The LNG industry is changing across the globe, according to Dennis Ostendorf, business unit director for oil and gas at Quintiq Applications
“Planning and scheduling in LNG used to be fairly simple. Production needed to be maximised and cargos were delivered to long-term customers based on a pre-agreed annual delivery programme (ADP). What we see more and more is a developing spot market which can yield much better prices for your cargoes than the long-term contracts,” Ostendorf explained.
According to him this brings a new dimension to the LNG planning puzzle, regarding delivering to this new spot opportunity. In addition, it also poses questions like what benefits can be reaped from it and what could be the costs of committing to the delivery.
“At first glance this may seem like an easy puzzle to solve. Simply compare the revenue of the to-be-diverted pre-agreed cargo and compare it with the potential revenue of the spot opportunity. Then you take into account any penalties that may arise and perhaps even the difference in logistics cost for the delivery. The results of these considerations will determine if the spot opportunity is a valuable one,” he said.
However, in practice, things are more complicated. If lifting dates are not the same, inventory issues may arise. These issues are also likely if the volumes of the diverted cargo and spot opportunities are not the same. The operator need to consider the consequences of disruptions arising from taking advantage of a spot opportunity, he noted.
“In order to solve these issues, simple one-to-one diversions do not always suffice. In order to maximise the benefits, you need to have full insight into both the economics and the logistics side of the business,” Ostendorf said.
“An integrated planning software, accessible to both marketing and planning, can give you this insight. Combined with a powerful optimiser, the right solution enables creative solutions to get the best out of your spot opportunities, while still adhering to your long-term commitments,” he concluded.
