Newly Acquired Underperforming Refinery Improves to Second-Quartile Performance with Savings of 24M USD/Yr

CASE STUDY

Newly Acquired Underperforming Refinery Improves to Second-Quartile Performance with Savings of 24M USD/Yr

Solomon’s Performance Excellence Process™ identified recommendations to improve operational efficiency, optimize staffing and work processes, reduce costs, and upgrade information systems.

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CHALLENGE

A company acquired an under-performing North American refinery. They sought to improve its operational efficiency and evaluate its workforce and management structuring.

SOLUTION

Solomon applied its PEP™ methodology with a phased approach, making specific performance improvement recommendations. These were in the areas of planning and optimization, yield and energy, advanced process control systems, hydrocarbon loss, workforce optimization, reliability, routine maintenance processes, operations/maintenance interface, and turnarounds.

RESULTS

The analysis prioritized 57 detailed recommendations to improve the refineries performance with estimated benefits of 24M USD/yr in savings. Post implementation, the refinery moved from the fourth quartile to the second in mechanical availability, with turnaround costs also reaching into the top half for availability, scope, and maintenance costs.

AN UPHILL BATTLE, DOWNSTREAM

A company acquired a mid-sized North American refinery whose performance was in significant decline due to waning mechanical availability, rising costs, and poor overall utilization. Having more extensive experience in the upstream sector, the purchasing company turned to Solomon to assess its new acquisition and make recommendations on how to optimize its operational and maintenance efficiency. The company also engaged Solomon to evaluate refinery management roles in order to make recommendations regarding organizational restructuring.

PHASE 1: IDENTIFYING INEFFICIENCIES

Solomon’s approach was carried out in three phases using its Performance Excellence Process™ (PEP), a methodology that is tailored to the specific needs of each client to set a baseline performance. Solomon then evaluated these work practices and compared them to industry best practices by scoring each to identify which areas provide the most significant opportunities for improvement (Figure 1).

Among the most significant findings were the following:

Limited standardized process existed to address reliability issues.
Over 60% of maintenance was reactive and performed on an emergency basis.
Little to no formal planning or scheduling of work took place.
Preventive maintenance was often postponed in favor of emergency work.
No backlogs had been developed.
Maintenance materials were poorly managed.
Accounting systems were not discrete and did not allow for analysis and improvement.

Figure 1. Scorecard Summary

PHASES II AND III: CLOSING THE GAPS

Once the key inefficiencies were identified, Solomon moved to Phase II of the process: developing, quantifying, and prioritizing actionable recommendations to address existing performance improvement opportunities. A total of 57 detailed recommendations were provided in the areas of planning and optimization, yield and energy, advanced process control systems, hydrocarbon loss, workforce optimization, reliability, routine maintenance processes, operations/maintenance interface, and turnaround processes.

Solomon noticed that the refinery reliability and maintenance performance had the largest potential for improvement. Solomon recommended that the client establish a culture of reliability and a reliability work process program with a dedicated leadership.

The assessment illustrated that issues derived mostly from existing processes, for example being reactive instead of proactive in nature. Solomon recommended a weekly, daily maintenance scheduling process be enacted and to integrate maintenance account and financial accounting into one system.

The client requested an additional analysis to improve its staffing resources and management. Solomon provided the refiner a detailed plan to develop a formal succession planning process, a formal career development process, and compensation benchmarking effort.

In addition to addressing the refinery’s functional and organizational inefficiencies, Solomon noted that the information systems in place also had improvement opportunities and could benefit from technological upgrades. As part of Phase III of the PEP process (implementation of recommendations), Solomon acted as a trainer and partner to the company. Solomon also recommended specific actions to the board of directors, helping to guide the selection, configuration, and implementation of new information systems.

A SUCCESSFUL PARTNERSHIP

To assist in the implementation process, Solomon provided training sessions of reliability and maintenance best practices to refinery management and implementation of new information systems. Solomon continues to support this client through a continuous service contract as the refinery continues its journey to increased efficiency.

OVERALL BENEFITS

Overall, Solomon’s Performance Excellence Process identified a total of 24M USD/yr in potential savings of implementing proposed recommendations. There are 90% of potential benefits associated with no- to low-capital investment opportunities.

From implementing the recommendations, the refinery has moved from fourth quartile in mechanical availability to healthily within the second quartile. Its turnaround performance also sits in the second quartile for availability, scope, and maintenance costs. Non-turnaround costs continue to be below average but are trending upward.

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