Integrating Petroleum Supply Chain

Integrating the Petroleum Supply Chain Drives Value
June 2009
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2009 Aspen Technology, Inc. All rights reserved
Agenda
Petroleum Industry Trends Petroleum Supply Chain Challenges Petroleum Supply Chain Solutions Petroleum Supply Chain Best Practices
Global Oil Outlook

Forecasted average oil prices for 2009 and 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 decrease by 2 MBPD in 2009 Spare oil production capacity could grow to 6MBPD in 2009
Information derived from CERA market briefing dated January 12, 2009
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
Tight capital markets will continue to impact new projects and production runs Low margins and high capital investment hurdles will delay or cancel a significant number 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
Strategic Issues for Petroleum

Globalization Fundamental shifts in demand, flow of trade and demography Changing capital investment and restructuring patterns New competition from India and China Energy Management & Sustainability Long term energy demand growth and the geopolitics of resources Alternative feedstocks Compliance regulations Portfolio 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, knowledge management, collaboration, value add services) Advanced IT technologies to support innovation Managing IP
Petroleum Industry Strategy

Merger & Acquisition
Economies of Scale Stay cost competitiveness 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 Feedstocks Yields Explore high value products Focus on supply chain coordination to maximize margin and reduce supply chain disruption Increase focus on collaborative decision making Ethanol, Bio Diesel, H2, Solar, etc. Gas Cracking, Catalytic Cracking, etc.
Throughput & Margin Increase
Optimization
Collaborative Decision Making
Explore Alternatives
What are the High Value initiatives in Petroleum Downstream?

Supply Chain Initiatives 1. Improve Feedstock Selection Integrate Planning and Scheduling Workflows Reduce Gap in Plan vs. Actual Crude Selection 2. 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 Monitoring 3. Real-Time Visibility into Refinery Operations KPI and Refinery Visualization Production Performance Analysis
Trend - Integrating the Supply Chain

Traditionally each operation within the supply chain (both inside and outside of the refinery) was managed and optimised in isolation Most oil companies have started to realise the large benefits to be had by integrating the supply chain and optimising across the enterprise. Integration of the supply chain requires changed business processes and working practices, supported by new and integrated tools. Optimisation of the supply chain can make a significant improvement in overall company profitability.
Agenda
10
The Petroleum Supply Chain

Produce Crude Refine Crude Wholesale (Rack) Marketing Retail Marketing
Inbound Logistics
Primary Distribution
Secondary Distribution
1 Supply and
2 Refining

Trading
Crude valuation Crude and Products Trading Crude blending Constraint modeling Inbound Logistics
Product Placement and Sourcing
Distribution
Inventory Management Scheduling (In-plant and Distribution) Performance management
Product blending Operations Scheduling Advanced controls Order execution Performance Management
Demand Management and Forecasting Regional Refinery Planning Unplanned Event Response Buy/ Make/ Sell/ Exchange tradeoffs Exchange management
11
Petroleum Supply Chain Challenges

Supply Chain Challenges
Uncertain Demand & Supply
Business Impact
Wrong products at terminals Large Demurrage charges High inventories or run-outs Managing compulsory stock obligations
Inventory Management
Product/crude shortages in the network High working capital Scheduling thousands of products/crude movements
Operations Scheduling
Nominating vessels, pipelines, inspections Managing exchange contracts Many users with unlinked spreadsheets
Enterprise Visibility
Local optimization without enterprise-wide visibility Poor visibility into future operational needs Difficult to define best mix of make, buy and trade decisions Difficulty in executing term and exchange deals profitably
12
Planning Directives
Summary of Challenges and Opportunities

Fundamental changes in the industry are creating opportunities and challenges in managing the petroleum supply chain. Unprecedented global changes of supply/demand balance requires excellent Supply Chain Management practices. Market volatility its here to stay, feast or be feasted upon Overcoming organizational barriers is a significant challenge How do you get there continuous focus on improving supply chain practices
13
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
14
Agenda
15
Typical Supply Chain work processes

Headquarters activity Refinery activity
Feedstock selection
Constrained Forecast
Unconstrained Forecast
Supply/Demand Optimisation
Refinery Production targets
Refinery Operational Planning
Market Demand Forecasting
Trading
Distribution & Exchange Plan
Production Schedule
Production Plan
Sales History & Open orders Demand plan Actualised movements
Primary Distribution Scheduling (Physical Operations)

Scheduled Movements to/from Refineries
Accounting
Blend Scheduling & optimisation
Refinery Scheduling
Product availability Product availability & demand & demand Retail Demand Pipeline Ship (by terminal) schedule schedule
Blend recipes
Process Unit Set-points
Load/delivery Confirmation, Credit checking
Secondary Distribution Scheduling
Pipeline Scheduling
Ship Scheduling
Advanced Process Control
16
Corresponding AspenTech Products

Aspen PIMS
Aspen Petroleum Supply Chain Planner (DPO)
Aspen PIMS
Aspen CDM
(Collaborative Demand Manager)
Trading
Distribution & Terminal Demand Exchange Plan & Inventories
Production Schedule
Production Plan
Aspen IMOS (Inventory Management

& Operations Scheduling) Scheduled Movements to/from Refineries
Accounting
Aspen Refinery Multi-Blend Optimizer
Aspen Petroleum Scheduler
Blend recipes
Aspen Fleet Optimizer
Aspen Distribution Scheduler
Aspen APC (DMCplus, etc)
17
Collaborative Demand Management

Aspen PIMS
Aspen PIMS
Aspen CDM
Trading
Production Schedule
Production Plan

Accounting
Blend recipes
18
Why Demand Management Matters

Aspen DPO
Distribution Planning
Demand Forecast Drives Critical Decisions

Aspen IMOS
Operations Scheduling & Inventory Management
More accurate demand = better planning

Forecast
If you do not know where you need to go, then you risk optimizing the route to get to the wrong place!
Aspen PIMS
Refinery Planning & Scheduling
19
Why Demand Management Matters

Aspen DPO
Demand Forecast Drives Critical Decisions

Aspen IMOS Forecast
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!
Aspen PIMS
20
Collaborative Demand Management

Business Process Flow
View History Generate Statistical Forecast View Forecast Incorporate Market Information
Override Override demand demand forecast forecast Information Information Competitor Competitor price price change change Change Change in in planned planned promotion promotion New New promotion promotion
Generate Demand Plan
Sales History Data
Adjusted History Data
Statistical Forecast
Adjusted Forecast
Consensus Forecast
Consensus Demand Plan
Adjust History
Adjust Forecast
Validate Market Information
ERP
Analysis/ Metrics
Collaborative Steps
21
Primary Distribution Planning Optimisation

Aspen PIMS
Aspen PIMS
Aspen CDM
Trading
Production Schedule
Production Plan

Accounting
Blend recipes
22
Aspen Petroleum Supply Chain Planner

(DPO)
e, k elin Pip , Truc l l a i n Ra ermi T o t
Purchase Exchange Receipts
Sales Pipeline Rail Truck Pipeline Sales
Truck Rack
Refinery 1 Tanks
Sales
Sales
Rail Barge
Pipe, Truck or Rail to Terminal
Sales Sales
Bulk Terminals
Pipe, Truck or Rail to Terminal
Exchange Delivery
Refinery 2 Tanks
Truck Rack
Terminals planning tool used to optimize the economics of

Sales
Aspen Petroleum Supply Chain Planner is an LP
distributing multiple commodities, using multiple modes of transportation, over multiple time periods.
23
Aspen Petroleum Supply Chain Planner (DPO): General Functionality and Use
Strategic 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
24
Inventory Management and Operations Scheduling

Headquarters activity Refinery activity Aspen PIMS
Aspen PIMS
Aspen CDM
Trading
Production Schedule
Production Plan

Accounting
Blend recipes
25
Inventory Management & Operations Scheduling Primary Distribution Scheduling environment Provides visibility of future inventory positions across the 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
26

Headquarters activity Refinery activity Aspen PIMS
Aspen PIMS
Aspen CDM
Trading
Production Schedule
Production Plan

Accounting
Blend recipes
27
The Business Problem

Traditional Processes
The Result
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 Excess inventory positions create poor cash flow High Cost per Volume Delivered (CPVD) Poorly negotiated freight contracts Excessive run-outs, retains Supply shocks result in excessive transportation costs or revenue loss Lost revenue at the terminal
28

Inventory Management Order Placement/Capture Fleet Scheduling & Source Optimization Order Assignment to Accounting Distribute for execution to fleets Execution (Real time) Management Reconciliation with ERP
29
Agenda
30
Industry Leading Practices

Standardization and streamlining of business processes
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
31
In Closing
The global oil market will continue to be volatile. Leading oil companies are working on operation excellence to manage financial risks and market dynamics. Operation excellence in S&D focuses on enterprise visibility and collaboration to improve forecast accuracy, supply optimization, and distribution scheduling & execution.
32

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Integrating the Petroleum Supply Chain Drives Value

2009 Aspen Technology, Inc. All rights reserved

2009 Aspen Technology, Inc. All rights reserved

Global Oil Outlook

Petroleum Industry Expectations

2009 Aspen Technology, Inc. All rights reserved

Strategic Issues for Petroleum

2009 Aspen Technology, Inc. All rights reserved

Petroleum Industry Strategy

Throughput & Margin Increase

Collaborative Decision Making

2009 Aspen Technology, Inc. All rights reserved

What are the High Value initiatives in Petroleum Downstream?

2009 Aspen Technology, Inc. All rights reserved

Trend - Integrating the Supply Chain

2009 Aspen Technology, Inc. All rights reserved

The Petroleum Supply Chain

Product Placement and Sourcing

2009 Aspen Technology, Inc. All rights reserved

Petroleum Supply Chain Challenges

Summary of Challenges and Opportunities

2009 Aspen Technology, Inc. All rights reserved

But how will the best handle the challenge?

2009 Aspen Technology, Inc. All rights reserved

2009 Aspen Technology, Inc. All rights reserved

Typical Supply Chain work processes

Refinery Production targets

Refinery Operational Planning

Market Demand Forecasting

Distribution & Exchange Plan

Sales History & Open orders Demand plan Actualised movements

Primary Distribution Scheduling (Physical Operations)

Blend Scheduling & optimisation

Process Unit Set-points

Load/delivery Confirmation, Credit checking

Secondary Distribution Scheduling

Advanced Process Control

2009 Aspen Technology, Inc. All rights reserved

Corresponding AspenTech Products

Aspen Petroleum Supply Chain Planner (DPO)

Refinery Production targets

Distribution & Terminal Demand Exchange Plan & Inventories

Aspen IMOS (Inventory Management

Aspen Refinery Multi-Blend Optimizer

Aspen Petroleum Scheduler

Process Unit Set-points

Load/delivery Confirmation, Credit checking

Aspen Fleet Optimizer

Aspen Distribution Scheduler

Aspen Distribution Scheduler

Aspen APC (DMCplus, etc)

2009 Aspen Technology, Inc. All rights reserved

Collaborative Demand Management

Aspen Petroleum Supply Chain Planner (DPO)

Refinery Production targets

Distribution & Terminal Demand Exchange Plan & Inventories

Aspen IMOS (Inventory Management

Aspen Refinery Multi-Blend Optimizer

Aspen Petroleum Scheduler

Process Unit Set-points

Load/delivery Confirmation, Credit checking

Aspen Fleet Optimizer

Aspen Distribution Scheduler

Aspen Distribution Scheduler