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Overview on “Operational Benchmarking” of PSU refineries in India.

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Presentation on theme: "Overview on “Operational Benchmarking” of PSU refineries in India."— Presentation transcript:

1 Overview on “Operational Benchmarking” of PSU refineries in India

2 Operational Benchmarking Overview  Why benchmarking ?  Why critical ?  Performance evaluation of Indian refineries  Methodology for performance evaluation  Benchmarking by Solomon Associates  Benchmarking by Shell Global Solutions  Areas for improvement  Consolidation & Way forward Pre Conference Petrotech 2007

3 Operational Benchmarking Overview Why benchmarking?  Is an on-going process to assess the present state of performance  Compare key performance parameters such as energy, distillate yield & product quality, maintenance reliability & availability, HR management, profitability  Understand competitive position  Identify the scope and adjust goal for further improvement  Implement initiatives for improvement Pre Conference Petrotech 2007

4 Operational Benchmarking Overview Why critical ? Survival in highly competitive & global environment after dismantling of APM, new mergers, new players  Ever increasing energy cost and security  Fluctuating operating margins  Challenges to process heavy & sour crude oils  Stringent quality and emission norms Pre Conference Petrotech 2007

5 Refinery performance evaluation Certain common parameters of performance are compared with its own previous performance as well as relatively to other refineries: Physical performance:  Primary / Secondary Unit Thru ’ put & Capacity Utilization  Distillate Yield  Production of Lube / Special Product  Specific Energy Consumption  Fuel & Loss  Hydrocarbon Loss Operational Benchmarking Overview Pre Conference Petrotech 2007

6 Refinery performance evaluation Financial performance:  Gross/Net margin  profit / Capital employed Other areas:  Compliance of Environmental Standards  Fire & Safety Performance  Maintenance/Shut-down time  Project implementation  HR management, productivity etc Operational Benchmarking Overview Pre Conference Petrotech 2007

7 Methodology for performance evaluation  No specific benchmarking programme or standard followed  MOP&NG constituted an Expert Committee in 1995 to review the Technological gaps in Indian refineries  Recommended energy benchmarking & targeting exercise for establishment of energy benchmark norms for refineries  Also to evolve a scientific & realistic approach for evaluation of performance of refineries w.r.t. Energy Consumption Operational Benchmarking Overview Pre Conference Petrotech 2007

8 Energy Performance Evaluation  Energy Benchmarking & Targeting carried out in in association with EIL  Energy Audits from time to reduce the gap between the Actual vis- à -vis Target Performance  Revalidation of benchmark numbers of major Units along with benchmarking of balance process units through EIL in 2003 Operational Benchmarking Overview Pre Conference Petrotech 2007

9 ENERGY BENCHMARKING & TARGETING  Process Units benchmarked on  Std. Configuration basis  Optimized process design with min. energy consumption  Economically viable size  Thermodynamic approach to assess levels of heat source & sink  Provision of Waste Heat Recovery schemes  It is calculated based on energy consumption (in the form of Fuel, Power, Steam & Cooling Water) of the Unit, heat export from that Unit & energy import into the Unit in the form of hot feed Operational Benchmarking Overview Pre Conference Petrotech 2007

10 Specific Energy Consumption Presently, energy performance of refineries is reviewed by analyzing the Specific Energy Consumption, Fuel & Loss and Hydrocarbon Loss. Specific Energy Consumption i s defined as Mbtu/bbl/NRGF where Mbtu – total energy consumption & loss in 1000 Btu Bbl – crude processed in Barrel NRGF – composite energy factor of the refinery  Composite energy factor of a refinery is derived as  {Energy Factor * unit T ’ put (bbl) } Crude T ’ put (bbl)  Composite energy factor is a function of refinery configuration Operational Benchmarking Overview Pre Conference Petrotech 2007

11 Refinery performance benchmarking  No data base on performance of international refineries is readily available in public domain  International agencies such as Solomon Associates, British Petroleum, KBC, Shell Global Solutions, etc conduct performance evaluation studies  Their objective is to develop valid industry performance criteria to facilitate participating refinery evaluate itself vis- à -vis other refineries in that geographical area Operational Benchmarking Overview Pre Conference Petrotech 2007

12 Solomon benchmarking studies  As advised by the Expert Committee constituted (to identify gaps in technology in Indian refineries) by MOP&NG in 1995, various refineries participated in benchmarking studies  Details of Indian refineries participated in International studies carried out bi-annually by M/s Solomon Associates YearRefineries participated 1989CPCL,IOCL (J), (M), (H) 1996IOCL(J),(M),(H),BPCL,HPCL(M),(V),KRL,CPCL 1998BPCL 2000CPCL Operational Benchmarking Overview Pre Conference Petrotech 2007

13 Refinery Performance evaluation – Solomon Associate's Method MAJOR KEY PERFORMANCE AREAS & PARAMETERS IDENTIFIED: Performance Areas Parameters of measure Capacity UtilizationEquivalent Distillation Capacity (EDC) Capacity Utilization Processing Efficiency Index EnergyEnergy Intensity Index ManpowerPersonal Index Maintenance CostMaintenance Index Turnaround Index Operating ExpensesCash Operating Index Net MarginNet Margin Index Operational Benchmarking Overview Pre Conference Petrotech 2007

14 Solomon benchmarking studies EDC – Equivalent Distillation Capacity  EDC concept helps for comparing performance between refineries of different size & configuration  EDC is a primary element for measurement of various performance indices.  EDC is measured as: Design EDC=  (Configuration Factor * design unit capacity, bbl/day) Utilized EDC=  (Configuration Factor * utilized unit capacity, bbl/day) Design & Actual T ’ put of each Process unit is required Operational Benchmarking Overview Pre Conference Petrotech 2007

15 Solomon benchmarking studies Capacity Utilization  Refinery capacity utilization indicates how much %age of existing distillation capacity is utilized & is obtained by Capacity Utilization = (Utilized EDC / Total EDC) x 100 Processing Efficiency  Refinery Processing Efficiency is a measure ‘value addition’ & is denoted by Processing Efficiency Index (PEI) PEI = [(Actual Volume Gain + Refinery Input) / (Estimated Volume Gain + Refinery Input)] x 100 Operational Benchmarking Overview Pre Conference Petrotech 2007

16 Solomon benchmarking studies Energy Efficiency  Is measured in terms of Energy Intensity Index (EII), which is: EII = [(Actual energy consumption / Standard energy consumption)] x 100 Standard energy consumption =  (utilized EDC of the unit x corresponding energy standard) Manpower  Is a function of total man-hours consumed by all refinery, maintenance and support personnel and measured as Equivalent Personnel = (Total man-hours of personnel deployed during the year including OT Hrs) ÷ (40 hours per week x 52 week per year) Operational Benchmarking Overview Pre Conference Petrotech 2007

17 Solomon benchmarking studies Maintenance Cost  Effective routine maintenance is measured as  Maintenance Index (MI) = Average routine maintenance cost of past two years / Total EDC  Turnaround Index (TI) = Annualised Turnaround Expenses / Total EDC Net Margin  Net Margin is a measure of value addition after meeting the operating expenses. It is measured as Net Margin Index (NMI) NMI = Grass Margin – Cash operating Index NMI can be calculated once the following data is available:  Grass Product Value  Raw Material Cost  Cash Operating Cost Operational Benchmarking Overview Pre Conference Petrotech 2007

18 Solomon benchmarking studies Operating Expenses  This is a measure of keeping Operating expenses in check.  It is measured as Cash Operating Index (COI) COI = Total operating cost / utilized EDC COI can be calculated once the following data is available:  Non –Volume related expenses  Salaries, Establishment  Maintenance & Repairs  Gen. & Admn.  Volume related expenses  Chemicals & Additives  Stores & Spares  Purchased Power & Fuel  Expenses as adjusted ( Refinery own fuel such as Fuel Gas, liquid fuel) Operational Benchmarking Overview Pre Conference Petrotech 2007

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21 Benchmarking by Shell GSI  Limited information was available from Solomon Studies for few participant refineries  To critically assess the performance of Indian refineries after dismantling of APM  Need to identify and evaluate various parameters of refining for comparison and improvement of bottom- line  Need to evaluate performance of refineries as well as process units  To compare performance of all 15 PSU refineries, Shell GSI was selected Operational Benchmarking Overview Pre Conference Petrotech 2007

22 Benchmarking by Shell GSI  Period – Financial Year &  Modules  Energy and Hydrocarbon Loss Management  Human Resource Management  Maintenance performance, Reliability and Availability Optimisation  Environmental Performance  Financial Performance Operational Benchmarking Overview Pre Conference Petrotech 2007

23 Benchmarking by Shell GSI  Boundaries of The Review –  Standard Refinery and Base Oil Operations, Maintenance, Management and Capital Projects.  Includes Head Office Support functions  Excludes Terminals, Supply and Distribution, Packaging Plants, Community Facilities. Operational Benchmarking Overview Pre Conference Petrotech 2007

24 Shell GSI Methodology  Shell GSI Database comprises approximately 50 Refineries worldwide (exclusive of 15 Indian refineries)  Peer Groups are divided on the basis of Region and/or on the basis of the Refinery Complexity.  Refinery Complexity – Refinery Complexity is defined in terms of Normal Shift Positions (NSP) which is not related to capacity but to process plant and equipment. The amount of equipment is also categorised by Mechanical Units (MUc) corrected for size.  Indices – Shell GSI has two Indices the Corrected Energy and Loss (CEL) and Shell Personnel Index (SPI) Operational Benchmarking Overview Pre Conference Petrotech 2007

25 Shell GSI Methodology Site Parameters Normalising Parameters Data InputsKey Performance Indicators Process Unit Type Boilers Power Generation Tanks etc Mechanical Equipment Unit Capacity Barrels of Intake Normal Shift Positions Corrected Mechanical Units Annualisation / Cycle Average Inflation / Exchange Rates Indices Operating Costs Fuel Consumption Staff Contractors Workhours Overtime Process operations Yields Shell Pers. Index CEL Unit Energy Costs/bbl Cost / MUc Unit Cost/T Utilisation Availability Operational Benchmarking Overview Pre Conference Petrotech 2007

26 Normal Shift Position Normal Shift Positions (NSP) is a measure of the Complexity of the Refinery and Base Oil facilities. The NSP for an Operating location are determined as: 1.The operating units are categorized into what are called Basic Building Blocks (e.g. Crude distillation unit which included furnaces, columns and desalters), 2.An allowed NSP is assigned to that building block and all building blocks summed to give the site NSP 3.The Mechanical Unit count is used in order to check whether for the given process configuration there is more or less than the expected amount of equipment to be operated and maintained and therefore an need to modify the basic NSP count 4.Lastly, for a full SPI study and organizational effectiveness review, an on-site survey is undertaken to confirm the above desktop work. Operational Benchmarking Overview Pre Conference Petrotech 2007

27  An index is calculated from the hours worked and a constant for that particular index as follows: Total hours worked X Constant NSP  The constant was determined to give an index of 100 for the site that was at the top tercile of the original survey.  Different constants are applied for Maintenance, Support and the Overall index Shell Personnel Index (SPI) Operational Benchmarking Overview Pre Conference Petrotech 2007

28 The CEL system is built up as per this diagram Process Units Cooling Water System Flare CEL Energy Loss Generation Consumption Ocean Refinery Storage & Handling Sundries Process Energy allowances to correct for changes in Process Conditions. Depends on closed refinery wide Mass Balance Closes the energy balance for the whole refinery Operational Benchmarking Overview Pre Conference Petrotech 2007

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31 Energy Performance ( ) Strength  Many process units near world average  Three sites ‘world class  Good generation index for sites with Gas Turbines  Energy conservation disciplines well advanced Opportunities  Older units offer scope to improve but will require investment. Geography of site could limit opportunities  Low utilisation has an effect on energy efficiency.  Site wide energy optimisation gaps caused by sequential site development  Ocean losses needs attention Operational Benchmarking Overview Pre Conference Petrotech 2007

32 Strength  At least one site is ‘world class’ on availability  Several sites are ‘world class’ for maintenance costs  Network of 15 refineries to share experience Opportunities  Relax statutory limits on turnaround duration  Relax statutory requirements on inspection requirements  Reduce Maintenance effort by enhancing efficiency of maintenance practices Maintenance Performance ( )

33 Comparison with Peer Groups Highlights  10 sites SCP and 5 sites MCP (small/medium complex plant)  Crude intake was higher in their Peer group for 8 refineries (5 SCP, 3 MCP)  Energy efficiency- 2 sites were in top Tercile and 3 sites in third Tercile (Asia Pacific). Globally only 1 site was in top Tercile and 5 in third Tercile  Refinery loss- 6 & 5 sites were in top Tercile for Asia Pacific & Globally respectively and 5 sites in third Tercile for both Asia Pacific & Globally.  SPI-No site in top Tercile in Asia Pacific and all in third Tercile Globally  Labour cost per NSP-4 & 6 sites were in top Tercile and 4 & nil in third Tercile for Asia Pacific & Globally respectively Operational Benchmarking Overview Pre Conference Petrotech 2007

34 Comparison with Peer Groups Highlights  Maintenance performance-Only one site in top Tercile (Asia Pacific & Globally). 8 & 9 in third Tercile for Asia Pacific & Globally respectively. Turnaround longer by 30-50%  Maintenance cost-6 & 10 in top Tercile for Asia Pacific & Globally respectively. 2 & nil in third Tercile for both  CO2 emissions-3 sites were in first Tercile and 5 in third Tercile for both Asia Pacific & Globally  VOC emissions- 8 sites were in third Tercile for both Asia Pacific & Globally.  Operating cost per bbl- 4 and 6 in top Tercile for Asia Pacific & Globally respectively. 6 in third Tercile for both group  Site energy cost-All are in 2 nd and 3 rd Tercile in both groups except for one refinery in top tercile in Asia Pacific  Cash operating expenses-8 & 10 in top Tercile and 4 & 2 sites in 3 rd Tercile for Asia Pacific & Globally respectively Operational Benchmarking Overview Pre Conference Petrotech 2007

35 Opportunities as per Shell study  Energy and Loss Management program – Energy is the single largest controllable cost. Opportunities for Indian PSU Refineries is ~ $US 240 million.  Maintained Availability – Unavailability is one of the largest controllable loss of Gross Income for the sites. Opportunities for Indian PSU Refineries is ~ $ 115 million  Unplanned Downtime – Unreliable plant also leads to loss of Income and adds costs. Opportunities for Indian PSU Refineries is ~ $US 50 million  Supply Chain Optimisation – External market impact on plant utilisation. Supply chain optimisation is of lower priority than the items above. Operational Benchmarking Overview Pre Conference Petrotech 2007

36 Comparison with Peer Groups Highlights  10 sites SCP and 5 sites MCP (small/medium complex plant)  Crude intake was higher in their Peer group for 9 refineries (6 SCP, 3 MCP)  Energy efficiency- 3 sites were in top Tercile and 4 sites in third Tercile (Asia Pacific). Globally 2 sites were in top Tercile  Refinery loss- 7 sites were in top Tercile and 2 sites in third Tercile (Asia Pacific & Globally).  SPI-No site in Global top Tercile, all but one in third Tercile  Maintenance performance-Only one site in top Tercile (Asia Pacific & Globally). 6 and 9 in third Tercile for Asia Pacific & Globally respectively Operational Benchmarking Overview Pre Conference Petrotech 2007

37 Comparison with Peer Groups Highlights  Maintenance cost-8 and 11 in top Tercile for Asia Pacific & Globally respectively.  CO2 emissions-3 sites were in first Tercile and 5 in third Tercile for both Asia Pacific & Globally  VOC emissions- 5 sites were in third Tercile for both Asia Pacific & Globally.  Operating cost per bbl- 4 and 3 in top Tercile for Asia Pacific & Globally respectively.  Site energy cost-All are in 2 nd and 3 rd Tercile except for one refinery in both groups  Cash operating expenses-6 and 8 in top Tercile for Asia Pacific & Globally respectively. 2 sites in 3 rd Tercile for both Operational Benchmarking Overview Pre Conference Petrotech 2007

38 Opportunities as per Shell study  Energy and Loss Management program – Energy is the single largest controllable cost. Opportunities for Indian PSU Refineries are ~ $US 200 million.  Maintained Availability – Unavailability is one of the largest controllable loss of Gross Income for the sites. Opportunities for Indian PSU Refineries are ~ $ 120 million  Unplanned Downtime – Unreliable plant also leads to loss of Income and adds costs. Opportunities for Indian PSU Refineries are ~ $US 40 million  Supply Chain Optimisation – External market impact on plant utilisation. Supply chain optimisation is of lower priority than the items above. Operational Benchmarking Overview Pre Conference Petrotech 2007

39 Energy Efficiency Performance Vis-a-Vis  Top Tercile for Asia Region improved 0.3%  Second Tercile for Asia Region improved 5.9%  Third Tercile for Asia Region improved 3.8%  Average improvement in Indian PSU Refineries was 6.0 %  On a comparative basis no gains against your competitors Operational Benchmarking Overview Pre Conference Petrotech 2007

40 Maintenance Performance Vis-a-Vis  Maintenance Cost per Mechanical Unit  Regional Top Tercile improved by 11.3%  Regional Second Tercile deteriorated by 4.7%  Regional Third Tercile improved by 0.5%  Average Indian PSU deteriorated by 9.0%  Cycle Maintained Availability  Regional Top Tercile constant  Regional Second Tercile deteriorated by 0.8%  Regional Third Tercile improved by 1.5%  Average Indian PSU deteriorated by 0.1% Operational Benchmarking Overview Pre Conference Petrotech 2007

41 Margin Performance Vis-a-Vis  On an Import parity basis Gross Margins improved by 210% between 2003/4 and 2004/5  By comparison Regional Marker Gross Margins improved by between 230 and 290%  Key constraints on Gross Margin potential  Refineries are constrained to their regional market  No outlets for premium quality products  Lack of conversion capacity (Distillates) and yield of low value Fuel Oil, outlet to petrochemicals

42 Areas for Improvement Energy & Operational performance  Smaller sites are characterised by high energy usage in storage and handling and high auxiliaries.  Heat integration in CDU/VDU  Reduction in excessive steam letdowns  Ocean loss is high which is common in all refineries  Minimisation of steam condensation for generating electricity  Better loss management Operational Benchmarking Overview Pre Conference Petrotech 2007

43 Areas for Improvement Energy & Operational performance  Increase conversion capacity ~15% less Fuel oil..  Steam and power network integration  Fuel optimization  Improvement in basic processes  Operational and maintenance excellence  Improved utilities plant and processes  Improved process-utility interface  Process unit and catalyst optimization Operational Benchmarking Overview Pre Conference Petrotech 2007

44 Areas for Improvement Energy & Operational performance  Optimise LPG and lower olefins yields  Strategically replace Naphtha as fuels with Natural Gas and develop aromatics and premium gasoline.  Upgrade FCCUs, HCUs for increased LPG Yields.  Continue to develop supply chain infrastructure, port capacity, crude and product pipelines.  Quality improvements not just in response to Environmental drives but also product differentiation  Energy efficiency improvement for emission performance.  Develop petrochemicals interfaces  Hydrogen management Operational Benchmarking Overview Pre Conference Petrotech 2007

45 Areas for Improvement Maintenance Availability & Reliability  Improve utilization & unplanned downtime for improved energy performance  Turnaround durations are variable. Some sites show good management practices which should be actively shared.  Typically shutdown duration is longer that best in the region. There are indications that scope is not fixed and also there is indications of high levels of “un-revealed” work  Current statutory cycle lengths are less than those possible internationally.  Statutory inspection scope is generally larger than permitted internationally. Operational Benchmarking Overview Pre Conference Petrotech 2007

46 Areas for Improvement Maintenance Availability & Reliability  Determine maximum economic cycle length  Identify vulnerable areas of plant (RBI, Corrosion Loops) and selectively replace such equipment.  Challenge and Control Scope of Shutdowns. Selective on- line inspection. Project scope control.  Integrate fully Operations and Maintenance shutdown teams.  Maintain good records to convince authorities to allow longer operating cycles  Rationalise High number of pieces of equipment to maintain or to fail.  Procurement optimization & optimum work volume Operational Benchmarking Overview Pre Conference Petrotech 2007

47 Maintenance Availability & Reliability  Determine correct operating windows for plants  Sufficient skilled Advisory staff (Rotating Equipment, Corrosion engineers, Inspectors) to investigate.  Bad Actor identification  Defect Elimination programs  Improved asset reliability & integrity  Selective upgrading of equipment  Implement shutdown/incident tracking with estimation of potential or actual economic impact. Areas for Improvement Operational Benchmarking Overview Pre Conference Petrotech 2007

48 Margin Improvement  Business process optimization/improvement  Improved planning tools, common global process for LP modeling,  Unconstrained LP Model for individual refineries, Network simulation (NETSIM) tool used to model supply envelope  Data set based on “best sustained performance”  Crude and feedstock selection  Refinery production optimization-yield improvement Areas for Improvement Operational Benchmarking Overview Pre Conference Petrotech 2007

49 Margin Improvement  Interfaces with refineries & petrochemicals  Hydrocarbon stream routing  Product mix/blending, handling, storage and quality  Refinery fuel cost optimization  Explore interfaces with “non-Fuels” sectors to maximise margin  Invest in capacity and/or constraint removal  Selective removal of Supply constraints and develop “export” opportunities Areas for Improvement Operational Benchmarking Overview Pre Conference Petrotech 2007

50 Consolidation  Study collects performance data on raw material, product yields, operating expenses, energy, maintenance, process, personnel etc for analysis  Understanding Performance Gaps is key to Performance Improvement  Many possibilities exist for examining gaps; customized peer group selection is available to help address specific issues  Approximately your size  Is in your market area  Has a similar configuration Operational Benchmarking Overview Pre Conference Petrotech 2007

51 Consolidation  Potential Consolidation of Existing Players and Emergence of Fewer, Stronger Players  Strategic Marketing Alignments and Joint Ventures  Organizations Looking to Optimize the Entire Value Chain  Supply Chain Management including In/Outbound Logistics, Marketing, Manufacturing, Planning  Strategic Downstream Integration into Petrochemicals Operational Benchmarking Overview Pre Conference Petrotech 2007

52 Way Forward….. Follow the Leading Performers  Attitude of the people running the refinery makes the difference - not the equipment in place  Pacesetters develop a refinery operating plan and stick to it  Individuals are held accountable for deviating from the plan  Great importance is put on maintaining plant reliability and availability  Return on existing assets is maximized before additional investments are undertaken Operational Benchmarking Overview Pre Conference Petrotech 2007

53 Way Forward…. Key to Success  Management leadership focus  Cohesive top management team  Organizational alignment  Data based decision making processes  Results (not action) orientation  Competitive Mind-set Operational Benchmarking Overview Pre Conference Petrotech 2007

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