PDD Iffco Sfc Kota

7/29/2019 PDD Iffco Sfc Kota

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PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03

CDM Executive Board

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CLEAN DEVELOPMENT MECHANISM

PROJECT DESIGN DOCUMENT FORM (CDM-PDD)

Version 03 - in effect as of: 28 July 2006

CONTENTS

A. General description of project activity

B. Application of a baseline and monitoring methodology

C. Duration of the project activity / crediting period

D. Environmental impacts

E. Stakeholders comments

ANNEXES

Annex 1: Contact information on participants in the project activity

Annex 2: Information regarding public funding

Annex 3: Baseline information

Annex 4: Monitoring plan


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SECTION A. General description of project activity

A.1 Title of the project activity:

>>

Feedstock conversion from Naphtha to Natural Gas (NG) at SFC-Kota Urea complex

Version 03

26/03/10

A.2. Description of the project activity:

>>Introduction:

The project activity is being implemented at Shriram Fertilisers and Chemicals Plant (SFC), a

unit of DCM Shriram Consolidated Ltd. (DSCL). DCM Shriram Consolidated Ltd., is located in

India manufacturing Urea, PVC, Caustic Soda, Liquid Chlorine, Hydrochloric Acid, Sugar,

UPVC Window frames, Speciality PVC Compounds, Cement and Power production.

SFCs Ammonia Urea complex is located at Kota in the state of Rajasthan, India. The plant was

commissioned in February 1969 by Chiyoda Chemical Engineering and Construction Co. of

Japan with installed plant capacities of 450 TPD of Ammonia and 700 TPD of Urea. It was

designed to use straight run naphtha as feedstock for producing ammonia as well as fuel for

supplying thermal energy to Reformer furnace and other pre-heaters. The plant was expanded in1974 and the capacity of Ammonia plant was increased to 600 TPD while the capacity of Urea

plant was increased to 1000 TPD.

Brief Process Description of Operation with Naphtha Feedstock:

The brief description of process while operating on naphtha feedstock is as under. More detailed

process description of Ammonia plant along-with schematic process flow diagram is enclosed as

Annexure -1.

Naphtha from suppliers is pre-fractionated and divided into two parts. Feed naphtha is de-

sulphurised to bring down the sulphur to less than 0.2 ppm maximum in Primary and Final

Sulphur Removal units. Fuel Naphtha is used as fuel for firing in Furnace. De-sulphurisedNaphtha is mixed with steam and fed to Primary Reformer where it is converted to Hydrogen

rich gas by steam reforming reaction. This is followed by Secondary Reforming with Process air

to maximize conversion of hydrocarbon to hydrogen. Carbon Monoxide is also formed during

steam reforming and is converted to Carbon dioxide in High Temperature and Low Temperature

shift reactors. Further, Carbon dioxide present in gas is removed in CO2 Removal Unit by

absorption in hot potassium carbonate solution in CO2 Absorber. Absorbed CO2 is removed from

solution by steam in Regenerator.

CO2 free gas from Absorber is introduced to Methanator where residual CO & CO2 are converted

to Methane. Synthesis gas is compressed and introduced in Ammonia Synthesis loop. Ammonia


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synthesis takes place in Iron catalyst. Synthesised ammonia is separated by condensation at low

temperatures and condensed ammonia is stored in storage tanks.

CO2 gas from Regenerator is compressed and reacts with Ammonia in Urea Reactors to convert

partially into Urea. The unconverted Ammonia and CO2 are recovered and recycled. The Urea is

separated from aqueous Urea solution in Crystallisers, centrifuges and sent to the top of the

Prilling Tower where they are melted and sprayed from top to get urea prills for bagging.

Purpose of Project Activity:

In Ammonia plant, hydrogen and CO2 are obtained from the processing of hydrocarbon feed. The

hydrogen is used for producing Ammonia, which further reacts with CO2, generated in Ammoniaplant, to produce Urea in Urea plant. As the CHR i.e. Carbon to Hydrogen ratio ( = Kg of Carbon

/ Kg of Hydrogen) of Naphtha is high at 5.45 (please see Annexure 2 for detailed calculation),

the CO2 produced in the process is more than that required for converting Ammonia to Urea.

This excess CO2 generated remains unutilized and is emitted to the atmosphere.

The purpose of the project is to minimize the emission of CO2 to atmosphere by

substituting naphtha with Natural gas as feedstock. The CHR of Natural Gas is 3.011(please

see Annexure 2 for detailed calculation) which implies that it has less carbon and more

hydrogen compared to Naphtha. The switchover to NG feedstock results in lower CO 2 generation

which is just sufficient enough to meet CO2 requirement for the Urea production and thus avoids

release of excess CO2 into the atmosphere.

NG also replaces Naphtha fuel which is required for supplying thermal energy in furnaces. Fuel

Naphtha is replaced with Fuel NG and hydrogen rich gas thereby reducing CO2 emissions with

flue gas from stack into the atmosphere. Thus the project activity primarily aims at significantly

reducing GHG emissions by changing the feedstock from Naphtha to Natural gas.

SFC has modified its Ammonia plant in order to use Natural gas in place of Naphtha and thus to

reduce GHG emissions through significant modifications in the Reforming section and other

areas of Ammonia Plant.

Contribution of Project Activity to Sustainable Development:

Apart from the reduction of GHGs, the project contributes in propagating the sustainable

development of the Host Country (India) as it meets the sustainable development indicators

stipulated by Government of India in the interim approval guidelines of CDM projects are as

under:

Contribution to social well being


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The project activity required significant modifications at the project site for laying down the

infrastructure for NG and at the equipment suppliers end, thereby generating direct and indirect

employment opportunities. During the construction phase, more than 18,690 man days of local

labour was utilised at site for project activities. (Please Annexure -3 for break up). SFC decided

to recruit manpower from the local communities and provide them the requisite training to

monitor and operate the modified plant. Seventeen plant operators (old and new) were trained by

external party (M/s Emerson Ltd India.) for the operation of new and modified equipment in

separate classes as well as during on the job training. (Please see Annexure -4 a giving name of

the course, faculty etc). Four Plant and Engineering Supervisors were sent to Emerson Head

Office, for advanced training on shutdown and control systems (See Annexure -4 b). Beside,

large numbers of small jobs were awarded to local contractors and service providers thus also

indirectly contributing to local well being.

In the absence of the project activity no employment would have occurred during modification

and operational phase.

Contribution to Economic well being

Production and sale of Fertilizers in India is regulated by Government of India and the fertilizer

companies in India are being provided with subsidies by the Government to ensure that the

farmers get the fertilizer at a affordable price thereby promoting development of agriculture

sector in India. Replacement of Naphtha to NG as feedstock for Urea manufacture will reduce

the subsidy payment bill of Government of India. The saved subsidy amount could be utilized for

various other social development schemes and activities of the government thereby leading to

economic well being.

Contribution to Environment well being

The project activity helps in direction of global climate change by reducing the generation of

CO2. Also, the Natural gas has Sulphur content of 10 ppmw ( max) whereas Naphtha has Sulphur

content of 50 ~ 100 ppmw. Use of Natural gas will significantly reduce generation and release of

Sulphur Dioxide (SO2) gas into atmosphere. Thus, the use of Natural Gas is significantly

beneficial for the environment and most preferred fuel at present from environment

conservational point of view. The project will also lead to marginal reduction generation of solid

waste like spent Zinc oxide catalyst due to lower sulphur content of gas

Contribution to Technological well being

Internationally, Urea manufacturing industry is mostly based on Natural gas as the feed stock.

However, most of the old Fertilizer plants installed before 1980s in India continue to use liquid

fuels like Naphtha and Fuel oil for Urea production. SFC Kota is the first old generation plant in

the private sector and second plant in India to opt for this technological up-gradation. (Letter

from Fertiliser Association of India to this effect is enclosed as Annexure -5).


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Besides leading to a significant reduction in emission of CO2 to atmosphere, Feed switchover

shall also result in improvement of plant technology. This will also encourage other Indian and

foreign Fertilizer plants to switch towards the cleaner and safer technology thus contribute

towards fight against global warming. Following technological improvements are possible with

use of NG:

1. There are lesser processing and feedstock purification steps required in case of NG. PreDesulphurisation Section can be stopped, thus simplifying the operation and making it

safe.

2. NG also reduces chances of catalyst poisoning, carbon letdown on catalysts as its sulfur

content and carbon content are low compared to Naphtha, thus improving the plantreliability.

3. There is 24 hours reduction in the time taken to start up the plant thus resulting in lowerunproductive consumption.

4. Operational problems like frequent choking of Naphtha vaporizers, Reformer Burners iseliminated.

5. Less risk of catalyst damage during emergency shutdowns as NG remains as gas anddoes not condense as naphtha does on cooling.

Apart from the above direct benefits, the project shall also lead to availability of Natural gas in

the industrial city of Kota, the site where the project is located. This shall result in use of NG for

transportation sector, as industrial fuel and substitute domestic cooking gas. This shall thuscontribute to use of cleaner fuel within the city of Kota and also spur the economic activity in

this area.

Thus it is ensured that the project activity is in-line with the sustainable development criteria

given by the GOI and has positive contribution towards all the stipulated indicators. The Host

Country Approval of the project has also been received on 3rd April 2007. ( Please see Annexure

-6 )

A.3. Project participants:

>>

Name of Party involved

(*)

((host) indicates a host

Party)

Private and/or public entity (ies)

project participants (*) (as

applicable)

Kindly indicate if the Party

involved wishes to be

considered as project

participant (Yes/No)

India (host) Private entity:

Shriram Fertilisers & Chemicals, a

division of DCM Shriram Consolidated

Limited

No


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(*) In accordance with the CDM modalities and procedures, at the time of making the CDM-PDD public

at the stage of validation, a Party involved may or may not have provided its approval. At the time of

requesting registration, the approval by the Party(ies) involved is required.

DCM Shriram Consolidated Ltd. is the project owner. The official contact for the CDM project

activity is DCM Shriram Consolidated Limited.

A.4. Technical description of the project activity:

A.4.1. Location of the project activity:

>>

A.4.1.1. Host Party(ies):

>>

India

A.4.1.2. Region/State/Province etc.:

>>

Rajasthan

A.4.1.3. City/Town/Community etc:

>>

Kota

A.4.1.4. Detail of physical location, including information allowing the unique identification

of this project activity:

>>

The address of the Shriram Fertilisers & Chemicals (SFC) is:

Shriram Fertilisers & Chemicals

DCM Shriram Consolidated Limited

Shriram Nagar,

Kota, Rajasthan

India-324004Website: www.dscl.com

Project is proposed at existing site at Shriram Fertilizers & Chemicals within plant area of 791

acres and is located at Kota in Rajasthan. Kota is located at 257 m from mean sea level (MSL)

and at latitude of 25o 8' (N) and longitude of 75o 54' (E).

Kota is located at a distance of 472 km from New Delhi and 900 Km from Mumbai on the New

Delhi - Mumbai broad gauge railway route. It is located at 235 km from Jaipur on National

Highway No 12 from Jaipur to Jabalpur and is a distance of 950 km from Kandla Sea Port.

( Please see next pagre for the map)


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F


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A.4.2. Category (ies) of project activity:

>>

The project activity corresponds to Sectoral Scope 5, Chemical Industry of the UNFCCC

Sectoral scope list for project activities.

A.4.3. Technology to be employed by the project activity:

>>

The Feed Switchover activity at SFC Kota plant involves major modification in Reforming

section, Feed treatment section of the plant and also in the instrumentation system of the plant.The technology for these modifications has been provided by M/s Haldor Topsoe A/s, Denmark

who is the world leader in Reforming technology and also the original designers of the plant in

1969. M/s HTAS were awarded the contract to provide the license to transfer and to use their

proprietary technology for steam reforming for feedstock changeover project. They also supplied

the proprietary catalysts for use within Primary Reformer and also provided Basic Engineering

Package and the Detailed Engineering package for the project. The project was commissioned

under their supervision as well.

L&T Chiyoda Limited (LTC) was awarded the contract for doing the detailed engineering for the

project. LTC is a consultancy joint venture between Ms/ L&T, a leading Indian engineering firm

and M/s Chiyoda, leading international engineering company based in Japan.

As the project involves substitution in raw material only, the changes were limited to upstream

equipment of the front end only and no changes were done Synthesis section or in Urea Plant.

The process flow diagram for both Naphtha as feed (pre project activity) and NG as feed (post

project activity) is attached herewith as Annexure 7. The description of modifications / additions

carried out in the plant to enable use of Natural Gas is summarised as under:

Natural Gas shall be supplied through an 8 dia pipeline from GAILs (Gas Authority of India

Ltd, the gas supplier) metering station up to the battery limit of SGC plant. Part of gas is used for

making Ammonia ( called Feed NG) and is heated up to 3800

C using newly installed direct fired,

NG Preheater. NG preheater comprises of radiant section, convection section and is heated by

burning fuel NG. The heated Process NG at 380 oC is then passed through Cobalt Molybdenum

catalyst in existing Hydrogenator reactor where sulphur in gas gets converted into HydrogenSulphide. This Hydrogen Sulphide is then catalytically separated from NG in existing Zinc Oxide

reactor for final sulphur removal. The gas from Zinc Oxide reactor is mixed with steam and sent

to new Steam Naphtha coil where it is heated upto 520oC in Convection section of the Primary

Reformer. The gas is then fed to two new inlet headers of Primary Reformers. From the Inlet

header, it is distributed to individual Primary Reformer tubes through existing Inlet hairpins and

new Reformer catalyst flange assembly.


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Heat is supplied to Primary Reformer through burners installed in side walls. These primary

reformer burners, which were earlier designed to operate with Naphtha, were replaced with new

side fired burners capable of burning NG as well. In order to heat NG and other surplus,

hydrogen rich fuel stream recycled from downstream equipment, two steam-heated shell and tube

type heat exchangers have been installed. Fuel at about 180 deg C is then fed to Reformer

burners along with hot combustion air.

Burner of another downstream fired heater (Start Up heater) was also replaced as the existing

burner was capable of using only Naphtha. Similarly, two small Mist Separators were also

installed as part of the project to remove any water entrained in gas mixture being fed to NG

Preheater.

The Flue gas, collected from flue gas duct, is sent to new Induced Draft fan from where it goesinto atmosphere through a flue gas stack. In the primary reformer convection section, the existing

BFW coil has been are replaced with new combustion Air pre-heater with associated FD fan.

New piping, ducts and control valves have also been installed to transport gases from various

equipment.

In view of the significant changes in the existing instrumentation control schemes arising out of

NG feedstock conversion, the new control valves, instrumentation and safety interlocks have

been installed. Emergency Shutdown system has been changed to incorporate the new

requirements and integrate with the existing control system.

As part of the project, existing equipment have been modified or replaced only when they could

not meet the new requirement under changed plant operating conditions when gas is in use. All

the equipment installed / modified as part of the project continuously remains in line during

operation and there is not a single stand by equipment installed as part of this project.

Major equipment of Hydro-desulphurisation Section which shall not be in service while Natural

Gas is being used are Crude Naphtha pumps, HDS pumps, Fuel Naphtha Pumps, No1 and No2

Pre-fractionators, Hydrogen Recycle Gas Compressor, HPS preheater, HDS Reactor, various heat

exchangers, Naphtha Tanks etc. It is proposed to keep these equipment as standby for any

emergency use. NDT tests and life assessment of these equipment and the past trends of their

health indicate that the condition of these equipment is satisfactory and can continue to be

operated if required in future. (Chartered Engineers certificate certifying that these equipment

have residual life of 25 years is enclosed as Annexure 7). These equipment have been stopped

only because they are not required while using Natural Gas in the plant and shall be operated in

future if naphtha is processed.


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A.4.4 Estimated amount of emission reductions over the chosen crediting period:

>>

The project activity had chosen the fixed crediting period of 10 years and for the whole crediting

life is aimed to produce cumulative emissions reductions of70,994 tCO2e.(The crediting periodfor the project activity starts from 2010 and ends in 2020.)

Year Annual estimation of emission reduction in

tonnes of CO2e

2010 70,994

2011 70,994

2012 70,9942013 70,994

2014 70,994

2015 70,994

2016 70,994

2017 70,994

2018 70,994

2019 70,994

Total estimated reductions (tonnes CO2e) 70,994

Total number of crediting years 10

Annual average over the crediting period of

estimated reductions (tonnes of CO2e)

709,940

A.4.5. Public funding of the project activity:

>>

The project has received no public funding from parties included in Annex-1 thus avoiding the

possibility of diversion of ODA.


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SECTION B. Application of a baseline and monitoring methodology

B.1. Title and reference of the approved baseline and monitoring methodology applied

to the project activity:

>>

The project activity follows an approved baseline and monitoring methodology titled as

AM0050 Feed switch in integrated Ammonia-urea manufacturing industry Version 2.1,

dated 14 May 2008,which is the revision of proposed methodology NM0165- Feed switchover

from Naphtha to Natural Gas (NG) by Phulpur plant of IFFCO. The methodology has been

approved with some modification by the Executive Board in their 31

st

meeting in Bonn,Germany.

.

Additionality is to be determined by using the Combined tool to identify the baseline

scenario and demonstrate additionality, version 02.1 15 December 2006.

B.2.Justification of the choice of the methodology and why it is applicable to the project

activity:

>>

The project activity meets all the conditions applicable to feed switch project activities in

existing integrated Ammonia-Urea Manufacturing facilities where feed switchover is taking

place from feedstock having higher Carbon to Hydrogen Ratio (CHR) such as Naphtha and Fueloil, to feedstock having lower CHR (e.g. Natural Gas).

The point wise information regarding the applicability conditions ofAM0050 Feed switch in

integrated Ammonia-urea manufacturing industryVersion 2.1,14 May 2008are as under:

Integrated ammonia urea manufacturing industries that involve partial or total

switching from naphtha to natural gas, as feed stock with a lower carbon to hydrogen

ratio (CHR) than that indicated in the baseline

The project activity shall be carried out in integrated Ammonia Urea manufacturing unit of

Shriram Fertilisers & Chemicals, Kota in which entire Ammonia is converted into Urea.

Project involves the total switching from Naphtha to Natural Gas. Naphtha is being used as

feedstock in the base line and has carbon to hydrogen ratio (CHR) of 5.45. It is proposed to

modify the existing plant to switch the feedstock to Natural gas which has the CHR of 3.011

ie lower than that of Naphtha in baseline. The detailed calculation of CHR Ratio for both

Naptha and NG is attached as Annexure 2. The provision for using naphtha shall be retained

for use in case of supply disruptions / emergencies. Naphtha consumption, if any, shall be

monitored and emission reduction shall be monitored accordingly.


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Integrated ammonia Urea manufacturing plants that are not constrained by local

regulations and/or programs from using naphtha as feed, neither obliged to use natural

gas (NG) and/or liquefied natural gas (LNG) as feed

As per the local regulatory compliance requirements, there is no need to switch from

Naphtha to Natural gas, and this project activity is not the result of meeting any regulatory

norms. The SFC plant is free to choose any feed stock and this decision is not governed by

any mandatory regulation of local government.

Project activities that do not result in the increase of the production capacity

The production capacity of SFCs Urea plant were assessed and fixed by Govt of India in

1.4.2000 at 379,000 MT / year (Please see Annexure -1 of the enclosed Annexure 8). The pre

and post project shall continue to remain same ie 379,000 Mt / yr. The project activity

involves modification in only one section of the plant and no additional equipment has been

installed in other sections of Ammonia plant and in any section of the Urea plant. The

production capacity of the other sections in Ammonia Plant and of Urea plant essentially

remains same. This is corroborated by the production plan received from government of

India indicating that production capacity during 2003-04 (before project conceptualisation),

2006-07 (during project implementation) and 2008-09 (after project implementation)

remains same at 379,000 MT of urea (See Annexure 9 for production targets of these years

given by Govt. of India)

This is corroborated by the copy of data for 2004 05, 05-06, 06-07 and 07-08 given to

Fertiliser Industry Coordination Committee (FICC, a Govt. of India body responsible for

Fertiliser subsidy disbursals), enclosed as Annexure -10. This is further corroborated by copy

of Schedules to Accounts section of Annual Report of the company for above years

indicating actual production. (Please see Annexure -11).

Natural gas is sufficiently available in the region or country, e.g future natural gas based

capacity, additions comparable in size to the project activity, are not constrained by the

use of natural gas in the project activity

The supply of NG in India is not constrained and is available for Fertiliser plants. The

demand is partly being met by gas supplies from Bombay High and from Gulf of Cambay

(called PMT Gas). It is also being procured as LNG through a mix of long term contracts and

spot gas purchases from international markets. Gas is mainly coming from Middle East

which has the largest gas reserves in the world. Also, large indigenous gas fields are being

developed to ensure that Natural gas is available to Urea plants in India in future. M/s

Reliance Industries has discovered huge gas reserves in KG D6 field in off shore of Krishna-

Godavari river basin, Bay of Bengal in 2003 and its pipeline for with and is laying pipeline to

supply about 40 MMSCMD of gas to Indian customers. This indigenous gas is available to

customers from Mar 2009 on a continuous basis. This is expected to increase the gas supply

in country from 125 MMSCMD to 165 MMSCMD thus leading to increased availability.

Gas supply from KG basin shall be ramped upto 80 MMSCMD in subsequent two years.


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SFC requirement of natural gas is 0.65 MMSCMD which is relatively very small in

comparison.

M/s Petronet LNG Ltd, India have also expanded their plant at Dahej by increasing its

capacity from 7.5 Mil MT / yr to 10 Mil. MT/Yr, thereby supplying additional 10

MMSCMD. This has been completed in 2009. LNG Terminal of 5 Million MT ( 20

MMSCMD) capacity in Kochi is also expected to be commissioned by 2012. In future,

additional gas may also be available in India through Iran-Pakistan-India pipeline under

discussion Thus indigenous and imported gas availability is expected drastically to increase

in future fulfil the demand. (Extract from AT Kearney presentation of gas sector, Oct 2008

enclosed as Annexure -12).

Govt. of India has laid down guidelines for gas allocation explicitly stating that gas should be

allocated to the existing fertiliser plants on priority basis. Top management of GAIL (Gas

Authority of India Ltd., our natural gas supplier and Indian Govt undertaking which is also

largest gas transporter in India) has assured that SFC shall be supplied with Reliance gas.

The gas supplies have been started in Sep 2007 and from May 2009, plant has been using

100% natural gas.

Thus, with theexpected growth of gas supply in India, availability of NG is not expected to

be a constraint for SFC or for any other gas user in India.

Integrated ammonia urea manufacturing plants in which the carbon in the naphtha

feed used prior to the implementation of the project activity is in excess of that needed in

the urea production process. The excess carbon in the feed is emitted as CO2 to the

atmosphere

The project activity is being implemented in integrated Ammonia Urea manufacturing plant

which was using Naphtha as feedstock in baseline. Due to high CHR of Naphtha, CO2

generation was in excess of the requirement. The excess CO2 was being emitted to

atmosphere. The project aims to reduce the excess CO2 emissions by changing Naphtha

feedstock (with the higher C/H ratio of 5.45) to NG (with lower C/H ratio of 3.01 as

explained in Annexure 2). The detailed carbon balance (attached as Annexure 13) indicates

that excess CO2 being vented earlier with Naphtha gets eliminated when operating on

Natural Gas.

The Integrated ammonia urea manufacturing plant is an existing plant with a historical

operation of at least 3 years prior to the implementation of the project activity

SFC Kota was commissioned in 1969 and expanded in 1974 (Copy of Govt. license dated

1974 attached as Annexure 14).The facility has successful operational history of 35 years

before implementation of project activity. The extract of companys Annual Report giving

production details for last three years is attached as Annexure 11.


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Project activities that do not result in changes in the production process (e.g as a result of

product change) other than the feed switch

The project activity is intended only to switch the feed for the production of Urea and

ammonia. The process of Urea production remains same, the input for Urea plant remains

same ie Ammonia and Carbon Dioxide. Perusal of the production data from companys

annual report (Annexure-11) indicates no new / additional product capable of being produced

in integrated Ammonia Urea plant has been added during last 3 years.

If the use of natural gas in project activity results in a situation where the natural gasdoes not have sufficient carbon to meet the requirement of urea production, then the

balance CO2 required for use in urea production is:

a) Either recovered with the use of a Carbon Dioxide Recovery Plant (CDR) fromCO2 in flue gases emitted from an existing source of fossil fuel combustion for

energy purposes within the project boundary. The CO2 in the flue gases would

have been emitted into the atmosphere in the absence of the project activity;

or

b) generated by using adequate quantities of natural gas for the production ofrequired amount of CO2 needed for Urea production. The CO2 emissions

occurring from the use of natural gas feed stock for the Urea production shouldbe lower than the CO2 emissions from Naphtha feed stock for same Urea

production

The project activity ensures sufficient carbon availability to meet requirement of Urea plant

when using natural gas as feedstock by using adequate quantities of natural gas. During the

design engineering for the project, process designers, M/s Haldor Topsoe, Denmark,

calculated that the equipment are capable of processing more natural gas than that required

for ammonia. This results in generation of the sufficient carbon dioxide required for

production of Urea. The excess hydrogen generated through this method is recycled back to

the Primary Reformer and is used as fuel in place of natural gas. Also, heat requirement of

primary reformer which was earlier being met by carbon rich fuel is now partly being met by

hydrogen rich fuel thereby reducing CO2 from the flue gases. Thus carbon emissions inproject case become lower than the baseline case. This method is a widely used method for

converting from Naphtha to natural gas and avoids using costly equipment for recovery of

Carbon Dioxide from flue gas and is recommended by our process licensor M/s Haldor

Topsoe, Denmark plant retrofits (See Annexure 15).

As may be seen from Carbon Balance (Annexure 13) and from the CER calculations, the

carbon emissions from baseline case are higher compared to project case thus meeting the

above conditions.


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The source of thermal energy for processing the feed is the combustion of fossil fuels in

boilers both in the baseline scenario as well as in the project activity

The thermal energy in form of steam and electricity is generated from coal based power plant

in baseline case. In the project case, this shall continue. The project activity only aims to

switch over to the feedstock for carbon and hydrogen and no modifications / additions have

been done in utility side.

Prior to the implementation of the project activity, no natural gas has been used in the

integrated ammonia urea manufacturing plant,

There were not any use of NG before the implementation of project activity in this Ammonia

/ Urea integrated plant. The natural gas supplies started to the Fertiliser plant in Sept 2007.

The correspondence between M/s SFC, BPCL (the gas suppliers) and GAIL (gas

transporters) indicating the date of commissioning of gas metering station skid and the start

of gas supplies is attached as Annexure 16. The perusal of raw material consumption

statement in last three years Annual Reports is attached as Annexure 11.

The quantity of steam and electricity required for the ammonia production process is

either not affected with the use of naphtha and natural gas i.e. it is the same with the use

of naphtha and natural gas or is lower in case of Natural Gas when compared toNaphtha.

The project involves replacement of feedstock of the Ammonia Plant from Naphtha to

Natural Gas. Such major changes in plant result in variation in utility consumption. In case of

SFC, the feedstock conversion has resulted in lowering of steam and electricity consumption

per ton of Ammonia produced. This is evident from the graphs and the monthly data from

2004 onwards enclosed in Annexure 17. The monthly average 36 Kg/cm2g Steam

consumption has reduced from 0.485 Ton / Ton Ammonia ( avg for period Apr 2004 Aug

2007, 100% Naphtha period) to 0.0382 Ton / Ton Ammonia ( May 09 Jan 10). Similarly,

power has reduced from 910 kWh / Ton Ammonia ( avg for period Apr 2004 Aug 2007,

100% Naphtha period) to 855 kWh / Ton Ammonia ( May 09 Jan 10). From this, we may

observe that both 36 Kg/cm2g steam consumption and power consumption has reduced afterchangeover to NG. The above reduction in utility consumption has resulted in reduction of

CO2 emissions but same has not been considered in the CER calculations for the project,

making them more conservative.

B.3. Description of the sources and gases included in the project boundary

The definition of project boundary states that the project boundary shall encompass all

anthropogenic emissions by sources of GHGs under control of project participant that are


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significant and reasonably attributable to the CDM project activity. The project boundary for this

CDM activity shall encompass all the sections of the Ammonia-Urea manufacturing process.

The methodology does not take into account the emission arising from the use of fuel in the

utility boilers and the electrical energy generation since the steam and electrical energy

requirement would be the same or lower for the same production output. The associated

emissions would also essentially be the same or lower in the project activity as compared to the

baseline emissions. Thus for simplification, emissions arising from these activities have been

excluded from the project boundary. The other emissions (CH4, N2O) remain the same or lower

in the project boundary so they are excluded from baseline and project activity.

As the Primary Reformer of the plant has sufficient capacity and can supply the adequate CO2for conversion to Ammonia, CDR plant is not required and therefore not included in project

boundary.

Leakage in the project activity due to Methane emissions from Natural gas production and the

emissions in pipeline during the transport and distribution is also considered.

Emissions sources included in or excluded from the project boundary:

Source Gas Included? Justification

Baseline

Processing of

feed

CO2 Yes

Main emission source. CO2 is

produced in the reforming of the

feed and is partially recovered for

use in the production of urea. CO2in excess of required amount is

released to the atmosphere

CH4 No

Negligible fugitive CH4 emissions

may occur during the processing of

the feed and products. These

emissions (if any) would beessentially the same as in the

project activity. Therefore, they are

excluded for simplification

N2O No Not applicable.


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Fuel used in

furnaces

CO2 Yes

Main emission source are flue gases

due to the combustion of fossil fuel

to provide thermal energy for feed

treatment (sulphur removal in

Hydro desulphurisation pre-heater

and primary desulphurization unit)

and the syn-gas production

(Reforming).

CH4 No These emissions (if any) would be

essentially the same as in the


excluded for simplificationN2O No These emissions (if any) would be

essentially the same as in the


excluded for simplification

Fuel used for

Steam

Requirement

CO2 No

Utility requirements are expected to

remain same as in project case as

production remains same. The

related emissions from utility

production shall remain same or be

higher compared to the project

scenario. Thus these have been

excluded for simplification and for

being conservative

CH4 No

These emissions ( if any) are

expected to be the same or higher

as compared to the project scenario.

Thus these have been excluded for

simplification and for being

conservative

N2O No These emissions (if any) are



Thus these have been excluded forsimplification and for being

conservative

Electricity

Requirement

CO2 No

These emissions (if any) are





conservative


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CH4 No

These emissions (if any) are





conservative

N2O No These emissions (if any) are





conservative

Source Gas Included? Justification

ProjectActivity

Processing of

feed

CO2 Yes

Main emission source. CO2 is

produced in the reforming of the

feed and is recovered for use in the

production of urea.

CH4 No

Negligible fugitive CH4 emissions


the feed. These emissions (if any)

would be essentially the same as in

the baseline activity. Therefore,they are excluded for

simplification.

N2O No Not applicable.

Fuel used in

furnaces

CO2 Yes

Main emission source due to the

combustion of fossil fuels. The

project activity will result in lower

thermal energy required, as sulphur

is negligible in NG/LNG.

CH4 No Negligible fugitive CH4 emissions


the feed. These emissions (if any)

would be essentially the same as in

the baseline activity. Therefore,

they are excluded for

simplification.

N2O No Excluded for simplification, this is

conservative.


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Fuel used for

Steam

Requirement

CO2 No

These emissions are expected to be

the same or lower as compared to

the baseline scenario. Excluded for


conservative.

CH4 No


the same or lower as compared to

the baseline scenario. Excluded for


conservative.

N2O No These emissions are expected to besame or lower as compared to the

baseline scenario. Excluded for


conservative.

Electricity

Requirement

CO2 No


same or lower as compared to the



conservative.

CH4 No





conservative.

N2O No These emissions are expected to be




conservative.

Energy

Consumed by

CDR plant

CO2 No No energy is consumed as CDR is

not required and hence not installed

CH4 No No energy is consumed as CDR is

not required and hence not installedN2O No No energy is consumed as CDR is

not required and hence not installed

The project boundary can be depicted as following:


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Feed

Feed treatment(Sulphur removal )

Syn-gas production(Reforming )

Syn

-

gas purification

Synthesis loop

Ammonia

Urea production

Urea

Thermal energy

Air

Steam

Electrical energy

Excess CO2 letout to atmosphere

CO2

Flue gas

Project Boundary

Flue gases

ExcessHydrogen Rich Gas


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B.4. Description of how the baseline scenario is identified and description of the

identified baseline scenario:

>>

The Baseline Scenario has been identified using the Combined tool to identify the baseline

scenario and demonstrate additionality, version 02.2 26th Aug 2008 developed by the

Methodology Panel and approved by the CDM Executive Board in its 28th

meeting. The same

tool is also used for demonstrating the additionality of the project. The choice of tool is as per the

approved methodology AM 0050 being followed for the project.

As per AM 0050 Methodology, the following steps have been used for the above purpose:

1. Identification of alternative scenarios.a. Sub-Step a : Identifying alternative scenarios to the proposed project activityb. Sub-Step b : Ensuring consistency with mandatory applicable laws and

regulations

2. Investment Analysis using Step 3 ofCombined tool to identify the baseline scenarioand demonstrate additionality, version 02.2 26

thAug 2008

3. Barrier Analysis ( Although not required as per AM 0050, however, still carried out forbetter understanding)

a. Sub-step a : Technical Barriersb. Sub0step b : Lack of prevailing practice

4. Common Practice Analysis

The various alternative scenarios to the CDM project activity have been identified

Alternative 1: The continuation of current practice, i.e. usage of naphtha alone as feedstock for

the production of urea, resulting in CO2 surpluses that are released to the atmosphere.

Alternative 2: Partial substitution of naphtha with NG/LNG so as to reduce the CO 2 surpluses

released to atmosphere for similar output of urea.

Alternative 3:Complete switchover from Naphtha to NG/LNG resulting in the reduction ofCO2 surpluses and equivalent emissions for similar output of urea.

Alternative 4:Usage of naphtha as feed and production of CO2 surpluses, but with capture of

the CO2 surpluses, which would otherwise be released to the atmosphere, for its use in

manufacture of other applications or products.

Alternative 1 - Continuation of current practice, i.e. usage of naphtha alone as feed for the

production of urea, resulting in CO2 surpluses that are released to the atmospherehas been

taken as the most plausible baseline scenario. Kindly refer subsequent section B.5 for the


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detailed procedure for arriving at the attractiveness of the Alternative 1 over the other

alternatives.

B.5. Description of how the anthropogenic emissions of GHG by sources are reduced

below those that would have occurred in the absence of the registered CDM project activity

(assessment and demonstration of additionality):

>>

The methodology requires project proponent to test additionality on the basis ofCombined tool

to identify the baseline scenario and demonstrate additionality, version 02.2 26th

Aug 2008

developed by the Methodology Panel and approved by the CDM Executive Board in its 28 th

meeting. The following

Step 1: Identification of alternatives to the project activities:

Step 1(a) : Define alternative scenarios to the proposed CDM activity

The various alternatives to the CDM project activity, identified are as under:

Alternative 1: The continuation of current practice, i.e. usage of naphtha alone as feedstock for

the production of urea, resulting in CO2 surpluses that are released to the atmosphere.

This alternative practice is presently being followed at SFC Kota. No modifications and

consequently, no investments would be required to continue the use of naphtha. Hence no

reduction in CO2 emissions or energy savings is possible.

Alternative 2: Partial substitution of naphtha with NG/LNG so as to reduce the CO2 surpluses


SFC Kota can partially switchover to NG feed and thereby reduce surplus CO2 emissions to the

atmosphere while maintaining the same Urea production. However, CO2 emission shall partly

continue as in Alternative-1. Also, significant modifications and addition of new equipment

would anyway be required in the plant for using Natural Gas / LNG in place of naphtha for

which the plant is originally designed for. This alternative will therefore require significantinvestment similar to that required for full NG / LNG conversion while the reduction in CO2

emissions will not be high.

Alternative 3: Complete switchover from Naphtha to NG/LNG resulting in the reduction of CO2

surpluses and equivalent emissions for similar output of urea.

This alternative could eliminate the emission of surplus CO2 and also reduce CO2 emission from

flue gases. This would require significant modifications and addition of new equipment in the

plant as the plant is originally designed for processing naphtha feedstock. Thus significant

investment shall be required for this alternative.


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Alternative 4: Usage of naphtha as feed and production of CO2 surpluses, but with capture of

the CO2 surpluses, which would otherwise be released to the atmosphere, for its use in

manufacture of other applications or products.

Alternative 4 cannot be a probable baseline scenario as this is not a general industry practice.

Surplus CO2 contains traces of Potassium Carbonate, Di Ethanol Amine, Vanadium Pentoxide

which are hazardous and cannot be used for general industrial manufacturing. There are no

facilities within the company where the surplus CO2 can be used and no product is being

manufactured by company which can use surplus CO2 for its manufacture other than Urea (please

see Annexure 11 giving the list of products from Annual Report of the company ). This indicates

that CO2 surplus cannot be used in any other application within the plant. Hence Alternative 4

has been excluded from further analysis.

Step 1(b):Consistency with mandatory law and regulations

Alternative -1 is the continuation of the current practice and is fully consistent with mandatory

laws and regulations. Similarly, all the above mentioned alternatives are in compliance with all

legal and regulatory requirements of India and do not contravene any law of the land.


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Step 2: Investment Analysis

Investment Analysis has been carried out for following alternatives as under:

Alternative 1: The continuation of current practice

As the above case represents the continuation of the current practice, there shall be no investment

for this case. Also there shall be no reduction in CO2 emissions and no energy savings which

arise on account of change in the feedstock form Naphtha to LNG; hence there shall be no

savings. Thus IRR for this Alternative shall be zero.

Alternative 2 & Alternative 3:

The assumptions made for investment analysis for Alternative 2 & 3 are as under:

1. Annual production of urea has been taken as 379,000 MT / Yr. This has been based on thecapacity assessed and fixed by the Government of India (Kindly refer Annexure -1 of

Annexure 8). This has been assumed constant as no changes are being made in any other

section of Ammonia Plant and in urea Plant which can lead to increase in capacity.

2. Existing Energy Consumption of the Urea plant ( in terms of Mkcal/ MT urea) has beentaken as 7.847 Mkcal / MT. This is as per the energy fixed by Government of India from

their evaluation of the plant energy consumption data and based on which the subsidy

payments for Urea productions are calculated. (Please see http://www.fert.nic.in/docs/Pre-

set_energy_norms.doc for the policy, enclosed as Annexure -17).

3. Energy saving arising out of feedstock conversion has been considered as 0.027 Mkcal / MTUrea. This is based on the comparison of the energy consumption of the Process Flow

Diagrams in the base case with naphtha feedstock and in case with natural gas feedstock,

prepared by M/s Haldor Topsoe Denmark, during the design engineering work of the project.

The comparison, is enclosed as Annexure 18)

4. The benefit of cost differential between naphtha and NG feedstock has been excluded from

IRR analysis due to the prevailing policy of Government of India regarding the calculation ofsubsidy payment and the energy saving in the Indian Urea plants. The relevant features of

the Fertilizer Policy are the following:

In order to provide urea to the farmers at an affordable price and promote agricultural

growth, the Government of India (GOI) calculates production cost of urea (including raw

materials and fuel cost) for urea plants based on the Group Concession Scheme (GCS).

Group Concession Scheme (GCS) was introduced from 1st

April, 2003 vide circular dated

30th January, 2003 replacing erstwhile Retention Pricing Scheme. Under GCS, the fertilizer

plants are grouped according to type of feed/fuel used, technology and vintage. The subsidy

is reimbursed to plant according to feed used, technology and vintage. ( Source :

http://www.fert.nic.in/pricepolicyurea.asp ,)


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Under GCS the production cost of Urea is termed as concession rate. In order to provide

Urea to the farmers at affordable price, GOI has fixed the sales price of Urea and all urea

manufacturers have to sell Urea at this notified price. The difference between the actual

production cost of Urea (concession rate) and notified sales price of Urea is reimbursed by

government as fertiliser subsidy. This subsidy is determined ex-post based on cost data

submitted by the urea plant, and is subject to pre-defined auditing and calculation procedures

by Government of India.

The concession rate of Urea for a plant is fixed based on vintage and type of feed/fuel used,

as per the GOI Circular No. FICC/CE/22/2003/164 dated 28th

May, 2003. The energy cost

component of Concession rate for making urea is calculated as product of the cost of energyused and energy consumption / MT urea. The energy cost component of the concession rate

for natural gas feedstock is lower than the naphtha due to the lower price of natural gas as

compared to naphtha, while the energy consumption remains almost same in case of

feedstock conversion. Thus, in case of NG feed, the Concession rate received from

Government by the manufacturer reduces to the extent of new energy price based on NG and

the benefit of reduction of energy price from naphtha to NG is not available to manufacturer.

Any reduction in concession rate of urea would thus be reducing the subsidy outgo of

Government of India only. SFC is not getting any benefits due to the differential cost of

Naphtha and Natural Gas. Hence in investment analysis the differential cost of Naphtha and

Natural Gas is not considered.

The actual cost of inputs which is submitted to GOI is certified statement of third party

financial auditor. GOI reviews the submitted statement of actual cost of inputs and

accordingly fixes the revised concession price of Urea. GOI submits documents to SFC

confirming the revision of concession rates based on escalation/de-escalation statements

submitted by SFC.

5. Operating costs for each feed .

Under the GCS Policy, in case the actual energy consumption of the plant is lower than the

normative energy consumption fixed by the government ( 7.847 Mkcal / MT in case of SFC

Kota, see Annexure 17), the benefit of energy saving between the norm and actual

consumption shall be passed on to manufacturer as incentive for energy efficient operation.

This benefit due to energy efficiency was reimbursed to the fertilizer plant based on the basic

cost (purchase cost excluding tax, levy, transportation etc) of the cheapest fuel used in the

plant. For example, if a plant conserves energy and saves naphtha fuel, reimbursement of

energy cost benefit would be based on basic cost of the cheapest fuel used in the plant (say

coal). So the reimbursement was not based on naphtha fuel, but based on coal fuel cost.

Hence, in case of SFCs Feed switch project, the cost savings due to avoidance of energy

required for Naphtha handling is calculated based on lowest cost fuel used in SFC Kota i.e.

coal. This is taken as Rs 1442 / MT (basic cost of coal excl Royalty, cess, taxes etc, incurred


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in 2004 05) with wt. average calorific value of 4298 kcal / kg (See Annexure 19 for

verified copy of the statement submitted to Govt. of India substantiating the same)

(Reference: Policy on Energy norms, raw material mix and mechanism for providing

escalation/de-escalation in prices of inputs for urea units during Stage-II of the New Pricing

Scheme, Source: http://fert.nic.in/docs/Pre-set_energy_norms.doc ).

Further, the operational efficiency including energy efficiency arising due to conversion to

NG/LNG will not be mopped by the Govt. for a period on the basis of energy efficiency and

financial returns subject to a maximum of five years as per the GOI Circular No.

12019/11/2003-PP (3) dated January 29th, 2004. regarding treatment existing non-gas based

urea units converting NLNG feedstockfuel.doc.(http://www.fert.nic.in/docs/Policy_treatment_existing_non-

gas_based_urea_units_converting_NGLNG_feedstockfuel.doc)

Thus the benefit on account of energy saving due to feedstock conversion has been taken into

account only for five years in the IRR calculations.

6. Lifetime of the project has been considered at 20 years, while the benefit from CDMrevenue has been taken for 10 years only.

7. Depreciation rate has been considered as 25% as applicable for Plant and Machinery underIncome Tax Act of India for year 2004-05

8. Salvage value of the equipment has been considered as 10% of the total investment at theend of 20 years lifetime as per the accounting practices followed in India

9. Income Tax rate has been taken as 35.875% as per Income Tax Act of India

10. The financial indicator chosen is the internal rate of return of the project (IRR) 1. This hasbeen compared with the cost of financing which has been taken from the Prime Lending

Rate (PLR) in India (the rate at which banks are willing to lend at) which is conservatively

estimated at 10.5%. PLRs are available in Reserve bank of India ( Indias Central bank)

online data base ( www.rbi.org.in) and during the period from Sep 04 till Mar 05 were in

range from 10.25 ~ 10.75. Please annexure 20 for the data.

11.The investment for the project has been taken as Rs 360 Million. The broad break-up of theinvestment is as under.

DO


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S.No Item Value ( Rs / Million)

1 FD Fan Assembly 16.24

2 ID Fan Assembly 17.82

3 NG Preheater 81.06

4 Steam Air Preheater 4.72

5 Primary and Secondary Fuel Gas Heaters 30.20

6 Steam NG Coil 49.40

7 Structure, Ducting & Accessories 45.11

8 Reformer Burner & Accessories 39.37

9 Start- Up Burner 0.82

10 Primary Reformer Catalyst 4.59

11 Hydrogen Drain Separator 0.19

12 Instrument & Control Valves 8.08

13 Combustion Air Preheater 20.8

14 Flue Gas Stack 12.58

15 Transformer 2.39

16 DCS 27.48

17 Computer 0.21

Total 360.87

For partial conversion ie 50% reduction in CERs by 50% reduction in NG, it has beenestimated to be Rs 240 Million, using 6/10 rule for equipment cost estimation (a standard

chemical engineering rule described in Annexure 21).

12.Annual increase in the cost of coal has been considered as 12% based on the CAGR forprevious 3 years ie 2001-02, 2002-03, 2003-04. ( Se Annexure - 22) Higher inflation rate

shall lead to higher future coal costs projections which leads to higher energy savings for

the project. Thus, higher inflation rate is more conservative in case of evaluating IRR

without CDM benefits.

13.Maintenance charges have been considered as Rs 0.5 Million / year for full conversion,estimated based on the experience of the plant personnel with the new equipment installed.

Break up enclosed as Annexure 22. For partial conversion, it has been reduced in

proportion to the investment and considered as Rs 0.33 Million corresponding to investment

of Rs 240 Million.

14.The exchange rate has been considered as Rs 56.55 / Euro (Average for 2004-05, sourceReserve Bank of India website). Sale price of CER has been considered as Euro 13 / CER

(average of Euro 10 ~ 15 / T CO2 price expected in future). The IRR analysis has been

checked for +/- 10% sensitivity analysis to CER price and exchange rates to identify the

impact of the changes.


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15.Only 90.5% of CDM revenue has been considered for the project balance 7.5% has beentaken as fees for the consultant and 2% for the adaptation fees. Issue fees of 13,420 Euros

have been considered.

Discussion on results of Investment Analysis:

Based on above assumptions, IRR has been calculated for partial conversion to RLNG / NG and

for full conversion to RLNG/NG. This has been based on the capital expenditure associated with

the project, revenues due to energy saving and the sale of CERs and is attached as Annexure -23

and Annexure -24.

From the calculations, it can be seen that the IRR for the various alternatives is as under:

IRR without CDM

Benefit)

IRR with CDM Benefit

Alternative -1 ie Continuation of

current practice

0 0

Alternative -2 ie partial

changeover of NG /R-LNG

-7.7 7.2

Alternative -3 ie full changeover

of NG /R-LNG

-7.6 12.4

The alternative scenario 1 ie continuation of current practice does not call for any of the

investment as the plant shall continue to operate as in current condition. Alternative -2 and

Alternative -3 require investment to incorporate the proposed modifications but as the savings

are not proportionate, they shall not be gainfully used and shall give negative return, resulting in

uneconomical deployment of capital. Thus, it may be observed that Alternative 1 is the

financially most attractive scenario. Under these conditions, operation of plant as per the existing

practice represents the only logical and feasible mode of operation and is thus chosen as Base

Case scenario for this project.

From the above table, it may be observed that the internal rate of return for Alternate -2 andAlternate -3 is around 7.7% to -7.6% which makes these projects unviable. However, when the

returns from CDM activity are included in the cash flows, IRR rises to 12.4% for full conversion

case while it remains 7.2% for partial conversion. This demonstrates that the projects are heavily

dependent on CDM revenues for their sustained feasibility, without which they are unviable and

may not have been implemented at all.

Evaluation of Alternative -2 and Alternative -3 indicate that IRR for Alternative -3 is higher than

the benchmark IRR ( 10.5%) chosen above. Thus Alternative -3 ie complete conversion is the

only feasible alternative while Alternative -2 ( ie Partial conversion) is not economically feasible

due to its IRR at 7.2% being significantly lower than the benchmark IRR of 10.5%. This is due to


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the incremental capital investment from partial to complete conversion being lower while the

benefits from full conversion being proportionately higher.

To summarise the above, we conclude as under:

1. The Alternative -1 ie the continuation of existing practice is the financially most viablealternative (while excluding CDM revenue).

2. Both Alternative -2 and Alternative-3, ie partial and full conversion are unviable projectswith negative IRR of -7.7% and -7.6% respectively and do not qualify for

implementation on their own.

3. IRR of Alternative -3 improves to 12.4% and the project becomes viable only whenCDM benefits are included in project cash flows.

In order to confirm the above finding and identify the impact of the 5 critical parameters on the

economics of project activity, the Sensitivity analysis has been carried out and the results are as

under:

1. Change in CER price + 10%2. Change in Euro to Rupee exchange rate + 10%3. Change in investment by + 10%4. Change in energy saving by + 10%5. Change in coal price by + 10%

IRR Without CDM ( %) With CDM ( %)

- 10% Increase in CER price -7.59 14.30

- 10% Decrease in CER price -7.59 10.43

- 10% Increase in Euro Conversion Rate -7.59 15.13

- 10% Decrease in Euro Conversion Rate -7.59 10.46

- 10% Increase in Investment -7.59 10.56

- 10% Decrease in Investment -7.58 14.57

- 10% Increase in Energy Saving -7.52 12.51

- 10% Decrease in Energy Saving -7.65 12.28

- 10% Increase in Coal cost -7.53 13.46

- 10% Decrease in Coal cost -7.65 12.28

It can seen from the above table that even after the variation of + 10% the IRR value is well

above the benchmark value of 10.5% for all cases. Thus, the project activity under CDM

revenues remains viable under normal business situations.

Step 2: Barrier Analysis


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Sub-Step 2a : Identify barriers that would prevent the implementation of type of the proposed

project activity.

Technology barriers

The factors which contribute to technology barriers for the project are as under:

1. Retrofit of Natural Gas reforming technology in a 35 year old, 1969 vintage Ammoniaplant originally designed for Naphtha steam reforming of much smaller capacity can lead

to substantial loss of production. The factors which can lead to high risk in retrofitting

the new technology are :

Uncertainty in predicting / simulating performance of existing equipment with new

feedstock

Incorrect assessment of the equipment capacity with new NG technology

Problems with retrofitting, installing new equipment within old constrained plant

layout.

Non existent factor of safety / design margins/ margins of error in old plants already

operating beyond their rated capacity etc.

These can cause very significant loss of Urea production due to plant breakdowns while

commissioning of the plant during start up and in the operation.

2. Extensive modifications in the plant and addition of new equipment require plant to beshut down for extended period for making the desired changes in the plant. Alternately, it

becomes necessary to complete most of the project implementation work (including

welding, cutting, at heights) within plant operating with hazardous substances like

naphtha, hydrogen, ammonia etc. This requires highest standards of work safety and

project implementation controls. Otherwise, a prolonged shutdown for hooking up the

project or any accident during pre shutdown preparatory work can lead to substantial loss

of production and consequent loss of revenue.

3. In order to operate the plant with natural gas, it is necessary to install new emergency

shutdown systems and control systems. These have to be integrated with existingemergency and control systems. Existing staff, which is trained to operate naphtha based

equipment with existing emergency and control systems need to be trained thoroughly

for the new conditions. Any mis-operation can lead to very significant loss of production

as well as unsafe operating conditions.

4. There are only two reliable technology suppliers for Ammonia Plant in world, ie M/s

Haldor Topsoe, Denmark and M/s KBR, USA. They hold proprietary technology, patents

for this design of Ammonia plants. SFC Kota is heavily dependent on the technology

supplier for smooth running of the plant and the perceived risk associated with

unfamiliar technology is too high to encourage the project proponent to come up with

such capital intensive project activity.


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Lack of Prevailing Practices

Factors which contribute to the lack of prevailing practices are as under:

1. Of the 31 Urea plants installed in India, 11 Urea plants are of vintage and technology

similar to SFC Kota and were designed to process Naphtha or Fuel oil as feedstock.

None of these plants had converted from original feedstock to natural gas during the

project conceptualisation and design stages of SFCs Feedstock conversion project. Thus

there were no prevailing practices in India at the time of project conceptualisation and

design

2. Concurrent to the project conceptualisation by SFC Kota, IFFCO Phulpur, Fertiliser plant

in North India had also taken up the project for conversion from naphtha to natural gas.

However, the process steps / equipment of IFFCO Phulpur are very different from SFC

Kota. The shortfall in CO2 is envisaged to be made up in case of SFC Kota by loading up

the Primary Reformer whereas in case of IFFCO, this is achieved by installation of CO2

Recovery ( CDR) plant. Thus design philosophy adopted for the projects is different

leading to significantly different design approaches and plant equipment.

4. The novel instrumentation and process control systems have been imported andimplemented for the first time in the Fertiliser industry in India. To reduce the costs of

instrumentation, Fieldbus technology was installed in Indian Fertiliser plant for the first

time. The technology and hardware was supplied by M/s Emerson Singapore and India.

To control the steam flow and other process plants which change depending upon the

extent of NG and Naphtha in the feedstock, a control scheme was proposed by the

process licensor, M/s Haldor Topsoe, Denmark. This is the first and only example of

implementation of such instrumentation scheme for measurement and control of S/C

Ratio in Indian Fertiliser Plant.

5. The detailed engineering work was awarded to M/s L&T Chiyoda. The project was firstlarge scale project for the party in Fertiliser field. Thus a willing risk was undertaken by

the company to work with a fresh partner in the field and further develop technical

capability of domestic design consultant firm.

6. SFC completed the project by undertaking its own project management and procurementwork against LSTK approach generally adopted by the industry. Construction was

carried out by the existing parties selected by SFC, this helped in reducing the overall

costs.

Thus, SFC- Kota is the first Urea plant in the private sector within India which has taken

the initiative to change the feed stock of their existing plant from the original design of

Naptha feedstock to NG/LNG. The approach adopted to make up for the shortfall of CO2

after Conversion to Natural Gas is also unique and being adopted for the first time in


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India. This technology adopted by SFC-Kota is considered as a risky venture and there are no

prevailing practices in India.

Sub Step 2b : Elimination of all the scenarios which are prevented by the identified Barriers

Alternative 1 : The continuation of current practice, i.e. usage of naphtha alone as feed for the

production of urea, resulting in CO2 surpluses that are released to the atmosphere.

This scenario does not face any of the barriers. The plant would have continued to run in a usual

manner and no barrier would have been faced. Thus the scenario cannot be eliminated by the barrier

analysis.

Alternative 2 :Partial substitution of naphtha with NG/LNG so as to reduce the CO2 surpluses


In this scenario the both the Barriers Technological Barriers as well as that of Lack of prevailing

practices would have been faced as this scenario also require the same modifications as that of the

project activity and this activity would also have been the first of its own kind.

Alternative 3: Complete switchover from Naphtha to NG/LNG resulting in the reduction of

CO2 surpluses and equivalent emissions for similar output of urea.

This is the proposed CDM activity and both the barrier identified above will be faced during theimplementation of the project activity

Outcome of Sub Step 2b

Alternative 1 is the only alternative which is not being prevented by all the identified

barriers and it is not the project activity without under taken as CDM activity hence

alternative 1 is the baseline scenario.

Step 4: Common Practice Analysis:

Sub-Step 4a. Analyze other activities similar to the proposed project activity

No Feedswitch project involving conversion of feedstock from Naptha to NG have so far been

registered by UNFCCC EB under the applicable methodology.

There are 31 Urea plants installed in India of which 11 Urea plants are of vintage and technology

similar to SFC Kota and were originally designed to process liquid feedstock like Naphtha or

Fuel oil for Urea production. None of these plants had converted from their original feedstock to

Natural gas prior to the start of the project.


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Concurrent to SFC Kota project, IFFCO Phulpur Urea plant in North India also started the

feedstock conversion project. Both the projects were completed during similar time periods.

Board approvals were given in Sep 2004 for IFFCO while it was given in Nov 2003 for SFC.

While IFFCO Phulpur -I & II were completed in June 2006 and Apr 2006 respectively, SFC Kota

modification was completed in Aug / Sep 2006.

Also, IFFCO Phulpur plants are of different process schemes and technology compared to SFC

Kota.. The design of Primary Reformer is entirely different than SFCs. IFFCO Phulpur -1 is a

Top fired Reformer for which design philosophy is different as compared to side fired design in

case of SFC. Primary Reformer for IFFCO Phulpur II is a side fired design but has Pre Reformer

installed upstream which reduces the load on Primary Reformer and makes it almost similar to a

gas based Reformer.

In case of SFC, we have adopted a different route by which we can use 100% NG or 100%

Naphtha as feed even without Pre Reformer, while using same catalyst. However, additional load

on Primary Reformer arising out of this has been evaluated carefully in consultation with

technology licensor. The impact of additional fuel firing on the tube wall temperatures and

precautions for rectifying the same have been adequately considered in the SFC design.

The approaches for making up the CO2 shortfall are also different for both the projects. As CO2

has been proposed to be recovered from CDR in IFFCO project, no additional NG is to be fired

in case of IFFCO to generate additional CO2 through Reformer. This results in lower heat flux

on Primary Reformer thus resulting in marginally lower load. In case of SFC, the existing

reformer had to be designed to accept additional load. By adding Fuel pre-heating equipment and

reducing steam to carbon ratio, the overall heat load on the furnace, though higher than earlier

has been kept at acceptable levels in SFC. This approach of SFC Kota is technically more

challenging and is being used for the first time in India.

Thus SFC Feedstock Conversion project and IFFCO projects are entirely different in their

project design conceptualization and implementation.

SFC Feedswitch project is thus the second plant to have completed the Feedstock conversion in

India although both the projects viz SFC Kota and IFFCO Phulpur were completed in first half of

Financial year 2006 -07. This is also further corroborated by certificate from M/s Fertiliser

Association of India, which is the non-profit association of all Fertiliser companies in India, tothis effect.( Annexure 5). Also, SFC is the first and only private sector fertiliser plant so far

to undertake feedstock conversion project.

Sub-step 4b. Discuss any similar options that are occurring.

Although the SFC project was conceptualised in 2003 and completed in Sep 2006, and IFFCO

project was also implemented during the same period, there is no other Naphtha of Fuel Oil

based Urea plant in India which has so far converted to Natural Gas except for these two plants.

As mentioned above, these are the only two projects in world which have so far applied for CDM

benefits under the approved methodology.


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As explained above, both the SFC and IFFCO projects have significant technological differences.

Also, SFC is the first and only private sector fertiliser plant so far to undertake feedstock

conversion project.

Hence, considering the above-mentioned aspects, SFC-Kota project should not be considered as

common practice in India. The successful registration of the proposed project activity as CDM

will provide a trigger for replication of similar feedstock conversion from Naptha to NG in other

fertiliser industries in India.

On the basis of the steps mentioned in Combined tool to identify the baseline scenario anddemonstrate additionality, version 02.1 15 December 2006, the project additionality can be

summarised that, in absence of the project activity the SFC management had no option other than

continuation of the existing use of Naphtha as feed instead of Natural Gas for Urea production

and will continue to produce GHG emissions as per Business as Usual scenario.

The CDM revenue which the plant would be getting would help the plant team to take risk on the

technological innovation and experimentation with the new untested technology. It will also help

the plant team to get trained for learning the new technology and operating the new technology

successfully. The CDM benefit alleviate the barriers faced by the plant team

In such case moving towards use of Natural gas in place of Naphtha will have additional

emission reduction and since the project does not violate any ODA funding it is also financially

additional.

CDM Consideration:

From above, it is evident that CDM consideration is essential for the implementation of the

project as it would help in mitigating the various barriers as discussed under:

It shall result in improving the financial viability of the project thus resulting in its

implementation.

The project, being first of its kind in India, is inherently risky due to implementation of the

new technology in an old, 35 year old plant. CDM benefits shall help in overcoming

technical risks associated with the project.

CDM revenues shall encourage SFC, its sister plants manufacturing PVC, caustic Soda /

Chlorine, Carbide, Cement, etc at its Kota complex to come up with other new projects for

mitigating GHGs. This shall be the first CDM project for Kota complex. Thus, it shall also

encourage other chemical plants in the region to identify and propose new GHG projects.


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CDM revenues for this project shall also encourage other Fertiliser plants in India and in

the world to undertake feed switch projects, thus contributing to the improvement of the

environment.

The management of SFC was fully conscious from the stage of initial conceptualisation of the

Feed switch project in 2003 that CDM revenues are absolutely necessary for making the project

viable. In fact the project was undertaken only when the mechanism of CDM became clear. This

is borne by following:

Company has been following developments in Green House Gas emission area much prior

to the start of the project activity. Some of the programmes attended by the executives ofthe company are as under :

o National Strategy Study for implementation of CDM in India, organised by TERIo Climate Technology bazaar, organised by Confederation of Indian Industries (

CII) in partnership of Ministry of Environment & Forest, Govt. of India, & TERI

in Nov 2003.

o State level capacity building workshop on CDM organised by M/s WinrockInternational and IGES Japan in Ahmedabad, India in March 2004.

The internal approval note dated 12.10.2003 was circulated by Deputy General Manager (

Fertiliser) to Executive Director of the complex and to Deputy Managing Director of the

company informing the possibility of CDM financing for Feedswitch project ( copy

enclosed as Annexure 25). The note was circulated after getting feedback from meetings

with various CDM consultants and attending workshop on CDM in Indian Industries on

9th Oct.03 in Mumbai, funded by UK and Common Wealth Office. (Copy of receipt of

railway tickets enclosed as Annexure 26 as proof of attendance).

Based on the note, and subsequent discussions between Dy. Managing Director and

Executive Director, it was decided to forward the proposal to the Board for their

forthcoming meeting. The proposal was discussed during the Board meeting on

30.10.2003, during which the CDM benefits of the project and their impact on the project

feasibility was discussed. It was decided to implement taking CDM revenues of the project

into consideration. ( Copy of Board proposal attached as Annexure 27)

Submission of Project Information Note ( PIN) to TERI ( Indian consultancy in energy

sector), M/s Agri-energy UK ( Jan 2004), kFW Carbon Fund ( Dec 2003), Eco-securities (

Dec 2003), PDIL ( premier Indian Fertiliser Industry consultancy firm), Ernst & Young (

January 2005)

Based on the inputs from various parties, M/s Agri-energy and DSCL Energy Services

Company were selected as Project participant and Service provider for Feedswitch project

during May 2006 and agreement signed in July 2006. (Please see Annexure 28).

Thus, based on above, it may be concluded that CDM was seriously considered during the

decision on the implementation of project and subsequent phases of basic and detailed design


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engineering. Once the CDM revenues were assured, the project execution was started in full

swing.

CDM Chronology:

The chronology of the project and the concurrent CDM activities is as under:

26t

Aug PDD was web hosted on internet. No comments were received from the stakeholders.

Date of event Event

May 2003. Preliminary enquiries were sent to M/s Haldor Topsoe and other consultants for

undertaking project design work.

12th

Oct 2003 Internal note submitted on approval of strategy for Feedstock switchover taking into

consideration the CDM benefits

30th Oct 2003 Approval obtained from Board on for execution of feedstock switchover project

Oct 03 May

04

Project Information Notes ( PIN) sent to various parties like TERI, Agri-energy, kFW

Carbon Fund, Eco-securities, Ernst & Young during the period from Oct 2003 to May

2004 for assessment of the CDM potential of the project

2nd

July 2004 Design engineering contract for the project signed with M/s Haldor Topsoe, Denmark

for basic and detailed designing of the plant modifications

13th Mar 2005 Environmental clearance was received for the project.

June 2005 The design job was completed and the specifications equipment of new equipment

and modifications were available for procurement

1st

Nov 2005 First order for major capital equipment was issued on for Combustion Air Preheater

equipment to M/s Rizzi, Italy. This has been chosen as Project Start Date. Other

major equipment were ordered subsequently.( See Annexure 29 )

Jan / Feb

2006.

Civil work started at site

June July

2006.

M/s Agri-energy and DSCL Energy Services were initially selected as Project

Participant for the Feedswitch CDM project. The final agreement was signed on 20th

July 2006

Sep 2006 The project was mechanically completed

27th

Oct 2006 Local Stake holder meeting was held at SFC Kota.

3rd April 2007 Application for Host Country Approval was submitted to Govt. of India in Oct 2006

and approval obtained in April 2007.

June / July

2007

Enquiries were sent to various DOEs in June 2007, offers were and M/s DNV

selected as DOE for validation vide agreement dated 20th

July 2007.


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28th Sept 07

Thus it may be observed from above, the project proponents have been actively pursuing CDM

process concurrent to the project design, implementation and commissioning. Some of the gaps

in

PDD Iffco Sfc Kota

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