The seven stages of chemical technology from concept to industrialization (Issue 61/100) -- Feasibility study report

Thread Content

This post was last edited by xiouxingzhe on 2026-7-11 20:38. Seven stages of chemical technology from idea to industrialization (Issue 61/100) —— Engineering translation: Feasibility study report. Dear friends: Hello everyone! In the previous issue, we discussed the overall picture of the engineering translation phase – translating technical language into engineering language, with multi-disciplinary collaboration being the most critical challenge at this stage. Starting from this issue, we will go through the various tasks in the project conversion phase, one by one, following the sequence of a chemical project from the process package to the construction drawings. Let’s talk about the first item: the feasibility study report. Many people’s impression of a feasibility study report is that it involves \"writing a thick document to submit for approval.\" But the true value of a feasibility study lies not in merely meeting requirements, but in answering a core question: should this project be built overall? Will the technology work? Is it cost-effective? Can compliance performance not be met? If the preliminary technical evaluation (issues 12 to 14) is conducted thoroughly, the technical part of the feasibility study will have a solid foundation. Of course, a feasibility study report must address not only the technical aspects – but also the market, site selection, investment estimates, economic evaluation, compliance checks, and preliminary safety assessments. In this issue, we will discuss the logical framework and key points for preparing a feasibility study report. I. What is the relationship between a feasibility study report and preliminary evaluations? This is a question that is often asked: Isn’t a round of evaluation already done during the innovation incubation phase? Why is a feasibility study still needed at the stage of engineering implementation? The purposes and depth of the two rounds of reasoning differ. In the innovation incubation phase, the analysis is done at a high level of approximation; its purpose is to identify potential directions – to determine whether an idea is worth taking to the laboratory or deserves further effort. During the engineering transition phase, the accuracy requirements increase to ±10% to ±20%, with the aim of making investment decisions – determining whether it is worth investing substantial funds and resources in developing this project. The precision has improved, so the basis has changed. The justification for the innovation incubation phase relies on desk simulations and rough estimates. During the feasibility study phase, reliance is placed on complete data from pilot plant tests and process packages – with established consumption rates, an equipment list, and information on utility requirements, it becomes possible to develop more accurate investment estimates. A feasibility study without pilot-scale data to support it makes it impossible to quantitatively assess technical risks – if the range of yields for the core reaction cannot even be determined, the cost estimates in economic analyses are nothing but speculation. Therefore, a feasibility study report is not a simple repetition of the preliminary discussions, but rather an enhancement and upgrade based on those discussions. It adopts the analytical framework from earlier arguments—the dual test of scientific feasibility and commercial viability—but uses more detailed data to support its conclusions and adopts a more comprehensive perspective to examine the project. II. Standard structure of a feasibility study report A complete feasibility study report for a chemical project typically includes the following sections. General Introduction. Project background, necessity of construction, basis for preparation, and project overview. This chapter is for decision-makers – why this project should be built, what the basis is, and what the conclusions are. Market forecasting and analysis. Current supply and demand situation and forecasts for the product in domestic and international markets, price analysis, target market positioning. The conclusions of market analysis directly determine the feasibility of the plant scale and product design. Construction scale and product plan. Basis for determining the plant scale, product specifications, and by-product plans. The data in this chapter mainly comes from the project definition and product specifications of the process package. Process technical plan. Selection and comparison of process technology routes, brief description of the process flow, selection of main equipment. This is the technical core of the feasibility study report. The PFD of the process package, the equipment data sheets, and the process flow description serve as the direct inputs for this chapter. Supply of raw materials, auxiliary materials, and utility services. Raw material sources and specifications, utility specifications and consumption. The material balance sheet and utility consumption table of the process package directly support the preparation of this chapter. Site selection and conditions for building a factory. Comparison of site selection options, site conditions — geology, meteorology, transportation, infrastructure. The location selection directly determines the project’s capital investment and long-term operating costs. General layout transportation. General layout, vertical design, logistics transportation plan. The outcomes of the scheme design phase provide a preliminary overall layout plan for this chapter. Utilities and auxiliary facilities. Water supply and drainage, power supply, heating, gas supply, refrigeration, air compression, maintenance. The utility consumption table and boundary condition table of the process package form the basis for utility engineering design. Energy saving. Energy consumption indicators, energy-saving measures, evaluation of energy-saving effects. The results of heat balance calculations and heat exchange network optimization are reflected in this chapter as specific energy consumption data and energy-saving solutions. Environmental protection. Sources and emission amounts of the three wastes, treatment solutions, and estimates for environmental protection investments. The data in this chapter comes directly from the HSE section of the process package, and it serves as an important basis for the subsequent environmental impact assessment report. Labor safety, health, and fire protection. Analysis of hazardous factors, safety protection measures, fire protection plans. The HAZOP analysis of the process package and the calculation data for safety valve discharge rates provide technical support for this chapter. Organizational structure and human resource allocation. Organizational structure, staffing, training plan. The level of automation and operational complexity of the device determine the number of staff required and the skill levels needed. Project implementation schedule. Construction period, schedule for each phase, key milestones. The schedule should allow for some flexibility – the actual construction period for chemical projects is often longer than what is optimistically estimated. Investment estimation and funding. Total investment estimate, sources of funding, and financing plan. The investment estimate is one of the key figures in a feasibility study report and serves as the basis for investment decisions. Financial evaluation. Cost estimation, sales revenue and taxes, profit forecasting, payback period, internal rate of return. The conclusions of the financial evaluation determine whether the project is commercially viable. Risk analysis and countermeasures. Technical risks, market risks, policy risks, management risks. The risk assessment matrix from the innovation incubation phase is upgraded to a more comprehensive risk analysis in this chapter. Conclusions and recommendations. Comprehensive evaluation of the project, main conclusions, existing problems and suggestions. This chapter is the final page for decision-makers – to build or not to build, why, and what the prerequisites are. III. Key Points in Formulating the Process Technology Plan The process technology plan is the technical core of the feasibility study report. This chapter must answer several key questions. Why was this process route chosen? It’s not possible to simply say that “this route is more advanced”; rather, the process of comparison and selection needs to be shown. List possible process routes and conduct a comparative analysis from multiple dimensions such as technical maturity, cost-effectiveness, safety, environmental sustainability, and availability of raw materials. When comparing with the main competing routes, let the data speak – show what the differences are in yield, energy consumption, and waste emissions – rather than simply stating that “this technology is superior”. What is the maturity level of the process? What is the pilot scale, how many hours has it been operating, and what is the basis for scaling up the key equipment? Do the pilot plant data support a direct scale-up to industrial scale? These issues directly determine the level of technical risk associated with the project. For mature processes with industrialization records, it is necessary to list the scale of the installed facilities, the time of commissioning, and their operating status. For processes undergoing initial industrialization, it is necessary to clarify where the uncertainties associated with scaling up lie and what countermeasures should be taken. What are the criteria for selecting major equipment? The technical source of the key equipment and its supply capacity have been preliminarily confirmed. Are there any devices that rely on a single source of import, and are there any restricted supply cycles? These issues directly affect project progress and investment control. IV. Method for preparing investment estimates: The accuracy of investment estimates during the feasibility study phase is generally required to be within ±20%. There are several main estimation methods, each with its own scope of application. For projects with similar precedents, the scale index method can be used to estimate the total investment. The basic formula for the scale index method is: the investment required for the new facility equals the investment in the existing facility multiplied by the ratio of the desired scale to the existing scale raised to the power of n, with n typically ranging from 0.6 to 0.7. This exponential method is applicable to similar projects with the same process route but different scales. If the manufacturing processes are completely different, or if there are significant differences in product types, the bias of the scale index method can be large; therefore, it is not recommended to use it directly. For chemical projects in which equipment costs account for a large proportion of the total investment, it is recommended to use the equipment cost coefficient method. First, estimate the purchase costs of all major equipment—based on the supplier’s preliminary quotes or prices of similar equipment—and then estimate various other costs such as installation fees, piping costs, instrumentation costs, electrical costs, and civil engineering costs using empirical coefficients. When estimating the cost of equipment, it is necessary to distinguish between domestic equipment and imported equipment – for imported equipment, additional costs such as tariffs, value-added tax, transportation insurance, domestic delivery fees, and installation and commissioning costs must also be taken into account. In the feasibility study phase, estimates should also include a provision for price fluctuations and design changes, typically ranging from 8% to 15% of the total cost. This reserve is not an arbitrary addition; it represents a reasonable range derived from statistics on historical project data. It should also be noted that when considering investment data for similar facilities, inflation and differences in construction locations must be taken into account. The budget for a facility built along the coast five years ago differs from that of one built inland today, as labor costs, transportation costs, and supporting facilities are all different; adjustments need to be made for each item. V. Core indicators of financial evaluation Financial evaluation is the core output of a feasibility study report. Several key indicators directly determine the economic viability of a project. Payback period. Total investment divided by annual net profit gives the number of years it will take to recover the investment. The payback period for chemical engineering projects is usually long—due to large investment amounts, long construction periods, and the time required to reach full operational capacity. If the payback period is too long, it indicates that the economic viability of the project is questionable. Internal rate of return. This is the key indicator for measuring a project’s profitability. A project is financially viable only if its internal rate of return is higher than the industry benchmark rate or the rate required by the company. However, the calculation of the internal rate of return relies heavily on assumptions – raw material prices, product selling prices, capacity utilization, and the pace of reaching full production capacity. Any assumed change will result in a corresponding change in the internal rate of return. Sensitivity analysis. Financial evaluation should not consider only a “most likely” scenario. It is necessary to analyze the extent of changes in the project’s economic indicators when the main variables change. If raw material prices increase by 10%, by how much will the internal rate of return decrease? If the product price drops by 10%, how much does the payback period increase? If the operation rate fails to reach the design value, can the economic indicators still hold? This kind of “stress test” helps decision-makers understand a project’s resilience to risks. VI. Dynamic updating of the feasibility study report: The feasibility study report is not a document that is completed in the early stages of a project and then left untouched. As the project progresses, many details will gradually become more precise – pilot plant data will be updated to reflect industrial-scale operation data, market analyses will need to be re-evaluated as market conditions change, and investment estimates will become more accurate as the design progresses. Therefore, a feasibility study report should be a document that can be iteratively updated. Each time a version is updated, the update date, update content, and basis for the update must be indicated. This iterative logic runs through the entire seven-stage model – from the preliminary screening in the innovation incubation stage, to the initial assessment in the feasibility study stage, to the rough estimate in the basic design stage, and to the detailed budget in the detailed design stage – with increasing precision at each stage and increasingly solid foundations. Preview for the next issue: Issue 62 – Proposal Design and Planning Submission: Laying the framework for the installation. The feasibility study report is complete, and the viability of the project has been confirmed. The next step is scheme design – between feasibility study and preliminary design, a spatial framework for the device is first outlined. How to arrange the overall layout, how to divide the functional areas, what the architectural style should be, and what are the procedures for submitting plans for approval. To be continued in the next issue.