chemical supply chain research

THE LOGISTICS INSTITUTE - ASIA PACIFIC A partnership between the National University of Singapore and Georgia Institute of Technology for research and education in global logistics and operations

T h e L o g i s t i c s I n s t i t u t e - A s i a P a c i f i c N a t i o n a l U n i v e r s i t y o f S i n g a p o r e 1 0 K e n t R i d g e C r e s c e n t , S i n g a p o r e 1 1 9 2 6 0 Tel : (65) 874 8984 !!!! Fax: (65) 775 3391W e b s i t e : w w w . e n g . n u s . e d u . s g / t l i a p

CHEMICALS SUPPLY CHAIN RESEARCH

Team members: Georgia Institute of Technology

Al-Khayyal, Faiz Vate, John Vande Reveliotis, Spyros

National University of Singapore Karimi, I. A. Srinivasan, R. Viswanadham, N.

Founded 1905

Chemical Supply ChainsSupply Chain Mapping and Tool Development

Chemicals SC Research

WP : TLI-AP/00/09 May 2000

I.A. Karimi, R. Srinivasan & N. Viswanadham

The Logistics Institute – Asia Pacific 10 Kent Ridge Crescent, Singapore 119260

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TABLE OF CONTENTS

EXHIBITS ...........................................................................................................................3 ACKNOWLEDGMENTS ...................................................................................................4 I. INTRODUCTION .......................................................................................................6

A. CHEMICAL INDUSTRY IN THE 1990'S ............................................................ 6 1. Brief History of Petroleum...................................................................................6 2. Crude Refining.....................................................................................................7 3. Supply and Distribution .......................................................................................8 4. Petrochemicals .....................................................................................................8 5. Business Challenges of the Oil Industry..............................................................9

B. SINGAPORE CHEMICAL INDUSTRY............................................................... 9 1. Petroleum .............................................................................................................9 2. Petrochemicals ...................................................................................................10 3. Chemicals...........................................................................................................10 4. Jurong Island......................................................................................................11

C. FOCUS OF THIS STUDY ................................................................................... 12 II. CHEMICAL SUPPLY CHAIN MANAGEMENT ...................................................21

A. OVERVIEW ......................................................................................................... 21 B. CHARACTERISTICS OF OIL SUPPLY CHAIN............................................... 21

1. Information Sharing:..........................................................................................21 2. Transportation & Large Inventories: .................................................................22 3. Trading :.............................................................................................................22 4. Customs & regulations:......................................................................................22

C. ROLE OF INFORMATION TECHNOLOGY..................................................... 23 III. CURRENT ISSUES...................................................................................................25

A. NEED FOR INTEGRATED DECISION MAKING............................................ 26 IV. REPRESENTATION FOR DECISION SUPPORT..................................................28

A. G2.......................................................................................................................... 28 B. SUPPLY CHAIN REPRESENTATION .............................................................. 29 C. SUPPLY CHAIN GENERATION ....................................................................... 29 D. FUTURE DEVELOPMENTS .............................................................................. 30

V. CONCLUSIONS & RECOMMENDATIONS..........................................................41 VI. ACHIEVEMENTS ....................................................................................................44 REFERENCES ..................................................................................................................45 APPENDIX I: INDUSTRIAL VISITS..............................................................................46

VAN OMMEREN........................................................................................................ 46 FAR EAST CHEMICALS ........................................................................................... 47 EASTMAN CHEMICALS........................................................................................... 47 EXXONMOBIL ........................................................................................................... 48 DUPONT...................................................................................................................... 49 SHELL.......................................................................................................................... 49 PETROCHEMICAL CORPORATION of SINGAPORE ........................................... 50 SINGAPORE REFINING CORPORATION .............................................................. 50 SCHERING PLOUGH................................................................................................. 51 JURONG TOWN COUNCIL ...................................................................................... 51

APPENDIX II: TOOLS FOR REFINERY PLANNING AND SCHEDULING: THE STATE OF THE ART .......................................................................................................53

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EXHIBITS

Table/Fig. No. Subject Pg No. Table 1.1: Petroleum Products and their Uses .............................................................13 Table 1.2: Petrochemicals and their Uses ....................................................................14 Figure 1.1: The Petrochemical Industry.......................................................................15 Figure 1.2: Typical Manufacturing Processes in the Petroleum and Petrochemical

Industries..............................................................................................................16 Figure 1.3: Some Petrochemical Product Families......................................................17 Figure 1.4: Singapore's Manufacturing Output............................................................18 Figure 1.5: Chemical Industry Output by Sectors .......................................................18 Figure 1.6: Map of Jurong Island................................................................................19 Figure 1.7: Example of Linked Infrastructure in Jurong Island...................................20 Figure 2. 1: The Oil Supply Chain...............................................................................24 Figure 3.1: Tasks in Refinery Operations ....................................................................27 Figure 4.1: Attributes of company objects in G2.........................................................31 Figure 4.2: More attributes of company objects in G2 ................................................32 Figure 4.3: Attributes of commodity objects in G2 .....................................................33 Figure 4.4: Workspaces for commodities and companies ...........................................34 Figure 4.5: Company connection attributes .................................................................35 Figure 4.6: Material connection attributes ...................................................................36 Figure 4.7: User choices ..............................................................................................37 Figure 4.8: Company network generation ...................................................................38 Figure 4.9: Material flow generation ...........................................................................39 Figure 4.10: Auction site demonstration......................................................................40 Figure 5.1: Proposed Jurong Island Intranet ................................................................43 Figure A2.1: Electronic Integration in OmniSuite.......................................................54

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ACKNOWLEDGMENTS We would like to thank the following people for their invaluable input, for the many illuminating discussions on different aspects of Chemical Supply chains as well sharing their insights on the road ahead. BIOINFORMATICS CENTRE Lim Teck Sin Tan Tin Wee CALTEX K. C. Mathew CHEMICAL INDUSTRIES (FAR EAST) Tan Pua Yong EASTMAN CHEMICALS Morton R Thomas ECONOMIC DEVELOPMENT BOARD OF SINGAPORE (EDB) Lai Pak Wah EXXONMOBIL Kong Kin-On James Meares Edward J Palkot JURONG TOWN COUNCIL (JTC) David Tan PETROCHEMICALS CORPORATION OF SINGAPORE (PCS) Bernard Leong Lian Wah SAP R Kashi Viswanath SHELL EASTERN PETROLEUM CO Tan Teng Hai

SCHERING-PLOUGH Seet Poh Cheng Patrick Yeung

SINGAPORE REFINING COMPANY Tony Anderson Mah Kai Leong Judy CH Yeao

VOPAK Paul Cox

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Law Say Huat Wilfred Lim Henk W. Schop Noel Tan Thian Chye Tay Ben Vree

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I. INTRODUCTION

A. CHEMICAL INDUSTRY IN THE 1990'S Chemicals is an all encompassing word and includes a variety of products ranging from petroleum, petrochemicals, specialty chemicals, pharmaceuticals to consumer products. Each of these has distinct characteristics and can be considered a different sector by itself. In order to understand the nature and the challenges in the oil and petrochemical industry, it is useful to look at their history.

1. Brief History of Petroleum It is generally accepted that crude oil is the residue of organic waste of microscopic plankton and plants. Millions of years ago, dead and decaying matter rained down to seabed. This organic matter mixed with sand and gravel formed thick layers of sediment. The matter was rich in carbon and hydrogen atoms and was slow-cooked over thousands of years under high pressure and underground heat in the absence of oxygen, converting it into hydrocarbons. The tiny droplets of oil permeated through small pores and fractures in till they were trapped in different type of rocks such as shale or clay - called caprocks. These are impermeable, meaning that the pores are so small that oil droplets cannot flow through them. Oil is trapped in reservoirs, hundreds and thousands of meters below land surface or sea. Geologists analyze rock types and determine which rock formation might contain oil. Oil always does not get trapped and sometimes seeps up to the surface to form thick black pools or tarry deposits. This seepage was a clue to the early explorers. Along with oil, gas is usually present. It is likely to be a mixture of methane and ethane (also called natural gas), propane and butane (bottled as cooking gas). Typically in such reservoirs, the lightest gas fills the pores of the reservoir rock as a gas cap above the oil. Once a reservoir is identified (exploration), drilling is done. When the drill bit penetrates the reservoir, the lower pressure inside the bit allows the oil fluid to flow into the well bore and then to the surface as a flowing well (production). As production continues over time the underground pressure reduces and the wells need help to keep going. These are done either from surface pumps or from gas injected back to the well, known as gas lift. Hot crude oil comes out, sometimes accompanied by natural gas. After the crude is pumped out of the ground, tankers, pipelines, barges, trains or trucks transport it. On arrival, it is separated by grade, and determined by its content and boiling point. For some grades, the crude oil is broken into its molecular components and cleaned to remove impurities. Finally, all grades are blended into final products. Crude oil is a mixture of petroleum liquids and gases in various combinations. But as it flows from a well crude oil has little direct use. Refining is a complex process that transforms crude oil into usable products. The main uses for oil products are transportation, heating and lighting and power generation. However, oil is an extremely versatile commodity: lubricants, waxes, polishes, many pharmaceuticals and cosmetics require oil as feedstock. Once products are manufactured from oil, there remains the complex task of distributing them to customers. Freight rates, product quantities and distances between distribution points and customers all have to be taken into account to select the best ways to transport products.

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2. Crude Refining Oil is a mixture of liquids and dissolved gases, which is of little use in its crude state. In a downstream refinery, physical and chemical processes convert crude oil to a wide range of useful products. The process of refining crude is complex. In a simplified format it is often referred to as the "Four B's": Boiling(Fractionation): is the process of heating petroleum to separate physically the components of crude. The resulting mixture of vapors and liquids is passed through a fractionating tower. Here the vapors cool and condense at various levels, which are then collected and drawn off by pipelines in five general grades or cuts. Breaking(Conversion): Some grades or cuts are converted again by breaking, or conversion, process. Heat and chemicals (catalysts) are used to break the bonds of larger molecules Bending(Treating): Sour oil or oil containing a high percentage of impurities like sulphur undergoes the bending process. In this process the molecules are bent or changed to remove impurities and improve the quality of the products. Blending refers to the final and finely calibrated process where products are mixed, sampled and analysed to meet stringent quality standards. The first process of boiling is technically called fractionation by distillation. This happens in a steel tower known as a fractionating column, so called because each constituent is known as a fraction. The column is kept very hot at the bottom and the temperature gradually drops towards the top. The inside of the column is divided at intervals by horizontal trays. Crude oil is first heated by a furnace and then passed into the lower part of the column. The boiling crude oil rises through the column. As each fraction reaches the tray where the temperature is just below the boiling point, it condenses and changes back to liquid. As the fractions condense on their separate trays, pipes draw them off. Distillation is a continuous process with boiling crude oil coming through the bottom and separate fractions flowing out at each level. Fractions collected at the top of the column are called light fractions. The ones collected at the bottom are called heavy fractions. The lightest fraction is refinery gas that is used in the refinery as fuel. Other light fractions are Liquefied Petroleum Gas (LPG), mogas (petrol) and naphtha (which is a major feedstock for chemical companies). The heavier fractions include kerosene, jet fuel and gas oil (diesel). The heaviest fractions are drawn off from the base of the column as fuel oils or residues. Following distillation, many of the separated products are processed to purify them. The heavy residues are redistilled under vacuum to provide raw materials for lubricating oil and asphalt. Distillation process, however, rarely yields what the market requires and depends on the grade of the crude oil. If only the process of distillation is used, fuel oils (heavy fractions) form almost a third and a half, while demand from customers is for lighter fractions. Modern refineries therefore use chemical conversion techniques to enable the yield of lighter fractions. During distillation large volumes of gases such as methane, butane, propane and a host of other gases are produced. These gases are recycled as fuels.

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Here is where the breaking process or conversion process is important. The larger molecules are broken up into smaller, more valuable molecules. There are various cracking processes like visbreaking (where the molecules are broken down under heat) and cat-cracking (where the molecules are broken down in the presence of a catalyst). Conversion techniques also can be applied to the lighter fractions. Naphtha can be converted in the presence of platinum-based catalyst into high-quality petrol by a process of reforming. Hydrogen is a by-product of reforming that is used in other refinery processes. Refinery residues are converted into useable products by different processes. Residues may also be processed by removing carbon, which is the basis of many coking techniques yielding coke for burning as fuel. Table 1.1 shows some typical petroleum products and their uses.

3. Supply and Distribution Supply and Distribution is a complex task for the products manufactured from oil. A variety of factors need to be taken into consideration for distribution. One of the aspects is the use of oil products. The main uses are transportation, heating, lighting, power generation and supply to petrochemical complexes. Freight rates, modes of transport, product quantities and distances between distribution points and customers all have to be taken into consideration to select the best ways to transport products. The main oil products usually leave the refinery in what is termed as bulk loads. Sometimes oil is packed in cans or drums for the consumer. Large consumers like petrochemical manufacturers, chemical companies and power stations may be supplied directly from the refinery via pipelines, rail, road or sea. Smaller customers are generally supplied via storage and distribution centers known as terminals or bulk plants or depots. From these centers, products are transported to customers via different modes of transport to customers. All this makes it a very complex task to ship the right product and the right quantity to the right place at the right time with the right quality and service. Product groups usually distinguish products. Within each group there may be a number of grades, which is dependent on its application. These products are appropriately marketed based on the consumer.

4. Petrochemicals The petrochemical industry is the extended part of the oil industry as shown in Figures 1.1 and 1.2. It is sometimes called as the downstream industry. Many petrochemical plants share facilities with oil refineries. Synthetic rubbers, detergents, plastics, packaging materials, artificial fabrics, dyes, adhesives, paints, etc are made from petrochemicals. The chemical industry depends on supplies of oils as feedstock for the manufacture of thousands of products that contribute to the comfort and convenience of modern lifestyle. There are thousands of synthetic chemicals in daily use. Figure 1.3 shows some families of petrochemical products and Table 1.2 shows some typical uses. Over 90% of them are carbon based. 10% of all oil is used by the petrochemical industry.

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Almost all organic petrochemicals are made by joining small molecules with just a few carbon atoms in their skeleton, into much larger and more complex structures. The most important building blocks of petrochemical industry are the Olefins or Alkenes (comprising of Ethylene, Propylene, Butylenes) and Aromatics (comprising of Benzene, Toluene, Xylene). The major source of ethylene is refinery gas streams and natural gas. Propylene and butylenes are obtained from the distillation column. The aromatics (benzene, toluene and xylenes are produced by catalytically reforming naphtha.

5. Business Challenges of the Oil Industry Business in the oil industry has been complex since its inception, which can be traced to the industrial revolution and the manufacture of the automobile. This can be attributed to factors like being volume based business, with substantial investments and asset base, handling of a large number of products, being a continuous process oriented business with supply and demand varying on a lot of unpredictable and uncontrollable factors like political scenarios, weather, etc. After the break-up of Standard Oil in the U.S., the business started becoming more complex with the fragmented companies trying ways and means to do business by forming joint ventures. The consumer scenario has also changed. In the early days, petrol was just one of the many products sold in hardware or provision stores. As demand grew, special filling stations were established, some with repair workshops. Modern service stations emphasize on speed and convenience. Some of the stations are open 24 hours a day, with special pumps that operate on a direct debit card system. In addition to selling a range of car accessories, many service stations sell convenience food and offer eating facilities, etc, adding another dimension to supply and distribution and thus diversifying into retail. Today markets have liberalized, consumers have grown smarter, oil supply is more than demand. Oil companies are trying innovative ways and means to combat the thin margins in fuels. Some of the activities undertaken by these companies to be profitable are – Efficient production and business processes, identifying and focusing on strategic business units, optimizing the supply chain and merging and acquiring.

B. SINGAPORE CHEMICAL INDUSTRY Figure 1.4 shows the significance of the Chemical industry to Singapore’s economy.

1. Petroleum Singapore is the third-largest petroleum-refining centre in the world, with a total refining capacity of 1.1 million barrels per day. Oil majors like BP Amoco, Caltex, ExxonMobil and Shell use Singapore as their refining base to serve their customers in Asia-Pacific. Singapore is now a total oil business centre, incorporating activities like refining, blending, storage, terminalling, trading and crude sourcing, marketing and distribution.

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Singapore’s oil refineries are an important foundation of its economy. The cost estimated at US$20-25 billion to build plus the land cost, the value of refineries is further underlined by their contribution to the country’s trade, its financial sector and the development of it’s port. Oil comprises 8% of Singapore’s total trade of nearly S$344 billion last year; in earlier years when the oil prices were higher it was well above 30%. Most of that flow is linked to the refineries, which draw in crude oil from the Middle East, Africa and Asia and send out finished products to this region as well as Europe and North America. The enormity of oil flows through its port has made necessary the creation of an oil and non-oil category in Singapore’s trade. Banks and financial institutions derive substantial business servicing the accounts of more than 100 active oil companies with operations in Singapore. As oil is a major commodity, it contributes anything from a third to 60% of bank’s revenues in the trade finance business. The emergence of Singapore as a major port is owed largely to the existence of the refineries and the trade they engender. About 45% of the traffic passing through the port are oil. The indirect spin-offs are just as formidable. The growth of oil trade has lead to the establishment of independent storage operations and the emergence of an active trading community here over the last decade.

2. Petrochemicals Singapore’s sizeable petroleum refining industry has provided a solid base for development of a world competitive petrochemical industry. The local refineries supply naphtha to Petrochemical Corporation of Singapore where it is cracked into feedstock used by downstream companies to produce a range of petrochemical products. An example of the strong linkages between the petroleum and petrochemical industries is Mobil’s aromatics complex, which is fully integrated with its own refinery here.

3. Chemicals The chemical and life sciences industry ranks after the electronics industry as the second largest industry in Singapore's manufacturing sector, one of Singapore's key engines of economic growth. In 1998, the chemical and life sciences industry contributed 23% to the total manufacturing output of S$124 billion. Investment commitments in the chemical and life sciences industry totalled S$3 billion, accounting for 39% of the total commitments of S$7.8 billion in 1998. These investments resulted in the creation of 1,100 new jobs. The chemical and life sciences industry comprises the petroleum, petrochemicals, specialty chemicals, pharmaceuticals, healthcare and food & beverage sectors. Figure 1.5 shows the contributions of the various sectors to the total chemical output of S$28 billion in 1998. For the chemical sector, the vision has been to develop Singapore into an integrated world-scale chemical hub, generating an output of more than S$75 billion by the year 2010. Specifically for the petrochemical sector, the target is to triple Singapore's present annual capacity for ethylene production to 3 million tonnes by 2010. This base load of key chemical building blocks is critical in developing high value-added downstream chemistry chains that are resilient to market fluctuations, thus ensuring sustainable long-term growth.

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Central to the future growth of the chemicals industry in Singapore is the development of Jurong Island.

4. Jurong Island Jurong Island has come a long way since its beginning as seven southern islands off Singapore - Pulau Merlimau, Pulau Ayer Chawan, Pulau Ayer Merbau, Pulau Seraya, Pulau Sakra, Pulau Pesek and Pulau Pesek Kecil. Pulau Ayer Chawan, Pulau Pesek and Pulau Merlimau became home to several large refineries such as Esso, Mobil and Singapore Refining Company (SRC). When the chemical industries was identified in 1980 as an industry cluster capable of contributing significantly to the economic growth of Singapore, amalgamation of the islands in forming Jurong Island, became the natural choice for the development of a petrochemical complex. In 1991 Jurong Town Council (JTC) was appointed the agent of the Jurong Island project. Based on the needs and feedback from industrialists, JTC planned and coordinated with the various government agencies for delivering the necessary infrastructure and services to the island, namely land through large-scale reclamation, roads, drains, utilities and others. JTC was appointed the government's agent to merge a cluster of seven islands off the southern coast of Singapore to form the Jurong Island by the year 2003. The $7-billion project reflected Singapore’s effort to meet the growing needs for industrial land from the petrochemical industry. By the end of 1998, 184 hectares around Pulau Sakra, Pulau Merlimau, Pulau Seraya and Pulau Ayer Chawan were filled up under the first phase of work. Work for phase 2 was started around Pulau Pesek, Pesek Kecil and Pulau Ayer Chawan. A total of 624 hectares was reclaimed by 1998. Arrangements were made for good accessibility: a two-kilometer causeway (Jurong Island Highway) linking Jurong Island to the mainland was opened to the public in mid 1999. Figure 1.6 shows a map of Jurong Island. Today, Jurong Island is home to leading petrochemical companies, as it emerges as a giant petrochemical complex. Industry luminaries like Chevron, Sumitomo, DuPont, Exxon, Mobil, Celanese, Mitsui and Lonza have taken their positions. In addition, third party service providers of utilities, tankages and terminalling facilities, such as SembCorp Utilities & Terminals, as well as Vopak and Oiltanking, have also found it advantageous to be located there. Jurong Island is currently home to about fifty-five leading petroleum, petrochemical and chemical companies with committed fixed asset investments of $20 billion. Incentives to companies: Capitalize on production linkages, linked to feedstock suppliers located close

by and offtakers are at hand to take the finished goods. Save on storage and distribution costs. Outsource for essential services and

facilities such as utilities, storage and terminalling- all conveniently located on the island itself.

Start operations in record time. Key infrastructure is in place- berths, jetties, roads, drains, electricity, water, industrial gases and telecommunications.

Companies in Jurong Island are able to inter-link their production processes-obtain feedstock from nearby plants and dispatch output to other plants downstream or

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outsource for essential services from companies situated on the island itself. A classic example of a company that is tapping this synergy with both its suppliers and end-users is Celanese Singapore Pte. Ltd. PCS provides for it’s ethylene requirements as feedstock and it’s output is in turn used as feedstock by neighboring plants like Poval Asia. At the same time it out sources utility supplies from Sembawang Utilities and Terminals, oxygen from Air Products and terminalling services from Van Ommeren. Companies located at Jurong Island enjoy the advantages of the innovative cluster development through symbiotic linkages and sharing of common infrastructure and facilities. As processes are linked, feedstock is sourced directly from nearby plants of other companies. Likewise, output is easily dispatched to end-users in the vicinity. The result is greater cost savings and increased efficiency. Figure 1.7 shows an example of these linkages for the Jurong Island companies in terms of feedstock integration.

C. FOCUS OF THIS STUDY As discussed above, the oil industry is the basis of many of the other (downstream) sectors. It has also been around for the longest time and is widely considered to be a mature and sunset industry. Moreover, in the Singapore context, it constitutes the major portion of the chemical manufacturing output as discussed above. On the other hand, the pharmaceutical sector promises tremendous growth in Singapore. Given the lack of commonality between the various sectors and the difficulty in studying all of them simultaneously, this group has focused its efforts on two distinct sectors (1) the Oil & Gas supply chain and (2) pharmaceutical marketing & distribution. Members of the team from NUS focused on the former and members from Georgia Tech focused on the latter sector. The other sectors can also be studied in the future using the methods and techniques developed in this study. The objectives of the study were: 1. Document global supply chains for the chemical industry with emphasis on oil &

gas and Singapore links 2. Focus on the Jurong Island chemical complex identifying companies and their

business interactions, products and trade volumes, modes of transportation, trade trends, etc.

3. Identify key research issues and the potential for logistics, IT and e-business The approach adopted was 1. Literature review and mapping of oil & gas supply chain 2. Company visits and discussions to gather information and identify issues 3. Discussions with statutory agencies

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LPG Liquefied Petroleum Gas (LPG) is a mixture of propane and butane.

These can be easily stored in metal cylinders as liquids under pressure or refrigeration. LPG is used for cooking and domestic heating

Petrol Petrol or Gasoline is used in vehicles and combustion engines.

Naphtha Naphtha is a very valuable petrochemical feedstock to produce plastics and other valuable materials at chemical factories. Sometimes naphtha is also used as a blending component for aviation fuels.

Kerosene Kerosene or paraffin was the first major product to be refined from crude oil. It is mainly used for central heating and domestic heating stove.

Jet Fuel Aviation or Jet fuel is basically quality kerosene. Quality, because, it should be easily pumpable at low temperatures, remains stable at high temperatures, burn cleanly and meet exact levels of energy output. It is used in high-performance jet engine aircrafts.

Diesel Fuel for diesel engines comes in two types. First type are the fuels for high-speed diesel engines in cars, lorries and buses. Second type are fuels for stationary or marine diesel engines, which are used in ships and power stations. The second type is of lower quality and consists of a blend of heavier fractions.

Lubes Lubricating oils are carefully researched and specifically blended to reduce wear and tear in every piece of machinery, from motor car to heavy industrial equipment. The products vary per their viscosity, with low viscosity for delicate scientific instruments to highly viscous for open gears and wire ropes.

Wax Waxes are removed from lube and fuel oil fractions and are used to make candles, electrical insulation, waterproofing, crayons, etc.

Bitumen Bitumen is a heavy residue from oil distillation and is left behind when all other products have been removed. It is dark, sticky and remains solid in room temperatures, but can be made to flow at high temperatures. It is suitable for making road and waterproofing.

Table 1.1: Petroleum Products and their Uses

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OLEFINS Product Uses

Ethylene Polyethylene (LDPE and LLDPE- films, moulding, pipe extrusions, wire and cable sheaths, etc.), PVC (pipes, window frames, packaging, bottles, floor and wall coverings, toys, upholstery, etc.), polystyrene (cups, construction and packaging, etc.), ethylene oxide and derivatives (e.g. monoethyl glycol - used as a coolant concentrate), polyester fibres, ethyl alcohol, synthetic rubbers, higher olefins and derivatives and ethyl benzene

Propylene Polypropylene, solvents, cumene, acrilonitrile., propylene oxide, polyurethanes, plasticisers

BBB BBB (Butylene / Butadiene / Butane) are used in making synthetic rubbers, thermoplastics, polyamide fibres (nylon)

AROMATICS

Product Uses

Benzene Polyamide fibres (nylon), polystyrene, synthetic rubber, resins, detergents, latex

Toluene Solvents, polyurethanes

Xylene Solvents, polyester fibres, plasticisers, resins

Table 1.2: Petrochemicals and their Uses

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Figure 1.1: The Petrochemical Industry

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Figure 1.2: Typical Manufacturing Processes in the Petroleum and Petrochemical Industries

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Figure 1.3: Some Petrochemical Product Families

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Figure 1.4: Singapore's Manufacturing Output

Figure 1.5: Chemical Industry Output by Sectors

TOTAL CHEMICAL INDUSTRY OUTPUT [98]: s$28billion

58%11%

11%

10%

10%

Petroleum Petrochemical

Speciality and Industry Materials/Non-metallics

Pharmaceuticals & Healthcare

TOTAL MANUFACTURING OUTPUT [1998]: s$124billion

48%

3%6%

14%

19%

5%5%

Electronics Electrical Machinery Machinery

Transport Equipment Metal Products Others

Chemicals

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Figure 1.6: Map of Jurong Island

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Figure 1.7: Example of Linked Infrastructure in Jurong Island

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II. CHEMICAL SUPPLY CHAIN MANAGEMENT

A. OVERVIEW The term "supply chain management" is a relatively new entrant to the oil industry although the industry has been practicing many of its components in one form or another for several decades. Supply chains in the electronics, automobile and other industries have received much attention in the last several years from academia and industry. The gains from these industries can be extended partly to the oil supply chain; however, there are features specific to the oil industry that preclude direct and en masse extension as discussed below.

B. CHARACTERISTICS OF OIL SUPPLY CHAIN The four main characteristics of the oil supply chain are as follows:

1. Information Sharing: In the old economy the company act as isolated silos optimizing their internal operations and dealing with suppliers through their purchase and customers through marketing departments. Virtually there is no communication between the companies except the paper flow of orders. There is a paradigm shift now with the growth of the Internet and the ease with which data, text and video information can be shared across partners. Also there is an increasing realization that supply chains can be streamlined by automating the interface processes between companies. The experience of companies over the last one year has shown that the bottom line benefits are enormous The chemical industry is well suited for e-supply chain management due to complex customer relationships, inefficiencies in the current supply chain, and the necessity to drive costs down due to the high-volume, low-margin fundamentals of the business. As a result, B2B e-commerce for the chemical industry is projected to reach $184.5 billion by 2003, trailing only the automotive and electronics industries in overall revenue, as new processes drive value through every link in the supply chain. As e-supply chains grow in sophistication, information management— how, when, and what companies buy and sell— becomes the ultimate benefit. The data created will help to drive strategic planning and decision-making. The chemical industry will then conduct activities at levels of efficiency that could not be imagined when the Internet first came into the public mind. The foundation for the future of e-supply chain management within the chemical industry is being built now, click by click. Partnering across companies throughout the supply chain to enable the industry to reach higher levels of success in their revenue and profitability goals in this dynamic new environment. A key driver, for most of them, is that established companies have realized that e-commerce is going to transform the industry, and they want to be the ones generating and capturing most of the value throughout the transformation. The industry has taken advantage of the Internet and e-commerce to improve information

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flows and basic transactions, but it is just starting to dive into Internet-enabled supply chain optimization. Many chemical companies are still developing e-commerce strategies, but an increasing number have started to implement major projects. Dow Chemical (Midland, MI) plans to spend $100 million on e-business this year, according to David Kepler. The group’s list of e-initiatives includes a founding role in new consortia for chemicals, thermoplastics, MRO, capital equipment, and elastomers, and a customer relationship management initiative

2. Transportation & Large Inventories: In the chemical Industry the B2B transportation is either by ships or trucks. This slow mode of transport induces in-transit inventory. The variability of transport times due to natural and man-made causes makes it necessary to have safety stocks at the companies ends. The inventory alone can run into billions of dollars. The electronic and auto industries have been very successful in reducing the inventories of all kinds basically by improving the communication between the partners. Given that the manufacturing plants require continuous feed, the slow transport makes it almost mandatory to maintain certain levels of inventories. It is not known whether the current levels of one month to two months are necessary. It is known that information replaces inventory. The use of Internet will certainly have its influence on the industry.

3. Trading : The oil supply chain is dominated by trading mechanisms. The raw materials such as crude, naptha are bought on the trading floors. This induces the habit of buying and selling raw materials both for use in the manufacturing and also for future trading in the market. The price uncertainty and the trading behavior both induce both in-transit and storage type inventories. The economics of oil supply chain is far more complex than that of other manufacturing items.

4. Customs & regulations: The logistics associated with Chemicals is more complex that for high technology components. Certification of vessels for safe transport is important. Oil spills, safety chemicals and contamination are very dangerous.

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C. ROLE OF INFORMATION TECHNOLOGY High-profile implementations include the industry’s recent and unprecedented commitment to consortia. This year alone major competitors have teamed up to announce consortia designed to streamline supply chains and contract business in chemicals and related products and services. The strengths of the new e-market consortia include deep industry expertise and formidable buying and selling power. A key driver, for most of them, is that established companies have realized that e-commerce is going to transform the industry, and they want to bethe ones generating and capturing most of the value throughout the transformation. The industry has taken advantage of the Internet and e-commerce to improve information flows and basic transactions, but it is just starting to dive into Internet-enabled supply chain optimization. “We’re on the verge of the third and most dramatic phase of the e-commerce revolution—the ability to reach and understand customers more effectively and realize greater efficiencies through the development of an electronic supply chain,” says Peter McCullagh, chief executive officer at e-Chemicals “The potential for value creation is enormous, but moving from traditional to e-supply chains is not straightforward, and we are in the very early stages of the transition.” Many chemical companies are still developing e-commerce strategies, but an increasing number have started to implement major projects. Dow Chemical (Midland, MI) plans to spend $100 million on e-business this year, according to David Kepler, who was named Dow’s vice president/e-business and e-commerce in mid-February. The group’s list of e-initiatives includes a founding role in new consortia for chemicals, thermoplastics, MRO, capital equipment, and elastomers, and a customer relationship management initiative

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Figure 2. 1: The Oil Supply Chain

Information Network

Field ProcessingProduction

Storage

Drilling

Legalities

Exploration

Products

Transportation

Distribution

PetrochemicalPlants

Petrol Pumps

Refining

Storage

Storage

Information Network

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Field ProcessingField ProcessingField ProcessingProductionProductionProduction

StorageStorageStorage

Drilling

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DrillingDrillingDrilling

LegalitiesLegalitiesLegalities

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ProductsProducts

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PetrochemicalPlants

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III. CURRENT ISSUES In the face of highly competitive markets and constant pressure to reduce lead times, enterprises consider supply chain management to be the next area where improvements can significantly impact the bottom line. Until now, in the chemical industry, modeling and analysis concerned the physiochemical phenomena. In the present era, with the advent of the Internet, other factors are becoming more important. These include the movement of materials, the flow of information and the financial transfers. These flows could be between departments within an enterprise and between supply chains across enterprises. Also, the information on customer profiles, market trends, logistics etc. has to be taken into account. Incorporation of these factors into the business model would assist the decision-makers in making more efficient enterprise level decisions, and result in a better-managed enterprise. One major impediment in consideration of the aforementioned factors currently is the fact that the desired information usually resides across a multitude of sources. These sources include the World Wide Web, the various exchanges like Chemdex, Chemconnect, World Chemical Exchange etc., the wide area networks of industrial clusters and the internal departments of all enterprises present in the supply chain. Present business support systems usually do not have the capability to capture this information from varied sources and represent it in a structured manner that would aid unified decision-making. Thus, they are unable to accommodate all the alternatives that the decision-maker has in front of him. Given this ground reality, the need for a new paradigm for decision support systems, which is capable of gathering dispersed information required for the normal function of an enterprise of providing a structured way to make decisions is obvious. In this paper, we propose a unified framework, which fills this crucial need of organizations and enables business decision support systems that would be effective in the present e-commerce age. Let us consider the example of an ethylene producing enterprise in the present day business scenario. The enterprise uses naphtha as a raw material. It has a long-term contract with a naphtha supplier, which satisfies a part of its need for naphtha. Buying naphtha on commodity exchanges fulfils the rest of its need. The enterprise has a contract with a 3rd party logistics (3PL) company for the transport of naphtha. The enterprise requires a variety of information in its day-to-day operation. It needs information about the availability and supply of naphtha on the various chemical exchanges. It needs updates on the movement of naphtha bought from the supplier. This information is available with the 3PL. It needs the market trends on the overall demand and supply of ethylene and also information regarding the supply chain of its competitors. The enterprise also needs to continuously weigh the choice of continuing with the present supplier against buying naphtha from another source. All this information is widely dispersed but essential for the decision-makers to decide the manner in which the requirement of naphtha is fulfilled. Due to the difficulty involved in collection of all this information manually and inability of present systems to gather this information and represent it in an organized fashion, the decisions made by the enterprise for buying materials, planning, scheduling etc. are really feasible solutions and not optimal ones. This brings forth the need for an representation scheme capable of capturing the various interactions – both inter-company and intra-company.

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A. NEED FOR INTEGRATED DECISION MAKING Figure 3.1 shows the major tasks involved in refinery operations. While decision support systems are available for many of these tasks they are inadequate and disjoint. Some issues in the current state-of-the-art are:

i. Planning-Scheduling integration requires multiple sources of information a. Expected stocks from previous planning cycles b. Expected product demands c. Planned refinery production d. Transportation-Planning integration e. Ship arrivals f. Jetty & tank availability

ii. Scheduling-Operations integration

a. Required to optimise transitions

iii. Planning is not integrated with scheduling

iv. Scheduling is done in a reactive mode

v. Modelling technology is used poorly

vi. Evaluation requires long turn around time thus resulting in ad-hoc decision making

vii. Integrity of process models questionable

a. Models have to be tweaked based on past experience

b. Hence, process models are used for guidance only

viii. Little or no cross checking between actual operations and planned

a. Difficult to identify metrics for evaluating planning effectiveness

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Figure 3.1: Tasks in Refinery Operations

CrudeSelection

Transportation

Product Demand Forecast

CrudeSupply

Scheduling

RefineryScheduling

BuyingProcessing

Delivery

Refinery Operation

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Transportation


CrudeSupply

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IV. REPRESENTATION FOR DECISION SUPPORT To achieve an object oriented representation and analysis of the chemical supply chain, an expert system called G2 was used. An expert system was preferred over other means such as database, HTML, etc., as it provides the facility to do more advanced and intelligent tasks such as modelling, analysis, simulation, etc. G2 is one of the most powerful and versatile expert system shells available and salient features of this package are as follows.

A. G2 G2 is marketed by Gensym Corporation, a Cambridge, MA, U.S.A. based company. It provides a comprehensive, object-oriented environment for building and deploying mission-critical, intelligent applications that dramatically improve complex business operations. G2's proven technology provides a competitive advantage by helping one optimize operating efficiencies, improve asset and service availability, better manage complex, time-critical operations, build and deploy operations management applications dramatically faster, minimize the costs of maintaining operations management applications, preserve, enhance, and leverage operations knowledge. With G2, one can apply knowledge to operational data to reach conclusions, provide advice, and execute decisions - all in real time. For business operations, G2-based intelligent systems capture and apply knowledge to enable continuous improvement in operational efficiency and performance. G2 enables one to represent knowledge as objects, rules, methods, and procedures using graphics and structural natural language. This allows applications to be readily understood, tested, and modified. G2 offers a highly interactive and visual development environment that simplifies and speeds the prototyping, development, and on-line deployment of intelligent systems. G2 objects are a powerful and intuitive way to represent the physical and abstract aspects of applications. Objects are organized in a hierarchical class structure, and G2 provides the flexibility of multiple inheritances so that an object inherits properties and behaviours from multiple object classes. Once an object - or class of objects - is defined, the work is immediately reusable. Any object or group of objects can be cloned repeatedly, and each cloned copy will inherit all the properties and behaviors of the original object. Objects, rules, and procedures can then be grouped into library modules that are shared by all G2 applications, allowing streamlined development of new applications. G2’s graphics represent much more than pictures - they represent the properties and behaviours of objects and the relationships among them. One can quickly model an application by graphically representing and connecting objects. These connections can be dynamically created, modified, and deleted even while G2 is on line. Connected objects form powerful models that visually represent application processes - such as material flows, industrial processes, communication networks, transportation and logistics networks, information routings, and even logic flows. G2 graphics also include built-in dialogs, graphs, charts, dials, tables, sliders, bitmaps, and meters to speed up the development of user interfaces.

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B. SUPPLY CHAIN REPRESENTATION All companies are represented as objects. There exists a class called company and all the companies are instances of this class. The properties of each company includes the following four lists: - A supplier list: list of companies that supply raw materials to the company.

- A consumer list: list of companies that it supplies its products to. - A raw material array: list of raw materials for the company. - A product array: list of products of the company.

Figures 4.1 and 4.2 show an example of the attributes of PCS [used as an example], its product-array and consumer-list are shown in detail just to illustrate the way information is stored in the companies’ attributes. All commodities are represented as objects as well. There exists a class called commodity and all the commodities are instances of this class. Each commodity has the following three attributes: - Cost: The market price of the commodity [real data not available].

- Commodity-Logistics: The most common transportation medium. - Lead time: Typical values.

Figure 4.3 shows an example of the attributes of ethylene-glycol. All instances of companies and commodities are created on separate workspaces named COMPANIES and COMMODITIES respectively as shown in Figure 4.4. Besides these, there are two other classes with names company connections and material connections that are used to link up companies and commodities respectively when the supply chain is generated. These connections also have attributes that are relevant to the supply chain. The company connections contain a material list that comprises of the list of materials that are being transferred over the connection and the logistics involved, as shown in Figure 4.5 Naphtha is being transferred between PCS and Kureha through pipes. At the same time material connections show the companies that are carrying out the conversion and logistics, as Figure 4.6 shows PCS converting naphtha to ethylene.

C. SUPPLY CHAIN GENERATION The user can choose any commodity or company as the starting point for the supply chain. Once the user makes his choice, the entire supply chain downstream of the staring point is generated. Figure 4.7 shows an example where the user chooses “crude” as the starting commodity.

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The user can choose to see either the supply chain in the form of a network of companies, i.e. the representation will show all the companies connected to each other in the way the material flows from one to the other, moving from left to right. So the left most company(s) is/are the starting point and the right most companies are the ones that produce the final product, i.e. the final product of the companies goes directly to the market [local/export]. The connections used to connect up the companies carry information in them such as the commodity (s) being transferred, the cost, the logistics and the lead times involved. Figure 4.8 shows an example of the company network being generated. The other option that the user has is to see the material flow directly as in we can see all the phases through which a given commodity goes through before it reaches the final product, all the intermediates and all the by products are shown. It is basically like a tree with the main trunk as the starting commodity and thereafter all the branches show the different products that result from different processes being carried out on it. In this form of representation the connections carry information pertaining to the companies that carry out the transformation and the logistics involved. Figure 4.9 shows an example of the material flow network being generated. One of the most useful and striking features of the program is its ability to do dynamic representation depending on the user’s choice. The program gives the user the flexibility to choose the starting point for the supply chain; this in turn gives the user the freedom to look at the supply chain for any commodity or company. Among the other features of the program is the clarity of representation and that the user need not be familiar with G2 to use this program.

D. FUTURE DEVELOPMENTS Currently the program also allows the user to choose any commodity that he wishes to buy, and the program shows on a workspace the companies that provide the material in question, the cost at which they provide it and also the logistics involved. As shown in Figure 4.10, the user’s query is the commodity “MTBE” and the companies that provide that are shown in the workspace together with the relevant information. Now this is basically the groundwork for the development of a future auction site where a user can request to bid for any commodity and the associated volume. The program should then be able to process the data real time and provide for the user the company that is offering the best price. Due to the unavailability of real data and numbers the program is currently using dummy values. But the scope for future work is potentially very promising. Currently very few auction sites are operational in the region and this could be one of the first of its kind, once it is complete in every aspect.

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Figure 4.1: Attributes of company objects in G2

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Figure 4.2: More attributes of company objects in G2

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Figure 4.3: Attributes of commodity objects in G2

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Figure 4.4: Workspaces for commodities and companies

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Figure 4.5: Company connection attributes

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Figure 4.6: Material connection attributes

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Figure 4.7: User choices

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Figure 4.8: Company network generation

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Figure 4.9: Material flow generation

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Figure 4.10: Auction site demonstration

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V. CONCLUSIONS & RECOMMENDATIONS In our previous discussion, we identified several research issues worthy of future attention. Of these, one issue that clearly stands out is the lack of integration in decision-making processes in chemical supply chains. Integration at the electronic level has been or continues to be achieved in several forms as follows.

- Communication between applications - Shared data - Process simulators (Petrofine, Hysis.Refinery) - Business applications (ERP)

However, a truly integrated decision-making is still missing in many business processes. We envision that the following e-era technologies will be required to achieve this goal. 1. Optimisation

(i) Solutions of large-scale problems (ii) Discrete + continuous decisions

2. AI & Expert systems (i) Domain expertise (ii) Search algorithms (iii) Graceful degradation

3. Intelligent Software Agents 4. E-business

(i) Exchanges (Auctions & Reverse auctions) (ii) Portals (iii) Community/company intranet

An example of how the above technologies can be brought to bear in the Singapore context is described below. Jurong Island offers a multitude of opportunities for optimisation and e-commerce in chemical industry in Singapore. With this in mind, a portal for Jurong Island was proposed by our team. However, this has been already implemented by Jurong Town Council and the contract has been assigned to a group of companies including IBM and others. Jurong Island is a structurally integrated business community. This portal should make it an e-business community. An N-way portal can provide quality information at the disposal of e-citizens of Jurong Island and sharing. The current portal of Jurong Island facilitates e-MRO (Maintenance, Repair and Operations). This can be taken a step further to include e-procurement for direct (e.g. Naphtha, catalysts, etc.) and indirect (e.g. stationery, utilities, etc.) purchases resulting in cost reductions via network leverage, logistics internal and external to the Island, optimized operations through improved buyer/seller collaboration operations, planning and scheduling of shared facilities resulting in inventory reductions, and knowledge-based applications. In addition, a supply chain representation such as

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presented in this report can be very handy in strategic decision making and attracting foreign investment in Jurong Island. EDB and JTC have realized the potential for this tool and are interested in future work in this area. The team has the following recommendations for a potential e-business community project (Figure 5.1) for Jurong Island.

Study the supply chain of Jurong Island as an integrated business community Develop Tools for assisting strategic decisions Identify well defined research projects Recruit manpower trained in e-commerce

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Figure 5.1: Proposed Jurong Island Intranet

(Based on Viswanadham N., 1999, Fig 1.2, page 5)

Supplier Logistics Provider

Supplier Distributor

Customer Customer

Retailer Retailer

Internet

Information NetworkJurong Island Intranet

Logistics Network

Material Flow Integration



Customer Customer

Retailer Retailer



Customer Customer

Retailer Retailer

InternetInternet



Logistics Network


Logistics Network


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VI. ACHIEVEMENTS This project has resulted in the following publications and thesis: 1. Julka, N., Srinivasan, R., Karimi, I., Viswanadham, N., Behl, A., “Enabling frameworks for chemical supply chains in the new e-commerce era,” Accepted for presentation at the AIChE annual meeting to be held in Los Angeles, CA, U.S.A., November, 2000. 2. Behl, A., “Object-oriented analysis and representation of the chemical supply chain,” 4th year research project, Department of Mechanical Engineering, National University of Singapore, May, 2000.

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REFERENCES 1. “Net Focus”, Chemical Week Associates, July 26,2000. 2. “Net Focus”, Chemical Week Associates, Aug 18,1999. 3. N. Vishwanadham, “Analysis of Manufacturing Enterprises”, Kluwer-Academic, 1999.

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APPENDIX I: INDUSTRIAL VISITS The team visited several different chemical industries that are the key players in the local market. Many of these visits occurred during the week of 24th January 2000 along with the team from TLI - Georgia Tech. These visits enabled the team to get a much clearer picture of what exactly the real-life issues are. Talking to the people who actually do things brought to surface a lot of issues that do not exist in theory. For instance, the meeting with Schering-Plough made it clear that e-commerce could theoretically could be implemented on the supply side for the pharmaceuticals manufacturers, but in practice, it would never work because of the fact that it is not easy for them to change suppliers just on the basis of the price offered. The supplied material need to satisfy a lot of criteria before it can be approved and the cost of all the chemical tests is usually a lot more than the savings offered by changing suppliers. So in practice e-commerce would not be as helpful as it sounds in theory to them.

VAN OMMEREN Specialization: Terminalling Location: Sakra [Jurong Island] Start Up: 1980 Area: 3.6 hectares, 1,071,000 cbm Products: storage tanks, terminalling of petroleum products and chemicals NEW: Supposed to double its capacity at Sakra to 200,000 cubic metre by 1999 end. 46 terminals and total storage capacity more than 14 million cbm word wide. 11% of its share is in Asia and 70% of which is in Singapore [Sebarok & Sakra island] Activities: Terminals are equipped to store mineral oil, chemicals, gases and fats. Fleet of 20 deep sea vessels for shipping of clean petroleum products and chemicals [especially methanol]. Pulau Sebarok: 925,000 cbm of oil storage and 45,000 of chemical storage [acylonitrile, BTX, TDI, MEG, MBTE and methanol]. 5 jetties catering for vessels of 8000 to 180000 dwt Pulau Sakra: 35,000 of chemical storage & terminalling. Chemicals stored for the 1st phase are mostly meant for DuPont’s Adiphic acid and Zytel plants.2nd phase VOTS built a new custom made tank-pit for Hoechst Acetyls VAM plant, two 10,000 metric tons stainless steel tanks for acetic acid and two 5,000 tons carbon steel tanks for vinyl acetate monomer storage. Today the total capacity at Sakra stands at 101,000 cbm.

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FAR EAST CHEMICALS Location: Sakra [Jurong Island] Start Up: 1998 Products: Chlor alkali, liquid chlorine, liquid caustic soda, sulphuric acid, sodium hypochlorite, calcium hypochlorite, zinc chloride Started a chlorine plant in 1998, capacity 31,500 t/y which expanded to 63,000 in 1999. This output is enough for the local need for chlorine, hydrochloric acid and caustic soda. Past financial year the prices of the companies’ products dropped mainly due to additional capacity built up on the region. The company operates on 4 major divisions: Chemicals, Property, Diamonds and others.

EASTMAN CHEMICALS Location: Sakra [Jurong Island] Start Up: 1993 Products: oxychems, R&D in coatings and paints, formulations, speciality plastics, food ingredients, processing aids for PVC plastics Main Role: Regional Headquarters and manufacturing site for oxo-chemicals Suppliers for chemicals, plastics and fibers: Manufacturer of fine chemicals [Hong Kong] and Copolyster [Kuantan, Malaysia] Specialization: Polyster Plastics for packaging, especially polyethylene terephthalata [PET], a bottle polymer that’s the world’s most recycled plastic, where Eastman’s share of the world market is 25%. It’s recyclable plastics, antioxidants and sorbates are used to keep food and beverage fresh. Eastman’s chemicals are found in pharmaceutical, photography and agricultural products. NEW: Manufacturing facility for oxo chemicals and oxo derivatives, investment: S$300 million on Sakra, expected to start in early 1999.150,000 t/y oxo-aldehyde plant for n-butanol and 2-ethylhexanol and three specialty oxo products sold to the resins, coatings and vinyl compounding markets. Plans for a second 150,000 t/y, US$200 million oxo-aldehyde plant at Sakra. SRC will supply 90,000 t/y of propylene, which is the main feedstock for oxo-chemicals, for 15yrs to them. Oxo describes the production of alcohols, aldehydes and other oxygenated organic compounds. These are essential inputs for various chemicals and plastics. Notes: Challenges being faced : -Supplier challenges [need suppliers with good flexible infrastructure and standardized IT].

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-Non-standard IT practices throughout the industry is a major hurdle. Also many sectors [eg. Shipping] focus on internal IT more than external. -Effective inventory management -Resource effectiveness: more activities done by lesser people, strategic thinking -Trust development required in the region -very high price competitiveness in the region [Asia-Pacific has the lowest product prices in the world] -lack of co-ordinated effort in the region Eastman is using EDI in states, having 33 supplies across US. Have implemented SAP worldwide. All developments in US, only implementation in rest of the world. About 90% of the products developed here are used in Asia Pacific region. Longest transit time is about 20 days in the region. Have experimented buying and selling on the net- experienced the at times buying is cheaper but so is selling. Good aspect is getting new customer experience.

EXXONMOBIL Location: Pulau Ayer Chawan [Jurong Island] Specialization: Oil Refinery Products: distillates (kerosene & diesel), naphtha & mogas, lubes & asphalt, fuel oil, additives [ ParaminsR}, speciality solvents, aromatics (paraxylene & benzene). Refinery: 270,000 bpd, 6 oil tankers [S$50 million] total capacity 230,000 dwt., 115 tanks {13 MB}. Exxon Chemicals Singapore Pte. Ltd: R&D in specialty solvents, evaluation of potential chemical intermediates for detergent industry, formulation of PVC compounds for specialty applications NEW: Involved in the construction of Singapore’s third petrochemical complex called the Singapore Chemical Complex located next to the Esso refinery in Jurong island fully integrated with the ESSO refinery. S$2 billion supposed to start in 2000. Steam cracker to make 800,000 t/y of ethylene, 450,000 t/y of polyethylene, 275,000 t/y polypropylene. 170 MW co-generation plant that will use steam from the cracker and provide for 75% of the power needs of Esso in Ayer Chawan. Also building a downstream 150,000 t/y oxo-alcohol plant, to be starting in 2000. Exxon Chemical’s Paramins (now Infineum) is one of the world’s four major suppliers of additives for lubricants and fuels. Others are Chevron Oronite, Lubrizol and Ethyl. Paramins operate a major plant in Pulau Ayer Chawan. Recent S$17.5 million expansion doubled the capacity to 30,000 t/y making it the biggest in the Exxon group.

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DUPONT Location: Sakra [Jurong Island] Specialization: Petrochemicals Start Up: 1973 Products: Delrin R poyacetal, LycraR Spandex Fibre, Adi-PureR adiphic acid, ZytelR nylon polymer Global leader in the business of chemicals, fibers and polymers. Four plants in Singapore total investment 108 billion. Tuas DuPont operates S$330 million spandex Fibre [ Lycra] opened in 1992 Lycra is used in combination with other fibers for textile and fashion industry. NEW: 1997 DuPont set the S$140 million second Lycra plant to double the existing capacity, to be operational by 1999. Also in Tuas an S$50 million engineering polymer compounding facility for production of polyacetal resin [Delrin] and glass reinforced resin [Zytel] since 1991. These are versatile engineering plastics used for metal replacement with application in automotive, electronics and appliance industry. Feedstock for Delrin is capped polyacetal polymer and for Zytel is nylon polymer. At Sakra S$160 million plant for nylon 6,6 resin [Zytel] since 1995. High performance polymer with demanding heat and chemical resistance. Adiphic Acid and hexamethylene diamine are feedstock both supplied from DuPont. Also at Sakra, there is a S$400 million facility for production of Adiphic Acid. DuPont Dow Elastomers

Sales in AP: S$140 million Capacity: 90,000 t/y EPDM Elastomer is a generic term for synthetic and natural rubber. Focus on metallocene process in the manufacture of ethylene-propylene diene monomer [ EPDM] and introduced a new line of EPDM hydrocarbon rubbers.

SHELL Location: Bukom [Jurong Island] Specialization: Oil Refinery The world’s largest petrochemical company. Founders of Singapore’s first petrochemical complex at Ayer Merbau in 1984 to form Ethylene Glycols Pte. Ltd. 1990 Shell’s Iso –Propyl Alcohol plant at Pulao Bukom started taking feedstock from its Long Residue Catalytic Cracker Unit. Second cracker and downstream plants operational in 1997 in Ayer Merbau . Two shell companies have entered into a joint venture with Exxon Chemical Company to manufacture and market fuel and lube additives for world market. Shell Petroleum Company and Shell Chemical Company together hold 50% stake in new company called Infineum expected to begin 2000.

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December 1997, Singapore designated on of Shells three global supply centers. Shareholders: 50% PCS, 30% The Polyolefin Company, 70% Ethylene Glycols, 70% Seraya Chemicals. Shell Eastern Chemicals: aliphic and aromatic hydrocarbon solvents, isopropyl alcohol, propylene, brake fluids, finished liquid detergents Singapore is the largest petrochemicals production and export center for Shell. Shell Research Eastern : R&D of fuels, bitumen & lubricants, operational 1997 . Shell Seraya Research Labs: R&D and technical services for polyols & polyurethanes

PETROCHEMICAL CORPORATION of SINGAPORE Basic feedstock is Naphtha and LPG that is supplied either by pipelines [if local supplier] or by ships. Secondary storage is done by Oiltanking and subsequently transferred to PCS by pipes. 2.6- 2.8 million tonnes of Naphtha consumed per year which is about 8.4 kt per day. Suppliers: Shell & Mobil [ships] , SRC [pipes] and imports[ships] taking 4 weeks lead time Work on 6-9 weeks of planning Inventory: 100,000 cubic meter which is 10 days [max] 7 days [average]. Owners of 3 bulk berths that take care of all imports and exports. Most of the local downstream companies are in Jurong Island and are connected by pipes and the rest is exported by Ships eg.: benzene is exported to Indonesia and the ships are provided by the traders. Each downstream submits 3 months forecast and subsequently demand forecast is matched with supply. Area of Interest and development: To do away with ship brokers.

SINGAPORE REFINING CORPORATION Last year, Asia saw 600 bpd growth with no growth in the buyers sector, OPEC production was cut down by 4 million bpd. The crude prices rose by 300%. SRC was forced to see products well below the price of crude itself. Logistics: Singapore is export oriented so mostly logistics are shipping and pipelines [increasing] with minimal support from trucks. For SRC it’s the shareholders charter ships so it’s not their concern. Major challenge: Shipping Scheduling

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90% of the crude comes from the Middle East, 15-30 days travel. Transportation cost is about US$ 0.5 per barrel which is a big component of the cost. SRC is not allowed to go to the open market to buy. They have to do so together with the shareholders who also are consumers for all their products. The share is 1/3 rd each. Currently they have a new e-commerce team working closely with BP. 40% of the cost is materials other than crude.

SCHERING PLOUGH One of the four pharmaceutical companies in Singapore while two more are under construction. YCH is one of the leading logistics companies that manage inventory and distribution for pharmaceuticals companies. Operations in Singapore are limited to production of the basic products. These are exported to other countries to be processed, packed and marketed. Belgium takes the biggest share and supply for Europe. They are planning to double capacity soon. Logistics: Outbound – all by air. Reasons: light weight and the products are time and environment sensitive so can’t be shipped. Inbound- 90% are imported and come by sea. The local suppliers are very few because local industry is more petrochemical based. Operations are more capital intensive and less labor intensive. Eg: S$300 m plant is being managed by 250 people in Singapore. Limitation: the products are expensive so not everyone can buy what they sell. E-commerce is almost non-existent on the selling side because there is almost no dealing with the general public. Most of the pharmaceuticals are prescription bases and can’t be bought off the shelf. On the buying side the cost of changing vendors is very high. The reason is that the products being supplied have to go through very intensive testing to be approved. This is cost and time intensive so changing vendors isn’t very feasible. Biggest expense in Singapore is Utility: water and electricity [monopoly of Singapore power]. Area of concern: all the 130 products are made in batch [40 processes]. Only stop until all the inventory is used up. Challenge is effective capacity planning. Also ways of increasing local sales: incentive low taxes in Singapore. Hong Kong is SEA distribution center. Main three areas of expertise: Respiratory, Cancer and Dermatology

JURONG TOWN COUNCIL Plans to achieve total mass balance in Singapore Petrochemical industry. Crude—refinery—naphtha—cracker—downstream Every drop of crude should be used up and every product of one must be used as feedstock for the other till the end product [preferably high value added]. Concentrating on 6 chains at present: Acetyls, Phenols, Oxochemicals, Acrylates, EOD, Styrenic. And also the crackers.

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Not very keen on having more refineries in Singapore: only get 10% naphta from crude so it’s not a very profitable business. Major export share goes to China. Singapore ports are 1st in terms of moving solids. Wish to create an environment to attract foreign ships to the local ports. Trying to cut down on pre-shipping time. Logistics – ships [99%] road [1%] Specialty Chemicals will be growing in future. CFC program [call for collaboration] – e-bureau services, e-logistics, e-MRO, e-HSE [Jurong Island.Com is a portal with extensive modules to be attached in the future]

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APPENDIX II: TOOLS FOR REFINERY PLANNING AND SCHEDULING: THE STATE OF THE ART

Planning-Scheduling tools

GRTMPS Petrofine Schedule Manager

Planning approach

Evaluate each crude individually to calculate margin Pecking order Evaluate crude blending using Petrofine Crude team makes buying decision

Scheduling approach is analogous OmniSuite and Modules for Refinery Planning and Scheduling

GRTMPS – Refinery Planning LP H/CAMS – Crude Assay Management H/SCHED – Crude/Refinery/Product Scheduling H/BOSS – Gasoline Blending H/COSS – Crude Oil Supply Scheduling H/ROSS – Refinery Scheduling

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Figure A2.1: Electronic Integration in OmniSuite

chemical supply chain research

Documents

t i o n

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singapore chemical industry

oil industry