RETtJRr'l TO R y::~-·""-- ~~,? ... " ,-. liITERNATIOR~ J3AHK FOR REC01JSTRUCTIOn AlID DEVELOPMlll'T t ,- ... O i;'! .. j'~ -----~------- . 66858 PRODUCTlmr OF IJITROG:SN F3RTILIZ'SR IE COr:TJDTCnOlT \HTH PETROLEl":;,r REFINIUG nI TH3 PHILI?PIl.!E ISLAlIDS Economic Department .?repared by: E. Hayne Rembert February 9, 1949 fRODUCTI9U Of .l'f+TROGF$J :FERT~ItPW Hi c,olLJUNCTIO£J t/ITH PETROLJ}JlvlREFln~!~G Ilil THE PHILIPPINE ISLAUDS 1. ~ased on preliminary studies, the installation of a petroleum refinery in the Philippines having a capacity of about 10,000 barrels of crude oil per day offers very ~tttraotive possibilities t both from p, stttndnoint of ee,rnings and as s. uotential source of rel-' materil:ds for the production of nitrogen fertilizers. 2. Considere.tions concerning petroleum refineries hA.ve been confined to plants equipned for simnle topning and cracking operations ~-rhich ~r1ll produce motor gasoline, kerosene. diesel oil p,nd, a.lternatively, he1:wy fuel oil or coke. Considering probable future re~uirements in the Philippines. a coking unit seems desirable in order to lim! t the nroduction of hee,vy fuel oil to domestic reauire- ments. 3. A 10,000 barrel refinery designed for coking: ie estimated to cost a,bout $9.4 million at current 'Oricee in the United States. This estimate includes erection costs a.t U.. S. rr>tes but is excluBi ve of oce;'n frei~ht and insurance. No breakdo"n into foreign exchange ~:md domestic currencies is ava.ilable but, in general, the foreign exchenge content of a uroject of this type will be 2.bout 75%. 4. The net profi t from operations. taking into account financir'l charges, 19 estimated at about $7.3 million per year e.t current prices ".'hen running crude oil from the Persian Gulf. On the basis of these estimates, e. refinery pould nay out in less than one and one-half years. 5. .i- nitrogen fertilizer nlant utilizir...o; gas from the refiner::T, hf'ving a capacity of 105,000 tons of anlJnoniThll sulphate ner ye::".r. reouires an estimated investment of a.bout $9',,7 million.. This compares ',!1 th about ::25 million required for e.n elfctrolyt.ic nlant, incluOin.~~ the hydroelectr:i.c stat1.on required for its opere,tion. rated at 126,000 ton8, phich "0S the original project submitted. to the :Bank. - 2- 6. Under existing conditions there is little advantage in using refinery gas over tLe electrolytic method from the standpoint of nrodtiction costs, both methods giving estimated costs of from $40 to $45 per ton of ammonium sulPhate in plants of comnarable size "rhen running to camci ty. The operEttion using re- finery gA..S, hOFever t is much less suBceptible to cost increa,ses ,,'hen running belo,·' ca:oad ty, due to the substantially 10"'er fixed charges on a, nl~,nt of this type. 7. Huch more information must be developed before a decision ann be reached on the l)racticability of producing ni trogen fertilizer in the Philinpines, par- ticularly ",i th respect to markets and prices~ The best possibilities for obtaining cheap fertilizer aymears to lie in the u~e of refinery gases for the production of urea rather than ammonium sulphate and this method is being further investigated at the present time. 8. Vihile this analysis /'l,!mlies apecificRl1y to the Philip~)ines, the general conclusiollS should aDply to other areas in which nitrogen fertilizer nlants are being considered and ,,'hich do not have domestic 'fJrmiuctiop. of nat.ural stUl or' coal. n BACKGRomm One of the most importRnt projects submitted to the :Be,nk by the Philil)1)ine Government involved the construction of e, lar:",;e hydroelectric station at ITe,ria Cristina on l:indanp,Q '\>'hich 1"oulcl he,ve a firm cape,city of 73,000 kw and ,,'hich ,,'ould re(1uire a ca1 )1 tpl investment of about ::12 million. Practically the entire output of this station "rould be used in a n:i. trogen fertilizer plant designed to produce 126.000 tons of I"JIlrrlonium sulphate per yeF<.r. 'Tlhe fertilizer nlant 1,'P,S estimated to cost about $13 million, bringing the total cost of the facilities to about $25 million, all of Hhich must be considered as necessary for the production of the nitrogen fertilizer. After making realistic adjustments in the cost of production for financial charges and basing the operation on the u!"e of im;>orted sulnhur 1"hich is the only - 3- assured source of s~ppl;r, the cost of production of ammonium sulphate "ra!'; estimated at about $41 per ton in bags. The cost of the customer ~·e.s estimated at about $55 per ton. These estimates a.re based on operating the manufacturing fadli ties to capacity and under these conditions about 50% of the cost is represented by fixed char.'<;es (about 820 Del'" ton). Therefore, i f the market for ammonium sul Dhe.te does not develop as anticipated. and. the Dlrult Fere able to operate at only about 50;· of cape.ci ty in times of 101"er demand, the cost of 'Production ,,'auld incree,se to annroxi,.... mately $61 per ton. The price of amnonium sul"he,te in the Uni ted St!'ltes in t,he period 1937-46 averaged from ';:26 to $30 per ton bulk f. o. 't,. ','orks. Currently, this nrice is in- cree.sed to about ;P45 per ton Cl.nd it is out of line on the hi~h side "'i th resnect to the prices of ammonia (l.nd sulphuric acid. lI Con8ideriIl6 the lp.,rge increa8e in world 1?roductive capflci ty for nitrogen re8ul ting from l.rartime expansion, it is possi ble that a small fUrther drop in f!gricul tural lJrices mey easily bring nitrogen fertilizer prices to a.nproximately the pre 1"nr level, if not Im"eT. Considering the large investment required in the origimd tlbn and the lack of flexi bili ty for controlling costs I').t less than caPl.:'ci ty operation, it l,raS sug- gested to the Philippine renresentati ves thr>,t alternate methods for producing nitrogen fertilizer be considered~ The basic material required for this purpose is hydrw;en athol'" than n1 trogen from the. ail', ~nd hydrogen can be obtcdned com- mercially b~r several methods as follo~·,s: (1) By the electrolJrsis of '·'~.ter PS contem'11ated in the original plan, (2) From v'ater gas produced ,,'1 th steam, e.i 1'" and coke. (3) From the decomposition of hydroce.rbon gpf'e~, such A.S ne,tur"l,l gas Dnd refinerY£:?;[1,ses from Detroleum cracking oper13,tions. Since the Philippine Islands hps no commercil'l,l production of either eoa1 or natural 2;88, the obvious rrethod for investi.c:;8tion is the 'Droouction and ntH ize.tion of refinery~ases. At the 'Dresent tiw6. no refining facUi tiel; are available in JJProducti~n4of 1 ton ammonium suiphate reou1re8 about 530 1 bs. ofa.mrUon~a, fmd 1700 lbs. of 60 0 sulphuric acid. Current f .0. b. prices of these items R,re ",75 and f;)13.75. respective)"y, givinp. mater~§Lls cost of ;:';31.55 'tier ton of ammt;>nium SUlphate. Production costs should not exceed:;i4 per ton for this t;rne of m~.terHl.l or a total of ~35.55 1Jer ton 1!lhich includes substantial lJrofi ts on both ammonia and ac1u. -4- the Philippines and, t~ereforet considerations of thfs scheme must include the construction of an oil refinery as ~"ell as the fertilizer plant. III PHIL IPPI1"'E. ,RES1J I PJ!l 'iENT S FOR PE!fROLG'"llH PRODUCTS Prior to the 1"ar (1937-)9) t requirements of liquid fllels in the Philippines averaged slightly less than 10,000 barrels per day. In 1947. total consumption of these products averaged about 14,500 barrels per da~r. this including about 1,900 barrels of bunker f1,lel Oil, the bulk of ~,'hich "re,s consumed rOr 1')o,,'er genera- tion. In 1948, imi)Orts of lJq'Uid fuels are estimated to have reached about 19.000 barrels per day. :Based on j)resent and Dast consumption, therefore, it is obvious the,t a refinery hewing a cS,paci tv of about 10,000 barrels Der day can be justi- fied on the basis of prel"8.r imports of 1:i.auid fuels and more than justUied on posti"ar consum'ltion figures. 'T'he no~twu' consUIDl')tion Dattarn, h0 1• ever, is comnli- f cated bv the follo l "ing figures. (1) An abnormal consumntion of bunker fnel oil for Dover generation. This requirement ,,'ill be grep,tly reduced. ,,'hen the hydroelectric ca';)acity is rehabilitated and exnanded as currently nlanned.ln the long run. i t is not likely the,t e.n anpreciable market l"Hl exist in the Philippines for heavy fuel oil excent for bunkering purposes. (2) An abnormally high consumption of motor gasoline due to the avail- ability of motor vehicles fro)ll. ,"ar su.rplus. There "'ill u.."ldoubtedly be a substa."ltial reduction in gasoline consumption ?"s these vehicles are retired from service. The me..ximum conservative capacity of an oil refinery b~,sed on anticinated domestic requirements eeems to be about 10,000 barrels per d~W e,t this time. For lmrposes of obtaining ga.s for fertilizer "Droduction. a ca1)acity of 5,000 barrels per day is adeauate for a fertilizer plant nrodncing about 50,000 tons of armnonium sulPP..ate per ys!:',r. - 5- IV COnSIDERATIONS CON"C:F1Fmnm A PETROL11JN RI:,FHTERY IN THE PHlLIPPIlJZS (1) Q[Bde Oil Sunnly At the present time, the best possibility for obtaining a steady sU1J~jly of crude oil to the extent of 5,000 to 10,000 barrels ner day is from the Persian Gulf. The estimates covering a refinery in the Philin'1ines have, therefore, been based on running Daman crude of 3.5 0 ii..P.I.l/which is currentl:r quoted at '2.00 'Jer barrel f .0. b. Persia."l Gulf ports. The freight rate in U.S. tanl;:ers to Hanila is ':';1.05 per barrel, giving a. delivered cost of f'3.05 per barrel in the i?hilippine Islands. Dame,n cr1J.d.e has an unusually hi,,,,h sul,!,hur content and is heavily stabi- lized (light fractious removed) orior to shi nment. The latter ch etr2l,cteristic is detrimental, since the ,gasoline obt~,ined directly from the crude oil is unb£'.la.nced and must be adjusted ,,7ith that obtl'dned from cracking o'!'ert,.ttons. ~he high sulphur content, normally undesirable, is re~'lly an asset in the Philinnine Islands, since this sulphur C0n be used for the production of sulnhuric acid" thus reducing the need for ir1Portir.g sulphur for this nurpo~e. Crude oil from the East ImUes n:~W become Awdlable in the fut1J.re a::2c some a.dvC'll tage in nrice ma.y develop from using it in nreference to tha.t o'ttl?ined from the Persi",n Gulf. The eo.uipment fI.rrangement 1··hich i~ being considered, ho"rever. is such thpt almost Pt.ny tyDe of crude oil cpn 1:e run s?t.isfactorily. (2) Refinerv 3aui~ment In this 1')reliminpry ~mplysis, sim")le topni:r..~ and cracking oller~).tions have been as!'~um~d 1-'i t'~ the refinery ,rod1.1.cing only gasoline, kerosene, diese~. oil, and, a.l ter-natively, bunker f'uel oil or coke. Production of lubricants, '-'aX :mc. snecial- ties are not considered, since the eOl;.inment for this nur'lose 1"ill re("~uire sena.rate justifice.tion 8,nd their productioj.1 has nO direct bearing on the immediate problem. 1.1 Degrees ;".,'::'.I. is a measure of the den!"it;t of petroleum)rocluct.s ClJld is a basis for fixin~ the value of cr~de oil. - 6- rto obtain estime,tes of yields and costs,' the Universal Oil Products Company of Chicago 1-"'S contacted,· since thiS firm is the outstanding contractor in the United States for small refineries of the type under consideration. T1"o types of oper1:l,tions hsve been considered, both of "rhich involve initial distillation and cracking. One oethod produces bua~er fuel oil in addi~ tion to gasoline, kerosene and diesel oil; 1.'hile the second method nroduces either bunker fuel oil or coke. Each nlan includes a'Opropriste treating fl'},cili ties, recovery units and all necessFlry auxiliaries, including t"lnkage. :matima.tes have been made for units rated at 5.000 end 10,000 ba.rrels per day of crude oil. The smaller un! t Fhen running to coke is ndequate for pro- ducing the ga.s necessary to produce 52,500 tons of ammonium sulphate per year. The larger :lJlant ,·ri11 more :Q.early provide the domestic requirements of !iouid fuels and "'i11 permit the expansion of fertilizer production to the equivalent of 105.000 tons of ammoniUl'!! sulphate per yeHr. An auxiliary plant h8.s been included in all estimates for the Production of Ubottle gas ll or liauid pro'lJane "'hich had founel ,,'ide acceptAnce in the U.S. and. other countries as an industrh~ and domestic fuel. () Estim~,ted Investment Costs The estimated investment reauired in refinery facilities ba.sed on current u.s. prices pnd erection costs are as fo1101"s for the four cases ,·'hich are being considered: Estirn?te,£. Oneretion Canacitv InvestClfmt in btls/day Fuel Oil 5,000 5,18u .780 Fuel Oil 10,000 7,869,560 Coke or Fuel Oil 5,000 6,184,780 Coke or 3'uel Oil 10,000 9,)69,560 These estj.mates I'l.re 1'1,11 f.a.s. ;':pst Co,,"st ports end do not include ocean freight and insurance. These estir:latel:.' r;mst be r:'l.ised by the ammmt of oce['n freight !'i.nd han('ling costs ['.n0 reduced by the s8vin~s redized. throUF.;h the - 7- use of local labor for erection. Nel ther amount is knOl''Il so these figures are taken as the a:r::l""")roximate cost of the refineries erected in the Philipnines. A breakdo1tJn into foreign exchange and (1omestic currency ref'uirements is not avail- able as yet, 'but on a project of this ty~e ~he foreign exchange content of the total investment is likely to be about 75%. (L;.) f:stimated Earnings In estimating the ep.rnings of an oil refinery in the PhiliuDine Islands, the current delivered prices for crude and refined nroducts have been used.. AS stated above, crude is assumed to have come from the Persian (iulf ,,'1 th A.n f ,,0. b. urice of -':2 per barrel 1"ith freight charges of '1.05 ner barrel (F.S. Ea.ritime rate).. Refined nroducts ha.ve been eRtimated at San }'rancisco Dosted nrices 8.S of l:ovember 22 plus U.S. Maritime rates to the PhilipDine Islpnds. This basis, in effect, provides the d.ifference in cost betl,'een refinerl, T)Toducts ')roduced in the Phili'!1pine Islfmds and the cost of comparoble nroducts inmorted ~.S such. The estimate does not take into account the e::-:isting selline; lJrice of petrole'l1m nrc- ducts in the ?hilippine Isle.nds ~,'hich are substantially hi:~her than the figur~s used. On this baSiS, the net profit before fine.ncial charges end taxes obtain- able from a 5t 000 barrel refinery amounts to 1'l.bout .'4'4 million per yepI'. ":1he proft t from an operetion involving a 10.000 barrel refinery is estimated at about 8.1 million per year. rro essential difference in :;:>rofi t exists between the t"'o re- finin,':; schemes 1·'hich have been conSidered • •i.ssuming amortizetion in tv'enty ye<>.rs., financiA.l cherges includinc; taxes '\!>rill Drobably amount to about 9% on the investment • Teking these charges into a.ccount, the net profit on a 5,000 barrel refinery becomes about 3.5 million Der year, e.nd about $'7.3 million T)er yen' on a 10,008 barrel un:i t. The estimated annual uroH t for each of the four c.,ses considered, after adjustment for financial charge~ are f" S fo1l01"s:; - 8- Operation Canrtci ty; Annual Profi t in bbb/day in million $ Fuel Oil .5.000 3 • .53 Fuel Oil 10,000 7~46 Coke .51 000 3.4·4 Coke 10.000 7. 2.5 Eased on the above estimates, each of the plants ','ould payout in about one and one-half years. Even i f the price of petroleum products dropped 50%, the project ,·'ould. payout in about three years. The foreign exchange savinGs possible through the operat1on of a refinery in the Philippine Islands are not subBte,ntially greater than the urofi t o-btetinable from the opere,tioD. A modern refinery has very low le.bor reauirements end consumes 11 ttle in the "'ay of domestic sUl)nlies. The difference between foreign eJ~chenge sflvin..s;s and profj tel 1,'ill urobably be less the.n 5fo. D8J.:an and other crudes from the PersiA11 Gulf hP,ve characteristics similF:lr to those o'bt~:>ined in "est. Texer and Oklnhoma in thA.t the anti-knock characteriRtics of the gasoline obt~ined direc'Uy from the crude are poor. Also, in order to mc,ke the crude sa.fe for shipment from the Persian Gulf J !'l. relatively larr:;e ~rcentage of the light fre.ctions are removed -!)rior to loading. Removal of these fractions further impair s the anti-knock chsr~ctforistics of the gasoline obh.ined directly from the crucle and, in add! tion, produces a gasoline of 101., volatili tyo :Sle~lded gasoline from Daman crude obtained. from a topping 1;)110. coking operation, I'tS contem- plated here, he,s e, vapor pressure of 8.3 Ibs. cornnared with e. minimum snecification of 10 Ibs. in the United States. The octR.ne number of the blended gaSOline is .56.5 v~hich can be brol1.ght to 71.4 by the addition of 3 e-c. per gallon of tetra- ethyl lead. 11. gasoline of this type "'ith the addition of lead is suitable for use in warm climates in ordinary intern:;l com'bUstion engines, It is, hOl'ever~ hot suit"ble for use in hi"~h compression motors or aircraft. r;"he gp,soline, h01"ever, is of better grf<.de than is generally marketed in Euroue. - 9- T,·'o methods are pvailaole for imorovin,"; the quality of the gasoline. The first,. ~,'hich does not reQuire additional canital investment, simDly involves producing e, lighter, lo"'er boiling fraction on ini tie.l distille.tion of the crude. This ~rocedure decreeses the yield of gasoline obtained and, correspondingly, in- creases the yield of kerosene. So long as the price differentisl betveen these oroducts is soal1, the method is satisfactory. The second method consists of Droviding t,t reforming unit for cr~lCking a "0ortion of the normnl gEtsoline frl:'ction from the c rude. This method increcu~es the volatility of the gasoline and imnroves its knock rp.ting, but at the same time reduces the yield of liauid prOducts at the exnense of nroducing more gas. :By this method •. the composite gasoline from Dam~n crude 1"ould have a vanor pressure of 10.6 lbs~ 8nd en octane rAting; of 67 1,tLich can be increased to 78.2 l"ith the addi tion of 3 ec~ uer ge,llon of tetraethyl lel'td. For a 10,000 barrel "!Jer day re- finery, a reforming uni t having a cauaci t:y of about 2,000 barrels per day Fill be required, this reDresentil'l",o; £In investment of pt least ~;6oo,ooo. ConSidering fixed charges, o?e:r~,t1ng costs /'lnc1 the dron in vl'tlue of lic:uid nroCtuC'ts, the net co~t of the oper;).tion of the reformer "'Duld amount to about :::360,000 Der yeer. On this basis, it is oelieved that the installl'ttion of 8. reformins; uni t f'hm.7.1d 08 de- ferred unt;l the more general use of hi~h comnression motor8 'oecomes <'. realit:r. Tests run oy the tJniversal Oil ?roduct~ Comnfl.ny indicate the kerosene produced from Damf'n crude is not entirely suit~ble for burr. in'; oil in kerosene lamns. This, hO\4rever, is not en inherent char9cteristic of kerosene obtai'1ed from this crude, since burning oil is bei11;:; succesefully nroduced both :i.11 the Vliddle East and in Europe from this source •. It is believed to be largely {31, matter of the nethod used for ch€'micelly tre!'tinc; the nroduct E1nd information on this point can be readily developed. - 10 V COnSIDERATIOnS COFCER'HTG 11. :nTROGbN j:'"'::::nT!L!ZER ?LA1~ (1) bqsls for CRlcu18tions The original nitrogen fertilizer nlant project submitted. by the Philipnine Government 88 e, basis for a loan held a rated ce.pecity of 126,000 tons of er.1illoniu:~ suluhate Der yeer. This ce:DBci ty is fl'Jr in exceSfl of C'ny nrior conslunution in the country nnd is probably in excess of repl future demlmds over the short term. Hpximum irrpc:rt!'" of ammonium sulphpte occurred in 1934 amounting to 64,000 tons. Pre 1 '9.r average imports 1,rere about 40,000 tons Dar ye1'l,r. In these calcull?tiom~, t",o sizes of nlants have been cone1dered--one ~.ri th an annua.1 cap::1ci ty of 52,500 tons of ",mmonium sulphate ner ye8T, the other l"ith double this capacity, or 105,000 tons per year. The equivalent flJnmonia 1Jro- duction for these ':J19.nts is 10 and 80 tons ;Jer day, res')ecti v81y. o,'he preliminary estimates hp.ve been prepared by the Chanica.! Construction CompPJlY 1,'ho developed the project originally submitted by the Philippine Jovernj71ent using electrolytic hydrogen. (2) Gas and Sulnhur Reautrements It is estimatod that a:,JDro~d.mately 77,000 cuMc feet ner hour of refi!lery gEeS is required for the production of 52,500 tons of aIIl"1onium sulphate ;Jer yap.r (40 tons of I;l.IDr.lOnia DeI' day). Produc:tion of ~"s :from a refinery producing liouid products only "'ill not nrovide thi~ amount of E,as from the distilling and cTP.ck- ing ouerations. even from 10,000 barrels of crude oi:!.. per 0!':W. i'Then nroducing coke, hOi"ever, in conjunction "'ith liouid 1Jroducts, a 5,000 bar:rel refine~r 1Jro- vides the r~~s.: reouirements for p., 40-ton m:lmonlA Tllant and I simil"'rly, ?, IO,OOC> barrel refinery provides adequate g"s for a 80 ton ammonia. nl[mt. In e"ch case, the sas 1)roduced by the refinery iF' substent:i.f',lly in r,aJ.ence 1''1 th the reouiremen ts of the fertilizer pla.."1t. The r:~F1ses provided to the fertilizer plant are 8.ssumed to be the totel production of the refinery of all materipls lif;hter than nr01')e.ne. - 11 It is estimated that 12.800 tons of sulphur are required to produce 52,500 tons of ammonium sulphate per year and double this amount is required for 105,000 tons per year. Production of hydrogen sulphide from a coking operation based on 10,000 barrels of crude oil J)t'r day is estimated at the equivalent of about 600 tons of sulphur per year. This gas can be used completely for the ryr~ ductiQIl of sulphuric acid. but it must be augmented "ri th substantial amounts of imported sulphur to provide totel req:u.irements. (3) Ji!2uipment As Ii basis fot' estirnctting, i t has been assumed th11t refinery-gases pould be delivered to the fertilizer ulant and that they ,,;ill be processed for the pro- duction of hydro/;en in conventional e~uipment sinilar to th~.t used for naturalo;p.s in the United States. This method involves catalytic cTackin~ of the gpses and substitutes for the electrolytic method i~cluded in the original proposal. ~itrogen "rill be obtcdned from liquid 8.ir usin,;; conventiorl.A.l compression and distillation equipment. The tl"O ge,ses '-Jill be combined to form f'I,r'1r:lOnia. in standard conversion equipment operating at 350 atmospheres. The plant ,,'ill have the usual aUXiliary equipment, including heat, exchtmgers, storage fFlcili ties and gas holders. The sulphuric acid plant 1"n1 l'l€ of strmdard construction of the contact type, using ge.ses obk,ined b;y burning suI ";?hur and hydrogen SUlphide. In 'vhe estimates availa.ble to date. it is assu.rnec1 that the only product from the fertilizer plant \,·ill be ammonium sulphate. r::'his 11l8.terial "'ill be 1)1'0- duced in conventional equipment by the direct combination of emmonia and su1 1)huric acid in a ~"ate:r solution from "'hich it ,:·ill be crvstallized, c~ried and bagged. The estimates include buildings, ".nrehouses and services. (4) ~stinated Investnent Costs T,'O sizes of ')lants he-v€: been consl.de7'ed, r)).ted at 52,500 !'l.nd 105,000 tons of Ammonium suluhate 1)er year. res'1ecti vely. '·'hese com"OP,re l·'i th the Dlant - 12- in the original project l"hich ~,rpS bssed on an annual production of 126,000 tons per year. Ij1he follo1dng t8ble summarizes the investment required broken dot,'n into domestic and foreign eJ:ch~?;e requirements-all expressed in $1,000: Ann1.U'!l Total Import Iiomestic ~'0e of ?lant Ca.nacit;:! Qost Reouirement§ Expenditures tons/yea.r Refinery Gas 52.500 6,850 5,480 1,370 Refinery Gas 105,000 9,700 7,750 1,950 Electrolytic 126,000 1),198 10,550 2,648 Electrolytic 126,000 24,941 18,652 6,289 (Rev. ) In the reviseo_ estimate covering the electrolytic pb..nt, the cost of the hy6roelectric station required hes been included along 1"i th the CO$'lt of the ammonium sulpho.te olant. Thi s is condderBd to be necessary since ')rA.cticf'.lly the entire output of the hydroelectric station "'ill be consumed in the fertilizer plant. In the C8Be of usinc~ refj.nery~af"0S, hOl· rever. it is not necess'J.ry to in- elude the cost of the refinery dnce this is obviously e, nrofitable venture inde- pendent of the fertil:izer 'Ohm~ al':,d if the grf! is not use( for the nroo.uction of fertilizer it cen be cons'luned in the refinery ~,S fuel or so16, for domeBtic use. In consideri::lg the estimated co~ts, they must be regarded t;'>,s fi rflt ap)roxirJwt. ions end as being probably on the hi~h £3i(le. So far as investment in the fertilizer plant alone 1s concerned, the clif;;:'er.:mce bet1"een 13, refinery gs,s and electrolyt:i.c ',lant is reIRtj.vel~r snaIl for a given CEl,DC-cCity, this difference being of the order of 10;. HOl'ever, ",hen the po','er stn,tion is included in the cost of the electrolytic 1jlcnt, the difference is of the order of 50~. (5) Estimated PrQQuction Costs In e~timf'tin:~ production costs ;in /'.1, Dlant up,in~ refinery g"'!,s, the cost of the {~p.s has been ba.sed on its he'1.ting v:lue in terms of bunker fuel oU. On this basiS, the cost has been assumed 0t 631 per 1000 cubic feet. This assumption is undou-~tecn:f hLsh over the Ions term.. since thE' v'lue of bu..>iker fuel oil has - 13 - been assumed at 25% above the co~t of crude oil and this condition can not be maintrined. In the normal price stru,cture b-tmker fuel oil is generally about 10 to 20;{ lONer in cost thBn1 crude oil. l\!'E'.tural gps for 'use in fertilizer Dla.nts in the U.S, is priced at about 5¢ per 1000 cubic feet. Sul1)hu!' requirements ot;ler the.n ClJn be obtfl.ined from the refin8ry are as~umed to be imDorted from the United States at a cost of G39.50 DeI' ton delivered to the plant. Hydrogen sul~~ide from the refinery has been included at no cost. Other items in the cost of production have been taken from information furnished by the Chemical Construction Company after making adjustments necessary for a direct comparison bet1!reen the t~·'o types of ouerations. Fixed charges are "be.sed on a 20-year amortization period for a 4,W loan (7.7jb) plus 1% for gener&l expenses, .8;; for ta.xes. and 8.• 5% for insurr.nce for R total of 10% •. On the basis outlined above, the f ,0. b. cost of am,~on:i.um sulpha.te per ton for various rates of prod'\lction in refinery gas mid electrolytic nlants £ere as follows:. COf1t ner ton in $ Rated lOOp 75~ 50% Tyu€ of Plpnt C[l.pacity Ca.uf\ci ty Cl:!pa .... 1t:r CaPlilcity Refinery Gas 52·,500 L~9, .50 53.70 58.70 Refine!"',! Ga.s 10.5,000 40.90 44.00 50.00 31ectrolytic 126 t oOO 37.70 41.20 48.20 Electrolytic 126,000 41.00 47.50 61.00 (Rev. ) In the revised estimate for the electrolytic :::>lant the cost of 1..10~,'er has been eliminated 8,S such and the operation of the hydroelectric station in- eluded in the total operatinp.; cost. In the Cfl.se of the refinery gas lJlants, the cost of pOl"er is taken 1¢ per K.".r.H.t "'hieh ~"il1 lJrobably be the nrevailing rate on Luzon. This compares ~"i th the estimpted cost of about J nils per K.1! .R. used in the calculations covering the electrolytic Dlant~ 14 13e.sed on the above figures, cost of production in a refinery g1'!.8 ple.nt is slightly 101"er tha.n in an electrolytic l)lent of comparable size ,,'hen each is run to cf'.pr:citv. However, ],'hen running belo1,r capacity the refineryg?s plant has a definitE' advrmtl:' 6 due to lo,,'er fixed che.rges. This is imnortant "'hen considered in COIDlection ,d th possible variations in demFllld due to reductions in ['l.griculturpl income [l'1(L similrr factors. (6) :8stim?ted Earnings It i~ not possible at this time to Drovide a significant estimate of eernin,gs on a ni tro<~en fertilizer nlant in the Phili lJpines, clue DrimEl.rlly to the difficult~.r of establishing a rfl,tion81 selling price for the 1)Toduct. Consic1ering ammonium sul~lhate only, Cl.. rrent prices in the ?hilipnines are renorted to be be- t"reen ~IOO and $200 per ton. _':"ver0:3e ir:lnorts in 1947 "'ere nriced at 2106 per ton c. i. f. Lanila. These prices compare ,·'1 th 845 -per ton bulk f. o. b. Forks in the Uni ted States, If one assumes the.t this nTice level "'ill rrle.intl:dn, then the pro- duction of anmonium suI nhate at a. co!:'+' of~~l}O to $45 'Oer ton in b1:lG8 in the Philipuines is ocviously e. very profi tp.ble venture. In the')erioc 1934/3e, the price of emnonium sulphate c.i.f. Hanila varied bet1,'een ·~30 and41 uer ton. Under nresent cond! tions, ~.rl th the trend of agricul turt"l prices dOlm'ard and the SUbstantiallY increp.sed cEpRci ty throughout the "'OrlO ror the nroduction of nitrogen fertilizers, it is to be expected that the price of ammonium sulDhate pill rp.";idly apnronch the prel,rar level an6 me,y even sell celol" thif' level. It is ouestiona"c-le, therefore, ,,'ht-ther B. nlp,nt to l')roauce 8!:!monium sulphate at e. cost of $40 to~;lJ,5 Del' ton is a goat investment over the long term even under the rr!ore favorable conditions offered "by the use of refinery .2;1"Be8. The solutjol1 to the probler:'l of obTaining 10'" cost ni tro,:,en fertilizer in the fhilip')ines aD')earS to lie in t.he U06 of refine!"" g,'ses for the :oroduction 15 - of urea rather thRn ammonium sUlphe.te. The economic aSY:lects of this process are being currently investigated. TIde preliminary analysis sho','s that the installation of a petroleum refinery in the P:'1ilippine Islands is a very attr~tcti ve project for further in- vestigl:1 tion independent of any considere,tions regarding the use of refinery ga,ses for the production of nitrogen fertilizer. The project can be undertaJ.::en by the Government. privBte interests or as a combined venture. Experience in countries ,,'hich do not nroduce crude oil has shm·m, that it is generally desirable to have participr"tion of private interests control some crude oil sUDplies. in order to insure the availability of crude oil at rensoru;.,ble Drices. Also. the pertici- pation of 1)rivate interests with diversified. Da,rketing facilities may justify the construction of a larger refinery than is indicated e.s necessary on the basis of domestic recl'l1.irements alone, since a ')ortion of the nroduction may be eX"')orted to other markets in which the .,.,rivate comugny he~ existint'; interests. Considering the tyne of refinery best £lui ted for the Phili p!)ine Islands, i t seems desirable thl",t the refinery should be able to produce ei ther coke or residual fuel oil denending on market reouiref.lents. This flexibility seems to be neces~ar7 since the domestic deln~nd Ior hea'V'Y fuel oil should decline as the availabili ty of hyc'll'oelectric power increeses. Petroleum coke vrhich is a high grade. 10'1-' ash content carbon is suitable for general use e.s fuel but it is also in great demand in European markets as a ra1,' material for electrodes. The ul ti- mate choice of the type and size of re:ine~\r requires considerably more study and this stUdy should include the ,ossibility of ex~orting heavy fuel oil to nearby ma,rkets. The estimates covering the .oetroleum refir.eI"J include the prod.uction of flbottle ge.s", which in a 10,000 barrel coking operatio!). ,,'ill amount to about - 16- 440 barrels per da~T. The market for this material must be carefully studied before this plant is installed, but the availability of this Droduct for industrial and domestic use seems to have very attractive pO$sibilities in the Philipnines. The use of refinery gases for the production of ni trogen fertilizer nrovides a sucste.ntifll reduction in the investment reauirec'c for a given Dla.nt ca- Daci t~J' a.s coml'')ared ,.r! th the electrolytic nrocess. Furthermore, the operat:ion of nuch 8. plant is much less suscenti ble to variations in cost ,.'hen opera.tin~ bel 01·' capaci ty; hm··ever, for the 'Jroduction of amr;onium sulphate the estime~ted costs ",re hi~~h by both methods comparE>d 1,'i th pre1 "ar imnort 'Ori ces nnd '?ro bpble future trencs. This i2 due to 8 le.rge extent to the necessity for importing sul:r;>hur ,.Thich accounts for a'bout 20% of the total cost of production. The best Dossi bili ties for obt~d.lling 10i" cost nitrogen fertilizer in the Philinpine Islands seem to be in the use of refinery ge,ses for the production of ammonia 1'l.nd the subseOl-.ent nroduction of uroa from the amrnonin. This process completely eliminates the need for ir:lported ral,' materia.le. Information is being developed on thi s process anci \·'ill be re!)orted a.t e~ later date. Based on existing information, there is a real economy in operating a nitrogen pl~mt besed on 80 tonSGer day of ammonia as compared "'i th 40 tons ner day, the caf:eronce in cost of [lmmouitun sulnhate being estimated at a'bont 20:'~. This ':lifferent.ial "ill be subskntial1_y increased 1"i th the nroduc tiou of urea. To run e r;lant of this size to cape.ctty, nitrogen prochwtion eouiva1ent to 105,000 tons of I'l,mmonium sulnhpte per yer:n must be obt?ined. Prior to the i"ar, maxirr.um irno:'orts of E'Jlunonium sulphate into the Philier'line IsbmcJs 'Ir'ere G4,OOO tons in 1934, pith the n.verr.ge for 1930-40 pmo1J.l'lting to about 40,000 tons. A realistic L1c?rket analysis mu.st -De lll!?de to eztl"b1.ish the maximum size of a nitrogen fertilizer p1r;tnt ,·'hich C8,n be c1rofi tD.bl~r o-oerDted in the Philippine Islands. TAIlkE I . n;IPORTS OF. PETRO!1:b'UlvI PRODUCTS. INTO· PHILIPPINE ISLANDS i .; . Que,ntity in 1,000-42 gallon bbls •. Value iIi $1,000 , , , Diesd Oi'1rJ ~. i. · .'! ~ Gasoline' . ; , . Kerosene , . BuB!5er Oil Total 9. ' ." , V .. 9- .9t , V V " (.~ V S, . (i( .V " I' - ; • , 1- • • 1929 608 8,782 529 ,5,918 1,489 2,828 ~2,626 17,,528 1934 641 5,144 442 2.419 2,05 2 3,495 · • ::3,1:35 11,0.58 19:35 992 6,662 547 2,970 2,)40 4,028 · • :3,879 13,660 1936 907 ,5,9 23 489 3,031 2,231 3,993 · :3,6 27 12,947 1937 827 4,946 453 2,292 1,920 3,832 :3,200 11,070 1939 946 6,141 393 2,382 2,085 5,283 · :3,424 13,806 : 1940 1,414 8,48,5 619 3,571 2,72,5 8,406 99 148 ;4,8.57 20,610 194,5 1946 732 352 369 ;1,453 1947 2,459 633 1,198 698 :4,987 1948* 3,914 768 1,294 1,584 :7,560 *Estima.ted. li!ncludes all fuel oils through 1939.' TABLE II Item Fuel Oil Residue Coke Residue Fuel Oil Residue Coke Residue 5.000 bble./day 5,000 bbls./day 10,000 bbl's~/day 10,000 bll2,aay Crude Top'Oing $ )40,000 $ )40,000 $1,000,000 $l,OOO~OOO Thermal Crack .. 1,0)5,000 1,635,000 Recycle Crr'ck. 1,960,000 ),150,000 L/p.G. (30ttle Gas) 7e.cili ties 75,000 110,000 110,000 175,000 Hydrogen Sulfide Re!':lovnl facili- ties 60,000 95,000 75r OOO 120,000 Ge.soline Trer"t- ing Facili ties 75.000 85.000 100,000 125.000 1,785,000 2,790,000 2,920,000 4,570,000 Auxilie.ry Equipment ~. 21 S.OOO 3.210,000 4, S80,000 4.430,000 5,000,000 6,000,000 7,500,000 9,000,000 Paid-up Roy?l t'r Thermal Crack- ing 8: Coking 184,780 184.780 369.560 369.560 Total Investment -. 5 , .~. ,780 $6,184,780 87,869,560 $9,.3 69,560 Note:· The above estimates are based on U.S.A. erection Bnd are subject to mc1,rket .ges in labor rates, a.nd c.ny snIes or other taxes "hich fluctuations, Che.Il. may 've imposed. The foUol,ring items are not included: Oce<:1n freight and marine insurance cJ:lloading e.nd port chCl.r/5:es Customs or imnort duties and taxes Certage to nlHnt site TABLE III ESTII"iATE OF OPERATnJ"G PROlnTS FROM PETROLEUH REFnffiRY ;rude Charge, bbls./day 5,000 5.000 10,000 10,000 )peration Fuel Oil Coke Fuel Oil . Coke Total Costs Jrude ® B).OS/bbl. deliver~d $15,.250 • 00 $15,250.00 $30,500.0 n $30.500:";0 Petraethyl lead 3ce/gal. of gasoline 605.00 730.00 1.210.00 1,460.o r 15,855.00 15.980,00 31.710,00 31,960.0( Operating Labor 134.40 134,40 134.40 IjL!' .4C 3upervision 10.40 10.40 10.40 10.4r ,steam 321.;,.00 410.00 648.00 820.0( Cooling l1ater 70.60 89.00 141.20 173.0( Fuel 980.00 1,308.00 1,960.00 2,616.oc ?o,,"'er 8.40 9.60 8.90 11.5C Ce.talyst & Chemicals (excl. T.E.L.) D.E.A. 0.75 2.25 1.S0 4.5 r Caustic 4.00 5.00 8.00 10.0r Inhibitor 2.26 3.36 4.52 6.7~ Laboratory 123.33 12;",)3 12) .. 33 . 1 23. 3~ iiaintenance 410.00 423 .. 00 626.00 739·0( 2,068,14 2,588.34 3.666.25 4,653.8: Administrative & Office 61.67 61,,67 61.62 61.6~ Tote,l Costs/day $17,984.81 $18,630.01 (excluding interest, taxes and depreciation) Total Credits Bulk Gasoline @ ~)6,90/bb1. $16.587.60 $20.010,00 $33,175. 2 0 $40,020.0 Kerosene ~ $6.67/bbl. 3,335.00 3,335.00 6.670.00 6.670.0 Diesel Fuel © 24.93/bbl. 3.697.50 3,697.50 7,395.00 7,395.0 Bunker "c" @ $3.95/bbl. 4,925.65 9,851.30 L/p.G. (Bottle Gas) ~ ~3.58/bbl. 397.38 291.18 794.76 1,582.3 Credits - Liouid Products ~ 28. 9f.!,3.13 $27,833.68 $57.886.26 855.667. } Coke ® $5.00/ton 525.00 l,050.0C Gas to Fuel (inc. H2S) € 63# /tifJ:ll }3 TU* 466.20 1,644.30 932.40 J. 288, 6( Total Credi ts ~29t409.33 $58,818.66 $60,005. 9~ Deduct: 2% on liquid products l')roduced for treating & handling losses 578.86 556.66 1.157.72 1.113.34 Gross Income/day $28,8jO.47 $29,446.32 $57~660~94 G58.892.6~ Deduct: Total Costs 18.610,01 35;437.92 Net Income/day $10t-845~66 $10;816.31 (before interest. taxes ~ Depree.) Net Income/year , ~;3t959,000.OO ),948,000.00 8,111,OOO~OO 8,109,OOO.Ot' *Ba.sed on ]Ul'lker lIe" price of ;~3.951bbl. TABLE IV FERTILn~ER IlvjPORTS Averl1ge Average L~