8/6/2019 Bharat Oil Company- Case Handout

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Case Handout: Bharat Oil

BHARAT OIL COMPANY

In 1950, the Bharat Oil Company, an independent refinery, had difficulty in the disposal

of sulphuric acid after it had been used to purify kerosene and gasoline. The companywas disposing of used acid by returning it to the manufacturers. The problem becameacute whenever the acid manufacturers were unable to accept return shipments of theimpregnated acid. Other refineries that had experienced the same problem constructedplants to reclaim the acid. A method of purifying the acid had been perfected. Thisraised the question of reclaiming the waste product again.

For the past decade, the company converted (annually) about 500,000 barrels ofMexican crude petroleum into gasoline, kerosene, and various grades of oil and asphalt.

The annual consumption of acid for conversion purposes was 1,800 metric tons (MT).This acid was bought as needed and shipped in tank cars to the plant where it wasstored until used. If gasoline and kerosene were to be marketed as motor and fuel oil, itwas essential to treat them with sulphuric acid in order to remove the impurities. A

definite quantity of acid was pumped into an agitator filled with either gasoline orkerosene and the two liquids were mixed. The quality, strength of the acid and thelength of time required for mixing depended upon the type of oil that was being treated.After the agitation, the acid was allowed to settle and was drawn off into storage tanks.In this condition it was of no value to the company as it could not be sold. Neither couldit be emptied into sewers or dumped into the ocean. In order to dispose of it, the sludgeacid was pumped into tank cars and returned to the acid manufacturers. The totalweight of sludge returned equaled that of the acid used. The freight on the sludge wasprepaid by Bharat Oil Company, and averaged Rs.250 per month. Aside from thisfreight cost, there was no other charge for the disposal of the sludge. At themanufacturers plant it was atomized in a hot coke fire, and the products of combustion(mainly sulphur dioxide) were sent lead chambers to be regenerated into sulphuric acid.

The acid reclaimed by this process was not returned to the Bharat Oil Company as itcould not be used for treating petroleum compounds because of the detrimental effectof the nitrogen it contained.

By returning impure sulphuric acid to the chemical manufacturer, the company avoidedthe necessity of maintaining a conversion unit, which was a public nuisance because ofthe offensive odors that it generated. This method of disposal, however, was notentirely satisfactory to Bharat Oil Company. The acid had value when reclaimed. Moreimportant, the manufacturers of the acid were often unable to accept the old acidimmediately because of limited storage facilities. Moreover, when there was a shortageof old tank cars, it was necessary to use new ones, which had to be re-cleaned atconsiderable expense to Bharat Oil before they could be used again for new acid.

Freight shipments were often slow, and by returning the sludge acid to themanufacturers the company did not control any part of its acid supply, as it could havedone had it operated a reclaiming plant in its refinery. Investigations indicated that nobetter arrangement could be made with any other chemical manufacturer.

When it had last considered the installation of a reclaiming plant, the management ofBharat Oil had decided against it on account of the offensive odors which the process

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8/6/2019 Bharat Oil Company- Case Handout

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Case Handout: Bharat Oil

generated, and because at that time the chemical process did not reconvert the acidinto a form usable in the refinery. However, a new method of purifying acid wasperfected which overcame the problem of obnoxious gases, and left no nitrogen in thereconverted product. The cost of a reclaiming unit of this kind with a capacity ofprocessing 10 tons of sludge per day was Rs.30,000; the unit would have a life of about

20 years; and little floor space was required. The reclaiming operation would require afew unskilled labour, with a minimum of supervision by the companys chemists. Thetotal cost of regenerated acid (exclusive of depreciation charge on the reclaiming unit)was estimated as follows (for varying rates of operation):

Percentage of capacity Costs per ton30% Rs.9.0050% Rs.8.00100% Rs.7.00

The reclaiming unit would yield as usable acid 75% of the sludge so that with one ofthese units, the company could meet 75% of its total requirements.

Sulphuric acid prices paid by Bharat Oil Company are listed in Exhibit 1.

Exhibit 1BHARAT OIL COMPANY

Prices Paid for Sulphuric Acid

Year Monthly Average Price Per MT (FOB)

1935 Rs.15.50

1936 Rs.15.501937 Rs.16.041938 Rs.16.501939 Rs.16.501940 Rs.16.501941 Rs.16.501942 Rs.16.501943 Rs.16.501944 Rs.16.501945 Rs.16.501946 Rs.16.501947 Rs.16.50

1948 Rs.15.531949 Rs.17.00

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