67,181 67,181 67,181 67,181 67,181 67,181 67,181 67,181 67.181 67,181 67,181 67,181 67,181 67,181 67,181 67,181 67,181 67,181 67,181 67,181

NON DEPRECIABIJS ASSEIS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0DEPRECIABLE ASSETS 17,894 41X983 65,227 65,227 65,227 65,227 65,227 65,227 65.227 65,227 65,227 65.227 65,227 65.227 65.227 65.227 65,227 65,227 65,227 65,227 65,227 65,227 65,227DEFERRED ASS EISflNC.IDC) 0 279 1.954 1,954 1,954 1.954 1,954 1,954 1,954 1,954 1,954 1,954 1,954 1,954 1,954 1,954 1,954 1,954 1.954 1,954 1,954 1,954 1,954

LESS: ACCOUNT DEPRECIATION 635 1,270 1,905 6,038 10171 14,305 18,438 22,571 26,313 30056 33,163 36,271 39,378 42,486 45,593 48,700 51,808 54,915 58,023 61,130 61,237 61,237 61,237

UABILTTTFS 13,614 26,748 40,678 36,611 32,543 28,475 24,407 20339 16,271 12,203 8,136 4,068 -0 0 -0 0 -0 -0 -0 -0 -0 0 0

CURRENT IJABOTITES 2,819 1819 4,068 4,068 4.068 4,068 4,068 4,068 4,068 4,068 4,068 4,068 0 0 0 0 0 0 0 0 0 0 0

ACCOUNT PAYABLE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0CURRENT PORTION OF I/T DEBT 2,819 1819 4,068 4,068 4,068 4,068 4,068 4,068 4,068 4.068 4,068 4,068 0 0 0 0 0 0 0 0 0 0 0SHORTTERM DEBT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

FIXED I1ABIITTIES 10,795 23508 36,611 32,543 28,475 24,407 20,339 16,271 12,203 8,136 4,068 0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 0

LONG TERM DEBT BALANCE 10,795 23,928 34611 32,543 28,475 24,407 20339 16,271 12,203 8136 4,068 0 -0 0 -0 0 -0 -0 -0 0 -0 0 0OTHER FIXED LIABILITIES 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

STOCK HOLDERS EQUITY 2.738 -1131 131 6,467 17,370 28.446 39,697 51,122 62.960 74.973 87,547 100296 113,219 126316 139,413 152.510 165,608 178,705 191,802 204,899 217,996 232993 247,990

SHARE CAPITAL 3,568 10,984 21X153 20,153 20153 20153 20,153 20,153 20153 20153 20,153 20,153 20153 20153 20153 20,153 20,153 20153 20,153 20,153 20153 20,153 20.153ACCOUNT RETAINED EARNINGS 6,307 -13,115 -20022 -13,686 -2,784 8,293 19,544 30969 42,807 54,820 67,394 80,143 93.066 106163 119,260 132,357 145,454 158,551 171,618 184,746 197,843 212840 227,837

IJABILTITFS & S/H EQUITY 10L876 24.617 40810 43,077 49,912 56,921 64,104 71,461 79,232 87,176 95,683 104.364 113,219 126316 139,413 152,510 165,608 178,705 191,802 204.899 217,996 232993 247,990

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Table 4.1-8 INTERNAL RATE OF RETURN MUSS

YEAR FIXED CHANGE IN (l)GROSS OPERATING DEPRECIATN (2)GR06S (3)lNCOME (4)BFR-TAX (5)AFT-TAX (6)LONG TERM (7)DEBT (8)BFRTAX (9)AFT-TAX P.CKCAPITAL WORKING CAPITAL PROFIT CASH TAX NET IN FLOW NET IN FIOW DEBT SERVICE NET IN FLOW NETIN FIjOW

EXPENDITURE CAPITAL EXPENDITURE IN FLOW ONROI ONROI ON ROE ON ROE(w/oIDC) PHI) (<H3) (4M6)OR(7) (5)+<6>OR(7)

3 2002 11,545 0 11,545 0 0 0 0 11.545 11.545 7,976 0 -3,568 3.568 0.00-2 2003 23,089 0 23,089 0 0 0 0 -23.089 -23,089 15,952 0 -7,416 -7,416 0.00-1 2004 24,244 0 24,244 0 0 0 0 -24,244 24.244 16,750 0 9,169 -9,169 0.00

1 2005 0 0 0 18,212 3,498 21,711 4,025 21,711 17,686 0 6,915 14,795 10,770 4.762 2006 0 0 0 25,397 3,498 28895 8927 28895 21,968 0 6,631 22,264 15,3.37 5.323 2007 0 0 0 25,397 3,498 28895 7,037 28895 21,857 0 6,346 22,549 15,511 5.894 2008 0 0 0 25,397 3,498 28895 7,148 28895 21,747 0 6.061 22.834 15,686 6.645 2009 0 0 0 25,397 3,498 28895 7,259 28895 21,636 0 5,776 23,118 15,860 7.676 2010 0 0 0 25,787 3,107 28895 7,521 28895 21,374 0 5,491 23,403 15,882 9.207 2011 0 0 0 25,787 3,107 28895 7,632 28895 21,263 0 5,207 23,688 16,056 11.738 2012 0 0 0 25,787 3,107 28895 7,989 28895 20906 0 4,922 23,973 15,984 16.749 2013 0 0 0 25.787 3,107 28895 8100 28895 20795 0 4,637 24,258 16,158 31.76

10 2014 0 0 0 25,787 3,107 28895 8210 28895 20685 0 4,353 24,542 16,332 0.0011 2015 0 0 0 25,787 3,107 28895 8321 28895 20574 0 •0 28895 20574 0.0012 2016 0 0 0 25,787 3,107 28895 8321 28895 20574 0 0 28895 20574 0.0013 2017 0 0 0 25.787 3,107 28895 8321 28895 20574 0 0 28895 20574 0.0014 2018 0 0 0 25,787 3,107 28895 8321 28895 20574 0 0 28895 20574 0.0015 2019 0 0 0 25,787 3,107 28895 8321 28895 20574 0 0 28895 20,574 0.0016 2020 0 0 0 25,787 3,107 28895 8321 28895 20574 0 -0 28895 20574 0.0017 2021 0 0 0 25,787 3,107 28895 8321 28895 20574 0 -0 28895 20,574 0.0018 2022 0 0 0 25,787 3,107 28895 8321 28895 20574 0 0 28895 20,574 0.0019 2023 0 0 0 28,895 0 28895 9,528 28895 19,367 0 0 28895 19,367 0.0020 2024 2,944 0 -2.944 28,895 0 28895 9,528 31.839 22,311 0 0 31,839 22,311 0.00

0 0 0 0 0 0 0 0 0 0 0 0 0 0.00

INTERNAL RATE OF RETURN PAYBACK PERIOD

BFRTAX AETTAX BFRTAX AETTAX SENSITIVITY ANALYSISIRR on INVEST 3521 28.19 % SIMPLE (No Dismount) 3 3 Years

IRR on EQUITY 63.68 49.78 % DCFRATE 10.00% 4 5 Years Factor Orignal FactoredERECTION COST 1.00 0 0 MUSSUREA 1.00 250 250 USS/TonNaphtha l.O) 333 333 LSS/MT

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(4) Sensitivity Analysis on ROI before Tax

In order to discuss the project profitability, the sensitivity analysis for ROI before Tax is

conducted against the Natural Gas of raw material price between US$ 4.0 to 6.0 per

MMBtu. For Urea product cost the same sensitivity analysis is conducted between 60 to

120 %. For Erection cost the same sensitivity analysis is conducted between 80 to 120 %.

Since the ROI before Tax has no effect on the payment of its loan interest and income tax,

the ROI before Tax is widely used for the profitability evaluation.

The calculated results are shown below and shown in Figure 4.1-1 through 4.1-3 for

Natural Gas price, Urea price and Erection cost respectively.

Sensitivity Analysis of ROI

Product Name Unit Price ROI before Tax, %

Natural Gas 4.00 US$/MMBtu 49.76

6.00 US$/MMBtu 3521

8.00 USS/MMBtu 16.50

Product Urea 150.0 US$/Ton 37.55

250.0 US$/Ton 3521

300.0 US$/Ton 34.09

Erection Cost 47,102,000 US$ 41.93

58,877,000 US$ 3521

70,652,000 US$ 30.33

No conversion of raw material 14.77

from Naphtha to Natural gas

Notes: Bold figures are the base figures of this feasibility study.

The raw material natural gas shares more than 50 % of production cost and it is very

sensitive on project profitability. But product urea price does not affect project profitability,

because production amount is not changed by the project. Product urea is important for

Z3L financial soundness.

If raw material of naphtha is not changed to natural gas, ROI before tax is calculated at

14.77 % and it is understood that conversion from naphtha to natural gas contributes very

much to proejct profitability improvement.

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23456789Natural Gas price US$/MMBtu

Fig. 4.1-1 Natural Gas Price vs ROI

50se 40&

% 30

S 20

§ 10r\

: I-------------- --------------------------- --

: . !

: I: |

100 150 200 250 300 350Product Urea Sales Price US$/T

Fig. 4.1-2 Product Urea Sales price vs ROI

60% 70% 80% 90% 100% 110% 120% 130% 140%Total Investment Cost %

Fig. 4.1-3 Total Investment Cost vs ROI

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(5) Evaluation

(a) Sales.Revenue

Total sales revenue for the whole project period comes from sales revenue only. The

annual sales revenue of Without Case is calculated to be 107,250 MUSS as shown is

Table 4.1-1 (1) for whole 23 years project life, which is composed 3 years

construction and 20 years operation periods.

The annual sales revenue of With Case is calculated to be 107,250 MUSS whole 3

years construction period because operation continues for the same period. But the

first year annual sales revenue is calculated at 85,800 MUSS, because plant shutdown

is expected due to tie-in work between new facilities and existing faclities and intial

trouble, which causes 80 % of operation load.

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(b) Production Costs

The annual total production costs, consist of the factory cost and the operating

expenses for the whole project period is summarzed below,which detail is shown in

Table 4.1-4(1) and (2).

Without Case

MUSS

113,557 to 111,619

With Case

During construction period 113,557 to 114,157

la year of operatic 75,440

2nd year and onward operation period 89,421 to 82,725

Based on above, average production cost per urea ton are calculated below.

Without Case US$/Urea-Ton

261.4

With Case

During construction period 265.6

la year of operatic 219.8

2nd year and onward operation period 201.5

(c) Profit

The total operating profit for the whole project period is calculated below, which

detail are shown in Table 4.1-5 (1) & (2).

Without Case

MUSS

-6,307 to-4,369

With Case

During construction period - 6,307 to - 6,907

la year of operatic + 6,335

2nd year and onward operation period +10,903 to +14,997

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(d) Evaluation

The project continues its negative profit without revamping project based on

estimated urea price of US$/Ton 250. The cashflow also continues its negative figure.

If urea price goes up by US$/Ton 11 or naphtha price comes down by US$/Ton 21

from base price of US$/Ton 333.43, cashflow turns to positive.naphtha price. When

project is implemented, natural gas price is lower than naphtha one and improvement

of profit is expected with positive cashflow.

The project profitability is very high because of raw material conversion and energy

consevation.

Current production cost is very high and is not competitive to international urea price

level. After proejct implementation, the same production cost goes down up to

US$/Ton 193 - 208, which is more than US$/Ton 50 cheaper than current one.

In project execution stage in India a foreign contractor usualy applies asuumed

income of the project to the authority of India and pays 48% of assumed income as

income tax. After the project completed the final income is applied and plus and

minus of income tax are adjusted accordingly.

However this year the authority of India announced the expansion of taxation to

foreign contractors in order to increase tax ammount. In a certain project tax issue was

raised and the payment from India was deducted 48 % from contract price.

Accordingly it was very difficult to execute the project

This tax issue is very critical for foreign contractors to execute projects in India and

would take time to be settled. Therefore the project execution in India might be

difficult for foreign contractors without the settlement.

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4.2 Cost versus Effects

4.2.1 Cost versus Energy Saving Effect

As described in 3.1.3 of CHAPTER 3, the quantity of the energy saving over the project

life is calculated as 55,705 toe/y. Intial investment cost for the project is 60,832

MUS$ (6,387 million JPY). Thus, the cost versus energy saving of the project is 8.72

toe-y/million JPY.

(Eq.): (55,705 toe-y)/(6,387 million JPY) = 8.72 toe-y/million JPY

4.2.2 Cost versus Greenhouse Performance Gas Reduction

The reduced quantity of C02 gas as the greenhouse performance gas is estimated to be

245,139 t-COo/y as described in CHAPTER 3. Intial investment cost for the project is

60,832 MUS$ (6,387 million JPY). Thus, the cost versus greenhouse performance gas

reduction is 38.4 t-C02-y/million JPY.

(Eq.): (245,139 t-CQ2/y)/(6,387 million JPY) = 38.4 t-C02-y/million JPY

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CHAPTER 5

SPREAD EFFECTS

Summary: Spread possibility of the applied technologies for the project in other area in India was examined. And further, quantitative evaluation and estimation on effects of energy saving and greenhouse performance gas reduction were made for the case after being spread.

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CHAPTER 5 SPREAD EFFECTS

5.1 Spread Possibility of the Applied Technology in other area

Production capacity of ammonia plants using naphtha as feedstock and fuel is

approximately 36 % in India. Most of naphtha based ammonia plants consume much

energy like ZIL.

There are 11 ammonia plants as listed below, which were constructed in 1960s-1970s like

ZIL and are still operated Most of the plants were revamped for the purpose of capacity

increase, but the energy consumption are still very high compared with latest and modem

plants.

Owner Location Capacity (Ammonia/Urea)

1) Gujarat State Fertilizer Co., Ltd Vadodara I,II,II Total 1050/1120 t/d

2) Coromandel Fertilizers Ltd Vizag 357/400 t/d

3) Shriram Fertilizer & Chemicals Kota 560/1000 t/d

4) Duncans Industries Ltd Plant-1,11,111

Panki I,II,III Total 1240/2045 t/d

5) Mangalore Chemicals &Fertilizers Ltd

Mangalore 660/1030 t/d

6) Southern PetrochemicalIndustries Corp. Ltd

Tuticorin 1100/1600 t/d

7) Indian Farmers Fertilizer Cooperative Ltd

Phulpur 910/1500 t/d

8) The Fertilizers and Chemicals Travancore Ltd

Cochin 600/1000 Vd

9) Madras Fertilizers Ltd Chennai 1275/1475 t/d

These plants need revamp of energy saving and feedstock change like ZIL in accordance

with the guideline of fertilizer subsidy policy with 3 steps reducing amount of subsidy.

Therefore spread possibility of the applied technologies in other fertilizer plants is very

high.

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5.2 Effects under Spread Consideration

5.2.1 Effects on Energy Saving

Effects of energy saving depend on the level of energy consumption. According to the

survey in India for this F/S there are 3 fertilizer plants (listed below) with similar level of

energy consumption as ZJL.

Owner Location Capacity(Ammonia/Urea) Sector

- Mangalore Chemicals &Fertilizers Ltd

Mangalore 660/1030 t/d private

- Southern Petrochemical Industries Corp. Ltd

Tuticorin 1100/1600 t/d private

- The Fertilizers and Chemicals Travancore Ltd

Cochin 600/1000 t/d public

Total 2360/3630 t/d

Assuming that above all fertilizer plants could save energy with applying energy saving

technologies and feedstock conversion like the project total effects of energy saving could

be estimated as 163,119 toe/y after calculated with capacity slide of ammonia and urea

plants.

ZIL Capacity Energy Saving as crude oil equivalent

Ammonia 750 t/d 36,383 toe/y

Urea 1,300 t/d 17,417 toe/y

Total 53,800 toe/y

3 plants total

Ammonia 2,360 t/d 114,485 toe/y

Urea 3,630 t/d 48,634 toe/y

Total 163,119 toe/y

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5.2.2 Effects on Greenhouse Performance Gas Reduction

In similar approach to the above, the yearly reduction of C02 gas emission is expected to

be approximately 727,232 t-COz/y, in case that the same technologies applied to this

project would be spread over other 3 fertilizer plants.

711. Capacity Reduction of C02 emission

Ammonia 750 t/d 183,289 t-COz/y

Urea 1300 t/d 53,892 t-COz/y

Total 237,181 t-COz/y

3 plants total

Ammonia 2,360 t/d 576,749 t-COz/y

Urea 3,630 t/d 150,483 t-COz/y

Total 727,232 t-COz/y

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CHAPTER 6

EFFECTS to OTHERS

Summary: Evaluation was made on other effects such as environmental, economical and social effects due to implementation of the project than the effects on energy saving and greenhouse performance gas reduction

described in CHAPTER 3.

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CHAPTER 6 EFFECTS to OTHERS

6.1 Environmental Effects

The plants revamped for the project fire fuel to supply energy required for production of

fertilizer. So huge amount of C02 and steam are released to the atmosphere together with

combustion heat as well as some NOx. The project can reduce fuel consumption by energy

saving, thus can reduce C02 and NOx.

Sulfur is contained in naphtha feedstock and fuel. Sulfur in feedstock naphtha will be

removed prior to feed to the process. The removed sulfur as gaseous phase is fired in a

furnace and vented to the atmosphere as sulfur oxide. Sulfur in fuel naphtha will be vented as

sulfur oxide after firing. Therefore the energy saving for the project can reduce emission of

sulfur oxides.

The project incorporating feedstock conversion from naphtha to natural gas can also reduce

emission of sulfur oxide, because sulfur in natural gas is smaller than naphtha.

Regarding effluent water as another environmental effects, ZJL has a policy of zero effluent

discharge and achieved it in 1989. The project is designed considering the same policy of

zero effluent discharge from the plants. Therefore no effects against environment is

achieved in the project.

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6.2 Economical Effects

As described before, this project was strongly requested by ZEL to survive in fertilizer

business against high feedstock price and reduction of fertilizer subsidy. ZIL needs

improvement of production cost in order to survive in fertilizer business against high

feedstock price and reduction of fertilizer subsidy.

The feedstock change and energy saving incorporated in the project is in accordance with the

guideline of fertilizer subsidy policy with 3 steps reducing amount of subsidy expected to

implemented by the government of India. After confirming economical feasibility and the

fertilizer policy of the government Z3L could have an intention to start the project. So the

project could contribute to the improvement of ZIL's finalcial performance after realization.

In addition spread possibility of the applied technologies in other fertilizer plants is very high.

The project could also contribute the improvement of agricultural and fertilizer industries.

ZEL was constructed as a first large factory in Goa. So the project could also contribute to

the local economy after realization.

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6.3 Social Effects

Following environmental and economical effects above, the social effects will be expected

after the project realization.

1) Security of Domestic Food Supply

Population of India almost reaches one billion and is estimated to become above China

in near future. Therefore food, fertilizer, energy, social overhead capital etc. should be

increased. Most of fertilizers necessary for agricultural product have been produced in

India to secure domestic supply of food. The government of India gives fertilizer

sector subsidy to retain retail price of fertilizer to secure domestic production.

Under the such subsidy policy old fertilizer plants with less efficiency are still operated

and drastic improvement has been suspended. Therefore production of fertilizer in

India became less competitive compared with international market. In order to improve

such situation old fertilizer plants with naphtha feedstock should be revamped to change

feedstock to natural gas and to reduce energy consumption, which are in compliance

with the guideline of long term policy on fertilizer sector expected to implement by the

government of India.

The spread possibility of the applied technologies in other fertilizer plants could be very

high. It is expected that the project could contribute the security of domestic food

supply.

2) Technology Transfer and Improvement

It is expected that the project related technologies such as plant design and engineering,

project development and management, plant construction and operation including

maintenance, etc will be transferred and improved in the regional area.

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CONCLUSION and RECOMMENDATION

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CONCLUSION and RECOMMENDATION

Fertilizer production in old plants in India became less competitive compared with

international market under fertilizer subsidy policy by government of India. The F/S result

for without revamp case same as present condition shows minus cash flow through the total

project. The past minus cash flow has been compensated by subsidy from the government,

but the amount of subsidy was reduced from 2000 and the government decided to phase out

the urea subsidy by April 2006. Therefore old fertilizer plants with naphtha feedstock should

be revamped to change feedstock to natural gas and to reduce energy consumption for then-

survival.

The F/S result shows that the project including feedstock change and energy saving could

drastically reduce production cost compared with the without revamp case. The quantity of

C02 reduction including spread effect in India would be relatively large. Therefore it is

understood that urgent implementation of the project would be necessary.

However, it would take much time to disclose a detailed government policy, which is

under planning to proceed phasing out the existing subsidy and to complete decontrol of

urea by April 2006. The government recommends to change feedstock from naphtha to

natural gas in fertilizer plants. So there are many projects of LNG terminal and pipeline to

supply natural gas to fertilizer plants. But it would also take much time to materialize.

We, Toyo Engineering Corp. will watch and follow the government policy and investigate

projects of LNG terminal and pipeline as well as will support Zuari Industries Limited

(ZIL) as required in every phase of the above development and implementation of the

project.

Following actions are required for further development and implementation of the project:

Toyo to support ZIL to evaluate this project based on the government policy.

Toyo to investigate projects of LNG terminal and pipeline

Both Toyo and ZIL to enter into the preparation for Japanese fund

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ATTACHMENT

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Reference List

1) Key Indicators, Statistics (1999-2000) of Finance Ministry, Government of India2) Sectoral Real Growth Rates in GDP, Statistics (1999-2000) of Finance Ministry,

Government of India3) Growth Rates of Core and Infrastructure Sectors, Statistics (1999-2000) of

Finance Ministry, Government of India4) C02 emissions, Statistics of Energy Information Administration (EIA)

Other References

- Background Paper on Long Term Policy on The Fertilizer Sector

- Annual Report 1999-2000

- Fertilizer Statistics 1998 - 99

- Fertilizer & Agriculture Statistics Northern Region

- Fertilizer & Agriculture Statistics Western Region

- Meeting India's Petroleum Requirements Demand Projections 2001-02 and 2006-07

- Zuari Industries Ltd. Annual Report 1998 - 1999

- Zuari Industries Ltd. Annual Report 1999 - 2000

- The Zuari-Chambal Group(Catalogue)

- 25 Years of Production at Fertilizer Division(Zuari Company History)- Statistical Hand Book of Goa 1998-99

- Official Telephone Directory (December 1999)

- Industrial Commercial & Foreign Trade Directory 1999

- Standards for Liquid Effluents, Gaseous Emissions, Automobile Exhaust, Noise and

Ambient Air Quality

- The Budget 2001-2002

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Public use of this feasibility study report is subject to a prior approval by International Cooperation Center of

New Energy and Industrial Technology Development Organization (NEDO)

TEL 03(3987)9466FAX 03(3987)5103