AIChE 2013 PAPER NUMBER 52eWHAT MAKES A HIGH-PERFORMING PLANT IN SOLOMON’S OLEFIN STUDIES? Claire L. Cagnolatti Vice President, Chemical Studies HSB Solomon Associates LLC Prepared for Presentation at the 2013 AIChE Spring National Meeting Topical 4: The 25th Ethylene Producers Conference San Antonio, TX (April 30, 2013) AIChE and EPC shall not be responsible for statements or opinions contained in papers or printed in its publications WHAT MAKES A HIGH-PERFORMING PLANT IN SOLOMON’S OLEFIN STUDIES? Claire L. Cagnolatti Vice President, Chemical Studies HSB Solomon Associates LLC Abstract: HSB Solomon Associates LLC (Solomon) has conducted its Worldwide Olefin Plant Performance Analysis (Olefin Study) benchmarking studies—a.k.a., Comparative Performance Analysis™ (CPA™)—of the olefin industry since 1987. As part of those studies, Solomon identifies a group of best-performing plants for every study in each of three feedstock categories—ethane, liquefied petroleum gas (LPG), and liquid. Solomon calls these plants High-Performing Plants (HPPs), and they are selected because of their high ranking in all major categories of plant performance. Each participating plant’s performance is compared to the HPPs in the Olefin Study Gap Analysis, which identifies, quantifies, and prioritizes the amount of net cash margin gap in 26 categories of operating performance.clf This paper shows the actual average performance level of the HPPs from the most recent Olefin Study conducted for operating year 2011. It also discusses the criteria that go into the selection of HPPs, including how the study data are used to rate these criteria. The analysis shows some common characteristics of HPPs from the most recent Olefin Studies including plant age, size, level of integration, and level of advanced process control. HPP performance in several operating areas such as energy, yields, utilization, reliability, and personnel are compared to the study averages. The paper concludes with other observations about HPPs and their performance over time. What Makes a High-Performing Plant in Solomon’s Olefin Studies? AIChE 2012 Paper Number 127a52e Introduction To take fullest and best advantage of the highly profitable ethylene and olefins markets, manufacturers want to position themselves to run their ethylene plants, also known as olefin plants or crackers, at the highest performance levels. Solomon Associates has conducted studies of the olefins manufacturing industry for nearly 25 years. As part of those studies, Solomon identifies a group of the best-performing plants for every study in each of three feedstock categories—ethane, LPG, and liquid. Solomon has named these plants High-Performing Plants (HPPs), and they are selected because of first- or second-quartile ranking in all major categories of plant performance. Each participating plant’s performance is compared to the average of the HPPs in their feedstock group in Solomon’s Olefin Study Gap Analysis, which identifies, quantifies, and prioritizes the amount of net cash margin gap in 26 categories of operating performance. This paper will discuss the criteria that go into the selection of HPPs, including how the study data are used to rate these criteria. The analysis will show the actual average performance level of the HPPs from the most recent Olefin Study conducted for operating year 2011, as well as some common characteristics of HPPs from the most recent Olefin Studies including plant age, size, level of integration, and level of advanced process control. HPP performance in several operating areas such as energy, yields, utilization, reliability, and personnel will be compared to the study averages. The paper will conclude with other observations about the HPPs and their performance over time. HSB Solomon Associates LLC (Solomon) gathers data on ethylene plant performance in the Worldwide Olefin Plant Performance Analysis (Olefin Study), the most recent of which was conducted for operating year 2011. Some of the analyses in this paper also used data from the 2007 Olefin Study and the 2009 Olefin Study. Unless otherwise cited, all references and data are from Solomon’s Olefin Studies. Solomon Associates Gap Analysis Each plant participating in the Solomon Olefin Study receives a Standard Economic Gap Analysis. This gap analysis compares that plant’s net cash margin to the average net cash margin of the “best” plants in their feedstock group. These “best” plants are called HighPerforming Plants, or HPPs. The differences in margin between the plant being analyzed and the HPP average are adjusted for plant capacity, feed/product/energy prices, and feedstock mix. The remaining difference is the plant’s performance gap. What Makes a High-Performing Plant in Solomon’s Olefin Studies? AIChE 2012 Paper Number 127a52e How Solomon Select HPPs Olefin plants are ranked on several performance areas as part of their participation in the Olefin Study. Rather than select the best few plants in each area of performance (a different set of high performers for energy, yields, utilization, etc.), Solomon uses a complex evaluation method to select plants that have above-average ranking in every major performance area. The first qualification to be an HPP is to have better-than-expected net cash margin. Since each region has different feedstock and product prices, and each plant has different size and feedstock mix, we use a calculation that accounts for these differences and calculates a predicted margin for each plant. All plants that achieve margins better than this prediction are eligible to become HPPs. These qualified plants are then separated into three feedstock groups according to the feed used in their furnaces to produce olefins: Ethane-Feed Group, LPG-Feed Group, and Liquid-Feed Group (includes both naphtha/heavy and mixed feedstock peer groups from the study). For each feedstock group, Solomon then applies the second qualification, which is based on overall plant performance. Each plant’s rank in all of the performance areas of operations measured by the study (utilization, energy, yields, hydrocarbon losses, work hours, reliability, maintenance cost, turnarounds, overall operating expense) are examined using a balanced scorecard method. While the factors used in this balanced scorecard method are proprietary, we can say that they are based on their relative influence on overall profitability. Only those found to be in the top half (first or second quartile) in every one of these benchmarks can remain on the list to be an HPP. The ones with the highest overall score from the balanced scorecard analysis become High-Performing Plants. For the 2011 Olefin Study, there are four HPPs for the Ethane-Feed Group, four plants for the LPG-Feed Group, and five plants for the Liquid-Feed Group. This means that out of 115 participating plants, only 13 plants (11%) qualified to be HPPs. It should also be noted that there is no plant with rankings in the first-quartile of every Solomon benchmark. Solomon does not notify the plants that become HPPs, but some plants will see evidence of this in their gap analysis. This method produces a peer group of plants from each feedstock group that have consistently high performance in all areas of operation. They may not be the top-ranked plant on any individual benchmark, but they are truly good performers in all aspects of olefin plant operations. These HPPs form the basis of comparison for the margin gap analysis. What Makes a High-Performing Plant in Solomon’s Olefin Studies? AIChE 2012 Paper Number 127a52e What does HPP Performance Look Like? From our Olefin Study presentation, we have extracted summary bar charts (Figure 1), in which colored bars represent the four quartiles of performance from first (green) to fourth (red). For the 2011 study, the average performance of the 13 HPPs is represented by the white squares. Utilization Yields Losses Energy Intensity Index (EII) Maintenance Cost AICHE13-01 Reliability Personnel Work Hours Personnel Cost Operating Expense AICHE13-02 Net Cash Margin Return on Investment AICHE13-01 Figure 1. HPP Performance Profile – 2011 Olefin Study As the bar chart in Figure 1 shows, the HPPs have a very good overall performance profile and serve as proper comparison points for the gap analysis. What Makes a High-Performing Plant in Solomon’s Olefin Studies? AIChE 2012 Paper Number 127a52e What are Typical Characteristics of HPPs? The following comparisons between the average plants in the study and the HPPs are based on data from the three most recent Olefin Studies for operating years 2007, 2009, and 2011. Facilities and Capacity One might think that HPPs are all new plants, but that is not an accurate description. While the HPPs have 35% newer average charge gas and refrigeration compressor age compared to the average plant in the study, their average age of furnace technology is only 4 years newer than the study average. HPPs are only 6% higher in complexity than the average plant in the study, as measured by the tons of high-value chemicals (HVC) produced per unit of EDC™ (Solomon divisor representing capacity and complexity). Despite having 23% larger production capacity than the average plant in the study, their equipment count is 15% less than average, implying larger capacity individual units. Also of note is the fact that there are NO dual-train plants among the HPPs. APC and Integration The average score for the level of installed advance process control (APC) for the HPPs is the same as the total study average. However, the difference is in how it is utilized. The utilization of APC by the HPPs is 12% better than the study average. From this comparison, it appears that it is not just having the APC equipment that is the advantage. Rather it is the way it is used and the confidence that the operating personnel have in the APC system to leave it engaged and online that makes the difference in plant performance. On average, 1 in 3 plants in the total study population shares their plant site with a refinery, but only 1 in 5 HPPs share their site with a refinery. Other site integration data were similar between the HPPs and the total study. Yields HPPs achieve an average of 99.6% of the benchmark yield value (based on the Lummus PYPS® Yield Model at actual operating severity and pressure). This means that the average value of the products actually achieved by the HPPs from cracking is almost equal to the theoretical yields predicted by a yield model. The average plant in the study achieves less than 98% of its benchmark yield value. This yield performance gap is worth approximately What Makes a High-Performing Plant in Solomon’s Olefin Studies? AIChE 2012 Paper Number 127a52e US $25M per plant per year, using the 2011 economic basis. This gap is larger for plants in areas where margins were higher. Energy HPPs average only 89% of the net energy consumption per ton of HVC of the average plant. One of the reasons for this is better waste heat recovery, as evidenced by Olefin Study data: • • • • 50% higher furnace feed preheat temperature 14% lower flue gas exit temperature 100% more furnace effluent sent through secondary TLEs 19% lower furnace outlet temperature after all waste heat recovery Reliability and Maintenance In each of the three most recent studies, maintenance and reliability were measured over a 2-year period. This means that the figures below represent a 6-year average of performance in these areas. The HPPs showed over 45% less lost production due to unreliability, and more than 30% less lost production for reasons unrelated to reliability compared to the total study average. The HPPs also have a shorter turnaround interval by 8% and shorter turnaround duration, resulting in 20% less turnaround downtime. The HPPs are remarkably 80% more likely to have a turnaround when economics are poor, showing that they wisely take advantage of low margin situations to shut down the plant for repairs that improve reliability. In turnaround execution, the HPPs have a 17% shorter turnaround prep time (from feed out to first break, meaning first work permit issued to work on the process equipment) and a 37% shorter startup time after turnaround (from feed in to on-spec). It is also notable that none of the 2011 study HPPs use the mini/major turnaround scheme (where a smaller “pit stop” turnaround occurs between major turnarounds allowing the extension of the interval between major turnarounds). Usage of this scheme was increasing from 2001 to 2009, but only a small percentage of plants reported its use in the 2011 study. It follows from the better reliability performance mentioned above that the HPPs manage maintenance and reliability differently than the average plant. The HPP plant work orders are on average 38% less emergencies than the average of the total study, and spend 7% more of their maintenance work order time on preventive maintenance work. Furnace What Makes a High-Performing Plant in Solomon’s Olefin Studies? AIChE 2012 Paper Number 127a52e reliability is also better managed, with the HPPs averaging from 3% to 30% longer furnace run lengths (depending on feed type) between decoking cycles than the average plant in the study. Personnel and Work Hours HPPs average only 64% of the total study average work hours per unit of production. The categories of personnel with the largest work hour differences per ton are: • • • Administration, up to 49% less Laboratory, up to 47% less Maintenance, up to 46% less The HPPs not only achieve superior performance, but they manage to do this with better productivity and fewer work hours. While some of this may be attributed to economy of scale, other efficiencies such as use of best practices are likely contributors as well. Other Observations About HPPs We consistently see an attitude of continual performance improvement among HPPs, especially among those who appear as HPPs in study after study. In fact, more than 75% of the HPPs were HPPs in a prior Olefin Study. Nearly all of these have been HPPs in three or more studies, despite large shifts in regional economics from the period of 2005–2011. While the HPPs are, on average, larger than the total study average, plants from all Capacity Peer Groups (four peer groups in the Olefin Studies according to plant capacity) are represented in the group of HPPs. These plants are located in every region of the world. Similarly, although the average of the HPPs is somewhat newer than the total study average, all of the Age of Technology Peer Groups, with the exception of the oldest group, are represented among the HPPs. This Age of Technology designation combines the plant age, furnace technology age, and compressor age. Flare losses and measurement losses are reported separately in the Olefin Study, to account for both the tons of production known to be lost to flaring and for the errors in measuring inventory or production quantities. HPPs average 40% lower flare losses than the total study average, and report 59% less measurement loss. What Makes a High-Performing Plant in Solomon’s Olefin Studies? AIChE 2012 Paper Number 127a52e Because of efficiencies gained in all performance areas, HPP average operating expenses per ton of production is 30% lower and average production cost per ton of HVC is 14% lower than the total study average. This results in an amazing 54% higher average ROI for the HPPs. Summary and Conclusions As this paper clearly illustrates, the HPPs in the Solomon Olefin Study are not just good in one or two performance areas. They achieve excellent performance in all areas of operations simultaneously, resulting in balanced overall top performance. While the HPP average plant is larger and newer than the study average, plants of all sizes, almost all ages, and from all regions can be and have been HPPs. Once a plant becomes an HPP, there is an approximate 75% chance that plant will repeat as HPP in a future Olefin Study. These HPPs are not imaginary or pro forma plants—they are very real and they represent realistic and achievable performance in the olefins manufacturing industry. Their performance sets the standard by which all participating Olefin Study plants are judged. The differences in margin between each plant and its feedstock peer HPPs are quantified in 26 categories of performance in the Economic Gap Analysis, which is a standard deliverable for study participants. This gap analysis allows participants to prioritize their performance improvement efforts according to the size of the margin gap, concentrate their efforts on the areas with the largest closeable gap, and achieve the best possible profit for their plant. What Makes a High-Performing Plant in Solomon’s Olefin Studies? AIChE 2012 Paper Number 127a52e