Case Handout: Bharat Oil

BHARAT OIL COMPANY

In 1950, the Bharat Oil Company, an independent refinery, had difficulty in the disposal of sulphuric acid after it had been used to purify kerosene and gasoline. The company was disposing of used acid by returning it to the manufacturers. The problem became acute whenever the acid manufacturers were unable to accept return shipments of the impregnated acid. Other refineries that had experienced the same problem constructed plants to reclaim the acid. A method of purifying the acid had been perfected. This raised the question of reclaiming the waste product again. For the past decade, the company converted (annually) about 500,000 barrels of Mexican crude petroleum into gasoline, kerosene, and various grades of oil and asphalt. The annual consumption of acid for conversion purposes was 1,800 metric tons (MT). This acid was bought as needed and shipped in tank cars to the plant where it was stored until used. If gasoline and kerosene were to be marketed as motor and fuel oil, it was essential to treat them with sulphuric acid in order to remove the impurities. A definite quantity of acid was pumped into an agitator filled with either gasoline or kerosene and the two liquids were mixed. The quality, strength of the acid and the length of time required for mixing depended upon the type of oil that was being treated. After the agitation, the acid was allowed to settle and was drawn off into storage tanks. In this condition it was of no value to the company as it could not be sold. Neither could it be emptied into sewers or dumped into the ocean. In order to dispose of it, the sludge acid was pumped into tank cars and returned to the acid manufacturers. The total weight of sludge returned equaled that of the acid used. The freight on the sludge was prepaid by Bharat Oil Company, and averaged Rs.250 per month. Aside from this freight cost, there was no other charge for the disposal of the sludge. At the manufacturers plant it was atomized in a hot coke fire, and the products of combustion (mainly sulphur dioxide) were sent lead chambers to be regenerated into sulphuric acid. The acid reclaimed by this process was not returned to the Bharat Oil Company as it could not be used for treating petroleum compounds because of the detrimental effect of the nitrogen it contained. By returning impure sulphuric acid to the chemical manufacturer, the company avoided the necessity of maintaining a conversion unit, which was a public nuisance because of the offensive odors that it generated. This method of disposal, however, was not entirely satisfactory to Bharat Oil Company. The acid had value when reclaimed. More important, the manufacturers of the acid were often unable to accept the old acid immediately because of limited storage facilities. Moreover, when there was a shortage of old tank cars, it was necessary to use new ones, which had to be re-cleaned at considerable expense to Bharat Oil before they could be used again for new acid. Freight shipments were often slow, and by returning the sludge acid to the manufacturers the company did not control any part of its acid supply, as it could have done had it operated a reclaiming plant in its refinery. Investigations indicated that no better arrangement could be made with any other chemical manufacturer. When it had last considered the installation of a reclaiming plant, the management of Bharat Oil had decided against it on account of the offensive odors which the process

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Case Handout: Bharat Oil

generated, and because at that time the chemical process did not reconvert the acid into a form usable in the refinery. However, a new method of purifying acid was perfected which overcame the problem of obnoxious gases, and left no nitrogen in the reconverted product. The cost of a reclaiming unit of this kind with a capacity of processing 10 tons of sludge per day was Rs.30,000; the unit would have a life of about 20 years; and little floor space was required. The reclaiming operation would require a few unskilled labour, with a minimum of supervision by the companys chemists. The total cost of regenerated acid (exclusive of depreciation charge on the reclaiming unit) was estimated as follows (for varying rates of operation): Percentage of capacity 30% 50% 100% Costs per ton Rs.9.00 Rs.8.00 Rs.7.00

The reclaiming unit would yield as usable acid 75% of the sludge so that with one of these units, the company could meet 75% of its total requirements. Sulphuric acid prices paid by Bharat Oil Company are listed in Exhibit 1. Exhibit 1 BHARAT OIL COMPANY Prices Paid for Sulphuric Acid Year 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 Monthly Average Price Per MT (FOB) Rs.15.50 Rs.15.50 Rs.16.04 Rs.16.50 Rs.16.50 Rs.16.50 Rs.16.50 Rs.16.50 Rs.16.50 Rs.16.50 Rs.16.50 Rs.16.50 Rs.16.50 Rs.15.53 Rs.17.00 *****************************

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