overview on “operational benchmarking” of psu refineries in india

Overview on

“Operational Benchmarking” of

PSU refineries in India

Operational Benchmarking Overview

Why benchmarking ?Why critical ?Performance evaluation of Indian refineries Methodology for performance evaluation Benchmarking by Solomon AssociatesBenchmarking by Shell Global SolutionsAreas for improvement Consolidation & Way forward

Pre Conference Petrotech 2007


Why benchmarking?

Is an on-going process to assess the present state of performance Compare key performance parameters such as energy, distillate

yield & product quality, maintenance reliability & availability, HR management, profitability

Understand competitive position Identify the scope and adjust goal for further improvement Implement initiatives for improvement



Why critical ?Survival in highly competitive & global environment after dismantling of APM, new mergers, new players

Ever increasing energy cost and security Fluctuating operating margins Challenges to process heavy & sour crude oils Stringent quality and emission norms


Refinery performance evaluation

Certain common parameters of performance are compared with its own previous performance as well as relatively to other refineries:

Physical performance: Primary / Secondary Unit Thru’put & Capacity UtilizationDistillate YieldProduction of Lube / Special ProductSpecific Energy ConsumptionFuel & LossHydrocarbon Loss

Operational Benchmarking Overview Pre Conference Petrotech 2007

Refinery performance evaluation

Financial performance: Gross/Net marginprofit / Capital employed

Other areas: Compliance of Environmental StandardsFire & Safety PerformanceMaintenance/Shut-down timeProject implementationHR management, productivity etc


Methodology for performance evaluation

No specific benchmarking programme or standard followed

MOP&NG constituted an Expert Committee in 1995 to review the Technological gaps in Indian refineries

Recommended energy benchmarking & targeting exercise for establishment of energy benchmark norms for refineries

Also to evolve a scientific & realistic approach for evaluation of performance of refineries w.r.t. Energy Consumption


Energy Performance Evaluation

Energy Benchmarking & Targeting carried out in 1996-97 in association with EIL

Energy Audits from time to reduce the gap between the Actual vis-à-vis Target Performance

Revalidation of benchmark numbers of major Units along with benchmarking of balance process units through EIL in 2003


ENERGY BENCHMARKING & TARGETING

Process Units benchmarked on Std. Configuration basisOptimized process design with min. energy

consumption Economically viable sizeThermodynamic approach to assess levels of heat

source & sinkProvision of Waste Heat Recovery schemes

It is calculated based on energy consumption (in the form of Fuel, Power, Steam & Cooling Water) of the Unit, heat export from that Unit & energy import into the Unit in the form of hot feed


Specific Energy Consumption

Presently, energy performance of refineries is reviewed by analyzing the Specific Energy Consumption, Fuel & Loss and Hydrocarbon Loss.

Specific Energy Consumption is defined as Mbtu/bbl/NRGF where

Mbtu – total energy consumption & loss in 1000 Btu

Bbl – crude processed in Barrel

NRGF – composite energy factor of the refinery Composite energy factor of a refinery is derived as

{Energy Factor * unit T’put (bbl) }

Crude T’put (bbl) Composite energy factor is a function of refinery configuration


Refinery performance benchmarking

No data base on performance of international refineries is readily available in public domain

International agencies such as Solomon Associates, British Petroleum, KBC, Shell Global Solutions, etc conduct performance evaluation studies

Their objective is to develop valid industry performance criteria to facilitate participating refinery evaluate itself vis-à-vis other refineries in that geographical area


Solomon benchmarking studies

As advised by the Expert Committee constituted (to identify gaps in technology in Indian refineries) by MOP&NG in 1995, various refineries participated in benchmarking studies

Details of Indian refineries participated in International studies carried out bi-annually by M/s Solomon Associates Year Refineries participated

1989 CPCL,IOCL (J), (M), (H)

1996 IOCL(J),(M),(H),BPCL,HPCL(M),(V),KRL,CPCL

1998 BPCL

2000 CPCL


Refinery Performance evaluation – Solomon Associate's Method

MAJOR KEY PERFORMANCE AREAS & PARAMETERS IDENTIFIED:

Performance Areas Parameters of measure

Capacity Utilization Equivalent Distillation Capacity (EDC)

Capacity Utilization

Processing Efficiency Index

Energy Energy Intensity Index

Manpower Personal Index

Maintenance Cost Maintenance Index

Turnaround Index

Operating Expenses Cash Operating Index

Net Margin Net Margin Index



EDC – Equivalent Distillation Capacity EDC concept helps for comparing performance between

refineries of different size & configuration EDC is a primary element for measurement of various

performance indices. EDC is measured as:

Design EDC = (Configuration Factor * design unit capacity, bbl/day)Utilized EDC= (Configuration Factor * utilized unit capacity, bbl/day)Design & Actual T’put of each Process unit is required



Capacity Utilization Refinery capacity utilization indicates how much %age of

existing distillation capacity is utilized & is obtained by

Capacity Utilization = (Utilized EDC / Total EDC) x 100

Processing Efficiency Refinery Processing Efficiency is a measure ‘value addition’ &

is denoted by Processing Efficiency Index (PEI)

PEI = [(Actual Volume Gain + Refinery Input) / (Estimated Volume Gain + Refinery Input)] x 100



Energy Efficiency Is measured in terms of Energy Intensity Index (EII), which is:

EII = [(Actual energy consumption / Standard energy consumption)] x 100 Standard energy consumption = (utilized EDC of the unit x corresponding energy standard)

Manpower Is a function of total man-hours consumed by all refinery,

maintenance and support personnel and measured as Equivalent Personnel = (Total man-hours of personnel deployed during the year including OT Hrs) ÷ (40 hours per week x 52 week per year)



Maintenance Cost Effective routine maintenance is measured as

Maintenance Index (MI) = Average routine maintenance cost of past two years / Total EDC

Turnaround Index (TI) = Annualised Turnaround Expenses / Total EDC

Net Margin Net Margin is a measure of value addition after meeting the operating

expenses. It is measured as Net Margin Index (NMI) NMI = Grass Margin – Cash operating Index NMI can be calculated once the following data is available: Grass Product Value Raw Material Cost Cash Operating Cost



Operating Expenses This is a measure of keeping Operating expenses in check. It is measured as Cash Operating Index (COI)

COI = Total operating cost / utilized EDC COI can be calculated once the following data is available: Non –Volume related expenses

Salaries, EstablishmentMaintenance & RepairsGen. & Admn.

Volume related expensesChemicals & AdditivesStores & SparesPurchased Power & Fuel

Expenses as adjusted (Refinery own fuel such as Fuel Gas, liquid fuel)


Sl No. Performance attribute BPCL KRL HPCL(M) HPCL(V) IOCL(J) IOCL(M) IOCL(H)1 Refinery Utilisation, % 3 28 8 5 9 30 162 Volumetric Expansion Index 26 17 50 11 8 10 -3 Processing Efficiency Index 33 25 21 15 10 9 164 Energy Intensity Index 54 56 39 55 53 47 25 Eq. Personnel 58 56 62 60 54 59 616 Maintenance Index, 11 1 36 13 2 3 617 Turnaround Index 5 6 23 10 7 1 338 Cash Operating Index, 11 14 38 19 8 17 559 Value Added Index 37 32 10 48 39 49 3

10 Net Margin Index 34 33 42 48 22 50 3811 Return on Investment 8 10 12 41 4 43 17

Ranking of Fuel Refineries (1996 Solomon Associates Survey)

Ranking of Lube RefineriesPerformance attribute BPCL KRL HPCL(M) HPCL(V) IOCL(J) IOCL(M) IOCL(H)Refinery Utilisation, % - - 17 - - - 12Energy Intensity Index - - 36 - - - 33Eq. Personnel - - 37 - - - 36Maintenance Index, - - 15 - - - 8Turnaround Index 10 14Cash Operating Index, - - 15 - - - 28Value Added Index - - 28 - - - 33Net Margin Index - - 18 - - - 23Return on Investment - - 19 - - - 24

Benchmarking by Shell GSI

Limited information was available from Solomon Studies for few participant refineries

To critically assess the performance of Indian refineries after dismantling of APM

Need to identify and evaluate various parameters of refining for comparison and improvement of bottom-line

Need to evaluate performance of refineries as well as process units

To compare performance of all 15 PSU refineries, Shell GSI was selected



Period – Financial Year 2003-04 & 2004-5

ModulesEnergy and Hydrocarbon Loss ManagementHuman Resource ManagementMaintenance performance, Reliability and

Availability OptimisationEnvironmental PerformanceFinancial Performance



Boundaries of The Review – Standard Refinery and Base Oil Operations,

Maintenance, Management and Capital Projects . Includes Head Office Support functionsExcludes Terminals, Supply and Distribution,

Packaging Plants, Community Facilities.


Shell GSI Methodology

Shell GSI Database comprises approximately 50 Refineries worldwide (exclusive of 15 Indian refineries)

Peer Groups are divided on the basis of Region and/or on the basis of the Refinery Complexity.

Refinery Complexity – Refinery Complexity is defined in terms of Normal Shift Positions (NSP) which is not related to capacity but to process plant and equipment. The amount of equipment is also categorised by Mechanical Units (MUc) corrected for size.

Indices – Shell GSI has two Indices the Corrected Energy and Loss (CEL) and Shell Personnel Index (SPI)


Shell GSI Methodology

Site Parameters

Normalising Parameters

Data Inputs Key Performance

IndicatorsProcess Unit Type

Boilers

Power Generation

Tanks etc

Mechanical Equipment

Unit Capacity

Barrels of Intake

Normal Shift Positions

Corrected Mechanical Units

Annualisation / Cycle Average

Inflation / Exchange Rates

Indices

Operating Costs

Fuel Consumption

Staff

Contractors

Workhours

Overtime

Process operations

Yields

Shell Pers. Index

CEL

Unit Energy

Costs/bbl

Cost / MUc

Unit Cost/T

Utilisation

Availability


Normal Shift Position• Normal Shift Positions (NSP) is a measure of the Complexity of the Refinery

and Base Oil facilities. The NSP for an Operating location are determined as:

1. The operating units are categorized into what are called Basic Building Blocks (e.g. Crude distillation unit which included furnaces, columns and desalters),

2. An allowed NSP is assigned to that building block and all building blocks summed to give the site NSP

3. The Mechanical Unit count is used in order to check whether for the given process configuration there is more or less than the expected amount of equipment to be operated and maintained and therefore an need to modify the basic NSP count

4. Lastly, for a full SPI study and organizational effectiveness review, an on-site survey is undertaken to confirm the above desktop work.


An index is calculated from the hours worked and a constant for that particular index as follows:

Total hours worked X Constant NSPThe constant was determined to give an index of 100 for the site that was at the top tercile of the original survey.Different constants are applied for Maintenance, Support and the Overall index

Shell Personnel Index (SPI)


The CEL system is built up as per this diagram Process Units

Cooling Water System

Flare

CEL

Energy

Loss

Generation

Consumption

Ocean

Refinery

Storage & Handling

Sundries

Process

Energy allowances to correct for changes in Process Conditions.

Depends on closed refinery wide Mass Balance

Closes the energy balance for the whole refinery


NSP Count

0

20

40

60

80

100

120

140

1 2 3 4 5 6 7 8 9 10 11 12G

UW

BG

GN

UM 16 17

DIG 19 20 21 22 23

KO

CM

UH 26 27

VIS

BE

GC

HE

MU

B 32 33P

AN

MA

NM

AT

MID 38 39 40

VA

D 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59

HSK TCR SCP MCP LCP VLCP


Equivalent Distillation Capacity

9909

5641.7

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,0001 2 3 4 5 6 7 8 9 10 11

GU

WD

IGB

GG 15 16

NU

M 18M

UH 20

VIS 22 23 24 25

BE

G 27 28K

OC

CH

EM

UB 32 33

PA

NM

IDM

AT 37 38 39 40 41

MA

NV

AD 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59

HSK TCR SCP MCP LCP VLCP

ED

C -

(C

om

ple

xit

y x

Ca

pa

cit

y)

.


Energy Performance (2003-04)

•StrengthMany process units near world averageThree sites ‘world classGood generation index for sites with Gas TurbinesEnergy conservation disciplines well advanced

•OpportunitiesOlder units offer scope to improve but will require investment. Geography of site could limit opportunitiesLow utilisation has an effect on energy efficiency.Site wide energy optimisation gaps caused by sequential site developmentOcean losses needs attention


•StrengthAt least one site is ‘world class’ on availabilitySeveral sites are ‘world class’ for maintenance costsNetwork of 15 refineries to share experience

•OpportunitiesRelax statutory limits on turnaround durationRelax statutory requirements on inspection requirementsReduce Maintenance effort by enhancing efficiency of maintenance practices

Maintenance Performance (2003-04)

Comparison with Peer Groups

2003-04 Highlights 10 sites SCP and 5 sites MCP (small/medium complex plant) Crude intake was higher in their Peer group for 8 refineries (5 SCP,

3 MCP) Energy efficiency- 2 sites were in top Tercile and 3 sites in third

Tercile (Asia Pacific). Globally only 1 site was in top Tercile and 5 in third Tercile

Refinery loss- 6 & 5 sites were in top Tercile for Asia Pacific & Globally respectively and 5 sites in third Tercile for both Asia Pacific & Globally.

SPI-No site in top Tercile in Asia Pacific and all in third Tercile Globally

Labour cost per NSP-4 & 6 sites were in top Tercile and 4 & nil in third Tercile for Asia Pacific & Globally respectively



2003-04 Highlights Maintenance performance-Only one site in top Tercile (Asia Pacific &

Globally). 8 & 9 in third Tercile for Asia Pacific & Globally respectively. Turnaround longer by 30-50%

Maintenance cost-6 & 10 in top Tercile for Asia Pacific & Globally respectively. 2 & nil in third Tercile for both

CO2 emissions-3 sites were in first Tercile and 5 in third Tercile for both Asia Pacific & Globally

VOC emissions- 8 sites were in third Tercile for both Asia Pacific & Globally. Operating cost per bbl- 4 and 6 in top Tercile for Asia Pacific & Globally

respectively. 6 in third Tercile for both group Site energy cost-All are in 2nd and 3rd Tercile in both groups except for one

refinery in top tercile in Asia Pacific Cash operating expenses-8 & 10 in top Tercile and 4 & 2 sites in 3rd Tercile

for Asia Pacific & Globally respectively


Opportunities as per Shell 03-04 study

Energy and Loss Management program – Energy is the single largest controllable cost. Opportunities for Indian PSU Refineries is ~ $US 240 million.

Maintained Availability – Unavailability is one of the largest controllable loss of Gross Income for the sites. Opportunities for Indian PSU Refineries is ~ $ 115 million

Unplanned Downtime – Unreliable plant also leads to loss of Income and adds costs. Opportunities for Indian PSU Refineries is ~ $US 50 million

Supply Chain Optimisation – External market impact on plant utilisation. Supply chain optimisation is of lower priority than the items above.



2004-05 Highlights 10 sites SCP and 5 sites MCP (small/medium complex plant) Crude intake was higher in their Peer group for 9 refineries (6

SCP, 3 MCP) Energy efficiency- 3 sites were in top Tercile and 4 sites in third

Tercile (Asia Pacific). Globally 2 sites were in top Tercile Refinery loss- 7 sites were in top Tercile and 2 sites in third

Tercile (Asia Pacific & Globally). SPI-No site in Global top Tercile, all but one in third Tercile Maintenance performance-Only one site in top Tercile (Asia

Pacific & Globally). 6 and 9 in third Tercile for Asia Pacific & Globally respectively



2004-05 Highlights Maintenance cost-8 and 11 in top Tercile for Asia Pacific

& Globally respectively. CO2 emissions-3 sites were in first Tercile and 5 in third Tercile

for both Asia Pacific & Globally VOC emissions- 5 sites were in third Tercile for both Asia

Pacific & Globally. Operating cost per bbl- 4 and 3 in top Tercile for Asia Pacific

& Globally respectively. Site energy cost-All are in 2nd and 3rd Tercile except for one

refinery in both groups Cash operating expenses-6 and 8 in top Tercile for Asia

Pacific & Globally respectively. 2 sites in 3rd Tercile for both


Opportunities as per Shell 04-05 study

Energy and Loss Management program – Energy is the single largest controllable cost. Opportunities for Indian PSU Refineries are ~ $US 200 million.

Maintained Availability – Unavailability is one of the largest controllable loss of Gross Income for the sites. Opportunities for Indian PSU Refineries are ~ $ 120 million

Unplanned Downtime – Unreliable plant also leads to loss of Income and adds costs. Opportunities for Indian PSU Refineries are ~ $US 40 million

Supply Chain Optimisation – External market impact on plant utilisation. Supply chain optimisation is of lower priority than the items above.


Energy Efficiency Performance

2004-05 Vis-a-Vis 2003-04Top Tercile for Asia Region improved 0.3%Second Tercile for Asia Region improved 5.9%Third Tercile for Asia Region improved 3.8%Average improvement in Indian PSU Refineries

was 6.0 %On a comparative basis no gains against your

competitors


Maintenance Performance

2004-05 Vis-a-Vis 2003-04 Maintenance Cost per Mechanical Unit

Regional Top Tercile improved by 11.3%Regional Second Tercile deteriorated by 4.7%Regional Third Tercile improved by 0.5%Average Indian PSU deteriorated by 9.0%

Cycle Maintained AvailabilityRegional Top Tercile constantRegional Second Tercile deteriorated by 0.8%Regional Third Tercile improved by 1.5%Average Indian PSU deteriorated by 0.1%


Margin Performance

2004-05 Vis-a-Vis 2003-04On an Import parity basis Gross Margins

improved by 210% between 2003/4 and 2004/5By comparison Regional Marker Gross Margins

improved by between 230 and 290%Key constraints on Gross Margin potential Refineries are constrained to their regional market No outlets for premium quality products Lack of conversion capacity (Distillates) and yield of low value

Fuel Oil, outlet to petrochemicals

Areas for Improvement

Energy & Operational performanceSmaller sites are characterised by high energy

usage in storage and handling and high auxiliaries.Heat integration in CDU/VDU Reduction in excessive steam letdowns Ocean loss is high which is common in all refineriesMinimisation of steam condensation for generating

electricityBetter loss management



Energy & Operational performanceIncrease conversion capacity ~15% less Fuel

oil..Steam and power network integration Fuel optimization Improvement in basic processesOperational and maintenance excellenceImproved utilities plant and processesImproved process-utility interfaceProcess unit and catalyst optimization



Energy & Operational performance Optimise LPG and lower olefins yields Strategically replace Naphtha as fuels with Natural Gas

and develop aromatics and premium gasoline. Upgrade FCCUs, HCUs for increased LPG Yields. Continue to develop supply chain infrastructure, port

capacity, crude and product pipelines. Quality improvements not just in response to

Environmental drives but also product differentiation Energy efficiency improvement for emission performance. Develop petrochemicals interfaces Hydrogen management



Maintenance Availability & Reliability Improve utilization & unplanned downtime for improved

energy performance Turnaround durations are variable. Some sites show good

management practices which should be actively shared.Typically shutdown duration is longer that best in the region.

There are indications that scope is not fixed and also there is indications of high levels of “un-revealed” work

Current statutory cycle lengths are less than those possible internationally.

Statutory inspection scope is generally larger than permitted internationally.



Maintenance Availability & Reliability Determine maximum economic cycle length Identify vulnerable areas of plant (RBI, Corrosion

Loops) and selectively replace such equipment. Challenge and Control Scope of Shutdowns. Selective

on-line inspection. Project scope control. Integrate fully Operations and Maintenance

shutdown teams. Maintain good records to convince authorities to

allow longer operating cycles Rationalise High number of pieces of equipment to maintain

or to fail. Procurement optimization & optimum work volume


Maintenance Availability & Reliability Determine correct operating windows for plantsSufficient skilled Advisory staff (Rotating Equipment, Corrosion engineers, Inspectors) to investigate.Bad Actor identificationDefect Elimination programsImproved asset reliability & integritySelective upgrading of equipmentImplement shutdown/incident tracking with estimation of potential or actual economic impact.



Margin ImprovementBusiness process optimization/improvementImproved planning tools, common global process for LP modeling, Unconstrained LP Model for individual refineries, Network simulation (NETSIM) tool used to model supply envelopeData set based on “best sustained performance”Crude and feedstock selectionRefinery production optimization-yield improvement



Margin ImprovementInterfaces with refineries & petrochemicals Hydrocarbon stream routing Product mix/blending, handling, storage and qualityRefinery fuel cost optimizationExplore interfaces with “non-Fuels” sectors to maximise marginInvest in capacity and/or constraint removalSelective removal of Supply constraints and develop “export” opportunities



Consolidation

Study collects performance data on raw material, product yields, operating expenses, energy, maintenance, process, personnel etc for analysis

Understanding Performance Gaps is key to Performance Improvement

Many possibilities exist for examining gaps; customized peer group selection is available to help address specific issuesApproximately your sizeIs in your market areaHas a similar configuration


Consolidation

Potential Consolidation of Existing Players and Emergence of Fewer, Stronger Players

Strategic Marketing Alignments and Joint Ventures Organizations Looking to Optimize the Entire Value

ChainSupply Chain Management including In/Outbound Logistics,

Marketing, Manufacturing, Planning

Strategic Downstream Integration into Petrochemicals


Way Forward…..

Follow the Leading Performers Attitude of the people running the refinery makes the difference

- not the equipment in place Pacesetters develop a refinery operating plan and stick to it Individuals are held accountable for deviating from the plan Great importance is put on maintaining plant reliability and

availability Return on existing assets is maximized before additional

investments are undertaken


Way Forward….

Key to Success Management leadership focus Cohesive top management teamOrganizational alignmentData based decision making processesResults (not action) orientationCompetitive Mind-set


overview on “operational benchmarking” of psu refineries in india

Documents

evaluation of performance

physical performance

previous performance

energy cost

key performance parameters

present state of performance

unit energy import

eil energy audits