Refining Business Processes

The Business Processes Lesson consists of eight topics, as follows:

Crude Supply and Processing Agreements
Crude & Product Quality Assurance
Maintenance and Turnarounds
Operations Planning
Refinery Benchmarking
Integrating Operational Information
Health, Safety and Environmental Compliance
Refinery Organization

Learn more about our updated online refining course here!

Crude Oil Supply and Processing Agreements

Refineries receive crude oil from a variety of sources, including:

Affiliated exploration and production companies
Long-term production purchase contracts with unaffiliated producers
Short-term (“spot”) purchases from trading companies
Exchanges of crude oil inventory

The sources used depend on the type of refinery and the product yield required, bearing in mind that different kinds of crudes produce different product mixes.

In the long term the volume of crude oil required is driven by the requirement to meet the demand for products in the marketplace. However, day-to-day crude supplies are impacted by factors such as:

Crude tankage available for storage at the refinery
Refinery throughput capacity
Minimum stock levels required for operation

Crude oil is usually delivered to refineries in large tankers, since this the most economical crude transport option. This is why most refineries choose locations in coastal areas.

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Crude storage facilities at a refinery must be sufficient to ensure that the supply of crude to the production process is continuous, but storage facilities must not be so large that unnecessary storage costs are incurred. Optimum working stock levels are normally in the range of 10–15 days’ supply. However, some countries mandate minimum crude stock levels in excess of optimum levels for national security reasons. Crude storage facilities are generally located in a separate area called a “tank farm”, away from the refinery to avoid the risk of a fire spreading if the occasion arises

Quality Assurance

Quality assurance is a key business process in every refinery complex.

It is usually part of the technical support organization which controls a variety of processes that help routinely deliver products that are “on spec“. Product qualities are set by the appropriate specification body (in the US it is the American Petroleum Institute – API) or by key large customers who request a specific set of product qualities.

Quality assurance consists of two primary business processes:

1. management of the laboratory where testing is carried out on samples of crude and products, and

2. procedures to ensure routine calibration and accuracy of the on-stream analyzers in the refinery that measure the flows through the refinery.

All the laboratory and analyzer information is captured, stored and analyzed in a LIMS system – Laboratory Information Management System.

In addition to quality products, the quality of every crude that is run in the refinery is tested. The lab uses a sample of the crude to produce a distillation curve so that refinery operations can set the equipment temperature and pressure conditions to maximize the yield of high value products in the crude.

Another important process is to monitor quality on any cooling water coming into or leaving the refinery – to ensure no hydrocarbons get into the ground water supply.

Refinery Maintenance and Turnarounds

Maintenance is the process of making ongoing repairs of the refinery facilities. Since a refinery is a continuous operation, maintenance needs to be carefully planned to ensure that it is carried out safely and without interfering with plant operations. Maintenance must be carefully coordinated with plant operations for mechanical maintenance of field equipment. Safety procedures are of the utmost importance.

Use of preventative maintenance practices can improve the efficiency and maximize plant reliability at optimum costs. These types of repairs can be made while the equipment is operating – often by the process operations staff.

Breakdown maintenance is exactly what the name implies…a machine or faculty breaks and needs to be repaired. Work that cannot be completed while the plant is operating is put on a list to be done during a unit or plant turnaround

Most refineries now use a computerized Mechanical Work Order (MWO) system to schedule and account for all repair work done on the plant.

Turnarounds are major overhauls that occur (every 3-5 years) when a unit of a refinery is shut down in order to carry out an overhaul or major maintenance program which is required to maintain the normal operations. Some characteristics of a turnaround are:

They are usually planned well in advance. Emergency turnarounds occur infrequently when there is a serious equipment failure.
They occur relatively infrequently.
The period between shutdowns is not equated to the life of the asset.
They have a high cost.
During a turnaround, the capacity of a unit can be increased through a “debottlenecking” or simple project; or a major project underway can be “tied in” or connected to the original facility – increasing refinery throughput or changing product yield pattern.

Emergency turnarounds can occur unexpectedly when a unit is shut down because of mechanical failure or a fire.

Refinery Operations Planning

A refinery is a highly complex facility, with an enormous number of operating variables that impact costs and profitability. With the advent of high speed computers refiners have developed sophisticated “mathematical models” that are used to help optimize the complex operations planning process.

A commonly used technique, known as “Linear Programming” (LP), can calculate the minimum cost or maximum profit operating plan, taking into account the hundreds or even thousands of relationships among the refinery’s operating variables.

With LP models it is possible to experiment with many different options without the risk of disastrous results. It would be most unwise to experiment with unconventional practices in a refinery where the consequences could result in a plant failure or severe economic deterioration. Clearly, the ability to study a range of actions on a mathematical model has its attractions.

Some of the specific applications of LP models in refineries include:

Scheduling refinery operations
Determining the need for new processes
Selecting the crude or combination of crudes run (the crude slate)
Determining distillation “cut points” or temperature ranges for the products
Establishing product blending guidelines

LP models also simulate the material balance across the entire refinery and across each individual portion of the refinery. Simultaneously, they also calculate the costs of the operation.

In order to use a refinery LP model successfully, it is extremely important that the cost and pricing data and other plant xxx are accurate and up-to-date as possible since the results are only as good as the data on which they are based. Cost and pricing data need routine validation to ensure the model is aligned with the market.

Integrating Operational Information

Refineries have three levels of processing and integrating operational information.

At the top level the refinery is influenced by data from the marketplace and the suppliers of crude to the facility.

Level 3 – The Planning Level

This information is the basis for the Linear Programs (LP’s) that are able to assimilate enterprise-wide information, and place this information within a refinery model which simulates the way the refinery operates. The goal of the LP can be set to either maximize profits and/or minimize costs.

Level 2 – The Plant Level

Schedules and plans produced by the LP are entered into the refinery’s Advanced Process Control (APC) System. The APC system also utilizes a refinery model, to optimize unit operations. The APC system gives the day-to day operating instructions to the process units to accomplish the optimization objectives The APC utilizes historical plant information from the Refinery Operational Database, as well as laboratory results.

The APC targets determined by the optimizer give a detailed set of electrical signals to the actual valves and temperature sensors throughout the plant. There are literally thousands of miles of wires and sensors in the facility. This system is called the Distributive Control System (DCS).

Level 1 – The Process Unit Level

The DCS sits between the Advanced Process Control model and the sensors. The sensors provide the feedback loop to the APC to ensure the planned operations are taking place.

Refinery Benchmarking

One of the most comprehensive benchmark surveys in any industry is conducted to measure refinery performance. It was initiated by Solomon Associates in 1986 and now covers two-thirds of the conversion capacity in the US and has data on the other major refining regions.

It is a bi-annual study and very comprehensive. When a Solomon study is underway there is additional reporting load put on the operations and accounting staff to get the data needed for the study.

Solomon has identified and measures those elements that most affect commercial success:

Refinery yields
Capital investments
Operating expenses
Energy consumption
Maintenance expenditures
Personnel data
Facility data

At completion of a Solomon survey, similar refineries are ranked in performance from top to bottom. The top quartile (or 25%) is a target that most refiners try to achieve, and the progress towards top quartile is often reported in their annual reports.

Health, Safety, and Environmental Compliance

In order to help align and get consistency in the reporting of sustainability information, the API and IPIECA (International Petroleum Industry Environmental Conservation Association) published a Compendium of Sustainability Reporting Practices and Trends for the Oil and Gas Industry. This set of guidelines published in 2003 provides an overview of the current state of sustainability, which is now a key non-financial indicator reporting among many oil and gas companies.

The reporting of sustainability is part of an evolving process that has its roots in corporate environmental reporting that began about two decades ago. Over time, environmental reporting had gradually expanded to include health and safety issues. More recently, many companies in the oil and gas industry have extended their reporting still further to include social and broader economic issues.

Sustainability is the generic term for non-financial indicator reporting has become an increasingly important means for communicating company performance and progress.

The key reporting components and issues in refining are:

Air emissions from operations, including sulfur dioxide, nitrogen oxides and volatile compounds.
A safety program that conforms to the Occupational Safety and Health Administration (OSHA) standard in the USA.
Other business risks involving the environment, labor, human rights, other social issues, and (International) anti-corruption measures.

US Governing Agencies

The governing bodies for US safety and environmental issues include the following:

Environmental Protection Agency (EPA)
The EPA is a federal agency responsible for interpreting and enforcing regulations and laws.
At the federal level, such laws include the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, and the National Environmental Policy Act, as amended.
State-Level Environmental Regulation

Note: In the US , environmental regulation and enforcement varies widely from state to state; however, most state environmental agencies are involved with compliance and enforcement efforts relating to the federal laws discussed above.

Superfund is the name for the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), as amended by the Superfund Amendment and Reauthorization Act of 1986 (SARA), are together referred to as Superfund, and the corrective action provisions of the Resource Conservation and Recovery Act of 1976 (RCRA).

Superfund Initiatives:

Identify hazardous waste sites
Ensure sites are remediated by PRPs (potentially responsible parties)
Compensate municipalities for damages to natural resources
Create a procedure for claims against responsible parties

Refinery Organization

The basic organization of most refineries is a combination of function and geography. Refineries cover hundreds of acres and have widely diverse equipment, facilities and operations. The organizational structure reflects this wide variation.

The key functions in a refinery are:

Process Operations which manages all the operating support activities that are required for refinery operations. The onsite process units are managed, 24/7, by a set of shift superintendents and operators. In the offsites like utilities/power and crude/product movements a 24/7 shift coverage is also prevalent. A specific set of process operators is continuously assigned to a particular operating unit (Distillation, Reformer, etc.)

Mechanical and Maintenance which manages the ongoing repairs of the refinery facilities. Since a refinery is a 24/7 operation, maintenance needs are carefully planned to ensure that they are carried out safely and without interfering with plant operations. Maintenance manages the parts warehouse and shop and includes a variety of skills: mechanics, rotating equipment, instrumentation specialists, and welders, to name a few. In many refineries, maintenance is contracted to a third party with the day-to-day contractor management done by experienced refinery supervisory teams.

The bulk of the staff in maintenance and process operations are located and managed centrally – but a best practice is to have significant numbers assigned to zones associated with specific operating units. This ensures continuity of operation and continually upgrades the knowledgebase of the operators – because every unit has different, complex operating characteristics.

Technical Services which manages all the technical facets of a refinery operation including the planning and scheduling of refinery operations, the management of all laboratory and analytical operations and the responsibility for the integrity of all products shipped, inspection and the monitoring of unit performance and project planning.

Support Functions are shown in blue boxes on the graphic.
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