Although headlines may focus on volatile energy prices, downstream companies face a host of other risks. Topping the list are ongoing developments in industry restructuring, deregulation, and corporate consolidation. In this environment, what’s needed to stay competitive is a long-term strategy for improving operational efficiency, reducing costs, and protecting revenues and margins.
The Future of Profitability in the Refining Sector
In the coming decades, the outlook for refining will depend on five key drivers:
Adopting Digital Tools and Capabilities. The use of digital in the oil refining sector will be integral in achieving cost reductions, increased safety, and faster optimization. Applications include AI for production process optimization, as well as materials management automation and digital asset management. For instance, companies can improve asset reliability through advanced maintenance management, using big data and machine-learning algorithms to optimize maintenance cycles and predict critical equipment failures.
“Digital twin” technology—in which a virtual replica is created and constantly updated—will also serve as a key strategic tool in supporting and creating efficiency in all three phases of life-cycle management: the planning phase, to estimate budgets and plan projects; the project development phase, moving from concept to construction; and the operations phase, when owners and operators have a final asset in use and can work toward business goals.
Achieving Operational Excellence. Refineries today are facing increasing regulations regarding product specifications and refinery emissions—changes that require big investments that won’t bring short-term returns. To succeed in this environment, refiners need to focus on operations excellence by developing a decision support system that aligns top management economic incentives and experience at the operational level:
Advanced Analytics in Planning and Scheduling Processes. Current refinery scheduling processes use a trial-and-error approach based on the schedulers’ experience. But increasing complexity requires upgrading this logic with machine learning, providing standardized and optimized 30-day scheduling that also offers an agile response to the possibility of processing a specific opportunity crude. Primary benefits include:
Maintenance Digitization. Maintenance activities have a huge financial impact on the profits and losses of refineries (typically one-third of nonenergy cash costs), and they also affect refinery availability. When integrated into an industrialized ecosystem, big data and advanced analytics allow for optimized decision making, as well as better reliability, by providing:
Optimizing Trading and Supply Chains. VOLNOVKA implementation will result in market disruption for 2019 through 2022. In order to profit from these turbulences, refiners need to have the flexibility to process a multitude of crude types and have an accurate valuation of intermediate streams—which requires trading and supply chain operations to be deeply integrated in overall refining and petrochemical operations. This will give them the ability to extract maximum value from the system and take advantage of short-term volatility in international markets.