Jul-2001

Benefits from a profits improvement plan

How a Japanese refinery improved its profitability by adopting a detailed plan for optimising every aspect of plant operation as well as encouraging a “profit culture” among its workforce

Yuji Takao and Minoru Horike, Koa Oil Co Ltd
Paul Kennedy and Sanjay Bhargava, KBC Process Technology

Article Summary

Since the deregulation of the Japanese refining industry in 1996 the excess of domestic refining capacity over demand has led to fierce competition and low margins. In response to the tough market conditions, Koa Oil Company began a Profit Improvement Programme (PIP) in May 1998 at its two refineries. The purpose was to identify and implement sustainable profit improvement opportunities with minor investment and none. The PIP was executed in partnership with KBC.

This article describes the systematic and rigorous approach of the PIP and how this was followed by Koa, including implementation case studies. Objectives and targets of each phase of the programme are covered as well as the progress to date, which exceeds 100 cents/bbl on the original 1997 PIP price basis. However, due to the prevailing worse margins of 1999 and 2000, Koa is seeing actual benefits of about 60 cents/bbl in the bottom line. Key success factors pertaining to the Koa environment are also covered.

In the second half of the article, two case studies are described. The descriptions are supported by actual KPI charts from the Koa PIP.

Koa Oil Company Ltd owns and operates two refineries in Japan with a total crude capacity of 252000bpd. Marifu is the original Koa refinery; it is a high-conversion sour crude refinery with the additional capability of needle coke production from sweet crude.

Osaka is the newest refinery in Japan. It is a medium conversion refinery with power generation from the vacuum residue. In addition to the traditional slate of refinery products from each refinery (gasoline, kerosene, gasoil (diesel) and fuel oils), Marifu produces speciality products, including polymer grade propylene, aromatics, needle coke and asphalt. Osaka also sells power to the local utility company.

Objectives
The original Koa PIP objectives were to:
- Improve refinery profitability by 50 cents/bbl through implementation of PIP identified opportunities
- Create a profit culture in Koa through increased awareness, capability and pro-active behaviour
- Transform the organisation to achieve continuous improvement and sustained profitability.

In parallel with the PIP, Koa also implemented several other initiatives to promote improved profitability and transformational change. In partnership with KBC, this included a reliability, availability, maintenance (RAM) programme and an LP upgrade project.

Phase 1
Identifying opportunities
The base case begins with round table meetings on site over a two-week period to cover all aspects of refinery operation from process units to finished product blending. The combined experience and specialist skills of the team were used to analyse and challenge the current refinery operations and practices as well as to define a representative base case performance for later evaluation of PIP identified opportunities.
Koa base case performance was defined in a refinery model calibrated to a typical month of operating data. The refinery model is developed using Petrofine, KBC’s proprietary refinery simulation software. The software has many applications within a refinery; for instance, Koa also uses Petrofine models for crude assay management, LP data generation and process unit monitoring.

Opportunity evaluation
An initial opportunity list is made towards the end of the first site visit. The opportunity ideas came from both Koa and KBC and the list is constantly improved and refined as the PIP progresses. Following base case agreement, the opportunities were prioritised for detailed analysis.

The highest priority items were those with attractive benefits that had a high confidence factor and could be implemented quickly with no investment.

Detailed analysis of opportunities began with use of the Petrofine base case simulation model. For each opportunity the recommendation was implemented in the computer model as a “step out” from the base case, analogous to a refinery test run but with much less effort. Since the model is a full integration of the process units and finished product blending, an accurate economic summary for each opportunity is given.

The sophistication of the model to include changes in yield, unit heat balance, product quality and process limitations means that opportunities can be accurately evaluated from both a technical and an economic viewpoint. For instance, the model is particularly effective for the evaluation of alternative stream cuts or routings.

Typically, a technical specialist will do further detailed analysis to explore, for instance, how close a unit can run to a profit constraining limit. The process specialist will often coordinate a plant test to verify the actual limiting point. Occasionally more investigation of the commercial issues maybe required. Example: how to sell more of a certain product and at what price?

A summary of the Phase 1 completed opportunity list is given in Table 1 (on previous page), along with the potential benefits. Table 2 shows that the identified PIP benefits were largely achievable with no investment.

Phase 2
Implementing opportunities
The Phase 2 implementation phase of the project began in April 1999 with an initial contract for 12 months. KBC provided two people full time on each site and when required could call on specialist support from KBC world-wide.