Tank farm monitoring: meeting Australia's fuel reserve needs — Part 1

Meeting Australia’s IEA treaty obligations will require refinery, terminal and storage operators to establish automated tank farm monitoring and inventory management solutions.

In April 2015, the Department of Industry and Science published its Energy White Paper 2015 “to provide an integrated Australian energy policy framework” that will be “consistent with the Government’s vision for economic reform and future competitiveness.”¹ The main focus of the white paper was on improving competitiveness in the energy sector, more productive use of energy and investment in innovation.

Unfortunately, transport energy security did not get much attention in the white paper. Australia is not meeting its obligations for fuel stockholdings under the International Energy Agency (IEA) treaty, but this only received a passing comment in the white paper.

At the same time a Senate committee on energy resilience and sustainability was releasing its findings², which included the following three recommendations:

1. The government should undertake a comprehensive whole-of-government risk assessment of Australia’s fuel supply, availability and vulnerability.
2. The government should require all fuel supply companies to report their fuel stocks to the Department of Industry and Science on a monthly basis.
3. The government should develop and publish a comprehensive Transport Energy Plan directed to achieving a secure, affordable and sustainable transport energy supply.

What is the risk?

A quite comprehensive analysis of Australian fuel supply chain risk, conducted by the National Roads and Motorists Association (NRMA) in 2013³, stated that:

The very small consumption stockholdings of oil and liquid fuels in Australia, combined with what appears to be a narrow assessment of our fuel supply chain vulnerabilities, does not provide much confidence that the strategic risks to our fuel supply chain are well understood and mitigated by our nation’s leaders, the business community or the population at large.

The report also quoted an ACIL Tasman Fuel Vulnerability Assessment 2011⁴ as saying that as of 2011 Australia received 55% of its petroleum shipments from Singapore, with Japan and Korea also being significant sources. Singapore acts as a regional supply hub for South-East Asia and in turn sources 40% of its supply from the Middle East. In a world of instability in the Middle East, and potential conflict in the South China Sea, disruption of supply via Singapore could have a significant impact on Australia’s fuel supply.

Australia’s high dependence on petroleum fuels for the transport of essential products such as food and pharmaceuticals makes this a significant problem for the country as a whole.

Australia is not meeting its reserve obligations

As a member nation of the IEA, Australia is obliged to meet the requirements of membership. One of those requirements is that fuel storage reserves must equal at least 90 days’ worth of consumption. Australia is the only IEA member country among 29 developed economies whose reserves are not meeting that obligation.

The Energy White Paper stated that meeting IEA obligations would mean an investment of several billion dollars over a decade.

The challenge that will arise for fuel storage facilities and terminals in the future will be a potential need to increase capacity — including perhaps for new tank farm facilities to be built — and to achieve a more accurate and timely method of measuring fuel stocks. To date, most fuel storage facilities in Australia rely on manual tank gauging measurements, and therefore there is never an accurate understanding of available stock.

Today’s low oil prices are also impacting oil and gas company profits, making investment in technology that may not at first seem essential to business operations unattractive. However, tank farm and terminal operators are now also faced with having to comply with international safety standards, so the challenge becomes investing in the right areas to not only improve safety and meet regulatory requirements, but to take advantage of the expenditure to maximise the business value of any tank monitoring technology that may be deployed.

How we got here

According to the Australian Petroleum Production & Exploration Association (APPEA)⁵, Australia’s production of oil, condensate and LPG peaked in 2000 and has been trending down ever since, while the production of natural gas more than doubled between 1998 and 2014 (see Figure 1).

There have been a number of refinery closures in recent years. As recently as 2012, Australia had seven oil refineries, but now only has four — New South Wales has lost all its refining capacity, and Victorian capacity has halved.

As a result of reduced local production and refining, Australia has been a net importer of oil since 2004. In fact, Australia’s dependency on fuel imports has increased from 60% in 2000 to over 80% today.

Figure 1: Imports and exports of petroleum products ($ billion). Source: IBISWorld Market Research.

According to the Senate committee:

Australia is a net importer of crude oil and refined petroleum products. In 2013–14, 82 per cent of the crude and other feedstock required for domestic refining was imported, with the balance supplied from indigenous production.⁶

It is also predicted that refining capacity may completely disappear by 2030, leaving Australia completely dependent on an overseas supply chain. In a world of increasing political instability, this leaves the country even more vulnerable to fuel supply disruption.

How much do we have?

How much fuel reserve Australia has is not accurately known. All fuel storage in Australia is held commercially, and is dependent on the business requirements of the organisations in the supply chain. The closure of refineries has resulted in them being converted to storage facilities and terminals, somewhat increasing storage capacity.

How much is available, in terms of ‘days of stock’, depends on whether stocks of fuel are expressed in days of net imports or in terms of historical average daily consumption.

According to the Senate committee, as of December 2014, Australian Petroleum Statistics (APS) reported that there was 4275 kt of crude oil equivalent stocks, representing 52 days’ cover of daily net imports. In terms of historical average daily consumption, the committee was informed that Australia has 34 days of fuel stocks.

The 34 day figure is calculated on the average daily consumption of fuel in Australia divided by what is believed to be the volume of fuel available to the market.⁷

The discrepancy seems to be that the 52-days figure includes fuel in transit at sea. IEA requirements only count fuel actually held in stock, which means that as of December 2014, Australia only had about one month of reserve transport fuel.

The main reason that the actual reserve is not accurately known is that the majority of fuel storage locations have no accurate way of measuring stock at any point in time.

Many refineries, storage facilities and terminal facilities in Australia have ageing tank infrastructure, which was built without any form of automated tank monitoring. Storing commercial stock, the organisation owning the tanks may have historically not been specifically interested in accurate or continuous measurement of inventory, and the costs associated with measuring it. Many will also have operated on a ‘just in time’ basis — keeping only enough stock to meet customer requirements — in order to minimise business overheads.

Manual tank monitoring

Where tanks are not instrumented, manual methods of measurement need to be used. The American Petroleum Institute’s Manual of Petroleum Measurement Methods⁸ defines standardised methods of manually measuring tank levels. The two methods are to measure either the ‘innage’ or the ‘ullage’ using a bob and gauge tape dropped from the top of the tank. Innage refers to measuring the actual fluid level from the bottom reference point of the tank, while ullage means the indirect method of measuring the distance to the fluid level from the tank’s top reference point. In terms of accuracy, neither method can take into account volume changes caused by temperature fluctuations.

There are also other obvious deficiencies in manual measurement methods, not the least of which are the risks to worker health and safety. Workers are of course required to work at heights — with the obvious risk of falls — and are likely to be exposed to flammable and toxic hydrocarbon vapours.

It is understandable that these factors alone mean that manual tank gauging is a process that does not occur at frequent intervals, and inventory may change significantly between measurements.

Manual methods also mean manual recording. Workers need to record their measurements at the tanks, and then at a later time enter them into whatever system is used by the facility to log the data. These are often simple spreadsheets. The scope for human error and inaccuracies is obvious.

Another downside of long manual measurement intervals is that tank overfill prevention is quite weak. In order to lower the risk of overfill, the acceptable upper level limit defining a full tank has to be at a lower level than if continuous measurement is used — effectively reducing a tank farm’s maximum capacity.

Safety as a driver for tank monitoring

While the Australian Government may well legislate for mandatory reporting for all fuel storage facilities, a major pre-existing driver for automated tank monitoring has been safety concerns following the Buncefield incident in the UK in 2005⁹.

Figure 2: Buncefield Oil Storage Depot, Hemel Hempstead, Hertfordshire. Source: iafflocal38.org.

After the accident, representatives from the Control of Major Accident Hazard (COMAH) Competent Authority issued a report entitled ‘Safety and environmental standards for fuel storage sites’¹⁰. The report makes safety recommendations for incident prevention in flammable and hazardous material storage sites.

As stated above, manual measurement methods are not reliable in preventing hazardous tank overfilling, and attempts to minimise the risk involve tolerating lower inventory levels. Today, modern overfill prevention systems that incorporate API 2350 (United States driven guidelines) and IEC 61511 functional safety standards are available. These systems can operate autonomously to not only alarm of potential overfilling, but to close emergency shutdown valves automatically.

An automated overfill prevention system (AOPS) also has a fast reaction time, which means that tanks can be safely filled to capacity, increasing overall inventory capacity.

Inventory visibility for business processes

The management systems of many tank farm and storage terminals rely on manual field measurements supported by tools and systems that are not very sophisticated and are often in-house developed, out of date and no longer supported.

Using Excel spreadsheets to generate reports, or relying on the tools that come with tank level gauges, results in the generation of isolated information that is difficult to put into context and which therefore provides limited value to operations. With manual measurements, the risk of error increases, as does the time to discovery of faults and failures — both of which can have a major impact on safety and performance.

In the interest of maximising business returns from automated tank monitoring, business process automation is as important as the automation of the physical process. Replacing a manual or legacy tank farm monitoring process with an optimised system can improve business returns. Eliminating the separation between the automation of physical processes and business automation systems such as ERP is not just ‘Internet of Things’ hype, but can provide real business benefits in terms of improved operational planning and control.

Integrating tank monitoring systems with the plant DCS and ERP systems also eliminates deviations between the availability of product and delivery schedules that can be caused by manually collected and out-of-date data — and can also have a large impact on the efficiency of downstream operations.

Figure 3: Integration from process to ERP. Source: Endress+Hauser. For a larger image click here.

The main impact of access to real-time data from start to finish is that everyone involved in the operation of the facility, from operators and technicians, right through to planners in the boardroom, has access to accurate information to enable their day-to-day decision-making.

In Part 2

In part 2 we will examine how automated tank farm monitoring can assist with accurate reporting, improve safety and therefore potential storage capacity, and also help to maximise business returns by improving business processes.

References

1. Australian Government 2015, Energy White Paper: Increasing competition to keep prices down, Department of Industry and Science, April 2015, p. 27.
2. Senate Standing Committee on Rural and Regional Affairs and Transport 2015, Australia’s transport energy resilience and sustainability, Commonwealth of Australia.
3. John Blackburn Consulting 2013, Australia’s Liquid Fuel Security: A Report for NRMA Motoring and Services, <http://www.mynrma.com.au/media/Fuel_Security_Report.pdf>.
4. ACIL Tasman 2011, Liquid fuels vulnerability assessment, <http://www.aip.com.au/pdf/ACIL_LFVA_2011.pdf>.
5. APPEA 2015, Key Statistics 2015, <http://www.appea.com.au/wp-content/uploads/2015/05/APPEA_Key-Stats15_web.pdf>.
6. Senate Standing Committee on Rural and Regional Affairs and Transport 2015, op. cit.
7. Ibid.
8. American Petroleum Institute 1994, Manual of Petroleum Measurement Standards, Chapter 3 – Tank Gauging.
9. COMAH 2011, Buncefield: Why did it happen?, <http://www.hse.gov.uk/comah/buncefield/buncefield-report.pdf>.
10. COMAH 2009, Safety and environmental standards for fuel storage sites, <http://www.hse.gov.uk/comah/buncefield/fuel-storage-sites.pdf>.

Image credit: ©stock.adobe.com/corlaffra