New Economic Fears Highlight Need for Manufacturing Excellence

Back in September 2009, this blog highlighted the 'new reality' faced by chemicals manufacurers.

As stated at the time "If our view is correct, we are in for a sustained period of lower volumes and reduced margins but punctuated by periods of high volatility caused by oil and currency markets. This will certainly mean that the pressure that has been experienced by the manufacturing sites during the downturn will continue."

With the current EU financial difficulties and the tightening fiscal controls in China, it appears that this statement was spot on. Although things have been generally better for manufacturers over the last 6-9 months,we are heading into very turbulent times once again, particularly in Europe and in Asia.

As I mentioned back in September, chemical manufactureres need to once again think very hard about the actions they need to take in order to survive the coming storm and to come out in good shape at the other end.

• There must be a clear focus on what has to be done to survive but this absolutely must not affect the ability to be flexible .
• A focus on cost effectiveness and value for money is essential.
• Wastes of all types must be identified and systematically eliminated using approaches such as Lean Manufacturing.
• Organisational effectiveness is a must. Staffing levels must be reviewed critically to ensure that organisations are as effective as possible and staff should be trained and ready to play their part by being able to safely and effectively start-up, shut-down, change grade and increase production rates at very short notice.
• Simply cutting numbers is not smart enough - skills must be retained but have sufficient flexibility to be available and ready, as and when required

Deepwater Horizon Incident Leads to Regulatory Reforms

photo : Upstream Today

As efforts continue to stop the flow of oil and manage the environmental impacts of the Deepwater Horizon disaster, the US Government has indicated that it will implement a series of regulatory reforms to minimise the risk of such an incident happening again.

Secretary of the Interior, Ken Salazar, has announced a series of reforms that will provide federal inspectors more tools, more resources, more independence, and greater authority to enforce laws and regulations that apply to oil and gas companies operating in US offshore areas.

Meanwhile, the question of blame is making the headlines. It was reported this week that US oil industry regulator the Minerals Management Service did not enforce the installation of a secondary shutdown system to give back up in the case of failure of the blow out valve. It is also reported that the various parties involved in the incident are already pointing the finger at each other in apportioning blame.

The immediate issues must be resolved by all parties working together to stop the leak and to address the environmental situation in the most effective manner possible. Detailed investigations and apportionment of blame will undoubtedly follow.

A technically sound and proven back up safety system has to be designed and implemented on similar offshore patforms. This is, in my view, essential in order to avoid a major loss of public and government support for the offshore oil and gas industry. With a significant proportion of the world's offshore reserves being located offshore, failure to do something different is not an option.

Shell Singapore Fully On-Line

photo : Hydrocarbons processing

Shell has announced that its integrated refinery and petrochemicals complex in Singapore is now fully on line.

Shell has long talked of highly efficient, integrated supersites being the company's blueprint for the future. The Singapore Site certainly ticks all the boxes with the following features

• Complex refinery with capability to process a wide range of crudes
• Flexible cracker using latest technology and with capability to process heavier raw materials from refinery
• World scale downstream plants with latest technologies
• Fully integrated site infrastructure
• Optimisation models to maximise margins depending on feedstock prices and availability

The site can process 500,000 bbl/day of crude and the cracker has a capacity of 800kT. All of the downstream plants are of large capacity.

According to the press release, the investment is Shell's largest ever in chemicals. As the blog noted back in November, at International eChem, we have long argued that the critical success factors for petrochemical operations are integration, size, technology, global reach and location. The SEPC complex scores top marks on all of these points.

Australia Invests in Carbon Capture and Use

photo : bp.blogspot.com

Sticking my my previous themes of Australia and environmental issues, I was interested to read that the Australian government has committed $40M to a project to capture CO2 and transform it into building materials.

The project is being run by the Calera Corporation, a company which specialises in this technology. Construction work is due to start construction this year and the facility will use carbon dioxide captured from TRUenergy's Yallourn power station.

Following the initial demonstration phase, Calera plans to capture more than 300,000 tonnes of carbon dioxide and convert it into more than 1 million tonnes of building material a year.

Calera believes that the solution is more financially attractive than any alternative carbon capture solution.

If the economics are sound, this has to be an excellent solution, with less uncertainty than carbon capture and storage. The world will undoubtedly continue to need high quanities of cement and if CO2 can be used a feedstock, rather than being released to the atmosphere as a perceived threat to climate, then this has to be a win-win solution to satisfy all parties.

Austraila Delays Emissions Trading Scheme

Australia has postponed the implementation of its proposed emissions trading scheme until 2012 at the earliest, according to news reports.

In justifying the postponment, Prime Minister Kevin Rudd said that by 2012, when the current Kyoto deal expires, governments around the world would need to make clear their new carbon reduction commitments.

Kevin Rudd has been under significant pressure from within Australia and in particular from Tony Abbott, the leader of the opposition Liberal Party.

Australia's move follows on from the uncertainties over the Cap and Trade bill in the US, which has slipped down the political agenda in recent months. These moves leave Europe increasingly isolated on the issue and has led to some member states questioning the wisdom of unilateral action on climate change. Other member states have suggested the imposition of carbon taxes at Europe's borders, to protect the competitiveness of Europe's industries.

This blog continues to argue that all manufacturing industries need a strong sustainability agenda, with increased use of renewables and a strong focus on new technologies to reduce energy consumption and waste. Government support should be for the development and implementation of such technologies, rather than trying to implement regional schemes which will do little to drive a global improvement in energy efficiency but which will lead to relocation of manufacturing plants and jobs.

As for carbon taxes, they are highly complex to implement, given the range of products to which they will need to be applied. They are virtually impossible to link back to energy efficiency and will be ultimately passed on to the consumer, thereby driving inflation.

Levels of Investment in Manufacturing Software Improving

There are many ways in which we can assess the health of the chemical industry. Thanks to Houston Neal of Manufacturing ERP Software Advice, for providing another perspective on the health of the chemical industry.

The 2010 Manufacturing Software State of the Industry Roundtable has focused on the state of manufacturing ERP Software.

The report shows that 2010 is healthier than 2009. Purchase activty is up, with the increase in activity attributed to two primary reasons - firstly that we have reached the 10-year anniversary of purchases made as a result of the Year 2000 (Y2K) date problem secondly and most importantly, many companies are restarting buying processes that were deferred in 2009. The report also notes that the chemical sector is one of the most active in terms of new purchases.

This last point is highly encouraging. I've seen many companies in the chemicals sector deferring spend in many areas as a result of the recession. Clearly for items such as control systems and manufacturing software, such expenditure can only be deferred for so long but to see a clear shift at this point in time is very welcome news.

UK Health and Safety Executive Publishes Buncefield Evidence

photo : Hertfordshire Constabulary

The UK Health and Safety Executive (HSE) has published some of the evidence being presented in the current trial of three companies over the explosion at the Buncefield depot in 2005.

As a reminder, several explosions occurred at the Buncefield Depot in the early hours of Sunday 11th December 2005. At least one of the initial explosions was of massive proportions and there was a large fire, which engulfed a high proportion of the site. Over 40 people were injured but thankfully there were no fatalities.

There was, however, substantial damage to  properties in the area and the fire burned for several days, destroying most of the site and emitting large clouds of black smoke into the atmosphere.

A number of videos and photos have been published. The videos are stunning, showing the speed at which the vapour cloud advanced. The photos show the damage to the control room and the spread of debris following the explosions.

I'd recommend all those with an involvement in chemical manufacturing to take a look and challenge your own operations.This type of incident is totally preventable if we take the time and effort to assess the risks and then take the right actions to systematically eliminate them.