I read an article recently about the difficulties faced by European refineries. Weak demand in Europe caused by the continent’s economic woes is a major factor. Problems related to refinery configuration are hurting, mainly due to the fact that Europe has strong demand for diesel but refineries are mostly old and designed to maximise gasoline output.
Also, Europe has not benefitted from the lower crude prices that have been enjoyed by North American refiners as a result of the tight oil availability in that region.
As a consequence, European refineries have been running at utilisation rates of 75 per cent, whilst refineries elsewhere around the world have been running at average utilisation rates of over 90 per cent.
This is putting much pressure on European refiners. Older, less efficient units are closing and some other units are being modified to meet the demand shifts. European refiners are undoubtedly feeling the pain and casualties will result but at the end of the process, the remaining refineries will be leaner and fitter and, most importantly, more competitive on the global stage
For Middle Eastern refiners and petrochemical companies, this does have resonance. In particular, the relative shortage of gas will ultimately impact the competitive advantage enjoyed by petrochemicals producers and although unconventional gas will soften the impact, this will not happen overnight. So what to do?
For those who have seen my previous columns, you will know that I’m a great advocate of Operational Excellence. All refiners and petrochemical producers should have plans in place to drive operational efficiency. This means flexibility, cost effectiveness and competitiveness in a challenging market. For existing facilities, there are a number of considerations.
Cost structure is very important. It is always valuable for managers to critically analyse all elements of cost and ask the question ‘Is there a better way?’ – making sure, of course that cost savings in one area do not have an adverse impact somewhere else. Producers should aim for the optimum cost (I deliberately do not use the word minimum) that ensures safe and efficient production.
Reliability should be excellent. If you have invested many millions of dollars in an asset, you must make every effort to drive the reliability of that asset. Advanced maintenance strategies will support this effort.
There should be a relentless elimination of waste, of all types – wasted effort is just as important to consider as physical waste. All processes should be lean, whether they are physical processes or administrative processes. Value stream mapping and a robust challenge process will allow the issues to be readily identified.
Producers should look to maximise output both in terms of cost and quality. On my own plants, I wanted to know where every single lost tonne of production had gone and, most importantly, what we could do better next time. This level of focus will ensure that assets are driven to the very highest levels of operation.
The supply chain is under enormous pressure. Demographics are changing, regulatory pressures are increasing. Cost efficient supply chain models result in reduced inventories and waste for lower working capital, reduced carbon footprint for a more sustainable operating model and greater accuracy and responsiveness for better customer service.
Finally, the workforce is the single most important issue. None of the above will be achieved unless you have a highly skilled and flexible workforce that is fully committed to continuous improvement.
This is both a cultural and a tactical issue. A strong leadership culture, fully committed to excellence, backed up by the right people, with excellent training and development plans is absolutely essential.
Andy Gibbins is Vice President, Middle East with Euro Petroleum Consultants [EPC] and based in Dubai. Prior to joining EPC, Andy spent over 20 years with Shell and NOVA Chemicals. EPC is a technical oil & gas consultancy with offices in London, Dubai, Moscow, Sofia and Kuala Lumpur. They are also the organisers of leading oil & gas conferences and training courses. EPC held the first “OpEx 2013” conference dedicated to Operational Excellence in Abu Dhabi in December, and the event will be repeated in 2014.
Please visit www.opex.biz for further details.
