Jan-2005

Improving olefins plant performance

A review of available modelling and optimisation tools for olefins plants. A cost effective approach has been developed for improving cash margins by a combination of rigorous simulation, optimisation and steam cracker economics

Darren C Le Geyt, KBC Advanced Technologies

Article Summary

The petrochemical market has been especially hard on olefin producers, being squeezed by high feedstock costs and low derivative prices. Producers must react quickly to volatile markets, accurately assessing the impacts of changing feedstock quality, price, and product demands, while optimising plant operation to maximise cash margin. Positioning an olefins producer to maximise the benefits from the predicted fly-up requires a quick, reliable and accurate way to evaluate the performance of the steam cracker in terms of feedstock selection and operating conditions.

There are a large number of specialised and generic modelling tools available for olefins plants, these operate on various platforms with different skill-sets required. Most often these tools are applied inconsistently due to the complexity of integrating the results and the lack of transparency with regard to the impact on operating margins. Profit improvement programs (PIP) have been conducted utilising KBC’s proprietary E-Solver, which bridges the gap between rigorous plant modelling and rapid, accurate and cost effective evaluation of plant performance.

Financial collapse, terrorism and global conflicts have all played their part in producing the most prolonged downturn in world markets seen in recent history. As previously mentioned, depressed derivatives markets and high feedstock costs have hit the petrochemical sector in particular, disrupting the seven-year cycle of earlier decades. Current analyses of the markets predict robust growth starting in 2005, with a fly-up in 2006. According to the analysts, this should result in a relatively sustained petrochemical market peak.

In order to minimise production costs, an understanding of what makes up the cost of production is required (Figure 1), followed by what control can be exercised over these variable and fixed costs. The variable costs (ranked in order of magnitude) are feedstock costs, by-product credits (which can be larger than ethylene revenue), energy consumption, catalyst and chemicals. The fixed costs cover maintenance, manpower, overheads, depreciation, tax and insurance.

In terms of profit improvement, all costs need to be minimised. However, in terms of plant optimisation, only the variable costs are available for manipulation. The fixed and allocated costs need to be subjected to their own improvement programs, but should nevertheless reflect the realities of operations via an integrated improvement program.

Margins capture
Profit improvement does not simply happen by wishing for better times, nor do adverse market conditions absolve companies from the necessity of improving margins. Market leaders will make a margin, whatever the market conditions, by aggressively reducing production costs on a continuous basis and reap the rewards in market upswings. Market laggards just try to hold on and hope that they can pay off their debts in the upswing.

Continual cost reduction and profit improvement is a very difficult process to implement initially, but if managed appropriately, profit culture will quickly take over and make continuous improvement second nature. PIPs, like most other improvement strategies, have three essential components: people, tools and methodology.

People with the right mix of knowledge of the operations, experience in profit improvement and commitment are required to build a team that can successfully implement the program. Management backing is crucial to the success of the program. Overall, a commitment to teamwork in the pursuit of the objective is the single most important item influencing the success of any program.

Most often lacking on a plant are the tools, or the ability to effectively use the tools required to evaluate opportunities and enable operations to present the benefits achievable in a concise and compelling way to management.

Profit improvement
The basic methodology that KBC has applied in a variety of PIPs was developed over the years. It is a generic structure that can be applied to many different scenarios. A consistent methodology is essential as no stone should be left unturned in the pursuit of a sustainable competitive advantage. The process needs to be well defined, documented and tracked to monitor the effectiveness of the program.

The first step in any improvement program is in quantifying “where you stand” versus best practices, or benchmarking. Benchmarking can be done in many ways – subscribing to industry benchmarks, hiring third party consultancies or developing in-house best practices and benchmarks. However, the benchmark in and of itself is worthless, unless it quantifies the gaps. More importantly, what/where one can realistically expect to find improvement opportunities for closing the gaps can only be done by people with in-depth knowledge of the operations and ability to identify improvement opportunities.

Identifying feasible opportunities requires experience of industry best practices, plant configuration/operations, logistics and the business environment. It is of no use proposing a $100 million de-bottlenecking project if no money is available. The best opportunities require very little or no capital investment, but strive to maximise the utilisation of the existing equipment in the current market environment.

Many operating and technical staff propose sound ideas on performance improvement, but simply go unheard. The chief reason for this is that they fail to communicate the ideas to management in a language they understand (what is the value to the bottom line). There are many reasons for this, the main one being the lack of tools to simply and effectively demonstrate the financial impact of any one of the hundreds of decisions that can be made and to provide an optimised solution in a reasonable timeframe, at a reasonable cost.

Nothing is more important than the implementation of opportunities. Identified benefits remain a purely academic exercise. Even with the right tools to demonstrate the cost and benefits of any changes in operation, there is often an inertia problem to deal with. People inherently do not like change for a number of reasons; unfamiliar territory, perception of extra work, lack of knowledge, poor communication or lack of management support. Whatever the reason, the obstacles to change must be managed and overcome for an organisation to remain profitable and grow.