less crisis, more projects: trends in shutdown & turnaround management

LESS CRISIS, MORE PROJECTS: TRENDS IN SHUTDOWN & TURNAROUND MANAGEMENT

Ed i t o r i a l

AS THE CRISIS ABATES PROJECTS RETURN: PROGRESS IN DOWNTIMES

Ageing plants and equipment as well as increasing competition from the Far

East and the growing investment pressure has led to radical structural changes

in the turnaround market and in the planning and execution of industrial plant

shutdowns. The current edition of Insight Report discusses approaches to

change management and optimisation and highlights the different viewpoints

of plant operators and suppliers.

Changed market conditions, the relocation of

refineries and petrochemical plants overseas

and not least the economic crisis have caused

operators to look for ways to optimise the plan-

ning and execution of plant shutdowns and

investment projects. The chief aim is to reduce

the length of shutdowns and turnarounds and to

increase plant uptime. However, because of the

high volume of projects, TAR scheduling has

become more complex. This added complexity

ultimately increases the potential risk. A further

factor is the anticipated rise in investment vol-

umes following the crisis due to the large back-

log of projects that built up in recent years. In

this light, is it feasible to further reduce shut-

down times without increasing the risk too

much? What other means are available to in-

crease efficiency and ensure economic viability

under these changing conditions? In fact, there

are several approaches to enhancing efficiency

and optimising the cost of a turnaround even

with little effort. A change in perspective or the

consistent implementation of simple measures

can result in considerable improvements.

Based on best practices and interviews, flexible

planning, changes in scope through greater

project integration and possible solutions will be

contemplated in this Insight Report from the

viewpoint of both plant operators and contrac-

tors.

CONTENTS

Project integration from the perspective of contractors: interview with Dieter Greuter, BIS Chemserv .... 3 Greater flexibility despite increasing complexity? ............................................................................... 5

Good practices in project integration ................................................................................................ 6

Is the upswing on its way or already here? ....................................................................................... 8

Challenges from the operators’ point of view ..................................................................................... 9

3

T.A. Cook Consultants Insight Report 03 – 07/2011 Trends in Shutdown and Turnaround Management

P r o j e c t i n t egr a t i o n f r om the p e r spe c t i ve o f con t r a c t o r s

Project integration from the perspective of con-tractors

Dieter Greuter is responsible for the execution of turnaround projects at BIS

Chemserv in Linz, Austria. In this interview he talks about the ideal way to

plan and execute a turnaround with project integration and future market de-

velopments from the perspective of contractors.

What advantages and disadvantages do you see

in the integration of investment projects in a

turnaround?

The advantage is certainly that it makes sense

to integrate projects during a plant turnaround

because then the right structures are already in

place. In other words, personnel are on site, the

plant has been shut down, there's an order

approval system that I can integrate to make

full use of the many resulting synergies. The

disadvantage is that shutdowns are relatively

short and the projects are always critical. That

can lead to problems if one tries to force

through such a project by all means.

What would be the ideal way to execute such a

project?

The ideal case would be that the project deter-

mined the schedule and the shutdown was ar-

ranged accordingly. Usually, however, the shut-

down is planned first and attempts are then

made to integrate the project. Frequently, pro-

ject integration only happens when the shut-

down plan is already set. But a long-term capital

project should always be the priority and the

shutdown oriented around the project. That

would be a novel approach for once.

Is this plan realistic or is the real picture quite

different?

The reality is different because turnarounds are

expensive and the main priority is to keep plant

downtime as short as possible.

What are typical investment projects during a

shutdown?

In general, they involve plant expansions and

optimisation but also replacing equipment, such

as columns or heat exchangers as well as the

necessary piping. In the case of actual plant

components, the asset does not have to already

be shutdown as the component can be built in

parallel. All that then has to be done during a

shutdown is to incorporate the installation into

the existing plant.

How much of a turnaround is spent on mainte-

nance work and how much on projects nowa-

days? Has anything changed in this regard over

the last years?

Projects have been on the up over the last

while. By that I mean over the last ten years or

so. In the case of newer plants, such as Total

Raffinerie Mitteldeutschland which was built in

1997, it's still not really a big issue. But overall,

plants are getting older and the need to replace

sections of piping or machinery is growing. This

development will definitely continue.

4


Pro je c t i n t egr a t i o n f r om the p e r spe c t i ve o f con t r a c t o r s

Do you see a trend towards more investment

projects now since the crisis has been over-

come?

Not yet, really. I think that at the moment eve-

rything is happening too fast. We are on a sharp

upwards curve but usually the curve goes right

back down afterwards. With regard to new in-

vestments, natural growth has not yet estab-

lished itself post crisis. Noticeable is that there

is enough work again and that there's a lot of

catching up to do. But whether it continues like

this and when the backlog will be cleared, can-

not yet be said. We have not seen an increase

in investment projects up until now.

What developments do you see here over the

next five to ten years?

The major concern will be how long plants in

Central Europe can hold on because relocating

to the Far East or Middle East is an issue. This

will particularly affect plants that are already

older and which raise the question whether it's

worth investing heavily in the plants or to give

them up. I believe that the investment volume

in Central Europe will decrease because plants

will be decommissioned. Investments and pro-

jects will move east.

5


F l ex ib i l i t y an d c omp lex i t y

Greater flexibility despite rising complexity?

Turnaround scheduling always needs to be flexible so that unexpected events

can be dealt with promptly. How can this flexibility be safeguarded in the face

of rising planning complexity due to the integration of an increasing number of

projects?

Turnaround planners often get caught in the

complexity trap. The combination of longer

production cycles, increasing cost pressures and

the considerable investment that is required in

the relatively old plants across Europe is result-

ing in more and more complex scheduling and

project planning for upcoming turnarounds. The

main issues here are: is more

planning necessary in order to fit

and coordinate all jobs in the

plan or is it better to develop a

rough plan that maintains a

certain amount of flexibility?

Does it still make sense to have

a TAR team or is it better in view

of the high volume of investment

projects to give the responsibility

for turnaround planning over to

a project team?

There are many approaches nowadays to make

a turnaround more economical and faster. As

well as innovative substitutes for common test-

ing methods, online order approval systems

have proven particularly valuable. These sys-

tems help improve the transparency of a TAR

and to prevent errors – well-founded, thorough

schedule and project planning is still only realis-

able by an experienced planning team, howev-

er. Obviously, pending investment projects

should be incorporated into the schedule too.

One option to reduce complexity is to develop a

schedule plan with different levels. Detailed

schedules are planned for all activities divided

into levels of differing complexity and with dif-

ferent timelines. These are then compiled into a

rough and transparent management plan. To

ensure that a schedule is actually applicable

requires a matured and consistently applied

reporting system. Such a system defines the

exact start and end point of a task but the rest

of the process remains dynamic. If there are

weaknesses in the reporting system, errors will

quickly occur in the schedule plan, rendering it

useless. At this point consistency is an absolute

must. Whether maintenance or an investment

project is to be the main priority when conceiv-

ing a turnaround has to be decided on a case by

case basis and should depend on which task has

the larger planning requirements. The planning

team then has to decide which processes re-

quire one hundred percent control of all jobs

and tasks and where a flexible concept with

greater freedom to make decisions at all levels

is more appropriate.

6


Goo d P r a c t i ce s

Good practices in project integration

Different tasks require different approaches and planning. But why reinvent

the wheel? What has been tried and tested in one place can be applied in oth-

er companies too.

Usually pending projects are integrated into the

turnaround schedule. Due to increases in pro-

ject volumes, the notion of integrating the turn-

around into the project plan is currently being

considered. Total Raffinerie Mitteldeutschland,

for example, has declared the planning and

control of projects to be a central management

role. In the past, maintenance comprised two

thirds of all activities conducted during a shut-

down at Total, one third was dedicated to capi-

tal investments. It made sense for plant opera-

tors to plan both sets of jobs together. It was

also practical during implementation – the pro-

ject manager for maintenance and the project

manager for investment projects now work

together in one office, so short distances and

direct communication are easily guaranteed.

For the joint management of both large turna-

rounds and investment projects general contrac-

tors are still employed are independent of con-

tractors who conduct routine maintenance work.

This ensures that maintenance will not suffer

under the growing project scope.In order to

reduce the overall scope, Wacker Chemie at

Burghausen no longer inspects all apparatus at

one and the same time. In cooperation with

TÜV, the company is investigating how often

each asset needs to be shut down and tested.

In some cases, a reduction of the operation

cycle of certain equipment is even being consid-

ered in order to optimise the whole process of

the turnaround.

In other cases, the operation cycle is length-

ened where possible so that plant installations

that used to have different inspection schedules

can now be tested in one turnaround. Fewer

shutdowns, and the reduction of the time re-

quired for the phased shut down and start up of

the plant shortens the total downtime within a

test cycle.

BASF in Ludwigshafen is in the process of reor-

ganising its TAR competences globally. The

global organisation of turnarounds across loca-

tions allows best practices to be determined

internally, which in turn leads to a reduction in

the complexity of maintenance and investment

projects thanks to the standardisation of sched-

uling and scope planning. The company has also

released the operative manager for mainte-

nance from day-to-day business so that he can

manage all of the tasks executed during a turn-

around. This gets rid of the double workload

which was susceptible to errors.

Resea r ch & S tu d i e s

7


Market Study Western Europe Technical services for Turnarounds in petro-chemical Plants

The Western European refining and petrochemical industry is un-der pressure from competition in emerging regions, making costs and effi ciency critical to their ongoing operations. Turnarounds as a major cost can be a source of crucial competitive advantage. TAR-management and en efficient shutdown conduction aiming to

shorten downtimes is therefore crucial for plant operators.

The success of these project depends mainly on the management an the competences of external technical service providers. But technical service providers have to deal with shorter downtimes, lower budgets, longer TAR-cycles and the need to conduct more and

more investment projects.

This study aims to help you understand the European TAR-market, providing authoritative infor-

mation on:

� legal frameworks

� business and organisational mo-

dels

� services and trade specialties for

turnarounds

� future trends

� strategies for the TAR business

This study is therefore an useful source of information for improving acquisition flexibil-ity as well as identifying international part-ners and new business opportunities.

For more information visit:

www.tacook.com

Study facts

� 173 plants � 461 Technical service providers � 143 Interviews � 25 Experts questioned with a delphi

survey � 101 Illustrations � 23 Tables

8


Deve lo pment a f t e r t he c r i s i s

Is the upturn on its way or already here?

"We have survived the crisis." This sentiment can be heard everywhere but

what changes can really be felt? Is investment on the up?

"A tsunami of projects is on the way." This

statement from one plant operator makes it

clear that huge investment is expected in plants

up to 2016, triggered by the catch-up effect

following the crisis. This may sound at first that

the strain on German and European markets will

ease but is soon relativized by the fact that

most planned investments target Asia, the Far

and Middle East. Investment plans are afoot in

Germany too but their scope is hardly compara-

ble with the intentions in Asia. On account of

the age of many European plants, their profita-

bility will be questioned in the future with re-

gard to the amount of investment required.

That said, in Europe the construction of a new

plant is not considered to be the only type of

investment as a lot of money has to be invested

into decommissioning a plant and specialist

waste disposal for the old plant and machinery.

Newer plants in the European region do not yet

have to deal with such issues. According to Axel

Koberstein, Unit Manager of Technical Projects

at Total Raffinerie Mitteldeutschland, a refinery

built in 1997: "We didn't have a crisis." There is

no backlog of investment projects at this plant,

and there has not yet been any need to consid-

er investing heavily into the replacement of

larger plant components. "We have the ad-

vantage that our plant and equipment is pretty

modern and we can fully meet the quality

standards demanded by the market in terms of

the environment, sulphur etc. The investments

that we are currently undertaking revolve

around energy improvements, energy effective-

ness and measures for the production of niche

products," says Koberstein.

Overall it seems that investments are being

planned by plant operators. Contractors and

service companies, however, have not yet seen

any indication of a growing order volume. If and

when the planned projects will actually be im-

plemented and whether the German and Euro-

pean markets will experience an upturn remains

to be seen.

9


Pro jek t i n t e gr a t i o n aus Be t r e i b e r s i c h t

Challenges from the perspective of operators

How do plant operators feel about the integration of investment projects in a

turnaround? What advantages and disadvantages can they expect?

Plant operators differentiate between invest-

ment projects to expand capacity and reliability-

centred projects, the objective of the latter

being to increase plant availability. However,

when it comes to integrating these projects in a

turnaround they see no difference: Because the

highest priority for all plant operators is that the

production continues with as few interruptions

as possible, projects of all kinds are preferably

integrated in a turnaround in order to prevent

considerable losses. One of the main causes for

these losses are the long start up and shut

down times which, for example, in the case of

synthesis gas facilities and steam crackers, can

take up more than a third of the entire shut-

down time as well as the loss of product that

has to be removed from the plant and disposed

of.

However, in addition to these financial ad-

vantages, there are several, critical disad-

vantages of project integration: plant operators

face particular challenges due to the increased

complexity of the turnaround. In addition to

that, a different contractor strategy is required

especially when integrating large projects into

turnarounds as few contractors can execute

both large turnarounds and extensive invest-

ment projects. Plant operators recommend that

large projects are allocated to various contrac-

tors on account of the differing requirements

and priorities even if this increases the organisa-

tional burden. The integration of maintenance

work and projects in work packages poses par-

ticular difficulties for all work processes of a

turnaround, necessitating more personnel in

organisation, logistics and infrastructure and

lengthening the dura-

tion of the whole turn-

around. Projects that

can be executed dur-

ing normal operations

are generally not inte-

grated in a turna-

round. This is seldom,

however, as most

projects are connected

to a production pro-

cess at a specific point

and thus affect it.

Assuming that no financial pressures to imple-

ment immediately exist, one option is to con-

duct projects as far as possible outside of the

turnaround and then integrate them with the

process during the next scheduled shutdown.

Depending on the project, the cost of the in-

vestment relative to the whole turnaround can

vary considerably. For example, scheduled ca-

pacity expansions, such as the erection of new

10


columns or turbines, are so cost-intensive that

the expense of the project surpasses that of the

rest of the turnaround.

The crisis does seem to be abating for plant

operators too and investment volumes are be-

ginning to rise again. The catch-up effect result-

ing from the backlog of projects that were post-

poned over the last years creates new challeng-

es for plant operators:

As the core engineering for all projects even

those overseas is conducted from Germany,

companies have to strengthen their key re-

sources at home either internally or through

third-party engineering firms. Following the

reduction of the workforce during the crisis,

considerable investment is required in personnel

recruitment and the use of external competenc-

es.

11


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Resea r ch & S tu d i e s

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Interview:

Greuter, Dieter. BIS Chemserv. Interview on 27.01.2011

Insight Report is a service of T.A. Cook Research & Studies

If you have any questions or suggestions please don’t hesitate to contact us: T.A. Cook Consultants | Leipziger Platz 2 | 10117 Berlin | Phone (030) 88 43 07-0 | Mail: [email protected]

T.A. Cook is a management consulting firm focusing on Asset Performance Management with offices in Berlin, Birmingham, Houston, Paris, Raleigh and Rio de Janeiro. The core competence of the consulting business is the sustainable implementation of asset, operations and service-oriented excellence. As a change management specialist, the firm delivers measurable value enhancement and bottom-line productivity gains. In order to achieve these results T.A. Cook offers a wide range of professional services which ensure that all business processes - from strategy definition through management to organizational design – are effective, efficient and sustainable. Complementing the consulting business, the T.A. Cook Academy has become a leading organizer of international conferences and seminars relating to Asset Performance Management. Annual events include the MainDays summit as well as conferences centered on topics such as Shutdowns & Turnarounds and Capex Management. T.A. Cook’s clients are typically businesses, their suppliers and contractors working with significant industrial assets across multiple sectors. The company has particular expertise in the petrochemicals, plastics, pharmaceutical, transport, mining and food sectors as well as excellent knowledge of the regulated environments occupied by gas, water and electricity utilities. Further information about T.A. Cook may be found at: www.tacook.com T.

Author: Nina Wolfs

Contact

E-Mail: [email protected] Tel.: +49 (0)30 88 43 07-0

Research Consultant at T.A. Cook Nina Wolfs is responsible for the compilation of market studies and analyses in the area of asset performance. She previously worked for different market research companies and has conducted various studies.

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