Turbulent Times Continue for Chemicals Manufacturers

Having already withstood one of the worst recessions in living memory, chemicals manufacturers were very much hoping for some respite, as the world economies appeared to be pulling out of recession.

The summer break, however, has brought more suggestions of double-dip recession and with car sales and construction starts down, together with a likely slowdown in economic activity in China, we can foresee a difficult few months for the chemical industry. The 'new normal' as predicted by my colleague Paul Hodges, is very much with us.

So how do we cope with this 'new normal'. We've already had job cuts and, in many instances, significantly reduced levels of discretionary expenditure. So where next? It certainly isn't an easy question to answer and there isn't a one size-fits-all solution but I think that a very high level of challenge and focus is most important, in order to ensure that we are fully focussed on doing the right things

Here's a list of questions to challenge the management team of any chemicals manufacturer...

• Do you have a highly capable manufacturing management team?
• Does your team understand the challenges of the new normal?
• Does the team understand the need for adaptability and flexibility?
• Does the team know how to achieve this adaptability and flexibility?
• Are management objectives aligned with these needs?
• Have strategies been prepared for the challenges which may occur?
• Are all of the operating and capital cost requirements fully understood?
• Is there a relentless drive to improve cost effectiveness?
• Does the management team understand fully the consequences of any decisions they make?
• Do you know what your competition is doing to achieve success in the new ‘normal’?
• Does your workforce have the right skill levels for the high level performance required under varying conditions?
• Does your workforce understand the need for change?
• Do you have appropriate agreements in place to give you the required levels of flexibility?
• Are your workforce objectives and targets aligned with those of management and the organisation?

Holidays

To all readers of the blog.

I will be on vacation until the end of August. Blogging will restart in September.

A Plain English Guide to Modern Manufacturing Methods

Thanks to Stephen Jannise of ERP Software Advice (see photo) for pointing out this excellent guide to Modern Manufacturing methods.

Although many such methods were pioneered in the automotive sector, the principles are very much applicable to the chemical industry. Indeed many chemical companies have achieved great success in the application of techniques such as Lean Manufacturing and Six Sigma.

In the post recession environment, companies will achieve success by being smart. This means innovation - such as investment in new technologies, development of new processes and optimisation of existing processes. Modern manufacturing techniques will facilitate much of the optimisation work.

The guide gives an excellent introduction for those who wish to familiarise themselves with the subject!

Iran Petrochemical Plant Explosion Kills Four

photo : http://www.tradearabia.com/

According to reports, 4 workers were killed as a result of an explosion at the NPC plant in the Gulf island of Kharg. The explosion occuured on Saturday evening.

According to the provincial governor 'An explosion from a gas leak occurred on Saturday evening around 7pm, but it was extinguished at 12am by firefighters'.

Despite the impact of sanctions, Iran has a good record on safety. A quick look at the programme for the 2011 International Conference on HSE, shows the high level of focus on safety issues, including a number of process safety topics. As a state-run organisation, NPC has invested heavily in new plants but has maintained a good safety record. It is hoped that the investigation rapidly identifies and addresses the root cause of this particular incident.

Ineos Bio Waste to Ethanol Projects Gather Momentum

photo : http://www.m13.ca/

The Ineos Bio waste to ethanol process is attracting a great deal of attention currently.

Back in December, this blog reported that Ineos Bio, together with its partner New Planet Energy, had been selected for a $50M grant for its advanced bioenergy facility in Florida, USA. The facility to use INEOS Bio’s advanced BioEnergy technology to produce bioethanol and power from a range of feedstocks, including forestry waste, agricultural waste, sustainable energy crops, construction waste and municipal solid waste.

More recently, in June this year, it was announced that INEOS Bio had received an offer of a £7.3m grant towards £52m construction costs for the first commercial plant in Europe using its advanced BioEnergy Process Technology. According to Ineos Bio, 'The plant, to be located at the INEOS Seal Sands site in the Tees Valley, is designed to produce 24,000 tonnes per year (30 million litres) of carbon-neutral road transport fuel and generate more than 3MW of clean electricity for export from over 100,000 tonnes per year of biodegradable household and commercial waste. This would provide the biofuel requirement of around 250,000 vehicles per year running on E10* and the electricity needs of 6000 households.'

The process takes domestic waste, converts it into gases and then uses an anaerobic fermentation step to convert the gases into bio-ethanol. My understanding is that the process is highly efficient and has relatively low costs, meaning that this type of facility could be installed in any large population centre and provide an effective means of energy production, whilst eliminating costly landfill or waste incineration.

The Florida facility is due on-line in 2011. If this project proves to be successful, which I fully expect to be the case, one can foresee many other such projects being implemented around the world.

ACC Calls For End of Moratorium on Deepwater Drilling

photo : www.offshore-technology.com

The American Chemistry Council (ACC) has called for a solution to be found to end the drilling moratorium in the Gulf of Mexico.

The ACC President and CEO, Cal Dooley, made these remarks in The Hill's Congress Blog. Dooley noted the potential harm to US Manufacturing, including chemicals manufacturing, of policies that will reduce the availability and increase the price of energy in the future.

Whilst the moratorium is understandable, as a reaction to events in the Gulf of Mexico, the issue needs to be considered in its wider context. Whilst this blog has long argued for a policy of sustainability and energy efficiency, the world is still highly dependent on fossil fuels and we are very far away from having an energy future based entirely on renewables.

Peak Oil is a major subject by itself, but all experts agree that we are well past the peak of oil discovery and that we are approaching, in the short-to-medium term, the peak of oil production. This means that oil and gas production from unconventional sources, such as shale gas, is increasingly important and we must also continue to find and safely and efficiently produce oil and gas from all conventional sources.

This does not mean that we should take unnecessary risks in doing so but instead should find engineered solutions to our issues and operate under a regime of thorough oversight and regulation. The Gulf of Mexico incident was a tragedy and steps must be taken to prevent this from happening in the future but we cannot afford to call a halt to deepwater production at this time.

Reliance Industries Joins Shale Gas Rush

photo : energy.alberta.ca

A regular theme on this blog has been the development of the shale gas industry. Now Indian major, Reliance Industries, has joined the party, investing a total of $1.36billion to acquire and develop a share in Texan shale gas assets.


Reliance has paid Pioneer Natural Resources some $236M for a 45% stake in the Eagle Ford shale assets in southern Texas for $236M and will further invest $1.052B to develop the fields over the next four years.

Back in April, Reliance invested $1.7B to create a venture with Atlas Energy, a deal which gave Reliance a 40% in the Marcellus shale fields in the USA.

This move again shows the growing importance of unconventional oil and gas to the IOCs and the petrochemical majors such as Reliance. With discoveries of conventional oil and gas reserves having peaked some time ago and with control firmly in the hands of the National Oil Companies, we can expect more and more activity in the development of unconventional resources. This will also increasingly shape the future of petrochemicals, now that the peak of investment in crackers based on conventional sources of feedstock appears to have passed.