Equipment Sizing and Economic Analysis of CHP Natural Gas Liquid Recovery Systems

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    Equipment Sizing and Economic

    Analysis of CHP Natural Gas

    Liquid Recovery SystemsChad Olsen , Theodore A. Kozman & Dr. Jim Lee

    a

    aEngineering Management Program Department

    of Mechanical Engineering, University of Louisiana

    at Lafayette, P.O. Box 44170, Room 244 CLR Hall,

    Lafayette, LA, 70504, USA Phone: (337)482-5354

    Fax: (337)482-5354 E-mail:

    Published online: 07 Jul 2009.

    To cite this article: Chad Olsen , Theodore A. Kozman & Dr. Jim Lee (2009)

    Equipment Sizing and Economic Analysis of CHP Natural Gas Liquid Recovery Systems,

    Energy Engineering, 106:1, 7-23

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    Equipment Sizing andEconomic Analysis of CHP

    Natural Gas Liquid Recovery SystemsChad Olsen, Theodore A. Kozman and Jim Lee

    ABSTRACT

    The objective of this research is to develop a methodology for analyz-ing combined heat and power (CHP) natural gas liquid (NGL) recoverysystems. The methodology developed around the central ideas of productrecovery, possible recovery levels, and the flexibility within the process,

    which led to the design of the CHP-NGL recovery system with equip-ment sizing and economic analysis methods. Requirements for sizing re-frigeration units, heat exchangers, and pumps are discussed. Using costsassociated with the project and relevant data of the system, the amountof NGL recovered, heating value, payback period, net present value ofproject, and the internal rate of return can be calculated to determine theeconomic feasibility of the project.

    INTRODUCTION

    The oil and gas industry has been around for nearly a century and ahalf, producing the life blood of the modern world economy. The naturalgas portion of this industry, however, is just beginning to show high prog-ress in capitalizing and marketing this resource. In the past, natural gashas been an unwanted byproduct of crude oil production and has beenvented or flared. As technology progresses, the ability to find, capture,

    process, transport, and utilize this invisible resource to its full potentialcan be accomplished effectively and economically. Major ongoing prob-lems found in the natural gas industry are the ability to safely process,store, and transport natural gas while maximizing throughput [1-6].

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    The hydrocarbon dew point (HCDP) of natural gas has direct ef-

    fects on the processing, storage, and transportation of natural gas throughtemperature and pressure [7]. Dew point is defined as the temperature atwhich condensation begins when natural gas is cooled at a constant pres-sure. As natural gas cools through processing and transportation, naturalgas liquid (NGL) such as a combination of condensed propane, butane,and heavier hydrocarbons (C4+) with different dew point temperatures ata given pressure will condense or evaporate back and forth from vaporsto liquids based on pressure changes [8].

    The HCDP of natural gas is dictated by the transporter of the pro-

    cessed natural gas, which is to be less than 20F at pipeline pressures [9].The problem is reaching this dew point and ensuring that the processed,or residual, natural gas dew point meets or exceeds this value. Keepingthe natural gas in transportation pipelines within the temperature rangeof 40F to 120F is one of the safeguards against what is known as slug-ging [10]. Slugs form when the condensation of NGLs builds up in lowpoints of the transportation pipelines, eventually causing a blockage. Theslug is held in place by gravity until the upstream pressure is great enough

    to temporarily push through the liquid barrier. Until the slug is removedfrom the system, the downstream pressure is reduced dramatically andcan cause numerous other problems and safety concerns both upstreamand downstream of the slug.

    The problems associated with HCDP are most economically and en-vironmentally mitigated by the implementation of equipment between thewellhead and the entrance to the transportation pipeline [11]. Solutions toprevent the condensation of NGLs in the transportation pipeline fall into

    three general categories: refrigeration, chemical, and physical methods[12-13]. The constant pressure from corporate managers and stockholdersto cut costs and increase production frequently leaves HCDP projects forthe future waiting until technology catches up.

    Meanwhile, the problems associated with NGLs cannot be toleratedby the end user, who expects a high quality product that performs to spec-ification and doesnt cause any safety concerns. Many industrial facilitiesrequire a dry natural gas, free of NGLs for the production process. Havinga wet natural gas, with moderate to high levels of NGLs, enter the systemcould cause both product and operational dangers. The same is true forresidential customers who have natural gas furnaces in their homes. If awet gas were to enter the burners, there is the possibility that the flamecould be smothered or the wet gas could change the flame activity, caus-

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    ing a potentially poisonous or explosive situation.

    These NGLs have been used as a profi

    t stream throughout the de-velopment of natural gas processing and are tied to other industries, suchas automotive and chemical [14]. The NGL financial markets fluctuatejust as any other market, causing the recovery of these liquids to move inand out of economic profitability. An instance of this was when the leadedautomobile gas market had the regulations changed by the U. S. federalgovernment for pollution reasons. This caused the recovery of leaded au-tomobile gas to become environmentally and financially unfriendly. Thechemical manufacturing industry was able to pick up the slack in the re-

    covered liquids demand shortly thereafter due to the large feed stocksavailable and advancing technology which financed their recovery. Evenwith the new demand from the chemical and more currently the pharma-ceutical industry, venting and flaring of natural gas and NGL streams isstill more favorable than capturing and selling natural gases and liquids.This is due, in large part, to the mentality that if you cannot see it, it is nota problem. With current environmental concerns, venting and flaring arebeing slowly eliminated throughout the oil and gas industry.

    The objective of this research is to develop a methodology for ana-lyzing combined heat and power (CHP) natural gas liquid (NGL) recov-ery systems. We will focus on combining the requirements of productionthroughput, reducing the physical footprint, and reducing the environ-mental footprint of the HCDP system through a CHP system. The analy-sis involves understanding how components are sized, how they interact,and what the economic feasibility of implementation is for this project. Itwill help us realize greater efficiencies of equipment while maintaining a

    small physical and environmental footprint at a cost competitive advan-tage. Utilizing a CHP system to combine compression production withcooling requirements to meet multiple processing objectives will also beexplored. The system diagram of a typical compressor engine utilizingrefrigeration for NGL recovery is shown in Figure 1.

    EQUIPMENT SIZING

    Sizing equipment for a project should be done with full attention tothe details of the system. For this type of project, there are three major com-ponents that need to be sized based on information of the engine and theprocess natural gas: the chilling unit, the heat exchangers, and the pumps.

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    The most significant sizing is that of the chilling unit needed to create thedesired cold space used to cool the incoming natural gas. This is wherethe sizing will need to start, followed by an analysis of heat exchangersand finally the pumps. The heat exchanger and pump analysis should bedone in parallel to optimize system performance. As flow rates change inthe heat exchangers, the pump size could change, and vice versa. In sizingequipment, simplified equations will be presented, where appropriate, asa guide for the project manager to start the sizing process.

    Chiller Sizing

    The chiller unit of a CHP system will determine the production rateof NGLs, which will be the driving force for all other components relatedto the NGL recovery. This component is also the major economic consider-ation in the implementation of this system. In turn, the chiller unit is basedupon the compressor engine and natural gas stream properties. However,since the compressor and natural gas streams are already known, assum-ing the natural gas composition remains constant, these conditions willdictate the chiller system. Understanding how to size a chiller system istherefore very significant to the implementation of this system.

    The main pieces of information needed to accurately size the chillerunit for the proposed system are the physical properties of the natural gas,

    Figure 1. System Diagram

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    the quantity of gas being cooled, and to what degree the natural gas needs

    to be cooled. With this information it is possible to verify if the compres-sor can supply the amount of waste heat needed to run the chiller unit.This will then drive the sizes of the heat exchangers and the pumps of thesystem. Also, knowing what the cooling rate will be for the gas will deter-mine how much NGL can be recovered.

    Depending on the gas throughput of the system, it may be possibleto utilize an ammonia chiller. The process flow of the proposed system isdesigned with gravity as the driving force, thereby reducing the amountof electricity needed to run the chiller unit.

    Heat Exchanger Sizing

    A number of heat exchangers will be needed to implement this NGLrecovery system. The main component of the system is the engine exhaustheat exchanger, with much smaller heat exchangers used for heat recoveryfrom the lube oil and water jacket of the compressor. Depending on thedesign and capacities, the lube oil and water jacket exchangers could besimplified into a single larger exchanger to minimize costs.

    The prime factors for sizing come from the exhaust natural gas char-acteristics and the requirements for running the chiller unit. Sizing heatexchangers involving air, the available heat load (Q) that can be taken outof the flow, is important in order not to oversize the exchanger:

    Q = CFMAirT 1.13 (1)

    Where Q is the Btu/minute load available in the air, CFMAir is cubic feet

    per minute of air,

    T is the change in temperature of the air before andafter the heat exchanger, and 1.13 is a constant commonly used to ensureenough driving force in the working fluid to function. The Btu load isknown based on the chiller sizing, and the CFMAir is assumed to be con-stant based on the engine performance. Finding Twill be a check to see ifthe engine exhaust can supply the heat to drive the heat exchanger.

    On the liquid side of the heat exchange using water as the workingfluid, the equation is essentially the same. The heat load that needs to beabsorbed is known because both sides must transfer the same amount ofheat. Using the following equation and setting either the Btu load or the Tequal from equation (1), it is possible to find the flow rate of the pump.

    Q = GPMWaterT 500 (2)

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    Where GPMWater is the flow rate measured by gallons per minute of water,

    and 500 is the constant based on manufacturers sizing equations. Thistype of heat exchanger sizing will be utilized multiple times in the coolingsystem, the lube oil, and water jacket heat exchangers. The main ideas fora project manager to keep in mind are how much fluid needs to be circu-lated and how much heat needs to be transferred.

    Pump Sizing

    Pump sizing will be done in tandem with heat exchanger sizing andis dependent on the chiller sizing used to obtain an accurately sized pump.

    The main considerations in sizing a pump are the flow rate, usually in gal-lons per minute (GPM), and how much upstream height is associated witheach pump. In the proposed CHP system there will be two pumps in thesystem, one to circulate the cooling fluid and one to remove the recoveredNGLs.

    The NGL recovery pump will depend on the rate at which NGLs areproduced, which is a function of the chiller sizing. The coolant circulationpump will be based on the heat exchanger fluid flow rates as discussed in

    the previous section.

    ECONOMIC ANALYSIS

    In determining the feasibility of implementing the system, the eco-nomic benefits and cost need to be understood. The benefits include in-creased natural gas quality, a new profit stream of selling the NGLs, and

    an increase in the effi

    ciency of the fuel being used. The costs associatedwith such a system include increased equipment capital, overhead suchas maintenance, capacity to store the recovered NGLs, and the increasedphysical footprint of the compressor system.

    Each natural gas production facility is different and unique in boththe equipment and arrangement of the equipment at the site. Natural gasmay not always be fully processed before it is compressed or processed toremove a significant portion of the NGLs. The majority of compressors dohave liquid separators on the incoming header to the compressor, but theydo not chill the incoming natural gas to remove NGLs found in the gas,such as the propane and butane. By adding a chiller system and recover-ing all of the NGLs through butane and a significant portion of propane,a drier natural gas will be sent to the compressor, and a larger volume of

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    NGLs can be recovered over and above a typical liquids separator. With

    the reduced amount of liquids reaching the compressor, the depth and fre-quency of maintenance needed will drop, and the amount of natural gasthat can be compressed will increase. This will result in greater through-put of natural gas to the pay line per unit of fuel used to compress thenatural gas.

    In the case of natural-gas-driven compressors, this means that lessfuel gas is pulled off the natural gas stream to power the compressor,thereby allowing more natural gas to be delivered to the pay line. In thecase of diesel-powered engines, greater fuel efficiency would reduce the

    number of times that a tank would need to be filled during a given periodof time, saving on delivery and diesel fuel costs if the diesel is not alreadyproduced on site.

    The major benefit of NGL recovery is the realization of a new profitstream. Instead offlaring, venting, or leaving the NGLs in the natural gaspipeline to form slugs, revenues can be generated from their individualsale. With better payback and moderate production rates, the ability torecover NGLs and to see a profitable return is much greater.

    The economic analysis of implementing this system needs to becarefully looked at to ensure that the project will be profitable. A facili-ties manager will not want to spend a large amount on a project that onlyends up costing more in the long run. However, in some cases this mayhappen due to new and upcoming environmental regulations. A costlysystem may be required to bring a facility into environmental compliance,thereby avoiding a shut-in or hefty fines, and should not be overlooked. Asystem that can be both profitable and environmentally friendly will be a

    positive factor for implementation. The major capital costs for implemen-tation of this project are the heat exchangers, pumps, and the chiller. Theother costs associated with implementation are the costs of piping, labor,and maintenance of the site after commissioning.

    The costs for the chiller, heat exchangers, and pumps are just thedelivered cost of the equipment without considering the integration andinstallation costs. The piping cost includes the raw materials, pipe, fit-tings, and supports that will be needed to pipe in all of the equipment tothe existing system. Labor includes the cost of manpower, lodging for theduration of the project, and equipment needed to complete the job. Trans-portation to and from the job site for men and equipment is also included,along with a miscellaneous category for any extras or contingency thatcome up during installation.

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    The recurring costs of this project are essentially the maintenance of

    the new system. This would include the maintenance needed for the twonew pumps, the chiller unit, and the new heat exchangers. Any cost sav-ings on the compressor are removed due to the new maintenance costs ofthe additional system.

    While the costs can add up very quickly on a project, the benefitsassociated with the project need to be properly analyzed. These benefitswill help keep the payback period short, and help the facility and par-ent company reduce the costs associated with environmental issues. Thereduction in down time is due to reduced NGL build-up in pipelines and

    compressor components. With the reduction of slugs in lines and traps,the system can be kept running longer between slug formation. With thereduction of NGLs in the natural gas going into the pay line, there is lesschance of developing transport pipeline fines.

    The final step in the economic analysis is to take all of this informa-tion and generate a report on the economic feasibility of implementation.Based on a company discount rate, the internal rate of return can be calcu-lated over a planning period for this project. Also calculated is the break-

    even point of the project, or how long until the project becomes profitable.The overall net present value of money is calculated for the same planningperiod along with the annual projected cash flow.

    The most obvious benefit is that there is now a new product to sell,the recovered NGLs. This benefit is variable due to the nature of supplyand demand for the NGLs. As the market changes, the economic feasi-bility of NGL recovery will change. However, with the current prices ofpetroleum products, recovery is a profitable project. Once the system has

    recovered the cost of implementation, it does not matter what the NGLscan be sold for, because all of it will be profit.

    MANAGEMENT TOOL

    All of the ideas discussed above have been used separately in manyindustries for many decades, but this unique combination of theory andpractice allows for the selection of a CHP system for NGL recovery withproduction, economics, and the environment in mind. Knowing whatthe key points are for a go or no go on a project is what makes thedifference between a tool that is cumbersome and a tool that is straight-forward for a manager to use. This knowledge helped to shape the de-

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    velopment of the sizing and economic sections of the HCDP reduction

    management.Sizing of equipment is important to a project, because the tenden-cy to either over- or under-size equipment based on past experience orjudgments can prove to be dangerous and costly. In knowing what theneeded variables of sizing are, a manager can more accurately and easilyassimilate the needed data to make an informed decision. The informa-tion presented in the above sizing section was developed into forms togather and centrally locate information about the process conditions foreasy access and modification. Having this information in a single loca-

    tion and in an organized format makes the system easier to size and theprogress of the project easier to track. Not only does this system keep allinformation organized for the manager, it also indicates which informa-tion is missing. Not having all the needed information can change theentire economic feasibility outlook of a project.

    Organizing the sizing information is a major advantage to a proj-ect manager, but having the economics organized may be of even moreimportance. The project manager is more than a technical person over-

    seeing other technical people. The project manager needs to understandhow a project will impact the facility, operating budget, and company asa whole. With economic analysis of a project done both before and dur-ing a project, it is easy to see where costs and benefits can come up andchange during a project or during a company policy change.

    The tool developed for economic analysis will report the internalrate of return and payback periods as well as cash flow on an annualbasis for six years. It gives an at-a-glance view of what the cost needs

    of the project are and how the project will impact the facilitys or com-panys cash flow. The structure of the analysis tool also allows for easywhat-if analysis as aspects of the project change before or during thecourse of the project. This will help to see what best and worst case sce-narios will yield and what the costs can end up being both in the shortand long run.

    In bringing these three concepts together in a coherent and logi-cal fashion, the creation of a project management tool geared towardsHCDP reduction is efficiently created for the manager. The underlyingframework of ideas and theory come from the project philosophy, the re-quired data comes from the need of sizing equipment correctly, and theeconomic analysis comes from a project managers need to know howthis project will impact other projects and the company as a whole.

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    CASE STUDY

    Once the management tool has been developed, testing the sys-tem is necessary to validate the process using a case study. For pric-ing equipment needed in this project, various vendors were contactedthroughout the country in the appropriate industry. A degree of uncer-tainty in the calculations is introduced due to the variability of naturalgas composition and the use of an average engine and not a specificcase. However, the general size and order of magnitude of the equip-ment and prices are sufficient in performing this case study. Refer to

    data in Tables 1 through 5.

    Table 1. Chiller Sizing Data Sheet

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    To fully understand if this project is worth pursuing, the economicanalysis described in the previous section needs to be performed. Theanalysis includes estimation of one-time costs, the recurring costs, thetangible benefits, and the final analysis using rate of return and paybackperiod. The estimated costs and benefits are presented in Tables 6 and 7.The final step is to take all of this information and generate a report on theeconomic feasibility of implementation. Based on a discount rate specificto a company, the internal rate of return can be calculated. Also calculated

    Table 2. Heat Exchanger Sizing Data Sheet for Engine Exhaust Gas

    Table 3. Heat Exchanger Sizing Data Sheet for Lube Oil and Water Jacket

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    is the break-even point or payback period of the project. The overall netpresent value of money is calculated for the same period along with theannual projected cash flow. This information is summarized in Table 7.

    The results in Table 7 are interesting to look at because such a smallproject is shown to be a big profit stream for the location. The paybackperiod or break-even point of this project, with only the sales of the re-covered NGLs as benefit, is less than half a year. In the first six years it ispossible to produce nearly $5,000,000 in revenues for a typical facility. Theinternal rate of return goes above 80 percent in the second year, which is asignificant advantage over other projects, giving a manager a very strongselling point to the capital expenditures approval group.

    Table 4. Pump Sizing Datat Sheet for NGL Recovery

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    Table 5. Pump Sizing Data Sheet for Circulating Fluid

    CONCLUSION

    Both the practicality and economic feasibility of a CHP based NGLrecovery system has been demonstrated in this research. Knowing whatthe recovery requirements are, knowing how much can be recovered, anddesigning a flexible system, a project analysis methodology was devel-oped. The utilization of only a few extra pieces of equipment coupled witha current system has been shown to be capable of meeting a managersNGL recovery needs.

    The calculations that determine the amount of cooling required andthe amount of recovery possible are of significant value to the manager

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    of a natural gas producing facility. The data show a manager what is be-ing wasted and provide information to understand how to avoid the con-

    tinued costs offlaring and venting. These calculations gave way to thedevelopment of an economic feasibility analysis of the costs and benefitsassociated with the CHP system. While firm numbers were not completelypossible to obtain, the order of magnitude was found for each componentof the costs and benefits. This facilitated the development of the economicfeasibility spreadsheet that demonstrated that this type of project was notonly environmentally friendly, but could also be highly profitable for thefacility.

    This type of system is capable of creating a significant profit streamfor a facility as well as significantly reducing its environmental footprint.With the current level of environmental regulations, and those in the worksnow, this will not be an issue that fades away. These issues will continue toimpact the operating budgets of facilities, and the sooner action is taken,the sooner profit will be realized from the investment.

    During the course of this research, many other topics of interest werediscovered that could be developed further to fine tune and improve the

    system developed in this research. The most signifi

    cant area would be todesign an automated system to more easily track this information in a da-tabase. This database could them be integrated into a companys facilitiesdatabase to give the needed information to easily move ahead with thistype of project on a large scale.

    Table 6. One-time cost Summary of Major Equipment

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    Table7.

    EconomicFeasib

    ilityReport

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    A more in-depth analysis of the impact of cooling the exhaust natu-

    ral gas stream would also be a good area to investigate further. The changein temperature of the exhaust gas will have an effect on the performanceof the engine, but the magnitude and effects of the change are unknown.This analysis could also yield insight on the air permitting needed for themodified compressor engine.

    One final area that would be useful to explore is the use of a seriesthermoelectric generators (TEG) to directly generate electricity on-site forthe electronic controls. Utilizing the waste heat from the water jacket andlube oil coolers to directly generate electricity for the system would be valu-

    able for isolated facilities. The use of TEGs would be another way to in-crease the efficiency of the system with minimal added cost and footprint.

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    [3] Javanmardi, J., Nasrifar, K., Najibi, S., and Moshfeghian, M. (2005), Economic evalu-ation of natural gas hydrate as an alternative for natural gas transportation, AppliedThermal Engineering, v 25, n 11-12, August, 2005, p 1708-1723.

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    [12] Wilkinson, J., Hudson, H., Cuellar K., and Pitman, R. (2002), Next Generation pro-cesses for NGL/LPG recovery. Hydrocarbon Engineering 7, no. 5, p 77-84.

    [13] Jamal, A., Leppin, D., Meyer, H., Abbasian, J., and Lu, Y. (2005), Techno-economicevaluation of an improved and energy efficient Natural Gas Liquid (NGL) removalprocess, 2005 AIChE Spring National Meeting, Conference Proceedings, p 2583.

    [14] Elliot, D., Qualls, W. R., Huang, S., Chen, J. J., Lee, R.J., Yao, J., Zhang, Y. (2005), Benefits

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    of integrating NGL extraction and LNG liquefaction technology, 2005 AIChE SpringNational Meeting, Conference Proceedings, 2005 AIChE Spring National Meeting, Conference

    Proceedings, 2005, p 1943-1958.

    ABOUT THE AUTHORSChad Olsen received his M.S. in engineering management from Uni-

    versity of Louisiana at Lafayette. He worked for the Industrial AssessmentCenter at the University of Louisiana at Lafayette and performed numerousenergy assessments of industrial facilities throughout the region. He also

    worked as a project engineer for COMM Engineering on various projects.

    Theodore A. Kozman is a graduate faculty in the Department ofEngineering and Technology Management and Mechanical Engineer-ing, University of Louisiana Lafayette. He is director of the Departmentof Natural Resources (DOE grant) assigned Louisiana Industries of theFuture Teams (LIFT) for statewide interaction with major industry energyusers to develop roadmaps for the major energy problems, and directorand founder of Louisiana Industrial Assessment Center to assist manu-facturing in reducing energy, waste reduction and productivity improve-ment. He received his Ph.D. in engineering science and mechanics fromthe University of Tennessee.

    Jim Lee is M. Eloi Girard Professor in engineering management atthe University of Louisiana Lafayette and associate director of LouisianaIndustrial Assessment Center. He received his M.S. and Ph.D. degrees inindustrial and management engineering from the University of Iowa. His

    research areas include simulation, statistical analysis, decision supportsystems, and computer-integrated production systems.

    Dr. Jim LeeEngineering Management ProgramDepartment of Mechanical EngineeringP.O. Box 44170, Room 244 CLR HallUniversity of Louisiana at LafayetteLafayette, LA 70504

    USA

    Tel :(337)482-5354Fax:(337)262-5472email: [email protected]

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