White Paper

Achieving Competitive Advantage from

Refinery-Wide Business Performance Optimization
Author: Ian Willetts, Director, Invensys Operations Management

What’s Inside:
1. Introduction
2. Challenging Times
3. Maximizing Business Performance
3.1 Improved Mass Balance Accuracy
3.2 Model Based Performance Monitoring
3.3 Optimal Regulatory and Advanced Process Control
3.4 Real-Time Unit and Refinery-wide Optimization
3.5 Energy Optimization
3.6 Optimal Refinery Planning
3.7 Enterprise Manufacturing Intelligence for Refinery
Performance Tracking
4. Conclusion
Achieving Competitive Advantage from
Refinery-Wide Business Performance Optimization

1. Introduction
The economic slowdown, rising energy costs and growing environmental pressures have created a “Perfect Storm” for the
global refining industry. In a June 2007 interview with Chemical Week, Michael Dolan, Senior Vice President at ExxonMobil
Corporation discussed how a focus on operational excellence, disciplined investment, and technology leadership helped the
company drive profits. Even though the economic environment is very different today versus 2007, the underlying premise of
the Michael Dolan interview is the same. Companies have to look for business process improvement strategies to navigate these
challenging times and maximize margin (or even minimize losses) and to emerge as leaders when the economy finally recovers.
This paper discusses the Refinery-wide Performance Optimization Solution from Invensys Operations Management, a unique
integrated technology that helps companies to integrate the business functions and workflows within their organization for
overall business process improvement.

2. Challenging Times
Refinery margins are a reflection of the balance between supply and demand and today demand is down significantly with the
economic slowdown. Refining margins in the United States have dropped precipitously since early 2007 as shown in Figure 1.

Figure 1: Representative US Refining Margins (Source: OilMarketReport.org)

Refining margins in the Asia Pacific region are not negative as they are in the United States and Europe and have actually improved
recently driven by a strengthening economy in the region. The low and negative margins are driving a shift in refining capacity
around the world. The U.S. Energy Department reported that Refineries ran at 78.4 percent of capacity in the week ending Jan.
15, 2010. This is the lowest level since 1989, excluding instances when hurricanes halted Gulf Coast operations. This decrease in
utilization can be clearly seen on the next page in Figure 2 which shows the 4-Week Average U.S. Percent Utilization of Refinery
Operable Capacity over the last 20 years.

Page 1
Achieving Competitive Advantage from
Refinery-Wide Business Performance Optimization

Figure 2: Historical Refinery Utilization (Source: US Energy Information Administration)

This low utilization combined with new more cost effective refining capacity coming on-line in the Middle East and Asia Pacific region
is leading to many companies shuttering refineries in the United States and Europe.

The overall picture is also not helped by rising energy costs which now represents approximately 45% of operating expenses versus
just 25% ten years ago. There is a strong correlation between the price of oil and the percentage of operating expenses that energy
costs represents. Figure 3 below is a plot that shows the interdependence between the price of a barrel of oil and the energy cost as a
percentage of operating expenses, assuming differing costs for the price of natural gas.

Figure 3: Energy Cost as a Percentage of Operating Expenses

versus the price of a Barrel of Oil (for different Natural Gas Prices in $/MMBtu)

The third contributing factor creating the “Perfect Storm” comes with worldwide growing environmental concerns that have resulted in
the enactment of strict regulatory frameworks and emission norms. Layering this on top of the slow economy and rising energy costs
creates a situation where the refining industry must look for every opportunity to maximize its business performance in order to survive
these challenging times and emerge as stronger companies.
Page 2
Achieving Competitive Advantage from
Refinery-Wide Business Performance Optimization

3. Maximizing Business Performance

Invensys Operations Management  created in 2009 from the integration of four different groups within Invensys — Invensys Process
Systems, Wonderware, Eurotherm and IMServ—is uniquely positioned to help refining companies optimize the business impact of
their operation’s performance and therefore overall profitability.

Traditional approaches to the effective management of industrial complexes have been described under the label of “operations
management,” but in today’s real-time business environment, operations management provides only a part of the solution. The
challenge is to couple the management of the operation with the drivers of the business. This requires a new strategy that crosses the
operational and business boundaries and provides a more holistic approach to managing and controlling the operation for business
success. This new strategy is called Operations Business Management and the four basic components of an operations business
management strategy are displayed below.

Figure 4: Real-Time Operations Business Management

The Refinery-wide Performance Optimization Solution integrates different technologies from the Invensys Portfolio to deliver different
aspects of real-time business operations management to the refining industry. The Solution provides the following capabilities all
within a streamlined integrated framework using industry leading technology:

1. Improved Mass Balance Accuracy Across the Refinery (Measure)

2. Model Based Performance Monitoring to improve Personnel/Operations Effectiveness (Empower)
3. Optimal Regulatory and Advanced Process Control (Control)
4. Unit and Refinery-wide optimization for agility and responsiveness to changing market conditions (Optimize)
5. Evaluate and Adjust Energy Production & Utilization (Empower and Optimize)
6. Enable Optimal Refinery Planning & Scheduling (Measure and Empower)
7. Provide Ready and Timely Access of Performance Data to all Stakeholders (Measure and Empower)

These seven capabilities can all be deployed as separate point solutions and many refining companies have deployed some aspect of
these capabilities within their assets today. For example Advanced Process Control is a standard and widely accepted best practice for
refining companies. The important difference in this Solution from Invensys Operations Management is that it can be deployed on top
of existing solutions, such as Advanced Process Control, but within an integrating framework. This integrated framework better informs
and aligns enterprise and local operating organizations with actionable objectives and shared performance measures which in turn
enables optimal operational and business performance.

With the necessary application and implementation services, the Refinery-wide Performance Optimization Solution enables refining companies
to conservatively add from $0.25/Bbl to $0.40/Bbl to the bottom line margin at each Refinery. For a medium complexity, 100,000 barrels per
day refinery, this can be worth as much as $15 million per year, with the value rising proportionately with throughput and refinery complexity. 

The following seven sections describe how each of these seven components of the solution individually add value and return on
investment should they be deployed in a stage wise manner. These sections also explain how these capabilities dovetail into others to
bring greater value within the overall solution, for maximum business value.

Page 3
Achieving Competitive Advantage from
Refinery-Wide Business Performance Optimization

3.1 Data Reconciliation and Improved Mass Balance Accuracy

One feature often overlooked in business process improvement initiatives is the need and the ability to take raw data from the
plant and process it to identify faulty instruments. Another feature often overlooked is to correct, through a reconciliation process,
“inaccurate” data before using that data to make operational decisions that could impact the profitability of the refinery. In a Paper
presented at the Invensys Operations Management North American Client Conference in 2007, Mike Cronkwright of Shell Canada
Products Ltd in Calgary described how Shell used this component of the overall solution to analyze over 300 flow meters across the
Shell Sarnia Refinery. Using the Mass Balance Module within the Refinery-wide Solution set, Shell was able to:

• Achieve tighter unit mass balances for yield, energy and profit monitoring
• Identify meters in Gross Error very quickly reducing the number of meters at fault from 25% to under 5%
• Achieve a satisfactory heat and material balance across the refinery as a starting point for the optimization process
• Provided more accurate mass flows to the Accounting team to assist with monthly mass balance closure and to the Site Business
Planning Group to help with the LP monitoring tool

These are significant benefits from a single component of the solution and the reconciled data feeds up to other applications for
further added value as at Shell. It is critical that any derived business or process information used and distributed within a business
performance initiative is as accurate as possible.

3.2 Model Based Performance Monitoring

In order to operate a refinery at its peak performance Refining companies need to be able to determine where the refinery is
operating today and what would be the financial impact of making any changes. Such decision support requires the operations
staff to have good process understanding and process insight that cannot be deduced from flowrate, temperature and pressure
measurements alone.

The primary goal of performance monitoring based on rigorous engineering models is to extract useful and consistent information
from raw process data to support high quality operational decision-making. The solution also combines real-time financial and
economic data together with the derived performance measurements to create quantifiable, actionable information. Benefits are
realized via continuous performance improvement by informed and thereby empowered frontline personnel who understand the
financial performance of current operations and the impact of driving operations to a higher and more profitable state. This is
applicable where the information helps operations to drive the plant toward more optimal operation and equally applies where the
lack of timely and accurate information about the degradation of process equipment may result in an unplanned process upset or,
worse yet, a shutdown.

Invensys customers are applying this part of the solution for applications that include:

• Crude Preheat Train Monitoring & Fouling Calculations

• Compressor and Gas Turbine Monitoring
• Distillation Tray Efficiency Calculations

The models implemented in each phase of a project are readily upgradable into open loop and closed loop process optimization
supporting the stepwise deployment of the overall Refinery-wide Performance Optimization Solution.

3.3 Optimal Regulatory and Advanced Process Control (APC)

Multivariable model predictive or Advanced Process control strategies are a standard and best practice for Petroleum Refiners for:

• Enabling the plant to operate closer to product specifications and process or equipment limits
• Improving process stability
• Reducing product quality variability
• Improving energy/utility efficiency, such as dispatching boilers, unit stabilization etc.
• Achieving economically optimal changeovers between operating modes with minimal process upsets

Page 4
Achieving Competitive Advantage from
Refinery-Wide Business Performance Optimization

Many refining companies that would consider deploying the Refinery-wide Performance Optimization Solution may already have in
place Advanced Process Controllers within their Refinery. However in today’s current economic situation, as explained previously,
refiners are running at or below historically low operating rates. Control loops that were tuned for operating at higher operating rates
may be poorly tuned for controlling processes at these lower flow rates, providing the opportunity to improve performance. Also the
nature of poorly tuned regulatory control has operators reacting to problems caused by the poor tuning rather than having the time to
drive process improvement and run the refinery as profitably as possible.

This component of the solution primarily leverages Invensys Operations Management consulting staff who are industry leaders in the
implementation of regulatory and advanced control technology. Prior to tuning, re-commissioning an existing or even installing a new
Advanced Process Control solution, the Invensys staff can use its advanced diagnostic methods and proprietary tools to document
control system performance and to recommend remedial actions that will make a positive difference.

Our process control performance analysis tools and diagnostic service provide a comprehensive analysis that includes information
on process constraints, field actuator problems, loop interaction and model identification for improved tuning. Improved regulatory
and advanced process control tuned to operate at today’s lower throughput are a critical pre-requisite to utilizing the optimization
component of the solution described next.

3.4 Real-Time Unit and Refinery-wide Optimization

By maintaining tighter control (less variability) through Advanced Process Control, operations are able to operate closer to product
specifications and process or equipment limits in order to improve energy efficiency, product yields, throughput etc. without violating
process constraints. Although the APC can hold the plant at its control targets, it does not have sufficient economics and unit model
rigor to calculate optimum operating targets in response to changing market conditions.

Real-time Optimization uses a rigorous first principles process model to continually calculate improved set points for the advanced
controller that will drive the unit to a higher profitability subject to plant constraints, given the current economic conditions. The
optimizer can be configured to drive for any user-definable objective function such as, for example:

• Maximum Profit from optimal product slate and yield, or

• Maximum Production rate at Minimum Energy Consumption

This stepwise improvement from basic control onto Real-Time Optimization is shown in Figure 5.

Figure 5: Regulatory Control to APC and onto Real-Time Process Optimization for Maximum Benefits

Page 5
Achieving Competitive Advantage from
Refinery-Wide Business Performance Optimization

The rigorous first principles model can be of a single unit such as the Crude and Vacuum Distillation Unit or Fluid Catalytic Cracker
Unit (FCCU) or it can be a collection of units such as the aromatics section of a refinery. The model will take real-time process
and economic data and perform an economic optimization to identify the improved set points for the APC that will drive higher
profitability. The optimizer will also report the current operating point versus the process constraints such as column flooding, available
cooling or furnace bridge wall temperature. The model sensitivities are used to quantify the financial benefits that could be realized
if it is possible to widen the constraints. While some constraints are tied to equipment limitations and may not be able to be pushed,
some “soft” process constraints maybe able to be relaxed to drive increased profitability.

The individual unit optimizers allow process operations to be managed within the defined criteria but do not look beyond the process
envelope at how upstream and downstream units could affect or be affected by the separate optimizers. The Refinery-wide solution
also supports the capability to build a refinery-wide model. This model will not be built to a fully rigorous level but will support the
appropriate level of rigor to support timely analysis and understanding of the refinery-wide behavior and the process and economic
interdependency of the individual units. The refinery-wide model will not be run in a closed-loop real-time mode but will be used
open-loop to understand the refinery-wide behavior as well as the refinery-wide process constraints that allows constraints to be
pushed safely and for profits to be maximized.

Although the following table is taken from an analyst report that is over 10 years old, the data is still very relevant today. Both APC and
real-time optimization are established practices followed by the industry leaders. The benefits from the control and optimization of
the individual units have been widely reported in the literature. Table 1 clearly shows that substantial benefits can be achieved by the
APC and Optimization components of the solution. The table does not include the additional benefits that can be realized from the
development of the refinery-wide model to compliment the individual optimizers.

Typical Unit Typical Bene-

Refining Unit Benefit c/bbl Size, 1000 Bbl/d fits, $million/yr
Crude/Vacuum 5 - 10 135 2.5 - 5.0
FCCU 20 - 40 38 2.8 - 5.6
Reformer 5 - 25 25 0.5 - 2.3
Hydrocracker 10 - 30 26 1.0 - 2.9
Alkylation 5 - 35 10 0.2 - 1.3
Delayed Coker 10 - 40 31 1.1 - 4.5
Light Ends 10 - 20 40 1.5 - 2.9
Isomerization 5 - 15 30 0.5 - 1.6
Lubes Vacuum 10 - 40 10 0.4 - 1.5
Aromatics 15 - 20 15 1.8 - 1.1

Table 1: Combined Benefits from Applying APC and Optimization to Refining Units
(Source Hart’s Fuel Technology and Management, Nov/Dec 1996)

In addition to driving the plant to its most profitable combination of constraints that optimizes product slate, balances energy usage
and finds the best yields, the rigorous tuned model can also be used to extract the relationship between inputs and outputs (LP
vectors) across each processing unit within the refinery. This data can be used for updating the planning models used to guide refinery
operations, as explained the sixth component of the overall solution below.

3.5 Energy Optimization

As the price of barrel of oil rises, Figure 3 on Page 2 clearly shows that energy costs become more and more of a factor in the
financials of refinery operations, representing an ever increasing percentage of operating costs. This combined with increasingly
stringent environmental regulations is leading companies to look for opportunities to improve energy efficiency. The cost of power
and utilities is often the largest controllable operating expense after the purchase of raw materials at most large operating sites.

Page 6
Achieving Competitive Advantage from
Refinery-Wide Business Performance Optimization

The Refinery-wide Performance Optimization Solution provides the ability to act in real-time and to automatically optimize energy
supply with changing economics and plant needs within environmental constraints. It is especially attractive for plants that have
varying energy prices or the changing possibilities to buy, produce or sell power.

This component of the Refinery-wide Optimization Solution can result in a significant reduction in energy cost of between 3 and 5%.
Additional side benefits include the ability to:

• Monitor and helps reduce emissions of CO2, SOX & NOX

• Automatically take advantage of off-peak power pricing
• Optimize fuel type, boiler & turbine load distributions
• Achieve better fuel gas management and fewer alarms

Figure 6 below shows a screenshot from a utilities optimization flowsheet developed within the integrated solution framework.

Figure 6 – A Utility Optimization flowsheet with the Steam Headers, and Power Generation, Export and Importation Systems

3.6 Optimal Refinery Planning

Today Refineries use empirical LP planning models to decide which crude oils to process, and how to operate the refinery’s process units
to meet the expected end-product demands for maximum expected profitability. Planning is performed by the Planning Department
which operates somewhat independently of the day-to-day operations staff in the refinery. Business performance optimization can only
be achieved by integrating work flows among different business functions within the company and the Refinery-wide Performance Opti-
mization Solution brings together the information from the rigorous process Optimization applications (Item 4 above) to support optimal
Refinery Planning by the Planning department. The Planning Department needs to drive optimal performance by enabling its personnel
to optimize production plans and schedules with the best possible LP Planning Models that reflect the most current state of the refinery.

Once an Optimizer is installed and working, it will continually track the performance and changes in the refinery over time, adapting
as it goes. As the optimization model retunes itself in response to changing process conditions it maintains the most accurate
relationships across the process units. This accurate model can then automatically export updated relationships between the feeds
and products (the LP vectors) for each processing unit throughout the refinery. These LP vectors are formatted ready for input into the
refinery planning model and when updated give the best possible representation of the plant for next month’s planning process. This
in turn will ensure that next month’s planning model identifies the most profitable way to operate the refinery.
Page 7
Achieving Competitive Advantage from
Refinery-Wide Business Performance Optimization

In addition, “Plan versus Actual” calculations enabled by the Refinery-wide solution will also allow the customer to track and quantify
the improved performance the updated LP models are helping to deliver.

3.7 Enterprise Manufacturing Intelligence for Refinery Performance Tracking

Process and business optimization as described above is performed on a daily basis by the industry leading refining companies
and Invensys Operations Management works very closely with both Royal Dutch Shell and ExxonMobil Corporation on many of the
components of the overall solution. Both Shell and ExxonMobil track quantify and report the benefits of deploying these technologies.
At the 2009 North American Client Conference, Michael Chisholm of Shell reported that the Deer Park DU-2 Crude Unit Optimizer is
still in use over 10 years after its initial deployment. The presentation clearly stated that tracking the optimizer KPI’s is one major factor
in ensuring the longevity of the optimizer. By tracking and reporting the dramatic benefits of process optimization, the management
of these leading companies see the value and continue to invest in maintaining and further deploying these solutions across their
assets. Shell has reported that it realizes $1000 in benefits from optimization for every $25 it spends on maintenance and support of its
optimizers. This is quite a compelling return on investment.

This last piece of the overall Refinery-wide Performance Optimization Solution is focused on enabling and automating a business
impact “feedback loop” from the Solution to the stakeholders in the Solution. The Enterprise Manufacturing Intelligence “feedback
loop” component of the solution acquires critical process and optimal performance data from the Optimizer and aggregates it with
data acquired from other data sources within the Refinery including the LIMS, ERP system and the existing refinery process historian to
provide deeper insight into and tracking of the refinery performance. This enables a unique and extremely valuable set of data to be
calculated, tracked and made readily available to all stakeholders. Included in this information is:

• Aggregated financial impact of the optimizers

• Operational constraints and financial opportunities from constraint pushing
• Planning model performance
• Key Performance Indices such as Energy Intensity and Product Yields
• Respective Refinery Performance (e.g. Utilization, Emissions, Profitability) across the fleet

The all important “Achilles Heel” of optimization solutions being “turned off” has been addressed by automating the business
performance feedback loop in order to ensure that the Solution’s benefits will be sustained years beyond the initial installation.

Page 8
Achieving Competitive Advantage from
Refinery-Wide Business Performance Optimization

Figure 7 below provides a diagrammatical representation of the information flow that enables the all important business performance
feedback loop.

Figure 7: Information flow to the Enterprise Manufacturing Environment

With clear measurable and visible benefits totaling million of dollars per year, refining companies are able to readily make the
decisions needed to continue to invest in these value-added technologies that ensure the Refinery-wide Performance Optimization
Solution delivers long term and sustainable benefits.

4. Conclusion
The Refinery-wide Performance Optimization Solution from Invensys Operations Management is a unique integrated technology that
helps Refining companies to maximize the returns on average capital employed (ROACE) of their huge asset base, while operating
these assets safely and in compliance with increasingly stringent environmental regulations.

©2010 Invensys Systems, Inc. All rights reserved. Avantis, Eurotherm, Foxboro, InFusion, Invensys, SimSci-Esscor, Triconex, Validation Technologies and Wonderware are
trademarks of Invensys plc., its subsidiaries and affiliated companies. All other product names are the trademarks of their respective holders. rel. 03/10

Page 9