On-Site Nitrogen Generation for Smaller Volume Nitrogen Users

By David Butler and Walter Dwarnick

Demand for liquid nitrogen has outpaced the growth in supply in almost all parts of the country. Rising costs for electricity, diesel fuel and distribution equipment have led to significant price increases to users of bulk liquid products, and these trends are expected to continue.

Investment in bulk liquid plants fell to almost zero for several years beginning in the late 1990s. The resulting disappearance of reserve capacity and the decrease in the ability of suppliers to load shift between production plants during planned and unplanned outages have contributed to supply shortages and more frequent customer run outs. Both end-users and independent distributors seeking relief by switching to another supplier have found that consolidation of major liquid-producing companies has resulted in fewer alternatives to their existing supplier.

Given all of these factors, end-users of nitrogen have come to regard bulk liquid nitrogen as a less reliable, more expensive and more volatile-priced nitrogen supply mode than was the case several years ago. As a result, users have become more willing to consider on-site nitrogen production options.

In-Plant Nitrogen Generation Costs
In-plant nitrogen generators can produce nitrogen at lower delivered cost than high-volume liquid plants because on-site production avoids a number of costs incurred when nitrogen is liquefied for transportation, then hauled to a distant site for vaporization.

• No power is required for nitrogen liquefaction. The energy demand for liquefaction more than doubles the energy footprint of bulk liquid compared to on-site-produced gaseous nitrogen.
• No costs incurred for maintaining, amortizing, earning a profit on the capital investment in a liquefaction facility, its bulk liquid storage tanks and its trailer loading equipment.
• No costs need to be recouped for amortizing and maintaining delivery trailers and highway tractors, hiring drivers and purchasing diesel fuel.
• No product is lost by transferring liquid nitrogen into a trailer at the production plant and then re-transferring it into the customer station storage tank.

Users requiring high-purity nitrogen (e.g. 99.999% pure) have two basic choices: Buy bulk liquid or, if their demand is high enough, have their nitrogen requirements produced in a cryogenic nitrogen unit located at their site.

On-site production of high-purity cryogenic nitrogen has always been the most attractive option for relatively high volume users. It is now becoming increasingly attractive for many lower volume users as well. Users which have requirements averaging 15,000 to 20,000 scfh or higher may find that on-site nitrogen generation costs less than liquid.

High-purity cryogenic nitrogen may be produced in two types of on-site production units: LIN-assist plants and conventional cryogenic plants. LIN-assist plants vaporize LIN within the gaseous nitrogen production unit to provide refrigeration for the air separation process. The vaporized LIN becomes a portion of the product supplied to the customer. LIN-assist plants have most frequently been applied at the lower end of the cryogenic plant application range where savings in capital cost outweigh the cost of continuously purchasing a portion of the final product as LIN.

Conventional cryogenic plants use an expander to provide the refrigeration required to liquefy a portion of the air entering the unit and then separate and purify the nitrogen by cryogenic distillation. As the cost of LIN increases due to higher energy costs, expander-based nitrogen generator systems are becoming increasingly attractive for smaller volume users of high-purity nitrogen.

Users which do not need “liquid purity” nitrogen, and which consume nitrogen at relatively low rates, should also consider non-cryogenic membrane or nitrogen PSA supply systems. The primary components of non-cryogenic nitrogen generation systems are selected to produce product at a specific combination of delivery rate and purity. Most applications involve producing nitrogen with a purity between 95% and 99.9%. The lower the acceptable purity, the less power will be required per unit of production, and the smaller the size and cost of the nitrogen generation unit as well.

Ownership and Operations Options
Bulk liquid users interested in switching to on-site production have two basic options: They can purchase and operate a production unit, or they can enter into a supply agreement with a company that will install the plant, operate it, maintain it and supply the product in a utility-like manner under long-term contract.

Options for Plant Buyers: Users which choose to own a nitrogen production unit can minimize the total production cost by integrating operation and maintenance of the unit into their core facility. Alternatively, they can purchase operation and maintenance services on a contract basis.

Most users choose to purchase a nitrogen production unit turnkey, with all required design, fabrication, construction, commissioning and start-up services. Alternatively, buyers may do some of the installation, with the seller providing assistance as needed during plant erection, mechanical completion, checkout and startup. Ongoing support options are available to support the buyer’s operations and maintenance team with additional expertise and on-site assistance as required.

Gas Supply Options: Long-term “sale of gas” supply arrangements meet the needs of companies that do not wish to own a plant, or prefer to focus their management, operations, maintenance and capital resources on the technology and operations which are unique to their core industry. Under supply-of-gas contracts, the nitrogen supplier installs, owns and operates the nitrogen production unit, delivering nitrogen gas as a utility.

Supply-of-gas arrangements typically have an initial supply period of seven to fifteen years. Customers usually realize immediate cost savings of 20-50 percent versus consumption of vaporized liquid nitrogen; and those savings will increase over time.

In any in-plant supply arrangement, whether the nitrogen user purchases and operates the plant or chooses another company to own the plant and supply nitrogen under long-term contract, a benefit is that a significant portion of the product cost will be fixed. Increases in the cost of product will be limited to reflecting the impact of changes in the cost for operations, maintenance, power and other expenses. In a sale-of-gas arrangement, periodic adjustments are usually handled through application of representative indices to portions of the initial pricing formula.

Liquid Distributor Options
Distributors serve many customers with growing businesses. Some customers grow to the point where on-site gas production should be more economical than continuing to use bulk liquid to meet their entire demand. When this occurs, distributors have several options that permit them to retain their customer’s goodwill and their back-up liquid supply business:

• They can assist their customer in transitioning to a customer-owned and operated on-site gas supply system.
• They can choose to be the on-site gas supplier to their long-term customer, purchasing, operating and maintaining an on-site nitrogen production system, with assistance as necessary, from the equipment supplier using remote monitoring and control systems.
• They can partner with the equipment supplier to share ownership plus operations and maintenance responsibilities.
• They can simply provide back-up LIN and maintenance of the back-up liquid storage and vaporization system, whether customer-owned or gas supplier owned.

Product Costs for Cryogenic Nitrogen Production
This comparison shows the typical magnitude of cost savings which can be achieved by choosing an in-plant nitrogen generation unit over using only vaporized bulk liquid nitrogen. It was drawn for a power rate of six cents per KWh and assumes that the power rate at both the on-site plant location and the bulk liquid plant is the same.

Numerous factors may alter the actual ratio of product costs at a given site. These include the distinct possibility that power costs at the usage site and the LIN production site are not equal. Transportation costs may also be higher or lower than “typical,” depending upon the distance between the user plant and the bulk liquid plant, and other factors.

The production rate range shown below can be divided into two sub-ranges:

Higher Production Volumes: Above about 60,000 scfh, on-site cryogenic production is clearly the preferred supply approach, offering significantly better economics than bulk liquid nitrogen. Nitrogen production cost is typically about 25 to 50 percent of the cost of delivered LIN. Capital and energy costs contribute similar amounts to the total unit cost of product.

Smaller Production Volumes: Smaller plants have higher capital costs for each unit of production versus larger plants. Below about 50,000 scfh, capital-related costs are more than half of the total product cost, and rise rapidly as a percentage as plant size decreases. The total cost of on-site nitrogen is typically 50 to 70 percent of the cost of LIN. The cost of power is often approximately one-third of the total cost of the nitrogen product.

Due to the smaller energy footprint for on-site nitrogen production, it becomes increasingly competitive against LIN when power costs increase at both the gas user site and the liquid production site.

A New Generation of Small Nitrogen Plants
Recognizing the strong impact of total installed cost on the cost-effectiveness of smaller capacity cryogenic nitrogen production units, new-generation cryogenic nitrogen production units are being developed with highly automated process monitoring and control systems, and a minimum number of shop-fabricated plant modules to minimize the time and expense associated with field installation. Whether purchased and operated by current LIN users, LIN distributors, nitrogen plant builders and operators, or major industrial gas companies, smaller high purity cryogenic nitrogen plants will become an increasingly important part of the nitrogen supply picture for smaller volume end-users.