Technical Risk Analysis of Control Valve failures in Pulp and Paper industry.

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Risk Mitigation for the Failure of Digester Blow Valve in Pulp
and Paper Sector using Long term Contracts
Author: Abhishek Bhadra
Company: GENPACT
Mentor
N Murali, GENPACT
Jayashree Thiyagarajan, GENPACT

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Table of Contents
Abstract_______________________________________________________________ 3
Dynamics of the Global Pulp and Paper Market ______________________________ 4
Indian Market Scenario__________________________________________________ 5
The Process ___________________________________________________________ 6
Right Valve for the right application________________________________________ 8
Main Areas of Failure ___________________________________________________ 8
MTBF (Mean Time between Failure)_______________________________________ 9
Buyer’s Perspective _________________________________________________________ 9
Seller’s Perspective ________________________________________________________ 10
Risk Mitigation________________________________________________________ 10
Structure _________________________________________________________________ 10
Salient Terms _____________________________________________________________ 11
Case Study ___________________________________________________________ 11
Risk Minimizing Initiatives ______________________________________________ 12

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Abstract
Twenty four hours per day, day after day, week after week, month after month,
continuously work with corrosive and erosive fluids under high pressure and at high
temperatures. Splashing of pulp and alkaline fluids, vibrations created by refiners and
pumps, pressure shocks, crystallization and scaling, impurities such as sand and metal
wires. It is under these conditions valves installed in the pulp and paper industry work
and it should work properly as a failure will cause tremendous costs. In spite of all the
technical precautions, failures do happen in the valves which are the integral part of the
pulping process. In the following chapters we’ll try and identify the various causes which
results in failures and the area in the pulping process which is most adversely affected by
the control valve failures. We’ll try and follow a data driven as well as realistic approach
in order to identify the root cause.
We’ll also try and formulate a Risk Mitigation strategy for the failures using long term
contract solution. During my stint as a Product Manager for one of the leading control
valve manufacturer I had observed that the digester blow valve had been the centre of all
kinds of debates between the manufacturer and the buyer. The situation normally ended
up as a no win situation for both the parties. The pulp production lost money because of
the failure and the manufacturer lost money and customer satisfaction. Using the solution
of Long term service contracts and simple risk mitigation strategies, we’ll try and come
up with a win-win situation for both the parties.
We’ll begin the paper by briefly describing the size of the pulp and paper market in India
and the world. We’ll also discuss the pulp and paper process and the criticality of the
control valves in the smooth functioning of the production.

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Then finally we’ll move on to the long term deal structure that would be suitable for both
the buyer and seller. We’ll discuss the risks involved in such a deal structure and the
various mitigation strategies.
Dynamics of the Global Pulp and Paper Market
“Almost a billion new consumers will enter the global marketplace in the next decade as
economic growth in emerging markets pushes them beyond the threshold level of USD 5,000 in
annual household income – a point where people generally begin to spend on discretionary
goods”
McKinsey
The World is changing fast and the consumer landscape is changing faster. There’s deregulation
everywhere and previously unexplored markets are opening up.
This brings increased competition and eventually results in the manufacturing moving to the low
cost regions. The Rapid Economic Growth in the developing markets like India and China acts as
a catalyst to the changing landscape.
There’s restructuring in the old world. For example North America is downsizing and
adjusting to maturing domestic market. Western Europe is upgrading with new capacity
and closing the old ones in order to reduce over capacity.
There’s rapid expansion in the emerging markets. Capacity is increasing ahead of
domestic demand growth.
The pulp production is slowly shifting southwards. There’s trend which shows that more
and more high cost mills are closing down in the northern hemisphere. Where as there’s
rapid expansion and organic growth in Latin America and Asia. The fiber deficit in Asia
has contributed to the increasing trade flows between the continents.

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Indian Market Scenario
Although per capita paper consumption in India is very low compared to other countries
the paper industry holds a considerable share in manufacturing production. Today more
than 380 small and big paper mills produce a variety of different paper, paperboard as
well as newsprint products. Cultural paper constitutes the biggest share in production
with 41% (in 1991), followed by Kraft-paper with a share of 27%, paperboard with 17%,
newsprint with 12% and specialty paper at 3% (Sharma et al., 1998). Installed production
capacity increased substantially from 0.77 million tonnes in 1970-71 to 3.95 million
tonnes in 1994-95. Production, however, has not increased accordingly. While in 1970-71
production ran at almost full capacity, in 1994-95, only 2.51 million tonnes of paper and
paper board were produced. Capacity utilization had decreased from 99% in 1970-71 to a
low of 60% in 1992-93 and slightly increased again to 64% in 1994-95
Number of Paper Mills, Production and Capacity

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Size, type and quality of the paper producing units are very diverse. As of 1995, more
than 50% of paper and paper board products were produced in only 38 paper mills. The
average size of a paper mill in India was 10,400 tonnes per annum (TPA), compared with
85,000 TPA in Asia and about 300,000 TPA in Europe and North America. About two
thirds of India’s paper mills have a capacity of less than 18,000 TPA (Meadows, 1997).
Large mills are defined as mills with an installed capacity exceeding 20,000 TPA.
Medium size mills have a capacity between 10,000 TPA and 20,000 TPA while small
mills are defined as mills with a capacity of less than 10,000 TPA. According to this
definition, only 48 large mills holding a share of 52% of total capacity were counted in
India in 1990. The range of size within this category varied considerably, between 20,000
TPA and more than 100,000 TPA. Large mills account for nearly 90% of the cultural
paper production.
Demand for paper and paper products has continuously been increasing over time.
Consumption of paper and paper board equaled 1.2 million tonnes in 1980-81 and
increased to 2.6 million tonnes in 1994-95. This trend is expected to be maintained in the
future.
The Process
Chemical pulping is dominated by two processes the sulphate process and the sulphite
process. Each process is designed to produce pulp with specific characteristics. In
sulphate pulping the cooking liquor is alkaline it has a high pH. The active chemicals are
sodium hydroxide and sodium sulphide. The process is named after sodium sulphate,
which is used to replace losses of sodium and sulphate.

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Cooking: The cooking processes for sulphate and sulphite are basically the same. In both
cases the chips are impregnated with cooking liquor, heated under pressure to 130-170 °C
and held at that temperature for some time. Then the pressure and consequently the
temperature are lowered and the pulp are blown or washed out of the digester.
There are two main types of process equipment for cooking - the batch digester and the
continuous digester. In the batch digester chips and cooking liquor are filled and the
contents are heated under pressure according to a specified temperature-time programme.
By the end of the programme the digester is emptied - blown – to the blow tank.
In the continuous digester steamed chips and liquor are filled in an even continuous flow
into the pressurized digester. The contents is heated up by various circulation systems as
it moves downwards. The cooked and partly washed pulp is fed out of the bottom in a
uniform flow. The spent cooking liquor (black liquor) is separated by screens around the
digester. The liquor is directed to the flash tanks where the pressure is decreased below
the vapor pressure. The generated steam is used for steaming of the chips and the black
liquor goes to the evaporation.
The cooking process for both types of digesters is basically the same. Each type has its
advantages, but most new cooking plants world wide are built with continuous digesters.
The next steps in the pulping process are:
1. Washing: The washing process aims at separating the black liquor from the fibers
as efficient as possible with a minimum of dilution of the liquor.
2. Screening: Screening systems takes away knots – whether knots or just poorly
impregnated chips – and shaves - poorly disintegrated fiber aggregates and fiber
bundles.
3. Bleaching: In the bleaching plant the pulp is treated in several stages with
chemicals containing chlorine oxygen and peroxide.
4. Evaporation: The evaporation process increases the dryness of the pulp from
15% to 60%. To make it combustible.
5. Recovery: The thick liquor from the evaporation plant is burnt in the recovery
boiler to generate steam and recover cooking chemicals.

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Right Valve for the right application
The author with a set of full bore ball valves The 3D cross section of a full bore ball valve
The blow valve controls the level in the digester. It works under very hard flow
conditions. The pressure drop can be up to 22 bars at a temperature of 160-180 °C. The
pulp contains knots, stones, etc, which wear-out the valves fast (6-30 months). Ball
valves with cylindrical bore and locked stellite seat rings are used. Stellited outlet or
ceramic sleeves can prolong the life-time.
Main Areas of Failure
Pareto
0
10
20
30
40
50
60
70
80
90
Digester
Blow Valve
switching
valves
MP Steam
feed
Flash tank level
0
0.2
0.4
0.6
0.8
1
1.2
Frequency Cum %
It has been observed that because of the extreme conditions the digester blow valve had
been the most important cause of stoppage in production.

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MTBF (Mean Time between Failure)
months
0
5
10
15
20
V1 V2 V3 V4 V5 V6 V7 V8 V9 V10 V11
months
The data shows the MTBF of a sample of 11 full bore ball valves. On an average it has
been observed that the failure happens between the 5th
month and the 10th
month of
commissioning.
Normally valve vendor is supposed to provide a PBG (Performance Bank Guarantee)
which is valid for 12 months from commissioning or 18 months from shipping
(whichever is earlier). The failure between the 5th
and the 10th
month leaves the vendor
low and dry. Most of the time, because of irregular checking the failure gets detected real
late when the only solution left is replacing the ball (the most expensive spare parts) or
replacing entire valve. If the vendor does not take mitigating actions the PBG is encashed
by the buyer, which normally equals to 20% of the entire deal amount.
The buyer loses valuable production time which results in high revenue leakage and
opportunity costs.
Hence it’s a no-win situation for both the buyer and the seller which normally results in a
bottleneck or courtroom drama!!
Buyer’s Perspective
Production Loss
High Opportunity cost
Revenue Leakage
Losses due to raw material pile up.

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Seller’s Perspective
Replacement Cost
Spare Parts Cost
Opportunity Cost
Untimely encashment of PBG resulting in revenue leakage
Dip in customer satisfaction index
Risk Mitigation
The only way to arrive at a Win-Win situation for both the buyer and the seller is having
a long term customized service agreement. The salient points of a CSA contract are:
Predictable cash flow for the seller
Risk Transferred to the seller for the failures.
Technology upgrades at lower costs.
Responsibility of the seller to have a dedicated customer support team
Increased productivity for the buyer.
Protection against market fluctuation
Predictable work-scope for the seller
Higher margins for the seller in long term
Structure
The CSA is a long term contract covering equipment maintenance which includes
material and repair. The deal structure could be made as per the requirement of the buyer.
The simple predictable monthly billings would be = Rate($/Valve operating Hrs)
* monthly valve operating hours.
The severity factors to be used for calculating monthly revenue for different
valves could be based out of the different parameters used for selecting the right
valve
1. Medium (Taking water at 20 Degree C and density 1 gm/cc as the base the
severity could increase or decrease with the alkalinity or acidity of the
medium)
2. Average flow of the liquid (The severity should increase with increase in the
flow volume)
3. Pressure rating of the valve(higher the pressure rating, higher the severity)
4. dP or the differential pressure across the valve(Higher the pressure drop
higher the severity)
5. Finally the Cv/Kv or the capacity of the valve should also be taken into
consideration for the severity calculation.

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The cost to the seller would be the cost of the maintenance shop visits. More the
number of shop visits, lesser would be the margin of seller.
The higher number of shop visits and hence higher cost for the high risk (with
high severity factors) critical application valves would be offset by the low risk
less critical valves.
There will be yearly escalation of the $/Valve operating hrs rate based on the
macro economic factors and the agreed upon global indices.
A Contract Margin review would be performed by the seller on a yearly basis in
order to understand the profitability of the contract.
Salient Terms
Booked Sales: Sales $ based on cost incurred and estimated OM% at completion
Calculated as ((Cost/(1-OM Rate))
Billed Sales: Sales $ billed or collected
Deferred Balance: Booked Sales-Billed Sales
OM is based on “at completion” sales minus cost
There is only one OM Rate on the contract at any point in time.
Deferred balance should be zero at the end of the contract
Case Study
Assumptions:
Three years have passed since 2004, the year the contract was signed.
The valves are operating pretty close to expectations with 20 valves, 4900 hours
per year
There had been 25 shop visits with average cost of $1450 /Shop Visit
Till Date Cost $ 36, 250 (25 *1450)
CTD Revenue (0.13$/hr) $40,801 (estimated OM at completion is 11.2% hence
Revenue= Till date Cost/(1-OM%)
Till Date Billing $38,220 (20 valves*4900Hrs*$0.13/hr*3yrs)
OM% 11.2% (Current “at completion OM%)
Booked OM $4,551 (Till date revenue-Till date cost)
Deferred Balance $2,581 (Revenue-Billings)
Conclusion: If the contract ended today the business would have to write off $2,581
of OM. At the end of the contract the deferred balance should always be zero.

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Risk Minimizing Initiatives
There are various steps which valve vendor can take at the design phase of the deal in
order to minimize risk and increase the MTBF.
Avoid over sizing of the pumps.
Increase the pressure level by moving the valve closer to the pump and/or place
the valve on a lower level.
Select a larger valve which will be working with a smaller opening angle e.g.
better pressure recovery factor (FL).
Select a valve with better pressure recovery factor (FL)
Use two valves in serial.
Use fixed restrictions, preferably after the valve.
Use valves with Stellited outlet or ceramics.
The cavitation test bed for testing the control valves