Economic benefits of standards Pilot projects Final report: THAILAND

(March 2011)
--------------------------------------------------------------------

1. Objectives and structure of the pilot project

The Methodology to assess and communicate the economic benefits of consensus-based

standards has been developed by the International Organization for Standardization (ISO)
and provides a tool for the assessment of economic benefits of standards that can be used
by all ISO members. The pilot project supported by ISO aims at assisting interested ISO
member bodies in the implementation of the ISO methodology. An ISO member body
selects a company in its country from an industry sector as an object for the assessment in
the pilot project.

The Thai Industrial Standards Institute (TISI), a member body of ISO, has participated in
the project and has chosen a company from the chemical industry sector, PTT Chemical
Public Limited, as the object of the assessment. The project team has been set up and was
composed of the following participants:

1) Project Coordinator
Ms. Chaowalee Ratanamungmeka Director of Standardization Promotion and
Development Bureau, TISI

2) Consultancy
Mr. Prakob Petcharutana Senior Vice President
NPC Safety and Environmental Service
Co., Ltd. (NPC S&E)

3) Project Assistant
Mrs. Nopporn Klum-em Foreign Relations Officer
International Affairs Bureau, TISI

4) Ms. Boonsri Hanesopa Promotion Officer

Standardization Promotion and Development
Bureau, TISI

Timeframe

No Activity Date
1 Select participants from the NSB for the case study 30 July 2010
2 Identify a consultant as a participant in the case study 18 August 2010
3 Send Pilot Project Materials August 2010
4 Study the Pilot Project Materials and collect any questions August 2010
5 Identify a company / an industry sector for the case study 19 August 2010
6 Obtain the agreement from the company to participate 30 August 2010
7 Collect information about the industry sector / the 7 September 2010
company
8 Analyze the value chain of the industry sector 22 September 2010
9 Collect information about standards used in this industry 22 September 2010
sector
10 Identify relevant business functions for the case study 22 September 2010
11 Decide on the scope of the case study: 22 September 2010
12 Sign the Declaration of confidentiality 17 November 2010
13 Consult with standards experts for the sector (from ISO) 15 17 November 2010
14 Identify key individuals of the company (e.g. heads of 15 17 November 2010
business functions) as interview partners

-1-
No Activity Date
15 Discuss and review how to conduct the upcoming 15 17 November 2010
interviews as effective as possible, incl. prepare
questionnaires, data collection tools etc.
16 Schedule and carefully prepare meetings for interviews 15 17 November 2010
with these individuals
17 Conduct interview and collect information 15 17 November 2010
18 Schedule dates for joint interviews/joint work with ISO/CS November 2010
staff
19 Analyze the collected information December 2010
20 Review the findings December 2010
21 Prepare draft report December 2010
22 Prepare final report January/February 2011
23 Ensure formal sign-off of the report by the company January/February 2011

Acronyms
A list of acronyms used in this report is given in Annex 1.

-2-
2. Introduction of the selected company

The petrochemical industry is important for the development of Thailand's economy since it
is a downstream industry which supports the sustainable development and produces
products which go into the four key living products namely housing, food, clothing and
medicine. Moreover, the petrochemical industry produces raw materials essential for
manufacturing, for consumption, means and facilities to enable convenient living.

PTT Chemical Public Company Limited (PTTCH), which is a leading company in its field in
Thailand, operates in the petrochemical business and the whole field of chemicals with the
main products being olefins and shared facilities, polymer products and ethylene oxide-
based performance products. In addition, the company also produces oleochemical
products as well as jetty and petrochemical buffer tank farm facilities in order to support its
activities of the PTT Group. Most products have been certified to standards on product and
management system.

In this respect, PTTCH is determined to improve the living standards of the Thai people. It
is the Company's commitment to continue making contributions to the country by
developing and adding value to the national resources, reducing imports, generating jobs
and income, and extending technology and innovation competence which upgrades the
country's human resources to meet the international standards. Consequently, the
company has been selected by TISI to be assessed in the ISO project.

Business assessment

TISI and PTTCH have discussed the pilot project aimed at assessing the economic benefits
of standards and have selected the value center polymer products to be the object of the
assessment.

Polymer products, as finished petrochemical products, have made use of synthetic plastics
to serve other process industries or the packaging industry, the electric appliances industry,
construction industry etc. Polymer products contain the following types of products:

1. High Density Polyethylene (HDPE)

2. Low Density Polyethylene (LDPE)
3. Linear Low Density Polyethylene (LLDPE)
4. Polystyrene (PS)

The assessment in this report is focused on the HDPE Plant (see 1. above), which has a
capacity of 300,000 tons per year. Another plant under its subsidiary, Bangkok
Polyethylene Plc. (BPE), has also an annual capacity of 500,000 tons. The products of
the two plants are distributed under the brand InnoPlus. In this case study, the HDPE
Plant that has been assessed is referred to as HDPE I-1.

The HDPE I-1 plant uses process technology purchased from Mitsui Chemical Inc.,
Japan. It is capable of producing HDPE, to make the conversion to end-products via the
processes of blown film, cast film, pipeline, injection and thread. Quality and
requirements can be adjusted to fit specifications, for the production of plastic bags,
drinking water bottles, milk bottles, lubricant gallons, home appliances, toys, construction
materials, as well as industrial and agriculture tools like ropes, fishing nets, nets, plastic
boxes, showcase boxes, water pipes, electrical wire pipes etc.

HDPE is distributed to local and international casting industrial plants via PTT Polymer
Marketing Co., Ltd. (PTTPM) which handles marketing and distribution activities for the
Group, to strengthen marketing competitiveness in domestic and overseas markets.

-3-
Company Information

PTT Chemicals has been established in December 2005 and has a total of 1,362
employees. It has production capacities in the fields of

Olefins & Shared Facilities

Polymer Products Value Center
EO-Based Performance Products Value Center
Oleochemical Products Value Center
Services & Others

Its annual production capacities are:

Ethylene 1,276,000 tons

Propylene 437,000 tons
Total potential olefins output per year 1,713,000 tons

Additionally, the company also produces

Mixed-C4s
Pyrolysis gasoline
Cracker bottom tailgas
Hydrogen

The operations of the company are organized in a headquarter in Bangkok and different
branches, all situated in the industrial district of Rayong, which is located around 180 km
southeast of Bangkok. More information about the company can be found in Annex 2.

Polyethylene is a product which PTTCH produces for the process industry. It is used for the
manufacturing of the equipment and various plastic resins used in daily life, supporting
thereby the development of the national economy. This resulted in the reduction of imports
of plastic resins from abroad. On the other hand, through its exports, PTTCH is able to
contribute to the national income and to the performance of the economy of Thailand.

Most customers of PTTCH are factories belonging to the petrochemical process industry
such as companies in the industries of packaging, electrical appliances, motor parts, and
textiles etc. PTT PM has managed the marketing and distribution through over 30
appointed domestic distributors and over 120 appointed distributors that cover all regions of
the world. Moreover, the distributors, in particular in China and Viet Nam, support strongly
the management in their target markets and they contribute to the increase of the efficiency
in order to serve the distribution and to leverage opportunities for more productivity of
PTTCH throughout their markets.

-4-
Organizational structure of PTT Chemical

The organization of PTT Chemical is composed of five Value Centers for the different
products and two centralized services for Governance and Shared Services as shown
in Figure 1 below. The Governance and Shared Services are at the corporate center
and serve the five Value Centers.

Figure 1 Organizational Structure

PTTCH performs its business operation under the structure of a Value-Based Organization
(VBO). Under the VBO, there are 3 key functions/roles as follows.

1) Governance
The function of governance is to set governing objectives and to establish common
practices and principles. Governance contains the following units:
1.1) Corporate Affairs
1.2) Strategy & International affairs
1.3) Marketing Commercial & SCM
1.4) Finance & Accounting
1.5) Operational Excellence
1.6) Organizational Effectiveness
1.7) Internal Audits

2) Shared Services
The role of Shared Services is to support common functions in order to maximize
resources with the highest degree of effectiveness. Shared Services contains the
following units:
2.1) Corporate Affairs
2.2) Finance & Accounting
2.3) Operational Excellence

-5-
 2.4) Organizational Effectiveness
2.5) Services & Others

3) Value Centers (VCs)

The function of the Value Centers is to take charge of creating products and business
results including the execution of strategic planning, marketing, finance and accounting.
The following VCs exist:
3.1) Olefins Shared Facilities
3.2) Polymers Products Value Center [HDPE I-1 is part of this VC]
3.3) EO-based Performance Products Value Center
3.4) Oleochemical Products Value Center
3.5) Services & Others

3. Attitude of the company towards standardization

The petrochemical industry is a big industry categorized into three main segments, i.e.
upstream industry, intermediate industry and downstream industry. Each industry
category has a big size and high costs since the production and factory construction uses
advanced technology with high capital expenditure.

In general, the management of the petrochemical industry has been related to production
processes that involve a certain risk with chemical reactions and resulting activity that may
be dangerous to health and the environment. If an accident occurs that disrupts the
production process and results in environmental destruction, there can be major losses that
may also have a long-lasting impact on the company image. Therefore, PTTCH has made it
a core part of its policy to apply management system standards such as ISO 9001, ISO
14001 and OHSAS/TIS 18001 thoroughly in order to institute a systematic management
approach as well as to reduce the risk and hazard related to occupational health and safety
and the environment. In addition, PTTCH emphasizes the importance of product quality and
applies systematically product standards that are intended to create and maintain customer
confidence. The HDPE I-1 plant applies both standards on product and management
systems.

Key Product Management

Value Center Products
Standards System Standards
Polymer Products 1. High Density Polyethylene TIS 816-1995 ISO 9001
Value Center (HDPE) Polyethylene resin ISO 14001
2. Linear Low Density (for more details OHSAS/TIS 18001
Polyethylene (LLDPE) see section 6.1)
3. Low Density Polyethylene
(LDPE)
4. Polystyrene

-6-
4. Analysis of the value chain

4.1 Industry value chain

As explained in section 3, the petrochemical industry in general is categorized into 3

segments i.e. upstream, intermediate and downstream. The upstream
petrochemical industry transforms natural gas such as Ethane, Propane Gas,
Liquid petroleum and fuel products into raw material to supply feedstock to be
transferred to the intermediate petrochemical industry. The intermediate
petrochemical industry transforms the upstream products into raw material for
manufacturing the intermediate products which cannot be used directly and transfers
them further to the downstream industry. For the downstream petrochemical
industry, it transforms the upstream and intermediate products to downstream
petrochemicals such as plastic resins, synthetic fibers which are the fundamental raw
materials for production by the process industries such as the industries for
packaging, electrical appliances, motor parts and textile etc.

The value chain of the petrochemical industry is shown in Figure 2 below:

Figure 2 Value chain of the petrochemical industry

PTTCH is a fully-integrated petrochemical manufacturer which covers the whole

value chain from the upstream to the downstream segment. Its products begin from
the business of Olefins-Shared Facilities, the upstream petrochemical and related
supply feedstock such as Ethylene and Propylene. It continues to the business of
Ethylene Oxide-Based Performance Products Value Center, the chemical industry
and intermediate petrochemical to extend specialty chemicals such as Ethylene
Oxide (EO) and Ethylene Glycol (EG) products, Choline Chloride, Ethanolamine and
Intoxicate etc. The last is the business of the Polymer Products Value Center, related
to downstream products such as Polymer which is the fundamental raw material of
the other industries. Moreover, PTTCH performs its business of Oleochemical
-7-
 Products Value Center, Bio-based Chemical fully supported energy and expand to
products with friendly environment.

4.2 Company value chain of PTTCH

In line with the ISO methodology, we apply the model developed originally by Michael
Porter (1985) from Harvard Business School for the description of the company value
chain. This model groups the activities within a company into nine different business
function (identified as A to I) as shown in the table below. Under each of the headers,
which identify the business functions, the key activities of PTTCH inside these functions
are listed:

A Management & Administration

- Management Review - Monitoring & Measurement
- Resources Management - Knowledge Management
- Finance - Accounting
- Legal - Risk Management
- IT - HR
- Quality, Health, Safety and Environment
B R&D
- Product Development
- Quality, Health, Safety and Environment
C Engineering
- Engineering
- Maintenance
- Quality, Health, Safety and Environment
D Procurement
- Feedstocks & Raw Materials Procurement
- Quality, Health, Safety and Environment
E F G H I
Inbound Production/Operations Outbound Marketing & Service
Logistics - Production Planning Logistics Sales - Feedback
- Materials - Processing - Packaging, - Order from
Management - Quality Assurance Shipping, Receiving Customers
- Raw - Laboratory Testing Distribution, - Quality, - Corrective &
Materials - Quality, Health, Safety Transport Health, Preventive
Inspection and Environment - Order Safety and Action
- Quality, Tracking Environme - Product Data
Health, - Quality, nt Analysis &
Safety and Health, Report
Environment Safety and - Quality,
Environment Health, Safety
and
Environment

4.3 The Value chain of the HDPE I-1 plant

As stated in section 2 of this report, the scope of this case study is limited to the
downstream petrochemical industry and focuses on the production of High Density
Polyethylene (HDPE), which is the core activity of the HDPE I-1 plant. The reason for
this selection is that the company has introduced since the beginning of its operations
certain indicators for the production and operations that can be used to assess the
economic benefits of standards.

-8-
The details of the Value Chain of the HDPE I-1 plant are as follows:

Marketing & Sales

Procurement

IN SCOPE
Production/
Inbound Logistic Outbound Logistic Service
Operations

Engineering

The value chain of the HDPE I-1 plant is driven by orders from customers to the PTT
Polymer Marketing Co., Ltd (PTTPM), a marketing agent and distributor of polymer
products for the PTT Group. PTTPM collects customer orders and customer
specifications and communicates these to the planning department. Afterwards it
transfers it to the raw materials and quality instrument unit which continues to the HDPE
I-1 plant, the producing unit. The HDPE I-1 plant will process until packaging and
keeping the final product in storage. In the production process, the effective placement
of polymer products will also be inspected by the technical unit. Before packaging and
storage, the products will be tested, checked before they are transferred to PTTPM for
distribution.

-9-
4.3 Key value drivers

PTT Chem (HDPE I-1)

Value drivers Description Source

Focused value Focus on production process with operation skill PTT Chem
chain coverage (HDPE I-1)

Quality of Ability to minimize failure rates in the production PTT Chem

production process (HDPE I-1)

Quality of product Ability to create high-quality products PTT Chem

(HDPE I-1)

Efficiency of Ability to optimize production processes in terms (PTT Chem

production of process time and costs (HDPE I-1)

-10-
 CATALYST SEPARATION SILO STORAGE
POLYMERIZATION PELLETIZING AND BAGGING
PREPARATION AND DRYING
STABILIZER
PELLET
CO-MONOMER AND HYDROGEN CENTRIFUGE
SEPARATOR
ETHYLENE
REACTOR
POWDER
DRYER PELLET
CATALYST HOPPER

HEXANE PRODUCT SILO

CATALYST
SLURRY EXTRUDER
DRUM

BLOWER

HEXANE RECYCLE HEXANE

CATALYST RECOVERY
SOLUTION BAGGING

PRODUCT
LOW POLYMER
BY-
BY-PRODUCT

Figure 3 - Process Flow of HDPE I-1

5. Scope of the assessment in the pilot project

In this case study, the production of high density polyethylene (HDPE) has been selected
for the assessment of economic benefits. The project covers the production and operation
from planning, production, quality control to laboratory testing. Standards related to product,
technology and management systems are applied in each process stage which enables us
to assess the benefits of standards for the company. As mentioned in section 4.3, the
reason for this selection has been that the core operation of the company is manufacturing.
Since the beginning of its operations in 2005 certain indicators for the production processes
have been applied. The indicators will also be used to assess the economic benefits of
standards (see sections 7 and 8 of this report).

It should be noted that the assessment does not cover the assessment of suppliers and the
inspection of the quality of their inputs. The reason is that the tests of the raw materials
have been completed by the suppliers before the materials are transferred to the HDPE I-1
plant and that the plant relies on the correctness of the tests done by the suppliers of main
raw materials, mainly the Olefin plant which adheres to ISO standards and is also a part of
PTTCH. Minor raw materials are subjected to random testing by the internal PTTCH
laboratory.

6. Use of standards by the company: Standards used in the company value chain

-11-
The HDPE I-1 plant applies the following types of standards throughout all of its operations.

6.1 Product Standards

Product standards, which are accepted in both domestic and international markets,
have been used for the manufacturing in the HDPE I-1 plant. The company has certified
the products against these standards. The year of certification against the respective
standards is indicated in the table below:

No. Product Standards Year of certification

1 TIS 816:1995 Polyethylene Resin 2007
2 U.S. FDA 21 Code of Federal Regulations part 2006
177.1520 (Olefin polymers) (Revised as of April 1,
2010)
3 RoHS Directive 2002/95/EC 2006
(Directive of the European Commission on the
Restriction of Hazardous Substances in Electrical
and Electronic Equipment)
4 European Standard EN 71:1994 + A1:2000 + 2008
AC:2002 Part 3 : Migration of certain elements
5 DIN 10955:1983 (revised in 2003) Sensory 2009
analysis; testing of container materials and
containers for food products

6.2 Process Standards

In recent years product competition has been on the rise at the international level. This
relates in particular to efficiency of production, which cannot be expressed simply
through the quality of the product. To increase efficiency, the company follows the
approach of continual improvement in the efficiency management by applying
international standards. The following international standards are applied in the HDPE I-
1 plant and certification has been achieved as indicated below.

No. Process Standards Year of certification

1 ISO 9001:2000 Quality management systems 2006
Requirements
2 ISO 14001:2004 Environmental management 2009
systems - Requirements with guidance for use
3 TIS 18001:1999 Occupational health and safety 2009
management system
4 OHSAS 18001:1999 Occupational health and 2009
safety management systems
5 ISO/IEC 17025:2005 General requirements for the 2006
competence of testing and calibration laboratories

6.3 Engineering Standards

-12-
 As explained in section 2, the process technology for the manufacturing of HDPE has
been purchased from Mitsui Chemical Inc., Japan. The complete design of the plant,
including the construction and the process technology, has been developed by Mitsui
and is used unchanged. The Mitsui technology and PTT Chem engineering know-how
apply extensively Engineering Standards. These standards are mainly standards of
ASTM, ASME, AWS and other standards organizations.

Engineering Standards are in particular significant to organize production and company

processes on the basis of and in accordance with scientific criteria to allow monitoring
and measuring of the company operations.

An overview of the Engineering Standards used in the HDPE I-1 plant is given in Annex
3.

The HDPE I-1 plant applies the following standards in each segment of the production
function of the value chain:

Stages in
Engineering
Production/ Product Standards Process Standards
Standards
Operation
Production - ISO 9001
Planning - ISO 14001
- TIS 18001
- OHSAS 18001
- ISO/IEC 17025
- API
(Construction)
- IEC
- ASME
- ASTM
- NFPA
- Engineering
Standards (see
Annex 3)
Quality - U.S. FDA 21 Code - Technology
Assurance of Federal Standards
Regulations part (internal
177.1520. specifications of
- RoHS Directive Mitsui Chemical)
2002/95/EC
- EN 71:1994
+A1:2000+AC:2002
: Part3
- DIN 10955:1983
(revision 2003)
- TIS 816-2538
(1995)
Laboratory - ASTM D-1238-04 - Mitsui Chemical
Testing - ASTM D-1505-03 Testing Method
- ASTM D-2839-02
- ASTM E-313
- ASTM D-1925
- ASTM D 1960
- ASTM D 638-03

-13-
 Stages in
Engineering
Production/ Product Standards Process Standards
Standards
Operation
- ASTM D-638-03
- ASTM D-4976-02
- ASTM E4
- ASTM E83
- ISO-7500
- ASTM D-1525-91
- ASTM D-2240-03
- ASTM D-1895
- ASTM D-1921
- ASTM D-256
- ASTM D-747
- ISO 75-1
- ASTM D-1693
- ASTM D-790-03
- ASTM D-4976-02
- ASTM D-3417-99
- ASTM D-3418-99

Quality, Health, - ISO 26000 (in

Safety and introduction)
Environment - ISO 9001
- ISO 14001
- TIS 18001
- OHSAS 18001

-14-
7. Selection of operational indicators to measure the impacts of standards

For the HDPE I-1 plant various indicators have been defined to assess the success of the
production process. In our assessment, four key indicators are used which relate to
standards and are applied to the production process. These four indicators are defined
below.

1) Plant Reliability: This indicator measures the stability and reliability of the operation
of the plant by comparing the actual production of the company with the Nameplate
production capacity (which is the maximum production capacity as stated by the
manufacturer).

2) Off Specification: The number of product that does not comply with the specification
(and are therefore "off" Spec). This is calculated as the prime product, which is
compared with the whole of the Polyethlyene (PE) product and subtracted from 100
percentage as shown below:

Off Spec. Ratio (%) = 100 - Prime Product (Ton)

Total PE Product (Ton)

3) Ethylene Consumption: The ethylene consumption is calculated through the equation

as shown below:

Ethylene Consumption = Ethylene (Ton)

PE Actual (Ton)

4) Energy Index: This indicator measures the usage of the quantity of energy in the
Polyethylene (PE) production. If this indicator is low, the energy consumption during
the polyethylene production process is low. The equation is given below:

Energy Index (Mwh/Ton) = Net Energy (Mwh)

PE Actual (Ton)

For the plastic resin production process of the HDPE I-1 plant, a manual on production
quality management has been prepared in accordance with ISO 9001 that specifies the
quality management system as the fundamental guideline for the manufacturing practice.
The core processes, related processes and any relevant criteria have been established to
enable higher efficiency. The production plan and any criteria of HDPE I-1 have been
established clearly such as production quantity from machinery capacity, the number of Off
Spec. in and out of planning, the shut-down periods resulting from different causes, the
quantity of each raw material, quantities of energy etc. The plant has reviewed these
indicators every year to further improve efficiency and effectiveness. In this respect, the
indicators explained above, i.e. Plant Reliability, Off Spec., Ethylene Consumption and the
Energy Index, have been selected by the TISI project team to assess the economic benefits
of standards. If these indicators have not been specified in the manual on quality
management of plastic resin production process in accordance with ISO 9001, the
production process does not comply with the specified planning.

-15-
 Selected Value drivers (if
Related Operational
business applicable for Standards used
activities indicators
functions (BF) the BF)
Production/ - Production - Focused Standards in 1) Plant
Operation Planning value chain accordance with Reliability
- Processing coverage clause 6
- Quality - Quality of
Assurance production 2) Off
- Laboratory process Specification
Testing - Quality of
- Quality, product
Health, Safety - Efficiency of 3) Ethylene
and production consumption
Environment

4) Energy Index

-16-
8. Calculation of the economic benefits of standards

The calculation of the economic benefits of the standards for the four indicators is
based on data for the years 2005 and 2009. Since 2006 the HDPE I-1 plant has
applied the ISO 9000 and other management standards. The data of 2009
demonstrate how these standards have contributed to an increase of the benefits as
compared to the year 2005.

Operational
Selected
indicators (to
business Financial impact for the operational indicator
measure the
functions (in 2010 prices)
impact of
(BF)
standards)
Production/ 1) Plant Reliability The value of Plant Reliability in 2009 increased from 2005 has
Operation been calculated as follows.

2005 2009

Production (Ton/Yr) 200,097 270,244

Plant Reliability (%) 94 99.66

Margin Gain (USD) ~ 4.6 MUSD

2) Off Specification The reduced Off Specification has been calculated as follows.

2005 2009

Production (Ton/Yr) 200,097 270,244

Off Spec. (%) 1.64 0.26

Off Spec. Margin Gain (USD) = 0.3 MUSD

3) Ethylene The reduced Ethylene Consumption has been calculated as

consumption follows.

2005 2009

Production (Ton/Yr) 200,097 270,244

Ethylene Consumption 1.033 1.024

Ethylene Cost Reduction (USD)~1.7 MUSD

-17-
 Operational
Selected
indicators (to
business Financial impact for the operational indicator
measure the
functions (in 2010 prices)
impact of
(BF)
standards)

4) Energy Index The reduced Energy Index has been calculated as follows.

2005 2009

Production (Ton/Yr) 200,097 270,244

Energy Index (Kcal/kg

PE) 604 487

Energy Index (kWh/Ton) 702.32 566.27

Energy Saving (USD) = ~2.8 MUSD

Financial impact of standards on the

Selected business
Operational indicators whole business function (in 2010
function
prices)
Production/Operation 1. Plant Reliability 4.6 MUSD
2. Off Specification 0.3 MUSD
3. Ethylene consumption 1.7 MUSD
4. Energy Saving 2.8 MUSD
Total 9.4 MUSD

Calculation of the contribution of standards to the HDPE I-1 EBIT (Year 2009)

The contribution of standards as a percentage of the total sales revenues or the turnover of
HDPE I-1 is ~3 %

9. Qualitative and semi-quantitative considerations

In this case study at least one additional important indicator are the savings resulting from
reduced needs for laboratory testing. However, it has been impossible to calculate the
impacts for this indicator since no data have been recorded. The testing service center of
PTTCH, which achieved ISO/IEC 17025 accreditation, conducts laboratory tests and is
responsible for the inspection of raw materials used for manufacturing, including the quality
of several products of the HDPE I-1 plant. The plastic resin produced by the HDPE I-1 plant
has also been tested and monitored. The benefits from meeting the requirements defined in
a standard on testing and calibration laboratories is demonstrated by high and consistent
product quality contributing to customer confidence. This resulted in cost and time savings
due to a reduced need for repeated tests both for the manufacturers and the customers.
This example shows how the standards generate economic benefits and provide guidance
for the further improvements of the HDPE I-1 plant.

-18-
10. Evaluation of the results

In this study on economic benefits of standards, we were unable to compare for the HDPE
I-1 plant a situation before and after the introduction of standards and to measure the
impacts from standards in this form. The reason is that the standards have been used since
2005, the beginning of the operation of the plant, which is based on the use of the
engineering standards applied by the company.

However, the HDPE I-1 plant has proactively introduced management system standards as
a framework for its manufacturing such as ISO 9001, ISO 14001, TIS 18001, OHSAS
18001 and ISO/IEC 17025. Due to a combination of the management system standards
and the engineering standards that are built-into the technology from the company and the
Mitsui technology, it has been possible to raise the plant to a level of performance as shown
in the improvements in the four key indicators. Without a consistent use and a management
approach based on these standards, such an improvement would otherwise not have been
possible. An impact from standards of 3% of the sales revenue can be considered to be
significant. In addition, the standards provide a framework for the management and
operation of the plant and can therefore be regarded as the glue that keeps the different
operations and systems of the plant together.

This case study also demonstrates how the ISO methodology can be applied in a specific
and flexible way. Such a flexible approach is required when a company has used standards
from its outset which makes it impossible to compare empirical data collected before and
after the introduction of the standards.

As the authors of this study, TISI suggests that reports resulting from the case studies in
other countries be provided to enable a comparison between the findings of the case
studies and the specific conditions of the companies that have been subject to the
assessment.

11. Conclusions

To assess the economic benefits of standards for PTTCH, TISI has selected to study
the production and operations of the HDPE I-1 plant which is involved in producing
high density polyethylene (HDPE). For the assessment of the impacts of standards
the following four key indicators have been selected: Plant Reliability, Off
Specification, Ethylene Consumption and Energy Index. The reason for this selection
is that the plant has collected systematically data in its regular operations for these
indicators and that it was possible to relate these data to the systematic use of
standards both at the management level as well as the technical and engineering
level.

After the year 2006, the HDPE I-1 Plant systematically applied and complied with the
ISO 9000 Standard as an administrative and management guideline which resulted
in an increased output in manufacturing and reduced the use of ethylene and
energy. In addition, the HDPE I-1 Plant has published a manual on quality production
which is used as a basis for planning, raw material provision and the monitoring and
testing of the material before manufacturing which is applied by its suppliers. It
controls the production process with a high-performance control system and is able
to identify the product that does not meet specified requirements through
measurements and product tests. This manual provides also guidance for the
function of every unit, and increases the capacity of the employees to control the
production processes and to achieve cost and time reductions while reaching a high
level of efficiency.

-19-
TISI is currently in the process of discussing with other companies in Thailand the
possibility to cooperate in similar projects with a view to extending the pilot project
undertaken with PTT Chemical.

-20-
ANNEX 1: Acronyms

Acronym Explanation

AASHTO American Association of State Highway and Transportation Officials

ACI American Concrete Institute
AGA American Gastroenterological Association
ANSI American National Standards Institute
API American Petroleum Institute
ASME American Society of Mechanical Engineers
ASTM American Society for Testing and Materials
AWS American Welding Society
DIN German Institute for Standardization
EG Ethylene Glycol
EN European Standard
EO Ethylene Oxide
HDPE High density polyethylene
IBC International Building Code
IEC International Electrotechnical Commission
ISA International Society of Automation
ISO International Organization for Standardization
LDPE Low density polyethylene
LLDPE Linear low density polyethylene
NFPA National Fire Protection Association
NPC Networks Professional Consulting
OHSAS Occupational Health & Safety Advisory Services
OSHA Occupational Safety and Health Administration
PTT CH PTT Chemical Public Company Limited
PTTPM PTT Polymer Marketing Company Limited
TIS Thai Industrial Standard
TISI Thai Industrial Standard Institute
USD United States Dollar
VBO Vertex Buffer Object

-21-
ANNEX 2: PPT Chemical - Company information
Name
Initial
Website
Establishment
Business Structure and Value
Chain
Annual Production Capability
Number of Employees
Head office Address
1st Branch (I-1 Road Branch)
2nd Branch (I-4 Road Branch)
3rd Branch (Jetty and Buffer
Tank Farm Branch)
4th Branch (Rachniyom Road)
PTT Chemical Public Company Limited
PTTCH
www.pttchemgroup.com
7 December 2005
Olefins & Shared Facilities
Polymer Products Value Center
EO-Based Performance Products Value
Center
Oleochemical Products Value Center
Services & Others
Ethylene 1,276,000 tons
Propylene 437,000 tons
Total potential olefins output per year
1,713,000 tons
Mixed-C4s
Pyrolysis gasoline
Cracker bottom tailgas
Hydrogen
1,362 persons
Energy Complex, Building A
15th - 18th Floor
555/1 Vibhavadi Rangsit Road, Chatuchak
Bangkok 10900
Tel: (66 2) 265 8400
Fax: (66 2) 265 8500
14 I-1 Road, Tambon Map Ta Phut,
Amphoe Mueang Rayong,
Rayong 21150, THAILAND
Tel: (66 38) 922 100
9 I-4 Road, Tambon Map Ta Phut, Amphoe
Mueang Rayong, Rayong 21150
Tel: (66 38) 922 000
19 Rong-Pui Road, Tambon Map Ta Phut,
Amphoe Mueang Rayong, Rayong 21150
Tel: (66 38) 922 750
59 Rachniyom Road, Tambon Noen-Phra,
Amphoe Mueang Rayong, Rayong 21150
Tel: (66 38) 994 000
-22-
ANNEX 3: Overview of Engineering Standards used in the HDPE I-1 plant

Machinery Engineering Standards

1) Pressure Vessel ASME Code, Section VIII or equivalent
ASTM / ASME / AWS or equivalent
2) Heat Exchangers
2.1) Shell and Tube Type ASME Code, Section VIII + TEMA or equivalent
ASTM / ASME / AWS or equivalent
2.2) Plate Type ASME Code, Section VIII + TEMA or equivalent
ASTM / ASME / AWS or equivalent
2.3) Air Coolers ASME Code, Section VIII + API 661 or equivalent
ASTM / ASME / AWS or equivalent
3) Tanks
3.1) Large Welded Low API 620 or Certify by Department of Industrial Work
Pressure Tanks ASTM / AWS
3.2) Large Welded API 650 or Certify by Department of Industrial Work
Storage Tanks ASTM / AWS
3.3) Spherical Tanks ASME Code Section VIII
ASTM / ASME / AWS
4) Steam Generators ASME, Sect. I
Pressure Parts: ASME Sect. I / II
Non Pressure Parts: ASTM
5) Heater
5.1) Process Heater API RP 530 APT 560
ASTM ASME B-31.3
5.2) Waste Heat Recovery 70 bar ASME Sect. I
< 70 bar ASME Sect. VIII, DIV I
ASME Sect. I / II, ASTM
6) Machinery
6.1) Pumps Pumping temperature Above 2000c Flammable or toxic
Liquids
Centrifugal Pumps Heavy duty service API 610
Reciprocating positive Displacement pumps API 674
Positive Displacement Pumps - Controlled Volume API
675
Rotary Positive Displacement Pump API 676
6.2) Fire Water Pumps NFPA
6.3) Diesel Engines DEMA, NFPA
6.4) Centrifugal API 617
Compressors
6.5) Screw Compressors API 619
6.6) Reciprocating API 618 IGC
Compressors
6.7) Lube and Seal Oil API 614
System
6.8) Fans and Blowers API 673
6.9) Steam Turbines General Purpose Steam Turbines API 611
Special Purpose Steam Turbines API 612
7) Foundations and Concrete ACI, AWS, AASHTO, OSHA
Structure ASTM, AWS, ANSI, TIS
8) Buildings UBC, ACI, AISC
ASTM, TIS
9) Structural Steel AISC, AWS, ANSI, UBC, OSHA
ASTM or equivalent

-23-
 Machinery Engineering Standards
10) Piping ASME, ANSI, API, MSS, AWWA
ASME, ASTM, AISI, API, TIS
11) Insulation ASTM
12) Bricks & Refractory ASTM
13) Electrical IEC, NEMA, NFPA, DIN, TIS, ICEA, NEC, ISO, IES, IEEE,
ANSI, NESC, OSHA, VDE, API
14) Instrumentation ANSI, API, ASME, ISA, AGA, NEC, IBC, ISO
ASTM
15) Fire Protection NFPA, API

-24-