UFAZ 2023 RP4 Project Management For Students

“From oil and gas to base chemicals, polymers and plastics”
Project Management in the

Petrochemical Industry
Robert PELLETIER UFAZ, December 2023
© R.Pelletier 2023
pelandco@yahoo.fr
to be prInted
Project Management in Petrochemical industry 1

The petrochemical “squeeze”
Yesterday’s An industry in constant move
last slide
For commodity polymers T
(which all suppliers can produce),
E
fierce price competition.
Least efficient supplier
C
(laggard) kicked out of market H
when prices are so low that it N
loses money. O
L
Petrochemical
Constant search for O
differentiated products (with manufacturer G
highly specific properties adapted to who wins! Source: CANY
H427 - May 2002

Y
specific applications). These grades
will bring most of the margin to • Total cost reduction (restructuration)
© R.Pelletier 2023
supplier.
• Product differentiation (R&D)
Project Management
Definitions
© R.Pelletier 2023
Some examples of projects
Development Cost of A new polystyrene
Airbus A380 plant ~100 . 106 $
~15 . 109 $
But also thousands of small or medium size projects:

changing the supplier of a raw material,
implementing a new safety system, suppressing a
Burj Towerbottleneck in the production line, implementing a
Dubai new grade into the product slate, recycling of a
818m, waste stream, adding a new type of packaging, A new large size
~1.5 . 109 $replacing an aging piece of equipment, installing an polyolefin extruder
6$
(part of a 20.10 $ 9
~20 . 10
downtown Dubaiimproved energy recovery system, … developing a
complex)
cheaper carbon fiber process…
Shell GTL in Qatar
© R.Pelletier 2023
140 000 bbl/d Turn-around in a
~20 . 109 $ steam cracker
Project Management in Petrochemical industry
~100 . 106 $ 4
Project management
▪ Whether big or small, all projects are linked to Investment

▪ To invest = To abandon resources today, with the hope of higher
resources later
▪ A vital necessity for the company
▪ One of its most important and difficult decisions
▪ Needs of money for investment is (nearly) always higher than the
financial possibilities
▪ The no-return investment decision is the final outcome of a long
sequence of studies → Project Management
© R.Pelletier 2023
Project management
Order of magnitude: relative development costs of a project:
1 to get the idea,
Young managers (and some of their bosses too)
From 3 to 30 years
10 to reach the patent protection level,
100 to perform the first feasibility study,
often underestimate the cost of
1000 to develop prototype or pilot plant, development and the time required
10000 to achieve industrialization, to reach beneficial operation.
10000 to achieve commercialization.
▪ Outstanding Research is NOT sufficient to achieve innovation.
▪ In fact, experience shows that most of innovation is “market pulled”,

not “technology pushed”
▪ “Research transforms dollars into ideas, innovation transforms ideas

into dollars”. Ref : A. Siraudin, Hemeria
▪ Managing time all along those years is probably the most difficult task.
All engineers along the chain of development need to have a clear
© R.Pelletier 2023
understanding of the whole program.

Project management
“Managing time all along
those years is probably the
Staging and planning in R&D
most difficult task”
▪ By nature, R&D is an uncertain activity; new difficulties may appear at

any stage of the project. Staging and planning for R&D projects much
more difficult than for realization projects (such a plant construction) with
no, or few, residual technical issues
▪ Main purpose of R&D staging and planning: minimize risk of technical

failure (often requiring to simultaneously study different technical routes) and
duration of the project (high net present value of preliminary studies, need to
beat competitors), optimize efficiency of organization
▪ “Hofstadter's Law: It always takes longer than you expect, even when
you take into account Hofstadter's Law” especially valid in R&D! ☺ ☺
© R.Pelletier 2023
Project management
▪ I am nearly sure Sir Edmund started from the
top! And, when planning your next vacations,
or preparing the overall program of a
petrochemical project, from R&D to beneficial
operation, you better start by the end!
Time
Starting the overall planning from beginning tends to downplay the
© R.Pelletier 2023
importance of technical choices to be made in later stages and to
postpone critical decisions along the project → catastrophic delays
Project Management
management in Petrochemical Industry
industry 8
Project management
▪ Starting from the end makes it easier to, early enough,

highlight important decisions to be taken along project
and to initiate the R&D actions necessary to define the
proper answers
▪ Main purpose is to enable parallel
evaluation of alternative routes from the
Time very beginning of the project:
How many different catalysts should we use for the
projected product slate? Should we develop our
own catalysts or use purchased ones? Should we
consider purchasing a license from competitors?
Should we use of a pilot plant or go straight from
lab to industrial design? Etc….
© R.Pelletier 2023
N.B. Principle different from retro-planification (move
backwards from the final fixed objective, on the basis of
intermediate deadlines for a well-defined project).
Project management
Planning - Staging
Typical example. From Gate 1 to Beneficial Operation
for industrialization of a new polymer product line
© R.Pelletier 2023
Project management. R&D organization
▪ From the first feasibility study up to industrialization and

commercialization, most of R&D is devoted to « D = Development »
▪ In the polymer field, there are in fact two Ds:
• « Process Development » and « Product Development »
▪ Process Development Engineers are the link between Research and

the industrial plants, while…
▪ Product Development Engineers are the link between Research and
the Market = the Clients
▪ Typically, in most polymer producing companies,
for 1 Research engineer, there are ~10** Development engineers
(5 in Process Development and 5 in Product Development)
© R.Pelletier 2023
** Order of magnitude only
Typical organization of a
Business Unit
in polymer field, with a zoom on R&D
▪ Process Development Engineers main tools

are process simulators and pilot plants.
Close cooperation with Production Support
Engineers (industrial tests, trouble shooting and
small projects in production plants)
Typically from 20 to 500 kg/h
in polymer field
© R.Pelletier 2023
Project management
Business Unit
▪ Product Development Engineers main tools
are Analytical labs (product characterization)
and Application labs (simulating processing
equipment used by customers).
Close cooperation with Technical Service
Engineers (helping clients in the proper use of
polymer grades supplied by company)
© R.Pelletier 2023
Project management
Business Unit
▪ Whatever their function (R&D, Production or Commercial), all these

engineers should work as one team, with daily contacts between
them. Standard practice (especially in USA): rotate engineers between
those different positions
▪ Very difficult to be a good polymer process development engineer if

no experience in product development; reverse also true!
Easier to start by process development, then move to product
© R.Pelletier 2023
development (not so easy for already experienced engineer to start from scratch
in the plant, because of safety issues).
SOME (often misunderstood) FACTS
about PATENTS
© R.Pelletier 2023
Some facts about patents
▪ But most patents deal with industrial matters. A patent is an exclusive right
granted for an invention: a product or a process that generally provides a new
way of doing something or offers a new technical solution to a problem.
▪ In 2020, close to 3.3 millions applications, vs 925000 in 1985. (Source: WIPO,

World Intellectual Property Organization, 2021 report). Among those, ~275 000 were
international patents, filed under the PCT (Patent Cooperation Treaty)
▪ In 2020, ~1.6 millions patents were granted, while total number of patents in
force is estimated at ~15,9 millions
▪ Excluding pharmaceuticals,
biotechnology, metallurgy and
food chemistry, ~15% were
covering the materials, chemical,
and petrochemical sectors in 2014;
significantly less in 2020
© R.Pelletier 2023
▪ Patents can be filed at the national, regional or international level
Steady growth rate of

worldwide patent
applications and grants
above 5%/y average
from 1995 to 2018
… with dramatic
increase in China
in last 20 years
© R.Pelletier 2023
Source : WIPO
Annual Report 2021

▪ Once first patent application is locally filed, period of 12 months to extend
protection abroad, benefiting from priority date of filing of this first application
▪ International PCT route (146 countries today). Single international patent application,
followed by international search and patentability study, performed by one of the
major patent offices. 18 months period to extend application to designated countries
in a simplified procedure, taking advantage of search report and patentability opinion
report. Decision to grant patent belongs to authorities of each designated country
▪ Although first Chinese laws on patents only recent (1984), Chinese Patent Office now
very efficient: 6000 patents examiners (more than in European Patent Office) coming
from best universities
▪ Chinese telecommunication companies HUAWEI is N°1 worldwide for the number of

patents filed under the international PTC system.
© R.Pelletier 2023
(But still high suspicion: barred from bidding on high-speed Internet in USA and India.)
Source: PHILIPS IP&S Europe, WIPO

18
▪ You have made a nice useful invention and you apply for a patent
▪ Examination by patent office concludes that your invention is new,
does not simply derives from previous known art, can be used
industrially and is properly described (the four conditions for patentability)
▪ Therefore, after paying the fees, you obtain a perfectly valid patent
for your invention
▪ Now, you want to move to industrial production based on your own
invention
▪ This is YOUR invention, it is now duly covered by a patent which is

YOUR property, so you can safely use this invention industrially
Right or wrong?
© R.Pelletier 2023
WRONG!
▪ Obtaining a patent on your invention DOES NOT automatically provide you
with the right to use it industrially
▪ It only prevents other parties from using this invention.
The basic principle of patent law is a prohibition right
▪ What you have the right to practice industrially or not is dependent solely
on other parties valid patents
▪ “Non infringement” studies certainly the most complete and difficult tasks
of Intellectual Property. Insuring you do not step on anyone’s patent: part
of Risk Management
▪ Covers all domains of your project → Team work (including, but not limited
to, Research and Intellectual Property Departments). Most often done
under the leadership of the Process/Product Development Group.
© R.Pelletier 2023
Wheelbarrow: innovation at work! 1st century in China, 12th in Europe
Imagine
…because
You took you are
aallvalidthe
these Chinese guy
developments
patent on the
who
areinvented
dependent
wheelbarrow, the wheelbarrow
buton
youthecannot
earlier
produce innor
thesell
patented 1st century
wheelbarrows…
wheel invention
© R.Pelletier 2023
N.B. Many countries have legislative provisions for granting a compulsory license to permit the owner of a
dependent patent to work his invention if he does not obtain consent from the owner of the dominant patent.
Why patenting your inventions?

▪ You may want to market the product and need a patent to protect
yourself against competitors imitating your idea; being the pre-eminent
player, ROI* of your expensive R&D activity will be improved
▪ Your intention may be to license or sell the invention; (a) patent(s) is
(are) needed to consolidate the rights that are on offer and protect
prospect licensee from potential competition
▪ You may consider creating a JV or simply cross-license technology with
another company. The existence of a strong patent portofolio will give
you bargaining power
▪ A strong patent portfolios gives a positive image for your enterprise,
demonstrating a high level of technological capacity. This may prove
useful for raising funds, finding business partners and increasing your
© R.Pelletier 2023
company’s market value.
*ROI = Return on Investment
The cost of a patent
▪ Costs of applying for and maintaining a patent: the most serious obstacle for
an extensive use of patent system*
▪ May vary widely depending on field, complexity, do-it-yourself (with help from
local patent office) or out-task to expensive IP experts (~300$/h), national only or
international, …
▪ Applying for patent in each of world ~200 countries (no one does!) would
cost ~1 M$ in filing and another ~1 M$ for maintaining it to its full term
▪ Selectivity (countries where product likely to be manufactured and/or sold) required to
keep cost reasonable. PTC system enables to limit initial investment for
international patents
▪ Do not forget cost of enforcement! Going to court to enforce your patent may
mean over 5 M$ and 5 years ….
© R.Pelletier 2023
*Simpler, cheaper, quicker, but shorter protection can be obtained thanks to « utility models »,
generally used for « small » inventions or improvements. (En France: certificat d’utilité, 10 ans)
▪ Value of a patent linked to its

nuisance power
•the usefulness of the
invention,
•the absence of easy
alternative,
•the possibility of identifying
counterfeit (process vs. product patents),
•the time domain it will cover I call this invention « the wheel », but, so far, I
(too early/late). have been unable to attract any venture capital.
© R.Pelletier 2023
▪ Patents similar to fortresses in good old times:

just there to deter enemy from getting in
▪ Must be placed on strategic roads, at strategic
locations, in a coordinated network, sometimes
with allies, regularly upgraded
▪ A lonely patent has seldom much value,
because often too easy to be by-passed.
Clusters of patents necessary to build up a strong strategic position
Patents can be sold, exchanged, shared,…, or abandoned according the
strategy of business
▪ Intellectual Property Strategy is an intrinsic part of Business Management.
© R.Pelletier 2023
Not really the specialty of Research engineers !

Example of a " strategic " patent
Photochemical reactor
▪ French company developing a photochemical process stunned by late discovery of
a French patent, filed by Japanese competitor about photonitrozation reactor.
▪ Patent claimed a very precise range (20 to 80 cm) for the distance between jacket
walls of two adjacent lamps: below 20 cm, too low productivity, above 80 cm, too
much side reactions. But:
• Typical reactor contains 20 to 40 lamps of 20 to 60 KW each.
• Mechanically, it proved impossible to design an assembly system of cooling water jacket
enabling lower than 20 cm distance.
• Making the distance higher than 80 cm would make a prohibitively large and expensive
reactor.
▪ No way an industrial reactor could reasonably be built outside of this 20-80 cm
range. Patent was killing the project!   
▪ Solution: frantic search dug out a "Communication à l’Académie des Sciences" of
1910, with design of a small reactor of 3 lamps, with ~30 cm between jacket walls!
e ▪ French company challenged validity of original Japanese patent in Japan itself. To
© R.Pelletier 2023
avoid court cost, both companies searched for agreement → cooperation !!!

26
▪ Most researchers tend to (over)estimate the value of an invention

by the amount of sweat secreted while developing it!
• The question is not “Was it difficult to develop?” but
“How much money can I make from it?”
• → Its nuisance power
• Real case example of “an abandoned patent” valued 1M$
▪ Process patent /vs Product patent

• Researchers and Engineers tend to focus on Process patents; however,
Product patents usually have more value
• Products patents not easy to get around; also counterfeit easily spotted
• Two examples of efficient Product Patents:
HIPS (Asahi) and PP (Phillips)
© R.Pelletier 2023
HIPS = High Impact Polystyrene PP= Polypropylene

Product / Process Patents
…
« Bimodal HIPS »
▪ Monsanto, Dow, …, took patents on processes to achieve bimodal
distribution of particle size of rubber, inside High Impact Polystyrene
▪ Few years later, Asahi patented a product with a specific range for the
particle size distribution. This specific range proved to be the most useful
one for commercial applications
▪ Whatever the process (double prepolymerization reactor, double Mw distribution of
© R.Pelletier 2023
rubber, use of two different rubbers, …), all competitors were dependent on
Asahi product patent.
ASAHI patents claims relate to a
composition of matter, without any
mention to the means for producing it.
Only examples describe a synthesis
process, but this does not limit the
scope of the claims.
© R.Pelletier 2023
The surprising case of crystalline Polypropylene
▪ Researchers at Phillips Petroleum had discovered a new

Chromium catalyst, useful and efficient for High Density
polyethylene production
▪ 1951: trying it with propylene ➔ failure: ridiculously small
yield of a white polymer; however, after observing some X-ray
diffraction, they conscientiously described this new material,
“crystalline polypropylene” in their laboratory notebook
▪ Only Ziegler catalysts developed at ~same time by Giulio
Natta at Montedison work with propylene. Montedison first
to patent and produce PP industrially in 1957
▪ Giulio Natta received the Nobel prize in 1963 for this
invention.
© R.Pelletier 2023
The surprising case of crystalline Polypropylene
▪ However, patent suit in US (Phillips vs Montedison, Hercules,

DuPont, Amoco…) launched to determine who was PP inventor. In
1958, Patent Office declared an “interference procedure”: legal
battle lasted 27 years!!!
▪ In 1983, Phillips declared the winner, based on the 32-year old
notebook record of the 1951 experiment, a total process failure!**
▪ Allowed to claim royalties for 17 years on all PP produced in USA,
also on all PP imported in USA (bumpers of cars for instance).
Collected > 1 bn $ !!!
© R.Pelletier 2023
**At that time, US patent law provided that a laboratory notebook, of a US laboratory and
daily signed by a US citizen supervisor, could provide the priority date of an invention

Another example of strategic patents: Nespresso
The NESPRESSO example

A great marketing idea!
• Coffee machine, based on a proprietary system of single-serving

"capsules" containing ground coffee, targeting at luxury market
• Machine rather cheap (often offered as gift), but capsules quite expensive
(0.35€/p) → the main source of income for the Nespresso company
•This lucrative system holds only if competition is prevented from offering similar
capsules, which could be used on existing Nespresso machines
• Nespresso Co deposited a great number of patents (~70) to protect its very
specific capsules. A marketing approach, nor really a scientific approach!
• Although first patents became public only in 2012, commercialization of
© R.Pelletier 2023
competitive product occurred in 2010, using loophole in patent protection and
legal actions against the Nespresso company
The HIPS** Mass Process example
▪ Main developments achieved by Dow Chemicals Co.. Basic patent
(application No. 2,694,692 filed in 1950) granted in 1954, with Dr John L.
McCurdy designated as co-inventor
▪ J.L. McCurdy left Dow in 1958, became the principal organizer, half owner,
and president of Brand Plastics, … to manufacture Polystyrene
▪ He then sought a declaratory judgment that patent No. 2,694,692, owned
by Dow but “co-invented” by himself, is invalid and that it has not been infringed
by Brand (interesting case of possible estoppel = preventing a party from asserting a
claim inconsistent with a position that party previously took )
▪ He also patented an arrangement of horizontal mass reactors, as opposed

to Dow’s vertical reactors, although, …
▪ …in practice, no real significant differences between horizontal and
vertical reactors operations
© R.Pelletier 2023
▪ McCurdy sold many licenses of “his” technology all over the world
** HIPS = High Impact PolyStyrene
The HIPS Mass Process example
For his own
For Dow
BRAND
company
McCurdy’s
patents
© R.Pelletier 2023
▪ Patents system: a very important tool for your strategy. But NOT
the only way to protect your technology
▪ If identification of counterfeit difficult (typical for process patents), if
uncertainty on financial resources to maintain patents rights
and/or extend to important countries, may be better NOT to
patent your invention.
▪ Keeping your invention secret may, sometimes, be a better
solution
▪ Patenting implies making your invention public, thus helping
competitors in their scouting activity
© R.Pelletier 2023
Keeping your invention secret may be a better solution. Of course, risk of…??
▪ Risk of third party’s later patent blocking your own development!

▪ In some countries, legal means (such as “Enveloppe Soleau” in France) to
officially date your invention and assign non-exclusive rights of
earlier personal possession (droit de possession personnelle antérieur). Can use
and develop technology within country, even in case third party later
patents same technology
▪ Official dating also useful before entering negotiations with
potential R&D partner in the field
▪ Make sure that secrecy is well maintained. A very difficult task
because of intense activity of economic intelligence and technology
© R.Pelletier 2023
scouting by competitors.

Economic Intelligence
Technology Scouting
© R.Pelletier 2023
Technology Scouting. Competitive intelligence
▪ Strategic decisions of investment must rely on clear knowledge of

• the market situation,
• the competitors,
• the weaknesses/threats that may hurt your company,
• the strengths/opportunities that may support your investment
▪ Marketing studies by no means reserved to “commercial people”

▪ In the petrochemical field, good engineering knowledge of
processes/products is required for proper technology scouting and
competitive intelligence
▪ Not to be confused with industrial espionage, which is illegal
© R.Pelletier 2023
▪ Strategic information
• the various actors on the market
• their sites, their integration, the internal equilibrium
• their installed capacities
• their processes. Their product slates
• their comparative economy of production
• their new R&D developments
• their investment projects
▪ It is gathered through permanent efforts of data collecting and

sharing by all departments of the company
© R.Pelletier 2023
Main sources
Main sources of
of information
information on
onethe
thecompetitor?
competitor? The competitor
▪ The competitor
• Its patents
• Its brochures, its financial reports, etc …
• Its applications for operating permits, its environmental reports,
• Its open-door events, …,
▪ The studies financed by the competitor

• Thesis, scientific publications, …
▪ The consulting firms of the competitor
© R.Pelletier 2023
Main sources of information on the competitor
▪ The competitors of the competitor

▪ The licensees of the competitor
▪ The engineering companies of the competitors
▪ The consulting firms of the competitor
▪ The suppliers of the competitor
▪ The contractors of the competitor
▪ The employees of the competitor
▪ The multi-client studies
© R.Pelletier 2023
▪ Main pitfalls in technology scouting

• The “not invented here” complex
• The Neighbor's Grass Is Always Greener
• The technology scouting of the competitors
▪ Everyone in the company is a scout, with various points of view
• Stand-alone, isolated piece of information is seldom useful, often dangerous
• Received pieces information should not be used “as such”
• Checking and analyzing the pieces of information requires varied
competencies
▪ Technology Scouting/Competitive intelligence: a team work!
© R.Pelletier 2023
Project Management
industry 42
R&D Cooperation
© R.Pelletier 2023
R&D Cooperation
Importance of R&D in the Polymer field
▪ All companies strive to offer the product slate best adapted to their
market(s), through permanent intensive Research, Process and
Product development
▪ Clear understanding of the present and future market needs is
required for properly running a polymer business
▪ In this technical market, polymer producer also needs to fully
understand the technology and products of its clients if trying to
develop and sell differentiated products
▪ “Life time” of a polymer grade seldom > 3 or 4 years, before
replacement by a more efficient grade, under pressure from
competitors’ products
→ Necessity of permanent (and costly) marketing and R&D studies
© R.Pelletier 2023
R&D Cooperation
Importance of R&D in the Polymer field
▪ Even when considering only one polymer family (polyethylene for

instance), no single polymerization process can efficiently supply all
grades for the various markets. Large companies thus operate 4, 5 or 6
… different ethylene polymerization processes in order to supply their
whole market
▪ Long R&D efforts and high “entrance ticket fee” required before being
recognized as a reliable supplier of differentiated product grades for
demanding markets
▪ Marketing and R&D studies represent high financial load for the
company
→ search for cooperation
© R.Pelletier 2023
R&D Cooperation
R&D cooperation in the Polymer field
When trying to share the high cost of development of a new
technology/product family, many ways for technical cooperation.
Hereafter, four examples:
▪ Joint Venture: two companies decide to merge their activity within a
given field, then develop, produce and commercialize together, through a JV
• Example. Elf Atochem and BP Petrochemicals merged their PP activities into a new JV
company : APPRYL. APPRYL could reach a critical size and become one of the main
suppliers in Europe much faster than each of its shareholders separately
▪ Technical cooperation agreement between peers: joint development

within a well-defined restricted domain. Search for widest patent protection
• Example. Montedison and Mitsui fought a bitter patent battle in the field of 3rd
generation Ziegler catalyst for PP, before deciding to merge their expertise and patent
© R.Pelletier 2023
portfolio. “FT” catalysts (FT=Ferrara/Tokyo) became the leading products and most PP
producers had to purchase catalyst license from the association

R&D Cooperation
▪ Technical cooperation agreement with customer: typically for

development of a new grade for a given or new application. Seems
logical, but quite difficult to operate because of diverging interests:
in case of success, customer fights for exclusivity while producer
searches for maximum market
▪ Example. Cooperation between a PE producer and a major paper manufacturer for
development of application of water dispersible PE fibrids in paper industry
▪ Licensing : one company purchases the technology developed by

another one, with (or without, not recommended) on-going cooperation
through “Process and Product Development Agreement”.
(Because of its importance, small zoom on licensing in next slides)
© R.Pelletier 2023
R&D Cooperation
“Kinglet strategy”
Thinking about this

historical famous story,
can you imagine what
can be the « kinglet
strategy » of a
company, within the
field of polymer
development?
© R.Pelletier 2023
R&D Cooperation
▪ Consolidation Restructuring has
been going on at a
tremendous pace,
Technology
largely driven by
agreement
globalization and
high cost of R&D
Here are some
alliances in the
Commodity
Polymers field in
1998 !
How many
changes can you
mention in the
last 18 years, in
this fast-moving
© R.Pelletier 2023
world ?

R&D Cooperation
▪ Consolidation
• Imagine you are a research engineer in the famous “Giulio Natta” Research
Center of Lyondell-Basell in Ferrara, Italy, working in the field of Ziegler-
Natta catalysts.
• You started your career as a Montedison employee in 1970 and retired as a
Lyondell-Basell employee in 2012. How many mergers did you go through?
Montedison
Himont (Hercules Inc. + Montedison) 1983
Montell (Himont + Shell) 1995
Basell (Montell + BASF) 2000
Lyondell-Basell (Basell+Lyondell Chem.) 2007
© R.Pelletier 2023
Lyondell-Basell

Zoom on Licensing
© R.Pelletier 2023
Licensing
▪ A license** is a consent by the owner to the use of some of its

intellectual property (IP) in exchange for money or something else
of value. Licensing does not occur when there is no IP.
▪ Intellectual property could be patents, know-how, trade secrets,
trade-marks, industrial designs, copyrights, …
▪ Quite often, license agreement associated with other agreements
(supply of premarketing quantities of products, future joint developments, …)
For the sake of coherence, simultaneous negotiation required
▪ A successful license agreement should be a win-win transaction.
Much more complex than the sale of physical product (where price is
usually the only important term). Proper understanding of both parties
benefits required for successful negotiation
© R.Pelletier 2023
**N.B. License in American English, Licence in British English or French

Licensing
▪ Most of licensing companies for refining and base chemicals processes

are engineering companies, like ABB Lummus, Axens, Forster Wheeler,
Kellogg Brown and Root, Lurgi, Snamprogetti, Stone &Webster,
Technip, Uhde, UOP, …
▪ … while most of licensing companies for polymer processes are
polymer producing companies, like Chevron-Phillips, Exxon Mobil,
Ineos, Lyondell-Basell, Mistui Petrochemicals, Total Petrochemicals, …
▪ In refining and base chemicals businesses, engineering

companies sell licenses to their customers while …
▪ In polymer businesses, polymer producing companies sell

licenses to their competitors!
© R.Pelletier 2023
53
Licensing
Example: Steam cracker main licensors
• LUMMUS Technology
• KBR Only engineering
• LINDE licensors
• STONE & WEBSTER
• TECHNIP FMC
“Due to the complexity of the process, only

a few experienced contractors can offer
competitive designs for ethylene plants
today”.
© R.Pelletier 2023
Sources: Linde, Technip

54
Licensing
Example of Linear PE licensors
Only PE producing
“Univation scientists and engineers
licensors
are working on the next generation
of products and technologies with an
unwavering commitment to
innovation, looking ahead to the next
50 years …”
© R.Pelletier 2023
Sources: Univation, Chevron-Phillips

Licensing
Example of Polypropylene licensors
Mostly PP
producing licensors
(2 exceptions for historical
reasons)
© R.Pelletier 2023
Sources:
Spheripol, Ineos,
Townsend Solutions

Licensing
▪ How can you explain such a drastic difference?
▪ In refining and base chemicals industries, whatever the producer,

products must abide to strict quality specifications, often fixed by
local authorities, with slow changes announced long time ahead
▪ In polymer industry, huge variety of products, with constant search
for best suited products, adapted to needs of thousands of
applications in highly specific markets.
© R.Pelletier 2023
Licensing
▪ In polymer field, licensor not only provides process technology to

enable safe and efficient industrial production by licensee
▪ Licensor also provides product/market expertise to enable licensee
to quickly establish a profitable business
▪ “Best process” is not the cheapest process. It is the process best
suited to the commercial strategy of licensee
▪ Engineering companies have NO direct experience of marketing
polymer grades : how could they provide this type of expertise?
•Example in field of Expandable Polystyrene (EPS). An eastern Europe company
purchased license of EPS from an equipment supplier/engineering company.
This continuous process used in-house developed static mixer technology: very
clever design, much simpler, cheaper, safer than traditional batch Suspension
polymerization process, followed by an impregnation step. But …
•Product different and not as good as traditional material. Customers
© R.Pelletier 2023
demanding significant rebates to purchase. Licensor unable to help licensee in
improving product quality.
Licensing
In polymer businesses, polymer producing companies

sell licenses to their competitors!
▪ Why would they do that ?
▪ Under which circumstances can this be a good strategy

for licensor?
▪ Please, find out some possible reasons which can induce

a polymer producer to license out its technology.
© R.Pelletier 2023
Licensing
▪ Getting some extra cash from an otherwise low profit activity

• Typical for commodity polymers. Non-differentiated grades do not bring high margins.
Selling licenses of technology for those commodity grades (but not for the differentiated
grades) can be more profitable.
▪ Expand its R&D and commercial efforts beyond critical size

• Example in field of commodity polymers. A French company developed own High Pressure
PE technology, but with a limited volume of sales in its own commercial territory. Revenues
from licensing out enabled to maintain important R&D team (including critical mechanical
expertise) and keep its technology competitive through continuous improvements.
• Example in field of high-performance polymers. An American company invented/developed

PolyPhenylene Sulfide (PPS), a new polymer of high melting point (288°C) and outstanding
chemical resistance. High price and difficulty of processing limited its commercial
development. To speed up worldwide acceptance of product, company licensed a Japanese
petrochemical producer, in charge of developing Asian market. Also, customers more
© R.Pelletier 2023
comfortable with two different production sites.

Licensing
▪ Increase market penetration of a product family

• Example in field of commodity polymers. A French company developed a mass
process for general purpose PVC, simpler than “standard” suspension process (no
water), yielding cheaper and more transparent products. But product was
“different” and compounders reluctant to buy from single source. Company tried
to break this drawback by providing cheap licenses
▪ Answer request of global supply for global processors

• Example in field of cable grade polymers. A US company, leader in field of cable
grade PE polymers, provided technology to a European petrochemical company to
ensure local production of these highly technical grades, requested by its
European customers
▪ Maximizing residual value when getting out of business

• Example in field of differentiated commodity polymers. A restructuring British
© R.Pelletier 2023
company sold license of technology + goodwill a few months before shutting
down its plant and getting out of business.
Licensing
▪ Imposed licensing by anti-trust authorities

• Example in field of commodity polymers. A European company in JV with its own licensor,
HIMONT, in field of PP. When HIMONT and SHELL merged their polyolefins businesses,
European authorities ordered HIMONT to divest its share in this JV. The European ompany
became full owner and obtained that most up-to-date technology for any future PP plant be
accessible at very favorable conditions
• Example in field of engineering polymers. A French company purchased an American

chemical company, both active in field of engineering polymers, especially PVDF (N°1 and N°3
in the world). FTC antitrust authorities ordered one of the 2 US PVDF plants be sold to
competitor, with the then current technology + access to all improvements developed by US
R&D within next three years. → One-way “Chinese wall” between American and French R&D
teams to prevent technology from flowing from France to US, then to competitor
▪ These two examples highlight necessity of constant R&D to support marketing

polymers. Licensing terms in the field need to reflect this specificity.
© R.Pelletier 2023
62
Licensing Terms
▪ ”Terms”, “terms of agreement”, “terms and conditions”,

“provisions” … = The issues agreed upon in the license agreement
▪ Usually, much more complex than for a standard sale agreement
because of the great number of key issues to be defined
▪ Example of one polyethylene license:

46 pages + 32 pages of appendices
▪ More than 800 pages with the other
associated licenses, secrecy,
disclosure, catalyst supply
agreements…
▪ More than 2000 pages with all
agreements linked to the whole deal
▪ 18-month negotiation
© R.Pelletier 2023
Licensing Terms
http://www.wipo.int/sme/en/documents/pdf/technology_licensing.pdf
▪ WIPO offers excellent recommendations for successful licensing of

technology
▪ For clarity, WIPO organized key issues in four clusters
• What is the subject matter of the license?
• What rights does the license give?
• Financial terms of the license?
• Technology growth and development over time?
• (I tend to add a 5th cluster about confidentiality and non-use
obligations)
▪ Please, in a teamwork within each project group, find out what are the
key issues for these clusters and what your group is expecting
© R.Pelletier 2023
when negotiating the license for Gr1 … Gr 2… Gr 3…

Licensing Terms
What is the subject matter of the license?
▪ May look simple, but often source of later conflicts. Licensor wishes
narrow definition of licensed IP/technology, licensee searches for broad
definition. Ambiguity is short term solution only, can create severe
problems in future
• Example: HPPE. Includes only homopolymers, low copolymers, high copolymers, all
chain transfer agents, all existing grades, with all additive packages, …?
▪ Is IP/technology fully proven and is licensor full owner of all of it? A

formal “representation” by licensor on these points necessary
▪ Can licensee “have access” to IP/technology before commitment in order
to fully assess its merits? ( samples, drawings, visits of plants, data on
investment, …). Implies careful confidentiality agreement, (which should
not hinder future, in case a third party’s technology is eventually chosen)
© R.Pelletier 2023
Licensing Terms
What is the subject matter of the license?
▪ How will IP/technology be transferred? Which documents will licensee receive?

Which training will be organized? Which assistance will be provided during
engineering phase, during start-up, …?
▪ Is the trademark associated with the products from this technology also
licensed? (Usually not accepted by licensor. In fact, some licensors demand that
grade names of licensee have no connection with grades of licensor).
▪ … plus many different questions which are specific to each deal. Each contract
contains a set of “definitions” to be used throughout the text. Extreme care
should be given to those definitions, in order to avoid ambiguity or deceiving
clauses.
© R.Pelletier 2023
Project Management
industry 66
Licensing Terms
What rights does the license give to licensee?
▪ When licensed IP/technology is well defined, next question is to
carefully precise what licensee is entitled to do with it
▪ In most cases, licensee will use IP Technology to manufacture and sell
polymers products. (In some cases, may be only to conduct research)
▪ Should be very clear if licensee is allowed to modify IP technology (or
use it as such), manufacture new grades, debottleneck plant, build new
plants, transfer it to other company, sublicense it, …
▪ Ownership of any modifications to be defined. Usually, grant back to
licensor
▪ All of these terms can be limited to a specific territory (usually different
for production and for sales).
© R.Pelletier 2023
Licensing Terms
What rights does the license give to licensee?
▪ Rights may be worldwide, or limited to a designated country, or group of
countries
▪ For engineering polymers (typically worldwide market), licensor tries
avoiding competition with licensee
▪ Rights may be exclusive within territory (sometimes even as to licensor).
Exclusivity may be necessary for licensee to make money, but dangerous
for licensor if licensee fails to develop technology
▪ Exclusivity may be limited to specific differentiated grades, or limited in
time (“head start”) or subject to minimum performance by licensee
▪ Exclusivity often demanded by authorities of some countries
(nationalized industry), or forbidden by others (free trade)
© R.Pelletier 2023
Project Management
industry 68
Licensing Terms
Financial terms
▪ Financial terms: (hard) negotiation possible only after license scope and
rights are defined. No clear method for valuation of technology
▪ Cost to licensor for developing its technology usually irrelevant
▪ Returning about 25% of future benefits of licensee to licensor can yield a
first order of magnitude
▪ Comparison with other available technologies (though very difficult
because of the differences of scope, rights, territory…) may be used to
narrow gap between licensor’s demands and licensee’s hopes
▪ Skill of negotiators, clear understanding of upper/lower bounds and of
items with room for compromise, will enable final agreement
▪ Negotiation requires teamwork, with strong leader and representatives of
© R.Pelletier 2023
major entities of company (Board, B.U., Marketing, Finance, Legal, I.P., R&D,
Production, …)
Licensing Terms
Financial terms
▪ Licensee may pay by “lump sum”, or by “royalties”, or by any equivalent
(“Net Present Value” method) combination of the two.
▪ Order of magnitude : 5 to 30 $/T for commodity polymers. May vary widely
among various regions of the world
▪ Licensee usually obtains a “capping of the royalties” (fully paid up license)
while licensor often imposes a “minimum fee” provision (especially in case
of exclusive license)
▪ MFL provision (most favored license) can protect licensee from unfair
competition from another later licensee. Nice to have, but, in practice, very
difficult to implement
▪ Cross licensing (typical for patents rights) often basis for JVs or R&D
© R.Pelletier 2023
partnerships, for profitable use of technologies of/by both parties
Project Management
industry 70
Licensing Terms
Financial terms - Warranties
▪ To increase confidence of licensee in licensed technology, licensor usually
provides technical warranties (production rate of various grades, product
specifications, utilities consumption, …)
▪ Test run procedure to verify plant performance fully defined in license
agreement. Many constraints on licensee (time limit for performing test-run, strict
conformity with Basic Design Package, wide safety margins, limit on total liability of
licensor…) usually restrict effective value of warranties
▪ Often better to obtain “representation” by licensor on performances of a real

plant using same technology
▪ “Hold harmless” provision: licensor agrees to indemnify and hold harmless
licensee as to claims/suits which may be asserted against him (typically for
patent infringements).
© R.Pelletier 2023
Here also, beware of usual “safety belts” by licensor !
Project Management
industry 71
Licensing Terms
Technology growth and development over time
▪ Polymer plants are built for 30 years at least, but typical lifetime of a
polymer grade is a few years only
▪ R&D is a must to maintain a competitive product slate
▪ Some experienced licensees, with large polymer business, may chose to
perform this R&D by themselves
▪ Most licensees rather enter into specific R&D cooperation agreement with
licensor (PPDA = Process and Product Development Agreement), at least in
first years after start-up
▪ Gain access to R&D performed by licensor (and by co-licensees in case of
“Licensees club”, run by licensor), against payment of a fee.
▪ Licensor usually keeps “lead time” (discloses improvement only after it has
© R.Pelletier 2023
been commercialized) and benefits from licensee(s) improvements
Project Management
industry 72
72
Licensing Terms
Technology growth and development over time
▪ IP ownership of improvements by licensee flowing back to licensor
needs to be carefully defined.
▪ Usually become licensor’s property. At least, licensor will obtain free
license for himself and his other licensees
▪ « Major improvements » (step change in performance) are often
excluded from automatic flow through PPDA
▪ This unbalanced situation may induce experienced licensee to sign out of
PPDA after some years and/or negotiate more favorable R&D agreement
• Example in field of commodity polymers. A US company licensed a French
company in field of PP, with PPDA agreement. Ran into financial problems
after hostile take-over by raider, became unable to perform adequate R&D
during a few years. French company signed out of PPDA, then sold license of
© R.Pelletier 2023
its own improvements to its original licensor
Project Management
industry 73
73
Licensing Terms
Secrecy and Non-use agreements
▪ Licensing out implies direct disclosure of confidential information to
licensee and indirect disclosure to contractors of licensee (typically to
engineering companies)
▪ Secrecy agreements, or Non-Disclosure Agreements (NDA), try to

protect licensor’s IP from flowing to 3rd parties through licensee:
quite difficult to combine strict confidentiality agreements and
efficient work by licensee
▪ To be considered “confidential” (Article 39-2 of Agreement on Trade Related
Aspects of Intellectual Property Rights), information
• (i) must be secret, i.e., not generally known or readily accessible to persons
that normally deal with that kind of information;
• (ii) must have commercial value because it is secret;
• (iii) the owner must have taken reasonable steps to keep it secret
© R.Pelletier 2023
▪ NDAs spell out purpose of disclosure; recipient (disclosee) can only
use “confidential Information” for that purpose (non-use)
Project Management
industry 74
74
Licensing Terms
▪ Defining too broadly “confidential information” may backfire against
licensor. Good way against too complex NDA is to make it reciprocal.
Licensee also have confidential information to protect.
▪ Major drawback of NDA is that any legal action because of breach of
confidentiality will make information fully public!!! Do not overestimate
efficiency of NDAs!
▪ Typical NDAs request disclosure only to those “who need to know” and
who have signed personal secrecy agreement with employer
▪ Personal secrecy agreements may remain binding even after termination
of work contract. Must include some form of “consideration”. Same
applies to employees of contractors of licensee and so on …
© R.Pelletier 2023
Project Management
industry 75
75
Licensing Terms
▪ Beware of secrecy agreements without any time limitations.
Confidentiality and non-use clauses may have different time limits
• Example in field of commodity polymers. A US company licensed a French
company in field of PP. “Non-use” lasted 10 years, “confidentiality” lasted 20
years. French company could build a second PP plant after 10 years, but had to
wait 20 years to build 3rd plant in JV with a 3rd party
▪ Often, licensor gives a limited list of “acceptable engineering companies”,

already exposed to “confidential information” and technically well aware
of technology
▪ Licensor provides BEDP (Basic Engineering Design Package) which will be
transformed into a FEED (Front-End Engineering Design) by one of these
authorized engineering companies. Detailed engineering and construction
© R.Pelletier 2023
engineering often performed locally
76
PROJECT SCOPE DEFINITION
© R.Pelletier 2023
Investment project management - Scope definition
▪ Project and Product Objectives

▪ Product Specifications
▪ Project Boundaries Certainly one
of the most
▪ Assumptions and Constraints
difficult task of
▪ Project Requirements and Deliverables the whole
▪ Schedule project!
▪ Work breakdown structure
▪ Summary of Budget
▪ Configuration Management
© R.Pelletier 2023
▪ Defining the Project Scope is the key task in Project Management

▪ Should NOT be confused with and limited to the definition of cost
and schedule only
▪ Changes in Project Scope are often source of misunderstandings,
grief and conflicts
▪ Yet, they are normal; as projects proceeds, new information is
generated which may induce those changes
▪ Beware of diverging implicit interpretation (perception) of what is
in or out of the project
▪ Project management should control those changes in an orderly
and timely way.
© R.Pelletier 2023
▪ One of the main challenges: the necessary dialogue between

Business team and Technical Group ➔ converge towards a
Project Scope Definition
▪ Iterative process much more difficult than imagined by young
managers! Need to overcome gross misunderstandings
▪ Engineers want to use “belt and suspenders” to feel safe
▪ Business people want “the butter and the money for the butter”
▪ Schedule: Always too tight. And business request “Speed up, put
more people on the project” not so efficient!
“It takes 9 months for a woman to make a baby. But 9 women
won’t make a baby in one months!”
▪ All engineers must understand the global economics of the project
© R.Pelletier 2023
and be familiar with the NPV approach (NPV = Net Present Value).
Scope definition “Risk Fund”
▪ Uncertainty inherent to all projects, including scope definition
▪ “Easy” approach: choose the “safe” design, making engineers comfortable

but maximizing CAPEX budget may be killing project
▪ “Optimistic” approach: leads to lower CAPEX budget, but risk of wrong

economic decisions and final cost over-run at end of project.
Proba- Weighted
Risk fund item, k€ Estimate
bility estimate
« Risk Fund »
Reinforcement of existing structures following the
• List, estimate cost and new snow and wind standards 2500 50% 1250
probability of extra works Treatments of the soils for the grass roots section 4000 15% 600
that further studies might New carcinogen norms for PM - investment
changes (ISBL pumps and storage, OSBL tanks) 6400 25% 1600
reveal as necessary
New carcinogen norms for EX - investment
• Incorporate only the changes (ISBL pumps and storage, OSBL tanks) 2800 25% 700
probability weighted sum Evolution of the BH regulation 2800 25% 700
into CAPEX budget. HI for aromatics 1000 50% 500
© R.Pelletier 2023
Construction of a new flare 8000 50% 4000
Total 25500 9350

Scope definition - “Value Improving Practices”
All along the design phases of the project, some VALUE IMPROVING
PRACTICES help engineers optimize the detailed definition scope.
Hereafter is a list of some of the most practiced techniques, (as defined
by a renowned consulting company).
1. Technology Selection
2. Classes of Facility Quality (Project Value Objectives)
3. Minimizing Standards and Specifications/Practices
4. Process Simplification
5. Waste Minimization
6. Process Reliability Modeling
7. Design to Capacity
8. Predictive Maintenance
9. Constructability
10. Energy Optimization
© R.Pelletier 2023
11. Value Engineering
Source: IPA Consulting
12. 3-D CAD Design

STAGING THE PROJECT
© R.Pelletier 2023
Project management - Staging the project
Because of the exponentially growing cost of development on the way

towards industrialization, proper management of the overall project
timing is key to the economic success.
Too slow, late arrival on the market, high
net present value of R&D (actualization rate is
high because of the risky nature of R&D),
Too fast, high probability of technical

failure, high cost of recycled studies.
Necessity for staging the project

development in a safe way.
© R.Pelletier 2023
For this proper staging, most companies use some form of a

four-gate process before the final go-ahead decision.
No-return
quit or decision
hold for funding FEL Commercialization
Ideas Front End Loading or
recycle Project Execution
Stage 1 Stage 2 Stage 3 Stage 4 Stage 5
Screen Gate 1 Gate 2 Gate 3 Gate 4
Conceptual Feasibility Development or Scale-up

or Scoping Pre-Project Basic Studies
Studies Studies
Studies
Assess qualitative Establish the Finalize the Demonstrate manufacturing PCR
Objectives :
technical & goals, scope and project basis of process, product performance
© R.Pelletier 2023
market merits project viability: design and price acceptability
basis of design. Post-
Commercialization
Review
The decision you take, or fail to
take, in the early stages of the
Scope, process, lay out, principles No return
project will determine the of operation, are frozen decision
future of your operation.
Stage 1 Gate 1 Stage 2 Gate 2 Stage 3 Gate 3 Stage 4 Gate 4
Conceptual Feasibility Development or Basic Studies

Scoping Studies Studies Pre-Project Studies
At Gate 3, project objectives, process definition, plant lay-out, all safety

and environment protection principles are frozen.
Any later change would be extremely costly in money and delay. In subsequent phases
of project (basic studies, detailed engineering, project execution), the heavy
engineering machine is running full speed.
© R.Pelletier 2023
Needless to say, changes are worse after plant start-up !!!
St. Gate 1 St. Gate 2 St. Gate 3 St. Gate 4

1 2 3 4
0. Corporate/ Business Strategy

1. Marketing
2. Technical In the Gate system, deliverables

prepared during each stage, and
A. Product
examined at each gate, deal with all
B. Process
aspects of the project in a coherent
C. Project Engineering
and systematic way.
3. Operation
4. Financial
© R.Pelletier 2023
5. Patents, license and legal
6. HSE
0. Corporate/Business
Strategy
• Explanation of fit with
Business Strategy
Stage 2 : Feasibility study
1. Marketing • Customers conctacted show A: plant site not yet decided
interest
• Selling price estimate B: plant site frozen
• Sales volume potential
estimate
2. Technical 3. Operation • Estimate of fixed and variable

A. Product • Probable Product production cost
Composition • Rough site logistics and
‐ Performance targets storage
established 4. Financial • Economic feasibility study
‐ Feasibility demonstrated via with first pass return (ERR,
lab experiments NPV, margin)
‐ Products, co-product and
analytical issues identified 5. Patent and legal • Thorough literature search
• Patent strategy fixed
B. Process • Analysis of alternate process
routes 6. HES • Waste management strategy
‐ Process route chosen evaluated
‐ Process schematic • HES and regulatory issues
‐ Raw material sourcing and analyzed, budgeted and
handling addressed planned
C. Project Engr. • Plant site options reduced
• Capacity, expandability and
© R.Pelletier 2023
product mix fixed
• Sized equipment list prepared
• Conceptual estimate ( 30-
35%)
St. Gate 1 St. Gate 2 St. Gate 3 St. Gate 4

1 2 3 4
Product HSE Main products MSDS. Products table completed. Product regulatory status
confirmed.
(Raw materials, finished Regulatory specification of MSDS (Material Safety Data
goods, by-products, finished products and raw Sheet) of all products. Conclusion of product risk
intermediate products) materials prepared. study.
Incompatibility matrix
Main incompatibilities completed. Product composition sent to
identified. Summary of relevant Authorities and Anti-
List of products used. Any product hazards. Cost / time Action plan defined to Poison Centers.
prohibited product ? estimate to address address market regulatory
regulatory and SHE – Product issues. Notification of finished product
Identification of regulations issues. (if new substance).
for manufacture, marketing Assessment of product risk
and use. First product risk assessment in use started. Commercial MSDS, labeling,
in use and end of life. transport documents,
packaging instructions in
compliance with regulation of
all market countries.
© R.Pelletier 2023
Industrial examples of poor staging of project
“Too early" approach”
Too early:
▪ A major international oil company developing a brand-new engineering polymer.
▪ Exceptional properties of a “high melting point polymer, offering a highly
desirable combination of strength, stiffness and impact resistance with good wear
and friction characteristics», made from extremely cheap monomers, but …
▪ Main challenge of Research (NL): improve catalyst (noble metal based and very
expensive) efficiency and recovery, in order to decrease variable costs
▪ Main problem faced in Pilot Plant (UK) used for premarketing: very difficult
transfer of product by pump from one reactor to the other
▪ Decision to move straight to a very large size plant (US), in order to compensate
cost by an “economy of scale”
▪ Industrial plant based on gravity transfer only ➔ 80 meters high structure! Twice
the initial forecast investment (~1bn $). Plant was built but never started
© R.Pelletier 2023
▪ Whole business put on sale by the oil company without success. 

Industrial examples of poor staging of project:
“Too late" approach”
Too late:
▪ New photochemical process for producing monomer of a high value polyamide,
developed at Research. Great job performed by “traditional chemists” at lab level
▪ After 4 years, project taken over by the oil/petrochemicals mother company. Decision
to build a Pilot Plant to support the safe design of industrial plant
▪ Extensive (3 years) and expensive (3 full time engineers) piloting before first engineering
feasibility study was eventually performed. PRA (Preliminary Risk Analysis) then quickly
identified a high electrocution risk, if using the proposed cylindrical reactor design
▪ Change to parallelepipedal reactor decided in urgency. No time to simulate the totally
different hydrodynamics, except by mathematical modeling
▪ Model supported the new design, but failed to take into account some phase
separation phenomena, which could not be observed on the cylindrical pilot reactor
➔ Three years of catastrophic industrial operation with no production ( I = ~2 109 € 2020)
▪ Design capacity reached 18 years after start-up! Now at >300% of initial design (after
© R.Pelletier 2023
many changes!).

Relationship between Research and
Process/Product Development
▪ Many (if not most) people see process development in the

petrochemical industry as a continuous activity...
▪ Starting in the laboratory at the research level,
▪ Extending to the pilot plant, conceived according to the positive
results of the lab,
▪ Then extrapolating from this pilot plant to the industrial design
Do you agree with the above ?
© R.Pelletier 2023
Relationship Between Research And
Expression of Need
Laboratory
Research
Conception of
Industrial Unit/ Product Slate
Economical Study/
Market Evaluation
Pilot Plant/Application Lab
Customer Test
One should NOT « extrapolate » from Pilot
Industrialization Plant to industrial level
One should first imagine the design of the
industrial project, then scale it down into a
© R.Pelletier 2023
pilot plant in order to verify the basis of
design.
Example of simple batch

polymer grafting process
Approximate dimensions Laboratory Pilot Industrial
Volume Reactor 10 liter 1 m3 100 m3

Diameter Reactor 0,20 m 1,0 m 4,5 m
Diameter Agitator 0,15 m 0,32 m 1,5 m
Surface Heat Transfer 0,06 m2 1,3 m2 28 m2
S/V 6 m2/m3 1,3 m2/m3 0,28 m2/m3
What could happen if trying to extrapolate from pilot to industrial size:

-in term of heat transfer?
© R.Pelletier 2023
-in term of agitator speed?
In the lab reactor, very high S/V ratio enables easy control of reaction
temperature; heat transfer not an issue for the chemist at the bench!
In the pilot plant, intermediate S/V ratio requires only moderate ΔT
between reactor and cooling water inside the jacket: may be ~10°C at
the peak of reaction
In the industrial plant, low S/V will induce much higher ΔT, typically
~45°C if trying to keep same reaction duration. This is easily obtained if
reaction temperature is ~100°C and cooling water available at ~27°C.
© R.Pelletier 2023
But ….
Example of simple batch polymer
grafting process
▪Heat released by the reaction

follows Arrhenius law
Qr= ΔH. A . exp(-Eac/RTr)
▪Heat removed by cooling reactor
follows the simple form
Qc= kt . S . ΔT ΔT = (Tr-Tw)
▪When controlling a constant
reactor temperature, those two
values are equal.
© R.Pelletier 2023
Two cases: stable or unstable heat transfer.

If unstable case, slight increase in reactor
temperature will increase heat released by
reaction more than heat removed by jacket →
diverging ! This occurs when ΔT > RTr2/Eac
Pilot plant may well be stable, while industrial plant will be unstable.
Phenomena unseen at pilot level -reaction run away or solid deposit on
the cooler wall surface- may prevent the proper industrial operation.
One should conceive the industrial plant first, then design a similar S/V
© R.Pelletier 2023
on the pilot plant, in order to properly simulate the industrial behavior.
Agitation system should homogenize the whole reactor, suspend
the solid particles, provide sufficient heat transfer at the wall,
shear apart agglomerates, …
Shape and diameter of different sizes of agitator are obtained by simple
homothecy. But what about the speed of rotation, N ?
Considering the necessary vortex for incorporation of the floating particles
into liquid, Froude number should be kept constant: Fr = N² DA/g
Considering the degree of agitation, Reynolds number should be kept
constant Re= ρNDA²/μ
Considering the shear effect necessary to delete agglomerates of polymer
© R.Pelletier 2023
particles, tip speed should be kept constant V = NDA

N² DA NDA NDA² ????
If you choose to “extrapolate from Pilot plant”, which way to go? Embarrassing…
Right approach: design the industrial reactor and its agitator

according to existing guidelines, then…
Verify on pilot plant if each of the three required duties will be
satisfied: to be performed in three different experiments,
using three different agitator speeds
Real life example: wrong approach → industrial failure. When tip speed was kept constant, Froude number too
small, vortex too weak: particles float on liquid surface, eventually get sintered into a fixed layer. When speed of
© R.Pelletier 2023
agitator increased to solve the issue (with increased tip speed), shearing too intense: soft polymer particles
stretched out into long filaments (elephant spermatozoids) which would plug the discharge system. Project
abandoned, investment partly lost, years of R&D wiped out, credibility in front of customers damaged. 
Concurrent engineering
vs
Sequential engineering
© R.Pelletier 2023
Concurrent engineering vs Sequential
Sequential engineering
“Sequential engineering”, sometimes called “Traditional
engineering”, or “Linear engineering”, or “Over-the-wall
is the process of marketing,
engineering” **,
engineering design, manufacturing, testing and
production where each stage of the development
process of the whole project is carried out
separately, and the next stage cannot generally
start until the previous one is finished.
** “Over-the-wall-engineering” ! Can you explain the meaning of
this expression ?
© R.Pelletier 2023
Project Management in Petrochemical industry Definitions from Wikipedia 101
101
Concurrent engineering vs. Sequential
Concurrent engineering
Concurrent engineering is a work
methodology based on the
parallelization of tasks (i.e.
performing tasks concurrently).
It refers to an approach used in
product development in which
functions of research, development,
design engineering, manufacturing
engineering and other functions are
integrated to reduce the time
required to bring a new product to
the market.
© R.Pelletier 2023
Definitions from Wikipedia

Concurrent engineering vs Sequential
Source
LEXMAR
Main advantage of Concurrent Engineering: time saving …if everything goes well
More effort is given to the very early stages when the structure of the
project is defined, leading to less iterations in the following stages.
Introduced initially by airplane manufacturers in order to reduce both time
and money for the development of a new model.
© R.Pelletier 2023
Misfortune of the Airbus A380 (7 years delay for delivery of the first commercial airplane)
shows that Concurrent Engineering is not foolproof!

103
The challenge of sequential engineering
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Note: all specialists report to their « Project Manager », but stay in

constant contact with their own technical group and hierarchy
The ideal case of concurrent engineering
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ECONOMIC ANALYSIS
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Project management - Economic Analysis
A typical economic analysis shall include:

▪ The choice of the reference scenario (no investment, closure or
sale of activity, …)
▪ Description of the project
▪ Timetable of the projected cash flow (in-out)
▪ Economic study : rate of return, pay-out time, sensitivity to main
hypothesis, business results prediction
© R.Pelletier 2023
Economic analysis – A projection into future
▪ A standard way of presenting

• Wiping out the effect of inflation (I personally do NOT recommend engineers
incorporate inflation in their calculations: source of confusion)
• Actualization of future cash flows
▪ Differential study (with realistic reference scenarios!):

• Base case: what if I do not invest, or if …
• Investment case: what if I invest on this project?
▪ Time scale considered : often 10 or 15 years after start-up, with residual

value (~5 EBITDA Earnings before Interest, Taxes, Depreciation, and Amortization )
▪ Cash flows considered:

• Sales (~ turn-over generated by the investment)
• Expenses (industrial costs, sales, R&D, cost of working capital,…)
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▪ Results after taxes
Economic analysis – Example
Prevision of cash-flow for

a new PP site to be
implemented in UK.
The economic study should

consider the total cost of the
project.
Actualization is required to
compare investment, operating
expenses and returns at various
times, usually under the form of
the NPV of the Analytical Income
Statement (compte d’exploitation).
© R.Pelletier 2023
Economic analysis - Working Capital
▪ Need for working capital
• Liquidity necessary to run the business on a daily basis.
• Equal to account receivable + stock – account payable
Debt to Customer credit

Suppliers awarded by our
About 60 to Customer suppliers
70 days of Credit
sales
Spare parts
Raw materials
Stock
Running Working Capital
Stock at plant or in Finished
Produit
Capital
outside deposits product
▪ Working capital usually expressed in % of turn-over
© R.Pelletier 2023
Economic analysis - Price/margin estimate
▪ Profitability extremely sensitive to

price
▪ 1% increase in price could mean
10% increase in profitability
▪ 5% reduction in fixed cost (very
difficult to achieve) leads to same
result
▪ Importance of product slate and
proportion of differentiated
products
▪ Crystal balls are required for the long term

predictions. Or an inspired guess by the Business
Director, especially when facing the cyclic
© R.Pelletier 2023
fluctuation of prices!
Wide cyclic fluctuations of prices, consequence of the « me-too » strategy
Prices Production Volumes

capacity
Demand
Prices
© R.Pelletier 2023
n n+1 n+2 n+3 n+4 n+5 n+6 Years
Much easier to justify new investments when

margins are high and demand is increasing!
▪ Market tight
▪ Margin increase Many examples of such fall
▪ Investment of price due to
simultaneous investment.
▪ Overcapacity
▪ Lower price and margin Only a few examples where
▪ No investment (accidental) counter-
... 2/3 years later cyclical investment led to a
▪ Market tight very fast ROI !
No company wants to let the competition take market share which will be hard to regain!
Efforts developed to limit this cyclic effect by “time swap” agreements between companies,
© R.Pelletier 2023
accepted by the Anti-Trust authorities. (In Japan, MITI was even organizing the proper staging of
investment by the various companies)
Margins (or Spreads)
▪ Prices of petrochemicals vary in wide proportions. Fairly dangerous to
use long term prediction on prices in the economic studies
▪ Predictions of some form of margin (or spread) are both more useful
and more reliable. Examples :
Spread Polyethylene = “PE - Ethylene”
Spread PVC = “PVC + 0.65 soda – 0.48 ethylene – 2.3 MWh elec – 2.8 MWh gas”
▪ In short term, any new investment changing supply/demand
equilibrium will impact margin
▪ In long term (i.e. beyond the cyclic behavior linked to time constant for
implementing new capacity), margins erode due to increased competition
from more efficient new plants and improved competitive materials
▪ This general phenomena is especially true for polymers, due to the very
© R.Pelletier 2023
high growth rate and the fierce competition for differentiated products,
fueled by permanent R&D.
Project Management
industry 114
114
Short term effects
▪ Start-up of a (large) new plant is likely to have a significant impact
on the overall supply-demand equilibrium
▪ This effect probably even more important on a regional level
▪ Time swap with competitors often used to avoid

too large a market shake-up.
© R.Pelletier 2023
Project Management in Petrochemical industry
115
Long term effects: Commingled “Experience Curve” + “Economy of scale”
Plotting “Spread of PP vs Cumulative production” in log-log plot yields a “bumpy” curve;
however, long term trend can be derived from data, according to Boston Consulting Group law.
Margin Example of
Polypropylene“
HIPP Differentiated”
High Impact PP
grades less
sensitive to
spread decay
than the
Homo standard PP
polymers
homopolymers
PP
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Cumulative production MT

THE REALIZATION PART Of A PROJECT
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The realization part of the project
▪ After Gate 3 approval, sudden burst in intensity of studies and

number of people assigned to project. Ideally, Gate 4 approval
should be obtained “while marching”, without discontinuity
▪ Very complex organization, requiring high skills in planning and
coordination expertise.
▪ Any change (even small) in the goals or definitions of the project
will behave like a sand grain inside a high precision mechanical
watch
▪ Realization Project Manager: a very demanding, but also
rewarding position, reserved to high class, cold blooded, born-
leader, experienced engineers.
© R.Pelletier 2023
▪ Execution of project by Engineering company consists of three main
activities:
• Engineering I
• Procurement I → EPC Contract
• Construction I
▪ Client will then proceed with:
• Commissioning
• Start-up
▪ Engineering itself is performed in two successive stages:
• Basic Engineering Conceptual phase → Front End Engineering Design FEED
• Detailed Engineering Execution Phase → All documents for purchasing of equipment and
erection of the plant
• Very often performed by two different engineering companies
▪ Example: Polystyrene plant in Korea based on French license
• Basic Engineering Design Package by the French petrochemical licensor
• FEED for ISBL performed by a French engineering company
• Detailed engineering performed by a Japanese engineering company
© R.Pelletier 2023
• Construction by a Korean engineering company
• 12 months from kick-off meeting in France to start-up! A record.

▪ Final cost structure of an industrial investment:

R&D, studies, engineering 20%
Equipment and supply 45%
Work on site 35%
▪ Some rough orders of magnitude, (with the standard reference to one
piece of itemized equipment) :
Number of studies man-hour: ~1000-2000 m-h./item
Number of work site man-hour: ~1500-2500 m-h./item
(In Europe, ~80€ / m-h.)
Average total investment cost: ~300-1500 k€/item
OSBL / ISBL : 0.5 to 1
Total cost / Cost of main equipment: ~ 2π (4 to 10)
© R.Pelletier 2023
Realization. Specific case of Turn-arounds
▪ Every 4, 5 or 6 years, long shut-down
for mandatory inspection and repairs
How many
workers during
▪ Most often an opportunity to
implement new investments (safety,
the turn-around
environment and process improvements, capacity of a steam-
debottlenecking, …)
cracker?
Wooclap.
▪ Minimizing turn-around duration is

one of the major objectives. Up to
4000 people can work at the same
time on site!
▪ Loss of production can be a s costly
© R.Pelletier 2023
as the work itself. ,

Pre-Commissioning – Commissioning – Start-up
Some pieces of advice from a great specialist
1) To be done by future operators (don’t outsource : poor result + no gain of plant knowledge)
2) Quality of material is of utmost importance (best trade-off cost/quality)
3) Follow construction since the beginning to allow correction before start up
4) Smooth and early overlap between pre-commissionning and constructing activities
5) Anticipated delivery of critical equipment
6) Anticipate availability of utilities needed for commissioning (power, inst. air, …)
7) Clear definition of responsibilities: contractors / eng. company / project team / start up team
8) Composition of crew: mix of experienced + newly hired + specialists + team spirit
9) Shift work or not? Shift only if strictly necessary (critical path)
10) Safety is THE major concern: Hazop, risk analysis, “2 minutes before action” reflex
© R.Pelletier 2023
11) Don’t shorten testing period before HC in to “start earlier”: you will lose time !
Source: P.Brennet Total Petrochemicals
An example of a successful project
An example of a successful turn-around**

▪ Major debottlenecking of a Styrene plant, during a mandatory turn-around, in a
50/50 jointly owned plant, one of the largest in the world
▪ Only 1 of the 2 companies interested by increased capacity. All extra loss of
production due to debottlenecking investment “charged” to this sole company.
Profitability of project strongly dependent on duration of turn-around
▪ Success of turn-around due the exceptional preparation in the early stages of
project (example : cranes movements and interference studied at stage 2!).
Perfect coordination between Technology provider, Engineering Company,
Subcontractors, Operation team, under strong leadership of Project Manager
(nicknamed : “the man who could walk on water”)
** One successful project, after long series of difficult, if not catastrophic, turn-arounds in the Corporation.
Convincing the disgusted top management to sign the Capex authorization proved to be one of the most difficult
tasks of the whole project !!!
© R.Pelletier 2023
See the small movie on this successful project as a first conclusion of this lecture
Project Management
industry 123
Conclusion
© R.Pelletier 2023
Conclusion
Mathematics
Control and Instruments
Chemistry Physics
© R.Pelletier 2023
Only a team can handle all of these issues !
Conclusion
The Product!
© R.Pelletier 2023
In the world of polymers, unity of these fields of expertise
will determine your industrial competitiveness!

UFAZ 2023 RP4 Project Management For Students

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“From oil and gas to base chemicals, polymers and plastics”

Project Management in the

Robert PELLETIER UFAZ, December 2023

Project Management in Petrochemical industry 1

H427 - May 2002

But also thousands of small or medium size projects:

Shell GTL in Qatar

▪ Whether big or small, all projects are linked to Investment

▪ Outstanding Research is NOT sufficient to achieve innovation.

▪ In fact, experience shows that most of innovation is “market pulled”,

▪ “Research transforms dollars into ideas, innovation transforms ideas

Project Management in Petrochemical industry 6

▪ By nature, R&D is an uncertain activity; new difficulties may appear at

▪ Main purpose of R&D staging and planning: minimize risk of technical

Starting the overall planning from beginning tends to downplay the

▪ Starting from the end makes it easier to, early enough,

▪ From the first feasibility study up to industrialization and

▪ Process Development Engineers are the link between Research and

▪ Process Development Engineers main tools

▪ Whatever their function (R&D, Production or Commercial), all these

▪ Very difficult to be a good polymer process development engineer if

▪ In 2020, close to 3.3 millions applications, vs 925000 in 1985. (Source: WIPO,

Steady growth rate of

Project Management in Petrochemical industry 17

▪ Chinese telecommunication companies HUAWEI is N°1 worldwide for the number of

Source: PHILIPS IP&S Europe, WIPO

▪ This is YOUR invention, it is now duly covered by a patent which is

Why patenting your inventions?

▪ Value of a patent linked to its

▪ Patents similar to fortresses in good old times:

Project Management in Petrochemical industry 25

Project Management in Petrochemical industry 26

▪ Most researchers tend to (over)estimate the value of an invention

▪ Process patent /vs Product patent

Project Management in Petrochemical industry 27

▪ Researchers at Phillips Petroleum had discovered a new

▪ However, patent suit in US (Phillips vs Montedison, Hercules,

Project Management in Petrochemical industry 31

The NESPRESSO example

• Coffee machine, based on a proprietary system of single-serving

▪ He also patented an arrangement of horizontal mass reactors, as opposed

▪ Risk of third party’s later patent blocking your own development!

Project Management in Petrochemical industry 36

▪ Strategic decisions of investment must rely on clear knowledge of

▪ Marketing studies by no means reserved to “commercial people”

▪ It is gathered through permanent efforts of data collecting and

▪ The studies financed by the competitor

▪ The consulting firms of the competitor

Main sources of information on the competitor

▪ The competitors of the competitor

▪ Main pitfalls in technology scouting

Importance of R&D in the Polymer field

▪ Even when considering only one polymer family (polyethylene for

▪ Technical cooperation agreement between peers: joint development

Project Management in Petrochemical industry 46

▪ Technical cooperation agreement with customer: typically for

▪ Licensing : one company purchases the technology developed by

Thinking about this

Project Management in Petrochemical industry 49

Basell (Montell + BASF) 2000

Lyondell-Basell (Basell+Lyondell Chem.) 2007

Project Management in Petrochemical industry 50