Natural Gas Business Challenges
Natural gas production starts by lifting gas out of the ground, refer Figure 1. Production covers the processing of Natural gas before sending it through pipelines for transportation. The processing activity removes various substances like heavy metal and other impurities from the Natural gas. The temperature of natural gas is cooled to -160 degree Centigrade to convert into liquid. This cooling process makes transportation more economical as the volume is reduced significantly from gas to liquid. The liquefaction process removes the impurities and aids in recovery of another valuable product, ethane.
The storage of Natural gas is an important activity. It helps achieve reliable supply even when seasonal demand patterns vary.
Transporting Natural gas over long distances across oceans is complex and requires large investments. Such transportation constitutes 25% of the world Natural gas movement and requires dedicated ships with eficient planning and scheduling processes. Stoppages in production plants, adverse weather conditions, tides and ship failure events can disrupt the loading and transportation process.
At the receiving terminal, the objective is to minimize inventory and storage requirements. This involves unloading the Natural gas at optimum flow-rates and at the same time balancing(the send out rate for) distribution. Unloading operation need to minimize the demurrage cost in the case of any unforeseen events.
Transportation of Natural gas, therefore, presents a number of business challenges. These include:
- Meeting contractual obligations
- Health, Safety, Security and Environment (HSSE) Compliance
- Interoperability standards natural gas quality
- Integration of various systems like ERP, Manufacturing Execution and Automation systems
- Ship nomination handling - due to availability and reliability of transporters
- Customer nomination for gas redelivery – as number of customers is increasing
- Complexity of terminal scheduling is high – because of more operational constraints
- Achieving more accurate Mass/Energy balance – dynamic nature of operating conditions
- Demurrage analysis – to record dierent shipping related events and track them accurately
Customer/Extraction point nominations for redelivery of gas
At various extraction points of Natural gas pipelines, the redelivery nominations are to be performed in consideration with pipeline nomination procedures. The nomination is influenced by customer consumption or maintenance, shut down activities and other operational limitations.
Complexity of Terminal scheduling
Complexity of terminal scheduling is ever increasing due to increase in number of customers at each consumption point and availability of Natural gas on Spot Market. Increase in customers poses the challenge of increase in marine terminal throughput (i.e. quantity of gas handled on a specified time duration, say per day). Natural gas on Spot Market expects adhoc scheduling of ships carrying Natural gas procured at significantly lower prices. Hence, more number of ships has to be accommodated on a very tight schedule.
Health, Safety, Security and Environment (HSSE) Compliance
To meet increasing demand the volume of Natural gas handled by all modes of logistics also increases. Number of ships transporting Natural gas has increased from 120 in the year 2000 to 400 by 2014. (Source: IHS Fairplay). The bulk movement poses HSSE risks and may violate country-specific compliance policies.
Interoperability Standards on Natural Gas Quality
In the European Union, the objective of providing consistent quality Natural gas to consumers is driven by interoperability standards. This policy assumes that the fundamental characteristic of the Natural gas market as a whole, from production to burner tip, needs to be taken into account to harmonize quality. Therefore, gas composition must be monitored throughout the supply chain.
Accuracy of Mass/Energy balance at Terminals
Achieving good accuracy of Mass/Energy balance at Natural gas terminals is a challenge as the process is continuous and dynamic in nature. The unloading of Natural gas from ship is a faster process step and decided by the pumping rate of ship. But the rate of delivery of Natural gas to dierent distribution/consumption points depend on consumer usage, and slower in nature. Hence, achieving accurate Mass/Energy balance at terminals is a challenge and requires a right tool to address the same.
With multiple shippers sharing the same terminal, the challenge is to record various events related to ship(e.g. Mooring event, Hose connection event) and monitoring various activities. The events recorded above will form the basis for demurrage analysis.
The above business requirements require more robust framework and seamless integration between enterprise applications and core operations applications. Following are the few challenges faced by current solution landscape,
- Adaptability – less adaptable to ever changing business environment
- Process driven Integration – Integration is more application driven rather than business process driven
- Scalability - more of stand alone applications less scalable
- Future proof – lack of support for centralized analysis of enterprise data and decision support, predict analysis capabilities
Integration of Different Business Systems and Execution Systems
The integration of various systems in the Natural gas supply chain requires an in-depth understanding of business process, operational aspects, quality management, asset management and of high level business systems like ERP. Apart from business systems a list of manufacturing execution systems and automation systems need to be integrated.
Ship Nomination Handling
Ship nominations become important with competition for berth and storage space. Nominations change due to operational constraints and other unforeseen events like weather and tide.
The Natural gas supply chain is asset centric. It requires large investments. Suppliers mitigate the risk by ensuring long-term contracts from customers. Most of these contracts dictate “Annual Contractual Quantity (ACQ)” and “Monthly Contractual Quantity (MCQ)” for supply of gas. As the demand peaks and the number of customers also increases, the expectation of excellence in operations continues to rise even though the constraints exist.
Main objective is to provide reference architecture (Figure – 2) for organizations in the Natural gas business, based on current challenges and what they may face in the near future. This single architectural approach will encourage simplification and unification for the system integrators(SI) and Solution providers in this domain.
The solution will enable business to achieve,
- Higher transparency in business
- processesMore reliability by automated business processes
- Increased operational visibility
- Lower TCO
The architecture will support more collaborative environment where operational sta will rely upon more data-driven events, work flows and automated analysis for identifying risks. Also provides up-to-date KPIs to fully understand the health of the business.