This document summarizes key logistical challenges that could impact petrochemical engineering project timelines. It notes that logistics capacity constraints will increase over the next decade due to rail, trucking, and marine congestion. Both project and operational logistics require expertise to navigate these challenges. The document recommends integrating logistics experts throughout the project life cycle to provide flexibility and avoid cost overruns from unforeseen logistical issues.

1. Logistics Engineering SupplyChain
Logistics &Transportation:
Key analysis on how it
could affect your project
timeline
Prepared for:
Petrochemical Engineering
Construction Conference 2015
Taylor Robinson
President, PLG Consulting
June 17, 2015

2. 2
Experience
 Delivering value to over
150 clients since 2001
 Real-world, industry
veterans team across
N.A.
 Logistics, engineering
and supply chain
experts with deep
operational experience
Core Expertise
 Bulk Logistics
 Freight Rail
 Energy & Chemical
Markets
 InvestmentAdvisory
and Corporate
Development
Services
 Diagnostic assessments &
optimization
 Supply chain design &
operational improvement
 Logistics infrastructure
design
 Environmental, Health,
Safety and Security (EHSS)
assessment, audit and
training
 Independent logistics
technology assessment &
implementation
 Investment strategy, target
identification, due
diligence, and post-
transactional support
About PLG Consulting
Partial Client List
Logistics &Transportation: Key analysis on how it could affect your project timeline

3. 3
• New extraction technologies resulting in record production of natural gas, natural gas
liquids (NGL), and crude oil – much of growth in the past five years!
• North America on pace toward full “energy independence” by 2020
• Implications of recent oil price correction is starting to be understood
• Is $60 oil the “new normal”?
• Expect numerous oil & gas market corrections and expansions over the next 5 – 10
years – still in the “early innings”!
Source: CAPP Report, June 2014 Source: RBN Energy, December 2014
The North American Energy Revolution
Logistics &Transportation: Key analysis on how it could affect your project timeline

4. 4
US gas demand will grow due to:
 Coal-fired generation plant converting to gas
 More industrial use – steel, fertilizer, methanol
 Mexican export via pipeline and LNG export
overseas
 Increasing use as transportation fuel
US gas cost competitiveness
is sustainable
 30+ year supply at ~$4/MMBtu; cost of
production decreasing
 Supply will overwhelm demand as prices
approach $5/MMBtu
 US government will likely limit LNG export to
protect US from world gas market price
Low-cost gas and NGLs driving US
industrial “renaissance”
 Implications of decreased production of shale
oil on natural gas and NGL volume still being
evaluated and understood
0
2
4
6
8
10
12
14
NaturalGas Price at Henry Hub ($/MMBTU)
Historical Futures
Source: EIA for historical and CME Group for futures as of Jan. 14, 2015
Shale Gas Will Have LongTerm Implications on U.S. Industrial
Landscape
60
65
70
75
80
85
U.S. NaturalGas Production (Bcf/day)
Actual Forecast
Source: EIA, Feb 2015
Logistics &Transportation: Key analysis on how it could affect your project timeline

5. 5
Ethylene and Propylene
Ammonia and Derivatives
Methanol
Polymers and Resins
Chlor-alkali
Other
Source: American Chemistry
Council and PLG analysis
Over $142B of New Shale-Related Investments Have Been
Announced According to ACC
PLG is building S.H.I.E.L.D.
• SHale gas Industrial Expansion
Logistics Database
• Interactive information on over
150 projects at launch
• Includes PLG chemical industry
expert insights on estimated
logistics volumes per project
• Expected release late summer
Logistics &Transportation: Key analysis on how it could affect your project timeline

6. 6
Abundant feedstock, structural cost
advantages, and domestic market growth
driving US petrochemical industry expansion
Rate of expansion growth will be slowed by:
 Lower crude oil prices (short or long term?) – six month
delay so far for a number of projects
 Lack of EPC capacity
 Shortage of craft labor resources in theTX/LA
 Increasing regulatory hurdles and delays
Expansion peak will be dampened and
overall build-out will take longer than
announced schedules
U.S. chemical industry is entering a historic
growth period with incredible growth
opportunities and challenges Source: ACC and PLG Analysis, December 2014
ACC Estimate
PLG Estimate
U.S. Chemical Industry Capital Investment: Incremental
Due to Shale Gas
0
200
400
600
800
1,000
1,200
1,400
Saudi
Ethane
US Ethane US
Weighted
WE Low
Cost
Asia
Naphtha
US
Naphtha
Dec. 2013
Dec. 2014
Source: Townsend Solutions, December 2014
Cash Cost US$/ton (Ethylene)
U.S. Petrochemical Industry Build-Out Realities
Logistics &Transportation: Key analysis on how it could affect your project timeline

7. 7
Logistics can be one of the largest underestimated
cost and schedule risk areas that may negatively
impact a project
It is challenging! Two types of logistics expertise are
vital for project success:
1. Project logistics
2. Operational logistics (post-commissioning)
• Both types of logistical planning and execution required
throughout the project life
Logistics expertise requires diverse skillsets such as:
 Dimensional shipping and handling for plant equipment
 Dry bulk materials for project construction
 Liquid/hazardous materials in operations
 International marine for project and operational cargo
 Rail freight for materials and products
 Domestic trucking for oversized and over weight loads
 Complex logistics project management
Logistics definition:
Logistics is the process of planning, implementing, and controlling
the flow and storage of materials, goods, equipment, services, and
related information from point of origin to point of consumption
Why Is Logistics CriticalTo Petrochemical Project Success?
Logistics &Transportation: Key analysis on how it could affect your project timeline

8. 8
Each ProjectTeam Must Include Logistics Representation
Nearly every key project decision needs logistics expert input
 Note: Some companies may include a representative from SupplyChain in place of/together with Logistics
Logistics should have a “seat at the table” on the project team
 Team member needs to be a Petchem industry veteran with broad logistical experiences – each mode, process,
and timeframe has different implications
 Project team member must have direct, rapid access to necessary Subject Matter Experts to assist
 Early logistics involvement vital during feasibility stage
Logistics will provide some project flexibility with team integration
Due to tightening U.S. logistics capacity, petchem projects will have little room for
error over the next five years and beyond
Logistics &Transportation: Key analysis on how it could affect your project timeline

9. 9
Feasibility /
Front End
Engineering
Detailed
Engineering
Procurement &
Construction
Commissioning
Operate &
Maintain
Project Stage Definitions
Does your project team have integrated, broad-based logistics planning and
execution expertise throughout the project?
Note: Each company has their own stage names and stage gate processes
Logistics &Transportation: Key analysis on how it could affect your project timeline

10. 10
Project logistics
 Logistics infrastructure evaluation
 Plant equipment logistics
 Construction materials logistics
 Mobilization/laydown yard
 Modularization plan
 Demobilization plan
Operational logistics
 Supply network strategy & design
 Pipeline strategy
 Bulk product terminal planning
 Process material flow management
 Modal transportation capabilities
 Rail
 Barge
 Ocean vessel
 Truck
The two types of logistics are interdependent
but can require different skillsets
Logistics Key Elements
Logistics &Transportation: Key analysis on how it could affect your project timeline

11. 11
Key Project Logistics Issues
Feasibility / Front End EngineeringStage
Project Logistics
Elements
Sample Issues
Logistics infrastructure
evaluation
Pipeline access and capacity
Marine, rail, highway access; capacity and capabilities for each potential site
Plant equipment logistics Dimensional freight route assessments required
Dimensional freight modal transition facilities and capabilities assessment
Construction materials
logistics
Capacity study for aggregate, concrete, fuel, and water requirements
-Sources, transportation, storage and unloading
Mobilization/laydown yard Land requirements and availability for both areas
Traffic flow optionality for materials, equipment, and labor resources
Modularization plan Local and international facility options with capacity and capability assets
Dimensional freight route assessments to and from facility
Demobilization plan Independent egress routes
Dimensional freight route assessments
Logistics &Transportation: Key analysis on how it could affect your project timeline

12. 12
Operational Logistics
Elements
Sample Issues
Supply network strategy &
design
Must analyze feedstock supply, energy supply, facility location and product
markets from a holistic supply chain viewpoint
Analyze potential capacity and network constraints that may develop in the
future
Pipeline strategy Feedstock material pipeline access options
Product(s) pipeline requirement optionality
Property easements vs. expandability
Process material flow
management
Local terminal facility options with capability assessment
Capacity planning for terminals
Terminal sourcing strategy – dual sourcing for critical materials?
Modal transportation
capabilities
Regional capacity and growth assessment by mode
Water and air draft for marine
Rail access – multipleClass I access if possible
Key Operational Logistics Issues
Feasibility / Front End EngineeringStage
Logistics &Transportation: Key analysis on how it could affect your project timeline

13. 13
Key Project Logistics Issues
Detailed Engineering Stage
Project Logistics
Elements
Sample Issues
Logistics infrastructure
evaluation
Further study on modal transportation bottlenecks and potential limitations
Logistics infrastructure design decisions based on loading/unloading and storage
capacities
Plant equipment logistics Confirmation of logistics requirements as specifications are finalized – route
studies, carrier capability, lead time requirements
Construction materials
logistics
Receipt, storage and inventory plan by material
Material handling/equipment facility planning
Mobilization/laydown yard Traffic flow design plan
Inventory control and site security planning
Site emergency response plan
Modularization plan Detailed capacity and flow planning based on updated design specifications
Module build resource planning and logistics synchronization with latest
construction schedule
Demobilization plan Detailed demobilization planning
Egress route planning for inventory removal
Logistics &Transportation: Key analysis on how it could affect your project timeline

14. 14
Operational Logistics
Elements
Sample Issues
Supply network strategy &
design
Material flow management planning including stocking and modal transition
points
Logistics asset detailed planning and sourcing based upon final specifications
Pipeline strategy Further diligence on available and new build pipeline options
Contractual commitments may be required – existing or new build
Process material flow
management
Finalization of requirements and optionality
Finalize sourcing decisions – 3rd party or internal
Modal transportation
capabilities
Modal transportation strategy including risk mitigation options
Detailed capacity studies by mode
Key Operational Logistics Issues
Detailed EngineeringStage
Logistics &Transportation: Key analysis on how it could affect your project timeline

15. 15
Project Logistics
Elements
Sample Issues
Logistics infrastructure
evaluation
Final confirmation of logistics infrastructure requirements
Transition to detailed operational planning steps
Plant equipment logistics Finalization and execution of detailed master plan for each plant component
Synchronization with construction schedule is critical
Construction materials
logistics
Execution stage of materials supply chain strategy
Potential Problem Analysis (PPA) plans in place
Mobilization/laydown yard Tactical order execution, traffic management, inventory management and
security in place
Modularization plan Detailed just-in-time component planning required
Strict executional focus is imperative
Demobilization plan Demobilization planning must be linked to updated construction schedule in real
time
Key Project Logistics Issues
Procurement/Construction Stage
Logistics &Transportation: Key analysis on how it could affect your project timeline

16. 16
Operational Logistics
Elements
Sample Issues
Supply network strategy &
design
Finalization of commercial agreements for feedstock, assets, services and
systems
Establish master schedule for operational logistics activities
Pipeline strategy Confirmation of contractual commitments and capacity availability
Process material flow
management
Complete commercial agreements for third party providers
Monitor construction of internal terminal assets
Modal transportation
capabilities
Finalize commercial agreements for additional volume for new facility
Confirmation of capacity availability
Backup planning detailed analysis
Key Operational Logistics Issues
Procurement/Construction Stage
Logistics &Transportation: Key analysis on how it could affect your project timeline

17. 17
Key Logistical Issues During Commissioning / Operate &
Maintenance Phase
• Disciplined transition from project team responsibility to operational logistics team
• Stock build of spare parts and MRO supplies
• Expedite procurement and delivery vendors, internal resources, and systems
needed for replacement and / or repair parts
• Final training and documentation for receipt inspection and dispatch inspection of
transportation carrier equipment
Logistics &Transportation: Key analysis on how it could affect your project timeline

18. 18
• U.S. Petchem expansion is being driven by shale gas boom
– but other dependencies will alter the growth path at
times over the next 10 years
• Logistics planning and execution have always been an
important part of a successful Petchem project and
operating facility….
• …And will become more critical than ever due to the
increasing logistics industry capacity constraints over the
next decade due to:
• Rail congestion will worsen in the U.S. GulfCoast
• Driver shortages/availability throughout U.S. trucking industry will persist
• Marine congestion, especially in the U.S. GulfCoast ports
• Logistics support for Petchem projects is expertise-
dependent - both direct expertise and support resources
expertise
• Unforeseen logistics challenges and high risk potential
have negative implications onTotal Installed Cost (TIC) and
justify extensive logistics planning and project
management
Presentation Summary
Logistics &Transportation: Key analysis on how it could affect your project timeline

19. Logistics Engineering SupplyChain
ThankYou !
For follow up questions and information,
please contact:
Taylor Robinson, President
+1 (508) 982-1319 / trobinson@plgconsulting.com
This presentation is available for download at:
http://plgconsulting.com/category/presentations/