A player in the oil sector uses simulation to determine the best investment strategy
When a company makes an acquisition, they need to be sure investments and process changes have an ROI.
A player in the oil sector acquires a competitor’s mining and oil processing operations. The company wants to know the most profitable investments to be made to increase the site’s productivity. The production has two mining sites, and each has its own ore processing machines. They are considering several options, such as the addition of redundant machines, the connection of both sites by pipelines or even the purchase or sale of semi-finished products to third parties. It’s a complex process to analyze with heuristic calculations.
As the system is extremely complicated, the company turns to simulation to reproduce their operations and test different combinations of machine and scenario. Maintenance being the most disruptive element of operations, each machine can have up to 11 different types of failures. Each of these failures does not reduce the machine’s production to zero. Depending on the type of failure, the production of the machine continues, but at a reduced rate. The production reduction is calculated according to a reduction ratio for each of the types of failures added together. In addition, this sector has a high degree of variability in the transformation of ore into a finished product. Indeed, the quality and quantity of the finished product depends on several factors such as the composition of the ore. The quantity of ore must therefore be converted several times during operations in order to obtain the closest values to reality.
How it works:
The model helps the leadership team to evaluate different investments to identify areas of investment with the highest ROI. They interact with the model through a user interface that includes all the parameters of the operations. The interface gives maximum flexibility to the user. For example, a special interface has been created to enable and disable certain machines so that the customer can see which machine redundancy had the greatest impact on his productivity.
Several other scenarios and parameters are added to the interface to give control of operations to the user. The simulation model must be able to simulate one year of production in order to allow decision-makers to make the best possible strategic decisions. Simulation allows them to know as much as possible about the maximum possible production as well as the minimum, enabling them to make informed decisions while reducing the risk of unnecessary investment.
The flexibility of this simulation model allows the company to know the next step in terms of major investment. The model can also allow them to create a multi-step investment plan to spread investments over several years while having a tool to validate their production objectives.