Basic Survey for Joint Implementation on Jinling Petrochemical Corporation, China Energy Conservation Project for Nanjing Refinery

NEDO-IC 99R34

Basic Survey for Joint Implementation on Jinling Petrochemical Corporation, China Energy Conservation Project For Nanjing Refinery

March, 2000

NEDOBIS E99007 New Energy and Industrial Technology Development Organization Consignee: Chiyoda Corporation 020004921-1 Basic Survey for Joint Implementation on Jinling Petrochemical Corporation, China. Energy Conservation Project For Nanjing Refinery.

CHIYODA CORPORATION March, 2000 213 pages

The investigation target:

This basic survey carries out for Nanjing Refinery of Jinling Petrochemical Corporation, China This project is the basic investigation for reduction the greenhouse gas by the energy conservation introduction of technology of our country. The energy conservation modification casting plan to each facility in the petroleum refinery is planned, and the energy conservation cost performance of the project, the greenhouse-gas curtailment cost performance, profitability, circulation, etc. are investigated. Clean Development Mechanism which our company will carry out in the future (henceforth CDM) It aims at investigating that it should consider as the promising project connected. NEDO-IC-99R34

Basic Survey for Joint Implementation on Jinling Petrochemical Corporation, China

Energy Conservation Project For Nanjing Refinery

March, 2000

New Energy and Industrial Technology Development Organization

Consignee: Chiyoda Corporation Introduction

This report is summarized the conclusions on the basic survey for energy conservation project for Jinling petrochemical Corp. Nanjing Refinery, which Chiyoda Corporation was contracted as a joint implement project in the 1999 fiscal year from the New Energy and Industrial Technology Development Organization (NEDO).

The Third Conference of the Parties to the United Nations Framework Convention on Climate Change (COP3) was held in Kyoto, Japan in December 1997, and at the conclusion of the conference, the Kyoto Protocol was targeted for developed countries (including former USSR and Eastern Europe) to reduce their overall averaged emission rate of greenhouse effect gases such as carbon dioxide by at least 5 percent below 1990 levels between 2008 to 2012 in order to prevent the global warming. In the Kyoto Protocol, the reduction target for Japan is adopted to 6 percent. [Joint Implementation^!)] and [Clean Development Mechanism(CDM)] are possible measures provided by the Kyoto Protocol to afford flexibility for achieving this goal positively acted to reduce the emissions of greenhouse effect gases collaboratively and distributing the result among numerous countries.

The objective of this survey is finding out the favorable project connected with the joint implementation of our country, which reduces a greenhouse effect gas and contributes to maintainable economic development in a partner country by introducing the energy-saving technology we have.

For such a background and the objective, the basic survey of an energy-saving project was carried out to the Nanjing Refinery in Jiangsu, China.

The contents of a study were examined about the reduction effect of the carbon dioxide which is a greenhouse gas as the energy conservation effect by improving and constructing the power recovery facility to FCC and RFCC, and by applying a pinch point technology to atmospheric/vacuum-distillation facilities to promote the maximization of heat recovery rate in heat-exchanger system

It become clear by the survey that it not only can gain the reduction of a substantial greenhouse effect gas, but can contribute to a profitability improvement of the concerned factory and the environmental improvement of an area by execution of this project. From now on, a detailed planning will be further examined with a counter partner in order to realize this project.

Finally, we appreciate respectfully to the persons concerned who cooperated in this survey, and it is pleased if this report becomes a help of a future study to the persons concerned.

March, 2000

Chiyoda Corporation Member List for Feasibility Study

Company Name Divisio n/Dept ./Group Title Name Chiyoda Takehiro Industrial Facility Project Division Senior General Corporation Hirobe Manager Chiyoda Ryuichi Industrial Facility Project Division General Manager Corporation Araki Environmental Project Dept. Chiyoda Misao Industrial Facility Project Division Manager Corporation Tateno Environmental Project Dept.. Chiyoda Osamu Industrial Facility Project Division Project Manager Corporation Miyamoto Environmental Project Dept. Chiyoda Susumu Industrial Facility Project Division Assistant Manager Corporation Hirai AAB Team Chiyoda Mayumi Industrial Facility Project Division Administrator Corporation Yamamoto Environmental Project Dept.. Chiyoda Ginjiro Front End Engineering Division General Manager Corporation Fujima Process Engineering Dept. Chiyoda Kazuo Front End Engineering Division Manager Corporation Matsuda Process Engineering Dept. Chiyoda Hiroshi Front End Engineering Division Manager Corporation Aida Process Engineering Dept. Chiyoda Yasuhiro Front End Engineering Division Engineer Corporation Watanabe Process Engineering Dept. Chiyoda Hideki Front End Engineering Division Engineer Corporation Ishikawa Process Engineering Dept. Chiyoda Masanori Detailed Engineering Division Engineering Corporation Kojima Piping Engineering Dept. Consultant Project Group Chiyoda Kesaichi Detailed Engineering Division Manager Corporation Karasawa Piping Engineering Dept. Project Group Chiyoda Yoshihiko Detailed Engineering Division General Manage Corporation Obata Piping Engineering Dept. Piping Group Company Name Division/Dept./Group Title Name Chiyoda Seiichi Detailed Engineering Division Assistant Manager Corporation Kurosaka Piping Engineering Dept. Piping Group Chiyoda Shoji Detailed Engineering Division General Manager Corporation Yoshida Electrical Engineering Dept. Chiyoda Toshio Detailed Engineering Division General Manager Corporation Takano Control System Engineering Dept. Chiyoda Akira Detailed Engineering Division Manager Corporation Mitani Control System Engineering Dept. Chiyoda Hiroo Detailed Engineering Division Engineering Corporation Tsuruta Mechanical Engineering Dept.l Consultant Chiyoda Yasushi Detailed Engineering Division Assistant General Corporation Egashira Mechanical Engineering Dept.l Manager Chiyoda Yasuhiro Detailed Engineering Division Engineer Corporation Kinoshita Mechanical Engineering Dept.l Chiyoda Toshiyuki Detailed Engineering Division Assistant General Corporation Nagashima Mechanical Engineering Dept.2 Manager Chiyoda Takaaki Detailed Engineering Division General Manager Corporation Mouri Mechanical Engineering Dept.2 Chiyoda Tadashi Procurement Division General Manager Corporation Miyaichi Purchasing Dept. Chiyoda Keiichiro International Business Development Assistant General Corporation Hagiwara Division Manager International Business Development Dept. Group 4 Chiyoda Yoshiyuki International Business Development Manager Corporation Machii Division International Business Development Dept. Group 4 Chiyoda Tsutomu Business Development Division Corporation Fujishiro Gasification & Power Dept. Chiyoda Hisao Industrial Facility Project Division Assistant General Corporation Takahashi Environmental Project Dept. Manager Company Name Division/Dept./Group Title Name Chiyoda Yoshishige Front End Engineering Division Manager Corporation Sugi Process Engineering Dept. Chiyoda Shigeru Front End Engineering Division Assistant Manager Corporation Sugiyama Process Engineering Dept. Chiyoda Nozomu Detailed Engineering Division Assistant General Corporation Tanohata Electrical Engineering Dept. Manager Chiyoda Shouzo Industrial Facility Project Division Assistant General Corporation Mori Manager Chiyoda Hideo Procurement Division Manager Corporation Shinpoh Purchasing Dept. Chiyoda Shigenori Detailed Engineering Division Assistant Manager Corporation Horinouchi Mechanical Engineering Dept.2 Chiyoda Kouichi Detailed Engineering Division Manager Corporation Seki Piping Engineering Dept. Piping Group Chiyoda Tarou Energy Project Division Engineer Corporation Ogawa ETS Task Team Chiyoda Industrial Facility Project Division Engineer Corporation Kawase Chiyoda Yonezou Procurement Division Manager Corporation Tanaka Inspection & Quality Control Dept. Inspection Group 2 Chiyoda Junji Procurement Division Manager Corporation Maruyama Purchasing Dept. Chiyoda Keisuke Detailed Engineering Division Assistant Manager Corporation Tsutsui Mechanical Engineering Dept.2 Chiyoda Kouichi Industrial Facility Project Division Assistant General Corporation Tamura Manager Chiyoda Tsuneo Front End Engineering Division Assistant General Corporation Watanabe Process Engineering Dept. Manager

Chiyoda Takae Detailed Engineering Division Assistant General Corporation Umezawa Mechanical Engineering Dept.2 Manager Company Name Division/Dept./Group Title Name Chiyoda Energy Project Division Engineer Corporation Yasunishi Energy Engineering Dept. Chiyoda Satoshi Environmental Project Division Manager Corporation Ogi Waste Management Project Dept. Chiyoda Noriaki Energy Project Division Manager Corporation Kawashima Power & Nuclear Facility Project Dept. Chiyoda Naoki Detailed Engineering Division General Manager Corporation Kumagai Mechanical Engineering Dept.l Table of Contents

Basic Survey for Joint Implementation Jinling Petrochemical Corporation, China Energy Conservation Project for Nanjing Refinery

Outline ...... 1

1 Basis of project planning ...... 3 1.1 Present status for partner's country ...... 5 1.1.1 Political, economical and social conditions ...... 9 1.1.2 Energy supply and demand conditions ...... 26 1.1.3 Project needs for CDM...... 45 1.2 Necessity for introduction of the energy conservation technology into the subject industry ...... 46 1.3 Purposes, needs and expected results for project execution, and influence effects etc., to the similar industries ...... 47

2 Materialization of project planning ...... 49 2.1 Project planning ...... 51 2.1.1 Outlines of the regional conditions for project site...... 52 2.1.2 Description of project scope ...... 66 2.1.3 Greenhouse effect gas to be reduced...... 71 2.2 Outlines of counter partner (Refinery)...... 72 2.2.1 Concerns of counter partner (Refinery) for project implementation ...... 72 2.2.2 Status of the related existing facilities at counter partner (Refinery) ...... 74 2.2.3 Capability of project implementation at counter partner (Refinery) ...... 78 (1) Technical capability ...... 78 (2) Management organization ...... 78 (3) Company management policy ...... 79 (4) Financial capability ...... 79 (5) Manning mobilization ...... 79 (6) Project organization ...... 80 2.2.4 Project scope of works and technical specification for the related facilities after modification at counter partner (Refinery) ...... 81 2.2.5 Split of work between both parties for supply of project funds, equipment and materials, and service etc., at the project execution stage...... 155 2.2.6 Expected preconditions and problems at the project execution stage...... 158 2.2.7 Project execution schedule ...... 159 2.3 Materialization of project financial plans ...... 162 2.3.1 Capital investment program for project execution ...... 162 2.3.2 Forecast of project funds preparation ...... 166 2.4 Conditional items for CDM...... 167 2.4.1 Establishment of the project execution conditions reflecting the present status of counter partner (Refinery), and necessary items to be coordinated with the government of partner countries for realization of CDM...... 167 2.4.2 Possibility to conclusion of the contract on the project execution as a CDM... 169 3 Results of project execution ...... 171 3.1 Effects of energy conservation ...... 173 3.1.1 Technical basis of energy conservation effect...... 173 3.1.2 Baseline to be used for calculation of energy conservation effect...... 173 3.1.3 Estimated amount, expected duration and cumulative volume to be maintained the effect of the energy conservation ...... 173 3.1.4 Definitive procedures to verify the energy conservation effect...... 174 3.2 Effects on reduction of greenhouse effect gas...... 175 3.2.1 Technical basis of effects on reduction of greenhouse effect gas...... 175 3.2.2 Baseline to be used for calculation of effects on reduction of greenhouse effect gas...... 175 3.2.3 Estimated amount, expected duration and cumulative volume to be maintained the effect on reduction of greenhouse effect gas...... 175 3.2.4 Definitive procedures to verify the effects on reduction of greenhouse effect gas...... 176 3.3 Effects to operational productivity ...... 177

4 Project economics ...... 179 4.1 Internal rates of returns ...... 181 4.2 Investment cost vs Project effects...... 183

5 Confirmation of effects on promotion for energy conservation technology ...... 185 5.1 Possibility on the promotion of energy conservation technology in the partner's country ...... 188 5.2 Effects after promotion of energy conservation technology ...... 205

6 Effects to other industries ...... 207

Conclusion ...... 211

Reference document list Outline

In order to carry out the prevention of the global warming by the greenhouse gas including carbon dioxide, the basic survey was carried out the energy conservation measures by the newly construction and the improvement of a power recovery facilities using the flue gas of the Jinling Petrochemical Corp. Nanjing Refinery located at Jiangsu Nanjing city in China.

The site survey was carried out in October and December, 1999 as the first and second survey respectively to obtain operation status and facility conditions on mainly FCC, RFCC and atmospheric/vacuum-distillation units. In addition, various data and information etc. were collected from the counter partner about the generating and consumption status of steam and electric power, which is the utility system of a petroleum refinery.

Consequently, the mutual investigation structure was prepared toward the realization of the project with consideration to energy saving about (D renewal of the existing power recovery equipment accompanied by throughput expansion plan of FCC unit and ® further power recovery from unused exhaust gas discharged from second catalyst regenerator of RFCC unit. However, about the energy recovery from the crude-oil preheating system for atmospheric/vacuum-distillation unit, since the effective utilization already reflected in the system, it kept in to the study of the energy balance of a present-condition.

On the one hand, domestic manufacturer's survey, which investigates the manufacturing technology and the performance of power recovery association equipment, was also carried out for the popularization enlargement of a power recovery unit.

From investigation and the examination result, it was considered that the energy-saving technology for reducing the load of the power to the concerned refinery is introduced by this project. Its modification planning and outline design was performed.

1. Renewal of power recovery equipment accompanied by FCC's throughput expansion plan 2. Installation of off gas treatment unit by facility reconstruction

Besides, about the installation of the power recovery unit to RFCC using the flue gas

- 1 - from the second catalyst regenerator, its induction is pass up for the following reasons. (1) The flue-gas temperature is very high, and its amount is very few (2) On Technical and Matter of Profitability

By the above-mentioned reconstruction, it became clear for the recovery of the power equivalent to 10.6 MW to be possible, and energy saving is achieved by reducing the consumption of the fuel for the power generation in the concerned refinery. As the third survey, we visited the refinery in March 2000, and the interim report about a detailed modification plan and the energy-saving effect was carried out.

The reduction effect of a carbon dioxide by realizing this energy-saving project will become about 70,000ton in one year.

At present, although China has not ratified the Kyoto protocol, when the international scheme with detailed Clean Development Mechanism (CDM) is established, it is expected that China as a candidate country of CDM joins positively to a project.

-2- 1. Basis of Project Planning

-3- 1, Basis of project planning

1.1 Present status for partner ’s country

The present condition of politics, Chinese economy and a Chinese social situation is outlined. Moreover, the outline is described about project needs, such as a policy and the object to an energy situation, joint enforcement, etc., and joint enforcement.

Positive Formula Country Name : People's Republic of China Head Capital : Beijing (Beijing) Country Ground Field Product : 9,600,000km2 (26 times of Japan) Total population : 1,248,100,000 persons (10 times of Japan) (as of 1998 excl. Taiwan, Hong Kong)

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People's Republic of China Map

-5- China general view

(1) Geographical features

They are 33% of mountains zones, 26% of plateaus, 10% of hills, 19% of basins, and 12% of flat grounds among the total area. It is rich large alluvial field a whole coast. There is a 4 mountain range of Himalaya, Kunlun, Tianshan, and the Altay. A plateau zone with an altitude of 1500m or more spreads in Tibet, Xinjiang Weiwuer both constituencies, Qinghai, Gansu, Yunnan, and Kueichou each state. Plateau of Tibet is the highest inside and it is about 4000m or more of averages. There are many mountain ranges, such as Tahsinganling, Yinshan, Qinling, Nanling, and Taihang. The Tarim basin of basin of the Xinjiang Weiwuer constituency is the largest, and a Junggar basin and Sichuan Pendi rank second to this.

4 large river system of the Huanghe, Heilongjiang, Changjiang (Yangtzechiang), and Zhu Jiang it is the neighborhood a fresh ground a belt has many things belonging to a inland river system. Changjiang is the longest and the full length of about 6300km and the next are about 5464km of the Huanghe, about 2965km (a part for the inside of a country) of Heilongjiang, about 2129km of Zhu Jiang etc., etc.

The Democratic People's Republic of Korea (Democratic People's Republic of Korea), Russia, Mongolian, Kazakstan, Kirgiz, Tajikistan, Afghanistan, India, Nepal, Bhutan, Myanmar, Laos, Vietnam, and the land border are touched, and the international border is 22,000km a total.

(2) Climate

Most belongs to the Temperate Zone and is clear in distinction of the four seasons. Northeasts Huabeis Northwests Southwest is continent nature climate. Huanan does not have change of climate at high temperature and a lot of rain. A southeast part is 1500mm or more, and a northwest part is a 50mm or less rainfall per year. Most is a temperate area and is clear in distinction of the four seasons.

- 6 - (3) Resources

China is an agricultural country which produces rice, an soybean, wheat, cotton, etc. The horse, sheep, and pig of stock raising are main, and the breeding member of a pig is the 1st place of the world. The breeding member of a pig is the 1st place of the world. The freshwater fishing of river, a lake, and a swamp other than coastal fishery is prosperous in fisheries.

Underground resources are as abundant as 163 sorts in mineral kinds. An iron-ore stone is 49 bill.ton in the amount of presumed burying, and the northeast districts, such as Anshan, Benxi, and Tonghua, occupy 50%. For coal, it is 983.3 bill.ton in the amount of presumed burying, and Huabei districts, such as Shanhsi and Shenhsi both regions, are the main places of production.

It is 1,361 mill.ton (95 years) and coal production is the 1st place of the world.

Although the amount of residual burying of petroleum is 1.8 bill.ton and it has 3 large oil field such as Daqing Youtian oil field of Heilongjiang, Daxiang oil field of Tianjin, and Sheng Li oil field of Shandong etc., as for many of existing oil fields, the quantity of production has made little increase. Development of the Tarim oil field in a western part, the Liaohe oil field of Liaoning province, the submarine oil field of the East China Sea, etc. is concentrated on.

(4) Population

Population is 1,248,100,000 persons (98 ends of the year, Taiwan, Hong Kong, and Macao are excluded). Among these, city population is 379,420,000 persons and farm village population is 868,680,000 persons.

A birthrate is 1.603%, mortality rate is 0.650%, and the rate of a natural increase is 0.953% (98 years). The government is eager in the increase control in population by encouragement of late marriage (27 years old of men, 25 years old of women), or "one-child policy."

-7- (5) Language

Chinese (Chinese word) is a public word. There are Tibet language, Uighur language, Mongolian language, Manchuria language.

Besides the Beijing language (basis of a standard word), the Han race's language also has many various dialects, such as Shanghai and Kuangtung.

(6) Main city

A capital is Beijing (12,230,000 persons). Main cities are Chongqing (30,590,000 persons), Shanghai (13,060,000 persons), Chengdu (9,970,000 persons), Harbin (9,210,000 persons), Tianjin (9,050,000 persons), Shijiazhuang (8,670,000 persons), Wuhan (7,310,000 persons), Chingtao (6,990,000 persons), Changchun (6,860,000 persons), Shenyang (6,740,000 persons), Guanzhou (6,740,000 persons), etc. (98 ends of the year).

(7) Residents

China is a multi-ethnic nation which consists of the races of 56, such as the Han race. The Han race occupies 92% of all population, and the remaining ethnic minorities are the Huizu 8,610,000, the Uighur fellows 7,210,000, the Miaozu 7,380,000, the Tibet fellows 4,590,000, the Mongolian fellows 4,800,000, the Manchuria fellows 9,820,000, 1,920,000 Korean fellows, etc. (90 year national census).

The Manchuria fellows reside in Heilongjiang and Jilin both province etc., and most assimilates to the Han race. Huizu lives in Ningxia, Uighur fellows live in Xinjiang Uygur mostly, and, as for the Tibet fellows, most lives in Tibet.

-8 - 1.1.1 Politics, economy, and social conditions

(1) Politics

1) Political organization

Although it is the socialist state of people democracy autocracy, it is one party autocracy of the Communist Party. As national organization (1) National People's Congress (2) People's Republic of China president (3)State Council (government) (4) Central Armed Services Committee (5) district each public representation convention and district each public government (6) race autonomous organization (7) Court and Criminal investigation are placed.

2) Constitution

It was adopted in December 4, 82 and the 5th 5th time National-People's-Congress meeting, and was proclaimed in the same day. While the Great Cultural Revolution color which was a special feature of the constitution (the above sentence and 60 articles of Chapter 4) was swept away for 78 years, the modernization construction route was incorporated.

And also [ it consisted of the above sentence and 138 articles of Chapter 4 (general rules, the fundamental rights of citizen and duty, the national flag and a capital) and was changed into "people democracy autocracy" from old "proletarian autocracy" ] (1) Revival of PRC President (2) Authority Expansion of National People's Congress and National-People's- Congress Managing Director Committee (3) An establishment of the national central Armed Services Committee, which guides the Chinese People's Liberation Army (4) The establishment of the term-of-office system to national initiative personnel affairs, such as a PRC President, the head of a National-People's-Congress managing director committee, and a Prime Minister (5) Enforcement of Prime Minister Responsibility System in State Council (6) Revival of Xiang government and Demolition of People's Commune (7) Right of citizen, Clarification of Duty (8) Official Recognition of Individual Economy Continuation

-9 - (9) Administration Division Installs Specially. Etc. are the big feature.

The meeting adopted the correction proposal of the constitution the 1st 8th time National People's Congress for 82 years on March 29, 93. The revision changed the economic regime into market economy from the old public truth system, maintained the economic order by economical legislation and macro management, and made the width of liberalization of an economic activity expand. Furthermore, the "state-owned firm" was changed into the "national company", and the direction of the right expansion of independence of a company and self-support accounting nature was shown.

3) Sovereign

PRC President. It will revive by the constitution for 82 years.

4) National People's Congress (National People's Congress)

It is the highest national power organization, consists of representation of province, a constituency, a direct control city, and an army, and it will be held once per year and authorize the following:

(1) Constitutional Amendment (2) Establishment and Revision of Fundamental Law (3) Election and dismissal of a PRC President and a vice president (4) Appointment and dismissal of a Prime Minister based on nomination of a PRC President and cabinet members based on a prime minister's nomination (5) Election of Central Armed Services Committee President and this Committee Constituent's Appointment and Dismissal (6) Election and Dismissal of the Chief Justice of the Supreme Court and the Supreme Public Prosecutors Office Chief (7) Recognition of National Economic Plan and National Budget (8) Determination about a war problem (9) It is Determination of Installation of Special Administration Division 5) National-People's-Congress managing director committee

It is the permanent organization of the National People's Congress. It is greatly

- 10- expanded by the new constitution and authority is as follows. (1) Interpretation of Constitution, and Supervision of Operation (2) Establishment and Revision of Other Laws except Law Which Should Enact National People's Congress (3) Recognition of the partial adjustment proposal of a national economic plan and national budget (4) Cancellation of the administration measure which State Council established because of breaking to the constitution, a law, and a ordinance. (5) Appointment and Dismissal of Foreign Residence Representative (6) Ratification and Abandonment of Agreement Which were Concluded with Foreign Country (7) Determination of Rank System of Military and Diplomatic Personnel (8) Determination of amnesty (9) Declaration of War (10) Determination of National General Mobilization and Local Mobilization (11) Determination of martial law for Whole Country and region, Constituency, and Direct Control City

It consists of the chairman, a head of a vice committee, a secretary chief, and a committee, and National People's Congress elects or dismisses. A constituent cannot take the post of the job of a national governmental agency, a judgment and a criminal investigation organization.

6) State Council

The central government equivalent to the Cabinet. State Council takes responsibility to the National People's Congress and its managing director committee, and reports activity. Composition and a prime minister system are carried out by a prime minister, a vice prime minister, the affairs-of-state committee, cabinet ministers (a division chief, chief), accounts inspection chief, and the secretary chief. The managing director conference of State Council consists of a prime minister, a vice prime minister, an affairs-of-state committee, and a secretary chief. The term of office of a prime minister, a vice prime minister, and an affairs-of-state committee is 1 term five years, and maximum 2 terms. Authority are as follows:

(1) Establishment of Administration Measure Based on Constitution, Law, and

-11 - Ordinance (2) Proclamation of decision and instruction (3) Unification instruction to each ministry (a part, committee) and local national organization (4) Creation and operation of an economic plan and national budget (5) Instruction and Management of National Administration Office Work (6) Conclusion of agreement and convention (7) Instruction of national-defense etc.

7) People's Republic of China central Armed Services Committee

National military affairs are directed.

8) Communist Party

The party agreement of the Communist Party of China is as follows. (1) A Cadre of Socialism achievement (2) Realization of Communist Social System is Policy Objective. (3) The indicators of action are Marx and Leninism, and a Maoism.

The Marxism group was born in the big city by instruction of Chen Tu-hsiu, Mao Zedong in 1920. The representative convention was held in Shanghai on July 23, 1921, 13 persons were present on behalf of 57 persons' member of the party, and the Communist Party foundation was declared. However, The foundation memorial day of a party is set to July 1.

9) National representative convention (party convention)

In the highest determination organization of a party, it will be opened once in every five years, and perform Listening and discussion of an interim-general-meeting report, Agreement revision and Election of central committee member and central order examination committee member Although advanced holding of a convention can be performed, postponement is impossible except "the case of an emergency."

- 12- 10) Interim general meeting

It is elected in a national representative convention and is the highest instruction organization. Political bureau calls the general meeting menber of an interim general meeting. In the general meeting of an interim general meeting, political bureau, a managing director committee, and an interim-general-meeting general secretary are elected, and the constituent of the central Armed Services Committee is determined. Political bureau and a managing director committee use the authority of an interim general meeting during the closing term of an interim-general-meeting. A secretariat is the office organization of political bureau and a managing director committee. A general secretary calls a political-bureau conference and a managing director committee conference, and superintends activity of a secretariat.

11) The conditions of military affairs

[500,000 persons' reduction plan of military force]. "It being a 500,000 military personnel reduction plan in three years" was formally recognized by the National People's Congress in March, 98. [which the Jiang Zemin general secretary expressed in the Communist Party convention in September, 97 ] A national-defense white book clearly shows reduction 19% of armies, 11.66% of navy and 11% of air force respectively, and it is made 2,500,000 person organization. The management of many of reduction portions is expected to be transferred to people armed Police under central Armed Services Committee command.

[Military power]

The total military force is about 2,800,000 persons (under reduction). Among those, for conscription is 1,275,000 persons and preparatory soldier is 1,200,000 persons.

- Army - The military force is 2,090,000 persons. Among those, conscription is 1,075,000 persons. It is divided into 7 large-force division, 27 region force division and 3 defense division, there are 24 group armies, and it is 60,000 persons each. Army divisions are infantry 59 (a part is mechanized), the armoring 11, and the cannons 5. Tank is 8800 cars, among these, T59 main-force tank is 6000 and sub force tank is 1200. A armoring Soldier transportation vehicle is 5500 cars. Cannon is

- 13 - 14,500 , such as 122mm cannon.

- Navy -

The military force is 260,000 persons (Coast Guard, navy air force, and marine corps are included). Among these, conscription is 40,000 persons. A submarine is 63 boats. A main battle warship is 53 boats. Arrangement is (1) North Sea squadron, (2) East Sea squadron and (3) South Sea squadron 3 squadrons. Navy air force is 25,000 persons. Strategy plane is about 541, bomber about 80 and Battle plane about 300.

- Air-Force -

The military force is 470,000 persons. Among these, conscription is 160,000 persons. It has separated to 7 air-force division, and the headquarter is Beijing. About 3000 battle planes, 120 medium size bombers (nuclear loading is possible for a part), 200 small size bombers, 290 reconnaissance plane, 425 transports, 210 helicopters. A air defense army division is 16 and independent air defense regiment is 28. Antiaircraft guns are 16,000 and missile unit is 100.

- People Armed Police Unit -

It is about 1,000,000 persons (increase tendency), and there are 45 army-division. Keeping of the public peace and order, the guard of an important organization, etc. are the purposes. Under jurisdiction of June, 93 to the Chinese People's Liberation Army.

[Conscription system]

A new military service method will be enforced in October, 84. A desire military service system is used together with a duty military service system. A military service term was changed by revision of the military service law in December, 98, and the military service term for three armies was shortened in 2 years from army 3 years, navy 4 years, and air-force 4 years. It will be estimated that the rate of volunteer goes up to 35% at 2000 ends of the year, and conversion in the army with many professional soldiers is aimed at. The object age of man and woman for conscription is 18-22 years old.

- 14 - [Civilian soldier]

The core Civilian soldier constituted from a retired officer or the people who become volunteer in future (16-30 years old) is about 5,000,000 persons, and 75 army divisions are constituted. In addition, there is 5-6,000,000 persons' common Civilian soldier (17-48 years old) constituted from city residents. Although basic civilian soldier receives arms a stockpile and fixed training in a place of residence, a place of work, etc., as for civilian soldier, it does not usually have arms only by basic training at the time of common. The core Civilian soldier stores arms to the place of residence or the office, etc. and periodical training is undertaken, the common Civilian soldier does not usually have arms only by basic training.

- 15- (2) Situation of economy

The situation of China economy for 98 years became severe in domestic and overseas because of the demand of the Asia countries hung low by the Asia currency crisis or influence of the flood which occurred in summer at northeast part and Huanan. Since the expansion tempo of business was applied halfway and became slow from the beginning of the year according to these factors, the China government made fixed- assets investment accelerate focusing on an infrastructure and a high-tech grade toward achievement of 8% growth of a government target. Since the expansion tempo of economic condition became slow from the beginning of the year according to these factors The China government made investment of fixed assets increase to an infrastructure, high-technology industry, etc., in order to make 8% growth of a government target attain. On the one hand, as for export to Asia countries etc. decreased drastically.

[Main economic index] 1996 1997 1998 GDP : 812.6 bill. 902 bill. 960.9 bill GDP per person : 678 733 770 GDP rate of growth : 9.6% 8.8% 7.8% (dollars ) 1) Production

As for the China economy, the tempo of an economic-condition rise has down gradually after 94, and the real GDP growth rate in 97 years became 8.8% compared with last year and 98 years became 7.8% compared with last year (Table 1.1.1-1).

Trial calculation by the quarter for the real GDP growth rate in 98 years, January - March will be 7.2% compared with the corresponding period of last year, 6.8% for April-June, 7.6% for July-September and 9.4% for October-December respectively. That is, an economic growth rate will fall most at April-June, then, the growth rate is drastically extended toward the end of the year.

In order to raise an economic growth rate, the China government made investment of fixed assets expand focusing on infrastructures, such as a water supply and communication, high-technology section and housing construction, etc., and investment of the fixed assets of the national company for 98 years became the

- 16 - increase of 19.6% compared with last year.

While the amount of investment to a national company became growth near 20%, but a rate of growth for private sector is low as the level of 1 figure. As a capital allowance for raising the growth of fixed-assets investment, the government has published the national bond of 100 bill, yuan in 98. About the influence of the flood by which 2,000 or more persons were killed, by the China government's trial calculation, although GDP growth rate is depressed 0.5% at the beginning, as a result, it became plus minus zero. It is because the demand of relief activity for restoration of the damage by the flood, such as infrastructure construction, food, medicine, etc. was extended. January - March of a real GDP growth rate in 99 will be 8.3% compared with the corresponding period of last year.

Table 1.1.1-1 Chinese main economic barometer 80s 90s 96 97 98 99 years Forecast (80-89) (90-94) Gvnmt ADB Real GDP Cmpd with the 9.9 12.4 9.6 8.8 7.8 7.0 7.0 previous year Industrial Cmpd with the 12.8 2.7 12.7 11.1 8.8 — — production previous year Consumer price Cmpd with the 7.1 10.3 8.3 2.8 -0.8 4.0 2.0 index previous year

Unemployment % 2.7 2.5 3.0 3.1 3.1 3.5 — rate Current account 100 mill $ 5,490 7,240 29,700 25,000 — 10,000 balance 1,800 (GDP ratio) % (-0.5) (1.4) (0.9) (3,3) (2.5) (-) (1.0) Fiscal balance 100 mill $ -20 -48 — 64 -70 — Ill — (GDP ratio) % (-0.6) (-1.0) (-0.8) (-0.8) (-1.2) (-) (-) Savings ratio % 21.2 41.4 40.5 41.5 41.5 41.0 1.99 year forecast: China government-March, 99, and ADB (Asian Development Bank)-April, 99. 2. The numerical value of the 80s of consumer prices is a retail prices increasing rate. 3. Unemployment rate of only city part. 4. A savings ratio is a GDP ratio of the domestic total storage.

- 17- About industrial production, 11.1% increase in 97 compared with last year , and 8.8% increase in 98. Although the growth of production was the same as that of an economic growth rate and growth fell most at the term ended April-June, heavy- industry relation, such as crude steel and cement, was extended toward the second half of a year by the acceleration by the government of fixed-assets investment. Although the rate of growth of production in April - June was down most as well as that of an economic growth rate, Heavy-industry relation, such as crude steel and cement, was extended toward the second half of a year by the investment acceleration of the fixed assets by the government.

In addition, production of a color television, a refrigerator, an air-conditioner, a passenger car, a personal computer, etc. was also expanded, however, in the market, it is expected that these goods are overproduction and its volume of inventories will increase in the future. In January - March 99, 10.1% increase compared with last year is achieved.

2) Employment

The unemployment rate of a Chinese city part will be the middle of the 80s in an uptrend gradually at a bottom, and became 97 years and 3.1% of this level no less than 98 years after 3.1% for 97 years. The unemployment rate of a Chinese city part is in an uptrend gradually from the 85, and 97 years and 98 years were 3.1%. However, Chinese unemployment statistics are difficult to grasp the actual condition due to the following problem:

(1) Farm Village Part Which Occupies 80 Percent or More of Population is not included. (2) In-house Unemployed Laid Off from Company is not Counted.

Although the unemployment rate of a government official announcement in China is low, in connection with national company reform, the layoff is increasing from the middle of the 90s, and the actual condition is getting worse considerably. The government is carrying out countermeasure against unemployment, such as a re employment project.

- 18 - 3) Consumer prices

The increasing rate of the consumer prices which increased to 24.1% in 94, after that the increasing rate became 10% or less at 96 and it gradually down to 2.8% in 97 and AO.8% in 98 by governmental restraint measures etc. The factor of the consumer prices depression for 98 are as follows:,

(1) Stability of Food Price (Four Year Continuation Good Harvest), (2) A Round of Consumers' Durable Demand, Such as Household-Electric- Appliances Product (3) Oversupply by the overproduction of goods, (4) The reduction in an income and the depression of the purchase volition by the increase in a layoff, (5) Consumption Control from Increase Concern in Expenditure by Reform of Housing System, Medical System, and School-Expenses System

As for food price, -5% of the increasing rate continues in or after 97. On the one hand, although service price is a still high increasing rate, the increasing rate have come down gradually as 20% in 97 and 10% in 98 ends of the year.

4) International balance of payment

Economic balance are continuing black figures in or after 94, 29.7 bill, dollars (3.3% of GDP ratios) in 97 and 25 bill, dollars (2.5% of GDP ratios) in 97. A capital account balance in 97 is the black figures as 22.98 bill, dollars, the same black figures as the previous year were maintained 98 yearsQ As for securities investment, the revenue and expenditure is balanced and other investment (such as trade trust, loan (loan), etc.) is changed into the red figures.

For foreign currency reserves, 97 ends of the year are 139.9 bill, dollars (34.9 bill, dollars increase compares with the previous year), 145 bill, dollars at 98 (5.1 bill, dollars increase) It is increasing a few with 146.6 bill, dollars at the end of March, 99.

About the cause that the increase rate of external reserves slowed down, it has judged as follows in the market. (1) Some of companies are making the foreign currency obtained by export transfer

- 19 - to an overseas account by concern of devaluation of currency. (2) Foreign currency is stored in overseas by false import and remittance. Furthermore (3) It used for intervention of an exchange market.

On the other hand, the China government commented the reason in which the increase in external reserves remained by a small margin, as follows.

(1) Under the influence of the Asia currency and a financial crisis, a part of country became unable to pay import price to China. (2) Some of Companies were permitted to Suspension of Foreign Currency. (3) The limit of a resident's individual use foreign currency was raised. (4) Foreign currency deposit of a company and an individual increased. (5) Support of 4 bill, dollars was Performed to Country Influenced of Asia Currency and Financial Crisis. (6) Since foreign currency flowed into overseas by the illegal activity

Eventually, China government strengthened the management to foreign currency transactions, the foreign exchange, and a foreign debt, and took out the notification which carries out foreign currency and foreign debt inspection in the whole country in order to maintain stably international-balance-of-payment and market price of currency (June, 98 or later).

5) International trade

Exportation and importation was favorable and exceeded 300 bill, dollars in 97. Export was changed to reduction by the depression of the export for Asia, also as for import, the materials, the parts, etc. of export article production were decreasing in 98. Since import was changing to depressed, the trade balance in 98 became 45 bill, dollars Black figures. A foreign-affiliated company occupies 46.9% among the total amount of trade, 41.0% of an export total amount and 54.6% of an import total amount for 97.

-20- Transition of the amount of trade (1,000,000 dollars)

1995 1996 1997 1998 Export : 148,770 151,066 182,697 138,800 Import : 132,078 138,838 142,361 140,200

Exportation and importation by main goods (1,000,000 dollars, 1997)

Export (FOB) Import (CIF) Goods Amount Percentage Goods Amount Percentage Clothing 15,277 8.4% Steel materials 6,520 4.6% Knitting 11,084 6.1% Crude oil 5,456 3.8% Footwear 8,145 4.4% Petroleum product 3,682 2.6% Toy 5,041 2.8% Chemistry fertilizer 2,995 2.1% Plastic 3,489 1.9% Computer parts 2,729 1.9%

Exportation and importation by the main country (1,000,000 dollars, 1997)

Export (FOB) Import (CIF) Country Amount Percentage Country Amount Percentage Hong Kong 43,781 24.0% Japan 28,993 20.4% United States 32,269 17.9% United States 16,298 11.9% Japan 31,820 17.4% Korea 14,929 10.5% Korea 9,116 4.9% Hong Kong 6,990 4.9% Germany 6,490 3.6% Germany 6,180 4.3%

6) Exchange rate

The Chinese exchange rate serves as the managed floating rate system. Also after the Asia currency crisis, Chinese currency is changing stable to a dollar. As for the devaluation of China currency, Prime Minister Zhu Rongji has expressed also maintaining the stability of the China currency this year as the stance of the

- 21 - China government In the National People's Congress in March, 99.

Although the devaluation of China currency serves to advantage at export competitiveness, there is also a demerit of making a foreign debt burden increase because of raw-material import in connection with the processing deal trade which takes the major portion of import or the cost of machine import, such as a foreign- affiliated company, is raised.

The real effective exchange rate was going up after the second half of 97, however it has gone down after the middle of 98. The real effective exchange rate was going up after the second half of 97, however it has gone down after the middle of 98. In 99, it is increasing in value again. 1 yuan =14.91 yen (as of April 20, 1999)

7) Finances

Fiscal balance in 97 (January to December) was A7.02 bill, dollars (GDP ratio A 0.8%) and A11.09 bill, dollars (Al.2%) in 98 respectively, and red figures were expanded by slowdown of annual revenue etc (except refund of a debt). The central government published the national bond (ten year thing) of 100 bill, yuan in the 98 fiscal year, and was taken as capital for an infrastructure investment, such as a railroad, communication, a water supply, and environmental protection.

Among those, the central government lent 50 bill, yuan to the district government as infrastructure investment capital. While estimating annual revenue on budget to be 130.7 bill, dollars (1,080.9 bill, yuan (increase of 9.7% compared with last year)) in the 99 fiscal year, and estimating annual expenditure is 148.9 bill, dollars (1,231.2 bill, yuan (14.3% increase)), a budget deficit is likely to expand by compared with last year 1.6 times for 18.2 bill, dollars (150.3 bill, yuan (1.7% of GDP ratios)).

The China government is an intention which achieves 7% growth of a government target by the stimulation of domestic demand for the public investment as infrastructure construction.

The important items of budget are as follows. (1) Infrastructure Construction, (2) Agriculture, Forestry, Water-Supply Task,

-22- (4) Rate raising of value-added tax return for export incentive,

Life guarantee of a primary lay-off person accompanied by national company reformation

8) An economic forecast (99 -2000)

The China economy for 99 years will be expected that an economic growth rate goes down due to (1) the economic recovery of the Asia countries is behind (2) the consumption demand in China is weak etc. Since the influence of stimulation-of- domestic-demand politics appears, the consumer prices which came down in 98 expect that consumer prices become less than 4%.

As for the trade forecast, according to the national plan committee, the rate of growth of export is expected to be zero, import expects the increase of 7%, and trade surplus is made into about 30 bill, dollars. About an economic growth rate forecast (1) China government to be 7% order for 99 years (2) Asian Development Bank to be 7.0% for 99 years and 6.5% for 2000 years (3) IMF is 6.6% and 7.0% for 99 years and 2000 years respectively.

(3) Social situation

[A historical large flood] The large flood occurred in mainly Changjiang (Yangtzechiang) and the Sungari of a northeast part on June to September in 1998. According to Ministry of Public welfare , 3,656 persons have been killed, the number of sufferers was about 230,000,000 persons and direct economical loss was estimated about 264.2 bill, yuan (about 4,000 bill.yen) with this calamity. A lot of soldiers were supplied to the front line, and each mass communications reported about [ contending of soldiers ] toward a flood every day.

Also Jiang Zemin PRC-President inspected each disaster area, and he expressed the posture in which the countermeasure against relief was wrestled with. The visit of Russia and Japan that were planning early in September was postponed in November.

In the large flood relief activity service person awarding conference of the 10,000

-23- person scale opened at Beijing late in September, President Jiang Zemin declared the victory to a large flood. Although a water level goes down gradually after that and damage ceased finally, Niu Maosheng, the minister of irrigation was asked in the responsibility of the whole flood damage, and was dismissed in November. And also much intentional- negligence construction was detected by dike break, and the persons concerned were punished. Moreover, by the indication with the "disaster caused by man" of a cause, valley each district carried out whole-surface prohibition of the deforestation, and the disorderly deforestation of the source of a stream induced extensive unemployment of a forestry pursuer. Moreover, the China government indicated that the disorderly deforestation of the source of a stream was the "disaster caused by man" of a cause, and valley each district prohibited the deforestation and extensive unemployment of a forestry pursuer was induced.

[Sanxia Dam construction]

The "Sanxia Dam" construction which builds the greatest multipurpose dam in the world in the Changjiang (Yangtzechiang) started construction work on December 14, 94. 1,130,000 residents of the submersion ground are due to be made to transfer by the completion in 2009. The Changjiang main stream was dammed up on November 8, 97, and it entered into the 2nd-term construction of dam main part construction.

The amount of storage of water and power-generation capability is estimated at 39,300,000,000 cubic meters and 84,700,000,000kw per year after completion. Although the comprehensive effects, such as flood prevention, power generation, damage from a drought, and water transport, are expected, it is anxious about the bad influence to an ecological system etc. from the environmental scholar etc.

An investment total amount is expected to become about 250 bill. yuan. The cartel of Japan was lost the international bid of the power-generation equipment for 97 years by the cartel of Europe and Canada.

[Serious environmental pollution] In proportion to economical development, environmental pollution, such as the

- 24 - atmosphere and water quality, is aggravating in every place in China. The China government announced the first air-pollution index (5 stage evaluation) for main 15 cities of the whole country, and Tianjin, Shenyang, and Guanzhou were considered as "contamination of the degree of middle" in January, 98. Since survey was performed for the floating particle-like substance, Chongqing and Shanghai, which are the remarkable pollution by SOx and NOx respectively, were considered as "slight pollution."

The China Environmental Protection Agency determined that production of leaded gasoline which has caused big air pollution will be stopped by 99 ends of the year in September. Moreover, he requested manufacture of the car that suited lead-free gasoline use to the domestic automobile manufacturer. When the Jiang Zemin PRC President visited Japan in November, 98 , the agreement document of Japanese-China environmental cooperation project was signed.

The countermeasure against air-pollution prevention is carried out for Dalian, Kueiyang, and Chongqing as the model city, and also the environment-information network construction which connects 100 cities in China were incorporated in the agreement document.

[Sightseeing boom] There were 63,480,000 tourists from overseas (Taiwan and Hong Kong are included) which visited China in 98 (10% increase compared with last year), and the foreign- currency income became 12.6 bill dollars (4% increase, the 7th place of the world). The domestic tourist of the same year increased compared with last year 7.8% (694,000,000 persons in total).

-25- 1.1.2 Energy supply and demand conditions

(1) Primary-energy supplies and demand

Chinese primary-energy consumption (the domestic total supply) in 1998 was 1,360 mill, tees (tons coal equivalent) which increased from about 1,000 mill, tees in 1991 at 3.9% of year average growth rates. In the meantime, the year average growth rate of coal is 3.0% which is less than the whole rate of growth. On the other hand, petroleum increases 6.1%, natural gas increases 4.7%, hydraulic power increases 8.5% of the year average growth rate respectively, and nuclear power generation is also introduced. Consequently, consumption percentage by the source of the primary energy in 1998 was that coal became 71.6%, petroleum 19.8%, natural gas 2.1% and hydraulic power etc. 6.5%. (Fig. 1.1.2-1, Table 1.1.2-1 and 1.1.2-2).

After entering in the 90s, China has achieved 10% or more of economic growth. However, remarkable shortage of energy due to increase the energy demand by consuming a lot of energy according to low efficiency, serves as the bottleneck, which restrains growth of the China economy. In order to achieve economic growth, energy needs to maintain sufficient growth.

Fig. 1.1.2-1 Transition of Chinese primary-energy

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

■ Total ■Coal #Oil MNatural gas ■ Hydraulic power

-26- Table 1.1.2-1 Transition of primary-energy production (l,000,000t of coal conversions) 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Quantity-of- production Coal 700 753 771 777 797 822 886 972 997 981 893

Petroleum 195 196 197 201 203 208 209 214 225 229 229

Natural gas 19 20 21 21 21 22 23 25 27 28 30

Hydraulic 43 47 50 49 51 59 70 80 77 86 88 power Sum total 958 1016 1039 1048 1073 1111 1187 1290 1326 1324 1240

Rate of growth 4.97 6.09 2.25 0.89 2.30 3.55 6.91 8.68 2.78 -0.16 -6.35 m Component- ratio Coal 73.1% 74.1% 74.2% 74.1% 74.3% 74.0% 74.6% 75.3% 75.2% 74.1% 72.0%

Petroleum 20.4% 19.3% 19.0% 19.2% 18.9% 18.7% 17.6% 16.6% 17.0% 17.3% 18.5%

Natural gas 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 1.9% 1.9% 2.0% 2.1% 2.4%

Hydraulic 4.5% 4.6% 4.8% 4.7% 4.8% 5.3% 5.9% 6.2% 5.8% 6.5% 7.1% power

Table 1.1.2-2 Transition of primary-energy consumption (l,000,000t of coal conversions) 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Amount of consumption Coal 709 737 752 790 826 866 921 979 1038 988 974

Petroleum 158 166 164 177 191 211 214 230 250 282 269

Natural gas 20 19 21 21 21 22 23 24 25 23 29

Hydraulic power 44 47 50 50 53 60 70 80 76 86 88

Sum total 930 969 987 1038 1092 1160 1227 1312 1389 1382 1360

Rate of growth 7.35 4.23 1.82 5.15 5.19 6.25 5.81 6.88 5.92 -0.56 -1.57

Component- ratio Coal 76.2% 76.0% 76.2% 76.1% 75.7% 74.7% 75.0% 74.6% 74.7% 71.5% 71.6%

Petroleum 17.0% 17.1% 16.6% 17.1% 17.5% 18.2% 17.4% 17.5% 18.0% 20.4% 19.8%

Natural gas 2.1% 2.0% 2.1% 2.0% 1.9% 1.9% 1.9% 1.8% 1.8% 1.7% 2.1%

Hydraulic power 4.7% 4.9% 5.1% 4.8% 4.9% 5.2% 5.7% 6.1% 5.5% 6.2% 6.5%

-27- During the 8th five piece year plan term in 1990 - 1995, the year average growth rate of GDP (gross domestic product) was 12%, and the year average growth rate of primary-energy production was 4.4%. The year average growth rate of energy consumption was 5.5%, and energy consumption elastic value was 0.46. The increase in the year average of the amount of energy consumption for these five years was 60.6 mill.ton (coal conversion), and the increase in the year average of energy production was 49.6 mill.ton (coal conversion). The problem on which the growth of energy production is more nearly less than consumptive growth turned into the serious problem.

The China government made the improvement of an energy industry the most important subject, and has performed the large capital injection. Energy projects, such as oil investigation, coal mine development, natural-gas mining, and construction of a power plant, were started in the area which runs short of supply. However, The demand-and-supply balance in a market changed late in 97. An energy supply-and-demand situation is changing to a buyer market gradually with the national remarkable energy short-supply situations. Accordingly, it is in the situation of energy oversupply now. The volume of inventories of coal is increasing every year. For example, the coal quantity of production in 1998 was 1,250 mill.ton, and volume of inventories became 200 mill.ton.

1) Coal As for the energy production and consuming structure of China in 1998, coal takes 72.0% and 71.6%. Development and production increase of coal is the maximum subject of Chinese energy production. In the 8th five piece year plan which started in 1991, the production increase of coal per year is made into 280 mill.ton. Among these, new starting construction work is 180 mill.ton and under production is 110 mill.ton. Thereby, the coking-coal production in 1997 became 981 mill.ton. Moreover, the mechanization of coal mining (80% for national important coal mine and 20% for district national coal mine) , raising of a concentrating-coal ratio (30%), the improvement in labor productivity, the introduction of foreign capital, etc. are aimed.

The feature of Chinese energy consumption is being dependent on coal greatly. It is because the coal, which is abundant domestic energy resources, must be used, and China has switched oil fire-power generation to coal fire- power generation, in order to turn oil to export. For this reason, the dependence of coal is in an uptrend in recent years. However, for the coal as an energy source, it has many problems such as the difficulty of extensive transportation, the environmental pollution, and the lowness of the efficiency

-28 - of energy use etc. Furthermore, there is many old equipment in a production facility, and the efficiency of energy for the equipment is bad. For this reason, the Chinese energy policy makes it the important subject, that is not only development of an energy source but increase the efficient use of energy.

Thus, the place of production of coal is located in Huabei (Shanhsi, Neimengku:39.5%), northwest (Shenhsi:32.5%), and a northeast (Liaoning:21.3%), and a means to transport coal to the seashore area where industry progressed has only a railroad, therefore 43% of freight transportation of a railroad serves as coal now, although coal serves as main Chinese energy sources. In order to overcome this present condition, generating electricity at the place of production of coal, and transmitting electricity to a consumer place by the high-voltage power line with transport-capacity reinforcement of a railroad, is also planned. If coal can be switched to the electric-power transportation instead of coal transportation, the increase in efficiency of energy consumption will be considered to progress drastically. Moreover, the coal transportation by the pipeline is promoted.

2) Oil

[Crude-oil production] The reserve production ratio of crude oil at the Chinese 1997 is 24,000,000,000 barrels, and the quantity of production serves as 3,210,000 barrels/day (Fig. 1.1.2-2). As for the crude-oil quantity of production in 1997, 62.1% of a totality is taken in the 3 land oil field (Daqing x Sheng Li, Liaohe) of eastern part, however the rate is decreasing every year (Table 1.1.2-3). On the one hand, crude-oil production in the sea oil field is increasing rapidly, and 10.2% of a totality is taken on the actual result in 1997.

China is doing its best in a depression improvement of the production quantity of the existing oil field, development of a landing oil field and sea oil field, and the incrementation of a production quantity.

-29 - Figure 1.1.2-2 Crude oil production quantity and deposits | b to -Q

85 86 87 88 89 90 91 92 93 94 95 96 97

Produ ction Deposits

Table 1.1.2-3 Transition of a crude oil production quantity (10,0001) 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Daqing 5,570 5,555 5,562 5,562 5,566 5,590 5,601 5,601 5,601 5,601 Sheng Li 3,330 3,335 3,350 3,355 3,346 3,270 3,090 3,000 2,912 2,801 Liaohe 1,267 1,335 1,360 1,370 1,385 1,420 1,502 1,552 1,504 1,504 Zhongyuan 720 698 630 610 581 550 483 410 400 402 Karamai 617 640 680 702 730 760 790 790 830 870 Huabei 605 548 535 501 480 460 464 466 467 468 Daxiang 422 408 383 381 390 405 425 430 434 435 Jilin 315 341 355 341 342 335 330 34 370 400 Tarim etc — 40 75 144 275 336 474 603 720 Others 784 815 807 841 861 854 923 973 1,020 1,120 Landing oil 13,630 13,675 13,702 13,738 13,825 13,919 13,944 13,730 14,141 14,321 field Sea oil 76 95 143 241 387 463 647 842 1,501 1620 field Sum total 13,706 13,770 13,845 13,979 14,212 14,382 14,591 14,572 15,642 15,941

The international bid is performed [ introduction of foreign capital / in the China upstream division ] about the Shanghai oil field development in 1982. Moreover, the introduction of foreign capital in a landing oil field was started in 1993, and the international bid of Xinjiang constituency Talimu Pendi of western part was performed. And, the introduction of foreign capital is advanced also to the project aiming at the production improvement from the existing oil field such as Daqing N Sheng LiN and Liaohe.

-30- In 1997 ends of year, the foreign investment agreement in a landing oil field development is 37 affairs, and serves as the aggregate 1 bill, dollar.

By the large-scale flood of the northeast part of the inside country in August, 1998, three oil fields (Daqing, Liaohe, Jilin) suffer damage, 2700 oil wells were closed, and it became the curtailment of production of 60,000 barrels/day. However, digging conditions were getting worse for these oil wells. Since the China National Petroleum Corporation (CNPC) which is performing production of three oil fields was already pointing to the curtailment of production of 48,000 barrels/day as a part for the first half of 1998 to these oil fields, and the damage to the oil field by flood was not so large.

[Crude-oil export and import] In China, while successive-diminution disposition has crude-oil export, crude-oil import is increasing rapidly, since crude-oil production is not extended and domestic demand increasing rapidly, For this reason, China is the net-import country of crude oil 1996 (Fig. 1.1.2-3).

Figure 1.1.2-3 Crude-oil export-and-import tendency

Although Chinese crude-oil export has contributed to foreign-currency purchase greatly, it is reduction disposition and about 400,000 barrels/day in recent years. As a crude-oil exporting country, 55.9% of a totality is for Japan, and the remainder

- 31 - serves as a Republic of Korea, the United States, etc. (Table 1.1.2-4). However, Chinese crude oil is mainly heavy and low sulfur crude oil, and the halves is used as a fuel as it is in Japan.

Table 1.1.2-4 Transition of a crude-oil export partner country (lOOOt) 1991 1992 1993 1994 1995 1996 1997 Japan 12,061.9 12,817.5 12,695.8 11,966.3 12,067.4 11,580.9 10.471.1 Korea 1,143.6 1,628.8 1,605.1 1,609.8 1,917.1 3,158.7 4,530.4 North Korea 1,101.9 1,005.6 1,033.0 832.8 1,021.5 936.2 506.1 Singapore 2,934.3 2,227.6 727.5 619.0 819.8 395.5 400.5 United States 4,611.3 3,610.2 2,777.1 3,059.7 2,475.3 2,654.2 2,309.8 Others 712.4 217.4 596.0 464.9 544.2 458.0 504.2 Sum total 22,565.4 21,507.1 19,434.5 18,552.5 18,845.3 19,183.4 18,722.1

About crude-oil import, since the spread of domestic crude oil price and international crude oil occurred price due to the depression to international crude-oil price, the import volume of foreign crude oil increased drastically in 1997. (Table 1.1.2-5). Since domestic crude oil is almost low sulfur crude oil, processing of crude oil containing 1.0% or more of a sulfur content is difficult in petroleum refinery in Chinese . Therefore, China has imported the low sulfur crude oil from Indonesia, the Middle East, etc. The Middle East crude-oil dependence on imports in 1997 is 47.3%. Although import of Oman crude oil forms 53.8% of Middle East crude-oil import (1997), import of Yemen crude oil is increasing in recent years. The number of the petroleum refineries which can process Middle East crude oil in China is four (Dalian, Maoming, Chinhae and Guangzhou). Although Oman crude oil is mainly imported for the Maoming petroleum refineries, in other petroleum refineries, mixed processing of domestic crude oil and import crude oil is performed.

Table 1.1.2-5 Transition of a crude-oil importing country (lOOOt) 1991 1992 1993 1994 1995 1996 1997 Iran 55.0 115.0 67.9 69.1 931.2 2,311.1 2,756.7 Oman 2,654.1 3,060.4 4,088.8 3,367.4 3,653.2 5,732.2 9,033.0 Yemen 0.0 483.2 1,655.4 1,258.2 2,473.2 3,765.7 4,055.0 Other Middle East 143.1 420.1 786.6 212.0 706.4 310.7 936.9 Indonesia 2,770.0 4,767.2 4,017.9 4,724.5 5,278.8 6,350.2 6,587.1 Other Asia 320.2 1,946.8 2,515.1 2,118.4 1,802.4 1,918.8 2,826.6 Africa 0.0 498.5 2,264.9 502.6 1,839.3 1,927.0 5,906.8 Others 35.0 111.7 542.1 93.7 400.8 497.5 3,369.4 vSum total 5,977.4 11,402.9 15,938.7 12,345.9 17,085.2 22,813.2 35,471.5

-32- About the crude-oil export-and-import tendency in 1998, the crude-oil export volume from January to September serves as minus 17% (comparison of the previous year) and 341,000 barrels/day. On the one hand about crude-oil import, minus 4.1% (comparison of the previous year) and 626,000 barrels/day by the import restriction of crude oil etc.

3) Natural-gas mine

Natural gas is one of important energy resources like coal and oil In China. Although the reserve production ratio of natural gas has 1,160-bill. m3, it is not yet utilized sufficiently. Compared with the average of the Asia countries for utilization of natural gas being 8 - 9%, China is as low as 2 - 3% among gross energy.

The estimated amount of natural gas in China is l,160-bill.m3, on the other hand, Russia is 48, 140-bill. m3 and Iran is 22,940-bill. m3. As compared with these, it is truly few, and it's the 22nd place and it takes about 0.8% in the entire world. But, since there was little volume of production until now, the years that can be mined are comparatively long. Other those for industry are only 23.7%, 64.7% of natural gas is used for the production of a }, and HU is only 9.8%. The consumer of natural gas is only 64.% for the production of chemical fertilizer, 23.7% for the other industry and 9.8% in a household purpose. For example, only 400,000 peoples use natural gas in 12,000,000 Beijing residents, and the gas consumption on this city is about 35-mill.m3/year average only.

As for the investigation and the development of natural gas in China, only the low priority was given compared with the crude-oil development until now. Shortage of capital, an infrastructure, transportation, a zeal for production and the low cost, and the high investigation cost had become the factor that obstructs the growth. However, in or after 85, China began to take in force into gas investigation, the gas volume of production became 16,500-mill.m3 in 95, and after that, it increased to 21,200-mill.m3 in 97. Natural gas production at the eastern part and Sichuan is made about 6-bill. m3 respectively, and form about 80% of whole China. The gas field about 180 is located in China now, and about 100-gas field is being produced. The associated gas also forms the hard core of the total gas production, and 78% is produced at Liaohe, Daxiangx Zhongyuan, and Hupei.

-33- Figure 1.1.2-4 Natural-gas production transition

4) Electric power

National electric-power ^ #1 (January, 1997 constitution) which the country has contributed in total is managing the electric power industry. The facilities component proportion ratio of hydroelectricity, a thermal power generation, and nuclear power generation will be 23:76:1 as of 1996. In connection with rapid economic growth, power consumption is also extended rapidly, and the year par-increasing rate from 1991 to 1996 are 9.8%.

In the ten year plan from 1990 to 2000, 1,100-bill.kWh of the amounts of power generation and 240-mill.kW power-generation facilities are needed in 2000 in cases where the average growth rate of GNP (GNP) is made into 6%. Although there are the following plans in order to achieve it, reconsideration of a target numerical value is performed in order to maintain 8 - 9% of GNP growth rate: (1) continuation and acceleration for the construction of power plant at location of coal mine (2) marine transportation of coal and construction of power plant along the bay area (3) power plant construction in the area of the important point of a railroad

- 34- [Electric-power supplies and demand] The transition of the amounts of power generation and the power-generation facilities are shown in Fig. 1.1.2-6 and Fig. 1.1.2-5. The capacity of power-generation facilities became 3.6 times for 16 years from 1980 to 1996. Although the facilities component proportion ratio of hydroelectricity and thermal power generation was 30% : 70% in 1980, the proportion of thermal power generation increased as 24% : 76% in 1996. In addition, the proportion of the nuclear power generation introduced in 1993 is about 1%. Since the country in China is wide, this proportion changes with areas greatly. In the southwest part (Fuchien, Yunnan, Kuanhsi) with abundant water, hydroelectricity exceeds a thermal power generation. On the one hand, almost all northern part (shantung, Huabei, Huadong) is a thermal power generation due to the limited water.

Fig. 1.1.2-5 Transition of Chinese power-generation installed capacity

200,000 180,000 160,000 140,000 £ 120,000 § 100,000 S' 80,000 60,000 40.000 20.000 0

K/y/% Hydraelectricity BS88 B838 Thermalelectricity Atomic energy —* — Total power-generation capacity

Fig. 1.1.2-6 Transition of Chinese generated energy

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2.000 0 80 85 86 87 88 89 90 91 92 93 94 95 96

HBH Hydroelectricity V//A Thermalelectricity Atomic energy —Total generated energy

-35- 100 mill.kWh oil 1.1.2-7. bill.kWh capability As The ■ ■ industry postal amounts gradually. government totality, The (excluding 12,000 10,000 amount 4.000 2.000 6,000 8,000

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[Nuclear power generation] (As of December, 1997) On-stream 3 sets 2,270,000kW Under construction 3 sets 2,200,OOOkW Planning 9 sets 8,400, OOOkW Total 15 sets 12,870, OOOkW Rate of the nuclear power generation taken to the total electric energy (1996) : 1.3%

CNNC has a plan which expands capacity of nuclear-power-generation plant of an on stream to 20,000,000kW by the 2010 and to 4,000-60,000,OOOkW by 2020.

Based on the "9th five piece year plan" (1996- 2000) announced on October, 1995, China is carrying out the construction planning for construction of eight sets nuclear power plants in four sites. In detail, it is four projects as 2nd and 3rd term construction of Qinshan, Lingao in Guangdong and Jiangsu Lianyungang, and the capacity of the power-generation plant becomes 6,600,OOOkW in total.

With a plan of Qinshan 2nd term construction, domestic type PWR (600,000kWx two sets) is under construction, and an electric-transmission on 2002 by 1st machine is planned. Two sets of CANDU-6 Nuclear reactor are planned in Qinshan 3rd term construction, and it business start up in 2003 is aimed. At the Guangdong Lingao site, construction of two PWRs which has the capacity 1,000,OOOkW are planned, and the business start up in 2003 is also planning . To the Jiangsu Lianyungang site, two 1,000,OOOkW class improved type VVER-1000 Nuclear reactor of Russia are construction schedules, and the completion of 1st machine is scheduled on 2004.

Daya bay power plant is undertaken the safety review by IAEA's (OSART: Operational Safety Review Team) inspection on October, 1996 , and it is concluded that the plant is being operated according to an international safety standard .

-37- (2) Oil industry

1) Oil-industry structure In China, the oil industry is reorganized as a part of state-enterprise reorganization in May, 1998 for a market competition induction. It unifies the upstream and the down-stream division of CNPC and SINOPEC who are Chinese 2 big oil conglomerate, and shifts to vertical consistency type 2 large-enterprise system divided into north and south by the re allocation of assets, such as an affiliate-company group, an oil field, and a petroleum refinery.

Until now, in China, CNPC occupies 90% of Chinese crude-oil production, and SINOPEC owned 77% of Chinese refining capability, and was in the monopoly status mostly in each field. However, by this reorganization, CNPC will work in the upstream and the down stream division of a northern part and a western part, and SINOPEC will work in eastern part and a coast part. Regulation and the administration function of a Chinese oil industry have shifted to the new national petrochemical-industry office (State Petroleum and Chemical Bureau).

China New Governmental Organizations Involved in the Petrochemical Industry

State Council (Cabinet)

State Development State Economic and Ministry of Land and Planning Commission Trade Commission Natural Resources

State Petrochemical Industry Bureau

China China China China Large-scale National Petrochemical National National petro-giants Petroleum Corporation Offshore Star under planning Corporation (SINOPEC) Oil Petroleum by the Ministry (CNPC) Group Corporation Corporation of Science and Group (CNOOC) (CNSPC) Technology

- 38 - Moreover, China carried out constitution reorganization of the price to domestic crude oil and a part of petroleum product in June, 1998. Crude oil produced from a landing oil field was divided into four quality, a light oil, middle-distillate-I, middle-distillate-II, and a heavy oil. Each oil was interlocked with the market price of overseas crude oil according to the quality, such as the light oil with Malaysian oil, the middle distillate-I with Indonesian oil etc.

A national evolution-operation board sets up an index price only for a premium gasoline and gas oil on the basis of the Singapore market, and CNPC and SINOPEC are allowed to set up its price in the boundary of less than 5% of the upper and lower sides of an index price.

In China, as described above, by the international dip in price of crude oil and a petroleum product, the differential of an international price and a home price was expanded and import of cheap overseas crude oil and petroleum product increased drastically. Thereby, since the volume of sales of domestic crude oil and petroleum product decreased, the sales of CNPC and SINOPEC got worse. The revenue in January 1998 to May of SINOPEC had become the red figures of 240mill. dollars.

The aim of a new price system is promoting merchandising to the home market of domestic crude oil and a domestic petroleum product by giving flexibility to a home price, and controlling import of crude oil and a petroleum product, and is to improve the revenue of a petroleum business corporation.

New price system introduction, and import restriction and import suppression are performed, and operation reorganization of a petroleum business corporation was achieved in or after July 1998. Consequently, the revenue of SINOPEC became the black figure of 25.8 mill, dollars in July and 55.7 mill, dollars in August 1998 respectively.

-39 - 2) Oil refining

As for the petroleum-refining capability in China, it was 3,855,000-barrels/day in 1997 (Table 1.1.2-6). However, in the petroleum refinery located in the inland in China, since restraint is in procurement of crude oil and the marketplace size of a petroleum product, the petroleum- refinery scale is small in average and its operating ratio is low. For this reason, Chinese petroleum-refinery operating ratio is about 70 percent.

Table 1.1.2-6 Petroleum-refining capability (1997) (l,000b/d) Atmospheric Thermal Catalytic Hydro Sulfur distillation cracking cracking cracking removal CNPC 220 0 0 0 0 SINOPEC 3,290 170 917 156 0 Others 345 0 23 0 20 Total 3,855 170 940 156 20

As for the operation status of a petroleum refinery in 1998, it had become the increase of 2% in January - July compared with the corresponding period of last year, however, substantial reduction of production after August was performed since the petroleum product was the excessive-supply situation in the market. For this reason, the crude-oil throughput from January to October in 1998 serves as A3% and 3,010,000 barrels/day in total compared with the previous year.

The characteristic of the structure for Chinese petroleum-refinery plant is that a catalytic- cracking is main facility as a secondary-processing unit. Moreover, since most domestic crude oil is low sulfur content, processing of 1.0% or more of high sulfur crude oil is difficult in the Chinese petroleum refiner

About the enlargement of Chinese refining capability, rather than constructing a new petroleum refinery at present, while the operating ratio of the existing petroleum refinery is improved as much as possible, and , priority is set to do a repair and enlargement of facilities. As for the foreign-funding entry to refining division, ARCO has participated in Zhenhai petroleum-refinery enlargement, and TOTAL has participated in the Dalian petroleum refinery.

Moreover, the Exxon Corp. has concluded the joint venture convention with Saudi ARAMCO

-40- in 1997 about the Fuchien petrochemistry of a Fujian, and Xiaocuo petroleum-refinery extension plan (80,000 barrels/day to 240,000 barrel/day). However, about the plan of the others containing joint venture plan, such as Saudi ARAMCO in Qingdao petroleum-refinery construction, the negotiation has delayed and the inroad to the refining division by the foreign company is limited in China.

3) Petroleum product demand

About Chinese petroleum product demand, it will support to the active economic growth in 1990s, and an increasing rate for-the-year during 1990 - 1997 has become 7.7% (Fig. 1.1.2-8). Chinese petroleum product demand increased drastically emphasizing the medium fraction in connection with economic development.

As for its demand, the year par-increasing rate during 1990 - 1997 becomes 10.1%, and the demand has exceeded drastically the rate of growth of the whole oil demand. On the one hand, about heavy oil demand, the year par increasing rate remains to 4.3% in 1990 - 1997, since the utilization acceleration of coal in a power-generation division was planned in order to cope with the appreciation of an electric power demand.

Figure 1.1.2-8 Transition of petroleum product demand and refining capability

90 91 92 93 94 95 96 97

Heavy oil ESI Median fraction □ Gasoline □Others

In the 9th five year plan, the energy development is taken as the electric-power subjective. Especially, a coal conveyance is scheduled to expand positively the coal thermal power station in the mining site of coal, and to be converted into an electric-power conveyance.

- 41 - A thermal power station takes cooperation closely with environmental preservation, hurries the development of the clean utilization know how of coal, and applies exhaust-gas- desulfurization-system know how, and it is important to popularize.

4) Oil product exportation and importation

Although refining capability has exceeded domestic demand greatly in China, petroleum product import is increasing drastically and serves as the net-import country of a petroleum product in or after 1992 due to low operating ration of refining facilities and increase of domestic petroleum product demand etc. (Fig. 1.1.2-9).

Fig. 1.1.2-9 Petroleum product export-and-import tendency

100

-100

V///A Export Emm Import - » ■ Net import

[Petroleum product import] The import liberalization of a petroleum product was performed in 1993. Since various trading companies and business enterprises imported the petroleum product in large quantities, which lowered quality and the price on various channels and names, the petroleum product import volume in 1993 became 350,000 barrels/day. Then, the petroleum product import volume in 1994 is decreasing on 250,000-barrels/day because the China government strengthened restriction again,

In 1997, since the price differential between domestic petroleum product and an international petroleum product which came down drastically was expanded, petroleum product import increases (48% compared with last year) again and serves as 410,000 barrels/ day (Fig. 1.1.2- 10).

- 42- Fig. 1.1.2-10 Transition of a Chinese petroleum product import volume

■ Heavy oil H Gas oil M Kerosene H Gasoline El Naphtha

In China, because the politics, which reduces the yield of heavy oil, is taken in order to plan the production increase of a light petroleum product, the import volume of heavy oil is increasing significantly. The import volume of heavy oil during 1990 - 1997 serves as the high elongation of an average of 57.7% of years, and the import volume in 1997 forms 55.1% of all import volumes on 226,000 barrels/day.

[Oil product export] Export of a petroleum product is also performed with small-scale, and the export volume in 1997 serves as 100,000 barrels/day (Fig. 1.1.2-11).

Fig. 11.2-11 Transition of a Chinese petroleum product export volume

-43- About the petroleum product export-and-import tendency after entering in 1998, the petroleum product inventory became excessive by the increase, smuggling, etc. with substantial petroleum product import by the price differential between the domestic and overseas markets. Thereby, the China government performed the import restriction of gas oil and a gasoline for the purpose of over-stock dissolution in February 1998.

As a result, the petroleum product import volume in January - September 1998 serves as 432,000 barrels/day (minus 3.6% compared with last year). Furthermore, the overall import prohibition of gas oil is performed from September 1998 for reorganization of domestic supply system, and it is also performing the overall import prohibition of a gasoline in October 1998. These import restriction actions are expected to be continued December 1998 or later.

(3) Environmental situation

1) Air pollution The Chinese air-pollution issue has the relation closely with the energy consuming structure. That is, industry and public welfare (household and office) both the sector have a low heat efficiency because of the old technology. Moreover, since there is much energy demand for heating in part in an area, energy expenditure per GDP is big compared with other country.

In subsequently to the U.S. and Russia, China being an energy consumption country of the third position in the world, 72% of the primary energy is formed with coal, the amount of C02 discharge increases relatively. Coal with the high content of sulfur and ash is main, and since sulfur-removal processing after combustion is hardly performed, the amount of discharge of sulfur dioxide reaches 20 times of Japan.

According to the data of the Environmental Protection Agency of Chongqing where especially S02 pollution is severe, in this city, 15 mill.ton coal is consumed at every year, its sulfur content in average is 4.0 - 4.5% , and ash content reaches to 25%. 800,000ton per year of SOs2 is discharged by this coal combustion, and the atmospheric air of Chongqing is polluted. In the severest area of Chongqing, the morbidity of a respiratory-system disease is 34.3%, the death rate by the respiratory-system disease is 177.88 person per 100,000 people, and the death rate of a lung cancer was also go up from 21.8 person per 100,000 people for 73 years to 62 person in 92 according the report.

- 44 - 1.1.3 Project needs for CDM

China is going to learn the international advanced energy-conservation politics, management method and the standard by efficient-staff dispatch, visitation or training, and also they are going to forward the introduction of technological know-how and facilities for energy- conservation.

In respect of financial resources credit, China is expecting to accelerate it by utilization of acquisition of contribution and low interest rate foreign loan of a foreign government or an international-finance constitution, and foreign company's direct investment. Therefore, it is considered that the needs of the project of CDM are big.

However, in the present circumstances, the China government is going to just clarify the plan actively promoted to CDM at the place of the international Conference of Parties of the United Nations Framework Convention on Climate Change (COP).

Although it is under discussion among each country about how to proceed CDM in order to make it materialized by COP 6, it is not yet established.

The China company has said that it cannot declare about needs for the moment since the China government's detailed plan is unknown. (Detailed adjustment way for the formation of CDM realization etc.)

-45- 1.2 Necessity for introduction of the energy conservation technology into the subject industry

Energy saving in the petrochemical industry is based on technological progress and overall production plans. On this basis, the oil, chemicals, and fiber and textile industries as a whole are to be developed and their overall level raised, allowing the rational utilization of oil resources on a comprehensive scale. With the objective of attaining an advanced level of energy conservation technology progress even by world standards, the necessary equipment is to be introduced on a priority basis, taking into consideration the conditions in China and the production conditions of the petrochemical industry. Technical improvements will then be made that will enable production to meet the standards set and allow the reduction of energy consumption. The target average energy consumption figure for superannuated equipment has been set at 750 kg/ton (standard oil).

The following regulations have been laid down for the achievement of energy conservation in the oil refining industry.

1) Improvement of normal-pressure vacuum distillation equipment and desalting and anti-corrosion technologies, as well as heat-exchange processes. The number of light hydrocarbon recovery devices is to be increased, and the thermal efficiency of heating furnaces is to be raised. Tower panels and filling materials are to be replaced with the latest types, and high-efficiency compressors and state-of-the-art heat exchangers are to be employed, while processes are to be computer controlled to achieve the best performance.

2) The steam released by the flue gas devices of reaction cracking equipment and surplus heat boilers is to be changed from low-pressure to medium-pressure. The utilization ratio of the low-level heat emitted by fractionating column tops and steady absorption systems is to be raised. More advanced technology for the recovery of cokes energy is to be introduced, raising the recovery rate to 70%. The more widespread use of new catalysts, high-efficiency spraying nozzles, and slide valves is to be promoted.

3) Regarding cracking reforming devices, the use of a more efficient solvent in place of diethyl-2-ether or ethanol-amine is to be promoted. For devices used to remove tar from solvent, there is an urgent need to utilize supercritical recovery technology. The filtration liquid cycle of ketone and benzene desulfurization devices must be improved. Regarding multipoint dilution, freezing-point dilution, two-stage filtration and the multi-evaporation recovery of solvent, low-efficiency filtration equipment, freezing equipment, and paraffin transport facilities for steam pumps are to be replaced with new, high-efficiency types.

Thus, regulations currently in force aim at achieving energy conservation through the introduction of highly efficient advanced technology.

- 46 - 1.3 Purposes, needs and expected results for project execution, and influence effects etc., to the similar industries

Particularly noteworthy is the fact that other refineries situated, as is the Dalian refinery, in coastal areas of China, such as Oilu, Fujian, Guangzhou, Gaolianqiao, Shanghai, and Jinling, where a strong import infrastructure is in place, will be forced to import and process an increasing amount of crude oil to meet the growing demand for petroleum products. In such an event, to be able to properly refine imported crude, which contains higher proportions of heavy oil and residual carbon than crude oil produced in China, these refineries will have to increase and modify their secondary cracking facilities, including the installation of new equipment. As these devices will give off large amounts of waste gas and waste heat, their introduction is likely to result in an energy imbalance. The energy conservation technology to be introduced under the project in question is thus expected to be eagerly welcomed by these refineries.

The overall energy effective utilization needs to be considered taking into account energy conservation in each equipment, operation of each equipment and the efficient utilization of a utility etc.

This refinery survey has meaningful in investigation of energy recovery on FCC and RFCC, which are energy generating type facilities and investigation of heat recovery on distillation unit that is energy consumption type facilities.

There is big possibility that an energy-conservation and energy-effective utilization project such as power recovery will popularize.

-47- Materialization of project planning 2u Materialization of Project Planning This chapter describes the project planning, outline, schedule and project investment. Moreover, a source of funds and the forecast of a financing plan, profitability, concern and appraisal of the partner to project are also described.

2.1 Project Planning The power recovery unit installed in the Sheng Li refinery under the basis of NEDO green aid model activity in 1996 operates favorably, and has also brought the high energy-conservation effect currently. The concerned refinery was recommended as a leading candidate refinery from SINOPEC in investigating the popularization possibility of FCC power recovery unit as a part of NEDO green helmet activity in December, 1998, in order to popularize the success that for Sheng Li refinery.

When it visited the concerned refinery, in addition to the scaled-up plan of a power recovery unit, they asked for the collaboration of further effective utilization of surplus flue gas, and the countermeasure against energy conservation of the whole refinery. SINOPEC has the plan which raises the concerned refinery as a model refinery about energy conservation, with advanced energy-conservation technology of Japan.

In this project, the renewal of power recovery unit and the installation of off-gas- treatment plant accompanied by the throughput expansion program of the fluid cat cracker (FCC) which is under planning by the refinery.

- 51 - 2.1.1 Outline of the regional conditions for project site In this chapter, the economy and the social outline of the Jiangsu and a Nanjing city which is located the Nanjing petroleum refinery are described.

(1) Jiangsu National heavy-industry giant company exists in a Jiangsu from early, and the Xiangzhen business enterprise (*) of a light industry is the region which is most developed in China. A big city, a small city, and small town are distributed over the Jiangsu like the constellation. It is an important region supporting the growth of the China economy, and the heavy industry and the light industry have secured a lead's seat. (*) : the small and medium sized firm of non-nationalization. Not only industry but the construction industry, commerce, food-and-drink business, etc. are contained. Every place are dotted with a famous-place historic spot and Jiangsu is one of the important sight seeing cities of the seven whole country.

Acreage : 2 102,600km2

Population : 71,820,000 people (1998)

Population density : 700 people/km 2

GDP : 720,000 mill, yuan (1998)

Provincial capital : Nanjing

Fiscal-balance Unit :100mill. yuan 1996 1997 1998 Revenue 223.17 273.20 296.60 Expenditure 310.94 379.50 424.90

-52- mrt±»at m m e *$% Y -m® tan mm # mm* s w*mm %MpJf e- /clfC T mK X m %% mj« A

-53- 1) Geographical features and climate A Jiangsu is located in the eastern-part coast area of the China continent, the lower stream of Changjiang and Huaihe, an east stand in a row in a Huang Hai, west stands in a row in Anhuei, south adjoins Shanghai and Chehiang, and north touches a shantung and a border. It belongs to subtropical warm climate and the mean temperature of every year is 13°C - 16°C. A plain is wide in flat geographical features, there are many rivers and lakes, and it is crowded with river networks. A plain takes 68.8% and river acreage takes 16.9%. There are large populations and the work force mine is abundant.

2) Resources The distribution of mine resources is wide and also has many kind. Coal near Xuzhou, the rock phosphate near the Lianyungang, salt of Huaibei area, and the kaolin of Yixing are known all over the country. There are iron, manganese, and a non ferrous metal in a hilly regions area. Mineral products, such as clay and fabric, occupy the high order in the mine resources of Chiangsu. Chiangsu has the huge tidal flat and the seabeach region, marine resources are abundant, and freshwater fish is about 140 kind. Especially, hairtail of Changjiang , icefish of Huaihe,pearl of Taihu, shrimp of Yangchenghu and marine products such as bonito, prawn, clam, eel etc. are famous.

3) Industrial economy Home GDP of the Jiangsu in 1998 achieved the growth of 7.8% compared with last year and 720,000,000,000 yuan. The provisions aggregate output of the same year is 3,563.80,0001, increased 874,000t from the past highest level, and grew 2.5%. The volume of production of cotton decreased 5.6% for market-demand reduction. The oil gross product decreased 3.8% from the previous year. The produce of the whole industrial company increase 13.6% from the previous year, and the produce of a light industry and a heavy industry increased 15.2% and 8.6% respectively from the previous year. A government owned corporation's produce grew 8.6% from the previous year, and the produce of group company and others increased 104% and 15.8%.

- 54 - 4) Major industry An electronic, petrochemistry, and automobile manufacture, are a major industry.

[Machinery and automobile industry] The produce of the machinery party of Jiangsu is 59,300,000,000 yuan, and there are 109 companies where production exceeded 100,000,000 yuan. It is five companies that production exceeded 1,100,000,000 yuan. The production of an automobile industry is 34,000,000,000 yuan which take 57%, and is extended 9.7% from the previous year. Among those, automobile production becomes about 90,000 sets and a motorcycle becomes 1,875,000 sets. The volume of production of a motorcycle is the first place in China.

[Electronic industry] The industrial gross product of electronic business community grew 32.3% from the previous year and 50,800,000,000 yuan. As products, the implemented microcomputer and VCD exceeds 200% compared with last year, monitor, printer, and IC are 100% increase, and CRT, color television, the program-control telephone-exchange machine, the telephone, the electronic component, etc. achieved 5% -15% of growth.

[Chemical industry] The selling revenues of a chemical industry are 29,100,000,000 yuan and the growth of 9.3% compared with last year. That whose production increased from the previous year by 16 kinds of material chemical preparations achieved the growth on which the xanthation second iron, a dark nitric acid, a caustic soda, soda, carbide, agricultural chemicals, methyl alcohol, a coloring matter, a polyvinyl chloride resin, a tyre, etc. exceed 100%, respectively. On the one hand, volumes of production, such as mineral phosphate , a sulfuric acid, a synthetic ammonia, and chemical fertilizer, decreased from the previous year.

- 55 - Jiangsu 10 big Nationalized enterprise (10,000 yuan) Company name Site Industry Year sales 1. YangZi Petrochemical Corporation Nanjing Petrochemistry 1,187,706 2. Jinling Petrochemical Corporation Nanjing Petrochemistry 843,345 3. Rush Train Group Nanjing Automobile 471,227 4. Man made fiber Limited - Man made fiber 634,046 5. Electric Group Taichuan Electric 574,380

6. Chiangsu Steel Group Limited - Metallurgical 316,331 7. Kanagi Group Limited Nanjing Motorcycle 376,671 8. Chiangsu Textile Group Xuzhou Food 104,958 9. Panda Electronic Group Nanjing Electric 377,831 10. Nanjing Steel Group Limited Nanjing Metallurgical 250,448 (1997)

5) Trading An export-and-import aggregate in recent years is as follows. The active trade with Japan was started in 74. lOOmill. dollars 1996 1997 1998 Export 115.99 140.96 156.27 Import 90.99 95.33 107.22

6) Tertiary industry The number of overseas sight seeing persons which visited the Jiangsu became 1,017,000 people in total and 21.5% increase, and tourist income increased 28.8% and became 410 mill, dollars compared with previous year.

7) The main important construction items The main important construction items of a Jiangsu are as follows. And its total budget serves as about 7,500,000,000 yuan. (1) Nanjing Lukou International Airport (2) Xuzhou Airport (3) The Wuxi sewage-disposal construction (the second term) (4) The first term construction of the Xuzhou (5) Water Way Arrangement Construction

- 56 - 8) Foreign-funding utilization outline It is the first place of the whole country, and the consultation capital-import amount of a Jiangsu is 9.8 bill, dollars. The number of establishment in business of a foreign-funding direct-investment company reaches 17,000 companies and the employee becomes 1,010,000 people, and an export gross amount achieves to 6.5 bill, dollars. The produced type business enterprise are 1,789 companies and un-producing type business enterprise are 300 companies. There is various industry, such as agriculture, forestry, a stock raising industry, a fishery industry, manufacture, electric power, gas, construction business, traffic, retailing trading, food business, a realty business, and social-service business. A foreign-funding direct investment is the country and the region of 47, and has Singapore, Hong Kong, the United States, Japan, Britain, the Republic of Korea, etc.

Amount of foreign-funding direct investment Unit :10,000dollar Number of cases Amount of contract Amount of execution 1996 2,691 1,068,256 521,009 1997 2,089 919,582 543,511 1998 1,817 757,764 663,179

Investment past-records (1997) by Country and region

Number of business enterprises 10,000dollar Hong Kong 518 163,253 United States 275 80,432 Japan 188 61,837 Singapore 154 296,532 England 34 49,264 Korea 94 34,805

-57- Number of classification-by-industry foreign-funding injection business enterprises

Type-of-industry The number of business enterprises Agricultural 65 Manufacture 1,669 Electric power, gas, and water service 26 Construction 23 Traffic transportation-business 56 Trading and food-and-drink business 46 Realty-business 47 Social-service 103 (1997)

-58 - (2) Nanjing city

Nanjing is the provincial capital of a Jiangsu and it is the prospered on the both banks of the river of a Changjiang lower stream of a river A Nanjing is in the place of about 15 hours at a special express from a Beijing, and is called "three-major furnace (three-major stove)" with the Chongqing of the Chang coast, and a Wuhan, and the warmth of summer is notorious. Geographical features are surrounded in an east, west, and south in a mountain, and are solid of ground. The textile goods produced here are notorious as one of the China three-major textiles. The town was built from 2,400 years or more before, and it was called as Jinling. Although Taizu of Ming dawn placed the capital here, since next Yongle returned capital to the Beijing, it came to be called a "Nanjing" by the mind of a southern capital to the Beijing.

Although Taizu of Ming put the capital here, since next Yongle moved the capital to the Beijing, it came to be called a "Nanjing" by the meaning of a southern capital to the Beijing. It became the capital of the Taiping Tiauguo which Hung Hsiu-chuan commands 1853. From 1927 to April, 48, it became the capital of China of the National Party. It is developed as an industrial town now.

It is one of a few cities with the rampart which is surrounded by the protective wall with a span of 35km by the old town now. As for Yuhuatai which deifies Zhongshanling of the grave of a Sun Yixian, and revolution Soldier, a peace Heaven history museum, etc., in the city has many famous-place historic spots which tell a history. In the city, Zhongshanling (grave of a Sun Yixian), Yuhuatai which deifies revolutionary soldier, Taiping Tiauguo historical museum, etc. have many famous-place historic spots. The Nanjing-Chang large-sized bridge constructed over the Chang (Yangtzechiang) with the span of 6,772m is what China accomplished in September, 68 single-handedly. The bridge is made from two layers, a top is a driveway (two lanes), and the bottom is a railroad (double track). In 83, the Jinling Hotel with 37th floor and 110m height, which was highest hotel in China of those days was opened, and the huge building stone was also discovered in the suburbs of the same year.

-59 - It is a friendship city with Nagoya-shi of Japan (December 21, 1978), and was assigned one of the historical cultural cities in 82. In Taiwan, a Nanjing is also made into the capital of China now, and a Beijing is called as Beiping.

Acreage : 4,700 km2

Population : 5,320,000 people (1998)

Population density : 1,132 people/km 2

G D P : 76,160 mill, yuan (1997)

Fiscal-balance Unit ilOOmill. yuan 1996 1997 Revenue 36.16 45.97 Expenditure 40.17 53.41

-60- * O 1) Industrial economy GDP of a Nanjing city is 76,160,000,000 yuan and the growth rate is 13.4% compared with last year. The rate of growth for first, second, and the tertiary industry is 6%, 13%, and 15.5% increase respectively, and the componen ratio by each industry are 6.9:50.1:43.

2) Major industry Nanjing is one of the important industrial matrixs in China, and it was constructing the synthetic industrial scheme emphasizing electronic industry, automobile industry, and the chemical industry for a long time.

[Electronic industry] The main products are a radar, communication facilities, broadcast television, semiconductor parts, computer and an electronic component. In recent years, a fiber optic communication, a microcomputer, a printer, electric vacuum parts and IC etc. are expanded. The export foreign-currency revenue in 1997 increased 5% and 42mill. dollars compared with the previous year.

[Automobile industry] Nanjing city is the production base of the largest light car in the whole country, and has the capability which mass-produces the light car of many kinds. Nanjing automobile Factory can manufacture 30 kinds of small vehicles, and a wagon vehicle. The number of automobile sale in 1997 is 74,558 sets, and a selling revenue is the growth of 14.3% compared with last year.

[Petrochemical industry] The largest petrochemical production plant in the whole country, such as the ethylene, an aromatic hydrocarbon, sulfuric acid and alkyl benzene is in Nanjing, and a comprehensive scale of production is in the second place of the whole country. Yangzi Petrochemical Corporation^ Nanjing Petrochemical Industry^ Jinling Petrochemical Corporation, etc. are the large-sized joint chemical-industry business enterprises with modern production level. As a major product, they are a synthetic ammonia, a sulfuric acid, nitrogenous fertilizer, hosphorus fertilizer, soda, catalyst, cement, etc.

3) Economic system reformation There are 34 companies of business enterprises which passed the national modernization business enterprise constitution testing, among those the 31-company business enterprise

-62- operates formally. A nationalized enterprise's active-capital recombination and accounting-capital transit began to step at a positive speed and the large-sized industrial group consisting mainly of Yangzk Jinling, etc. was established. There are about 70 companies of business enterprises which carried out a joint venture, bankruptcy, and restructuring in 1997, and the co ordination of an industrial structure is progressing.

4) Foreign-funding utilization outline The foreign major company of Germany, the Netherlands, the Republic of Korea etc. made to the Nanjing the large-scale technology concentration type business enterprise. There are 29 companies of business enterprises which the investment gross amount is 10 mill, dollars or more, and business of electronic information, a biotechnology science medicine, a fine chemicals, a car, a motorcycle, etc. is carried out. There are 2,572 companies of 3 Ziqiye(*) as of 1997 end-of-year.

* : "joint business enterprise" with a foreign capital, "collaboration business enterprise" with a foreign capital and "monopolistic-capital business enterprise" which the foreign capital contributed 100%, these 3 kinds of Foreign affiliate calls as 3 Ziqiye.

The main 3 Ziqiye (10,000 yuan) Business enterprise name Site Industry Country Year sales 1. Nanjing Machinary Corp. Nanjing Motorcycle Hong Kong 307,900 2. Nanjing Comunication Corp. Nanjing Communication Sweden 75,500 3. Mitsubishi Aircondit. Corp. Nanjing Air-conditioning Japanese 73,600 4. Nanjing Chemical Industry Nanjing Chemical ind. Hong Kong 41,600 5. Nanjing Netherlands 136,900 (1997)

- 63 - Number of 3 Ziqiye classification-by-industry Type-of-industry The number of business enterprises Primary industry Agriculture, forestry, 13 livestock farming, fishery Secondary industry Manufacture 25 Electronic and communication 28 Spinning 5 Construction business 7 A chemical industry, medicine 28 Tertiary industry Realty business 7 Social service 21

Investment past records by the country and the region (1997)

Number of business enterprises 10,000 dollars Hong Kong 82 13,958 Taiwan 104 8,625 United States 66 8,328 Japanese 25 1,869 Korea 10 1,916

The main export goods and an export value Kind Moneys (10,000 dollars) Proportion Cement, toy, electronic component, 15,536 14.47 Electric equipment, non ferrous metal, small machine, etc. The Braun tube, communication facilities, 23,220 21.63 Motorcycle, AV facilities, man made fiber, tableware, vessel, technical article, transformer, knitted-fabric products, cotton dress Total 38,756 36.1

- 64 - The main export partner countries

Country and region Moneys (10,000 dollars) Proportion Hong Kong 24,325 22.66 United States 20,098 18.72 Japan 18,941 17.64 Taiwan 7,943 7.4 German 6,532 6.08 Republic of Korea 3,082 2.87 Singapore 2,182 2.03 Netherlands 2,030 1.89 France 1,769 1.65 Malaysia 1,510 1.41 (1997)

The main importer articles and an import value Kind Moneys (10,000 dollars) Proportion Electronic primary material 13,048 20.79 Communication facilities 7,483 11.92 Electronic component 6,000 9.56 Electronic plant 3,042 4.85 Chemical-industry primary material 2,630 4.19 Computer external facilities 1,889 3.01 Copper material 1,265 2.02 Food-processing facilities 1,000 1.59

Country and region Moneys (10,000 dollars) Proportion Japan 15,996 25.49 Sweden ,289 14.8 Hong Kong 8,384 13.36 Netherlands 6,864 10.94 Taiwan 6,345 10.11 United States 4,974 7.93 Republic of Korea 4,111 6.55 German 1,316 2.1 (1997)

-65- 2.1.2 Description of Project Scope

The summary of a project is shown below about two sets of the fluid catalitic crackers and atmospheric/ vacuum-distillation unit of Nanjing Refinery, which is the object of the energy saving investigation of this project.

- Fluid Catalist Cracking (FCC) and Regenerator gas teating facilities - Residual-oil Fluid Catalist Cracking (RFCC) Regenerator gas teating facilities - The heat-recovery system of atmospheric/vacuum-distillation unit

(1) Fluid Catalist Cracking (FCC) and Regenerator gas teating facilities

The Fluid Catalist Cracking (FCC) (l,200,000ton/year) is designed by UOP with complete burning type unit, and its operation started in 1960 and already passed 40 years (photograph 2.1.2-1). Although existing FCC unit has the regenerator flue gas power recovery equipment (photograph 2.1.2-2) installed in 1989, for the mechanical long term deterioration, efficiency is falling significantly and has seen the renewal stage. In the FCC unit, there is a plan, which performs expansion of a throughput and mixed processing of a heavy fraction. The refinery requests modification design to UOP Co. in 1989, and has concluded the final study toward execution by Nanjing design institute. In this energy-saving project, renewal of the existing power recovery unit whose use becomes impossible under the new operating condition after FCC's modification, and off- gas-treatment apparatus is newly established from the restriction of an air contamination protection in connection with FCC's modification.

The equipment configurations of this project are as follows. Major part FCC unit : Modification design and repair work are wholly performed by the counter partner. The 3rd and 4th catalyst separator : Renewal Catalyst cooler : Renewal Power recovery unit : Renewal Waste heat boiler : Renewal Flue-gas denitrification unit : It includes in a waste heat boiler. Flue-gas sulfur-removal unit : Establishment Stack : Renewal

-66- (2) Residual-oil Fluid Catalist Cracking (RFCC) Regenerator gas teating facilities

The RFCC unit (l,000,000ton/year) is two step combustion type plant designed by the U.S. S&W company, and is a relative new unit which operated in 1990. The 1st stage regenerator flue gas is introduced into the power recovery unit through expander after removing fine catalyst by the 3rd stage catalyst separator. On the one hand, power recovery from the 2nd regenerator flue gas is not carried out, but only performing heat recovery with waste heat boiler.

In a Nanjing Refinery, they have big interest in the induction of the power recovery using the flue gas from RFCC unit 2nd regenerator. However, since regenerator flue-gas temperature is high (785 °C) and very few amounts of gas, even if it used the technology of a developed country in order to realize this energy-saving project, it became clear that there are question on technical and matter of profitability. Therefore, the installation of the power recovery unit to RFCC plant shall pass up by this projec. However, the Nanjing-Refinery side shows interest about the flue-gas sulfur- removal facility, in order to plan environmental capitalization in the future.

So, the specification of the flue-gas desulfurization facility was studied.

The facilities configurations in the installation study of an off-gas-treatment unit are as follows. - RFCC facilities : No modification. - The 2nd regenerator flue gas power recovery unit : No installation - Waste heat boiler : No modification. - Flue gas desulfurization facility : Newly installation - Limestone and gypsum separation facility : Newly installation - Stack : Renewal

(3) The heat-recovery system of atmospheric/vacuum-distillation unit

The topper and vacuum-distillation unit (3,500,000ton/year) are designed with combined operation type, and the supply of feed stocks to the facility has adopted the direct charge system. The rate improvement of heat recovery has so far been promoted with the original technology of China. As a result of analyzing a present operation status, it became clear to have obtained sufficient heat-recovery efficiency like the newest plant.

-67- If high-yield operation is needed, more effective heat recovery will be possible by adding a heat exchanger etc. at the operation plan of the future. But, in this report, it considers to a present validation and the suggestion of a future improvement for heat recovery.

-68 - 2.1.3 Greenhouse effect gas to be reduced

According to the "second appraisal report" which IPCC(*) announced at 1995 ends of year, the mean temperature of the earth in 2100 becomes higher 2°C than those in 1990, and the sea level is conjectured to go up by 50 cm.

(*) IPCC : The Intergovernmental Panel on Climatic Change which were organized in 1998 by the United Nations Environment Program and World Meteorological Organization jointly

In order to prevent the global warming by human activities, it has agreed with the large- scale greenhouse-effect-gas reduction plot after 2000 aty the Kyoto conference in 1997.

Summarizing the amount of artificial discharge of 6 kinds of warming gas which are carbon-dioxide, methane, hydro fluorocarbon (HFC), par fluorocarbon (PFC), and 6 fluorizede sulfur, will be reduced 5% rather than the base year in 1990 by the whole conclusion country. A reduction target of Japan is 6%.

The eco right transaction other than the rate of a reduction is approved in the contents of agreement of the Kyoto conference.

The execution of this project achieves the fuel reduction consumed at the power- generation plant of the concerned refinery by making effective use of the energy as dynamic force or electric power collected by power recovery facility installed in FCC unit of a Nanjing Refinery.

Therefore, the greenhouse effect gas, which serves as the object of reduction in this project, is a carbon dioxide (C02).

- 71 - 2.2 Outline of counter partner (Refinery)

2.2.1 Concerns of counter partner (Refinery) for project implementation The suggestion about FCC power recovery unit of the concerned refinery and the energy conservation of the whole plant in connection with this project is summarized in December, 1998. Because it is enabled to supply the power for operation in a plant with the power recovery unit using FCC's exhaust gas, they have big interest and expectation in the power recovery unit.

Moreover, the technical support requisition of the project to the induction of the power recovery unit from the concerned refinery to RFCC plant was made. About the energy conservation of the whole plant, the following technology was introduced from the Japan side to the refinery and SINOPEC, and the high validation was obtained.

(Introduced technology) - (1) Installation of Air preheater for fired heater - (2) Rotational-Frequency Control of High-Voltage Motor (Introduction of VWF) - (3) Installation of high efficient burner - (4) as for Energy Conservation and Environmental Measure. " VOC Collection-Management-Technique in Transportation and Storage • Off-Gas-Treatment Facilities

Especially the conuter pertner was interested in high efficient burner and the exhaust gas desulfurization system.

The concerned refinery has cleared the present China environmental standards. Moreover, the refinery also has the still severe environmental index (a detailed numerical value is unknown) defined separately, and environmental measure is carried out with very strong consciousness. Although they are keeping in mind to the energy conservation and environmental measure, the concerned refinery is a situation whose processing of import crude oil with a high sulfur content increases future more and more.

For this cause, they have to solve the corrosion issue of a refining facilities and the environmental measure.

-72- Since SOx of the exhaust gas generated from refining facilities by changing the quality of crude oil will be increased, the countermeasure against it an early stage is required. The concerned refinery is not planning the installation of direct-desulfurization unit which carries out a sulfur removal in a crude-oil refining process. For this reason, they are presupposing that he wants to plan the induction of the exhaust gas desulfurization system which can absorb SOx, NOx, and a soot dust about 70%.

About the exhaust gas desulfurization system, big interest was expressed from the counter partner to the technical advanced nature of CT-121 of CHIYODA The rate of a high sulfur inclusion to petroleum coke that is an oil residual will also be considered in the near future. Accordingly, the concerned refinery considers the following countermeasures about these facilities inductions : 1) Expecting the assistance of the technology and financial resources credit from Japan. 2) By soft loan, preferential treatment, such as becoming a duty-free candidate, is applied. 3) In China, the tax of 3000 yuan is to be added to merchandising per It of petroleum products from April, 2000. For the national tax revenue obtained for this new tax, it is used for an environmental-preservation project.

- 73 - 2.2.2 Status of the related existing facilities at counter partner (Refinery)

(1) Outline A Jinling Petrochemical Company • Nanjing refinery is one of large-sized refineries in a China. A refinery is located in 20km of northeasts from the Nanjing city of the capital of a Jiangsu, a Yangtze River (Yangtzechiang) is north, the Shanghai-Nanjing railroad, and a highway-route 312 are in south, and operation was started in 1965.

It has a 7,000,000t crude-oil throughput per year, and Sheng Li, Renqiu, and overseas crude oil are mainly processed. Sheng LU Renqiu crude oil are received through pipeline, and overseas crude oil is unloaded at Nanjing harbor which is the largest river commercial port in China, after that, it receives through 10,000t class berth located in Jinling Petrochemical Company.

The various products is distributed to Jiangsu where is the remarkable economic development area and each district along a Yangtze River from a Nanjing harbor by the water carriage. The crude-oil throughputs for 96 years and 97 years were 5,645,000t and 5,814,000t, respectively. The Jinling Petrochemical Company participated in collectivization with Nanjing Chemical Industrial Group and Yizheng Chemical Fibre Industry in 97. From now on, it is considered that a Jinling Petrochemical Company will maintain close relationship with Yangzi Petrochemical Corp. belonging to the group same as a business enterprise affiliated with SINOPEC.

(2) A refinery facilities outline and an operation situation The secondary-treatment plant consists of crude-oil residual oil fluid-catalytic-cracking, catalytic-reforming, naphtha hydrorefining, aromatic extraction, molecular sieve dewaxing, hydro cracking, gas separation, alkylation, visbreaking, delayed coking, etc. The plant of hydro cracking, residual oil fluid catalytic cracking, and the alkylation introduces technology from the U.S.

Although the capability proportion of the topping plant and a reforming plant is low, construction of continuation catalyst regeneration and a catalytic-reforming plant is effected, and the enlargement of reforming equipment capability is planned. The countermeasure against crude residual oil is treated by catalytic cracking, the hydro cracking, the delayed coking, and the visbreaking plant, and is in high average

- 74 - relatively.

Each processing capacity utilization rate at the time of field survey, the amount of the utility used, and the facilities flow in a refinery are as follows. :

Capacity-utilization rate Capacity (t/y ear) Operating Ratio 1) Atmospheric distillation (1) 7,000,000 80% 2) Atmospheric distillation (2) 3,500,000 80% 3) Vacuum distillation (1) 5,000,000 80% 4) Vacuum distillation (2) 2,500,000 80% 5) Residual catalytic cracking (1) 1,200,000 90% 6) Residual catalytic cracking (2) 1,000,000 90% 7) Hydrocracking (1) 800,000 80% 8) Hydrocracking (2) 100,000 -% 9) Hydrorefining (gas oil) 1,200,000 95-100 %

10) Naphtha splitter - -% 11) Catalytic reforming 150,000 -% 12) CCR 700,000 90% 13) Visbreaker 800,000 -% 14) Delayed Coking 1,000,000 90% 15) Gas separation 250,000 90% 16) Polypropylene 10,000 -%

17) Aromatic extraction - 90%

18) Ethylbenzene separation - 90% 19) Polystyrene (1) 10,000 -% 20) Polystyrene (2) 18,000 -% 21) Alkylate 60,000 -%

22) Propane deasphalting - -% 23) Straight asphalt 150,000 70%

-75- Utility Unit cost The amount of the every year used 1) Electric power : 0.5RMB/kWh 350 x 10"kWh

2) Fuel oil : 1,400 (*)RMB/Ton 65 x lO^Ton

3) Fuel gas : 1,000 (*)RMB/Ton 210 x 103Ton

4) Steam : 70 (**)RMB/Ton 1,900 x lO^Ton

5) Cooling water : 0.40RMB/Ton 14 x 103Ton

6) Nitrogen : l.ORMB/Ton 19 x 106Nm3

(*) Amount of fuel oil / fuel gas used Fuel-oil Fuel gas • Productive-facilities furnace : 40 x 103Ton 170 x lO^on • Boiler facilities : 25 x lO^Ton 40 x 103Ton

(**) The amount of the steam used • The amount of the productive facilities used : 1,600 x 103Ton • The amount of the utility plant used : 300 x 103Ton

- 76 - Block flow

Jinline Petrochemical Cortoration (Naming Refinery)

Alkylate (60)

Gas separation >LPG (250)

Catalytic- reforming Atmospheric •Shengli/Renqiu crude oil Naphtha Aromatic distillation Splitter extraction EB / o-xylem •Import crude oil (7.000+ "► o-xylene separation 3.500) -► A mixed xylene

"► Gasoline

-► Jet fuel

"►Kerosene Vacuum Residual distillation Hydro-cracking catalytic (5.000+ (800+100) c raking (1.200) 2,500)

Catalytic- Delayed coking cracking (1.000) (1.200)

-► Petroleum coke

"► Heavy oil

Propane deasphalting Visbreaker

Asphalt Blowing "►Asphalt (150)

- 77- 2.2.3 Capability of project implementation at counter partner (Refinery)

(1) Technical capability

The power recovery unit by the original technology of China is installed in existing FCC and RFCC in Nanjing Refinery.

Moreover, the Nanjing Refinery is carrying out an extension, modification, maintenance and repair work of various plants. They are executing for many years, such as study of process facilities specification, a basic design, detail design of equipment, piping, civil, archtect, instrumentation, electricity, and equiment and material purchase and construction work. Even in cases where this project becomes execution, there is no technical issue.

(2) Management Organization The organization chart of Jinling Petrochemical Corporation

Chemical-fertilizer factory r Affair room -Admin, division Alkylbenzene factory Technology section -Production section First petrochemical factory -|Mech.-power section Safety division Second petrochemical factory -[Enviro ’t-preserv. Sec. -[Quality insp. division Jinling Petrochemical Refinery] —[Refinery Mgr]—[Vic Mgr Production-run section Labor section Paint factory Keyman section Supply section Thermoelectricity factory -{Traffic selling dep ’t Education division Maintenance business corporation -[Accountancy section Measurement section Design place -[Master plan section Exami.plan ’g division Research institute

-78 - (3) Company management policy

Management performance in 1997 :

Gross-assets sum : 8,300 mill, yuan For-the-year gross-revenue sum : 12,800 mill, yuan Profits-tax sum : 1,300 mill, yuan Export-and-import turnover : About 1 mill, dollars

Management-policy;

"Safe, stability, long-term, full-load and high-quality" operation

(4) Financial capability Although discussion detailed about the forecast of a source of funds and a loanee is not made in case of this project implementation, probably, the financing by ODA will be connected with project realization as a method which does not require a financial burden for them. As a sector of the ODA to China, an economic infrastructure (traffic, energy, communication), agriculture, environmental, health, medical care, etc. are applied. The agreement is made between Japan and China by carrying out assistance about the power plant construction for corresponding to absolute supply deficiency with an energy sector.

Therefore, it is preferable to plan the yen credit by ODA also about this project.

(5) Manning mobilization Since a constitution, the Jinling Petrochemical Cortoration is continuing foundation and growth, and allocat efficient staff in all fields. Even in cases where a project is carried out, it is satisfactory at efficient-staff capability and allocation.

-79 - (6) Project organization

National evolutional-operation board * Examination and recognition of a project ^Examination and recognition of the accommodation-loan induction from overseas (request to a loanee)

SINQPEC * Submission to a national evolutional-operation board after examination and recognition of the project, (including fmancial- resources-credit introduction plan)

Jinling Petrochemical, Nanjing-Refinery * Planning of a project *Financial-resources-credit plan * Project construction * Plant-engineering administration * Facilities purchase Test run

-80 - 2.2.4 Project scope of works and technical specification for the related facilities after modification at counter partner (Refinery)

(1) Introduction of the power recovery facility to FCC unit

< Existing Fluid Catalytic Cracking (FCC) >

A present schematic diagram is shown in 2.2.4-1. The Fluid Catalytic Cracking (FCC) (l,200,000ton/year) is designed by UOP with complete burning type unit, and its operation started in 1960 and already passed 40 years.

Although existing FCC unit has the regenerator flue gas power recovery equipment installed in 1989, for the mechanical long term deterioration due to an abrasion of the turbine blade proceeding caused by uneffective separation ability of the solid fine catalist in the 3rd stage separator, efficiency is falling significantly and has seen the renewal stage.

The existing power recovery facility consists of the expander, air blower, gear, motor and electric generator. The power collected by the expander is 5.1 MW. 4.8 MW power is consumed to drive the air blower connected with the same axle, and the amount of power generation in a generator is 0.3 MW.

< Modification of fluid catalytic cracking (FCC) >

In China, to correspond the petroleum product demand increasing, they have to refine import crude oil containing many heavy fractions in order to compensate the insufficient amount of domestic crude oil. Moreover, the modernization of a petroleum refinery needs to be promoted simultaneously to cope with import crude oil. This is the common issue to the petroleum refinery located at coastal area.

Nanjing Refinery also has a plan, which performs expansion of a throughput and mixed processing of a heavy fraction in order to cope with diversification of processing stock oil. The refinery requests modification design to UOP Co. in 1989, and has concluded the final study toward execution by Nanjing design institute.

- 81 - < FCC flue gas power recovery facility >

By this modification, although throughput increasing and processing the heavy crude material are achieved, the amount of generation carbon which must burn by the regenerator increase, and the amount of regenerator flue gass also increase significantly. The catalyst circulating load is restricted by the limitations of the stand pipe modification on existing plant. Consequently, a catalyst-circulating load will be controlled relatively and regenerator temperature rises to a maximum of 720-750°C.

The existing power recovery facility has already passed 11 years after operation, and is superannuated as described above. Moreover, as for the present power recovery facility, maximum operating temperature is restricted even with 700 °C from mechanical limitation. In the changing of the operation conditions, the refinery will choose either renewal a power recovery facility or stopping the facility.

With a Nanjing Refinery

When a power recovery facility is not operateds, the energy conservation effect is nothing, and of economical cost is big. Since energy recovery becomes huge beyond the present condition in cases where it renews.

Then, their concern is very high to this project. However,

Model selection of the domestic expander suitable for the operation temperature currently planned is difficult. - There are technical issues, such as a safety reasonse. - An investment is big.

It is difficult for a Nanjing Refinery to perform a project by himself for the above- mentioned reason. They expect the collaboration from Japan also including financial resources.

The Nanjing Refinery is constructed on condition that only a domestic low sulfur crude oil is refined. Therefore, it is not the equipment configuration, which can process

-82 - overseas high sulfur crude oil. Moreover, the flue gas from the regenerator of FCC that is the object of this project is discharged to the atmosphere as it is, without being treated with a flue gas desulfurization or denitrification facility, etc., since the atmospheric control was loose till recent years. The atmospheric-pollutant discharge critical value as of 1998 is shown in Table 2.2.4-1, however the flue gas from regenerator is over a reference value in present condition.

Table 2.2.4-1 Atmospheric-pollutant discharge critical value Application classicication of the The 3rd classicication category concerned facility The application module as a The 3rd class criteria pollution source

The highest permission The highest emission emission concentration velocity Pollutant [mg/m31 fkg/hl 802 550 (*1) 160(*1) (192 ppm-w) Soot dust 18 (*2) 8.5 (*2) Notes (*1) Apply to a pollution source with stack height of 100m or more. (*2) Apply to a pollution source with stack height of 40m or more.

In China, the newest environmental regulation is applied, in cases where the facilities constructed newly or modification is performed. In case this project is executed, the flue gas desulfurization facility that can satisfy environmental standards is necessary. The Nanjing Refinery recognizes it as an air contamination being the issue, which cannot be overlooked any longer, and it is inclined to install a flue gas desulfurization facility positively.

The schematic diagram of this project on FCC unit is shown in Fig. 2.2.4-2.

A unit configuration is as follows. - FCC unit : Modification design and its construction are wholly performed by the counter partner. - The 3rd and 4th catalyst separatorr : Renewal - Catalyst cooler : Renewal - Power recovery facility : Renewal

-83 - Waste heat boiler : Renewal Flue-gas denitrification facility : It includes in a waste heat boiler. Flue gas desulfurization facility : Newly construction Stack : Renewal

-84 - Fig. 2.2.4-1

00 cn Fig. 2.2A-2 SOx Emission FCC UNIT: OPERATION Regulation WASTE GAS POWER RECOVERY HP STEAM Concent, [ppm(v) ] : 50 <192 AND TREATING SYSTEM Rate [kg/h] : 25.7 <160 (AFTER PROJECT REALIZATION) Solid Content < 5mg/Nm3 (ED DENOx 750 Solid = J 00mg/Nm3 (ro WHB Max.( 180,000") REACTOR El THIRD CAT. C=) SEPARATOR DESOx - 732 I 270 57 00 SOx = 500ppm(v) STACK 05 = 257.3 kg/h CSJ 592 -j

- LEGEND ------REGENERATOR ( ) : Flow Rate ,Nnf/h Max ( 165,000 ) / / : Flow Rate ,kg/h I I : Temperature ,°C MOTOR/ AIR BLOWER GENERATOR : Pressure ,kPaG EXPANDER

(*1) Bold line illustrates the modification area in this project (*2) Major operating condition is indicated in the drawing. 1) Model selection

(a) Design condition (a-1) The design condition of a flue-gas expander The design condition of a flue-gas expander is shown in Table 2.2.4-2.

Table 2.2.4-2 Design condition of a flue-gas expander Unit Value Gas flow rate [Nm3/h] 180,000

Inlet temperature [°C] 732 Inlet pressure [KpaG] 150 Outlet pressure [KpaG] 10 Gas composition N2 [Vol.%-wet] 76.75 C02 [Vol.%-wet] 15.00 CO [Vol.%-wet] 0.20 02 [Vol.%-wet] 3.00 H20 [Vol.%-wet] 5.00 SOx [ppm-wet] 500 S03 [ppm-wet] 50 NOx [ppm-wet] 400 Dust concentration [mg/Nm3-dry] 100

(a-2) The design condition of an air blower The design condition of an air blower is shown in Table 2.2.4-3.

Table 2.2.4-3 Design condition of an air blower Unit Value Gas flow rate [Nm3/h] 165,000 Inlet temperature [”C] 20 Inlet pressure [KpaG] -2 Outlet pressure [KPaG] 200

-87 - (b) Train composition (b-1) Technical study As a configuration of a power recovery facility, there is double shaft and single shaft type train. A double-shaft-type train configuration makes an expander a power- generation dedication, and makes it the axial disposition different from an air blower. A single shaft type connects a flue-gas expander, air blower, and motor/generator to one sequence. The feature of a double-shat-type train formation is described below. The conceptual diagram of the double-shat-type train is shown in Fig. 2.2.4-3.

Figure 2.2.4-3 Example of the train formation of a double-shat-type train

Generator Flue gas expander Gear box

Electrical system

Motor Air blower Gear box

As the air blower and the flue-gas expander have been independent respectively, the double-shaft-type train is widely applied to the reconstruction which installs a new flue-gas expander using an existing air blower as it is. Since most flue-gas expander installation work can be performed during operation of FCC unit, there is a merit that keeps minimum shut doun period of a facility, and can execute its construction work. Moreover, since an extension portion is only a flue-gas expander, the installation space can be kept in small area. It is easy to arrange the installation space even if working area is restricted in refinery.

-88 - The flue-gas expander generator, which our company installed in the Shengli refinery in the green helmet project, has applied this formation. As for operability, in case of double-shat-type train formation, even if it is stopping the flue-gas expander by bypass mode, the operation of FCC unit is possible continuously.

However, when the parallel off of a generator happens by some causality, such as a electric power failure and mechanical damage, the load to the flue-gas expander which does not have a load element other than a generator is lost at an instant. And since there is a possibility that the casing of a flue-gas expander may be damaged by over rotational speed, the institution of a reliable equipment protection system becomes indispensable. Usually, an allowed time until an equipment protection system carries out the completion of actuation is 1 or less second.

Moreover, although the change of the off-gas flow from a regenerator is an element to which the action of a flue-gas expander is changed directly, this is usually occurring in normal operation. In the case of such a situation, consideration is required in carrying out reaction, which the variation of the performance characteristic of a flue-gas expander has on the operating pressure of a regenerator, into an allowed value.

In order to carry out adequate management in emergency to the equipment protection and an operation variation, execution of the dymamic simulation with high accuracy and application of the high-class control system of reliability and responsiveness etc. is indispensable.

In performing above-mentioned measure, many design informations are needed in high accuracy as performance data of an expander in addition to the operating conditions of a regenerator. Required data may not be obtained taken into consideration present technical level of Chinese expander manufacture. Therefore, when adopting a double-shat-type train formation, it is thought preferable to apply a foreign made flue-gas expander.

Next, the feature of a single-shaft-type train formation is described. The conceptual diagram of the single-shaft-type train is shown in Fig. 2.2.4-4.

-89 - Figure 2.2.4-4 Example of the train formation of a single shaft type

Gear box Electrical Generator/ system Flue-gas expander Air blower Motor

As for the single-shaft-type train formation, the flue-gas expander is connected with the air blower on the same axle. When introducing this train formation, not only a flue-gas expander but a air blower is installed newly. Besides, since the capacity of existing air blower becomes insufficient, it will be replaced with new one in this project. Therefore, though which of a single shaft type and a double-shaft-type train formation is adopted, a modification scope does not change.

About the single-shaft-type train, since the load of a air blower is secured even when a generator becomes an instant no-load by the power failure etc. for example, the pole moment of inertia of a system is large, and the time diversification of a rotational-speed upsurge is slow. And, if the rotational speed of a flue-gas expander goes up, while flue-gas expander output will decrease by degradation, the dynamic force (resistance) of a air blower increases. A single-shaft-type train formation can take the time allowance until the actuation completion of an equipment protection system compared with a double-shat-type train formation.

When a single-shaft-type train formation is used, even if it cannot fully grasp the transitional performance characteristic of a flue-gas expander, the application of an equipment protection system with an adequate reliability is possible. From this, it is thought that the equipment model can be selected from China flue-gas expander. When a flue-gas expander stops in an emergency, continuous operation of a FCC unit is not possible. However, in case of scheduled shut down of the expander, continuous operation of FCC unit is possible by start up of the spare air blower which is not connected directly with the expander.

-90 - About power recovery, since the power collected by the flue-gas expander is directly transferred to air blower without transforming into electric power, efficincy of single shaft type is more advantageous. It is that the load by the flue-gas expander occurs in working a air blower since there is no flue gas at the time of the start up of a FCC unit, and the required rated power of a drive machine becomes large as demerit of the single-shaft-type train for this reason.

The demerit of the single-shaft-type train is that the required rated power of the driver for air blower becomes large, since the load of a flue-gas expander occurs when starting a air blower because there is no flue gas at the time of the start up of FCC unit.

(b-2) Selection of a train formation Since an existing air blower is renewal, though which train formation is selected, a modification scope does not change. Even when the China expander is selected, it is safe from the management to urgency such as the parallel off of a generator, if it is a single-shaft-type train formation. - The China model can also be selected if it is a single-shaft-type train formation. - About power recovery efficiency, the single-shaft-type train formation is surpassing. In consideration of the above-mentioned superiority, we decided that a single-shaft-type train formation is selected in this project. In addition, since execution of this project is performed in parallel to the capacity extension construction work of a FCC unit, there is no problem about a construction period.

(c) The component of the train This power recovery train consists of the following. - Flue-gas expander - Air blower - Driver / generator - Special control valve - Electronic governor - The 3rd stage catalyst separator - Piping The above-mentioned configuration is shown in Fig. 2.2.4-S and 2.2.4-6.

- 91 - Figure 2.2.4-S Configuration of a power recovery unit (1/2)

REGENERATION FLUE GAS Existing slide valve

Equipment bolder line WASTE HEAT BOILER

STACK

HYDRAULIC OIL UNIT FCC R ^GENERATOR

Power recovery unit

3RD.STAGE SEPARATOR PENSION EXPANSION JOINT JOINT CO to AIR BLOWER MOTOR/GENERATOR GAS EXPANDER GEAR

4TH.STAGE SEPARATOR

H Control/Operation panel

Genera' ;ontrol joards Existing FCC unit BE. OIL UNIT Disch.

Recover y catal yst HP Steam HP Steam LP Steam LP Steam Recovery power Existing Cooling water (Supply) Cooling water (Supply) Powjr/Iighting/power for instrui onto substation Cooling water (Return) [ Cooling water (Return) Measuring instrument sign Plant air Plant air listing control Instrument air Instrunent air ____room Figure 2.2A-6 Configuration of a power recovery unit (2/2)

Electrical facility in power recovery units

Power recovery unit FCC existing substation

Motor / Generator 6,300V main circuit board switchboard Motor / Generator Protective relay board

Generator 380V Expander and Motor / Generator control panel control center Compressor unit Generator exciter board DC-power- Generator supply board synchronous board

Direct-current-motor Paging equipment starting board Lube oil unit Control / motivation board

Expander control/

Lighting equipment Fire alarm

Relay terminal " "Control ™ ~ 1 Earthing equipment board

FCC existing control room (d) Flue-gas expander (d-1) Selection of machine model A flue-gas expander is divided roughly from a mechanical constitution, and is classified into the following type. (D Axial direction inlet/upper direction outlet with one stage or two stage axial- flow type ® Multi stage type of upper or bottom inlet and outlet

Two companies of U.S. makers are designing the type CD- And license production of the machine by the design of one company of them is carried out in Japan. And, also in China, two companies are manufacturing the flue-gas expander of the type (D, and produce about 100 sets until now. It seems that the rates of operation is quite good according to the latest information although the performance data about the rates of operation of the China flue-gas expander are not obtained.

The German maker produces the model of type (2). Although there is no operation performance in Japan, several sets are used in China. It plans to select one stage or a two stage axial-flow type with type CD currently manufactured in Japan and China as a flue-gas expander introduced by this project.

(d-2) The precautions to design gas flow Precautions are described about the flue-gas expander design gas flow of this project. Fig. 2.2.4-7 indicates the partial loading characteristic of the expander.

In this figure CD When Expander Design Gas Flow is Made into 100% of the Amount of Maximum Gas from FCC unit (Upstream) ® When Equipment Design Gas Flow is Made into 90% of the Amount of Maximum Gas from Upstream Each partial-loading characteristic is shown.

The model selected on the basis of (D is designed so that energy-conversion efficiency may serve as the maximum mostly at the running point of 100% of gas flow, and recovery power also serves as the maximum. However, efficiency drops significantly as the amount of flue gass decreases. And recovery power also decreases more than decrease of the amount of flue gass.

-94- On the other hand, the model selected on the basis of ® always has recovery power larger than CD, when its operation with little gas flow. However, in case the amount of gas from the upstream serves as the maximum, a part of flue gas needs to be bypassed.

Generally, as for a flue-gas expander, efficiency becomes bad by the load fluctuation. Therefore, it is advisable to maintain operation by the gas flow rate near design gas flow as much as possible.

Precaution : Especially since a load will increase conversely if an operation gas flow rate becomes 40-45% or less of design flow. For this reason, the design condition which maximizes the recovery electric energy per year needs to be determined on the basis of the fluctuation pattern of the gas flow rate for the year.

Fig. 2.2.4-7 Expander Partial Load Characterisl

Weight Flow (%) [maximum gas flow rate from FCC upstream]

Gas Expanser Design Point @ flue gas 100% Gas Expander Design Point flue gas 90%

(d-3) The precautions about the quality of the material A catalyst separator has to be installed in the upstream of expander. The solid fine catalyst included in a flue gas so much from a regenerator is separated by the catalyst separator. Although mentioned later for details, the fine catalyst included in the flue gas introduced into an expander abrades the expander rotor blade, which rotates at high speed. In order to prevent the abrasion, the installation of a catalyst separator, which

-95- has high separation ability, is required. However, it is impossible to separate a catalyst completely, though the newest catalyst separator is installed. Therefore, the raw material selection and the machining about a rotor blade part are very important if an equipment life is considered.

Moreover, the flue gas introduced into an expander has a high temperature (closely 730 °C) and the sulfide is also contained. Therefore, adequate design attention including raw material selection is necessary so that long-term operation in severe conditions may be made.

The following consideration is made to the flue-gas expander of this project. - Apply the waspaloy (special alloy) which is a heat-resistant alloy for rotor blade, stator blade, and disk as the heat-resistant sake. - Perform a coating to a rotor blade as countermeasure against abrasion by the scattering catalyst. - The cooling measure by the steam is applied to the rotor blade root part in order to remove a high stress as further countermeasure against high temperature. - Provide an expansion joint for inlet / outlet piping considering not to concentrate the thermal stress of piping to expander casing.

The above mentioned consideration shall be applied to both Japan made and China made expander. About the service life of a rotor blade, it will be in ten years or more for Japanese made, but its Chinese made about six years.

(d-4) Selection of expander model The design condition of the expander to be applied for this project are operating temperature of 732°C and the flue gas of 180,000 Nm3/h. The following issues became clear when the China expander was investigated. - As a manufacture experience, the maximum operation temperature of an expander is 700°C. - There is no model, which adapted to this process requirement about flow rate as far as our investigation.

Since the predominance of the equipment price, the ease of obtaining the parts for maintenance, etc. China-made expander was considered to be selected. However, it is thought that it is difficult to select the China-made equipment from a technical viewpoint in this project.

- 96 - In this project, a flue-gas expander made in Japan shall be used from the following r easons; - There is experience that made the machine more than a design conditions whose high-temperature operation can be carried out. - An appropriate model can be selected about gas flow.

The sectional drawing of the model, which is planning to apply for this project, is shown in Fig. 2.2.4-S.

The amount of recovery power of a flue-gas expander is 10,863 kW in a design condition. Since there is no flue gas at the time of the start up of FCC unit, an air blower is made to operate by drive. In this case, a load generates also from this expander connected with one axis. The amount of required power at this case (windage-loss power) is expected to be about 2,800 kW.

-97- - 98- (e) Air blower (e-1) Selection of machine model Since an air blower design capacity (165,000 Nm3/h) is large, it cannot cope with ordinary horizontal-type multi-stage centrifugal compressor. An axial compressor or a internal gear type two stage centrifugal compressor will be applied. In Japan, as for the air blower of this size, the axial-flow type is usually applied. The internal gear type was regarded as durability being low until now as compared with the horizontal-type-multi-stage centrifugal compressor. However, in chemistry plants, such as a caprolactam, there is an operation performance applied to about 200,000m3/h inlet airflow. And its efficiency is equal compared with an axial-flow type, moreover, there is the merit in which a price is cheap.

However, when applying a internal gear type centrifugal compressor in this design condition, there is no machine manufacture in Japan and China and a selection model is limited to made in Germany. Since there is sufficient performance if it is an axial- flow type, Japan-made or China-made can be selected. In this project, an axial-flow typeJapan-made air blower shall be applied.

(e-2) Applied model and detailed equipment data The applied model was taken as the Japan-made 5 stage axial-flow type air blower as above-mentioned. The performance curve of the applied model is shown in Fig. 2.2.4-9.

It is thought that application needs to be examined after beginning the quality side and investigating an operation appointment model in detail performance and operation progress / maintenance performance etc. also about made in China from now on, although the model made in Japan was made into application this time.

Although the Japan-made model is applied to this project, it is thought that the application of China-made equipment needs to be studyed after survey in detail from now on, such as quality, experience, operation progress and maintenance performance etc.

The amount of required power for a air blower is 8,059 kW in a design condition. And, the amount of required power in the minimum airflow at FCC-unit start up is expected to be 6,400 kW.

-99- Figure 2,2,4-9 Performance curve of an applied model (air blower)

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1300*9 VOLUME FLOW

- 100 - (f) Model and output power of a driver / generator (f-1) Model Selection The electric generator is required in order to transform the surplus recovery power which generated in normal operation into a electric power. And, at the time of a FCC-unit start up, in order that there may be no recovery power from a flue-gas expander, the driver for start up of air-blower is required. A synchronizing motor/generator is applied as start up driver.

(f-2) Rated power Since a motor/generator is connected with a air blower, a flue-gas expander by one axis, the rated power needs to fulfill the following four conditions. O 110% or more of the required power, when a air blower is adjusted to rated airflow and rated discharge pressure, under specified temperature and humidity. O 105% or more of the maximum value of required power, when a air blower is adjusted to the required amount of dry airs and a rated discharge pressure corresponding to the variation of expectable temperature and humidity. O 105% or more of the required power, when the discharge pressure of a air blower is maintained and it becomes the possible minimum airflow, as conditions until a flue-gas expander generates output at the time of a FCC-unit start up. I.e., rated-power = (required power for air blower (about 2,800 kW) + windage- loss power of flue-gas expander (about 2,800 kW)) x 1.05 <> Since the reduction gear is applied in the train, the gear loss is taken into consideration (about 300 kW).

The rated power of a motor/generator is decided to 10,000 kW, as a result of taking the above into consideration.

(f-3) Installation ofWVF A air blower is started from the condition that there is no flue gas at the time of the start up of FCC unit. In a 1 axis train formation, since the train pole moment of inertia at the time of starting is very large, it cannot start with ordinary motor/generator. Therefore, the institution of VWF is required.

As the consideration in the case of VWF institution: - VWF board is very big and occupies very large space in substation. - In order to absorb the heat, which is generated from VWF, large-scale HVAC is required for the substation.

- 101 - (f-4) Recovery power In a FCC unit, the amount of recovery power, which can be expected after this project execution, is 10,563kW that deducted reduction gear loss (300kW) from the flue-gas expander output (10,863kW). 8,059kW in the above-mentioned amount of recovery power is consumed by the air blower, and remaining 2,504kW is transformed into a power with a generator (at generator shaft end).

(g) Special control valve This control valve is installed on suction piping of a flue-gas expander and bypass piping, and carries out very important action. In a normal operation, this control valve adjusts the gas flow rate to flue-gas expander and bypass gas amount. Furthermore, the valve that can perform rapid opening and closing is required for the emergency. This valve is a butterfly valve manufactured with the special metal having high temperature-proof and abrasion-proof.

In order to carry out a rapid action, an hydraulic drive system is applied. Furthermore, in order to relieve the impact at the time of rapid valve closing , the switching function which a action speed becomes slow is required just before valve full closing. As for the closure time of this valve, it is indispensable to find out the conditions which can operate safely and certainly by forecasting movement of the system at the time of emergency appearance suing dymamic simulation.

The following function is required for the valve and, especially in the double-shaft- type train formation, the grade of needs is very high-level. • Control of the expander speed at the time of acceleration (follow a governor's control signal) • The rapid closure (inlet valve) and rapid opening (bypass valve) at the time of an expander trip • Control which keeps the regenerator pressure range of fluctuation within tolerance after an expander trip (bypass valve)

(h) Electronic governor As brains of the power recovery train, an electronic governor does generalization control such as expander rotational-frequency control, power-generation mode change, coupling fracture detection, inlet and bypass valve control etc. It is the key portion of design work to input the characteristic, the protection

- 102 - conditions, etc. of an equipment which were selected into this electronic governor, and to make the electronic governor memorize the control information based on the result of dymamic simulation etc. correctly.

(i) The 3rd stage catalyst separator In order to assure the stable operation of a flue-gas expander, a very highly efficient catalyst setarotor needs to be installed in the gas supply line before expander. If the performance of the 3rd stage catalyst separator is poor, various problem, such as abrasion or fracture on rotor/stator bladse of an expander, performance deterioration by the dust insertion, vibration etc. will be caused. Although it seems that the performance of the China made 3rd stage catalyst separator has also improved in recent years, there is little information. At least, the mechanical design of a separator and provision of an internal ceramic tube need to be performed by the Japanese side taking into consideration of the risk of damage to expander body.

G) Piping Since the piping around flue-gas expander is under the environment of high- temperature service containing a sulfide, it is indispensable to apply 18-8 stainless steel material.

- 103- 2) Auxiliary equipment

(a) Waste heat boiler

[The design condition] The design condition for equipment such as the flue-gas conditions to boiler, allowable- pressure loss, flue-gas outlet conditions, etc. are as follows.

(a-1) Boiler inlet gas conditions Boiler inlet gas conditions are shown in Table 2.2.4-4.

Table 2.2.4-4 Boiler inlet gas conditions Unit Value Gas flow rate [Nm3/hl 180,000 Gas temperature (inlet) A 550 Gas composition N2 [Vol.%-wet] 76.75 CG2 [Vol.%-wet] 15.00 CO [Vol.%-wet] 0.20 02 [Vol.%-wet] 3.00 H20 [Vol.%-wet] 5.00 SOx fppm-wct] 500 803 [ppm-wet] 50 NOx [ppm-wet] 400 Dust concentration [mg/Nm3-dry] 100

(a-2) Boiler outlet gas conditions Boiler outlet gas conditions are shown in Table 2.2.4-S.

Table 2.2.4-5 Boiler outlet gas conditions Unit Value Gas temperature (outlet) >= 270

A § A NOx concentration (*1) [ppml ii Allowable differential pressure [mmH20] 400 (*2) Notes (*1) Incorporating denitrification facility in a waste heat boiler attains the reduction of the amount of NOx. (*2) A allowable differential pressure is the sum total value of the differential pressure of a waste heat boiler and denitrification apparatus.

- 104- (a-3) Generating steam conditions High-pressure steam shall be generated using the recovered heat. The conditions of generating steam are shown in Table 2.2A-6.

Table 2.2A-6 Generating steam conditions Unit Value Steam temperature ra 300 Steam pressure [MPaG] 3.5

(a-4) Configuration The process flow diagram of the waste heat boiler is shown in Fig. 2.2.4-10. Operation conditions, utility consumption, equipment lis and the plot plan are shown in Table 2.2.4-7, 2.2.4-S, 2.2.4-9 and Fig. 2.2.4-1 respectively

- 105 - • 901 - OUT SCOPE

SUPPLY SCOPE

SUPPLY Figure

2.2.4-10

Flow diagram of an exhaust-heat-recoverv boiler Superheater Economizer Evaporator Evaporator Table 2.2.4-7 Operating conditions Unit Value Gas flow rate [Nm3/h] 180,000

Gas temperature Boiler inlet [°C] 550 Denitrification facility [°C] 350 inlet Denitrification facility rc] 350 outlet Boiler outlet VC] 270

Generating steam Temperature [°C] 300 Pressure [MPaG] 3.5 Amount [Kg/h] 29,000

Differential pressure Boiler section [mmH20] 240 Denitrification facility [mmH20] 150

NOx concentaration (*1) Denitrification facility [ppm-wet] 400 inlet Denitrification facility [ppm-wet] 40 outlet Notes (*1) The reduction amount of NOx is achived by the Denitrification facility installed in the interior.

Table 2.2A-8 Utility consumption (including Denitrification facility ) Item Consumption Note (1) Steam (3.5 MPaG x 300°C) 3.0 ton/h (Soot blower) Intermittence (2) Instrumentation air 50 Nm3/h Continuation (3) Plant air 10 Nm3/H (Soot blower) Continuation (4) Ammonia 235 Kg/H (25% Liquid Ammonia) Continuation (5) Power 35 kW Continuation

- 107- Table 2.2.4 — 9 Equipment list Equipment No. Equipment name Qty Specification Remarks (1) FCCWHB FCC Waste Heat Boiler 1 Vertical, Forced Cerculation type

24t/hx3.5MPaGx300°C

BFW circulation pump 1 + 1S Centrifugal 164m3/hx0.4MPaGx22 kW

Soot blower 2 Half extraxtion and insertion type 0.4 kW

Dilution air blower 1 Centrifugal 34m3/minxl,OOOmmH 2Ox22 vw

Dilution air heater 1

Denitrification reactor 1 7.6m x 6.3m x 5.3mH 180,000 Nm3/h

37m3

Boiler stack 1 2.5 m (j) x 20 mH (3) Ammonia feed facility Ammonia storage tank 1 Cylindrical vertical 12.1 m3

Ammonia injection 1 + 1S 0.6 m3/hx0.4 MPaGx3.2 kW pump

- 108 - [<^> BOILER

Insulation Drum

Tank

ARRANGEMENT HEAT

Flash Sound Steam

WASTE GENERAL

i- L ~p

PPOU.

ENGINEERING

ANGLE

are DEPARTMENT BASIC APPO DRAWN CHKO CHKO mm

: unit

FCC

WHB for Plan

Plot

4 a A 11 — 2.2.4

Fig. W Evaporator Economizer Evaporator Superheater

- 109- (b) Flue-gas denitrification facility

[The design condition] Flue-gas denitrification facility is incorporated in a new waste heat boiler. Flue-gas conditions, gas treatment conditions, etc. for the facility design are as follows.

(b-1) Flue-gas conditions The flue-gas conditions in a denitrification facility are shown in Table 2.2.4-10.

Table 2.2.4-10 Flue-gas conditions Item Unit Value

The amount of flue-gas [Nm3/h-wet] 180,000 Flue-gas temperature ra 370 Flue-gas composition N2 [vol%-dryl 81.1 02 [vol%-dry] 3.2 C02 [vol%-dry] 15.8 H20 [vol%-wet] 5.0 NOx [ppm-dry 024%] 400 SOx [ppm-wet] 500 Soot dust [mg/m3N] 100

(b-2) Gas treatment conditions The gas treatment conditions at outlet of the denitrification facility are shown in Table 2.2.4-11.

Table 2.2.4-11 Gas treatment conditions Module Value

Gas treatment conditions NOx rate of removal m >= 90 NOx conditions [ppm-dry] <= 40 (02= 4% ) Leakage NH3 conditions [ppm-dry] <= 5 Soot dust conditions mg/Nm3-dry <= 50 Total-pressure loss [mmH20] <= 100

(b-3) Outline of the denitrification facility This facility converts NOx in furnace combustion gas into nitrogen and a steam by the dry-type ammonia catalytic-deoxidization method, and it consists of a denitrification

- 110 - reactor and its auxiliary equipment.

(b-4) Equipment Configuration The process flow diagram and material/heat balance is shown in Fig. 2.2.4-12 and Table 2.2.4-12 respectively. As for the equipment list, refer to table 2.2.4-9 as before mentioned.

- Ill -

Gas

— ■ — ------” 5 150 3.7 76.1 20.2 1,765 Mixing Air

- - - - — - - - - 4 79.0 21.0 1,700 1,000 Ambient Dilution Gas)

------3 100 1.5 off NH3 65.0

Regenerator

Outlet - — 2 99 <5 40

3.3 370 300 5.0 494 15.6 80.8 182,219 173,123 DeNOx Balance(FCC

Inlet 1 - -

- 100 3.2 370 400 5.0 500 400 15.8 81.0 180,000 171,000 DeNOx Material 4%) 4%)

dry dry dry dry dry wet wet wet wet °c dry(0z dry(02 mmAq kg/cm2G ppm ppm ppm i vol% vol% vol% vol% vol% Nm3/h Nm3/h mg/m3N Rate No.

2.2.4-12

02 N2 SOx C02 NH3 NOx H20 Dust Flow

Pressure Stream Composition Temperature Table Gas

- 113- (b-5) Process chemistry A flue gas passes the catalyst layer of a denitrification reactor under a specified gas temperature after fully mixing with injection ammonia. The nitrogen oxide is converted into nitrogen and a steam by the following reaction in this process. 4NO+ 4NH3 +02 -> 4N2 + 6H20 6NOs2 + 8 NH3 -> 7N2 + 12H20

The flue gas, which came out of the denitrification reactor, is introduced into a waste heat boiler through a duct.

The flow rate of ammonia required for a denitrification is adjusted so that NOx concentration in the flue gas after denitrification processing may become specified value. Then, dilution mixture is carried out by air and it is supplied into flue gas through the ammonia injector with many nozzles.

(b-6) Denitrification catalyst A honey comb type catalyst is used for a denitrification catalyst.

(b-7) Denitrification reactor The flue gas from FCC unit is discharged to atmosphere through a stack after desujfurization via a denitrification reactor and a waste heat boiler. A denitrification reactor is located in the down stream of ammonia injector, and the catalyst case filled with the denitrification catalyst is incorporated.

(b-8) Ammonia feed equipment This facility consists of an ammonia flow control valve, an ammonia isolation valve, and an ammonia injector. Ammonia is fed from storage tank. Feedback control of the ammonia flow rate is carried out so that NOx concentration of a denitrification reactor outlet may become below specified concentration. Air for ammonia dilution is supplied from an air piping header, in order to be made to become ammonia concentration below the explosion lower limit and to improve the dispersibility of ammonia.

- 114 - (c) Flue-gas-desulfurization-facility

[The design condition] The design conditions such as flue-gas conditions, gas treatment conditions, etc. are as follows.

(c-1) Flue-gas conditions The flue-gas conditions at desulfurization facility inlet are shown in Table 2.2.4-13.

Table 2.2.4-13 Flue-gas conditions Unit Value The amount of Flue-gas [Nm3/h] 180,000 Flue-gas temperature [”C] 270

Gas composition N2 [Vol.%-wet] 76.75 C02 [Vol.%-wet] 15.00 CO [Vol.%-wet] 0.20 02 [Vol.%-wet] 3.00 H20 [Vol.%-wet] 5.00 SOx [ppm-wet] 500 803 [ppm-wet] 50 Soot dust power [mg/Nm3-dry] 100

(c-2) Gas treatment conditions The gas treatment conditions shown in Table 2.2.4-14 is established to fulfill the newest environmental standards of China.

Table 2.2.4-14 Gas treatment conditions Module Value Gas treatment conditions The rate of S02 removal r%i >= 90 ft Soot dust concentration [mg/Nm3-dry] Vt O Pressure [mmH20] 35 Total-pressure loss [mmH20] 320

(c-3) Sewerage conditions In consideration of the influence to the existing waste-water-treatment facility by installation of exhaust gas desulfurization system, conditions of sewerage is shown in Table 2.2.4-15.

- 115 - Table 2.2.4-15 Sewerage conditions Sewerage characteristic Unit Value COD ____ [EES!]____ <20

(c-4) Process application As the general process of the desulfurization facility manufactured on a commercial basis, there are a limestone gypsum method, the hydroxylation magnesium method, and a sodium-hydroxide method. The feature of these 3 kinds of processs is summarized into Table 2.2.4-16.

Process selection was done in consideration of the following items. - Since the capability of the existing waste-water-treatment facility in Nanjing Refinery is insufficient, the process shall be little displacement with the good quality of sewerage. - Plant cnstruction cost is low. - An absorbent can obtain easil and operation cost is low. - Facility reliability is high.

As a result of the technology assessment about each process on the basis of the above, a limestone gypsum method is selected and CT-121 process which our company has a licence will be applied for this project.

The newest technology has also been developed in recent years, for instance, technology of separating 502 using absorption solutions such as an amine solution and Phosphate, sulfur-removal technology of utilizing a microorganism and producing simplex sulfur directly, etc. A technical investigation is performed also about these and the Nanjing-Refinery is interested to new sulfur-removal technology. However, these processs do not have or a few experience, they were not selected in consideration of the facility reliability.

- 116 -

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/ cheap small

tower

neutralization

absorption (since

solution of

solution Sodium-hydroxide

COD oxidation

adjustment

Mass Expensive PH High and NaOH Na2S04 amount Comparatively Comparatively Oxidation

tower

process circulating

method

absorption

drain) expensive)

an liquid a

in as

liquid

(0H)2 area

emits

removal Mg absorption

(it / — small cheap

tower

neutralization

absorption (since

slurry

of solution

COD oxidation sulfur

ac(justment Magnesium-hydroxide

a PH Mass High Expensive Mg(0H)2 MgS04 amount Comparatively Comparatively Oxidation and

JBR plaster

a in

solution

the

method additive,

and

liquid

neutralization

gas /

cement

cheap) a

area gypsum

comparison

waste

absorption /

expensive large

oxidation of

becomes CaC03

The

(it part slurry

etc.) quantity

Limestone

(since COD

adjustment

Low Low Comparatively PH contact Small Comparatively Gypsum CaC03 board, Simultaneous neutralization cost

quality volume

area

cost and

2.2.4-16 system

water water

Process Installation Construction Operating Control Product Waste Waste Oxidation Absorber Table

- 117- CT-121 process feature is shown below.

(1) Most simplified Process Four processes are occurring simultaneously within the single JBR vessel: •Absorption of S02 • Oxidation of acid sulfites to form acid sulfates • Neutralization of acid sulfates to form gypsum • Growth of gypsum crystals for strength and ease of dewatering Thus; O Small Equipment number O Without Recalculation Pump O Small Power Consumption

(2) Easy Operation Operation of CT-121 Process is quite easy due to simplified process. And CT-121 can easy adjust requested efficiency, it create from two easy control parameter(pH, JBR Level) of S02 removal efficiency.

(3) No Scaling Trouble Our selected pH is lower than other conventional wet limestone process. Then oxidation of sulfite species to sulfate species is rapid and complete, limestone is completely utilized in S02 neutralization. And our absorber have an enough seed gypsum, so we can eliminate scaling trouble.

(4) Small capacity of WWTS S2062' or some other poly-thionic acid are almost nothing in the absorber liquid. And N-S compound is quit smaller than other conventional spray type.

(5) High Quality Gypsum Limestone is completely utilized in S02 neutralization then purity of gypsum is high.

(c-5) Jet Bubbling Reactor A schematic depicting the JBR operation is shown in Figure-1. The untreated gas enters a gas cooling chamber, then an inlet plenum created by a deck plate. Sparger pipe openings in the deck plate force the gas into the top layer of slurry contained in the lower section of the JBR vessel. After bubbling through the slurry, the gas flows upward and passes out of the JBR through a mist eliminator

- 118- to the stack.

By referring to Figure-1, it can be seen that the slurry in the JBR is divided into two "zones": the jet bubbling zone and the reaction zone. This concept is an important design feature, because four processes are occurring simultaneously within the single JBR vessel: •Absorption of S02 • Oxidation of acid sulfites to form acid sulfates • Neutralization of acid sulfates to form gypsum • Growth of gypsum crystals for strength and ease of dewatering

The jet bubbling zone provides the gas-liquid interfacial area in the JBR, where the S02 in the gas dissolves in the liquid film on the surfaces of the bubbles. The bubbles vary in diameter from about 3 mm to about 20 mm (in this size of bubbles even small liquid droplets are contained), providing a greatly extended interfacial area, and making the JBR an extremely efficient contractor.

The capability is even further enhanced by the continual and rapid collapse and formation of bubbles in the zone, thus continually regenerating new and fresh interfacing area and transporting reaction products away from the jet bubbling zone into the reaction zone, and bringing fresh reactants into contact with the gas.

All four of the simultaneous processes occurring in the JBR are initiated in the jet bubbling zone and are completed in the reaction zone below the jet bubbling zone.

- 119- The bulk of the slurry in the JBR resides in the reaction zone where limestone slurry is added. The JBR is designed to provide a residence time of over 20 hours in the reaction zone, as contrasted to 5 to 10 minutes in conventional systems where large pumps quickly withdraw slurry bottoms for external circulation. This residence time allows completion of the reactions initiated in the jet bubbling zone and provides sufficient time for gypsum crystal growth and dissolution of the oxygen from the oxidizing air sparged into the slurry in the reaction zone.

At this point, one of the key design concepts of the CT-121 gas desulfurization process comes into play. The JBR is designed to operate in a pH range between 3.0 and 5.0, a range substantially below that used in conventional wet limestone desulfurization processes. This key concept provides several major advantages. • Limestone dissolution, one of the normally limiting processes, is very rapid in an acid environment • Limestone is completely utilized in S02 neutralization • Carbonate ion from the limestone is decomposed by the acid, preventing accumulation of unreacted alkali in the system •Oxidation of sulfite species to sulfate species is rapid and complete, whereas it is slow and incomplete at the pH used in the conventional wet limestone desulfurization processes.

The problem of maintaining high S02 removal performance at a pH below 5.0 has not previously been satisfactorily solved, because accumulating acid-sulfite ion quickly generates an equilibrium back-pressure of S02 which limits removal efficiencies to low levels.

This problem has been completely overcome in the CT-121 gas desulfurization process: in the totally oxidizing environment of the JBR, acid-sulfite ion is instantly oxidized to acid-sulfate ion, which exhibits no S02 back-pressure. Because no acid-sulfite is permitted to exist in the JBR, very high S02 removal efficiencies are routinely obtained under the design acidic conditions. Thus, in the acidic, oxidizing environment of the JBR, the slurry in the reaction zone is composed of virtually pure gypsum solids. The slurry is maintained at a concentration of about 20 percent solids by bleeding off a properly proportioned stream of gypsum slurry.

- 121 - Conventional wet desulfurization processes employing gas-liquid contractors must depend upon a series of large pumps, tankage and piping to circulate adequate volumes of absorbent liquor to and from the gas-liquid interfacial area, hence the familiar and critical parameter of liquid-to-gas ratio (L/G). Again referring to Figure-1, note that the JBR is designed with a large diameter, low speed turbine agitator, which, in conjunction with the supplementary agitation provided by both the gas spargers and the oxidizing air spargers, provides all the circulation required to transport reagent and products between the jet bubbling zone (site of gas-liquid contact) and the reaction zone.

All liquid circulation is internal to the JBR. No external circulation with its associated pumps, tankage, and piping is required, and L/G ratio is virtually meaningless for the CT-121 gas desulfurization process.

- 122 - (c-6) A design condition characteristic to CT-121 process CT-121 process is the limestone gypsum method as basic technology. The conditions of lime used in this process, the gypsum product which is a byproduct and cooling water are as follows. The quality of the limestone used as an absorbent is shown in Table 2.2.4-17. The quality of industrial water and gypsum are shown in Table 2.2.4-18 and 2.2.4-19 respectivery.

Table 2.2.4-17 Quality of the limestone Unit Conditions CaCOS [wt%l >95.0 Other inclusions [wt%l <5.0 Particle size [Meshl <325

Table 2.2.4-18 Quality of industrial water Unit Value Temperature A 30 Pressure [kg/cm2Gl 4 COD [ppml 5 Cl ____ [PP™1____ 50

Table 2.2.4-19 Quality of Gypsum Gypsum outturn Unit Conditions CaS04.2H20 [wt%l > 95 (in dry gypsum) Particle size average n ml >50 Water content [wt%l < 12

The allowable differential pressure of component is shown in Table 2.2.4-20.

Table 2.2.4-20 Allowable differential pressure of component Allowable-pressure loss Unit Conditions Duct |mmH201 20 Gas-cooling equipment |mmH201 40 JBR [mmH201 235 Mist eliminator [mmH201 25 A total differential pressure [mmH20] 320

- 123- (c-7) Configuration The process flow diagram and plot plan are shown in Fig. 2.2.4-14 and 2.2.4-15. The material/heat balance and equipment list shown in Table 2.24-21 and 2.2.4-22 respectivery.

Major equipments are as follows. - Gas-Cooling Equipment : Installation as an independent equipment of FCC unit. - JBR (Reactor) and Auxiliary : Installation as an independent equipment of FCC unit. - Mist eliminator : Installation as an independent equipment of FCC unit. - Duct (*1) : Installation as an independent equipment of FCC unit. - Flue gas duct (*1) : Installation as a Thing Characteristic of FCC unit. - Limestone feed facility : Installation as Common with FCC and RFCC unit. - Gypsum Separation Equipment : Installation as Common with FCC and RFCC unit.

Notes (*1) An existing duct and pipe will be removed from material viewpoint because the flue-gas temperature down stream of desulfurization facility drops.

- 124- Fig. 2.2.4 — 14 Process Flow Diagram for Disulfurization

S-101 Limestone Silo

A-101 JBR Agitator 1W »

Flue Gas X-102 A/B Limestone Feeder FCC

A-102 X-101 X-105 Limestone Slimy Mist Elininator Tank Agitator T-102 Limestone Slurry Tank P-102 A/B Limestone Sbtry Punp Waste Wate,

B-101 A/B P-101 A/B T-101 Oxidation Ar Blower Gas Cooling Punp

X-103 A/B A-201 Centrifuge Decanter JBR Agitator

RFCC Gypsum P-103 A/B T-103 Filtrate Punp Filtrate Tank X-201 Mist Elininator X-205

B-201 A/B P-201 A/B T-201 Oxidation Ar Blower Gas Cooling Punp JBR - - - 0.0 wt* ioao 6.0 Water C ” 16 — 57 4.0 Waste - - - 1.6 1.6 Ton/Hi - - 0.0 wt* 1000 100.0 Water

°c -6.0 15 • 57 4.0 Filtrate

- 2.4 0.0 2.4 gas)

12* 0.5 4.6 wt% 12.0 83.0 100.0 flue - - 14

Gypsum Moisture 0.1 0.7 0.0 0.6 0.0 Ton/Hr regenerator

- - - 1.0 Ql 18.8 wl% 80.0 100.0 100.0 100.0 Vol.% Air mg/m3N

Shitty Slurry 6.0

“ "C *C mmAq m3/Hr 4 - 13 (FCC

57 4.0 20% 900 900 Oxidation Gypsum - - - 3.2 2.5 0.0 0.6 0.0 Ton/Hr m3N/Hr Balance

ppm ppm

47 26 - 1.3 16.9 wt* 75.0 23.8 83.1 100.0 100.0 Vol.% mg/m3N Slurry Slurry

Inlet

•c *C mmAq m3/Hr - 3 12

8 16 57 57 35 25% Stack 34.900 Limestone 171.900 206.800 249.100 - - 1.5 i.i 0.3 0.0 Material/Heat Ton/Hr m3N/Hr

ppm ppm

47 26 - 6.0 16.9 83.1 95.0 100.0 100.0 Vol.% 2.2.4-21 mg/m3N

wt* *C mmAq m3/Hr - - 2 Outlet 11

8 16 70 57 Limestone JBR Table 34,900 171.300 206.300 248.200 - - - 0.4 0.3 0.0 Ton/Hr m3N/Hr ppm ppm

53 - - - 5.0 474 wt* 95.0 100.0 100.0 100.0 Vd.% mg/m3N Water

Gas •c "C

mmAq m3/Hr . 10

7.0 9 30 81 Flue 100 270 355 9.000 Make-up 180.000 171.000 346.100 - - - 22.6 22.6 Ton/Hr m3N/Hr - MW MW 18.02 18.02 64.06 80.08 100.09 172.17 Rate Phase

NO NO NAME Flow

Solid

UNIT UNIT NAME & Gas

(Dry) (Dry) (Dry)

Gas

CaSQ4*2H20 Temperature Total Liquid H20 CaCOO Others pH REMARKS H20 S02 S03 Dust Temperature Dry Pressure REMARKS Actual

- 126 - Table 2,2,4=22 Equipment List

Equip. No. NAME No. Spec. Remarks Rea'd ; T-101 JBH for FCC 1 Type Vertical Cylindrical Size 8 m* xio. 5 eti Material FRP : T-201 JBR for RFCC 1 Type Vertical Cylindrical Size 5.5 a* X10.5 mH Material FRP ; T-102 Limestone Slurry Tank 1 Type Cylindrical Size 2. 5a *t> X2. 5mH Material CS+Linin* ! T-103 Filtrate Tank 1 Type Cylindrical 2.8m* X2. SmH Material CS+Linin* : A-101 JBR Agitator for PCC 1 Type PBT

Impeller 2.3m* Material CS+Rubber Lining 37 kW 1 A ~201 JBR Agitator for RFCC 1 Type PBT 50 r. p. m. Impeller 1.6 m* CS+Rubber Lining Motor 18. 5 kW : A-102 Limestone Slurry Tank 1 Type PBT Agitator 85 r. p. m. 0.7m* CS+Rubber Lining Motor 1.5 kW P-101 A/B Gas Cooling Pump 1 +1S Type Centrifugal, Horizontal for FCC Size 560 m3/h X 20 mH Material CS+Rubber Lining (Casing) /CS+Rubber Lining (Impeller) Motor 75 kW P-201 A/B Gas Cooling Pump 1 +1S Type Centrifugal. Horizontal for RFCC 260 m3/h x 20 mH Material CS+Rubber Lining (Casing) /CS+Rubber Lining (Impeller) Motor 37 kW P-102 A/B Limestone Slurry Pump 1 + 1S Type Centrifugal, Horizontal 4 n>3/h X 30 mH Material CS+Rubber Lining (Casing) /CS+Rubber Lining (Impeller) Motor 2.2 kW P-103 A/B Filtrate Pump 1 +1S Type Centrifugal, Horizontal Size 20 m3/h x 40 mH Material CS+Rubber Lining (Casing) /CS+Rubber Lining (Impeller) 7. 5 kW B-101 A/B Oxidation Air 1 +1S Type with Auxiliary Blower for FCC Size 900 Nm3/h X 3,500 mmAq Material CS/CS 19 kW B-201 A/B Oxidation Air 1 +1S Type with Auxiliary Blower for RFCC Size 800 Nm3/h X 5,000 mmAq Material CS/CS 19 kW s-ioi Limestone Silo 1 Type Vertical Cylindrical Size 5mfx 7. 5 mH Material CS X-101 list Eliminator for FCC 1 Type Chevron Size 13. 8 m2 Material FRP (Casing)/PP (Element) X-201 list Eliminator for RFCC 1 Type Chevron Size 6. 6 m2 Material FRP (Casing)/PP (Element) X-102 A/B Limestone Feeder 1 +1S Type Table Size 0.7 ton/h Material CS 0. 75 kW X-103 A/B Centrifuge Decanter 1 +1S Type Centrifuge Decanter with Auxiliary (Gypsum Dewatering) Material SUS316 22 kW X-104 jypsum Storage House 1

X-105 Stack for FCC 1 Type : Vertical Cylindrical Size : 2.2m$X80mH Material : CS (Outer)/FRP (Inner) X-105 Stack for RFCC 1 Type : Vertical Cylindrical Size : 1. 5m4> X80mH Material : CS (Outer)/FRP (Inner)

127 37500 Fig.

2.2.4-15

(1/2)

Plot

Plan 000

z 128 000

DIG NO. RLTI 6. 91032-PLT-002-2. ROO 1 R00

1 1 1 1 1 1 » 1 1

1 1 -PIT-002-2. 1 1 09 O

Mica; 91032 Fig. 2.2.4-15 (2/2) Plot Plan u 'e1 I M 1*1 «i~"i PLTI6.

i i LL

i i Z m. o i i

- »«c i i i i 2 ! ! 2

129 (c-8) Chemistry of the CT-121 Gas Desulfurization Process On an overall basis, the system chemistry appears similar to that of conventional limestone scrubbing systems. It is at the detail level, where the different steps in the overall reaction occur, that the CT-121 process proves its unique capability for SOz removal with stoichiometric limestone consumption.

The overall reaction equation is: S02 + CaC03 + l/2 02 + 2H2G -> CaS04 - 2H20 + C02 (1) Detailed steps in the overall reaction are: S02(g) SO^l) (2) S02(1) + h2o —^ H2S03 (3) h2so3 HSG3 + H+ (4) o,(g) -> o,(i) (5) hso3 + 1/2 Oz (1) -> S04" + H + (6) CaC03 (s) + H+ —^ Ca++ +HC03- (7) hco3 + H+ co 2 + h2o (8)

Ca++ + S04" + 2H20 -> CaS04 • 2H20 (s) (9)

CaS04 • 2H20 (s) -> Crystal growth (10)

(g): Gas phase , (1): Liquid phase , (s): Solid phase

The major reaction steps in the jet bubbling layer are represented by equations (2), (3) and (4). The rate controlling step in that layer is the gas phase mass transfer of so2. The major reaction steps in the reaction zone are represented by equations (5), (6), (7), (8), (9 ) and (10). The rate determining steps are thought to be the dissolution of 02 and the crystal growth rate of the gypsum byproduct.

Oxidation of the sulfite ions in the JBR generates H+ ions which provide the desired acidic condition in the liquid, (pH 3.0-5.0). The acidic solution and the presence of dissolved oxygen promote the conversion of sulfite and bisulfite ions to sulfate ions.

Troublesome dissociation back pressures (low S02 removal), experienced because of bisulfite ion in conventional (higher pH) systems, is thus eliminated. The design pH also allows total utilization of the limestone reagent. The presence of H+ ions minimizes carbonate concentrations and thus eliminates any tendency to scale or plug.

- 130- Mother liquor from the CT-121 process, unlike that from other processes, has virtually no COD. This is a distinct advantage where the waste liquor is to be released to receiving waters. Rates of reaction for both limestone dissolution and oxidation of the bisulfite are greatly increased within the pH range of 3.0 to 5.0. Limestone dissolution takes place quickly and completely. All reaction products other than gypsum go into solution, and no solid phase calcium carbonate remains in the JBR. This makes it possible not only to achieve high reagent utilization, but also to eliminate scaling in the mist eliminator.

(c-9) Specific Process Description The CT-121 system is divided into three main sections, S02 Removal, Limestone Feed and Gypsum Dewatering.

SQ2 Removal Section The flue gas subsequently flows the pre-cooling section where it is contacted with fine liquid and slurry sprays consisting of make-up water and recirculating scrubber slurry to ensure the cooling and saturation with water of the gas prior to entering to the Jet Bubbling Reactor. This feature will enhance high reliability. Additionally, the slurry sprays offer some S02 removal capability.

The adiabatically cooled gas passes to the inlet plenum of the JBR, down through the spargers and into the froth layer, then up to the outlet plenum and goes out from the stack after pass through two stages of vertical arranged mist eliminator.

Oxidation Air for the gypsum is separately blown down into the reaction zone of the JBR, and that, which does not react, passes out with the wet gas.

The process flow diagram for this system can be found hereinafter.

In details, in the transition duct at the inlet of the JBR (T-101, T-201), the flue gas is cooled by JBR absorbent slurry spray and saturated in that zone prior to its introduction into the JBR. A Gas Cooling Pump (P-101, P-201) is used to circulate the slurry for spray.

When the flue gas is thus prescrubbed by the slurry, targeted components are partially removed. Then, the humid gas enters the body of the JBR where major S02 absorption and particulate removal occurs.

- 131 - After leaving the JBR, the flue gas passes through a Mist Eliminator (X-101, X-201) to remove entrained mist.

The JBR vessel is equipped with a JBR Agitator (A-101, A-201) for suspending gypsum crystals in the liquid.

Limestone reacts with absorbed S02 in combination with the injected air by Oxidation Air Blowers (B-101, B-201) to form gypsum, neutralization of absorbed S02.

The by-produced gypsum is withdrawn from the JBR as 20 wt. percent slurry, by the Gas Cooling Pump to the gypsum dewatering section.

Limestone Feed Section Powdered limestone is supplied to the limestone slurry tank from the Limestone Silo (S- 101) via the Limestone Feeder (X-102).

Gypsum Dewatering Section Gypsum slurry withdrawn from the JBR is fed to the Centrifuge Decanter (X-103) of gypsum dewatering equipment. The filtrate from the dewatering equipment is stored in the Filtrate Tank (T-103), and is fed to the limestone slurry tank for the slurry preparation and the JBR for the reuse of the filtrate Water.

- 132- (2) Introduction of the power recovery fracility to RFCC unit

An actualities schematic diagram is shown in Fig. 2.2.4-16.

The RFCC unit (1,000,000 ton/year) is two step combustion type plant designd by the U S. S&W company, and is a relative new unit which operated in 1990. The 1st regenerator flue gas is introduced into the power recovery unit through expander after removing fine catalyst by the 3rd stage catalyst separator. Moreover, high-pressure steam is generated by CO boiler, which burns CO (carbon monoxide) in a flue gas using associate fuel, installed in down stream of power-recovery-facility. On the one hand, power recovery from the 2nd regenerator flue gas does not carry out, but only performing heat recovery with waste heat boiler. The existing 1st regenerator flue-gas power recovery facility consists of the expander, air blower, reduction gear, and motor/ generator, and its recovery power is 3.3 MW.

Since it is comparatively new equipment, there is not expansion or a modification plan for the time being.

In the Nanjing Refinery, they have big interest in the induction of the power recovery using the flue gas RFCC unit 2nd regenerator. However, there are the following techinical issues to be cleared. - Since regenerator flue-gas temperature is high (785 °C), it cannot introduce into an expander as it is. - As there are very few amounts of gas from the 2nd regenerator, there is no suitable expander model. As countermeasure : - The temperature of the 2nd regenerator flue gas is cooling down to the durable temperature of an expander by installing a cooler. - Manufacturing the expander suitable for a design condition as a special article. However, installing a power recovery unit will be pass up in this energy-saving project for the following reasons ; - The considerable equipment modification is required although recovery power is Small. - A payout time will become 15 years or more.

- 133- <192 <160 STACK

Regulation ,°C

kP£ ,

kg/h

914 222 GAS

: :

914ppm(v) OPERATION

Pressure Temperature = =222.6

WASTE STAGE

CO-BOILER

SOx [ppm(v)] [kg/h]

LEGEND FIRST REGEN. FROM Emission

r- Concent, Rate

► STEAM

HP ------MOTOR BLOWER

BYPASS

AIR OF

SYSTEM

CONFUTATION

GAS UNIT:

2.2.4-16

RFCC CURRENT WASTE Fig. SECOND REGENERATOR

- 134- As there are many sulfur contents in the raw material of RFCC unit compared with FCC unit, SOx concentration in the flue gas which comes out from RFCC unit is high. The flue gas from the RFCC unit is discharged to the atmospher as it is, without being treated with a flue gas desulfurization or denifrcation facility etc., since the atmospheric control was loose till recent years.

The environmental standard as of 1998 is shown in Table 2.2.4-23. The flue gas from regenerator does not fulfill the critical value.

Table 2.2.4-23 Atmospheric-pollutant discharge critical value Application classicication of the The 3rd classicication category concerned facility The application module as a The 3rd class criteria pollution source

The highest The highest emission permission emission velocity concentration Pollutant |mg/m31 fkg/hl S02 550 (*1) 160(*1) (192 ppm-w) Soot dust 18 (*2) 8.5 (*2) Notes (*1) Apply to a pollution source with stack height of 100m or more. (*2) Apply to a pollution source with stack height of 40m or more.

In China, the newest environmental standards is applied in cases where the facilities constructed newly or modification is performed. In case this project is executed, the flue gas desulfurization facility with which it can be satisfied environmental standards is needed (in this case the installation of RFCC 2nd regenerator flue-gas power-recovery- facility ). Also in RFCC apparatus, Nanjing-Refinery side is inclined to install a flue gas desulfurization facility positively.

The energy-conservation project by the induction of the power recovery facility to RFCC unit shall not carry out from investment recovery viewpoint as described above. However, Nanjing-Refinery side shows interest about flue gas desulfurization facility, in order to plan environmental capitalization in the future. So, the specification of the flue gas desulfurization facility was studied.

- 135- The description of the study is shown in the schematic diagram of Fig. 2.2.4-17.

The equipment configuration of the detailed study is as follows. - Major part of RFCC unit : No modification - The 2nd regenerator flue gas power recovery facility : No installation - Waste heat boiler : No modification - Flue gas desulfurization facility : Newly installation - Limestone gypsum separation equipment : Newly installation - Stack : Renewal

- 136-

<192 <160

Regulation G ,°C e

RP project. ,

100 24.- DeSOx

: :

this

5mg/Nm3 drawing. OPERATION

kg/h in

Pressure Temperature

the GAS

[ppm(v)] [kg/h]

in 914ppm(v) area

Content = =222.6

Emission WASTE

STAGE

LEGEND

CO-BOILER

SOx

SOx Concent, Rate Solid r- indicated FIRST REGEN. FROM

is modification STEAM

HP the

» condition

illustrates

operating line

BLOWER

Bold Major BYPASS

AIR

) (*1 (*2) SYSTEM

REGENERATOR:

EXECUTION)

SECOND TREATING

PROJECT GAS

UNIT

2.2.4-17

(AFTER RFCC WASTE Fig. SECOND REGENERATOR

- 137- 1) Model selection

(a) Ooperating conditions for flue-gas expander and air blower

The design condition of the flue-gas expander and air blower is shown in Table 2.2.4-24 and 2.2.4-25 respectivery.

Table 2.2.4-24 Design condition of flue-gas expander Unit Value Gas flow rate [Nm3/h] 30,000

Inlet temperature [°C] 785 Inlet pressure [KPaG] 140 Outlet pressure [KPaG] 10

Gas composition N2 [Vol.%-wet] 76.90 C02 [Vol.%-wet] 15.80 CO [Vol.%-wet] 0.60 02 [Vol.%-wet] 3.60 H20 [Vol.%-wet] 1.00 SOx [ppm-wet] 800 503 [ppm-wet] 80 Dust concentration [mg/Nm3-dry] 100

Table 2.2.4-25 Design condition of air blower Unit Value Gas flow rate [Nm3/h] 26,000

Inlet temperature rq 20 Inlet pressure [KPaG] -2 Outlet pressure [KPaG] 200

- 138- (b) The issue in power-recovery-facility institution

(b-1) Operating temperature The flue gas from the RFCC equipment 2nd regenerator will be supplied to a flue-gas expander at 785 °C. However, the flue-gas expander which can endure such a high temperature is not manufactured for the time being. Besides, the flue gas from FCC regenerator is 732 °C, and, this temperature is considered to be the maximum temperature which can install a flue-gas expander at present.

Furthermore, if taking into consideration China-made flue-gas expander to be applied, its inlet flue-gas temperature even maximum is about 700°C according to the past records, in spite of using the main material equivalent to Japan-made expander. Therefore, a cooling facility needs to be provided in upstream of the flue-gas expander.

(b-2) Gas flow rate Since the amount of gas from the RFCC 2nd regenerator is small, it is a Japanese maker's out of products range. Although requesting Japanese maker to manufacture it as a special article can also be studied, it is very expensive considering apparatus size. Moreover, it is difficult to recover investments within the forecast machine life of the flue-gas expander, since it is expected that recovering investment costs will take in 15 years or more.

In China, the small-sized flue-gas expander whom the Japanese maker is not producing is manufactured, and since introduction was also considered when applying the 1 shaft train formation, a manufacturer's survey was performed. However, the flow rate of the smallest model (36,000 Nm3/h) is still 20% larger than the design condition (30,000 Nm3/h) of this project at.

Installing the expander of an excessive size does not have a merit, because the partial load efficiency of flue-gas expander is not effective as described above.

About model selection of air blower, it is thought that there is no question on its quality to use China-made air blower from the survey results of Chinese manufacturer. The further detailed surveies, such as operation experience, operation record and maintenance exoperience etc., need to be carried out.

- 139 - As a reference, the forecast output is shown in Table 2.2.4-26, if installing a power recovery facility in the 2nd regenerator of RFCC unit.

Table 2.2.4-26 Forecast output of power recovery facility The amount of gas Inlet / outlet pressure Expected output (Nm3/h) (kPaA) (kW) Air blower 26,000 99/221 1,000 Flue-gas expander 30,000 221/106 2,000

(c) Results By this project, the power recovery facility to the RFCC unit 2nd regenerator flue gas shall not install for a reason below as a result of a study. - Since the operation temperature of the regenerator is high, the cooling facility is required for flue-gas expander installation. - Since there are few amounts of gas, proper model cannot be selected.

2) Auxiliary equipment

(a) Flue-gas-desulfurization-facility

[The design condition] The conditions of flue-gas and gas teatment for facility design are as follows.

(a-1) Flue-gas conditions The flue-gas conditions in desulfurization-facility are shown in Table 2.2.4-27.

Table 2.2.4-27 Flue-gas conditions Unit 1st regenerator 2nd regenerator flue gas flue gas The amount of emissions [Nm3/h] 55,000 30,000 Flue-gas temperature [°C] 270 270

Gas composition N2 [Vol.%-wet] 72.6 79.9 CG2 [Vol.%-wet] 14.10 15.80 CO [Vol.%-wetl 0.40 0.60 02 [Vol.%-wet] 0.30 3.60 H20 [Vol.%-wet] 12.50 1.00 SOx [Vol.%-wet] 1,000 800 S03 [Vol.%-wet] 100 80 Soot dust concentration [mg/Nm3-dry] 100 100

- 140 - (a-2) Gas treatment conditions Gas treatment conditions are shown in Table 2.2.4-28.

Table 2.2.4-28 Gas treatment conditions Unit Value Gas treatment conditions The rate of S02 removal [%i >= 90 Soot-dust concentration [mg/Nm3-dry] <= 50 Pressure |mmH201 35 Total-pressure loss |mmH201 320

(a-3) Sewerager conditions The conditions of sewerage are shown in Table 2.2.4-29.

Table 2.2.4-29 Sewerager conditions Sewerager conditions Unit Value COD rpp mi <20

(a-4) Process application As a flue-gas-desulfurization process, CT-121 will be applied as same as FCC unit.

(a-5) A design condition characteristic to CT-121 process CT-121 process is the limestone gypsum method as basic technology as described before. The conditions of lime used in this process, the gypsum products which is a by-product, and cooling water are as follows. The quality of limestone used as an absorbent is shown in Table 2.2.4-30. The quality of industrial water and gypsum are shown in Table 2.2.4-31 and 2.2.4-32 respectivery.

Table 2.2.4-30 Quality of limestone Unit Conditions CaC03 [wt%l > 95.0 Other inclusions |wt%l <5.0 Particle size [Meshl <325

- 141 - Table 2.2.4-31 Quality of industrial water Unit Value Temperature rci 30 Pressure [kg/cm2Gl 4 COD ipp mi 5 Cl [ppml 50

Table 2.2.4-32 Quality of gypsum Gypsum charactraristic Unit Conditions CaS04.2H20 [wt%l > 95 (in dry gypsum) Mean particle diameter [muml >50 Water content [wt%j <12

The allowable differential pressure of component is shown in Table 2.2.4-33.

Table 2.2.4-33 Allowable differential pressure of component Allowable-pressure loss Unit Conditions Duct [mmH201 20 Gas-cooling equipment [mmH2Gl 40 JBR [mmH20j 235 Mist eliminator [mmH201 25 A total differential pressure [mmH201 320

(a-6) Configuration The process flow diagram and material/heat balance are shown in Fig. 2.2.4-18 and Table 2.2.4-34. As for the equipment list and plot plan, please refer to Table 2.2.4-22 and Fig. 2.2.4- 15.

Major equipment are as follows. - Gas-Cooling Equipment : Installation as an independent equipment of RFCC unit. - JBR (Reactor) and Auxiliary Equipment : Installation as an independent equipment of RFCC unit. - Mist eliminator : Installation as an independent equipment of RFCC unit. - Duct (*1) : Installation as an independent equipment of RFCC unit. - Flue gas duct (*1) : Installation as an independent equipment of RFCC unit. - Limestone feed facility : Installation as Common with RFCC and FCC . - Gypsum Separation Equipment : Installation as Common with RFCC and FCC .

- 142 - Notes : (*1) As existing duct and pipe will be removed from material viewpoint because the flue gas temperature down stream od desulfurization facility drops.

(a-7) Process description About a process, please refer to clause 2.2.4 (1) 2) (c-9) since the same process as for FCC unit is applied.

- 143 - Fug. 2.2.4—18 Process Flow Diagram for Disulfurization Facility

S-101 iw )—<5^ Limestone Silo

A-101 JBR Agitator

X-102 A/B Limestone Feeder FCC

A-102 X-101 X-105 Limestone Sluriy Mist Eliminator Stack Tank Agitator T-102 Limestone Sluriy Tank P-102 A/B Limestone SUn-y Punp Waste VVate.

B-101 A/B P-101 A/B T-101 Oxidation Ar Blower Gas Cooling Punp

X-103 A/B A-201 Centrifuge Decanter JBR Agitator

RFCC Gypsum P-103 A/B T-103 Filtrate Punp Filtrate Tank X-201 Mist Elininator X-205

B-201 A/B P-201 A/B T-201 Oxidation Ar Blower Gas Cooling Punp JBR - - - 0.0 wt% 100.0 6.0 Water

°C 16 —

60 4.0 Waste - - - 1.0 1.0 Ton/Hr - - 0.0 wtK 100.0 100.0 6.0 Water

"C 15 — - 60 4.0 Filtrate gas) - - 2.1 0.0 2.1

Ton/Hr flue

0.5 3.7 12% wtK 12.0 83.9 100.0 - - 14

Gypsum 0.1 0.0 0.5 0.0 0.6 Moisture regenerator

Ton/hr ppm ppm - (RFCC 0.1 0.8 WtK 19.1 80.0 100.0 100.0 Vol.% 100.0

Air mg/m3N

Slurry Slurry 6.0

*C mmAq m3/Hr °C 4 13 —

60 4.0 800 800 20% Oxidation Gypsum - - - 22 0.0 0.5 0.0 2.7. on/Hr Balance

T m3N/Hr

ppm ppm

91 50 - 1.3 19.7 wtK 80.3 75.0 23.8 100.0 Vol.% 100.0 mg/m3N Slurry

Slurry Inlet

C *C mmAq m3/Mr “ 3 -

7 15 60 35 60 25% Stack 19,300 78.800 98.100 Material/Heat 119,300 Limestone - -

1.0 1.3 0.3 0.0 Ton/hr m3N/Hr ppm ppm

91 50 - - 2.2.4-34 19.7 5.0 80.3 95.0 100.0 Vol.% 100.0

mg/m3N wtK "C mmAq 2 Outlet m3/Hr - -

7 15 60 70 Limestone JBR Table 19.300 78,800 98,100 118,900 " - - 0.3 0.0 0.3 Ton/Hr m3N/Hr ppm ppm

- - - 8.5 102 914 wtK 91.5 100.0 Vol.% 100.0 100.0 mg/m3N Water

Gas *C

mmAq m3/hr 1 'C 10

7.0 8 71 30 Flue 100 270 375 7.200 78.000 85.200 Make-up 163.500 - - - 10.9 10.9 Ton/Hr m3N/Hr - MW MW 18.02 18.02 80.06 64.06 100.09 172.17 Rate Phase

NO NO NAME Flow

Solid

UNIT UNIT & NAME Gas

(Dry) (Dry) (Dry)

Gas

Temperature Total Total Dust H20 S02 CaCOS Pressure REMARKS SOS Dry CaS04'2H20 Others Temperature Liquid H20 pH Actual REMARKS

- 145 - (3) Heat recovery

The topper and vacuum distillation unit (3,500,000 ton/year) are designed with combined operation type, and the supply of feed stocks to the facility has adopted the direct charge system. The rate improvement of heat recovery has so far been plomoted with the original technology of China. From the topping plant, not only a petroleum product but the raw material to petrochemical facility is produced. A part of side stream oil of vacuum-distillation unit is sent to the FCC, and bottoms oil is sent to the RFCC.

As a result of analyzing a present operation status, it became clear to have obtained sufficient heat-recovery efficiency like the newest plan. As for its reason, heavy-gravity-crude-oil have been refined at the survey stage. Although the further improvement of heat recovery by installation of additional heat exchanger is possible, if present heavy-gravity-crude-oil processing under the same operation conditions continues from now on, it will be thought that there is no necessity for modification.

1) Auxiliary facility

(a) The outline of the capacity for existing facility Present heat-recovery efficiency was evaluated for the topping unit (CDU) and vacuum- distillation unit (VDU), and studied whether it would be possible to reduce fuel consumption in fired heater by further heat recovery (namely, achievement of C02 reduction).

In the Nanjing Refinery, technical exchange with the other petroleum refineries in China was performed actively, and they have so far performed the improvement of the heat- recovery efficiency of CDU and VDU based on their own study results. However, since the technical information about a foreign petroleum refinery was limited, they desired the comparison of the present facility and overseas facility about heat recovery.

In order to understand the present heat-recovery situation of CDU and VDU and to establish an improvement guide line, the comparison study of CDU/VDU equipment

- 146 - (hereinafter called as MODERN DESIGN) which our company built in 1998, and CDU/VDU of Nanjing Refinery is performed.

The MODERN DESIGN as well as a Nanjing Refinery has applied the direct charge system which is directly introduced into VDU in bottoms oil of CDU as feed oil of VDU, without passing through an intermediate tank. Moreover, about the disposition of the heat exchanger for preheatings, the newest pinch-point technology is utilized, and it is devised so that a heat exchange may become the maximum. The flow diagram of a MODERN DESIGN is shown in Fig. 2.2.4-19.

- 147- DESIGN

©■ — ® MODERN

for

Diagram

Flow

19 — 2.2.4

Fug.

CDU/VDU

INTEGRATION OF

DESIGN CHARGE

DIRECT MODERN

- 148 - As present CDU and present VDU operation situation of a Nanjing Refinery, the operation data recieved from the Nanjing Refinery are used at the time of survey, and the survey result which the petroleum energy center (PEC) performed in 1998 is used about missing data. The data of a MODERN DESIGN CDU/VDU have extracted the design data at construction stage. The comparison result about a throughput and each products yield is shown in Table 2.2.4-35.

Table 2.2.4-35 Comparison of a throughput and a products yield Nanjing Refinery MODERN DESIGN * Crude oil/throughput Unknown Arabian Heavy CDU 56,700 B/D 100,000 B/D VDU 34,400 B/D 48,500 B/D

* Side stream oil yield CDU 40 Vol% (vs. crude-oil feed) 51 Vol% (vs. crude-oil feed) VDU 58 Vol% (vs. VDU eed) 58 Vol% (vs. VDU eed)

* Each product yield (as opposed to the feed to CDU) LPG 2.3 vol% (included in Naphtha) Naphtha 5.8 vol% 17.8 vol% Kerosene 9.2 vol% 11.4 vol% GO 22.6 vol% 22.1 vol% VGO 34.8 vol% 28.1 vol% VR 25.3 vol% 20.6 vol%

The kind of feed oil of a MODERN DESIGN is Middle East crude oil (Arabian Heavy) generally classified as a heavy oil. The yield rate of VGO (side stream from VDU) and VR (bottoms oil of VDU) of Nanjing Refinery is 5vol% higher than those for MODERN DESIGN.This shows that crude oil currently refined in the Nanjing Refinery is a heavy distillate with many high boiling-point fractions.

When the quality of crude oil considers the influence which it has on the heat exchange of CDU/VDU, it is advantageous to heat recovery to refine crude oil containing many high boiling-point fraction. The Nanjing Refinery has RFCC plant on the down stream of VDU , and it produces the more valuable gasoline fraction and the olefin component used as the raw material of the petrochemicals from VDU bottoms oil by cracking.

- 149- Secondly, the comparison of the major equipment which composes a facility is shown in Table 2.2.4-36.

Table 2.2.4-36 Composition comparison of major equipments Nanjing Refinery MODERN DESIGN * Major component CDU (topper) Desalter 2 stage formation 2 stage formation Pre flasher Existence Nothing Pre flasher number of tray 26 tray - Main tower number of tray 49 tray 57 tray Number of product 7 products 5 products

VDU (vacuum-distillation ) Type Dry type Dry type Flash zone pressure 35 mmHgA 25 mmHgA Tower internal Dumped-packing Stacked-packing Number of product (except BTM) 3 products 3 products

The pre flasher is installed in CDU of the Refinery. Separating a light oil with a pre flasher improves the throughput of a main column, although it does not contribute to the improvement of heat recovery. As for the desalter, the two stage system is applied and it is considered to correspond to oil containing many sludge, and import crude oil.

7 kinds of products are extracted from CDU, and this has more kinds than those for an ordinary petroleum-refining plant. In the Refinery, the chemistry plant is arranged to the down stream of this unit, and chemistry raw materials such as a normal paraffin are used effectively.

VDU plant is a Dry type which does not use steam. Dry type sets up the pressure of the flash zone lowness as compared with Wet type which injects steam. In the Nanjing Refinery, the pressure of the flash zone is set as 35mmHgA, and it is slightly higher compared with the latest plant. Although the reduction effect of fuel oil is obtained by reducing the yield of bottoms oil when the tower degree of vacuum has been improved, substantial modification, such as a tower and a vacuum generating facility is needed. Since it is not necessarily connected with the effective utilization of heat recovery, the validation of a tower degree of vacuum has excluded.

- 150- From the viewpoint of heat-of-combustion recovery, the configuration of a furnace and the present operation status are summarized in Table 2.2.4-37.

Table 2.2.4-37 Configuration and the operation status of the furnace Nanjing Refinery MODERN DESIGN * Furnace composition and operation status CDU (topper) Heat utilization in convection section CDU feed / CDU feed / Combustion air Combustion air Heat utilization in radiation section CDU feed CDU feed Furnace inlet temperature 273°C 281°C Furnace outlet temperature 360°C 363°C Rate of heat recovery at Unknown 66% crude-oil preheating section Furnace efficiency 87% Min. 85% Rate of excess air 4% 2%

VDU (vacuum-distillation) Heat utilization in convection section CDU feed / VDU feed / Combustion air Combustion air Heat utilization in radiation section VDU feed VDU feed Furnace inlet temperature 347°C 350°C Furnace outlet temperature 387°C 400°C Furnace efficiency 87% Min. 85% Rate of excess air 3% 2%

About CDU furnace, the waste heat of a convection section is utilized as a source of a preheating the CDU feed and combustion air. This heat utilization approach is called a direct charge system or a hot charge system, and it becomes a precondition to always carry out series operation of CDU and VDU. Since it is one of the effectual measures for the effective utilization of heat, it is mostly applied to the plant constructed in recent years.

In a MODERN DESIGN, CDU feed whose temperature level is about 280 °C is preheated in the convection section just before the furnace radiation section, and the convection section and the radiation section of the furnace are used in series. As there are few construction volumes of piping and the adjustment of the outlet temperature of the furnace is easy at the time of operation, our company has applied this system to all the plans constructed in past. On the one hand, in the Nanjing Refinery, CDU feed with temperature of 140°C or less at desolter upstream is preheated in the convection section.

- 151 - In case of this system, it is possible to give more heat of combustion to CDU feed by the few heat transfer area, since the temperature difference between combustion gas in a convection section and a tube side-stream fluid is large. However, as the flue-gas temperature in the combustion air preheating section which is down-stream becomes low, the temperature of combustion air cannot be raised even as a MODERN DESIGN.

Moreover, combustion of a furnace is controlled so that CDU feed temperature at radiation section passage become specified temperature. And, it is impossible to adjust the heat input of a convection section. Therefore, the temperature management of a desalter inlet is difficult. The desalting efficiency of a desalter is greatly influenced by operation temperature.

About VDU furnace, the MODERN DESIGN has applied the same heat-recovery approach as CDU. On the one hand, in the Nanjing Refinery, this convection section is also used as a source of CDU feed preheating. Accordingly, in the Nanjing Refinery, all of the heat source in two furnace convection sections are used for the preheating of CDU feed, and the heat-recovery maximization to CDU feed is achieved. In VDU in this case, since the heat of a convection section is not used for the preheating of VDU feed, the furnace load in the VDU becomes large.

Temperature of CDU feed at furnace radiation section inlet, a MODERN DESIGN is 281°C and the Nanjing Refinery is 273°C respectively. If it converts into the heat of combustion volume for furnace, it is equivalent to about 1.0 MMkcal/h. The temperature level of the furnace inlet achieved by the Nanjing Refinery is slightly low compared with a MODERN DESIGN. However, judging from the construction experience of our company, it is high level.

The heat efficiencies for both CDU/VDU furnace in Nanjing Refinery is 87%. This is higher level than the MODERN DESIGN as a result of using the heat of a convection section for CDU feed preheating and good utilization of the heat in flue gas as mentioned above. Although a surplus air content (4% & 3%) is slightly high as compared with general value (2 - 3%), and there is no question.

- 152 - (b) Results of efficiency evaluation on existing facility The appraisal of the present condition on CDU and VDU are summarized as follows. - Processing crude oil is a heavy oil and act in favor for crude-oil preheating. - In VDU plant, the low deep-drawing degree is acting favorably in heat recovery. - The convection section of a furnace is used for the preheating of CDU feed (crude oil). The furnace of CDU/VDU is used for CDU feed preheating, and the heat exchange with CDU feed (low temperature level) is performed. - The present CDU furnace inlet temperature is 273°C, and it is not so bad as compared with a MODERN DESIGN (281 °C). Furnace inlet temperature is an index showing the status of heat recovery. When further heat recovery is performed and it increases to a MODERN-DESIGN grade, about 1.0 MMkcal/h reduction of heat of combustions volume is obtained. However, the heating area of a heat exchanger needs to be added about l,600m2. In the present processing status, it is clear that there are few effects against expansion cost. - As for the cause which has the heat recovery in a Nanjing Refinery in high level, processing crude oil property and the operation conditions (yield pattern of products) have affected greatly. If processing crude oil shifts to light oil or carry out a substantial deep drawing in the conserned facility from now on, it is thought that the big energy-saving effect by the equipment mofification is obtained.

(c) Cardinal points for improvement of heat-recovery efficiency When the modification of a facility will be performed for the purpose of the improvement of heat-recovery efficiency in the future, although it needs to carry out on the basis of the plan about processing oil property, a products yield, a product quality standards etc. prerared by Nanjing Refinery, the items considered to be a cardinal points are described below.

- Addition of the heat transfer area for heat exchanger : The heat exchange with VDU bottoms oil and side stream oil is mainly increased. - Change of the heat-exchange approach of CDU furnace convection section : From CDU feed crude-oil preheating at the desalter inlet, it changes into CDU feed preheating at just before the radiation section. The stabilization of desaler operation temperature is achieved by this way. - Change of the heat-exchange approach of VDU furnace convection section : From CDU feed preheating at the desalter inlet, it changes into VDU feed preheating at just before the radiation section. The stabilization of desaler operation temperature is achieved by this way.

- 153 - - Rearrangement of the heat exchanger: By examining the rearrangement of the heat exchanger using pinch-point technology, it changes into an optimum heat-recovery system.

- 154- 2.2.5 Split of work between both parties for supply of project founds, equipment and materials, and service etc., at the project execution stage

The work demarcation between Japan side and China side such as supply of project founds, equipment and materials, and service etc., for the project execution are conseiderd as follows. According to this basis, the necessary total project found was calculated. In addition, all the technical standard and norms applied were taken as the international standard and the norm.

(1) Japan side The Japan side supplys in principle the capital in related with this project, equipment and service, etcexcept a feild constraction works and which is described below;

1) Perform detailed FS on the basis of this survey 2) Decision of a project master plan 3) The basic design and detailed design for the newly installed facility and equipment (excluding the detailed design for civil, architectual, and fire fighting facilty) 4) Manufacture of the facility equipment and purchasing of materials shown in the following required for this project. a) Gas expander (for FCC) unit b) Exhaust gas desulfurization and a denitrification unit c) Compressor (for FCC) d) Special pumps e) Special piping materials and parts f) DCS and a special instrument and a special analyzer g) Special electrical equipment h) Special tools 5) The training of operation / maintenance staff to the above-mentioned newly installed equipment 6) The purchasing of the spare part for one year operation of the above-mentioned newly instiled equipment 7) The shop inspection for above-mentioned newly-installed equipment and the materials before a factory shipment 8) Customs clearance at Japan or third country for tthe above-mentioned new-construction equipment/materials and ocean transportation to international port in China (including insurance) 9) The feild construction planning

- 155 - 10) Suggestion and technical assistance in connection with the detailed design and the site work about civil, architacture, and fire fighting 11) Control / supervisor instruction of test operation and performance test operation

(2) China side In principle, China side provides the capital, equipment and service, etc including a feild constraction works in connection with this project caused in a partner country side.

1) Soil investigation and site preparation on the construction site for newly installed ewuipment and facility. 2) The supply of basic engineering datas, such as a climatic condition Climate 3) All authoriteis procedure and application in relate with this project execution 4) The supply of the design documents for existing facility and equipment 5) Detail design for civil, architectual, and fire fighting 6) Manufacturing and purchasing the equipment and materials shown in the following required for this project. a) All pressure vessels b) Gas expander unit (for RFCC) c) Generator d) Blower and general-purpose pumps e) Air-conditioning facility f) General piping materials and parts g) General-purpose instruments, cable, and instrument materials h) General purpose electrical equipment, cable, and electrical materials i) General tools j) Civil and a architectual materials k) Insulation and a painting materials 7) The witness shop inspection on major equipment which supplys Japan side 8) Customs clearance and unloading in China port 9) Inland transportation to the construction site, unloading and unpacking inspection at construction site for an newly instslled facility equipment and materiasl 10) Equipment installation work 11) Waste heat boiler assembling work 12) Piping modification and tie-in work 13) Civil works (including equipment foundation, sewerage, pavement) 14) Building and stell stracture works

- 156- 15) Instrumentation work 16) A insulation and fireproofing works 17) Painting work 19) A general training in case there is an operation / maintenance staff employed newly 20) The execution of the test operation and peformance operation under the instruction of a Japanese supervisors. 21) Supply of the water, electrical and electric equipment, steam, compressed air etc. for construction 22) Disposal of the scrap materials 23) Exemption actions, such as the custom duties, corporate income tax, individual income tax, and VAT in related with import goods which it agrees by the contract in the future.

- 157- 2.2.6 Expected preconditions and problems at the project execution stage

The precondition to implement this project is as follows.

(1) Though the technical level of the Chinese power recovery unit to FCC plant is inferior, they were making it construct with Chinese technology considering overall long range planning of the refinery. However, since the cost considered at the beginning goes up, the concerned refinery is looking over the financial-resources-credit plan again, and it is unfixed.

(2) About installation of the power recovery unit to RFCC, the amount of flue gas, which was planning at the beginning, is not obtained from RFCC unit. Therefore, as a result of investigating whether supplying of an equipment plant is possible, overseas including Japan, the expander which can correspond to little gas was not made, but was understood that only the Chinese equipment manufacturer is manufacturing. And by the survey, it is judged that it can sufficiently be used in respect of the quality of equipment. About whether the China expander is actually adopted, the further operation performance, operation expiration, the maintenance service, etc. are investigated in detail.

* The counter partner is presupposing that he wants to procure a control valve, a control system, etc. from Japan, in order to secure the maintenance and the safety of a plant.

(3) Probably, the concerned refinery will study how it is coped with to a future regulation-of- exhaust-gas issue. This time, the degree of interest was high about the off-gas-treatment technology introduced from the Japan side.

- 158- 2.2.7 Project Execution Schedule

The action plan and the execution schedule to a commercial agreement which are assumed when this project execution is adopted after this Basic Survey Project for Joint Implemen Project finalization, between Japan and the China government, or among the concerned company are described.

(1) Project execution schedule (refer the attached-drawing 2.2.7 project execution ) This project execution schedule was planed with divided into the following two-stage.

1) The first stage — Action plan to a commercial agreement In this stage, in order to examine formal accommodation-loan moneys, the amount of carbon dioxidere duction in detail, and the profitability of a project, detailed feasibilitystudy is carried out with a counter partner's collaboration.

As a definite action plan; - Preparation of site survey execution for a detailed F/S execution - Site-survey for a detailed-F/S execution - Preparation of an analysis and basic design data based on site survey - Preliminary design for a budgetaly purpose - Estimation works of a construction budgetaly cost - Detailed-F/S reporting - Financial support request from counter partner - Loan agreement arrangements and conclusion - Preparation of Contract and negotiation for design, procurement, and a construction work - Conclusion of a contract for design, procurement and a construction work. (Hereinafter-called EPC works -Engineering/Procurement/Construction). - Conclusion of a loan agreement

- 159- 2) Second stage - EPC works The second stage performs the activities from conclusion of the deal to EPC activities and completion of test operation, and the execution period is 31 months.

- Contract effectuation - Basic-design works - Detailed-design works - Procurement service of equipment and materials - Shipping / transportation works - Feild constraction works - Supervision of test operation and turn over.

- 160- -1 9 1 - ~~sr A First B Second 16 IS 14 13 12 11 No. 10 6 s 2 3 T~ 2 5 4 y 8 6 7

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& site report and and negotiation survey

analysis operation analysis

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Petrochemical

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ExCClltlOIl 14 4 | 8- 15 16 B V 17

Schedule 18 19 20 21 Project 22 23 Month 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 2.3 Materialization of project financial plans

2.3.1 Capital investment program for project execution

Because of the realization of this project, the application of a Japanese government's economic support program with long payment periods is essential at low interest on the character of the countermeasure against energy conservation.

The principal source of funds assumed for project realization is described below.

(1) Japan Bank for International Cooperation (JBIC) At the Cabinet council in March, Heisei 7, the consolidation of the Japan Export- Import Bank and Overseas Economic Cooperation Fund was decided. Based on this decision, an international cooperation bank law proposal was submitted at the 145th ordinary session of the Diet, and it was approved and materialized by the house-of- Councillors plenary session on April 16, Heisei 11. Thereby, the Japan Export- Import Bank and Overseas Economic Cooperation Fund will combine, and an international cooperation bank will newly be established on October 1, Heisei 11.

An international cooperation bank succeeds to the activities which Japan Export- Import Bank and Overseas Economic Cooperation Fund have carried out, and became a leading organization which takes charge of the foreign public capital affiliation which combined ODA and non-ODA of our country. The activities of an international cooperation bank can be divided into two, an foreign economic policy and economic cooperation.

a) Activities, such as international finance An international cooperation bank carries out the activities for contributing to export and import of Japan, acceleration of the economic activity in overseas and stability of international-finance system.Recently, when the Asia currency crisis occurs, while it endeavored the stability of international-finance system with granting of untied loan to the countries of Asia, and it takes positive assistance to the Japanese- parentage company of the said place region in severe conditions which is the deterioration of business circumstances or the depression of a credit etc.

- 162 - (D Export Credit (D Import Credit ® Foreign-investment finance @ Untied loan © Refinance © Bridge Loan © Investment © Survey Business

b) Overseas-economic-cooperation operating It carries out the activities for backing up the self-support of a developing country such as economic social foundation improvement, economic stability, etc. Basic activities is to provide the fund on low interest and long term concession-conditions as shown below. Especially, Yen credit serves as the important financial support which cannot be lacked in social foundation (infrastructure) land improvement required for the economic development of a developing country. It takes about 40 percent of government fund assistance (ODA) of Japan, and the economic-assistance activities of an international cooperation bank serve as the pillar of ODA of our country.

(2) Ministry of International Trade and Industry and Export-Import Insurance Department

The trade-insurance law was established in 1950 in order to do positive growth of the foreign-trade and other external transaction. Currently, there is the following international trade insurance.

(D General Trading Insurance Indemnify the loss by the export disable of an export cargo, by the increase cost concerning carriage or the charge of marine insurance, by the recovery disable of the money after loading concerning export of the cargo such as plant etc. from Japan.

- 163 - © Foreign Exchange Fluctuation Insurance Compensate for the exchange loss of the exporter concerning export, such as a plant, (icurrently suspends).

@ Export bond insurance Compensate for the loss generated in the bank etc. by having forfeited the bond concerning export, such as a plant unreasonably

(3) New Energy and Industrial Technology Development Organization (NEDO)

It was established for the purpose of the following in 1980, based on the legislation about ©development and acceleration of an induction of a substitute energies for petroleum, © ational Use of Energy, © improvement of research-and- development structure for industrial technology, @ coal mining structural- adjustment temporary expedient law and ©temporary expedient laws of coal mine- pollution compensation and the interim coal mine-pollution restoring law.

® Carry out activities required for development of what has especially required planning the acceleration of industrialization with the technology about a substitute energies for petroleum, support to the development of heat-of-the-earth resources

- 164 - and the coal resources in overseas, and development of a substitute energies for petroleum, and its acceleration of an induction.

® Carry out the activities for research and development about industrial technology.

@ Carry out the activities concerning the structural adjustment of a coal mining.

In addition to the above, development of a substitute energies for petroleum and its introductory acceleration business, the activities of the rationalization of the use of energy, research-and-development associated business of industrial technology, coal mining structural-adjustment business, coal mine-pollution compensatory business, and alcoholic manufacture business are also made into their activities and business.

- 165- 2.3.2 Forecast of project funds preparation

Generally at the Chinese present circumstances, it seems that the countermeasure against energy conservation has a low priority compared with the capitalization of productive facilities from the operative viewpoint to a cost.

However, the cost competitiveness upswing of the production company by energy conservation is a national requirement, since substantial import of of good quality and low-priced crude oil and petrochemicals becomes positive by WTO accession planned within the year. Moreover, The China government requests achievement to cleare the severe environmental standards to nationalized enterprise etc., in order to improve the pollution regarded as the most serious in the world now. Since the countermeasure against energy conservation contributes to environmental preservation greatly, it can also expect a central government's assistance.

Toward the basis of the above situation, and the realization of a project, a central government is made to understand the significance of the concerned project well, and it is necessary to gain a high priority by the China side. Then, support requisition to a Japanese government will be done from the China side. Also in such a case, as for 1/3 of the project total budget, self-supplying by China side is needed.

- 166 - 2.4 Conditional items for CDM This chapter describes about the prior confirmation item of seeming necessity, in order to carry out the project jointly with the counter partner.

2.4.1 Establishment of the execution conditions reflecting the present status of counter partner (Refinery), and necessary items to be coordinated with the government of partner countries for realization of CDM

In order to make it a more definite and realistic project plan based on this investigation document, the prior confirmation and the co ordination of a related agency to the item described below are required.

(1) The promotion of this project should be determined by the concerned refinery based on the result of this report. (2) After that, this project execution is approved by the commitee of a Jinling petrochemical corporation. (3) Obtain the approval to the introduction of foreign technology of this project from SINOPEC. (4) It is having obtained the approval about a project induction, and perform further verification of technical basis, such as the design, code, standard and the norm which are applied. (5) Based on the description of the work split described by Chapter 2.2.5, perform a detailed estimation by our company and the counter partner, in order to define a cost required for project execution. (6) Investigate the delivery period of the equipment and the material which are supplied by each party, and determine a project execution schedule. (7) Perform determination of the supply place of major equipments, and verification of a transportation route and the installation manual for major equipment. (8) Calculate the economical profitability of a project. (9) Determine a capital plan required for an operation from an economical profitability. However, a capital plan is determined, adjusting with SINOPEC and national development and plan commitee, etc. (10) In executing a project, the China side partner does the council for obtaining a Chinese related government corporation's approvals in advance in order to carry out project smoothly.

- 167- (11) A partner requests an affiliation to Japanese government through China government. (12) Determine the process of the affiliation to this project between Japanese government and China government. (13) Conclude to the agreement between governments according to the process of an affiliation. - conclude Loan agreement as an example. (14) Conclusion of the agreement about the induction of plant and equipment

- 168- 2.4.2 Possibility to conclusion of the contract on the project execution as aCDM

Since the detailed an international agreement of CDM etc. was not decided now, this project is performed as an energy-conservation project, and we were not able to discuss the matter in connection with C02 reduction with concerned refinery and SINOPEC. However, the counter partner fully understands the necessity for the measure against global-warming prevention.

As long as we hear from a partner, the China government is considered in agreement with a convention. It is thought that there is possibility that this project in connection with the energy conservation and the environmental measure of the concerned petroleum refinery will be taken up by CDM.

In addition, in China, the new system of taxation is to be enforced from April, 2000 to a petroleum product sale. Probably, the affiliation from the Japan side will serve as only technical support, when the obtained tax revenue is applied to this project. Therefore, at present, it is hard to judge whether thecounter partner agrees to CDM positively.

- 169- 3. Results of project execution

- 171 - 2,Results of projecLsxscution

This chapter describes the energy-conservation effect, the effect of greenhouse-gas reduction, the view that an effect generates and the calculation method. By making this project achieve, the effect of energy conservation and carbon-dioxide reduction will be continued until a facilities life is run out (assumed as 15 years).

3.1 Effects of energy conservation

3.1.1 Technical basis of energy conservation effect The energies of the exhaust gas discharged from FCC plant to which capacity is scaled up are collected by the expander, the power consumption of an air blower is made to reduce by driving an air blower directly. Furthermore, surplus energy is transformed into electric power with a generator. Thereby the fuel used in the power-generation plant in the concerned refinery is reduced.

3.1.2 Baseline to be used for calculation of energy conservation effect Though capacity expansion work on FCC plant is carried out, in cases where a power recovery plant is not installed, the amount of aggregate consumption of electric power in equipment is made into the base line of an energy-conservation operative calculation. Although the quantitative figure was not able to be obtained by this survey, the energy- conservation effect can be appraised by the power recovery system.

3.1.3 Estimated amount, expected duration and cumulative volume to be maintained the effect of the energy conservation

(1) Estimated amount of the energy conservation effect The energy-conservation effect by having carried out the project is power collected with power recovery plant. The quantity is 10.6 MW at the end of the shaft of a generator, and it is equivalent to the energy of 302 TJ/yr. When the heat value of fuel oil for power generation is made to 10,000 Kcal/kg and a generating efficiency is made into 32%, the amount of reduction of one year is equivalent to 22,560 toe. Where, the operation day of a refinery was counted as 330 days in one year.

- 173- (2) Expected duration to be maintained the effect of the energy conservation The general life of a petroleum-refining plant is considered to be 15 years or more by the relative maintenance. Therefore, the period which can expect the energy- conservation effect was assumed to be for 15 years after project.

(3) Cumulative volume of the energy conservation The amount of cumulating of the period, which can expect the energy-conservation effect, is 4,530 TJ in the energy conversion (15 years). When this is converted into crude oil, it means that 338,400 toe was reduced.

3.1.4 Definitive procedures to verify the energy conservation effect The power conversion of the dynamic force which an air blower consumes, and the generating power in an electric generator are displayed by DCS, and the energy- conservation effect can be verified. And it is achieved by recording continuously. By recording simultaneously the throughput and the amount of exhaust-gas generating of FCC plant, the validation with consideration to the equipment-operating ratio of every year is possible. The following information is used in order to calculate the conversion of the dynamic force which an air blower consumes. - inlet air temperature and pressure - exhaust air pressure - synthesis theoretical efficiency (a friction loss etc. is included) - power transformation efficiency

- 174- 3.2 Effects on reduction of greenhouse effect gas

3.2.1 Technical basis of effects on reduction of greenhouse effect gas The energies of the exhaust gas discharged from FCC plant to which capacity is scaled up are collected by the expander, the power consumption of an air blower is made to reduce by driving an air blower directly. Furthermore, surplus energy is transformed into electric power with a generator. Thereby the fuel used in the power-generation plant in the concerned refinery is reduced and the amount of carbon dioxides exhausted in connection with combustion of fuel is reduced.

3.2.2 Baseline to be used for calculation of effects on reduction of greenhouse effect gas Though capacity expansion work on FCC plant is carried out, in cases where a power recovery unit is not installed, the amount of aggregate consumption of electric power in equipment is made into the base line of reduction of greenhouse effect gas. Although the quantitative figure was not able to be obtained by this survey, the effect on reduction of greenhouse effect gas can be appraised by the power recovery system.

3.2.3 Estimated amount, expected duration and cumulative volume to be maintained the effect on reduction of greenhouse effect gas (1) Estimated amount for reduction of greenhouse effect gas The reduction amount of greenhouse effect gas by having carried out the project is power collected with power recovery plant. Its amount is 302 TJ/yr. This is equivalent to 22,560 toe/year, and the amount of discharge of a carbon dioxide is calculated as follows;

where as; * The heat value of refinery fuel 40.19 TJ/kton. * Carbon emission factor 21.1 tC/TJ, * Fraction of carbonaceous oxidation 0.99 * The proportion of the molecular weight of 44/12. carbon dioxide and carbon

The amount of carbon-dioxide discharge reduction = 22.56 x 40.19 x 21.1 x 0.99 x 44/12 = 69,446 ton/yr

- 175 - (2) Expected duration to be maintained the effect on reduction of greenhouse effect gas The general life of a petroleum-refining plant is considered to be 15 years or more by the relative maintenance. Therefore, the period that can be maintained the reduction of greenhouse effect gas was assumed to be for 15 years after project.

(3) Cumulative volume of the greenhouse effect gas The amount of cumulating greenhouse effect gas reduction will be about 1,041,688 ton in 15 years (about 1,040,000 tons).

3.2.4 Definitive procedures to verify the effects on reduction of greenhouse effect gas The power conversion of the dynamic force which an air blower consumes, and the generating power in an electric generator are displayed by DCS, and the effect on reduction of greenhouse effect gas can be verified. And it is achieved by recording continuously. By recording simultaneously the throughput and the amount of exhaust- gas generating of FCC plant, the validation with consideration to the equipment operating ratio of every year is possible. The following information is used in order to calculate the conversion of the dynamic force that an air blower consumes. - inlet air temperature and pressure - exhaust air pressure - synthesis theoretical efficiency (a friction loss etc. is included) - power transformation efficiency

- 176 - 3.3 Effects to operational productivity

While reducing the amount of the greenhouse effect gas emission by this project, it is affected to productivity in respect of the following. - By replacing the existing power recovery unit which became aged into the newest model in connection with scaled up of FCC plant, the reliability of whole equipment improves and also the productivity improves. - As a result of energy conservation, fuel unit price comes down and profit improves. - With the exhaust-gas sulfur-removal and denitrification plant which are newly installed as environmental measure, the newest integrated emission standard of air pollutants value can be passed. Moreover, it will have FCC plant to which processing of high-concentration sulfur oil and a heavy oil is made, and productivity improves.

- 177- 4. Project economics

- 179- 4, Project economics

4.1 Internal rates of returns

4.1.1 Project cost The following are included in as a project cost. - Basic and detailed design expense - Equipment and material cost - Forwarding charges - Construction cost (including test operation)

The exchange rate of a currency is extended for all the periods that need capital, and applies the conversion rate as of March, 2000.

US$1 = 105 yen and 1 yuan = 13 yen

About the scope of work between Japan and China, in principle, Japan side is taken as basic design, design and purchase of major equipment, a part of detail design and construction supervision, and China side shall carry out a part of detail design, the purchase of a local-content article, and construction work as described in subsection 2.2.5. All costs were calculated at a price of 2000 year.

The construction cost of this project is about 2,850mill. yen (about 219mill. Yuan :lyuan= 13 yen). The detail is as follows.

(Unit : 1,000,000 yen) (a) A basic design and detail-design expense 90 (b) An equipment and material expense 2,490 (c) Forwarding charges 40 (d) On-site cost of construction (incl. test operation) 230 Total 2,850

- 181 - 4.1.2 Returns and Investment Recovery by Project implementation

By executing a project, it becomes clear it not only can gain the reduction of a substantial greenhouse effect gas, but that energy conservation of the concerned refinery is made and its profitability improves. Hereafter, the detailed planning including the financing will be discussed with the counter partner for project realization.

It calculates [effect / energy-conservation / at the time of carrying out a project ] about the returns of every year, and the recovery years of capitalization. About the energy- conservation effect when carrying out a project, the returns and the investment recovery are described below.

(1) Returns for one year The energy-conservation effects are as follows as described in previous chapter: - Power collected with power recovery unit : 10.6 MW (at the end of the shaft of the generator) - Energy conversion 302 TJ/yr - Heat value of fuel oil for power generation 10,000 Kcal/kg, - Generating efficiency 32% - The amount for power generation of fuel reduction for one year: 22,560 toe/yr - Unit cost of fuel oil in a refinery : 1,400 yuan/ ton

Returns for one year 22,560 toe/yr x 1,400 yuan/ton 31.58 mill.yuan 410 mill, yen (1 yuan =13 yen)

(2) Investment recovery years

Project cost : 2,850 mill, yen

Investment recovery years = Construction cost / Returns for one year = 2,850 mill, yen / 411 mill, yen = 6.9 Year

- 182- 4.2 Investment cost vs. Project effects

The investment cost vs project effect is as follows.

Project cost Construction cost : 2,850 mill, yen (28.5 x 10*) = 27.14 x 106 US$ (*1)

The effect by the project execution The amount of energy consumption reduction : 302TJ/yr (the amount of energy conservation) The amount of discharge carbon-dioxide reduction : 69,446 ton/yr

The amount of carbon-dioxide reduction per 1US$ (15 year project Life base) 69,446 x 15 / (27.14x10") = 0.04 ton/US$

Cost which carbon-dioxide lton reduction takes (15 year project Life base) 27.14 x 10" / (69,446x15) = 26.0 US$/ton-CQ2

The investment per carbon-dioxide reduction lton for one year is 27.14 x 10" / 69,446 = 390.8 US$/ton-C02

Notes (*1) 1 US$=105 yen

- 183 - 5. Confirmation of effects on promotion for energy conservation technology

- 185 - ^Confirmation of effects on promotion for energy conservation technology

This chapter describes the popularization vision of FCC power recovery facility in China. The technical popularization of FCC power recovery facilitye is greatly affected on the development of oil refining industies.. Furthermore, the present condition and the tendency of the oil refinery in China are also described.

FCC power recovery facility for Qilu-Petrochemical-Company, Shengli Oil Refinerys in Chinese was implemented as a part of NEDO model project in 1996. This model project have been started in 1993, and the survey period before model business commencement is taken into consideration, it means that the time for about ten years had already passed.

In those days (second half of the 1980s) in China, design / manufacture technology of FCC power recovery facility and the operation know how of a facility had the considerable delay compared with Japan. Most major equipment and materials of FCC power recovery facility for Shengli Oil Refinerys were used made in Japan from the viewpoint of the assurance of a facility performance as a national project.

On the one hand, there is also information that design / manufacture technology and the operation know how on Chinese FCC power recovery facilityof have been accomplished the remarkable improvement in these ten years. In order to confirm this information, the survey on equipment/material manufacturers in China was performed as a part of the investigation project of this year ( interview survey with counter partner, design institute, manufacturers ).

The development and the possibility of FCC power recovery facility popularization in China are described as the survey result in the following clause. The following can be considered as conditions for accelerating the popularization of this facility in China from now on; Use China made equipment and the materia, which is considerably low price compared with made in Japan Promote Chinese design institute for the detail design of the facility And it is reducing a total facility construction cost.

- 187- 5.1 Possibility on the promotion of energy conservation technology in the partner's country

5.1.1 Technical Popularization Vision of FCC Power Recovery Facility

(1) Survey 1) The present condition and development of the petroleum refinery in China Present China was changed into the crude-oil importing country from exporting country because of deterioration of the amount on domestic crude oil production, and the growth of demand. The import volumes of crude oil were about 16% of an overall rate of consumption in 1998, and should be supposed that it reaches to about 50% in 2005 .

At the beginning in China, they imported crude oil from Indonesia or Oman with low- sulfur and light oil, and mixed with domestic crude oil, then being processing. However, since the demand of crude oil increased further, they are impoting Middle East crude oil with high sulfur content / heavy oil in addition to Indonesiae and Oman oil in recent years. This is causing large impact to Chinese petroleum refinery. Hence, many Chinese petroleum refineries are designed for processing of domestic crude oil, and it does not cope with the variation of an import crude-oil brand.

A Chinese policy is that the petroleum refinery in inland processes domestic crude oil, and the petroleum refinery of a riverside or a coastal area processes import crude oil. For this reason, it is the present condition that many plants of a petroleum refinery cannot cope with processing of import crude oil. Furthermore, by mixing a high sulfur content / heavy-oil crude oil, a refining aptitude is reduced and insufficiency or lack of sulfur-removal facility has caused environment pollution. And, many of petroleum refineries in inland have the throughput as small-scale as about l,000,000ton/year. These petroleum refineries are having the big problem to delay of the measure against energy saving and the environment pollution .

- 188 - 2) The policy of the China government to an oil refinery The China government announced the following opinion to the issue of the above 1.

According to the May, 1999 Xinhua-she advices, ten ministries and government offices, such as national-economy Trade Committee, at Beijings on 28th, held the national videotelephone council and took the measure about the compilation of a small-scale petroleum refinery, and the law of the distribution system of crude oil/petroleum product.

By the council, Director Li Yougwu of national coal oil and a chemical-engineering office read out the "opinion on the compilation of a small-scale petroleum refinery, and the law of the distribution system of crude oil and a petroleum product" which Cabinet sent to eight ministries and government offices, such as national-economy Trade Committee.

The Cabinet was pointed out as follows by "the opinion." About the petroleum mining facility without a mining license, or the facility which refines petroleum by the ordinary method, it controls uniformly based on regulation, such as a "China mineral-resources method" and "the decision of the Cabinet about the problem about environmental preservation." After "notification of the Cabinet about regulating the enlargement of oil-manufacture capacity strictly" is submitted, it establishes newly freely, and about the petroleum refinery not incorporated in the national crude-oil allocation plan in 1998, it is closed down within the appointed period including the small-scale petroleum refinery which has processed import fuel oil.

Although it was incorporated in the national crude-oil allocation plot for 98 years before issuing "an opinion", the small-scale petroleum refinery which cannot clear a pollutant effluent standard, and the small-scale petroleum refinery, to which an quality cannot clear a national standard, the small-scale petroleum refinery which cannot produce all products as a unleaded gasoline of more than No. 90 from January 1, 2000, are also closed within the appointed period.

The small-scale petroleum refinery which is planning construction or under construction without receiving the certification of a Cabinet must stop construction immediacy, and the completed petroleum refinery must not begin output, either.

- 189 - It have to distribute systematically all of crude oil produced in a domestic oil field, and crude oil imported. Wholesale of the petroleum products produced by the domestic petroleum refinery, such as the gasoline, diesel oil and kerosene, is concentrated and carried out to a China petroleum commonalty and a China petrochemical commonalty.

National-economy Trade Committee's viceproject manager, Shi Wanpeng told as follows by the council. The compilation of a small-scale petroleum refinery is for preventing duplication construction, speeding up the structural adjustment of an oil refinery, being for promoting a grouping and large-scaling, speeding up the technical progress of petroleum-refining industry, improving quality, and protecting an environment. This is also for rationalizing the utilization of petroleum resources, improving a government owned large/mediam size corporation's economic efficiency, and reinforcing market competitive power.

The number of the petroleum refineries of China in 98 ends of year is reached at 220 or more places. Among these, the number of small-scale petroleum refineries with capacity l,000,000ton/ year is 166 places, and it forms 76% of the totality.

The disorderly deployment of a small-scale petroleum refinery not only caused the redundancy of the production capacity of oil-manufacture industry, but caused the things of confusing dilapidation of a mine, environment pollution, and normal production / distribution system of crude oil and a petroleum product.

3) The view to the technical popularization of a counter partner's FCC power recovery SINOPEC which is a representative of a counter partner will cope with it with the following strategy to their subsidiary petroleum refinery in consideration of the above 1) and 2) in the future.

(a) The strategy to the whole petroleum refinery They keep in mind that the construction of a new petroleum refinery is not permitted according to the government policy, and the following measure is taken into consideration to an existing petroleum refinery. - 1 Measure against energy saving of the whole petroleum refinery including the renewal of FCC power recovery facility (the energy consumption rate of Chinese oil manufacture is quite high (7.8%) compared with petroleum refineries of Japan (6%))

- 190- - 2 Expansion and renovation of the sulfur-removal facility for Middle East crude-oil processing containing high sulfur - 3 The establishment and introduction of technological know-hows for the gas-oil deep sulfur-removal facility accompanied with exhaust-gas restriction (exhaust-gas regulation of smoke, SOx etc.) of a diesel engine vehicle being enforced in China in the near future - 4 Reinforcement, improvement, and introduction of technological know-hows for waste-water-treatment facility, since most of petroleum refineries are passing the drain exceeding discharge regulation value - 5 Installation of the facility for utilizing petroleum coke which is a by product effectively The syngas generated by gasification is utilized for power generation and chemical- industry raw material. - 6 Installation of the flue-gas-desulfurization facility, and introduction its technological know-hows New smoke-eliminating discharge restriction is applied to the facility extended or reconstructed from now on.

(b) The view to the technical promotion of FCC power recovery FCC power recovery facility has effective in energy saving and an environmental- preservation measure to the oil refineries. From this reason, 65 sets of FCC power recovery facilitys were installed in the whole country in 1996. Probably, it will reach about 80 sets by 2000. (However, the FCC unit below 300,000ton/year capacity does not have it facility in consideration of the economic effect.)

The basic policy about the technical popularization of SINOPEC is planning the maximum utilization of domestic goods in consideration of simplified facility composition and economical efficiency under the capital and technical assistance of Japan. They consider the establishment of the power recovery facility to a small-scale FCC unit, and the renewal of the power recovery facility built in its early stages to be the subject petroleum refineries for popularization.

The details are as follows; -1 Financial resources As for the financial resources credit of popularization 1st power recovery facility, the counter partner has expected the assistance of Japanese governments, such as the

- 191 - environmental ODA, for the project cost including purchase expense of the Chinese equipment/material and the detail-design expense. - 2 Facility Composition The existing facility is combined with the air compressor mostly, and its constitution is complicated and does not suit with FCC process unit. (If a power recovery facility stops, FCC facility also have to stop .)

Therefore, a prevalent type applies the same facility configuration installed in the Shengli refinery, which is simplified constitution, independent power generation and little reaction affect to FCC unit operation. (Even if a power recovery facility stops, continuous operation of FCC unit is possible.)

Both facility block diagram is shown below.

Figure 5.1.1-1 The existing power recovery facility

Gas expander Reduction gear

Air compressor Induction motor / Generator

Figure 5.1.1-2 Power-recovery-unit installed in the Shengli refinery (independent power-generation type)

Gas expander Reduction gear

Generator

- 192- 3 Designs Although the independent power-generation type is advantageous as stated above, the Chinese design institute has not yet established the safety design for the facility. That is, in an independent power-generation type, a generator becomes no-load by the power failure etc., and the rotational frequency of a gas expander increases. Thereby, the blades of the gas expander may jump out at high speed, and the big accident may be caused.

The conventional design for gas expander train in China connects a gas expander, a compressor, and a generator on the same axle. Moreover, the load capacity of a compressor is designed larger than a generator load, and even if a generator becomes no-load, they have applied the design technique in which a compressor load protects the over-speed of a gas expander.

Therefore, in popularization 1st facility, the Japan side performs the basic design, the operation simulation, etc. including the safety design of a system. And design institute of China where the employment cost of design is lower than Japan performs the detail design and the construction design for the facility. During this period, technology transfers, such as the safety-design approach and an operation simulation, are performed. Then, the all design activity is carried out by the China side from 2nd machine.

4 Promotion of China Product The manufacturing technology of the equipment and material for FCC power recovery facility in China improved greatly in recent years. Especially the production technology about the gas expander and 3rd catalyst separator is remarkable progress. The performance of FCC power recovery facility installed in the China major petroleum refineries for the past ten years and the manufacturer of the gas expander and a generator currently used are shown in Table 5.1.1-1.

By using the China product for major equipment, the construction cost of a power recovery facility will come down significantly, and the promotion of the facility will be accelerated. However, major control units (DCS etc.) and a special valve will be applied Japanese products.

- 193 - Informed by SINOPEC m mama FCCSSSB* MSS 1 0 0 0 F>/# tti* KW/Hr Ntf/Hr til* KW/Hr i S INOPEC 1987#5^ 120 5,985 GHH (@3®) (03®) 1,750 7,500

2 S INOPEC 1987#4£ 100 5,620 GHH (03®) ASE (^J:-f» 1,770 7,500

3 CNPC 1987#10£ 90 5,700 mmwa&ai (*b) (*B) 1,520 3,200

4 CNPC 1987#!!^ 120 8,265 f(*S) GE (*#40 1,660 5,900

5 CNPC mmmmtxmm 1987#12H 80 5,700 mmw&m (*@) (*a) 1,520 3,200

6 S INOPEC 1988#12)! 100 6,510 GHH (03®) ASE (Xrc-^» 1,938 6,500

7 SINOPEC AW5%fb%%# 1988#8J3 120 7,002 No Data No Data 1,938

8 S INOPEC 1 9 8 9# 80 9,194 f(3KB) GE (*#40 1,864 8,385

9 CNPC 1 9 8 9# 80 9,800 (*H) ASE 2,000 7,220

10 SINOPEC mttmbx.'ikn 1 9 9 0# 80 8,800 (*b) (*B) 1,760 6,300

11 CNPC 1 9 9 0# 80 5,630 mmmm'ikn (*a) ;v>vt(*a) 1,540 3,200

12CNPC *S5MHbxM 1 9 9 2# 80 7,800 m (*h) i (4>a) 1,765 6,300

13SINOPEC 1 9 9 3# 60 3,400 mmw&m (*a) (*a) 1,050 4,000

14SI NOP E C 1 9 9 3# 60 3,600 (4>B) (*B) 1,159 4,000

15S INOPEC aaamfbx&m 1 9 9 6# 140 6,000 (#) mmm (b*) s±m« (#) (b*) 2,100 5,800

- 194- 4) Survey of design institute The survey of a design institute was carried out on 2 kinds of design places.

That is, the design institute of the engineering special occupation which performs the detail design of whole equipment, and the design institute of each petroleum-refinery accompanying which carries out a construction design.

As a result, Beijing design institute and Luoyang design institute etc. have many design experience for almost all FCC unit and power recovery facility in China, and they have sufficient capability for the detail design of whole equipment.On the one hand, as for construction design, the design institute of each petroleum-refinery accompanying can fully undertake. (The design institute of a Shengli Oil Refinery carried out construction design, and made it complete successfully with previous Shengli-Oil-Refinery model project) Therefore, there is totally no question to a detail design and a construction design promoting a Chinese design institute.

5) Survey of a manufacturer Refer to Table 5.1.1-2, 5.1.1-3, and 5.1.1-4 about the manufacturer name, the survey summary and the evaluation.

- 195 - Table 5.1.1-2 China manufacturer survey summary (1- piping material) Survey period : November 2 - November 11 (appraisal A:enable Biconditional enable Ciuse is impossible)

NO. VENDOR NAME PART MATERIAL ms mm tmB NOTE NAME 1 LANZHOU PETROLEUM PROCESSING VALVE SPECIAL BUTTERFLY VALVES B m h NOV. 03’ 99 • *B0F*3!iWFCC PLANTT##m$Wo AND CHEMICAL MACHINERY PLANT SLIDE GATE VALVES B • BS#OFCC PLANTM^T*L Ac= • s^isiitJOBtcMLTii,

2 TAIYUAN STEEL (GROUP) PIPE STAINLESS STEEL PIPES C tJM NOV. 05’99 • SURVEY!:# LT£

3 NANJING CHENGUANG-TORA OTHERS EXPANSION JOINTS A NOV. 06’ 99 • ^BB^lSl^FCC PLANTT-co WM^VNo EXPANSION JOINT CO.,LTD.

4 YANGZHOU HUABAO PIPE FITTING FLANGE FORGED STEEL FLANGES D Hil'N NOV.08 ’ 99 • FLANGE!*, BROTHER COMPANY A## LTV ^ FACTOTY FITTING WROUGHT STEEL FITTINGS B FORGED STEEL FITTINGS D • FORGED FITTINGS WROUGHT STEEL wxsufte,tit5mm>o • %#E#AME5£T-tz&, •

5 SUZHOU NEWAY MACHINARY VALVE CAST STEEL VALVES A mm NOV. 10’ 99 CO.,LTD. iztttzgmbmg-e&Zo ■ 0EMM60X (HfflVALVE, SPACE,WHEATLEY, MALBRANQUE. TKS) „ 6 SHANGHAI BAOXIN PIPE FITTING FLANGE FORGED STEEL FLANGES D ±$NOV. IV 99 • FLANGE!*, LXV^ tz&, CO.,LTD FITTING WROUGHT STEEL FITTINGS B mmRximm^nmmxnto FORGED STEEL FITTINGS D • FORGED FITTING*WROUGHT STEEL JiSil

■ xwmmmB&xt'tfrs • ##%#!:(*, #ST*#&v0 • BENKANCDES tlX ^tzo A* FLANGE&VWROUGHT STEEL FIHING^#± LTV^= (JISffl^SA/CS/SlOOOPC)

- 196- Table 5.1.1 -3 China manufacturer survey summary (2- rotating machine) Survey period November 9 - November 17 (appraisal A:enable Biconditional enable C:use is impossible)

Category: GAS EXPANDAR ITEM Visit place Appraisal Note GAS EXPAND OR Xi'an aeroengine A Possible for FCC, 3000-16600Kw Only fort China project

Category: BOILER ITEM Visit place Appraisal Note BOILER Shanghai Miura boiler A The small flowing-through type, 4T/h ,12kg/m2 Export is possible.

Category: CENTRI. PUMP ITEM Visit place Appraisal Note ISO PUMP WUXI and ACE A Export is possible. EQUIPMENT (Shanghai NW) FIRE WATER PUMP WUXI and ACE A For China domestic use EQUIPMENT (Shanghai NW) API610(End-Top) KSB Shanghai A Export is possible. However, only 7Th edition is. ISO PUMP KSB Shanghai A Export is possible. CWPUMPfH/V) KSB Shanghai A Export is possible. FIRE WATER PUMP KSB Shanghai A Export is possible (in NFPA, it is KSB Australia course). BFWPUMP KSB Shanghai B Export is possible (confirmation important of the delivery system as a precondition).

Category: CANNED MOTOR PUMP ITEM Visit place Appraisal Note CANNED MOTOR PUMP Shanghai Nikkiso A China domestic use only acc. to Nikkiso strategy.

Category: STEAM TIRBINE ITEM Visit place Appraisal Note STEAM TURBINE Shanghai A 3000-300000Kw large-sized power generation 6000KwBFW Pump Only China domestic use

Category: GENERATOR ITEM Visit place Appraisal Note GENERATOR Shanghai electrical machinery A Mainly large-sized 3-600 MW. Only China domestic use

Category: ELECTRIC MOTOR ITEM Visit place Appraisal Note ELEC. MOTOR Shanghai electrical machinery A Mainly large-sized 100 - 16000Kw Only China domestic use

- 197- Category: PACKAGE AIR COMPRESSOR ITEM Visit place Appraisal Note SCREW TYPE Shanghai INGERSOLL- A The Oil Injection Type about 180- RAND 2,400m3/h Export is possible (however, business firm which has an office in China shall be nominated).

Category : 3Rd Stage Separator ITEM Visit place Appraisal Note 3Rd Stage Separator Xi'an aviation engine A Only for China project

Category: Expansion Joint ITEM Visit place Appraisal Note Expansion Joint Xi'an aviation engine B Only for China project (For FCC) The prior confirmation is required

- 198- Table 5.1.1-4 China manufacturer survey summary (3- rotating machine) Survey period November 28 - December 9 (appraisal A:enable Biconditional enable C:use is impossible)

Category: GAS EXPANDAR ITEM Visit place Appraisal Note GAS EXPANDOR Lanzhou machinery A 2000-18000kw Only for China ptojrct

Category: BOILER ITEM Visit place Appraisal Note BOILER Qingdao Ebara environmental A There are several experience in China. (Thing to 35t) facility limited The buyback of the canning article is carried out to Japan. Export is also possible. However, it does not have the China domestic dealership but pays well via Ebara. A vapor pressure is to 3.82MPas. 70t and 130t Boiler can also be manufactured with an establishment meter. BOILER Qingdao Ebara environmental A There are many experience in China. Experience (General-purpose article 2t facility limited of the buyback to Japan is also many. or less) Export is possible. A vapor pressure is IMPa.

Category: CBNTRI. PUMP ITEM Visit place Appraisal Note ISO PUMP Shenyang water pump A Only for China project. A water pump can be used. FIRE WATER PUMP Shenyang water pump B There is no experience remainder. D. Engine driving is completely useless. As conditions, Fire Pump manufacture experience reconfirmation is required. API610 (End-Top & 2st B- Shenyang water pump A Only for China project. B Pump) 8 edition un-corresponding. Although it is Byron Jackson Design, the license has run out in 92. CWPUMP(V) Shenyang water pump A Only for China project. Ebara Design (he has no license relation now) BFW PUMP(Multi-stage Shenyang water pump A Only for China project. KSB Model (he has no Ring Section) license relation now) Power Plant experience — many

Category: CANNED MOTOR PUMP ITEM Visit place Appraisal Note CANNED MOTOR PUMP Dalian empire electrical A It is the question of a selling territory and only machinery the China project use.

VERTICAL CANNED Dalian empire electrical A It is manufacturing as an object for LPG. MOTOR PUMP machinery

Category: STEAM TIRBINE ITEM Visit place Appraisal Note

- 199- STEAM TURBINE Hangzhou turbine A 1000kw-40000kw. It cooperates with a Siemens (SPECIAL PURPOSE AG and the company newest model manufacture TURBINE) is possible. Only for export to communal-society countries and the China domestic use. It challenges also about an overseas inquiry. STEAM TURBINE Hangzhou turbine A The Russia design appointment. API611 Latest (GENERAL PURPOSE Edition (1988 editions) is un-applying. TURBINE) Only China project use.

Category: GENERATOR ITEM Visit place Appraisal Note GENERATOR Shenyang motor C Design beingold. There is a possibility with bad efficiency etc.

Category: ELECTRIC MOTOR ITEM Visit place Appraisal Note ELEC. MOTOR Shenyang motor B NEMA cannot be carried out. IEC conformity When lOOOkw motor is seen, noize is high and a validation is difficult. Presently, may be lOOOkW only for the China project use..

Category: Mechanical Seal ITEM Visit place Appraisal Note Mechanical Seal Shenyang pillar B The quality of carbon is very bad. The halves grade lease of life of Japan .

Category: Centrifugal Comipressor ITEM Visit place Appraisal Note Centrifugal Compressor Shenyang blower A It is the design of Demag and is 15000 or less (INTEGRALLY GEARD) kws. Only China project use Experience is only air. API672 correspondence is possible. Centrifugal Compressor Shenyang blower A 800-10000 or less kws of the designs of Nuovo. (Nouvo Model) Only China project use. He has no experience of large-sized gas. API- 617 correspondence is possible. Centrifugal Blower Shenyang blower A 75kW - 4000kW air blower only (single stage and multi stages) (high-speed blower of Bull Gear type is also manufactured) Only China project use. Gear Shenyang blower A Acceleration gear for Compressor is manufactured. Almost all machine tools use an overseas first- class-producer article. Only China project use.

Category: Refrigerator ITEM Visit place Appraisal Note Refrigerator The Ebara Yabtai air- A The plan which places all the production lines of conditioning facility limited the Fujisawa factory in the future. Moreover, the manufacture of a Screw refrigeratoris also considered. It is unknown whether a turbo type is manufactured.

-200- (a) Evaluation of a survey result The equipment and material about FCC power recovery facility are described below.

- 1 Gas Expander The survey have been carried out to Lanzhou machinery and Xi'an aeroengine company. These two companies manufacture almost all gas expanders in China. In addition to Table 5.1.1-1 (information on SINOPEC), the power recovery unit by the combination with a China gas expander is satisfactorily operated in the following petroleum refinery. The West Pacific-Ocean petrochemical corporation Lanzhou oil refinery The Shanghai oil refinery Jinling petrochemical corporation (Since the power recovery facility of the above-mentioned petroleum refinery has passed for ten years or more after installation except the West Pacific-Ocean petrochemical corporation, these are in the renewal stage.)

It was judged that the China expander could be used from the viewpoint of the above operation performance, manufacturer's production experience, and factory QC. In a project execution stage, further discussion with SINOPEC, design institute, and a manufacturer are required to confirm about the control system, quality and a performance assurance etc.

- 2 Third stage catalyst separator Xi'an aeroengine company has its production experience. And, they supply the swirl tube, which is an internal part of catalyst separator, to other pressure-vessel manufacturers. It is possible to use their product judging from an operation experience.

- 3 Special Butterfly Valve Lanzhou machinery is manufacturing almost whole high temperature service special butterfly valves for FCC unit and power recovery facility, which is existing train formation. However, as for the special valve in the independent power-generation type power recovery facility, it is mandatory to make a quick operation (valve open/close speed is 0.6 seconds). Therefore, a special butterfly valve will apply Japan product, and the use of the China product will be difficult.

-201- 4 Flue-Gas Duct Duct material (carbon steel and stainless steel (SUS304)) and refractory lining material apply the China product.

5 Expansion Joint for Flue-Gas Ducts The joint business venture of the Tokyo Rasenkan Co., Ltd and the China business enterprise is in a Nanjing (NANJING CHENGUANG-TORA EXPANSION JOINT CO., LTD.). Although it is considered possible to use the expansion joint of this business corporation from technical and a quality control side, using it for the upstream of the gas expander which are high temperature and high pressure service has uncertainty. Therefore, it can consider that the expansion joint the upstream of a gas expander uses a Japan product, and uses China product for the downstream of the gas expander, which is comparatively low temperature and low pressure service.

6 Instrumentation Although the survey of instrument manufacturer have not been performed, it is possible to use China product for general-purpose measuring instrument judging from our experience on Shengli-refinery model project. The control system including DCS for the gas expander uses Japan product.

7 Generator, Steam Turbine, Pump, and Motor These rotating machines can be used the China product.

8 Compressors If a fluid is air, the usage of the China product is possible. However, the further investigation is required at project execution stage considering the quality /capacity / pressure of the process fluid, if the China product is used for a process fluid.

9 Piping material In Shengli-refinery model project, piping material with carbon steel used the China product and its stainless steel used Japan product respectively. Since the stainless steel product is available in a market considerably in recent years in China, all piping materials use the China product.

-202- -10 Electrical equipment and material All electrical equipment and material use the China product as there is a experience in Shengli-refinery model project.

(2) Technical diffusion scenario of FCC power recovery facility In order to make easier technical diffusion of FCC power recovery facility, the major items of an execution plan are as follows provided that the construction funds of the 1st machine can be received financial support from Japan (excluding site construction expense) ; When preparing an execution plan, it shall perform by the collaboration of SINOPEC and CNPC, which is a counter partner.

The environmental ODA or JBIC of Japanese assistance shall be as construction funds. - Renewal of an old model facility shall be as a object (the establishment of a small FCC power recovery facility is executed after 1st machine completion). The configuration of facility is a direct-electricity-generation type (reinforcement of the power-generation combined with steam turbine ). And since emission control is applied to modification or renewal, an exhaust gas desulfurization system is installed. - As for design activities, the Japan side carries out a basic design, and the China side carry out a detail design and construction design. - Equipment and a material use the China product as much as possible as price is low.

The details are as follows;

1) Construction funds In order to make easier diffusion, the construction funds of the 1st machine can be received financial support from Japan. However, field construction expense including material expense for civil and architecture shall be born by the China side. The China side pays all funds after 1st machine.

2) FCC process used for 1st diffusion power recovery facility The Chinese government at present prohibits the construction of new petroleum refinery. Therefore, the renewal of an old model power recovery facility or the small FCC unit in which the power recovery facility is not installed shall be an installation

-203 - object. Since the power recovery facility for small FCC unit has few recovery powers, it shall be apply skid mounting type (package unit) which is simplified model and the few site work volumes in consideration of economical efficiency. But the study and the investigation to this model is not yet carried out. Therefore, the large-sized power recovery facility with sufficient return on investment can be recommended to diffusion 1st machine. Examination and the investigation of a small power recovery facility are carried out during the diffusion project execution period of 1st machine, and reflect it to 2nd machine.

3) Composition of a power recovery facility The configuration of a facility must improve a return on investment. In the existing facility, the waste gas by which the power recovery was carried out is sent to a waste heat boiler, and the steam is generated there. After that, this steam is connected to the refinery steam network. So, this steam is further introduced into a steam turbine, and collects dynamic forth as electric power. It considers as a direct-electricity-generation 2 generation type. This facility configuration is used as a direct-electricity-generation type (2nd generation type). In addition, since emission control is applied when performing modification or renewal of the facility, the facility configuration shall install a flue gas desulfurization and denitrification facility in the downstream of the waste heat boiler.

4) Work demarcation between Japan and China a) Design activities In principle, as for a power recovery facility, the Japan side carries out a basic design and a dynamic simulation, and China side carries out a detail design and construction design. Since a flue gas desulfurization and denitrification facility are skid mounting type package units, the Japan side carries out basic and detail design. (Refer to the 2.2.5 clause for details) b) Equipment and Material In order to reduce a construction cost, the China manufacturer's investigation was performed. This manufacturer of equipment and material shall be determined with the counter partner, which is an end user reflecting this results. (Refer to the 2.2.5 clause for details) As the flue gas desulfurization and denitrification facilities are skid mounting type package units, and its assembling is performed in Japan, all equipment and raw materials shall be Japan product.

-204- 5.2 Effect after promotion of energy conservation technology

5.2.1 Energy-Conservation Effect

Currently, also in a certain refinery (7,300,000t of crude-oil throughputs/, year)has a plan that the energies of the exhaust gas discharged from FCC plant are collected by the expander, along with steam generated from FCC are transformed into a electric power with generator. Thereby, the fuel consumed in a power-generation plant is reduced.

The amount of energy conservation is equivalent to the power collected with a power recovery unit if the project is executed. A maximum of 8 MW is presumed at the end of the shaft of a generator, and it is equivalent to the energy of 228 JT/yr. When the heat value of fuel oil for power generation is made to 10,000 Kcal/kg and a generating efficiency is made into 32%, the amount of reduction for one year is equivalent to 17,000toe/yr.

5.2.2 Greenhouse-Effect-Gas Reduction The above-mentioned energy-conservation effect is converted into the amount of carbon dioxide;

Heat value of refinery fuel : 40.19 TJ/kton Carbon emission factor : 21.1 tC/TJ Fraction of carbonaceous oxidation : 0.99 Proportion of the molecular weight of a carbon dioxide and carbon : 44/12

The amount of carbon-dioxide discharge reduction = 17.00 x 40.19 x 21.1 x 0.99 x 44/12 =52,331 ton/yr

Greenhouse-effect-gas reduction of a adequate amount and energy conservation will be achieved by popularizing a direct-electricity-generation (2 generation type) power recovery unit, as the previous subsection described. Candidates are the following refineries. 0 The refinery which is planning the institution of a power recovery plant, © The refinery which is planning the renewal of a power recovery unit due to an old model, (D Small FCC facilities with which the power recovery plant is not installed

-205- 6. Effects to other industries

-207- 6. Effects to others

6.1 Effect to Environments, Economy, and Community while Obtaining Energy-Conservation and Amount Reduction of Discharge of Greenhouse Gas by Carrying Out Project

Ecological, economy, and a community are not affected by the realization of this project. Rather, it contributes to the environmental preservation of a region, the facilities operation efficiency and the fuel-consumption efficiency of the concerned refinery also increase, and an economic effect is obtained by reduction of fuel consumption and greenhouse effect gas emission.

Environment : The energies of the exhaust gas discharged from FCC plant to which capacity is scaled up are collected by the expander, the power consumption of an air blower is made to reduce by driving an air blower directly. Furthermore, surplus energy is transformed into electric power with a generator. Thereby the fuel used in the power-generation plant in the concerned refinery is reduced, and the exhaust gas (carbon dioxides) exhausted by combustion of fuel is reduced.

Moreover, the emission of an air pollution substance (Sox, Nox, and dust) can stop greatly with the exhaust-gas sulfur removal / denitrification plant installed as auxiliary equipment, and the contribution of the environmental enhancement to a circumference is enormous.

Economy : By the realization of this project, the amount of the fuel used currently consumed by the power-generation plant of a refinery will be reduced, and a power-generation unit cost will be reduced. This is connected with the delivery of the products with competitiveness.

Social : It becomes clear that this energy-conservation project reduces a carbon dioxide, sulfur oxide, the nitrogen oxide, and a dust, and brings an environmental improvement. And probably, the recognition that the concerned refinery is making big contribution a surrounding region and surrounding residents will newly arise. Moreover, this project also affects other factories and other industry, and it can expect that the new project for energy conservation and carbon dioxide reduction commences.

-209- 4

Conclusion

-211 - Conclusion

Nanjing Refinery which is the China side counter partner of this basic survey, have expressed that they wants to carry out this project very much under the technological cooperation and a capital affiliation of Japan since they have a high appraisal and interest in this energy-saving project.

In this project, a greenhouse effect gas is reduced by introducing FCC power recovery equipment, and an exhaust gas desulfurization and denitrification facilities. Moreover, it can stabilize the low production rate of a petroleum product with the improvement of energy consumption, and it became clear to bring the improvement of the environment by reduction of sulfur oxide and the nitrogen oxide etc. of a circumference area. It expects that a new recognition that the concerned business enterprise is contributing greatly to the circumference area occurs by this project popularizing extensively to same kind business enterprise.

On the one hand, in present China, the reorganization and the amalgamation of an oil refinery are planned and rationalization of the whole business community is proceeded. As an example, in order for them to cope with the increase of import crude oil which are heavy and high sulfur content, they need to perform the renewal and the reconstruction of the facilities immediately. Probably, the activation of a refining business community will make reaction to Chinese economic development greatly.

The China side anticipates the technology and the financial support for the China oil-refinery activation from a private enterprise and a Japanese government. From now on, a detailed planning will be further examined with a counter partner in order to realize this project.

Finally, we appreciate respectfully to the persons concerned who cooperated in this survey. And it is fortunate if this investigation result becomes the cause of the economic development of China.

-213- EsferencfiS- document list

1. China ultimate publishing company "China statistics for-the-year 1999 ” 2. The Kyodo News Service "China tendency 1999" 3. So So Sha. "China informational handbook 1997 edition" 4. Institute of Energy Economics, Japan "Economy of energy" 5. Heavy-and-chemical-industry "The petrochemical-industry 2000 edition of Asia" 6. East-West-trade "Chinese oil industry and petrochemical-industry 1998 -99 edition" 7. The Institute of Energy Economics, Japan "International energy tendency analysis" 8. Economic Planning Agency Research Bureau "Asia economy 1999" 9. Kyodo News Service "WORLD YEARBOOK world annual" 10. A Nuclear encyclopedia 11. Jinling-Petrochemical-Cortoration pamphlet 12. Nanjing Refinery pamphlet When you release the description of this report, please obtain beforehand the allowance of Global Environment Technology Department of New Energy and Industrial Technology Development Organization (NEDO).

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