Linear Programs & Business Interruption

Agenda

• Introduction to KBC• Typical Planning Processes & Plans• Tools used to Support Processes• What is a Linear Program• Some Linear Program Problems• Application in Business Interruption• Examples• Summary

Mark Anderson

• World Wide Vice President KBC Planning Services

– 25 years of international oil industry experience

– 20 years of refinery planning experience.

• Planning– KBC Process Technology Limited, UK– Star Petroleum Refining Company Ltd, Thailand– Caltex Oil Corporation, Dallas, Texas, USA– Caltex Oil South Africa Limited, South Africa

• Process Engineering– Caltex UK, London Office, UK– Caltex Oil South Africa Limited, South Africa– California Texas Oil Corporation, Malaysia– Bahrain Petroleum Co. BSC (closed), Bahrain

KBC Evolution

1979KBC founded as independent consulting company, specialised in energy improvement in refineries

1983 First yield & energy study applied to petrochemicals (ethylene plant)

1986 Development of Petrofine simulation software leads to first refinery-wide Yield & Energy Survey

1993 Y&E Survey develops into comprehensive Profit Improvement Program (PIP)

1995 On-site Implementation Services takes KBC profit improvement deliverable to a new dimension

1996 Development of new business area in Reliability, Availability & Maintenance

1997 KBC goes public - listed as plc on London Stock Exchange

2000KBC forms an exclusive alliance with Clockwork Solutionsutilising asset management technology

2000

2002

Core skills and competencies extrapolated into Planning, Petrochemicals, Gas Processing and Energy Industries2000

KBC extends its operations to include a comprehensive Risk Management Program with the acquisition of Risk Solutions

KBC Office LocationsKBC extend into Oil and Gas market analysis with PEL acquisitionand enhance Energy services with Linnhoff March acquisition

Global Track Record

Typical Planning ProcessesFe

edba

ck P

roce

sses

Supply PlanSupply PlanCrude and Feedstock Purchases,Intermediate & Component

Purchases, Inventory Management & Targeting, Product Exchange Management & Targeting, Risk Management,

Contracts, Forecasting – demand and pricing

Operating Plan

Look Ahead Schedule

Operating Plan

Process Unit Schedule

Refinery Production Planning (Product Mix & Process Strategies), Inventory Planning, Distribution Planning,

Chartering, Contracts

Schedule of Oil Movements & Blends

InventoriesInventories SchedulesProcess Unit Schedules, feedstock or intermediate product

or component arrival schedules

Detailed Blend Recipes, Marine Terminal Scheduling, Pipeline Scheduling

Process TargetsTargetsOperating Targets, Qualities, Flows, Process System Line

ups, Blending Line-ups

OperationsOperations Physical Operations, Demurrage, Loss Control, Unit Operations Control, Blending Control

Planning Tools Architecture

Schedule of Oil Movements, Blends etc

Supply Plan

Operating Plan

Targets

Operations

Process Unit Schedules

Scheduling& Blending

Models

LP VectorGeneration

Process Simulation

Models

Process

& LabData

LP Model

PerformanceMonitoring

DataReconciliation

Scheduling ModelUpdate

Annual Plan

What is Linear Programming?

• Mathematical technique to determine the optimum use of resources

– raw materials & plant and its flexibilities

• obtain a particular objective – minimum cost or maximum profit

• while satisfying constraints– product productions, product qualities, unit

constraints etc

LP Example

• Suppose two products, X and Y are to be made, subject to the following limits:

1. Blend Stock Availability X + Y < 502. Maximum Additive 0.1X + 0.2Y < 83. Grade Split Y < X + 20

• Anticipated revenues for the two products are X = $4.50 / BBL and Y = $6.50 / BBL.

Graphical Solution

Graph of Constraints

0

10

20

30

40

50

0 10 20 30 40 50 60 70Product X

Prod

uct Y

Blendstock Availability Maximum Additive Grade Split

Feasible Region

Graphical Solution

Graph of Profit

0

10

20

30

40

50

0 10 20 30 40 50 60 70Product X

Prod

uct Y

$300 Profit $250 Profit $200 Profit

Graphical Solution

Graph of Profit

0

10

20

30

40

50

0 10 20 30 40 50 60 70Product X

Prod

uct Y

Blendstock Availability MaxAdditive Grade Split $285 Profit

Optimum

Mathematical pathtaken to reach solution

Graphical verses Computer Solution

• A graphical solution works for small models

– addition of one product would create a three dimensional graph

– two additional products would make a graphical solution impossible

• Refining & Petrochemical plants contain many different feedstocks, products & constraints

• Hence, the need for a computer solution for LP

Some LP Problems

Profit

Variables

Local Optimum

initialize LP run at this point

Profit

Variables

Stability orConvergenceProblems

Examine solutions at both points

Elements of Refinery LP Model

LP System

Process Units

StreamsProductsFeeds

Product Blends

Crude Assays

Operating CostsProcess Yields

Stream Qualities

Product Specifications

Operating Constraints

Volume ConstraintsPricing

LP Solver

MarketCase Data

Model DataRefinery

Model Structure

System provider

Example of Reformer LP – Structure and Data

Data

Data

LP Usage

LP INPUT LP DATABASE LP OUTPUT

Feed Options

Prices

Fixed Products

Planned Inventory Changes

Unit availability

Special Blend Specs

Crude Assays

Process Sub-Models

Standard Blend Specs

Routing options

Cost Data

Gross Margin

Net Margin

Optimum OperationFeed Rate & Type

ProductionsBlend recipes

Inventory changesUnit capacity usedColumn cut points

Unit severitiesStream routings

Variable Data • Regular updates

Fixed Data• Quarterly update

Application of LP’s in Business Interruption

• Medium/long term verses short term interruptions

• For medium/long term interruptions – week +– plan for condition of plant prior to business interruption verses – plan for condition of plant after the business interruption

• For short term interruptions – days– No new “plan” created– Situation managed within inventory constraints without loss overall

crude throughput

• Assess refining facilities impact in steady state– start-up and shutdown time periods

• External issues for example – selling cargoes of crude due to insufficient storage capacity – importing / sourcing product to meet domestic or export commitment

Does LP Match Plant ? Backcasting

• What is Backcasting?

Compare Actual Performance Against Planned and Best Possible Performance

Leading To

Improvements in Performance Knowledge and Tools

Improved Decision Making

Which Will

Reduce the Gap Between Actual and Best Possible Performance

Increased Profits

Backcasting ? Other Names.

Performance ReviewPerformance Review

Backcasting Methodology

1. Compare Refinery Plan with Actual - Volumes and $/bbl– Supply Plan– Refinery Plan– Actual Performance

2. Explain the Deviations, using LP Cases & Spreadsheet analysis – Crude Mix– Domestic Production– Prices– Unit Utilization– Giveaway– Unit Yields vs. LP– Other (Fuel, Slop, Unexplained)

3. Investigate, Action and Follow Up any New Areas of Opportunity– Refinery Working Team

Backcasting Summary Sheet Example

Plan vs. Actual Vol Exp $/bblRefinery Plan (New LP) 105.5% +3.50Actual (Plan Prices) 105.6% +3.26Actual vs. Refinery Plan (New LP & Plan Prices) ==> - 0.24

Deviations 1. Crude Mix Similar to Plan +0.062. Product Lifting & Inventory - 0.203. Unit Utilization +0.034 Product Giveaway -0.05 5. Actual Yields Different to LP -0.08 **

Total -0.24Detailed Backcast Results and more detailed breakdowns will support this

summary. Clear Backcast Action Plans are then developed and progressed to: Improve : 1. Plan Inputs 2. Plan 3. Planning Tools 4. Implementation

Impact of Visbreaker shutdown

Light Ends Fuel Gas LPG

ButaneLt Naphtha

Gasoline

Hvy Naphtha Hydrotreater& Reformer

Kerosene Hydrotreater Jet Fuel/Stove OilFCC Gasoline

Crude Alkylate

Gas Oil Hydrotreater Diesel/Heating Oil

Atmospheric Resid

Vac Gas Oil VGO HDTFCC/Hydrocracker

Alkylation Light Cycle Oil

SlurryVac Resid

Visbreaker Fuel Oil

KeroGas OilLCO Cutter

Visbreaker Shutdown

• Linear Program Modifications

– Route Vacuum Residue to Fuel Oil– No diesel recycle to the hydrotreater– No naphtha recycle to the hydrotreater/reformer– No gas production– No utility consumptions or productions

• Relatively straight forward modifications required

• With this unit shutdown there are probably no external issues to be considered

Impact of VGO HDS/FCCU/Alky shutdown

Light Ends Fuel Gas LPG

ButaneLt Naphtha

Gasoline

Hvy Naphtha Hydrotreater& Reformer

Kerosene Hydrotreater Jet Fuel/Stove OilFCC Gasoline

Crude Alkylate

Gas Oil Hydrotreater Diesel/Heating Oil

Atmospheric Resid

Vac Gas Oil VGO HDTFCC/Hydrocracker

Alkylation Light Cycle Oil

SlurryVac Resid

Visbreaker Fuel Oil

KeroGas OilLCO Cutter

VGO HDS/FCCU/Alky Shutdown

• Linear Program Modifications examples– Route Vacuum Gas Oil to Sales– Route Vacuum Gas Oil to Fuel Oil Blending – more Sales– Remove Slurry from Fuel Oil Pool– Remove FCCU/Alky Plant Products from gasoline blending– Add opportunities to import gasoline components– Remove LCGO recycle to DHT– No gas production– No utilities production or consumption– Imports to meet supplies of gasoline/LPG etc– Crude feed reduction to manage VGO/fuel Oil inventories

• Less straight forward modifications required – but certainly feasible

• With this unit shutdown there are probably external issues to be considered

Summary

• LP’s widely used in refining industry to support planning processes

• LP’s are not without problems– Aware of the pitfalls

• LP’s can match refinery operations– Best Practice LP Model Structure & Data

• Can be used in Business Interruption analysis– Need to consider all options

Questions ?