Updated: Jan 20, 2020
Systems Navigator's Joost Smits wrote an article for LNG Industry on how LNG terminals can improve customer satisfaction. The full article can be read below.
‘Keeping customers happy.’ A simple statement that describes the main mission of the commercial team of Regas LNG, a fictitious regasification terminal. As simple as the statement may be, the reality is much harder. What started as a slow ride for Regas LNG turned out to be a bumpy rollercoaster that required intelligent adaptations to a changing environment. Nowadays, Regas LNG is very successful because of its high service levels due to the use of advanced technology. This article shows how Regas LNG solved major service level issues by testing different planning rules, the introduction of a new commercial concept and using advanced planning and scheduling technology.
Case study: Regas LNG
Regas LNG is a regasification terminal that has been developed in phases. The first phase has been operational since 2015 containing 2 jetties and 180,000 cbm of storage space. Additional storage capacity will come online in 2016 and 2017. The 2 jetties can facilitate vessels smaller than Q-Flex size. Regas LNG started operations with a single customer in 2015, but increased the number of customers in 2016 and 2017.
Figure 1: Regas LNG commercial projections
2015 - Terminal Startup
In 2015 the Annual Delivery Plan (ADP) of Regas LNG was straightforward; 180,000 cbm of storage capacity is enough to facilitate a single 2.5 MTPA customer. The ADP (see Figure 3) has no interruptions in the send-out pattern, which means the service level is 100% even when early or late vessel arrivals are taken into account (see Figure 4). A second customer (2 MTPA) was contracted for 2016. To facilitate this new contract, an additional tank of 180,000 cbm became operational in 2016. This increases planning complexity slightly, but nothing the Regas LNG planners couldn’t handle. This all changed in 2017…
Figure 2: Robustness test ADP for 2015
Figure 3: ADP for 2015
2017 – Complexity Hit
Regas LNG is facilitating 3 customers this year and the commercial team is struggled to ensure each party were content. Creating a workable ADP turned out to be a difficult puzzle as combining the 3 individual ADPs requested by the customers into a single ADP led to an infeasible plan. Figure 4 shows what happens when the 3 individual ADPs are combined into a single plan: the blue line illustrates the total tank inventory position over the year. It is clear that this plan is infeasible, since various tank tops occur during the year.
Figure 4: Combined ADP of all 3 customers for 2017
This is the scheduled send out of Regas LNG. Explanation of colors:
Red: maximum send out
Blue: total send out
Green: customer 1 send out
Yellow: customer 2 send out
Orange: customer 3 send out
The Regas LNG planning team tried to make adjustment to arrival windows, e.g. by moving windows in time, but noticed that new tank tops were created later in the year. Fortunately, they had access to an advanced planning and scheduling system which gave them 3 scheduling options to create a feasible ADP for all users. The methods were Round Robin, FCFS or to use an advanced algorithm.
Scheduling based on the Round Robin rule is straightforward: the first arrival window is for customer 1, the second for customer 2, the third for customer 3, the fourth again for customer 1 and so on. Although this seems fair to all customers, there is a downside. Contracts having a lower throughput, in this case customers 2 and 3, benefit later in the year. A lower throughput requires less vessel arrivals, which means that customers 2 and 3 can pick all preferred slots for the larger part of the year. The arrival slots of customer 1 are scheduled around the already reserved slots for customers 2 and 3. The downside of Round Robin is made visible in reoccurring reductions in the send out pattern, see Figure 5. These reductions are causing a loss in the terminal service level. A further disadvantage of the Round Robin method is that it favors the terminal customers with the least throughput, when (arguably) a terminal should favor a customer with the most throughput.
Figure 5: ADP for 2017 based on Round Robin scheduling rules
The scheduled send out pattern is not a straight line, indicating that the service level is not 100% even without potential failures or unscheduled maintenance.
Missed sent out is caused by the inefficient scheduling of vessel arrivals: some arrival windows can’t be used due to tank tops.
FCFS (First Come First Served)
The FCFS scheduling rule is a bit more advanced than using Round Robin. It looks at which customer is in most need of a vessel arrival slot in order to meet the contract requirement and reserves an arrival window for that customer. Using FCFS instead of Round Robin improves the service level of the terminal, but there is still a lot of missed send out due to inefficient scheduling of vessel arrivals, see Figure 6.
Figure 6: ADP for 2017 based on FCFS scheduling rules
The FCFS method has less disruptions in the scheduled send out than the Round Robin method. Still, vessel scheduling can be more efficient.
The final option available to Regas LNG planners is the use of an advanced algorithm. The algorithm ensures a feasible plan while following predefined individual contractual rules. Figure 7 shows that the ADP an algorithm can generate that has a service level close to 100%. Regas LNG was very happy with these results and decided to use the algorithm method as a scheduling rule for their 2017 ADP.
Figure 7: ADP for 2017 based on an advance algorithm
An advanced scheduling algorithm is able to generate an ADP that has a service level close to 100% without adjusting contract parameters or investing in additional storage capacity.
2018 – Changing Market Conditions Cause a Surprise
In this case study , the commercial market conditions are foreseen to unexpectedly change in 2018. Customers 2 and 3 forecast a lower throughput and want to reduce their contracts to 0.75 MTPA instead of respective 2 and 1.5 MTPA. Regas LNG assumes that this willnot cause major difficulties when creating the new ADP for 2018, since the terminal throughput is reduced in total. The commercial department quickly find out that this turned out to be incorrect. Suddenly, the ADP showed a reduction in service levels.
Figure 8: Service level analysis
Service level analysis is performed using simulation. It is a test for robustness: how well does a plan perform in case of changes to the plan.
The number of cases shows the number of plans that reached a certain service level in the simulation run.
Figure 8 illustrates that it is far more difficult to generate an ADP if customers 2 and 3 both have 0.75 MTPA contracts than having 1 MTPA contracts. The graph also shows that service levels below 95% can be expected if anything happens that is not according to plan. Since reality is never the same as planned it is not advised to accept a lower contractual throughput of 0.75 MTPA without other adjustments to the contract or investing in storage capacity.
Figure 9: ADP for 2018 including reduced throughput customers 2 and 3
Regas LNG’s surprise issue is caused by one main factor: storage capacity. A reduced throughput leads to an increased period of time during which customer 2 and 3 have inventory position to meet send out obligations. This has a major effect on the total inventory position resulting in a limited availability of arrival windows caused by a lack of ullage, which is illustrated in Figure 9. At this moment in time Regas LNG does not want to invest in additional storage capacity. Fortunately, there is a solution for this!
Introducing Lending & Borrowing
Customer 2 and customer 3 are allowed to reduce the contracted throughput on condition that they agree to include the concept of Lending & Borrowing to their contracts. Customer 2 can use (in tank) LNG from customer 3 to meet send out requirements, which is returned once a vessel discharges LNG from customer 2 and vice versa. Customer 1 still has a running contract and does not require any changes to the contract and therefore is not part of the Lending & Borrowing of LNG at Regas LNG. The effects of introducing Lending & Borrowing contracts are astounding, which are shown in Figure 10 and Figure 11. It not only solves all service level issues even when operations do not go as according to plan, but also ensures that no investments in additional storage capacity are required.
Figure 10: Introducing Lending & Borrowing
Lending & Borrowing creates an ADP that not only has a scheduled send out service level of 100%, but is also very robust (see Figure 11).
Figure 11: Service level analysis including Lending & Borrowing
The robustness of the ADP generated using Lending & Borrowing is very good. In 98% of cases a service level of 100% is found, which means that even if there are unexpected changes to the plan, such as varying cargo sizes or early/late vessel arrivals, the send out obligations are still met.
Creating a feasible ADP at Regas LNG was straightforward in the first two years of operation. After that the planning complexity increased and advanced planning and scheduling technology was required to continue offering the high level of service terminal customers were accustomed to.
Regas LNG experimented with various planning rules for the ADP for 2017, such as Round Robin or First Come First Served. It turned out that these rules were not able to provide desired service levels, which was caused by the difference in contracted throughput and send out requirements between the 3 customers of Regas LNG. A solution was found in the use of an advanced scheduling algorithms.
When 2 of the 3 customers requested modifications to their contracts due to unforeseen changes in market conditions in 2018 Regas LNG introduced Lending & Borrowing. This met the contract amendment requests while keeping the terminal service level at 100% without investing in additional storage capacity.
Regas LNG succeeded in keeping its customers satisfied by making use of advanced planning & scheduling technology. In the end, it was able to create an Annual Delivery Plan that even allowed for changes in cargo sizes and arrival windows without reducing the service level.
Download this white paper from our Dataroom.
Link to LNG Industry can be found here.