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Assumptions for Economic Assessment
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10.2. Assumptions for Economic Assessment
While quality cost data was available for the Refinery, little data was available for the wastewater treatment facilities. Thus, a number of estimates were prepared based on data from the Refinery, the Belarussian National Economics Expert and consultant judgment.
The focus of the analysis is on wastewater treatment only. No treatment or re-use technologies being implemented at the Refinery were evaluated. In developing the base case for the refinery, planned investments identified in Section 4 were included in assessing the financial position of the MRP. For analytical purposes, changes resulting from the implementation of mitigation measures are evaluated against the Refinery’s estimated net revenue over the designated timeframe (2005 to 2014). No treatment efficiencies or potential load reductions were identified, and thus, had to be imputed.
The following assumptions have been made to establish the boundaries for the analysis.
- Analysis of contaminant reductions will focus on the two outfalls: Outfall #1 - Manifold for the Refinery, 26,000 m3/day; Outfall #2 – Discharges of the towns of Mozyr and Kalinkovichy, 32,000 m3/day.
- Water intake is equal to water discharges, except where noted.
- There would be no population growth or increased industrial usage of the identified timeframe.
Refinery Operating Costs and Revenues – as identified by Refinery staff for 2000 to Aug 2003. 2002 data was used as the benchmark for projections.
80% of revenues from export markets
Growth in export revenues will be four times the rate for local markets (1.32% per annum versus 0.33%)
Tax rate is 20%.
Production Costs – Labour/Materials – assumed to grow by 1.5% per annum.
Discharge fees assumed to be 2.0% of “Other Material Expenditures.”
“Full Cost of Product” assumed to be 95% of Production Cost.
Cost of Sales, assumed to include marketing associated administration, legal and risk protection costs, assigned at 110% of production cost.
Equipment depreciation is 18% of a three-year average of capital investment.
Employment growth is 1% per annum.
- All costs identified are assumed to be 2001 constant dollars (including 2002 revenue and cost data identified above).
- All costs are presented in US dollars.
- Water usage is independent of Plant revenues. Only discharge fees are linked to water usage.
- Any new process that reduces effluent will result in a proportional decline in contamination (in absolute quantity of contamination – and assumed concentrations will remain the same). It is anticipated that the MRP will have a ready secondary market for removed contaminants and sludge, and revenues received will cover any incremental disposal costs. Else, this will be covered under operating expenses of the Refinery as a whole.
- Depreciation of wastewater treatment assets are included in depreciation expenses for the refinery as a whole.
- Residential water is 72% of the intake for treatment. Thus, industrial water constitutes 28% of the total volume of water requiring treatment.
- Payments charged for water treatment services $0.048 per m3.
- Payments received for water treatment services $0.033 per m3.
- Average treatment cost for industrial water – $0.36 per m3.
- Average treatment cost for industrial water – $0.09 per m3.
- FOR ASSESSMENT PURPOSES ONLY – The following were assumed as treatment costs:
Materials used in wastewater treatment – $0.003 per m3.
Energy used in wastewater treatment – $0.059 per m3.
Labour costs for wastewater treatment – $0.009 per m3.
Maintenance costs for wastewater treatment – $0.024 per m3.
- No wastewater treatment related programs/initiatives would be implemented under Status Quo.
- The timeframe for the analysis of investments is 2005 to 2014. It is assumed that any new investments can be made starting in 2004.
- The discount rate used for Net Present Value (to assess values over ten year timeframe into a single 2005 value) is 10%.
- The refinery will continue to absorb the net cost of running the wastewater treatment plant. Any subsidies received to compensate any operating losses have not been considered.
- Effluent loadings were developed from actual monitoring data, with residual parameters obtained from Phase 1 estimates presented in Chapter 10. Only parameters where “Coefficient of Conversion in Monopollutant” were available were analyzed.
- No consideration for ambient parameter levels has been considered. Thus, the value of the damages of the total amount of the contaminant has been considered.
- Adjusted value per tonne of monopollutant (i.e. economic measure of damages resulting from wastewater discharges) is $481. The benchmark value for monopollutant in Belarus is $275, which is adjusted by a factor of 1.75 for the Dnieper River.
- The opportunity cost associated with environmental damages is assumed, based on professional judgment by country Economic Experts, to be 10% of the total value of environmental damages.
- No cost contingencies or incremental insurance has been considered.
- No reductions in CO2 considered from any reductions in energy use.
- No water conservation programs have been considered in this analysis.
- Projects are considered independent and the net impact is not necessarily cumulative (and thus net impact needs to be evaluated with potential benefits identified on the combined initiative).
