September 2012

Using Single Blend Optimizer to Quickly Maximize Bunker Profits Work Highlights

By Ara Barsamian
Fired Equipment/Heat
Introduction Exchangers
• Engineering design review
In the current global economic downturn, we can increase profit margins in the face of constantly and cost estimating consulting
increasing fuel and operating costs by using a bunker blend optimization tool. By optimization, we support was provided for a
mean maximizing profit, and as such, money has to be explicitly included in blend optimization major refinery expansion
calculations. project with respect to the
fired heaters being supplied
There are three types of blend optimizers: for a grassroots delayed
coker unit. Support consisted
• Single Blend Single Product Optimizer (SBSPO) of reviewing and commenting
on the licensor’s proposed
• Multi-Blend Optimizer (MBO) technical specification, and
making an independent
• On-line Single Blend Optimizer (OBO) estimate of the heater’s cost.
The owner then used this
In this article, we will concentrate on the Single Blend Single Product Optimizer because in terms of information in further
value (“Bang-per-buck”), it easily provides multimillion dollar benefits for a modest 10 to 20 discussions with the licensor.
thousand dollars investment and essentially zero risk.
Process Control/
MBOs provide tens of millions of dollars in benefits, mostly in reduction of inventory and freeing Instrumentation
tank storage capacity, but at a much higher initial investment cost (in the order of 200 to 400k$) and
• Process control/
additional complexity (e.g., links to a refinery LP planning tool). instrumentation consulting
support provided to a major
OBOs are a necessity for large (50 kBPD or more) in-line blenders, typical benefits being in the integrated oil company at their
range of 5 to 10M$/yr or more for a significant investment in control system and on-line analyzers of engineering office. This work
the order of 1 to 2M$. involves both new capital
projects and technical support
Blend optimization applies equally to bunker, marine distillates, gasoline, diesel, and other fuels, for operating facilities.
although our examples will focus on marine bunker.
Process, Operations & Safety
Functionality of Single Blend Single Product Optimizer (SBSPO)
• Continuing to provide
A single blend optimizer does the following: consulting services for high-
level screening assessments
• Calculates the most profitable recipe based on available components’ properties, available of various third-party
inventory, prices, product specs, and batch size. (emerging) breakthrough
technologies.
• Calculates the “blendability” of a component for “buy/sell” decisions; e.g., can you use the
opportunistic cargo of cracker bottoms to make a desired quantity of IFO 380 using also the
other blend components you have on hand?

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4 West Main Street, Rockaway, NJ 07866 • 973-627-4455 • www.carmagen.com
 • Allows the “forced” use of a particular blend component in a blend to make “room” in the component tank for
additional receipts or rundowns, or prevent overflows. The same “forced” use can also be done for multiple
components.
• Calculates the “cheapest” recipe to correct an off-spec product tank.
Input Data Requirements for Single Blend Optimization
The optimizer calculations require the following data:
• Blend components quantities (inventory). Properties (from Lab) and prices (from Platts, OPIS, refinery LP, other
traders, etc.)
• Product quantity (heel) in the blend tank, heel properties (from Lab), and prices (from Platts, OPIS, refinery LP,
traders, etc.)
• Product specifications (as specified in contract; could be ISO8217:10 or ISO8217:05, or custom specs as agreed)
• If available from the Lab, the site measurement precision (ISO or ASTM repeatability and reproducibility). This can
be used to “zero out” the errors between Lab tests and the blend optimizer predictions.
All this information is stored on a small spreadsheet-based “local” database, in the form of a “Case.” You can store
different cases for making IFO 380HS or IFO 380LS, IFO 180HS, etc.

Typical Blend Optimizer Inputs

Single Blend Optimization Output Results
The results of the blend optimization provides:

• The most profitable recipe • The predicted properties of the finished product blend

• The blend components used • The profit in $/mt (or m3, barrels, etc.)

• The blend batch size

An illustration is shown below:

Bunker Blend Optimizer Results

Other Applications
Blendability Testing
As a trader, and potentially an independent blender or refiner, when you have an opportunistic cargo of a blendstock, say,
cracker bottoms, should you buy it? Can you make any money with it?
The fastest way is to run a blend for the product spec and quantity you need. This requires doing the following:
• Entering the opportunistic cargo specs (e.g., cracker bottoms) into the optimizer blend component database
• Cracker bottoms offered price ($/mt)
• Select the product spec, e.g., IFO 380 4.5%S
• Blend batch size, e.g., 33,000 mt
Then you can run a case with cracker bottoms and without them and compare the gross profit per mt. In the example below,
the gross profit/mt without the cracker bottoms is $16.97 vs. $35.15 with the cracker bottoms, for exactly the same specs and
blend quantity.

Blendability Checks

Storage Tank Capacity Management

Many times we are faced with a situation to make room in a tank to either put in an opportunistic cargo, have an emergency
rundown to the tank, or simply inventory buildup that threatens a tank overflow.
A single blend optimizer allows us to quickly evaluate a reasonable option by manually forcing the use of “X”-barrels out of the
subject tank to make both room in the tank for something else while we make a finished product blend still meeting specs,
albeit at possibly a reduced profit. However, we know what to expect BEFORE we actually do it. In the example below, we
forced an increased use of Visbreaker Resid from 34914 mt to 40000 mt in the blend to make room for a new resid cargo, the
penalty being a decrease in gross profit from $0.50/mt to $0.30/mt.
Yes, you can do much better money-wise with a MBO over a longer period of time, say ten days to a two weeks time horizon,
rather than having a myopic view of a single blend. However, it takes much more information, more expertise in using the
MBO software, and the MBO software itself is in the 200 to 400k$ cost range vs. less than 10k$ for the single blend optimizer.
 Storage Tank Capacity Management

Why Do You Need Blend Optimization Tools?

Optimization deals (mathematically) with a multiplicity of variables and constraints simultaneously (see illustration below for a
small number of specification constraints). This is impractical to do with just a pencil and paper.
Tools were developed after World War II to optimize military logistics problems, and in 1950, they were extended to refining
and fuels blending problems.
In the context of marine bunkers, the bunker fuel market involves interactions between refiners (which provide the bunker
blend making ingredients, known as blend components), the suppliers that buy components or semi-finished bunkers such as
HFO and make the finished bunker fuel, the traders that either buy bunker or bunker blend components from refiners or
suppliers and sell the finished bunker fuel to ship owners, and of course, the ship owners themselves who interact with both
traders, suppliers, and refiners, depending on the opportunity.

Example of Optimization “Blend Space”

Example of
“Property
Giveaway” Space
Viscosity

Blend
Space
Pour
Density

Sulfur
Flash
V
Al+Si
The ship owners are in a very difficult financial situation, since they are being pressured to buy very expensive lower Sulfur
fuels such as 0.5%S or MGO, whether at open sea or in emission control areas. More than 50% of the ship operating costs
are the cost of fuel. The price differential between an IFO 380-4.5%S and a MGO is around $300 to $400/mt; so to stay in
business, the ship owners have to very carefully select the lowest cost bunkers that meet specs.

The Marine Bunker Fuel Market

Bunker Fuel Market

Traders

Refiners,
Shipowners
Suppliers

Price=Supplier Selling Price+Trader Commission+Transport Cost+Taxes/Duties

Supplier bunker optimization has greatest opportunity to maximize margins!

Optimization helps suppliers and refiners produce bunkers that meet specs while also having reasonable profit margins; so, it
becomes a "win-win" situation for everybody in the marine bunker supply chain.
Summary
In this article, we illustrated the main benefits from the use of a single blend, single bunker product optimizer to improve bunker
profit margins; the same points apply to marine distillate blending, gasoline, diesel, or other fuels. It provides millions of dollars
of annual benefits for a modest investment of approximately 20k$, and without elaborate training and support costs.
Acknowledgement
I am grateful to Dr. Ward Davis and Steve Graybill of NexIdea Systems for permission to use their Model-BF gasoline blending
optimizer software.

About the Author

Ara Barsamian has over 30 years experience in blending (crude, mogas, distillate, fuel oil, lubes), Oil Movements and Storage (OM&S),
crude handling logistics, refinery tank farm sizing studies, refinery supply chain management, NIR analyzers, and master plan/automation
benefits studies for major process plants and hydrocarbon storage facilities.

Please contact Jerry Lacatena (jlacatena@carmagen.com) if you’d like more information on Carmagen’s expertise in this area.