TINC 2007 – “The Continuum of TA Excellence” 2008 1 TURNAROUND INDUSTRY NETWORK CONFERENCE An Owners Only Forum for Industry Best Practices TINC 2008 June 16-19, 2008 Trade-Off Economics in Plant and Refinery Turnarounds Jan A. Jackson Senior Consultant – AP-Networks
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TINC 2007 – “The Continuum of TA Excellence”1
2008
TURNAROUND INDUSTRY NETWORK CONFERENCEAn Owners Only Forum for Industry Best Practices
TINC 2008
June 16-19, 2008
Trade-Off Economics in Plant and Refinery TurnaroundsJan A. Jackson
Senior Consultant – AP-Networks
TINC 2007 – “The Continuum of TA Excellence”2
2008
In case you did not know…
“Smoking is one of the leading causes for
…..statistics.”
TINC 2007 – “The Continuum of TA Excellence”3
2008
BackgroundPurpose of Presentation
1. Describe various types of economic trade-off scenarios in the turnaround environment
2. Present some on-going high-level turnaround data research and emerging trends.
3. Provide a conceptual framework for your turnaround decision-making and trade-off considerations
Refinery: Limited options for capacity expansion, resource attrition
Turnaround: Contracting and labor, skill level
Turnarounds are being executed in an increasingly difficult context
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I. Essential ConceptsWhat are “Constraints”? What are “Trade-Offs”?
The “Triple Constraint1“ of (Turnaround) Management Constraints exist due to (inter-) dependencies Constraints are an artifact of scarcity They force us to consider trade-offs
performance
cost
time
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I. Essential ConceptsConstraints in the “real” world are not just ‘triple’ but manifold
scope
cost
schedule
reliability
company objectives
refinery objectives
personnel skills
personnel availability
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I. Essential ConceptsOptimization of the ‘Cost Curve’
cost (crash)
cost (opt.1)
t(crash) t(opt.1)time
cost
t(normal)
• Decreased labor productivity• More complex field management• Higher number of safety incidents• Expediting charges• Inefficiencies in coordination
• Increased general conditions
• Indirects• Rental Equipment
TRADETRADE
MINIMUMTIME 1
2
3
Cost Curve
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I. Essential ConceptsOpportunity Costs and the ‘Cost Curve’
cost (crash)
cost (opt.1)
t(crash) t(opt.1)time
cost
t(normal)
Opportunity Costs
t(opt.2)
cost (opt.2)1
2
4MINIMUMTIME
3
Cost Curve
Cost Curve-revised-
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In case you did not know…
“There are three kinds of lies:
lies, damn lies, and statistics.”- Benjamin Disraeli -
TINC 2007 – “The Continuum of TA Excellence”15
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II. Data PresentationLabor Performance1 deteriorates with increasing TA size
SIndirect manhour portion increases by 1% per each additional 20,000 hours in size for turnarounds up to 400,000 hours in size. 30% in support hours appears to be the upper limit.
27.5%
II. Data PresentationLarger TAs have increasing portion of ‘support hours’
TINC 2007 – “The Continuum of TA Excellence”19
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II. Data PresentationTurnaround Durations by Shift Pattern
0.80
1.00
1.20
1.40
1.60
1.80
2.00
6-10s 7-10s
SHIFT TYPE
LA
BO
R P
ER
FO
RM
AN
CE
7-12s
MEANMEAN
7-10s and 7-12s show wide range of outcomes and strong potential for labor hour overruns of 40-60%. 6-10s are very predictable with few ‘catastrophic’ outcomes.
TINC 2007 – “The Continuum of TA Excellence”20
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$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
$100,000,000
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
$110.00
$120.00
$130.00
$140.00
$150.00 1. Total TA Costs and Labor Hours strongly correlated2. Up to 300,000 hrs data have very tight fit to trend-line3. “All-In Rate” level is elevated between 300-500,000 hrs
II. Data PresentationTurnaround Costs by Man-hours (left axis) and All-In Rate
TA SIZE IN MANHOURS
1
All-In Rate2
3
TO
TAL
TU
RN
AR
OU
ND
CO
ST
S
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II. Data PresentationMan-hours and Turnaround Duration
Total Scope is base-lined as 400,000 Earned Hours on 49 CDs (5-8s). Each shift pattern meets final scope target on a different day due to
productivity differentials.
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III. Case StudyCreating the Base Case
DIRECT LABOR5-8s
$80.0MM
$40.0MM
$20.0MM
$60.0MM
MATERIAL
PER DIEM
IND. LABOR
EQUIP. / GC
DIRECT LABOR6-10s
IND. LABOR
MATERIAL
PER DIEM
EQUIP. / GC
PREMIUM 15%
+ $10MM
49 Days 39 Days 37 Days 33 Days- 10 Days - 2 Days - 4 Days
DIRECT LABOR7-10s
IND. LABOR
MATERIAL
PER DIEM
EQUIP. / GC
PREMIUM 23%
+ $7MM
DIRECT LABOR7-12s
IND. LABOR
MATERIAL
PER DIEM
EQUIP. / GC
PREMIUM 32%
+ $7MM
DIRECT LABOR7-14s
IND. LABOR
MATERIAL
PER DIEM
EQUIP. / GC
PREMIUM 32%
+ $6MM
30 Days- 3 Days
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III. Case StudyTurnaround Durations by Shift Pattern
BASE (5-8s)
A- (7-14s)
B-(6-10s)
C-(6-10s)
D-(6-12s)
E-(7-10s)
F-(7-12s)
20 25 30 35 40 45 50
CALCULATED TA DURATION
PR
OD
UC
TIV
ITY
ST
UD
Y A
ND
SH
IFT
PA
TT
ER
N4 CDs
2
19 CDs
10 CDs
33 CDs
37 CDs
39 CDs
30 CDs
49 CDs
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III. Case StudyTrade-Offs (e.g. capacity 200,000 bbl/d)
20 25 35 45 50 554030
$50.0MM
$60.0MM
$70.0MM
$80.0MM
$40.0MM
$6.00 margin bbl
$12.00 margin bbl
$2.00 margin bbl
7-12s 7-10s 6-10s 5-8s
+ $10MM
+ $7MM
+ $7MM
33 37 39 49
$4.00 margin bbl
30
7-14s
+ $6MM
1
2
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III. Case StudyCompression v. Acceleration
28211470 35 42 49 56
2
3
1
4
FEASIBLE RANGE
Compression increases degree of concurrency (t(conc.)/total duration) => increasing demand on coordination/supervision skills
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IV. Summary
Larger TAs tend to have worse Labor Performance Index (LPI). The complexity of these events is not fully valued.
LPI development changes significantly at ~270 and ~500 personnel/shift
Portion of support hours increases by 1% for every 20,000 hrs up to 400,000 hrs, and then log to lim. 28%
All-In Rate is highest for TAs between 300-500,000 hrs. Higher work intensity accelerates safety incidents. Larger TAs have higher work intensity Impact of 7-day shift schedules on LPI often
underestimated
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IV. SummaryThe Need For Post-Turnaround Reviews of Data