UNIVERSITAS INDONESIA

ANAEROBIC GASEOUS BIOFUEL PRODUCTION USING

MICROALGAE BIOMASS

REPORT ASSIGNMENT 5

GROUP 14

GROUP PERSONNEL:

ABBIYAH SAUSAN ULFA 1606951140

A'ISYAH FADHLILLAH 1606951166
ANISA MAULIDA 1606951172
DYAH KUNTI SURYA ANDARI 1606951191
MUFIID FATKHURRAHMAN 1606951216

CHEMICAL ENGINEERING DEPARTMENT

FACULTY OF ENGINEERING
UNIVERSITAS INDONESIA
SEPTEMBER 2018
EXECUTIVE SUMMARY

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 LIST OF FIGURES

In a process and plant design, economy analysis is one of the most

important things to consider. An economic analysis is done to determine the
feasibility to built and develop the plant. By taking the demand of 2.5% of biogas,
this plant will have production capacity of 76.94 tons/year. Then, an economic
analysis is done with the determined capacity. The cost that need to be calculated
is capital investment and operating cost. After calculating both capital investment
and operating cost, further analysis is needed to determine the feasibility.
Before starting to count economic of biogas plant, calcualtion will be based
on several assumptions in order to simplify the calculation. The assumption that is
made are USD currency that will be used in, work days, equipment purchasing
etc. Cost index need to be considered as well before calculating economic
analysis. Cost Index is used to predicting plant equipment price in the year when
the item bought in present time.
A capital investment is required for any industrial process, and
determination of the necessary investment is an important part of a plant-design
project. The total investment for any process consists of fixed-capital investment
for physical equipment and facilities in the plant plus working capital which must
be available to pay salaries. Total equipment cost (bare module cost) in gbiogas
plant is divided into fabricated equipment, such as heat exchanger, vessel, or
photobioreactor; and process machinery such as pump, compressor, or centrifuge.
Total equipment cost that has calculated is $ 1,357,390.48. Supporting equipment
is equipment needed to accelerate production process and facilities. Total
supporting cost that has calculated is $36,130. Civil work cost is the cost to build
the plant which includes building cost, concrete, steel, asphalt and other things.
Total civil work cost that has calculated is $ 356,992. Biogas plant will be build in
area of 2200 m2. The total cost for land is $ 368,115. Electric utility is the
electricity that required to operate the plant. The electricity unist cost is $749. The
market research cost is the cost required to conduct a research in an activity that
directly connected us with the demand and expectation information of our
product’s consumer in Indonesia. The total market research cost is $ 3,681. The

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additional cost that is needed is $ 2,948. The total capital investment of a biogas
plant is $ 3,752,215.
Operational cost is the total expense to run a production process. Operating
cost consist of the expense of manufacturing a product as well as the packaging
and shipping, selling and distribution, and general overhead expenses. Material
cost is very important because production process is depend on the material
supplier. The cost of raw material in the first year is $ 893,627 and annual cost of
raw material is $ 893,627. The cost of total indirect and direct labor is $ 440,750.
Utility costs are costs that used to finance the main necessities of the production
such as water and electricity. Each of water and electricity cost are $ 182,293 and
$ 479,092. Maintenance is required both for factories, offices, and supporting
equipment so it can be used continuously. The total cost of maintenance is $
221,944. The total cost of insurance is $ 56,900. After all of the cost breakdown
from operational cost calculated, the total operational cost per year could be
obtained.
To startup the plant, a large sum of money needed to meet the initial capital.
Thus, the calculation in this scenario is based on the assumption that the plant
would run based on subsidy from the government, and the rest is by investor. The
share capital for investor is 50%, while the rest would be owned by the
government. A profitability analysis is carried out to analyze the plant’s economic
feasibility. The factors to determined economic feasibility of the plant are
Payback Period (PP), Break-Even Point (BEP), Net Present Value (NPV), Return
on Investment (ROI), and Internal Rate of Return (IRR).
By the time, there will be instability that affects plant production, thus
affecting the economic feasibility. This instability happens because of the various
factors. Therefore, the sensitivity analysis needs to be done against some changes
to analyse what variables that can affect the stability of manufacturing process.

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LIST OF TABLES

v
 CHAPTER 1
CAPITAL ESTIMATE
1.1 Calculation Assumption
In counting economic of Biogas Plant, calcualtion will be based on several
assumptions, such as :
 USD currency that will be used in economic analysis is having exchange
rate 1USD= Rp 14,941,00
 There are 330 work days and it is devided itu 2 days per batch.
 The equipment is purchased in 2021
 Duration estimated to complete the plant is 2 year
 The production begin in 2022
 The life time of this plant is 20 years, estimated to operate from 2022 to
2042
 Depreciation will be calculated using declining balance method
 All equipment has its salvage value
 Plant total production is 5242 m3 biogas per year
1.2 Cost Index
The purchased cost of each piece of process equipment may now be
estimated from published cost data or from appropriate manufacturers’ bulletins.
Regardless of the source, the published purchased-cost data must always be
corrected to the current cost index. Most cost data which are available for
immediate use in a preliminary or predesign estimate are based on conditions at
some time in the past. Because prices may change considerably with time due to
changes in economic conditions, some method must be used for updating cost
data applicable at a past date to costs that are representative of conditions at a later
time. This can be done by the use of cost indexes. A cost index is merely an index
value for a given point in time showing the cost at that time relative to a certain
base time. In this economic analysis, Chemical Engineering Cost Index is used to
predicting plant equipment price in the year when the item bought in present time.
The available CEPCI data for 2017 can only be obtained for the range year between
2009-2017. The Table below shows the data for cost index from 2009-2017.

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Table 1. 1 CEPCI Data

Year CEPCI
2009 521.9
2010 550.8
2011 585.7
2012 584.6
2013 567.3
2014 576.1
2015 610.8
2016 624.6

2017 634.8

Chemical equipment cost index is needed as cost index estimation to purchase

equipment for plant process in 2021. This cost index for purchasing year can be
extrapolated from the chart that made of the CEPCI data. The data is plotted into a
chart then the equation can be used to estimate cost index.

CEPCI DATA
700
600
500 y = 11.912x - 23394
R² = 0.8305
400
300
200
100
0
2008 2010 2012 2014 2016 2018

Figure 1. 1 CEPCI Chart

The estimated CEPCI Value can be seen in table below. The index is used to
calculated equivalent cost at present time by multiplying original cost by the ratio
of cost index present value to thecost index value at time basis obtained ( original
cost)

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Table 1. 2 Estimate CEPCI Value

Year CEPCI
2018 644.416
2019 656.328
2020 668.24
2021 680.152
2022 692.064
2023 703.976
2024 715.888
2025 727.8

1.3 Total Capital Investment

A capital investment is required for any industrial process, and
determination of the necessary investment is an important part of a plant-design
project. The total investment for any process consists of fixed-capital investment
for physical equipment and facilities in the plant plus working capital which must
be available to pay salaries, keep raw materials and products on hand, and handle
other special items requiring a direct cash outlay.

Figure 1. 2 Three Diagram Showing Cash Flow for Industrial Operation

The tree-growth concept, depicts a trunk output to start the particular industrial
operation designated as the total capital investment. The capital needed to supply the

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necessary manufacturing and plant facilities is called the fixed-capital investment,

while that necessary for the operation of the plant is termed the working capital. This
total capital investment includes all the funds necessary to get the project underway.
This encompasses the regular manufacturing fixed-capital investment and the
working-capital investment along with the investment required for all necessary
auxiliaries and nonmanufacturing facilities. The sum of the fixed-capital investment
and the working capital is known as the total capital investment. The fixed-capital
portion may be further subdivided into manufacturing fixed capital investment and
non manufacturing fixed-capital investment.
The amount of total capital investment can be estimated using the Guthrie
method. It should be noted that this plant is a grass-root process plant with
equipments inside its building. The estimation is calculated as such:
𝐶𝑇𝐶𝐼=1,18(𝐶𝑇𝐵𝑀+𝐶𝑠𝑖𝑡𝑒+𝐶𝑏𝑢𝑖𝑙𝑑𝑖𝑛𝑔+𝐶𝑜𝑓𝑓𝑠𝑖𝑡𝑒𝑓𝑎𝑐𝑖𝑙𝑖𝑡𝑖𝑒𝑠)+𝐶𝑊𝐶
With:
𝐶𝑇𝐵𝑀 = total bare-module cost
𝐶𝑠𝑖𝑡𝑒 = site development cost (10% 𝐶𝑇𝐵𝑀 as a grass-root plant)
𝐶𝑏𝑢𝑖𝑙𝑑𝑖𝑛𝑔 = building cost
𝐶𝑜𝑓𝑓𝑠𝑖𝑡𝑒𝑓𝑎𝑐𝑖𝑙𝑖𝑡𝑖𝑒𝑠 = offsite facilities (5% 𝐶𝑇𝐵𝑀)
Contingency and contractor fee = 18%.
The above components make up the fixed capital investment. Meanwhile,
𝐶𝑊𝐶 = working capital which makes up for the rest of the total capital investment
and is estimated using the following formula:
𝐶𝑊𝐶=𝑘𝐶𝐹𝐶
with k = 0.05 for a single and simple product and an addition of 0.10 as a
start-up cost from the contractor. In total, k = 0.15 or 15% of the fixed capital
investment.
1.3.1 Total Equipment Cost
Total equipment cost (bare module cost) in green diesel plant is divided into
fabricated equipment, such as heat exchanger, vessel, or photobioreactor; and process
machinery such as pump, compressor, or centrifuge. Fabricated equipment is custom
designed, usually according to the pressure vessel code and other design standards,
for any size and shape that can be shipped. Process machinery is selected from a

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vendor supplied list of standard sizes and often includes a driver, such as an electric
motor. A module contains not only the piece of equipment or machinery, but also all
other materials for installing it (setting it and connecting it to equipment in other
modules), including the piping to and from other modules; the concrete (or other)
foundation; ladders and other steel supporting structures; the instruments, controllers,
lighting. and electrical wiring; insulation; and painting. Also, depending on plant
location and size, some equipment may be housed in process buildings or shelters.
But, because of plant design class deal, piping cost and concrete module will not be
included and will be calculated manually.
To calculate the total bare module cost, FOB of equipment should be
multiplied with bare module factor. Bare- module factors vary among the various
types of fabricated equipment and process machinery, decreasing somewhat with
increasing size. The extent of this variation for ordinary materials of construction
and low to moderate pressures can be seen in table 1.3, which is taken from
Guthrie (1974), based on single units of smaller size, where the factors are as
much as 10% lower for multiple units of the same type.

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 Table 1. 3 Equipment Cost

Year Basis Cost (USD) Bare Module Cost (USD)

Equipment
No Equipment Qty Cost
Code Year
Index in
Price per
Total Price
Cost
Price in 2021
Module Total Bare
Basis piece Index factore Module Cost
year Basis

Heat Exchanger
2 Heat Exchanger HE-100 1 2018 644.416 27,519 27,518.86 680.15 29,044.92 3.17 92,072.39
3 Heat Exchanger HE-101 1 2018 644.416 28,728 28,727.66 680.15 30,320.74 3.17 96,116.76
4 Heat Exchanger HE-102 1 2018 644.416 62,079 62,078.77 680.15 65,521.33 3.17 207,702.63
Reaktor
5 PBR 50 2018 644.416 50.00 2,500.00 680.15 2,638.64 3.05 8,047.84
6 Fermentor 2 2018 644.416 38,798 77,595.80 680.15 81,898.86 1.9 155,607.84
Centrifuge
disk stack
7 1 2018 644.416 101,276 101,275.79 680.15 106,892.02 2.03 216,990.80
centrifuge

Separator

8 Membrane 1 2018 644.416 30,000 30,000.00 680.15 31,663.65 2.32 73,459.66

9 Absorber column 1 2018 644.416 12,000 12,000.00 680.15 12,665.46 4.16 52,688.31
10 stripping column 1 2018 644.416 12,000 12,000.00 680.15 12,665.46 4.16 52,688.31
11 flash tank 1 2018 644.416 3,500 3,500.00 680.15 3,694.09 2.45 9,050.53

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Year Basis Cost (USD) Bare Module Cost (USD)

Equipment
No Equipment Qty Cost
Code Year
Index in
Price per
Total Price
Cost
Price in 2021
Module Total Bare
Basis piece Index factore Module Cost
year Basis

Mixer
Seeding Tank
12 1 2018 644.416 4,000 4,000.00 680.15 4,221.82 1.8 7,599.28
Mixer
13 Make up MDEA 1 2018 644.416 4,000 4,000.00 680.15 4,221.82 1.8 7,599.28
Storage
Nutrient Storage
14 1 2011 585.7 12,500 12,500.00 680.15 14,515.79 1.7 24,676.85
Tank
Amonia Storage
15 1 2011 585.7 10,000 10,000.00 680.15 11,612.63 1.7 19,741.48
Tank
Water Storage
16 2 2018 644.416 502 1,003.08 680.15 1,058.71 2.8 2,964.38
Tank
Utility
17 Clarifier 2 2010 550.8 1,871 3,742.84 680.15 4,621.82 1 4,621.82
18 Filter Tank 1 2016 624.6 2,807 2,807.13 680.15 3,056.80 2.32 7,091.77
19 Ion Exchange 1 2016 634.8 2,807 2,807.13 680.15 3,007.68 2.32 6,977.82
20 Softener Tank 1 2018 644.416 600 600.00 680.15 633.27 2.32 1,469.19
21 Deaerator 1 2018 644.416 10,000 10,000.00 680.15 10,554.55 2.45 25,858.64
23 Boiler 1 2018 644.416 12,000 12,000.00 680.15 12,665.46 2.19 27,737.35

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Year Basis Cost (USD) Bare Module Cost (USD)

Equipment
No Equipment Qty Cost
Code Year
Index in
Price per
Total Price
Cost
Price in 2021
Module Total Bare
Basis piece Index factore Module Cost
year Basis
24 Cooling tower 1 2016 634.8 3,743 3,742.84 680.15 4,010.24 2.17 8,702.22
Compressor
25 Kompresor 1 2018 644.416 59,786 59,785.73 680.15 63,101.14 2.15 135,667.45
Pump
26 centrifugal P-100 1 2018 644.416 1,845 1,844.91 680.15 1,947.22 2.8 5,452.21
27 centrifugal P-101 1 2018 644.416 277 276.58 680.15 291.92 2.8 817.38
28 centrifugal P-102 1 2018 644.416 117 116.71 680.15 123.19 2.8 344.92
29 centrifugal P-103 1 2018 644.416 918 917.83 680.15 968.73 2.8 2,712.45
30 centrifugal P-104 1 2018 644.416 118 117.60 680.15 124.12 2 248.25
31 centrifugal P-105 1 2018 644.416 906 906.26 680.15 956.51 2.8 2,678.24
32 centrifugal P-106 1 2018 644.416 670 670.15 680.15 707.31 2.8 1,980.48
33 centrifugal P-107 1 2018 644.416 6,481 6,481.30 680.15 6,840.72 2 13,681.43
34 centrifugal P-108 1 2018 644.416 506 505.50 680.15 533.53 2.8 1,493.90
35 centrifugal P-109 1 2018 644.416 1,857 1,856.52 680.15 1,959.47 2 3,918.94
36 centrifugal P-110 1 2018 644.416 2,013 2,012.60 680.15 2,124.20 2 4,248.41
37 centrifugal P-111 1 2018 644.416 1,693 1,693.49 680.15 1,787.40 2 3,574.80
38 centrifugal P-112 1 2018 644.416 2,113 2,113.28 680.15 2,230.47 2 4,460.95
39 centrifugal P-113 1 2018 644.416 2,731 2,730.96 680.15 2,882.40 2 5,764.80
40 centrifugal P-114 1 2018 644.416 1,774 1,773.70 680.15 1,872.06 2 3,744.12

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Year Basis Cost (USD) Bare Module Cost (USD)

Equipment
No Equipment Qty Cost
Code Year
Index in
Price per
Total Price
Cost
Price in 2021
Module Total Bare
Basis piece Index factore Module Cost
year Basis
41 centrifugal P-115 1 2018 644.416 23,875 23,874.75 680.15 25,198.72 2 50,397.43
42 centrifugal P-116 1 2018 644.416 861 861.04 680.15 908.79 2 1,817.59
43 centrifugal P-117 1 2018 644.416 2,332 2,331.51 680.15 2,460.80 2 4,921.60

Total Equipment Cost 1,357,390.48

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1.3.2 Supporting Facilities Cost

Supporting equipment is equipment needed to accelerate production process
and facilities. This plant area building consists of production room, laboratory,
office, toilet, etc. The amount of these supporting equipment is determined from
the number of employees and also their needs. Table 1.4 details the supporting
equipment or offsite facilities.
Table 1. 4 Supporting Equipment Cost

Price per Unit Price

No Supporting Equipment Quantity
(Rp) (USD)
1 Air Conditioners Split Type 5 2,500,000 837
2 Control system setup 1 9,400,000 629
3 Bin Canisters 20 50,000 67
4 CCTV Accessories 1 2,000,000 134
5 CCTV Cameras 15 500,000 502
6 Coffee Dispensers 1 1,100,000 74
7 Company Computers 20 4,200,000 5,622
8 Company Vehicles 2 125,000,000 16,732
9 Conference Chairs 14 600,000 562
10 Conference Tables 2 3,000,000 402
11 Cupboards 2 1,500,000 201
12 Employee Lockers 5 7,000,000 2,343
13 Faximilies 2 900,000 120
14 Filing Cabinet 3 1,500,000 301
15 Kitchen Sets 1 2,500,000 167
16 Neon Lamps 30 15,000 30
17 Office Chairs 30 600,000 1,205
18 Office Desks 30 1,000,000 2,008
19 Office Stationeries 30 200,000 402
20 Pantry Utensils 1 1,500,000 100
Printer, Scanner, and
21 2 1,400,000 187
Photocopier Machines
22 Receptionist Desk Sets 1 2,500,000 167
23 Sofas 3 1,500,000 301
24 Telephones 10 120,000 80
25 Televisions 2 1,300,000 174
26 Toilet Sets 2 2,000,000 268
27 Toiletries 3 400,000 80

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Price per Unit Price

No Supporting Equipment Quantity
(Rp) (USD)
29 Wall Clocks 10 60,000 40
30 Water Dispensers 4 269,000 72
31 White Boards 2 89,000 12
32 Dining Table 23
990,000 1,524
33 Dining Chairs 92
34 Laboratory set 2 5,870,000 786
Total 36,130

1.3.3 Controller Cost

For determining the cost of pipes, the type of the pipe has to be known
first. It’s determined by P&ID. Controller is very important for the process so the
spare in case of emergency is needed.
Table 1. 5 Controller Cost

Controller
Total
Price Total Price
Type Qty Spare Price
(USD) (IDR)
(USD)
Level Indicator 5 2 35.00 245.00 3,660,545
Level
Level Transmitter 5 2 120.00 840.00 12,550,440
Flow Indicator 2 1 51.00 153.00 2,285,973
Flow
Flow Transmitter 2 1 120.00 360.00 5,378,760
Pressure Indicator 4 2 51.00 306.00 4,571,946
Pressure
Pressure Transmitter 4 2 101.00 606.00 9,054,246
Temperature
Indicator 10 5 220.00 3,300.00 49,305,300
Temperature
Temperature
Transmitter 10 5 90.00 1,350.00 20,170,350
Total 7,160.00 106,977,560.00

1.3.4 Building and Civil Work Cost

Civil work cost is the cost to build the plant which includes building cost,
concrete, steel, asphalt and other things. The cost is determined by volume of
building and open area. It depends on the assumption and plant layout design that
was made. Table 1.6 further explains the calculation.

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Table 1. 6 Building Area

No. Building Area (m2)

1 Office Building 330
2 Storage Building 400
3 Prayer Room 77
4 Canteen 110
5 Clinic 88
6 Control Room 120
7 Laboratory 110
8 Engineering workshop & Maintenance 220
9 Security Office 9
Total 1464

Table 1. 7 Open Area

No Area Area (m2) Material

1 Process area 10400 Concrete
2 Utility area 400 Concrete
3 Car Parking 400 Asphalt
4 Motor Parking 300 Asphalt
5 Truck Parking 750 Asphalt
6 Green Area 360 Trees, Soil, grass
7 Open Area (road) 6432 Asphalt
Total 19,042
Based on Table 1.6 and 1.7 civil work cost can be determined based on the
basic material and building cost, which shown in Table 1.8
Table 1. 8 Civil Work Cost

Price
Component 2 2
Area (m2) Cost (USD)
Price (IDR/m ) Price (USD/ m )
Building 3000000 201 1464 $ 293,956
Concrete 42750 2.9 10800 $ 30,902
Green Area 20000 1.3 360 $ 482
Asphalt 60000 4.0 7882 $ 31,652
Total $ 356,992

1.3.5 Land Cost

The biogas plant is to be built in Cilegon, therefor its building cost is based
on the prediction of the average land price around Cilegon area. The land cost

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differs every year, its predicted that the price is Rp2,000,000/m2. So, the total cost
for land is shown in Table1.9.
Table 1. 9 Land Cost

Component Area (m²) Price/m2 Total Price (USD)

Land area 2200 2,500,000 $ 368,115

1.3.6 Electricity Cost

Electric utility is the electricity that required to operate the plant. It is
presented in Table 1.10.
Table 1. 10 Electricity Equipment Cost

Price per Unit

Component Needs Qty Total Price USD
(USD)

Lamp (PL-C 36 Watt) 30 2.6 $ 78

Socket Outlet
50 3.5 $ 177
Manufacture
Socket Outlet Office 30 3.5 $ 105
Switch 250 1.3 $ 335
Electric Panel 8 6.7 $ 54
Total $ 749

1.3.7 Market Research and Additional Cost

The market research cost is the cost required to conduct a research in an
activity that directly connected us with the demand and expectation information of
our product’s consumer in Indonesia. The method to do the market research cost
is consulting with some consultant company. Market research analysis is will be
doing once before we begin the production and after some years of production.
The consultant hired in this plant is a reputable local consultant company, that will
use their data to determine the production capacity. Therefore, for market research
analysis around Rp is used. It is shown in Table 1.11.
Table 1. 11 Market Research Cost

No Activity Cost (IDR) Cost USD

1 Survey 5,000,000 $ 335
2 Consultant Services (1st and 2nd year) 50,000,000 $ 3,346
Total Market Research Cost 55,000,000 $ 3,681

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Beside the market research cost, there are some additional cost that will be
included in CAPEX. The cost is based on the Indonesia Law of Industry No 14.
2001, with the additional of local services company such as Telkom for telephone
wire instalment and internet, water and hydrants installation, and licensing, shown
in the Table 1.12.
Table 1. 12 Additional Cost

No Components Description Cost (IDR) Cost (USD)

Brand 7,000,000 $ 469
1 Licensing
Performance Test 2,040,000 $ 137
Internet Network Installation 1,500,000 $ 100
Telephone Installation 1,500,000 $ 100
2 Other Installation
Water Installation 20,000,000 $ 1,339
Hydrants Installation 12,000,000 $ 803
Total Additional Cost 54,040,000 $ 2,948

1.3.8 Total Capital Expanditure

Capital expenditure is the capital investment on the plant. To analyse the
capital investment, the total capital investment should be calculated first. The total
capital investment of a biogas plant is stated as a one-time expense for the design,
construction, and start-up of a new plant. The Total Capital Investment, CTCI, or
CAPEX, consists of equipment group, mass material group, indirect cost, and
other cost.

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 Table 1. 13 Total Capital Investment

Investment Group Component Description Parameter Cost (USD) Total Cost (USD)
Main Equipment Production Process Equipment Calculated
1,357,390
Equipment Offsite Equipments for Utility and Waste Treatment Calculated
Supporting Equipment Office Facilities and Additional Hardwares Calculated 36,130
Control Process Controller and Indicators Calculated 7,160
Materials
Direct Cost Building and Civil Work Concrete, Asphalt and Building Calculated 356,992 2,129,483
Electricity Electricity Installment Calculated 749
Licensing Patent Registration and Performance Testing Calculated 605
Additional Cost
Land Land Cost for Plant Development Calculated 368,115
Installation Installation Cost Calculated 2,343
Contractor Fee Contractor Fee Calculated 28,559
Contingency - 15% TBM 203,609
Indirect Cost 637,637
Market Research Survey and Consultant Service Calculated 3,681
Engineering Expense EPC Fee 29.6% TBM 401,788
TOTAL PERMANENT INVESTMENT ( CTPI) 2,767,120

FIXED CAPITAL COST ( CTPI*1.18) 3,265,202

WORKING CAPITAL COST (CWC) 487,013

TOTAL CAPITAL INVESTMENT(CTCI) 3,752,215

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1.4 Benchmarking
The purpose of doing a benchmarking is to ensure the validity of cost &
investment of this plant, and to provide further visualization of the economic
capability of the plant. In the world, there are still only few and mostly considered
new biogas plants that does production in a significant and accountable quantity.

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 CHAPTER 2
OPERATING COST
2.1 Direct Production Cost
Operational cost is the total expense to run a production process. Operating
cost consist of the expense of manufacturing a product as well as the packaging
and shipping, selling and distribution, and general overhead expenses. The
manufacturing expense will be interpreted to mean those expenses required to
make a product and to ready it for shipment. Unit cost is the cost of an item based
upon either a mass or volume unit. Raw materials, by-products and utility costs
are quoted on these bases. Operational is categorized into fixed operation cost and
variable cost. Fixed operation cost is all the costs that we spent other than
manufacturing cost, such as administrative cost, distribution cost, marketing cost,
etc. Variable expenses vary approximately in direct proportion to the production
rate.
2.1.1 Raw Material Cost
Material cost is very important because production process is depend on the
material supplier. Biogas production plant with production capacity 1721.916 m3
gas methane per year and require large amount of raw material. There are
microalgae, carbon dioxide, water, microorganism and nutrient.
List of raw materials and prices as well as the suppliers required in the
production of bio-asphalt are summarized in the Table 2.1. All of the raw material
required are shipped every week, so the calculation used the amount of material
needed for a week-worth production.

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Table 2. 1 Raw Material Cost

Amount used per Amount Supply Price per
batch (kg) kg Annual Price in first
Material Supplier Note
unit Expanses year
(kg) (+2% stock)
(USD)
Supply per
Chlorella Vulgaris 45180.70458 46084.31868 8.701 - 400,974.60 LIPI
year
Supply per
Carbondioxide 3205.275458 3269.380968 0.669 2,145.29 2,188.19 PT. Air Liquide
year
Carbondioxide for Supply per 20
6.677657205 6.811210349 0.669 147.49 150.44 PT. Air Liquide
make up days
PT. Mada Putra Supply per 20
Amonia for PBR 3676.47825 3750.007815 0.196 23,792.16 24,268.00
Perkasa days
Supply per
Lactoacilus 45.18070458 46.08431868 3.012 44,905.53 45,803.64 LIPI
week
Supply per
Acetobacterium 45.18070458 46.08431868 7.764 115,756.47 118,071.60 LIPI
week
Supply per
Methanobacterium 45.18070458 46.08431868 18.740 279,412.16 285,000.40 LIPI
week
Amonia For PT. Mada Putra Supply per
259.8218333 265.01827 0.196 16,814.25 17,150.54
fermentor Perkasa week
PT. Mada Putra Supply per
MDEA 6.44316 6.5720232 2.998 19.32 19.71
Perkasa year
PT. Mada Putra Supply per
MDEA For make up 0.37370328 0.381177346 2.998 2,959.73 3,018.92
Perkasa week
Total 485,952.39 893,627.11

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2.1.2 Direct and Indirect Labours Salary

The number of workers is determined based on production capacity and the
structure of worker. Wages paid to labors must be over the limit the regional
minimum wage (UMR) in the area Cilegon, West Java province. Value of the
minimum wage in 2019 amounted to Rp 3.913.078 based on Surat Keputusan
(SK) Governor number 561/Kep.318-Huk/2018.
Direct worker costs consist of fixed costs and variable costs. Fixed costs are
fixed-cost throughout the year. Variable costs are amount of bonus that earned by
workers. Some reasons for this bonus as there are allowance for labor costs, such
as religious holidays, special allowances each year, and the cost of overtime. The
amount is 10% of the wages of workers for a year. Table 2.2 shows the direct
labor cost in this biogas plant.
Table 2. 2 Direct Worker Salary

Amount/
Salary/month/ Total Total Salary
Position shift
person ($) Workers /year ($)
(person)
Operator and 303 10 30 109,256
Technician
Production 359 3 9 38,736
Supervisor
Utility 303 2 6 21,851
Operator
Utility 359 1 3 12,912
Supervisor
Total 48 182,756
Total per year
182,756

The total direct workers salary is $ per month and $ per year. There are
three components of remuneration that the company should give to employees:
1. Basic wages (basic income), is the base remuneration (base salary).
2. Fixed allowance, ie payments to workers who carried out regularly and is not
associated with the presence of workers or certain of achievement.
3. Allowances are not fixed, is a payment that is directly or indirectly associated
with the workers be given on an intermittent basis and are paid according to the
time unit that is not the same as the time of payment of basic wages, such as
transport.
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The estimate number of operators is for per shift and to account for three
shifts daily. For this plant, since the process operation is continuous, the operators
should cover the full 24 hours, 7 weeks, 12 month a year. For the basis, it is
decided to make 3 shift operations in direct labor. The cost of indirect works can
be seen in Table 2.3.
Table 2. 3 Indirect Labor Salary

Wage per Total Wage

Department Position Month Amount Cost per Month
(USD) (USD)
President Director 1,724 1 1,724
Stakeholder Secretary of
1,086 1 1,086
President Director
Finance Accounting
Finance 1,086 1 1,086
Manager
Department
Finance Staff 345 3 1,035
Marketing Marketing Manager 1,086 1 1,086
Department Marketing Staff 345 3 1,035
HR Manager 1,086 1 1,086
HRD
Traning Coordinator 310 1 310
Department
HR Staff 345 3 1,035
Production Manager 1,086 1 1,086
Production
Process Engineer 469 2 938
Department
Electrical Engineer 345 1 345
HSE Manager 1,086 1 1,086
HSE
Department Safety Engineer 469 1 469
Research and
Research and Development 1,086 1 1,086
Development Manager
Department Research and
345 3 1,035
Development Staff
Quality Quality Control
1,086 1 1,086
Control Manager
Department Quality Control Staff 359 3 1,076
SCM Manager 345 1 345
General Security 248 5 1,242
Support and
Service Receptionist 248 2 497
Department Cleaning Service
248 5 1,242
and office boy
Clinic Doctor 483 1 483

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Table 2. 4 Indirect Labor Salary (Continued)

Total Indirect Labour Wage per month 21,500

Total Indirect Labour Wage Cost per Year 257,994

Total Indirect and Direct Labor 440,750

2.1.3 Utility
Utility costs are costs that used to finance the main necessities of the
production such as water, electricity, and plant infrastructure. Variable utility
costs are costs for utilities that used for production processes. Those utilities are
such as electricity and fuel for the generator when there is no electricity supply
from PLN or when it is black out. This biogas production plant also has the utility
for water. To calculate the cost of electricity on production process, data of power
needed by each equipment to operate are used. Calculation of energy balance is
done based on the assumption that power needed by each equipment to be
operated in one year.
2.1.3.1 Electricity
Table 2.5 shows the electricity required to operate each equipment in main
process.
Table 2. 5 Electrcity Cost for Main Process
Duration
Power Power
No Equipment Qty process
(kW) (kWh)
(h)
1 Lamp for Photobioreactor 1 12 0.10 1.2000
2 P-100 1 24 1.10 26.4000
3 P-101 1 24 0.50 12.0000
4 C-100 1 24 0.40 9.6000
5 P-102 1 24 2.00 48.0000
6 CEN-100 1 24 2.56 61.4400
7 Fermentor R-101 1 24 0.32 7.5984
8 P-103 1 24 0.10 2.4000
9 P-104 1 24 0.25 6.0000
10 P-105 1 24 0.47 11.2800
11 P-106 1 24 0.50 12.0000
12 Fermentor R-102 1 24 1.50 36.0000
13 P-107 1 24 0.50 12.0000
14 C-101 1 24 10.00 240.0000
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Duration
Power Power
No Equipment Qty process
(kW) (kWh)
(h)
15 P-108 1 24 0.02 0.4800
16 P-109 1 24 0.50 12.0000
17 P-111 1 24 0.09 2.1600
18 P-112 1 24 0.50 12.0000
19 P-113 1 24 1.50 36.0000
20 P-114 1 24 0.02 0.4800
21 P-115 1 24 0.02 0.4800
22 P-116 1 24 0.02 0.4800
23 P-117 1 24 0.02 0.4800
TOTAL 550.48
TOTAL electicity requirement a year 181,657.87

Table 2.6 shows the electricity required to operate each equipment in supporting
equipment.
Table 2. 6 Electricity Cost for Supporting Equipment
Power Operation Total Power Per
Supporting Equipment Qty
(kW) time (h) Day (kWh)
Air Conditioner 5 0.2 24 24
CCTV 15 0.04 24 14.4
Dispenser 1 0.08 24 1.92
Faximiles 2 0.0005 10 0.01
Neon lamp 30 0.4 10 120
Photocopy, scanner, and
2 0.1 10 2
printer machine
Televisions 2 0.4 5 4
UV lamps 4 0.015 10 0.6
Total per day 167
Total per year 55,087

Table 2.7 shows the total electricity required in biogas plant

Table 2. 7 Total Electricity Cost
Total Requirement/year
No Requirement Unit
(kWh)
1 Process and utility unit 181,657.87
2 Other units 55,087
TOTAL 236,744.77
Group I-3/TM (Above 200kWh) Electricity Cost USD 0.077/kWh
Total Electricity Cost (per year) 182,293.47
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2.1.3.2 Water
Water is needed to produce steam which provide heat for the process.
Table 2.8 shows the cost needed for water. Water cost for industry based on price
list from PDAM Cilegon is Rp. 9,500.00 or $ 0.65/m3.
Table 2. 8 Water for Utility Cost

Total Total Annual

Amount Cost
No Requirement Amount Amount Cost
(m3/day) (USD/m3)
(m3/day) (m3/year) (USD)
Water for boiler/steam
generator
a. Boiler water
1 259.24 648.10 213,872.67 139017.23
requirement
b. Make up
388.86
water for boiler
Water for cooler
a. Cooling water
2 540.60 553.33 182,598.90 118689.28
requirement
b. Make up 0.65
12.73
water for cooler
Process water
a. Input to
829
photobioreactor
3 b. Input to 1032.10 340594 221386.30
15
fermentor
c. Make up
water for 188
MDEA
Total 2233.53 737,065.89 0.65 479,092.83

2.2 Maintenance
Maintenance can be defined as an activity to maintain condition of the
facilities or plant equipment and made repairs or replacement that necessary in
order to obtain a satisfactory state of production operations, as well as planned
before. Maintenance is required both for factories, offices, and supporting
equipment so it can be used continuously, and optimal production quality can be
assured.
Maintenance process is performed with the three parts, i.e major equipments
maintenance, plant and office building maintenance, and supporting equipment
maintenance. Maintenance cost consists of cost for maintaining and repairing
equipment. It is usually takes 10% of total investment cost production (Ir. Yuriadi
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Kusuma, M.Sc "Effective Maintenance Management"). This can be calculated by

the next equation. Table 2.9 shows the total cost for plant maintenance.
𝑻𝑪𝑰
𝑴𝒂𝒊𝒏𝒕𝒆𝒏𝒂𝒏𝒄𝒆 𝒄𝒐𝒔𝒕 = 𝟏𝟎% 𝒙
𝒍𝒊𝒇𝒆𝒕𝒊𝒎𝒆

Table 2. 9 Maintenance Cost

Maintenance Cost (USD)
Main Equipment 203,609
Supporting Equipment 1,084
Plant and Building 7,251
Total Maintenance Cost 221,944

2.3 Insurance
This plant calculates the insurance for building and plant, raw materials and
the workers (labors), as shown in Table 2.10.
Table 2. 10 Insurance Cost
Insurance Percentage Source Price of Price of
Type (%) Source Insurance ($)
Worker 3.70% salary for worker 440,750 16,308
Plant 2.27% cost of equipment 1,357,390 30,840
Raw 2% raw material cost
485,952 9,719
Material
Total of Insurance 56,900

2.4 Operating Cost Breakdown

After all of the cost breakdown from operational cost calculated, the total
operational cost per year could be obtained. The total operational cost per year is
shown in the Table 2.11.
Table 2. 11 Total Operating Cost

Component Cost (USD)

Raw material 485,952
Utility 661,386
Direct labor 182,756
Indirect labor 257,994
Maintenance 211,944
Total Operational and Maintenance Cost per Year 1,856,933

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and the percentage pie chart could be seen in Figure 2.1

Figure 2. 1 Operational Cost Breakdown

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CHAPTER 3
ECONOMIC EVALUATION

3.1 Biogas Production Capacity

Demand for biomethane in Indonesia is X m3 , while the supply ranged

3.2 Product Pricing

The biogas selling price is determined by setting a competitive price to other
biogas product in current market. Based on a
Therefore, from the calculation of total capital investment, operational cost,
and expected sales revenue, the biogasselling price is determined to be Rp X per
kg, which is lower than the current market price, thus being competitive and
profitable at the same time. The following Table 3.1 shows the product pricing:
Gambar 3. 1 Product Pricing Calculation
Value/Year
Sales Volume (m3) 5,242
Operational Cost ($) 1,856,033
Capital Investment (CAPEX) ($) 3,742,506
Total Cost (COGS) (Rp) 100.00% 5,599,439
Expected π (Rp) 28.89% 1,617,678
Expected Sales Revenues ($) 7,217,116
Gross Value ($/kg) 1,377
Net Value (VAT 10%) ($) 1,515

3.3 Cash Flow

To determine the cash flow, data of production capacity is needed where
every year, there are the same amount of the production capacity, product price,
operating cost, investment and salvage, depreciation of main equipment,
supporting equipment, and building depreciation.
3.3.1 Equity
To startup the plant, a large sum of money needed to meet the initial capital.
Thus, the calculation in this scenario is based on the assumption that the plant
would run based on subsidy from the government, and the rest is by investor. The
share capital for investor is 50%, while the rest would be owned by the

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government. The calculation of payment to the investor could be seen below in

Table 3.2.

3.3.2 Depreciation
3.3.3 Before and After-Tax Cash Flow
3.4 Profitability Analysis
A profitability analysis is carried out to analyze the plant’s economic
feasibility. The factors to determined economic feasibility of the plant are
Payback Period (PP), Break-Even Point (BEP), Net Present Value (NPV), Return
on Investment (ROI), and Internal Rate of Return (IRR).
3.4.1 Payback Periode
Payback period is the time needed for cash inflow to be equivalent with cash
outflow. Payback period mainly indicates project’s liquidity rather than
profitability (Sullivan, et al. 2015). Payback period can be calculated from the
cumulative cash flow. The payback period of this project is X years

3.4.2 Break Even Point

For a single project analysis, breakeven point is the point where the annual
values from production offsets the initial investment. It also define the amount of
product that must be sold to the customer with a determined price to offset the
cost and obtain profit.
The breakeven point can be determined from the payback period, and it is
obtained by interpolating the number of sold product relative to the year. The
breakeven point of this project is X kg.

3.4.3 Net Present Value (NPV)

Net Present Value (NPV) shows the net benefits received by a project over
the life of the project at a certain interest rate. NPV can also be interpreted as the
present value of the cash flows generated by the investment. In calculating the
NPV is necessary to determine the relevant interest rate.

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A project can be counted as feasible if the NPV > 0, which means the
project is profitable or provide benefits if implemented. If NPV < 0, the project is
not eligible to run because it does not generate profit.

3.4.4 Internal Rate of Return (IRR)

Internal Rate of Return (IRR) is a measure of the maximum interest rate
paid on a project (percentage). In other words, the IRR is the interest rate when
NPV = 0 so that the formula used to calculate the IRR is:

Where r is the value of IRR and TCI is Total Capital Investment. The
calculation of IRR is done by using Microsoft Excel where it already has the
function to calculate the IRR in economic analysis. If Microsoft Excel cannot
calculate the negative IRR value, modified IRR formula is used. Excel's MIRR
function has this form:=MIRR (values, finance_rate, reinvest_rate).
The values argument is the same as the values argument for the IRR. It is an array
or cell reference to the cash flows for which the MIRR is to be calculated.
The finance_rate argument is the annual interest rate that would be paid to cover
any negative cash flows incurred during the life of the investment.
The reinvest_rate argument is the interest rate that would be earned on cash that
the investment generates during its life.

3.5 Sensitivity Analysis

By the time, there will be instability that affects plant production, thus
affecting the economic feasibility. This instability happens because of the various
factors. Therefore, the sensitivity analysis needs to be done against some changes
to analyse what variables that can affect the stability of manufacturing process.
The changes of some variables will affect the product price. Product price is
one of the essential variable that can influence the stability of production because
it will decide the income of an industry. There are many causes that can impact
the product price such as

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3.5.1 Selling Price Fluctuation

3.5.2 Operational Cost Changes
3.5.3 Civil Work Fluctuation
3.5.4 Sensitivity Graph
3.5.5 Strategy

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CHAPTER 4
CONCLUSION


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REFERENCES

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