Category Archives: Business

Changing Petrochemical Center of Mass

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The Middle East (ME) is currently undergoing a dramatic change in petrochemical supply and refining capacity. Multiple projects in several countries are underway that will offer greater capacity of key hydrocarbon feedstocks as well as fuels. 

The current run up in crude oil prices has produced an abundance of cash for oil producing states in the ME.  Acutely aware of the transient nature of their oil reserves, the cash generated has been applied to infrastructure. Social infrastructure as well as industrial infrastructure has been expanded in the ME with facility no doubt eased by the nationalized nature of the petroleum companies. 

In the USA, a run up in crude oil prices has not resulted in a major uptick in refinery capacity, port expansion, or the birth of new universities. Instead, US oil companies have plowed investment into new discovery activity in an attempt to sustain the current rates of consumption. Profits are channeled into CEO salary packages and to shareholders, who, in turn, go to great lengths to shelter their funds from taxes that support US infrastructure.

Saudi crackers alone are expected to add 14m tonnes/year of extra ethylene capacity by 2015. ME market share of PE and PP is expected to double by 2011. So large will the demand for ethane be that there is considerable skepticism that the full potential of the buildup will be realized.

Since ethylene comes from the cracking of ethane, and presently a large share of ethane comes from natural gas, the question arises as to the effect on natural gas prices as ethane scarcity becomes apparent.  Naphtha crackers are part of the answer to the question of supply. The US has (had) abundant natural gas and a corresponding reliance on the extraction and cracking of ethane from this resource. Elsewhere in the world, a large fraction of ethylene comes from naphtha feedstocks.

And so it is that the Saudis are building crackers to bolster their feedstock supplies. The Dow/Siam Cement JV is also addressing their ethylene supply issue with a second naphtha cracker in Map Ta Phut (ICIS, 2007, December 3-16, p 6).

The largest petrochemical complex in the world is under construction at Ras Tanura in the eastern province of Saudi Arabia.  This US$20 Bn project is being developed jointly by Dow and Saudi Aramco and is expected to come onstream in 2012. The goal is to integrate the existing Ras Tanura and Yanbu refineries into a single operation offering petroleum refining and production of value added hydrocarbons like ethylene.  Clearly, the principals have downstream conversion in mind. The project will have the first naphtha cracker in the ME and will offer ethylene cracking and aromatics capacity as well.

According to the article in ICIS, Basell claims that the ME will be the only net PE and PP exporting region by 2011.  And so it was that the petroleum scare in the first decade of the 2000’s financed and expedited the migration of dominance in the polyolefin industry to the Middle East.

On Marketing Chemicals

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If you are a marketing person in the chemical industry, the question of how-to and how-much is never far from your mind.  I’m not talking about selling pesticides or drain cleaner to consumers. I’m referring to B2B chemical sales.  Feedstocks, reagents, catalysts, additives, etc.

Management never likes to pay much for advertising and will always be skeptical of the value of ads. Yet, deep within that black heart most managers know that some advertising is necessary.

Sales to the public is demand that can be fairly easily measured. Sales in the public domain are open and lots of nifty and informative stats and trends can be compiled to help plot marketing strategy.

By contrast, sales of products that are not out in the open, or products that are part of a proprietary process leading to another kind of product are things that are somewhat problematic to understand.  Products that are uncommon or are unique to a few limited circumstances are not products that you necessarily want to promote in the mass media.

If a company makes a bracket that is used to hold a fuel flow sensor on a 1998 Buick, chances are that the product will be useless for just about every other application.  But many components on that same Buick are of a general nature and may be found on many kinds of cars.

In chemical marketing, many products are of a general nature and many are highly specific. The marketing approach for highly specialized products is necessarily more focused than that for chemicals of a more general utility. A specialized product requires that marketing people be like a Dachshund- these dogs were bred to go into burrow hole to pull out the critter that lives in there. Marketing specialty chemicals requires the same sort of proclivity.

Where do I find information about who uses what?  I search patents, SciFinder (to see who is publishing with what materials), Google, and I talk to people about what they are looking for. Purchasing people always have a list of troublesome products. Your company should have a decent customer list to draw upon.

Another approach is to do a patent search starting with a particular company AND a key word. While there is absolutely no assurance that the company is actually practicing the art that they patented, it is possible to collect a list of companies that have used your product at one time.

Finally, there is the Johnny Appleseed approach. You simple plant literature at every fertile site you can find, and you do it several times with multiple media. Brochures, emails, cold calls, websites, conferences, and technical literature.  “Technology Push” is hard work. Especially if the economy has taken a dive. It can take 3 months to 3 years for a potential customer to give you a call when they finally decide to make a query.

The marketing of obscure products is spotty business and hazardous to your wallet if you are on commission. The best circumstance is to have a portfolio of products, or a catalog. If your collection is good enough, something will always be in demand.

On Running a Plant

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Here is a collection of thoughts on running a chemical plant, listed in no particular order.

  • Always have some extra production capacity. Don’t be tempted to book every hour of plant time with processes.
  • It’s easier to get purchase orders than you think. Corollary: It is easier to overbook a plant than you think.
  • Hire the smartest, hardest working people you can afford. 
  • Never do R&D in the plant. Consider using laboratories for that.
  • You will eventually have an incident or an accident. Make sure the HAZWOPER people drill every now and then.
  • Beware the rag layer. It will confuse the operators.
  • Hot filter cakes can ruin your whole day.
  • Somebody sit and think about how failures might be expected to propagate during an incident.
  • Don’t be an asshole.
  • Watch out for reactions with initiation lag times. They’ll getcha.  Stored energy is scary.
  • Try to get the supplier to send dry, clean solvents. Purifying solvents is always a money losing operation.  The same is true for all starting materials.
  • To the greatest extent possible, try to move solutions around rather than solids. Solids handling is always more difficult.
  • Think about where that butyllithium solution is going to go if there is a spill.
  • Try to decide early on how you would like the next disaster to unfold. This is true for all hazardous operations- plant operations, highway driving, or marriage.

I’m sure there are many more good suggestions from Bloggerspace.

Send your Gluteal Scan to the FBI

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It is hard to believe with all of the “good” news lately that the US gvernment is on our side. The Bush II Y2009 budget proposal comes in at a stunning $3.1 Trillion against an estimated $2.5 Trillion in receipts.

The FBI wants to collect biometric data on US citizens. It wasn’t clear to me as to whether they want to collect this data as law abiding citizens go about their business at airports with iris scans and electronic fingerprints, or if they will limit the effort to people taken into custody.  In any case, the notion of our government collecting ever more data on its citizens should bring chills to everyone.  It is all about control. Once taken, never returned.

I, for one, would be only too happy to fax a photocopy of my biometric gluteal cleft to the FBI to post wherever it suits them. It shines like a mackerel in the moonlight. In fact, there is a protest movement I could get on board with- The Million Man Moon on Washington.

The Customs and Border Patrol agency has proposed the new “10 + 2” rule which should be a real delite to deal with. We’re already scrambling to figure out what the hell this means for the purchasing people.  Lots of detailed info will have to be timed properly to keep things moving through customs.  It’s going to be a big mess and the only benefit will be that the government will collect more duties.

Chinese Cyberwar and US Interests

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An intelligence report posted by International Relations and Security Network (ISN) at the Center for Security Studies at ETH in Zurich reveals what appears to be a widening and systematic program of cyber attacks on US government data infrastructure by elements within the military organ of China.

Rachel Kesselman at ISN Security Watch writes-

According to a 2006 US Defense Department report, the Chinese People’s Liberation Army (PLA) began developing information warfare reserves and militia units in 2005, often incorporating them into broader exercises and training. The establishment of this elite Chinese unit is evident by a likely increase in sophisticated attacks on high-risk targets.

Reports in Chinese newspapers also suggest that the Chinese are actively attempting to establish a cybermilitia. A Time Magazine article entitled “Enemies at The Firewall” purports that the military has put forth a concerted effort to carry out nationwide recruiting campaigns in hopes of discovering the country’s most brilliant hackers. 

Like so many Americans, I live in a bubble. The extent and brazenness of the activity reported by ISN and other sources only serves to stimulate the paranoid cortex of my brain.

What seems likely is that most nations are engaged in systematic probing of the data resources of the upper tier states. Chinese enthusiasm for this activity may or may not be exceptional among the nuclear states. Certainly, computer spycraft is nothing new and that China practices it shouldn’t be a surprise.

Henry Kissinger once remarked that nation states do not have friends. They only act in parallel with states having similar interests. In this vein, we should not be lulled into thinking that China, or any other state for that matter, is our friend. China is certainly not our friend. The US is a fountain of wealth that they aim to tap through government backed market activity.

Economic idealogues in the US prattle on tirelessly about the virtues of the free market and the merits of regulatory deconstruction. But on the global scale, markets are unavoidably tied to regulatory constructs as a result of notions about security and dominance.

Just try to get a shipment of anything to China or to South Africa or into the USA. There is no free market. Every single aspect of a transaction is highly regulated or controlled by some apparatus that is highly controlled. Tariff codes, tariffs, shipping reglations, wire transfers, and customs clearance- the reality of a free market barely extends past the canopy of a fruitstand in a farmers market.

I believe that the US should cast off this free market puritanism and act in a manner so as to protect its economic interests. Yes, we’d like to keep as free a market as possible. But American culture, not government, has to be the locus of change. American culture should de-emphasize its fascination with pure wealth and look askance at the sterile detachment many influential businessmen have with regard to their profit motive. We want to be profitable. But we do not want to hand over the keys to our technological toolshed for a quick buck. If we cannot afford to manufacture here, there should be an expectation that we try to innovate around the economic barriers rather than just resort to abandonment.

We should be wary about using the language of friendship with China. This nation has its own sense of where it is headed and has become quite refractory to admonitions and paternalistic brow beatings by the US and others.  It has its own momentum and will do what is in its best interest. Americans should do what is in their best interest as well. That is, avoid trading the farm to foreign interests who have much more discipline with their attention span. 

America’s Achilles heel seems to be the inability to be patient and plan for results over the long term. We live in a NOW culture. Advances in computer technology has only engorged our expectation that we can and should have everything now. The mortgage and credit crises are only the latest examples of this.

American culture has gotten fat and lazy. Our rotund wastelines are only the exterior. Within our culture is a kind of bacchanalian sloth that has drifted like a fog into our collective yard party. Everyone is too busy eating and drinking to notice that the greed-heads have set the house on fire.

Analytical Life Without NMR

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We synthetikkers live in the gilded age of NMR. This analytical method is so fast and so rich in quantitative and structural details that we may forget what it’s like to produce materials that aren’t amenable to NMR rigged for liquid samples and H, C, F, B, Si, and P.

I’ve been busy making metal oxides and various complexes for sale that lend themselves to a very short list of analytical methods. When you make compounds for sale you have a responsibility to provide an unambiguous assay of purity for the lot.  Compounds that are poorly soluble, paramagnetic, or lack NMR active nuclei can be problematic for NMR assay in a production setting. Yeah yeah, I know- get a solid state NMR. Well, we don’t have one and it ain’t gonna happen in my lifetime. Meanwhile, I have 200 g of new product that needs to get certed and into inventory.

Lately I have been taking cues from catalog company web-sites and exploring other methodologies. Complexometric titrations for metals assay, AA, gravimetric AgX for halides, Karl Fischer for water, Loss On Drying (LOD) for volatiles (water, solvents), combustion analysis (C, H, & N), Glow Discharge MS (the Big Hammer) for refractory metal oxides, XRD for anything that could be in the xtal database, melting points, TGA, and I’m turning back to FTIR. 

I haven’t been using FTIR in a quantitative way, just looking for a “Conforms to Structure” result. But nonetheless, in the preparation of new compounds for the product list it is a life saver. I can convince myself that the desired ligands are there and use other methods to try to quantitate their wt %.

I always feel better if we can come up with 3 methods that corroborate the composition. You don’t always have to come up with methods that are on the specification either. It is reasonable to report results on a Certificate of Analysis that are “Report Only” and show general conformance rather than some percentage quantity.  Examples might be appearance, color, or even an NMR spectrum.

I have only recently begun to use XRD and am a mere novice in its intracies. I have sent solid solutions where components that I knew to be there were not detectable. I have also sent samples that came back with % compositions of several xtal phases. For characterization of production lots, it has utility in the detection of certain components. Amorphous phases and random, solid solutions are a blind spot for the method. On the other hand, there is ca one half million compounds in the database so it can detect xtal phases down to ~ 1%.

I have learned an expensive lesson in regard to ICP MS. The method is quite blind or unreliable with certain elements. Sulfur and halides in particular. A sample can be loaded with sulfur (often as sulfate) and the assay will come back with a wildly low value. An ICPMS assay of rare earth metal oxides can support a claim for 99.99 % total rare earth oxides. A GDMS of the same sample may show that it is 99.8x % in metals and even lower if you include halides, sulfur, and phosphorus. 

To be fair to purveyors of ICP MS, it is quite sensitive but standards at the lower limit of detection may not be available. Sub ppm numbers without an explanation of conditions and error are to be taken with skepticism.  Everything looks like a dogs lunch once you get down to the sub ppm level.

The Black Art of Procurement

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The act of consumating a business deal can be very exciting and fulfilling. It can also be a moment fraught with anxiety. [A variety of unwholesome metaphors could be brought in at this point, but I’ll resist.]  A business deal requires a buyer and a seller. The buyer has to satisfy needs that have an inverse relationship with the seller. The buyer wants a low price and high value per $. The seller wants a high price and a nominal value per $.

All buyers have a list of requirements: First, the buyer has to bring home a service or a product. Second, the buyer needs some kind of assurance that the transaction won’t go afoul by slow or non-delivery, poor quality, or shabby service. The buyer often has a third need, one that may or may not be evident from the beginning to the seller. Most buyers have a need to demonstrate that they have gotten a bargain. It is not enough to have merely purchased a thing- most people have a real need to bring back a kind of buyers trophy.

What many sellers may not appreciate is the kind of pressures that may be on a buyer in the B2B world.  The value of a buyer to his/her employer is the ability to get the lowest price under the best terms. The ability to put the squeeze on vendors is a highly prized attribute among buyers.  Some organizations actually consider their purchasing department to be a kind of profit center.

A company that is involved in technology development for their own use or for licensing may have several kinds of buyers. They may have a conventional purchasing department for paper clips, hardware, and commodity chemicals. This department is charged with sourcing and buying fairly ordinary things.

But the same company may also have a procurement group that focuses on the sourcing and purchasing of specialty items. In the fabulous world of chemical industry, a procurement manager may specialize in items that must be custom made or are otherwise scarce, highly technical, patented/licensed, or just plain expensive.

Some materials are particularly critical to a company. It may be a key chemical feedstock, a special reagent, a catalyst, or something that is difficult to make or is highly specialized. The procurement of specialized materials often requires the attention of a chemist. So, it is not at all uncommon to find chemists involved as procurement managers in the chemical industry. In fact, many high level procurement people I know were chemists early in their careers. 

Procurement people are quite important players in a company. They have heavy responsibilities and are always under pressure to perform. They deal in dollars and days. Their performance is easily monitored by their superiors by the simple metrics of dollars and delivery times. To put the delivery puzzle together, they have to negotiate and enforce specifications, price schedules, supply contracts, secrecy agreements, delivery schedules, and often international multimodal logistics. 

If a procurement person flubs a detail, like delivery of raw material on a certain date, a process shutdown at the plant could be the result. Depending on the magnitude of the fiasco, this could be a career ending injury for the manager.

We live in the age of just-in-time delivery of feedstocks. Raw material inventory sitting in a warehouse is equivalent to having a big pile of money sitting there. Extended warehousing of raw material inventory means that some amount working capital is is not only unavailable, but is not earning interest in an account somewhere.

Every query a buyer issues is an opportunity to work on lowering prices. Some materials are purchased regularly while others are more episodic. Some companies have a policy of buying under contract and others are satisfied to issue a spot purchase order as needed. Some buyers may have favorite vendors and others may not. Shopping for the best price usually means that multiple vendors are tagged for quotations.

Sourcing information is increasingly dependent on the internet.  Mysterious job shops in Asia or the Ottoman Empire are as easily found on a web search as are the venerable giants BASF or DuPont.  A lot of filtration has to be done by the buyer to sort out the authentic from the wannabe’s. It has been my experience at trade shows and on the web that many Asian suppliers are so anxious to cash in on the export trade that they will say yes to virtually every query.  They are not dishonest, really. They just have a severe can-do attitude. I’d do the same thing.

In the end, a seller needs to remember this about procurement people- Always do your best to make them look good in front of their bosses. That means offering a decent price and an honest assessment of delivery dates. A good price followed by poor delivery will harm a relationship as fast as anything. Be honest, earnest, and on time and your buyer will be good to you.

On Expired Patents

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The website Latepatents.net has collated a top 100 list of companies with a link to their individual expired US patents.  Said patents have expired due to failure to pay maintenance fees and not due to normal expiry. I checked a random sampling at the USPTO and found that indeed the patents were expired.

Readers will have to determine for themselves the value of these heaps of company treasure lying about the Public Domain landscape like so many abandoned Buicks, tanks still full of gas.

Given the quality of the companies that have the prematurely expired patents, and the resources they surely spend on IP management, I’ll hazard a guess that most of these patents were allowed to expire on purpose.

Patents are obtained for many reasons. One invention might lead to prompt and exclusive sales and profits for its owner. Another invention might lead to possible cash flow in the future if certain circumstances align properly. Some patents may be intended to be put up for lease or sale. Still other inventions serve to block competitors from facile entry into your line of business, so called “picket fence” patents.

It is not unusual for a given bit of intellectual property to become obsolete before the natural expiration of the patent. Technology can advance sufficiently such that a process or composition is no longer competitive. A company can move away from a technology package for business reasons having nothing to do with the suitability of the patented art.

Finally, I think that some patents are obtained simply because the company has a “policy” that requires the disclosure of inventions and subsequent mechanical submission to the attorneys. If you are a hammer, everything looks like a nail. If you’re running an intellectual property office, every disclosure looks like a patent. 

If too many “improvements” turn into applications, it may not be the fault of over-eager patent attorneys. More likely, it is the result of choices made by company management. I have witnessed a few circumstances where managers have been reluctant to exercise business judgement and have heaped the decision to patent solely upon the hapless attorney. What choice does the attorney have but to prosecute the patent?

It is my opinion that business people far too frequently allow their attorneys to make IP business decisions for them. The typical excuse is that it is a “legal matter”. The question for a business person is this- Can we make a choice that prevents the issue from becoming a legal matter?  Sometimes we use lawyers because we need a surrogate to do the dirty work for us.

The common default choice found in IP is that if it can be patented it should be patented. This is an expensive and weak-minded philosophy and I’ll wager that the patents in the aforementioned list are expired as a result of some second thoughts on the value of these inventions.

Aurum Oracle, What Say You?

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Watching the market take on water like a leaky Liberian freighter, I’m wondering about the wisdom leaving my assets in the 401(k) plan.  It’s a fact that the market goes up and the market goes down. The question is, what kind of games do the fund managers play as share prices fall? Do they sell-off many low priced shares for fewer shares of stronger stocks? If so, how does that affect your recovery as the market strengthens? I don’t know. Sounds like its time to understand this better.

Gold has been steadily increasing in value since at least June of 03 (near the limit of my horizon). Since stock prices started to nose downward in early 4Q2007, the slope of gold price growth increased. The inverse price trend with investor confidence in stocks is normal behaviour for gold.

But looking at the upward trend in gold prices this decade, I’m left to wonder if there isn’t some fundamental change happening. If the price is rising due to global demand, who is out there steadily driving up prices? Are there big players who are in the know?  And what are the consequences for individuals?

The Astute and the Cagey

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It is possible to split business organizations coarsely into two camps- Old Testament and New Testament. Old Testament organizations tend to be conservative along all of the organizational degrees of freedom. Employees have conservative mannerisms and dress, decorum is strenuously observed, desktops are always neat and tidy, and the management of personnel tends to be rigid. Lots of complicated rules and no mercy.

New Testament organizations on the other hand, tend to be more tolerant of iconoclasm and Bohemian values. The New Testament company is all about redemption and mercy. Ties are hastily donned for visitors from Old Testament businesses because Friday business casual lasts all week. Startups tend to be New Testament.

New Testament businesses are like friendly Unitarians and liberal Quakers, while Old Testament businesses are like sober Pentecostals and Mormons. One is not necessarily better than the other, though if you are caught in the wrong “denomination”, you are probably very unhappy.

Having once experienced the transition from New to Old Testament management, I can say that it can be a very uncomfortable ride. This transition can cause people to elicit interesting or unexpected behaviour. One of the insights that I have had relates to the manner in which people may engage in discussion or negotiation.

Some business managers are naturally very shrewd or astute individuals. They are able to achieve penetrating insights into relationships and circumstances where others might just see a toothy grin or hear a plausible excuse. After all, even Freud had to admit that sometimes a cigar was just a cigar. But the astute business person may be able to intuit a more creative view.

Sometimes, however, astute is confused with cagey. A cagey manager can be shrewd, but the difference is that a cagey person is one who is fundamentally unwilling to reveal information. Why is this important? Because information is the currency of trust. Information truthfully (and carefully) revealed is what allows relationships to move forward. Information about your intent and interest can go a long way to make a potential customer feel better about the business decision to buy your products.

Cagey managers may go well beyond simple mistrust of everyone. They may also be convinced that they understand what the customer “really” wants or what their real intent is. It is possible for smart people to step across the line and enter a space where they believe they can see what is happening behind the curtain. It is a very dangerous thing for a manager to think he is smarter than the customer.

The time tested optimum path is to take the customers word at face value, even if it means that you will get taken advantage of now and then. Give the customer what they ask for and not what you think they really mean. You can’t fall off the floor.