3. Tools & Methodology for Profit Improvement
Planning Process
3
Petroleum Supply Chain
Supply Chain Management within refinery
Trade-offs between inventory (working capital) and
supply chain costs
Blendstock inventory vs. optimum product blending
Product inventory vs. economies of shipment size
Product inventory vs. customer demands
Intermediate feedstock inventory vs. plant reliability
Accurate refinery planning essential to evaluate supply
chain costs
4. Tools & Methodology for Profit Improvement
Planning Process
4
Planning Process
Methods & Procedures
Communications
Performance Metrics
Feedback
Continuous Improvements
Model Maintenance
Planning Tools
• Refinery LP Models
• Structure
• Yield/Quality Data
• Constraints
• Operations scheduling
• Blend Scheduling
Plans
&
Decisions
Accurate Tools
Best Process Better
Plans
Better
Decisions
More Profit
Planning System Elements
5. Tools & Methodology for Profit Improvement
Planning Process
5
Planning and Scheduling Horizons
Horizon Time Span Purpose
Long Range 2-5+ years Capital Strategy
Term Supply Contracts
Annual 12 months Budgets
Monthly 2-3+ months Monthly feed purchases
Product sales outlook
Operating strategies
Inventory strategy
Weekly/Biweekly 4-6 weeks Unit strategies
Production volumes
Daily 10-14 days Operating instructions
Stream and inventory management
Unit targets
Product Blends
Immediate Optimize unit operations
LP
Scheduler
APC/Simulation
6. Tools & Methodology for Profit Improvement
Planning Process
6
Obstacles to Good Planning
Limitations
Resources and manpower
Knowledge and experience
View limited to KNPC only
Lack of simulation models for accurate yield predictions
Result
Out-of-date planning models
Inaccurate predictions of product production
Operations ignore planning directions/strategies
Experience factors and spreadsheets used for local
strategies and optimization
Planning operates in “glorious isolation”
7. Tools & Methodology for Profit Improvement
Planning Process
7
Common Planning Problems
Crude quality impact not adequately modeled
Limited cut point optimization
Perfect fractionation
Limited process unit yields representation
Limited feed quality and severity adjustments
Models over-constrained;
Constraints not challenged
Inconsistencies between integrated and local LP models
Ineffective analysis of Actual vs. Plan
Ineffective LP model maintenance
8. Tools & Methodology for Profit Improvement
Planning Process
8
Typical 10-15c/bbl benefit
Or $30 million/year for KNPC
Benefits of Improved Planning
Increased value of products produced
Improved utilization of facilities
Optimized operating instructions to process units and
to blending
Better timing of product liftings
Plan closer to optimum; Feasible schedules closer to
the plan
Better response to market opportunities and changes in
liftings
Better tactics to deal with planned plant shutdowns
Reduced inventories and internal oil movements
9. Tools & Methodology for Profit Improvement
Planning Process
9
Best Practices
Planning Processes
And
Planning Tools
10. Tools & Methodology for Profit Improvement
Planning Process
10
Best Practice Planning Process Features
Supply Plans for Asset Optimization.
Multi-refinery LP (M-PIMS) model of refineries
with common crude supply and product markets.
Optimum allocation of products to refineries
based on refinery capabilities.
Optimize use of intermediates and blend
components between refineries.
Long-term crude supply forecast.
11. Tools & Methodology for Profit Improvement
Planning Process
11
Best Practice Planning Process Features
Operating Plans by Individual Refinery
Overall feed supply & product demands from
supply plan.
Fine-tune product slate by refinery.
Optimize operations with current operating
constraints.
Interim plan updates.
12. Tools & Methodology for Profit Improvement
Planning Process
12
Best Practice Planning Process Features
Accurate LP Models.
Multi-refinery model = combined individual
refinery models with intermediate stock transfers.
Individual Refinery responsible for configuration,
data, and constraints.
13. Tools & Methodology for Profit Improvement
Planning Process
13
Best Practice Planning Process Features
Clear, frequent communications between all
groups involved
Agreement (“buy-in”) by all groups essential
Profit performance monitoring
Monitor and analyze deviations to plan, and to “Best
Achievable”
Quantify profit impact
Feedback systems and continuous improvement
LP model updates
Price/demand forecasting
14. Tools & Methodology for Profit Improvement
Planning Process
14
Best Practice Planning Process Features
VIRTUOUS CIRCLE
EXECUTE
PLAN
MEASURE
PERFORMANCE
REVIEW
15. Tools & Methodology for Profit Improvement
Planning Process
15
Operations Planning Cycles
PLAN
SCHEDULE
OPERATE
Variance Analysis
Model Update
Feedback
&
Adjustment
16. Tools & Methodology for Profit Improvement
Planning Process
16
Complexity
Detail
Accuracy Ease of Use
Input Data Management
Interpretation of results
Solution speed
Maintenance
Linear models of non-linear refinery operations
Key: Accurately capture major economic drivers
Planning Tools
17. Tools & Methodology for Profit Improvement
Planning Process
17
Best Practice LP Model Features
Scope encompasses assets with common feed and product
markets (i.e. multi-refinery)
Constraints reflect true capability and flexibility of the system
(represents the TECHNICAL ENVELOPE)
Swing cuts for cut point optimization
Crude assays and main fractionators (FCC, Coker)
Fractionated swing cut qualities calculated by simulation
Stream pooling with quality recursion
Prevents over optimization of stream dispositions for short term
planning
Maintain stream disposition flexibility in refinery
18. Tools & Methodology for Profit Improvement
Planning Process
18
Best Practice LP Model Features
Process unit models
Feed pooling
Yields and product qualities adjusted for feed quality
and operating severity
Base yield and delta vectors
Product blending by quality specification
Utility balances
Base loads and variable consumption
19. Tools & Methodology for Profit Improvement
Planning Process
19
LP Models Scheduler
Refinery Operations Planning
Supply Plan Operating Plan Daily Instructions
Process Simulation Models
LP Data Maintenance
Application
Calibration
Factors
Performance
Monitoring
Data
Reconciliation
Operating
Targets
Integration of Planning Process and Tools
20. Tools & Methodology for Profit Improvement
Planning Process
20
Supply Planning
Supply interfaces
requires communication / collaboration
Planning turnarounds and other major events with
refinery operations and maintenance
Blending and scheduling
Shipping
Incremental product valuations
Inventory management
Impact of constraints
Products
Unit capacity and severity
21. Tools & Methodology for Profit Improvement
Planning Process
21
Product Blending
Inventory management
Blendstock and finished product
Shipment schedule coordination
Product quality giveaway
Tracking and reporting
Economic and operational impacts
22. Tools & Methodology for Profit Improvement
Planning Process
22
Operations Planning
Typically 1 month time horizon.
Monthly operating plan.
Optimum asset utilization, and product production.
Spot sales opportunities for products, intermediates and
blend components.
Valuations and impact on plan.
Unit shutdown planning.
Planned and unplanned maintenance and Turnarounds.
Inventory management.
Outages, overfills.
Interface with scheduling, operations, maintenance.
23. Tools & Methodology for Profit Improvement
Planning Process
23
Refinery Scheduling
Scheduling does not optimise, but sequences
operations
Methodology for translating plan into operating
orders
Interfaces with planning / operations / process engineers /
maintenance
Updating operating instructions
Frequency
Methodology / techniques
Communication techniques
Written / electronic
Daily meetings
24. Tools & Methodology for Profit Improvement
Planning Process
24
Performance Measurement
What was the actual operation?
Record flows in volume, convert to weight.
Record lab tests for critical qualities.
Cumulative Month to date Mass Balances on
critical process using sensible method for
accounting for missing data.
Volume and weight average of product
dispatched * critical quality giveaway.
ANYTHING UNMEASURED CANNOT BE
CONTROLLED
25. Tools & Methodology for Profit Improvement
Planning Process
25
Performance Review Aims
Ensure that refinery always operates at
optimum as defined by LP model plan.
NOT to allocate BLAME.
Constructive, NOT Destructive, criticism.
NOT to figure out how much profit was lost
because no human can forecast future.
Update plan with better data, more realistic
constraints, technical envelope.
Ensure operations are always at current
optimum.
26. Tools & Methodology for Profit Improvement
Planning Process
26
Back-casting
A method of measuring the planned vs. actual
profit deviation, and identifying the causes.
Profit deviation need not be a loss. Can be extra
profit because plan was too pessimistic.
Backcasting uses the LP model (using cases) to
calculate profit.
Compare Backcast solutions to help understand
the cause of profit differences.
27. Tools & Methodology for Profit Improvement
Planning Process
27
Using Back-casting Cases in
Performance Review
Are deviations “one-off” or part of a trend?
Are measurements of actual performance
believable and accurate?
Decide what actions required to avoid negative
(or positive) deviations in future.
28. Tools & Methodology for Profit Improvement
Planning Process
28
Actions From Performance Review
Do more research into cause by process engineers,
including simulation model runs, plant test runs, lab
testing.
Change the LP model data.
Add, tighten, or free up, constraints in the LP model.
Change Process operations and product blending to make
more profit at no cost.
Persuade management to accept costs for items like extra
demurrage and maintenance using Backcasting results.
Make case to Corporate Planning for extra investments
using Backcasting results.
29. Tools & Methodology for Profit Improvement
Planning Process
29
Profitability Gaps
Prices
Crude Plan Actual
Products Plan Actual
Rates
Crude Plan Opt Actual
Products Plan Opt Opt Actual Opt
Refinery
capacity Plan Actual Best
Lost
Opportunity
Margin
$/bbl
Plan Actual
Best
Achievable
Market
Planning
Refinery