Integrating Petroleum Supply Chain

7/27/2019 Integrating Petroleum Supply Chain

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Integrating the Petroleum SupplyChain Drives Value

June 2009


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22009 Aspen Technology, Inc. All rights reserved 2

Disclaimer

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Aspen Technology, executed by an authorized officerof each company.


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32009 Aspen Technology, Inc. All rights reserved

Agenda

Petroleum Industry Trends

Petroleum Supply Chain Challenges

Petroleum Supply Chain Solutions

Petroleum Supply Chain Best Practices


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Global Oil Outlook

Information derived from CERA market briefing dated January 12, 2009

Forecasted average oil prices for 2009and 2010 are $47 and $59 per barrel

respectively US and Canadas GDP forecasted to be

negative in 2009 rebounding in 2010

Global GDP is expected to shrink in 2009

Global oil demand expected to decreaseby 2 MBPD in 2009

Spare oil production capacity could growto 6MBPD in 2009


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Tight capital markets will continue to impact new projects and production runs

Low margins and high capital investment hurdles will delay or cancel a significantnumber of capital projects

Downstream chemical volumes and margins will remain weak for 2009 Increased potential for mergers and acquisitions as smaller companies struggle

with financial and capital issues

Petroleum Industry Expectations

Continued lower global demand with

rising spare capacity will keep average

oil prices around $50 per barrel in 2009

OPEC could cut production in the first

quarter of 2009


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Strategic Issues for Petroleum

Globalization

Fundamental shifts in demand, flow of trade anddemography

Changing capital investment and restructuring patterns

New competition from India and ChinaEnergy Management & Sustainabili ty

Long term energy demand growth and the geopolitics ofresources

Alternative feedstocks Compliance regulations

Portfol io Management M&A primary vehicle for growth for certain segments

(mid-sized companies) Sharpen product portfolio through restructuring New groups of buyers emerge (India, China, Middle

East)

Innovation

New business models and processes (skills, knowledgemanagement,collaboration, value add services)

Advanced IT technologies to support innovation Managing IP


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Merger & Acquisi tion Economies of Scale

Stay cost competitiveness

Throughput & Margin Increase

Increase Capacity Utilization (USA, Western Europe, Japan, etc.)

Grass-root refinery & petrochemicals complex (Middle East, China, India,Russia)

Revamp existing plants (Korea, China, India, etc.)

Increase conversion unit capacity

Optimization

Feedstocks

Yields Explore high value products

Collaborative Decision Making Focus on supply chain coordination to maximize margin and reduce supply

chain disruption

Increase focus on collaborative decision making

Explore Alternatives Ethanol, Bio Diesel, H2, Solar, etc.

Gas Cracking, Catalytic Cracking, etc.

Petroleum Industry Strategy


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What are the High Value initiatives in

Petroleum Downstream?Supply Chain Initiatives1. Improve Feedstock Selection

Integrate Planning and Scheduling Workflows

Reduce Gap in Plan vs. Actual Crude Selection2. Optimize sourcing and distribution of products

Distribution Optimization

Manufacturing Initiatives

1. Decrease GAP between Plan and Actual Molecular management /Component modeling System Application of Planning and Scheduling

2. Increase Unit Throughput and Improve Reliability Advanced Process Control and optimization with

Performance Monitoring3. Real-Time Visibility into Refinery Operations

KPI and Refinery Visualization Production Performance Analysis


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Trend - Integrating the Supply Chain

Traditionally each operation within the supply chain (bothinside and outside of the refinery) was managed andoptimised in isolation

Most oil companies have started to realise the large benefitsto be had by integrating the supply chain and optimisingacross the enterprise.

Integration of the supply chainrequires changed businessprocesses and workingpractices, supported by new

and integrated tools.

Optimisation of the supply chain can make a significantimprovement in overall company profitability.


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Agenda






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The Petroleum Supply Chain

Produce Crude

Primary DistributionSecondary Distribu tionInbound Logistics

Refine CrudeWholesale (Rack)Marketing

1 Supply and

Trading Crude valuation Crude and

Products Trading Crude blending Constraint

modeling Inbound Logistics

Refining2

Product blending Operations Scheduling Advanced controls Order execution Performance

Management

Product Placement

and Sourcing

3

Demand Management andForecasting

Regional Refinery Planning Unplanned Event Response Buy/ Make/ Sell/ Exchange

tradeoffs Exchange management

4

Retail Marketing

Distribution

InventoryManagement Scheduling (In-plant

and Distribution) Performance

management


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Supply Chain Challenges Business Impact

Wrong products at terminals

Large Demurrage charges

High inventories or run-outs

Many users with unlinked spreadsheets

Local optimization without enterprise-wide visibility

Poor visibility into future operational needs

Difficult to define best mix of make, buy and tradedecisions

Difficulty in executing term and exchange deals

profitably

Scheduling thousands of products/crude movements

Nominating vessels, pipelines, inspections

Managing exchange contracts

Managing compulsory stock obligations

Product/crude shortages in the network

High working capital

Uncertain Demand

& Supply

Inventory Management

Planning Directives

Operations Scheduling

Enterprise Visibili ty



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Summary of Challenges and

Opportunities Fundamental changes in the industry are

creating opportunities and challenges inmanaging the petroleum supply chain.

Unprecedented global changes ofsupply/demand balance requires excellentSupply Chain Management practices.

Market volatility its here to stay, feast orbe feasted upon

Overcoming organizational barriers is asignificant challenge

How do you get there continuous focuson improving supply chain practices


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But how will the best handle the

challenge?AspenTech observes Best in Class Petroleum Industry

Leaders working in these areas:

Enterprise Strategy versus Individual Market/Region Strategy &Management

Nimble, Market-based Refining, Marketing, and Supply Strategy Organizational and Process Alignment

(Refining Supply Trading and Marketing)

Building an integrated view of key shared data (inventories, demand,supply plan, production plan)

Standardized Work Processes and Enabling Technology


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Agenda






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Typical Supply Chain work processes

Refinery activityHeadquarters activit y

MarketDemand

Forecasting

Refinery Operational Planning

BlendScheduling

& optimisation

Production Plan

Primary Distribution Scheduling(Physical Operations)

Supply/Demand OptimisationUnconstrained Forecast

Constrained Forecast

RefineryProduction targets

Distribution &

Exchange Plan

Demand plan

Scheduled Movements

to/from Refineries

SecondaryDistributionScheduling

Retail Demand(by terminal)

RefineryScheduling

Trading

Accounting

Sales History&

Open orders

Production Schedule

Actualisedmovements

Advanced Process Control

Process UnitSet-points

Blend recipes

PipelineScheduling

Pipelineschedule

Product availability& demand

ShipScheduling

Shipschedule


Load/deliveryConfirmation,

Credit checking

Feedstock selection


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Corresponding AspenTech Products

Refinery activityHeadquarters activity

Aspen CDM(Collaborative

Demand

Manager)

Aspen PIMS

Aspen

Refinery

Multi-Blend

Optimizer

Production Plan

Aspen IMOS

(Inventory Management&

Operations Scheduling)

Aspen Petroleum

Supply Chain Planner

(DPO)Unconstrained Forecast



Distribution &

Exchange Plan

Demand plan

Scheduled Movements

to/from Refineries

Aspen

Fleet

Optimizer


Aspen

Petroleum

Scheduler

Trading

Accounting

Sales History&

Open orders

Production Schedule

Actualisedmovements

Aspen APC

(DMCplus, etc)


Blend recipes

Aspen

Distribution

Scheduler

Pipelineschedule


Aspen

Distribution

Scheduler

Shipschedule



Credit checking

Aspen PIMS

Terminal Demand

& Inventories


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Demand

Manager)

Aspen PIMS

Aspen

Refinery

Multi-Blend

Optimizer

Production Plan

Aspen IMOS



Aspen Petroleum





Distribution &

Exchange Plan

Demand plan

Scheduled Movements

to/from Refineries

Aspen

Fleet

Optimizer


Aspen

Petroleum

Scheduler

Trading

Accounting

Sales History&

Open orders

Production Schedule

Actualisedmovements

Aspen APC

(DMCplus, etc)


Blend recipes

Aspen

Distribution

Scheduler

Pipelineschedule


Aspen

Distribution

Scheduler

Shipschedule



Credit checking

Aspen PIMS

Terminal Demand

& Inventories

Collaborative Demand Management


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Why Demand Management Matters

Demand Forecast Drives CriticalDecisions

More accurate demand = better

planning

If you do not know where you need to go,

then you risk optimizing the route to get

to the wrong place!

Forecast

Aspen PIMS

Aspen IMOS

Aspen DPO

DistributionPlanning

Operations

Scheduling &InventoryManagement

RefineryPlanning &Scheduling


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Why Demand Management Matters

Demand Forecast Drives CriticalDecisions

More accurate demand = better

planning

If you do not know where you need to go,

then you risk optimizing the route to get

to the wrong place!

Forecast

Aspen PIMS

Aspen IMOS

Aspen DPO


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Collaborative Demand Management

Business Process Flow

Generate

Statistical

Forecast

Statistical

Forecast

Analysis/

Metrics

View

Forecast

Adjusted

Forecast

AdjustForecast

Generate

Demand

Plan

Consensus

Demand Plan

Sales

History

Data

ERP

View

History

Adjusted

History

Data

AdjustHistory

Consensus

Forecast

CompetitorpricechangeCompetitor

price change

Overridedemandforecast

Information


Information

Newpromotion

Newpromotion

Changeinplanned

promotion

Change inplanned

promotion

CompetitorpricechangeCompetitor

price change


Information


Information

Newpromotion

Newpromotion

Changeinplanned

promotion

Change inplanned

promotion

IncorporateMarket

Information

ValidateMarket

Information

Collaborative Steps


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Demand

Manager)

Aspen PIMS

Aspen

Refinery

Multi-Blend

Optimizer

Production Plan

Aspen IMOS



Aspen Petroleum





Distribution &

Exchange Plan

Demand plan

Scheduled Movements

to/from Refineries

Aspen

Fleet

Optimizer


Aspen

Petroleum

Scheduler

Trading

Accounting

Sales History&

Open orders

Production Schedule

Actualisedmovements

Aspen APC

(DMCplus, etc)


Blend recipes

Aspen

Distribution

Scheduler

Pipelineschedule


Aspen

Distribution

Scheduler

Shipschedule



Credit checking

Aspen PIMS

Terminal Demand

& Inventories

Primary Distribution Planning Optimisation


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Aspen Petroleum Supply Chain Planner

(DPO)

Sales

Terminals

Rail

Barge

Pipe, Truck orRailtoTerminal

Refinery 2 Tanks

Exchange Receipts

Pipeline

Exchange Delivery

Pipelin

e,

Rail,T

ruck

toTerm

inal

Bulk Terminals

Purchase

Sales

Sales

TruckRack

Pipeline RailTruck

Sales

TruckRack

Refinery 1

Tanks

Pipe, Truck orRailtoTerminal

Sales

Sales

Sales

Aspen Petroleum Supply Chain Planner is an LPplanning tool used to optimize the economics ofdistributing multiple commodities, using multiple

modes of transportation, over multiple time periods.


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Aspen Petroleum Supply Chain Planner

(DPO): General Functionality and UseStrategic Users

Study effects of adding or removing assets (e.g. terminals or markets)

Evaluate expansion of distribution facilities (e.g. pipeline expansions)

Determine the optimal size of rail/barge/marine fleets Developing financial budgets

Operational Users

Optimize product distribution using varied transportation options

Evaluate make/buy/exchange options

Use economics to drive decisions in response to supply chain events

Proactively evaluate supply & demand problems before they occur Optimize terminal inventory

Seasons and seasonal changeovers Turnarounds, shutdowns, slowdowns


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Demand

Manager)

Aspen PIMS

Aspen

Refinery

Multi-Blend

Optimizer

Production Plan

Aspen IMOS



Aspen Petroleum





Distribution &

Exchange Plan

Demand plan

Scheduled Movements

to/from Refineries

Aspen

Fleet

Optimizer


Aspen

Petroleum

Scheduler

Trading

Accounting

Sales History&

Open orders

Production Schedule

Actualisedmovements

Aspen APC

(DMCplus, etc)


Blend recipes

Aspen

Distribution

Scheduler

Pipelineschedule


Aspen

Distribution

Scheduler

Shipschedule



Credit checking

Aspen PIMS

Terminal Demand

& Inventories

Inventory Management and OperationsScheduling


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Inventory Management & Operations

SchedulingPrimary Distribution Scheduling environment

Provides visibility of future inventory positions acrossthe organisation

Web-based, multi-user environment

The backbone of the Petroleum Supply Chain integrates with: Refinery Planning and Scheduling

Primary Distribution Planning

Secondary Distribution Scheduling

ERP system

Tank Gauging systems

Back office systems


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Demand

Manager)

Aspen PIMS

Aspen

Refinery

Multi-Blend

Optimizer

Production Plan

Aspen IMOS



Aspen Petroleum





Distribution &

Exchange Plan

Demand plan

Scheduled Movements

to/from Refineries

Aspen

Fleet

Optimizer


Aspen

Petroleum

Scheduler

Trading

Accounting

Sales History&

Open orders

Production Schedule

Actualisedmovements

Aspen APC

(DMCplus, etc)


Blend recipes

Aspen

Distribution

Scheduler

Pipelineschedule


Aspen

Distribution

Scheduler

Shipschedule



Credit checking

Aspen PIMS

Terminal Demand

& Inventories

Aspen Fleet Optimizer


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Poor inventory management

Missed Opportunistic purchasing

No demand planning

Primarily manual processes (phone,

fax, email, excel) Reactive order process

Excess transportation costs

No control over supply chain

The Business Problem

Traditional Processes

The Result

Excess inventory positionscreate poor cash flow

High Cost per Volume Delivered(CPVD)

Poorly negotiated freightcontracts

Excessive run-outs, retains

Supply shocks result inexcessive transportation costs orrevenue loss

Lost revenue at the terminal


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Inventory Management

Order Placement/Capture

Fleet Scheduling & Source Optimization

Order Assignment to Accounting

Distribute for execution to fleets

Execution (Real time) Management

Reconcil iation with ERP

Aspen Fleet Optimizer


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Agenda






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Industry Leading Practices

Standardization and streamlining of businessprocesses Well defined business processes from forecasting, planning,

scheduling to execution

Standardization and integration of tools and systems Well defined system functional scope and data transfer

Enterprise visibility Inventory, production, deals and movements

Network optimization Refining and distribution

Analytic-based decision support Case study and situation simulation


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In Closing

The global oil market will continue to be volatile.

Leading oil companies are working on operationexcellence to manage financial risks and marketdynamics.

Operation excellence in S&D focuses on enterprisevisibility and collaboration to improve forecastaccuracy, supply optimization, and distributionscheduling & execution.

Integrating Petroleum Supply Chain

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