CASE STUDY

Middle East Refinery Plans to Be Among the Most Globally Competitive

Solomon uses Q1 Day 1™ benchmarking and organizational assessment to develop evolving targets for net cash margin, energy efficiency, and optimal staffing.

CHALLENGE

A corporation in the Middle East engaged Solomon to evaluate the expected performance of a proposed refinery and terminal project.

SOLUTION

Solomon used its Q1 Day 1™ methodology to determine benchmarks for competitive net cash margin, energy expenditure, and optimal staffing.

RESULTS

Pro forma benchmarking tasks and organizational assessment indicated the refinery could be competitive with some of the highest-performing facilities in the world.

PLANNING FOR THE TOP QUARTILE

A corporation in the Middle East engaged Solomon to assess the potential performance of a proposed refinery and terminal project. To determine the operating cost and personnel levels required in the initial period after startup, Solomon used its Capital Investment Analysis (Q1 Day 1™) methodology, with the ultimate goal of helping its client achieve top-quartile performance.

BENCHMARKING THE REFINERY PROJECT

Solomon’s first task was to perform a pro forma benchmarking analysis of the proposed refinery. After establishing a peer group of six high-performing refineries in Europe and the Asia/Pacific region, as well as setting a baseline indicator of four refineries in the Kingdom of Saudi Arabia (KSA), benchmarking results showed the project to be competitive. The refinery’s performance was projected to fall into the first quartile based on Solomon’s Worldwide Fuels Refinery Performance Analysis (Fuels Study) for operating year 2010. The light (Arab Medium) and heavy (Arab Mix) cases resulted in projected net cash margins of 6.36 and 6.5, respectively — well above the peer group and baseline (refer to Figure 1).

Solomon also recognized opportunities to improve refinery margins even further by reducing

Figure 1. Total Europe/Middle East

the project’s Energy Intensity Index™ (EII®) and improving operational availability through specific recommendations. Tightening the projected steam and electrical consumption was expected to result in a reduction of the refinery’s projected EII score of 84 to approximately 81, on target with its peer group. A process assessment later revealed that adjustments to the continuous catalytic regeneration (CCR) reformer could improve operational availability beyond the peer group.

Solomon also made recommendations that improved the Personnel Efficiency Index (PEI) and Maintenance PEI (mPEI), leading to an optimized, more efficient staff. In addition, its recommendations helped the project realize reductions to operating expense (OpEx) and improve net cash margins.

BENCHMARKING THE TERMINAL PROJECT

The second task Solomon undertook was again a pro forma benchmarking analysis, but this time focusing on the proposed marine terminal project. The results showed the terminal falling within the second quartile for manageable non-volume expenditure (MNVE) according to Solomon’s Liquid Terminal Performance Analysis for 2010 — well above the baseline group and within reach of a high-performing target peer group operating in the first quartile (refer to Figure 2). The subsequent operational assessment also revealed opportunities to contribute to a favorable MNVE of approximately 1,250 USD per thousand units of equivalent terminal complexity (kETC), already projected for the project.

Figure 2. Marine Terminal Efficiency

ORGANIZATIONAL ASSESSMENT

After the benchmarking exercises, Solomon performed an organizational assessment to determine tiers of efficiency that began at a baseline (Tier 1) for start-up when fully on-line and aspired to significantly optimized PEI (Tier 2) after the first year and optimized PEI (Tier 3) after the first turnaround.

The baseline/Tier 1 group comprised refineries in the KSA and included three conversion refineries and two joint ventures. Tier 3 represented the high performing target peer group of six refineries defined in the refinery benchmarking, and Tier 2 served as a midway point (refer to Table 1).

To generate more efficient staffing targets, a single organizational structure was developed for Tiers 2 and 3 based on one of the peer refineries’ operations, maintenance, and engineering (OME) areas.

Nine OME areas were initially proposed for the project, with Solomon recommending

Table 1. Tier Staffing Targets

consolidation down to three through changes in practices, procedures, and work group charters. With optimized staffing achieved over time and recommendations to improve general, operational, technical, and maintenance processes implemented, the refinery was projected to be comparable to other high-performing facilities globally.

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