CASE A P P L I C A T I O N 3.

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THE ADVANTAGE OF PETROVANTAGE:

BUSINESS 1NTELLIGENCE/DSS
CREATES AN E-MARKETPLACE

BACKGROUND THE DSS

Aspen Tech supplies software to the process industries, PetroVantage is a suite of applications that enable a com-
and has carved out an important niche that in 2001 led to pany to determine the best place to buy crude oil or any
annual revenues of about $380 million. With the release of elements that make up different fuel mixtures, where to
PetroVantage, the 21-year-old company plans to stream- refine it, how to ship it, and how to distribute it to the
line the processes for potentially lucrative industry petro- retail sites. Engineers use parts of the application for every
leum. "The opportunity for companies to extract value aspect of refinery or plant operations, including the
using PetroVantage, from well head to gas pump, is sub- design, building, cost, training, infrastructure and equip-
stantial," said David McQuillin, Aspen Tech's chief oper- ment, and maintenance of a facility. IBM provides the
ating officer and chief executive-elect. "The key part of hardware, software, Web-hosting, and implementation
this application is the trading and logistics capabilities." infrastructure.
PetroVantage can save companies hundreds of thousands PetroVantage has developed online models that incor-
of dollars per day. porate the attributes of about 600 of the world's 700 oil
Industry analysts say the logistics of delivering petro- refineries. These attributes include production capacity and
leum from the wellhead to the consumer are among the products produced. The marketplace provides an online
most complicated of any industry. There are 500 types of platform for negotiating crude oil and oil products sales,
crude oil, each with different characteristics; each refinery evaluating deals, managing logistics, and linking key partic-
is unique, concentrating on different blends and end-prod- ipants in complex crude oil trades. Traders use the system
uct uses. Deciding what oil to buy and how to transport it to buy, sell, and swap the physical barrel of crude oil and
involves an arcane process in which 20 to 25 worldwide crude oil products, such as gasoline or jet fuel. The site's
traders make decisions that affect the international distri- advantage lies in its ability to manage so many functions.
bution process. These traders must integrate information Decision support functions are what differentiate
on type, bulk, docking, refining, and delivery. They must PetroVantage from other oil industry e-marketplaces,
know how much oil is coming out of the earth, where the such as HoustonStreet.com and Altra Energy Technol-
ships are to transport it, what refineries can process the ogies. The platform is unique because these kinds of deci-
product, and what ports can accept the cargo. Then deci- sion support tools need to be based on some very complex
sions must be made on how to transport the refined prod- models of what you can do with the crude oil.
uct to distributors. Critical analysis of these worldwide The suite of applications falls into four main cate-
systems can be flawed, resulting in delays and losses. gories: end-to-end supply planning, refining solutions, fuel
PetroVantage officials see an opportunity to launch a marketing, and, recently added, exploration and produc-
Web-based solution to modernize this immense process. tion. Perhaps the greatest return would be seen by those
"The world does more with petroleum than any other sub- most familiar with procuring, trading, transporting, and
stance except water," said Chuck Moore, vice president of storing oil and fuel. Moore said that 70 percent of fuel and
the petroleum business group at Aspen Tech. "We think crude oil distribution in the United States is handled by
there's a big opportunity here, especially because we will Aspen Tech's systems.
be leveraging some of the strengths of Aspen Tech."

Developed from Anonymous, "PetroVantage Launches Commercial Software," National Petroleum News, Jan 2002, Vol. 94,
No. 1, p. 54; William Copeland, "Accurate Inventory Tracking Means Opportunities Gained," World Refining, Vol. 11, No. 9,
November 2001, p. 48; Matthew French, "Aspen Tech Fuels Up Its PetroVantage Product at Citgo," Mass High Tech, Vol. 20,
No. 35, September 2,2002, p. 8; Dyke Hendrickson, "Online Oil Exchange Heats Up," Mass High Tech, Vol. 18, No. 39, Sep-
tember 25,2000, p. 1; Lewis, David, "Oil Exchange Lassos Big User—Occidental Joins Nine Other Customers in Pilot Test of
E-marketplace," InternetWeek, Special Issue 872, August 6,2001, p. 42.

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 CHAPTER 3 DECISION SUPPORT SYSTEMS: AN OVERVIEW 141
PETROVANTAGE DEVELOPMENT ketability. "A trader using this software has a tremendous
AND PILOT TESTING advantage over one who isn't," Cimino said. "A buyer can
find, across the global market, a number of sellers and be
PetroVantage was pilot-tested by Citgo from early to mid- able to determine within minutes what would be the best
2002. The Tulsa, Oklahoma, company announced in investment, based on what he or she already has and what
September 2002 that it would deploy the Petro Vantage they need."
across its entire enterprise to figure out cost-cutting mea-
Moore said that even market anomalies can be better
sures and meet customer demands at 14,000 retail loca-
dealt with using PetroVantage. The test came shortly after
tions in 47 states. While the application isn't actually used
September 11, "When the airplanes around the country
at the retail level, all of the decision-making that takes
were grounded, oil and fuel companies were swimming in
place in the chain of command prior to that could rely on
jet fuel, and had nowhere to unload it." Moore explained,
PetroVantage.
"Using our solution, [a customer] was able to find the
Williams R&M signed up with PetroVantage in the right deals to mix the fuel they had and turn it into diesel
spring of 2001, and subsequently joined the PetroVantage
and home heating oil, and get it out of their hands [A]
Foundation Client Program. Williams R&M operates a
process that normally takes several weeks was reduced to
refinery in Memphis with a capacity of 165,000 barrels per
several days."
day. It pilot-tested PetroVantage to optimize its processing
The Williams Cos. uses PetroVantage to simplify the
decisions, as well as crude oil logistics and refined-prod-
trading process. Without PetroVantage, crude traders
ucts distribution.
today might buy and sell on "several different electronic
Occidental's marketing subsidiary, Occidental platforms, with a telephone in each ear to several brokers
Energy Marketing Inc., joined another nine oil compa- and the fax and e-mail going back and forth." "We like
nies—including the $11.6 billion Williams Cos. and spin- being able to go to a single site and pull everything
off Williams Energy Partners, as well as Midwest indepen- together: what it costs to buy the components that make
dent oil refiner Premcor—in testing PetroVantage in 2002. gasoline, the cost of arranging a barge or a ship, what kind
Occidental thinks the marketplace can help it wring better of [storage] tankerage is available once it gets to port and
profit margins from crude oil trading. Occidental sells what that's going to cost," said Bill Copeland, manager of
crude oil to wholesalers and brokers, as well as directly to terminal services for Williams Energy Partners. Williams
refineries run by companies such as ExxonMobil. also optimizes the scheduling of storage tanks to boost its
The pilot program went well throughout 2001 and terminals' profits. Occidental Marketing uses the e-mar-
2002, but the platform's long-term viability depends on ketplace to seek the best refineries to buy its oil at the
other factors, especially the participation of the largest oil most favorable price at a given time.
companies. PetroVantage is working to include futures
The PetroVantage collaborative software solution
and options, which some trading firms use to hedge
replaces the time-consuming data-gathering tasks and
against fluctuations in the price of oil.
multiple approximations used in many of today's key trad-
ing and logistics decisions with fast and accurate optimiza-
RESULTS tion tools integrated with continuously updated data. It
The platform went live in September 2002. Its first com- enables companies to identify costly deviations in opera-
mercial customers were Citgo, Premcor, Enron, and tions, logistics, and deal margins. At the same time, it pro-
Williams Energy Partners. PetroVantage officials predict vides a means for faster and better coordination of
that their platform has the potential to achieve $20 billion responses from the many individuals across multiple com-
to $30 billion in annual savings from the oil industry's panies and locations that are required to drive higher
logistics and trading costs of $150 billion per year through profitability in critical operations.
its collaborative software solution. PetroVantage represents the next generation of digi-
Moore says, "If a company deals in a million barrels a tal marketplaces. "The company will offer a collaborative
day and you can save them even a few cents on each bar- workflow environment that enables the petroleum indus-
rel, you're talking about a return of hundreds of thousands try to integrate state-of-the-art decision-support technol-
of dollars per day saved. Citgo deals in a million barrels ogy with an intuitive transaction platform, a feature no
per day and 7 billion gallons of fuels per year." other petroleum industry marketplace currently offers"
Michael Cimino used to work in the trading and pro- (PetroVantage Literature).
curement of space, and now ensures its usability and mar-
1 4 2 PART II DECISION SUPPORT SYSTEMS

PERTANYAAN STUDI KASUS

1. Bagaimana DSS/BI yang disediakan oleh PetroVantage 4. Menurut anda, fitur apa lagi yang seharusnya dimasukkan
menciptakan dan kemudian membantu pengambil pada aplikasi PetroVantage dan mengapa?
keputusan di pangsa pasar elektronik? 5. Bagaimana aplikasi/sistem seperti PetroVantage dapat
2. Mengapa penting untuk melakukan pilot-testing dengan memberikan manfaat bagi industri lain? Berikan Contohnya!
PetroVantage selama hampir dua tahun? ,
3. Diskusikan jenis-jenis masalah yang dapat terjadi jika
perusahaan minyak besar memilih untuk tidak menjadi
pelanggan PetroVantage