Manufacture of benzene:

There are various methods that can be used to produce benzene. These methods include catalytic reformation, steam cracking and Toluene hydrodealkylation. Catalytic reformation involves the use of a mixture of aluminium oxide and platinum which are catalysts in the process and the raw material in the production is gasoline or naphtha plus hydrogen. The process involves the feed stock which is the mixture of naphtha or gasoline with hydrogen, this mixture is exposed to the catalyst at a 500 degree temperature, however the resultant by product includes methylbenzene and because this product is not as valuable as benzene and therefore it is converted, the process of converting the by product into benzene is known as dealkylation.

The steam cracking process involves breaking down hydrocarbons which are saturated into smaller and unsaturated products, the hydrocarbon is mixed with steam and then exposed to heat in a furnace where a number of products are formed, the product is then transferred to the heat exchanger where the reaction is stopped, benzene is then separated from the other products and stored ready for transport and sale.

This paper will focus on the steam cracking process of naphtha to produce benzene, 75% of the worlds production of benzene is attributed to steam cracking of naphtha, 0.175 tonnes of benzene are produced per tonne of ethylene in the process, the costs of producing benzene includes capital costs, working capital costs, taxation costs, production costs such as labour costs and raw material costs.

Production costs:

Capital costs:

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Capital costs include start up costs involved in starting up the firm, these costs are incurred once and they are the costs incurred in setting up buildings, setting up the plants, the construction costs and all the items required to set up the plant. These costs are incurred once but they are important in that a firm cannot start without this capital.

Considering an olefins petrochemical configuration plant that is capable of producing 100,000 tonnes of benzene the capital requirement is 30 to 40 million dollars, this is much lower than the coal configured plant to produce benzene.

Working capital

Working capital on the other hand is also a capital requirement required to purchase the raw materials, however these cost can be recovered at the end of plant life. Considering our plant type and capacity the working capital is required to purchase the raw material which is naphtha and other inputs is estimated to be 5million dollars

Maintenance costs:

These are the costs associated with the maintenance of the plant. They are incurred due to the tear and wear as a result of usage of the plant. Because the value of the firm is estimated to be 40 million dollars the maintenance cost will be estimated at 10% per year and therefore the cost will be 400,000 dollars.

Operating labour:

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The plant will be required to employ labourers in the firm to undertake various tasks, some of the number of task involved in the production problem will determine the labour requirements, for this reason therefore the costs of labour will depend on the number of labourers and labour requirements will also depend on the capacity of the firm. The costs of labour will also depend on the number of shifts which the firm intends to employ. According to labour rates per hour the estimated rate is 20 dollars per hour and therefore if the firm will operate for 8 hours then the labour cost per unit employee will be 160 dollars per day and if the firm employs 10 labourers the cost will be 1,600 dollars per day. Two shifts will double the labour cost and therefore the costs will be 3,200 dollars per day.

Supervision costs:

Employees will have to be supervised and the cost per supervisor is usually higher than the cost of unit labour required, the cost of supervision will depend on the number of labourers and also the number of shifts the firm requires. The number of shifts on the other hand will depend on the production requirements by the firm, if the capacity of the firm is low and that the firm intends to produce more then the firm should include more than one shift even operate for 24 hours. If the number of workers will be 10 then there is only a need to have one supervisor if anyone shift is to be employed, supervision rates can be estimated at 30 dollars per hour and therefore for 8 hours the cost will be 240 dollars per day. Two shifts will require the firm to employ two supervisors and therefore the cost will be 480 dollars a day.

General administration costs:

Administration costs include the costs incurred by the employment of the administration department in the firm, some of these administrators will include managers, auditors, accountants and secretaries. These employees will be paid higher than the labourers in the firm and therefore there is need to account for them, the administration is put in place in order to ensure the smooth running of the firm and also to administer sales, prepare pay checks, market product and ensure efficiency in production.

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Other costs associated with administration costs may be incurred whereby there will be purchase of office stationary and although this may be a very low cost it must be considered in the production process.

Local taxes:

Taxes are a source of government revenue and every firm will pay taxes which are defined by the local authority, these taxes include the operation tax and also the tax on profits, these taxes are charged at a certain percentage depending on the type of operation being undertaken. Most taxes are based on the profits and local taxes will be charged on profits, if the firm is supposed to pay 10% of profits as tax then if the profit is equal to 10 million per year then taxes to be paid will be 100,000 dollars.

License fees:

In order to undertake the production process the local authorities will require that a firm licences its undertakings with them, this costs will depend on the type of business and also the rates provided by the local authorities. Licenses are acquired for a defined period of time example one year, five years and the cost of licence will depend on the period licensed. In most cases licence fees for these type of venture is high and it is estimated at 100 000 dollars.

Raw materials:

There is also a cost that will be incurred in the purchase of raw materials, raw materials in this case include the hydrocarbons and also water, these costs are incurred each time the firm produces benzene but they are covered by the sales of the product, for this reason therefore the

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raw material costs is part of working capital. As earlier discussed the working capital required is 5million dollars and this includes raw materials which is naphtha.

Interest on borrowings:

The capital required to start up the firm may be obtained from financial renders, these is in other words known as finance through loans, when the loan is obtained the firm is required to pay instalments and at the same time the firm will pay interest incurred by the loans. The interest on borrowing will depend on the amount of funds borrowed, the interest rate level and the repayment period. Interest rates are estimated currently at 15 % per year and if the firm acquires a 40 million dollar for a period of 10 years then the interest rate will be 3 million and per year the firm will be required to pay 300,000 as interest per year to the lenders.

Laboratory costs:

Quality control in the firm is important in order to achieve high quality and purity of benzene, the laboratory costs include the costs incurred to check the products produced in order to meet the standards defined by the firm. These costs will depend on the frequency of checks administered on the palnt, if qualtity checks are done each day then the cost will be determined per day, if cost per check is 200 dollars then per month the company pays 6,000 dollars per month.


These costs include electricity costs, production water costs and other miscellaneous costs incurred, these costs will depend on the production hours of the firm and these costs are incurred each month and therefore they must be accounted for.

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Bank charges costs:

Banks will charge a certain amount for any transactions undertaken by the firm through the bank, because the firm will require to have a separate account in the bank there will be standing charges and transaction charges that are incurred in the process, these costs must be considered in order to get the correct amount of costs and profits of the firm. Example checks processing charges.

Depreciation Costs:

Due to wear and tear the firm will incur depreciation costs, these costs are determined through a certain percentage set by accountants and they are charged each year or month, depreciation costs will be imposed on the plant, vehicles and also buildings owned by the firm.

Most companies will set their depreciation costs at 10% to 20% and if we assume that the firm sets its depreciation cost at 15% then and that the total asset value is 10 million which is simple depreciation method then depreciation per year will be 150 000 dollars.

Insurance costs:

There is need to insure the firm from fire, accidents and other services provided by the insurance companies, these costs will depend on what products are insured, the costs of what is insured and the rates that the insurance companies offers. given that the estimated rate of insurance premium cost is 15% and the company insures property worth 5 million for ten years then the company will be required to pay 75,000 per year as insurance premium.

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Shipping and packaging:

After benzene is produced there is need to package the product for transportation purposes, these costs therefore include the costs of packaging and also the costs of transporting these products. These costs will depend on the method of packaging and also the distance from the plant to the consumer.


Chemindustry processes (2008) Benzene, retrieved on 8th march, available at http://chemindus

Hall W. and E. Ockerbloom (1994) Petrochemicals, American Chemical society, US

Robert Meyer (2005) Handbook of Petrochemicals Production Processes, McGraw Hill publishers, New York