What’s the value of patents?

The task of gaining and then maintaining a Patent is both laborious and expensive: many companies have given up this effort, or at least only use external expertise when necessary for the ideas seen at the time as their most important innovations. Many times the real value of an idea will only become obvious many years later.

Patents protect unique ideas for new product developments: but Patents also have another use, as a defensive statement of the company knowledge base at a certain point in time. Both aspects are quoted by Endress+Hauser as the reason they encourage R&D engineers to file for patents. Angelika Andres is a physicist and patent lawyer who heads the 20-strong patent department of the Group, tasked to assess and process all invention disclosures: she comments that “We strongly encourage our employees to register their ideas as soon as possible and without any reservation.” A total of 236 new patent applications were made in 2013, six more than the previous year: Germany and the European Union, the USA and China are the main countries where E+H patents are listed. Of 720 employees who work in research and development, 365, or over half of them, were involved in filing an initial patent application last year. These inventors were honoured at the annual “Innovator’s Meeting, in Freiburg, Germany, earlier this year, and are pictured below. Prizes were awarded for patents that are seen to be of particular economic significance for the company.

eh inventors 2014

“We operate in an intensively competitive industry,” states Michael Ziesemer, coo of the Endress+Hauser Group. “Our advantage is secured by innovative products – and in turn we can safeguard these innovations by protecting them with patents at a very early stage.” Ziesemer has no problem with the Euro5m ($7m) invested every year in this protection of their intellectual property.

70% of patents ‘not used’

As patents become older, the higher the maintenance fees become, so the patent portfolio is regularly reviewed, keeping an eye on markets of decreasing importance. Only about a third of patents are actually ever used: but even the ‘unused’ patents have an economic weight, providing at times a protective wall around the business, and used “in order to stave off attacks from competitors”. Ziesemer explains that from time to time competitors believe that their industrial property rights have been infringed. “A large patent portfolio acts as a protective shield.” The more patents a company can throw into the balance, the better the prospects in a dispute. “Our patents are our insurance.”

A wireless example

Michael Ziesemer cites the recent developments in wireless technology to provide a significant example here. “The peak time for patents was ten years ago. If we hadn’t patented technologies and the corresponding software and hardware back then, we would have to pay license fees today and would only be able to supply our sensors as components.” Instead, today Endress+Hauser is a successful system supplier in the field of wireless solutions. This also shows that how innovative a new invention really is and what advantages it can offer customers often only becomes obvious after many years.

New GE plant in Saudi Arabia

As part of their $1Bn investment commitment to local manufacturing in Saudi Arabia, GE has started construction of a 9500sq.m building in the Second Industrial City in Dammam. This will enable the expansion of the manufacturing capability and operations of the nearby existing Pressure Control facility, which is certified to the API and ISO quality management systems. This expansion will create over 100 new career opportunities for skilled Saudi engineers and accelerate customer deliveries on key equipment such as wellheads and valves for the upstream oil and gas sector, more than doubling the existing workforce.

Rami Qasem, president and ceo of GE Oil & Gas, (Middle East, North Africa and Turkey) said: “The current expansion will enhance the in-house repair facilities and add more capacity to our manufacturing unit. It will contribute to promoting the operational efficiency of our customers in addition to creating new jobs for Saudi professionals and developing local suppliers in the SME sector.”

This ground-breaking follows the recently announced GE plans to expand the manufacturing capabilities of the GE Manufacturing Technology Center in Dammam, which will now manufacture the most advanced, high efficiency GE gas turbines, creating new engineering jobs and more opportunities for local suppliers. Over 500 GE turbines currently generate over 50% of Saudi electricity.

New paperless recorder

Yokogawa has announced the launch of their new SmartDAC+ GX and GP series paperless recorders, which comply with the FDA 21 CFR Part 11 guidelines, and accommodate an increased number of inputs. The FDA 21 CFR Part 11 guidelines were issued in 1997, and stipulate what is required for electronic records and electronic signatures to have the same validity as paper-based records and signatures. With release 2, the GX and GP series recorders now comply with these guidelines for use in production operations.

In addition the new units can be used with up to six expansion units, each of which can accommodate up to 60 inputs. Including direct inputs, this gives each recorder the ability to handle a combined total of up to 450 inputs. The expansion units can be located at up to 100m from the recorder, so enabling reduced cabling costs for satellite operations.

The recorder also is available with an optional graphic display, enabling the unit to operate as a process display unit or console panel, in addition to its main data recording function.

Emerson expands flow manufacturing in Europe

In a US$76m (Euro55m) investment in new facilities at company’s campus in Cluj-Napoca, Romania, Emerson is strengthening their growing global manufacturing and engineering services network

The expansion includes a new 18,800 square-metre flow measurement manufacturing building. This US$60m (Euro43.4m) investment will help meet growing demand for the company’s flow measurement products and services in Europe and other regions.

Additionally, in the summer of 2014, Emerson Process Management moves into a separate, newly constructed US$16m (Euro11.6m) facility on the Cluj campus that will be home to the Regional Project Engineering Centre and the European System Integration Centre for its PlantWeb Solutions Group. This facility will house up to 600 employees who provide engineering and support services for European control systems and automation projects, plus an initial 100 additional personnel to assemble and test control systems for projects throughout Europe.

“Our customers in Europe and elsewhere strive to improve efficiencies, meet safety and environmental regulations, and reduce energy use, and they are turning to Emerson for our technology and expertise to meet these goals,” said Steve Sonnenberg, president of Emerson Process Management. “Adding this new manufacturing capability and centralising our systems assembly and integration for DeltaV and Ovation systems in Cluj, as well as increasing our project management, engineering and sales support staff there, enable Emerson to better support our European customers and ensure improved response times for our product and service support across the region.”

The new flow technology manufacturing building will offer calibration, services and customer training facilities for Emerson Process Management’s Micro Motion, Rosemount, and Roxar flow measurement technologies. This facility will provide modern and spacious production capabilities as well as offices for engineering and customer support services, and fulfil market demands for quality and traceable calibration. In addition, a state-of-the-art customer experience centre is planned that will incorporate training and meeting facilities, along with displays of Emerson technologies. The new facility adds to Emerson’s current European network of facilities, which includes an existing flow manufacturing and service centre in Ede, The Netherlands.

“These additional capabilities increase our flexibility and ability to manage our European customers’ most challenging needs,” said Sonnenberg. “With this strategic investment, we are committed to continually increasing our local expertise and improving our service levels to customers.”

Emerson’s Cluj-Napoca campus is now one of the parent company’s largest sites in Europe, currently employing more than 1,900 people. This location has proven to be an excellent choice for Emerson’s rapidly expanding production and knowledge centres due to the number of local technical and economic sciences universities and availability of highly qualified engineering professionals.

Emerson’s Cluj-Napoca campus currently manufactures Fisher pressure regulators, Roxar flow metering and flow assurance products, Rosemount Analytical products, Leroy-Somer power generators, Control Techniques electrical equipment for photovoltaic power plants, Ridgid tools, and Appleton ATX lighting fixtures and junction boxes for hazardous and adverse environments

Alfa Laval acquires Frank Mohn

Alfa Laval has signed an agreement to acquire Frank Mohn AS, a leading manufacturer of submerged pumping systems to the marine and offshore markets. The acquisition, which strengthens Alfa Laval’s fluid handling portfolio by adding a unique pumping technology, will further reinforce Alfa Laval’s position as a leading supplier to the marine and offshore oil & gas markets.

Alfa Laval has agreed to acquire Frank Mohn AS (“Frank Mohn”), with the product brand Framo, for a total cash consideration of NOK 13Bn ($2.2Bn), on a cash and debt free basis, from Wimoh AS, a company controlled by the Mohn family. Frank Mohn, headquartered in Bergen, Norway and with approximately 1,200 employees, generated sales of NOK 3.4Bn ($600m) and had an order intake of NOK 6.1Bn ($1Bn) in 2013. The operating margin is significantly above the Alfa Laval average. The acquisition is expected to be EPS accretive as from closing of the transaction.

“Frank Mohn is an excellent company that we have been following closely for several years. It has highly skilled employees, high quality products and a market-leading position within segments offering attractive long-term growth prospects”, says Lars Renström, President and CEO of the Alfa Laval Group. “The combination of Frank Mohn and Alfa Laval will provide a very attractive offering of products, systems and services and it will strengthen our leading position as a provider of critical systems for ships and offshore oil & gas production units, with unmatched service capabilities.”

Alfa Laval continuously looks for growth opportunities and considers the long-term growth prospects for marine and offshore oil & gas markets to be very attractive. Frank Mohn is a leading supplier to these markets by providing submerged pumping systems, under the product brand Framo.

With the acquisition of Frank Mohn, Alfa Laval also strengthens its fluid handling portfolio by adding industrial pumping systems to the existing range of equipment, which is today mainly dedicated to sanitary applications with high demands on hygiene.

Frank Mohn’s main product in the marine segment is its unique submerged cargo pumping system, which plays a vital part in maximizing the utilization of product and chemical tankers. The system enables safe and flexible cargo handling performance for quicker turnaround time and fewer voyages in ballast.

In the oil & gas segment, Frank Mohn offers packaged pumping systems for offshore installations including seawater lift, water injection and fire water pumping systems contributing to safe and efficient operations.

The service organization of Frank Mohn provides technical support during the installation phase of a project, as well as professional service throughout the lifetime of the installed systems. The service activities represented slightly more than 20 percent of the total sales 2013.

“Consolidation and globalization takes place in all industries. We have shown competitiveness through innovation, quality and a long-term view on customer relations. Alfa Laval’s commitment and focus on quality products to an international market is a heritage we share”, says Trond Mohn, Chairman of Frank Mohn AS. “Our customers and employees have recognized Alfa Laval as a reliable supplier of heat exchangers and separators for generations.”

Trond Mohn continues: “Alfa Laval is the only company we could see as a responsible and long-term owner of Frank Mohn AS and I am very happy that we have reached an agreement. Through Alfa Laval’s industrial platform and global reach we are confident that Framo will continue to serve demanding customers and foster its position as a global leader.”

The acquisition of Frank Mohn will be funded by existing credit facilities and a fully committed bridge facility. Alfa Laval’s net debt/EBITDA ratio on a pro forma basis (following completion of the acquisition) would be around 2.5x. The transaction is expected to be EPS accretive as from the closing and synergies are expected to reach about NOK 120 million annually, gradually realized over a three year period.

After closing, Alfa Laval intends to include Frank Mohn and the product brand Framo in the Marine & Diesel division, headed by Peter Leifland, Executive Vice President, Alfa Laval Group. The company will be kept together and form a new segment in the Marine & Diesel division, under the same management as today. The activities in the Bergen area in Norway; the new office and sales & service facility at Askøy – as well as production facilities at Fusa, Flatøy and Frekhaug – will become Alfa Laval’s operational centre for marine and offshore pumping systems. Together with Alfa Laval’s other marine operational centres in Aalborg, Denmark, and Tumba, Sweden, it will create an even stronger supplier to the marine and offshore industries.

The closing of the transaction is subject to approval from regulatory authorities.

Alfa Laval’s acquisition strategy is based on the business concept of constantly optimizing the performance of our customers’ processes. This means that Alfa Laval seeks to undertake acquisitions and form alliances that strengthen the existing key technologies by adding new solutions as well as complementary products and channels. Over the last five years, Alfa Laval has acquired some 20 companies with total sales, the year prior to the acquisitions, of about SEK 7.5Bn.

Metso investment in South Korea

In the December INSIDER, page 2, Metso reported a breakthrough, with new orders in the South Korean energy market for boiler control systems. They now are following this up with investment into a new green-field global valve technology centre in Chungju, South Korea, to open in September. It is anticipated that this will strengthen the Metso control valve and service capabilities for customers in the oil and gas and power industries. The new centre will also house research and development, engineering, and service support units for South Korean EPC companies, which play a major rôle in many projects worldwide. 

The new technology centre builds on the foundation provided by the globe valve technology and service company that Metso acquired in South Korea in 2012. This investment is a continuation of the ambitious growth strategy to develop the Metso valve business, which saw a globe valve technology centre opened in Shanghai in 2010 and another opened in Finland in 2011. In 2012 there followed in a new valve supply and service centre in India, and the completion of expanded valve production premises in the USA. Cutting-edge industrial valve technology and supply centres are operating in Brazil and Germany, and there are also 55 service hubs and 30 valve service centres around the world.

INEOS plans to make a killing with shale gas

It was in the INSIDER last November that we reported on the Ineos Grangemouth refinery and petrochemical plant labour problems, which arose from the turndown in the oil quantity being delivered from the North Sea via the BP Forties pipeline. Because of that uncertain supply, and the ethane feedstock supply contract which runs out in 2017, the petrochemical plant had an uncertain future.

So Ineos have said that they will look to import ethane from the USA, and are conducting studies for the construction of a receiving terminal in Grangemouth. Meanwhile, the company have other European cracker complexes, some of which also require with ethane feedstock supplies, to produce ethylene for the European market as a whole. First priority has been to gain ethane supplies for the Rafnes (Norway) cracker, and one 15 year contract has been signed with Range Resources (USA) for 400,000 tpa ethane, to be delivered via the Mariner East pipeline to Marcus Hook in Philadelphia. From there it will be shipped in three new custom-built (by Evergas) ethane tankers, to Rafnes. At the Rafnes facility, TGE Gas Engineering of Germany is constructing a new ethane storage tank of 17,000 tonnes capacity, with a completion date of December 2014, bringing total site storage to 30,000 tonnes. US shipments are expected to start in earnest in early 2015.

The cost savings are significant

The drive behind this project is the cost savings achievable with US shale gas. Already Rafnes produces ethylene at a cost of $950/tonne, ie quoted as well below the European average. Ineos Olefins and Polymers Europe expects the Rafnes costs to drop to near $500/tonne, with the access to low cost US shale-gas derived feedstocks.

So Ineos is looking at further expansion plans: FEED for a 33,000 tonne storage unit at Grangemouth is being quoted by Babcock International, in competition with TGE, and another tanker build project is being brought forward, with two further in consideration. At Rafnes an expansion of the cracker capacity to 50,000 tpa will be completed by end 2015. A further ethane supply contract has been signed with Consol Energy, and there are discussions with other suppliers continuing.

David Thompson, Ineos procurement and supply chain director, commented “This [Consol] contract adds to our supply portfolio providing for long term sourcing of advantageously priced US ethane for our European crackers. It will allow us to continue to consolidate the competitiveness of Ineos ethylene production in Europe.”

The future for Grangemouth

The options for Grangemouth are still open, and could involve trans-shipment from Rafnes. Plant modifications costing GBP300m would be needed to prepare the Grangemouth site to change the feedstock to shale gas-derived ethane. Ineos has four crackers, with further plants in France and Germany as well, giving a quoted total production capacity of 3 million tpa (although this sounds a very high figure), sourced from both oil and gas feedstocks. So there is a large market demand for efficient low cost plant operations.

Natural shale gas and oil shale reserves occur in hard dense deposits of shale, which were formed from ancient sea basins millions of years ago. Shale is more than just natural gas: the Energy Information Agency (EIA) reports: “Shale plays known primarily for natural gas production – or where horizontal drilling initially targeted natural gas – are also seeing accelerating oil-focused drilling.” In the North Dakota (USA) shale gas area “total oil production has approximately tripled since 2005”. Shale gas is sought in geographic areas where there can be natural gas, and shale oil reserves, in shale rock.

The history tells a story

From 1860, Young’s Paraffin Light and Mineral Oil Company Limited produced oil from shale or coal by “treating bituminous coals to obtain paraffine therefrom”. This company was based in Boghead, near Bathgate in Scotland – the centre of the shale oil industry in the UK that continued until 1920, when the six surviving shale oil companies were purchased by the forerunner of BP. In 1924 the Grangemouth refinery was positioned there, largely because of the large local pool of skilled workers, trained in refining in the Scottish shale oil industry. A map of the shale oil pits and mines can be seen on www.scottishshale.co.uk, and they are spread across the lowlands from Dundee to East Kilbride, with Grangemouth in the middle. Production from 1880 to 1940 totalled around 2m tpa.

So you might be forgiven for thinking that Ineos might be sitting in the middle of an area where shale gas, equivalent to that being processed into ethane for them in the USA, might be right under their feet, associated with the already proven shale oil deposits. Ineos are very forward thinking, so maybe this might come into their planning some time.

  • The US Energy Department has approved exports of liquefied natural gas (LNG) from the Cameron LNG project of Sempra Energy. This approval of up to 1.7 billion cubic feet/day from the Louisiana terminal to countries with which the US does not have a free-trade agreement is the sixth such approval from the US since 2011. The total allowed LNG export level has reached a potential 8.5 billion cubic feet/day.
  • The Nexen Buzzard field, 60 miles northeast of Aberdeen, is the UK’s highest producing oilfield, sending 160,000 barrels of oil equivalent per day via the Forties pipeline to the Kinneal terminal for processing at Grangemouth. It began production in 2007. ABB has recently won a service contract to support the Integrated Control and Safety System (ICSS) on-board the Nexen Buzzard platform. The contract offers a number of new advanced services such as ServicePort (system and process optimisation) and ServicePro (asset management) and includes a maintenance management package with an associated KPI reporting tool. ABB will also host a full scale replica of Nexen’s offshore control network in their Aberdeen office, to perform configuration management and comprehensive testing of all software changes prior to installation on site.
  • The Ineos plans have had a spin-off benefit for their main competitor in Europe, Borealis AG, who have just negotiated a new 7 year supply contract for ethane supplies from Statoil’s gas plant at Karsto in Norway, at much reduced prices. Borealis ceo Mark Garrett said “We think it’s great Ineos is doing it, as it’s helped us in our other negotiations.”

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