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Proprietary © 2005 Solomon Associates Solomon’s Worldwide Energy Industry Benchmarking IAPG CONFERENCE 2006 Mendoza, Argentina Anniversary.

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Presentation on theme: "Proprietary © 2005 Solomon Associates Solomon’s Worldwide Energy Industry Benchmarking IAPG CONFERENCE 2006 Mendoza, Argentina Anniversary."— Presentation transcript:

1 Proprietary © 2005 Solomon Associates Solomon’s Worldwide Energy Industry Benchmarking IAPG CONFERENCE 2006 Mendoza, Argentina Anniversary

2 Proprietary © 2005 Solomon Associates Benchmarking Topics Introduction Performance and Gap Analysis Solomon’s Key Metrics Use of Benchmarks Cat. Cracking Performance Analysis

3 Proprietary © 2005 Solomon Associates What We Do Provide comparative performance analysis for the global energy industryProvide comparative performance analysis for the global energy industry  Fuels/lubes refining  Petrochemicals  Pipelines and Terminals  Electric Power generation Provide consulting services worldwide to facilitate performance improvementProvide consulting services worldwide to facilitate performance improvement

4 Current situation: Operating results – Operating expense – Operating expense – Yield Practices/performance – Yield Practices/performance Staffing Staffing ComparativePerformanceAnalysis Current situation: Operating results – Operating expense – Operating expense – Yield Practices/performance – Yield Practices/performance Staffing Staffing ComparativePerformanceAnalysis Current situation: Operating results – Operating expense – Operating expense – Yield Practices/performance – Yield Practices/performance Staffing Staffing Build/AdjustVision ComparativePerformanceAnalysis Current situation: Operating results – Operating expense – Operating expense – Yield Practices/performance – Yield Practices/performance Staffing Staffing Build/AdjustVision DevelopImplementation Action Plan ComparativePerformanceAnalysis Current situation: Operating results – Operating expense – Operating expense – Yield Practices/performance – Yield Practices/performance Staffing Staffing Build/AdjustVision DevelopImplementation Action Plan Implement Practices and Processes ComparativePerformanceAnalysis Current situation: Operating results – Operating expense – Operating expense – Yield Practices/performance – Yield Practices/performance Staffing Staffing Build/AdjustVision World-ClassPerformance DevelopImplementation Action Plan Implement Practices and Processes Biennial Feedback Loop A valid, external comparison is the best way to gauge how well you are doing and to guide your staff to meet the challenge … Proprietary © 2005 Solomon Associates Knowing Where You Stand Competitively Is Imperative!

5 Proprietary © 2005 Solomon Associates NSA Participation and Trend Groups USACANLTATotal Population Trend Group Trend Group – participation in each of last three studies

6 Proprietary © 2005 Solomon Associates Benchmarking Topics Introduction Solomon’s Key Metrics

7 Proprietary © 2005 Solomon Associates Refineries Seeking Answers To Two Key Questions To Strengthen Positioning Competitiveness Looking outside the fence “How competitive is my refinery in the marketplace?” Efficiency Looking inside the fence “How well is my refinery operating the facilities that it has today?”

8 Proprietary © 2005 Solomon Associates How Competitive Is A Refinery In The Marketplace? Strategic perspective – economic viabilityStrategic perspective – economic viability Comparison of total cost and resources required to manufacture petroleum productsComparison of total cost and resources required to manufacture petroleum products  Without regard for number or size of process units or other structural aspects contributing to higher costs  As a result, competitive positioning may be limited by structural or configuration constraints  Customers unwilling to cover differences in cost per barrel of product by refineries supplying the market Customers at the pump don’t care if a refinery has higher costs – they only want the lowest price

9 Proprietary © 2005 Solomon Associates How Well Is A Refinery Operating The Facilities That It Has Today? Operational perspective – focus on efficiencyOperational perspective – focus on efficiency Comparison of total costs and resourcesComparison of total costs and resources  Taking into account actual configuration aspects – number and size of individual process units and other structural aspects Focus is on the effectiveness of cost control and resource management typically within a refinery manager’s control

10 Proprietary © 2005 Solomon Associates Competitive Metrics Overview Key Metrics (Same As Previous) EDC is the normalization factor for competitive metricsEDC is the normalization factor for competitive metrics Refinery EDC (UEDC) based metricsRefinery EDC (UEDC) based metrics  Cash Operating Cost, US Cents/UEDC  Non-Energy Cost, US $/EDC  Maintenance Index, US $/EDC  Personnel Index, Work Hours/100 EDC  Personnel Cost Index, US $/EDC  Capital Investment Index, US $/EDC

11 Proprietary © 2005 Solomon Associates Efficiency Metrics Overview Key Metrics Energy Efficiency (no change in methodology)Energy Efficiency (no change in methodology)  Energy Intensity Index – EII™ Non-Energy Efficiencies (new)Non-Energy Efficiencies (new)  Maintenance Cost Efficiency Index – MEI™  Personnel Efficiency Index – PEI™  Non-Energy Cost Efficiency Index – NEI™

12 Proprietary © 2005 Solomon Associates 2004 Competitive vs Efficiency Metrics Maintenance 26.6 US Study Average Using New EDC Factors US EDC Group Group US $/EDC Competitive Metric US Study Average MEI™ Efficiency Metric

13 Proprietary © 2005 Solomon Associates Benchmarking Topics Introduction Performance and Gap Analysis Solomon’s Key Metrics

14 Proprietary © 2005 Solomon Associates Impact on 2004 Company Results Maintenance – US Quartiles Competitive Metric, US $/EDC Efficiency Metric, MEI™

15 Proprietary © 2005 Solomon Associates US Average Two-Dimensional Analysis Example – Maintenance Cost US Participants Efficiency Gap Refinery TargetPeerGroup Competitive Gap

16 Proprietary © 2005 Solomon Associates Gap Analysis Refinery Vs Peers – Maintenance Cost Key Gap Components Efficiency(15) Size/Complexity*(8) Size/Complexity*(8) Total Competitive Gap(23) Total Competitive Gap(23) * Size/Complexity = Competitive Gap – Efficiency Gap Refinery vs Peers US $M

17 Proprietary © 2005 Solomon Associates Closing The Gap Efficiency Vs Size/Complexity Gap – Maint. Cost US Average Efficiency Gap Refinery TargetPeerGroup Competitive Gap Closing 100% of Efficiency Gap Size/Complexity Gap

18 Proprietary © 2005 Solomon Associates Impact on 2004 Company Results Maintenance – US Quartiles Competitive Metric, US $/EDC Efficiency Metric, MEI™

19 Proprietary © 2005 Solomon Associates Closing The Gap Efficiency Vs Size/Complexity Gap – Maint. Cost US Average Efficiency Gap Refinery TargetPeerGroup Competitive Gap Closing 100% of Competitive Gap Via Efficiency Improvements

20 Proprietary © 2005 Solomon Associates Impact on 2004 Company Results Maintenance – US Quartiles Competitive Metric, US $/EDC Efficiency Metric, MEI™

21 Proprietary © 2005 Solomon Associates Benchmarking Topics Introduction Performance and Gap Analysis Solomon’s Key Metrics Cat. Cracking Performance Analysis

22 Proprietary © 2005 Solomon Associates Study Focus Raw material selectionRaw material selection Product yieldsProduct yields Plant utilizationPlant utilization Operating cost analysisOperating cost analysis Energy efficiencyEnergy efficiency Maintenance and reliability effectivenessMaintenance and reliability effectiveness Labor productivityLabor productivity

23 Proprietary © 2005 Solomon Associates Operating Expense Breakdown Catalysts & Catalyst Additives, 11% Other Volume- Related, 4% Non- Maintenance Personnel, 8% Energy, 59% T/AMaintenance,7% Chemicals,3% Non-T/AMaintenance,7% All Other Fixed Costs, 1%

24 Proprietary © 2005 Solomon Associates Yields and Margins Raw Material Breakdown HydrotreatedFeedstock UnhydrotreatedFeedstock 4% 6% 21% 36% 2% 20% 4% 2% 4% 1% Vacuum Gas Oil Heavy Gas Oil Atmospheric Reduced Crude All Other Light Gas Oil

25 Proprietary © 2005 Solomon Associates Yields and Margins Raw Material Pricing Adjustments Various gas oils – sulfur and aniline pointVarious gas oils – sulfur and aniline point Heavier feeds – sulfur and Concarbon residueHeavier feeds – sulfur and Concarbon residue

26 Proprietary © 2005 Solomon Associates Yields and Margins Product Pricing Catalytic naphtha based on gasoline blending valueCatalytic naphtha based on gasoline blending value Light-cycle oils valued as distillate feed or blending stock; dependent on local marketLight-cycle oils valued as distillate feed or blending stock; dependent on local market Heavy-cycle oils and slurry valued as fuel oil blending stocksHeavy-cycle oils and slurry valued as fuel oil blending stocks Butylenes and i–butane valued as alkylation feedsButylenes and i–butane valued as alkylation feeds Propane and n–butane valued as finished productsPropane and n–butane valued as finished products Propylene valued as chemical feedPropylene valued as chemical feed

27 Proprietary © 2005 Solomon Associates Net Cash Margin Distribution By Region Non-US Countries United States 1Q/2Q Break 2Q/3Q Break 3Q/4Q Break

28 Proprietary © 2005 Solomon Associates Range of Study Performance US $/bbl Average Value Gross Product Value Raw Materials Cost Gross Margin Operating Cost Net Cash Margin US $/bbl Higher Values Lower Values

29 Proprietary © 2005 Solomon Associates Percent of Participation Net Cash Margin, US $/bbl Net Cash Margin FCC MRCC or RCC

30 Proprietary © 2005 Solomon Associates Percent of Participation Return on Investment, % Return On Investment FCC MRCC or RCC

31 Proprietary © 2005 Solomon Associates Benchmarking Topics Introduction Performance and Gap Analysis Solomon’s Key Metrics Use of Benchmarks Cat Cracking Performance Analysis

32 Proprietary © 2005 Solomon Associates Use of Benchmarks Establishing a plant’s performance levelEstablishing a plant’s performance level Quantification of improvement opportunities by expense type and maintenance categoryQuantification of improvement opportunities by expense type and maintenance category Confirming causal plant characteristicsConfirming causal plant characteristics Discovery of practices responsible for performance gaps with “Peer Group”Discovery of practices responsible for performance gaps with “Peer Group” Provide “business case” for change programsProvide “business case” for change programs Convince personnel of need for new targetsConvince personnel of need for new targets

33 Proprietary © 2005 Solomon Associates Anniversary


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