An energy intensive process business using gas as its primary fuel suffered a loss of supply after a long period without interruptions. Another outage shortly afterwards caused a lot of anxiety and led to calls to install oil burners as a backup.
There was concern that the clamor for modifications was an emotional reaction to the loss of control experienced when the gas supply was interrupted and an objective assessment was required to decide whether to proceed with the investment or not.
There was no clear understanding of all the ways that the gas supply could fail or how the plant would react if it did. Various stakeholders had different views of how the business could respond, how big an impact an outage would have on the business and its long term effect on the value of the business.
Broadleaf interviewed gas suppliers, the gas transport operators and plant management to establish the circumstances in which the supply might be interrupted, how severe the loss of gas would be, how long it would last, and the likelihood of this happening. We also explored responses that the business already had available to it and how these interacted with the scale and duration of the possible outages.
The analysis was complicated by the fact that the gas was sourced from several suppliers, the fact that some of the plant’s equipment was already able to burn oil and the way energy was shared between the client’s plants. We built a Monte Carlo simulation model of the risks and the responses the business would make to them and quantified the long term value of lost production, increased energy costs and other financial impacts. The model allowed the costs of various events and their mean value to the business to be quantified in the existing configuration and with various possible enhancements to the plant.
Exploring the risks and the way that the business would respond helped to build a shared view within the management team of the true nature of the risks. It also stimulated business continuity planning that made the plants better able to withstand outages through improved operating practices.
It was found that almost all outages would either be limited in scale and short enough for pragmatic operational measures to allow the business to ride them out or so severe and protracted that it would be impracticable to procure sufficient oil to keep the business going without gas. The cost of any feasible provision for oil to completely replace gas during an outage was found to exceed the value of outages when averaged over the long term. The operational improvements stimulated by the exercise overcame the concerns generated by the events that triggered the analysis.
The business was left with a clear plan for managing gas outages, a more realistic management team understanding of the risks it faced in this area and improved contingency measures to deal with the smaller short term events.