Digitalization, Profitability And Sustainability

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In a candid interview with IAA magazine, Lawrence Ng, Vice President, APJ Sales, and Tommy Kers, Senior Director, APJ Solutions Consulting, Aspen Technology, Inc talk about showcasing the new AspenTech (transaction release), dual challenge, and sustainability. Goh Tz’en Long reports.

 

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Key themes:

  • The new AspenTech and the dual challenge
  • Generating value and sustainability for the next generation capital-intensive and process industries
  • Other hot topics, such as the hydrogen economy, recycling plastic, etc.

 

Questions:

 

What is the rationale for the transaction and positioning of AspenTech today?

AspenTech is a global software leader helping industries at the forefront of the world’s dual challenge meet the increasing demand for resources from a rapidly growing population in a profitable and sustainable manner. The transaction enables AspenTech to create the platform at scale to compete in today’s industrial landscape. It also enhances the company’s investment capacity for inorganic and organic growth; by accelerating the company’s reach and relevance into new markets. This also enhances customer value creation on profitability and sustainability.

 

What are the markets AspenTech will focus on? 

In terms of technology, AspenTech will focus on asset optimization in five key areas – namely, performance engineering; manufacturing and supply chain; asset performance management; subsurface science and engineering (GSS); digital grid management (OSI). Emerson’s OSI Inc. and the Geological Simulation Software (GSS) businesses are highly complementary to AspenTech’s existing portfolio, open up new opportunities to provide transformative value in sustainability, and expand AspenTech’s product offerings in existing end-markets.

 

Since its founding in the early 1990s, OSI has been focused on optimizing transmission, and distribution systems for utility companies in the power industry, which places the company in the middle of the global electrification imperative, including managing the complexity created from a broader set of renewables, and other power sources. This new growth market diversifies AspenTech from its traditional end-markets and makes available added solutions to serve existing customers.

 

The GSS business, which will now be known as Subsurface Science and Engineering (SSE), allows AspenTech to provide an end-to-end solution for the oil and gas supply chain with an extension to the chemicals supply chain, ensuring a complete interlock from reservoir to the gas station and into chemicals production. There is also a long-term sustainability growth opportunity, as companies continue to leverage subsurface technologies for carbon sequestration, geothermal and hydro energy, and mining of rare earth metals for applications, such as electric vehicle batteries.

 

By sector, the new AspenTech will focus on verticals, such as energy; chemicals; exploration and production; power; pharma; metals and mining; food and beverage; pulp and paper. More specifically, through Emerson’s existing channels, AspenTech is now more competitive in the pulp and paper, commercial power generation (inside the plant), commercial water and wastewater, pipelines and terminals/standalone midstream, greenfield construction sites, as well as expanding our footprint in life sciences, metals and mining, and food and beverage, which are established growth areas in the early phases of digitalization.

 

Discuss the dual challenge, and its impact on capital-intensive, and process industries.

The dual challenge is about meeting the growing demand for resources from a growing population, with increasing standards of living, while also addressing sustainability goals. According to the U.S. Energy Information Administration (EIA), it is projected that nearly 50% increase in world energy usage by 2050, will be led by growth in Asia. The EIA called out the industrial sector for taking the largest share in energy consumption. To mitigate the dual challenge, digitalization and sustainability are necessary to achieve new levels of operational excellence.

 

To be a market leader, technology is mission critical. The next decade is likely to be focused on driving increased efficiency from current assets with existing technologies, while scaling the capabilities of new technologies. From an industry perspective, companies need to have a collaborative mindset, in order to achieve Net Zero goals. Secondly, the global energy transition costs are substantial over the next three decades. In fact, operational efficiencies and profitability from today’s system will help provide the funds. Third, organizational excellence is essential, as talent; skills development; continuous learning; and succession planning, are key drivers for leading companies. It is also mandated that while achieving sustainability goals is important, making them sustainable themselves is a key to success.

 

How is the AspenTech leading the market – by show of value? Discuss how companies can achieve both profitability, and sustainability.

Greater digitalization leads to increased profitability. For example, AspenTech’s customers create about USD 59B in value each year. The annual value in global refining has resulted in USD 22B profit achieved, as well as the reduction of 16M metric tons of carbon dioxide emissions – as a sustainability proof point. It is important to note that these value calculations do not include the value created by OSI and SSE business units.

 

How can customers make better decisions, especially in the upstream oil and gas – what were their key challenges?

The upstream oil and gas sector has faced a variety of challenges – such as unpredictable oil prices, changing patterns of demand, and ensuring safe working conditions at remote sites. Accelerated digitalization programs, particularly those that include digital twin technology, can provide agility and resilience to better handle future market uncertainty, and lay the foundation for longer-term competitive advantage.

 

Digitalization can be a strategic lever for making upstream producers more agile and flexible. Many industry watchers predict permanent changes in the roles of the oil and gas workforce, as on-the-ground teams, become increasingly virtual or remote. Organizations are seriously considering how more work can be done remotely, and fewer crews in dangerous settings, in and around assets.

 

Autonomous drilling and production are happening now, as select companies are pushing their digitalization strategy. Technology can help the upstream industry navigate structural CAPEX and OPEX reductions, adding resilience and agility, to the development of assets. In the current business climate, it is necessary to balance capital costs to match the environment. For example, companies need to put over 20%, or in some cases, as much as 60% of capital spending budget on hold. Companies need to assess for the next 24 months, which projects you should defer, and which are most strategic for recovery and growth and be an advantaged producer, as demand recovers.

 

Advanced economic modelling and risk tools can rationalize the company’s CAPEX portfolio into a series of scenarios, ranking them by impact on revenue and sustainability, as well as by financial risk and externalities. Companies can examine optionality of locations, timing, and contracting, and their impact on agility, workforce, cost, and enterprise value. This can be used on a global basis, or by individual assets. Using these tools, companies can make similar choices on a rational basis within 30 days.

 

Elaborate on the top three investment areas outlined in a survey – namely, hydrogen, energy optimization, and carbon capture & storage, and utilization (CCSU).

AspenTech’s customers expect to pursue a range of sustainability strategies over the next three years. In a customer survey conducted by AspenTech – out of 103 customer respondents, representing industry executives, and operational leaders in energy, chemicals, engineering procurement construction (EPCs), process licensors and equipment, power sectors. The top three primary sustainability projects respondents expect to be awarded over the next three years include hydrogen (as the top initiative area at 51%); followed by energy optimization at 48%. Finally, 47% of the respondents called out carbon capture and storage, and utilization (CCSU).

 

Outline the key sustainability levers and AspenTech’s pathways towards sustainability.

The three key sustainability levers, include improving resource efficiencies; supporting energy transition and decarbonization initiatives; and innovating new solutions for the circular economy (contributing to reducing emissions, waste).

 

AspenTech has been ramping up focus on enabling sustainability technology pathways. The three pathways include 60+ sample models; industry partnerships; and new solutions. The sample models cover key innovation areas, such as carbon capture; emissions reduction; bio-based feedstock; hydrogen economy; materials recycling, etc. Industry partnerships focused on sustainability include joining the Alliance to End Plastic Waste, as an Enabler member, and the Energy Cooperation Program in China. New solutions include digital grid management, and subsurface science and engineering, which support key sustainability pathway of electrification, and carbon storage.

 

Explain how digital technology can power a sustainable hydrogen economy.

It is necessary to maximize hydrogen investments with digital technology. With capital and funding to fuel the hydrogen economy, industry players are seeing that the combined impact of innovation brainpower, project execution capability, and Industrial AI-fuelled digital technology, can lead to growth and market share.

 

First, it is necessary to de-risk the hydrogen economy as a system. To do so, an end-to-end systems view is crucial, which includes producing Green or Blue Hydrogen powering hydrogen production through renewables; carbon capture; hydrogen storage and transport; as well as hydrogen end use. Each component needs to be scaled, in order to succeed as a system.

 

Second, digital technologies can improve the economics of renewable power to hydrogen electrolysis system. Rigorous and AI-assisted models combined with economic models – can accelerate and multiply the efforts of technology innovators to reach new levels in economic and technical breakthrough. This requires viewing renewables, power storage and hydrogen synthesis as one system that can be optimized, subject to the stochastic variabilities of wind and solar.

 

Third, the efficiency and economics of reforming processes needs to be improved, combined with carbon capture. Technology needs to capture and remove a higher percentage of carbon dioxide produced, with better energy efficiency.

 

Fourth, it is necessary to advance the safe handling and transport of hydrogen. Simpler and safer approaches to cryogenic hydrogen and streamlining the use of ammonia as a carrier is required. It is also mission-critical to accelerate and scale in the development of hydrid models combining AI with engineering domain expertise. Digital technology is helping drive towards understanding and eliminating safety risks and controlling operations to stay within safe operating parameters.

 

Fifth, digital technology can help improve economics around fuel cells. Bringing advanced data analytics and hybrid models online allows manufacturers to learn from generations of fuel cell design and accelerate economic progress. Overall, digital technology can value-add in areas, such as time-to-market, cost of production, risk mitigation, as well as customer satisfaction.

 

Comment on how the industry can explore recycling solutions with digitalization.

The recycling of plastics has remined at low levels for many years, and expanding this activity is key to move towards the circular economy. This demanding concept is based upon principles that manufacturing processes move from the current linear lifecycle to integrate waste and by-products and eliminate emissions, while overall reducing impact on the natural environment.

 

The good news is that many companies across the plastic value chain are actively working and collaborating to resolve plastic waste issues. In addition, digital capabilities are helping solve some of the largest challenges in recycling activities. For mechanical recycling processes, when the plastic is melted to create a new plastic article, it can be difficult to re-integrate the material back into value chain. The variety of plastic types typically identified by the recycling symbols #1 – #6 often demands different solutions, requiring labor-intensive sorting. Many packages are composed of a mix of plastics used, typically marked #7, that can require unique approaches.

 

For example, Japanese company FP Corporation had complex business and sustainability challenges in its packaging and logistics operations. It successfully applied digital supply chain solutions to optimize its complex production and distribution processes for both profitability and sustainability targets.

 

Working with partner Time Commerce, the company generates a detailed scheduling plan that integrates its demand plans and warehouse capacity with key cost components for production, inventory, and transportation. The plan includes the retrieval of spent containers from consumer locations, and the material re-use at production sites, primarily made from polystyrene (PS #6) and polyethylene terephthalate (PET or PETE #1). The company estimates that it reduced landfill waste by 443,000 metric tons and cut carbon emissions by 160,000 metric tons in FY2019, continuing the improvement seen in the previous year.

 

Digital technologies are also helping to develop and improve new recycling capabilities often referred to as “advanced recycling”. This advanced approach differs from mechanical recycling in that it takes the polymer apart to make the starting monomer or feedstock, or another intermediate that can be used, as a feedstock. Advanced recycling provides the opportunity to manage large volumes of plastic waste and convert it to usable materials. As processes improve, it can also provide more flexibility in the types and variability of plastics that can be recycled.

 

Pyrolysis is the primary process for advanced recycling of polyethylene (HDPE #2 and LLDPE #4) and polypropylene (#5). Several global companies are working on pyrolysis processes with a focus on digital simulation solutions, such as AspenTech’s Aspen Plus software. These solutions model the complex reactions that occur in polymer decomposition, so conditions can be optimized for cost and emissions. Pyrolysis can be a helpful first step in a local recycling plan, as the liquid product formed, is much easier to transport than large volumes of plastic waste.

 

Please share sustainability-centric use cases, and how AspenTech helps, at large.

AspenTech is focused on customer success by helping customers run their assets safer, greener, longer, and faster. Elements of success include partnering together; increasing profitability; accelerating sustainability; and competency development.

 

Sustainability-centric customer cases in APAC includes:

  • FPCO – reduce carbon dioxide emissions, with precise production, and distribution planning
  • LOTTE Chemical – implemented multiple projects to save energy, and achieve corporate emissions reduction goal
  • S-Oil – reduce carbon dioxide emissions by 1.5%. Total savings of $39M, ROI less than one year
  • LG Chem – identify projects to reduce energy. Implemented projects with minimum investment, and maximum benefit.

 

Any recent customer releases in the region?

(June 2, 2022) KH Neochem selects Aspen Technology software to accelerate digitalization for the Self-Optimizing Plant. A leading Japanese chemical producer, KH Neochem, has selected Aspen DMC3 advanced process control software with patented adaptive process control to accelerate the digital transformation journey across its network of plants.

 

(February 2, 2022) Numaligarh Refinery Limited partners with Aspen Technology in pursuit of operational excellence. Indian energy company Numaligarh Refinery Limited has chosen to partner with AspenTech in the company’s digitalization journey, in pursuit of operational excellence via proven innovation. With the deployment of software products, such as Aspen HYSYS; Aspen Unified PIMS; Aspen DMC3; Aspen InfoPlus.21; Aspen Tank Operations and Movement Systems; and Aspen Operations Reconciliation and Accounting; the company can sustain optimal plant performance, as well as make faster, and more accurate decisions.

 

(August 17, 2021) Evolution Mining deploys Aspen Technology software to mitigate unplanned downtime and improve plant performance. A leading Australian gold miner, Evolution Mining has deployed Aspen Mtell software at the company’s Mungari Gold Operations, Western Australia, to help mitigate unplanned downtime, and provide information to support productivity improvements.

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