CHAPTER I

EXECUTIVE SUMMARY

Company Name: Bicol Essentials Corp.

Company Logo:

This logo represents the corporation. The two

curves presented by the blue and orange stand
for the initials of Bicol Essentials, B and E. The
iconic Mayon volcano at the center symbolizes
the Bicol region where the Pili tree is native.

Location: Sta. Ana, Gubat Sorsogon

Proponents: Raymond V. Albuero

Jan Carlo Baltazar

Mary Rose N. de Lima

Genesis L. Fabia

Ela Marie D. Locsin

Jam Krista L. Madrona

Mark Frances R. Naag

Financing Sources: Firms assets and investors

Type of Organization: Corporation

Summary of the Project

This projected plant design covers the design, conceptualization and process
operation of a proposed Manila Elemi Extraction Plant. As stated in the overview, the
plant will extract the essential oil (manila elemi oil) from Canarium luzonicum resin. The
study tackles the marketability of the product and identifies the series of unit processes
and unit operations employed in the production. Economic analysis is also presented in
this study.

Name of the Firm

The Bicol Essentials Corporation, the suggested name of the company, caters

high quality essential oils that are considered as high end product in the local and

international market.

Plant Location

The chosen site of the proposed manila elemi oil extraction plant is Sta. Ana
Gubat, Sorsogon. The location is unindustrialized and needs development. It is remote
area thus providing an area far from people to avoid the hazards that might be cause by
the plant. Since Sorsogon is the major producer of Manila elemi in the country. The
place has amenities needed by the proposed plant.

2
Name of the Product

The company calls its product as Bicol Essentials Elemi Oil. The hydrosol is
packaged to be sold as wholesale to other industries such as candle making, soap
making and others.

Rationale and Effectivity Date

The proponents have presented a preliminary estimate of the proposed plant in

Sta. Ana, Gubat, Sorsogon that will have a daily production capacity of 166.08 kg for

Manila elemi oil and 1913.96 kg. The construction will commence on April-May 2013 to

June 2015.

Mission

As a Corporation

To build a lasting relationship with our customers characterized by excellence,

concern for the individual and integrity.

For Bicol Essentials Corp. Clientele

To respond to their essential oil needs by providing quality and innovative

products.

For Bicol Essentials Corp. Employees

To create leaders out of our employees within an environment that inspires

growth, creativity, and a passion for excellence.

3
For Bicol Essentials Corp. Shareholders

To safeguard their interests while optimizing return on investments.

Vision

A company empowered in becoming a forefront in essential oil industry in the

world. We are dedicated in gaining the trust of customers by providing the best quality

of essential oil at a competitive cost. Anchoring to be technically competent,

environmentally and socially responsible in all our endeavors, we will be a global leader

and model to the rest of the globe. We are always guided by conducting ourselves with

professionalism, integrity and fairness. We exist as a company to promote the best

interest of all our stakeholders.

Goals

Bicol Essentials Corporation’s primary goal is to provide the highest quality of

essential oil that will satisfy our client’s needs. Specifically:

 To be prime mover in determining the needs of the client

 To always deliver high quality products at exact time

 To be innovative by undertaking research and development to improve its

product and adjust to its product and adjust to its consumer’s needs in change of

time

 To be socially responsible, create and maintain appropriate ethical,

environmental and risk management standards as a major part of the business

4
Overview of Financial Criteria

Project Cost: Php. 191, 660, 411.94

Payback Period: 0.25 year

Rate of Investment: 403.314%

Description of the Product

Essential oil from Pili (Canarium luzonicum) resin is a light yellow liquid with a

citrus-like odor. It is light sensitive therefore must be stored in a tinted bottle. Its shelf-

life is approximately 4 years.

Summary of Findings and Conclusion

The proposed essential oil extraction plant for pili (Canarium luzonicum) resin,

based on estimations made and analysis, is said to be successfully feasible.

The average production is 166.08 kg Manila elemi oil and 1913.96 kg per day.

The extraction of the essential oil will be confirming to the world’s standard of essential

oil industry. The source of labor and the plant location are well-planned in the study.

The quality of the product is properly supervised from the selection of raw materials

down to delivery of the products. There is no major waste generated by the plant. The

resinoid will be properly disposed. The heated water from the condenser outlet is being

cooled in the cooling to avoid thermal pollution in the environment.

The estimated overall project cost is sufficient enough to sustain the financial

requirements of the study. The project is feasible based on the financial analysis like

5
rate of return and payback years. The computed payback year is less than a year

therefore there is a great potential for progress.

6
 CHAPTER II

MARKET STUDY

Pili is a tropical tree from the Philippines that can grow up to 30 meters (98 feet)

high. Its trunk is an excellent source of Manila Elemi. The essential oil is extracted

through a steam distillation process from the resin of Canarium luzonicum (also known

as C. commune) of the Burseraceae family.

Sorsogon Province which is the main source of the resin has several hectares of

land area planted to pili. The gum is exported to different countries abroad. Barangay

Manapao of Gubat Sorsogon as the main source of resin.

The high demand of Manila Elemi for export is due to the essential oil extracted

from it. Terpineol, elemicine, elemol, dipentene, phellandrene and limonene are the

main components of the oil extracted from the gum. The oil is also valued because of

its therapeutic properties .

In the world’s perfume industry, the pale yellow Manila elemi oil is often used as

middle note because of its medium aroma strength that blends well with lavender,

rosemary, frankincense, sage, myrrh, patchouli, vetiver and other international

fragrances. Chanel, a luxurious brand also launched a new skin care product which has

the manila elemi oil as the key ingredient. The oil is evident as fragrance component in

other luxury perfumes.

As the global trend for natural and cosmetic products intensifies the demand for

the Manila elemi resin is expected to further increase in the global market.

7
 There is an economic potential for an industry of Manila elemi. By exporting not

the resin but the essential oil, earnings could be more than doubled at the current price.

A. Product Description

 Essential Oil

Manila elemi is the trade name for the soft, fragrant exudates obtained from the

trunk of the Canarium ovatum tree species or pili. It is mainly used by the fragrance

industry after distillation of its essential oils.

This essential oil has a citrus-like and a bit spicy smell and has a pale in color. Its

components are valuable for pharmaceutical and cosmeceutical use.

It contains therapeutic properties like analgesic, expectorant, tonic, antiseptic and

stimulant.

The oil shows remarkable antibacterial activity against Staphylococcus aureus

and Escherichia coli. It likewise showed antifungal properties against Candida albicana

and Fusarium monoliferme which are filamentous fungi.

This essential oil is also used for beauty products and perfumes of different

international luxury brand like Chanel, Gucci, Dior, Donna Karan, Ralph Lauren and

Marc Jacobs. Chanel now carries pili in its newest product for its moisturizing

properties, the Ultra Correction Lift for facial skin rejuvenation.

The product can also be used in the making of varnish, air freshener and other

scented products.

8
Quality Assurance

Table 1 presents the properties of Manila elemi. However, natural resins are

subject to variations due to environmental conditions during harvest. Therefore, the

given parameters may vary. These parameters shall be used to monitor the quality of

the essential oil during the processing to produce better quality of oil. Gas

Chromatograph-Mass Spectrometry and UV Viscometer can be used to test these

properties.

Table 2.1 Properties of the components of Manila elemi oil.

Composition of Manila Elemi
Monoterpenes
a-Pinene 0.45%
b- Pinene 0.13%
Camphene 0.03%
Myrcene 0.05%
Sabinene 5.73%
a –Phellandrene 17.56%
b –Phellandrene 2.27%
Limonene 56.02%
a –Terpinene 0.15%
g –Terpinene 0.25%
(E)-b –Ocimene 0.03%
(z)-b –Ocimene 0.04%
para-Cymene 1.1%
a –Terpinolene 2.82%
*(E)-Sabinene hydrate 0.47%
*(Z)-Sabinene hydrate 0.12%
Ketones
*Camphor 0.04%
*Pipertone 0.06%
Carvone 0.08%
Sesquiterpenes
d –Cadinene 0.02%
a-Copaene 0.06%
b- Elemene 0.19%
a –Humulene 0.07%
Germacrene-D 0.07%

9
 Monoterpenols
*Linalol 0.02%
Terpinene-4-ol 0.49%
a –Terpineol 1.14%
*(Z)-Sabinol 0.1%
*(Z)-Carveol 0.02%
*(E)-Carveol 0.03%
*p-Cymen-8-ol 0.17%
Sesquiterpinol
Elemol 6.28%
Guaiol 0.1%
*Bulnesol 0.02%
*Eudesmol 0.12%
b –Eudesmol 0.19%
Ethers
Methyl Eugenol 0.18%
Elemicin 2.4%
Source: Villanueva,Torres 1993; http://www.thegoodscentscompany.com

 Hydrosol

The word hydrosol was first used in the production of gold in 1864. `Hydro' means

water and `sol' means solution – the new liquid that result from steam distillation.

Hydrosols is also known as floral waters, hydroflorates, flower waters or distillates

are like the manila elemi oil but in far less of a concentration making them suitable for all

manner of applications where the manila elemi oil would be too strong and can be used

directly on the skin without further dilution. The herbal water contains diluted elemi oil

which is approximately .02% oil in hydrosol. Organoleptically, it has strong taste, strong

scent and a pH of less than 5.5.

In the past, hydrosols were considered a byproduct of steam distillation, but now

are considered an important co-product. Clinically, the chemical components in the

hydrosol are primarily acids, which are hydrophilic. They acidify the water or the

10
product, which is beneficial to the skin or in the body. Thus the hydrosol acts as a

healing anti-inflammatory and mild, but therapeutic antiseptic. Bacteria do not live well

in acidic environments, which is why acidic liquids such as vinegar make good

preservatives for food items like pickles, Chile peppers and Olives. Acidic environments

are astringent and so the hydrosols are useful in skin care products as astringents

constrict and contract the tissues. Hydrosols can be used externally in skin care

products, internally as a douche, taken as a tonic or combined in a beverage drink.

Toiletries makers are finding many uses for hydrosols. They can be used alone as body

or room sprays. It is also used as flavorings and curables.

Because hydrosols are produced at high temperatures and are somewhat acidic,

they tend to inhibit bacterial growth. They are not however sterile. They are a fresh

product, like milk, and should be kept refrigerated.

B. Product Demand and Supply

 DEMAND

For the last 100 years there has been an increasing demand for the products that

contain flavours and fragrances. According to the study of Müller, flavour and fragrance

compositions are the most numerous single group and highest-value intentional

additives utilized by the food and personal care industries, accounting for about 72% of

the total global value of F&F products. They are also the most profitable and show the

highest rate of growth in recent history among food and personal care product

11
ingredients. Aroma chemicals account for 16% of total world value, and essential

oils/natural extracts for 12%. The following figure shows the estimated sales of essential

oil and aroma chemical sales made in 2006.

Figure 2.1 Estimated 2006 Worldwide Essential Oil & Aroma Chemical Sales

Figure 2.2 World Consumption of Flavor and Fragrance Products 2010

12
 The figure above shows the distribution of the consumption of products

containing flavours and fragrances. It is evident that Western Europe has the highest

consumption of the products.

Furthermore, it is also stated that growth for the demand of essential oils is

forecasted at 3–4% per year, on average, to 2015. While fragrances for detergents,

household products and industrial uses are expected to continue their steady growth,

flavor compositions appear well-positioned for good growth because of strong demand

in developed countries for flavorful, wholesome and convenient-to-prepare processed

foods. Also, the strong consumer preference for natural flavors and even fragrances

increasingly favors consumption of more expensive essential oils and extracts of natural

origin.

Considered as the most important of the oleo resins, elemi oil has also found its

place in the global market. Chanel, a luxurious brand launched a new skin care product

which has the manila elemi oil as the key ingredient. The oil is also evident as fragrance

component in other luxury perfumes, such as Gucci by Gucci Pour Homme, Dior

Homme Sport for Men, Marc Jacobs Bang for Men, Donna Karan DKNY Women,

Revlon Pink Happiness for Women, Ralph Lauren Extreme Polo for Men and dozens

more.

Along with the increasing demand for essential oils, the demand for Manila elemi

in the international market is expected to increase. The Philippine Forestry Statistics

data showed that in 2003, 361,386 kg of the resin valued at $528,336 was exported to

13
France, Germany, Japan, Spain, Switzerland and the United States. At present, the

demand for manila elemi is 20 to 30 metric tons per month.

Another product of hydrodistillation is the hydrosol. Some hydrosols are used in

the flavor, fragrance, chemical industries, soap making and candle making. But in most

distillations, the water is drained and disposed of or allowed to run off into the terrain.

The demand for hydrosols used to be low, and distillers were unable to make a

significant profit. As awareness and demand for hydrosols increase, they are becoming

more readily available. Hydrosols contain small amounts of essential oils (as well as the

water-soluble parts of the plant that are not found in the oil), but at a more affordable

price(http://www.herbcompanion.com/Body-Care/AromaticWaters.aspx#ixzz1o78Ir398).

 SUPPLY

The Philippines is the sole exporter of Manila Elemi. The Food and Agriculture

Organization, in its Corporate Document Repository titled “Gums Resins, and Latexes

of Plant Origin,” lists the Philippines as the only source of internationally traded elemi.

The country exports Manila elemi resin in raw form in cases with inner plastic

bags graded depending on the quality of the gum resin. Sorsogon has the largest land

area planted to pili (669 hectares).

Barangay Manapao in Gubat produces 900-1,000 kilograms per month. As the

worldwide trend for natural products intensifies, demand for the Manila elemi resin is

expected to pick up in the global market.

14
 The average producer’s capacity is only two metric tons per month. This is not

surprising because the only resin producer is Barangay Manapao, Gubat, Sorsogon.

C. Raw Materials

The main raw materials used for the production of Manila Elemi Essential Oil are

Manila Elemi and water.

MANILA ELEMI

Manila Elemi, locally known as “salong, sahing, pulot or pilit”, is the pale yellow

resin which exudes from the bark of Canarium species pili (Canarium ovatum), piling-

liitan (Canarium luzonicum) and pagsahingin(Canarium asperum) when they are tapped

or wounded. Its aromatic scent can be described as sharp pine and lemon-like scent

with citrus and woody notes.

Manila Elemi has long been used by our ancestors for torches and starting fires.

Sources and Availability

Bicol Region has the biggest number of productive pili trees (72%) among the

country’s six regions reportedly cultivating it. The others are: Southern Tagalog, 9%;

Western and Eastern Visayas, 18.5%; Southern Mindanao and CARAGA, 1% (Bureau

of Agricultural Statistics, 1996).

15
 Distribution of Productive Pili Trees in
the Philippines

18%

Bicol Region
Others

82%

Figure 2.3 Distributiion of Pili Trees in the Philippines

In Bicol, Sorsogon has the biggest area devoted to pili with 669 hectares followed

by Albay 145 hectares, Camarines Sur 100 hectares, Camarines Norte 50 hectares and

Catanduanes 4 hectares(PILI: Assessment of The Pili Industry In The Bicol Region).

The largest producer of Manila Elemi in Sorsogon can be found in Gubat, Sorsogon

specifically in Brgy. Manapao which produces 1,269 kgs per week, followed by Brgy.

Union with 543 kgs, Brgy. Sta. Ana with 345 kgs and Brgy. Sangat with 261 kgs (Pili

Sap Production, Municipality of Gubat As of July 1, 2011).

WATER

Water (H2O) is the most abundant compound on Earth's surface, covering about

70%. In nature, it exists in liquid, solid, and gaseous states. It is in dynamic

16
equilibrium between the liquid and gas states at standard temperature and pressure.

At room temperature, it is a tasteless and odorless liquid, nearly colorless with a hint of

blue. Many substances dissolve in water and it is commonly referred to as the

universal solvent. Because of this, water in nature and in use is rarely pure and some of

its properties may vary slightly from those of the pure substance.

Sources and Availability

In Gubat, Sorsogon, Malaboo River situated near Brgy Sta. Ana will serve as the

primary source of the prospected Manila Elemi Essential Oil Extraction Plant. A dig-up

well near the plant can also be utilized as another water source.

D. Plant Location

The municipality of Gubat is a second class town in the province of Sorsogon

belonging to its second congressional district. It is located in the east coast of the

province. It is bounded on the north by the municipalities of Bacon and Prieto Diaz, on

the south by the municipality of Barcelona, on the west by Sorsogon City and the town

of Casiguran , and on the east by the vast Pacific Ocean.

Sta Ana is one of the barangays of Gubat. It is situated at most two kilometers

south from the town proper. It is also nearest to the river of the town. Due to its

proximity to the town proper and to the sources, it is the ideal site for a Manila Elemi Oil

Extraction Plant.

17
 The land cost in Gubat is reasonable enough. The rate is 1500 pesos per square

meter.

The pinpointed location is at most less than one kilometer from the main road of

Sta. Ana. The site of the plant will be accessible due to its short distance from the Gubat

proper. Therefore the raw materials from different barangays will be strategically

delivered to the plant.

Since the town of Gubat is the main producer of Manila Elemi, tappers from the

said town will be the prospected suppliers. The plant will be collecting the resin through

the middlemen who buy the material from the Pili farmers. There are 33 barangays that

will supply the raw material for the extraction plant.

Water Supply

The water supply for the plant will mainly depend on two sources. The Malaboo

river of Sta. Ana situated near the plant location will serve as a source of this utility for

general purposes like cooling, washing, steam generation and as a raw material for the

plant. Another dependable source of water is the dig up well which is excellently

feasible.

Climate

The municipality experiences a Type II climate characterized by a short dry

season in the months of April to August, and a pronounced maximum rainfall from

November to January. The average rainfall is 6.65 mm while the highest readings occur

in the month of February at 14.3 mm and the lowest at .4 mm in the month of May. The

mean temperature is 27.245 degrees Celsius.

18
Type of Land

When considering the type of land, the location is mainly composed of Bascaran

clay, clay loam and hydrosoil. These types of soil are suitable for the construction of

buildings of the plant.

Communication Facilities

The town has modern and adequate communications facilities including cellular

mobile phone (Sun Cellular, Globe and Smart), Cable facility, internet cafes and internet

service providers. Accessibility to these technologies boosts the efficiency of the plant

through updated information and reliable communication.

The town is very politically stable and therefore very friendly to business

establishments particularly manufacturing plants for the development of its local

economy.

19
Figure 3. Plant Location of the Manila Elemi Oil Extraction Plant

20
 CHAPTER III

TECHNICAL STUDY

A. PROCESS DESCRIPTION

Several ways of extracting essential oils are employed by different industries but

hydro distillation and steam distillation are most commonly used. Both have advantages

depending on the material to be utilized. The process to be used in the plant is steam

distillation because it suits the property of the resin and it is more efficient to use in large

scale operations. The following processes will be involved in the production of elemi oil.

Feedstock Preparation

Manila elemi is collected from the trunk of Canarium luzonicum tree. Then,

impurities from the resin such as wood pellets and pebbles are removed manually. The

cleansed resin is then air-dried using a blower for 45 minutes.

Essential Oil Extraction

Distillation

To extract the elemi oil by steam distillation, 600 kg of water is introduced to each

of the two boilers. The steam will then enter four distillation columns where each has

375kg of air dried Manila elemi. The steam will be continuously supplied in the column

for 12 hours.

Condensation

At the end of the distillation, a total of 520kg of steam (mixture of elemi oil and

water) will be liberated from one retort. It will pass in a shell and tube heat exchanger

with inlet water at 25°C. At this point, the steam will be condensed into a mixture of

21
elemi oil and hydrosol. The outlet water for the heat exchanger will have a temperature

of 40°C.

Separation

After the steam is condensed, the mixture of elemi oil and hydrosol will be fed to

a gravity separator. Here, the 41.55 kg of elemi oil will be separated from 478.47 kg of

hydrosol for each gravity separator. After which, the elemi oil will be subjected to quality

assessment.

B. PROCESS FLOWCHART

The is the visual presentation of the production process in the extraction of

manila elemi oil from the Canarium luzonicum resin can be found on page 23.

22
 PROCESS FLOWCHART

PROCESS FLOW DIAGRAM

23
C. PROCESS FLOW DIAGRAM

24
25
PRODUCTION SCHEDULE

26
E. MATERIAL AND ENERGY BALANCE

27
28
29
30
31
F. Equipment Design and Specification

CONDENSER(E1-4)

Description units
Heat duty KJ/h 100 263.04
OD mm 19.05
ID mm 13.51
BWG 14
Tube length mm 3 657.6
55/280

Tube area
0.31048/0.4738
0.3705
48.11/34.11857

53
22.5
35.60
FT factor 0.9
32.04
A 25.83
No. of tubes 59
No. of pass 1
Shell diameter in 10
Baffle type Horizontal
Baffle mm 63.5
spacing(.25 SD)

BOILER (B1 & B2)

Description units
Model number LSS0.10-0.7
Power KW 0.75
Capacity kg 1200

Steam output ton/h 0.1

Working pressure MPa 0.7
Saturated steam ≤170

32
 temperature
Thermal efficiency 98%
Weight kg 435
Dimensions
L mm 1370
W mm 700
H mm 1370
Fuel Kg/h 5.75
consumption(propane)

COOLING TOWER

Description units
Model name OCT FRP -04-1
Nominal capacity Cooling 400
tower tons
Heat of rejection Mcal/ h
Air flow 55000

Operating weight 5500

Fan diameter mm 2400

Dimensions
D mm 5800
H mm 3700

RETORT

Description Units
Height Meter 5
Diameter meter 3
Thickness inches 0.285
Pressure MPa 0.7
Capacity kg 375
Number of trays Unit less 15

33
 GRAVITY SEPARATOR

Description Units
Height Meter 0.7958
Diameter Meter 1.0724
Thickness Millimeter 2
Volume m3 0.53928

34
H. PLANT LAYOUT

Top View

Front View

35
 Back View

Isometric View (Left)

36
 Isometric View (Right)

Close Up View of Production Building

37
 Laboratory

Small Office in Laboratory

38
 GCMS Room

Packaging Are of Manila Elemi Oil

39
Top View

Front View

40
 Back View

Isometric View (Left)

41
Isometric View (Right)

Close-Up View

42
I. SAFETY CONSIDERATIONS AND RISK ANALYSIS

Safety is important in running an industrial plant. Risks cannot be avoided but

may be reduced through proper safety management and hazard minimization. Planning

must be made to avoid incidence of damages to personnel and employee.

General

All employees are required to undergo medical evaluations depending on their

working place or area to ensure if they are fit for type of work they have.

A Standard Operating Procedures must be developed to identify necessary

protective gears for each part of the production process.

Company policies must be established and training programs should be given to

new or transferred employees to orient them in their work environment, responsibilities,

the possible hazards of the workplace and safety measures and procedures that is

necessary to reduce risk. A simplified from of orientation can be given to temporary or

part time employees according to their type of work.

A handbook for employees must be provided containing company’s VMGO and

policies, evacuation procedures and emergency responses, hazard of operations, job

descriptions and employee’s responsibilities.

Warning signs must be visible to high risked areas to warn and remind

employees of the hazards. First aid kit and fire extinguishers must be available in

working areas.

43
Equipment Safety Rules

An operator is the person responsible for the safe and efficient operation of any

equipment. The operator must develop safety habits to prevent personal injury, injury to

others, and damage to equipment. Safety rules vary depending on the type and size of

the plant. However, the basic safety rules listed are common.

 Wear approved clothing and shoes in the plant at all times.

 Wear gloves when handling hot lines or cleaning fuel oil burner tips.

 Wear appropriate eye protection in all designated areas. Use hand shields when

visually inspecting the furnace fire.

 Wear goggles and respirators when cleaning the fire side of the boiler, breeching,

or chimney.

 Wear a hard hat when working where there is a possibility of head injury

 Do not use hands to stop moving equipment

 Store all oily rags or waste in approved containers to prevent fires caused by

spontaneous combustion.

 Only use approved safety cans to store combustible liquids.

 Check all fire safety equipment on a regular basis to be sure it is in proper

working condition.

 Check fire extinguishers periodically for proper charge and correct location.

 Do not use unsafe ladders or substitutes for ladders.

 Ladders should never be used as bridges.

 Do not leave loose tools on ladders, catwalks, tops of boilers, or scaffolds.

44
 Do not carry tools in back pockets.

 Do not throw a tool to anyone at any time.

 Use the proper tool for the job.

 Do not use defective tools.

 Always secure and tag steam stop valves, bottom blowdown valves, and

feedwater valves when a boiler in battery is removed from service for cleaning

and inspection.

 Never start any equipment that has been tagged out for safety reasons.

 Make sure the equipment has been secured and tagged out before attempting to

clean or repair.

 Always use low voltage droplights when working in boiler steam and water

drums.

 Precheck all equipment for starting hazards.

 Clean up liquid spills at once.

 Move quickly and with purpose in emergencies but do not run.

 Personally double check the plant and equipment before starting up or making

repairs.

 Make repairs on live equipment only in extreme emergencies.

 Always report any unsafe condition in the plant to the immediate superior.

45
Product Transport Security Plans

Department of Environment and Natural Resources requires a security plan as

well as contingency plans in case of unexpected incidents in transporting the oil. The

Company should abide the rules and regulations of the government in transporting

products.

J. QUALITY CONTROL

Good quality products are result of usage of good raw materials and proper
monitoring of the processes involved in the production. Parameters should be
established and controlled to also attain a desirable quality of the product. Variables can
be easily controlled through efficient instrumentation and laboratory analysis is needed
to verify the quality of the product.

GENERAL

The primera class of Manila Elemi resin will be used in the process.

There are several tests to check the quality of the elemi oil produced by the
process. The company will use Gas Chromatography- Mass Spectrometry and
Determination of Acid Value.

GC-MS

Gas chromatography –Mass Spectrometry is actually two techniques that are

combined to form a single method of analyzing mixtures of chemicals. Gas
chromatography separates the components of a mixture and mass spectroscopy
characterizes each of the components individually. By combining the two techniques, an
analytical chemist can both qualitatively and quantitatively evaluate a solution
containing a number of chemicals. In this equipment the oil can be characterize into it’s
components.

46
ACID VALUE

Acid value is a measure of the amount of carboxylic acid groups in a chemical

compound, such as a fatty acid, or in a mixture of compounds.

DETERMINING ACID VALUE

Weigh 0.2-0.5gms of sample in 250ml conical flask then add 50ml of neutralized ethyl
alcohol. Now heat the mixture on a water bath to dissolve the sample. Titrate the
solution against 0.1N KOH using phenolphthalein indicator. The end point will be from
colourless to pink.

CALCULATIONS:
Acid value = A x N x 56.1
W

Where: A – ml of 0.1N KOH consumed for sample.

N – Normality of KOH
W – Weight in gms of the sample.

The quality of the oil produced will be evaluated by comparing the results of the
tests to the standard properties of manila elemi oil.

47
 CHAPTER IV

FINANCIAL STUDY

Analysis of the factors concerning the economic success of engineering projects

plays a vital factor on the construction of a processing plant. Evaluation of this

parameters must done by the process engineers before starting the development of a

process, and before pursuing the design of a process and plant. Based on that

evaluation determines whether to undertake an investment or not.

A. Total Investment Cost Estimation

Investment of capital is the prime mover to put up an industrial plant to procure

and install the necessaryequipments and machineries. Another important to obtain is

land and service facilities for the plant to be erected with all the piping, controls and

services. Another large amount of money must be supplied for the payment of expenses

for the operation of the plant.

The fixed – capital investment refers to the capital needed to fund for the

necessary manufacturing and plant facilities while the working capital is needed for the

operation of the plant. The sum of these two is known as the total capital investment.

The fixed – capital portion is composed of manufacturing fixed-capital investment and

nonmanufacturing fixed – capital investment.

48
 Fixed – Capital Investment

Fixed – capital for manufacturing refers to the capital needed for the installed

process equipment with all the auxiliaries that are needed for the complete plant

operation. Piping, instruments, insulation, foundation and site preparation are some of

the examples of costs included in the manufacturing fixed – capital investment.

DIRECT COST
Description Cost

Land 77,085,266.50

Land Improvement 10,000,000.00

Buildings 5,970,328.00

Office equipment and Supplies 3,048,700.00

Plant Supplies 4,491,990.00

Auxilliary Facilities (Utilities, Shipping, etc.) 11,317,727.89

Installation Cost 3,032,462.50

Pipes and Fittings 3,000,000.00

Electrical 9,317,727.89

Service Vehicles 6,460,000.00

Process Equipment 9,129,850.00

Instrumentation and Allowances 1,212,985.00

Total Direct Costs 144,067,037.78

INDIRECT COST

Contingencies 10,000,000.00

Engineering and Supervision 7,000,000.00

49
Construction Expense 10,000,000.00

Contract Services 1,500,000.00

Business Permit 100,000.00

Total Indirect Costs 28,600,000.00

FIXED CAPITAL INVESTMENT

Fixed Capital Investment 172,667,037.78

INITIAL WORKING CAPITAL

Initial Working Capital 18,993,374.16

GRAND TOTAL INVESTMENT COST

Grand Total Investment Cost 191,660,411.94

Nonmanufacturing fixed – capital investment is the fixed capital required for the

construction overhead and for all plant components that are not directly related to the

process operation. This includes the land, processing and administrative buildings,

warehouses, laboratories, transportation, utility and waste-disposal facilities, shops, and

other permanents parts of the plant. The construction overhead cost consists of field-

office and supervision expenses, home-office expenses, engineering expenses,

miscellaneous construction cost, contractor’s fees, and contingencies.

Working Capital

The total amount money invested in (1) raw materials and supplies carried in

stock, (2) finished products in stock and semifinished products in the process of being

manufactured, (3) accounts receivable, (4) cash kept on hand for monthly payment of

50
operating expenses including salaries and raw material purchases, (5) accounts

payable, and (6) taxes payable comprise the working capital.

 Purchased Equipment

One of the basis of several predesign methods for estimating capital investment

is the cost of purchased equipment. It can be divided conveniently into processing

equipment, raw materials handling and storage equipment, and finished-products

handling and storage equipment.

In this study, the machineries and equipment required for producing Manila elemi

essential oils are detailed in the table below.

Equipment
Equipment Quantity
Water Tank 2
Boiler 2
Retort 4
Heat Exchanger 4
Gravity Separator 4
Cooling Tower 1
Water Purifying 1
Unit

 Purchased – Equipment Installation

The purchased-equipment istallation costs entails the costs for labor,

foundations, supports, platforms, construction expenses, and other factors directly

51
related to the erection of purchased equipment. It is estimated to be 6% of the total fixed

capital investment.

 Instrumentation and Controls

The major factors for instrumentation consists of the instrument cost, installation-

labor costs, and expenses for auxilliary equipment and materials. The total

instrument cost depends on the amount of purchased cost for all the equipment. It

may amount to 10% of the purchased equipment cost.

 Piping

The piping cost encompasses the pipes, fittings, valves, labor and other items

involved in piping.

 Electrical installations

The electrical installation cost includes the materials for power and lighting,

installation labor and building service lightning under the heading of building-and-

services costs.

 Buildings

The expenses for labor, materials, and supplies involved in the construction of

building comprises the cost for buildings.

52
  Auxiliary Facilities

The service facilities involves the utilities for supplying power, water, compressed

air and fuel.

Miscellaneous service items such as first aid, cafeteria equipment and fire protection

facilities are included under the service facilities cost.

 Land

The land cost depends on the cost of surveys and the cost factor per acre

depending on the location of the property.

 Construction Expense

Construction or field expense includes temporary construction and operation,

construction payroll, taxes and insurance, and other construction head.

 Engineering and Supervision

The cost for engineering and supervision involves the drafting, design and

engineering, accounting, reproductions, communications and home office expense.

 Contingencies

Contingencies are regarded as the “emergency fund” of an industrial plant. It is

an estimate of amount allocated for unpredictable events such as storms, price

changes, design changes, and other unforeseen expenses.

53
 B. Total Product Cost Estimation

Total product cost is subdivided into two categories – the manufacturing cost and

the general expenses.

Manufacturing Cost

Manufacturing cost includes the amount used during the production or

manufacturing operation of an industrial plant. Its three important factors were direct

production cost, fixed charges and plant overhead cost.

Direct Production Cost

The cost for the direct production is related to the cost used during the

manufacturing operations.

Raw Materials Cost

The raw materials cost is composed of the expenses incurred for the raw

materials to be used in the production.

DIRECT PRODUCTION COST

Description Cost
Raw Materials 10,800,000.00
Operating Labor 5,160,000.00
Operating Supplies 500,000.00
Utilities 9,317,727.89
Packaging Materials 48,326,000.00
Total Direct Cost 74,103,727.89

PLANT OVERHEAD
Indirect Labor 2,448,000.00

54
Maintenance and Repair (2%FCI) 3,453,340.76
Office Supplies 100,000.00
Laboratory Expense (Lump Sum) 200,000.00
Transportation Expense 200,000.00
Depreciation 1,867,510.43
Taxes (0.05% of FCI) 86,333.52
Contract Services 1,500,000.00
Representation (Lump Sum) 200,000.00
Miscellaneous (Lump Sum) 200,000.00
Total Plant Overhead Cost 10,255,184.70

GENERAL EXPENSES
Administrative Expenses 7,608,000.00
Miscellaneous (Lump Sum) 100,000.00
Total General Expense 7,708,000.00

TOTAL ANNUAL PRODUCT COST

Total Annual Product Cost 92,066,912.59

SELLING PRODUCT COST

Manila Elemi Oil per liter 12,304.60
Hydrosol per liter 594.00

UNIT PRODUCT COST

Manila Elemi Oil per liter 1,835.47
Hydrosol per liter 9.11

Total Operating Labor Cost

The total operating labor cost is subdivided into two: the direct and indirect

operating labor cost. The direct operating labor cost refers to the employess

directly involved in the production process while the indirect constitutes the

administrative personnel.

55
Utilities Cost

The utility cost refers to the expenses for steam, electricity consumption

and others.

Packaging Cost

Includes packaging for manila elemi oil, hydrosol and resinoid products.

Plant Overhead Costs

The plant overhead costs involves the expenses for the industrial plant

services for it to function properly.

Depreciation

One of the determinants for the computation for financial evaluation is the

depreciation. In this proposed plant, linear depreciation was used to compute the

depreciation of the equipments, materials and other fixtures.

General Expenses

Administrative Cost

Administrative expenses includes the salary of the administrative

personnels, along with the office supplies and equipment, and other overhead

items related with administrative activities.

56
Miscellaneous cost

Miscellaneous costs are extra money allotted for whatever unforeseen

expenses. The amount is expressed as a lump estimate.

PROJECTED SALES

The current Inflation rate is equal to 4.5 %.

For Manila Elemi Oil

YEAR UNIT PRICE QUANTITY GROSS SALES
2015 12,304.60 47,850 588,775,110.00
2016 12,858.31 47,850 615,269,989.95
2017 13,436.93 47,850 642,957,139.50
2018 14,041.59 47,850 671,890,210.78
2019 14,673.46 47,850 702,125,270.26
2020 15,333.77 47,850 733,720,907.42
2021 16,023.79 47,850 766,738,348.26
2022 16,744.86 47,850 801,241,573.93
2023 17,498.38 47,850 837,297,444.75
2024 18,285.81 47,850 874,975,829.77

For Hydrosol

YEAR UNIT PRICE QUANTITY GROSS SALES

2015 594.00 465,400.61 276,447,962.34
2016 620.73 465,400.61 288,888,120.65
2017 648.66 465,400.61 301,888,086.07
2018 677.85 465,400.61 315,473,049.95
2019 708.36 465,400.61 329,669,337.20
2020 740.23 465,400.61 344,504,457.37
2021 773.54 465,400.61 360,007,157.95
2022 808.35 465,400.61 376,207,480.06

57
 2023 844.73 465,400.61 393,136,816.66
2024 882.74 465,400.61 410,827,973.41

Summary of Sales
Summary of Sales
Year Essential Oil Hydrosol Total Sales

2015 588,775,110.00 276,447,962.34 865,223,072.34

2016 615,269,989.95 288,888,120.65 904,158,110.60

2017 642,957,139.50 301,888,086.07 944,845,225.57

2018 671,890,210.78 315,473,049.95 987,363,260.72

2019 702,125,270.26 329,669,337.20 1,031,794,607.46

2020 733,720,907.42 344,504,457.37 1,078,225,364.79

2021 766,738,348.26 360,007,157.95 1,126,745,506.21

2022 801,241,573.93 376,207,480.06 1,177,449,053.99

2023 837,297,444.75 393,136,816.66 1,230,434,261.42

2024 874,975,829.77 410,827,973.41 1,285,803,803.18

Projected Income Statement

RATE OF RETURN ON INVESTMENT

The rate of return on investment (ROI) is one of the profitability indicators

expressed on an annual percentage basis. It is calculated by dividing the yearly

net profit by the capital investment and this fraction is multiplied to 100.

( ) ( )

58
 ( )

Return of Investment
Year ROI Net Income Payback Period
2015 403.314 772,992,381.25 0.25
2016 421.463 807,777,038.40 0.24
2017 440.428 844,127,005.13 0.23
2018 460.248 882,112,720.36 0.22
2019 480.959 921,807,792.78 0.21
2020 502.602 963,289,143.45 0.20
2021 525.219 1,006,637,154.91 0.19
2022 548.854 1,051,935,826.88 0.18
2023 573.552 1,099,272,939.09 0.17
2024 599.362 1,148,740,221.35 0.17

PAYOUT PERIOD

Payout or payback period is defined as the minimum length of time necessary to

recover the capital investment. Investment cost and income statement projections are

used in estimating the project payback period. Thus,

59
 CHAPTER V

Conclusions and Recommendations

This pili resin extraction plant aims to be the first essential oil plant in Bicol which

dramatically change the lives of Bicolanos. Based on the analysis, the rate of return is

403.314%. The following are the assumptions made in the study:

1. A constant 30 tons of Manila elemi is demanded annually which translates to

3.324 tons of Manila elemi oil.

2. All the products produced will be sold locally and internationally. Therefore there

is a constant sale of the product.

3. All of the world’s demand in Manila elemi oil will be provided by the plant (i.e.

there is no competition)

The researchers of the study is encouraging to consider other factors for the

development of the plant.

60
 Bibliography

A. Books

Geankoplis, C. J. (2003). Transportation Processes and Separation Process

Principles. 4th Ed.

B. Research Studies

Villanueva, M., Torres, R. (1993). The Composition of Manila Elemi Oil.

C. Other Publications

Bureau of Agricultural Statistics (BAS). (1996). Annual Report. Diliman, Quezon

City. 168 pp.

Pili Sap Production, Municipality of Gubat. July 1, 2011.

Bureau of Agricultural Statistics (BAS). (1996). Annual Report. Diliman, Quezon

City. 168 pp.

61
D. Internet Sources

http://www.herbcompanion.com/Body-Care/AromaticWaters.aspx#ixzz1o78Ir398

http://www.mountainroseherbs.com/learn/whatishydrosol.html

http://www.fromnaturewithlove.com/library/storagehydrosols.asp

http://www.quinessence.com/essential_oil_storage_methods.htm

62