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Optimisation in the Hydrocarbon Supply Chain
At Reliance Industries Limited (RIL), a private sector enterprise that operates the world’s largest refinery in a single location (1.24 Mio bbl/d), the planning and scheduling of crudes are margin critical, resource intensive and complex processes.
Decisions have to be taken at different stages of the crude supply chain (i.e. Crude Purchasing, Crude Sequencing, Crude Discharging, Crude Blending and Crude Processing), and at different levels in the management hierarchy (Planning, Scheduling and Operations). RIL had a need to minimize the margin leakages at its Jamnagar refinery supersite, arising out of the inability of the schedule to match the optimised monthly plan. This led to the following undesirable consequences:
- Gross Refinery Margin leakage between monthly planning, daily scheduling and actual operations
- High demurrage cost and delay of crude VLCC’s.
- Piling of opportunity crudes at the end of the planning month
Shell Global Solutions was selected by RIL to improve the company’s optimisation of their crude supply chain. In this project consultants from ORTEC were involved, which provided access to the newest mathematical optimisation techniques applied in the solution.
Crude Planning and Scheduling Supply Chain integration
Traditionally in the oil industry, decisions in crude planning have been taken independently from the decisions in crude scheduling (and vice versa), driven by the individual business needs.
These differences in business needs between planning and scheduling have led to silo-based solutions, resulting in different tools, different business processes, different information requirements, leading ultimately to different requirements for competencies of staff. Silo-based solutions intrinsically lead to loss of margin.
Crude Planning and Scheduling (CPS) Supply Chain Integration covers three areas, as discussed in the following three sections.
Vertical integration refers to the integration in time between monthly crude planning and daily crude scheduling.
The following elements lead to an enhanced vertical integration:
- One repository of information used for crude planning and crude scheduling, albeit the information is provided with different granularity.
- Overall KPIs for vertical integration, e.g. Gross Refinery Margin leakage between planning and scheduling.
- Incorporation of optimal planning targets in Crude scheduling.
- Common data used between crude planning and scheduling, where applicable, e.g. for representing crude assays.
Horizontal integration refers to the integration in the Supply Chain Hydrocarbon flow, i.e. between Crude Supply and Crude Manufacturing, through alignment of the CPS stages: crude sequencing, crude discharging, crude blending, and crude processing.
The following elements lead to an enhanced horizontal integration:
- Incorporation of scheduling feasibility checks in crude planning ensures that a crude plan will be able to be scheduled.
- For each decision taken for one of the CPS stages, there is always one shared end-to-end view on the impact on all other CPS stages. For instance, the crude scheduler can immediately investigate a change in the discharge of a crude, and respond to the consequences for the blending and processing of that crude.
Integration of processes, tools, information, and people
Besides vertical and horizontal integration, CPS Supply Chain integration also includes the alignment of business processes, the decision support tool, information management, and staff competencies.
The following elements lead to an enhanced integration:
- Clear communication protocols between crude planning and scheduling, realizing that crude planning and scheduling decisions are based on complementary and fit for purpose tools. Crude purchase is based on GRM maximization with the refinery LP model, and crude blending is based on a dedicated event-based optimisation tool for crude blending.
- Total seamless integration between automatic and manual scheduling: at each point in time, this allows the user to select a scheduling decision, proposed by the tool, or manually override that decision, or to make a full manual decision.
- Every user (either planner or scheduler) has access to the same information, with same level of granularity.
Crude Scheduling in Reliance Industries Ltd
Effective Supply Chain Management contributes to margin (GRM) maximization by minimizing the feedstock costs, while delivering the right materials at the right time. Cost competitiveness is achieved in the RIL Jamnagar supersite by processing cheap and difficult-to-process crudes to produce a.o. Euro V grades of gasoline and diesel. Crude blending forms an integral part of this strategy.
The solution was the development of a highly responsive decision support system named GeCOS (Generic Crude Oil Scheduling System) using advanced Operations Research techniques, as defined in the references. GeCOS provides advice to the user, but at any point in time affords the user the freedom to modify, enhance, and overrule the proposed decisions. GeCOS captures all the complex hardware constraints of the RIL refinery (segregation and allocation requirements etc), and yet gives optimized and practical crude blends on a daily basis, while anchoring it to the overall optimum business plan which aims to maximize the GRM.
The resultant crude supply chain optimisation achieved through GeCOS was able to contribute significant value addition to the RIL bottom-line, by the synergistic combination of committed and effective schedulers/planners, robust business processes, and efficient decision support tool, based on a seamless horizontal and vertical integration in the crude supply chain.
Reliance Industries Limited (RIL) has improved their crude planning and scheduling through implementation of GeCOS, and has reported substantial savings due to this implementation, resulting from:
- Reduction in margin leakage between crude planning and scheduling, so all required, planned crudes are available at any point in time during the scheduling horizon, to ensure proper crude blending, as:
- Crude sequencing takes into account scheduling constraints, such as pipeline displacement, and tank bottoms
- Crude scheduling takes into account crude planning targets, such as minimising deviation from monthly quantitative and qualitative targets
- Reduction in margin leakage between crude scheduling and operations, as crude scheduling takes into account oil movement logistic constraints, such as pumping and line-up constraints
- Increased processing of opportunistic high TAN, high Sulphur and low API crudes
- Smoother and fewer CDU (and hence downstream) mode switches over a wide crude suite (17-47 API) from one to two days average crude blend lengths
- Improved prediction of CDU blend properties honouring over 30 critical qualities on CDU streams and honouring multiple physical and facility constraints in crude receipt, blending and the crude distiller operation
- Reduced working capital (in terms of crude stocks) and consequently room for lower number of crude tanks and additional marine tank farm facilities
- Reduced demurrage costs
- Reduction in number of cases where critical quality windows are violated. Reduced quality gives away in critical crude blend qualities
- Less stockpiling of “bad” (less desirable) crudes at the end of the month leading to avoidance of non optimal purchase of complementary blending crudes
- Faster development of crude plan and schedule, and faster handling of disturbances (e.g. delays in ship arrivals, availability of tanks), which allows for more time spent on scenario and opportunity analyses, instead of information gathering
- Faster competency development of new crude planners and schedulers
Critical to the success was:
- The domain knowledge, the wealth of RIL specific information regarding crude planning and scheduling processes and the interest of the RIL team, consisting of refinery schedulers in Jamnagar refinery and refinery planners from Mumbai in ensuring clear requirements
- The transparent approach of cooperation and the support and the willingness of the RIL top management to effect the change in the existing tools and business processes surrounding the same
- The involvement of Shell Global Solutions through a development team with deep business knowledge in crude scheduling and crude blending
- Involvement of ORTEC consultants which provided access to the newest mathematical optimization techniques applied in this solution
A key to success was the selection of the platform for the development of the software. The decision support system was developed in the optimization modelling system AIMMS (www.aimms.com). AIMMS is an advanced development environment for building optimization-based operations research applications and advanced planning systems.
This project has demonstrated a highly successful approach for optimal crude planning and scheduling in the world’s largest refinery. This success was based on the following pillars:
- Seamless vertical integration between monthly planning and daily scheduling; horizontal integration between the various activities in the crude supply chain; and synergistic and complementary alignment between the CPS business processes, the decision support tool , and the scheduler’s/planner’s experience
- Use of advanced Operations Research techniques, whilst taking into account:
- The experience of the crude planner and scheduler to deal with unforeseen (hence not modelled) disturbances. Throughout the whole CPS process, the crude planners and schedulers will remain in full control about the decisions to be taken. Models mentioned above are used to provide advice to the user, but at any point in time the user can modify, enhance, and overrule the decisions of the models.
- The required responsiveness. The response time of the models should meet the requirements of the business, which should allow for a full development of a 40 days crude plan, in less than a day.
- Seamless collaboration between RIL’s supply chain planning department, Shell Global Solutions consultancy team, and ORTEC’s Operations Research specialists
The success of this project is defined by a substantial increase in GRM in RIL Jamnagar refinery.
This project demonstrated a successful collaboration between Reliance supply chain planning department (India), Shell Global Solutions International Supply and Distribution consultancy team, and ORTEC’s Operations Research specialists (The Netherlands), and can be considered a living testimony of the implementation of state-of-the-art practices in project management involving multi-disciplinary and cross cultural global participation.