Determining the road to top performance via Refinery Benchmarking

Stuart Cooney, Managing Consultant, Shell Global Solutions International B.V.

1

Introduction

Shell Global Solutions has carried out many refinery benchmarking studies over the last several years with the purpose of assisting Shell and non-Shell customers in defining what ‘top performance’ means for their business and to help map out the path to achieving that improved performance. Benchmarking is an important step in the overall value generation cycle in providing input into such aspects of the business improvement planning as the alignment of business strategy as well as the simple definition of areas of relative strength and weakness of a refinery. Shell Global Solutions places benchmarking at an early stage of the business improvement cycle, during what is referred to as an opportunity 1 confirmation programme (OCP).

Low-risk structured and proven approach
Long-term benefits

Implementation programme

Value
Preparation

Opportunity confirmation programme (OCP)
Strategic alignment Benchmarking Programme definition Business improvement plan
Agreement and mobilisation

A key question that is faced when analysing the performance of any site is what areas for improvement are largely or wholly within the responsibility of the refinery management and what areas are partially or fully beyond the control of the refinery. This is often considered to be a question of the competitiveness of the site as opposed to the efficiency of the site. In this article the author will look at how, using benchmarking data the industry attempts to understand these different parameters so as to focus improvement efforts on those aspects that can be influenced by the refinery and those more appropriately dealt with at a corporate or strategic level. Critically the article then looks at what aspects of the improvement programme can be undertaken by the site on its own and those where there is insufficient resources or skills available and external intervention or assistance is necessary. Another key issue to be dealt with includes a correct understanding of the timeframe within which change can be effected and the path to be taken toward top performance. It can be seen from longer term benchmarking data how long it has taken the industry, and even individual participants, to achieve top performance. This along with the correct path from current to top performance can be seen from the benchmarking data, helping those who are now beginning the improvement journey to close the performance gap more quickly than those who went before, however, also setting targets that are challenging but can be demonstrated to be achievable. Lastly, sites on the road to improvement need to achieve sustainability in this process. This means not only changing the technology and infrastructure of the refinery but also changing the way people work and think about their roles.

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Refinery peer groups After all the raw benchmarking data has been normalised using the above parameters and techniques. energy and cost data and other activities have been excluded from study. Most notably indices are used for energy and loss performance and personnel efficiency benchmarking. Shell Global Solutions has two proprietary indices being the corrected energy and loss (CEL) and the Shell personnel index (SPI). The last significant factor taken into account to normalise refinery performance is the total intake. crude and feedstocks for processing. Hence. The second important element of the Shell benchmarking methodology is the mechanical unit count. Important to any business is to maintain a positive margin between the income from products sold minus the costs of the raw materials and minus the costs associated with operating the processing equipment. for the refinery. It is firstly important to know what has been included in the benchmarking study and secondly to understand. The mechanical unit count converts the physical number of pieces of equipment on site into a count that is weighted for the complexity and cost of the maintenance task for that piece of equipment. Shell has developed several techniques for comparing different refineries and uses other well established approaches in order to make fair comparisons between different refineries. This method of comparison is necessary due to the large variation in refinery characteristics. refineries can then be compared on the basis of different Peer groups.2 Study boundaries All benchmarking studies begin with a defined set of boundaries. It is important to note that the NSP is independent of the processing capacity of the refinery or the individual units. for complex integrated sites. In this process. Peer groups divide the refinery population being benchmarked by either the type or complexity of the refinery or by the geographical region in which the refinery operates. based on Shell’s historical data. how process plant. The Shell benchmarking database contains refineries with a range of NSP counts from approximately 10 to over 120. Benchmarking indices In order to compare refineries it is often necessary to convert the raw information into an index. Hence more complex equipment such as compressors or storage tanks has a higher factor than a simple heat exchanger. The refineries that participate in the Shell Global Solutions benchmarking range in capacity between approximately 5 million bbls/yr to over 230 million bbls/yr of processing intake. Benchmarking . The mechanical unit count is adjusted for the processing capacity assigning more complexity to larger processing units. The first element of the Shell benchmarking methodology is the calculation of the refinery complexity expressed as normalised shift positions or NSP. an allowance for a certain parameter is calculated and this is compared with the actual site performance.2 A few of the more important concepts of benchmarking are mentioned here. Comparing refineries There are approximately 800 refineries operating in the world and it would be most probable that no two refineries are exactly the same in complexity and capacity.

o Energy costs.8 0. Lastly. o Personnel costs. when expressed only in cost per bbl can mislead the reader regarding the competitiveness of the site.4 EUROPEAN REGION AMERICAS REGION 1.2 US $ per Barrel 1 0. o Other fixed costs. Variable operating costs. These techniques provide a similar view on the operating costs competitiveness of the refinery. o Other variable costs. when measured solely on cost per bbl will be uncompetitive. o Maintenance. Operating costs per bbl are subdivided in to various categories as follows: • • • Total operating costs (including depreciation). Older or more complex refineries may have more plant and equipment to maintain and operate than newer facilities which. Both techniques have been used by Shell manufacturing facilities to understand their competitive ranking. Competitive Ranking of Maintenance Costs Maintenance Costs 1. Changes in technology.3 Understanding refinery competitiveness and efficiency At the end of the day the competitive position of a refinery is primarily measured by two quite simple parameters. Fixed costs. material and energy costs which. For example the maintenance costs per bbl from can be ranked from lowest to highest for each of the geographic regions.2 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Other benchmarking organisations that operate in the petrochemical industry have developed alternatives to the cost per bbl approach. Refineries have quite varied combinations of processing units that were constructed over many years. Firstly. as the approach adopted by Shell Global Solutions. the key competitiveness metric. plant layout and design concepts as well as the improvements in engineering capabilities mean that metrics based solely on barrels of intake or capacity are inadequate in determining the scope for improvement in a refinery’s performance. This should in essence be the criterion for competitiveness whether the stakeholders in the organisation are private or public. Refineries in different regions or countries will have different unit labour.4 0. Shell Global Solutions benchmarking has always focussed on cost per bbl as.6 0. the economy of scale of new larger 42 43 44 45 46 1 2 3 4 5 6 7 8 9 0 .6 ASIA PACIFIC REGION 1. the refinery’s ability to place its products in profitable markets and secondly to control its operating costs so as to deliver a positive net margin and a sufficiently attractive return on investment for its stakeholders. Determining the efficiency of a refinery is a more difficult task and this is where the use of the indices referred to earlier becomes more important.

consider Figures 2 and 3. maintained and operated in order to correctly focus the limited resources of the organisation on maximising the value of the assets. Hence. can also rank maintenance costs on the basis of cost per mechanical unit.processing facilities and super sites will always make such sites look competitive on a per bbl basis but there may be hidden inefficiencies that if revealed can lead to even better performance. On the other hand an organisation with a refinery that is also uncompetitive but already amongst the most efficient needs to think more strategically about the asset.2 1.4 0. Mechanical units were described above as an inventory of the equipment on the site that has to be maintained. which show the refinery maintenance costs expressed in terms of US$ /bbl and in terms of US$ / mechanical unit. Comparing Refinery Maintenance Costs Maintenance Costs Asia Pacific 1400 Europe Americas COMPETITIVE BUT INEFFICIENT 1200 UNCOMPETITIVE AND INEFFICIENT US $ per Mechanical Unit 1000 800 600 400 200 COMPETITIVE AND EFFICIENT 0 0 0. As with the competitive metric.6 0.2 0.6 US $/bbl 34 46 1 2 3 4 5 6 7 8 9 0 . In order to illustrate this point. cost per mechanical unit can be considered as a measurement of the efficiency with which the site executes the maintenance tasks for the actual equipment that they have to deal with. Efficiency Ranking of Maintenance Costs 1200 ASIA PACIFIC REGION 1000 EUROPEAN REGION AMERICAS REGION US $ per Mechanical Unit 800 600 400 200 35 36 37 38 39 40 41 42 43 44 45 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 The industry needs to understand the difference between the competitive position of the refinery and the efficiency with which it is being managed. These parameters were ranked individually in Figures 2 and 3. costs per bbl. but Figure 4 simultaneously looks at the competitive ranking and efficiency of the refineries.8 1 UNCOMPETITIVE BUT EFFICIENT 1.4 1. A refinery that is currently uncompetitive but also is not efficient in its operations or maintenance needs to focus within its own fence on achieving better efficiency.

sometimes after benchmarking has been normalised data by factors such as barrels or mechanical units or even when the index has been created. .5 2 2. 3 large very complex refineries consume more energy per bbl in order to achieve the level of conversion of crude to products when compared with less complex sites. Energy Costs vs. being based on crude or fuel oil prices.Dividing the results into quadrants based on the average maintenance cost per bbl and the average maintenance cost per mechanical unit one can divide the benchmarked population into four groups. Energy Efficiency Energy Efficiency vs. Those in the region defined as being uncompetitive and inefficient need to investigate further if improvements in efficiency can be made so as to bring the refinery into a more competitive quadrant while those who are already efficient but still uncompetitive need to consider how to either drive for even greater efficiency or whether they have a structurally higher number of mechanical units or process plants which prevents them achieving a truly competitive position. Energy Cost Asia Pacific 220 HSK Europe Americas 200 VLCP HSK 180 Energy Index SCP 160 VLCP LCP MCP SCP MCP LCP VLCP MCP HSK 140 SCP 120 LCP HSK TCR LCP 100 LCP MCP SCP VLCP 80 0 0. In the same chart the individual site results have been also grouped by geographical peers. As was mentioned above. However.5 1 1. When investigating benchmarked aspects such as costs there is often a strong influence of geography on unit rates. For example.5 Energy Costs US$/bbl As fuel prices are more or less equivalent on an international basis. when analysing the potential for improvements in energy it is best to consider complexity peer groups rather than regional peer groups. The strategy for prioritising and closing any gaps will depend on the quadrant in which the refinery is located.5 3 3. there are still some residual differences between refineries of different complexities. The use of an energy index system such as CEL largely compensates for the differences in complexity as can be seen by the scatter of the complexity groups in Figure 5. or conversely only looking regionally at competitors. there is a tendency towards higher energy costs per bbl for more complex facilities as compared to those of lower complexity.

The next part of the process again refers to the benchmarking data but breaks down the difference between the actual and target performance into as many components or cascading (hence the waterfall term) elements. Looking at the benchmarking data on maintenance labour for these two sites by cost per bbl and hours worked per mechanical unit in Figure 8 it can be seen that the site coloured red is in fact one of the most efficient in its use of maintenance labour but.4 0. two of the sites that are in the top right (uncompetitive and inefficient) quadrant could be selected (Figure 7).6 0.4 Determining the improvement opportunity Once the competitive and/or the efficiency gaps have been determined it is then necessary to determine to what extent the gap can be closed.8 1 1.4 1. Often there is a remaining structural gap. has a structurally high labour cost. Referring back to the previous example on maintenance costs.6 UNCOMPETITIVE BUT EFFICIENT Aspects out of control Aspect 2 Aspect 3 Aspect 4 US $/bbl Among the various reasons for the poor performance could be either the amount of labour employed in the maintenance activities or the cost of those resources. The best in class target could be for a regional or complexity peer group or even the global best practice. or possibly even an advantage. The site coloured orange on the other hand has ample opportunity to look at . Comparing Refinery Maintenance Costs Maintenance Costs Asia Pacific 1400 COMPETITIVE BUT INEFFICIENT 1200 UNCOMPETITIVE UNCOMPETITIVE AND INEFFICIENT Europe Americas US $ per Mechanical Unit 1000 800 600 400 200 COMPETITIVE AND EFFICIENT 0 0 0. remaining at the end of the process.2 1.2 0. for the region. GAP OPPORTUNITY WATERFALL DIAGRAM Actual result Benchmarking indicator Aspect 1 G A P Best in class Realistic target Progress to Target One popular way of viewing the process is via a ‘waterfall diagram’ as illustrated in Figure 6. The process begins by establishing the result for the refinery and the ‘best in class’ result for the same key performance indicator (KPI).

4 Maintenance Costs US $/bbl 1.6 Europe Americas 1.8 0.6 UNCOMPETITIVE BUT EFFICIENT 0. This site should be looking at the quality of their maintenance activities. The site. in Figure 9. Mechanical Availability Asia Pacific 1.4 0.8 1 1. Maintenance CostsMechanical Availability vs.2 0. coloured orange (consistent with the previous discussion) has a very poor mechanical availability. to avoid repeated shutdowns. to reduce unit downtime. is also not achieving top performance indicating that even though they are already a top performer on maintenance labour efficiency there is room still for improvement if reliability can be improved. Maintenance Labour cost vs. In order to achieve a high mechanical availability a site needs to execute the maintenance tasks both quickly. which may be one of the reasons behind the high labour effort in maintenance.4 0.6 0.2 0 89 90 91 92 93 94 95 96 97 98 99 Mechanical Availability % . The site coloured red. and effectively. despite high costs and low labour. how well planned are these activities and perhaps improving the skills of their maintenance workforce.improving maintenance efficiency and take better advantage of what appears to be low unit labour rates. Efficiency Maintenance Labour Asia Pacific 90 Europe Americas COMPETITIVE BUT INEFFICIENT 80 UNCOMPETITIVE AND INEFFICIENT 70 Hours per Mechanical Unit ' 60 50 40 30 20 10 COMPETITIVE AND EFFICIENT 0 0 0.2 $ US/bbl 4 The mechanical availability of a site can also be considered as an efficiency metric.2 1 0.

.4 0.2 Maintenance Costs US$/bbl 1 0. In the following chart it can be seen that sites which are beginning with a low Mechanical Availability and perhaps low Maintenance Costs in fact have to increase the maintenance spend in order to improve reliability and availability. It is of prime importance in designing an improvement programme that activities are undertaken in the correct sequence and that there is focussed attention on improving the most appropriate parameters.6 0.8 0. Over the intervening years all sites. takes time. have improved and the sites that originally had the lowest efficiency have improved most.5 Achieving top performance The road to top performance is not always direct.2 0 85 90 95 100 Mechanical Availability % One key reason for participating in any benchmarking exercise is to attempt to identify top performers and to learn from their best practices.5 Shell developed the SPI methodology over 20 years ago in order to drive efficient use of personnel and to provide a methodology for highlighting best practices. Trend of Mechanical Availability and Maintenance Costs for 2002 andMaintenance Costs vs. It can be seen from Figure 11 that 15 years ago the difference between the most and least efficient sites was greater than 100%.6 2004 1. even them one that was originally the most efficient. The gap between the most and least efficient Shell locations is now approximately 25% of the gap 15 years ago. One illustration of the value of sharing best practices can be made with reference to Shell’s experience with the SPI methodology. Learning from the best practices of others within your organisation or from others is the best way of making sure that you attack the issues facing your Refinery in the correct order as notes above but will hasten the rate at which you can close the gaps between your Refinery and top performers. Considering optimisation of Mechanical Availability and Maintenance Costs as being a priority for a Refinery then the improvement journey is to a great extent dependent on the starting point. Other sites having already begun to improve reliability and availability of their process units are then able to continue to improve these parameters while reducing maintenance spend. cannot be travelled alone and requires much more than just technological and engineering input.4 1.approximate 2006 position 2004 and Mechanical Availability 2002 1.

. The lesson here is that there is always a need to consider and validate priorities. This level of sustainability is achieved by ensuring that the changes made are fully embedded in the organisation before moving onto the next improvement project. The majority of the Shell sites achieved their current level of performance approximately 5 years ago and have maintained this good performance since then. Changing the way people work. Another aspect is that of achieving sustainable top performance. Embedding change in an organisation is normally the most difficult aspect of achieving top performance.Long Term Improvements in Shell’s Refinery Personnel Efficiency 250 230 210 Overall Personnel Index 190 170 150 130 110 90 70 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 With very few exceptions the progress towards top performance is a gradual one and not one in which massive changes occur in a single year. This chart highlights the need for a consistent long term vision and plan. are organised and interact with each other is a potentially more difficult task and one deserving of as much attention in any improvement programme as the technical aspects. but against a consistent set of metrics. Taking a view of the lost time incident frequency data over a period of fifty years it can be seen that major improvements were made up until the early 1970s by improving process designs and applying the learnings from incidents 6 around the world. There are one or two instances of significant year on year change but these are due to retirement of old inefficient plants and facilities. During the 1970s the rate of improvement in safety performance slowed and there was a realisation that further improvements required an alternative approach than simply engineering out the risks. Notably in the past year or two there has been an increase in personnel. A very good illustration of the relative difficulty of implementing the technical and mind set changes is the long term improvements that Shell has made in the safety performance of our manufacturing facilities across the globe. Implementing technological change such as new plant and equipment. Current high margins and increasing environmental challenges are driving more intense project and associated activities. plus more modern control facilities are relatively simple and clear cut.

it is necessary to understand the differences between competitiveness and efficiency so as to correctly focus on improvement efforts and responsibility for those efforts. 6 Conclusion In conclusion benchmarking provides a consistent set of metrics by which to determine where the opportunities for improvement lie within a business or individual refinery. Shell divides refineries in to six different complexes. There is no single path between the current state of a business and the desired future position and change programmes need to be carefully considered so as to move the business in the right direction. The opportunity conformation programme is a proprietary Shell Global Solutions International BV methodology used to align business improvement strategy. Benchmarking also provides the means to identify and exchange best practices which serves to ensure consistent improvement and to speed up the process. and very large complex plants (VLCP). Achieving top performance and sustaining it requires the industry to deal effectively with the management of the people in organisations that are affected by or responsible for implementing change at all levels of all organisations. However.Shell’s long-term Refinery Safety Performance Lost Time Incident Index 100 Process Design 80 60 40 20 0 1950 Changing the technology Enhanced Safety Management Contractors HSEMS Hearts & Minds Changing the mindset 1960 1970 1980 1990 2000 2010 Since the 1980s there has been a greater focus on the way in which safety is managed on site. sustainable improvement is not only a process of improving the technology or engineering out poor performance. large complex plants (LCP). The basis for these complexity groups was given in the XIII RTM paper. large complex plats (MCP). Lastly. Hydroskimming (HSK). 3. thermal cracking (TCR). medium complex plants (MCP). confirm opportunities for improvement and outline the business improvement plan. the incorporation of all people working on our sites. 2. A detailed description of the Shell Global Solutions refinery benchmarking methodology was given in a paper presented by the author at the XII Refinery Technology Meet organised by the Centre for High Technology (India) in Hyderabad in November 2005. Shell complex plants (SCP). Correct selection of geographical or refinery complexity peer groups allows the improvement vision and targets to be established. . external verification of management systems and finally understanding that safe operations are as much a matter of the mind set of all employees not just the technology and rules. Footnotes 1. There is a fundamental need to understand how people work and interact and what influence that has on almost an individual level to achieve top performance. The path will be a long one.

The value at a site level is a weighted average of all process units. . 5.4. The methodology compares actual site workhours with a standard allocation based on the actual operating plant on site. Lost time incident frequency is expressed as the number of lost time incidents per million workhours. 6. available for production. Major turnaround downtime is amortised over the operational cycle (based on the last two turnarounds) and routine maintenance downtime is the average of the past two years. Shell personnel index (SPI) is a proprietary Shell methodology for determining the efficient use of personnel on site in terms not only of absolute numbers or people but also in terms of the balance of skills and the balance between own and contract personnel. Mechanical availability is the amount of time a process unit is not undergoing maintenance and. A lost time injury is one where the employee is not able to return to normal duties the next day. therefore.

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