Axens provides an enjoyable prelude to ERTC
Posted by: Billy Thinnes, News editor
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| The panel for the Monday morning session of Axens' refining seminar. |
BERLIN--Axens has carved a nice niche out for itself the last several ERTCs by having a dinner and seminar tagged onto the front end of the official opening of the conference. It is always a pleasure to arrive in the host city of the ERTC conference a couple of days early, get your bearings, adjust the internal clock (especially for those of us traveling from the States) and spend some quality time with the folks from Axens and their invited guests. This year, Axens hosted a Sunday night dinner at the "Cathedral of Electricity." The building was conceived in 1924 and first served as a transformer station. It now is known as the "Umspannwerk Kreuzberg", and exists as a shrine to industrial culture. The concept of fire blends well within a "Cathedral of Electricity," and fire greeted dinner guests as they arrived, and sent patrons gloriously out into the night as a talented troupe of fire dancers performed at the conclusion of the evening to the captivated crowd. In between the bookends of fire, conversation and drinks flowed, and the yellow curry dish warranted particular mention from the foodies in the crowd.
The following day, Axens convened its seminar at the Esplanade Grand Hotel. Topics of conversation included innovation in catalysts, maximizing middle distillate yield out of FCC units and an overview of the current refining market. As an appetizer to the official ERTC meeting, the Axens day-long seminar is a good way to stimulate the appetite for further munching on technical presentations and economic analysis of the HPI.
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| Fire greeted Axens' guests as they entered the "Cathedral of Electricity." | The firedancers showed discipline and creativity as they cavorted to a lively soundtrack. |
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| The yellow curry was a highlight of the dinner buffet. | Conversation during dinner was light-hearted as old friends caught up and new friendships were made. |
New regulatory pressures mean a tough slog for the EU's refining industry
Posted by: Billy Thinnes, News editorBERLIN—The EU refining industry faces a tough slog, as market conditions, new regulatory fervor and biofuels all conspire against hydrocarbon processors in Europe. Martin Suenson, the executive officer of EUROPIA, came to the ERTC to discuss exactly this subject, and his remarks are parsed below.
General message. Mr. Suenson said that the European refining industry is a key sector in the EU framework, but is facing major challenges. These include supply/demand imbalances, flat demand, expected low margins and competition from other regions. Plus, environmental legislation could increase these challenges and some of the regulation is unique to the EU, so it is not a balanced challenge when compared to the rest of the world.
"Europe faces a major supply/demand imbalance, as it is importing 27 million tons of middle distillates from Russia and exporting 31 million tons of gas to US," Mr. Suenson said. "Let us not forget that refining is a vital part of the supply chain to meet EU consumer needs."
Demand is down. Europe has been most impacted by falling demand in 2009 and 2010. Even by 2015, demand growth is not expected to catch up with capacity additions. Mr. Suenson sees 2010 as the bottom of the demand drop and projects that things will not catch up until 2015.
In short, refinery utilization rates are down and are not forecast to recover quickly. Mr. Suenson said Wood Mackenzie predicts margins to be around break even, with utilization rates below 2007 levels and any capacity rationalization will be insufficient to balance a growing gas surplus.
Offering a summary of the market situation, Mr. Suenson said there is a product slate mismatch, falling demand, falling utilization rate and falling margins. He also noted that biofuels will depress oil product demand further, with all of these factors putting increased pressure on profitability.
Regulatory questions. The acronym-laden alphabet soup that European refiners are facing includes: Corporate Average Fuel Economy (CAFE), National Emission Ceilings (NEC), the Intergovernmental Panel on Climate Change (IPCC), Pollutant Release and Transfer Registers (PRTR), the Large Combustion Plants (LCP) Directive and the Fuels Quality Directive (FCD).
"The world in which we are living, from a regulatory viewpoint, is very, very complex," Mr. Suenson said.
The EU Emissions Trading System (ETS) Phase 3 will start in 2013 and have an impact on EU refining. The refining industry has been assessed as an Energy Intensive Industry (EII) and labeled as being "exposed to significant risk of carbon leakage."
"The EU ETS will create a competitive challenge to EU refineries without similar constraints elsewhere in the world," Mr. Suenson said.
He concluded his remarks by saying that for the European refining industry to achieve the environmental ambitions that regulators seek and still maintain competitiveness, what is required is environmental policies that: give a longer term predictable legislative framework, are cost effective and recognize and mitigate the competitive impact of unilateral legislation.
Final Day: Official ERTC newspaper
Posted by: HP Editorial StaffTo see the official conference newspaper for the final day of the ERTC 14th Annual Meeting in Berlin, please click here.
Stepping out at the ERTC in Berlin
Posted by: Billy Thinnes, news editor
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| The team from DV Clean Technologies welcomed visitors to their hosptiality suite on Monday night. |
BERLIN--Fireworks lit the night sky and thousands of revelers took to the streets of Berlin Monday night. It was only later that I realized all the hoopla was not to commemorate the start of the 14th annual ERTC meeting, but rather to celebrate the 20 year anniversary of the fall of communism. Silly me... but there were other signs, slightly less grand, that the ERTC gathering was picking up steam. Join me on a photographic tour of the beginning of the meeting and please don't fret, I will be providing irregular updates as the proceedings proceed. .
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Day One: Official ERTC newspaper
Posted by: HP Editorial StaffTo see Day 1 of the official conference newspaper for the ERTC 14th Annual Meeting in Berlin, please click here.
Small technologies can deliver big punches
Posted by: Billy Thinnes, news editor
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| The panel for Monday morning's plenary session included Alois Verag of OMV, Martin Sueson of EUROPIA, Charles Cameron of BP and Matthew Crabbe of GT Forum. . |
BERLIN—To kick of the 14th annual ERTC meeting, delegates gathered in the stately and ornate main conference room at the Maritim Hotel in Berlin early Tuesday morning for a sober analysis of the status of the refining industry. The opening plenary session commenced with Charles Cameron, the head of research and technology in refining and marketing for BP in London, discussing small technologies delivering big punches.
"I am here today as the lead cheerleader to help us get out of this latest down cycle," Mr. Cameron remarked. "BP believes we need technology more than ever—we are in a commodity industry, but to make that commodity there is an awful lot of technology needed. The industry must continue to invest but invest wisely in technology."
Mr. Cameron moved on to discuss some bleak numbers from BP's 2009 3rd quarter. He displayed a slide that showed refining margins trending significantly downward over a one year period, with margins sliding from $7/bbl in the 3rd quarter of 2008 to below $4/bbl in the 3rd quarter 2009.
"What is evident is that some of the US and European operations are operating at low margins. The margin conditions are excessively poor in US and inventories are very high and wont' go down for the next few weeks," Mr. Cameron said. "It will take one or two quarters more before things begin to significantly improve."
Mr. Cameron spoke about BP's capital expenditures (CAPEX), noting that the company's uptick in spending is due to the Whiting, Indiana, refinery upgrade project. This bump in CAPEX spending will be sustained until the revitalized Whiting comes online in 2012. Whiting, one of oldest refineries in the world, was built in 1890. It made sense to upgrade this aging refinery, Mr. Cameron said, because it harbors a location advantage, with more extra heavy crude flows coming from Canada and heading to the Gulf. BP is repositioning Whiting to process advantaged feedstocks at scale and intends to capture the appropriate light/heavy spread. Once online, the refinery should run over 340,000 bpd of extra heavy crude.
Within the OECD, Mr. Cameron sees flat or falling demand for core refined products, compared to strong growth in Asia (he based his assessment on IEA numbers). There could be some local needs for diesel until 2020, in Europe in particular, but beyond 2020 it will fall off, he said.
BP is currently a strong advocate for low capital projects with high technology content. Deploying wireless instrumentation and control loop monitoring requires a small initial investment and then these technologies should pay for themselves many times over as the years progress. Using such technology is key for predicting when equipment needs to be changed out. Since 2006, BP has been working on predictive analytics, using wireless monitoring. The company has implemented just under 1,000 wireless instruments across nine refineries. Mr. Cameron projects that there is a savings value of $3,000 to $6,500 per instrument deployed.
BP is also embracing predictive analytics, using the concept to detect deviations from normal equipment behavior, probing differences in temperature and vibrations, so that problems can be caught before equipment gets damaged.
NPRA 2009 Q&A and Technology Forum - Day Three
Posted by: HP Editorial StaffTo see day three of the official conference newspaper of the NPRA Q&A and Technology Forum, please click here.
NPRA 2009 Q&A and Technology Forum - Day Two
Posted by: HP Editorial StaffTo see day two of the official conference newspaper of the NPRA Q&A and Technology Forum, please click here.
NPRA 2009 Q&A and Technology Forum - Day One
Posted by: HP Editorial StaffTo see day one of the official conference newspaper of the NPRA Q&A and Technology Forum, please click here.
Using scenarios to look into the future
Posted by: HP staffHello from Calgary! We are in Canada for another of Shell Global Solutions' Regional Symposium customer events. We've headed to North America to focus on activities and trends in that region.
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| Robert Trout, Director Strategic Accounts, Shell Global Solutions, Europe, spoke at Shell Global Solutions' Customer Regional Symposia in Calgary Canada. |
There are some shoots of encouraging economic news emerging although there seem to be as many commentators ready to knock this down as premature and who demand more focus on whether the long-term causes of the downturn have been resolved. Regardless of the speculation, now is the time to couple those short term measures and actions with staying firm to a robust long term strategy.
As I said in Barcelona, when the downturn is resolved, the three "hard truths" about today's energy system will become apparent again. Shell uses scenarios to explore the future. These are not mechanical forecasts, but rather they recognise that people hold beliefs and make choices that can lead down different paths. They reveal different possible futures that are plausible and challenging. Our latest scenarios look at the world in the next half century and link the uncertainties we hold about the future to the decisions we must make today.
In the first scenario – called Scramble – policymakers pay little attention to more efficient energy use until supplies are tight. Likewise, greenhouse gas emissions are not seriously addressed until there are major climate shocks.
In the second scenario – Blueprints – growing local actions begin to address the challenges of economic development, energy security and environmental pollution. A price is applied to a critical mass of emissions giving a huge stimulus to the development of clean energy technologies, such as carbon dioxide capture and storage, and energy efficiency measures. The result is far lower carbon dioxide emissions.
These scenarios help us to test our strategy against a range of possible developments over the long-term. However, in our view, the Blueprints' outcomes offer the best hope for a sustainable future, whether or not they arise exactly in the way we describe. We believe they are possible with the right combination of policy, technology and commitment from governments, industry and society globally. But achieving them will not be easy, and time is short. We urgently need clear thinking, huge investment and effective leadership.
In a recent report to the G8 industrialised nations, the International Energy Agency highlighted just how much the current economic downturn has hurt investment in energy. It estimates that global oil and gas upstream investment budgets for 2009 were slashed by 21 per cent versus last year with more than 20 major oil and gas projects cancelled or deferred between October 2008 and April this year.
With the three hard truths very much in place, we have a duty as an industry to plan for the future and come up with responses to meet that energy challenge and to emerge even stronger when this severe downturn passes. We all need to move – and move fast – to significantly cut costs. By combining the best of our technologies, experiences and skills, the oil and gas industry can achieve a higher production peak in the future and push the peak back by years or even decades.
Shell Global Solutions gathers in Calgary
Posted by: Billy Thinnes, News Editor, Hydrocarbon ProcessingAt the second of three Shell Global Solutions' (SGS) regional symposiums, held in Calgary, SGS customer Francisco Vina of PDVSA was asked why he attended the event and what affect the global economic climate was having on his business. His answer can be viewed below.
Women's Global Leadership Conference in Energy and Technology held in Dubai
Posted by: HP staff  |
| HH Sheikh Ahmed Bin Saeed Al-Maktoum welcomed attendees to the conference. |
The one day conference was organized by Gulf Publishing Co. and inaugurated by HH Sheikh Ahmed Bin Saeed Al-Maktoum, chairman and CEO of Emirates Airline and Group. In attendance were over 115 individuals from all over the world with an interest in the energy and technology industries.
"The complex relationships between the global oil companies, the price of oil, supply and demand, funding for new technology development, alternative energy resources and all of this as it impacts our environment are key issues that we all must face," Sheikh Ahmed said in his inaugural address. "I am confident that conferences such as this, along with a renewed commitment to the future of our children and planet, will provide the stability we all crave as citizens of the world."
Within the framework of the conference, several presentations and panel discussions were held, dedicated to issues such as: sustainable solutions for meeting energy demand; the dynamics and impacts of the current market on the relationship between national and international oil companies; the relationships among the global economy; the price of oil; supply and demand; human capital; and the recruitment and retention of young talent in tough economic times.
In his welcome speech, Sheikh Ahmed praised the staff of Gulf Publishing Co. for the effort they put into making the conference a success.
"Gulf Publishing is creating lasting connections for women in the energy industry," he said. "They have given you a platform to express ideas and exchange diverse opinions in an exciting, dynamic environment."
The conference wrapped up with a networking reception, where participants had the chance to further elaborate on the subjects of the conference and build relations for future collaborations.
The Women's Global Leadership Conference in Energy and Technology benefited from the Platinum Sponsorship of Ernst & Young, the Gold Sponsorship of Schlumberger and the Silver Sponsorship of ExxonMobil. The conference was also supported by numerous organizations around the region.
The next Women's Global Leadership Conference in Energy and Technology will be held in Houston Texas, on November 3-4, 2009.
Shell customers offer their thoughts
Posted by: Billy Thinnes, News EditorAt Shell Global Solutions' Barcelona Symposium, customers Paul Baillargeon, of Repsol, and Martino Spampinato, of ISAB SrL, discussed why they attended the event and what effects the global economic climate were having on their businesses.
Challenges facing project managers in the current economic climate
Posted by: Phil Brown, Director, Global Refining, Foster Wheeler  |
| Phil Brown of Foster Wheeler said that in the medium term, it's likely that demand for refined products will continue to grow. |
No one doubts we live in challenging financial times, with the oil and gas sector particularly affected by a combination of slowing economic growth coupled with the lower price of crude. This can offer project managers in the sector significant challenges in successful project development and execution, however, it is possible to emerge ahead from the downturn.
In the medium term it's likely that demand for refined products will continue to grow, especially in Asia Pacific and the Middle East. Clean fuels legislation will continue to be enacted in many regions with International Maritime Organization bunker fuel sulphur specs likely to have a significant impact. Finally dieselization in Europe will continue. All three of these trends will continue to drive investment in refining, though in the short term some companies will likely cut back the scope of projects, reduce scale and look to reduce capex – in many cases as a response to a struggle to find the necessary finance.
For those projects still on track, managers will find that the current economic situation offers both challenges and benefits. In the case of supply, short and medium term delivery of bulk items, such as cabling, have improved and some prices have fallen. However, many major equipment vendors are reducing capacity rather than cutting prices. Similarly the costs of materials and labour may fall as more projects get cancelled or deferred. It is crucial that due-diligence of suppliers and sub-contractors is not neglected in these uncertain times.
Project managers must remember the importance of the Front End Engineering and Design (FEED) stage; a good well-defined FEED can minimize the likelihood of future changes and thus the likelihood of costs overrunning. It also means that clients can make investment decisions on a robust basis and take advantage of any beneficial prices that may prevail or upturn in the market. For additional financial security project managers could also consider phased investment and 'quick gain' projects that allow some pre-investment for the future.
Procurement strategies should also be carefully evaluated in a downturn and there is an increased importance on the need for vendor monitoring to ensure quality and liquidity before and after an order placement. Construction is still very heavily loaded as current projects move to completion, but early planning of construction activities and early selection of site subcontractors are recommended to avoid a loss of productivity and to help schedule assurance.
While some projects will be reconsidered or cancelled due to lack of funding, a number of major companies are looking to the long-term fundamentals and plan to continue with their investment plans and will take advantage of potential lower prices. To stay ahead of the game, project executors need to embark on quality FEEDs now, which ensure companies are, for modest outlay, in a good position to proceed when more confident of an upturn. They should also proactively look at the ways to enhance a project's economics and work closely with contractors and vendors to make sure to achieve the optimum project, in terms of scope, price, contracting strategy, schedule and quality, while being mindful of liquidity. By proceeding now with studies, FEEDs or the engineering, procurement and construction phase, companies can get ahead of the game and take advantage of a wider range of options in terms of contractor selection, material and equipment sources and contracting strategies, which will ensure a successful project.
Critical factors involved in mobilizing change
Posted by: Maarten Van Hasselt, Global Delivery Group Manager, Implementation and Change Management, Shell Global Solutions  |
| Maarten Van Hasselt urged businesses to develop consensus regarding "big picture" items. |
Though undoubtedly a cause for concern, the current economic climate does offer significant opportunities for businesses within the oil and gas sector to improve efficiency and refresh outdated business practices. While the ideal situation is that we decide to implement change out of a desire to be better, the current reality sees many of companies making changes out of the necessity to keep their heads above water.
Einstein said that doing the same thing again and again while expecting different results is the definition of insanity. Our current reality requires that we change the way we have been doing things because we must deliver different results. We have now moved from an environment where the main focus is on ROI to one where the key concern is on ensuring cash-flow. No-matter the current economic conditions the focus must be on getting results faster, even if other priorities change.
In mobilizing change the first critical factor is engendering a sense of relevant urgency amongst all employees. While the current climate offers many leaders the opportunity to create a sense of urgency, translating it into a manner that engages with all an organisations' employees can be problematic and managers must take time to engage with those on every level.
Once this urgency has taken hold, people naturally appear very busy. The skill, however, is in identifying where the key activity should take place and to develop a prioritized list of actions – a 'definitely must do' list. Similarly, managers have a habit of including every gap or upside opportunity in their plans, resulting in an overly complex plan that can take too long to implement. Again the key is to identify one or two major performance gaps and focus efforts on closing them.
The final critical factor is alignment, ensuring that all employees within a direct line of reportage are on message and, in simple terms, have the same fundamental agenda from which to work. This also relies upon agreement as to what the "bigger picture" objectives are, along with ability to effectively "cascade actions" whereby the larger objectives are translated into daily deliverables.
Effective communication at all times, and in all formats, is essential to achieve successful change management. We all know that change isn't easy, especially in larger businesses and mobilizing staff can pose considerable problems. However, with the impetus for change considerably more pressing in the current financial climate, businesses that utilize the right tools have the ability to make real and long-lasting changes for the better and prepare their people by unlocking their potential to get results faster, invigorating the organization for the downturn and the upturn.
How refineries can win in the downturn
Posted by: Süleyman Özmen, Refining and Chemicals Global Licensing General Manager, Shell Global Solutions
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| Süleyman Özmen recommends converting a VGO hydrotreater into a mild hydrocracker. |
At the first of three Shell Global Solutions' Regional Symposiums, held in Barcelona on May 8th, Süleyman Özmen, refining and chemicals global licensing general manager for Shell Global Solutions, discussed "How Refineries Can Win in the Downturn."
It seems that many industries are now talking of "green-shoots" and when the upturn will come, however, the energy market seems better placed than most to ride out the current economic storm and offer excellent long-term investment potential. Demand for energy will only increase in the future, from both developed and emerging markets, with Shell CEO Jeroen van der Veer, commenting that energy is "a better investment than paying out cash in dividends today."
Of course, in spite of this positive long-term view, European refineries are facing significant challenges. Demand for refining products is stagnating and assets are ageing. Gasoline is suffering from overcapacity while middle distillates are in short supply. Regulatory pressures also cease to ease with particularly stringent regulations in the sphere of low- sulphur products. Finally, like a number of businesses, many refiners are short on cash and are finding finance difficult to secure.
To help turn these issues around refiners are increasingly looking at methods to upgrade their facilities without significant CAPEX, improving yield and quality with minimal cost or operational impact. Examples of these technological solutions include revamping a VGO hydrotreater or distillate hydrotreater into a mild hydrocracker, FCC revamps to maximize propylene/LCO production and thermal cracking units upgrades to increase diesel production – one of the key growth products.
The results can be impressive. The conversion of a VGO hydrotreater into a mild hydrocracker is a way of maximising existing hardware to increase the conversion capacity of the refinery. Such a unit can then achieve conversions of the 370C+ vacuum gasoil fraction at levels up to 50% higher than the design target, with longer cycle length. In the field of diesel production, the investment in thermal cracking technologies allows refiners to maximise middle distillate production and reduce the amount of less desirable fuel oil produced, as well as converting residue gas oils to middle distillates.
Despite economic pressures refiners should avoid at all costs the "stop and go" behaviour that has typified past crises and accept that they need to invest for the inevitable demand surge in the future. Low CAPEX investment ahead of the upturn is vital as is identifying key trends early is vital, e.g. the growing demand for clean diesel over gasoline and further regulations stipulating cleaner fuels.
With these measures in place refiners can be confident that they have the best possible footing to see out the downturn and be better placed for the upturn. The downturn period will also be a good time to work on developing new investment projects by completing the selection of technology and the basic engineering work to be ready to launch when capital is made available.
The view from a chief scientist
Posted by: Carl Mesters, Shell Chief Scientist, Chemistry and Catalysis  |
| Carl Mesters is a big fan of the Shell CONSEP tray. |
At the first of three Shell Global Solutions' Regional Symposiums, held in Barcelona on May 8th, Carl Mesters, Shell chief scientist for chemistry and catalysis, discussed "Innovation, Technology and Downturns: A Chief Scientist's View."
Crisis sparks innovation and people are at their most creative when faced with adversity owing to the urgency required. Effective implementation of technology in tough economic times depends on optimism, consistency of strategy, relevant innovation and learning to "fail fast" and move on, minimizing wasted time. Many businesses feel that with the extra time pressures of managing in a downturn, coupled with worries over liquidity and arranging finance, introducing innovation and new technology should be deferred.
However, despite the economic climate, the challenges affecting the oil and gas industry will not go away. The issue was summarized by Shell's CEO Jeroen van der Veer, who described "meeting the world's growing energy needs in an environmentally responsible manner" as a "tremendous challenge" and "technology is essential to answering this challenge." Innovation should not only apply to research and development, but to almost all aspects of a business, from improved deal structuring to better sharing and retention of knowledge.
That said, Shell Global Solutions appreciates that in a downturn there are desirable characteristics in technology that can help maintain a healthy bottom-line. These include the ability to retrofit technology to maximize an asset's potential, operational flexibility, high reliability and quick ROI.
An example of a technology currently employed by Shell Global Solutions that exhibits these characteristics is the Novel Distillation Technology. This fulfils the business requirement of providing low cost and fast debottlenecking of distillation columns. The Shell CONSEP tray is designed to operate under conditions well beyond the capacity of normal high volume trays and thus can register significant capacity increases of between 10 and 50%. Furthermore, the technology reuses existing assets and paybacks within weeks – just the sort of moderate investment that may suit some operators in these turnaround times.
Similar improvements can be made in the fields of aeration, nozzles and separators and in the upgrading of catalyst materials. These can all be relatively small-scale measures that do not involve significant cost or upheaval (they can be described as "plug-in hardware"). However, their results can be impressive with more reliability, low NOx emissions and a more active catalyst.
Technology, therefore, can become a valuable tool in squeezing the maximum possible value from existing assets. With capital expenditure remaining low, a series of key technological innovations can make a real difference to a company's bottom-line and help maintain economic equilibrium in stormy economic seas.
ACHEMA 2009 opens in Frankfurt
Posted by: Mark Peters, Publisher, Hydrocarbon ProcessingThe 29th ACHEMA opened on Monday in Frankfurt, Germany. With over 3,767 exhibitors from 49 countries crammed into 133,848 square meters of exhibit space, ACHEMA is one of the largest exhibitions and conferences for the chemical/petrochemical and related industries. This year the theme is focused on maximization of energy and resource efficiencies. A special show section is focusing on the use of renewable resources.
Hydrocarbon Processing is exhibiting at this year's ACHEMA and encourages attendees to visit its booth in Hall 4.2 (booth space at O1b). Representing the magazine are: Tricia Crossey, process editor; Beth Cunningham, trade show coordinator; Catherine Watkins, district manager; Roger Kingswell, district manager; Elda Guldi, sales representative; and Mark Peters, publisher.
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| Lin Bo Qiange of the China Center for Energy Economic Research at Xiamen University addresses the ACHEMA Worldwide Business Forum on Tuesday. | Catherine Watkins and Beth Cunningham of Hydrocarbon Processing cover the magazine's booth at ACHEMA 2009. |
The Worldwide Business Forum on Tuesday covered China's energy strategy and perspectives. It started with a statement by Zhai Qian, consul of the Chinese General Consulate in Frankfurt am Main, on the government's policy on sustainable energy development. LinBo Qiang of the China Center for Energy Economic Research at Xiamen University discussed some of the strategy changes in China's upcoming five year plan.
China became the largest emitter of CO2 in 2007. Thus, it is interesting to hear Mr. Qian remark, "CO2 emission has no solution." According to Mr. Qian, even if China changes to a cleaner energy structure its CO2 emissions will still increase. It was acknowledged, though, that China has great potential for energy efficiency improvements, but since its GDP growth is so large, emissions will continue to grow. Other panelists included Mr. Wuttke, BASF S.A., and Mr. Tanguy, Total S.A.
Strategically managing supplier relationships
Posted by: Wayne Hutchinson, Vice President, Category and Supplier Management, Shell International
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| Wayne Hutchinson offered insight on managing C and P in an advantageous manner. |
In the current climate almost every business, including many in the petrochemical sector, is being hit by the economic crisis. Often the immediate reaction is to cut costs where possible, especially regarding suppliers. However, managing supplier relationships strategically, with a focus on contracting and procurement (C and P), can be an effective way to maximize long term savings rather than just concentrating on the short term gain.
Many businesses see C and P as a separate, administrative "tick box" when actually it can be a strategic part of a business, supporting overall objectives and key to achieving top quartile performance. Top quartile C and P performance means category strategies that are intimate with the business, integration across business units and functions to optimise demand management, development of supplier relationships that result in lowest costs for both parties, effective contract management and best practice tools and processes to ensure a low cost C and P function.
During a downturn, it's crucial to ask questions to suppliers. For example, suppliers often know where and how to remove cost from your business. Furthermore, value is often created when transparency of objectives and work processes exist between two parties. Top quartile category management is seen as beating market pricing as the market moves, so it's important to know the real market price. Knowing your spend profile with suppliers and your future demand is key to setting your supplier strategy.
In summary, a business should behave as one entity rather than seeing itself as a collection of smaller operations that can be run independently. Achieving this requires businesses to develop and deliver on a clear integrated group procurement strategy and an external supplier management mindset that can standardize and globalize processes and systems to drive efficiencies and cost savings, thereby achieving every business owner's goal.
Operational tactics for winning in the downturn
Posted by: Paul Newman, Global Manager of Service and Implementation for Shell Global Solutions
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| Paul Newman of Shell Global Solutions advocated for the more efficient use of contractors. |
With the global economy slowing and an uncertain future ahead, many senior industry leaders are asking how they can maximize cash generation without jeopardizing integrity and safety or risking the long term viability of the company. The challenge often includes incorporating measures to reduce stock-levels, energy consumption and manpower while seeking to improve contracting and procurement (C and P). Optimizing turnaround schedules and ensuring maximum profitability are also important variables. Operational approaches and tactics for winning in the downturn include a focus on health, safety, security and environment (HSSE), reliability, cost, energy/CO2, margin and people.
In terms of HSSE, ensuring asset integrity is a vital element as ageing assets are not only inefficient, but also can result in a high turnover of skilled staff and – in the worst case scenario – costly accidents. Consequently, stopping asset integrity work is not an option, but companies can focus on the critical items to save cash. Deferring on certain elements is permissible providing that HSSE remains the priority, with risk assessed and mitigated against (for example, the case of corrosion under insulation).
Within the realm of reliability, another potential source of cost savings is through more efficient management of contactors, increasingly possible due to the high demand for jobs. A recent chemicals client of Shell Global Solutions found that maintenance staff's hands-on-tool time measured only 15% of available time. This was upped to 45% and achieved through a combination of measures including preparing work permits in advance (during the night shift), clearing out workshops, better prioritizing and reduced onsite travel time.
Hydrocarbon and supply-chain optimization is another way to maximize not only margins, but also generate cash. This can be achieved through a combination of factors, including stock reduction using risk-based methodologies, margin variance analysis to analyze and learn from past operation and ensuring your business is using the right crudes and the right product slate. The result should be real savings with an estimated 10-15% reduction in working capital use per year.
In general, the downturn offers many businesses the opportunity to streamline and boost operational efficiency in terms of energy/CO2, people and cost. Companies should comprehensively assess each sector and determine where work processes can be simplified and waste eliminated. Business leaders must adopt a cost-conscious mindset that is pragmatic about proper staffing levels. This extends to new activities and projects as many businesses suffer from an "initiative overload," which can spread activities too thinly and minimize potential for cash generation.
To summarize, the key concepts for winning in the downturn are shorter upfront analysis, allowing projects to move quickly and changes to be made in response to market conditions; smaller, more frequent interventions involving staff of all levels; better organizational alignment; and clearer communication as to objectives and an understanding of how projects can be managed to ensure they are financially sustainable. By keeping these in mind, it should be possible for oil and gas businesses to succeed despite the downturn and come out of the period on firmer footing.
The path ahead for oil and gas markets
Posted by: Dr. Fereidun Fesharaki, Chairman and CEO, FACTS Global Energy
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| Dr. Fereidun Fesharaki said that in the long term, market tightness will return. |
Like much of the world's industry, the oil and gas sector is dominated by questions and uncertainty: How long will the downturn continue? Are we at the bottom of the market? When will the turn around come and how can we be prepared? These are supplemented by industry specific concerns such as the impact of regulatory changes and the massive short term supply/demand issues facing the gas industry.
The reality is that as the economy has taken a dive so has demand for oil. Figures from FACTS Global Energy (FGE) show a dramatic fall in demand growth for oil globally, with growth of 1.5% in 2007 falling by 2.6% by 2009, with a corresponding fall in price per barrel. Regionally the impact has varied, with Asian oil product demand dramatically down by 1.6 mmb/d in Q1 of 2009 versus the same period in 2008. With this slackening demand have come lower prices, especially for Organization of the Petroleum Exporting Countries (OPEC) producers e.g. Dubai crude has seen a price fall from Q2 of 2008 to Q2 of 2009 of $72.99.
While it is easy to become despondent when looking at current figures, it is crucial businesses look beyond the crisis and recognise that in the longer term, market tightness will return as spare capacity falls. This should be driven by strong "baseload" demand once the global economy recovers, especially in emerging markets, which became the key drivers of demand in the early 21st century. OPEC has an important role to play, as non-OPEC supply is projected to plateau between 2012 and 2015. However, adding OPEC production is likely to prove problematic over the long-term as much new capacity will be needed to just meet projected field decline.
In the downstream sector we can make some predictions on how the market will behave coming through the downturn. As mentioned, emerging markets are of particular interest. India will soon become the largest refined product exporter in Asia, exporting about 1.2 mmb/d by 2010, while China may well prove to be somewhat of a wild-card. Chinese capacity looks set to increase adding 3.2 mmb/d of refining capacity between July 2008 and the end of 2015. Demand, however, remains uncertain and under various demand scenarios China could be a major oil product importer or exporter.
Specific products also look likely to differentiate considerably against the price of Dubai crude, with the growth of diesel looking set to account for 40% of oil product demand growth product in the period to 2015, increasing to 45% if jet fuel is included. Fuel oil also looks relatively tight.
In the field of natural gas, unconventional natural gas production looks set to dominate the agenda with current production forecasts for 2010-2030 considerably higher than those of previous years, with US shale playing an increasing role. Substantial volumes of Qatari LNG are expected to reach US shores in the next couple of years and the developments in this market will have substantial implications on global trade flows and pricing. Another issue in the spotlight is the unprecedented new supply capacity expected online in the next few years. Today's world is marked by supply gluts, a global economic malaise causing falling LNG demand and prices. However, the picture could change by the middle of next decade.
So while there may be some "hard truths" that the oil and gas industry must accept, for example the correlation between economic growth and demand along with the fact that emerging rather than developed markets increasingly set the agenda as key consumers, it is possible to make projections for the future that show distinct optimism in both upstream, downstream and gas sectors. The key is to utilize available data, plan against trends both regionally and product-specific and maximize assets. Following this agenda should enable organizations to stay ahead of the game and set the stage for future growth.
Responding to the downturn
Posted by: Karl Rose, Chief Strategist, Shell International
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| Karl Rose is chief strategist for Shell International. |
At the first of three Shell Global Solutions' Regional Symposiums, held in Barcelona on May 8, Karl Rose, chief strategist for Shell International, discussed "Charting a Course Through Stormy Seas: Shell's Response to the Downturn."
Economic growth is a key driver for oil and gas demand. Consequently, in the current bear market we see a significant drop in demand for hydrocarbons, as was the case during the recessions of the early eighties and nineties. The key question oil and gas companies need to ask themselves is not only how to cope with the downturn, but also how to accelerate growth when the markets pick up again.Companies often tend to react to crisis with a typical "bear" mentality of reducing investment levels, cutting costs and conserving cash until normality returns. This response relies on the assumption that the recession will be short, few opportunities will be missed while hibernating in the metaphorical "cave" and that there will be a return to a status quo once the crisis has passed. But some indicators (e.g. increased levels of volatility, high levels of consumer debt, etc.) point to this recession being potentially different and there may be no quick return to a status quo.
In the short term we see a continued economic downturn in 2009 followed by a more or less speedy recovery, depending on the effectiveness of measures taken by local governments and policy makers in response to the crisis.
For the oil and gas industry, one needs to bear in mind, however, that our long term assumptions of the "three hard truths" have not changed – global demand for energy is accelerating, "easy oil" will not keep up with demand and using more energy will mean more carbon dioxide emissions and increasing climate stress.
We think that oil companies should not only focus on a strategy of overly defensive measures, like cost containment and capital preservation, but should also try to use this time of adversity as an opportunity for implementing necessary improvements. Those that seek new ways and try to thrive during a time of recession will be best placed competitively once economic recovery is achieved.
Core to Shell's strategy for success in the Upstream is sustaining and building new heartlands through leadership in exploration, increasing the recovery from our existing portfolio, focusing on technology and value chain integration and applying operational excellence throughout our operations, including the ability to execute "mega-projects."
Success in the Downstream will depend on the ability to combine ongoing cost reductions and portfolio optimisation with the ability to develop new markets. A strong focus on maintaining our heartland positions while looking for strategic opportunities in the East and investing in selected manufacturing sites that support our marketing objectives will be required. Operational excellence and future fuels leadership are also key to success for the Shell downstream business.
In summary, we should remember that the long term oil and gas fundamentals remain positive and that a downturn offers not only risks, but also opportunities. We need to seek ways to use this short term crisis to maximise the efficiency of our operations and implement improvements that will last well into the recovery cycle.
Shell Global Solutions explores 'winning in the downturn'
Posted by: Robert Trout, Director Strategic Accounts, Shell Global Solutions, Europe
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Robert Trout spoke at Shell Global Solutions' Regional Symposia in Barcelona, Spain. |
Hola! On Friday, we were in the beautiful city of Barcelona for the first of three Shell Global Solutions' Regional Symposiums where we bring together our customers from around the world, representing the refining, petrochemical, upstream and industrial markets fields, to debate issues at the core of our businesses with keynote addresses from energy experts and industry leaders.
I hope that the title of this event, "Out of Uncertainty Comes Opportunity: Winning in the Downturn" hit the right note and captured the operating environment which faces us all right now. We want to balance realism with optimism. While this economic recession is turning out to be so much deeper than anyone could have originally thought, it's essential that we remain energized and focused on what we can do to not only survive but emerge even stronger when this severe downturn passes.
This is a complicated time for our industry. Long-term supply-demand analysis, market commentators, Shell and the IEA (to name but a few), all predict that the long term outlook for oil and gas is robust. But our immediate future lies in a recession environment, with lower oil prices and downstream margins and a cost structure in the industry that is high by historical standards.
It is within this context that we hope we have produced an agenda that gives valuable insights into the trends of the challenges that face us but also some practical information about some of the appropriate actions and strategies which could help our customers to emerge successful both in the short and long term.
We were very grateful to Dr Fereidun Fesharaki, founder, chairman and CEO of FACTS Global Energy, who provided fascinating perspectives on the potential short and long term effects of the economic climate, which provided an ideal framework for the rest of the event. My Shell colleagues outlined our company's approach to maximize value in these difficult times, presenting potential tactics and solutions including using innovation and technology and how a pressurized environment can often foster innovation rather than thwart it.
While we're on the subject of Barcelona, it's appropriate to quote the great and unique Spanish Catalan architect Gaudi who said, "Originality consists of returning to the origin. Thus, originality means returning through one's own resources, to the simplicity of the early solutions."
Perhaps that's just what is needed in the current economic climate. We're not here to re-invent the wheel as they say...but to look at how we work with what we've got to make the most of constrained resources and most definitely, keep our eyes fixed on what we hope for in the long term future.
Taking Barcelona by storm
Posted by: Billy Thinnes, News Editor, Hydrocarbon ProcessingOver the next several days, Hydrocarbon Processing will be bringing you exclusive content from last week's Shell Global Solutions Regional Symposia in Barcelona, Spain. The gathering brought together Shell experts and industry leaders for presentations, lively discussion and debate on topics like surviving the global economic downturn and positioning businesses for the long-term. Please check back here daily for new presentation summaries, speaker blog entries, photographs of attendees and video of the event.
OTC 2009 - Day 4
Posted by: Editorial StaffTo see day four of the official conference newspaper of the 2009 Offshore Technology Conference, please click here.
OTC 2009 - Day 3
Posted by: Editorial StaffTo see day three of the official conference newspaper of the 2009 Offshore Technology Conference, please click here.
OTC 2009 - Day 2
Posted by: Editorial StaffTo see day two of the official conference newspaper of the 2009 Offshore Technology Conference, please click here.
OTC 2009 - Day 1
Posted by: Editorial StaffTo see day one of the official conference newspaper of the 2009 Offshore Technology Conference, please click here.
NPRA Annual Meeting - Day Three
Posted by: HP Editorial StaffTo see day three of the official conference newspaper of the NPRA Annual Meeting, please click here.
NPRA Annual Meeting - Day Two
Posted by: HP Editorial StaffTo see day two of the official conference newspaper of the NPRA Annual Meeting, please click here.
NPRA Annual Meeting - Day One
Posted by: HP Editorial StaffTo see day one of the official conference newspaper of the NPRA Annual Meeting, please click here.
Surveying the scene at the GPA
Posted by: HP staff
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Terry Cavanagh & Alpine Express provided attendees with spirited German music at Bryan Research & Engineering's suite. |
SAN ANTONIO--The GPA's 88th Annual Convention featured extensive technical coverage of operations, maintenance, facilities design and regulatory compliance. Other sessions covered the anticipated changes in climate change regulations and the impact on the industry from several different perspectives. The developments of the LNG industry along with the marketing of NGL's were popular sessions. These forums and technical sessions provided two and a half days of interesting topics for the attendees to choose from.
The GPA's convention is known for some fun and elaborate suites and this year's was no different. The Ballroom level of the Marriott River Center in San Antonio on Monday night had events such as Hurricane Relief sponsored by Mafi-Trench, L.A. Turbine Corp.'s Belgium Beer café, CB& I Randall Gas Technologies' dancing heads video center, Bryan Research & Engineering entertained with a German band, Virtual Materials Group featured a western singer and GE Oil & Gas had the Coyote Ugly girls from the bar on the River Walk.
Other companies with suites were:
ABB Totalflow
Chart Energy Chemicals
Dresser Waukesha
BASF
Dew Point Controls
eSimulation Inc.
Exterran
John M. Campbell & Co.
Linde Process Plants
Paratherm Corporation
S-Con
Texas Turbine, Inc.
Total Energy
Gas Processors Association's 88th Annual Convention opened in San Antonio today
Posted by: Mark Peters, Publisher, Hydrocarbon Processing|
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SAN ANTONIO--Over 1,400 attendees made it to San Antonio for the GPA's 88th Annual Convention on Monday, March 9, 2009. The opening general session was presided over by GPA President Bob Dunn from Prism Gas Systems. Mr. Dunn's remarks reflected upon the change in the gas processing industry since the convention a year ago when gas in the US was going for over $9 per mcf and is now at $4 per mcf. In addition, he discussed the changes at the GPA such as a new logo and greater involvement in the outside US market with a sponsorship of the International Petroleum Technology Conference this coming December in Qatar.
The keynote speaker, Michael L. Williams of the Texas Railroad Commission, discussed his role in helping to regulate the Texas energy business, focusing on successes in this area and coming concerns. Mr. Williams related that when he was first sworn in to the Texas Railroad Commission there were only 200 producing gas wells in the Barnett Shale, while now there are over 8,200.
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Mr. Williams spoke at length about the legislative initiatives on climate change and in particular cap and trade regulations coming out of Washington, DC. He believes that cap and trade taxes will have an adverse impact on the Texas economy. Mr. Williams also covered some of the initiatives that he thinks are necessary to lower carbon emissions without the adverse economic impact of cap and trade. His position is that the successful development of clean coal technology coupled with solar, wind, biomass and nuclear energy would help reduce the carbon emissions of power generation significantly.
The GPA's 88th Annual Convention continues through Wednesday.
GE Oil & Gas Annual Meeting in Italy
Posted by: Mark Peters, Publisher, Hydrocarbon ProcessingFLORENCE, ITALY--Concerns over the rapid drop in oil and gas prices and the economic outlook dominated discussions at the 2009 GE Oil & Gas Annual Meeting that took place January 26-27. Opening comments by Claudi Santiago, president and CEO of GE Oil & Gas, welcomed the 800+ attendees with recognition that this year and the next will be difficult times for the industry. Jeff Immelt, chairman and CEO of GE, addressed the meeting next, reaffirming GE's commitment to the oil and gas industry in all stages, from production and pipelining to hydrocarbon processing. This commitment is founded on the belief of the long-term viability and need of the products provided by the industry. Other presentations in the opening afternoon included a focus on the technologies, advances and case studies that GE Oil & Gas has provided over the recent past.
I had a very interesting conversation with Mohammad Ehteshami, vice president of engineering for GE Oil & Gas, over the synergies that GE Oil & Gas is able to develop between its various business segments. Mr. Ehteshami is a good example, having been with GE for 25 years (22 years with GE Aviation). The experience of GE Aviation with reliability, efficiency and capability offers technologies that will benefit upstream, midstream and downstream. Recent developments include undersea compressors and multiphase pumping capabilities. The size of GE allows the leveraging of large research and development budgets to the industries that they serve such as using electric motors and drivers to increase the efficiency of compressors, a prime focus of the industry in these days of increased scrutiny on emissions.
The Tuesday session started with a presentation by Robert Mundell, an economics professor at Columbia University and winner of a 1999 Nobel Prize in economic science. He gave a detailed explanation of the current global economic situation with the primary causes covered in detail along with his coverage of the individuals that were the "five goats" of the crisis, which included Henry Paulson, Bill Clinton and others.
Other highlights included Giacomi Rispoli, R&D director of ENI, on new refining process for heavy oil upgrading and Tom Price, marketing and business development vice president for El Paso, on the latest developments in Rocky Mountain gas and getting the gas to markets where it is needed. Other speakers included Oscar Prieto, CEO of Atlantic LNG and Lew Watts, president and CEO of PFC Energy.
CLNG sponsors educational LNG video for public television
Posted by: HP staffThe Center for Liquefied Natural Gas (CLNG) has sponsored an educational video about liquefied natural gas (LNG) entitled "Spotlight On LNG." The video started airing on public television stations throughout the US on January 17.
CLNG sponsored the five-minute video as part of its continued effort to enhance public education and understanding about liquefied natural gas (LNG). The Spotlight On LNG video provides viewers with basic facts about LNG by explaining what LNG is, how it is used, and how LNG helps to meet America's clean energy needs. The video includes an LNG demonstration performed by CLNG's president, Bill Cooper, in which he safely extinguishes a burning cigarette in a beaker filled with LNG to illustrate that LNG is not flammable or explosive in its liquid state. Cooper subsequently takes a drink of water on which he has just poured LNG to demonstrate that if spilled, LNG quickly disperses leaving no residue or slick on water or land.
"The Spotlight On LNG video will provide the public with an unbiased educational overview of LNG and hopefully dispel some of the myths out there about this clean, safe and essential fuel," said CLNG president Bill Cooper. "With U.S. LNG imports expected to increase through 2030, the public deserves to hear the unvarnished facts about a fuel source that will help to generate electricity, and warm and cool their homes for years to come."
To watch the Spotlight On LNG video, visit:
http://www.lngfacts.org/Media-Center/Video_Public_Television.aspEducational outreach discussed at Houston BMA luncheon
Posted by: Billy Thinnes, News Editor, Hydrocarbon Processing
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Tommy Lyles, Susan Ganz and Bill Pike (left to right) meet with well-wishers after their panel discussion at the Houston BMA's January 15 luncheon. |
HOUSTON--A polite crowd of marketing professionals gathered to gab and listen to speakers during a Business Marketing Association (BMA) luncheon at the Courtyard on St. James Place in Houston on January 15. As attendees settled into their dinner rolls and iced tea, the panel program commenced, with three speakers delving into educational and perceptional outreach efforts from the energy industry to students, educators, members of the media, legislators and the general public.
Bill Pike spoke first, as a representative for the Society of Petroleum Engineers (SPE). He discussed the SPE's educational website, www.energy4me.org. He then described other outreach efforts, including an energy education kit for K-12 classrooms and an oil and natural gas book for students. According to Mr. Pike, SPE distributed 6,500 books in 2008 and plans on translating the book into multiple languages in 2009.
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A full day with the Houston GPA
Posted by: Tricia Crossey, Process Editor, Hydrocarbon ProcessingHOUSTON--The Houston Gas Processors Association (GPA) offered an introductory class to gas processing last Wednesday morning. During the seminar, Richard Jones discussed the physical properties of natural gas and NGL's, the economics of liquid recovery, NGL values and uses and different types of gas plants.
The luncheon guest speaker was Stuart McCalum from the national GPA. His talked focused on the implications of the new Obama administration and what it means for the midstream industry. He stated that the Democratic leadership in Congress has made every indication that they intend to put climate change at the top of the legislative agenda. According to Mr. McCalum, this was reinforced by Obama's selection of Carol Browner to serve in the White House as the assistant to the President for energy and climate change.
Mr. McCalum also stated that Congressman Waxman (D-CA) and Congressman Markey (D-MA) have sponsored legislation that would establish an aggressive cap and trade program while granting EPA and DOE significant discretion. In the Senate, the Lieberman-Warner bill specifies that gas processing facilities are the point of regulation for green house gas emissions. Mr. McCalum concluded by stating that he believes the new administration will probably wait until 2010 to pass any comprehensive climate change bill, due the country's economic situation.
After the luncheon, those that attended the seminar enjoyed a tour of the Copano gas plant in Sheridan, Texas. It was an interesting perspective to see an entire gas plant operation, from where the raw gas enters the plant through all the complicated processing steps and finally to where the product is piped to suppliers. The group saw the demethanizer, control room (now updated with Delta V software), cryogenic, reboiler and dew point units. Our tour guide commented on how operations will shift from steam or electric use, depending on what's less expensive that quarter.
January 2010 Issue
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