iapg 2006.ppt

ProprietaryProprietary

© 2005 Solomon Associates© 2005 Solomon Associates

Solomon’s Worldwide Solomon’s Worldwide Energy Industry Energy Industry BenchmarkingBenchmarking

IAPG CONFERENCE 2006IAPG CONFERENCE 2006Mendoza, ArgentinaMendoza, Argentina

AnniversarAnniversaryy



Benchmarking TopicsBenchmarking Topics

IntroductionIntroduction

Performance and Gap AnalysisPerformance and Gap Analysis

Solomon’s Key MetricsSolomon’s Key Metrics

Use of BenchmarksUse of Benchmarks

Cat. Cracking Performance AnalysisCat. Cracking Performance Analysis



What We DoWhat We Do

• Provide comparative performance analysisProvide comparative performance analysisfor the global energy industryfor the global energy industry Fuels/lubes refiningFuels/lubes refining PetrochemicalsPetrochemicals Pipelines and TerminalsPipelines and Terminals Electric Power generationElectric Power generation

• Provide consulting services worldwide toProvide consulting services worldwide tofacilitate performance improvementfacilitate performance improvement

Current situation:Current situation:• Operating results• Operating results – – Operating expenseOperating expense – – YieldYield• Practices/performance• Practices/performance• • StaffingStaffing

ComparativeComparativePerformancePerformance

AnalysisAnalysisCurrent situation:Current situation:• Operating results• Operating results – – Operating expenseOperating expense – – YieldYield• Practices/performance• Practices/performance• • StaffingStaffing



Build/AdjustBuild/AdjustVisionVision




DevelopDevelopImplementationImplementation

Action PlanAction Plan






Implement PracticesImplement Practicesand Processesand Processes




World-ClassWorld-ClassPerformancePerformance



Implement PracticesImplement Practicesand Processesand Processes

Biennial FeedbackBiennial FeedbackLoopLoop

A valid, external A valid, external comparison is the best comparison is the best way to gauge how well way to gauge how well you are doing and to you are doing and to

guide your staff to meet guide your staff to meet the challenge …the challenge …



Knowing Where You Stand Knowing Where You Stand Competitively Is Imperative!Competitively Is Imperative!



NSA Participation and Trend NSA Participation and Trend GroupsGroups

USAUSA CANCAN LTALTA TotalTotal

PopulationPopulation 8888 1313 3939 140140

Trend GroupTrend Group 7676 1111 3333 120120

Trend Group – participation in each of last three studiesTrend Group – participation in each of last three studies



Refineries Seeking Answers To Two Refineries Seeking Answers To Two Key Questions To Strengthen Key Questions To Strengthen PositioningPositioning

CompetitivenessCompetitivenessLooking outside the fenceLooking outside the fence

““How competitiveHow competitiveis my refineryis my refinery

in the marketplace?”in the marketplace?”

EfficiencyEfficiencyLooking inside the fenceLooking inside the fence

““How well is my How well is my refinery operatingrefinery operating

the facilities that itthe facilities that ithas today?”has today?”



How Competitive Is A Refinery In How Competitive Is A Refinery In The Marketplace?The Marketplace?

• Strategic perspective – economic viabilityStrategic perspective – economic viability• Comparison of total cost and resources Comparison of total cost and resources

required to manufacture petroleum required to manufacture petroleum productsproducts Without regard for number or size of process Without regard for number or size of process

units or other structural aspects contributing to units or other structural aspects contributing to higher costshigher costs

As a result, competitive positioning may be As a result, competitive positioning may be limited by structural or configuration constraintslimited by structural or configuration constraints

Customers unwilling to cover differences in cost Customers unwilling to cover differences in cost per barrel of product by refineries supplying the per barrel of product by refineries supplying the market market

Customers at the pump don’t care if a Customers at the pump don’t care if a refinery hasrefinery has

higher costs – they only want the lowest pricehigher costs – they only want the lowest price



How Well Is A Refinery OperatingHow Well Is A Refinery OperatingThe Facilities That It Has Today?The Facilities That It Has Today?

• Operational perspective – focus on Operational perspective – focus on efficiencyefficiency

• Comparison of total costs and resources Comparison of total costs and resources Taking into account actual configuration aspects Taking into account actual configuration aspects

–number and size of individual process units and –number and size of individual process units and other structural aspectsother structural aspects

Focus is on the effectiveness of cost control and Focus is on the effectiveness of cost control and resource management typically within a refinery resource management typically within a refinery

manager’s controlmanager’s control



Competitive Metrics OverviewCompetitive Metrics OverviewKey Metrics (Same As Previous)Key Metrics (Same As Previous)

• EDC is the normalization factor for EDC is the normalization factor for competitive metricscompetitive metrics

• Refinery EDC (UEDC) based metricsRefinery EDC (UEDC) based metrics Cash Operating Cost, US Cents/UEDCCash Operating Cost, US Cents/UEDC Non-Energy Cost, US $/EDCNon-Energy Cost, US $/EDC Maintenance Index, US $/EDCMaintenance Index, US $/EDC Personnel Index, Work Hours/100 EDCPersonnel Index, Work Hours/100 EDC Personnel Cost Index, US $/EDCPersonnel Cost Index, US $/EDC Capital Investment Index, US $/EDCCapital Investment Index, US $/EDC



Efficiency Metrics OverviewEfficiency Metrics OverviewKey MetricsKey Metrics

• Energy Efficiency (no change in Energy Efficiency (no change in methodology)methodology) Energy Intensity Index – EII™Energy Intensity Index – EII™

• Non-Energy Efficiencies (new)Non-Energy Efficiencies (new) Maintenance Cost Efficiency Index – MEI™Maintenance Cost Efficiency Index – MEI™ Personnel Efficiency Index – PEI™Personnel Efficiency Index – PEI™ Non-Energy Cost Efficiency Index – NEI™Non-Energy Cost Efficiency Index – NEI™



2004 Competitive vs Efficiency 2004 Competitive vs Efficiency MetricsMetricsMaintenanceMaintenance

26.626.6US Study AverageUS Study Average

Using New EDC FactorsUsing New EDC Factors

US EDCUS EDC GroupGroup

11

22

33

44

55

66

US $/EDCUS $/EDC

23.823.8 43.743.7

18.618.6 4848

21.021.0 38.438.4

35.635.620.320.3

37.937.916.716.7

32.932.920.120.1

Competitive MetricCompetitive Metric

118.1118.1US Study AverageUS Study Average

MEI™MEI™

7676 184.7184.7

88.988.9 155.1155.1

157.5157.587.687.6

158.9158.977.777.7

Efficiency MetricEfficiency Metric

86.386.3 138.0138.0

149.9149.994.594.5



Impact on 2004 Company ResultsImpact on 2004 Company ResultsMaintenance – US QuartilesMaintenance – US Quartiles

66.366.3 184.7184.7

15.315.3 49.349.3

Competitive Metric, US $/EDCCompetitive Metric, US $/EDC

Efficiency Metric, MEI™Efficiency Metric, MEI™



10

20

30

40

50

60

60 80 100 120 140 160 180 200

Efficiency Metric, % of Standard

Com

petit

ive

Met

ric,

US

$/ED

C

US AverageUS AverageU

S A

vera

ge

US A

vera

ge

Two-Dimensional AnalysisTwo-Dimensional AnalysisExample – Maintenance CostExample – Maintenance Cost

US ParticipantsUS Participants

Efficiency GapEfficiency Gap

RefineryRefinery

TargetTargetPeerPeer

GroupGroup

Competitive Competitive GapGap



Gap AnalysisGap AnalysisRefinery Vs Peers – Maintenance CostRefinery Vs Peers – Maintenance Cost

Key Gap ComponentsKey Gap ComponentsEfficiencyEfficiency (15)(15)

Size/Complexity*Size/Complexity* (8)(8) Total Competitive GapTotal Competitive Gap (23)(23)

* Size/Complexity = Competitive Gap – Efficiency Gap* Size/Complexity = Competitive Gap – Efficiency Gap

Refinery vs PeersRefinery vs PeersUS $MUS $M



10

20

30

40

50

60

60 80 100 120 140 160 180 200


Com

petit

ive

Met

ric,

US

$/ED

CClosing The GapClosing The GapEfficiency Vs Size/Complexity Gap – Maint. Efficiency Vs Size/Complexity Gap – Maint. CostCost


S A

vera

ge

US A

vera

ge


RefineryRefinery


GroupGroup


Closing 100% ofClosing 100% ofEfficiency GapEfficiency Gap

Size/Complexity GapSize/Complexity Gap




66.366.3 184.7184.7

15.315.3 49.349.3





10

20

30

40

50

60

60 80 100 120 140 160 180 200


Com

petit

ive

Met

ric,

US

$/ED

CClosing The GapClosing The GapEfficiency Vs Size/Complexity Gap – Maint. Efficiency Vs Size/Complexity Gap – Maint. CostCost


S A

vera

ge

US A

vera

ge


RefineryRefinery


GroupGroup


Closing 100% ofClosing 100% ofCompetitive GapCompetitive Gap

Via Efficiency ImprovementsVia Efficiency Improvements




66.366.3 184.7184.7

15.315.3 49.349.3







Performance and Gap Analysis Performance and Gap Analysis


Cat. Cracking Performance AnalysisCat. Cracking Performance Analysis



Study FocusStudy Focus

• Raw material selectionRaw material selection• Product yieldsProduct yields• Plant utilizationPlant utilization• Operating cost analysisOperating cost analysis• Energy efficiencyEnergy efficiency• Maintenance and reliability effectivenessMaintenance and reliability effectiveness• Labor productivityLabor productivity



Operating Expense BreakdownOperating Expense Breakdown

Catalysts &Catalysts &Catalyst Additives,Catalyst Additives,

11%11%

Other Other Volume-Volume-Related,Related,

4%4%

Non-Non-MaintenanceMaintenancePersonnel,Personnel,

8%8%

Energy,Energy,59%59%

T/AT/AMaintenance,Maintenance,

7%7%

Chemicals,Chemicals,3%3%

Non-T/ANon-T/AMaintenance,Maintenance,

7%7%

All OtherAll OtherFixed Costs,Fixed Costs,

1%1%



Yields and MarginsYields and MarginsRaw Material BreakdownRaw Material Breakdown

HydrotreatedHydrotreatedFeedstockFeedstock

UnhydrotreatedUnhydrotreatedFeedstockFeedstock

4%4%6%6%

21%21%

36%36%

2%2%

20%20%

4%4%2%2%

4%4%1%1%

Vacuum Gas OilVacuum Gas Oil Heavy Gas OilHeavy Gas OilAtmospheric Reduced CrudeAtmospheric Reduced Crude All OtherAll OtherLight Gas OilLight Gas Oil



Yields and MarginsYields and MarginsRaw Material Pricing AdjustmentsRaw Material Pricing Adjustments

• Various gas oils – sulfur and aniline pointVarious gas oils – sulfur and aniline point• Heavier feeds – sulfur and Concarbon Heavier feeds – sulfur and Concarbon

residueresidue



Yields and MarginsYields and MarginsProduct PricingProduct Pricing

• Catalytic naphtha based on gasoline Catalytic naphtha based on gasoline blending valueblending value

• Light-cycle oils valued as distillate feed or Light-cycle oils valued as distillate feed or blending stock; dependent on local marketblending stock; dependent on local market

• Heavy-cycle oils and slurry valued as fuel Heavy-cycle oils and slurry valued as fuel oil blending stocksoil blending stocks

• Butylenes and i–butane valued as alkylation Butylenes and i–butane valued as alkylation feedsfeeds

• Propane and n–butane valued as finished Propane and n–butane valued as finished productsproducts

• Propylene valued as chemical feed Propylene valued as chemical feed



Net Cash Margin DistributionNet Cash Margin DistributionBy RegionBy Region

0

5

10

15

20

25

0 25 50 75 100

Percent of Participants

Net

Cas

h M

argi

n, U

S $/

bbl

Non-US CountriesNon-US Countries

United StatesUnited States

1Q/2Q Break1Q/2Q Break





Range of Study PerformanceRange of Study PerformanceUS $/bblUS $/bbl

Average ValueAverage Value

Gross Product Value Gross Product Value

Raw Materials Cost Raw Materials Cost

Gross MarginGross Margin

Operating CostOperating Cost

Net Cash Margin Net Cash Margin

US $/bblUS $/bblHigher ValuesHigher ValuesLower ValuesLower Values

24.5624.565.955.95

60.2760.2747.1947.19

4.434.431.671.67

21.1021.103.683.68

49.2149.2129.2529.25



4

7

10

13

16

19

Percent of Participation

Net

Cash

Marg

in,

US

$/b

bl

0 25 50 75 100

Net Cash MarginNet Cash Margin

FCCFCC

MRCC or RCCMRCC or RCC



10

20

30

40

50

60

70

Percent of Participation

Retu

rn o

n Invest

ment,

%

0 25 50 75 100

Return On InvestmentReturn On Investment

FCCFCC

MRCC or RCCMRCC or RCC








Cat Cracking Performance AnalysisCat Cracking Performance Analysis




• Establishing a plant’s performance level Establishing a plant’s performance level • Quantification of improvement Quantification of improvement

opportunities by expense type and opportunities by expense type and maintenance category maintenance category

• Confirming causal plant characteristicsConfirming causal plant characteristics• Discovery of practices responsible for Discovery of practices responsible for

performance gaps with “Peer Group”performance gaps with “Peer Group”• Provide “business case” for change Provide “business case” for change

programsprograms• Convince personnel of need for new targetsConvince personnel of need for new targets



AnniversaryAnniversary

iapg 2006.ppt

Documents

target peer group

cracking performance analysis

size complexity gap maint

gap analysis cat

gap analysis

efficiency gap

competitive gap

2004 company resultsmaintenance