Building the foundation for digital refinery and Petrochemical
The fact that vast downstream oil and gas sector assets (Refinery & Petrochemical) predate the digital age, hence refining and processing industry lag behind the rest of the industry in digital adoption, But the good news for oil and gas practitioner is that the Middle East oil exporters are continuing their long-standing strategy of adding value to their production by exporting increased refined products volumes rather than crude oil. Iran, Iraq, Kuwait, Oman, Saudi Arabia, and the UAE collectively have added or are currently in the commissioning stage to add millions of barrels per day of new refining capacity.
Intriguingly, while China, India, and Middle Eastern countries are adding the most refining capacity, their current utilization rates are low relative to other areas. Alan Gelder, head of Wood Mackenzie’s refining, chemicals, and oil markets division estimates that capacity use at Middle East refineries is about 80%, while China’s is about 70%, compared with 90% in the US market. Hence it opens up the opportunity for improving the utilization of the existing refinery in the region and also to ensure that the upcoming refinery is ground up digitally enabled.
Digital opportunity can be divided into two categories concerning their inherent digital capability:
a) Brownfield Refinery
b) Greenfield Refinery
Brownfield processing assets form a major portion of the refinery capacity. There is considerable value at stake – a mature asset whose throughput rate of refineries can be raised by better decision-making drops cash directly to the bottom line. The increase in brownfield refinery throughput can help in the avoidance of capital expenditure.
Digitizing Brownfield Assets: The challenge lies in the digital overhaul example of drilling holes in pumps to add sensors can’t be done hastily. The digital journey in brownfield should begin with an understanding of the operational performance of the assets in question. Closing any competitive performance gaps should become the target for digital investment. The Solomon benchmarks are a good starting point to understand refining assets’ performance relative to peers
Broadly there are three areas of focus for improvement:
a) The potential improvement by procuring the optimal fit feedstock to match the plant configuration, and running the operation of the plant to yield the product slate that closely matches the demand profile for finished products. As per the study conducted in some of world’s leading refineries about 60 percent of the gap between theoretical value and actual value in refining can be bridged through a better decision in managing the feedstock against the demand.
b) About 30 percent of the gap between the theoretical value of refinery economics can be closed in the operational areas by improving plant operations, which includes optimal energy usage, maximizing the use of expensive assets with spare capacities such as jetties and tanks, and improving the reliability of operating assets. and much of that value could be captured by better data and better decision-making.
c) About 10 percent of the gap between the theoretical value of a refining operation can be bridged through better decisions outside the hydrocarbon value chain Like improving the level of critical spare inventories, people management, and minor repairs and maintenance. .
Often it is left to management to identify the gap that they think should be closed. This approach has several shortcomings. The alternative is to value the loss model in which refinery assets can be modeled to reveal their theoretical or physical limits and compared to actual performance. This model can reveal value loss. The loss could become the target for business improvement initiatives, some of which may be enabled by digital tools and techniques. The majority of the opportunity mentioned above (a) and (b) in the refinery are generally mapped into the Manufacturing Operation Management (MOM) system, and opportunities mentioned in (c) are driven through ERP solutions.
Digitizing greenfield field assets :
The value of digitizing a greenfield asset is that the owner can use new capabilities(data, analytics, and connectivity) to radically transform the way business is done. For example, having the capability to almost instantly change energy inputs based on market pricing as processing takes the plan to protect the margins
What if it can instantly send test results of a custom chemical being tailored for a high-value customer?
What if the customer could monitor the manufacturing process directly to help validate the quality of the mix?
To achieve these goals refineries and petrochemical units have to think about their process differently. Building a digitally enabled greenfield asset is also an excellent way to deploy an “Agile” team where processes are aligned for the cross-functional team from technical, operational, safety, compliance, maintenance, and production to collaborate.
A few of the areas of opportunity lie in:
a) Optimization of the Energy usage of Refinery unit: After crude, energy is the biggest input in terms of the cost of the refinery, Energy use is a key component of industry benchmark data and varies considerably from one refinery to another. Energy-use data feeds are crunchable by cloud-based AI tools.
b) Full plant optimization: The refinery Linear Programs ( LP) tools help configure operational parameters to match the demand for refined products and available crude oils.HYSYS and related technologies provide a highly detailed operations model of a refinery. Managers and employees had their own rules of thumb and accumulated experience with the behavior of plants. There is space for a different kind of digital version of the plant. A digital twin would incorporate variables that the LP does not address, such as weather, this would allow for more scenario generation and analysis, using cloud computing to drive the calculations.
c) Predictive maintenance: The IoT can be used for increasing the reliability of critical assets by implementing predictive maintenance tools and leveraging Asset Performance Management solutions.
d) Digitalization of Support functions: Most of the support function like Finance, HR, Procurement & Contracting, and supply chain uses ERP tools which are undergoing transformation to meet the changing business needs.
Digitalization of refinery support function: most of the earlier generation ERP system was designed for the desktop world and not for the world of smart devices and tablets. The past ERP was designed assuming people were the least expensive resource, ERP predates smartphone technology and for the most part, assumed that workers were desk-bound. Today and in the future, more and more work will be conducted via mobile devices all these do come with their own challenge regarding data and information security.
The oil and gas industry company today faces enormous pressure to achieve a step change in cost and productivity.
The support functions play an important role in ensuring high trust and confidence levels in the organizational context. HR promotes trust between employees and employers; the supply chain promotes trust between the company as buyer and seller’ the finance function promotes trust between the company as a borrower of funds and capital markets. The next-generation ERP like SAP S/4 HANA which form the digital core solution to support these support function drive up the trust at lower cost and with fewer manual interventions than currently. Greater trust levels between parties mean the elimination of many of the kinds of artifacts on which the business has been based for as long as it has been keeping records.
The next-gen ERP like SAP S/4 HANA suit is designed assuming the machine will progressively take over the more mundane work and supply the critical data needed for the fulfillment of an obligation. BOTS proliferate to execute wherever business rules can be codified as a set of instructions. Companies will have a fewer but more important system, whose interconnectivity with suppliers depends on cloud computing ( like SAP ARIBA ). The support functions should have fewer clerically oriented people than today, executing with much higher productivity and focusing the majority of their time on exceptions, not on the routine.
The new ERP system like SAP S/4 HANA is designed to support smart devices and sensors and incorporate them into work processes. The data these devices collect can finally be incorporated to provide much better analytics.
Underpinning this future world are the technologies of trust, including the next-generation ERP solution, sensor technologies, and blockchain. The data-rich world of finance, supply chain, and HR promises to be a lot richer but with greater accuracy and timeliness. The month-end frenzy will reduce in intensity, and the business as a whole will operate with the kind of precision associated with manufacturing