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Refinery optimization: Closing the gap between planned and actual performance

02.01.2013  |  Petela, E.,  Aspen Technology Inc., Houston, Texas

Plant managers should remember that small, incremental changes can make huge differences to the competitiveness of a refinery in today's international marketplace.

Keywords: [refinery optimization] [scheduling] [advanced process control]

Refinery optimization is a complex business. Plant managers across the globe face constant pressure to achieve commercial targets. Fundamentally, a key part of the operational planning process relies on setting accurate goals, whereby planning and scheduling, process modeling and day-to-day plant operations are important tools to help set targets and achieve them.

Often, management encounters more questions than answers. Why do the linear programming (LP) models not reflect reality? How do we cope with continuously changing targets? Why are we not performing to expectations? The optimal plan typically will be a “stretch” target. It may not factor in certain constraints like tankage, but it will account for plant availability while not assuming any product quality giveaway.

Refining is not a linear process. In reality, there is always a broad range of variables and fluctuations to manage. As a result, there will almost certainly be a gap between planned and actual performance. A small percentage variation in the production process or delays in scheduling can be costly and equate to plant inefficiency. For executive decision-makers, this could have a significant impact on planning and forecasting for their entire operation. On the positive side, this could mean that actual selling prices are higher than those for expected or opportunistic purchases. Conversely, the effect might be negative, causing less throughput, lower yields and product quality giveaways.

Planning is key to profitability

Primarily, there are two types of gaps: unanticipated events that have a big impact, with a large gap across a short time frame; and the ongoing margin leak during normal operation, with small gaps over a longer period of time.

Overall, these gaps are likely to have negative impacts on refinery profitability levels. The typical gap between planned and actual financial performance is about 5%, but it is not uncommon to see a gap of 10% of gross margin. For a mid-size refinery, at today’s margins, a 10% gap represents a potential financial loss of up to $20 million per year (MM/yr). It is hardly surprising that, for most refiners, closing this gap is one of the largest (non-capital) improvement opportunities.

Therefore, from the perspective of the planners, it is important to ensure that plans are as accurate as possible from the outset of the process. To best achieve this accuracy, planners must consistently question their models. They must ask several key questions:

  • Is the plan optimum, or should it be stretched?
  • Is the plan fit for purpose, and is it resilient?
  • Does the plan provide a true representation of the capabilities of the refinery?

These considerations must also take into account the current status the plant is operating under, along with the likely changes over time. When first developed, planning models usually reflect reality based upon the criteria known at the point of design. However, changes to the refinery mean that the model will require modifications over time, to prevent inaccuracies from occurring.

Since it is necessary to update the planning model, planners must decide how often to make necessary alterations. The best practice will be to use engineering simulation models (process and rigorous reactor models) to update the planning model. Engineering models may require tuning to current operations, but there is growing awareness that their usage is becoming critical to delivering optimum planning models. In this context, a blend of planning and engineering tools provides a powerful solution.

Dealing with risk

Any refinery plan must be able to effectively manage risk. This is always a difficult challenge. Key input variables in planning can have a large degree of uncertainty associated with them—feedstock and product prices, for example.

In the course of the planning process, refineries typically will need to make assumptions and even informed guesses about the future values of these variables. Inaccuracies in these guesses will result in significant gaps between planned and actual profitability.

The traditional approach to making these assumptions is to perform a scenario analysis. Typically, such an analysis requires the time-consuming definition of a large number of cases. Incorporating risk analysis can help develop more resilient plans that are likely to be achievable.

Key role of scheduling

Closely linked to planning, scheduling is typically more about feasibility than economic optimization. Planning output is typically delivered to the refinery’s management and scheduling teams. The schedulers then take the plans and convert them into hour-by-hour actions. However, a sensible approach to scheduling should not only look at the various options for achieving the plan, but also provide the ability to react quickly to deviations from that plan.

Just as with the planning process, refinery management should continuously question the scheduling approach. Key questions typically include:

  • Are the plans and schedules aligned?
  • What is the feedback to the planning process?
  • How quickly can the schedulers cope with unplanned events, and can they evaluate opportunistic sales and purchases in the necessary time frame?

Here, petroleum-scheduling solutions that come with a planning and scheduling model accuracy (PSMA) tool, which facilitates and automates the process of model-accuracy tracking, can play a key role.

Managing energy

Another key area that refinery management must focus on is energy management. Refineries are extremely high consumers of energy; approximately 40% of a refinery’s outgoing costs are energy-related. The cost of energy is the highest refining cost after crude oil purchases (Fig. 1). The energy cost for an average, 100,000-barrel-per-day (bpd) refinery can hit $100 MM/yr.

  Fig. 1.  Planners can easily review and manage constraints
  with a full view of the refinery.

The rising cost of energy, along with stricter environmental emissions rules, means that there is a need for better planning and management. In the future, there will be an increasing focus within refineries on energy optimization rather than only on hydrocarbon optimization. Today, the focus on energy reporting is being superseded by a focus on energy management, which requires management of both the demand and the supply side.

Refiners must question energy costs. In particular, they should ask themselves the following:

  • Can energy costs be reliably forecasted?
  • Do energy usage and costs meet the plan?
  • Can energy and emissions constrain the plan?

Operational focus

Some refineries have successfully implemented—and are continuing to integrate—planning, scheduling and energy-management systems as part of an overall risk-management strategy, effectively taking a more integrated approach to their overall operational strategy (Fig. 2). Refiners can look to achieve improvements in unit and refinery-wide performance by concentrating on two areas in particular: closed-loop control and open-loop management.

  Fig. 2.  Visual tools enhance data analysis to support better
  crude purchasing decisions.

Advanced process control (APC) techniques typically come into play with closed-loop control. Recent advances in APC have reduced the cost of implementation and made controller maintenance much easier. As a result, APC can now be justified on most units.

Composite APC applications can be used to synchronize and optimize the operation of multiple units. New work is focused on feeding targets from scheduling directly to APC applications, which can understand operating constraints and can feed back to the scheduling system (and, from there, feed back to planning).

Open-loop performance management is also vital to adding value in the refinery. Most performance-management systems in use are actually performance-reporting systems. For performance management to be valuable, it needs to move beyond simple reporting by delivering information in as near real time as possible, and it also needs to provide what is known as “look-ahead” capability. This enables refiners to answer the question, “How will this information impact my monthly plan, define the magnitude of the issue and facilitate rapid solution investigation?”

Performance reporting is capable of pinpointing where a refinery is making errors and, therefore, help eliminate their reoccurrence in the future. The point is not to avoid making the same mistake twice; it is managing performance to avoid making the mistake the first time.

Ultimately, performance management is extremely powerful because it draws on data from many of the other tools previously outlined, from planning and scheduling to APC. Refineries should carry out a systematic performance analysis to quickly identify gaps and actions. To be effective, this analysis requires multi-disciplinary input.

Closing the gap is key to success

Refining margins continue to be squeezed in today’s highly competitive marketplace. The difference between planned financial performance and actual financial performance may be up to 10% of a refinery’s gross margin. Closing this gap is one of the highest return opportunities for refinery managers today.

Refineries should regularly define gaps in financial performance—typically on a monthly basis. To do so effectively, however, requires a systematic analysis of why actual performance falls below target. Each step of the process—from planning to scheduling through operations—needs to be analyzed for gaps, along with the financial value of closing those gaps. Once the reasons for the gaps are known, appropriate actions can be taken. In some instances, these may be one-off actions (e.g., replacing unreliable equipment or process systems that require long-term operational changes).

Refinery management must remember that small, incremental changes can make huge differences to the competitiveness of a refinery. Software technology solutions provide a realistic method of closing the gap between planned and actual performance, and they are critical to achieving long-term commercial success. HP

The author

  Eric Petela is Aspen Technology Inc.’s director of business consulting for Europe and the Middle East, and he is responsible for providing technical support to AspenTech’s oil and gas clients in the areas of manufacturing and petroleum supply chain. Mr. Petela joined AspenTech in 1997 and has over 30 years of experience in the oil and gas, refining and petrochemical industries. Mr. Petela is also a specialist in improving plant operations through process engineering, planning and scheduling technologies. He has extensive commercial experience and in-depth knowledge of refining, olefins, chemicals and polymers process units, and the highly integrated energy and utility systems within complex manufacturing sites. Mr. Petela began his career in the area of process plant design, and he held a variety of roles over a number of years before moving to a business consulting role. He has implemented projects and performed consulting services for many oil and chemical companies around the world. Mr. Petela has a BSc degree from the University of Nottingham, and he is a chartered engineer in the UK and a fellow of the Institution of Chemical Engineers. 

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