I.

Industry Analysis

The petroleum refining industry converts crude oil into more than 2500 refined products,
including liquefied petroleum gas, gasoline, kerosene, aviation fuel, diesel fuel, fuel oils,
lubricating oils, and feedstocks for the petrochemical industry. Petroleum refinery activities start
with receipt of crude for storage at the refinery, include all petroleum handling and refining
operations, and they terminate with storage preparatory to shipping the refined products from
the refinery.

The petroleum refining industry employs a wide variety of processes. A refinery’s processing
flow scheme is largely determined by the composition of the crude oil feedstock and the chosen
slate of petroleum products. Petroleum refining begins with the distillation, or fractionation, of
crude oils into separate hydrocarbon groups. The resultant products are directly related to the
characteristics of the crude oil being processed. Most of these products of distillation are further
converted into more useable products by changing their physical and molecular structures
through cracking, reforming and other conversion processes. These products are subsequently
subjected to various treatment and separation processes, such as extraction, hydrotreating and
sweetening, in order to produce finished products. Whereas the simplest refineries are usually
limited to atmospheric and vacuum distillation, integrated refineries incorporate fractionation,
conversion, treatment and blending with lubricant, heavy fuels and asphalt manufacturing; they
may also include petrochemical processing.

II. Business Analysis

A. Business Description and Overview

Petron Corporation is the largest oil refining and marketing company in the Philippines
supplying 40% of the country’s oil demand. Petron operates an integrated crude oil refinery
and petrochemicals complex with a rated capacity of 180,000 barrels per day in Limay,
Bataan.

Petron’s ISO-14001-certified refinery processes crude oil into a full range of petroleum
products including liquefied petroleum gas (LPG), gasoline, diesel, jet fuel, kerosene, fuel oil,
solvents, asphalts, mixed xylene and propylene.

From the refinery, Petron moves the products mainly by sea to 32 depots and terminals
situated all over the country. Through this nationwide network, Petron supplies fuel oil,
diesel, and LPG to various industrial customers. The power sector is Petron’s largest
customer. Petron also supply jet fuel at key airports to international and domestic carriers.

Through nearly 1,300 service stations, Petron retails gasoline, diesel, and kerosene to
motorists and public transport operators. Petron also sells their LPG brands “Gasul” and
“Fiesta Gas” to households and other consumers through an extensive dealership network.
Petron operates a lube oil blending plant at the Pandacan Terminal, where it manufactures
lubes and greases. These are sold in service stations and sales centers. Petron also operate a
facility in Subic Bay which produces fuel additives.

1.1. Corporate Vision and Mission

Petron’s vision is "to be the leading provider of total customer solutions in the energy
sector and its derivative businesses."

This will be achieved by:

 Being an integral part of customers' lives, delivering consistent customer experience
through innovative products and services;
 Developing strategic partnerships in pursuit of growth and opportunity;
 Leveraging refining assets to achieve competitive advantage;
 Fostering an entrepreneurial culture that encourages teamwork, innovation and
excellence;
 Caring for community and the environment;
 Conducting employees with professionalism, integrity and fairness;
 Promoting the best interest of all stakeholders.
 B. SWOT Analysis

STRENGTHS WEAKNESS

 Strong market presence  Declined liquidity

 Substantial infrastructure  High operating costs

OPPORTUNITIES THREATS

 Technology upgrades  Intense competition from

 Refinery expansion global major
projects  Political unrest in Middle
 Capital investments East and Africa
 Global economic scenario

III. Problem Analysis

The unusual price and supply dynamic has inevitably affected the oil and gas sector, with
activity, liquidity, and profitability contracting sharply. The decline in crude oil prices of some
70% has had a major effect on oil and gas companies’ liquidity positions.

Looking at the Refinery’s point of view, fully operational process units and enhanced process
efficiencies ensures that the target production of refined petroleum products is achieved. With
Petron’s strong market presence, sales are high through local and international demands
resulting to substantial cash flow. Should a critical process unit shutdown due to mechanical
failure, production will be highly affected and can contribute to upsetting the operating
expenses and profitability. This can, to some degree, influence the liquidity position of Petron.

3.1. APS-2 (atmospheric pipestill unit) is the largest distillation unit of the Refinery with a
full capacity of 100 thousand barrel per stream day (MBSD). Its furnace has two forced
draft fans, each with a capacity of delivering 1,010 m3/min of air, that run in parallel to
supply the air needed for combustion. Combustion air requirement for 100 MBSD
operation is 2,025 m3/min. The turndown rate of APS-2 is 60 MBSD and its combustion
air requirement is 1,215 m3/min. If one of the fans fails, a single fan operation cannot
provide the combustion air requirement even at turndown rate and therefore will
 result to unit shutdown. Accordingly, the motor is operating near its full load ampere
(FLA) of 34 amps. Once FLA is reached, motor will trip and will result to unit shutdown
as well.

3.2. Objectives for improvement are the following:

 Design, procure, and install a new forced draft fan-motor assembly with a rated
capacity and pressure of 1,620 m3/min and 500 mm H2O each, respectively (per
basic engineering study)
 Install the new assembly within the 35-day duration of APS-2 maintenance
turnaround
 Total construction cost must not exceed the approved budget of PhP
85,200,000.00

IV. Causal Analysis

4.1. To achieve the unit’s maximum federate of 100 MBSD, the furnace (F-2101) must be
fired at a duty of 76.1 MW given the API of the crude oil slate. At this furnace duty,
the calculated combustion air requirement is 2,025 m3/min. Below is the process flow
diagram of APS-2’s combustion air system.

The forced draft fans (B-2101 A & B) supply the combustion air to the furnace.
Normally, the bypass is closed. The combustion air travels through the air preheater
(K-2101) to exchange heat with the flue gas. The hot flue gas is drawn from F-2101’s
stack by the induced draft fan (B-2102) and the cold flue gas, after heat exchange, is
 streamed back to the stack and into the atmosphere. The preheated combustion air
from K-2101 now flows to the burners of F-2101 for the firing.

4.2. Root Cause Analysis using Root Cause Tree Diagram

V. Decision Analysis

5.1. Options or alternatives to address the problem:

1. Design, procure, and install a new forced draft fan-motor assembly for 100 MBSD
feed. Construct within 35 calendar days and within approved budget
2. Decrease feed rate of APS-2 unit from maximum 100 MBSD to 72 MBSD

5.2. Decision Analysis Technique

 Option 1: Design, procure, and install a new forced draft fan-motor assembly for 100 MBSD feed
Potential Problem Possible Cause/s Preventive Action Contingency
Underdesign of new fan- Incorrect data and Ensure accuracy and Re-use old fan-motor
motor assembly for 100 parameters used for consistency in data and assembly
MBSD calculation parameters used for
calculation and ensure
Insubstantial use of calculation is
design factors according conservative
to best practices
Consider all design
factors per best
practices (ExxonMobil
Design and Global
Practices, API, ASME,
etc.)

Detailed review of
design by all
engineering, operations,
and maintenance
departments/sections
Total construction cost is Overpriced equipment Ensure at least 5 bidders Award the
over the approved and due to lack of bidders for procurement of equipment to
appropriated budget equipment and 5 winning vendor and
Overpriced equipment bidders for the construction contract
due to auxiliaries service/construction to winning
contract contractor and
Overpriced construction request management
contract due to lack of Ensure equipment for supplementary
bidders auxiliaries and additional budget
construction scope is
Overpriced construction sufficient and within the
contract due to objectives of the project
additional scope
Construction duration Incorrect assumption Detailed review of Extend 35-day
exceeds scheduled 35-day and/or estimate of scheduling shutdown
opportunity duration of activities opportunity
both by Owner and Ensure all activities for
Contractor the completion of the
project are considered
Interference of
construction activities Identify additional
by other Contractors at activities and/or
site activities by other
Contractors in the site
Additional activities that may interfere with
arising during work activity
construction due to lack
 of consideration in Ensure proper and
scope of work complete quality
control, inspections, and
Repeat work testing

Option 2: Decrease feed rate of APS-2 unit from maximum 100 MBSD to 72 MBSD
Potential Problem Possible Cause/s Preventive Action Contingency
Choking of APS-2 New euipment and Maintain operation at Do not decrease
equipment and machineries designed best efficiency points or maximum feed
machineries for 100 MBSD max. at their operability range capacity of APS-2
feed rate of APS-2 are
operated at below
design operation
Tripping of equipment New equipment and Maintain operation Do not operate at
and machineries machineries designed above min. operating below 60 MBSD
for 100 MBSD max. parameters
feed rate, when
operated at 43 MBSD Modify trip settings
(min. feed rate for 72
MBSD), is out of
operability range
Decreased profit Decreased production Increase profit margin Increase feed rate to
100 MBSD max.
Decrease operating cost

Increase production
volume of other
products

5.3. Select Best Alternative

Based on decision analysis using IE tools, best course of action is to design, procure,
and install a new fan-motor assembly for 100 MBSD capacity. The forced draft fans
will normally run in parallel providing 2,025 m3/min of combustion air at 365 mm H2O
to the furnace to provide the required coil outlet temperature (COT) required to heat
the crude at 100 MBSD feed rate. Should one of the fans fails, the furnace will run at
minimum/turndown rate of 60 MBSD and a single fan operation can provide sufficient
air to continue furnace operation at this minimum feed rate. Hence, shutdown of unit
will be prevented at fan failure.
VI. Develop/Design Systems Improvement

To implement the chosen option, it must begin at detailed design and engineering wherein
standards and best practices are used to identify, calculate, and evaluate the design parameters
of the forced draft fan and its components. Components include the induction motor, bearing,
coupling, air intake, ducting, and its electrical and instrumentation facilities. These are all
considered during this stage to ensure compliance with the best practice of combustion air
systems.

After identifying the design parameters and hence the technical requirements and
specifications, the Owner will bid the requirements and approved Vendors will provide their
technical proposals for engineering evaluation. Once evaluated, the equipment will be awarded
or procured to Vendor that is both technically acceptable to the requirements of Owner and is
commercially competitive.

In parallel to this, the Owner will identify the scope of work needed to complete the installation
of the fan-motor assembly. In this particular project, the scope of work is categorized into four
(4) major components: mechanical, civil & structural, electrical, and instrumentation. This is
 compiled into a Job Specifications or Invitation to Bid document where the contracting
specifications are also discussed. The Owner will then bid-out the Job Specifications to
accredited Contractors and will have their technical proposals evaluated according to scope of
work and duration. Once evaluated, the contract will be awarded to the Contractor that is both
technically acceptable and is commercially competitive.

The procured equipment will then be installed by the Contractor, with supervisory assistance
from the commissioning engineer of the Vendor, within 35 calendar days. Both Contract and
Vendor shall ensure quality control and compliance to the technical requirements and
specifications. The Owner, particularly the Engineering group, monitors the project and is
responsible for the overall completion of the project from design phase to close-out and
turnover stage to Operations and Maintenance groups.

VII. Impact Analysis

7.1. Petron applies the Management of Change (MOC) to introduce changes in its process
units. The MOC is a best practice used to ensure that safety, health and environmental
risks are controlled when a company makes changes in their facilities, documentation,
personnel, or operations. The MOC is created once the project is completed and is
distributed to all stakeholders. An Operations and Maintenance Manual is also
created to ensure proper operation and maintenance of the new facility.
 7.2. Risk Analysis using FMEA
Potential
Potential Failure
Cause(s)/Mechanism Potential Effect(s) of Failure
Mode
(s) of Failure
No/Less Blocked air intake Less combustion air to furnace
Combustion Air FL-2101A (lower air to fuel ration) which
Flow may eventually trip the furnace
Suction damper of B- Less combustion air to furnace
2101 A/B closed (lower air to fuel ratio) which may
eventually trip the furnace
Isolation damper on Less combustion air to furnace
B-2101 A/B (lower air to fuel ratio) which may
discharge closed eventually trip the furnace
Isolation damper on No combustion air to furnace
air preheater suction (lower air to fuel ratio) which may
closed eventually trip the furnace
Low pressure at the furnace
High pressure upstream of
damper
Air preheater bypass Cold combustion air to furnace
damper fully open leading to a lesser combustion
efficiency
More combustion air Less combustion air to furnace
to stack due to (lower air to fuel ratio) which may
damaged air eventually trip the furnace
preheater seal Potential corrosion of B-2102 and
K-2101 due to low temperature
of flue gas (dew point of flue gas)
Suction damper of B- Pressure build up in furnace
2102 closed leading to potential rupture and
subsequent fire and explosion,
resulting in injury and asset
damage
Safeguards/Mitigation Severity Risk Recommendations
Combustion air flow to furnace will
be maintained via B-2101B 1 B1
Combustion air flow to furnace will Petron to confirm if suction
be maintained via B-2101B damper is configured as fail
1 C1
open, if yes, this scenario is
not credible
Combustion air flow to furnace will
be maintained via B-2101B 1 C1
Damper/valve line-up during start-
up
3 B3
DTI-742 (instrumentation)
Damper/valve line-up during start- 3 B3
up
Oxygen balance conducted to
identify leak in seals
1 C1
DTI-742 (instrumentation)
Damper/valve line-up during start- Refer to recommendation no.
up 1
High pressure alarm (PHA-2110) on
3 C3
furnace F-2101
Stack damper can be manually
opened