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Determining the road to top performance

via Refinery Benchmarking

Stuart Cooney, Managing Consultant, Shell Global Solutions International B.V.

1 Introduction
Shell Global Solutions has carried out many refinery benchmarking studies over the last
several years with the purpose of assisting Shell and non-Shell customers in defining what
‘top performance’ means for their business and to help map out the path to achieving that
improved performance.

Benchmarking is an important step in Low-risk structured and proven approach


the overall value generation cycle in
Long-term benefits
providing input into such aspects of
the business improvement planning Implementation
as the alignment of business strategy programme

as well as the simple definition of Value


areas of relative strength and
weakness of a refinery. Shell Global Preparation
Solutions places benchmarking at an
early stage of the business Opportunity
confirmation
improvement cycle, during what is programme (OCP)
referred to as an opportunity Strategic alignment
1
confirmation programme (OCP). Benchmarking Agreement and
Programme definition mobilisation
Business improvement plan

A key question that is faced when © Shell Global Solutions International B.V., 2005. All rights reserved.

analysing the performance of any site


is what areas for improvement are largely or wholly within the responsibility of the refinery
management and what areas are partially or fully beyond the control of the refinery. This is
often considered to be a question of the competitiveness of the site as opposed to the
efficiency of the site. In this article the author will look at how, using benchmarking data the
industry attempts to understand these different parameters so as to focus improvement efforts
on those aspects that can be influenced by the refinery and those more appropriately dealt
with at a corporate or strategic level. Critically the article then looks at what aspects of the
improvement programme can be undertaken by the site on its own and those where there is
insufficient resources or skills available and external intervention or assistance is necessary.

Another key issue to be dealt with includes a correct understanding of the timeframe within
which change can be effected and the path to be taken toward top performance. It can be
seen from longer term benchmarking data how long it has taken the industry, and even
individual participants, to achieve top performance. This along with the correct path from
current to top performance can be seen from the benchmarking data, helping those who are
now beginning the improvement journey to close the performance gap more quickly than
those who went before, however, also setting targets that are challenging but can be
demonstrated to be achievable.

Lastly, sites on the road to improvement need to achieve sustainability in this process. This
means not only changing the technology and infrastructure of the refinery but also changing
the way people work and think about their roles.
2 Benchmarking
A few of the more important concepts of benchmarking are mentioned here.2

Study boundaries
All benchmarking studies begin with a defined set of boundaries. It is firstly important to know
what has been included in the benchmarking study and secondly to understand, for complex
integrated sites, how process plant, energy and cost data and other activities have been
excluded from study.

Comparing refineries
There are approximately 800 refineries operating in the world and it would be most probable
that no two refineries are exactly the same in complexity and capacity. Hence, Shell has
developed several techniques for comparing different refineries and uses other well
established approaches in order to make fair comparisons between different refineries.

The first element of the Shell benchmarking methodology is the calculation of the refinery
complexity expressed as normalised shift positions or NSP. The Shell benchmarking
database contains refineries with a range of NSP counts from approximately 10 to over 120. It
is important to note that the NSP is independent of the processing capacity of the refinery or
the individual units.

The second important element of the Shell benchmarking methodology is the mechanical unit
count. The mechanical unit count converts the physical number of pieces of equipment on site
into a count that is weighted for the complexity and cost of the maintenance task for that piece
of equipment. Hence more complex equipment such as compressors or storage tanks has a
higher factor than a simple heat exchanger. The mechanical unit count is adjusted for the
processing capacity assigning more complexity to larger processing units.

The last significant factor taken into account to normalise refinery performance is the total
intake, crude and feedstocks for processing, for the refinery. Important to any business is to
maintain a positive margin between the income from products sold minus the costs of the raw
materials and minus the costs associated with operating the processing equipment. The
refineries that participate in the Shell Global Solutions benchmarking range in capacity
between approximately 5 million bbls/yr to over 230 million bbls/yr of processing intake.

Benchmarking indices
In order to compare refineries it is often necessary to convert the raw information into an
index. Most notably indices are used for energy and loss performance and personnel
efficiency benchmarking. This method of comparison is necessary due to the large variation in
refinery characteristics.

In this process, based on Shell’s historical data, an allowance for a certain parameter is
calculated and this is compared with the actual site performance. Shell Global Solutions has
two proprietary indices being the corrected energy and loss (CEL) and the Shell personnel
index (SPI).

Refinery peer groups


After all the raw benchmarking data has been normalised using the above parameters and
techniques, refineries can then be compared on the basis of different Peer groups. Peer
groups divide the refinery population being benchmarked by either the type or complexity of
the refinery or by the geographical region in which the refinery operates.
3 Understanding refinery competitiveness and efficiency
At the end of the day the competitive position of a refinery is primarily measured by two quite
simple parameters. Firstly, the refinery’s ability to place its products in profitable markets and
secondly to control its operating costs so as to deliver a positive net margin and a sufficiently
attractive return on investment for its stakeholders. This should in essence be the criterion for
competitiveness whether the stakeholders in the organisation are private or public.

Shell Global Solutions benchmarking has always focussed on cost per bbl as, the key
competitiveness metric. Operating costs per bbl are subdivided in to various categories as
follows:

• Total operating costs (including depreciation).


• Variable operating costs.
o Energy costs.
o Other variable costs.
• Fixed costs.
o Maintenance.
o Personnel costs.
o Other fixed costs.

For example the maintenance costs per bbl from can be ranked from lowest to highest for
each of the geographic regions.

Competitive Ranking of Maintenance Costs


Maintenance Costs

1.6

ASIA PACIFIC EUROPEAN AMERICAS


REGION REGION REGION
1.4

1.2

1
US $ per Barrel

0.8

0.6

0.4

0.2

0
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Other benchmarking organisations that operate in the petrochemical industry have developed
alternatives to the cost per bbl approach. These techniques provide a similar view on the
operating costs competitiveness of the refinery, as the approach adopted by Shell Global
Solutions. Both techniques have been used by Shell manufacturing facilities to understand
their competitive ranking.

Determining the efficiency of a refinery is a more difficult task and this is where the use of the
indices referred to earlier becomes more important. Refineries have quite varied combinations
of processing units that were constructed over many years. Changes in technology, plant
layout and design concepts as well as the improvements in engineering capabilities mean that
metrics based solely on barrels of intake or capacity are inadequate in determining the scope
for improvement in a refinery’s performance.

Older or more complex refineries may have more plant and equipment to maintain and
operate than newer facilities which, when measured solely on cost per bbl will be
uncompetitive. Refineries in different regions or countries will have different unit labour,
material and energy costs which, when expressed only in cost per bbl can mislead the reader
regarding the competitiveness of the site. Lastly, the economy of scale of new larger
processing facilities and super sites will always make such sites look competitive on a per bbl
basis but there may be hidden inefficiencies that if revealed can lead to even better
performance.

As with the competitive metric, costs per bbl, can also rank maintenance costs on the basis of
cost per mechanical unit. Mechanical units were described above as an inventory of the
equipment on the site that has to be maintained. Hence, cost per mechanical unit can be
considered as a measurement of the efficiency with which the site executes the maintenance
tasks for the actual equipment that they have to deal with.

Efficiency Ranking of Maintenance Costs


1200

ASIA PACIFIC
EUROPEAN AMERICAS
REGION
REGION REGION

1000
US $ per Mechanical Unit

800

600

400

200

0
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The industry needs to understand the difference between the competitive position of the
refinery and the efficiency with which it is being managed, maintained and operated in order
to correctly focus the limited resources of the organisation on maximising the value of the
assets. A refinery that is currently uncompetitive but also is not efficient in its operations or
maintenance needs to focus within its own fence on achieving better efficiency. On the other
hand an organisation with a refinery that is also uncompetitive but already amongst the most
efficient needs to think more strategically about the asset.

In order to illustrate this point, consider Figures 2 and 3, which show the refinery maintenance
costs expressed in terms of US$ /bbl and in terms of US$ / mechanical unit. These
parameters were ranked individually in Figures 2 and 3, but Figure 4 simultaneously looks at
the competitive ranking and efficiency of the refineries.

Comparing Refinery Maintenance


Maintenance Costs Costs
Asia Pacific Europe Americas

1400
COMPETITIVE BUT INEFFICIENT UNCOMPETITIVE AND INEFFICIENT

1200

1000
US $ per Mechanical Unit

800

600

400

200

COMPETITIVE AND EFFICIENT UNCOMPETITIVE BUT EFFICIENT


0
0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6

US $/bbl
Dividing the results into quadrants based on the average maintenance cost per bbl and the
average maintenance cost per mechanical unit one can divide the benchmarked population
into four groups. The strategy for prioritising and closing any gaps will depend on the
quadrant in which the refinery is located. Those in the region defined as being uncompetitive
and inefficient need to investigate further if improvements in efficiency can be made so as to
bring the refinery into a more competitive quadrant while those who are already efficient but
still uncompetitive need to consider how to either drive for even greater efficiency or whether
they have a structurally higher number of mechanical units or process plants which prevents
them achieving a truly competitive position.

In the same chart the individual site results have been also grouped by geographical peers.
When investigating benchmarked aspects such as costs there is often a strong influence of
geography on unit rates, or conversely only looking regionally at competitors.

As was mentioned above, sometimes after benchmarking has been normalised data by
factors such as barrels or mechanical units or even when the index has been created, there
are still some residual differences between refineries of different complexities. For example,
3
large very complex refineries consume more energy per bbl in order to achieve the level of
conversion of crude to products when compared with less complex sites. The use of an
energy index system such as CEL largely compensates for the differences in complexity as
can be seen by the scatter of the complexity groups in Figure 5. However, there is a tendency
towards higher energy costs per bbl for more complex facilities as compared to those of lower
complexity.

Energy Costs vs. Energy Efficiency


Energy Efficiency vs. Energy Cost
Asia Pacific Europe Americas

220

HSK

VLCP
200 HSK

180

SCP
Energy Index

160

VLCP
HSK
140 MCP
LCP
SCP SCP

MCP
120 LCP
LCP
LCP HSK VLCP
TCR
MCP
100 SCP
LCP MCP
VLCP

80
0 0.5 1 1.5 2 2.5 3 3.5

Energy Costs US$/bbl

As fuel prices are more or less equivalent on an international basis, being based on crude or
fuel oil prices, when analysing the potential for improvements in energy it is best to consider
complexity peer groups rather than regional peer groups.
4 Determining the improvement opportunity
Once the competitive and/or the efficiency gaps have been determined it is then necessary to
determine to what extent the gap can be closed.

GAP OPPORTUNITY WATERFALL DIAGRAM One popular way of


viewing the process is
via a ‘waterfall diagram’

Aspect 1
Actual as illustrated in Figure 6.

Aspects out of control


result The process begins by

Aspect 2
establishing the result

Aspect 3
Benchmarking

for the refinery and the

Aspect 4
indicator

Best in Realistic ‘best in class’ result for


G class target
A
the same key
P performance indicator
(KPI). The best in class
target could be for a
regional or complexity
peer group or even the
global best practice.
Progress to Target

The next part of the


process again refers to the benchmarking data but breaks down the difference between the
actual and target performance into as many components or cascading (hence the waterfall
term) elements. Often there is a remaining structural gap, or possibly even an advantage,
remaining at the end of the process.

Referring back to the previous example on maintenance costs, two of the sites that are in the
top right (uncompetitive and inefficient) quadrant could be selected (Figure 7).

Comparing Refinery Maintenance


Maintenance Costs Costs
Asia Pacific Europe Americas

1400
COMPETITIVE BUT INEFFICIENT UNCOMPETITIVE
UNCOMPETITIVE AND INEFFICIENT

1200
US $ per Mechanical Unit

1000

800

600

400

200

COMPETITIVE AND EFFICIENT UNCOMPETITIVE BUT EFFICIENT


0
0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6

US $/bbl

Among the various reasons for the poor performance could be either the amount of labour
employed in the maintenance activities or the cost of those resources. Looking at the
benchmarking data on maintenance labour for these two sites by cost per bbl and hours
worked per mechanical unit in Figure 8 it can be seen that the site coloured red is in fact one
of the most efficient in its use of maintenance labour but, for the region, has a structurally high
labour cost. The site coloured orange on the other hand has ample opportunity to look at
improving maintenance efficiency and take better advantage of what appears to be low unit
labour rates.

Maintenance Labour cost vs. Efficiency


Maintenance Labour

Asia Pacific Europe Americas

90
COMPETITIVE BUT INEFFICIENT UNCOMPETITIVE AND INEFFICIENT

80

70
Hours per Mechanical Unit '

60

50

40

30

20

10

COMPETITIVE AND EFFICIENT UNCOMPETITIVE BUT EFFICIENT


0
0 0.2 0.4 0.6 0.8 1 1.2

$ US/bbl

4
The mechanical availability of a site can also be considered as an efficiency metric. In order
to achieve a high mechanical availability a site needs to execute the maintenance tasks both
quickly, to reduce unit downtime, and effectively, to avoid repeated shutdowns. The site, in
Figure 9, coloured orange (consistent with the previous discussion) has a very poor
mechanical availability, which may be one of the reasons behind the high labour effort in
maintenance. This site should be looking at the quality of their maintenance activities, how
well planned are these activities and perhaps improving the skills of their maintenance
workforce. The site coloured red, despite high costs and low labour, is also not achieving top
performance indicating that even though they are already a top performer on maintenance
labour efficiency there is room still for improvement if reliability can be improved.

Maintenance CostsMechanical
vs. Mechanical
Availability
Availability
Asia Pacific Europe Americas

1.6

1.4
Maintenance Costs US $/bbl

1.2

0.8

0.6

0.4

0.2

0
89 90 91 92 93 94 95 96 97 98 99

Mechanical Availability %
5 Achieving top performance
The road to top performance is not always direct, takes time, cannot be travelled alone and
requires much more than just technological and engineering input.

Considering optimisation of Mechanical Availability and Maintenance Costs as being a priority


for a Refinery then the improvement journey is to a great extent dependent on the starting
point. In the following chart it can be seen that sites which are beginning with a low
Mechanical Availability and perhaps low Maintenance Costs in fact have to increase the
maintenance spend in order to improve reliability and availability. Other sites having already
begun to improve reliability and availability of their process units are then able to continue to
improve these parameters while reducing maintenance spend. It is of prime importance in
designing an improvement programme that activities are undertaken in the correct sequence
and that there is focussed attention on improving the most appropriate parameters.

Trend of Mechanical Availability and Maintenance Costs


for 2002 andMaintenance
2004 Costs andvs.approximate
Mechanical Availability 2006 position

2002 2004

1.6

1.4

1.2
Maintenance Costs US$/bbl

0.8

0.6

0.4

0.2

0
85 90 95 100

Mechanical Availability %

One key reason for participating in any benchmarking exercise is to attempt to identify top
performers and to learn from their best practices. Learning from the best practices of others
within your organisation or from others is the best way of making sure that you attack the
issues facing your Refinery in the correct order as notes above but will hasten the rate at
which you can close the gaps between your Refinery and top performers.

One illustration of the value of sharing best practices can be made with reference to Shell’s
experience with the SPI methodology.5

Shell developed the SPI methodology over 20 years ago in order to drive efficient use of
personnel and to provide a methodology for highlighting best practices. It can be seen from
Figure 11 that 15 years ago the difference between the most and least efficient sites was
greater than 100%. Over the intervening years all sites, even them one that was originally the
most efficient, have improved and the sites that originally had the lowest efficiency have
improved most. The gap between the most and least efficient Shell locations is now
approximately 25% of the gap 15 years ago.
Long Term Improvements in Shell’s Refinery
Personnel Efficiency
250

230

210
Overall Personnel Index

190

170

150

130

110

90

70
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

With very few exceptions the progress towards top performance is a gradual one and not one
in which massive changes occur in a single year. There are one or two instances of significant
year on year change but these are due to retirement of old inefficient plants and facilities. This
chart highlights the need for a consistent long term vision and plan. Notably in the past year
or two there has been an increase in personnel. Current high margins and increasing
environmental challenges are driving more intense project and associated activities. The
lesson here is that there is always a need to consider and validate priorities, but against a
consistent set of metrics.

Another aspect is that of achieving sustainable top performance. The majority of the Shell
sites achieved their current level of performance approximately 5 years ago and have
maintained this good performance since then. This level of sustainability is achieved by
ensuring that the changes made are fully embedded in the organisation before moving onto
the next improvement project.

Embedding change in an organisation is normally the most difficult aspect of achieving top
performance. Implementing technological change such as new plant and equipment, plus
more modern control facilities are relatively simple and clear cut. Changing the way people
work, are organised and interact with each other is a potentially more difficult task and one
deserving of as much attention in any improvement programme as the technical aspects.

A very good illustration of the relative difficulty of implementing the technical and mind set
changes is the long term improvements that Shell has made in the safety performance of our
manufacturing facilities across the globe. Taking a view of the lost time incident frequency
data over a period of fifty years it can be seen that major improvements were made up until
the early 1970s by improving process designs and applying the learnings from incidents
6
around the world. During the 1970s the rate of improvement in safety performance slowed
and there was a realisation that further improvements required an alternative approach than
simply engineering out the risks.
Shell’s long-term Refinery Safety Performance

100

Lost Time Incident Index


Process Design
80
Enhanced Safety Management

60 Contractors
Changing the
technology HSEMS
40
Hearts & Minds
20
Changing the
mindset
0
1950 1960 1970 1980 1990 2000 2010

Since the 1980s there has been a greater focus on the way in which safety is managed on
site, the incorporation of all people working on our sites, external verification of management
systems and finally understanding that safe operations are as much a matter of the mind set
of all employees not just the technology and rules. There is a fundamental need to
understand how people work and interact and what influence that has on almost an individual
level to achieve top performance.

6 Conclusion
In conclusion benchmarking provides a consistent set of metrics by which to determine where
the opportunities for improvement lie within a business or individual refinery. However, it is
necessary to understand the differences between competitiveness and efficiency so as to
correctly focus on improvement efforts and responsibility for those efforts. Correct selection of
geographical or refinery complexity peer groups allows the improvement vision and targets to
be established.

There is no single path between the current state of a business and the desired future
position and change programmes need to be carefully considered so as to move the business
in the right direction. The path will be a long one. Benchmarking also provides the means to
identify and exchange best practices which serves to ensure consistent improvement and to
speed up the process.

Lastly, sustainable improvement is not only a process of improving the technology or


engineering out poor performance. Achieving top performance and sustaining it requires the
industry to deal effectively with the management of the people in organisations that are
affected by or responsible for implementing change at all levels of all organisations.

Footnotes
1. The opportunity conformation programme is a proprietary Shell Global Solutions
International BV methodology used to align business improvement strategy, confirm
opportunities for improvement and outline the business improvement plan.
2. A detailed description of the Shell Global Solutions refinery benchmarking
methodology was given in a paper presented by the author at the XII Refinery
Technology Meet organised by the Centre for High Technology (India) in Hyderabad
in November 2005.
3. Shell divides refineries in to six different complexes. Hydroskimming (HSK), thermal
cracking (TCR), Shell complex plants (SCP), medium complex plants (MCP), large
complex plats (MCP), large complex plants (LCP), and very large complex plants
(VLCP). The basis for these complexity groups was given in the XIII RTM paper.
4. Mechanical availability is the amount of time a process unit is not undergoing
maintenance and, therefore, available for production. Major turnaround downtime is
amortised over the operational cycle (based on the last two turnarounds) and routine
maintenance downtime is the average of the past two years. The value at a site level
is a weighted average of all process units.
5. Shell personnel index (SPI) is a proprietary Shell methodology for determining the
efficient use of personnel on site in terms not only of absolute numbers or people but
also in terms of the balance of skills and the balance between own and contract
personnel. The methodology compares actual site workhours with a standard
allocation based on the actual operating plant on site.
6. Lost time incident frequency is expressed as the number of lost time incidents per
million workhours. A lost time injury is one where the employee is not able to return to
normal duties the next day.