Maintains the supply of all resources needed for production and the products produced.

11.3.2 Feedstock Supply Risks

The availability and cost of raw materials for petrochemicals production is probably the most important factor in determining the success of the project. The cost of raw materials strongly influences the cost competitiveness of a project. It is not surprising, therefore, that the risks associated with raw material supply are often the most important risks in the petrochemicals sector. In common with other projects, raw material supply risk can be broadly divided into volume and price risk. Firstly, volume risks are typically higher for petrochemicals projects due to the fact that petrochemical processes usually rely on upstream processing facilities which need to supply high specification feedstock. The petrochemicals industry has been able to profitably process a wide range of different feedstocks. Ethane, propane and heavier components from gas processing facilities have, for instance, driven the development of some of the largest new integrated petrochemicals plants in the Middle East. Feedstocks from refineries continue to provide a significant proportion of feedstocks to the petrochemicals industry. Many petrochemicals plants also source the basic petrochemical building blocks directly from producers. In these cases the petrochemical project will be taking the long-term performance risk of the underlying project that supplies the feedstock. Given that most of these supplies will be supplied on a dedicated basis, project finance lenders will spend a considerable amount of time assessing the underlying risks to which their project is exposed.

Secondly, the risks associated with feedstock prices are also high due to the cyclical nature of the industry and the fact that numerous factors can influence prices in the short term. The cyclicality of the industry means that lenders to a petrochemicals project financing will want to ensure that the project can demonstrate economic viability even when the product revenues are at historically low levels. This means that the feedstock cost will have to be highly competitive. Ideally the feedstock supply arrangements to a project should be based on a long-term fixed feedstock price. Many of the petrochemicals projects in the Middle East have been successfully financed on the basis of low, fixed price ethane feedstock. In practice, however, fixed prices are difficult to achieve for widely traded commodity feedstocks and hence the impact on project economics of variable (often formula) based pricing will have to be carefully assessed through rigorous economic analysis.

1.3 An example of the application of BCM: background

A more detailed and comprehensive explanation of BCM may be gained by referring to an industrial application, in this case its use in auditing the maintenance department of a food processing plant (FPP).

The plant layout was shown in Figure 1.3 and an outline process flow diagram being shown in Figure 1.4. At the time of the audit the production pattern was three shifts per day, 5 days per week, 50 weeks per year. There was also considerable spare capacity. For example, only three lines out of four (see Figure 1.4) were needed to achieve full capacity. However, each line had its own product mix to satisfy the market demand. Thus, the availability of any given line for maintenance depended on the market demand and the level of finished product stored. Offline maintenance could be carried out in the weekend windows of opportunity or, by exploring spare capacity, during the week. In general, the maintenance manager found it easier to carry out most of the offline work during the weekend.

The relationship between the plant and the market demand for its product (and/or raw material supply) has a considerable influence on maintenance strategy. It governs the way production will use the plant, the plant operating pattern. This in turn determines the frequency, duration and cost of scheduling the plant for offline maintenance, maintenance windows.

The market demand is different across different industries. For example, base-load power stations (stations that provide the cheapest electricity) are required to operate for as long as possible because of a constant and continuous demand. The FPP of this example is a multi-product company where the demand for each product may well vary with time, often seasonally.

The problem the company faced was that they wanted to increase their output by using the weekends for production and by operating each line for as long as possible. Experience had led to the feeling that each line could operate continuously for about 4 weeks before coming out, for two shifts, for maintenance. The company wanted to know how this was going to affect their maintenance strategy and the following tasks were requested:

To audit their existing maintenance department in order to compare it to international best practice.

To propose an alternative maintenance strategy that would facilitate the new mode of continuous operation.

To provide an organizational vision (via models) of where the company should be heading in the next 5 years.

The audit of the FPP (task A above) will be used to provide a detailed and comprehensive explanation of BCM. This will include descriptions of each of the main elements of BCM, e.g. objectives, and will also introduce a number of generic models that can be used to map and understand the operation of these elements. You may find it necessary during your progress through the audit to refer back to the master diagram of Figure 1.1. It is important as you progress through the audit that you consider how you would modify the organization to comply with tasks B and C above – the answer to these tasks will be incorporated into this section as exercises.

2.1 Naval Petroleum Reserve

The conversion of the U.S. Navy to oil-burning ships made access to petroleum an immediate national security concern. Even though the United States was then a net exporter of crude oil, beginning in 1912 the United States set aside oil-bearing lands in California, Wyoming, and Alaska as a naval petroleum reserve. The reserve was to ensure that crude oil would be available for use by the navy in the event of an extended military conflict.

The naval petroleum reserve can be thought of as in situ storage of strategic stocks. Rather than removing oil from the ground and placing it in storage, the oil is stored in place. Although in situ storage seems like a commonsense approach to creating strategic reserves, the historical experience with the naval petroleum reserve reveals several problems with storing strategic stocks in the ground.

First, unless the land area of the reserve is sufficiently large to preclude other land owners from tapping the same reservoir of oil, production must be undertaken to protect the reserve from commercial encroachment. This has been the case at one of the naval petroleum reserve sites since the 1920s, as well as intermittently at two of the other sites, including the infamous Teapot Dome. The problem was particularly severe in the U.S. context where the rule of capture gives ownership of oil and gas to anyone who brings it to the surface on their own land. Yet preserving the reserve would likely be a problem whenever the entire reservoir is not dedicated as strategic stocks.

Second, in situ reserves are often not located near transportation facilities with adequate capacity to handle surge production. In the case of the Alaskan Naval Petroleum Reserve, for example, a second Alaskan oil pipeline would have to be built and then left to stand idle if the oil from the reserve were to be available as additional supply to the market. Providing surge capacity places a high demand on transportation facilities.

Third, it is generally costly and difficult to keep shut-in wells in a state of readiness that allows them to achieve full levels of production rapidly. After the Six Day War in 1967, the secretary of the navy ordered one of the naval petroleum reserve sites to be prepared to produce at its maximum expected rate within 60 days. The readiness requirement was never met, and, when commercial production was begun in 1976, the maximum rates of production anticipated turned out not to be achievable.

In situ storage like that provided by the naval petroleum reserve has an even more fundamental disadvantage: the large amount of proved reserves that must be set aside to achieve substantial surge capacity. It is rarely possible to extract more than one-eighth of a reservoir within 1 year. Imagine that the United States wanted to have the capability for 3 mmb/d of surge capacity for 1 year. Reservoirs of approximately 8 billion barrels of proved reserves would have to be set aside, more than one-third of all U.S. proved reserves. Once the purpose of strategic oil stocks shifted from supporting military operations in extended conflicts to providing surge capacity for avoiding the economic losses from oil price shocks, in situ stocks were no longer appropriate as strategic stocks.

Home-based workers

A commissioned report undertaken by the Advanced Research Company Ltd for the Department of Labour Protection and Social Welfare (1999a) on policies and regulations to protect home-based workers produced a number of important findings. The survey undertaken for this study included 800 home-based workers who were in specific vertical industries, namely fabric products, leather products, wooden products, plastic products and souvenir and home decoration products. Most of these workers were female and their status was marked as ‘frontline’, meaning that they are the workers who actually perform the tasks or make the products, not the ones who take the order for the products (approximately 85 per cent). Most of them delivered products to their employers directly. The length of work experience for home-based work tended to fall into the one to five years category but there were some cases where it exceeded ten years. Their ages ranged from 26 to 45 years and they possessed only a primary school-level education.

Home-based workers’ perception of their employers revealed a reliance on their employers to supply raw materials, individual safety equipment (whole or partially bought/rented) and machinery (whole or partially bought/rented). Most home-based workers agreed that the employers should share the burden of costs for safety equipment and machinery. In terms of the employment contract, most of these home- based workers did not have any explicit employment contract with their employer. The surveyed home-based workers also said that they wanted details on basic pay and welfare pay for any work-related injuries or ailments to be specifically included in the employment contract. Given this, it is not surprising that the survey respondents reported problems with their raw materials supply, low quality of equipment and supply of machinery, lack of funds to purchase machinery and individual safety equipment, and unfair basic pay. For the basic pay, most of them did not want to earn basic pay that was less than what a worker in the formal economy earns. Most of them stressed a need for a social welfare system to support workers and dependents in the case of illness.

In 2003, another study on home-based workers was undertaken by the Advanced Research Company Ltd (Department of Labour Protection and Social Welfare, 2003). They surveyed 1,108 home- based workers in 16 provinces, both in Bangkok metropolis and other regional provinces. The survey revealed that determining the status of these home-based workers was exceedingly difficult. Besides performing the work themselves, the home-based workers might act as the head of a work group and distribute jobs or tasks to other members in the group. Sometimes they acted as employers of these other members, who could be employees in the household or other family members. From the interviews, many of the home-based workers, about 67.1 per cent, were manufacturers themselves. With respect to working conditions, most of them (53.9 per cent) had over 250 working days per year and most of them (70.9 per cent) worked about seven to ten hours per day. Their working environment was unsuitable, as most of these home-based workers were using part of their living space as their workspace. These spaces were small and cramped, with poor lighting and poor ventilation. This led to problems such as poor air quality from dust and worker health problems due to ergonomic issues: problems such as backache, muscle strain, etc. Some of the root causes included ignorance or lack of awareness of dangers from not using equipment properly. In addition, this study found that these home-based workers received wages on a piece-rate system, and these varied according to the types and nature of work assigned. Many of the home-based workers were reported to earn on average B50 to B99 per day, a level far below the minimum wage. These home-based workers were not entitled to any non-wage benefits either in terms of medical care, compensation for accidents or paid holidays. On the other hand, the majority of these home-based workers (67.8 per cent) felt that they should receive some welfare or medical care from their employers or the government or the work group. In addition, most of them (62.6 per cent) thought that there should be some social security fund and that there should be some provident fund with equal proportions of contributions from the employer, government and home-based workers. In terms of worker safety, the majority of these home-based workers (77.3 per cent) strongly agreed that there should be a legal provision to prohibit the outsourcing of dangerous work (such as handling explosive materials) to home-based workers. The other findings in this study were similar to the previous study undertaken in 1999, which reported on low wages and lack of capital for production (as they needed to get the necessary raw materials, equipment or machinery themselves).

A similar study on homeworkers was undertaken in 2004 by the Social Research Institute, Chulalongkorn University (Pongsapich et al., 2004). A survey of about 300 households engaged in subcontracting work, namely handicraft paper, leather works and seeding, was undertaken using structured in-depth interviews. Most of the sample homeworkers (77.4 per cent) were female and had about four to six years of primary education. Most of them earned less than B3,000 per month (i.e. less than the minimum wage per month: see Table 9.11). On average, they worked 9.4 hours per day and seven days a week. More than half of the sample respondents indicated that they had some health problems related to their jobs. These symptoms included pains in their back, waist, legs and arms and headaches, fevers, rashes and breathing problems. Survey respondents said that home-based work was an opportunity to earn extra income to support their family. This was considered a good opportunity, especially for those who had limited education and skills and those who could not take full-time jobs outside their home, such as housewives or older people. The disadvantages of home-based work included inconsistent order volumes, which fluctuated with the demand of both internal and external markets.

Pension funds

The most important pension funds in China are National Social Security Fund (NSSF) and provincial pension funds. China’s fast-expanding and powerful national pension fund, NSSF, has become a key investor in the fund and an indicator of the stock market; when NSSF starts to enter the stock market, this often indicates that the stock market is approaching the bottom and is going to turn around soon. Many investors may follow NSSF to enter the market. The NSSF was established on 1 August 2000 by approval of the State Council. The National Council for Social Security Fund (NCSSF) is in charge of managing the operation of the NSSF’s assets. NSSF aims to be a solution to the problem of aging and serves as a strategic reserve fund accumulated by the central government to support future social security expenditures and other social security needs. The funding sources of NSSF are as follows: fiscal allocation of the central government; allocation from the lottery public welfare fund; capital derived from reduction or transfer of state-owned shares; capital raised in other ways with approval of the State Council; investment proceeds and equity assets. By the end of 2011 the total assets under management of the NCSSF reached RMB 868.84 billion Yuan. The total was expected to be over RMB 1 trillion Yuan by the end of 2012. Due to its huge size, its investment can be considerable. But it has to take a passive investment strategy because safety is the most important thing for the fund. For example, at the end of 2009, the total assets under management of the SSF amounted to RMB 776.5 billion. Among different asset categories, fixed income assets accounted for 40.67 percent, domestic stocks 25.91 percent, equity assets 20.54 percent, global stocks 6.54 percent, and cash equivalents 6.34 percent.

SSF’s investment often forecasts the trend of China’s stock market. In October 2008, the stock market reached as low as 1664.93 points. In the next 3 months, from November 2008 to January 2009, SSF opened 32 new A-share accounts. After that, China’s stock market reached the high point of 3478 in August 2009. History shows that each time SSF starts to open new A-share accounts it is very likely that China’s stock market is approaching a turnaround point to go up. SSF also invests in PE. In 2011, it invested RMB 19.5 billion Yuan in 13 PEs; and the total investment in PE was expected to be RMB 30 billion Yuan by the end of 2012. Its annual return for the past 19 years is 9.17 percent. For the past 9 years, it has achieved an annual return of 18 percent from its investments in China’s stock market. Its investment in the stock market is only about 20 percent of its assets, while it contributes 40 percent of the total return. So, the stock market is important for its investments.

China’s local Social Security Fund amounted to about RMB 2 trillion Yuan by the end of 2011. Local pension funds are only allowed to invest in China T-Bills, while the national pension fund NSSF has more investment opportunities. The annual returns of local pension funds have been less than 2 percent for the past 10 years, and would be negative if inflation were taken into consideration. So, China may allow its local pension funds to be invested in its stock market in the near future to improve investment returns. Guangdong Province, a province in Southern China, has approval to transfer RMB 100 billion Yuan, or $15.84 billion, of local pension funds to the NCSSF for investment operations. The capital will be mainly invested in fixed-income assets, and some may be in the stock market. According to Mr Dai Xianglong, the Chairman of the NCSSF, allowing pension funds to enter the stock market does not mean that all funds will be invested in the market, and such investment may be first piloted in some developed provinces.

II. Productivity—How is it measured?

A broader view of productivity expands the notion of capital-labor substitution, expressed by Eq. (2), to take into account all input factors (e.g., materials, energy, outside services). Total productivity is calculated from the formula:

(3)Pt=OTL+C+R+Q

Where Pt = total productivity

Qt = total output

L = labor

C = captial

R = raw material and purchased parts

Q = other miscelleneuos goods and services

In this case intermediate goods are treated as input and therefore must also be included in the output.

This type of a total productivity index, represented by a single equation, is useful because it gives managers a handy scorecard to answer the question: How are we doing?

It has an advantage over partial- or single-factor measures by making information available on tradeoffs among factors and allowing senior managers to make more informed business decisions.

The concept of total productivity is particularly useful at the firm or business unit level of the organization. Partial productivity measures; such as given by (Eqs. 1) and (2) are useful for day-to-day operational control at lower levels of the organization.

IV.B Self-Regulation Tested (the ASNE)

No sooner had the canons been adopted by a fledgling editors organization than it had its first challenge, one it failed if effective self-regulation was the goal. Fred Bonfils and Harry Tammen had purchased the Denver Post shortly before the turn of the 20th century, turning it into a highly profitable sensational scandal sheet. They performed some laudable public service, although the paper's offices were once sacked by an enraged mob and both men were shot by the outraged attorney of one of the subjects of their lurid stories.

When a Wyoming oil field that the U.S. Navy was preserving as a strategic reserve was turned over to the Department of the Interior, Bonfils and Tammen came into information regarding oil field leases about to be granted by corrupt government officials in the Harding administration to soon-to-be-successful oil companies and some individuals. Instead of exposing the corruption and the questionable leases in the Post, Bonfils and Tammen (Bonfils was a member of the new ASNE) used the information about the leases to negotiate contracts with lessees that enriched the publishers by $500,000.

The Ethics Committee of the ASNE recommended Bonfils's expulsion, but procedural matters intervened and Bonfils was allowed to resign from the organization instead. He continued, of course, with the Denver Post. Even though he left the organization, the ASNE was powerless to discipline him by denying the former member the right to continue as a newspaper editor. Thus, self-discipline sounded a hollow note in journalism in the absence of a power to punish wrongdoers by revoking their right to practice their craft. Organizations were left with publicity as their chief weapon in the ethics wars.

A further blow to self-discipline aspirations in journalism came in 1931 when the U.S. Supreme Court placed a definitive stamp on the free press provision of the First Amendment by ruling that government may not engage in prior restraint of expression. The case involved a Minnesota editor whose newspaper had been a thorn in the side of local government, publishing caustic remarks and accusations about local leaders. Frustrated elected community leaders ordered the troublesome newspaper suppressed, an action that ended up in the Supreme Court with a ruling that leaders must tolerate abuse by journalists, punishing them only after the fact of publication and with sufficient reason to make a court case of the matter.

The ASNE experience and the court decision effectively demolished chances for self-regulation, taking along with them the laudatory stamp of professionalism for the journalist. Essentially, the inability of the ASNE to discipline and the Supreme Court's decision on prior restraint both reaffirmed the basic premise of the Bill of Rights, guaranteeing individuals rights over the needs of society in all but the most extraordinary of circumstance. In this case, individuals in the media generally may not be held accountable, to the extent of losing their livelihoods, to either their peers or the government. That these conclusions were at odds with continuing and persistent aspirations among academics and some journalists is evident given that journalism programs still taught a community norm orthodoxy in journalism and the SPJ still heard a minority advocate punishment provisions in discussions of its 1996 code.

Although the First Amendment was absolute in its tone, some legal restrictions have emerged over the years, with libel, privacy invasion, business and broadcast licensing, and copyright laws providing some broad boundaries beyond which media may not go without punishment. Yet the courts have generally protected free press provisions of the Bill of Rights.

Broadcasting emerged during the 1930s as a strong mass medium, creating a new control situation that the government handled differently from the print media. Under a justification of managing scarce public resources (the airwaves), Congress created the Federal Communications Commission (FCC) to license and regulate broadcast stations (first radio and then television). Although the Federal Communications Act of 1934 prohibited censorship in deference to the First Amendment, several subsequent actions directed the electronic media to ensure greater responsibility.

Two example are the equal time provision of the Federal Communications Act, which ensures that if stations deal with election matters, then they will allow equal time for all candidates for the given office (exclusive of paid political commercial time), and the fairness doctrine, a post-World War II FCC regulation that required stations to allow alternative views on matters of controversy they aired. News programming was generally exempt from both the equal time provision and the fairness doctrine.

The FCC further restricted ownership in ways designed to encourage some pluralism of broadcast voices in a community until it loosened these and other restrictions during the 1990s. Within this structure, and given the FCC life-or-death powers over radio and television stations, broadcast codes and news ethics codes were sensitive to such power, providing at least one venue in which news operations could be taken off the air for infractions.

Yet the matter of media ethics largely rested through the 1930s and the years of World War II from 1941 through 1945, as vigorous public discussion, vocal criticism of press behaviors, and court decisions on privacy and libel became the prime regulators of journalistic conduct.

I Media Policy: Overview

The New Order came into existence after October 1, 1965, when General Suharto defeated the coup by young army officers led by Lt. Colonel Untung. In less than 24 hours Suharto's forces wrested control of Jakarta's central Merdeka Square, bounded on the north side by the Presidential Palace, on the east by Suharto's Kostrad (Army Strategic Reserve Command) headquarters, on the west by the Republic of Indonesia Radio (RRI) station, and on the south by the telecommunications center. Soon after dawn on October 2, Suharto forces took control of the Halim air force base, to find the bodies of six generals murdered by Untung supporters. The Thirtieth of September Movement (as the Untung coup was dubbed) was quashed less than 48 hours after it had been launched. Over the next 32 years, however, the media were variously implicated in the production and reproduction of mythologies about the coup and Suharto's counter-coup.

The New Order government asserted that the Indonesian Communist Party (PKI) had masterminded the coup. This premise quickly solidified into incontestable “fact” through constant repetition in textbooks and mass media. The Communist Party, and all organizations associated with it were banned. In the months following Suharto's counter-coup, the army, along with anti-Communist vigilante groups, slaughtered approximately half a million people, destroyed left-wing films and books, and banned hundreds of publications. Anyone suspected of Communist sympathies was barred from working in the press, radio, film, and television.

As with industry in general, the New Order government adopted a corporatist approach in dealing with the media industry. For each functional group (e.g., actors, journalists, radio station owners), the government authorized a single representative professional organization. These corporatist bodies, premised on the New Order principle of family values, were responsible for the implementation of the government's prescriptions and proscriptions for the industry.

All institutions had to adhere to the state ideology of the Pancasila, or five principles, initially enunciated by Sukarno in a June 1945 speech. Somewhat revised by the New Order, these principles were: belief in the one and only God, just and civilized humanity, the unity of Indonesia, democracy guided by the inner wisdom of deliberations of representatives, and social justice for all the Indonesian people. Since 1978, courses on the Pancasila were compulsory not only at all levels of education, from primary school to university, but also for all public servants, including those working in state radio and television. More specifically for the media, there were dozens of regulations barring any media text that might inflame primordial ethnic (Suku), religious (Agama), racial (Ras), or group (Antar-golongan, euphemism for the class) tensions. This restriction, referred to by its mnemonic SARA, was used by the state to not only restrict news reporting of ethnoreligious tensions and control the public interpretation of all sociopolitical conflicts, but also to exclude and restrict the use of local languages in the media (such as Chinese) in a variety of ways, particularly in the case of television and film.

For most of the New Order, the media policy was formulated and implemented through the Department of Information (Deppen). Indeed, what constituted the media was defined by whether a culture industry was under the purview of that department. While press, radio, and television had been under the control of the Department of Information ever since independence, film, along with the Board of Film Censorship (BSF), was moved from the Department of Culture to Information after 1966. When the Internet was introduced in the closing years of the New Order, there was considerable confusion as to whether this medium would be administered by Deppen or by another department.

On the surface, the media appeared to be fully under the command of the government, controlled through layers of formal and informal censorship processes, increasing in the later years through ownership. The government's ban of three popular newsmagazines in June 1994 became a focal point for middle class dissent against a corrupt and aging dictator. In an unprecedented drawn out legal battle, the editor of the most prestigious of the three proscribed publications, Tempo, won two well-publicized court cases challenging the minister of information's authority to impose the ban. When the Supreme Court finally upheld the minister's appeal, it only reinforced the view of many that, at the highest levels, the judicial system was corrupt and susceptible to political pressure.

On May 21, 1998, in the midst of the worst economic crisis since his accession to power, Suharto resigned. In 2000, the first democratically elected government since 1955 abolished the Department of Information and many of the most restrictive rules through which it had circumscribed the media since 1966.

The process of democratization since 1998 has transformed the content of the media, particularly the news media. Structures of the media industry are changing too, albeit more slowly. A much-debated, and highly controversial media bill was finally passed on November 28, 2002. Many observers will regard the implementation of the bill as a touchstone for the emerging democracy in Indonesia.

To Adjust Mentality and Enhance Self-Confidence

The overestimation of energy security risks mainly stems from the insufficiency of experience and self-confidence. For a long time, the long history of traditional agricultural economy and planned economy has made China not only lack the experience of market economy but also the notion of market economy, which makes people have a poor understanding on the interdependence of the global economy and lack sufficient confidence in the international energy market. In addition, they have insufficient knowledge of how market economy can ensure the improvement of China’s overall strength, so that they are not very confident in market economy.

In the international community, some people have argued that China’s oil import growth has pushed up international oil price. This argument is known as the “China Threat theory.” In fact, they are taking advantage of one of Chinese weaknesses, that is, Chinese people care much about what others say about them. As long as some media reported that it was China’s huge oil imports that impacted the oil price in the international market, we Chinese people would be nervous. It seems that huge energy imports do increase the country’s insecurity [14]. The weak-state mentality often makes us fall into the passive position in the world, also produces impetuous mood and excessive nationalism domestically. We say that China is a responsible country, so we should take a serious and responsible attitude towards the international community and handle affairs according to international practices and international laws [27].

Energy security in peacetime is different from that in wartime. We shall not at every turn adopt the thinking mode in wartime when facing energy issues. If full-scale war broke out, besides the military installations and military forces, important facilities and factories, such as transportation, energy, and communication would undoubtedly become the first targets of attack. At that moment, general energy security safeguard measures would have become ineffective. Oil security facilities in peacetime, such as oil strategic reserve facilities and their transmission and distribution systems, domestic oil wells, and multinational oil pipelines built in consideration of diversification, are instead, likely to be the most vulnerable targets in the war. Oil is indispensable material in the war. In the two world wars, the scramble for oil and the attacks on oil fields, refineries, transportation pipelines, and oil tankers were important contents of war.

Li Junfeng has pointed out that the biggest problem in China lies in the mentality that needs to be adjusted. China should take a more positive and confident attitude in engagement in international trade. Energy is important, but as common trade commodity, it’s just one part, not the whole of economy. We should not elevate the microlevel energy trade problem to the national security level.

Han Xiaoping believes that in the context of globalization, when markets are integrated with each other, China’s energy problems are not only problems of China itself, but problems of the whole world. Han Xiaoping believes that in the context of global market economy, market is the first factor. The countries that have a normative and perfect market may have the discourse power in the commanding height. The United States does not supply resources to the world, and besides weapons, aircraft, and software, there are few competitive products in the United States, but the United States has always been dominating the global economy since the two world wars. It is not its strong military force but its huge market with mature and perfect mechanisms in the United States that plays the key role. The United States is domineering in international relations just because they understand and effectively operate the power of this market [26].

Chen Xinhua has stressed that the out-of-place policy and system is the biggest hidden danger of energy security, and policy formulation requires objective and comprehensive information as well as talents who are proficient in the energy economy. Many Chinese engineers are knowledgeable in energy technologies, but in China there are seriously less talents who understand the energy economy and energy market. China, as a resource importer, should not adopt policies made by energy-exporting countries and in particular should not apply energy-exporting countries’ control over resources to the control over our domestic energy market. As a resource-importing country, only open, diversified, and competitive markets can effectively absorb the global resources and capabilities and thus ensure our energy security. Making great endeavor to improve the domestic market is an important means to curb international environment deterioration [3].

In the opinion of Yang Guang, in the oil problem, people have added too much nationalism mood for rendering. Some people are very vulnerable to “international loneliness” and feel they are abused by “oil powers,” thus falling into thinking fallacies. They assume that the United States and the US capital have controlled most oil producers, and for China there is no real oil security at all; without a strong blue water navy, for China there will be no oil security in the real sense; or political relations determine oil supply and demand. China does not have sufficient confidence in whether the international market can meet the huge demand for oil in China and does not have enough capacity to deal with international political and economic turmoil. The international oil market is not classified according to the affinity of interstate political relations, and international oil prices are not divided into different categories according to the strength of overseas military forces or the level of diplomatic relations. If there is no large-scale war, business is still a business, oil is only oil after all, so the relation of supply and demand, market laws, and payment capacity will be more important than interstate relations and ideology [2].

9.2.2 Step 1: Understanding the structure and characteristics of operation of the plant (the ‘top-down’ stage of the analysis)

(a)

Construct process flow diagrams and draw up a plant inventory

Construct process flow diagrams such as those of Figure 4.7 (modeling the complete system) and Figure 4.8 (modeling its subsystems). The process flow diagrams should indicate plant production rates, raw material storage capacity; inter-stage storage and final-product(s) storage capacities; the latter the way the units have been structured to perform process functions – e.g. at least one of the filtration units is needed to operate to fully meet the requirements of the reaction stream (see Figure 4.8). The process flow diagrams should also identify unit production rates, product-quality requirements and unit-operating patterns. Use the process flow diagrams to make up an inventory of the plant at unit level, tying up with the documentation system and essentially a list of units, with a description and an identity code (see Figure 9.4).

Understand the plant-operating characteristics and production policy

Identify the production-operating policy for the plant (arriving, through discussion and investigation, at a description which is not disputed by any of the parties concerned). This should include the process relationship between all the plants making up the operation. In each case, it is necessary to identify the plant-operating pattern (shifts per day, days per week, weeks per year, with seasonal variations) and the expected product output, mix and quality.

Determine how other production factors (such as raw materials supply) and any external factors (such as safety regulations) influence the operating pattern of the plant and/or unit(s). Estimate the lost-production costs for the plant and for its units. Determine whether these are constant or variable (e.g. in power generation, they might depend on the time of day; in agrochemical production on the time of year). It will be instructive to use the batch chemical plant throughout this section to illustrate each of the steps of the procedure.

The batch chemical plant, which manufactures a wide range of similar organic chemicals, comprises six reaction streams, three making soluble products and three making insoluble ones. Each stream is dedicated to a specific range of chemicals and the streams are not inter-changeable. The finishing streams are also divided into those processing soluble and those processing insoluble products, and are only inter-changeable within these groupings. A plant path (as indicated in Figure 4.7 by the bold line) is a complete path through the plant from reaction process to packaging. A typical reaction stream, indicating the interrelationship of the units, is shown in Figure 4.8.The reaction process operates on a 48-hour batch cycle while the finishing process operates on a 168-hour semi-continuous cycle. A number of reaction cycles have to be completed before enough chemical is stored to allow the finishing process to begin.

In addition to the main product flows, the plant is supported by a full range of chemical and engineering services, i.e. primary and intermediate chemical supplies, salt, flake ice (not shown). The reaction streams are computer controlled and the rest of the plant is remotely controlled, hence the plant can be operated by a small production staff.

The production plan is complex because of the many products manufactured, but there is a balance throughout the plant which means there is little or no spare capacity in the finishing streams if all the reaction streams are in use. At present the plant is production limited.

Rank the plant units in order of their criticality

It is important to rank the identified units (or systems) according to the impact of their failure on production and safety. Such a ranking is best based on the consequences of unit failure multiplied by the likelihood of unit failure:

A number of companies have constructed their own consequence/risk probability matrix. Figure 9.5 shows an example of such a matrix used by Woodside energy. Such a matrix would be suitable for ranking the units for the batch chemical plant.

Identify the user requirement for each unit

Using the information gathered in (a) and (b), identify the plant user requirement. User requirements are identified via the approach outlined in Figures 5.9 and 5.10. The information derived at this stage ((b) and (c)) is essential for formulating, in Step 2, the unit life plans.

The batch chemical plant can be considered as being made up of six mostly independent plant paths. Up until now an average availability level, for a plant path, of 92% has been achieved. Because of the demand for the product the maintenance objective for the next 2 years is to increase this figure to 96% at no extra maintenance cost. The plant is about 10 years old and has an expected life of 30 years or more, given appropriate life-extension work. The plant can be regarded as hazardous because of its employment of corrosive chemicals at high temperature and pressure. The company is safety conscious and has recently introduced Du Pont safety procedures and standards.

The user requirements for the individual units are determined as outlined in Figure 5.10.This will be illustrated using reaction unit 3 as an example. This is a production-critical unit from which production want 100% reliability of operation over its 51-week operating period (i.e. 98% annual availability) and high product quality (i.e. conforming to written quality standards). In addition they have stated that the reactor should be maintained in such a way that it will operate safely for its expected life.

Understand the maintenance scheduling characteristics of the plant (using information from (a) and (b))

Identify the opportunities, the production windows, for offline maintenance. These may result from seasonal, monthly, weekly or daily variations in demand for the product. Some of these windows may be well defined in terms of frequency and duration, e.g. those arising from statutory pressure vessel inspection. In other cases, they may occur with much less certainty, e.g. due to fluctuating demand for the product. This is one of the most important characteristics influencing opportunity scheduling, such as may be desirable for a power station on two-shift operation tending to generate windows of up to 1-week duration, which occur with random incidence.

Production-related windows can arise:

for a unit, or a group of units, because of production scheduling, e.g. in a multi-product plant where a given product mix does not require a particular production line;

for the plant, or for units, because of production changes, e.g. catalyst changes;

for a unit, or a group, because of the availability of redundant or standby equipment;

for a unit, or a group, because of the availability of inter-stage storage and excess capacity;

for the whole plant, or for units, because of statutory safety work.

Identify ‘domino’ situations, where the effects of offline maintenance on a unit propagate along a batch process. Inter-stage storage prevents the whole line coming off and spreads the maintenance for the line over a longer period, i.e. it smooths peaks.

Identify ‘process chains’ where, in order to maintain a single unit, a whole process involving many units needs to be taken offline. This either causes maintenance resource peaks or excessive planned downtime for maintenance.

Information from this step is essential to setting up the maintenance schedule (part of Step 3).

The batch chemical plant is operated on a full-time basis, i.e. 168 hours per week. During the Christmas week, however, the plant is not used by production but the chemicals are held in process to minimize the effect of the holiday loss. There are no windows for long-term maintenance scheduling. There is an agreed maintenance shutdown of 1 week per plant path. Closer investigation shows that over any monthly period all the units in a plant path become available for maintenance, at short notice, for periods of between 2 and 8 hours. These windows arise randomly because of the batch nature of the process and the various washing- out procedures that are required between different products. They can be used for small offline jobs if there is good communication between production and maintenance.

It will be instructive at this point to consider how the batch nature of the process influences the scheduling of the major offline maintenance. Because of the short cycle time (48 hours) of the reaction process each reaction stream has to be considered as a whole when major maintenance work needs to be carried out. In other words, if a single reaction unit is taken offline for 1 day, then the whole reaction stream has to be taken offline. This is not the case with the units in the finishing stream because the cycle times are much longer. Thus, if a reaction stream is taken offline for, say, 3 days, this window of maintenance opportunity moves down the finishing stream unit by unit, the ‘knock-on’ principle. The inter- changeability between finishing streams makes the scheduling of maintenance in this window a straightforward exercise.

Because there is a little inter-changeability between reaction streams, and no spare capacity in a normal sales market, failure of the plant means high downtime cost.

Exercise

Outline the maintenance scheduling characteristics for a plant within your own company. If possible use the process flow diagram of your answer to E4.2 to carry out this exercise. You should give particular attention to influence that the market demand for the product has on the production and maintenance schedules.

Review Questions

Refer to the ammonia plant of Case study 1 of Chapter 12 and discuss in p outline the maintenance scheduling problem. Do you consider there were 4 any maintenance windows at plant level or at unit level?

Refer to the bus fleet of Case study 6. Can you explain maintenance windows in this fleet situation? How were they used for scheduling maintenance work?