May-2024

A refiners strategic journey towards sustainability

A refinery’s strategic journey represents a delicate balance between profitability, environmental commitments, and technological advancements.

Aleix Carrillo, Duncan Manuel and Michelle Wicmandy
KBC (A Yokogawa Company)

Article Summary

Energy consumption is a key cost factor in refinery economics. About half of the refiner’s operating costs are dedicated to meeting the demands of energy consumption.1 Adding to this complexity, a Reuters report revealed that 43% of surveyed global workers plan to leave the energy sector by 2025.²

Amidst this financial and labour landscape, a mid-sized refinery confronts rising energy costs, workforce shortages, and the pressing need to meet net zero global commitments by 2050. In addition, this journey unfolds in a setting of diverse perspectives and agendas among the leadership team and board of directors. Despite these obstacles, the refinery committed to cutting Scope 1 and 2 emissions by 30%, benchmarked against a 2019 baseline, as depicted in Figure 1.

Operating in a rapidly changing business environment, the board sought to balance profitability by understanding how the precise product mix, customer base, feedstocks, and technologies interact. To reinforce this initiative, the refinery’s Chief Operating Officer (COO) emphasised, “We need to strategically invest for the long term, but we must also remain profitable in the here and now. If we cannot generate a positive cashflow today, how can we possibly raise the funds for the investment we need to make?”

Achieving a balance between present performance and long-term strategic investments required alignment, commitment, and a clear and executable plan. Optimising current performance while ensuring long-term success required the refiner to keep one foot firmly planted in the present and the other in the future.

The present – Project Catalyst
The refinery’s leadership team conducted a comprehensive ‘wall-to-wall’ operations assessment. This evaluation uncovered several key focus areas, including soaring energy costs, reliability issues, and team demographic challenges. Over a six-week period, the following challenges were addressed:
• Asset reliability to overcome underinvestment
• Energy efficiency for quick wins
• Yield optimisation with digital twin software
• Turnaround optimisation for decarbonisation planning
• Recruitment and organisation to mitigate challenges
• Technology for digital transformation.

Rotating equipment issues significantly impacted asset availability and throughput. This issue led to decreased profit margins and hindered the site’s ability to capitalise on a high-margin environment. The emphasis was on identifying reasons for underperforming asset reliability and building consensus on corrective actions.

While historical underinvestment played a role in current performance levels, the primary issue stemmed from a lack of root cause analysis and follow-up actions, combined with a lack of start-up readiness.

In Europe, rising energy costs have heightened the focus on energy optimisation for many assets.3 A strategic energy and maturity review identified that the refinery overlooked the latest technology, monitoring tools, and efficient practices for energy management. Relying primarily on the operators’ tacit knowledge, the asset fell short of industry benchmarks, including KBC’s proprietary Best Technology Index. However, through comparative analysis, the team identified quick-win opportunities that required minimal or no capital expenditures to swiftly improve the asset’s performance. These opportunities not only delivered immediate value but also contributed to the programme’s overall funding.

Additionally, long-term, mid-to-high Capex improvements were identified and fed into the decarbonisation workstream. Addressing no or low Capex opportunities was integral to the refinery’s success in optimising energy usage and achieving its goals.

By creating a digital twin of the refinery, yield optimisation opportunities could be thoroughly reviewed. This assessment revealed numerous areas where operating parameters and procedures could be improved. Furthermore, the focus on no or low CapEx opportunities played an integral role to the programme benefits and funding, similar to energy efficiency opportunities.

Refinery margin erosion is largely attributed to turnarounds.4 This programme aimed to review both the overall turnaround philosophy and the detailed scope of the next two turnarounds. The focus was to identify activities that could be descoped, moved off the critical path, and optimised. Given two scheduled turnarounds between the assessment and 2030, the turnaround review was inextricably linked to the decarbonisation planning activities.

Many refiners struggle with dual challenges: an ageing workforce and difficulty recruiting young engineers and skilled operators.1,5 In addition, the oil and gas industry is frequently perceived as contributing to climate change rather than being part of the solution in the energy transition journey.3 The scale of the problem was assessed, which has led to developing mitigation plans to address potential gaps over one-, three-, five-, 10-, and 15-year time horizons.

Technology is crucial for streamlining operations, revolutionising work processes, and supporting necessary productivity improvements to mitigate ongoing resourcing issues. During this programme stage, the technology and digitalisation vision were outlined for the operating assets, consistent with the overall organisational vision. Having defined the vision, a gap analysis was conducted, leading to the development of a draft target application architecture. This strategic approach ensured the technology was leveraged optimally to achieve the refinery’s goals.

After completing the assessment phase, the next step involved defining the resultant programme, Project Catalyst. The process of defining the programme involved overcoming the primary challenge of getting multiple stakeholders with differing perceptions regarding priorities, timescales, and resource requirements into agreement. To address this, several highly facilitated programme design workshops were held. These workshops were deliberately not high tech. The team intentionally used basic tools such as marker pens, sticky notes, a long sheet of brown paper, and coloured voting dots.

Prioritising specific interventions was based on the corporate goals, legislative frameworks (such as maintaining a safe and compliant operation) and individual benefits aligned with opportunities (such as maximising the transformation investment). Engaging team members across the organisation led to the development of a practical programme where each workstream was assigned monthly deliverables that were captured on a 4m-long poster. This poster, shown in Figure 2, served as a key management tool to communicate the programme’s progress and ensure that everyone from the control room to the board room understood the project.

The future – Project Horizon 2050
Building on the Project Catalyst programme, a similar exercise was conducted to ensure the refiner met their decarbonisation targets. This initiative resulted in Project Horizon 2050. It should be noted that the ‘One Foot in the Present – Project Catalyst’ and ‘One Foot in the Future – Project Horizon’ workshops were held concurrently. The COO’s vision was to transform the refinery into a future-ready asset capable of meeting customer and societal demands in a sustainable, affordable, and reliable way, including a decarbonisation roadmap for reaching net zero with technology leading the way.