Changing an organisation’s operational business model is a complex challenge in anybody’s books. Following changes to the LPG market in New Zealand in 2010, LPG company, Liquigas, made a strategic decision to redesign its business model. It had to change from being the owner, marketer and distributor of LPG to become an infrastructure provider to the wholesale LPG industry. New Zealanders use over 140,000 tonnes of LPG every year. Whether it’s used in the home, a restaurant, or an industrial setting, around half of this LPG is likely to have started its journey at a Liquigas facility. Liquigas called on Orbit Systems to work with the company and its project managers to help reinvent its business model, redefine its commercial and operating agreements and develop and install completely new business and information systems.
CASE STUDY
Liquigas is one of New Zealand’s major infrastructure providers. It was formed in 1981 to ensure that liquified petroleum gas (LPG) was available throughout the country. The natural gas from which the LPG is derived has been produced from wells in the Taranaki region for over 50 years.
To ensure New Zealanders could have access to the local supplies, $112 million was invested in building world class terminals and a distribution infrastructure which forms the basis of the Liquigas network.
Liquigas is based in New Plymouth and has depots in Auckland, Port Taranaki in New Plymouth, Christchurch and Dunedin with a combined storage capacity of up to 7,000 tonnes of LPG. The LPG is distributed from these depots to wholesalers then on through retailers to thousands of homes and businesses throughout the country.
In 2010 Liquigas decided to change its business model in response to a changing market environment. The opening of a new gas field meant there would be additional LPG available to the market which would put pressure on existing storage facilities. Liquigas took a strategic decision to cease trading LPG and to become an infrastructure provider to the industry. It would do this by making its storage capacity and distribution capabilities available on an open access basis to any wholesaler who wished to contract for their use.
To restructure its business in this way Liquigas needed to move from owning or directly managing the inventory of LPG stored in their facilities to a situation where the LPG was owned by a variety of competing LPG wholesalers. It also needed to establish a system to share the finite storage capacity among several competing users in a fair and efficient manner.
This is where Orbit Systems came in.
Liquigas’ objectives were achieved through the development and implementation of a new access regime which included two key innovations:
1. The Liquigas Facilities Code
This is a legal document which sets out the rules, terms and conditions which apply to customers when they use Liquigas services. The Code provides fair, consistent, and transparent rules for all users of Liquigas facilities.
2. Slate and Allocation Model (SAM)
This is a purpose-designed and built software package which enables Liquigas to administer those rules. The system tracks, monitors and forecasts inventory levels at each depot by customer; manages the shipping slate; ensures a secure supply of LPG to the South Island, and provides reports to customers and Liquigas management. It defines the roles and responsibilities of each party and provides security of supply to customers and end-users.
The custom-built SAM system tracks customer forecasts of inputs and uplifts over a three-month period, calculates actual usage, and reports daily to traders and customers.
It is the only model of its type in the New Zealand LPG industry.
Four years on, SAM has become a critical planning tool for Liquigas and the LPG industry. It allows them to examine broader trends in supply or demand or market distribution and facilitates quick responses to any delays in shipping, unplanned production outages and other one-off events.
Liquigas was a finalist in the DeLoitte Energy Excellence Awards 2011 for its innovation in developing and implementing the SAM system.
Orbit Systems is currently developing another software solution for Liquigas. Called STORM, this new system is a storage forecasting and simulation model that assists with long term planning.
“SAM is the only modelling tool of its type in the New Zealand LPG industry. The amount of information SAM processes is well beyond the capabilities of any individual or an off-the-shelf software package. We are able to apply the rules of the Facilities Code using SAM with much fewer resources than would otherwise have been required.”
Albert de Geest: Chief Executive Officer, Liquigas.
