Apr-2014

Better yield accounting methods improve financial results

A yield accounting system can improve the efficiency of solving material balance errors and correct measurement errors throughout an entire facility

Kaylen McMullen, Joseph McMullen and John Hernandez
Schneider Electric and Invensys

Article Summary

Refineries, petrochemical plants and other processing facilities must accurately account for all material in the plant. They simply cannot afford to give material away and incur monetary losses due to incorrect tracking and financial assessment of receipts and shipments. Small percentages of unaccounted material relative to the entire plant throughput add up during the course of the year. This could have a negative impact on the plant’s profitability, as well as its competitive market position.

Hydrocarbon processing facilities must also ensure they are minimising or eliminating true material losses as they strive to comply with stringent regulatory controls. So, any methods that properly measure receipts, shipments, process streams and tank inventories to help meet compliance targets should be a welcome addition to their business practices.

Additionally, if a plant has the capability to keep an accurate material balance while identifying faulty measurements, quality and other performance targets will be improved, while losses due to inaccurate metering and product downgrades will be reduced. Therefore, it is imperative to have an accurate account of where plant material is located. Leaders in the processing industries accomplish this using meticulous yield accounting procedures aided by state-of-the-art software.

Beyond financial, regulatory and quality issues, the inability to properly reconcile the material balance of streams and components adversely affects accounting, where comingled ownership of processed materials is involved and/or there is a joint venture involved requiring an accurate distribution of costs and profits.

Properly implemented yield accounting practices and technology are the key to better tracking of materials, closing the material balance around an entire processing facility, reducing booked losses and properly assessing the financial performance of the facility. To understand the financial magnitude of the issue, consider that the typical material balance around a 250 000 bpd refinery will show imbalances of 1.5 to 2%. Best practices in yield accounting, including advanced software methods, can reduce this imbalance by 0.5% or more. This improvement in the closure, appraised at today’s refinery margins, can represent up to $5.0 million per year. Today’s yield accounting software solutions provide necessary assistance in closing the balances by identifying measurement and data-entry errors, performing mathematical reconciliation of the plant measurements and accurately reporting reconciled consumption and production information to the financial systems.

Improving the overall effectiveness of the yield accounting system will lead to more reliable plant and business performance metrics and more accurate financial reporting. The primary issues are data quality, data sources and important characteristics of a best of breed yield accounting application. A facility that utilises the suggested practices and techniques, and implements such an application, will make positive improvements in the accuracy of their financial reporting.

Data quality
All raw plant data need to be reconciled before they can be used. Reconciliation turns raw data into useful information by removing data in gross error and determining statistically correct data for each instrument based on the process as a whole.

The key data issues that impede closing the material balance are plant data measurement errors, data entry errors and missing data. Raw plant measurements can vary based on instrumentation accuracy, maintenance and calibration history, and changes in the process conditions and compositions of the materials being measured. The objective in using a yield accounting software application is to adjust the raw measurements within their measurement tolerances to close the balance. However, the reconciliation procedure may have to adjust some of the measurements beyond their tolerance limits in order to close the balances. A good yield accounting application will perform the reconciliation, automatically (programmatically) detect and identify meters that are grossly erroneous, and close the balances within measurement tolerances of the remaining (good) meters.

Even the most experienced user is likely to make errors in data entry, which can bias the solution completely by incorporating nonsensical data. A validation process is therefore required on manually entered data so that many errors may be corrected immediately at their source. Wherever possible, data validation rules should be configured at the point where manual data are entered. The user makes entries and the interface layer should immediately flag any values that are not within acceptable limits. This saves time for the yield accountant by cleaning up the data near the start of the process. Nevertheless, it should be possible to configure data value constraints within the yield accounting software.

Missing data also pose a problem for the yield accountant. This can occur due to a number of reasons. An interface between the yield accounting software and source data may fail and may not have appropriate store-and-forward procedures to recover from communication failures or the data simply may not have been recorded in the source database. For example, operators receive orders and directives for material movements in and around tanks, receiving terminals and shipping terminals. They are tasked with starting and stopping the transactions and monitoring the movements as they occur. This monitoring and execution process typically requires operators to log start and end times along with other related data for each transaction by making data entry or pressing a button. If the required actions are not done properly and completely, this may cause gaps in the information that is available to the yield accounting application. The yield accounting solution should be capable of identifying missing movements based on the rest of the information and will bring this to the attention of the yield accountant.

Automated data sources
Yield accounting requires various types of information as input. Some of the data may be manual, but most of the data will be automated; that is, they come from electronic databases connected to the plant network and are communicated electronically to the yield accounting application. The main automated data sources are process stream data, tank inventories, movements (receipts, shipments and inter-plant transactions) and quality data (lab and process analysers). The process data are obtained from a process historian that is closely coupled with the plant control systems. The tank inventories come from tank gauging systems and possibly from an application that may be used to monitor and control tank operations. Movement data may come from the process historian, a movement software management application or manual entry based on operator logs. Quality data originate from a plant laboratory and/or on-line process analysers. Often, quality data generated in the laboratory are passed into the process historian. This is a challenge with the rapid expansion of shale crudes’ physical and chemical properties and their effect on the laboratory data quality passed into the process historian. The yield accounting application obtains those data along with other process data directly from the process historian, eliminating the need for integration to the laboratory information system.