2016 Integrating Capital Projects And Turnarounds Whitepaper

2016 Integrating Capital Projects
and Turnarounds Whitepaper
Market outlook and critical analysis for capital projects and shutdowns within US petrochemicals
and reﬁning industries, with detailed insight in to proven best practices and common challenges
facing the market
Brought to you by Petrochemical Update
www.petchem-update.com/shutdown-turnaround/

The whitepaper covers:
∞ Top challenges turnaround and capital teams have faced when integrating projects, and how these issues have
been solved, including: scheduling, planning, cost allocation, and operations and maintenance issues.
∞ Communication and leadership strategies adopted on the most successful integrated projects.
∞ Technology and game changers to help teams with scheduling, design, budgets and an index to measure which
projects and turnarounds belong in integration, and which should stand alone.’
Featuring insights from:
CHRIS VAUGHN
Maintenance Team Leader
DuPont
NIKKI BISHOP
Director, Global
Turnaround Program
Emerson Process Management
BOBBY SINGH
President
Project Assurance
RICH VERWEGEN
Turnaround Team Leader
NOVA Chemicals
BOBBY VICHICH
Vice President Turnaround
Consulting Services
AP-Networks
BRENT LANGLEY
Senior Consultant
Oracle Corporation

Gulf Coast Shutdowns
& Turnarounds
June 7-8, New Orleans, USA 2016
www.petchem-update.com/
shutdown-turnaround/
Introduction
Even though companies often plan maintenance projects months or even years in
advance, some 68% of US refiners and chemical plants still fail to deliver their
planned shutdowns, turnarounds and outages on time, according to Brent Langley,
senior consultant at Oracle Corporation. Since turnarounds are by definition a lost
profit opportunity, any delay in executing them adds to production losses, and
undermines shareholder value and regulatory compliance.
Capital project work as a percent of turnaround work has grown from just 2% in
2006 to nearly 25% in 2014, according to Bobby Vichich, vice president of
turnaround and project management consultancy AP-Networks. Lack of effective
project-turnaround integration between capital project teams and turnaround teams
is often cited as the top reason for turnaround failures.
With the next 3-5 years expected to see a high number of shutdowns, turnarounds
and outages at petrochemical plants & refineries in the US, it is more important than
ever for producers to build effective plans and processes to deliver maintenance
projects on time, on budget and safely.
Moreover, experience and data show that including more than 30% of capital
project work into a turnaround execution window severely heightens the
complexity of the event. The interface between the capital project and turnaround
teams has historically been one of the most difficult to manage and is even more
critical for the upcoming large-scale projects as more complex projects tend to
experience more and bigger schedule and budget overruns.
This white paper features insight from seasoned turnaround managers,
maintenance teams, capital managers and industry consultants in North America to
highlight the key strategies and latest lessons learned at petrochemical and refining
facilities that have significantly improved their turnaround programs, with a focus
on:
• Effective scheduling, planning, cost allocation, and operations & maintenance
(O&M) when integrating capital projects with shutdowns/turnarounds;
• Communication and leadership strategies from leading integrated projects and
turnarounds;
• Technology and game changers to help teams with scheduling, design and
budgets.
Outlook for Capital Projects and Shutdowns
Despite weaker oil prices, analysts expect US petroleum refinery capital spending to
rise over the next three to five years as refiners race to prepare facilities to meet new
regulations from the US Environmental Protection Agency (EPA), take advantage of
cheap domestic feedstock, and as North America becomes an exporter of
petroleum products.
Refiners in the US and Canada are projected to spend about $6.7 billion on new
capital projects in 2016, up from $5 billion in 2015, according to Chris Paschall, vice
president of global research for the petroleum refining industry at consulting firm
Industrial Info Resources.
Out of that, refiners in the US and Canada have scheduled about $1.3 billion of
maintenance spending in 2016, and the number of scheduled refinery turnaround
projects is expected to increase in 2016-2017 after it fell sharply in 2015 as refiners
delayed projects to process the flood of inexpensive crude oil, Paschall told
Petrochemical Update.

& Turnarounds
Phillips 66, for example, plans $1.2 billion of capital expenditures in refining in 2016,
with 70% of that to be invested in reliability, safety and environmental projects,
including compliance with the new Tier 3 gasoline specifications.
Meanwhile, HollyFrontier is targeting a capital investment program of $325 million
during 2015-2018 on projects to expand and modernize operations at its five US
refineries.
Spending on US petrochemical projects, especially new ethane crackers and
polyethylene units, is also expected to grow in 2016-2020, based on announced
construction projects, expansions and debottlenecks (See Table 1, 2 and 3).
NEW CRACKERS
Sasol
ExxonMobil
Chevron Phillips
Dow Chemical
Formosa
Formosa
Total
Oxichem/Mexichem
Axiall/Lotte
Shell
Braskem
Shin-Etsu
Williams
PTT/Marubeni
COMPANY
1500000
1500000
1500000
1500000
1200000
1590000
900000
544000
1000000
1500000
1100000
500000
1500000
1000000
CAPACITY
(Tons)
Louisiana
Texas
Texas
Texas
Texas
Louisiana
Texas
Texas
Louisiana
Pennsylvania
West Virginia
Louisiana
Louisiana
Ohio
LOCATION
N/A
2017
2017
2017
2017
N/A
N/A
2018
2018
2020
N/A
N/A
N/A
2024
ANNOUNCED
START-UP
2018
2017
2017
2017
2017
2022
2023
2018
2023
2021
2019
2022
2025
2024
INDUSTRY PROJECTED
START-UP
Table 1: New US ethane crackers
Source: Petrochemical Update’s US Ethane, EthyIene & PoIyethyIene: Exports & Markets Report (December 2015).

& Turnarounds
Moreover, a rise in margins for polypropylene has resulted in recent
announcements for potential increased production of the plastic in the US, starting
as early as 2016.
Formosa and Vinmar are studying the feasibility of building a polypropylene plant in
Louisiana. Formosa Plastics said it will build a new polypropylene plant at its
complex in Point Comfort, Texas.
Braskem America CEO Fernando Musa also said the ﬁrm was studying a new plant,
as well as debottlenecking options at its ﬁve existing US polypropylene sites.
EXPANSIONS
INEOS
Williams
Westlake
LyondellBasell
Chevron Phillips
Westlake
LyondellBasell
LyondellBasell
Huntsman
BASF
Indorama
COMPANY
115000
272000
82000
363000
100000
100000
125000
375000
25000
150000
370000
CAPACITY
(Tons)
Texas
Louisiana
Kentucky
Texas
Texas
Louisiana
Texas
Texas
Texas
Texas
Louisiana
LOCATION
2014
2014
2014
2014
2014
2014
2015
2015
N/A
2014
2017
START-UP
Started Up
Started Up
Started Up
Started Up
Not Sure
On-Schedule
On-Schedule
Upgrading Cracker
acquisition, renovation
& restart
STATUS
Table 2: Announced US Ethane Cracker Expansions
Featuring insight from:
US Ethane, EthyIene & PoIyethyIene:
Exports & Markets Report
us-ethane-and-ethylene-exports-markets-report/

& Turnarounds
Badlands NGL
Braskem
Chevron Phillips
Dow Chemical
Dow Chemical
ExxonMobil
Formosa
Formosa
LyondellBasell
Nova Chemicals
Odebrecht
PTT/Marubeni
Sasol
Sasol
Sasol/INEOS
Shell
COMPANY
1,500,000
N/A (1,000,000)
1,000,000
400,000
650,000
1,300,000
400,000
525,000 + 600,000
450,000
430,000
700,000
450,000
420,000
470,000
1,500,000
CAPACITY
(Tons)
Unspecified
HDPE/LDPE
HDPE, LLDPE
LDPE
LLDPE
LLDPE
LDPE
LLDPE, HDPE
HDPE
LLDPE
Unspecified
HDPE
LLDPE
LDPE
HDPE
HDPE/LLDPE
GRADES
N. Dakota
West Virginia
Texas
Texas
Texas
Texas
Texas
Texas, Louisiana
US
Alberta
West Virginia
Ohio
Louisiana
Louisiana
Texas
Pennsylvania
LOCATION
Unspecified
N/A (2022)
2017
2017
2017
Late 2016 (2018)
2017 (2018)
N/A (2022)
Mid-2017 (2019)
3Q 2016 (early 2017)
Unspecified
2020 (2024)
2016 (2018)
N/A (2018)
2016 (early 2017)
2018 (2022)
ANNOUNCED START-UP
Table 3: US Polyethylene Projects
Featuring insight from:
US Ethane, EthyIene & PoIyethyIene:
Exports & Markets Report
us-ethane-and-ethylene-exports-markets-report/

& Turnarounds
Common Problems
Bobby Singh, president of shutdown & turnaround consulting firm Project
Assurance and author of the book “World-Class Turnaround Management –
Business Driven and Reliability Focused” has conducted a benchmark survey of
turnaround teams for refineries and chemical plants. The annual survey, which is
distributed to about 25-30 maintenance, project, turnaround, cost control and
operations managers 4-5 times a year, shows that many turnarounds lack focus,
planning and leadership:
• More than 90% of turnarounds failed to meet the company’s business and
turnaround goals.
• Eight out of 10 turnarounds experienced cost overruns of up to 40%;
• Half of the turnarounds waivered from the schedule;
• Nine out of 10 turnarounds had scope growth of up to 50% mid project;
• Most turnarounds were impacted by shortages of skilled staff;
• Three out of four times the schedule was abandoned the first week of the
turnaround.
Singh said many companies are struggling to get their departments to develop a
collaborative strategy, but that they can significantly improve their turnaround
performance and capital project integration via strategic planning, systematic
processes and strong leadership.
“Leadership must give clear expectations and stand up for the priorities of both
teams in order to mitigate the issues,” Singh said. “They must focus on creating a
knowledge-based organization where the team understands the purpose of the
turnaround and is motivated to achieve results.”
Singh’s top rules for facilitating turnarounds and shutdowns include:
1. Establishing a company-specific turnaround management process and
procedures based on best industry practices;
2. Implementing a strategic turnaround planning system to create synergistic focus
on turnaround goals, critical issues and success initiatives;
3. Focusing on safety, business success, mechanical integrity and cost-effective
execution;
4. Assigning high-impact turnaround teams through customized training and
getting expert support;
5. Developing contracting strategy and plan to select the most qualified
contractors and management teams;
6. Conducting quarterly turnaround planning preparedness reviews to ensure
focused planning and efficient execution;
7. Achieving effective turnaround management controls through value-added
planning, dynamic cost controls and progress reporting;
8. Implementing productivity improvement plan to achieve highest field
efficiencies and logistical coordination;
9. Conducting post-turnaround evaluation to develop initiatives for eliminating
weak areas and improving future results;
10. Ensuring continuous learning through customized turnaround management
training and benchmarking programs.

& Turnarounds
To Integrate or Not?
Improved refiner margins mean more capital project activity is on the books, and
more capital projects are executed during the maintenance turnaround window
than ever before.
Refiners are willing to spend the money to improve, but they don’t want to lose
money from lost production, according to Nikki Bishop, director of the Global
Turnaround Program at Emerson Process Management.
Integrating the capital project with the turnaround could minimize downtime, saving
time and money.
Since an outage at a refinery or a petrochemical plant typically runs for 45 days in
execution, 60 days spec to spec, taking two in one year does not make economic
sense, according to Rich Verwegen, turnaround team leader maintenance services
at NOVA Chemicals.
Every turnaround at NOVA has had some level of capital project in place. The scope
of the project work is almost equal to the maintenance expense, Verwegen said,
and having a process in place ensures consistency and alignment.
Integrating a capital project with a turnaround not only ensures the facility is shut
down only once, but also brings communication benefits, according to Bobby
Singh of Project Assurance.
“During execution, both parties may need to work on the same equipment, use
same procedures, use same skilled workforce and avoid any conflicts that may
result in delays and restarting the refinery and costs overruns,” he said. “The only
way to avoid this is to address these up front, rather than confront during
execution.”
Yet, integrating a capital project with a turnaround is less desirable in other cases
due to inherent differences in the two types of events. A master plan for leadership
helps teams to develop the best timing of events.
NOVA, for example, is using the Primavera 6 solution by Oracle – a project
management tool to handle large-scale, highly sophisticated and multifaceted
projects by breaking them down into thousands of separate activities – to address
planning and to schedule all events to a level 5 detail.
A plant manager, for example, may have shutdowns and turnarounds in several units
planned for the year, in addition to capital projects. A solution like Primavera 6
allows the leadership to take all the scopes of work and data in one place to
visualize the best, most cost-effective option.
“The solution will look at inventory reserves, timing of which units are out globally
and look at various scenarios to determine if the shutdown should be delayed or
the timing changed, or done alongside a capital project,” Langley said.
The solution is used by everyone on the team with various security layers so that
management can look at both the project team plans and maintenance team plans
company-wide to determine the best strategy.
Meanwhile, AP-Networks uses an Integration Index to quantitatively measure the
level of integration on a scale of 0 to 100%. Numerical models correlate with
turnaround predictability and schedule competitiveness to measure the integration
possibility as strong, borderline or weak. The index is designed to pinpoint gaps
between project and turnaround teams and to serve as an indicator of turnaround
performance outcomes, Vichich said.
The company has a database of more than 1,300 turnaround observations from
which it develops mathematical models and regression analyses that correlate

& Turnarounds
planning and preparation practices to outcomes. This allows AP-Networks to see –
with supporting industry-wide data – how project/turnaround integration relates to
outcomes, he added.
Case study: Implementing Integration Processes and
Procedures at NOVA Chemicals
When planning a turnaround/shutdown, companies have primarily focused on
scheduling maintenance to minimize the impact on revenue. But there are other
important factors to consider to ensure that the turnaround is finished on time and
on budget.
Organizations need to fully understand the scope of the event, including the daily
costs, the procurement plan, purchase lead times, the resources needed and
contractor requirements. They must be able to manage changes throughout the
event.
The lack of an approved scope can increase the final cost and completion time by
more than 10%, according to Oracle’s Brent Langley.
“The biggest barrier is a clean scope. We have to freeze the scope to start planning.
There is always the potential for minor changes. Even minor changes have an effect
on the turnaround,” NOVA’s Verwegen said.
As a first step, Verwegen requests milestones and a milestone document with
deadlines is created for production to determine dollar value of production and
man power. Milestone deadlines at NOVA start as soon as a month after feasibility
discussions begin, and detailed planning starts a full year before the project begins.
In one case, NOVA began planning a turnaround/capital project integration 2.5
years ahead of the scheduled start date.
Unlike many other facilities, the capital project work is planned by the turnaround
team to ensure consistency and alignment of schedules. The capital project leaders
then assess and join review meetings. NOVA implemented this process a few years
ago, after a major expansion project and a turnaround that were planned separately
did not go well.
At NOVA, the capital team will schedule engineering and procurement with the help
of an engineering and procurement firm, and the turnaround team will schedule
construction manpower for the shutdown with the help of a construction company.
Indirect costs such as equipment rental and contractor work hours are distributed
between the project and turnaround teams using a percentage formula through the
SAP software solution.
“Everything in the project has to line up with the turnaround – all deliveries, all
components. [The project team] run the process, but [the turnaround team] track it.
If there is any project work that can be done outside the turnaround and not impact
production, we’ll work it in. We attempt to do project work and turnaround work
together, starting at execution,” Verwegen said.
The teams align early on at NOVA using a plans review process. The project group
has to come up with the scope. The turnaround team requests details of what can
be done before the turnaround begins, as well as manpower hours, critical work
processes, and construction plans. Together, the team looks at constructability,
critical paths and man power needs.

& Turnarounds
According to Vichich, by the end of the basic design, the project team should have
clearly defined objectives, engineering philosophy, construction philosophy,
contract and procurement strategies, project control (schedule and cost) strategy,
execution organization, as well as document deliverable formats for contractors and
for handover to operations.
“Any changes to these after basic design and budget authorization will cost the
project money,” he said.
At NOVA, change happens as soon as the day after a team’s first meeting, and
teams must have a communication process in place early on to manage change
and the scope of how it impacts the turnaround and the project, Verwegen said.
“We have a rigorous process in place to make any change to the scope of the
project that usually requires a higher level of leadership to make these changes,” he
added.
Case Study: Leadership Strategies at DuPont
Scheduling and resource planning are the primary focus areas when managing a
shutdown/turnaround. The organization must anticipate production loss during the
asset’s downtime. Organizations that have adopted planning and scheduling
optimization solutions have seen a 3% improvement in shutdown project
completion times from shutdown to startup, according to Langley.
To truly improve the process, teams must take a focused approach. At DuPont, an
efficient turnaround process that follows the schedule will ensure the plant re-starts
result in on time, and sometimes earlier than planned.
“Turnarounds can really be the biggest loser for a company when the team loses
focus and does not take a focused approach,” said Chris Vaughn, maintenance and
turnaround team leader at DuPont. “We see that with the proper planning and
process in place, we have seen 20-day planned outages come back online on days
17 or 18. Not losing money, but saving money and production.”
It took DuPont two years to improve the process and establish best practices. The
first step was to change the company culture and get leadership support.
“If you want a good system in place, you must engage people from each team to
build the process and establish integrity, and have leadership on your side cheering
on the effort,” Vaughn said. “The schedule has to be built early with insight from all
teams.”
In return for leadership support, the turnaround team promised communication
improvement.
“Turnaround time is emotional. It feels like the movie ‘Groundhog Day’. Same thing,
different day, over and over,” Vaughn said. “People don’t see what’s going on at the
plant and they get anxious, so you should provide timely updates and explain what
is happening to ease the stress among the teams.”
When the first project is over, it is important to reflect on the event and evaluate
how it can be improved. According to Vaughn, implementing a good system at
DuPont as allowed the company to plan its annual turnarounds in 8-10 months
rather than a year (the industry-average).

& Turnarounds
Implementing an Effective Communication Strategy
Maintenance and project teams often have extremely different objectives that can
lead to costly process discrepancies. Teams must understand both their own
priorities and those of the other teams.
The project team focuses on how long the turnaround will take and is less
concerned with the complexity of the turnaround. Maintenance, on the other hand,
is focused on safety and detail. Leadership must lay out clear expectations to avoid
conﬂict between the two teams.
Vichich once interviewed a maintenance team after a turnaround and was told it
had been their best outage ever, safe and perfectly executed. In the same day, he
interviewed the capital projects team, which said it had been the worst event ever.
An outage that was planned for 54 days ended up taking well over 100 days, hurting
cost and production.
The project team is usually focused on minimizing costs, while the turnaround team
is focused on minimizing the scope and the execution window, Vichich said.
“If the capital team says they want the project done in 30 days, and you know it will
take 45 to do safely, make sure to be honest and realistic with the business. Giving
in to their demands when you know the request is not possible will not solve any
problems. Honest communication with the teams is vital,” Vaughn said.
By communicating needs up front, the schedule can be made more efficient,
according to Bishop.
Managing Skilled Labor Resources and Turnaround
Teams
Turnarounds and capital projects require skilled resources that are often hired on a
contract basis. These skilled workers move around from turnaround to turnaround.
If a company does not have the right resources secured for an event, the
turnaround cannot happen.
Because of a general shortage of skilled labor in North America, NOVA meets
regularly with a regional construction association to give estimates on manpower
hours needed for upcoming projects. The company most often needs carpenters,
boilermakers, insulators, electricians and welders, depending on the project.
With turnarounds happening every 3-5 years, there is a good chance that an entirely
new team is at the reﬁnery by the time the next turnaround comes around, so there
is often a learning curve with the new team, including with full-time managers.
With baby boomers reaching retirement age and leaving the industry, and with
Millennials lacking the experience to take over their roles, companies are facing a
critical engineering and management shortage, in addition to a skilled labor
shortage.
Communication between teams is important to handle this learning curve. Some
plants will have a weekly cadence call, for example, Bishop said.
Project management tools like Oracle’s Primavera solution also help address this
problem, according to managers interviewed for this industry paper, as they have a
centralized platform of project intelligence that increases organizational
competence, provides a common framework for project management, and helps
new hires get up to speed quickly.

& Turnarounds
“By providing the visibility needed to allocate the right resources to the right project,
Primavera helps organizations make the most of a shrinking labor pool,” Oracle’s
Langley said.
Conclusion
AP-Networks’ study of medium and high-complexity turnarounds executed since
mid-2012 shows that turnarounds most often fail due to increased event
complexity, inefficient organizational capability, lack of engaged leadership,
ineffective scope development and scope freeze, as well as inadequate capital
project integration.
The latter, in particular, most often stems from difficulties in successfully integrating
capital and maintenance work, and plans, and has resulted in many late projects,
late engineering work packages, and late materials.
Companies that plan to integrate capital projects with turnarounds must ﬁrst
acknowledge that the two differ in some respects, especially timing, duration and
key drivers.
Yet, experience at some of North America’s leading petrochemical and reﬁnery
owners shows that capital projects and turnarounds also overlap in a number of
ways, and can be successfully aligned during planning and execution, pre-planning,
pre-turnaround and pre-construction via integrated schedules and scopes, risks and
data-based reviews, performance benchmarking, more advanced planning, and
more coordinated communication between and across project interfaces.

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