iapg 2006.ppt
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© 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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
ComparativeComparativePerformancePerformance
AnalysisAnalysisCurrent situation:Current situation:• Operating results• Operating results – – Operating expenseOperating expense – – YieldYield• Practices/performance• Practices/performance• • StaffingStaffing
Build/AdjustBuild/AdjustVisionVision
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
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
ComparativeComparativePerformancePerformance
AnalysisAnalysisCurrent situation:Current situation:• Operating results• Operating results – – Operating expenseOperating expense – – YieldYield• Practices/performance• Practices/performance• • StaffingStaffing
Build/AdjustBuild/AdjustVisionVision
World-ClassWorld-ClassPerformancePerformance
DevelopDevelopImplementationImplementation
Action PlanAction Plan
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 …
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© 2005 Solomon Associates© 2005 Solomon Associates
Knowing Where You Stand Knowing Where You Stand Competitively Is Imperative!Competitively Is Imperative!
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
Benchmarking TopicsBenchmarking Topics
IntroductionIntroduction
Solomon’s Key MetricsSolomon’s Key Metrics
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© 2005 Solomon Associates© 2005 Solomon Associates
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?”
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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™
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
Benchmarking TopicsBenchmarking Topics
IntroductionIntroduction
Performance and Gap AnalysisPerformance and Gap Analysis
Solomon’s Key MetricsSolomon’s Key Metrics
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© 2005 Solomon Associates© 2005 Solomon Associates
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™
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
CClosing The GapClosing The GapEfficiency Vs Size/Complexity Gap – Maint. Efficiency Vs Size/Complexity Gap – Maint. CostCost
US AverageUS AverageU
S A
vera
ge
US A
vera
ge
Efficiency GapEfficiency Gap
RefineryRefinery
TargetTargetPeerPeer
GroupGroup
Competitive Competitive GapGap
Closing 100% ofClosing 100% ofEfficiency GapEfficiency Gap
Size/Complexity GapSize/Complexity Gap
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© 2005 Solomon Associates© 2005 Solomon Associates
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™
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© 2005 Solomon Associates© 2005 Solomon Associates
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
CClosing The GapClosing The GapEfficiency Vs Size/Complexity Gap – Maint. Efficiency Vs Size/Complexity Gap – Maint. CostCost
US AverageUS AverageU
S A
vera
ge
US A
vera
ge
Efficiency GapEfficiency Gap
RefineryRefinery
TargetTargetPeerPeer
GroupGroup
Competitive Competitive GapGap
Closing 100% ofClosing 100% ofCompetitive GapCompetitive Gap
Via Efficiency ImprovementsVia Efficiency Improvements
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© 2005 Solomon Associates© 2005 Solomon Associates
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™
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© 2005 Solomon Associates© 2005 Solomon Associates
Benchmarking TopicsBenchmarking Topics
IntroductionIntroduction
Performance and Gap Analysis Performance and Gap Analysis
Solomon’s Key MetricsSolomon’s Key Metrics
Cat. Cracking Performance AnalysisCat. Cracking Performance Analysis
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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%
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
2Q/3Q Break2Q/3Q Break
3Q/4Q Break3Q/4Q Break
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
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
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© 2005 Solomon Associates© 2005 Solomon Associates
Use of BenchmarksUse of Benchmarks
• 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
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© 2005 Solomon Associates© 2005 Solomon Associates
AnniversaryAnniversary
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