International Journal of Advanced Engineering Research and Technology (IJAERT)

Volume 1 Issue 1 pp 15-21 December 2013 www.ijaert.org

IJAERT @ 2013
Economic Evaluation of Continuous Heterogeneous Catalytic
Transesterification of Jatropha oil Plant
Haruna Ibrahim
1
, Abdulkarim A. Ahmed
2
, Idris M. Bugaje
3
, Ibrahim A. Muhammed-Dabo
4
1,2,3,4
Department of Chemical Engineering, Ahmadu Bello University, Zaria-Nigeria
ABSTRACT:
Biodiesel is a renewable diesel produced from animal
fats and plant oils by transesterification reaction. It
consists of fatty acid alkyl esters most typically fatty
acid methyl esters. Economic evaluation of a pilot plant
for a continuous heterogeneous catalytic process of
biodiesel production was evaluated. The plant produces
biodiesel from Jatrophacurcas oil and methanol using
bulk solid calcium oxide at 60
0
C reaction temperature
and a pressure of 1 atm. Annual production capacity
was set up at 11 550 litres of biodiesel and 3 840 litres of
glycerol. The estimated total fixed capital cost and total
manufacturing cost were $9697 (N1 600 000)
and$60958 (N8458164) which yield a net profit of
$17644 (N2911185). The process included the sales of
the glycerol co-product of biodiesel into commercial
glycerol market which increases the income generated.
The plant depreciation was estimated to be $679 (N112
000). The return on investment, internal rate of return,
payback period and net present value were estimated.
Keywords: biodiesel, Jatropha, oil, production, viability
1. Introduction
Over the years the energy crisis and environmental issues
have arouse the interest of establishing alternatives to finite
fossil fuel resources to reduce the effect of environmental
degradation and sustainability of energy supply. Biodiesel
which consists of alkyl esters of fatty acids has been found
to be a good replacement, blending agent and supplement
to fossil diesel for use in compression ignition engines.
Biodiesel has been found to have better performance in
engines than the conventional fossil diesel and
environmental friendly. It has the ability to lubricate
engine thereby elongate the engine life span, has no
aromatic compounds, low sulphur content [1],
biodegradable and low emission [2]. It also has higher
cetane number than fossil diesel [3]. All these advantages
have made biodiesel to gain a worldwide recognition and
acceptance to be used in compression ignition engines
without modification. However, it has been use in blending
with fossil diesel for compression ignition engines 20% or
B20 in U.S. and 10% or B10 in Europe. Using a blend of
20% reduces the carbon dioxide emission by 15% [4].
In support of these advantages, awareness has been created
for the use of biodiesel in diesel engines especially for
environmental concern. Europe and United State of
America are the leading producers and consumers of
biodiesel in the World. Europe in 2003 produced 1.7 x 10
9
litres and U.S.A produced 1.14 x 10
8
litres in 2004 [5].
U.S.A. 2013 total annual biodiesel production was 2190
gallons and the total number of producers was 112 [5].
Biodiesel can be produced from any material that contains
fatty acid either linked with other compounds or as free
fatty acids [6]. Use of non-food feedstocks for biodiesel
production has been advocated to avoid food crisis. This
article focuses on the economic evaluation of a constructed
biodiesel production plant from Jatrophacurcas seed oil
using calcium oxide catalyst. The economic feasibility was
carried out to determine the viability of the plant.
2. The Pilot Plant
The approach involved the design of the plant for the
production of biodiesel from Jatrophacurcasseed oil with
methanol using calcium oxide catalyst. The plant was
simulated, designed, constructed, assembled and tested.
The detail simulation, design and construction of the pilot
plant were given in Ibrahim et al [7]. The cost of the
fabrication and construction of the pilot plant was used to
estimate the cost of the plant. The cost of
Jatrophacurcasseed was estimated based on the local sales
in Zaria. Also the cost of methanol was based on the
current price at Zaria and cost of calcium oxide catalyst
was an estimate of National Research Institution for
Chemical Technology, NARICTs hydrated lime sales
price.
Aspen HYSYS
(R)
software of plant7.0 developed by
hyprotech of Canada was employed to simulate in the
development of this production process. 11 550 litres of
biodiesel was produced per annul by processing of 13 281
kg of Jatrophaoil, 1 441.8 kg of methanol (making mole
ratio of 1:3 oil to methanol) and 219.3 kg of bulk calcium
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 1 Issue 1 pp 15-21 December 2013 www.ijaert.org
IJAERT @ 2013
oxide catalyst. The plant was designed to operate two shifts
per day, 250 days in a year. Aspen HYSYS
(R)
has
comprehensive thermodynamic packages, vast component
libraries and advanced calculation techniques [8] is
suitable for chemical Engineering plant design. Regarding
the vegetable oil feed stock Jatrophacurcas seed oil was
considered as the raw material. Due the fact that oleic acid
is major component of the Jatrophacurcas seed oil (42-
43.5%) [9] triolein (C
57
H
104
O
6
) was choosing to represent
Jatropha oil in the HYSYS
(R)
simulation. Accordingly,
methyl oleate (C
19
H
36
O
2
) was taken as the resulting
biodiesel product and its properties were available in
HYSYS
(R)
component library.
2.1 Transesterification of the Jatrophacurcas Oil
Transesterification of Jatrophacurcas seed oil with
methanol catalyzed by bulk calcium oxide was carried out
as a continuous reaction conducted in a hot water
jacketed, stirred tank reactor at 60
0
C and 1 atm. The
product of the reaction was passed through sintered
funnels to separate out the bulk calcium oxide catalyst.
The liquid component containing methyl esters and
glycerol was collected into the separating funnels. The
methyl ester and glycerol were separated out after about
one hour by gravity as shown in fig. 1. These products
were clean and dry free of contaminants. This eliminates
the cost of washing and drying as in the case of
homogenous process.
3. Analysis and Discussion
Based on the cost of fabrication of the plant equipment
and current local costs of raw materials and also banks
interest charge in Nigeria, the financial estimate for
capital and production costs and accrue revenue were
obtained as follows. It was assumed that the present raw
material cost and interest rate remain unchanged
throughout the life span of the plant. The materials of
construction were sourced locally in Kaduna except the
pump which was imported from U.S. The fabrication of
the plant was done in Kaduna by Hanigh Nigeria Limited
located at Kakuri, kaduna south.
Figure 1: Continuous heterogeneous catalytic transesterification of Jatrophaoil process plant flowsheet
3.1 Fixed Capital Investment.
This represents the capital necessary to purchase
equipment and installation of process equipment with all
auxiliaries that are needed for complete process operation.
It include the amount require to purchase spare parts,
construction of the plant and the acquisition of items
necessary for plant operation [10]. This fixed capital cost
of this investment amount to 15.91% of total capital
investment. The equipment cost amount to 25% of the
fixed capital and the rest is for physical plant capital cost
which includes piping, installation, instrument, land and
building, which are direct costs. There are also indirect
costs which are neither directly involved in the material
and labour or installation nor in the complete facility. They
include engineering and supervision cost, construction
expenses, contractor fees and contingency fee.
3.2 Purchase Equipment Cost
The total purchase equipment cost (PEC) was estimated to
be $2424 (N400, 000) based on the actual cost of materials
of construction and fabrication of the pilot plant by
Hanigha Nigeria limited.Taking purchase equipment cost
to be 25% of total fixed cost, then the total fixed cost was
found to be
) 000 600 1 ( 2424 $
25 . 0
9697
N TFC = =
3.3 Depreciation Cost
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 1 Issue 1 pp 15-21 December 2013 www.ijaert.org
IJAERT @ 2013
This is the amount of economic loss of the fixed assets.
This theory is that, fixed asset begins to loss their values
from the day they are put into use, and therefore some
provision must be made for allocation of these depreciation
cost to the business operation during the life time of the
asset. Equation 1gives the expression for depreciation;
( ) 1
cos
span life
value salvage t capital fixed
on Depreciati

=
Sometimes salvage value is zero meaning that the equipment
is worthless after usage to the period it is replaced. But for this
plant not all the items under fixed cost are depreciable. For
example, the buildings will not depreciate and the land. Some
of the equipment may still be valuable after used. According
to Peters and Timmerhaus [11] a process model to estimate
Federal tax regulations generally limit salvage or scrap values
to 10% or less of the initial value of the property. Assuming
the salvage value is 10% the total fixed capital after the life
period of the plant (10 years). Hence, the depreciation of this
plant was $679 (N112 000). Table 1 shows analysis of fixed
capital cost.
Table 1: Summary of Fixed Capital Cost
Item % TFC Cost (N) Cost ($)
Total fixed cost (TFC) 1600000 9696.97
Purchase Equipment Cost 25 400000 2424.24
Installation Cost (IC) 8 128000 775.76
Instrumentation and Control Installation Cost (ICIC) 5 80000 484.85
Piping and Installation Cost (PIC) 7 112000 678.79
Electrical Installation Cost (EIC) 5 80000 484.85
Building Process and Auxilliary Cost (BAC) 5 80000 484.85
Service Facility Cost (SFC) 10 160000 969.70
Yard Improvement Cost (YIC) 3 48000 290.91
Land Cost (LC) 1 16000 96.97
Total Direct Cost 1104000 6690.91
Indirect cost
Engineering and Supervision Cost (ESC) 12 192000 1163.64
Construction Expenses (CEC)
8 128000 775.76
Contractors Fee
3 48000 290.91
Contingency Fee
8 128000 775.76
Total Indirect cost 496000 3006.06
3.4 Manufacturing Cost
This is the cost of processing and sales of products. This
includes the cost of raw materials. This generally consists
of the variable cost, fixed costs and general expenses.
Variable cost consists of direct and indirect costs.
Generally, variable cost may include costs of raw
materials, utilities, miscellaneous materials, shipping and
packaging. Fixed costs also include the cost of
maintenance, operating labour, supervision, plant
overheads, capital charges, Insurance rates and Royalties.
General expenses are made up of administrative costs,
engineering and legal costs, office maintenance and
communications, distribution and selling cost. Assuming
the plant is run for 250 days/yr taking the remaining days
for maintenance and holidays and 12 hours per day. The
plant was designed to consume 4.427kg/h of Jatropha oil,
0.4806kg/h of methanol and 0.07311kg/h of calcium oxide
catalyst. Therefore, annual quantities of raw materials
required were found to be 13 281 kg of Jatropha oil, 1 441.8
kg of methanol and 219.33 kg of calcium oxide. 1 441.8kg of
methanol was 1 841.14 litres. A litre of industrial grade
methanol as at the time of preparing this report cost $19.97
(N2 800) or at Zaria. Actual market price of
Jatrophacurcasseed was not available; assuming 25 kg of
Jatropha oil cost $30.30(N5000).
3.5 Total Investment
This is the total cost of money invested into the business. It is
the sum total of total fixed capital investment and the
manufacturing cost. For this investment, the total investment
cost was found to be $60 958 (N10 058 164). Out of this total
investment 15.91% was for total fixed capital investment
while the remaining 84.04% was for production cost. The raw
materials was 77.79% of the total investment cost and 92.51%
of total production (or manufacturing) cost. As shown in Table
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 1 Issue 1 pp 15-21 December 2013 www.ijaert.org
IJAERT @ 2013
2, the leading cost in the production cost was methanol. The
investment will yield more profit and cash flow than what was
obtained in table 3 when the price of methanol falls.
Table 2: Summary of manufacturing cost
Item %TFC Cost (N) Cost ($)
Fixed charges
Depreciation cost 112000 678.79
Insurance 0.5 8000 48.48
Rent 10 160000 969.70
Maintenance cost, (MC) 1 16000 96.97
Local taxes (LT) 0.1 1600 9.70
Operating Labour Cost (OLC) 12 192000 1163.64
Plant Overhead Cost (POC) 9 144000 872.73
Total Fixed charges 633600 3840
Variable cost
Jatropha oil 2656200 16098.18
Methanol 5155203.68 31243.66
Catalyst 13160 79.76
Raw materials 7824563.68 47421.60
Utilities 12 192000 1163.64
Operating Supplies Cost 16%MC 2560 15.52
Salaries and wages 40% OLC 76800 465.45
General & Administrative cost 0.5 8000 48.48
Cost of sales 28.5POC 41040 248.73
Direct Supervisory and Electrical Labour Cost 18%OLC 34560 209.45
Total Variable Cost 7824563.68 47421.60
Total Manufacturing Cost 8458163.68 51261.60
3.6 Income
The plant was designed to produce 3.85 litres/h of
biodiesel and 1.28litres/h of glycerol making 11 550 litres
per annul and 3 840 litres per annul respectively. Let the
selling price of biodiesel and glycerol be fixed at $1.8/l
(N300/l) and $16.97/l (N2 800/l) respectively. Based on
these two products the income, profits, cash flow, returns
on investment and payback period of the investment
transaction were prepared in Table 3 below.
Table 3: Revenue Accrue
Income N/year
$/year % Years
Biodiesel 3465000
21000
Glycerol 10752000
657163.64
Total Income 14217000
86163.64
Profit Before Tax
(PBT) 4158836
25205.07
Income Tax (30% PBT) 1247650.80
7561.52
Net Profit (NP) 2911185.20
17643.55
ROI
28.94
Internal Rate of Return
36.92
Net present value 2379.95
14.42
Payback period
3.6
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 1 Issue 1 pp 15-21 December 2013 www.ijaert.org
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3.7 Pay Back Period
According to Mark [12], Payback Period represents the
amount of time that it takes for a capital budgeting project
to recover its initial cost. The sum of the manufacturing
cost of year1 and net profit of that year becomes total
investment for the second year. By using excel spread
sheet cash flow table was prepared as shown Table 4 hence
the payback period was calculated from the table.The
payback period was found to be 3.6 years from table 4 for
this project. Equation 2 is an expression for payback period
[12];
Table 4: Cash Flow of Investment
Year Income ($)
Investment
($)
Gross
Income ($)
Cash
Flow ($)
Cash Flow
Accumulated
($)
0 0 60958.57 -60958.57 -60958.57 -60958.57
1 86163.64 60958.57 25205.07 17643.55 -43315.02
2 101349.57 78602.12 22747.45 15923.22 -27391.81
3 121880.96 94525.33 27355.63 19148.94 -8242.86
4 146571.61 113674.28 32897.34 23028.13 14785.27
5 176264.09 136702.41 39561.68 27693.17 42478.44
6 211971.67 164395.58 47576.08 33303.26 75781.70
7 254912.89 197698.84 57214.05 40049.83 115831.53
8 306553.14 237748.67 68804.47 48163.13 163994.66
9 368654.67 285911.80 82742.87 57920.01 221914.67
10 443336.74 343831.81 99504.93 69653.45 291568.12
( ) 2 ) (
|
|
.
|

+ =
year following the in flow cash Total
year that in NCF of alue Absolutev
NCF negative a with year Last PBP
Thus the project will recoup its initial investment in 3 years
7 months after the start of the investment as shown in fig. 2
below.
3.8 Internal Rate of Return IRR
Ana et al, [13] described Internal Rate of Return as an
indicator to quantify the efficiency of an investment.
Anexpressionto determine the IRR is expressed in equation
3 given by Ana et al, [13] as;
( )
( ) 3
1
0
1

=
+
+ = =
N
i
n
n
r
CF
I NPV
Where, CF is the cash flow, I is the initial investment, n is
the number of period and r is the Internal Rate of Return.
Its value is usually obtained by trial and error. It is an
interest rate at which net present value NPV is equal to
zero.
With the help of excel the interest rate at which NPV is
equal to zero was found to be 36.9276%, hence, the
internal rate of return IRR was 36.92%. This means that
this investment will earn 36.93% provided things go well
as plan. At the time of this report, the interest rate in
Nigeria was 25%, internal rate of return IRR of 36.92%
indicates that this investment was a good one because IRR
was greater than the cost of borrow [14]. The IRR decision
rule specifies that all independent projects with an IRR
greater than the cost of capital should be accepted.
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 1 Issue 1 pp 15-21 December 2013 www.ijaert.org
IJAERT @ 2013
Figure 2: Graph of cash flow against period
3.9 Net Present Value
Net present value is one of the most important analyses
that determine the economic viability of an investment
plant. The Net present Value NPV greater than zero
indicates that the project can be commercially viable [15].
The net present value of this investment was found to be
$14.42(N2379.95), indicating that it is a commercially
viable investment because NPV is positive.
4. Acknowledgment
This project was sponsored by National Research Institute
for Chemical Technology NARICT, Zaria. The authors
wish to recognize the tremendous support of Prof. Idris M.
Bugaje to the success of this project.
5. Conclusion
The total fixed capital investment was $9697 (N1 600
000) and total production cost was N8 458 163.68 making
the total investment at the start of the business to be $60
958 (N10 058 164). The net profit of this investment was
$17 644 (N2911185.20). The return on investment ROI
was 28.94%. The payback period of the business was
approximately 3 years 7 months. The business Internal
Rate of Return IRR was found to 36.92% greater than the
cost of borrow and the Net Present Value at this was
$14.42 (N2379.95). NPV was positive indicating that the
business is commercially viable.
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