PROJECT MANAGEMENT CHE 620

(Formaldehyde Plant)
Prepared by;

Mohammad Amirul Assyraf Bin Mohammad Noor

2012805802

Nik Nur Shahira Binti Ibrahim

2012209148

Ahmad Amir Firdaus Bin Mad Apandi

2012865934

Siti Zuhairah Binti Zulkepli

2012855924

Nur Syafiqah Binti Fadaly

2012662222

Anis Binti Abd. Gani

2012805454

EH 220 6A

Prepared for;

Dr. Abdul Hadi

Faculty of Chemical Engineering

12 June 2015
1
INTRODUCTION

Formaldehyde (CH2O) is known as the first series of aliphatic aldehydes. The occurrence of
formaldehyde is abundant in air and is also a byproduct of several biological processes. The
average person produces 1.5 ounces of formaldehyde per day as part of normal human
metabolism. Plants and animals produce formaldehyde as their byproducts. For example,
Brussels sprouts and cabbage emit formaldehyde when they are cooked.

Formaldehyde can be produced by oxidation of methanol with air in the presence of catalyst.
Formaldehyde may be produced at a relatively low cost, high purity, and from a variety of
chemical reactions, making formaldehyde one of the most produced industrial chemicals in the
world. Formaldehyde industries have been grown since 1972, from a yearly global production
volume of 7 million metric tons up to 24 million metric tons in recent years. In addition,
commercial uses of formaldehyde have widespread industrial applications, which showcase how
important the chemical is in our everyday lives.

Physical and chemical properties

Formaldehyde has a colorless and distinctive pungent smell even can be detected in low
concentrations. It is a highly flammable gas, with a flashpoint of 50C. The heat of combustion is
134.l kcal/mol or 4.47kcal/g. Formaldehyde is soluble in a variety of solvents and miscible in
water. Formaldehyde usually sold as 37 weight percent solution in water known as formalin.

Product description and usage

2
Formaldehyde, HCHO or CH2O is the simplest of aldehydes. At ordinary temperature it is a gas
with a very pungent odor. Formalin is a trade name for a solution containing 40% formaldehyde
and 60% water or water and methyl alcohol. In photography, formaldehyde is used in low
concentrations for process C-41 (color negative film) stabilizer in the final wash step, as well as
in the process E-6 pre-bleach step, to obviate the need for it in the final wash. Formaldehyde is
used extensively in the woodworking and cabinet-making industries. Urea-formaldehyde is used
in the glues that bond particle board together. The particle board is used underneath wood veneer
and plastic laminate. Cabinets, bank counters, and veneered and laminated woodwork all use
particle board containing urea-formaldehyde under the plastic laminate and wood veneer.
Formaldehyde is a common building block for the synthesis of more complex compounds and
materials. Products generated from formaldehyde include urea formaldehyde resin, melamine
resin, phenol formaldehyde resin, polyoxymethylene plastics, 1,4-butanediol, and methylene
diphenyl diisocyanate. The textile industry uses formaldehyde-based resins as finishers to make
fabrics crease-resistant. Formaldehyde-based materials are key to the manufacture of
automobiles, and used to make components for the transmission, electrical system, engine block,
door panels, axles and brake shoes.

3
Demand
Formaldehyde has been manufactured primarily from methanol since the beginning of the
century. Because of its low cost and high purity, formaldehyde has become one of the most
important industrial and research chemicals in the world.

Consumption of formaldehyde depends mainly on the construction, automotive and furniture

markets. Formaldehyde is usually produced close to the point of consumption since it is fairly
easy to make while it cannot be shipped easily over long distances. It can develop stability-
associated problems during transport. As a result, world trade in formaldehyde is minimal.

Its demand is expected to increase in the coming years quite significantly due to a healthy
demand from the formaldehyde-based resin and automobile fuel sector. The growth in demand
for methanol in Malaysia is expected to be at the rate of five percent during the forecast period,
and the majority of domestic demand would be fulfilled by imports.

The five largest markets are North America, Europe, Latin America, Middle East and China.
Formaldehyde demand growth slowed down in 2008-2009, this was due to a slowdown in the
global property market. However, it is believed that from 2010 this should improve on the back
of demand for specialty chemicals.

According to SRI Consulting (researchers and consultants that gather and analyze critical data
from around the globe on chemical markets, processes, companies and developments.), world
consumption is forecast to grow at an average annual rate of 4.0% during 20092014.

SRI Consulting further says that significant-to-rapid demand growth in Asia, mainly China, for
most applications will balance out moderate growth in North America, Western Europe, Africa
and Oceania. Central and South America, the Middle East, and Central and Eastern Europe are
forecast to experience significant growth in 2009-2014 due to increased production of wood
panels, laminates and MDI (Methyl di-p-phenyleneisocyanate).

4
Figure below shows world consumption of formaldehyde. China shows the most consumer
follow by Western Europe and United States. The least consumers are Ocenia. Malaysia are
among the least consumer in the world.

Figure 6.0: World consumption of formaldehyde

(http://chemical.ihs.com/nl/Public/2010/1001/1001.html)

There are a lot of companies mentioned in demand for formaldehyde such as Petroliam
NasionalBhd (PETRONAS), Eastman Chemical Company, Linde AG, LyondellBasell
Industries, Praxair IncTerra Industries, Inc/CF Industries.

World consumption is forecast to experience significant growth during 2011-2016. In

conclusion, it is believed that formaldehyde demand will depend on economic recovery,
especially in the housing and construction industries.

5
SUPPLY
The commercial production of formaldehyde was first started in Germany in the 1880s but the
development of a methanol synthesis route in the 1920s gave the spur to the development of
large-scale manufacture.

The methanol industry in Malaysia accounts for only around three percent of the overall
production in the Asia-Pacific region.

For example, in Malaysia there is have a company name Hexzachem Sarawak Sdn. Bhd.
(formerly known as Hexza-Neste Chemicals Sdn. Bhd.) is a company registered in Malaysia
with a license to produce formaldehyde and formaldehyde-based resins in Sarawak.

There are also some suppliers for formaldehyde. It is Integrated Sales SdnBhd which based in
Malaysia. Supply ability per day for the company is 10 metric tons.

Besides, Newquest (Trading) Pte Ltd. supplies chemicals to various industries, including soap
and detergent, glass, adhesives, petrochemicals and oilfields. Within the company, there are two
adhesive manufacturing plants (Bintulu Adhesives & Chemicals and Petanak Enterprises Sdn.
Bhd.) operating in East Malaysia. These plants acquire the chemicals from NewQuest to produce
urea formaldehyde resin, phenol formaldehyde resin and low formaldehyde emission resin. The
resins are used for the manufacturers of plywood, chipboard and MDF board in the Asean
region. The plants also produce urea formaldehyde pre-condensate for the fertilizer industries.

Formaldehyde can be store as a liquid and gas. The figure below shows that formaldehyde is
store in liquid state.

6
Figure 7.0: Formaldehyde in liquid state

7
Table 1.0: World supply for formaldehyde

in 2013 (thousand tonnes)

Country / Region Production Consumption

North America
Canada 675 620
Mexico 136 137
USA 4650 4459
South and Central America 638 636
Western Europe 7100 7054
Eastern Europe 1582 1577
Middle East 454 438
Japan 1396 1395
Africa 102 102
Asia
China 1750 1752
Indonesia 891 892
Malaysia 350 350
Republic of Korea 580 580
Others 789 795
Australia and New Zealand 304 304
Total 21 547 21 091

8
FUTURE MARKETING POTENTIAL

Formaldehyde is a chemical compound that is widely used in industrial manufacturing and a

number of other industries. It is the best to select the least toxic materials, which is not always as
simple as it appears. At times, a more toxic material may be a better performer and less
expensive. In general, the risk to occupants from a toxic product is lower if the agent is not
inhaled or touched. There are many examples of products that use formaldehyde such as floor
polish, sheet vinyl flooring, softwood plywood and wall coverings.

Nowadays, the cabinets where has the particle board that made with urea formaldehyde binder
that emits formaldehyde and other harmful chemical. For the future usage, the cabinets must
have the three goals which is the energy efficiency, conservation of natural resources and indoor
air quality. The cabinet made with a particleboard underlayment. The particleboard contains glue
that uses urea formaldehyde. At room temperature urea formaldehyde easily convert from solid
to gas. It is the property that makes urea formaldehyde a Volatile Organic Compound (VOC). As
interest green products grow, manufactures are responding with cabinet lines designed to satisfy
consumer demands for healthier indoor environment. Instead of particleboard, the use panels
made from compressed wheat straw. The glue used in this product is a non-toxic MDI resin.

The other product for future marketing is wrinkle-free fabric. This product is to help clothes,
upholstery and bedding stay wrinkle free, they are often treated with a formaldehyde-based resin.
But, the consumers can expect is an allergic skin reaction, like a rash, blisters and eczema. The
consumers are recommended to buy clothing produced in the countries, such as Japan, that have
strict formaldehyde guidelines.

Cosmetics also have the formaldehyde. The examples of the cosmetics are nail polish, nail polish
remover and hair-styling products. These products contain the most formaldehyde, up to 50% as
formalin in some case. But the chemical is also used as a preservative in skincare and baby
products, even natural and organic ones.

9
ORGANIZATIONAL STRUCTURE FOR PROJECT MANAGEMENT

The organization structure is effective for defining the role and responsibilty of the project
manager and his/her team members during the plant construction. There must be a clear
understanding of the reporting relationships of all member of the project team. Every department
play their role and responsibility in order to achieve their goal for this project.

Project Manager

Legal Planning and

Assistance Scheduling

Safety and
Engineering Construction Administration
Licensing

Licensing Chemical Construction Human

Management Technology Resources

Civil
Environmental Site Work
Financial
Protection Management
Mechanical
Security and
Safeguard Cost Control
Electrical
Occupational
Public Relation
Safety Instrumentation
and Control

Environmental

Figure 1: Organisational structure.

10
THE WORK BREAKDOWN STRUCTURE (WBS)
WBS is constructed to ensure that any task required is not overlooked, which may cause
problems and delay of the project.

No. Task Duration Predecessor Resources Assigned to

1 Organization
a) Task outline 3 days - Planning & Safety & licensing,
scheduling Engineering,
Construction,
Administration
2 Design
a) Design plant 3 months 1 (a) Engineering Construction, Financial,
Safety & licensing
Construction,

b) Design safety 5 days 2 (b) Safety & Engineering

measurement of plant licensing
3 Financial Financial, Construction,
Engineering, Engineering
Cost control
a) Site purchasing 10 days 2 (b)
b) Equipment purchasing 8 weeks 2 (b)
c) Construction cost 5 days 3 (a), (b)
4 Construction Engineering Engineering,
Administration
a) Installation 8 months 3 (c)
b) Setup 1 month 4 (a)
5 Test and run
a) Site clearing 3 days 4 (b) Site work Engineering
management

b) Inspection for safety 2 days 4 (b) Occupational Engineering

measurement safety

c) Test and run 3 days 5 (a), (b) Engineering Licensing management

6 Termination
a) Final report 5 days 6 (a) Safety & Administration
licensing,
Engineering,
Construction
Table 1: Work Breakdown Structure (WBS) of the project.

11
12
 6.0 SCHEDULING (PERT/ CPM)

Since activity-on-node (AON) network is easier to draw compared to activity-on-arrow (AOA) network, AON network is applied to
display the project network.

68 78 298 301
F
S
0 3 3 63 63 68 109 114 114 278 278 298 301 304 304 309
I
T
N
A 3 (a) 5 (a)
68 10109 298 3 300 N
R
1(a) 2 (a) 2 (b) 3 (c) 4 (a) 4 (b) 5 (c) 6 (a) I
T
3 60 5 5 164 20 3 5 S
3 (b) 5 (b) H
41 2

Figure 2: Activity-on-node (AON) network of the project.

13
BUDGETING

7.1 The Cost of Equipment

EQUIPMENT UNIT PRICE PER UNIT TOTAL PRICE

(RM) (RM)
Reactor 1 25,435 25,435
Distillation column 2 1,716,407 3,432,814
Heat exchanger 5 3,433,500 17,167,500
TOTAL MAIN 6 5,175,342 20,625,749
EQUIPMENT
COST

Table 2: Total Cost of Equipments

Price and cost of the main equipment have been evaluated based on Chemical
Engineering Plant Cost Index (CEPCI). The total cost of equipment is RM 20,625,749.

14
 Task Durati Cost
o. on

Organization

b) Task outline 3 days RM 21 000

(Planner & Project Manager)

Design

c) Design plant 3 RM 7 000

months
(Engineers)

d) Design safety measurement of RM 9 000

plant 5 days

(Safety & licensing manager)

Financial

(Administrator, Engineers) RM 12
000

d) Site purchasing 10 days

e) Equipment purchasing 8
weeks

f) Construction cost
5 days

15
 Construction

(Engineer & Labor workers) RM 7 900

c) Installation 8
months

d) Setup
1
month

Test and run

d) Site clearing 3 days RM 900

(Labor workers)

e) Inspection for safety measurement 2 days RM 9 000

(Safety & licensing manager)

f) Test and run 3 days RM 7 000

(Engineers)

Termination

b) Final report 5 days RM 21 000

(Safety & licensing manager,

Engineers, Administrator)

16
Fixed and Total Capital Investment

For total capital investment (TCI):

Total Capital Investment = Fixed Capital Investment + Working Capital + Start Up

Specification Cost (RM)

DIRECT COST
1. ONSITE
Purchased Equipment 20,625,749
Purchased Equipment Installation 10% E 2,062,574.9
Instrumentation (installed cost) 13% E 2,681,347.37
Piping Installed 30% E 6,187,724.7
Electrical Installation 12% E 2,475,089.88
Inflation 9.3% E 1,918194.657
2. OFFSITE
Building 30% E 6,187,724.7
Yard Improvement 10% E 2,062,574.9
Land 4, 500, 000
Service Facilities 30% E 6,187,724.7
TOTAL DIRECT COST (RM) 54,888,704.81

INDIRECT COST
Engineering and Supervisions 30% E 6,187,724.7
Constructor Expenses 10% TDC 2,062,574.9
Construction Fee 6% TDC 1,237,544.94
TOTAL INDIRECT COST (RM) 9,487,844.54
Table 3: The Data of Fixed Capital Investment

17
Total cost (RM) = Total Direct Cost + Total Indirect Cost

= RM 54,888,704.81+ RM 9,487,844.54

= RM 64,376,549.35

7.3 Contingencies
= 8% ( tot)

= 0.08 (RM 64,376,549.35)

= RM 5,150,123.95

7.4 Fixed Capital Investment

() = () + ()

= RM 64,376,549.35+ RM 5,150,123.95

= RM 69,526,673.3

18
 7.5 Working Capital and Startup Expenses

Specification Cost (RM)

Working Capital 10% FCI 6 952 667.33
Startup Expenses 8% FCI 5 562 133.86
Table : The Cost of Working Capital & Startup Expenses

Therefore,

() = ( ) +
+

= RM 69,526,673.3+ RM 6 952 667.33+ RM 5 562 133.86

= RM 82 041 474.49

Therefore, the total capital investment needed for Formaldehyde Plant is RM 82 041
474.49. The cost was includes all equipment cost, cost of working and startup expenses and also
the direct and indirect cost in setting up the plant.

7.6 Raw Material Consumption

Raw Material
Price of raw material
Methanol RM1552.27 / tonne
Raw material usage
Methanol 2.884tonne/hr
Total cost of raw material RM36 852 606

4476.75 / hr 24 hr / 1d 7d/1wk 49 wk/1 yr

= RM 36,852,606 / yr

19
 7.7 Total Production of Formaldehyde

Product
Price per product:
Formaldehyde RM 4338.86/tonne
Product Amount
Formaldehyde 2.5479tonne /hr
Total Annual Sales for Formaldehyde RM91,004,595.36

7.8 Estimation on operating labor

= (6.29 + 31.72 + 0.23)0.5 (1)

Where:
NOL = number of operator per shift
P = number of processing step involving the handling particulate solids
(transportation and distribution, particulate size control, particulate removal)
Nnp= number of non-particulate processing step and includes compression,
heating and cooling, mixing and reaction.

The equation (1) is derived for process with two solid handling steps and not acceptable
for greater number of solid handling operation.
= (2)
The value of NOL is the number of operator required to run the process unit per shift. A
single operator works on the average 49 weeks a year, 3 week vacation and sick leave, five 8-
hour shifts per week. This amounts to:

49 4 196
=

20
A chemical plant normally operates 24 hours/day and requires,

3 365 105
No. of shift per year = =

The number of operators needed to provide this number of shift is:

1095 /
= 5.6 operator
196 .

Means 6 operators are needed for each operation in plant in certain time. This number of
operator in only for a labor and not include any support or supervisory staff.

EQUIPMENT NUMBER OF Nnp

EQUIPMENT
Reactor 1 1
Distillation column 2 -
Heat exchanger 5 5
TOTAL EQUIPMENT 8 6
Table 3: List equipment for estimation of operating labor requirement

By using equation (1):

N0L= (6.29 + 31.72 + 0.23)0.5

= (6.29 + 31.7(0)+ 0.23(6)0.5

= 2.77

Number of labor required per shift: 5.6 2.77 = 15.512 person per shift

16

21
The total of labor needed for a plant:

16 persons per shifts 5 shift

= 80 persons per operator

Cost for a labor per year:

= RM29.67 7 day

= RM207.69 per week

= RM207.69 52 weeks/year

= RM10800 per year

Total Labor Cost = RM10800 80 persons per operator = RM864 000 per year

22
 7.9 Total Production of Cost Estimation

Costs (RM)
Direct Manufacturing Costs
Patent and Royalties 3 % FCI 2 085 800.199
Maintenance and Repair 10 % FCI 6 952 667.33
Operating Labor Cost 864 000
Operating Supplies 10 % Operating Labor 86 400
Direct Supervision & Clerical 25 % Operating Labor 216 000
Labor
Laboratory Charges 15 % Operating Labor 129 600
Plant Overhead 40 % Operating Labor 345 600
Raw Material RM36 852 606
Total Direct Manufacturing 47 532 673.53
Costs (RM)
Indirect Manufacturing Costs
Insurances 1 % FCI 695 266.733
Total Indirect Manufacturing 695 266.733
Costs (RM)
Total Manufacturing Expenses = RM 48 227 940.26
General Expenses
Distribution & Selling Expenses 15 % FCI 10 429 001
Administration 10 % Operating Labor 86 400
10% Direct Supervision 21 600
10 % Maintenance 695 266.733
Research & Development 5 % FCI 3 476 333.665
Total General Expenses = RM 14 708 601.4
Table 4: The Production of 85000 tonne of Acrylic Acid

23
Total Production Costs

Total production cost

= Total Manufacturing Expenses + Total General Expenses

= RM 48 227 940.26+ RM 14 708 601.4

= RM 62 936 541.66

Gross Profit

, = ,

= RM 91,004,595.36 RM 62 936 541.66

= RM 28 068 053.7

Income Taxes

= 20% ()

= 0.20 (RM 28 068 053.7)

=RM 5 613 610.74

Net Annual Profit

, = ,

=RM 28 068 053.7 RM 5 613 610.74

= RM 22 454 442.96

Based on the overall evaluation, it can be concluded that this plant is indeed
economically feasible and thus contributes a promising return to satisfy investments. So that, this
plant of production of formaldehyde has a bright potential since the demands of the production
as mention under needs and marketing analysis is continuously increasing.

24
TERMINATION

Project termination is one of the most serious decisions a project management team and its
control board have to take. It can be carried out by using a brief checklists.

Project Termination Checklist

# Item Results / Reference to Contract /

Remarks

1 Final presentation of the project results ---

2 Follow procedure for the final Final acceptance of all project results
acceptance of project results
3 Handover of project results to the ---
customer and/or user
4 Official celebration with all stakeholders ---
5 Complete and close all project All controlling tools complete and
controlling tools closed
6 Complete and close all reports or All reports and documents complete and
documents closed
7 Generate final project reports for the Final project reports for the customer
customer
8 Close the contract Contract closed, including all necessary
signatures
9 Issue final invoice and follow up on Payment received
payment
10 Generate final project reports for other Final project reports for other
stakeholders stakeholders
11 Generate final project reports for our Final project reports for our own
own organization organization

25
# Item Results / Reference to Contract /
Remarks

12 Complete and close project management Project management handbook

handbook complete and closed
13 Lessons learned workshop Final risk assessment;
problems and solutions;
changes;
claims and their settlement
14 Handover to the team that takes care of Handover accepted
the warranty period or further customer
support
15 Support all team members to find new All team members have new
assignments assignments
16 Feedback of the customer (executive ---
level)
17 Feedback of the customer (end user ---
level)
18 Feedback of control board ---
19 Feedback of team members ---
20 Feedback of other stakeholders ---
21 Close all project accounts Project accounts closed
22 Carry out the final project calculation Final project calculation complete
23 Have a party with your team ---
24 Release resources ---

26
REFERENCES

Yant, W. P.; Schrenk, H. H.; Sayers, R. R. (1931). "Methanol Antifreeze and

Methanol Poisoning".

Berger, Sandy (30 September 2006). "Methanol Laptop Fuel". CompuKiss. Retrieved 22
May 2007.

Weast, Robert C., ed. (1981). CRC Handbook of Chemistry and Physics (62nd ed.). Boca Raton,

FL: CRC Press. pp. C301, E61

Francis-Floyd, Ruth (April 1996). "Use of Formalin to Control Fish Parasites". Institute of

Food and Agricultural Sciences, University of Florida.

Turner JH, Reh DD (June 2012). "Incidence and survival in patients with sinonasal cancer: a

historical analysis of population-based data". Head Neck 34 (6): 87785.

Read, J. (1935). Text-Book of Organic Chemistry. London: G Bell & Sons

Woon, David E. (2002). "Modeling Gas-Grain Chemistry with Quantum Chemical

Cluster Calculations

Heterogeneous Hydrogenation of CO and H2CO on Icy Grain Mantles". Astrophys. J. 569:541-

48.

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